<PAGE>
As filed with the Securities and Exchange Commission on July 16, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
--------------
HOLLYWOOD CASINO CORPORATION
and the Guarantors named in Footnote (1) below
(Exact Name of Co-Registrants as Specified in their Charters)
--------------
<TABLE>
<S> <C> <C>
Delaware 7011 75-2352412
(State or (Primary Standard Industrial (I.R.S. Employer Identification No.)
Other Classification Code Number)
Jurisdiction
of
Incorporation
or
Organization)
</TABLE>
William D. Pratt
Two Galleria Tower, Suite Executive Vice President, Secretary and General
2200 Counsel
13455 Noel Road Two Galleria Tower, Suite 2200
Dallas, Texas 75240 13455 Noel Road
(972) 392-7777 Dallas, Texas 75240
(972) 392-7777
(Address, Including Zip
Code, and Telephone Number, (Name and Address, Including Zip Code, and
including Area Code, of Co- Telephone Number, Including Area Code, of Agent
Registrants' Principal For Service)
Executive Offices)
--------------
With a copy to:
Michael A. Saslaw, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telephone: (214) 746-7700
Facsimile: (214) 746-7777
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to the Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<CAPTION>
Proposed
Maximum
Proposed Maximum Aggregate Amount of
Title of Each Class of Amount to be Offering Offering Registration
Securities to be Registered Registered Price Per Unit Price(2) Fee(3)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11
1/4% Senior Secured Notes due
2007........................ 310,000,000 Not applicable $310,000,000 $86,180
- --------------------------------------------------------------------------------------------
Floating Rate Senior Secured
Notes due 2006.............. 50,000,000 Not applicable $50,000,000 $13,900
- --------------------------------------------------------------------------------------------
Senior Subordinated
Guarantees(4) ........... -- -- -- --
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
(1) HWCC-Tunica, Inc., a Texas corporation (I.R.S. Employer Identification No.
75-2513808), and HWCC-Shreveport, Inc., a Louisiana corporation (I.R.S.
Employer Identification No. 75-2734327).
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Calculated in accordance with Rule 457(f) under the Securities Act of
1933.
(4) The 11 1/4% Senior Secured Notes due 2007 and the Floating Rate Senior
Secured Notes due 2006 are guaranteed by the Co-Registrants. No separate
consideration will be paid in respect of the guarantees.
The Co-Registrants hereby amend this registration statement on such date or
dates as may be necessary to delay its effective date until the Co-Registrants
shall file a further amendment which specifically states that this
Registration Statement thereafter shall become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Subject to Completion, Dated July 16, 1999
[HOLLYWOOD CASINO LOGO APPEARS HERE]
Offer to Exchange All Outstanding
Original 11 1/4% Senior Secured Notes due 2007
for
Registered 11 1/4% Senior Secured Notes due 2007
and
Original Floating Rate Senior Secured Notes due 2006
for
Registered Floating Rate Senior Secured Notes due 2006
of
Hollywood Casino Corporation
. The exchange offer will . You will not owe
expire at 5:00 p.m., New additional federal income
York City time, on , taxes if you exchange your
1999, unless we extend original notes.
this date.
. If you fail to tender your
. If you decide to original notes, you will
participate in this continue to hold
exchange offer, the unregistered securities
registered notes you and your ability to
receive will be the same transfer them could be
as your original notes, adversely affected.
except that, unlike your
original notes, you will
be able to offer and sell
the registered notes
freely to any potential
buyer in the United
States.
. No public market currently
exists for the notes. We
do not intend to list the
notes on any securities
exchange and, therefore,
no active public market is
anticipated.
. We will not receive any
proceeds from the exchange
offer.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
We urge you to read the "Risk Factors" section of this prospectus beginning on
page 12, which describes information you should consider before participating
in the exchange offer.
----------------
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is
not an offer to buy these securities in any state where the offer or sale
is not permitted.
The date of this prospectus is , 1999.
<PAGE>
PROSPECTUS SUMMARY
This brief summary highlights selected information contained elsewhere in
this prospectus. Because it is a summary, it does not contain all the
information you should consider before exchanging your original notes. You
should read the entire prospectus carefully, including the text under the
section entitled "Risk Factors" and the consolidated financial statements and
the notes relating to those statements. Except where otherwise noted, the words
"we," "our," "ours," "us" and "Hollywood Casino" mean Hollywood Casino
Corporation and all of its subsidiaries.
The Company
We develop, own and operate highly themed casino entertainment facilities
under the service mark Hollywood Casino(R). We currently own and operate two
casinos, one in Aurora, Illinois, and the other in Tunica County, Mississippi.
Our properties enjoy leading market positions in two of the five largest gaming
markets in the United States. The Aurora casino, located approximately 35 miles
west of downtown Chicago, features two riverboat casinos and a large land-based
pavilion. The Tunica casino, located approximately 30 miles south of Memphis,
Tennessee, includes a dockside casino and a hotel and entertainment complex.
Our facilities feature our unique Hollywood theme, which incorporates the
excitement and glamour of the motion picture industry by utilizing designs
inspired by famous movies, displays of motion picture memorabilia and movie-
themed gaming, entertainment and dining areas. In addition to our existing
properties, we recently received approval and have a license to develop, own
and operate a destination gaming resort in Shreveport, Louisiana, located
approximately 180 miles east of Dallas, Texas. We believe the Shreveport
casino, which will also incorporate our Hollywood theme, will be the premier
gaming facility in the market offering customers the largest riverboat casino
and numerous entertainment amenities. We believe that our unique Hollywood
theme differentiates our properties from those of our competitors by providing
a high quality gaming and entertainment environment, which has enabled us to
develop strong customer loyalty. For the year ended December 31, 1998, we
generated net revenues of $268.8 million, a net loss of $1.6 million and
earnings before interest, tax, depreciation and amortization expenses, adjusted
to give effect to the anticipated termination of management and consulting
agreements in connection with our acquisition of Pratt Casino Corporation
("Adjusted Pro Forma EBITDA"), of $52.3 million.
Recent Transactions
We have recently entered into or completed the following transactions:
. Acquisition and Termination of Management and Consulting Contracts. We
intend to use $40.3 million of the proceeds from the original offering
of the notes to finance the acquisition of the Aurora management and
Tunica consulting contracts by acquiring the stock of Pratt Casino
Corporation and satisfying its obligations. On April 28, 1999, we
entered into a voting agreement to effect these transactions. On May 25,
1999, Pratt Casino Corporation, PRT Funding Corp. and New Jersey
Management, Inc. filed for bankruptcy under a joint plan of
reorganization, as required by the terms of the voting agreement. We
expect to purchase Pratt Casino Corporation when it emerges from
bankruptcy.
. Tender Offer for our 12 3/4% Senior Secured Notes. In connection with
the original offering of the notes, we consummated a tender offer for
our 12 3/4% Senior Secured Notes due 2003. Tenders representing
approximately 97% of the aggregate outstanding principal amount of the
12 3/4% Senior Secured Notes were received by the depositary.
Simultaneous with the completion of the original offering of the notes,
we deposited government securities in an amount sufficient to
immediately discharge our obligations with respect to the 12 3/4% Senior
Secured Notes not tendered in the tender offer through an irrevocable
redemption of those notes on November 1, 1999.
1
<PAGE>
. Aurora Expansion. We intended to use $40 million of the proceeds from
the offering of the original notes to replace our smaller riverboat at
our Aurora casino with a larger, newly constructed riverboat. However,
on June 25, 1999, the Governor of Illinois signed into law legislation
passed by the Illinois legislature that allows dockside gaming for
existing licensees. As a result of this legislation, we now plan to
replace our two existing riverboats with a single, two level dockside
gaming facility. We believe the $40 million in proceeds from the
offering of the original notes will be sufficient for the construction
of our dockside facility. Pending receipt of regulatory approvals, we
expect to commence construction in the fourth quarter of 1999. Once
commenced, we expect construction to be completed in approximately 14
months.
Principal Executive Offices and Telephone Number
Our principal executive offices are located at Two Galleria Tower, Suite
2200, 13455 Noel Road, Dallas, Texas 75240, and our telephone number is (972)
392-7777.
2
<PAGE>
The Exchange Offer
Securities to be On May 19, 1999, we issued $310 million aggregate
Exchanged............... principal amount of 11 1/4% senior secured notes and
$50 million aggregate principal amount of floating
rate senior secured notes to the initial purchasers
in the original offering in a transaction exempt
from the registration requirements of the Securities
Act of 1933. The terms of the original notes and the
registered notes will be the same, except that,
unlike the original notes, you will be able to offer
and sell the registered notes freely to any
potential buyer in the United States. For more
details, see the section entitled "Description of
the Registered Notes."
The Exchange Offer....... You must properly tender your original notes in
accordance with the procedures described on page 78
of this prospectus.We will exchange all original
notes that you properly tender and do not withdraw.
If we exchange your original notes, we will issue
registered notes promptly after the expiration date
of the exchange offer.
Registration Rights We sold the original notes to the initial
Agreement................ purchasers, in a transaction exempt from the
registration requirements of the Securities Act. The
original notes were immediately resold by the
initial purchasers in reliance on Rule 144A under
the Securities Act. In connection with the sale, we
and those of our subsidiaries that are guarantors
entered into a registration rights agreement with
the initial purchasers requiring us to make the
exchange offer. The registration rights agreement
further provides that we, together with the
guarantors, must use our reasonable best efforts to:
. file the registration statement with respect
to the exchange offer on or before July 18,
1999;
. cause the registration statement with respect
to the exchange offer to be declared
effective on or before October 16, 1999;
. consummate the exchange offer within 30
business days after the registration
statement with respect to the exchange offer
becomes effective; and
. file a shelf registration statement for the
resale of the original notes with respect to
any original notes for which we cannot effect
an exchange offer within the above time
periods or if any holders of original notes
are legally prohibited from participating in
the exchange offer.
Ability to Resell New Based on interpretations by the Staff of the SEC set
Notes................... forth in published no-action letters, we believe you
may offer for resale, resell and otherwise freely
transfer the registered notes without registration
or delivering a prospectus to a buyer if:
. you acquire the registered notes in the
ordinary course of your business;
. you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate
in the distribution of registered notes; and
. you are not related to us.
3
<PAGE>
However, the SEC has not considered this exchange
offer in the context of a no-action letter and we
cannot be sure that the staff of the SEC would make
the same determination with respect to the exchange
offer as in other circumstances. Furthermore, you
must, unless you are a broker-dealer, acknowledge
that you are not engaged in, and do not intend to
engage in, a distribution of your registered notes
and have no arrangement or understanding to
participate in a distribution of registered notes.
If you are a broker-dealer that receives registered
notes for your own account pursuant to the exchange
offer you must acknowledge that you will comply with
the prospectus delivery requirements of the
Securities Act in connection with any resale of your
registered notes. If you are a broker-dealer who
acquired original notes directly from us and not as
a result of market-making activities or other
trading activities, you may not rely on the SEC
staff's interpretations discussed above or
participate in the exchange offer and must comply
with the prospectus delivery requirements of the
Securities Act in order to resell the registered
notes.
The exchange offer is not being made to:
. holders of original notes in any jurisdiction
in which the exchange offer or its acceptance
would not comply with the securities or blue
sky laws of that jurisdiction; and
. holders of original notes who we control.
No Minimum Required......
There is no minimum amount of original notes that
you must tender in the exchange offer.
Procedures for
Exchanging Your If you wish to exchange your original notes for
Original Notes.......... registered notes you must transmit to State Street
Bank and Trust Company, our exchange agent, on or
before the expiration date either:
. a properly completed and executed letter of
transmittal, which we have provided to you
with this prospectus, or a facsimile of the
letter of transmittal, together with your
original notes and any other documentation
requested by the letter of transmittal;
. a computer generated message, in which you
acknowledge and agree to be bound by the
terms of the letter of transmittal,
transmitted by means of the Depository Trust
Company's Automated Tender Offer Program
system; or
. a notice of guaranteed delivery, in
accordance with the procedures described
under the heading "Description of the
Exchange Offer--Guaranteed Delivery
Procedures."
By agreeing to be bound by the terms of the letter
of transmittal, you will be deemed to have made the
representations described on page 76 under the
heading "Description of the Exchange Offer--
Procedures for Tendering Your Notes."
4
<PAGE>
Guaranteed Delivery If you wish to exchange your original notes for
Procedures.............. registered notes and time will not permit the
documents required by the letter of transmittal to
reach the exchange agent before the expiration date
of the exchange offer, or you cannot complete the
procedure for book-entry transfer on a timely basis,
you must exchange your original notes according to
the guaranteed delivery procedures described on page
81 under the heading "Description of the Exchange
Offer--Guaranteed Delivery Procedures."
Special Procedures for
Beneficial Owners....... If you are a beneficial owner whose original notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
you wish to exchange your original notes for
registered notes, you should contact the registered
holder promptly and instruct the registered holder
to exchange the original notes for you. If you wish
to exchange your original notes for registered notes
on your own behalf, you must either make appropriate
arrangements to register ownership of the original
notes in your name or obtain a properly completed
bond power from the registered holder.
The transfer of registered ownership may take
considerable time and you may not be able to be
complete the transfer before the expiration date of
the exchange offer.
Expiration Date.......... The exchange offer will expire at 5:00 p.m., New
York City time, on , 1999 or such later date
and time to which it is extended.
Withdrawal Rights........ Unless we extend the date, you may withdraw your
tendered original notes at any time before 5:00
p.m., New York City time, on the expiration date of
the exchange offer.
Interest on the
Registered Notes and Interest on your registered notes will accrue from
the Original Notes...... the date of the original issuance of the original
notes or from the date of the last periodic payment
of interest on the original notes, whichever is
later. Interest will not be paid on original notes
that are tendered and accepted for exchange.
Exchange Agent........... State Street Bank and Trust Company is serving as
exchange agent in connection with the exchange
offer.
Material Federal Income
Tax Considerations...... The exchange of your original notes for registered
notes in connection with the exchange offer should
not constitute a sale or an exchange for federal
income tax purposes. See "Material Federal Income
Tax Considerations."
Effect of Not If you fail to tender your original notes, you will
Tendering............... continue to hold unregistered securities and your
ability to transfer them could be adversely
affected.
Please review the information on page 76 under the heading "Description of
the Exchange Offer" for more detailed information concerning the exchange
offer.
5
<PAGE>
The Registered Notes
The summary below describes the principal terms of the registered notes. Some
of the terms and conditions described below are subject to important
limitations and exceptions. The "Description of the Registered Notes" section
of this prospectus beginning on page 83 contains a more detailed description of
all of the material terms and conditions of the registered notes.
Issuer.................. Hollywood Casino Corporation
Notes Offered........... $310 million in aggregate principal amount of 11 1/4%
registered fixed rate senior secured notes due 2007.
$50 million in aggregate principal amount of
registered floating rate senior secured notes due
2006.
The registered fixed rate notes and registered
floating rate notes are referred to collectively as
the "registered notes." The original notes and the
registered notes are referred to collectively as the
"notes."
Maturity................ The fixed rate notes will mature on May 1, 2007. The
floating rate notes will mature on May 1, 2006.
Interest................ Interest on the notes will be payable semi-annually
on each May 1 and November 1, commencing November 1,
1999. The fixed rate notes will bear interest at a
rate of 11.250% per annum. The floating rate notes
will bear interest at a rate per annum equal to LIBOR
plus 628 basis points. The initial rate of interest
on the floating rate notes will be 11.360% and will
be reset semi-annually.
Subsidiary Guarantors... The registered notes will be unconditionally
guaranteed on a senior secured basis by HWCC-Tunica,
HWCC-Shreveport and in the future by certain of our
U.S. subsidiaries. Hollywood Casino-Aurora and HWCC-
Louisiana will not be guarantors. If we cannot make
payments on the notes when they are due, the
guarantors must make them instead.
Ranking................. The registered notes will be our senior secured
obligations. The registered notes will rank equal in
right of payment with all of our existing and future
senior debt and will rank senior in right of payment
to any of our future subordinated debt. The
guarantees will be senior secured obligations of the
guarantors. The guarantees will rank equal in right
of payment with all of the guarantors' existing and
future senior debt and will rank senior in right of
payment to any of their future subordinated debt. The
registered notes will be structurally subordinated to
all indebtedness and other liabilities of Hollywood
Casino-Aurora, except to the extent of the principal
balance of the Hollywood Casino-Aurora intercompany
note described below, and to all indebtedness and
other liabilities of HWCC-Louisiana and each other
non-guarantor subsidiary.
Security................ The registered notes will be secured by:
. a pledge of the capital stock of some of our
U.S. subsidiaries, including Hollywood Casino-
Aurora, HWCC-Tunica, HWCC- Shreveport, HWCC-
Louisiana and all of the capital stock of future
U.S. subsidiaries and up to 65% of the capital
stock of any foreign subsidiaries that guarantee
the notes;
6
<PAGE>
. a pledge of the intercompany note payable to us
and issued by HWCC-Tunica and the intercompany
note payable to us and issued by Hollywood
Casino-Aurora, which has a balance of $31.5
million and will increase as additional amounts
are loaned by us to Hollywood Casino-Aurora up
to $108 million;
. a collateral assignment of the security
documents relating to the Hollywood Casino-
Aurora intercompany note, including a first
priority lien on substantially all of its assets
limited to the then outstanding amount of the
intercompany note of Hollywood Casino-Aurora;
. a first priority security interest in the $40.7
million of the net proceeds of the original
offering that were deposited into escrow,
pending release in connection with completion of
the acquisition of Pratt Casino Corporation or
the special mandatory redemption; and
. a first priority security interest in the
Company's trademarks and service marks.
HWCC-Tunica's guarantee will be secured by
substantially all of the assets of HWCC-Tunica. HWCC-
Shreveport's guarantee will be secured by a
collateral assignment of the management contract for
the planned Shreveport casino. Although Hollywood
Casino-Aurora will not guarantee the registered
notes, the indenture provides that Hollywood Casino-
Aurora may not, directly or indirectly, create,
incur, assume or suffer to exist any lien on any
asset owned now or in the future, or on any income or
profits from any of its assets, or assign or convey
any right to receive income from any of its assets,
except permitted liens. For more information on the
collateral securing the notes, see the discussion
under the section entitled "Description of the
Registered Notes--Security."
Optional Redemption..... At any time on or prior to May 1, 2002, we may redeem
up to 35% of the original aggregate principal amount
of the fixed rate notes with the net cash proceeds of
qualified equity offerings, at a redemption price
equal to 111.250% of the principal amount thereof,
plus accrued interest and any liquidated damages to
the date of redemption; provided that at least 65% of
the original aggregate principal amount of fixed rate
notes remains outstanding immediately after any
redemption. In addition, at any time on or after May
1, 2003, we may, at our option, redeem the fixed rate
notes in whole or in part at the prices set forth in
this prospectus under the heading "Description of the
Registered Notes--Optional redemption."
At any time, we may, at our option, redeem the
floating rate notes, in whole or in part, at the
redemption prices set forth in this prospectus under
the heading "Description of the Registered Notes--
Optional redemption", plus accrued and unpaid
interest to the date of redemption. For more
information on our optional redemption rights, see
the discussion under the section entitled
"Description of the Registered Notes--Optional
redemption."
Special Mandatory We have deposited $40.7 million in a special account
Redemption............. with the trustee to secure our obligation to redeem
$40.3 million of the notes at 101% of their principal
amount if we determine that we cannot consummate our
acquisition of Pratt Casino Corporation or, in any
event, if it has not been completed by January 31,
2000.
7
<PAGE>
Covenants of We will issue the registered notes under an indenture
Indenture.............. with State Street Bank and Trust Company. The
indenture, among other things, restricts our ability
and the ability of our restricted subsidiaries to:
. borrow money;
. pay dividends on stock or repurchase stock;
. make investments;
. use assets as security in other transactions;
and
. sell certain assets or merge with or into other
companies.
For more details on these restrictive covenants, see
the discussion under the section entitled
"Description of the Registered Notes--Restrictive
Covenants."
Form of Registered The registered notes will be represented by one or
Notes.................. more permanent global notes in definitive, fully
registered form. The global notes will be registered
in the name of a nominee of The Depository Trust
Company and will be deposited with State Street Bank
and Trust Company, as custodian for The Depository
Trust Company's nominee.
For more details, see the discussion under the
section entitled "Description of the Registered
Notes--Book-Entry; Delivery and Form."
Use of Proceeds......... We will not receive any cash proceeds from the
issuance of the registered notes in connection with
the exchange offer.
Risk Factors
We urge you to carefully review the risk factors beginning on page 12 for a
discussion of factors you should consider before exchanging your original notes
for registered notes.
8
<PAGE>
Summary Financial and Operating Data
The following table summarizes certain of our selected historical income
statement data for fiscal years 1998, 1997 and 1996 that have been derived from
our financial statements, which have been audited by Deloitte & Touche LLP,
independent auditors, and are included elsewhere in this prospectus. On
December 31, 1996, we distributed our approximate 80% ownership interest in
Greate Bay to our stockholders. The adjusted 1996 column has been derived from
our audited financial statements and adjusted to exclude the operations of
Greate Bay and its subsidiaries. For a presentation of the consolidated
financial information for the year ended December 31, 1996 and prior periods,
which include the results of operations of Greate Bay, see "Selected
Consolidated Financial Information" and our financial statements and notes
thereto. In 1998, our results of operations were negatively impacted by a
significant increase in gaming taxes imposed by the Illinois legislature.
Gaming taxes incurred by the Aurora casino increased by $11.6 million in 1998.
Financial data as of March 31, 1999 and for the three months ended March 31,
1999 and 1998 have been derived from our unaudited financial statements, and in
our opinion, include all normal recurring adjustments necessary for a fair
presentation of such information. Operating results for the three months ended
March 31, 1999 are not necessarily indicative of the results that may be
achieved for the year ended December 31, 1999. The summary pro forma operating
data for the three months ended March 31, 1999 and for the year ended
December 31, 1998 give effect to the offering of the original notes, the
acquisition of Pratt Casino Corporation, and the tender offer for and
satisfaction and discharge of our 12 3/4% Senior Secured Notes, as if these
transactions had occurred on January 1, 1998. The summary pro forma balance
sheet data at March 31, 1999 gives effect to the offering of the original
notes, the acquisition of Pratt Casino Corporation, and the tender offer for
and satisfaction and discharge of our 12 3/4% Senior Secured Notes, as if these
transactions had occurred on March 31, 1999. The summary financial and
operating data set forth below should be read in conjunction with the financial
statements and notes thereto and with "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
<TABLE>
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
---------------- -----------------------------------------
Adjusted
1999 1998 1998 1997(1) 1996(2) 1996
------- ------- --------- --------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues........... $69,773 $63,807 $ 268,760 $ 267,757 $ 258,487 $530,580
Operating expenses(3).. (60,185) (54,747) (234,155) (226,851) (238,145) (505,839)
Income from operations
before write down of
assets................ 9,588 9,060 34,605 40,906 20,342 24,741
Write down of assets... -- -- -- (19,678) (22,141) (22,141)
Income (loss) from
operations............ 9,588 9,060 34,605 21,228 (1,799) 2,600
Interest income........ 359 672 2,844 1,896 2,299 3,101
Interest expense....... (7,389) (7,451) (30,260) (30,437) (28,862) (59,090)
Net income (loss)...... 330 69 (1,605) (17,347) (29,103) (55,293)
Other Financial Data:
Adjusted EBITDA(4):
Aurora casino EBITDA
before management
fees(3)............... $10,534 $10,002 $ 39,228 $ 46,724 $ 44,100 $ 44,100
Tunica casino EBITDA
before consulting fees
and land lease........ 6,758 6,601 25,666 29,577 20,601 20,601
Greate Bay EBITDA...... -- -- -- -- -- 10,914
Tunica land lease...... (995) (940) (3,899) (3,935) (3,486) (3,486)
Management and
consulting fees....... (2,900) (2,846) (10,072) (10,809) (10,560) --
General Partnership
interest.............. 259 304 1,097 711 -- --
Development expenses... (215) (255) (779) (1,480) (1,065) (1,065)
Corporate expenses..... (1,876) (1,513) (6,629) (5,441) (8,288) (7,328)
------- ------- --------- --------- --------- --------
Total Adjusted
EBITDA(3)(4).......... $11,565 $11,353 $ 44,612 $ 55,347 $ 41,302 $ 63,736
======= ======= ========= ========= ========= ========
Cash provided by
operating activities.. $15,553 $19,262 $ 16,751 $ 31,613 $ 13,673 $ 12,309
Cash (used in) provided
by investing
activities............ (800) 1,584 (8,490) 1,961 (15,056) (42,143)
Cash used in financing
activities............ (3,390) (3,242) (6,402) (14,803) (5,555) (5,216)
Capital
expenditures(5)....... (3,698) (1,899) (12,037) (5,101) (45,035) (53,078)
Depreciation and
amortization.......... (4,000) (4,214) (16,562) (18,901) (21,006) (40,836)
Ratio of earnings to
fixed charges(6)...... 1.1x 1.1x -- -- -- --
Pro Forma Operating
Data(7):
Pro Forma Adjusted
EBITDA(4)(8).......... $13,887 $ 52,306
Cash interest
expense(9)............ 10,565 43,273
Ratio of Pro Forma
Adjusted EBITDA to
cash interest
expense............... 1.3x 1.2x
Ratio of total pro
forma debt to Pro
Forma Adjusted
EBITDA................ N/A 7.4x
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
As of March 31,
1999
-----------------
Pro
Actual Forma
-------- --------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents(10).............................. $ 53,481 $125,072
Total assets............................................... 278,390 355,837
Total debt................................................. 226,455 388,482
Shareholders' equity (deficit)(11)......................... 7,842 (62,754)
</TABLE>
- --------
(1) Restated to reflect the modification of our income tax treatment resulting
from the distribution of the common stock of Greate Bay.
(2) Adjusted to exclude the financial information of Greate Bay and its
subsidiaries.
(3) In 1998, the Illinois gaming tax rate changed from a flat rate of 20% to a
graduated rate that increases from 15% to a maximum rate of 35%. Gaming
taxes incurred by the Aurora casino in 1998 increased by $11.6 million, or
38%, from 1997.
(4) Adjusted EBITDA for the periods presented represents earnings before
interest, taxes, depreciation and amortization, extraordinary items and
write down of assets of $19.7 million and $22.1 million for the years ended
December 31, 1997 and 1996, respectively and tax settlement costs of $1.1
million for the year ended December 31, 1998. Adjusted EBITDA is presented
because we believe it is frequently used by securities analysts, investors
and other interested parties in the evaluation of companies in our
industry. However, other companies in our industry may calculate EBITDA
differently than we do. Adjusted EBITDA is not a measurement of financial
performance under generally accepted accounting principles and should not
be considered as an alternative to cash flow from operating activities or
as a measure of liquidity or an alternative to net income as indicators of
our operating performance or any other measures of performance derived in
accordance with generally accepted accounting principles.
(5) Capital expenditures in 1998 included the partial funding of our
$13 million upgrade of the Tunica casino and the cost of the five year hull
inspection of the Aurora casino. Capital expenditures in 1996 included the
costs of completing the new hotel tower and other significant improvements
at the Tunica casino and a new parking garage and banquet space at the
Aurora casino.
(6) Earnings were insufficient to cover fixed charges by $0.3 million, $11.6
million and $55.7 million in each of 1998, 1997 and 1996, respectively, and
by $29.2 million in 1996 as adjusted. For purposes of computing the ratio
of earnings to fixed charges, fixed charges consist of interest expensed
and capitalized, amortized premiums, discounts and capitalized expenses
relating to debt and 33% of rent expense, which management believes is
representative of the interest component of rent expense. Earnings consist
of income from continuing operations before income taxes and equity in
earnings of unconsolidated affiliates, plus fixed charges, other than
capitalized interest, but excluding the amortization thereof.
(7) If we do not acquire Pratt Casino Corporation and we redeem $40.3 million
of the notes pursuant to the special mandatory redemption, pro forma
operating data for the periods presented would have been: (i) Three months
ended March 31, 1999: Pro forma adjusted EBITDA of $11.6 million, cash
interest expense of $9.4 million and total pro forma debt of $348.2 million
and (ii) Year ended December 31, 1998: Pro Forma adjusted EBITDA of $44.6
million, cash interest expense of $38.7 million and total pro forma debt of
$347 million.
(8) Pro Forma adjusted EBITDA gives effect to the consummation of the
acquisition of Pratt Casino Corporation and was computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, 1999 December 31, 1998
------------------ -----------------
(in thousands)
<S> <C> <C>
Total adjusted EBITDA................... $11,565 $44,612
Adjustment for effective purchase of
Aurora management contract
(represents the limited partnership
interest in the partnership that
manages the Aurora casino)........... 2,022 6,494
Adjustment for effective purchase of
Tunica consulting contract
(consulting fee paid under the Tunica
consulting contract)................. 300 1,200
------- -------
Pro Forma adjusted EBITDA........... $13,887 $52,306
======= =======
</TABLE>
10
<PAGE>
(9) Cash interest expense represents cash interest that would have been paid on
the notes at a blended interest rate of 11.3% and actual cash interest that
was paid on our outstanding indebtedness other than the 12 3/4% Senior
Secured Notes being refinanced in this offering.
(10) Pro forma cash and cash equivalents includes (a) unapplied net offering
proceeds of $40 million for the Aurora casino expansion and (b) unapplied
net offering proceeds of $25 million and cash on hand of $22.5 million to
fund the remainder of our $50 million contribution to the planned
Shreveport casino.
(11) Pro forma accumulated deficit includes the following: a $39.9 million net
charge from the acquisition of Pratt Casino Corporation and a $30.7
million extraordinary loss on the early retirement of our 12 3/4% Senior
Secured Notes.
11
<PAGE>
RISK FACTORS
We urge you to carefully consider the following factors, as well as the
other matters described in this prospectus.
Leverage--We have a substantial amount of debt, which could adversely affect
our financial condition and results of operations and prevent us from
fulfilling our obligations under the notes.
We currently have a large amount of indebtedness when compared to the equity
of our stockholders. In fact, primarily as a result of the loss on the early
retirement of our 12 3/4% Senior Secured Notes and the related write-off of
the deferred financing fees on those notes, the acquisition of Pratt Casino
Corporation and the tender offer and satisfaction and discharge of our 12 3/4%
Senior Secured Notes, we have a significant negative net worth. Moreover, the
terms of the indenture governing the notes limit, but do not prohibit, the
incurrence of additional indebtedness. If new debt is added to our current
debt levels, the related risks that we now face could intensify. After giving
pro forma effect to the offering of the original notes and the use of proceeds
as contemplated, we would have had total debt and stockholders' deficit at
March 31, 1999 as set forth below:
<TABLE>
<CAPTION>
As of March 31, 1999
--------------------
(in thousands)
<S> <C>
Pro forma total long-term indebtedness.................. $384,965
Pro forma stockholders' deficit......................... (62,754)
</TABLE>
Pro forma earnings would have been insufficient to cover pro forma fixed
charges for the 12 months ended December 31, 1998 by $5.9 million and for the
three months ended March 31, 1999 by $518,000. If we do not complete the
acquisition of Pratt Casino Corporation and instead redeem $40.3 million of
the notes pursuant to the special mandatory redemption, pro forma earnings
would have been insufficient to cover pro forma fixed charges for the 12
months ended December 31, 1998 by $8.9 million and for the three months ended
March 31, 1999 by $1.7 million.
Our large amount of indebtedness could, for example:
. make it more difficult for us to satisfy our obligations with
respect to the notes or other indebtedness and, if we fail to comply
with the requirements of this indebtedness, could result in an event
of default;
. require us to use a substantial portion of our cash flow from
operations to pay indebtedness and reduce the availability of this
cash flow to fund working capital, capital expenditures and other
general corporate activities;
. limit our ability to obtain additional financing in the future for
capital expenditures, working capital and other general corporate
activities;
. impair our ability to successfully withstand a downturn in our
business or the economy in general; and
. place us at a competitive disadvantage against other less leveraged
competitors.
The occurrence of any one of these events could have a material adverse
effect on our financial condition, results of operations and ability to
satisfy our obligations under the notes. In addition, we will face interest
rate risk since interest expense on our floating rate notes will vary based on
changes in LIBOR. As a result, our interest rates could increase, which could
have a material adverse effect on our financial condition, results of
operations and ability to satisfy our obligations under the notes. For more
information on the requirements of the notes and our other indebtedness, see
the discussion under the sections entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of the Registered Notes."
On June 9, 1999, we announced that we had received notification from the
Nasdaq Stock Market that we do not meet the minimum net tangible asset
requirement for continued listing on the Nasdaq National Market System and,
therefore, Nasdaq's staff had determined that continued listing is no longer
warranted. We have requested a hearing before Nasdaq's Listing Qualifications
Panel, effectively staying any delisting action pending a final decision by
the panel. Our failure to maintain a listing on the Nasdaq National Market
System, or a relatively comparable quotation system or exchange, may have a
material adverse effect on our ability to raise equity capital.
12
<PAGE>
Ability to Service Debt--We may not be able to generate sufficient cash flow
to meet our debt service obligations.
Our ability to make payments on and to refinance our indebtedness, including
the notes, and to fund planned capital expenditures depends on our ability to
generate cash flow in the future. This, to a certain extent, is subject to
general economic, financial, competitive, legislative and regulatory factors
and other factors, including weather, that are beyond our control. We cannot
assure you that our business will generate cash flow from operations in an
amount sufficient to enable us to pay our indebtedness, including the notes,
or to fund our other liquidity needs. As a result, we may need to refinance
all or a portion of our indebtedness, including the notes, on or before
maturity. We cannot assure you that we will be able to refinance any of our
indebtedness on commercially reasonable terms or at all. Our inability to
generate sufficient cash flow or refinance our indebtedness on commercially
reasonable terms would have a material adverse effect on our financial
condition, results of operations and ability to satisfy our obligations under
the notes.
Limits on Collateral--The trustee's ability to realize on the collateral
securing the notes and the guarantees may be limited.
The registered notes will be secured by:
. a pledge of promissory notes payable to us and issued by HWCC-Tunica
and Hollywood Casino- Aurora;
. a collateral assignment of the security documents relating to the
Hollywood Casino-Aurora intercompany note, including a first
priority lien on the assets of Hollywood Casino-Aurora limited to
the then outstanding balance of the intercompany note, which will
initially be $31.5 million and will increase up to $108 million as
additional advances are made from us to Hollywood Casino-Aurora; and
. a pledge of the capital stock of certain of our U.S. subsidiaries,
including Hollywood Casino-Aurora, HWCC-Tunica, HWCC-Shreveport and
HWCC-Louisiana, and up to 65% of the capital stock of our foreign
subsidiaries.
HWCC-Tunica's guarantee will be secured by substantially all of the assets
of HWCC-Tunica. HWCC-Shreveport's guarantee will be secured by a collateral
assignment of the management contract for the planned Shreveport casino.
The liens securing the Hollywood Casino-Aurora intercompany note
collaterally assigned to the trustee to secure the notes is limited to the
balance under the Hollywood Casino-Aurora intercompany note, which as of the
date of the indenture was $31.5 million. The liens will be increased from time
to time to secure additional amounts loaned by us to Hollywood Casino-Aurora,
including upon the expected advances of $37 million in connection with the
acquisition of Pratt Casino Corporation and up to approximately $40 million in
connection with the Aurora casino expansion, up to a principal amount of $108
million. We intend to loan the funds as needed to Hollywood Casino-Aurora for
use in connection with the Aurora casino expansion. We granted a first
priority security interest in the account to the trustee for the benefit of
the holders of the notes. However, we are not obligated to loan the funds
deposited in the account to Hollywood Casino-Aurora to finance the planned
Aurora casino expansion or to maintain a minimum balance in the account
pending any loan, and we may use the funds for any purpose permitted by the
terms of the indenture, including as general working capital. Accordingly, in
the event of a default, we cannot assure you that any funds will be available
in the account to meet our obligations under the notes or that the Aurora
intercompany note or the liens securing the intercompany note will be
increased in the future.
We cannot be sure that upon an event of default the proceeds of any sale of
the collateral in whole under the indenture and the related security documents
would be sufficient to satisfy our obligations under the notes or the
guarantors' obligations under the guarantees. If the proceeds were
insufficient, the deficiency would represent an unsecured obligation of
Hollywood Casino and the guarantors and we cannot be sure that you would
recover the deficiency. Neither we nor the guarantors prepared an appraisal of
the collateral securing the notes, and the value of the collateral at any time
will depend on market and other economic conditions including the availability
of suitable buyers for the collateral. For more information, see the
discussion under the section entitled "Description of the Registered Notes--
Security."
13
<PAGE>
The trustee's ability to foreclose on the collateral upon an acceleration of
the notes will be limited by applicable gaming laws, which generally require
that persons who own or operate a casino, receive payments under a management
contract or purchase, possess or sell gaming equipment, hold a valid gaming
license. No person may hold a license in Illinois, Louisiana or Mississippi
unless the person is found qualified or suitable by the relevant gaming
authorities. In order for the trustee to be found qualified or suitable, such
gaming authorities would have discretionary authority to require the trustee
and any or all of the holders of the notes to file applications and be
investigated and found qualified or suitable as an owner or operator of gaming
establishments or supplier of gaming equipment. If the trustee is unable or
chooses not to qualify, be found suitable or be licensed to own, operate or
sell the assets, it would have to retain an entity licensed to operate or sell
the assets. In addition, in any foreclosure sale or subsequent resale by the
trustee, licensing requirements under the relevant gaming laws may limit the
number of potential bidders and may delay any sale, which could have an
adverse effect on the sale price of the collateral. Therefore, the economic
benefits of realizing on the collateral may, without the appropriate
approvals, be limited. For more information, see the discussion under the
section entitled "Business--Casino Regulation."
The right of the trustee to repossess and dispose of the collateral upon
acceleration of the notes is also likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy proceeding were to be commenced by
or against us or any guarantor prior to or possibly even after the trustee has
repossessed and disposed of the collateral.
Holding Company Structure--We must depend on the business of our subsidiaries
to satisfy our obligations under the notes.
We conduct substantially all of our business through our subsidiaries. Our
ability to satisfy our obligations under the notes depends on dividends or
other intercompany transfers from our subsidiaries. Although Hollywood Casino-
Aurora and HWCC-Tunica will be obligated to make interest payments to us under
the intercompany notes, none of our subsidiaries are obligated to make
distributions to us merely as a result of our ownership interest in order for
us to satisfy all of our obligations under the notes. In addition, state
regulators could limit or prohibit the ability of our subsidiaries to make
distributions to us.
HWCC-Tunica and HWCC-Shreveport will, and some of our other U.S. restricted
subsidiaries in the future may, unconditionally guarantee our obligations
under the notes. However, because our operating cash flows and our ability to
service debt, including the notes, is dependent upon the operating cash flows
of our subsidiaries, the guarantees by our subsidiaries do not provide you
with significant additional assurance that we will be able to satisfy our
obligations under the notes.
Hollywood Casino-Aurora and certain of our other subsidiaries, including
HWCC-Louisiana which will indirectly own the planned Shreveport casino, do not
guarantee our obligations under the notes. The notes are effectively
subordinated to all indebtedness and other liabilities of each subsidiary that
is not a guarantor, including of Hollywood Casino-Aurora, except to the extent
of the pledge to the trustee of the Hollywood Casino-Aurora intercompany note
and the collateral assignment of the related security documents. This security
interest will be limited to the then outstanding amount of the Hollywood
Casino-Aurora intercompany note, which was initially $31.5 million. At March
31, 1999, Hollywood Casino-Aurora had outstanding approximately $22.5 million
of indebtedness, including $20.7 million in capitalized lease obligations,
owed to third party creditors, which is structurally senior in right of
payment to the notes to the extent the aggregate principal amount of the notes
exceeds the principal balance of the Hollywood Casino-Aurora intercompany
note.
In the event of a bankruptcy, liquidation or reorganization of any of the
non-guarantor subsidiaries, holders of their indebtedness and their trade
creditors would, after repayment of our secured intercompany notes, generally
be entitled to payment of their claims from the assets of those subsidiaries
before any additional assets are made available for distribution to us. At
March 31, 1999, our non-guarantor subsidiaries had indebtedness of
approximately $25.1 million, excluding secured intercompany debt, trade
payables and accrued expenses.
14
<PAGE>
Enforcement of the guarantees against our subsidiaries or any future
guarantors is subject to defenses available to guarantors generally, including
the right to force the trustee to exercise its remedies against us prior to
commencing any action on the guarantee. The guarantors will waive these
defenses to the guarantees to the extent it may legally do so.
History of Net Losses--We have a history of net losses and cannot be sure that
we will have earnings in the future.
We incurred net losses of $1.6 million in 1998, $17.3 million in 1997 and
$55.3 million in 1996 on net revenues of $268.8 million, $267.8 million and
$530.6 million, respectively. These losses reflect, among other factors:
. interest incurred on indebtedness;
. non-recurring, non-cash charges related to tax settlement costs of
$1.1 million in 1998 and the write down of receivables from Greate
Bay, totalling $15.7 million in 1997 and $18.7 million in 1996; and
. the 1996 consolidated operating results of Greate Bay Casino
Corporation, an 80%-owned subsidiary of ours until December 31,
1996.
Prior to our spin off of Greate Bay to our stockholders, we operated the
Sands Hotel and Casino in Atlantic City through our 80% ownership of Greate
Bay. On January 5, 1998, the entities that owned the Sands filed for
protection under Chapter 11 of the United States Bankruptcy Code.
Operating costs will increase as we expand our operations. Interest expense
will increase if interest rates rise on our variable rate indebtedness or if
we incur other indebtedness outside this offering. We cannot be sure that we
will attain profitable operations on an annual basis or at all.
Aurora Expansion Risks--The failure to complete the planned Aurora expansion
on time and on budget could adversely affect us.
We intended to use $40 million of the proceeds from the offering of the
original notes to replace our smaller riverboat at our Aurora casino with a
larger, newly constructed riverboat. However, on June 25, 1999, the Governor
of Illinois signed into law legislation passed by the Illinois legislature
that allows dockside gaming for existing licensees. As a result of this
legislation, we now plan to replace our existing riverboats with a single, two
level dockside gaming facility. Construction of our dockside facility is
expected to take approximately 14 months from the commencement of
construction. Construction of our dockside facility could be delayed while we
obtain all other required regulatory approvals. We expect the construction
cost to be approximately $40 million for the dockside expansion.
The construction of our dockside facility is subject to significant
development and construction risks that could affect the cost of and time to
complete the project, including the following:
. regulatory delay, including the approval of applications, plans and
specifications by the U.S. Army Corps of Engineers and the Illinois
Gaming Board;
. labor disputes;
. shortages of material and skilled labor;
. adverse weather conditions;
. engineering problems;
. environmental issues;
. fire, flood and other natural disasters; and
. geological, construction, demolition, excavation, regulatory or
equipment problems.
The occurrence of any of these events could delay the construction of our
dockside facility and may cause unanticipated cost increases. In addition,
although construction activities related to the construction of our dockside
facility are designed to minimize disruption, construction noise and debris
and the temporary closing of
15
<PAGE>
certain facilities may disrupt our current operations. Any construction delays
could exacerbate or magnify these disruptions. Any significant delay in the
construction of our dockside facility or failure to complete construction
within the budget or on schedule could have a material adverse effect on our
business, results of operations, financial condition and ability to satisfy
our obligations under the notes.
Shreveport Casino Uncertainties--The planned Shreveport project faces many
uncertainties relating to developing, financing, constructing, opening,
operating and licensing the casino.
We plan to construct the Shreveport casino. In the early stages of
development, we must overcome the uncertainties associated with developing,
financing, constructing, opening, operating and licensing the casino.
We currently estimate that the total cost of constructing and opening the
casino will be approximately $230 million, $50 million of which we plan to
contribute through an unrestricted subsidiary as equity capital and $180
million of which we plan to borrow in the form of indebtedness that is
recourse only to our unrestricted subsidiaries that own the casino. However,
we cannot assure you that we will be able to raise the funds necessary to
undertake and complete the construction and opening of the planned Shreveport
casino or whether we will be able to obtain financing on terms we consider
favorable. Moreover, any indebtedness we do obtain to finance the project may
limit QNOV's ability to pay us management fees under our management contract
or to pay us dividends. It is also possible that the payment of management
fees or dividends from the planned Shreveport casino could be limited or
prohibited by any regulatory or gaming authorities. If we are unable to raise
sufficient capital to finance the Shreveport project, we will either revise
the planned development to accommodate the level of financing we are able to
obtain, seek a financial partner or abandon the project completely.
Events that can affect the final cost and time to complete the project
include:
. regulatory delay, including the approval of applications, plans and
specifications by the U.S. Army Corps of Engineers and the Louisiana
Gaming Control Board;
. labor disputes;
. shortages of materials and skilled labor;
. adverse weather conditions;
. engineering problems;
. environmental issues;
. fire, flood and other natural disasters; and
. geological, construction, demolition, excavation, regulatory or
equipment problems.
Significant cost overruns or delays in completing the Shreveport project may
have a material adverse effect on our ability to receive management fees under
the Shreveport management contract and equity distributions, which could have
a material adverse effect on our financial condition, results of operations
and ability to service our obligations under the notes.
The license to own and operate the Shreveport casino is subject to annual
renewal by the Louisiana Gaming Control Board in October of each year, and we
cannot assure you that the license will be renewed.
Upon completion of our Shreveport resort, we will compete directly with
Binion's Horseshoe, Harrah's, the Isle of Capri and Casino Magic in the
Shreveport/Bossier City market. Some of these competitors have higher profile
brand names in the Shreveport/Bossier City market and greater financial
resources than we do. We cannot assure you that we will be able to effectively
compete against these four established casinos, three of which have been in
operation since 1994, or that the Shreveport/Bossier City market is large
enough to allow more than four casinos to operate profitably. Furthermore,
although the Louisiana Gaming Control Board has expressed no intent to grant
the fifteenth and final riverboat gaming license at this time, the remaining
riverboat gaming license could ultimately be granted in, or one or more of the
current operators in other parts of Louisiana could relocate to, the
Shreveport/Bossier City market which would directly increase competition in
our market.
16
<PAGE>
Also, we cannot be sure that we will be able to effectively compete against
any other future gaming operations that Louisiana or other authorities may
authorize in the gaming market in which the Shreveport casino will operate.
For example, in 1997, the Louisiana legislature adopted legislation permitting
up to 15,000 square feet of slot machine gaming at pari-mutuel wagering
facilities located in parishes in Louisiana that approve slot machine gaming
in a referendum election. Shortly thereafter, a referendum election was held
that approved slot machine gaming at Louisiana Downs, which is located in
Bossier City, approximately nine miles from the site of the Shreveport casino.
The Shreveport casino will also face competition from other forms of gaming,
such as state-sponsored lotteries and video lottery terminals, pari-mutuel
betting on horse and dog racing and bingo parlors, as well as other forms of
entertainment in Louisiana and other places from which we will draw customers.
Our inability to successfully operate the Shreveport casino and compete in
the market may have a material adverse effect on our ability to receive
management fees under the Shreveport management contract and equity
distributions, which could have a material adverse effect on our financial
condition, results of operations and ability to satisfy our obligations under
the notes.
Pratt Casino Corporation Acquisition Uncertainties--We may not be able to
acquire the Aurora and Tunica management and consulting agreements.
We intend to acquire the Aurora management and the Tunica consulting
contracts by acquiring the stock of Pratt Casino Corporation and satisfying
Pratt Casino Corporation's obligations. On April 28, 1999, we entered into a
voting agreement with Pratt Casino Corporation and various other parties to
effect these transactions. On May 25, 1999, Pratt Casino Corporation, PRT
Funding Corp. and New Jersey Management, Inc. filed for bankruptcy pursuant to
a joint plan of reorganization. This plan will be subject to approval by the
bankruptcy court. Moreover, Pratt Casino Corporation is currently subject to
regulatory review by New Jersey gaming authorities that must approve the
transaction. We cannot assure you that either the bankruptcy court or these
gaming authorities will approve the agreement that we have reached with Pratt
Casino Corporation and its creditors on the same or similar terms, or at all.
If we are unable to consummate this transaction, $40.3 million aggregate
principal amount of the new notes will be subject to the special mandatory
redemption at a redemption price of 101% of their principal amount, as
discussed under the section entitled "Description of the Registered Notes--
Special Mandatory Redemption." Moreover, if we are unable to acquire the
Aurora management and Tunica consulting contracts, those casinos will continue
to be obligated to pay management and consulting fees until the Tunica
consulting contract expires in December 2003 and the Aurora management
contract expires in July 2090, or until they are otherwise terminated.
Management fees under the Aurora management contract are paid to a limited
partnership that is subject to annual license renewal. There can be no
assurance that the Illinois Gaming Board will continue to renew the license of
that entity or permit future payments under the Aurora management contract,
which could result in disputes or litigation. We incurred net expenses under
these contracts totalling approximately $7.7 million in 1998.
Tunica Land Lease Risks--The termination of the lease for the Tunica casino
could have an adverse effect on the notes.
The land underlying the Tunica casino is subject to a lease, and the
leasehold interest will be subject to a deed of trust securing the guarantee
of the notes by HWCC-Tunica. Thus, the leasehold deed of trust will be subject
and subordinate to the lessor's interest in the real estate subject to the
leasehold. If the lease were to be terminated by the lessor as the result of a
default by HWCC-Tunica under the lease, HWCC-Tunica would lose possession of
the land subject to the lease and the improvements on the land, thereby
extinguishing the leasehold deed of trust for the benefit of the notes as well
as making it impossible for HWCC-Tunica to operate the Tunica casino. The
extinguishment of the leasehold deed of trust would in turn impair the value
of the security instruments that will secure the guarantee of HWCC-Tunica.
Moreover, the termination of the lease for the Tunica casino would require us
to terminate or attempt to relocate those operations, which could have a
material adverse effect on our financial condition, results of operations and
ability to satisfy our obligations under the notes.
17
<PAGE>
Competition--The competitive nature of the gaming industry could threaten our
position.
The gaming industry is highly fragmented and characterized by a high degree
of competition among a number of participants, some of which have greater
financial and other resources than we do. Competitive gaming activities
include:
. land-based casinos;
. dockside casinos;
. riverboat casinos;
. video lottery terminals; and
. other forms of legalized gaming in the United States and other
jurisdictions.
Legalized gambling is currently permitted in various forms throughout the
United States, in several Canadian provinces, and on Native American
reservations in particular states, including Louisiana and Mississippi. Other
jurisdictions may legalize gaming in the near future. Various states have
proposals to legalize gaming either introduced or being prepared for
introduction to their state legislatures. Additionally, established gaming
jurisdictions could award new gaming licenses or permit the expansion of
existing gaming operations. New or expanded operations by other persons in the
markets we serve, or in new markets, can be expected to further increase
competition for our present and proposed gaming operations and could have a
material adverse effect on our financial condition, results of operations and
ability to satisfy our obligations under the notes.
The Aurora Casino. The Illinois Riverboat Gambling Act and the rules
promulgated by the Illinois Gaming Board under that act authorize only ten
owner's licenses for riverboat gaming operations in Illinois and permit a
maximum of 1,200 gaming positions at any time for each of the ten licensed
sites. All authorized owners' licenses have been granted and no additional
licenses or gaming positions are permitted without further state legislation.
One licensed site ceased gaming operations in 1997. As a result of the recent
legislation, we believe that this license will likely be relocated and will
commence operations at a new site in Cook County, which would increase
competition in our principal market. We directly compete with three riverboat
sites which are licensed in Illinois within 50 miles of downtown Chicago. In
addition, we directly compete with five riverboat sites opened since 1996 in
northern Indiana. Increased competition from casinos in Indiana has resulted
in greater competition for patrons from the downtown Chicago market and from
the suburban Chicago market and we could face increased competitive pressure
in the near future. It is possible that the Illinois legislature could pass
legislation increasing the number of licenses in Illinois in the future, which
could increase competition in our principal market. Also, Native American
tribes are seeking to open casino facilities in northwestern Indiana and
Michigan under the Indian Gaming Regulatory Act. The opening of additional
casinos in the Chicago market could have a material adverse impact on the
operations of the Aurora casino which would have a material adverse effect on
our financial condition, results of operations and ability to satisfy our
obligations under the notes.
The Tunica Casino. The Tunica casino faces intense competition from the nine
other casinos currently operating in the Tunica market. Moreover, because the
Mississippi Gaming Control Act does not limit the number of licenses that may
be granted, the Tunica casino may face increased competition in the future
from new operators in the Tunica market. Increases in gaming and hotel
capacity have negatively affected the Tunica casino in the past and could have
an adverse impact in the future. Operators have opened casinos and hotels in
north Tunica County, closer to the Memphis market than our Tunica casino,
including the largest casino in the market, which has had a negative impact on
the Tunica casino. Additional casino and hotel capacity in the Tunica market,
such as the reopening of a casino by Isle of Capri Casinos, Inc. in the summer
of 1999, could further increase competition for the Tunica casino in
attracting visitors. Also, although we do not believe we face significant
competition from casinos outside of the Tunica market, gaming operations have
been established in other areas of Mississippi, including a large casino
complex on the Gulf Coast. The increase in competition in the Tunica market
and, to a lesser extent, the Gulf Coast, could have a material adverse effect
on the Tunica casino which could have a material adverse effect on our
financial condition, results of operations and ability to satisfy our
obligations under the notes.
18
<PAGE>
Regulatory Compliance--We must adhere to various regulations and maintain our
licenses to continue our operations.
We, as well as some of our key employees, are required to obtain and hold
various licenses and approvals in Illinois, Louisiana and Mississippi and will
be subject to licensing in each other jurisdiction in which we may conduct a
gaming operation in the future. Our failure or the failure of any of our key
personnel to obtain or retain a license in any jurisdiction could have a
material adverse effect on us and our ability to obtain or retain licenses in
other jurisdictions. Generally, regulatory authorities have broad discretion
in granting, renewing and revoking licenses.
We are subject to a variety of regulations in the states in which we
operate. If additional gaming regulations are adopted in a state in which we
operate, these regulations could impose restrictions or costs that could have
a material adverse effect on us. From time to time, various proposals have
been introduced in the Illinois, Louisiana and Mississippi legislatures that,
if enacted, would affect the tax, regulatory, operational or other aspects of
the gaming industry. We cannot be sure whether new legislation will be
enacted, and, if enacted, the effect that the legislation would have on our
financial condition, results of operations and ability to satisfy our
obligations under the notes.
In 1997, the U.S. Congress created the National Gambling Impact Study
Commission to conduct a comprehensive study of all matters relating to the
economic and social impact of gaming in the United States. In accordance with
the legislation creating the commission, the commission recently released a
report on its findings and issued its recommendations for the future of gaming
in the United States. Overall, the commission determined that, with only a few
exceptions such as Internet gambling, gaming is an issue to be settled at
state and local levels rather than by the federal government. Over the course
of its two year study, the commission discovered a lack of information
regarding the costs and benefits of gaming. Consequently, the commission
recommended a pause in the expansion of gaming operations to provide time to
develop impartial, objective research on the impact of gaming.
Gaming Taxes--Any increase in federal, state or local taxes could have a
negative impact on us.
From time to time, certain legislators have proposed the imposition of a
federal tax on gross gaming revenues. In March 1996, tax legislation was
introduced in Congress which included a proposal to impose a 15% federal tax
on taxable gaming services, defined as gross gaming receipts less total gaming
payoffs. Although no action has been taken on such legislation, we cannot
assure you that such tax or any similar tax will not be imposed in the future.
In addition, gaming companies are currently subject to significant state and
local taxes and fees in addition to normal federal and state corporate income
taxes, and these taxes and fees are subject to increase at any time. For
example, our operating results were negatively impacted in 1998 by a
significant increase in gaming taxes imposed in Illinois. The introduction of
new taxes or the increase in the rates of existing taxes could have a material
adverse effect on our financial condition, results of operations and ability
to satisfy our obligations under the notes.
Anti-Gaming Initiatives--Anti-gaming initiatives have been proposed in
Mississippi and Louisiana.
The regulatory environment in any particular jurisdiction may change in the
future and any such change could have a material adverse effect on our results
of operations. In Mississippi, a proposal was filed on March 22, 1999 for a
referendum to ban gaming in Mississippi within two years of enactment. Two
similar referenda were proposed in 1998 which, if approved, would have amended
the Mississippi Constitution to ban gaming in Mississippi and would have
required all currently legal gaming entities to cease operations within two
years of the ban. A Mississippi state circuit court judge ruled that the first
of the proposed referenda was illegal because, among other reasons, it failed
to include required information regarding its anticipated effect on government
revenues. The Mississippi Supreme Court affirmed the circuit court ruling, but
only on procedural grounds. The second referendum proposal also failed to
include the same language on government revenues as the first referendum and
was struck down by another Mississippi state circuit court judge on the same
grounds as the first. The recently filed referendum must be approved by the
Mississippi Secretary of State and signatures of
19
<PAGE>
approximately 98,000 registered voters must be gathered and certified in order
for such a proposal to be included on a statewide ballot for consideration by
the voters. The next election for which the proponents could place such a
proposal on the ballot would be in November 2000. It has not yet been
determined whether the recently filed initiative adequately addresses the
issues regarding the effect on government revenues of a prohibition of gaming
in Mississippi. If such referenda were approved or if legislation were enacted
prohibiting gaming in Mississippi, it would have a material adverse effect on
our financial condition, results of operations and ability to satisfy our
obligations under the notes.
Also, in 1996, the State of Louisiana adopted a statute in connection with
which voter referenda on the continuation of gaming were held locally where
gaming operations are conducted and which, had the continuation of gaming been
rejected by the voters, might have resulted in the termination of operations
at the end of their current license terms. Louisiana's parishes voted to
continue riverboat gaming in all parishes where such operations are currently
conducted. Proposals to amend or supplement the Louisiana Riverboat Economic
Development and Gaming Control Act are frequently introduced in the Louisiana
State legislature. In addition, the State legislature, from time to time,
considers proposals to repeal the act. If such proposals were approved or if
legislation were enacted prohibiting gaming in Louisiana, it would have a
material adverse effect on our financial condition, results of operations and
ability to satisfy our obligations under the notes.
Gaming Redemptions--We may require you to dispose of your new notes or redeem
your new notes if any gaming authority finds you unsuitable to hold them.
Under certain circumstances, we have the right, at our option, to cause a
holder to dispose of its notes or to redeem its notes in order to comply with
gaming laws to which we are subject. For more information, see the discussion
under the section entitled "Description of the Registered Notes--Optional
Redemption."
Business Interruptions--We may temporarily lose the service of our casinos.
Our profitability is dependent upon the continued operations of our casino
facilities. Any temporary closure of our casinos would negatively impact our
profitability. The Aurora casino's gaming vessels could be lost from service
due to casualty, mechanical failure or extended or extraordinary maintenance
or inspection, or severe weather conditions, including floods. In addition,
each vessel is subject to U.S. Coast Guard regulations requiring periodic hull
inspections every three to five years, which could result in a temporary loss
from service of the vessel. We currently maintain business interruption
insurance on our Aurora and Tunica operations in amounts we consider adequate,
but we cannot be sure that we will be able to maintain this insurance in the
future in sufficient amounts on terms we consider commercially reasonable, or
at all. The loss of service of any one of our casinos would have a material
adverse effect on our financial condition, results of operations and ability
to meet our obligations under the notes.
Key Personnel--We depend on our key personnel and skilled employees for our
success. The loss of their services and the inability to hire and retain them
could have a negative impact on us.
The success of our casinos is largely dependent upon the efforts and skills
of certain executive officers. The loss of any of these officers could have a
material adverse effect on us. A shortage of skilled labor exists in the
gaming industry, in general, and may be particularly acute in rural areas such
as Tunica County, which may make it more difficult and expensive to attract
and retain qualified employees. We cannot be sure that we will be able to hire
and retain the necessary skilled labor to meet all of our needs.
Controlling Stockholders--The Pratt family is our principal stockholder and
exercises control over us.
As of December 31, 1998, the Pratt family owned approximately 54% of our
outstanding common stock. As long as the Pratt family continues to
beneficially own a significant percentage of the outstanding shares of our
common stock, it will be able to control the election of our directors and
exercise a controlling influence over our business and affairs.
20
<PAGE>
Change of Control--We may not have the ability to raise the funds necessary to
finance the change of control offer required by the indenture.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding notes. However, it
is possible that we will not have sufficient funds at the time of the change
of control to make the required repurchase of the notes. For more information,
see the discussion under the section entitled "Description of the Registered
Notes--Repurchase at the Option of Holders."
Lack of Public Market--No active trading market exists for the notes and one
may not develop.
No active trading market exists for the notes. We have been informed by the
initial purchasers that they intend to make a market in the notes. However,
the initial purchasers may cease their market-making at any time. In addition,
the liquidity of the trading market in the notes, and the market price quoted
for the notes, may be adversely affected by changes in the overall market for
high yield securities and by changes in our financial performance or prospects
or in the prospects for companies in our markets and in the gaming industry in
general. As a result, you cannot be sure that an active trading market will
develop for the notes.
Year 2000 Issues--Our business and our suppliers' businesses are highly
dependent on computer systems and any computer problems due to the Year 2000
may adversely affect our business.
We use computer systems in virtually all areas of our operations. Should we
or certain of our vendors not be "Year 2000 compliant," the operations of our
casinos could be disrupted for an indeterminate period of time, potentially
having a material adverse impact on our results of operations. Possible
consequences of our not being Year 2000 compliant include, but are not limited
to, problems with hotel reservations operations, hotel check-in/check-out
procedures, point-of-sale transactions in food, beverage and retail areas and
the updating and accumulation of slot machine player marketing information.
Additionally, disruptions could occur to the compiling of financial
information in our back-office accounting, purchasing, inventory and payroll
systems. Embedded microchips in certain systems such as elevators, escalators
and the heating, ventilation and air conditioning could lead to interruptions
in service. All of these problems could inconvenience hotel and casino
customers and have a material adverse effect on our financial condition,
results of operations and ability to meet our obligations under the notes.
We could also be exposed to Year 2000 problems should certain of our
suppliers have disruptions to their operations due to Year 2000 problems. We
do not consider these problems to be as significant as those with our own
systems because in most instances we believe we could find alternate vendors
for our supplies. However, Year 2000 problems for certain suppliers, such as
utility providers, could result in disruptions to our casino operations for an
indeterminate period of time. Additionally, should providers of financial
services such as ATMs, credit card processing and credit card cash advance
experience Year 2000 problems, our operations could be adversely affected. See
the discussion under the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Consolidated
Items--Year 2000 Compliance."
Failure to Exchange Original Notes--You may suffer adverse consequences if you
fail to exchange your original notes.
If you do not exchange your original notes for registered notes in
connection with the exchange offer, you will continue to be subject to the
provisions of the indenture regarding transfer and exchange of the original
notes and the restrictions on transfer of the original notes. In general, the
original notes may not be offered or sold, unless registered under the
Securities Act and applicable state securities laws. We do not currently
intend to register the original notes.
Forward-Looking Information--You should not place undue reliance on forward-
looking information.
This prospectus contains certain forward-looking statements about our
financial condition, results of operations and business within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended. You can find many of these statements by looking for
words like "believes," "expects," "anticipates," "estimates," "intends,"
"may," "will," "could," "pro forma," or
21
<PAGE>
similar expressions used in this prospectus. These forward-looking statements
are subject to numerous assumptions, risks and uncertainties, including, among
other things, those discussed above.
All forward-looking statements speak only as of the date of this prospectus.
Because these statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the forward-
looking statements. You are cautioned not to place undue reliance on these
statements, which speak only as of the date of this prospectus.
We do not undertake any responsibility to release publicly any revisions to
these forward-looking statements to take into account events or circumstances
that occur after the date of this prospectus. Additionally, we do not
undertake any responsibility to update you on the occurrence of any
unanticipated events which may cause actual results to differ from those
expressed or implied by the forward-looking statements contained in this
prospectus.
22
<PAGE>
USE OF PROCEEDS
The net proceeds from the offering of the original notes were used to
refinance our existing 12 3/4% Senior Secured Notes, and will be used to fund
the Aurora casino expansion, to acquire Pratt Casino Corporation and to
partially fund our equity investment in the planned Shreveport casino. The
following table sets forth the sources and uses of the proceeds from the
offering of the original notes (dollars in millions):
<TABLE>
<CAPTION>
Sources
- ----------------------------------------------------------------------------------
<S> <C>
$310.0
11 1/4% Senior Secured Notes............................................... ------
50.0
Floating Rate Senior Secured Notes......................................... ------
Total Sources............................................................ $360.0
======
</TABLE>
<TABLE>
<CAPTION>
Uses
- -------------------------------------------------------------------------------
<S> <C>
Tender Offer, Satisfaction and Discharge of 12 3/4% Senior Secured
Notes(1).............................................................. $224.0
Aurora Casino Expansion................................................ 40.0
Escrow for Acquisition of Pratt Casino Corporation(2).................. 40.7
Partial Equity Investment in the Shreveport Casino..................... 25.0
General Corporate Purposes............................................. 19.6
Estimated Fees and Expenses(3)......................................... 10.7
------
Total Uses........................................................... $360.0
======
</TABLE>
- --------
(1) Includes the tender premium on our 12 3/4% Senior Secured Notes and
assumes that all of our outstanding 12 3/4% Senior Secured Notes are
repurchased in the tender offer.
(2) If we determine that we cannot consummate the acquisition of Pratt Casino
Corporation, or in any event, if it has not been consummated by January
31, 2000, we must redeem $40.3 million of the notes at 101% of their
principal amount.
(3) Includes the discount to initial purchasers and offering and tender offer
expenses payable by us.
We will not receive any cash proceeds from the exchange of the original
notes for registered notes. In consideration for issuing the registered notes
as contemplated in this prospectus, we will receive in exchange original notes
in like principal amount, which will be cancelled and as such will not result
in any increase in our indebtedness.
23
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999 on an
actual basis and on a pro forma basis after giving effect to the offering of
the original notes, the acquisition of Pratt Casino Corporation, and the
tender offer for and satisfaction and discharge of our 12 3/4% Senior Secured
Notes, as if these transactions had occurred on March 31, 1999. Primarily as a
result of the accounting treatment for our acquisition of Pratt Casino
Corporation, the loss on the early retirement of our 12 3/4% Senior Secured
Notes and the related write-off of the deferred financing fees on those notes,
we have a significant negative net worth. The information set forth below
should be read in conjunction with our unaudited quarterly consolidated
financial statements, together with the related notes to the financial
statements, included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of March 31,
1999
--------------------
Actual Pro Forma
--------- ---------
(in thousands)
<S> <C> <C>
Current maturities of long-term debt and capital lease
obligations:
Current maturities of long-term debt.................... $ 7,614 $ 2,614
Capital lease obligations............................... 903 903
--------- ---------
Total current maturities of long-term debt and capital
lease obligations..................................... 8,517 3,517
--------- ---------
Long-term debt:
11 1/4% Senior Secured Notes due 2007................... -- 310,000
Floating Rate Senior Secured Notes due 2006............. -- 50,000
12 3/4% Senior Secured Notes due 2003, net of
unamortized discount of $6,739......................... 192,973 --
Other................................................... 5,165 5,165
Long-term capital lease obligations..................... 19,800 19,800
--------- ---------
Total long-term debt................................... 217,938 384,965
--------- ---------
Minority interest........................................ 3,109 --
--------- ---------
Shareholders' equity (deficit):
Common stock, $.0001 par value; authorized 50,000,000
shares; issued and outstanding 24,950,000 shares....... 2 2
Additional paid-in capital.............................. 216,926 216,926
Accumulated deficit(1).................................. (209,086) (279,682)
--------- ---------
Total shareholders' equity (deficit)................... 7,842 (62,754)
--------- ---------
Total capitalization.................................. $ 237,406 $ 325,728
========= =========
</TABLE>
- --------
(1) Pro forma accumulated deficit includes the following: a $39.9 million net
charge from the acquisition of Pratt Casino Corporation and a $30.7
million extraordinary loss on the early retirement of our 12 3/4% Senior
Secured Notes.
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information and the following
selected financial information of Hollywood Casino-Aurora and Hollywood
Casino-Tunica for each of the five years in the period ended December 31, 1998
is derived from our audited, consolidated financial statements. The financial
information for 1996, 1995 and 1994 includes the operating results of Greate
Bay. On December 31, 1996, we distributed our approximate 80% ownership
interest in Greate Bay to our stockholders. In 1998, our results of operations
were negatively impacted by a significant increase in gaming taxes imposed by
the Illinois legislature. Gaming taxes incurred by the Aurora casino increased
by $11.6 million in 1998. The following financial information should be read
in conjunction with the text under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our
consolidated financial statements and the notes relating to those statements
included in this prospectus.
HOLLYWOOD CASINO CORPORATION AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1998 1997(1) 1996 1995 1994
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues............ $268,760 $267,757 $530,580 $539,943 $464,384
-------- -------- -------- -------- --------
Expenses:
Departmental........... 197,836 185,753 426,769 396,157 338,776
General and
administrative........ 17,778 16,790 37,169 36,914 33,189
Management and
consulting fees....... 1,200 3,927 -- -- --
Depreciation and
amortization.......... 16,562 18,901 40,836 40,955 30,960
Amortization of
preopening costs...... -- -- -- -- 11,002
Development............ 779 1,480 1,065 6,765 5,154
-------- -------- -------- -------- --------
Total expenses........ 234,155 226,851 505,839 480,791 419,081
-------- -------- -------- -------- --------
Income from operations
before write down of
assets................. 34,605 40,906 24,741 59,152 45,303
Write down of assets.... -- (19,678) (22,141) -- --
-------- -------- -------- -------- --------
Income from operations.. 34,605 21,228 2,600 59,152 45,303
-------- -------- -------- -------- --------
Non-operating income
(expenses):
Interest income........ 2,844 1,896 3,101 3,708 4,227
Interest expense....... (30,260) (30,437) (59,090) (55,558) (46,233)
Tax settlement costs... (1,087) -- -- -- --
(Loss) gain on disposal
of assets............. (61) 552 (1,841) (514) (26)
-------- -------- -------- -------- --------
Total non-operating
expenses, net......... (28,564) (27,989) (57,830) (52,364) (42,032)
-------- -------- -------- -------- --------
Income (loss) before
income taxes,
extraordinary and other
items.................. 6,041 (6,761) (55,230) 6,788 3,271
Income tax provision.... (816) (5,359) (63) (268) (1,527)
-------- -------- -------- -------- --------
Income (loss) before
extraordinary and other
items.................. 5,225 (12,120) (55,293) 6,520 1,744
Minority interest in
earnings of Limited
Partnership............ (6,494) (5,012) -- -- --
-------- -------- -------- -------- --------
(Loss) income before
extraordinary items.... (1,269) (17,132) (55,293) 6,520 1,744
Extraordinary items:
Early extinguishment of
debt, net of related
tax benefits(2)....... (336) (215) -- (23,808) 126
-------- -------- -------- -------- --------
Net (loss) income....... $ (1,605) $(17,347) $(55,293) $(17,288) $ 1,870
======== ======== ======== ======== ========
Basic (loss) income per
common share(3):
(Loss) income before
extraordinary items... $ (.05) $ (.69) $ (2.24) $ .27 $ .07
Extraordinary items.... (.01) (.01) -- (.97) .01
-------- -------- -------- -------- --------
Net (loss) income...... $ (.06) $ (.70) $ (2.24) $ (.70) $ .08
======== ======== ======== ======== ========
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1998 1997(1) 1996 1995 1994
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Diluted (loss) income per
common share(3):
(Loss) income before
extraordinary items........ $ (.05) $ (.69) $ (2.24) $ .26 $ .07
Extraordinary items......... (.01) (.01) -- (.96) .01
-------- -------- -------- -------- --------
Net (loss) income........... $ (.06) $ (.70) $ (2.24) $ (.70) $ .08
======== ======== ======== ======== ========
Other Financial Data:
Adjusted EBITDA(4):
Aurora casino EBITDA before
management fees............ $ 39,228 $ 46,724 $ 44,100 $ 44,754 $ 50,588
Tunica casino EBITDA before
consulting fees and land
lease...................... 25,666 29,577 20,601 29,166 9,775
Greate Bay EBITDA........... -- -- 10,914 41,091 40,240
Tunica land lease........... (3,899) (3,935) (3,486) (3,608) (1,210)
Management and consulting
fees....................... (10,072) (10,809) -- -- --
General Partnership
interest................... 1,097 711 -- -- --
Development expenses........ (779) (1,480) (1,065) (6,765) (5,154)
Corporate expenses.......... (6,629) (5,441) (7,328) (5,045) (7,000)
-------- -------- -------- -------- --------
Total Adjusted EBITDA(4)..... $ 44,612 $ 55,347 $ 63,736 $ 99,593 $ 87,239
======== ======== ======== ======== ========
Cash provided by operating
activities.................. $ 16,751 $ 31,613 $ 12,309 $ 53,527 $ 40,439
Cash (used in) provided by
investing activities........ (8,490) 1,961 (42,143) (99,186) (115,416)
Cash (used in) provided by
financing activities........ (6,402) (14,803) (5,216) 35,706 52,817
Capital expenditures......... (12,037) (5,101) (53,078) (55,009) (101,729)
Depreciation and
amortization................ (16,562) (18,901) (40,836) (40,955) (41,962)
Ratio of earnings to fixed
charges(5).................. -- -- -- 1.1x --
<CAPTION>
As of December 31,
------------------------------------------------
1998 1997(1) 1996(1) 1995 1994
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets................. $270,740 $276,218 $308,158 $514,463 $464,135
Total debt, including capital
lease obligations........... 227,529 226,922 232,046 496,847 432,117
Shareholders' equity
(deficit)................... 7,512 9,117 38,836 (57,233) (39,947)
</TABLE>
- --------
(1) Restated to reflect the modification of our income tax treatment resulting
from the distribution of the common stock of Greate Bay--see Note 3 of
notes to our consolidated financial statements.
(2) Includes the following items: (i) for 1998 and 1997, costs associated with
our mandatory semi-annual offer to repurchase our 12 3/4% Senior Secured
Notes, net of related tax benefit, and (ii) for 1995, costs associated
with the October 1995 issuance of our 12 3/4% Senior Secured Notes.
(3) During 1997, we adopted the provisions of Financial Accounting Standards
No. 128, "Earnings per Share." The earnings per share calculation has been
restated for all prior periods presented.
(4) Adjusted EBITDA for the periods presented represents earnings before
interest, taxes, depreciation and amortization, extraordinary items, write
down of assets of $19.7 million and $22.1 million for the years ended
December 31, 1997 and 1996, respectively, and tax settlement costs of $1.1
million for the year ended December 31, 1998. Adjusted EBITDA is presented
because we believe it is frequently used by securities analysts, investors
and other interested parties in the evaluation of companies in our
industry. However, other companies in our industry may calculate EBITDA
differently than we do. Adjusted EBITDA is not a
26
<PAGE>
measurement of financial performance under generally accepted accounting
principles and should not be considered as an alternative to cash flow from
operating activities or as a measure of liquidity or an alternative to net
income as indicators of our operating performance or any other measures of
performance derived in accordance with generally accepted accounting
principles.
(5) Earnings were insufficient to cover fixed charges by $0.3 million, $11.6
million, $55.7 million and $0.2 million in each of 1998, 1997, 1996 and
1994, respectively. For purposes of computing the ratio of earnings to
fixed charges, fixed charges consist of interest expensed and capitalized,
amortized premiums, discounts and capitalized expenses relating to debt
and 33% of rent expense, which management believes is representative of
the interest component of rent expense. Earnings consist of income from
continuing operations before income taxes and equity in earnings of
unconsolidated affiliates, plus fixed charges, other than capitalized
interest, but excluding the amortization thereof.
27
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues................ $162,947 $160,307 $163,391 $152,508 $148,000
-------- -------- -------- -------- --------
Expenses:
Departmental.............. 118,459 108,653 114,006 102,780 95,495
General and
administrative........... 14,136 14,673 14,645 14,406 11,926
Depreciation and
amortization............. 7,350 7,491 8,834 9,172 7,121
Amortization of preopening
costs.................... -- -- -- -- 5,863
-------- -------- -------- -------- --------
Total expenses........... 139,945 130,817 137,485 126,358 120,405
-------- -------- -------- -------- --------
Income from operations...... 23,002 29,490 25,906 26,150 27,595
-------- -------- -------- -------- --------
Non-operating income
(expense):
Interest income........... 112 156 205 306 458
Interest expense.......... (6,046) (6,847) (6,704) (6,493) (6,654)
Gain on disposal of
assets................... 4 134 -- -- --
-------- -------- -------- -------- --------
Total non-operating
expense, net............ (5,930) (6,557) (6,499) (6,187) (6,196)
-------- -------- -------- -------- --------
Income before income taxes
and extraordinary item..... 17,072 22,933 19,407 19,963 21,399
Income tax provision........ (6,559) (8,419) (6,883) (7,554) (7,557)
-------- -------- -------- -------- --------
Income before extraordinary
item....................... 10,513 14,514 12,524 12,409 13,842
Extraordinary item.......... -- -- -- (989) --
-------- -------- -------- -------- --------
Net income.................. $ 10,513 $ 14,514 $ 12,524 $ 11,420 $ 13,842
======== ======== ======== ======== ========
<CAPTION>
As of December 31,
------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets................ $100,310 $104,071 $107,449 $ 93,196 $ 73,356
Total debt, including
capital lease obligations.. 54,248 58,972 65,430 55,829 50,141
Shareholder's equity........ 28,720 28,948 28,033 25,549 14,071
</TABLE>
28
<PAGE>
HWCC--TUNICA, INC.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1998 1997 1996 1995 1994(1)
-------- -------- -------- -------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues................. $105,773 $107,263 $ 94,524 $ 94,416 $32,413
-------- -------- -------- -------- -------
Expenses:
Departmental................ 79,328 77,058 72,602 63,842 22,623
General and administrative.. 5,813 5,769 5,962 5,711 2,425
Depreciation and
amortization............... 8,123 9,916 10,906 10,356 3,610
Amortization of preopening
costs...................... -- -- -- -- 5,939
-------- -------- -------- -------- -------
Total expenses............. 93,264 92,743 89,470 79,909 34,597
-------- -------- -------- -------- -------
Income (loss) from
operations.................. 12,509 14,520 5,054 14,507 (2,184)
-------- -------- -------- -------- -------
Non-operating income
(expenses):
Interest income............. 587 281 835 637 374
Interest expense............ (10,937) (10,980) (10,060) (10,792) (4,454)
(Loss) gain on disposal of
assets..................... (65) 6 (45) (505) --
-------- -------- -------- -------- -------
Total non-operating
expenses, net............. (10,415) (10,693) (9,270) (10,660) (4,080)
-------- -------- -------- -------- -------
Income (loss) before income
taxes and
extraordinary items......... 2,094 3,827 (4,216) 3,847 (6,264)
Income tax (provision)
benefit..................... (689) 845 -- 694 --
-------- -------- -------- -------- -------
Income (loss) before
extraordinary items......... 1,405 4,672 (4,216) 4,541 (6,264)
Extraordinary items.......... -- -- -- (9,614) 126
-------- -------- -------- -------- -------
Net income (loss)............ $ 1,405 $ 4,672 $ (4,216) $ (5,073) $(6,138)
======== ======== ======== ======== =======
<CAPTION>
As of December 31,
-----------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets................. $120,461 $118,727 $116,620 $122,240 $99,889
Total debt, including capital
lease obligations........... 85,798 85,683 86,645 88,340 61,789
Shareholder's equity......... 25,287 23,882 19,210 23,426 28,499
</TABLE>
- --------
(1) The Tunica casino commenced operations on August 8, 1994.
29
<PAGE>
SELECTED QUARTERLY CONSOLIDATED FINANCIAL INFORMATION
The following selected quarterly consolidated financial information and the
following selected quarterly financial information of Hollywood Casino-Aurora
and Hollywood Casino-Tunica for the three month periods ended March 31, 1999
and 1998 are derived from our unaudited, consolidated financial statements
and, in our opinion, include normal recurring adjustments necessary for a fair
presentation of the information. Operating results for the three month period
ended March 31, 1999 are not necessarily indicative of the results that may be
achieved for the year ending December 31, 1999. The following financial
information should be read in conjunction with the text under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our unaudited quarterly consolidated financial statements and
the notes relating to those statements included in this prospectus.
HOLLYWOOD CASINO CORPORATION AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended March
31,
-----------------------------
1999 1998
------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues.................................... $69,773 $63,807
------- -------
Expenses:
Departmental................................... 51,085 45,673
General and administrative..................... 4,585 4,305
Consulting fees................................ 300 300
Depreciation and amortization.................. 4,000 4,214
Development.................................... 215 255
------- -------
Total expenses................................ 60,185 54,747
------- -------
Income from operations.......................... 9,588 9,060
------- -------
Non-operating income (expenses):
Interest income................................ 359 672
Interest expense............................... (7,389) (7,451)
Loss on disposal of assets..................... (1) (1)
------- -------
Total non-operating expenses, net.............. (7,031) (6,780)
------- -------
Income before income taxes and other item....... 2,557 2,280
Income tax provision............................ (205) (291)
------- -------
Income before other item........................ 2,352 1,989
Minority interest in earnings of Limited
Partnership.................................... (2,022) (1,920)
------- -------
Net income...................................... $ 330 $ 69
======= =======
Basic and diluted income per common share....... $ .01 $ .00
======= =======
</TABLE>
30
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
1999 1998
-------------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Other Financial Data:
Adjusted EBITDA(1):
Aurora casino EBITDA before management
fees..................................... $ 10,534 $10,002
Tunica casino EBITDA before consulting
fees and land lease...................... 6,758 6,601
Tunica land lease......................... (995) (940)
Management and consulting fees............ (2,900) (2,846)
General Partnership interest.............. 259 304
Development expenses...................... (215) (255)
Corporate expenses........................ (1,876) (1,513)
-------- -------
Total Adjusted EBITDA(1)................... $ 11,565 $11,353
======== =======
Cash provided by operating activities...... $ 15,553 $19,262
Cash (used in) provided by investing
activities................................ (800) 1,584
Cash used in financing activities.......... (3,390) (3,242)
Capital expenditures....................... (3,698) (1,899)
Depreciation and amortization.............. (4,000) (4,214)
Ratio of earnings to fixed charges(2)...... 1.1x 1.1x
<CAPTION>
March 31, 1999
--------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets............................... $278,390
Total debt, including capital lease
obligations............................... 226,455
Shareholders' equity....................... 7,842
</TABLE>
- --------
(1) Adjusted EBITDA for the periods presented represents earnings before
interest, taxes, depreciation and amortization. Adjusted EBITDA is
presented because we believe it is frequently used by securities analysts,
investors and other interested parties in the evaluation of companies in
our industry. However, other companies in our industry may calculate
EBITDA differently than we do. Adjusted EBITDA is not a measurement of
financial performance under generally accepted accounting principles and
should not be considered as an alternative to cash flow from operating
activities or as a measure of liquidity or an alternative to net income as
indicators of our operating performance or any other measures of
performance derived in accordance with generally accepted accounting
principles.
(2) For purposes of computing the ratio of earnings to fixed charges, fixed
charges consist of interest expensed and capitalized, amortized premiums,
discounts and capitalized expenses relating to debt and 33% of rent
expense, which management believes is representative of the interest
component of rent expense. Earnings consist of income from continuing
operations before income taxes and equity in earnings of unconsolidated
affiliates, plus fixed charges, other than capitalized interest, but
excluding the amortization thereof.
31
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
1999 1998
-------------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues.............................. $ 43,393 $38,720
-------- -------
Expenses:
Departmental............................. 31,654 27,485
General and administrative............... 3,806 3,781
Depreciation and amortization............ 1,785 1,924
-------- -------
Total expenses.......................... 37,245 33,190
-------- -------
Income from operations.................... 6,148 5,530
-------- -------
Non-operating income (expense):
Interest income.......................... 64 36
Interest expense......................... (1,434) (1,590)
Gain on disposal of assets............... 1 2
-------- -------
Total non-operating expense, net........ (1,369) (1,552)
-------- -------
Income before income taxes................ 4,779 3,978
Income tax provision...................... (1,823) (1,520)
-------- -------
Net income................................ $ 2,956 $ 2,458
======== =======
<CAPTION>
March 31, 1999
--------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets.............................. $108,981
Total debt, including capital lease
obligations.............................. 53,958
Shareholder's equity...................... 31,676
</TABLE>
32
<PAGE>
HWCC--TUNICA, INC.
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
1999 1998
-------------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues.............................. $ 26,375 $25,072
-------- -------
Expenses:
Departmental............................. 19,431 18,151
General and administrative............... 1,479 1,557
Depreciation and amortization............ 1,966 2,020
-------- -------
Total expenses.......................... 22,876 21,728
-------- -------
Income from operations.................... 3,499 3,344
-------- -------
Non-operating income (expenses):
Interest income.......................... 135 122
Interest expense......................... (2,740) (2,731)
Loss on disposal of assets............... (2) (3)
-------- -------
Total non-operating expenses, net....... (2,607) (2,612)
-------- -------
Income before income taxes ............... 892 732
Income tax provision...................... -- --
-------- -------
Net income................................ $ 892 $ 732
======== =======
<CAPTION>
March 31, 1999
--------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets.............................. $115,554
Total debt, including capital lease
obligations.............................. 87,414
Shareholder's equity...................... 18,179
</TABLE>
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with our consolidated financial
statements and the notes relating to those statements included in this
prospectus.
Results of Operations for the Three Month Periods Ended March 31, 1999 and
1998
Our net revenues for the three month period ended March 31, 1999 of $69.8
million, represent a 9.4% increase from the $63.8 million during the same
period of 1998. The increase is attributable to improved net revenues at the
Aurora casino of $4.7 million, or 12.1%, and at the Tunica casino of $1.3
million, or 5.2%. Operating expenses increased by $5.4 million to $60.2
million during the three month period ended March 31, 1999 from $54.7 million
during the same period of 1998.
Consequently, our income from operations increased by $528,000, or 5.8%,
during the first quarter of 1999 compared to the same period of 1998. Income
from operations at the Aurora casino increased by $618,000 to $6.1 million
during the three month period ended March 31, 1999 compared with the same
period of 1998 due to increased patron volume. Income from operations at the
Tunica casino increased slightly by $155,000 to $3.5 million due primarily to
a refocusing of marketing efforts and to improved hold percentages.
Aurora Casino
General. Income from operations at the Aurora casino, adjusted to exclude
management fees, amounted to $8.7 million and $8.1 million, respectively, for
the three month periods ended March 31, 1999 and 1998. The 1999 increase
results from improvement in casino revenues as a result of increased marketing
efforts and, as explained below, to an increase in the number of daily cruises
during the first quarter of 1999 compared to 1998.
Gaming Operations. The following table sets forth certain unaudited financial
and operating data for the Aurora casino's operations for the three month
periods ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Table games....................................... $ 10,465,000 $ 11,410,000
Slot machines..................................... 30,776,000 25,024,000
Poker revenues.................................... 568,000 669,000
------------ ------------
Total........................................... $ 41,809,000 $ 37,103,000
============ ============
Table games:
Gross wagering (drop)(1).......................... $ 59,408,000 $ 62,897,000
Hold percentage(2)................................ 17.6% 18.1%
Slot machines:
Gross wagering (handle)(1)........................ $542,397,000 $444,823,000
Hold percentage(2)................................ 5.7% 5.6%
</TABLE>
- --------
(1) Gross wagering consists of the total value of chips purchased for table
games ("drop") and coins wagered in slot machines ("handle").
(2) Casino revenues consist of the portion of gross wagering that a casino
retains and, as a percentage of gross wagering, is referred to as the
"hold percentage".
Total gross wagering at the Aurora casino as measured by table drop and slot
machine handle increased $94.1 million, or 18.5%, during the first quarter of
1999 compared to the first quarter of 1998. The increase reflects increased
patron volume primarily in slot machine wagering as a result of an aggressive
marketing
34
<PAGE>
campaign which began in 1998. Additionally, during January and February of
1998, the smaller of the Aurora casino's two riverboats ceased operating
daytime cruises on weekdays in an effort to reduce less profitable operations
in response to an unprecedented increase in gaming taxes imposed by the state
of Illinois effective January 1, 1998. All cruises resumed in March 1998;
however, patron volume during the first quarter of 1998 was approximately
25,000 less than in the first quarter of 1999.
Revenues. Casino revenues increased $4.7 million, or 12.7%, during the first
quarter of 1999, compared to the same period of 1998 due to the increases in
gross wagering previously discussed. Table game revenues decreased $945,000,
or 8.3%, during the first quarter of 1999 compared to the 1998 period as a
result of the 5.5% decrease in drop coupled with the decline in the table game
hold percentage to 17.6% in 1999 from 18.1% in 1998. The 21.9% increase in
slot machine handle together with a slight increase in the slot machine hold
percentage during the first quarter of 1999 resulted in a three month slot
machine revenue increase of $5.8 million, or 23%, compared to the
corresponding period in 1998. Poker revenues declined $101,000, or 15.1%, due
to increased competition from the August 1998 opening of a poker room by a
nearby riverboat operator.
Food and beverage revenues at the Aurora casino increased $115,000, or 3.6%,
during the first quarter of 1999 compared to the prior year period reflecting
the increased patron volume during 1999. Other revenues did not change
significantly during the three month period ended March 31, 1999 compared to
the same period of 1998.
Promotional allowances represent the estimated value of goods and services
provided free of charge to casino customers under various marketing programs.
These allowances, as a percentage of food and beverage and other revenues at
the Aurora casino, were 60.4% during the three month period ended March 31,
1999 compared to 58.1% during the like period in 1998. The increase from the
prior year period reflects an increase in promotional activities as part of
the Aurora casino's marketing efforts.
Departmental Expenses. Casino expenses increased $4.2 million, or 16.1%,
during the first quarter of 1999 compared to the 1998 period. Such increase
results from additional gaming taxes associated with the increase in casino
revenues as well as to the higher marketing expenses previously discussed.
Food and beverage expenses increased $80,000, or 6.7%, during the first
quarter of 1999 compared to the same period in 1998 again reflecting the
increased patron volume. Other expenses decreased $100,000, or 31.1%, during
the first quarter of 1999 compared to the 1998 period due to reductions in
personnel and other non-departmental operating expenses resulting from
management's efforts to contain costs.
Tunica Casino
General. Income from operations at the Tunica casino amounted to $3.5 million
for the three month period ended March 31, 1999 compared to $3.3 million
during the same period of 1998. The increase is primarily attributable to
increases in gross wagering and to improvement in the slot machine and table
games hold percentages.
35
<PAGE>
Gaming Operations. The following table sets forth certain unaudited financial
and operating data relating to the operations of the Tunica facility for the
three month periods ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended March
31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
Casino Revenues:
Table games....................................... $ 3,803,000 $ 3,443,000
Slot machines..................................... 20,491,000 19,146,000
Poker revenues.................................... 242,000 214,000
------------ ------------
Total........................................... $ 24,536,000 $ 22,803,000
============ ============
Table games:
Gross wagering (drop)(1).......................... $ 19,127,000 $ 18,686,000
Hold percentage(2)................................ 19.9% 18.4%
Slot machines:
Gross wagering (handle)(1)........................ $390,615,000 $372,017,000
Hold percentage(2)................................ 5.2% 5.1%
</TABLE>
- --------
(1)(2) See corresponding notes to the table at "Aurora casino--Gaming
Operations" above.
Total gross wagering at the Tunica casino as measured by table game drop and
slot machine handle increased $19 million, or 4.9%, during the three month
period ended March 31, 1999 compared to the same period of 1998. Slot machine
handle and table game drop increased by $18.6 million, or 5%, and $441,000, or
2.4%, respectively, during the first quarter of 1999 compared to the prior
year period. Management believes such increases are attributable to the
implementation of a new, more aggressive marketing campaign designed to
reposition the Tunica casino within the Tunica gaming market. Patron volume
declined slightly during the first quarter of 1999 compared to the same period
in 1998 indicating that the Tunica casino has been successful in attracting
higher value patrons.
Revenues. Casino revenues increased $1.7 million, or 7.6%, during the three
month period ended March 31, 1999 compared to the 1998 period. Table game
revenues increased 10.5% during the first quarter of 1999 due to the increase
in table drop discussed above combined with an increase in the table game hold
percentage to 19.9% in 1999 from 18.4% in 1998. Slot machine revenue increased
$1.3 million, or 7%, during the first quarter of 1999 compared to the 1998
first quarter reflecting the increase in gross wagering discussed above
coupled with a slight increase in the slot machine hold percentage to 5.2% in
1999 from 5.1% in 1998. Poker revenues also increased by 13.1% during the
first quarter 1999 period.
Rooms revenue increased $387,000, or 19.3%, during the three month period
ended March 31, 1999 compared to the same period in 1998. Hotel occupancy
rates declined slightly to 80.8% in the first quarter of 1999 compared to 82%
in the 1998 first quarter period. Renovations to hotel rooms and suites
together with inclement weather in January 1999 negatively impacted occupancy
rates; however, occupancy rates during February and March of 1999 surpassed
those of the corresponding months in 1998. The improvement in room revenues
resulted from an increase in the average daily room rate to $64 during the
1999 period from $51 during the 1998 period. Food and beverage and other
revenues did not change significantly during the first quarter of 1999
compared to the same period in 1998.
Promotional allowances represent the estimated value of goods and services
provided free of charge to casino customers under various marketing programs.
Such allowances, as a percentage of rooms, food and beverage and other
revenues, increased to 71% from 61.1% during the three month period ended
March 31, 1999 compared to 1998. The first quarter percentage increase is the
result of higher complimentary room and food and beverage costs due to
increased marketing efforts.
36
<PAGE>
Departmental Expenses. Casino expenses increased $1.6 million, or 9.6%,
during the three month period ended March 31, 1999 compared to the 1998 period
reflecting the implementation of marketing programs. Rooms expense decreased
$176,000, or 40%, during the first quarter of 1999 compared to the prior year
period reflecting the increased allocation of hotel costs associated with
marketing programs to the casino department. Food and beverage and other
expenses also decreased by $66,000, or 6.8%, and $51,000, or 15.7%,
respectively, for the period ended March 31, 1999 compared to the 1998 period
as a result of increased allocations to the casino department.
Other Items
Our operating expenses, exclusive of the Aurora casino and Tunica casino,
consist primarily of general and administrative expenses and expenses incurred
in connection with the pursuit of additional gaming venues.
General and Administrative. General and administrative expenses increased by
$280,000, or 6.5%, during the first quarter of 1999 compared to the same
period in 1998. Such expenses at the Aurora casino (net of management fees)
decreased by 2.3% for the 1999 three month period as a result of management's
efforts to control costs. The Tunica casino also experienced a reduction in
general and administrative expenses of 6.2% (net of consulting fees) for the
three month period ended March 31, 1999 compared to the prior year primarily
as a result of cost containment efforts. The remaining corporate general and
administrative expense increase of $387,000, or 21.3%, for the 1999 three
month period results from increases in corporate overhead costs, primarily in
legal fees and personnel costs.
Depreciation and Amortization. Depreciation and amortization expense
decreased $214,000, or 5.1%, during the three month period ended March 31,
1999 compared to the 1998 period primarily due to certain operating equipment
at the Aurora casino becoming fully depreciated during June 1998.
Development Expenses. Development expenses represent costs incurred in
connection with our pursuit of potential gaming opportunities in jurisdictions
where gaming has not been legalized. Such costs decreased by $40,000, or
15.7%, during the three month period ended March 31, 1999 compared to the 1998
period primarily as a result of an overall decrease in prospective venues and
projects.
Interest. Interest income decreased $313,000, or 46.6%, for the three month
period ended March 31, 1999 compared to the same period of 1998 as a result of
less cash being available for investment purposes during the 1999 period and
to the discontinuation of the recording of interest income with respect to
outstanding loans to Greate Bay. Interest expense did not change significantly
during the three month period ended March 31, 1999 compared to the prior year
period.
Income Taxes. Management believes that it is more likely than not that our
future consolidated taxable income (primarily from the Aurora casino and the
Tunica casino) will be sufficient to utilize at least a portion of the net
operating loss carryforwards, tax credits and other deferred tax assets
resulting from temporary differences. Accordingly, under the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", the consolidated balance sheet reflects a net deferred tax asset of
$1.8 million as of March 31, 1999.
Results of Operations for the Years ended December 31, 1998, 1997 and 1996
The following presentation is adjusted to present all periods on a
comparable basis by reflecting the following:
On December 31, 1996, we distributed all of the common stock of Greate Bay
held by us to our stockholders, which resulted in Greate Bay no longer being
our subsidiary. For the year ended December 31, 1996, however, the operations
of Greate Bay are included in our consolidated results of operations. The
following table sets forth
37
<PAGE>
our pro forma losses before income taxes and other items, exclusive of Greate
Bay and its subsidiaries, for the year ended December 31, 1996 as if the
distribution of Greate Bay common stock had occurred at December 31, 1995 and,
as a result, Greate Bay and its subsidiaries had not been consolidated with
us.
On April 1, 1997, we acquired the general partnership interest in the
limited partnership that manages the Aurora casino. Prior to that date, the
limited partnership was wholly owned by subsidiaries of Greate Bay. As a
result of the purchase, the limited partnership is now consolidated with us,
and earnings attributable to the limited partnership interest not owned by us
are deducted from our operating income as minority interest. The 1997
financial information set forth below is adjusted from the consolidated
financial statements presented elsewhere to include only the earnings
attributable to us as general partner in income before taxes, nonrecurring,
extraordinary and other items.
Except for this presentation, the impact of Greate Bay's exclusion from the
1998 and 1997 results of operations will not be addressed in the discussion
that follows.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1998(1) 1997(2) 1996
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Casino revenues................................. $252,863 $251,471 $244,485
Other departmental revenues..................... 42,425 41,454 36,660
Less--promotional allowances.................. (26,528) (25,168) (22,658)
-------- -------- --------
Net revenues................................ 268,760 267,757 258,487
-------- -------- --------
Casino expenses................................. 184,589 171,623 174,032
Other departmental expenses..................... 13,247 14,130 12,716
General and administrative expenses............. 16,497 15,631 18,766
Management and consulting fees.................. 10,072 10,809 10,560
Depreciation and amortization................... 16,562 18,901 21,006
Development expenses............................ 779 1,480 1,065
-------- -------- --------
Total expenses.............................. 241,746 232,574 238,145
-------- -------- --------
Operating income before write down of assets.... 27,014 35,183 20,342
Write down of assets............................ -- (19,678) (22,141)
-------- -------- --------
Income (loss) from operations................... 27,014 15,505 (1,799)
Interest expense, net........................... (27,385) (28,453) (26,563)
Tax settlement costs............................ (1,087) -- --
(Loss) gain on disposal of assets............... (61) 552 (46)
Equity in earnings of general partnership....... 1,066 800 --
-------- -------- --------
Loss before income taxes, extraordinary and
other items.................................... $ (453) $(11,596) $(28,408)
======== ======== ========
</TABLE>
- --------
(1) As presented in consolidated financial statements except for the general
partnership interest.
(2) The adjusted financial information for 1997 has been restated to reflect
changes resulting from our modification of the tax treatment for the
distribution of Greate Bay common stock. See Note 3 of Notes to
Consolidated Financial Statements.
Our net revenues for 1998 reflect an increase of $1 million, or less than
1%, from the $267.8 million earned during 1997. The 1998 increase was realized
by improved net revenues at the Aurora casino which more than offset the
decline in net revenues at the Tunica casino. Net revenues for the year ended
December 31, 1997 were $267.8 million, an increase of 3.6% from net revenues
of $258.5 million in 1996. The 1997 increase is directly attributable to the
$12.7 million, or 13.5%, increase in net revenues at the Tunica casino, offset
by a $3.1 million, or 1.9%, decline in net revenues at the Aurora casino.
The 1998 decline in income from ongoing operations of $8.2 million, or
23.2%, compared to 1997 reflects the slight increase in net revenues offset by
a $9.2 million, or 3.9%, increase in operating expenses other than
38
<PAGE>
asset write downs. The increase in ongoing operating expenses primarily
resulted from increased gaming taxes at the Aurora casino as well as higher
marketing and promotional expenses in response to increased competition at
both the Aurora casino and the Tunica casino. The 1997 increase in net
revenues over the prior year, coupled with a 2.3% decline in operating
expenses, exclusive of asset write downs, results in our ongoing income from
operations improving by $14.8 million, or 73%, to $35.2 million in 1997 from
$20.3 million in 1996.
Aurora Casino
General. Income from operations at the Aurora casino, adjusted to exclude
management fees, amounted to $31.9 million for the year ended December 31,
1998 compared to $39.1 million and $35.3 million, respectively, during 1997
and 1996. The 1998 decrease from the prior year is primarily due to an
increase in the Illinois wagering tax rate which took effect on January 1,
1998. The new tax structure consists of a graduated tax rate system with rates
ranging from 15% to 35% based on total adjusted gross receipts. For the years
ended December 31, 1998 and 1997, the Aurora casino paid or accrued wagering
taxes of $42.4 million and $30.7 million, respectively. Had the new rates been
in effect during 1997, the wagering tax for the Aurora casino would have been
$41.3 million. Management has pursued an operating strategy of implementing
changes to its cruising schedule and curtailing marginally profitable
operations in response to the increased taxes. The 1998 increase in wagering
taxes also reflects the 1.6% increase in gaming revenues compared to the prior
year. The operating income decrease is also attributable to increased
competition from the opening in northern Indiana of two riverboat gaming
operations during April and August 1997. These two operations added
approximately 3,700 new gaming positions to the Chicago market area, an
increase of nearly 35%.
Income from operations increased 10.9% during 1997, as compared to 1996,
despite increased competition from the opening in northern Indiana of three
riverboat gaming operations during June 1996 and two additional operations in
April and August 1997 which more than doubled gaming capacity in the Chicago
area. The new facilities added approximately 9,100 gaming positions to the
Chicago area; the four existing Illinois riverboats in the Chicago area have
less than 5,300 gaming positions. The Chicago area riverboats in general, and
the Aurora casino in particular, continued to adjust and respond to this
increased competition as demonstrated by the Aurora casino's increase in net
revenue during both the third and fourth quarters of 1997 compared to the same
periods in 1996. The second half of the 1996 period was also negatively
impacted by severe local flooding in July 1996 which caused the cancellation
of several cruises. Local economic conditions were also negatively impacted
for a period of time as a result of extensive flood damage in the surrounding
area.
Gaming Operations. The following table sets forth selected unaudited
financial and operating data for the Aurora casino's operations for the years
ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
(in thousands, except
percentages)
<S> <C> <C> <C>
Revenues:
Table games............................... $ 42,942 $ 47,206 $ 51,230
Slot machines............................. 111,192 105,413 105,894
Poker revenues............................ 2,270 1,346 --
---------- ---------- ----------
Total................................... $ 156,404 $ 153,965 $ 157,124
========== ========== ==========
Table games:
Gross wagering (drop)(1).................. $ 247,911 $ 273,689 $ 304,851
Hold percentages(2)....................... 17.3% 17.3% 16.8%
Slot machines:
Gross wagering (handle)(1)................ $1,983,873 $1,866,687 $1,902,642
Hold percentages(2)....................... 5.6% 5.7% 5.6%
</TABLE>
- --------
(1) Gross wagering consists of the total value of chips purchased for table
games ("drop") and coins wagered in slot machines ("handle").
(2) Casino revenues consist of the portion of gross wagering that a casino
retains and, as a percentage of gross wagering, is referred to as the
"hold percentage."
39
<PAGE>
Total gross wagering at the Aurora casino as measured by table drop and slot
machine handle increased by $91.4 million, or 4.3%, during 1998 compared to
1997. The increase results from the continuation of aggressive marketing and
promotional programs introduced in the second quarter of 1998 to recapture
market share in the Chicago area. Declines in gross wagering during the 1998
first quarter resulted from reductions in patron volume due to changes in the
Aurora casino's cruising schedule. In an effort to reduce unprofitable
operations and capitalize on profitable cruises in response to the increased
wagering tax discussed above, the smaller of the Aurora casino's two
riverboats ceased operating daytime cruises on weekdays during January and
February; however, all cruises resumed in March. Increased competition in the
Chicago market due to the opening of two new casinos in northern Indiana in
April and August 1997 has also limited growth in casino wagering.
Total gross wagering decreased by $67.1 million, or 3%, during 1997 compared
to 1996. The decrease is directly attributable to the competition from the
five new casinos mentioned above. The 1997 decline in total gross wagering
reflects a slot handle decline of $36 million, or 1.9%, and a table drop
decrease of $31.1 million, or 10.2%. For the second half of 1997, total gross
wagering was $34.1 million, or 3.3%, greater than the comparable period in
1996. The second half 1997 increase reflects the Aurora casino's adjustment to
the increased competition (the comparable 1996 period includes operations
subsequent to the opening of three of the five new Indiana riverboat
operations) as well as the impact of local flooding in 1996. The 1997 annual
period decrease in casino wagering continues to reflect the significance of
the additional gaming competition in the Chicago market area from the Indiana
gaming operations. However, the Illinois-based riverboat operators located
closer to the new Indiana facilities and which drew a greater percentage of
their customers from areas now more conveniently served by the Indiana
facilities suffered a greater loss of patronage than the Aurora casino. The
Aurora casino's 1997 decrease in gross wagering compares favorably with the
decrease in gross wagering for the two Joliet, Illinois riverboat operators
which, based on information published by the Illinois Gaming Board, suffered a
combined decrease in gross wagering of 15% during the year ended December 31,
1997 compared to 1996. Accordingly, the Aurora casino's location and resulting
customer base west of Chicago together with the success of its facility
improvements program, including the completion of a new 500-space parking
garage facility during September 1996, have helped maintain patron volume.
Revenues. Casino revenues increased by 1.6% during 1998 compared to 1997.
Table game revenues decreased $4.3 million, or 9%, during 1998 compared to
1997 reflecting the 9.4% decrease in drop. Slot machine revenues during 1998
increased $5.8 million, or 5.5%, compared to 1997 reflecting the 6.3% increase
in slot wagering partially offset by the decline in the slot machine hold
percentage to 5.6% from 5.7%. Casino revenues were also favorably impacted by
the introduction of poker during the second quarter of 1997, which generated
casino revenues of $2.3 million during 1998 compared to $1.3 million during
1997.
Casino revenues decreased $3.2 million, or 2%, during the year ended
December 31, 1997 compared to 1996. The 1997 decrease reflects a decline in
table game revenues of $4 million, or 7.9%, resulting from the decrease in
table drop mentioned above, lessened somewhat by an increase in the hold
percentage to 17.3% in 1997 from 16.8% in 1996. Slot machine revenue declined
only slightly, less than 1%, in 1997 compared to 1996 despite the $36 million
decline in slot machine handle as the slot machine hold percentage increased
slightly to 5.7% in 1997 from 5.6% in 1996.
Food and beverage revenues did not change significantly during 1998 compared
to 1997 or during 1997 compared to 1996.
Other revenues increased $897,000, or 46.7%, during 1998 compared to 1997
after declining by $2 million, or 50.7%, during 1997 compared to 1996
primarily due to management's decision to reinstate valet and parking garage
fees in 1998 which had been eliminated during 1997 due to competitive
pressures.
Promotional allowances represent the estimated value of goods and services
provided free of charge to casino customers under various marketing programs.
These allowances, as a percentage of food and beverage and other revenues at
the Aurora casino, were 60.6%, 60.7% and 64.5%, respectively, during the years
ended December 31, 1998, 1997 and 1996. The 1998 change is not significant;
the 1997 decrease represents the reduction of promotional activity with
respect to parking as mentioned above.
40
<PAGE>
Departmental Expenses. Casino expenses increased $10.1 million, or 9.9%,
during 1998 compared to 1997 primarily due to the wagering tax increase
discussed above. Higher marketing costs, partially offset by reductions in
payroll costs, also contributed to the increase. Gaming taxes imposed by the
State of Illinois are determined using a graduated tax rate applied to the
licensee's gaming revenues. The Aurora casino expenses such gaming taxes based
on its anticipated annual effective tax rate. Casino expenses in 1997
decreased $5.9 million, or 5.5%, from the prior year reflecting management's
success at controlling personnel costs and improving overall profitability.
Food and beverage expenses did not change significantly during 1998 compared
to 1997 or during 1997 compared to 1996.
Other expenses decreased $309,000, or 18.8%, during 1998 compared to 1997
reflecting reductions in personnel and other operating expenses. Other
expenses increased $575,000, or 53.9%, in 1997 compared to 1996 as fewer
expenses were allocated to the casino department, primarily as a result of
reduced parking costs.
Tunica Casino
General. The Tunica casino earned income from operations, adjusted to
exclude consulting fees payable to a subsidiary of Greate Bay, of $13.7
million in 1998 compared to $15.7 million in 1997 and $6.3 million in 1996.
The 1998 decrease is attributable to a lower than expected table games hold
percentages and to increased competition in the Tunica market which has
resulted in increased marketing costs. The competitive pressure has resulted
from the opening of approximately 1,700 new hotel rooms by other casino
operators during the fourth quarter of 1997 and early 1998. The increase in
1997 was primarily due to the opening of the Tunica casino's new 352-room
hotel tower in September 1996, which increased room capacity by over 225% and
added luxury suites, meeting spaces, and other amenities.
Gaming Operations. The following table sets forth certain unaudited
financial and operating data relating to the operations of the Tunica facility
for the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
(in thousands, except
percentages)
<S> <C> <C> <C>
Casino Revenues:
Table games............................... $ 13,658 $ 15,083 $ 16,650
Slot machines............................. 81,801 81,404 69,644
Poker revenues............................ 1,000 1,019 1,067
---------- ---------- ----------
Total................................... $ 96,459 $ 97,506 $ 87,361
========== ========== ==========
Table games:
Gross wagering (drop)(1).................. $ 76,366 $ 78,115 $ 82,350
Hold percentage(2)........................ 17.9% 19.3% 20.2%
Slot machines:
Gross wagering (handle)(1)................ $1,555,316 $1,595,645 $1,332,949
Hold percentage(2)........................ 5.3% 5.1% 5.2%
</TABLE>
- --------
(1)(2)See corresponding notes to the table at "Aurora Casino--Gaming
Operations" above.
Total gross wagering at the Tunica casino as measured by table game drop and
slot machine handle decreased by $42.1 million, or 2.5%, during 1998 compared
to 1997. The decreased patron volume is directly attributable to increased
competition in the Tunica market. Slot machine handle decreased by $40.3
million, or 2.5%, and table game drop decreased by $1.8 million, or 2.2%,
during 1998 compared to 1997.
Total gross wagering increased $258.5 million, or 18.3%, during 1997
compared to 1996. The additional patron volume is directly attributable to the
hotel expansion mentioned above. This increase reflects an increase in slot
machine handle of $262.7 million, or 19.7%, offset by a decline in table game
drop of $4.2 million, or 5.1%.
41
<PAGE>
Revenues. Casino revenues decreased $1 million, or 1.1%, during 1998
compared to 1997. Table game revenues decreased 9.4% during 1998 due to the
previously discussed decline in table drop coupled with an overall decline in
the hold percentage to 17.9% in 1998 from 19.3% in 1997. Slot machine revenues
did not change significantly during 1998 compared to the prior year as the
change in gross wagering was virtually offset by the impact of the change in
the slot machine hold percentage. Poker revenues decreased 1.9% during 1998
compared to the prior year primarily from a reduction in the number of poker
tables during the period from ten to six.
Total casino revenues in 1997 increased $10.1 million, or 11.6%, compared to
1996. Slot machine revenues increased $11.8 million, or 16.9%, as a result of
the increase in slot handle described above. This increase in revenue was
partially offset by a 9.4% decrease in table game revenues, to $15.1 million
in 1997 from $16.7 million in 1996. The decrease in table game revenues is
attributable to a decline in table drop of $4.2 million, as discussed above,
coupled with a drop in the hold percentage to 19.3% in 1997 from 20.2% in
1996.
Rooms revenue decreased $265,000, or 2.7%, during 1998 compared to 1997 due
to increased competition for overnight patrons. Hotel occupancy rates
decreased as a result of the additional competition to approximately 82% in
the first quarter of 1998 from approximately 88% during the same period of
1997. Occupancy rates at the Tunica casino for the second, third and fourth
quarters of 1998 rebounded to approximately 92%, compared to 93% during the
corresponding period of 1997, as the market began to absorb the additional
hotel room capacity. Occupancy rates during the period from September through
December 1998 were also negatively impacted by rooms being taken out of
service for maintenance and upgrading. Room revenues increased in 1997 by $4.3
million, or 81.1%, compared to 1996 as a result of the opening of the Tunica
casino's new 352-room hotel tower during the third quarter of 1996, increasing
the number of guest rooms by over 225%. Hotel occupancy rates decreased
slightly as a result of the additional room capacity, declining to an average
of 92% for 1997 and 88% for the period from August through December 1996, from
an average of 99.7% from January through July 1996. The addition of
recreational vehicle parking spaces has also contributed to the increases in
rooms revenue. Additions of 51 and 22 parking spaces, respectively, were made
to the RV Park at the Tunica casino in 1998 and 1997 bringing the total
current number of parking spaces to 123.
Food and beverage revenues increased $719,000, or 5%, during 1998 compared
to 1997 as a result of increases in both food prices and in the number of
dining patrons resulting from increased promotional activities. Food and
beverage revenues in 1997 increased $2.3 million, or 19.5%, principally due to
additional patron volume, increased marketing efforts and the opening of a new
casual dining outlet. Other revenues increased $209,000, or 18%, during 1998
compared to the prior year due to increased patron volume using such services.
Other revenues increased by 6.1% during 1997 compared to 1996 due to increased
patron volume with respect to such ancillary services as telephones, cable
television and vending machines.
Promotional allowances represent the estimated value of goods and services
provided free of charge to casino customers under various marketing programs.
These allowances, as a percentage of rooms, food and beverage and other
revenues, increased to 63.9% in 1998 from 61.2% during 1997 and 61.1% in 1996.
The 1998 increase results from increased complimentary food and beverage and
other services due to increased marketing efforts. Although the dollar amount
of promotional allowances increased by $4.1 million, or 36.7%, the stability
of the percentage of promotional allowances in 1997 compared to 1996 indicates
that management's efforts to increase revenues while controlling the cost of
promotional activities were successful.
Departmental Expenses. Casino expenses increased by $2.8 million, or 4.1%,
during 1998 compared to 1997 as a result of additional promotional activities
instituted during the third quarter of 1998 in response to competitive
pressures. Casino expenses in 1997 increased $3.5 million, or 5.3%, due to
additional patron volume as evidenced by the 11.6% increase in casino
revenues.
Rooms expense did not change significantly during 1998 compared to 1997.
Rooms expense in 1997 increased $262,000, or 16.7%, compared to the prior year
primarily due to the additional patron volume associated with the opening of
the new hotel tower.
42
<PAGE>
Despite the increases in food and beverage revenues discussed above, food
and beverage expenses decreased by $402,000, or 9.3%, during 1998 compared to
1997. Such decrease results from the previously noted increase in marketing
activities with respect to food and beverage programs, the costs of which are
allocated to casino expenses. Food and beverage expense increased $573,000, or
15.3%, during 1997 compared to the prior year primarily due to increased
patron volume associated with the opening of the new hotel tower and
additional dining outlets. Such increase was partially offset by increased
promotional activity, the cost of which is allocated to the casino department.
The decrease in other expenses during 1998 compared to 1997 was not
significant from a monetary amount. The increase in other expenses of
$143,000, or 11.4%, during 1997 compared to the prior year reflects increased
costs associated with merchandise sales and lounge entertainment.
Other Items
Our operating expenses, exclusive of the Aurora casino and the Tunica
casino, consist primarily of general and administrative expenses and expenses
incurred in connection with the pursuit of additional gaming venues.
General and Administrative. General and administrative expenses increased
$866,000, or 5.5%, during 1998 compared to 1997. Increases in such costs at
the Aurora casino of 3.9% and at the Tunica casino of 1.0% were not
significant; the remaining increase of $622,000 in corporate overhead costs
resulted primarily from increases in professional fees. General and
administrative expenses decreased $3.1 million, or 16.7%, in 1997 compared to
the prior year. Such expenses decreased 4.2% at the Aurora casino and 4.1% at
the Tunica casino due to management's cost containment efforts. The remaining
corporate decline in general and administrative expense of $2.7 million is due
to reductions in corporate overhead costs, primarily in travel costs and
professional fees.
Depreciation and Amortization. Depreciation and amortization decreased by
$2.3 million, or 12.4%, in 1998 compared to 1997 and by $2.1 million, or 10%,
in 1997 compared to 1996. The 1998 decrease results primarily from certain
operating equipment at the Tunica casino becoming fully depreciated during the
third quarter of 1998. Although completion of a parking garage at the Aurora
casino and a new hotel tower at the Tunica casino during the third quarter of
1996 significantly increased the amount of depreciable assets, the revision in
estimated useful lives of buildings, barges and certain operating equipment
effective October 1, 1996 resulted in an overall decrease in depreciation and
amortization during 1997 compared to 1996.
Development Expenses. Development expenses represent costs incurred in
connection with our pursuit of potential gaming opportunities in jurisdictions
where additional gaming licenses may be available as well as those where
gaming has not been legalized. The $701,000, or 47.4%, decrease in 1998
development costs compared to 1997 reflects an unusually high level of
spending in 1997 not repeated in the current year. Such costs in 1997
increased $415,000, or 39%, compared to 1996 primarily as a result of our
efforts in obtaining a gaming site in Louisiana. A gaming project in
Shreveport, Louisiana was approved by the Louisiana Gaming Control Board
during the third quarter of 1998. See "--Liquidity and Capital Resources--
Capital Expenditures and Other Investing Activities."
Write Down of Assets. In connection with a refinancing of its indebtedness
in 1994, Greate Bay issued $40.5 million discounted principal amount (face
amount of $110.6 million) of deferred interest notes (the "PPI Funding Notes")
to us in exchange for $38.8 million principal amount of 15 1/2% notes issued
by another Greate Bay subsidiary and held by us. It was anticipated that one
of our primary methods of realizing the carrying value of the new notes would
be through the utilization of existing tax net operating losses of Greate Bay
and its subsidiaries. As a result of our distribution of Greate Bay stock at
December 31, 1996 to our stockholders, Greate Bay's tax net operating losses
are no longer available for utilization in our consolidated tax returns.
Accordingly, at December 31, 1996, we provided a valuation allowance in the
amount of $18.7 million which reduced the carrying amount of the PPI Funding
Notes to their estimated realizable value of $35.6 million at that date. As a
result of the filing for protection under Chapter 11 of the United States
Bankruptcy Code by Greate Bay's most significant operating subsidiary on
January 5, 1998, we took an additional write down during 1997 further reducing
the carrying amount of the PPI Funding Notes at both December 31, 1998 and
1997 to an estimated
43
<PAGE>
realizable value of $12.3 million. Management presently anticipates that the
remaining balance will be realized through a combination of repayments from
Greate Bay and asset acquisitions from Greate Bay and its subsidiaries.
During November 1995, we loaned $10 million of the proceeds from the 12 3/4%
Senior Secured Notes to an unaffiliated gaming company in the form of two $5
million notes. See "--Liquidity and Capital Resources--Financing Activities."
On February 27, 1998, both parties agreed to settle the outstanding
obligations with the payment of $4.4 million and the issuance of two new,
short-term obligations totaling $1.6 million, which were paid in April 1998.
The $4 million difference between the $10 million carrying amount of the notes
receivable and the agreed upon settlement was reflected as a write down of the
notes receivable as of December 31, 1997.
During 1996, management determined that certain properties in Texas acquired
as potential sites for future development should be offered for sale. An
evaluation of the net realizable value for such sites resulted in a write down
for the anticipated loss on disposal of the properties of $3.4 million for the
year ended December 31, 1996. No additional write downs were recorded in 1998
or 1997.
Net Interest Expense. Net interest expense did not change significantly
during 1998 compared to 1997. Net interest expense increased $1.9 million, or
7.1%, during 1997 compared to the prior year. The 1997 increase is primarily
attributable to additional interest incurred with respect to the new parking
garage at the Aurora casino which is treated as a capital lease for financial
reporting purposes and to the capitalization of interest at the Tunica casino
with respect to construction of its new hotel tower during 1996.
(Loss) Gain on Disposal of Assets. The 1998 loss results primarily from the
sale of certain slot machines at the Tunica casino as part of its program to
update such equipment; the 1997 gain resulted primarily from the sale of a
company-owned aircraft.
Consolidated Items
Income Taxes. As previously disclosed in our quarterly report on Form 10-Q
for the period ended September 30, 1998, and subsequent to the issuance of our
1997 consolidated financial statements, we determined that we should revise
our tax treatment of the spin-off of the stock of Greate Bay which occurred on
December 31, 1996. As a result, the 1997 and 1996 consolidated financial
statements have been restated from amounts previously reported to record the
appropriate amounts for income taxes, deferred taxes, interest and penalties
due to the recognition of additional taxable income resulting from the revised
tax treatment of the spin-off.
For the year ended December 31, 1996, we utilized approximately $9 million
of our available net operating loss carryforwards as a result of the
additional taxable income we recognized from the spin-off. For alternative
minimum tax purposes, the revised tax treatment resulted in us utilizing all
of our remaining alternative minimum tax loss carryforwards and being liable
for the payment of approximately $2.2 million in additional alternative
minimum taxes. We paid our $2.2 million alternative minimum tax obligation for
1996 plus accrued interest thereon during the fourth quarter of 1998. As a
result of the obligation for alternative minimum tax payments and the impact
on net deferred tax assets, we restated our consolidated statement of changes
in shareholders' equity (deficit) from amounts previously reported to provide
an additional $6.3 million charge to paid-in capital consistent with the
treatment of other effects of the spin-off transaction.
For the year ended December 31, 1997, the revised tax treatment resulted in
our recognition of additional income tax expense of $2.1 million in addition
to the accrual of interest on the underpayment of our federal tax obligations.
We paid $4.7 million during September 1998 with respect to our revised
estimated 1997 federal income tax obligation.
In connection with the revised tax treatment, we have commenced litigation
against our former independent accountants and tax advisors alleging negligent
advice and breach of contract.
44
<PAGE>
Management believes that it is more likely than not that our future
consolidated taxable income, primarily from the Aurora casino and the Tunica
casino, will be sufficient to utilize a portion of the net operating loss
carryforwards, tax credits and other deferred tax assets resulting from
temporary differences. Accordingly, under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," the
consolidated balance sheet reflects net deferred tax assets of $1.8 million as
of December 31, 1998.
Sales by us or existing stockholders of common stock by a five percent
stockholder, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"), can cause a "change of control," as defined in Section 382 of the
Code, which would limit our ability or that of our subsidiaries to utilize
these loss carryforwards in later tax periods. Should such a change of control
occur, the amount of loss carryforwards available for use in any one year
would most likely be substantially reduced. Future treasury regulations,
administrative rulings or court decisions may also effect our future
utilization of our loss carryforwards.
Tax Settlement Costs. Tax settlement costs of $1.1 million represent both
costs incurred to date as well as management's estimate of probable costs to
be incurred arising from and directly related to the modification of our tax
treatment of the spin-off of Greate Bay stock previously discussed.
Extraordinary Item. We were required to make an offer to purchase not more
than $2.5 million in principal amount of our 12 3/4% Senior Secured Notes at
each semiannual interest payment date. During 1998, we made two redemption
offers and redeemed $2.8 million of the 12 3/4% Senior Secured Notes resulting
in an extraordinary loss of $336,000. During 1997, we made one such offer and
redeemed $2.5 million of the 12 3/4% Senior Secured Notes. The 1997 redemption
resulted in an extraordinary loss of $326,000, reduced by an estimated income
tax benefit of $111,000.
Year 2000 Compliance. In the year 2000, computer programs that have date
sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. Such an error could result in a system failure or miscalculations
causing disruptions of operations including, among other things, a temporary
inability to process transactions or engage in similar normal business
activities.
Management has initiated a program to prepare our computer systems and
applications as well as our non-information technology (embedded microchip)
systems for the Year 2000. The initial stage of the program consisted of
identifying those systems which might be at risk. All identified systems were
categorized as:
. those necessary for regulatory compliance purposes;
. essential systems; and
. non-essential systems.
Within the essential systems group, an additional rating factor of one to
five was assigned to each system with a factor of one indicating the greatest
significance. Readiness of information technology and non-information
technology systems for the Year 2000 is currently being investigated or has
been determined by means of vendor certification or internal testing. System
readiness for the Year 2000 is anticipated to be completed by September 1999
with the essential and regulatory systems anticipated to be completed by June
1999. The two major information technology systems identified as not Year
2000-compliant are being updated, modified or replaced. Management expects the
costs of acquiring, testing and converting such systems will be less than $1
million. The majority of these costs will be incurred during 1999 and have
been included in management's forecast of capital expenditures. See the
discussion under the section entitled "--Liquidity and Capital Resources--
Capital Expenditures and Other Investing Activities."
We have also initiated formal communication with our significant suppliers
to determine the extent to which our operating and information systems are
vulnerable to those third parties' failure to resolve their Year 2000
compliance issues. An initial determination of our exposure with respect to
third-party supplied systems has recently been completed. Additional
procedures, if necessary, are now being taken to remediate potential
vulnerabilities.
45
<PAGE>
Contingency plans are also being developed by management with respect to
internally developed systems not fully tested prior to the Year 2000.
Accordingly, we do not anticipate any internal systems failures will have a
material impact on our operations or financial condition. We will continue our
efforts to ensure that major third party vendors as well as public and private
providers of infrastructure services such as utilities and communication
services will be Year 2000 compliant. The failure of such infrastructure
services could result in a "worst case" scenario in which operations relying
on services like mechanical gaming devices would be temporarily disrupted. We
cannot presently estimate either the likelihood or the potential cost of such
failures.
While we cannot be sure that we and our suppliers and customers will fully
resolve the Year 2000 compliance issues, neither the estimated costs nor the
outcome of the Year 2000 problem is expected to have a material impact on our
operations, liquidity or financial position.
Inflation. Management believes that in the near term, modest inflation,
together with increased competition within the gaming industry for qualified
and experienced personnel, will continue to cause increases in operating
expenses, particularly labor and employee benefits costs.
Seasonality and Other Fluctuations. Historically, the Aurora casino's
operations have experienced some seasonality due to severe winter weather.
Consequently, the results of our operations for the first and fourth quarters
have traditionally been less profitable than the other quarters of the fiscal
year. Furthermore, management believes that seasonality may also cause
fluctuations in reported results at the Tunica casino. In addition, the
operations of the Aurora casino and the Tunica casino may fluctuate
significantly due to a number of factors, including chance. Such seasonality
and fluctuations may materially affect our casino revenues and overall
profitability.
Liquidity and Capital Resources
Operating Activities. The operations of the Aurora and Tunica casinos
constitute our primary sources of liquidity and capital resources. The Aurora
casino contributed approximately $11.4 million of cash flow from operations
during the first quarter of 1999 after deducting the payment of $2.6 million
of management fees. The Tunica casino provided $2.8 million of cash from
operations during the first quarter of 1999 after deducting the payment of
$300,000 of consulting fees to Greate Bay. Our other sources of funds include
interest income earned on temporary investments. In addition to operating
expenses at the Aurora casino and the Tunica casino, uses of operating cash by
us during the first quarter of 1999 included costs to pursue development
opportunities of $215,000 and corporate overhead costs of $2.2 million.
The Internal Revenue Service is currently examining our consolidated federal
income tax returns for the years 1993 through 1996. Management believes that
the results of such examination will not have a material adverse effect on our
consolidated financial position or results of operations.
During the first quarter of 1999, consolidated cash flow from operations of
$15.6 million and equipment financing of $1.9 million were used, in part, by
us to fund capital expenditures of $3.7 million, to repay third party
indebtedness and make payments under capital lease obligations of $3.1 million
and $138,000, respectively, and to pay distributions amounting to $2 million
to Greate Bay as limited partner in the entity which currently holds the
management contract on the Aurora casino.
Acquisition and Termination of Management and Consulting Contracts. On April
28, 1999, we entered into a voting agreement with Greate Bay, Pratt Casino
Corporation and substantially all of the holders of $85 million of senior
notes currently in default which were issued by PRT Funding Corp., a wholly
owned subsidiary of Pratt Casino Corporation, and guaranteed by Pratt Casino
Corporation. Under the terms of the agreement, we would purchase the stock of
Pratt Casino Corporation from Greate Bay as part of a debt restructuring of
PRT Funding, Pratt Casino Corporation and other subsidiaries of Pratt Casino
Corporation. On May 25, 1999, Pratt
46
<PAGE>
Casino Corporation, PRT Funding Corp. and New Jersey Management, Inc. filed
for bankruptcy pursuant to a joint plan of reorganization in accordance with
the terms of our agreement. On the date on which Pratt Casino Corporation
emerges from bankruptcy proceedings, we would acquire its stock for nominal
consideration and satisfy Pratt Casino Corporation's obligations for $40.3
million in cash.
Upon completion of the restructuring, Pratt Casino Corporation's only assets
would be a consulting contract with our Tunica casino and its limited
partnership interest in a partnership that manages the Aurora casino under a
long-term management contract. The acquisition of Pratt Casino Corporation
when it emerges from bankruptcy will enable us to terminate the Aurora
management and Tunica consulting contracts. We incurred net expenses pursuant
to those contracts totalling $2.3 million during the first quarter of 1999.
Our acquisition of Pratt Casino Corporation will also result in a charge of
approximately $40.3 million during 1999, as no asset value will be attributed
to the Aurora management and Tunica consulting contracts. Upon completion of
this offering, we will deposit $40.7 million of proceeds into a special
account with the trustee to secure our obligation to redeem $40.3 million of
the notes at 101% of their principal amount in the event that the acquisition
of Pratt Casino Corporation has not been completed by January 31, 2000.
The plan will require the approval of the bankruptcy court as well as by
various gaming regulatory organizations.
Financing Activities. During October 1995, we issued $210 million of 12 3/4%
Senior Secured Notes due November 1, 2003, discounted to yield 13 3/4% per
annum. The 12 3/4% Senior Secured Notes were refinanced and discharged with a
portion of the proceeds from the original offering of the notes.
During September 1998, Hollywood Casino-Aurora entered into a bank loan
agreement to borrow up to $2 million on an unsecured basis. Borrowings under
the agreement are payable in 36 monthly installments including interest at the
rate of 7.5% per annum. Hollywood Casino-Aurora borrowed $2 million under the
agreement during October 1998.
HWCC-Tunica had a $1.3 million bank credit facility available to borrow
against through September 30, 1998. Outstanding borrowings on the line of
credit of $462,000 at December 31, 1998 are to be repaid in monthly
installments over 36 months and accrue interest at the rate of prime plus 1
1/4% per annum subject to a minimum of 8.75%.
Effective as of April 1, 1997, we acquired from PPI Corporation, a Greate
Bay subsidiary, the general partnership interest in the limited partnership
which holds the Aurora management agreement. The acquisition price for the
general partnership interest included a note in the amount of $3.8 million and
the assignment of $13.8 million undiscounted principal amount of PPI Funding
Notes and $350,000 accrued interest due from Greate Bay to PPI Corporation.
Our annual principal and interest payments on the $3.8 million note
approximate the general partner's share of partnership distributions now being
made to us.
As of March 31, 1999, our scheduled maturities of long-term debt and
payments under capital leases during the remainder of 1999 are approximately
$4.4 million and $2.1 million, respectively. The estimated debt maturities
include the potential redemption of $2.5 million principal amount of 12 3/4%
Senior Secured Notes pursuant to the mandatory redemption offer previously
described. No such redemptions will be required as a result of the discharge
of our 12 3/4% Senior Secured Notes with a portion of the proceeds from this
offering.
Capital Expenditures and Other Investing Activities. Capital expenditures at
the Aurora casino during the first three months of 1999 were $529,000. We plan
to use approximately $40 million of the proceeds from this offering to replace
our two existing riverboats with a newly constructed dockside gaming facility
to provide a more spacious and comfortable gaming experience to our patrons.
Management also anticipates spending $4 million during the remainder of 1999
primarily for its ongoing capital improvements program which will include new
slot machines and casino equipment, renovations to one of the Aurora casino's
riverboats, new telephone and point-of-sale systems and the renovation of a
restaurant facility.
47
<PAGE>
Capital expenditures at the Tunica casino during the first three months of
1999 amounted to $3.1 million. Management anticipates spending $3.9 million
during the remainder of 1999 as part of a two-year capital improvements
program. We have substantially completed the following improvements to the
Tunica casino: the upgrade of all of our hotel rooms, suites and public
spaces, including the installation of a new marble floor in the hotel lobby;
the development of a new VIP check-in and private entertainment lounge to
enhance the level of service we provide our premium gaming patrons; the
addition of 400 new state of the art slot machines; the expansion of the
number of recreational vehicle spaces; and the opening of the 18-hole
championship golf course with our joint venture partners.
HWCC-Tunica entered into an agreement with Harrah's Entertainment and Boyd
Gaming during 1996 providing for the joint construction and ownership of a
golf course. Contributions by HWCC-Tunica to the limited liability corporation
formed to develop and operate the golf course have totaled approximately $2.1
million, including $66,000 during the first quarter of 1999.
In September 1998, we received a license to develop a Hollywood-themed hotel
and casino complex on the Red River in Shreveport, Louisiana. We originally
planned to develop the Shreveport casino in a joint venture in which we would
have had an interest of approximately 50%. On April 23, 1999, we acquired the
interest of our joint venture partner in the Shreveport casino for $2.5
million, $1,000 of which was paid at closing, with the remainder to be paid
six months after the opening of the Shreveport casino. As a result, we will
have a 100% interest in the Shreveport casino with the exception that our
remaining joint venture partner holds a 10% residual interest in the event the
project is ever sold. The total estimated cost of the Shreveport casino is
approximately $230 million. We anticipate contributing approximately $50
million as an equity investment in the project with the remaining construction
and preopening costs, estimated at $180 million, to come from non-recourse
project financing. We anticipate securing the project financing and commencing
construction in the summer of 1999 with a planned opening date approximately
14 months later.
We continue to pursue several additional potential gaming opportunities. We
intend to finance any future ventures with cash flow from operations, together
with third party financing, including non-recourse project financing.
Conclusion. Management anticipates that our funding requirements for the
next twelve months will be satisfied by existing cash and cash generated by
the Aurora and Tunica casinos.
48
<PAGE>
BUSINESS
General
We develop, own and operate highly themed casino entertainment facilities
under the service mark Hollywood Casino. We currently own and operate two
casinos, one in Aurora, Illinois, and the other in Tunica County, Mississippi.
Our properties enjoy leading market positions in two of the five largest
gaming markets in the United States. The Aurora casino, located approximately
35 miles west of downtown Chicago, features two riverboat casinos and a large
land-based pavilion. The Tunica casino, located approximately 30 miles south
of Memphis, Tennessee, includes a dockside casino and a hotel and
entertainment complex. Our facilities feature our unique Hollywood theme,
which incorporates the excitement and glamour of the motion picture industry
by utilizing designs inspired by famous movies, displays of motion picture
memorabilia and movie-themed gaming, entertainment and dining areas. In
addition to our existing properties, we recently received approval and have a
license to develop, own and operate a destination gaming resort in Shreveport,
Louisiana, located 180 miles east of Dallas, Texas. We believe the Shreveport
casino, which will also incorporate our Hollywood theme, will be the premier
gaming facility in the market offering customers the largest riverboat casino
and numerous entertainment amenities. We believe that our unique Hollywood
theme differentiates our properties from those of our competitors by providing
a high quality gaming and entertainment environment, which has enabled us to
develop strong customer loyalty.
We believe we have an opportunity to significantly increase our operating
cash flow and enhance our value by: (1) expanding our Aurora casino by
replacing our two riverboats with a significantly larger and more luxurious
dockside gaming facility; (2) developing and operating a large riverboat
casino and resort complex in the Shreveport/Bossier City gaming market through
an unrestricted subsidiary which will be obligated to pay us fees under the
Shreveport management contract; (3) acquiring the management and consulting
contracts that require the payment of fees by our Aurora and Tunica casinos to
third parties; and (4) continuing to refine and execute our operating and
marketing strategies to enhance the market positions of our Tunica and Aurora
casinos. These four elements, together with this offering, comprise our five
point strategic plan. In addition to enhancing our operating performance, we
believe that the successful execution of this plan will improve our financial
flexibility and simplify our organizational structure.
The Aurora Casino. The Aurora casino commenced operations in June 1993. The
Aurora casino's primary market is the affluent suburbs north and west of
Chicago. Approximately 5.7 million adults live within a 50-mile radius and
approximately 8 million adults live within a 100-mile radius of Chicago. The
facility is easily accessible from major highways, can be reached by train
from downtown Chicago in approximately 50 minutes and is approximately 30
miles away from both the O'Hare International and Midway airports.
The property's two riverboat casinos, City of Lights I and City of Lights
II, contain an aggregate of approximately 29,550 square feet of gaming space,
approximately 975 slot machines and approximately 55 table games. The Aurora
casino also includes an approximately 64,000 square foot, land-based pavilion
featuring a glass-domed, four-story atrium with two upscale lounges, our
award-winning Fairbanks gourmet steakhouse, the Hollywood Epic Buffet, a
1950s-style diner, a high-end customer lounge and a new, private, intimate
dining room, called the "Gold Room," for our premium players. The Aurora
casino's two parking garages provide convenient access for approximately 1,340
cars. The Aurora casino also offers retail items at the Hollywood Casino
Studio Store, a highly-themed shopping facility that offers movies on video,
soundtrack CDs and logo merchandise from major Hollywood studios.
The Aurora casino was the first of our properties to feature the distinctive
Hollywood theme. We believe that the use of the Hollywood theme throughout the
Aurora casino's gaming, dining and entertainment facilities provides a
uniquely entertaining atmosphere for our patrons and encourages both initial
and repeat visits. The Aurora casino currently features numerous displays of
motion picture memorabilia including Don Corleone's car
49
<PAGE>
from The Godfather, the motorcycle from The Great Escape, Elliot Ness' car
from the movie version of The Untouchables, the Mirthmobile from Wayne's World
2, the space buggy from Armageddon, Luke Skywalker's lightsaber from Star Wars
and a lifeboat and other memorabilia from the Academy Award(R) winning picture
Titanic. The Aurora casino also includes themed gaming areas featuring slot
machines with custom graphics and the use of movie star look-alikes to
entertain guests. The pavilion's dining and entertainment facilities
extensively utilize our Hollywood theme, and include the following:
. Club Harlow(R), an upscale lounge which caters primarily to the
facility's high-end customers and provides direct VIP access to a gaming
area emphasizing higher limit table games and slot machines;
. the Living Room at Harlows, a private area where premium customers can
relax and enjoy complimentary hors d'oeuvres prior to and after boarding
the casino;
. the award-winning Fairbanks gourmet steakhouse, which has been heralded
as the best steakhouse in the western suburbs;
. the "Gold Room," a private and beautifully-appointed, intimate dining
room which offers a specially-designed menu and the ultimate in guest
service for our premium players;
. the Hollywood Epic Buffet, a buffet-style restaurant which features a
large collection of movie memorabilia; and
. Louie Dombrowski's, a 1950s style diner offering everything from blue
plate specials and Chicago Dogs to ice cream sundaes and soda fountain
treats.
The Aurora casino is also located near the Paramount Arts Center. This
1,900-seat, art deco-style theater was completely renovated by the City of
Aurora in 1992. We use the Paramount Theater to provide headliner
entertainment for our customers. Entertainers we have booked at the Paramount
include: Frank Sinatra, Tom Jones, Ann-Margret, The Temptations, Howie Mandel,
Willie Nelson, Engelbert Humperdinck, Paul Anka, Bill Cosby, Smokey Robinson,
The Beach Boys, Aretha Franklin, Kenny Rogers, Frankie Valli, Liza Minelli and
Steve Lawrence & Eydie Gorme.
We believe that the Aurora casino is one of the market leaders in the
Chicago gaming market, the fourth largest gaming market in the United States
after Las Vegas, Atlantic City and the Connecticut Native American casinos.
Based upon published reports, we generated 10.4% of total gaming revenues in
the Chicago gaming market with only 9.1% of the market's gaming positions,
resulting in the Aurora casino capturing 114% of its "fair share" of the
market's gaming revenues in 1998. The Chicago gaming market consists of four
Illinois casinos, including the Aurora casino, and five northern Indiana
casinos located within 50 miles of downtown Chicago. The Chicago gaming market
has experienced a significant increase in gaming revenues due to the
substantial increase in capacity from the opening of the five northern Indiana
riverboats in 1996 and 1997. In 1998, the Chicago gaming market generated
approximately $1.5 billion in gaming revenues, an increase of approximately
100% from 1995.
On June 25, 1999, the Governor of Illinois signed into law legislation
passed by the Illinois legislature that allows dockside gaming for existing
licensees. As a result of this legislation, the Aurora casino's riverboats no
longer cruise, but are operating as dockside gaming facilities. The Aurora
casino's patrons are now able to freely enter and exit the docked riverboats
during the Aurora casino's operating hours.
The Aurora Casino Expansion. We currently operate two riverboat casinos,
City of Lights I and City of Lights II, with approximately 29,550 combined
square feet of gaming space. City of Lights I is significantly larger than
City of Lights II. We believe that the operating results of the Aurora casino
have been limited by the small size of City of Lights II. We originally
planned to replace the smaller and less spacious City of Lights II with a
larger, newly constructed riverboat. As a result of the recent legislation, we
now plan to replace both City of Lights I and City of Lights II with a single,
two level dockside facility which will feature a 50,000 square foot main
gaming level with high ceilings and wide aisles for customer comfort. Our
plans also currently provide for a 25,000 square foot mezzanine level that
will include a poker room, a 150-seat Hollywood Diner, a 30-seat walk-up
delicatessen and a 200-seat show lounge. We believe that the $40 million in
proceeds
50
<PAGE>
from the offering of the original notes designated for the development of a
new riverboat casino will be sufficient for the development of the dockside
gaming facility. Commencement of construction of the dockside casino could be
delayed pending receipt of required regulatory approvals. While it may take us
longer to complete and open, we believe that a dockside gaming facility would
provide us with an even greater economic benefit than a new riverboat.
The Tunica Casino. The Tunica casino commenced operations in August 1994.
Tunica is the closest gaming jurisdiction to, and easily accessible from, the
Memphis metropolitan area. Approximately 4.9 million adults live within a 200-
mile radius of Tunica County, approximately 867,000 of whom reside within 50
miles of Memphis. In addition, Memphis hosted approximately 8 million visitors
in 1998. The Tunica market has become a regional destination resort,
attracting customers from markets such as Nashville, Atlanta, St. Louis,
Little Rock and Tulsa. The Tunica casino is accessible to its customers via
Highway 61 and Interstate 55.
The Tunica casino features a 54,000 square foot, single-level casino with
approximately 1,500 slot machines and approximately 50 table games. The
facility's 506-room hotel and 123-space recreational vehicle park provide
overnight accommodations for the Tunica casino's patrons. The casino includes
the award-winning, highly-themed Adventure Slots gaming area, featuring
special effects, multimedia displays of memorabilia from famous adventure
motion pictures and over 200 slot machines. Additional quality entertainment
amenities provided by the Tunica casino include our award-winning Fairbanks
gourmet steakhouse, The Hollywood Epic Buffet, a 1950s-style diner, an
entertainment lounge, a themed bar facility, an indoor pool, and showroom,
banquet and meeting facilities. Also, in November 1998, we opened an 18-hole
championship golf course adjacent to our facility through a joint venture with
Harrah's Entertainment and Boyd Gaming. The Tunica casino also offers parking
for 1,850 cars.
Our Hollywood theme is utilized throughout the Tunica casino, which is
designed to resemble a large motion picture sound stage complete with catwalks
and movie-set style lighting. In addition, numerous movie props and pieces of
motion picture memorabilia are displayed throughout the facility, including
the Stay-Puft Marshmallow Man from Ghostbusters, Elvis Presley's car from
Spinout, the helicopter and Harrier "jump jet" from True Lies and the DeLorean
time travel machine from the Back to the Future movies. The aircraft from True
Lies and memorabilia from other motion pictures are dramatically suspended
from the ceiling. In 1998, we installed one of our largest and most dramatic
memorabilia pieces--a model which was used in the filming of the Academy Award
winning movie Titanic. The 28-foot long model of the Titanic is depicted
sinking into the Atlantic Ocean. In addition to offering an entertaining
gaming atmosphere, the Tunica casino also provides overnight and extended stay
facilities in the hotel and recreational vehicle park. The Tunica casino also
provides headliner entertainment for its customers. Entertainers who have
performed at the Tunica casino include the Commodores, Collin Raye, the
Spinners, the Smothers Brothers, Al Hirt, Bill Haley and the Comets and Little
Anthony and the Imperials. We believe that the Tunica casino delivers a
comprehensive range of gaming, entertainment, dining and lodging facilities to
its patrons, all in an easily accessible, uniquely themed atmosphere.
The Tunica casino continues to be one of the leading operators in the Tunica
gaming market. Based upon published market information, we generated 9.1% of
the total gaming revenues in the Tunica gaming market with only 8.8% of the
market's gaming positions, resulting in the Tunica casino capturing
approximately 104% of its "fair share" of the market's gaming revenues in
1998. There are currently ten casinos operating in the Tunica gaming market,
including the Tunica casino. The market has rapidly become the fifth largest
gaming market in the United States after Las Vegas, Atlantic City, the
Connecticut Native American Casinos and Chicago, generating approximately $1.1
billion in gaming revenues in 1998.
The Tunica casino is located in a cluster with gaming facilities operated by
Harrah's Entertainment and Boyd Gaming. We have named our three casino cluster
"Casino Strip" in order to establish a marketing identity for the cluster. The
three properties operate a free shuttle bus service among the casinos and have
also conducted joint marketing programs including a billboard campaign and
radio advertising. Furthermore, the three properties conduct joint special
events to attract customers to the cluster. Every year the three properties
host an extensive Fourth of July fireworks display, which is one of the
largest in the South. In the second quarter of 1999, the
51
<PAGE>
three casinos will be hosting a major professional bull riding competition,
which will include the construction of a 6,000 seat temporary stadium. The
event will also include a musical performance by the widely acclaimed country
band Brooks & Dunn.
In 1998, we launched a $13 million upgrade of the Tunica casino which we
believe will enhance our position as one of the highest quality facilities in
the Tunica gaming market. As of March 31, 1999, we have added approximately
255 new state of the art slot machines, upgraded all of our hotel rooms and
public areas, enhanced the facility's exterior through landscaping and
lighting improvements, substantially increased the number of spaces at our
recreational vehicle park and opened the 18-hole championship golf course. By
the end of the second quarter of 1999, we intend to substantially complete the
upgrade all of our hotel suites, replace an additional 136 slot machines, the
development of a new, VIP check-in and a private premium players' lounge to
enhance the level of service we provide our premium gaming patrons, and the
installation of a new marble floor in our hotel lobby.
The Shreveport Casino. We recently received approval and have a license to
develop, own and operate a casino and hotel resort in Shreveport, Louisiana.
The destination resort is currently designed to include a 405-room, all suite,
art deco-style hotel, and a 3-level riverboat casino. The resort is also
designed to include a large land-based pavilion housing numerous restaurants
and entertainment amenities, an 85-foot wide seamless entrance to the
riverboat from the land-based pavilion on all three levels, which will give it
the feel of a land-based casino, and over 40,000 square feet of retail space.
We plan to have the retail space developed by a group that includes the
principal developer of Beale Street in Memphis, Tennessee. The Shreveport
casino will feature our unique Hollywood theme, which will be utilized
throughout the resort.
The Shreveport resort will be located next to Harrah's existing riverboat
facility, which will form the first cluster in the Shreveport/Bossier City
market. The primary feeder markets for Shreveport/Bossier City are Dallas/Ft.
Worth and East Texas. Once completed, the Shreveport casino will be the fifth
casino operating in the Shreveport/Bossier City gaming market. The existing
four operators generated approximately $600 million in gaming revenues in
1998.
Our principal target market for our Shreveport casino will be patrons from
the Dallas/Ft. Worth metroplex. There are approximately 7.1 million adults who
reside within 200 miles of Shreveport/Bossier City. We believe that the
location of our executive offices in Dallas will provide us with a competitive
advantage in attracting customers to the Shreveport casino from this market.
We originally intended to develop the Shreveport casino as a joint venture
with Sodak Gaming, Inc. and New Orleans Paddlewheels. Under the terms of the
joint venture agreement, all of the equity capital for the project was to be
provided by us and Sodak, resulting in each of us owning 50% of the joint
venture, with New Orleans Paddlewheels holding a 10% residual interest payable
in the event that the project is ever sold in the future. On April 23, 1999,
we acquired Sodak's interest in the joint venture, giving us complete control
of the development of the Shreveport casino. Under the terms of the agreement,
we will pay Sodak $2.5 million for its interest, which represents the amount
of capital contributed by Sodak to the project, $1,000 of which was paid at
closing, with the remainder to be paid six months after we open the Shreveport
casino. New Orleans Paddlewheels will retain its 10% residual interest.
The Shreveport casino will be owned by a general partnership named Hollywood
Casino Shreveport, which will in turn be owned by our unrestricted subsidiary,
HWCC-Louisiana. HWCC-Louisiana and Hollywood Casino Shreveport will not be
subject to the limitations imposed by the terms of the indenture governing the
notes. HWCC-Shreveport, a restricted subsidiary, will operate the Shreveport
casino under a management agreement with Hollywood Casino Shreveport, which
will be assigned to secure the notes. The management agreement provides that
Hollywood Casino Shreveport will pay a management fee to HWCC-Shreveport of 2%
of net revenues plus an increasing percentage (5-10%) of the Shreveport
casino's annual EBITDA above $25 million. We currently anticipate that it will
cost approximately $230 million to develop and open the Shreveport casino. We
expect to invest approximately $50 million of equity in Hollywood Casino
Shreveport, of which approximately $25 million will be funded from the
proceeds of this offering and $25 million will be funded from our existing
cash. We intend
52
<PAGE>
to raise approximately $180 million in project debt, including equipment
financing to fund the construction of the Shreveport casino. The project debt
financing will be recourse only to our unrestricted subsidiaries that own the
Shreveport casino. We anticipate securing the project financing and commencing
construction later this summer and we expect that it will take us
approximately 14 months to construct and open the Shreveport casino.
Upon completion of our Shreveport resort, we will compete directly with
Binion's Horseshoe, Harrah's, the Isle of Capri and Casino Magic in the
Shreveport/Bossier City market. Some of these competitors have higher profile
brand names in the Shreveport/Bossier City market and greater financial
resources than we do. We cannot assure you that we will be able to effectively
compete against these four established casinos, three of which have been in
operation since 1994, or that the Shreveport/Bossier City market is large
enough to allow more than four casinos to operate profitably. Furthermore,
although the Louisiana Gaming Control Board has expressed no intent to grant
the fifteenth and final riverboat gaming license at this time, the remaining
riverboat gaming license could ultimately be granted in, or one or more of the
current operators in other parts of Louisiana could relocate to, the
Shreveport/Bossier City market which would directly increase competition in
our market.
Also, we cannot be sure that we will be able to effectively compete against
any other future gaming operations that Louisiana or other authorities may
authorize in the gaming market in which the Shreveport casino will operate.
For example, in 1997, the Louisiana legislature adopted legislation permitting
up to 15,000 square feet of slot machine gaming at pari-mutuel wagering
facilities located in parishes in Louisiana that approve slot machine gaming
in a referendum election. Shortly thereafter, a referendum election was held
that approved slot machine gaming at Louisiana Downs, which is located in
Bossier City, approximately nine miles from the site of the Shreveport casino.
The Shreveport casino will also face competition from other forms of gaming,
such as state-sponsored lotteries and video lottery terminals, pari-mutuel
betting on horse and dog racing and bingo parlors, as well as other forms of
entertainment in Louisiana and other places from which we will draw customers.
Acquisition and Termination of Management and Consulting Contracts
On April 28, 1999, we entered into a voting agreement with Greate Bay, Pratt
Casino Corporation and substantially all of the holders of $85 million of
senior notes currently in default which were issued by PRT Funding Corp., a
wholly owned subsidiary of Pratt Casino Corporation, and guaranteed by Pratt
Casino Corporation. Under the terms of the agreement, we would purchase the
stock of Pratt Casino Corporation from Greate Bay as part of a debt
restructuring of PRT Funding, Pratt Casino Corporation and other subsidiaries
of Pratt Casino Corporation. On May 25, 1999, Pratt Casino Corporation, PRT
Funding and New Jersey Management, Inc., filed for bankruptcy pursuant to a
joint plan of reorganization in accordance with the terms of our agreement. On
the date on which Pratt Casino Corporation emerges from Chapter 11 bankruptcy
proceedings, we would acquire its stock for nominal consideration and obtain a
release of Pratt Casino Corporation's obligations for $40.3 million in cash.
Upon completion of the restructuring, Pratt Casino Corporation's only assets
would be a consulting contract with our Tunica casino and its limited
partnership interest in a partnership that manages the Aurora casino under a
long-term management contract. The acquisition of Pratt Casino Corporation
will enable us to terminate the Aurora management and Tunica consulting
contracts when it emerges from bankruptcy. We incurred net expenses pursuant
to those contracts totalling $7.7 million in 1998. Our acquisition of Pratt
Casino Corporation will also result in a charge of approximately $40.3 million
during 1999, as no asset value will be attributed to the Aurora management and
Tunica consulting contracts. Upon completion of this offering, we will deposit
$40.7 million of the proceeds into a special account with the trustee to
secure our obligation to redeem $40.3 million of the notes at 101% of their
principal amount if we determine that we cannot consummate our acquisition of
Pratt Casino Corporation or, in any event, if it has not been completed by
January 31, 2000.
The plan will require the approval of the bankruptcy court as well as the
various gaming regulatory organizations having jurisdiction over the Aurora
management and Tunica consulting contracts.
53
<PAGE>
Operating Strategy
We seek to deliver a high quality and high value entertainment experience to
our customers. We believe our strategy has allowed both our Aurora and Tunica
casinos to capture gaming revenues in their markets in excess of their "fair
share" by offering comprehensive, easily accessible and highly-themed casino
entertainment facilities, a high level of customer service and attention,
extensive player incentive, promotion and reward programs, liberal slot
machine payouts and aggressive table game policies and headliner
entertainment. We also utilize our sophisticated casino information technology
systems that enable us to track and monitor individual patron play on a "real
time" basis, identify high value patrons and specifically tailor incentives,
promotions and rewards, often during a customer's same visit. We believe our
ability to provide timely and highly personalized service and attention to our
customers is important in developing a loyal basis of higher value patrons.
In addition to providing an exciting and unique gaming environment, our
facilities provide a broad range of amenities to our customers. Both of our
Aurora and Tunica facilities provide both casual and award-winning, gourmet
dining in a variety of attractive restaurants featuring the Hollywood theme.
The Tunica casino offers an adjacent 506-room hotel and 123-space recreational
vehicle park which enable us to market the facility to tourists and other
overnight guests. We believe that our high quality, non-gaming facilities
provide customers entertainment and lodging options that encourage repeat
visits and customer loyalty and expand our patron mix to include those
customers who seek or require certain non-gaming amenities.
We use sophisticated casino information technology developed by Advanced
Casino Systems Corporation, a subsidiary of our former affiliate Greate Bay.
The technology includes table game and slot machine monitoring systems which
enable our casinos to track and rate patron play through the use of a casino
player's card. These systems provide our management with the key
characteristics of patron play as slot machines and table games are connected
with its data base monitoring system. When patrons use the casino player's
card at slot machines or table games, the information is immediately available
to our management and allows management to implement marketing programs to
recognize and reward patrons during their visits to the casino. Such
promotions and complementaries are generally provided through direct mail
programs and specialized invitations and include food, hotel accommodations,
special player events, retail merchandise, sweepstake giveaways and "cash-
back" programs based on patrons' gross wagering. We believe that our ability
to reward our customers on a same-visit basis is valuable in developing a
loyal base of higher value patrons. Our systems also allow management to
monitor, analyze and control the granting of gaming credit, promotional
expenses and other marketing costs. Our casino system also enables our
properties to capture and maintain patron information necessary in
implementing its casino player's card and other database marketing programs.
We use our databases to focus our marketing efforts on patrons who have been
identified as higher value patrons. This focus is particularly important at
the Aurora casino where the number of gaming positions available on each daily
casino excursion is limited. We believe that our process of identifying higher
value patrons, encouraging participation in its casino player's card program
and tailoring promotions and special events to cater to this market segment
enhances the profitability of our casinos.
We also market to the "mass" casino patron market segment through various
forms of advertising media as well as through group and bus tour packages.
Once new patrons are introduced to our gaming facilities and the casino
player's card program, we use our database capabilities to direct market to
these patrons in an attempt to convert them into higher value patrons.
Competition
The gaming industry is highly fragmented and characterized by a high degree
of competition among a large number of participants, some of which have
greater financial and other resources than we do. Competitive gaming
activities include:
. land-based casinos;
. dockside casinos;
54
<PAGE>
. riverboat casinos;
. video lottery terminals; and
. other forms of legalized gaming in the United States and other
jurisdictions.
Legalized gambling is currently permitted in various forms throughout the
United States, in several Canadian provinces, as well as on Native American
reservations in certain states, including in Louisiana and Mississippi. Other
jurisdictions may legalize gaming in the near future through the introduction
of proposals to legalize gaming in their state legislatures. In addition,
established gaming jurisdictions could award additional gaming licenses or
permit the expansion of existing gaming operations. New or expanded operations
by other persons can be expected to increase competition for our present and
proposed gaming operations and could have a material adverse impact on us.
The Aurora Casino. The Illinois Riverboat Gambling Act and the rules
promulgated by the Illinois Gaming Board under the act authorize only ten
owner's licenses for riverboat gaming operations in Illinois and permit a
maximum of 1,200 gaming positions at any time for each of the ten licensed
sites. All authorized owner's licenses have been granted and no additional
licenses or gaming positions can be permitted without further state
legislation. One licensed site ceased gaming operations in 1997. As a result
of the recent legislation, we believe that this license will likely be
relocated and will commence operations at a new site in Cook County, which
would increase competition in our principal market. Four riverboat sites,
including the Aurora casino, are currently licensed in Illinois within 50
miles of downtown Chicago. Two of these riverboat sites are in Joliet,
approximately 40 miles southwest of downtown Chicago, and a third is in Elgin,
Illinois, approximately 20 miles from Aurora, 40 miles from downtown Chicago
and amid the affluent northern and western suburbs. In addition, the Aurora
casino competes directly with five riverboat operations opened since 1996 in
northwestern Indiana within 50 miles of downtown Chicago. Increased
competition from casinos in Indiana has resulted in greater competition for
patrons from the downtown Chicago market and from the suburban Chicago market.
The next closest operating casinos are in Milwaukee, Wisconsin,
approximately 90 miles from downtown Chicago, and in Peoria, and Rock Island,
Illinois, approximately 160 miles from downtown Chicago. In addition,
legislation authorizing three casinos in the Detroit, Michigan area has been
approved. Native American tribes are seeking to open casino facilities in
northwestern Indiana, Michigan and Wisconsin under the Indian Gaming
Regulatory Act. The opening of additional casinos proximate to Chicago could
have a material adverse impact on the Aurora casino.
The Tunica Casino. The Tunica casino faces intense competition from the
other nine casinos operating in north Tunica County and Coahoma County. Within
the Casino Strip cluster, the Tunica casino competes with Sam's Town and
Harrah's Mardi Gras. A second casino owned by Harrah's in the Casino Strip
closed during 1997, but is expected to be reopened by Isle of Capri Casinos,
Inc. in the summer of 1999. A three casino cluster, called "Casino Center,"
consisting of Binion's Horseshoe, Sheraton Casino and Goldstrike Casino is
located north of the Casino Strip cluster and closer to the Memphis market.
Bally's operates a casino and hotel adjacent to, but not connected with, the
Casino Center. Fitzgeralds is located between Casino Center and the Casino
Strip cluster. In addition, Lady Luck operates a casino in Coahoma County
which is located approximately 40 miles south of the Casino Strip cluster.
During July 1996, Grand Casinos opened a casino complex immediately north of
Casino Center with 140,000 square feet of gaming space including approximately
3,270 slot machines and 120 table games. Three hotels with an aggregate of
1,366 rooms, a conference center and a golf course are currently available and
other amenities are scheduled for later completion. The opening of this casino
space, now the largest casino in Mississippi, increased casino capacity in
Tunica County by 24%.
We believe the shortage of hotel rooms was a restriction to growth in prior
years. However, a number of casino operations have completed and opened hotel
facilities from 1996 through the present. During 1997 and early 1998, the
Goldstrike Casino completed a 31-story, 1,200-room hotel tower and Binion's
opened a 300-room
55
<PAGE>
hotel tower. Sheraton Casino also completed construction of 150 hotel rooms.
The total number of hotel rooms in Tunica County has increased to
approximately 5,700 rooms from 1,250 at the end of 1995, an increase of more
than 350%. The additional hotel capacity has made the Casino Center
increasingly competitive in attracting overnight visitors.
The Mississippi Gaming Control Act does not limit the number of licenses
that may be granted. Any significant increase in new capacity in the Tunica
gaming market could negatively impact the operations of the Tunica casino.
Although we do not believe that we face significant competition from casinos
outside of the Tunica gaming market, legalized gaming operations are
established in and around Mississippi, including twelve casinos in the Gulf
Coast. Beau Rivage, a large casino complex, was recently opened on the Gulf
Coast and could potentially compete for customers with the casinos in the
Tunica gaming market. In addition, the Tunica casino may eventually face
competition from the opening of gaming casinos closer to Memphis, including
DeSoto County, Mississippi, which is the only county between Tunica County and
the Tennessee border. DeSoto County has defeated gaming proposals on three
separate occasions, most recently in November 1996, and by statute cannot vote
on such issue again until 2004. Casino gaming is not currently legalized in
Tennessee or Arkansas. Although we do not anticipate such legislation in the
near term, the legalization of gaming in either Tennessee or Arkansas could
have a material adverse impact on the Tunica casino.
Trademarks
We use the service mark Hollywood Casino which is registered with the United
States Patent and Trademark Office. We consider our rights to the Hollywood
Casino service mark to be well established and to have significant competitive
value to our business. The loss of our right to use the Hollywood Casino
service mark and to prevent others from using the same or a deceptively
similar mark could have a material adverse effect on us. We are currently in
litigation with Planet Hollywood regarding our trademarks. A trial date has
been set for July 19, 1999. See the discussion under "--Legal Proceedings."
We also use the service mark "Hollywood" and other "Hollywood-formative"
marks to promote our casino and related services. These marks are either
registered or are the subject of pending registration applications with the
United States Patent and Trademark Office.
Development Activities
We maintain a proactive business development strategy in order to enhance
our long-term growth. We are currently pursuing various development
opportunities, including in jurisdictions which are considering legalizing
gaming. If we were to proceed with the development of any of these
opportunities, we would likely pursue them through an unrestricted subsidiary.
As a result, the amount of capital we would be able to invest in these
developments would be limited by the terms of the indenture governing the
notes.
Properties
The Aurora Casino. The Aurora casino consists of two, four-level riverboats
named City of Lights I and II, which have combined casino space of
approximately 29,550 square feet and approximately 1,200 gaming positions. The
complex also includes the four-story, approximately 64,000 square foot land-
based pavilion and two parking garages under capital lease agreements.
The first parking garage contains approximately 31,000 square feet of office
space of which approximately 22,600 square feet are currently being used for
administrative offices. The Aurora casino leases the parking garage, including
the office space, from the City of Aurora under a 30-year lease ending June
2023, with the Aurora casino having the right to extend the term under renewal
options for an additional 67 years. The second garage, completed in 1996, has
approximately 500 parking spaces and includes approximately 1,500 square feet
of retail space. The facility is owned by a governmental agency and operated
by the Aurora casino pursuant to a lease with an initial term expiring in 2026
with the right to extend the lease for up to 20 additional years.
56
<PAGE>
The Tunica Casino. The Tunica casino consists of a 60,000 square foot,
single level casino with 54,000 square feet of gaming space, 506 hotel rooms
and suites and support facilities that include two restaurants, a buffet, an
arcade and a gift shop, banquet space, an enclosed pool and atrium, a showroom
and administrative offices. An eight-story, 350-room hotel tower was completed
in 1996. The Tunica facility also includes a 123-space recreational vehicle
park and a 1,850-space surface parking area.
The ground lease for the Tunica site has an initial term of five years from
the date gaming operations commenced, and an option to extend the lease for
nine successive five-year terms. Because the ground lease for the Tunica site
covers approximately 70 acres, there is sufficient land for future expansion
should circumstances warrant an expansion.
Other Properties. We hold an option to purchase approximately 159 acres of
land in Palmer, Massachusetts for possible development of a gaming resort
complex in the event that gaming is approved by the state legislature. We also
hold two sites for resale in the Houston, Texas area.
Employees
At June 30, 1999, we employed approximately 2,850 persons, principally at
the Aurora and Tunica casinos. None of our employees are represented by a
labor union or covered by a collective bargaining agreement. We consider our
relationships with our employees to be good.
Casino Regulation
Illinois
The Illinois Riverboat Gambling Act currently authorizes riverboat gaming
upon any water within or forming a boundary of the State of Illinois, except
for Lake Michigan. The Illinois Riverboat Gambling Act strictly regulates the
facilities, persons, associations and practices related to gaming operations
pursuant to the police powers of the State of Illinois, including
comprehensive law enforcement supervision. The Illinois Riverboat Gambling Act
grants the Illinois Gaming Board specific powers and duties, and all other
powers necessary and proper to fully and effectively execute the Illinois
Riverboat Gambling Act for the purpose of administering, regulating and
enforcing the system of riverboat gaming. The Illinois Gaming Board's
jurisdiction extends to every person, association, corporation, partnership
and trust involved in riverboat gaming operations in the State of Illinois.
Owner's Licenses. The Illinois Riverboat Gambling Act requires the owner of
a riverboat gaming operation to hold an owner's license issued by the Illinois
Gaming Board. The Aurora casino's owner's license was renewed in 1998 and
expires in December 1999. The Illinois Gaming Board is authorized to issue ten
owner's licenses statewide. Each owner's license permits up to two boats as a
part of the riverboat gaming operation. An entity may be licensed as the owner
of more than one riverboat gaming operation in Illinois, subject to Illinois
Gaming Board approval. In addition to the ten owner's licenses which may be
authorized under the Illinois Riverboat Gambling Act, the Illinois Gaming
Board may issue special event licenses allowing persons who are not otherwise
licensed to conduct riverboat gaming to conduct such gaming on a specified
date or series of dates. Riverboat gaming under such a license may take place
on a riverboat not normally used for riverboat gaming.
An owner's license is issued for an initial period of three years and must
be renewed every four years thereafter, unless the Illinois Gaming Board sets
a shorter period. An owner's license is eligible for renewal upon payment of
the applicable fee and a determination by the Illinois Gaming Board that the
licensee continues to meet all of the requirements of the Illinois Riverboat
Gambling Act, the Illinois Gaming Board's rules and any conditions placed on a
prior license renewal. Any bankruptcy, liquidation, reorganization, cessation
of gaming operations, or substantial change in the ownership or control of an
owner's license, or an event which adversely
57
<PAGE>
affects the character, reputation or financial integrity of the licensee,
during the term of a license may cause the Illinois Gaming Board to suspend,
restrict or revoke the license or impose other discipline. The Illinois Gaming
Board also requires that officers, directors and employees of a gaming
operation and suppliers of gaming equipment, devices and supplies and certain
other suppliers be licensed. Licenses issued by the Illinois Gaming Board may
not be transferred to another person or entity. All licensees must maintain
their suitability for licensure and have a continuing duty to disclose any
material changes in information provided to the Illinois Gaming Board.
Applicants for and holders of an owner's license are required to obtain
formal prior approval from the Illinois Gaming Board for changes proposed in
the following areas: key persons; type of entity; equity and debt
capitalization of the entity; investors and/or debt holders; source of funds;
economic development plans or proposals; riverboat cruising schedules or
routes, capacity or significant design change; gaming positions; anticipated
economic impact; or agreements, oral or written, relating to the acquisition
or disposition of property (real or personal) of a value greater than $1
million.
A holder of an owner's license is allowed to make distributions to its
partners, stockholders or itself only to the extent that such distribution
would not impair the financial viability of the gaming operation. Factors to
be considered by the licensee include, but are not limited to, the following:
. cash flow, casino cash and working capital requirements;
. debt service obligations and covenants associated with financial
instruments;
. requirements for repairs, maintenance and capital improvements;
. employment or economic development requirements of the Illinois
Riverboat Gambling Act; and
. a licensee's financial projections.
The Illinois Gaming Board will require a business entity or personal
disclosure form and approval as a key person for any business entity or
individual with an ownership interest or voting rights of more than 5% in a
licensee, the trustee of any trust holding such ownership interest or voting
rights, the directors of the licensee and its chief executive officer,
president and chief operating officer, as well as any other individual or
entities deemed by the Illinois Gaming Board to hold a position or a level of
ownership, control or influence that is material to the regulatory concerns
and obligations of the Illinois Gaming Board. Each key person must file, on an
annual basis, a disclosure affidavit, updated personal and background
information, and updated tax and financial information. Key persons are
required to promptly disclose to the Illinois Gaming Board any material
changes in status or information previously provided to the Illinois Gaming
Board, and to maintain their suitability as key persons. In order for the
Illinois Gaming Board to identify potential key persons, each holder of an
owner's license is required to file a table of organization, ownership and
control with the Illinois Gaming Board to identify the individuals or entities
that through direct or indirect means manage, own or control the interests and
assets of the applicant or licensee. Based upon findings from an investigation
into the character, reputation, experience, associations, business probity and
financial integrity of a key person, the Illinois Gaming Board may enter an
order upon the licensee to require economic disassociation of a key person.
Each licensee is required to provide a means for the economic disassociation
of a key person in the event such disassociation is required.
An "institutional investor," as defined in the regulations under the
Illinois Riverboat Gambling Act, that individually or jointly with others,
cumulatively acquires, directly or indirectly, 5% or more of any class of
voting securities of a publicly-traded licensee or a licensee's publicly-
traded parent corporation shall, within no less than ten days after acquiring
the securities, notify the Administrator of the Illinois Gaming Board of the
ownership and shall provide any additional information as may be required. If
an institutional investor acquires 10% or more of any class of voting
securities of a publicly-traded licensee or a licensee's publicly-traded
parent corporation, it shall file an Institutional Investor Disclosure Form
within 45 days after acquiring that level of ownership interest, unless such
requirement is waived by the Administrator. The licensee shall notify the
Administrator as soon as possible after it becomes aware that it or its parent
is involved in an ownership
58
<PAGE>
acquisition by an institutional investor. Notwithstanding the foregoing, the
institutional investor's obligation shall be independent of the licensee's
obligation to notify the Administrator.
An ownership interest in a holder of an owner's license may be transferred
or pledged as collateral only with the consent of the Illinois Gaming Board.
Regulation of Gaming Operations. The Illinois Riverboat Gambling Act does
not limit the maximum bet or per patron loss and licensees may set any maximum
or minimum bets or other limits on wagering. No person under the age of 21 is
permitted to wager. Vessels must have the capacity to hold a minimum of 500
persons if operating on the Mississippi River or the Illinois River south of
Marshall County, and a minimum of 400 persons on any other waterway. The
number of gaming positions are limited to a maximum of 1,200 per license. A
licensee may conduct riverboat gambling regardless of whether it conducts
excursion cruises. A licensee may permit the continuous ingress and egress of
passengers for the purpose of gambling.
A $2 per person admission tax is imposed on the owner of a riverboat
operation. Such admission tax for the Aurora casino amounted to $6.6 million,
$7.2 million and $6.4 million, respectively, during 1998, 1997 and 1996.
Additionally, a wagering tax is imposed on the adjusted gross receipts, as
defined in the Illinois Riverboat Gambling Act. This gaming tax increased
significantly in 1998. The tax rate changed from a flat 20% to graduated rates
ranging from 15% to 35%. The licensee is required to wire transfer all such
gaming tax payments to the Illinois Gaming Board. The wagering tax for the
Aurora casino amounted to $42.4 million, $30.7 million and $31.3 million,
respectively, for the years 1998, 1997 and 1996.
The Illinois Gaming Board is authorized to conduct investigations into the
conduct of gaming employees and into alleged violations of the Illinois
Riverboat Gambling Act and to take such disciplinary and enforcement action as
it may deem necessary and proper. Employees and agents of the Illinois Gaming
Board have access to and may inspect any facilities relating to the riverboat
gaming operations at all times.
A holder of any license is subject to imposition of penalties and fines,
suspension or revocation of the license, or other action for any act or
failure to act by the holder or his or her agents or employees, that is
injurious to the public health, safety, morals, good order and general welfare
of the people of the State of Illinois, or that would discredit or tend to
discredit the Illinois gaming industry or the State of Illinois. Any riverboat
operation not conducted in compliance with the Illinois Riverboat Gambling Act
may constitute an illegal gaming place and consequently may be subject to
criminal penalties, which penalties include possible seizure, confiscation and
destruction of illegal gaming devices and seizure and sale of riverboats and
dock facilities to pay any unsatisfied judgment that may be recovered and any
unsatisfied fine that may be levied. The Illinois Riverboat Gambling Act also
provides for civil penalties equal to the amount of gross receipts derived
from wagering on the gaming, whether unauthorized or authorized, conducted on
the day of any violation. The Illinois Gaming Board may revoke or suspend
licenses, as the Board may see fit and in compliance with applicable laws of
Illinois regarding administrative procedures, and may suspend an owner's
license, without notice or hearing, upon a determination that the safety or
health of patrons or employees is jeopardized by continuing a riverboat's
operation. The suspension may remain in effect until the Illinois Gaming Board
determines that the cause for suspension has been abated and it may revoke the
owner's license upon a determination that the owner has not made satisfactory
progress toward abating the hazard.
The Illinois Gaming Board may waive any licensing requirement or procedure
provided by rule if it determines that such waiver is in the best interests of
the public and the gaming industry.
Mississippi
The ownership and operation of casino gaming facilities in Mississippi are
subject to extensive state and local regulation, including the Mississippi
Gaming Control Act. Gaming in Mississippi can be legally conducted
59
<PAGE>
only on vessels of a certain minimum size in navigable waters of counties
bordering the Mississippi River or in waters of the State of Mississippi which
lie adjacent to the coastline of the three counties bordering the Gulf of
Mexico and counties in which gaming has been approved by the voters.
Mississippi's gaming operations are subject to the licensing and regulatory
control of the Mississippi Gaming Commission and various federal, state, and
county regulatory agencies.
The Mississippi Gaming Control Act does not restrict the amount or
percentage of space on a vessel that may be utilized for gaming nor does it
limit the number of licenses that the Mississippi Gaming Commission can grant
for a particular area. The Mississippi Gaming Control Act provides for
legalized dockside gaming at the discretion of the fourteen counties that
either border the Gulf Coast or the Mississippi River, but only if the voters
in such counties have not voted to prohibit gaming in that county. An
amendment to the Mississippi Constitution has been proposed for adoption
through the initiative and referendum process which, if a sufficient number of
signatures are gathered to place the matter on the ballot and if adopted by
the voters of the state, would prohibit gaming in Mississippi. See "Risk
Factors--Anti-Gaming Initiatives."
Each of HWCC-Tunica's directors, officers and certain key employees who are
actively and directly engaged in the administration or supervision of gaming
in Mississippi, or who have any other significant involvement with the gaming
activities of the Tunica casino, must be found suitable therefor and may be
required to be licensed by the Mississippi Gaming Commission. All personnel
responsible for the direction and management of the Tunica casino have been
found suitable by the Mississippi Gaming Commission. The finding of
suitability is comparable to licensing, and both require submission of
detailed personal financial information followed by a thorough investigation.
An application for licensing may be denied for any cause deemed reasonable by
the issuing agency. Changes in licensed positions must be reported to the
issuing agency and the Mississippi Gaming Commission has jurisdiction to
disapprove a change in licensed positions. If the Mississippi Gaming
Commission were to find a director, officer or key employee unsuitable for
licensing or unsuitable to continue having a relationship with HWCC-Tunica,
HWCC-Tunica would have to suspend, dismiss and sever all relationships with
the person or lose its license. HWCC-Tunica would have similar obligations
with regard to any person who refuses to file appropriate applications. Each
gaming employee must obtain a work permit.
The licenses obtained by HWCC-Tunica are not transferable and will need to
be renewed periodically. The ownership license for the Tunica Casino has been
renewed through October 18, 1999. Presently, the policy of the Mississippi
Gaming Commission is to award casino licenses for two-year periods, subject to
renewal. The Mississippi Gaming Commission has the power to deny, limit,
condition, revoke and suspend any license, finding of suitability or
registration, and to fine any person as it deems reasonable and in the public
interest, subject to an opportunity for a hearing.
Any individual who is found to have a material relationship to, or material
involvement with, HWCC-Tunica may be required to be investigated in order to
be found suitable or to be licensed as a business associate of HWCC-Tunica.
Key employees, controlling persons or others who exercise significant
influence upon the management or affairs of HWCC-Tunica may also be deemed to
have such a relationship or involvement. Additionally, certain beneficial
owners, lenders and landlords of HWCC-Tunica may be required to be licensed.
The landlord under the ground lease for the Tunica casino has been found
suitable by the Mississippi Gaming Commission.
The statutes and regulations give the Mississippi Gaming Commission the
discretion to require a suitability finding with respect to anyone who
acquires any debt or equity security of HWCC-Tunica regardless of the
percentage of ownership. In addition, the Mississippi Gaming Commission has
discretionary authority to require a holder of any debt to file an
application, to be investigated and to be found suitable. While the
Mississippi Gaming Commission generally does not require the individual
holders of obligations to be investigated and found suitable, the Mississippi
Gaming Commission retains the discretion to do so for any reason, including
but not limited to a default or where the holder of a debt instrument
exercises a material influence over the gaming operations of the entity in
question. The applicant is required to pay all costs of investigation.
60
<PAGE>
Any owner of debt or equity securities found unsuitable and who holds,
directly or indirectly, any beneficial ownership of debt or equity interests
in HWCC-Tunica beyond such period of time as may be prescribed by the
Mississippi Gaming Commission may be guilty of a misdemeanor. Any person who
fails or refuses to apply for a finding of suitability or a license within 30
days after being ordered to do so by the Mississippi Gaming Commission may be
found unsuitable. HWCC-Tunica is subject to disciplinary action if, after it
receives notice that a person is unsuitable to be an owner of its debt or
equity securities or to have any other relationship with it, HWCC-Tunica:
. pays the unsuitable person any distributions or interest upon any
securities of HWCC-Tunica or any payments or distribution of any
kind whatsoever;
. recognizes the exercise, directly or indirectly, of any voting
rights in its securities by the unsuitable person; or
. pays the unsuitable person any remuneration in any form for services
rendered or otherwise, except in certain limited and specific
circumstances.
In addition, if the Mississippi Gaming Commission finds any owner
unsuitable, such owner must immediately offer all of the owner's securities in
HWCC-Tunica for purchase, and HWCC-Tunica shall, in turn, purchase the
securities so offered, for cash at fair market value, within 10 days of the
date of such offer.
The Mississippi Gaming Commission has the power to impose additional
restrictions on the holders of HWCC-Tunica's securities at any time through
its power to regulate licensees.
Mississippi gaming regulations provide that a change in control of HWCC-
Tunica may not occur without the prior approval of the Mississippi Gaming
Commission. Mississippi law prohibits HWCC-Tunica from making a public
offering of its securities without the approval of the Mississippi Gaming
Commission if any part of the proceeds of the offering is to be used to
finance the construction, acquisition or operation of gaming facilities in
Mississippi, or to retire or extend obligations incurred for one or more of
such purposes.
Because HWCC-Tunica is licensed to conduct gaming in Mississippi, neither
HWCC-Tunica nor any affiliates may engage in gaming activities outside of
Mississippi without the prior approval of the Mississippi Gaming Commission.
The Mississippi Gaming Commission has adopted regulations related to foreign
gaming approval, and HWCC-Tunica has been approved by the Mississippi Gaming
Commission under its regulations to engage in gaming activities in certain
jurisdictions outside of Mississippi.
License fees and taxes are based upon a percentage of the gross gaming
revenues received by a casino operation, the number of slot machines operated
by the casino and the number of table games operated by the casino. In
particular, gaming licensees must pay an annual $5,000 license fee and an
additional fee based on the number of gaming devices. A state gross revenues
fee of 8% is due on adjusted gross gaming revenues. Several local governments
have been authorized to impose additional gross fees on adjusted gross gaming
revenues of up to 4% and annual license fees based on the number of gaming
devices on board. Tunica County imposes a fee of 4% on adjusted gross gaming
revenues. These gaming taxes for the Tunica casino amounted to $11.7 million,
$11.9 million and $10.7 million during 1998, 1997 and 1996, respectively.
Gross gaming taxes paid to the state are allowed as a credit against
Mississippi state income tax liability.
During January 1999, the Mississippi Gaming Commission adopted a regulation
requiring that new casino applicants invest a minimum of 100% of the higher of
the appraised value of their casino or the construction cost of their casino
in land-based facilities. These facilities shall include any of the following:
the construction of a minimum of 250 hotel rooms for each casino, a theme
park, golf courses, marinas, a tennis complex, entertainment facilities or any
other facility approved by the Mississippi Gaming Commission. The regulation
will apply to all new casino projects.
Louisiana
The ownership and operation of a riverboat gaming vessel is subject to the
Louisiana Riverboat Economic Development and Gaming Control Act. As of May 1,
1996, gaming activities are regulated by the Louisiana
61
<PAGE>
Gaming Control Board. The Louisiana Gaming Control Board is responsible for
issuing the riverboat gaming license and enforcing the laws, rules and
regulations relative to riverboat gaming activities. The Louisiana Gaming
Control Board is empowered to issue up to 15 riverboat gaming licenses to
conduct gaming activities on a riverboat of new construction in accordance
with applicable law. However, no more than six riverboat gaming licenses may
be granted to riverboats operating from any one parish. Shreveport and Bossier
City are located in two adjacent parishes.
The laws and regulations of Louisiana seek to prevent unsavory or unsuitable
persons from having any direct or indirect involvement with gaming at any time
or in any capacity; establish and maintain responsible accounting practices
and procedures; maintain effective control over the financial practices of
riverboat gaming licensees, including establishing procedures for reliable
record keeping and making periodic reports to the Louisiana Gaming Control
Board; prevent cheating and fraudulent practices; provide a source of state
and local revenues through fees; and ensure that riverboat gaming licensees,
to the extent practicable, employ and contract with Louisiana residents, women
and minorities.
The Louisiana Riverboat Economic Development and Gaming Control Act
specifies certain restrictions and conditions relating to the operation of
riverboat gaming, including but not limited to the following:
. in parishes bordering the Red River, such as our property in
Shreveport, gaming may be conducted dockside; however, in all other
authorized locations gaming is not permitted while a riverboat is
docked, other than for forty-five minutes between excursions, unless
dangerous weather or water conditions exist as certified by the
riverboat's master;
. each round trip riverboat cruise may not be less than three nor more
than eight hours in duration, subject to specified exceptions;
. agents of the Louisiana Gaming Control Board are permitted on board
at any time during gaming operations;
. gaming devices, equipment and supplies may be purchased or leased
only from permitted suppliers;
. gaming may only take place in the designated gaming area while the
riverboat is upon a designated river or waterway;
. gaming equipment may not be possessed, maintained, or exhibited by
any person on a riverboat except in the specifically designated
gaming area, or a secure area used for inspection, repair, or
storage of such equipment;
. wagers may be received only from a person present on a licensed
riverboat;
. persons under 21 are not permitted on gaming vessels;
. except for slot machine play, wagers may be made only with tokens,
chips, or electronic cards purchased from the licensee aboard a
riverboat;
. licensees may only use docking facilities and routes for which they
are licensed and may only board and discharge passengers at the
riverboat's licensed berth;
. licensees must have adequate protection and indemnity insurance;
. licensees must have all necessary federal and state licenses,
certificates and other regulatory approvals prior to operating a
riverboat; and
. gaming may only be conducted in accordance with the terms of the
riverboat gaming license, the Louisiana Riverboat Economic
Development and Gaming Control Act and the rules and regulations
adopted by the Louisiana Gaming Control Board.
No person may receive any percentage of the profits from our operations in
Louisiana without first being found suitable. In September 1998, we, our
officers, key personnel, partners and persons holding a 5% or greater interest
in the partnership were found suitable by the Louisiana Gaming Control Board.
A riverboat gaming
62
<PAGE>
license is deemed to be a privilege under Louisiana law and as such may be
denied, revoked, suspended, conditioned or limited at any time by the
Louisiana Gaming Control Board. In issuing a riverboat gaming license, the
Louisiana Gaming Control Board must find that the applicant is a person of
good character, honesty and integrity and that the applicant is a person whose
prior activities, criminal record, if any, reputation, habits and associations
do not pose a threat to the public interest of the State of Louisiana or to
the effective regulation and control of gaming, or create or enhance the
dangers of unsuitable, unfair or illegal practices, methods, and activities in
the conduct of gaming or the carrying on of business and financial
arrangements in connection therewith. The Louisiana Gaming Control Board will
not grant any riverboat gaming licenses unless it finds that:
. the applicant is capable of conducting gaming operations, which
means that the applicant can demonstrate the capability, either
through training, education, business experience, or a combination
of the above, to operate a gaming casino;
. the proposed financing of the riverboat and the gaming operations is
adequate for the nature of the proposed operation and from a source
suitable and acceptable to the Louisiana Gaming Control Board;
. the applicant demonstrates a proven ability to operate a vessel of
comparable size, capacity and complexity to a riverboat in its
application for a riverboat gaming license so as to ensure the
safety of its passengers;
. the applicant designates the docking facilities to be used by the
riverboat;
. the applicant shows adequate financial ability to construct and
maintain a riverboat;
. the applicant submits a detailed plan of design of the riverboat in
its application for a riverboat gaming license;
. the applicant has a good faith plan to recruit, train and upgrade
minorities in all employment classifications; and
. the applicant is of good moral character.
The Louisiana Gaming Control Board may not award a riverboat gaming license
to any applicant who fails to provide information and documentation to reveal
any fact material to qualifications or who supplies information which is
untrue or misleading as to a material fact pertaining to the qualification
criteria; who has been convicted of or pled nolo contendere to an offense
punishable by imprisonment of more than one year; who is currently being
prosecuted for or regarding whom charges are pending in any jurisdiction of an
offense punishable by more than one year imprisonment; or if any holder of 5%
or more in the profits and losses of the applicant has been convicted of or
pled guilty or nolo contendere to an offense which at the time of conviction
is punishable as a felony.
The transfer of a riverboat gaming license is prohibited. The sale,
assignment, transfer, pledge, or disposition of securities which represent 5%
or more of the total outstanding shares issued by a holder of a riverboat
gaming license is subject to prior Louisiana Gaming Control Board approval. A
security issued by a holder of a riverboat gaming license must generally
disclose these restrictions.
Section 2501 of the regulations enacted by the Louisiana State Police
Riverboat Gaming Division under the Louisiana Riverboat Economic Development
and Gaming Control Act requires prior written approval of the Louisiana Gaming
Control Board of all persons involved in the sale, purchase, assignment,
lease, grant or foreclosure of a security interest, hypothecation, transfer,
conveyance or acquisition of an ownership interest, other than in a
corporation, or economic interest of 5% or more in any licensee.
Section 2523 of the regulations requires notification to and prior approval
from the Louisiana Gaming Control Board of the application for, receipt,
acceptance or modification of a loan; use of any cash, property, credit, loan
or line of credit, or guarantee or granting of other forms of security for a
loan by a licensee or person acting on a licensee's behalf.
63
<PAGE>
Exceptions to prior written approval apply to any transaction for less than
$2.5 million in which all of the lending institutions are federally regulated,
or if the transaction involves publicly registered debt and securities sold
pursuant to a firm underwriting agreement.
The failure of a licensee to comply with the requirements set forth above
may result in the suspension or revocation of that licensee's riverboat gaming
license. Additionally, if the Louisiana Gaming Control Board finds that the
individual owner or holder of a security of a corporate licensee or
intermediary company or any person with an economic interest in a licensee is
not qualified under the Louisiana Riverboat Economic Development and Gaming
Control Act, the Louisiana Gaming Control Board may require, under penalty of
suspension or revocation of the riverboat gaming license, that the person not
receive dividends or interest on securities of the corporation; exercise
directly or indirectly a right conferred by securities of the corporation;
receive remuneration or economic benefit from the licensee; or continue in an
ownership or economic interest in the licensee.
A licensee must periodically report the following information to the
Louisiana Gaming Control Board, which is not confidential and is to be
available for public inspection: the licensee's net gaming proceeds from all
authorized games; the amount of net gaming proceeds tax paid; and all
quarterly and annual financial statements presenting historical data that are
submitted to the Louisiana Gaming Control Board, including annual financial
statements that have been audited by an independent certified public
accountant.
The Louisiana Gaming Control Board has adopted rules governing the method
for approval of the area of operations and the rules and odds of authorized
games and devices permitted, and prescribing grounds and procedures for the
revocation, limitation or suspension of licenses and permits.
On April 19, 1996, the Louisiana legislature adopted legislation requiring
statewide local elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit licensed riverboat gaming, licensed video poker
gaming, and licensed land-based gaming in Louisiana parishes. The applicable
local election took place on November 5, 1996, and the voters in the parishes
in which riverboats are currently located voted to continue licensed riverboat
gaming. However, it is noteworthy that the current legislation does not
provide for any moratorium on future local elections on gaming.
As a result of the Justice Department's recent indictment of former
Louisiana Governor Edwin Edwards and certain other persons, on charges
relating to, among other things, riverboat gaming licenses in Louisiana, the
Louisiana regulators are applying greater scrutiny to the suitability and
business practices of the licensee.
Non-Gaming Regulation
We are subject to certain federal, state and local safety and health laws,
regulations and ordinances that apply to non-gaming businesses generally, such
as the Clean Air Act, Clean Water Act, Occupational Safety and Health Act,
Resource Conservation Recovery Act and the Comprehensive Environmental
Response, Compensation and Liability Act. We have not made, and do not
anticipate making, material expenditures with respect to the environmental
laws and regulations. However, the coverage and attendant compliance costs
associated with the laws, regulations and ordinances may result in future
additional costs to our operations. For example, in 1990 the U.S. Congress
enacted the Oil Pollution Act to consolidate and rationalize mechanisms under
various oil spill response laws. The Department of Transportation has proposed
regulations requiring owners and operators of certain vessels to establish
through the U.S. Coast Guard evidence of financial responsibility in the
amount of $5.5 million for clean-up of oil pollution. This requirement would
be satisfied by either proof of adequate insurance, including self-insurance,
or the posting of a surety bond or guaranty.
The riverboats operated by us must comply with U.S. Coast Guard requirements
as to boat design, on-board facilities, equipment, personnel and safety. Each
of them must hold a Certificate of Seaworthiness or must be approved by the
American Bureau of Shipping for stabilization and flotation, and may also be
subject to local zoning and building codes. The U.S. Coast Guard requirements
establish design standards, set limits on the operation of the vessels and
require individual licensing of all personnel involved with the operation of
the vessels. Loss of a vessel's Certificate of Seaworthiness or American
Bureau of Shipping approval would preclude its use as a floating casino.
64
<PAGE>
All of our shipboard employees, even those who have nothing to do with the
marine operations of the vessel, like dealers, waiters and security personnel,
may be subject to the Jones Act which, among other things, exempts those
employees from state limits on workers' compensation awards.
Legal Proceedings
Planet Hollywood Litigation. Planet Hollywood International, Inc. and Planet
Hollywood (Region IV), Inc. filed a complaint in the United State District
Court for the Northern District of Illinois, Eastern Division on July 29,
1996, against us, Hollywood Casino-Aurora and a member of the Pratt family. On
September 18, 1996, we filed an answer to the Planet Hollywood lawsuit, along
with numerous counterclaims against Planet Hollywood, Robert Earl and Keith
Barish. Planet Hollywood filed an amendment to their complaint on January 21,
1997, which, among other things, added HWCC-Tunica and Greate Bay as
defendants. Shortly thereafter, we and Greate Bay filed answers and
counterclaims to their amended complaint.
In its complaint, Planet Hollywood alleges, among other things, that we and
Greate Bay have, in operating the Hollywood Casino concept, infringed on their
trademark, service mark and trade dress and have engaged in unfair competition
and deceptive trade practices. In our counterclaims, we and Greate Bay allege,
among other things, that Planet Hollywood has, through their planned use of
their mark in connection with casino services, infringed on our service marks
and trade dress and have engaged in unfair competition. A trial date has been
set for July 19, 1999.
Given the uncertainties inherent in litigation, we cannot be sure that we
will prevail in this matter. However, we believe that Planet Hollywood's
claims are without merit and intend to defend our position and our
counterclaims vigorously.
Arthur Andersen Litigation. On October 8, 1998, we filed a complaint in the
district court of Dallas County, Texas against Arthur Andersen LLP, our former
independent accountants, and selected partners alleging negligent advice and
breach of contract with respect to the tax consequences resulting from the
spin-off of Greate Bay's stock to our shareholders on December 31, 1996. In
1998, we resolved any potential disputes with the Internal Revenue Service and
our stockholders that could arise in connection with the adverse tax treatment
of the distribution of Greate Bay's stock. The estimated cost of such
settlements is $.9 million and we have included this amount as damages in our
complaint against Arthur Andersen. The lawsuit is currently in the initial
stages of discovery.
Other Litigation. Although we are involved in other legal proceedings
arising in the ordinary course of our business, we are not involved in any
other legal proceeding that we believe will result, individually or in the
aggregate, in a material adverse effect upon our financial condition or
results of operations.
65
<PAGE>
MANAGEMENT
Set forth below is certain information concerning our directors and
executive officers:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Jack E. Pratt.............. 72 Chief Executive Officer and Chairman of the
Board of Directors
Edward T. Pratt, Jr........ 75 Vice President, Treasurer and Vice Chairman of
the Board of Directors
William D. Pratt........... 70 Executive Vice President, Secretary, General
Counsel and Director
Edward T. Pratt III........ 43 President, Chief Operating Officer and Director
Paul C. Yates.............. 37 Executive Vice President and Chief Financial
Officer
Charles F. LaFrano III..... 44 Vice President of Finance
James A. Colquitt.......... 80 Director
Theodore H. Strauss........ 74 Director
Oliver B. Revell III....... 60 Director
</TABLE>
Set forth below is a description of the backgrounds of our directors and
executive officers. Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt
are brothers and Edward T. Pratt III is the son of Edward T. Pratt, Jr. There
is no other family relationship between any of our directors and any of our
executive officers or any of our subsidiaries or affiliates. Our officers are
elected by the Board of Directors and hold office until their respective
successors are duly elected and qualified.
Jack E. Pratt has been Chief Executive Officer and Chairman of the Board
since 1993. From 1990 to May 1995, he also served as our President. Mr. Pratt
also served as Chairman of the Board of Directors and Chief Executive Officer
of Greate Bay for more than five years prior to his resignation from such
positions on January 2, 1998. Mr. Pratt served as Chairman of the Board of
Directors and Chief Executive Officer of GB Holdings, Inc. and Greate Bay
Hotel and Casino, Inc. and as Chairman of the Board of Directors, President
and Chief Executive Officer of GB Property Funding until his resignation from
such positions on January 2, 1998. On January 5, 1998, these Greate Bay
subsidiaries filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code. Mr. Pratt served until his resignation from such positions in
January 1998 as Chairman of the Board of Directors and Chief Executive Officer
of Pratt Casino Corporation, Chairman of the Board of Directors, President and
Chief Executive Officer of PRT Funding Corp. and Chairman of the Board of
Directors and President of New Jersey Management, Inc. On May 25, 1999, Pratt
Casino, PRT Funding and New Jersey Management filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code.
Edward T. Pratt, Jr. has been Vice President, Treasurer and Vice Chairman of
the Board of Directors since 1990 and has served for more than five years as
Treasurer and Vice Chairman of the Board of Directors of Greate Bay. Mr. Pratt
also served until his resignation from such positions on January 2, 1998 as
Vice Chairman of the Board of Directors of GB Holdings and of GB Property
Funding and as a director of Greate Bay Hotel and Casino. On January 5, 1998,
these Greate Bay subsidiaries filed petitions for relief under Chapter 11 of
the United States Bankruptcy Code. Mr. Pratt has been Chief Financial Officer,
Principal Accounting Officer and a director of Pratt Casino, PRT Funding and
New Jersey Management since January 2, 1998 and also served as Vice Chairman
of the Board of Directors of Pratt Casino and PRT Funding from September 1993
to January 1, 1998 and as Executive Vice President, Treasurer and a director
of New Jersey Management for more than five years prior to January 1, 1998. On
May 25, 1999, Pratt Casino, PRT Funding and New Jersey Management filed
petitions for relief under Chapter 11 of the United States Bankruptcy Code.
66
<PAGE>
William D. Pratt has served as Executive Vice President, Secretary, General
Counsel and a director since 1990 and has served as Executive Vice President,
Secretary, General Counsel and director of Greate Bay for more than five
years. Mr. Pratt also served until his resignation from such positions on
January 2, 1998 as Executive Vice President, General Counsel and Secretary of
GB Holdings and of GB Property Funding and as a director of Greate Bay Hotel
and Casino. On January 5, 1998, these Greate Bay subsidiaries filed petitions
for relief under Chapter 11 of the United States Bankruptcy Code. Mr. Pratt
also served until his resignation from such positions in January 1998 as
Executive Vice President, Secretary, General Counsel and a director of Pratt
Casino and PRT Funding and as Vice President, Secretary and a director of New
Jersey Management. On May 25, 1999, Pratt Casino, PRT Funding and New Jersey
Management filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code.
Edward T. Pratt III has served on the Board of Directors since 1992. From
1992 to July 1993, he served as our Vice President, from July 1993 to May
1995, he served as Executive Vice President, and in May 1995, Mr. Pratt was
elected President and Chief Operating Officer. Mr. Pratt served as Executive
Vice President-Development and Corporate Affairs of Greate Bay for more than
five years until November 1995 when he was elected President and Chief
Operating Officer of Greate Bay. He also served until his resignation from
such positions on January 2, 1998 as President, Chief Operating Officer and a
director of GB Holdings, and as Executive Vice President and a director of GB
Property Funding. On January 5, 1998, these Greate Bay subsidiaries filed
petitions for relief under Chapter 11 of the United States Bankruptcy Code.
Mr. Pratt has been Executive Vice President and Secretary of Pratt Casino, PRT
Funding and New Jersey Management since January 2, 1998 and also served as
President, Chief Operating Officer and a director of Pratt Casino and as
Executive Vice President and a director of PRT Funding from September 1993 to
January 1, 1998. On May 25, 1999, Pratt Casino, PRT Funding and New Jersey
Management filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code.
Paul C. Yates has served as Executive Vice President and Chief Financial
Officer since May 1998. Prior to August 1997, Mr. Yates served as a Managing
Director of Bear, Stearns & Co. Inc., a leading national investment banking
firm, for a period of more than five years. Bear, Stearns & Co. served as an
underwriter with respect to the October 1995 offering of our 12 3/4% Senior
Secured Notes and is an initial purchaser of the notes offered in this
Offering Memorandum.
Charles F. LaFrano III has served as Vice President of Finance since 1994
and has served as Vice President of Greate Bay for more than five years. Mr.
LaFrano also served until his resignation from such positions on January 2,
1998 as Vice President and Assistant Secretary of GB Holdings and GB Property
Funding. On January 5, 1998, these Greate Bay subsidiaries filed petitions for
relief under Chapter 11 of the United States Bankruptcy Code. Mr. LaFrano
served until his resignation from such positions in January 1998 as Vice
President and Assistant Secretary of Pratt Casino and PRT Funding. On May 25,
1999, Pratt Casino and PRT Funding filed petitions for relief under Chapter 11
of the United States Bankruptcy Code.
James A. Colquitt is self-employed as an insurance consultant and was
elected to the Board of Directors in December 1995. Until 1983, Mr. Colquitt
was Chairman of the Board of Colquitt, Owens & Stephens, a general insurance
agency based in Marietta, Georgia. From 1986 until November 1995, Mr. Colquitt
served on the Board of Directors of Greate Bay.
Theodore H. Strauss has served on the Board of Directors since 1993. Mr.
Strauss has been a Senior Managing Director of Bear, Stearns & Co. for more
than five years. He also serves on the Board of Directors of Clear Channel
Communications, Inc. and Sizeler Property Investors, Inc. Bear, Stearns & Co.
served as an underwriter with respect to the October 1995 offering of our 12
3/4% Senior Secured Notes and is an initial purchaser of the notes offered in
this Offering Memorandum.
Oliver B. Revell III was elected to fill an existing vacancy on the Board of
Directors on September 12, 1997. Mr. Revell has been President of Revell Group
International, a security consulting business, since September 1994. From May
1991 until September 1994, Mr. Revell was a Special Agent in Charge for the
Federal Bureau of Investigation.
67
<PAGE>
Compensation Committee Interlocks and Insider Participation
The compensation committee of the Board of Directors is comprised of William
D. Pratt, James A. Colquitt and Theodore H. Strauss. Mr. Pratt also serves as
an executive officer and director of Greate Bay. Mr. Strauss is a Senior
Managing Director of Bear, Stearns & Co., which served as underwriters with
respect to our offering of the 12 3/4% Senior Secured Notes and is an initial
purchaser of the notes offered in this Offering Memorandum.
Compensation of Directors
Our non-employee directors receive an annual fee of $50,000 for service on
the Board of Directors as well as grants of stock options under the Hollywood
Casino Corporation 1996 Non-Employee Director Stock Plan (the "Directors'
Plan"). Directors who are our officers, employees or otherwise affiliated with
us are not presently expected to receive compensation for their services as
directors. Directors are entitled to reimbursement of their reasonable out-of-
pocket expenses in connection with their travel to and attendance at meetings
of the Board of Directors or committees of the Board of Directors.
Compensation of Executive Officers
The following table provides certain summary information concerning
compensation we paid or accrued to or on behalf of our Chief Executive Officer
and each of the four other most highly compensated executive officers
determined as of the end of the last fiscal year for the fiscal years ended
December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Annual Compensation Long-term
------------------------------ Compensation
Name and Principal Other Annual Awards/ All Other
Position Year Salary Bonus Compensation Options Compensation(1)
------------------ ---- -------- -------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Jack E. Pratt(2)........ 1998 $643,729 $170,208 $ -- 150,000 $ 19,270
Chief Executive Officer
and 1997 643,235 228,476 -- 150,000 33,920
Chairman of the Board 1996 646,770 -- 14,000 150,000 279,984
Edward T. Pratt III(2).. 1998 423,860 170,208 -- 150,000 4,000
President and Chief
Operating 1997 423,840 228,476 -- 150,000 3,500
Officer 1996 426,167 -- -- 150,000 1,980
Edward T. Pratt,
Jr.(2)................. 1998 323,425 73,012 -- -- 4,000
Vice President,
Treasurer and 1997 324,312 101,545 -- -- 3,500
Vice Chairman of the
Board 1996 325,891 -- 18,500 -- 171,150
William D. Pratt(2)..... 1998 293,373 73,012 -- -- 11,240
Executive Vice
President, 1997 294,195 101,545 -- -- 11,547
Secretary and General
Counsel 1996 295,811 -- 14,000 -- 215,208
Paul C. Yates(3)........ 1998 164,113 75,000 -- 150,000 --
Executive Vice
President and
Chief Financial Officer
</TABLE>
- --------
(1) Includes our matching contributions to The Hollywood Casino Corporation
Retirement Savings Plan (the "Savings Plan") on behalf of the named
executive officer. See "--Employee Retirement Savings Plan." Amounts set
forth above for Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt
also include pension benefit accruals on their behalf. See also "--
Employment Contracts."
(2) Jack E. Pratt held and Edward T. Pratt, Jr., William D. Pratt and Edward
T. Pratt III concurrently hold positions as officers of Greate Bay.
Through September 1998, Greate Bay reimbursed us for that portion of
salary, bonus and other compensation which relates to services provided to
Greate Bay. Effective October 1, 1998, Greate Bay pays us a monthly
service fee which approximates its portion of shared overhead costs.
(3) Mr. Yates began his employment in May 1998 and, therefore, the amounts
reflected above represent only the period from the commencement of his
employment through the end of the year.
68
<PAGE>
Option Grants in Last Fiscal Year
The following table contains information concerning the grant of stock
options under the Hollywood Casino Corporation 1996 Long-Term Incentive Plan
(the "1996 Plan") to the named executive officers. No grants of stock options
under the 1992 Hollywood Casino Corporation Stock Option Plan (the "1992
Plan") were made to the named executive officers during the fiscal year ended
December 31, 1998.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Appreciation for
Option Grants in Last Fiscal Year Individual Grants Option Term
------------------------------------------------------------ ----------------
% of
Total Options
Options/ Granted to Market Price
SAR'S Employees in Exercise or on Date of Expiration
Name Granted(1) Fiscal Year Base Price Grant Date 5% 10%
---- ---------- ------------- ----------- ------------ ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack E. Pratt........... 150,000 31.9 $1.75 $1.75 6/19/03 $72,524 $160,259
Edward T. Pratt III..... 150,000 31.9 1.75 1.75 6/19/03 72,524 160,259
Edward T. Pratt, Jr..... -- -- -- -- -- -- --
William D. Pratt........ -- -- -- -- -- -- --
Paul C. Yates........... 150,000 31.9 1.91 1.91 5/11/05 116,405 271,274
</TABLE>
- --------
(1) Options are granted "at market" on the date of grant and first become
exercisable six months from the date of grant for Jack E. Pratt and Edward
T. Pratt III. The options granted to Mr. Yates were awarded on May 11,
1998 and become exercisable as follows: 50,000 shares on the first
anniversary of the date of grant, an additional 34,000 shares two years
after such date, an additional 33,000 shares three years after such date
and the remaining 33,000 shares four years after such date.
Option Exercises and Holdings
The following table provides information, with respect to the named
executive officers, concerning options outstanding under the 1992 Plan and the
1996 Plan during the last fiscal year and unexercised options held as of the
end of the fiscal year:
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
<TABLE>
<CAPTION>
Value of Unexercised
in the Money Options
at Fiscal Year-End
Value Realized Number of Unexercised (Market Price of Shares
(Market Price Options at Fiscal Year at Fiscal Year End($1.03)
Shares at Exercise End Less Exercise Price)
Acquired Less ------------------------- -------------------------
Name on Exercise Exercise Price) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack E. Pratt........... -- $ -- 450,000 -- $-- $--
Edward T. Pratt III..... 40,008 64,989 450,000 -- -- --
Edward T. Pratt, Jr..... -- -- -- -- -- --
William D. Pratt........ -- -- -- -- -- --
Paul C. Yates........... -- -- -- 150,000 -- --
</TABLE>
On June 19, 1998, our Board of Directors approved the repricing of all
options granted under the Directors' Plan prior to January 1, 1998. The
exercise price on such options was reset at $1.75 per share, the market value
of our stock at the date of repricing. All of the options repriced remain
fully vested. The following table presents certain information concerning the
repricing of options to all of our executive officers and directors since our
inception.
69
<PAGE>
Ten Year Option Repricing Table
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Option Term
Underlying of Stock Exercise Price New Remaining at
Date of Options at Time at Time of of Exercise Date of
Name Repricing Required of Repricing Repricing Price Repricing
---- --------- ---------- ------------ -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
James A. Colquitt....... 6/19/98 10,000 $1.75 $6.25 $1.75 8 yr.
James A. Colquitt....... 6/19/98 2,500 1.75 3.88 1.75 8 yr., 7 mo.
Theodore H. Strauss..... 6/19/98 10,000 1.75 6.25 1.75 8 yr.
Theodore H. Strauss..... 6/19/98 2,500 1.75 3.88 1.75 8 yr., 7 mo.
Oliver B. Revell III.... 6/19/98 10,000 1.75 2.81 1.75 9 yr., 3 mo.
</TABLE>
Employment Contracts
Jack E. Pratt, Chairman of the Board and Chief Executive Officer, Edward T.
Pratt, Jr., Vice Chairman of the Board, Vice President and Treasurer, and
William D. Pratt, Executive Vice President, Secretary and General Counsel, are
under employment contracts with us and have provided services to Greate Bay
under intercompany service and allocation agreements ratified by the
respective non-interested directors of the Boards of Directors. Their
employment contracts were executed during October 1989 and originally expired
on September 30, 1992, but have subsequently been extended by amendment
through December 31, 2001 with respect to Jack E. Pratt and to December 31,
2000 with respect to Edward T. Pratt, Jr. and William D. Pratt. Services to
Greate Bay will continue to be provided pursuant to intercompany service
agreements. The terms of the contracts may be extended again by mutual
agreement of the parties and the extended term, or any further extension
thereof, will be followed immediately by a four-year period as consultants to
us. Upon expiration of the consulting term, each of the Pratt brothers will be
entitled to receive a lifetime pension benefit and his designated beneficiary
is entitled to receive a death benefit, throughout the term of the employment,
consulting and pension benefit periods.
The terms of the employment contracts provide for an annual base salary in
the first year for Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt of
$350,000, $223,000 and $191,000, respectively, subject to annual review and
increase by the compensation committee of the Board of Directors. Compensation
under the consulting and pension benefit provisions of the employment
contracts of each of the Pratt brothers will be 75% of their respective
highest annual salaries during the employment term of each contract. The death
benefit is derived by multiplying each Pratt brother's highest annual salary
during his employment term by 50% and such benefit will be paid annually to
his designated beneficiary for a period of ten years after his death. The
estimated annual pension benefit payable to Jack E. Pratt, Edward T. Pratt,
Jr. and William D. Pratt is currently $484,000, $244,000 and $221,000,
respectively.
Edward T. Pratt III, President and Chief Operating Officer, is under an
employment contract dated as of May 1, 1996 in such capacities continuing
through April 30, 2000 unless sooner terminated by either party. The terms of
Mr. Pratt's agreement provide for a minimum annual base salary effective
January 1, 1996 of $425,000, subject to annual review and increase by the
compensation committee of the Board of Directors. In the event of a change in
control, the agreement provides that if Mr. Pratt's employment were to be
terminated, he would receive the greater of the remaining compensation under
his employment contract or three times his then annual base salary, payable in
a lump sum or in equal monthly installments over the applicable period.
Paul C. Yates, Executive Vice President and Chief Financial Officer, is
under an employment contract dated as of May 11, 1998 in such capacities
continuing through May 10, 2000, unless sooner terminated by either party. The
expiration date of the contract is then subject to an automatic one-year
renewal unless either party provides 90-day notice not to renew. The terms of
Mr. Yates agreement provide for a minimum annual base compensation of
$250,000. In addition, Mr. Yates participates in our incentive bonus plans;
however, the employment agreement provides for a minimum annual bonus of
$75,000. In the event of a change in control, the agreement provides that if
Mr. Yates' employment were to be terminated, he would receive the remaining
compensation and minimum bonus under his employment agreement payable in a
lump sum or in equal monthly installments over the applicable period.
70
<PAGE>
Stock Option Plans
The Hollywood Casino Corporation 1996 Long-Term Incentive Plan. During 1996,
our stockholders approved the adoption of the Hollywood Casino Corporation
1996 Long-Term Incentive Plan. We have reserved 3,000,000 shares of our class
A common stock for grants of nonqualified stock options, stock options
qualified for special tax treatment under the Code and restricted stock awards
(collectively, "awards") to our employees and those of our subsidiaries.
Awards under the 1996 Plan, together with the exercise price, vesting
schedule and restrictions and conditions, if any, are determined by a
committee of the Board of Directors. However, any common stock acquired
pursuant to an award to a director, executive officer or 10% or greater
stockholder must be held by that participant for at least six months from the
date of the award, unless the committee determines that a disposition would
not violate the federal securities laws. The exercise price must be at least
100%, or at least 110% in the case of incentive stock options granted to
certain employees who own greater than 10% of our outstanding common stock, of
the fair market value of the common stock on the date of grant and may be paid
in cash or in shares of our common stock valued at fair market value on the
date of exercise.
No participant in the 1996 Plan may currently receive awards during any
fiscal year covering an aggregate of more than 500,000 shares of common stock.
The grant of incentive stock options is also subject to a $100,000 calendar
year limit for each participant. Upon termination of a participant's
employment for any reason, the participant will forfeit the nonvested portions
of all awards he or she holds. Awards which have not yet vested are not
transferable or assignable other than by will, by the laws of descent and
distribution or as otherwise allowed by the 1996 Plan. The 1996 Plan also
provides that in the event of a "Change in Control," as such term is defined
in the 1996 Plan, all unmatured installments of awards will become fully
accelerated and exercisable in full.
The Hollywood Casino Corporation 1996 Non-Employee Director Stock
Plan. During 1996, our stockholders approved the adoption of the Hollywood
Casino Corporation 1996 Non-Employee Director Stock Plan. We have reserved
150,000 shares of our class A common stock for grants of nonqualified stock
options to directors who are not our employees ("outside directors") in order
to attract and retain such individuals and encourage their performance.
Under the Directors' Plan, an option to purchase 10,000 shares of common
stock was granted to each outside director upon adoption of the Directors'
Plan in 1996. Each person becoming an outside director subsequent to adoption
of the Directors' Plan will automatically receive an option to purchase 10,000
shares on the date that person becomes a director. Additionally, outside
directors will receive a nonqualified option to purchase 2,500 shares of
common stock on January 15 of each year. The exercise price for all options
under the Directors' Plan is 100% of the fair market value of the common stock
on the date of grant and may be paid in cash or in shares of our common stock
valued at fair market value on the date of exercise. An outside director may
also elect to receive all or part of his or her retainer fee in the form of
common stock based on the market value of the common stock as of the end of
the period for which such fee applies. Common stock received in lieu of a
retainer fee is fully vested upon receipt.
Options granted under the Directors' Plan extend for ten years from and may
be exercised any time after six months from the date of grant. Upon
termination of a participant's service as a director due to death or total
disability, outstanding options may be exercised for a period of 12 months
after the termination unless the original expiration date of the option is
sooner. Upon termination of a participant's service as a director for reason
of retirement, outstanding options may be exercised for a period of three
months after retirement. Options granted under the Directors' Plan are not
transferable or assignable other than by will, by the laws of descent and
distribution or as otherwise allowed by the Directors' Plan.
The 1992 Hollywood Casino Corporation Stock Option Plan. During 1992, we
reserved 1,197,000 shares of our class B common stock for the purpose of
establishing the Hollywood Casino Corporation 1992 Stock
71
<PAGE>
Option Plan for our key executives. After the completion of our initial public
offering in June 1993, all stock options outstanding under the 1992 Plan
became exercisable for class A common stock and any options granted under the
1992 Plan after that date are to purchase class A common stock.
Options granted under the 1992 Plan vest in equal annual installments over a
period of three years. In the event of the death, disability or retirement of
a participant in the 1992 Plan, the participant's options will accelerate and
be exercisable in full. If the participant's employment with us is terminated
for cause, as defined in the 1992 Plan, the options held by that participant
shall automatically terminate. Options granted under the 1992 Plan are not
assignable except by will, the laws of descent and distribution or pursuant to
a qualified domestic relations order. The 1992 Plan provides that if any
person or group, other than certain members of the Pratt family, becomes the
beneficial owner of 51% or more of the total voting power of each class of our
capital stock, subject to particular exceptions, the vesting of all
outstanding options will accelerate and be exercisable in full. The exercise
of incentive stock options granted under the 1992 Plan is subject to a
$100,000 calendar-year limit for each option holder based on the fair market
value of the our common stock at the time the option was granted. The exercise
price of options granted under the 1992 Plan may be paid in cash or in shares
of class A common stock valued at fair market value on the date of exercise.
Employee Retirement Savings Plan
During 1993, we adopted The Hollywood Casino Corporation and Subsidiaries
Retirement Savings Plan, a qualified defined contribution plan for the benefit
of all of our employees who satisfy certain eligibility requirements. The
Savings Plan is qualified under the requirements of Section 401(k) of the Code
allowing participating employees to benefit from the tax deferral
opportunities provided therein. All of our employees who have completed one
year of service, as defined, and who have attained the age of 21, are eligible
to participate in the Savings Plan.
The Savings Plan provides for us to make matching contributions based upon
certain criteria, including levels of participation by our employees. We
accrued matching contributions totaling approximately $778,000 for the year
ended December 31, 1998.
72
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our common stock by (1) each person who is known by us to own
beneficially more than 5% of our common stock, (2) each of our directors and
named executive officers and (3) all current directors and named executive
officers as a group.
<TABLE>
<CAPTION>
Shares of Percentage of
Common Stock Outstanding
Beneficial Owner Beneficially Owned(1) Common Stock
- ---------------- --------------------- -------------
<S> <C> <C>
Jack E. Pratt............................. 8,219,377(2) 32.4%
Edward T. Pratt III....................... 2,822,525(3) 11.1%
Edward T. Pratt, Jr....................... 1,091,544 4.4%
William D. Pratt.......................... 1,354,447(4) 5.4%
Paul C. Yates............................. 160,000(5) *
Theodore H. Strauss....................... 20,500(6) *
James A. Colquitt......................... 27,500(6) *
Oliver B. Revell III...................... 15,000(6) *
All directors and officers as a group (9
individuals)............................. 13,737,893(7) 52.9%
</TABLE>
- --------
* Less than 1%
(1) Except as otherwise described, each individual has the sole power to vote
and dispose of the common stock beneficially owned by him.
(2) Mr. Pratt's address is Two Galleria Tower, Suite 2200, 13455 Noel Road,
Dallas, Texas 75240. Beneficial ownership is attributable to the
following: (a) C. A. Pratt Partners, Ltd., a Texas limited partnership of
which Jack E. Pratt is the General Partner, owns 1,642,001 shares, or
6.6%, of our outstanding stock, (b) the MEP Family Partnership and the CLP
Family Partnership, both Texas general partnerships for which Mr. Pratt is
the Managing General Partner, own 14,000 and 7,000 shares, respectively,
both less than 1% of our outstanding stock (c) 1,079,632 shares, or 4.3%,
of our outstanding stock owned of record by adult children of Mr. Pratt
and subject to a proxy giving him the right to vote such shares and
prohibiting the transfer of such shares without his approval and (d)
975,136 shares, or 3.9%, of our outstanding common stock held by Mr. Pratt
as custodian for his minor children. Also includes options to purchase
450,000 shares of our common stock exercisable within 60 days of the date
hereof under the 1996 Plan.
(3) Mr. Pratt's address is Two Galleria Tower, Suite 2200, 13455 Noel Road,
Dallas, Texas 75240. Beneficial ownership is attributable to 1,438,812
shares, or 5.8%, of our common stock owned of record by siblings of Mr.
Pratt and subject to a proxy giving him the right to vote such shares and
prohibiting the transfer of such shares without his approval. Also
includes options to purchase 450,000 shares of our common stock
exercisable within 60 days of the date hereof under the 1996 Plan.
(4) Mr. Pratt's address is Two Galleria Tower, Suite 2200, 13455 Noel Road,
Dallas, Texas 75240. Beneficial ownership is attributable to the
following: (a) 381,088 shares, or 1.5%, of our outstanding stock owned of
record by adult children of Mr. Pratt and subject to a proxy giving him
the right to vote such shares and prohibiting the transfer of such shares
without his approval and (b) WDP Jr. Family Trust, for which Mr. Pratt is
the Managing Trustee, owns 200,294 shares, less than 1% of our outstanding
stock.
(5) Includes options to purchase 50,000 shares of our common stock exercisable
within 60 days of the date hereof under the 1996 Plan.
(6) Includes 17,500 shares of our common stock for each of Mr. Strauss and Mr.
Colquitt and 15,000 shares of our common stock for Mr. Revell subject to
options exercisable within 60 days of the date hereof under the Directors'
Plan.
(7) Includes 1,005,000 shares of our common stock subject to options
exercisable within 60 days of the date hereof.
73
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Greate Bay Casino Corporation
As a result of our distribution of our approximate 80% interest in Greate
Bay stock to our stockholders on December 31, 1996, Greate Bay is no longer a
consolidated subsidiary. Greate Bay, however, remains approximately 36% owned
by the Pratt family and we have a number of common officers and directors.
During 1990, we acquired approximately $38.8 million of unsecured notes (the
"PCPI Notes") issued by PCPI Funding Corp., a subsidiary of Greate Bay. As
part of a refinancing in February 1994, PPI Funding Corp., a newly formed
subsidiary of Greate Bay, issued approximately $40.5 million discounted
principal amount of new deferred interest notes, referred to as the PPI
Funding Notes, in exchange for the $38.8 million principal amount of PCPI
Notes held by us.
It was anticipated that one of our primary methods of collection with
respect to the PPI Funding Notes would be through the utilization of tax net
operating losses generated in prior years by Greate Bay. As Greate Bay is no
longer a consolidated subsidiary for federal income tax purposes, this means
of collection is no longer available to us. At December 31, 1998, we evaluated
the collectability of the PPI Funding Notes. Such evaluation was based, in
part, on our determination of the potential for repayment of the PPI Funding
Notes by means of the available cash and noncash assets of PPI Funding Corp.
and its affiliates. We concluded that a valuation allowance in the amount of
$22.7 million was necessary to reduce the carrying amount of the PPI Funding
Notes to their estimated realizable value of $12.3 million. Management
anticipates that this balance will be realized through a combination of asset
acquisitions and repayments from Greate Bay.
Prior to distributing our approximate 80% interest in Greate Bay to our
stockholders in 1996, Greate Bay borrowed funds on a demand basis from us for
various purposes. As of December 31, 1998, the outstanding balance on such
borrowings was $6.8 million. Of the amounts borrowed, $250,000 was due on
April 1, 1998, for which payment has not been received. Such borrowing from us
continues to bear interest at the rate of 14% per annum, payable semiannually.
The remaining $6.5 million was borrowed from us during 1996 on a demand basis
with interest at the rate of 13 3/4% per annum payable quarterly commencing
October 1, 1996. Interest receivable in connection with such borrowings
amounted to $1.8 million at December 31, 1998. Payment of interest by Greate
Bay on borrowings from us is subject to the approval of New Jersey gaming
authorities.
As of April 1, 1997, HWCC-Aurora Management acquired the general partnership
interest in Pratt Management, which holds the management contract on the
Aurora casino, from a subsidiary of Greate Bay. As general partner, we receive
99% of the first $84,000 of net income earned by the partnership each month
and 1% of any income earned above such amount. Distributions made to the
Greate Bay subsidiary that retained the limited partnership interest amounted
to $5.6 million during 1998. We issued to the Greate Bay subsidiary a five-
year note in the original amount of $3.8 million, assigned $7.6 million
principal amount of PPI Funding Notes and assigned certain accrued interest
receivable in exchange for the general partnership interest. The $3.8 million
note is payable in monthly installments of $83,000, including interest at the
rate of 14% per annum, commencing on May 1, 1997 in an amount equal to our
share of quarterly cash distributions from Pratt Management. The outstanding
principal amount of the note at December 31, 1998 was $2.8 million. We
incurred interest expense on the note amounting to $439,000 during the year
ended December 31, 1998.
Pursuant to a ten-year consulting agreement with HWCC-Tunica, Greate Bay
receives monthly consulting fees of $100,000.
We and our subsidiaries share certain general and administrative costs with
Greate Bay under a services agreement. Net allocated costs and fees charged to
Greate Bay amounted to $1.0 million during the year ended December 31, 1998. A
receivable in the amount of $179,000 in connection with such allocated costs
and fees was due to us at December 31, 1998.
74
<PAGE>
Advanced Casino Systems Corporation, a subsidiary of Greate Bay, provides
computer-related, marketing and other administrative services to our casino
facilities. Advanced Casino Systems Corporation has an agreement with the
Tunica casino through December 31, 1999. This agreement provides for the sale
of computer hardware and information systems equipment and the licensing of
software necessary to operate the facility. The Tunica casino pays prices and
fees in amounts and on terms and conditions that Advanced Casino Systems
Corporation provides to unrelated third parties as well as a fixed license and
consulting fee of $33,600 per month. Advanced Casino Systems Corporation is
also reimbursed for its direct costs and expenses incurred under this
agreement. Advanced Casino Systems Corporation also provides similar services
and hardware to the Aurora casino which it charges for direct costs and
expenses. Total billing to us and to the two casinos for such products and
services amounted to $1.1 million during the year ended December 31, 1998.
Payables to Advanced Casino Systems Corporation at December 31, 1998 totaled
$109,000.
As a result of revising the tax treatment for the spin-off of Greate Bay's
stock to our stockholders at December 31, 1996, our stockholders on the
distribution date would also have been required to revise their method of
reporting the distribution received on their separate federal income tax
returns. We committed to assume the obligation for additional federal income
taxes owed by our stockholders arising from the revised tax treatment.
Consequently, we reached an agreement with the Internal Revenue Service to
settle the obligations on behalf of our stockholders, exclusive of the Pratt
family, for $100,000 and to issue new tax reporting forms to the Pratt family.
Such forms will require the Pratt family members to amend their federal income
tax returns for 1996 resulting in substantial additional taxes and interest.
We have agreed to reimburse the Pratt family for these additional tax
obligations which total approximately $790,000.
On April 28, 1999, we entered into a voting agreement with Greate Bay, Pratt
Casino Corporation and substantially all of the holders of $85 million of
senior notes currently in default which were issued by PRT Funding Corp., a
wholly owned subsidiary of Pratt Casino Corporation, and guaranteed by Pratt
Casino Corporation. Under the terms of the agreement, we would purchase the
stock of Pratt Casino Corporation from Greate Bay as part of a debt
restructuring of PRT Funding, Pratt Casino Corporation and other subsidiaries
of Pratt Casino Corporation. On May 25, 1999, Pratt Casino Corporation, PRT
Funding Corp. and New Jersey Management, Inc. filed for bankruptcy pursuant to
a joint plan of reorganization in accordance with the terms of our agreement.
On the date on which Pratt Casino Corporation emerges from bankruptcy
proceedings, we would acquire its stock for nominal consideration and satisfy
Pratt Casino Corporation's obligations for $40.3 million in cash.
75
<PAGE>
DESCRIPTION OF THE EXCHANGE OFFER
Purpose and Effect
On May 19, 1999, we sold the original notes to the initial purchasers. In
connection with the sale of the original notes, we entered a registration
rights agreement with the initial purchasers requiring us to register the
notes with the SEC and offer to exchange the registered notes for original
notes. A copy of the registration rights agreement has been filed as an
exhibit to the registration statement of which this prospectus is a part and
we urge you to read the text of the registration rights agreement. We
expressly qualify all of our discussions of the registration rights agreement
by the terms of the agreement itself. As a result of the timely filing and the
effectiveness of the registration statement, we will not owe liquidated
damages provided for in the registration rights agreement.
The registration rights agreement further provides that we will use our
reasonable best efforts to, among other things, cause to be filed with the SEC
this registration statement under the Securities Act with respect to an offer
to exchange your original notes for newly issued registered notes. Except as
discussed below, upon the completion of the exchange offer we will have no
further obligations to register your original notes. Any original notes not
tendered will continue to be subject to particular restrictions on transfer.
Accordingly, the liquidity of the market for the original notes could be
adversely affected upon consummation of the exchange offer.
In order to participate in the exchange offer, we require that you represent
to us that:
. you are acquiring the registered notes in the ordinary course of
your business;
. you are not engaging in, and do not intend to engage, in a
distribution of the registered notes;
. you do not have an arrangement or understanding with any person to
participate in the distribution of the registered notes;
. you are not our "affiliate," or an "affiliate" of the guarantors, as
that term is defined under Rule 405 of the Securities Act; and
. if you are a broker-dealer, you will receive registered notes for
your own account, your registered notes will be acquired as a result
of market-making activities or other trading activities, and you
acknowledge that you will deliver a prospectus in connection with
any resale of your registered notes.
You may be entitled to "shelf" registration rights. In accordance with the
registration rights agreement, we are required to file a shelf registration
statement covering your original notes for a continuous offering in accordance
with Rule 415 of the Securities Act if:
. we determine that we are not permitted to effect the exchange offer
because of any change in law or applicable interpretations of the
staff of the SEC; or
. any holder of Transfer Restricted Securities notifies us within 20
business days following the date the exchange offer is consummated
that:
(1) it is prohibited by law or SEC policy from participating in the
exchange offer; or
(2) it may not resell the registered notes acquired by it in the
exchange offer to the public without delivering a prospectus and
that this prospectus is not appropriate or available for such
resales; or
(3) it is a broker-dealer and owns original notes acquired directly
from us or any of our affiliates; or
.we do not consummate the exchange offer by , 1999.
For purposes of the foregoing, "Transfer Restricted Securities" means each
original note until the earliest to occur of:
. the date on which the original note has been exchanged in the
exchange offer for a new note which is entitled to be resold to the
public without complying with the prospectus delivery requirements
of the Securities Act,
76
<PAGE>
. the date on which the original note has been disposed of in
accordance with a Shelf Registration Statement and the purchasers
thereof have been issued a registered note, or
. the date on which the registered note is distributed to the public
pursuant to Rule 144 under the Securities Act and each registered
note held by a broker-dealer until the date on which the registered
note is disposed of by a broker-dealer pursuant to the "Plan of
Distribution" contemplated by this registration statement, including
the delivery of the prospectus contained herein.
In the event that we are obligated to file a shelf registration statement,
we will be required to keep the shelf registration statement effective until
May 20, 2001. Other than as described above, you will not have the right to
participate in the shelf registration or require that we register your notes
in accordance with the Securities Act.
Based on interpretations of the SEC's staff set forth in no-action letters
issued to third parties unrelated to us and the guarantors, we believe that,
with the exceptions set forth below, your registered notes issued in
connection with the exchange offer in exchange for your original notes may be
offered for resale, resold, and otherwise transferred by you without
compliance with the registration and prospectus delivery requirements of the
Securities Act if:
. the registered notes acquired in connection with the exchange offer
are being obtained in the ordinary course of your business;
. you are not engaging in and do not intend to engage in a
distribution of the registered notes;
. you do not have an arrangement or understanding with any person to
participate in a distribution of the registered notes; and
. you are not our "affiliate," as defined in Rule 405 under the
Securities Act, or an "affiliate" of the guarantors.
If you tender in the exchange offer for the purpose of participating in a
distribution of the registered notes, you cannot rely on this interpretation
by the SEC's staff and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with your secondary
resale transaction. If you are a broker-dealer that receives registered notes
for your own account in exchange for your original notes, where such original
notes were acquired by you as a result of market-making activities or other
trading activities, you must acknowledge that you will deliver a prospectus in
connection with any resale of your registered notes. See "Plan of
Distribution." If you are a broker-dealer who acquired original notes directly
from us and not as a result of market-making activities or other trading
activities, you may not rely on the SEC's interpretations discussed above or
participate in the exchange offer and must comply with the prospectus delivery
requirements of the Securities Act in order to sell your registered notes.
Consequences of Failure to Exchange
Following the completion of the exchange offer, except as provided above and
in the registration rights agreement we refer to, you will not have any
further registration rights and your original notes will continue to be
subject to certain restrictions on transfer. Accordingly, if you do not
participate in the exchange offer, your ability to sell your original notes
could be adversely affected. You may suffer adverse consequences if you fail
to exchange your original notes. See "Risk Factors--Failure to Exchange
Original Notes."
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any validly tendered original
notes which are not withdrawn prior to 5:00 p.m., New York City time, on the
expiration date of the exchange offer. We will issue $1,000 principal amount
of registered notes in exchange for each $1,000 principal amount of your
original notes. You may tender some or all of your notes in the exchange
offer. However, you may tender your original notes only in integral multiples
of $1,000 in principal amount.
77
<PAGE>
The form and terms of the registered notes will be the same as the form and
terms of your original notes except that:
. interest on the registered notes will accrue from the last interest
payment date on which interest was paid on your original notes, or,
if no interest was paid, from the date of the original issuance of
your original notes; and
. the registered notes have been registered under the Securities Act
and will not bear a legend restricting their transfer.
This prospectus, together with the letter of transmittal you received with
this prospectus, is being sent to DTC's nominee and to others believed to have
beneficial interests in the original notes. You do not have any appraisal or
dissenters' rights under the General Corporation Law of the State of Delaware
or under the indenture governing your notes. We intend to conduct the exchange
offer in accordance with the requirements of the Securities Act and the rules
and regulations of the SEC under the Securities Act.
We will have accepted your validly tendered original notes when we have
given oral or written notice to the exchange agent. The exchange agent will
act as agent for the tendering holders for the purpose of receiving the
registered notes from us. If the exchange agent does not accept any tendered
original notes for exchange because of an invalid tender or for any other
valid reason, the exchange agent will return the certificates, without
expense, to the tendering holder as promptly as practicable after the
expiration date of the exchange offer.
If you participate in the exchange offer, you will not be required to pay
brokerage commissions, fees, or, subject to the instructions in the letter of
transmittal, transfer taxes in connection with the exchange of your original
notes for registered notes. We will pay all charges and expenses, other than
particular applicable taxes you may incur in connection with the exchange
offer.
Expiration Date; Extensions; Amendments
The exchange offer will expire at 5:00 p.m., New York City time, on
, 1999, unless we, in our sole discretion, extend it. In any event,
we will hold the exchange offer open for at least twenty business days. If we
decide to extend the exchange offer, we will notify the exchange agent and
each registered holder by oral or written notice before 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
We reserve the right, in our sole discretion:
. to delay accepting your original notes;
. to extend the exchange offer;
. to terminate the exchange offer if any of the conditions were not
satisfied by giving oral or written notice of delay, extension or
termination to the exchange agent; or
. to amend the terms of the exchange offer in any manner.
In the event that we make a material or fundamental change to the terms of
the exchange offer, we will file a post effective amendment to the
registration statement.
Procedures for Tendering Your Notes
Only you may tender your original notes in the exchange offer. Except as
stated on page 80 under the heading "--Book Entry Transfer," to tender in the
exchange offer, you must:
. complete, sign and date the enclosed letter of transmittal, or a
copy of it;
. have the signature on the letter of transmittal guaranteed, if
required by the letter of transmittal; and
. mail, fax or otherwise deliver the letter of transmittal or copy to
the exchange agent on or before the expiration date.
In addition, either:
. the exchange agent must receive certificates for your original notes
and the letter of transmittal before on or the expiration date;
78
<PAGE>
. the exchange agent must receive a timely confirmation of a book-
entry transfer of your original notes, if that procedure is
available, into the account of the exchange agent at the Depositary
Trust Company under the procedure for book-entry transfer described
below before the expiration date of the exchange offer; or
. you must comply with the guaranteed delivery procedures described
below.
For your original notes to be tendered effectively, the exchange agent must
receive the letter of transmittal and other required documents at the address
set forth under "--Exchange Agent" before the expiration date of the exchange
offer at the address set forth under "--Exchange Agent."
If you do not withdraw your tender before the expiration date, it will
constitute an agreement between you and us in accordance with the terms and
conditions in this prospectus and in the letter of transmittal.
The method of delivery to the exchange agent of your original notes, your
letter of transmittal and all other required documents is at your election and
risk. Instead of delivery by mail, we recommend that you use an overnight or
hand delivery service. In all cases, you should allow sufficient time to
assure delivery to the exchange agent before the expiration date of the
exchange offer. Do not send either a letter of transmittal or your original
notes directly to us. You may request your broker, dealer, commercial bank,
trust company or nominee to make the exchange on your behalf.
Procedure if your Original Notes are not Registered in your Name
Any beneficial owner whose original notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who
wishes to tender the original notes in the exchange offer should contact the
registered holder promptly and instruct the registered holder to tender the
original notes on the beneficial owner's behalf. If the beneficial owner
wishes to tender on the owner's own behalf, the owner must, before completing
and executing a letter of transmittal and delivering the owner's original
notes, either make appropriate arrangements to register ownership of the
original notes in the beneficial owner's name or obtain a properly completed
bond power or other proper endorsement from the registered holder. We strongly
urge you to act immediately since the transfer of registered ownership may
take considerable time.
Signature Requirements and Signature Guarantees
Unless you are a registered holder who requests that the registered notes be
mailed to you and issued in your name, or unless you are a member of, or
participant in, the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, the Stock Exchange Medallion
Program, or an "Eligible Guarantor Institution" within the meaning of Rule
17Ad-15 under the Exchange Act, each an "Eligible Institution," you must
guarantee your signature on a letter of transmittal or a notice of withdrawal
by an Eligible Guarantor Institution.
If a trustee, executor, administrator, guardian, attorney-in-fact, officer
of a corporation, or other person acting in a fiduciary or representative
capacity signs the letter of transmittal or any notes or bond powers on your
behalf, that person must indicate their capacity when signing, and submit
satisfactory evidence to us with the letter of transmittal demonstrating their
authority to act on your behalf.
Conditions to the Exchange Offer
We will decide all questions as to the validity, form, eligibility,
acceptance, and withdrawal of tendered original notes and our determination
will be final and binding on you. We reserve the absolute right to reject any
and all original notes not properly tendered or the acceptance of which would
be unlawful in the opinion of our counsel. We also reserve the right to waive
any defects, irregularities, or conditions of tender as to particular original
notes. Our interpretation of the terms and conditions of the exchange offer,
including the instructions in a letter of transmittal, will be final and
binding on all parties. You must cure any defects or irregularities in
connection with tenders of original notes as we shall determine. Although we
intend to notify holders of defects or irregularities with respect to tenders
of original notes, we, the exchange agent, or any other person will not
79
<PAGE>
incur any liability for failure to give this notification. Tenders of original
notes will not be deemed to have been made until any defects or irregularities
have been cured or waived. Any original notes received by the exchange agent
that are not properly tendered and as to which defects or irregularities have
not been cured or waived will be returned by the exchange agent to the
tendering holders, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date of the exchange offer.
We reserve the right to purchase or to make offers for any original notes
that remain outstanding after the expiration date of the exchange offer or to
terminate the exchange offer and, to the extent permitted by law, purchase
original notes in the open market, in privately negotiated transactions or
otherwise. The terms of any of these purchases or offers could differ from the
terms of the exchange offer.
These conditions are for our sole benefit and we may assert them at any time
or for any reason. We may waive in whole or in part at any time and from time
to time these conditions in our sole discretion. Our failure to exercise any
of our rights will not be a waiver of our rights and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to
time.
We will not accept for exchange any original notes tendered, and no
registered notes will be issued in exchange for any original notes, if at the
time any stop order is threatened or in effect with respect to the
registration statement or the qualification of the indenture relating to the
registered notes under the Trust Indenture Act. We are required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
In all cases, the issuance of registered notes will be made only after
timely receipt by the exchange agent of certificates for original notes or a
timely book-entry confirmation of the original notes into the exchange agent's
account at DTC's book-entry transfer facility, a properly completed and duly
executed letter of transmittal or, with respect to DTC and its participants,
electronic instructions of the holder agreeing to be bound by the letter of
transmittal, and any other required documents. If we do not accept any
tendered original notes for a valid reason or if you submit original notes for
a greater principal amount than you desire to exchange, we will return the
unaccepted or non-exchanged original notes to you at our expense. In the case
of original notes tendered by book-entry transfer into the exchange agent's
account at DTC's book-entry transfer facility under the book-entry transfer
procedures described below, the non-exchanged original notes will be credited
to an account maintained with the book-entry transfer facility. This will
occur as promptly as practicable after the expiration or termination of the
exchange offer for the original notes.
Notwithstanding any other provision of the exchange offer, we will not be
required to accept for exchange, or to issue registered notes in exchange for,
any notes and may terminate or amend the exchange offer if at any time before
the acceptance of the notes for exchange or the exchange of the registered
notes for the original notes, we determine that the exchange offer violates
applicable law, any applicable interpretation of the staff of the SEC or any
order of any governmental agency or court of competent jurisdiction.
Book-Entry Transfer
The exchange agent will make requests to establish accounts at DTC's book-
entry transfer facility for purposes of the exchange offer within two business
days after the date of this prospectus. Any financial institution that is a
participant in the book-entry transfer facility's systems may make book-entry
delivery of original notes being tendered by causing the book-entry transfer
facility to transfer the original notes into the exchange agent's account at
the book-entry transfer facility in accordance with the appropriate procedures
for transfer. However, although delivery of original notes may be effected
through book-entry transfer at the book-entry transfer facility, a letter of
transmittal or copy thereof, with any required signature guarantees and any
other required documents, must, except as provided in the following paragraph,
be transmitted to and received by the exchange agent on or before the
expiration date of the exchange offer or the guaranteed delivery procedures
below must be complied with.
80
<PAGE>
DTC's Automated Tender Offer Program, referred to by us as ATOP, is the only
method of processing the exchange offer through DTC. To accept the exchange
offer through ATOP, participants in DTC must send electronic instructions to
DTC through DTC's communication system instead of sending a signed, hard copy
letter of transmittal. DTC is obligated to communicate those electronic
instructions to the exchange agent. To tender notes through ATOP, the
electronic instructions sent to DTC and transmitted by DTC to the exchange
agent must contain the participant's acknowledgment of its receipt of and
agreement to be bound by the letter of transmittal for those notes.
Guaranteed Delivery Procedures
If a registered holder of original notes desires to tender any original
notes and the original notes are not immediately available, or time will not
permit the holder's original notes or other required documents to reach the
exchange agent before the expiration date of the exchange offer, or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if:
. the tender is made through an Eligible Institution;
. before the expiration date of the exchange offer, the exchange agent
received from the Eligible Institution a properly completed and duly
executed letter of transmittal and notice of guaranteed delivery, in
form provided by us the notice of guaranteed delivery must state the
name and address of the holder of the original notes and the amount
of original notes tendered, that the tender is being made and
guaranteeing that within three New York Stock Exchange trading days
after the date of execution of the notice of guaranteed delivery,
the certificates for all physically tendered original notes, in
proper form for transfer, or a book-entry confirmation and any other
documents required by the letter of transmittal will be deposited by
the Eligible Institution with the exchange agent; and
. the certificates for all physically tendered original notes, in
proper form for transfer, or a book-entry confirmation and all other
documents required by the applicable letter of transmittal are
received by the exchange agent within three New York Stock Exchange
trading days after the date of execution of the Notice of Guaranteed
Delivery.
Withdrawal Rights
You may withdraw your tender of original notes at any time before 5:00 p.m.,
New York City time, on the expiration date of the exchange offer.
For a withdrawal to be effective, a written or, for a DTC participant,
electronic ATOP transmission notice of withdrawal, must be received by the
exchange agent at its address provided in this prospectus before 5:00 p.m.,
New York City time, on the expiration date of the exchange offer.
The notice of withdrawal must:
. specify the name of the person who deposited the original notes to
be withdrawn;
. identify the original notes to be withdrawn, including the
certificate number or numbers and principal amount of the original
notes;
. be signed by the holder in the same manner as the original signature
on the letter of transmittal by which the original notes were
tendered or be accompanied by documents of transfer sufficient to
have the trustee of the original notes register the transfer of the
original notes into the name of the person withdrawing the tender;
and
. specify the name in which any original notes are to be registered,
if different from that of the holder who tendered the original
notes.
81
<PAGE>
We will determine all questions as to the validity, form and eligibility of
your notice and our determination will be final and binding on all parties.
Any original notes withdrawn will not be considered to have been validly
tendered. We will return any original notes which have been tendered but not
exchanged without cost to the holder as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn
original notes may be retendered by following one of the above procedures
before the expiration date.
Exchange Agent
You should direct all executed letters of transmittal to State Street Bank
and Trust Company, the exchange agent for the exchange offer. Questions,
requests for assistance and requests for additional copies of the prospectus
or a letter of transmittal should be directed to the exchange agent addressed
as follows:
By Mail: Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department
P.O. Box 778 2 Avenue de Lafayette
Boston, Massachusetts 02102 Fifth Floor, Corporate Trust Window
Attention: Mackenzie Elijah Boston, Massachusetts 02111-1724
Attention: Mackenzie Elijah
By Hand in New York (as Drop Agent)
State Street Bank and Trust Company By Hand in Boston:
61 Broadway State Street Bank and Trust Company
15th Floor, Corporate Trust Window 2 Avenue de Lafayette
New York, New York 10006 Fifth Floor, Corporate Trust Window
Boston, Massachusetts 02111-1724
Facsimile Transmission Number
(for Eligible Institutions Only) Confirm by telephone:
(617) 664-1452 (617) 662-1525
Fees and Expenses
We currently do not intend to make any payments to brokers, dealers or
others to solicit acceptances of the exchange offer. The principal
solicitation is being made by mail. However, additional solicitations may be
made in person or by telephone by our officers and employees.
Our estimated cash expenses incurred in connection with the exchange offer
will be paid by us and are estimated to be $100,000 in the aggregate. This
amount includes fees and expenses of the trustee for the new and old notes,
accounting, legal, printing and related fees and expenses.
Transfer Taxes
If you tender original notes for exchange you will not be obligated to pay
any transfer taxes. However, if you instruct us to register registered notes
in the name of, or request that your original notes not tendered or not
accepted in the exchange offer be returned to, a person other than you, you
will be responsible for the payment of any transfer tax owed.
82
<PAGE>
DESCRIPTION OF THE REGISTERED NOTES
You can find the definitions of capitalized terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Company" refers only to Hollywood Casino Corporation and not to any of its
subsidiaries.
The Company will issue the registered fixed rate notes and registered
floating rate notes together as a single series under a single indenture
entered into among the Company, HWCC-Tunica and HWCC-Shreveport, each as
guarantors, and State Street Bank and Trust Company, as trustee. The
registered fixed rate notes and the registered floating rate notes are
collectively referred to as the "registered notes." The original notes and the
registered notes are collectively referred to as the "notes." The terms of the
notes include those stated in the indenture and the Collateral Documents and
those made part of the indenture by reference to the Trust Indenture Act of
1939, as amended. The terms of the notes and the provisions of the indenture
are subject to compliance by the Company and its Restricted Subsidiaries with
the provisions of applicable gaming laws, unless in conflict with the Trust
Indenture Act in which case the provisions of the Trust Indenture Act will
control. The Collateral Documents referred to under the caption "Security"
define the terms of the agreements that secure the notes.
The following description is a summary of the material provisions of the
indenture, the registration rights agreement and the Collateral Documents. It
does not restate those agreements in their entirety. We urge you to read the
indenture, the registration rights agreement and the Collateral Documents
because they, and not this description, define your rights as holders of the
notes. Certain defined terms used in this description but not defined below
under "--Certain Definitions" have the meanings assigned to them in the
indenture.
Except as otherwise set forth below, the terms of the fixed rate notes and
the floating rate notes will be identical. The fixed rate notes and the
floating rate notes will vote together as a single class on all matters.
Brief description of common terms of the fixed rate notes and the floating
rate notes and the guarantees
The Notes
The notes:
. are senior secured obligations of the Company;
.are secured by:
(1) a first priority pledge of the Capital Stock of Hollywood Casino-
Aurora, HWCC-Tunica, HWCC--Louisiana, HWCC-Shreveport and each future
guarantor;
(2) a first priority pledge of the Aurora Intercompany Note payable to
the Company by Hollywood Casino-Aurora in an initial principal amount of
$31.5 million, which will increase from time to time as additional amounts
are loaned by the Company to Hollywood Casino-Aurora up to $108 million;
(3) a collateral assignment of the security documents related to the
Aurora Intercompany Note, including a first priority lien (limited to the
then outstanding balance of the Aurora Intercompany Note and subject to
liens as permitted by the Collateral Documents) on substantially all of
the assets of Hollywood Casino-Aurora securing its obligation under the
Aurora Intercompany Note;
(4) a first priority security interest in the $40.7 million of Escrowed
Funds to be deposited into escrow pending release in connection with
completion of the Pratt Casino Corporation Acquisition or the Special
Mandatory Redemption; and
(5) a first priority security interest in trademarks and service marks
of the Company, subject to liens permitted by the Collateral Documents;
. are pari passu in right of payment to all existing and future senior
indebtedness of the Company;
83
<PAGE>
. are senior in right of payment to any existing and future
subordinated Indebtedness of the Company; and
. are unconditionally guaranteed by the guarantors, as described
below.
The notes are effectively subordinated to all indebtedness and other
liabilities of each Subsidiary that is not a guarantor, including Hollywood
Casino-Aurora, except to the extent of the pledge to the trustee of the Aurora
Intercompany Note and the collateral assignment of the related security
documents, which security interest will be limited to the then outstanding
amount of the Aurora Intercompany Note and was initially $31.5 million. See
"Security." At March 31, 1999, Hollywood Casino-Aurora had outstanding
approximately $22.5 million of Indebtedness, including $20.7 million in
capitalized lease obligations, owed to third party creditors, which will be
structurally senior in right of payment to the notes to the extent the
aggregate principal amount of the notes exceeds the principal balance of the
Aurora Intercompany Note.
The Guarantees
The notes are jointly, severally and unconditionally guaranteed by HWCC-
Tunica and HWCC-Shreveport and will be guaranteed in the future by any
domestic Restricted Subsidiaries and up to 65% of any foreign Restricted
Subsidiary of the Company having a Tangible Consolidated Net Worth in excess
of $2.5 million. See "Certain Definitions--Guarantors."
Each Guarantee of the notes:
. is a senior secured obligation of the guarantor;
. is senior in right of payment to all existing and future
subordinated indebtedness of each guarantor;
. is pari passu in right of payment with all existing and future
senior indebtedness of each guarantor; and
. is secured by substantially all of the assets of each guarantor,
including substantially all of the personal and material real
property assets comprising HWCC-Tunica, subject to liens permitted
by the Collateral Documents, and by the Shreveport Management
Agreement held by HWCC-Shreveport.
As of March 31, 1999, on a pro forma basis after giving effect to the
offering of the original notes, the acquisition of Pratt Casino Corporation
and the tender offer for and satisfaction and discharge of our 12 3/4% Senior
Secured Notes, the Company would have had no outstanding Indebtedness that
ranked pari passu in right of payment with the notes and HWCC-Tunica would
have had outstanding approximately $3.4 million of Indebtedness that ranked
pari passu in right of payment with HWCC-Tunica's Guarantee. See "--Security"
and "--Certain Definitions--Guarantors." As of the date of the Indenture,
HWCC-Shreveport will have no liabilities other than the guarantee of the notes
and will have no assets other than the Shreveport Management Agreement
relating to the management of the planned Shreveport Casino.
The guarantors jointly and severally guarantee the Company's obligations
under the notes on a senior secured basis. The obligations of each guarantor
under its Guarantee will be limited as necessary to prevent the Guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk Factors--
Fraudulent Conveyance."
Subsidiaries
The Company is a holding company that operates its riverboat and dockside
casinos, casino hotels and related facilities through its Subsidiaries.
Repayment of the Intercompany Notes and other obligations and payment of
dividends from its Subsidiaries are the Company's principal sources of cash to
pay operating expenses, capital expenditures and principal of and interest on
its debt. The Company anticipates that the primary source of cash to pay the
Company's obligations will be derived from the Aurora Casino and the Tunica
Casino. See "Risk Factors--Holding Company Structure."
84
<PAGE>
Under the circumstances described below under the subheading "--Certain
Covenants--Designation of Restricted and Unrestricted Subsidiaries," the
Company will be permitted to designate certain of its subsidiaries as
"Unrestricted Subsidiaries." The Company's Unrestricted Subsidiaries will not
be subject to most of the restrictive covenants in the indenture and will not
guarantee the registered notes. As of the issue date of the original notes,
the Company expected to designate the following as Unrestricted Subsidiaries:
. HWCC-Louisiana and its Subsidiaries;
. Pratt Management, L.P.;
. HWCC-Holdings; and
. HWCC-Golf Course Partners, Inc.
Principal, maturity and interest
The indenture provides for the issuance by the Company of notes with a
maximum aggregate principal amount of $360.0 million, of which $310.0 million
was issued as fixed rate notes and $50.0 million was issued as floating rate
notes. The Company was issued notes in denominations of $1,000 and integral
multiples of $1,000. The fixed rate notes will mature on May 1, 2007 and the
floating rate notes will mature on May 1, 2006.
Fixed rate notes
Interest on the fixed rate notes will accrue at the rate of 11.250% per
annum and will be payable semi-annually in arrears on May 1 and November 1,
commencing on November 1, 1999. The Company will make each interest payment to
the holders of record on the immediately preceding April 15 and October 15.
Interest on the fixed rate notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Floating rate notes
The floating rate notes will initially bear interest at a rate per annum
equal to LIBOR plus 628 basis points, which will be reset semi-annually, as
determined by the calculation agent. Interest on the floating rate notes will
be payable semi-annually in arrears on May 1 and November 1, commencing on
November 1, 1999. The Company will make each interest payment to the holders
of record on the immediately preceding April 15 and October 15. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
The amount of interest for each day of a 30-day month that the floating rate
notes are outstanding (the "Daily Interest Amount") will be calculated by
dividing the interest rate in effect for such day by 360 and multiplying the
result by the principal amount of the floating rate notes. The amount of
interest to be paid on the floating rate notes for each Interest Period will
be calculated by adding the Daily Interest Amounts for each day in the
Interest Period.
All percentages resulting from any of the above calculations will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% being rounded to 9.87655%) and all dollar amounts used in or
resulting from such calculations will be rounded to the nearest cent (with
one-half cent being rounded upwards).
The calculation agent will, upon the request of the holder of any new
floating rate note, provide the interest rate then in effect with respect to
the new floating rate notes. All calculations made by the calculation agent in
the absence of manifest error will be conclusive for all purposes and binding
on the Company and the holders of the floating rate notes.
85
<PAGE>
Methods of receiving payments on the notes
If a holder has given wire transfer instructions to the Company, the Company
will pay all principal, interest and premium and liquidated damages, if any,
on that holder's notes in accordance with those instructions. All other
payments on notes will be made at the office or agency of the paying agent and
registrar within the City and State of New York unless the Company elects to
make interest payments by check mailed to the holders at their addresses set
forth in the register of holders.
Paying agent and registrar for the notes
The trustee will initially act as paying agent and registrar. The Company
may change the paying agent or registrar without prior notice to the holders,
and the Company or any of its Subsidiaries may act as paying agent or
registrar.
Transfer and exchange
A holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
indenture. The Company is not required to transfer or exchange any note
selected for redemption. Also, the Company is not required to transfer or
exchange any note for a period of 15 days before a selection of new notes to
be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes.
Security
The notes will be secured by, among other things,
(1) a first priority pledge by the Company to the trustee for the benefit
of the holders of the notes of the Capital Stock of each of Hollywood
Casino-Aurora, HWCC-Tunica, HWCC-Shreveport, HWCC-Louisiana and each future
guarantor;
(2) a first priority pledge by the Company to the trustee for the benefit
of the holders of the notes of the Aurora Intercompany Note and a
collateral assignment of the security documents related to the Aurora
Intercompany Note, reflecting a first priority Lien of the Company on
substantially all of the assets of Hollywood Casino-Aurora, subject to
liens permitted by the Collateral Documents, to secure the Aurora
Intercompany Note. The Aurora Intercompany Note will initially have an
outstanding principal balance of $31.5 million, which will increase from
time to time as additional amounts are loaned by the Company to Hollywood
Casino-Aurora up to $108 million. For example, the balance would increase
upon the advance by the Company of funds to Hollywood Casino-Aurora in
connection with the Aurora casino expansion and upon the advance of funds
in connection with the Pratt Casino Corporation Acquisition. In the event
that Gaming Authorities approve intercompany loans to Hollywood Casino-
Aurora in excess of $108 million, such additional intercompany loans and
any security therefore will be pledged to the trustee;
(3) a first priority pledge by the Company to the trustee for the benefit
of the holders of the notes of the Tunica Intercompany Note and a
collateral assignment of the related security documents, reflecting a
second priority Lien of the Company on substantially all of the assets of
HWCC-Tunica, subject to liens permitted by the Collateral Documents, to
secure the Tunica Intercompany Note;
(4) a first priority security interest in the $40.7 million of Escrowed
Funds to be deposited into escrow pending release in connection with
completion of the Pratt Casino Corporation Acquisition or the Special
Mandatory Redemption; and
(5) a first priority security interest in the Company's trademarks and
service marks, subject to liens permitted by the Collateral Documents.
86
<PAGE>
The notes will also be secured by a first priority lien in the Aurora
Expansion Cash Account so long as there are funds in such account. The Company
will be permitted to use the funds in the Aurora Expansion Cash Account for
working capital purposes and any other purposes permitted under the indenture
unless and until the trustee exercises its remedies with respect to that
account.
The guarantees will be secured by, among other things,
(1) a first priority Lien on substantially all of the assets (whether now
owned or hereafter acquired or constructed) of HWCC-Tunica represented by
(a) a ship mortgage and other security interests, as applicable, on or in
the Tunica Casino vessel and improvements thereon, (b) a leasehold mortgage
on the Tunica Casino hotel and related assets, and (c) a Lien on
substantially all personal property owned and used in the operation of the
Tunica Casino, in each case, subject to liens permitted by the Collateral
Documents;
(2) a collateral assignment of the Shreveport Management Agreement and
the Substitute Management Agreement, if applicable;
(3) the collateral assignment of the Aurora Management Agreement and the
Tunica Consulting Agreement if the Company consummates the Pratt Casino
Corporation Acquisition and does not terminate the Aurora Management
Agreement and the Tunica Consulting Agreement; and
(4) a first priority Lien on substantially all of the assets (whether now
owned or hereafter acquired or constructed) of any future guarantors,
subject to liens permitted by the Collateral Documents.
Although Hollywood Casino-Aurora will not guarantee the notes, the indenture
will provide that Hollywood Casino-Aurora may not, directly or indirectly,
create, incur, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired, or any income or profits therefrom, or assign or convey
any right to receive income therefrom, except Permitted Liens. See "--Certain
Covenants--Limitation on Liens." Hollywood Casino-Aurora will also covenant
not to make any principal prepayments with respect to the Aurora Intercompany
Note for so long as it is not a guarantor of the new notes or unless otherwise
required by Gaming Authorities. If Hollywood Casino-Aurora becomes a guarantor
pursuant to a Guarantee secured by a first priority lien on substantially all
of the assets of Hollywood Casino-Aurora, subject to liens permitted by the
Collateral Documents, it may make principal payments on the Aurora
Intercompany Note as permitted by the indenture.
The indenture will provide that, except as otherwise provided therein, the
Company will, and will cause each of HWCC-Tunica and any future Subsidiaries
of the Company that become guarantors to, grant to the trustee a valid first
priority security interest in substantially all of its assets, except working
capital (subject to liens permitted by the Collateral Documents) to the extent
required by the Collateral Documents, enforceable against all third parties,
and to execute and deliver all documents and to take all action necessary or
desirable to perfect and protect such a security interest in favor of the
trustee. See "--Certain Covenants--Additional Subsidiary Guarantees."
The Company, the guarantors (as applicable) and the trustee will enter into
the Collateral Documents, including the security agreement and the pledge
agreement of the Company securing the notes, the security agreements, pledge
agreements, leasehold mortgages and fleet mortgages, as applicable, securing
the Guarantees, and the collateral assignment of the security agreement,
pledge agreement, leasehold mortgages, mortgages and fleet mortgages securing
the Aurora Intercompany Note, which together define the security interests of
the holders in the notes and the Guarantees. These Collateral Documents will
secure the payment and performance when due of all of the Obligations of the
Company under the indenture and the notes.
The trustee's ability to foreclose upon the Collateral will be limited by
relevant gaming laws, which generally require that persons who own or operate
a casino, receive payments under a management contract or purchase, possess or
sell gaming equipment hold a valid gaming license. In addition, the right of
the trustee to repossess and dispose of the Collateral upon the occurrence of
an Event of Default is likely to be significantly impaired by applicable
bankruptcy law if a bankruptcy proceeding were to be commenced by or against
the Company and the guarantors prior to or even possibly after the trustee has
repossessed and disposed of the Collateral. See "Risk Factors--Limits on
Collateral."
87
<PAGE>
Fraudulent Conveyance--Federal and state statutes allow courts, under specific
circumstances, to void guarantees or other debt and require noteholders to
return payments received from guarantors.
Under the federal bankruptcy laws and comparable provisions of state
fraudulent transfer laws, a guarantee or other debt obligations could be
voided, or claims in respect of a guarantee or other debt obligations could be
subordinated to all other debts of that guarantor or debtor if, among other
things, the guarantor or debtor, at the time it incurred the indebtedness
evidenced by its guarantee or other debt obligations, received less than
reasonably equivalent value or fair consideration for the incurrence of the
guarantee and:
. was insolvent or rendered insolvent by reason of the incurrence;
. was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay as they mature.
In this event, any payment by a guarantor in connection with its guarantee or
a debtor in connection with the debt obligations could be voided and required
to be returned to the guarantor or debtor or to a fund for the benefit of the
creditors of that guarantor or debtor.
The measures of insolvency for purposes of these fraudulent transfer laws
vary depending upon the law applied to determine whether a fraudulent transfer
has occurred. Generally, however, a guarantor or debtor would be considered
insolvent if:
. the sum of its debts, including contingent liabilities, were greater
than the fair saleable value of all of its assets; or
. the present fair saleable value of its assets were less than the
amount that would be required to pay the probable liability on its
existing debts, including contingent liabilities, as they become
absolute and mature; or
. it could not pay its debts as they came due.
On the basis of historical financial information, recent operating history and
other factors, we believe that each guarantor and each of our subsidiaries
that has or will have intercompany debt obligations to us, after giving effect
to its guarantee of the notes or receipt of funds underlying the intercompany
debt, will not be insolvent, will not have unreasonably small capital for the
business in which it is engaged and will not have incurred debts beyond its
ability to pay as they mature. We cannot be sure, however, what standard a
court would apply in making its determination or that a court would agree with
our conclusions.
Optional redemption
Fixed rate notes
At any time prior to May 1, 2002, the Company may on any one or more
occasions redeem up to 35% of the original aggregate principal amount of fixed
rate notes issued under the indenture at a redemption price of 111.250% of the
principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the redemption date, with the net cash proceeds of one or
more Qualified Equity Offerings; provided, however that:
(1) at least 65% of the original aggregate principal amount of the fixed
rate notes issued under the indenture remains outstanding immediately after
the occurrence of such redemption (excluding fixed rate notes held by the
Company and its Subsidiaries); and
(2) the redemption must occur within 60 days of the date of the closing
of such Qualified Equity Offering.
Except pursuant to the preceding paragraph, the fixed rate notes will not be
redeemable at the Company's option prior to May 1, 2003.
88
<PAGE>
After May 1, 2003, the Company may redeem all or a part of the fixed rate
notes upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of principal amount) plus accrued
and unpaid interest and liquidated damages, if any, thereon, to the applicable
redemption date, if redeemed during the twelve-month period beginning on May 1
of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003........................................................... 107.000%
2004........................................................... 104.666%
2005........................................................... 102.333%
2006 and thereafter............................................ 100.000%
</TABLE>
Floating rate notes
The floating rate notes will be redeemable, in whole or in part, at any time
and from time to time, at the option of the Company upon not less than 30 nor
more than 60 days' prior notice, at the following redemption prices (expressed
as percentages of principal amount), plus accrued and unpaid interest and
liquidated damages, if any, to the applicable redemption date (subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the twelve-month
period beginning on May 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999........................................................... 105.000%
2000........................................................... 104.000%
2001........................................................... 103.000%
2002........................................................... 102.000%
2003........................................................... 101.000%
2004 and thereafter............................................ 100.000%
</TABLE>
Mandatory redemption
Except as described below, the Company is not required to make mandatory
redemption or sinking fund payments with respect to the notes.
Mandatory disposition pursuant to gaming laws
Each holder, by accepting a note, shall be deemed to have agreed that if any
Gaming Authority requires that a person who is a holder or the beneficial
owner of the notes be licensed, qualified or found suitable under applicable
gaming laws, the holder or beneficial owner, as the case may be, shall apply
for a license, qualification or a finding of suitability within the required
time period. If the holder or beneficial owner fails to apply for such
license, qualification or finding of suitability within the required time
period, such holder or beneficial owner, as the case may be, shall be required
to dispose of its notes within the specified time and the Company shall have
the right to redeem the notes of such holder or beneficial owner, subject to
approval of any applicable Gaming Authority, at the lesser of:
(1) the principal amount thereof,
(2) the amount that such holder or beneficial owner paid for the notes or
(3) the fair market value of the notes.
Any holder of notes required to apply for a finding of suitability must pay
all investigative fees and costs of the applicable Gaming Authorities in
connection with such investigation. Immediately upon the imposition of a
requirement to dispose of notes by a Gaming Authority, such holder or
beneficial owner shall, to the extent required by applicable law, have no
further right:
(1) to exercise, directly or indirectly, through any trustee or nominee
or any other person or entity, any right conferred by the notes or
89
<PAGE>
(2) to receive any interest, dividends, economic interests or any other
distributions or payments with respect to the notes or any remuneration in
any form with respect to the notes from the Company or the trustee. Under
the indenture, the Company is not required to pay or reimburse any holder
of the notes or beneficial owner who is required to apply for such license,
qualification or finding of suitability for the costs of the licensure or
investigation for such qualification or finding of suitability. Such
expense will, therefore, be the obligation of such holder or beneficial
owner. The Company shall notify the trustee in writing of any such
redemption as soon as practicable. The Company shall not be responsible for
any costs or expenses any such holder may incur in connection with its
application or a license, qualification or a finding or suitability. The
indenture will require the trustee to report the names of the record
holders of the notes to any Gaming Authority when required by law.
Special mandatory redemption
The Company deposited into escrow the $40.7 million of Escrowed Funds, which
will be held by the trustee pursuant to an Escrow Agreement as collateral to
secure the obligations of the Company under the notes. The Escrow Agreement
will provide for release of the Escrowed Funds to the Company upon receipt by
the trustee of an officers' certificate, certifying that:
(1)the final order of the United States Bankruptcy Court has been
approved providing for the Pratt Casino Corporation Acquisition;
(2)all necessary approvals from Gaming Authorities for the consummation
of the Pratt Casino Corporation Acquisition have been obtained;
(3)substantially concurrently with the release of such Escrowed Funds,
the Aurora Intercompany Note and the related mortgage will be increased by
an amount equal to approximately $37.0 million in connection with the Pratt
Casino Corporation Acquisition and that any necessary documentation
evidencing such increase will be collaterally assigned to the trustee for
the benefit of the holders of the notes; and
(4)HWCC-Aurora Management, Pratt Casino Corporation and Pratt Management
will be designated as Restricted Subsidiaries, and that the Board of
Directors has approved that, within five business days following the
consummation of the Pratt Casino Corporation Acquisition, and subject to
the approval of applicable Gaming Authorities
(a) (i) these Restricted Subsidiaries will become guarantors and will
execute a supplemental indenture and deliver an opinion of counsel to
the trustee to such effect, and will grant a first priority security
interest in substantially all of their assets to secure their
obligations under the Guarantees, subject to liens permitted by the
Collateral Documents, and (ii) the Company will pledge the Capital
Stock of these guarantors to the trustee for the benefit of the holders
to secure the Company's obligations under the notes, or
(b) these Restricted Subsidiaries will be dissolved, terminated or
otherwise merged out of existence with the Company or any other
Restricted Subsidiary as the successor entity and the Tunica Consulting
Agreement and the Aurora Management Agreement will be terminated.
The Company will also deliver an officers' certificate and an opinion of
counsel stating that all of the conditions for the release of the Escrowed
Funds have been satisfied. Following the release of funds, the trustee will no
longer have a security interest in the Escrowed Funds pursuant to the Escrow
Agreement and the Escrow Agreement shall terminate.
If, prior to January 31, 2000, the Company determines in its sole discretion
(as evidenced by a resolution of the Company's Board of Directors certified by
an officer of the Company and delivered to the trustee) that it is unable to
consummate the Pratt Casino Corporation Acquisition by January 31, 2000, the
Company shall redeem $40.3 million aggregate principal amount of notes (the
"Special Mandatory Redemption") at a redemption price equal to 101% of the
principal amount of the notes, plus accrued and unpaid interest and liquidated
damages, if
90
<PAGE>
any, to the date of redemption; provided, however, that such redemption will
occur on January 31, 2000 if the Pratt Casino Corporation Acquisition has not
been consummated and the officer's certificate mentioned in the preceding
paragraph has not been delivered to the trustee by January 31, 2000. The
redemption date for the Special Mandatory Redemption shall be the earlier of
(1) five days after the date that the certified resolutions are delivered to
the trustee pursuant to the preceding sentence, or (2) January 31, 2000. Any
such redemption shall be made on a pro rata basis between the floating rate
notes and the fixed rate notes. The trustee will release the Escrowed Funds
for use toward the Special Mandatory Redemption on the redemption date. Notice
of any Special Mandatory Redemption will be mailed to each holder not less
than five days prior to the redemption date.
Pending release of the Escrowed Funds pursuant to the Escrow Agreement, the
Escrowed Funds will be invested in "cash equivalent investments" (as defined
in the Escrow Agreement and generally will consist of short-term, high-quality
investments including United States government securities, certificates of
deposit and highly rated commercial paper) as directed by the Company. Any
interest or other profit resulting from such investment will be used to pay
premium and interest due on the notes upon the Special Mandatory Redemption if
required, or otherwise released to the Company.
Repurchase at the option of holders
Change of Control
If a Change of Control occurs, each holder of notes will have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that holder's notes pursuant to an offer on the
terms set forth in the indenture (a "Change of Control Offer"). In the Change
of Control Offer, the Company will offer a payment (the "Change of Control
Payment") in cash equal to 101% of the aggregate principal amount of notes
repurchased plus accrued and unpaid interest and liquidated damages, if any,
thereon, to the date of purchase. Within ten days following any Change of
Control, the Company will mail a notice to each holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase notes on the date (the "Change of Control Payment Date")
specified in such notice, which date shall be no earlier than 30 days and no
later than 60 days from the date such notice is mailed, pursuant to the
procedures required by the indenture and described in such notice.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all notes or portions thereof so tendered;
and
(3) deliver or cause to be delivered to the trustee the new notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of notes or portions thereof being purchased by the
Company.
The paying agent will promptly mail to each holder of notes so tendered the
Change of Control Payment for such notes, and the trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each
holder a note equal in principal amount to any unpurchased portion of the
notes surrendered, if any; provided, however that each such note will be in a
principal amount of $1,000 or an integral multiple thereof.
The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
The provisions described above that require the Company to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether any other provisions of the indenture are applicable. Except as
described above with respect to a Change of Control, the indenture does not
contain provisions that permit the holders of the notes to require that the
Company repurchase or redeem the notes in the event of a
91
<PAGE>
takeover, recapitalization or similar transaction. No assurance can be given
that the Company will have sufficient funds at the time of a Change of Control
in order to consummate a Change of Control Offer.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the indenture applicable to a Change of Control Offer made by the
Company and purchases all notes validly tendered and not withdrawn under such
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the direct
or indirect sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the properties or assets of the Company and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of notes to require the Company to repurchase such notes as a result of
a sale, lease, transfer, conveyance or other disposition of less than all of
the assets of the Company and its Subsidiaries taken as a whole to another
person or group may be uncertain.
Asset sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) such fair market value is determined by the Company's Board of
Directors and evidenced by a resolution of the Board of Directors set forth
in an officers' certificate delivered to the trustee; and
(3) at least 75% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash. For purposes of this
provision and not for purposes of the definition of "Net Proceeds" (except
to the extent set forth in such definition with respect to the conversion
of non-cash proceeds to cash), each of the following shall be deemed to be
cash:
(a) the assumption of Indebtedness or liabilities of the Company (as
shown on the Company's most recent balance sheet) that are pari passu
in right of payment to the notes or, in the case of an Asset Sale by
any Restricted Subsidiary, the assumption of Indebtedness or
liabilities of such Restricted Subsidiary (as shown on the Restricted
Subsidiary's most recent balance sheet) that are pari passu in right of
payment with the Guarantees that are assumed by the transferee of any
such assets, in each case, pursuant to a customary novation agreement
that releases the Company or such Restricted Subsidiary from further
liability; and
(b) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by
the Company or such Restricted Subsidiary into cash (to the extent of
the cash received in that conversion).
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the Restricted Subsidiary may apply such Net Proceeds:
(1) to acquire all or substantially all of the assets of, or a majority
of the Voting Stock of, a Gaming Related Business;
(2) to make a capital expenditure with respect to its existing
operations; or
(3) to acquire other long-term assets that are used or useful in a Gaming
Related Business; provided, however, that the Company or the Restricted
Subsidiary, as the case may be, grants to the collateral agent, on behalf
of the holders, a first priority security interest, subject to Permitted
Liens, on any property or assets (including a pledge of any Voting Stock
required under the terms of the indenture) acquired or constructed with the
Net Proceeds of any Asset Sale on the terms set forth in the indenture and
the Collateral Documents
92
<PAGE>
to the extent permitted by applicable Gaming Authorities. Pending the final
application of any Net Proceeds, the Company or the Restricted Subsidiary
shall invest the Net Proceeds in Cash Equivalents held in an account in
which the trustee shall have a first priority security interest (subject to
Permitted Liens) for the benefit of the holders of the new notes.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." Within
ten days following the date that the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company will make an offer (an "Asset Sale Offer")
to all holders of notes with the Excess Proceeds from any Asset Sales in an
amount equal to the maximum principal amount of notes that may be purchased
out of the Excess Proceeds. The offer price in any Asset Sale Offer will be
equal to 100% of principal amount plus accrued and unpaid interest and
liquidated damages, if any, to the date of purchase, and will be payable in
cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer,
the Company may use such Excess Proceeds for any purpose not otherwise
prohibited by the indenture or the Collateral Documents. If the aggregate
principal amount of notes tendered into such Asset Sale Offer exceeds the
amount of Excess Proceeds, the trustee shall select the notes to be purchased
in the manner described under "--Selection and notice." Upon completion of
each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Event of loss
Within 270 days after any Event of Loss with respect to any Collateral
comprising the Aurora Casino or the Tunica Casino with a fair market value (or
replacement cost, if greater) in excess of $1.0 million, the Company or the
affected Restricted Subsidiary of the Company, as the case may be, may apply
the Net Loss Proceeds for such Event of Loss: (1) to acquire all or
substantially all of the assets of or a majority of the Voting Stock in a
Gaming Related Business; (2) to make a capital expenditure with respect to its
existing operations; or (3) to acquire other long-term assets that are used or
useful in a Gaming Related Business.
In addition, within 360 days after any Event of Loss with respect to any
Collateral comprising the Aurora Casino or the Tunica Casino with a fair
market value (or replacement cost, if greater) in excess of $1 million, the
Company or the affected Restricted Subsidiary of the Company, as the case may
be, may apply the Net Loss Proceeds for such Event of Loss to the rebuilding,
repair, replacement or construction of improvements to the respective casino,
with no concurrent obligation to make any purchase of any notes. Any Net Loss
Proceeds for an Event of Loss with respect to any Collateral that are not
reinvested as provided in the first or second sentences of this paragraph will
be deemed "Excess Loss Proceeds." Within ten days following the date that the
aggregate amount of Excess Loss Proceeds exceeds $10 million, the Company
shall make an offer to all holders of notes with the Excess Loss Proceeds from
any Event of Loss (an "Event of Loss Offer"). The Event of Loss Offer shall be
made in an amount equal to the maximum principal amount of new notes that may
be purchased out of the Excess Loss Proceeds, at a purchase price in cash in
an amount equal to 100% of the principal amount thereof, plus accrued and
unpaid interest and liquidated damages, if any, thereon to the date of
purchase, in accordance with the procedures set forth under "Selection and
notice." To the extent that the aggregate amount of notes tendered pursuant to
any Event of Loss Offer is less than the Excess Loss Proceeds, the Company
may, subject to the other provisions of the indenture and the Collateral
Documents, use any remaining Excess Loss Proceeds for any purpose not
prohibited by the indenture or the Collateral Documents. Upon completion of
any such Event of Loss Offer, the amount of Excess Loss Proceeds shall be
reset at zero. Pending the final application of the Net Loss Proceeds, such
proceeds shall be invested in Cash Equivalents held in an account in which the
trustee shall have a first priority security interest (subject to Permitted
Liens) for the benefit of the holders of the notes. Such pledged funds will be
released to the Company to pay for or reimburse the Company for the actual
cost of such permitted application of Net Loss Proceeds as provided above or
permitted rebuilding, repair, replacement or construction, or such Event of
Loss Offer, pursuant to the terms of the Collateral Documents relating to the
respective Casino property. The indenture will also require the Company or the
Restricted Subsidiary to grant to the trustee, on behalf of the holders, a
first priority security interest, subject to liens permitted by the Collateral
Documents, on any property or assets (including a pledge of any Voting Stock
required under the terms of the indenture) acquired or constructed with the
Net Loss Proceeds on the terms set forth in the indenture and the Collateral
Documents to the extent permitted by applicable Gaming Authorities.
93
<PAGE>
Compliance with Securities Laws
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with each
repurchase of notes pursuant to a Change of Control Offer, an Asset Sale Offer
and Event of Loss Offer. To the extent that the provisions of any securities
laws or regulations conflict with the Change of Control, Asset Sales or Event
of Loss provisions of the indenture, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under these provisions of the indenture by virtue of
such conflict.
The agreements governing the Company's other Indebtedness may contain
prohibitions of certain events, including events that would constitute a
Change of Control or an Asset Sale. In addition, the exercise by the holders
of notes of their right to require the Company to repurchase the notes upon a
Change of Control, or in the case of an Asset Sale Offer or an Event of Loss
Offer, could cause a default under these other agreements, even if the Change
of Control Offer, Asset Sale Offer or Event of Loss Offer itself does not, due
to the financial effect of such repurchases on the Company. Finally, the
Company's ability to pay cash to the holders of notes upon a repurchase under
a Change of Control Offer may be limited by the Company's then existing
financial resources. See "Risk Factors--Change of Control."
Selection and notice
If less than all of the notes are to be redeemed or repurchased at any time,
the trustee will select notes for redemption or repurchase as follows:
(1) if the notes are listed, in compliance with the requirements of the
principal national securities exchange on which the notes are listed; or
(2) if the notes are not so listed, on a pro rata basis between the fixed
rate notes and the floating rate notes, if applicable, by lot or by such
method as the trustee shall deem fair and appropriate.
No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days
before the redemption date to each holder of notes to be redeemed at its
registered address. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note shall state the portion of the principal amount thereof
to be redeemed. A note or notes in principal amount equal to the unredeemed
portion of the original note will be issued in the name of the holder thereof
upon cancellation of the original note. Notes called for redemption become
irrevocably due and payable on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on notes or portions of them called
for redemption.
Restrictive covenants
Restricted payments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of the Company's or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment in connection with
any merger or consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the Company's or any
of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable:
(a) in Equity Interests (other than Disqualified Stock) of the
Company or
(b) to the Company or a Restricted Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company;
94
<PAGE>
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated to the new notes or that is subordinated to the Guarantees,
except:
(a) a payment of interest or principal at the Stated Maturity thereof
and
(b) a payment of interest or principal of intercompany Indebtedness
permitted by clause (6) of the second paragraph under the covenant
entitled "--Incurrence of indebtedness and issuance of preferred
stock"; or
(4) make any Restricted Investment (all such payments and other actions
set forth in clauses (1) through (4) above being collectively referred to
as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(2) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of indebtedness and
issuance of preferred stock"; and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments and any Shreveport Casino Investment treated as a
Restricted Payment as set forth in the definition of "Shreveport Casino
Investment," made by the Company and its Restricted Subsidiaries after the
date of the indenture (excluding Restricted Payments permitted by clauses
(2) and (3) of the next succeeding paragraph) is less than the sum, without
duplication, of:
(a) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the date of the indenture to the
end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period
is a deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received by the Company
since the date of the indenture as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock) or from the issue or sale of
convertible or exchangeable Disqualified Stock or convertible or
exchangeable debt securities of the Company that have been converted
into or exchanged for such Equity Interests (other than Equity
Interests (or Disqualified Stock or debt securities) sold to any
Subsidiary of the Company), plus
(c) 50% of any cash dividends received by the Company, Hollywood
Casino-Aurora or any other Restricted Subsidiary that is a guarantor
after the date of the indenture from an Unrestricted Subsidiary of the
Company, to the extent such dividends were not otherwise included in
Consolidated Net Income of the Company for such period, plus
(d) to the extent that any Restricted Investment that was made after
the date of the indenture is sold for cash or otherwise liquidated or
repaid for cash, the sum of (i) 50% of the cash proceeds with respect
to such Restricted Investment in excess of the aggregate amount
invested in such Restricted Investment (less the cost of disposition,
if any) and (ii) the aggregate amount invested in such Restricted
Investment, plus
(e) to the extent that any Subsidiary that was designated as an
Unrestricted Subsidiary after the date of the indenture is redesignated
as a Restricted Subsidiary, the lesser of (i) the amount of the
Investment in the Subsidiary treated as a Restricted Payment at and
since the time that the Subsidiary was designated as an Unrestricted
Subsidiary, as determined by the last paragraph of this covenant, and
(ii) the fair market value of the Investment in the Subsidiary as of
the date that it is redesignated as a Restricted Subsidiary.
95
<PAGE>
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any
Guarantor or of any Equity Interests of the Company in exchange for, or out
of the net cash proceeds of the substantially concurrent sale (other than
to a Subsidiary of the Company) of, Equity Interests of the Company (other
than Disqualified Stock); provided, however, that the amount of any such
net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(3) (b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary
of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management (or the estate or trust for the
benefit of any such member of management) pursuant to any management equity
subscription agreement or stock option agreement; provided, however, that
the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $250,000 in any calendar year and
$1 million in the aggregate; and
(5) the redemption or repurchase of any debt or equity securities of the
Company or any Restricted Subsidiary required by, and in accordance with,
any order of any Gaming Authority, provided, however, that the Company has
used its reasonable best efforts to effect a disposition of such securities
to a third-party and has been unable to do so.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued to or by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be
valued by this covenant shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the trustee. Not later
than the date of making any Restricted Payment, the Company shall deliver to
the trustee an officers' certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this "Restricted Payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the indenture.
Incurrence of indebtedness and issuance of preferred stock
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and the Company will not issue any Disqualified Stock and will not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness (including
Acquired Debt) or issue Disqualified Stock, and the Company's Restricted
Subsidiaries may incur Indebtedness, if the Fixed Charge Coverage Ratio for
the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which
such additional Indebtedness is incurred or such Disqualified Stock or
preferred stock is issued would have been at least 2 to 1, determined on a pro
forma basis (including a pro forma application of the net proceeds therefrom),
as if the additional Indebtedness had been incurred or the preferred stock or
Disqualified Stock had been issued, as the case may be, at the beginning of
such four-quarter period.
96
<PAGE>
The first paragraph of this covenant will not prohibit the incurrence of any
of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount at any one time
outstanding under this clause (1), including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (1), not to exceed $12.5 million at any
one time outstanding;
(2) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by the Company and the Guarantors of Indebtedness
represented by the notes and the related Guarantees to be issued on the
date of the indenture and the exchange notes and the related Guarantees to
be issued pursuant to the registration rights agreement;
(4) the incurrence by the Company or any of its Restricted Subsidiaries
of FF&E Financing or Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case, incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in any
Casino owned and either operated or to be operated by the Company or such
Restricted Subsidiary, in an aggregate principal amount, (including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (4)) with respect to any
such Casino not to exceed $7 million in aggregate principal amount for each
Casino owned or operated by the Company at any time outstanding;
(5) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the indenture to be
incurred under the first paragraph of this covenant or clauses (2), (3),
(4) or (5) of this paragraph;
(6) the issuance by any Restricted Subsidiary of preferred stock to the
Company or the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries as provided in the covenant entitled
"Advances to Restricted Subsidiaries"; provided, however, that with respect
to intercompany Indebtedness: (a) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
person other than the Company or a Restricted Subsidiary thereof and (b)
any sale or other transfer of any such Indebtedness to a person that is not
either the Company or a Restricted Subsidiary thereof, shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company
or such Restricted Subsidiary, as the case may be, that was not permitted
by this clause (6);
(7) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of the Indenture to be outstanding;
(8) the guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Restricted Subsidiary of the Company that was permitted
to be incurred by another provision of this covenant;
(9) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness
or an issuance of Disqualified Stock for purposes of this covenant;
provided, however, in each such case, that the amount thereof is included
in Fixed Charges of the Company as accrued;
(10) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness in respect of performance, surety or appeal bonds provided
in the ordinary course of business; and
97
<PAGE>
(11) the assumption of the obligations under the Pratt Casino Corporation
Notes in connection with the Pratt Casino Corporation Acquisition,
provided, however, that such Indebtedness is retired or repaid within five
business days following the assumption of such Indebtedness.
The Company will not incur any Indebtedness (including Permitted Debt) that
is contractually subordinated in right of payment to any other Indebtedness of
the Company unless such Indebtedness is also contractually subordinated in
right of payment to the notes on substantially identical terms; provided,
however, that no Indebtedness of the Company shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of
the Company solely by virtue of being unsecured.
For purposes of determining compliance with this covenant, in the event that
an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (11) above, or
is entitled to be incurred pursuant to the first paragraph of this covenant,
the Company will be permitted to classify such item of Indebtedness on the
date of its incurrence, or later reclassify all or a portion of such item of
Indebtedness, in any manner that complies with this covenant.
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
of any kind on any asset now owned or hereafter acquired, except Permitted
Liens.
Dividend and other payment restrictions affecting subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to
the Company or any of its Restricted Subsidiaries, or with respect to any
other interest or participation in, or measured by, its profits, or pay any
indebtedness owed to the Company or any of its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the Indenture and
any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in such Existing Indebtedness, as
in effect on the date of the indenture;
(2) the indenture, the new notes, the Guarantees and the Collateral
Documents;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a person
acquired by the Company or any of its Restricted Subsidiaries as in effect
at the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any person, or the
properties or assets of any person, other than the person, or the property
or assets of the person, so acquired, provided, however, that, in the case
of Indebtedness, such Indebtedness was permitted by the terms of the
indenture to be incurred;
98
<PAGE>
(5) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided, however, that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced;
(9) Liens securing Indebtedness that limit the right of the debtor to
dispose of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements, assets sale agreements, stock sale
agreements and other similar agreements entered into in the ordinary course
of business; and
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Merger, consolidation or sale of assets
Neither the Company nor any guarantor may, directly or indirectly: (1)
consolidate or merge with or into another person (whether the Company or the
Guarantor is the surviving corporation); or (2) sell, assign, transfer, convey
or otherwise dispose of all or substantially all of the properties or assets
of the Company and its Subsidiaries taken as a whole, in one or more related
transactions, to another person; unless:
(1) either (a) the Company or the guarantor is the surviving corporation
or (b) the person formed by or surviving any such consolidation or merger
(if other than the Company or the guarantor) or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made
is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia;
(2) the person formed by or surviving any such consolidation or merger
(if other than the Company or the guarantor) or the person to which such
sale, assignment, transfer, conveyance or other disposition shall have been
made assumes all the obligations of the Company or the guarantor under the
new notes, the indenture, the registration rights agreement and the
Collateral Documents pursuant to agreements reasonably satisfactory to the
trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) the Company or the guarantor, as the case may be, or the person
formed by or surviving any such consolidation or merger (if other than the
Company or such guarantor), or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made will, on the date of
such transaction after giving pro forma effect thereto and any related
financing transactions as if the same had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock."
This "Merger, Consolidation or Sale of Assets" covenant will not apply to a
sale, assignment, transfer, conveyance or other disposition of assets between
or among the Company and any of its Restricted Subsidiaries or any of the
guarantors. The Company anticipates that, in connection with its acquisition
of Pratt Casino Corporation and the termination of the Aurora Management
Agreement and the Tunica Consulting Agreement, it will cause each of HWCC-
Aurora Management, Pratt Management, L.P. and Pratt Casino Corporation to be
merged, dissolved or otherwise terminated. The indenture will permit each of
these contemplated transactions.
99
<PAGE>
Transactions with affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated person; and
(2) the Company delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1 million, a resolution of the Board of Directors set forth in an
officers' certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board
of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10 million, an opinion as to the fairness to the holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing,
other than in connection with
(i) any transaction or series of transactions involving the
approval, amendment, restatement, replacement or modification of a
management or consulting agreement between the Company or any
Restricted Subsidiary of the Company, on the one hand, and an
Unrestricted Subsidiary, on the other hand, so long as such
agreement is on terms and conditions comparable to those that each
of the Company or such Restricted Subsidiary and such Unrestricted
Subsidiary would negotiate on an arm's-length basis with third
parties, as determined by the Board of Directors of the Company, and
(ii) any transaction or series of transactions involving the
approval, amendment, restatement, replacement or modification of a
management or consulting agreement between the Company or any
Restricted Subsidiary of the Company, on the one hand, and any
Affiliate, on the other hand, other than a Subsidiary of the
Company.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement or arrangement entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) payment of reasonable directors fees and expenses to persons who are
not otherwise Affiliates of the Company;
(4) sales of Equity Interests (other than Disqualified Stock) to
Affiliates of the Company;
(5) Restricted Payments that are permitted by the provisions of the
indenture described above under the caption "--Restricted Payments";
(6) existing agreements as in effect on the date of the indenture between
the Company and its Affiliates, as such agreements may be amended,
restated, replaced or otherwise modified, as long as the amendment,
restatement, replacement or modified agreement is neither materially more
favorable to the Affiliate nor materially less favorable to the Company, as
determined by the non-interested members of the Board of Directors; and
100
<PAGE>
(7) any other transactions that do not involve, in the aggregate for all
such transactions, the payment of more than $250,000 in consideration in
any one calendar year.
Additional subsidiary guarantees
If any Restricted Subsidiary attains, or if the Company or any of its
Restricted Subsidiaries acquires or creates a Restricted Subsidiary after the
date of the Indenture that has, a Tangible Consolidated Net Worth of $2.5
million or more, then that Restricted Subsidiary or newly acquired or created
Restricted Subsidiary must become a guarantor and execute a supplemental
indenture and Collateral Documents securing the Guarantee and deliver an
opinion of counsel to the trustee within 20 business days of the date on which
it was acquired or created. Any Restricted Subsidiary that becomes a guarantor
shall remain a guarantor unless designated an Unrestricted Subsidiary by the
Company in accordance with the indenture or is otherwise released from its
obligations as a guarantor as provided in the indenture.
Designation of restricted and unrestricted subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default;
provided, however, that in no event shall the business currently operated by
Hollywood Casino-Aurora or HWCC-Tunica be transferred to or held by an
Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an
Unrestricted Subsidiary, the aggregate fair market value of all outstanding
Investments owned by the Company and its Restricted Subsidiaries in the
Restricted Subsidiary so designated will be deemed to be an Investment made as
of the time of such designation and will either reduce the amount available
for Restricted Payments under the first paragraph of the covenant described
above under the caption "--Restricted Payments" or reduce the amount available
for future Investments under one or more clauses of the definition of
Permitted Investments, as the Company shall determine. That designation will
only be permitted if such Investment would be permitted at that time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary
to be a Restricted Subsidiary if the redesignation would not cause a Default.
Limitation on issuances and sales of equity interests in Subsidiaries
All of the Company's Restricted Subsidiaries shall be wholly owned by the
Company, by one or more of its Restricted Subsidiaries or by the Company and
one or more of its Restricted Subsidiaries.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, transfer, convey, sell, lease or otherwise dispose of any Equity Interests
in any Restricted Subsidiary of the Company to any person (other than the
Company or a Restricted Subsidiary of the Company), unless:
(1) such transfer, conveyance, sale, lease or other disposition is of all
the Equity Interests in such Restricted Subsidiary; and
(2) the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant described
above under the caption "--Repurchase at the Option ofHolders--Asset
Sales."
In addition, the Company will not permit any Restricted Subsidiary of the
Company to issue any of its Equity Interests (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any person
other than to the Company or a Restricted Subsidiary of the Company.
Change in management contracts
The indenture will provide that the Company shall not, and shall not permit
any of its Restricted Subsidiaries to, enter into any amendment to the Aurora
Management Agreement or the Tunica Consulting Agreement or grant any consent
with respect to, or waiver of, any of the terms of these agreements, except
101
<PAGE>
amendments, consents and waivers to cure ambiguities, defects or
inconsistencies, or make changes that do not adversely affect the rights of
any holder of the Notes; provided, however, that the Aurora Management
Agreement and the Tunica Consulting Agreement may be terminated in connection
with or subsequent to the Pratt Casino Corporation Acquisition.
Business activities
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than a Gaming Related Business, except to such
extent as would not be material to the Company and its Subsidiaries taken as a
whole.
Advances to Restricted Subsidiaries
All advances to Restricted Subsidiaries made by the Company after the date
of the Indenture will be evidenced by intercompany notes in favor of the
Company, other than equity contributions made by the Company to any of its
Restricted Subsidiaries. These intercompany notes will be pledged pursuant to
the Collateral Documents as Collateral to secure the Notes. Each intercompany
note other than the Aurora Intercompany Note will be payable upon demand and
will bear interest at the same rate as the new notes. The Company agrees that
it shall not permit Hollywood Casino-Aurora to prepay principal under the
Aurora Intercompany Note for so long as Hollywood Casino-Aurora is not a
guarantor of the new notes unless otherwise required by Government
Authorities.
Payments for consent
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration to or
for the benefit of any holder of new notes for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of the
indenture or the new notes unless such consideration is offered to be paid and
is paid to all holders of the new notes that consent, waive or agree to amend
in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
Reports
Whether required by the SEC, so long as any new notes are outstanding, the
Company will furnish to the holders of new notes, within 15 days following the
time periods specified in the SEC's rules and regulations:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by the Company's independent public accountants; and
(2) all current reports that would be required to be filed with the SEC
on Form 8-K if the Company were required to file such reports.
In addition, following the consummation of the exchange offer contemplated
by the registration rights agreement, whether or not required by the SEC, the
Company will file a copy of all of the information and reports referred to in
clauses (1) and (2) above with the SEC for public availability within the time
periods specified in the SEC's rules and regulations (unless the SEC will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the Company and
the guarantors have agreed that, for so long as any new notes remain
outstanding, they will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Whether required by the SEC, for so long as HWCC-Louisiana, or any successor
thereto, is an Unrestricted Subsidiary, the quarterly and annual financial
information required by the preceding paragraph shall include a reasonably
detailed presentation, either on the face of the financial statements or in
the footnotes thereto, of the financial condition and results of operations of
the Company and its Restricted Subsidiaries separate from the financial
condition and results of operations of HWCC-Louisiana, or any successor
thereto, and its consolidated
102
<PAGE>
subsidiaries, with an indication that such entities are Unrestricted
Subsidiaries and that any Indebtedness of such entities is non-recourse to the
Company.
Events of default and remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
liquidated damages with respect to, the notes;
(2) default in payment when due of the principal of, or premium, if any,
on the notes;
(3)(i) default in the payment of principal of, premium, if any, and
interest on notes required to be purchased pursuant to the Special
Mandatory Redemption, or with respect to a Change of Control Offer, Asset
Sale Offer or Event of Loss Offer, when due and payable; or (ii) failure to
perform or comply with the provisions described under (a) "Limitation on
Merger, Consolidation or Sale of Assets" or (b) "Restricted Payments" (but
only if the failure under this clause (b) is caused by a Restricted Payment
described in the first set of clauses (1) through (3) of the first
paragraph of the covenant entitled "Restricted Payments");
(4) failure by the Company or any of its Restricted Subsidiaries for 60
days after notice to comply with any of the other agreements in the
Indenture or the Collateral Documents;
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the indenture, if that default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has
been so accelerated, aggregates $8 million or more;
(6) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $8 million, which judgments are
not paid, discharged or stayed for a period of 60 days;
(7) failure to perform or breach by the Company or any guarantor of any
material representation or warranty or agreement in the Collateral
Documents, the repudiation by any party of any of its obligations under any
of the Collateral Documents or the unenforceability of any of the
Collateral Documents against any party for any reason, continued for 30
days after written notice from the trustee or holders of at least 25% in
principal amount of the outstanding new notes as provided in the indenture;
(8) except as permitted by the indenture, a default by any guarantor of
the obligations of such guarantor and its Guarantee, any Guarantee by HWCC-
Tunica, HWCC-Shreveport or any other guarantor that has a Tangible
Consolidated Net Worth of $8 million shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to
be in full force and effect or any such guarantor, or any Person acting on
behalf of any such guarantor, shall deny or disaffirm its obligations under
its Guarantee;
(9) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries that is a Significant
Subsidiary; and
(10) any revocation, suspension or loss of any gaming license which
results in the cessation or suspension of business at any Casino owned by
the Company or any of its Restricted Subsidiaries for a period of more than
120 consecutive days.
103
<PAGE>
In the case of an Event of Default arising from certain events of bankruptcy
or insolvency, with respect to the Company, any Restricted Subsidiary that is
a Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding notes
will become due and payable immediately without further action or notice. If
any other Event of Default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the then outstanding new notes
may declare all the notes to be due and payable immediately.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding notes may direct the
trustee in its exercise of any trust or power. The trustee may withhold from
holders of the notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest or liquidated damages) if it determines that withholding notice is in
their interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of
the notes waive any existing Default or Event of Default and its consequences
under the indenture except a continuing Default or Event of Default in the
payment of principal of, premium and liquidated damages, if any, and interest
on the notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the notes pursuant to the
optional redemption provisions of the indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the notes. If an Event of Default occurs prior to May
1, 2003, by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the notes prior to May 1, 2003, then the premium specified in
the indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the notes.
The Company is required to deliver to the trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any Default or
Event of Default, the Company is required to deliver to the trustee a
statement specifying such Default or Event of Default.
No personal liability of directors, officers, employees and stockholders
No director, officer, employee, incorporator or stockholder of the Company
or any guarantor, as such, shall have any liability for any obligations of the
Company or the guarantors under the notes, the indenture, the Guarantees, the
Collateral Documents or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each holder of new notes by accepting
a new note waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
Legal defeasance and covenant defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes and all
obligations of the guarantors discharged with respect to their subsidiary
guarantees ("Legal Defeasance") except for:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and liquidated damages,
if any, on such notes when such payments are due from the trust referred to
below;
(2) the Company's obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
104
<PAGE>
(3) the rights, powers, trusts, duties and immunities of the trustee, and
the Company's and the guarantor's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and the guarantors released with respect to
certain covenants that are described in the indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants shall not
constitute a Default or Event of Default with respect to the new notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described
under "Events of Default" will no longer constitute an Event of Default with
respect to the new notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the trustee, in trust, for
the benefit of the holders of the new notes, cash in U.S. dollars, non-
callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, or interest and
premium and liquidated damages, if any, on the outstanding notes on the
stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether the notes are being defeased to
maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the trustee an opinion of counsel reasonably acceptable to the trustee
confirming that:
(a) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or
(b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such opinion of counsel shall confirm that, the
holders of the outstanding notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either:
(a) on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit); or
(b) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(6) the Company must have delivered to the trustee an opinion of counsel
to the effect that, assuming no intervening bankruptcy of the Company or
any guarantor between the date of deposit and the 91st day following the
deposit and assuming that no holder is an "insider" of the Company under
applicable bankruptcy law, after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the trustee an officers' certificate
stating that the deposit was not made by the Company with the intent of
preferring the holders of new notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
105
<PAGE>
(8) the Company must deliver to the trustee an officers' certificate and
an opinion of counsel, each stating that all conditions precedent relating
to the Legal Defeasance or the Covenant Defeasance have been satisfied.
Amendment, supplement and waiver
Except as provided in the next three succeeding paragraphs, the indenture,
the notes, the Guarantees or the Collateral Documents may be amended or
supplemented by the Company and the trustee with the consent of the holders of
at least a majority in principal amount of the notes then outstanding
(including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, notes), and any existing
default or compliance with any provision of the indenture, the notes, the
Guarantees or the Collateral Documents may be waived with the consent of the
holders of a majority in principal amount of the then outstanding notes
(including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, the notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting holder):
(1) reduce the principal amount of new notes whose holders must consent
to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes (other
than provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
note;
(4) waive a Default or Event of Default in the payment of principal of,
or interest or premium, or liquidated damages, if any, on the notes (except
a rescission of acceleration of the notes by the holders of at least a
majority in aggregate principal amount of the notes and a waiver of the
payment default that resulted from such acceleration);
(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of notes to receive
payments of principal of, or interest or premium or liquidated damages, if
any, on the notes;
(7) waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the section
entitled "--Repurchase at the Option of Holders");
(8) release any guarantor from any of its obligations under its Guarantee
or the indenture, except in accordance with the terms of the indenture;
(9) release all or substantially all of the Collateral from the Lien of
the indenture or the Collateral Documents (except in accordance with the
provisions thereof); or
(10) make any change in the preceding amendment and waiver provisions.
Any amendment to, or waiver of the provisions of any of the Collateral
Documents relating to the covenant described under "--Liens" or the security
provisions of the indenture will require the consent of the holders of at
least 85% in aggregate principal amount of notes then outstanding.
Notwithstanding the preceding, without the consent of any holder of notes,
the Company, the guarantors and the trustee may amend or supplement the
indenture, the notes, the Guarantees or the Collateral Documents:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated new notes in addition to or in place of
certificated notes;
106
<PAGE>
(3) to provide for the assumption of the Company's obligations to holders
of notes in the case of a merger or consolidation or sale of all or
substantially all of the Company's assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the
legal rights under the indenture of any such holder;
(5) to comply with requirements of the SEC in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act; or
(6) to enter into additional or supplemental Collateral Documents or an
intercreditor agreement.
Satisfaction and discharge
The indenture will be discharged and will cease to be of further effect as
to all new notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated (except lost, stolen or
destroyed new notes that have been replaced or paid and new notes for
whose payment money has theretofore been deposited in trust and
thereafter repaid to the Company) have been delivered to the trustee
for cancellation; or
(b) all notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the making of a
notice of redemption or otherwise or will become due and payable within
one year and the Company or any guarantor has irrevocably deposited or
caused to be deposited with the trustee as trust funds in trust solely
for the benefit of the holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as
will be sufficient without consideration of any reinvestment of
interest, to pay and discharge the entire indebtedness on the new notes
not delivered to the trustee for cancellation for principal, premium
and liquidated damages, if any, and accrued interest to the date of
maturity or redemption;
(2) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute a
default under, any other instrument to which the Company or any guarantor
is a party or by which the Company or any guarantor is bound;
(3) the Company or any guarantor has paid or caused to be paid all sums
payable by it under the indenture; and
(4) the Company has delivered irrevocable instructions to the trustee
under the indenture to apply the deposited money toward the payment of the
new notes at maturity or the redemption date, as the case may be.
In addition, the Company must deliver an officers' certificate and an
opinion of counsel to the trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
Concerning the trustee
If the trustee becomes a creditor of the Company or any guarantor, the
indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security
or otherwise. The trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the SEC for permission to continue or
resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur and be continuing, the trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to such provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request of any holder of notes, unless such holder shall have offered to the
trustee security and indemnity satisfactory to it against any loss, liability
or expense.
107
<PAGE>
Additional information
Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights agreement without charge by writing to William D. Pratt,
Executive Vice President, Secretary and General Counsel, Hollywood Casino
Corporation, Two Galleria Tower, 13455 Noel Road, Suite 2200, Dallas, Texas
75240.
Book-entry, delivery and form
Except as set forth below, your notes will be issued in registered, global
form in minimum denominations of $1,000 and integral multiples of $1,000 in
excess thereof.
The notes will be represented by one or more notes in registered, global
form without interest coupons (the "Global Notes"). The Global Notes will be
deposited upon issuance with the trustee as custodian for The Depository Trust
Company ("DTC"), in New York, New York, and registered in the name of DTC or
its nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Depository Procedures
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures
are solely within the control of DTC and are subject to changes by them. The
Company takes no responsibility for these operations and procedures and urges
investors to contact the DTC or its participants directly to discuss these
matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by
it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes).
Investors in the Global Notes who are Participants in DTC's system may hold
their interests therein directly through DTC. Investors in the Global Notes
who are not Participants may hold their interests therein indirectly through
organizations which are Participants in such system. All interests in a Global
Note may be subject to the procedures and requirements of DTC. The laws of
some states require that certain Persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer
beneficial interests in a Global Note to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act
on behalf of Indirect Participants, the ability of a person having beneficial
interests in a Global Note to pledge such interests to persons that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests.
Except as described below, owners of interest in the Global Notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
"holders" thereof under the indenture for any purpose.
108
<PAGE>
Payments in respect of the principal of, and interest and premium and
liquidated damages, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered holder
under the indenture. Under the terms of the indenture, the Company and the
trustee will treat the persons in whose names the new notes, including the
Global Notes, are registered as the owners thereof for the purpose of
receiving payments and for all other purposes. Consequently, neither the
Company, the trustee nor any agent of the Company or the trustee has or will
have any responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes; or
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the new notes (including principal
and interest), is to credit the accounts of the relevant Participants with the
payment on the payment date unless DTC has reason to believe it will not
receive payment on such payment date. Each relevant Participant is credited
with an amount proportionate to its beneficial ownership of an interest in the
principal amount of the relevant security as shown on the records of DTC.
Payments by the Participants and the Indirect Participants to the beneficial
owners of new notes will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the trustee or the
Company. Neither the Company nor the trustee will be liable for any delay by
DTC or any of its Participants in identifying the beneficial owners of the new
notes, and the Company and the trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of new notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the Global
Notes and only in respect of such portion of the aggregate principal amount of
the Notes as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the new notes, DTC
reserves the right to exchange the Global Notes for legended new notes in
certificated form, and to distribute such new notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and may
discontinue such procedures at any time. Neither the Company nor the trustee
nor any of their respective agents will have any responsibility for the
performance by DTC or its respective participants or indirect participants of
its respective obligations under the rules and procedures governing its
operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for definitive new notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Notes and the Company fails to
appoint a successor depositary or (b) has ceased to be a clearing agency
registered under the Exchange Act;
(2) the Company, at its option, notifies the trustee in writing that it
elects to cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the new notes.
109
<PAGE>
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated
Notes delivered in exchange for any Global Note or beneficial interests in
Global Notes will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary in accordance with
its customary procedures.
Same Day Settlement and Payment
The Company will make payments in respect of the new notes represented by
the Global Notes (including principal, premium, if any, interest and
liquidated damages, if any) by wire transfer of immediately available funds to
the accounts specified by the Global Note holder. The Company will make all
payments of principal, interest and premium and liquidated damages, if any,
with respect to Certificated Notes by wire transfer of immediately available
funds to the accounts specified by the holders thereof or, if no such account
is specified, by mailing a check to each such holder's registered address. The
new notes represented by the Global Notes are expected to be eligible to trade
in the PORTAL market and to trade in DTC's Same-Day Funds Settlement System,
and any permitted secondary market trading activity in such new notes will,
therefore, be required by DTC to be settled in immediately available funds.
The Company expects that secondary trading in any Certificated Notes will also
be settled in immediately available funds.
Certain definitions
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified person:
(1) Indebtedness of any other person existing at the time such other
person is merged with or into or became a Subsidiary of such specified
person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other person merging with or into, or becoming a
Subsidiary of, such specified person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified person.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition,
"control," as used with respect to any person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such person, whether through the ownership of voting
securities, by agreement or otherwise; provided, however, that beneficial
ownership of 10% or more of the Voting Stock of a person shall be deemed to be
control. For purposes of this definition, the terms "controlling," "controlled
by" and "under common control with" shall have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights for value, other than sales of inventory in the ordinary course of
business consistent with past practices; provided, however, that the sale,
conveyance or other disposition of all or substantially all of the assets
of the Company and its Subsidiaries taken as a whole will be governed by
the provisions of the Indenture described above under the caption "--
Repurchase at the Option of Holders--Change of Control" and/or the
provisions described above under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset
Sale covenant; and
(2) the issuance of Equity Interests in any of the Company's Restricted
Subsidiaries or the sale of Equity Interests in any of its Subsidiaries.
110
<PAGE>
Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:
(1) the sale or other disposition of City of Lights I and/or City of
Lights II in connection with the replacement or expansion of the Aurora
casino, to the extent of the non-cash proceeds received;
(2) any single transaction or series of related transactions that
involves assets having a fair market value of $1 million or less as
determined by the Board of Directors;
(3) a transfer of assets between or among the Company and its Restricted
Subsidiaries;
(4) an issuance of Equity Interests by a Restricted Subsidiary to the
Company or to another Restricted Subsidiary;
(5) the sale or lease of equipment, inventory, accounts receivable,
memorabilia or other assets in the ordinary course of business;
(6) the sale or other disposition of cash or Cash Equivalents; and
(7) a Restricted Payment or Permitted Investment that is permitted by the
covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"Aurora Casino" means that certain riverboat casino complex and related
facilities located in Aurora, Illinois and owned, leased or otherwise held by
Hollywood Casino-Aurora.
"Aurora Expansion Cash Account" means a segregated cash account pledged to
the trustee for the benefit of the holders of the notes.
"Aurora Intercompany Note" means that certain promissory note dated as of
the date of the indenture issued by Hollywood Casino-Aurora to the Company
initially in a principal amount of $31.5 million, as may be increased from
time to time upon advances to Hollywood Casino-Aurora from the Company,
subject to the approval of Gaming Authorities for aggregate amounts in excess
of $108 million.
"Aurora Management Agreement" means the Management Services Agreement dated
as of June 21, 1991, and as amended through the date of the indenture, between
Hollywood Casino-Aurora and Pratt Management, L.P.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire by
conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have a
corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the Board of Directors of the
corporation;
(2) with respect to a partnership, the Board of Directors of the general
partner of the partnership; and
(3) with respect to any other person, the board or committee of such
person serving a similar function.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of corporate stock;
111
<PAGE>
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than one year from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each
case, with any lender party to any Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $500 million and a
Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper rated at least P-1 or the equivalent thereof by
Moody's Investors Service, Inc. or at least A-1 or the equivalent thereof
by Standard & Poor's Rating Services and in each case maturing within one
year after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Casino" means any gaming establishment and other property or assets
directly ancillary thereto or used in connection therewith, including any
buildings, restaurants, hotels, theaters, parking facilities, retail shops,
land, golf courses and other recreation and entertainment facilities, vessels,
barges, ships and equipment.
"Change of Control" means the occurrence of any of the following events:
(1) the sale, lease, transfer, conveyance or other disposition (other
than to the Company), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries, taken
as a whole;
(2) the liquidation or dissolution of the Company;
(3) the Company becoming aware of (by way of a report or any other filing
pursuant to Section 13(d) of the Exchange Act, proxy vote, written notice
or otherwise) the acquisition by any person or related group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any
successor provision to either of the foregoing, including any "group"
acting for the purpose of acquiring, holding or disposing of securities
within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than
the Principals, in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business combination
or purchase of beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act, or any successor provision) of 30% or more of the total
voting power entitled to vote in the election of the Board of Directors of
the Company or such other person surviving the transaction and, at such
time, the Principals collectively shall fail to beneficially own, directly
or indirectly, securities representing greater than the combined voting
power of the Company's or such other person's Voting Stock as is
beneficially owned by such person or group;
(4) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such
board or whose nomination for election by the stockholders of the Company
was approved by a vote of a majority of the directors then still in office
who were either directors at the
112
<PAGE>
beginning of such period or whose election or nomination for election was
previously so approved) ceasing for any reason to constitute a majority of
the Company's Board of Directors then in office; or
(5) the Company consolidates with, or merges with or into, any person, or
any person consolidates with, or merges with or into, the Company, in any
such event pursuant to a transaction in which any of the outstanding Voting
Stock of the Company is converted into or exchanged for cash, securities or
other property, other than any such transaction where the Voting Stock of
the Company outstanding immediately prior to such transaction is converted
into or exchanged for Voting Stock (other than Disqualified Stock) of the
surviving or transferee person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee person
immediately after giving effect to such issuance.
"Collateral" means all "collateral" referred to in the Collateral Documents
and all other property or assets that become subject to a Lien in favor of the
trustee or the holders of the notes.
"Collateral Documents" means each Security Agreement between the trustee and
each of the Company, HWCC-Tunica, HWCC-Shreveport and any other guarantor, as
the case may be, and each stock pledge, deed of trust, mortgage and fleet
mortgage executed by the Company or any of its Restricted Subsidiaries
creating a lien that secures the notes and the Guarantees, each collateral
assignment of any other documents creating a Lien that, after giving effect to
such collateral assignment, secures the new notes or any Guarantee, and any
other document creating a Lien that secures the notes or any Guarantee.
"Consolidated Cash Flow" means, with respect to any specified person for any
period, the Consolidated Net Income of such person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss realized
by such person or any of its Restricted Subsidiaries in connection with an
Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such person and its
Restricted Subsidiaries for such period, to the extent that such provision
for taxes was deducted in computing such Consolidated Net Income; plus
(3) consolidated interest expense of such person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations), to the extent
that any such expense was deducted in computing such Consolidated Net
Income; plus
(4) any preopening expenses to the extent that such preopening expenses
were deducted in computing Consolidated Net Income on a consolidated basis
and determined in accordance with GAAP, and
(5) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any
such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of such person and its
Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; minus
(6) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash
expenses of, a Restricted Subsidiary of the Company shall be
113
<PAGE>
added to Consolidated Net Income to compute Consolidated Cash Flow of the
Company only to the extent that a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Restricted
Subsidiary without prior governmental approval (that has not been obtained),
and without direct or indirect restriction pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Restricted Subsidiary or
its stockholders.
"Consolidated Net Income" means, with respect to any specified person for
any period, the aggregate of the Net Income of such person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that:
(1) the Net Income (but not loss) of any person that is not a Subsidiary
or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions
paid in cash to the specified person or a Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders;
(3) the Net Income of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded;
(5) the Net Income of any Unrestricted Subsidiary shall be excluded,
whether or not distributed to the specified person or one of its Restricted
Subsidiaries; and
(6) Extraordinary Non-Cash Items shall be excluded.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of the Indenture;
or
(2) was nominated or ratified for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who
were members of such Board at the time of such nomination or election.
"Credit Facilities" means, one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including
through the sale of receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables) or letters of
credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"Determination Date," with respect to an Interest Period, means the second
London Banking Day preceding the first day of the Interest Period.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which any outstanding Notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders thereof have the right to require the Company to
repurchase such Capital Stock upon the occurrence of a change of control or an
asset sale shall
114
<PAGE>
not constitute Disqualified Stock if the terms of such Capital Stock provide
that the Company may not repurchase or redeem any such Capital Stock pursuant
to such provisions unless such repurchase or redemption complies with the
covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Escrow Agreement" means that certain agreement dated as of the date of the
indenture between the trustee and the Company with respect to the Escrowed
Funds.
"Escrowed Funds" means the $40.7 million of the net proceeds from the sale
of the original notes deposited into escrow with the trustee under the Escrow
Agreement.
"Event of Loss" means, with respect to any property or asset, any (i) loss,
destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the date of the indenture, until such amounts are
repaid.
"Extraordinary Non-Cash Items" means any loss from the purchase of the
Aurora Management Agreement and the Tunica Consulting Agreement, loss from the
early retirement of the 12 3/4% Senior Secured Notes, loss from the write-off
of the original issue discount on the 12 3/4% Senior Secured Notes, loss from
the write-off of unamortized deferred charges and financing fees from the 12
3/4% Senior Secured Notes, loss from any write-downs associated with the
disposition of certain real estate assets currently owned by the Company in
Houston, Texas, any losses from the write-down from receivables with respect
to the Greate Bay Casino Corporation and PPI Funding Corp. notes in favor of
the Company and the loss from the retirement or disposition of the riverboats
comprising the Aurora Casino in connection with the replacement or expansion
of the Aurora Casino.
"FF&E Financing" means Indebtedness, the proceeds of which are used solely
to finance the acquisition or lease by the Company or any of its Restricted
Subsidiaries of furniture, fixtures or equipment ("FF&E") used in the ordinary
course of the operation of the business of the Company or its Restricted
Subsidiaries.
"Fixed Charges" means, with respect to any specified person for any period,
the sum, without duplication, of:
(1) the consolidated interest expense of such person and its Restricted
Subsidiaries for such period, whether paid or accrued, including, without
limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net of the effect of all payments made or
received pursuant to Hedging Obligations; plus
(2) the consolidated interest of such person and its Restricted
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another person that is
guaranteed by such person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such person or one of its Restricted Subsidiaries,
whether or not such guarantee or Lien is called upon; plus
(4) the product of
(a) all dividends, whether paid or accrued and whether or not in
cash, on any series of preferred stock of such person or any of its
Restricted Subsidiaries, other than dividends on Equity Interests
payable solely in Equity Interests of the Company (other than
Disqualified Stock) or to the Company or a Restricted Subsidiary of the
Company, times
115
<PAGE>
(b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and local
statutory tax rate of such person and any of its Restricted
Subsidiaries, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
In calculating Fixed Charges on a pro forma basis, any Indebtedness bearing
a floating interest rate shall be computed as if the rate in effect on the
date of computation had been the applicable rate for the entire period.
"Fixed Charge Coverage Ratio" means with respect to any specified person for
any period, the ratio of the Consolidated Cash Flow of such person and its
Restricted Subsidiaries for such period to the Fixed Charges of such person
for such period. In the event that the specified person or any of its
Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases or
redeems any Indebtedness (other than ordinary working capital borrowings) or
issues, repurchases or redeems preferred stock subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated
and on or prior to the date on which the event for which the calculation of
the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, guarantee, repayment, repurchase or redemption of
Indebtedness, or such issuance, repurchase or redemption of preferred stock,
and the use of the proceeds therefrom as if the same had occurred at the
beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified person or any of
its Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be given pro forma effect as if they had
occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated on a
pro forma basis in accordance with Regulation S-X under the Securities Act,
but without giving effect to clause (3) of the proviso set forth in the
definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the specified person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Gaming Authority" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or any foreign government, any state, province or any city or other
political subdivision or otherwise and whether now or hereafter in existence,
or any officer or official thereof, including, without limitation, the
Illinois Gaming Board, the Louisiana Gaming Control Board and the Mississippi
Gaming Commission, with authority to regulate any gaming operation (or
proposed gaming operation) owned, managed or operated by the Company or any of
its Subsidiaries.
"Gaming Related Business" means the gaming business and other businesses
necessary for, incident to, connected with, arising out of, or developed or
operated to permit or facilitate the conduct or pursuit of the gaming business
(including developing and operating lodging facilities, restaurants, sports or
entertainment facilities, transportation services or other related activities
or enterprises and any additions or improvements thereto) and potential
opportunities in the gaming business.
116
<PAGE>
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever
(including, without limitation, any Gaming Authority) of the United States or
foreign government, any state, any province or any city or other political
subdivision or otherwise and whether now or hereafter in existence, or any
officer or official thereof, and any maritime authority.
"Government Securities" means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith
and credit is pledged or (b) obligations of a person controlled or supervised
by and acting as an agency or instrumentality of the United States of America
the timely payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and also
includes a depository receipt issued by a bank (as defined in Section 3(a)(2)
of the Securities Act of 1933, as amended), as custodian with respect to any
such Government Security or a specific payment of principal of or interest on
any such Government Security held by such custodian for the account of the
holder of such depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Security or the specific payment of
principal of or interest on the Government Security evidenced by such
depository receipt.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any specified person, the
obligations of such person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such person
against fluctuations in interest rates.
"Hollywood Casino-Aurora" means Hollywood Casino-Aurora, Inc., an Illinois
corporation, all of the Capital Stock of which is owned by the Company.
"HWCC-Aurora Management" means HWCC Aurora Management, Inc., an Illinois
corporation, all of the Capital Stock of which is owned by the Company.
HWCC-Aurora Management Note" means that certain promissory note, dated as of
April 1, 1997, in the original aggregate principal amount of $3.8 million,
issued to PPI Corporation.
"HWCC-Holdings" means HWCC-Holdings, Inc., a Texas corporation, all of the
Capital Stock of which is owned by the Company.
"HWCC-Louisiana" means HWCC-Louisiana, Inc., a Louisiana corporation, all of
the Capital Stock of which is owned by the Company.
"HWCC-Shreveport" means HWCC-Shreveport, Inc., a Louisiana corporation, all
of the Capital Stock of which is owned by the Company.
"HWCC-Tunica" means HWCC-Tunica, Inc., a Texas corporation, all of the
capital stock of which is owned by the Company.
"Indebtedness" means, with respect to any specified person, any indebtedness
of such person, whether or not contingent, in respect of:
(1) borrowed money;
(2) obligations evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof);
117
<PAGE>
(3) banker's acceptances;
(4) Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable or other amounts (other than accounts payable or other
obligations to trade creditors which have remained unpaid for greater than
90 days past their original due date or that are being contested in good
faith and for which adequate reserves have been made) incurred in the
ordinary course of business that ordinarily would constitute a trade
payable to trade creditors;
(6) any Hedging Obligations;
(7) all Indebtedness of others secured by a Lien on any asset of the
specified person (whether or not such Indebtedness is assumed by the
specified person); provided, however, that the amount of such Indebtedness
shall be limited to the lesser of the fair market value of the assets or
property to which such Lien attaches and the amount of the Indebtedness so
secured; and
(8) to the extent not otherwise included, the guarantee by the specified
person of any indebtedness of any other person,
and any and all deferrals, renewals, extensions, refinancings and refundings
(whether direct or indirect) thereof and any amendments, modifications or
supplements thereto, if and to the extent any of the preceding items (other
than letters of credit and Hedging Obligations) would appear as a liability
upon a balance sheet of the specified person prepared in accordance with GAAP.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Intercompany Notes" means (i) the Aurora Intercompany Note, (ii) the Tunica
Intercompany Note and (iii) any other promissory notes issued by Restricted
Subsidiaries of the Company in favor of the Company or a guarantor to evidence
advances by the Company or such guarantor.
"Interest Period" means the period commencing on and including an interest
payment date and ending on and including the day immediately preceding the
next succeeding interest payment date.
"Investments" means, with respect to any person, all direct or indirect
investments by such person in other persons (including Affiliates) in the
forms of loans (including guarantees or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or
other securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the
Company or any Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Subsidiary not sold or disposed
of in an amount determined as provided in the final paragraph of the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
The acquisition by the Company or any Subsidiary of the Company of a person
that holds an Investment in a third person shall be deemed to be an Investment
by the Company or such Subsidiary in such third person in an amount equal to
the fair market value of the Investment held by the acquired person in such
third person in an amount determined as provided in the final paragraph of the
covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"LIBOR," with respect to an Interest Period, means the rate (expressed as a
percentage per annum) for deposits in United States dollars for a six-month
period beginning on the second London Banking Day after the
118
<PAGE>
Determination Date that appears on Telerate Page 3750 as of 11:00 a.m., London
time, on the Determination Date. If Telerate Page 3750 does not include such a
rate or is unavailable on a Determination Date, LIBOR for the Interest Period
shall be the arithmetic mean of the rates (expressed as a percentage per
annum) for deposits in a Representative Amount in United States dollars for a
six-month period beginning on the second London Banking Day after the
Determination Date that appears on Reuters Screen LIBO Page as of 11:00 a.m.,
London time, on the Determination Date. If Reuters Screen LIBO Page does not
include two or more rates or is unavailable on a Determination Date, the
Calculation Agent shall request the principal London office of each of four
major banks in the London interbank market, as selected by the Calculation
Agent, to provide such bank's offered quotation (expressed as a percentage per
annum), as of approximately 11:00 a.m., London time, on such Determination
Date, to prime banks in the London interbank market for deposits in a
Representative Amount in United States dollars for a six-month period
beginning on the second London Banking Day after the Determination Date. If at
least two such offered quotations are so provided, LIBOR for the Interest
Period shall be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, the Calculation Agent shall request each of three
major banks in New York City, as selected by the Calculation Agent, to provide
such bank's rate (expressed as a percentage per annum), as of approximately
11:00 a.m., New York City time, on such Determination Date, for loans in a
Representative Amount in United States dollars to leading European banks for a
six-month period beginning on the second London Banking Day after the
Determination Date. If at least two such rates are so provided, LIBOR for the
Interest Period will be the arithmetic mean of such rates. If fewer than two
such rates are so provided, then LIBOR for the Interest Period will be LIBOR
in effect with respect to the immediately preceding Interest Period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.
"London Banking Day" means any day in which dealings in United States
dollars are transacted or, with respect to any future date, are expected to be
transacted in the London interbank market.
"Net Income" means, with respect to any specified person, the net income
(loss) of such person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), net of any related provision for taxes on
such gain (but not loss), realized in connection with: (a) any Asset Sale;
or (b) the disposition of any securities by such person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of such
person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Loss Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Event of Loss,
including, without limitation, insurance proceeds from condemnation awards or
damages awarded by any judgment, net of the direct costs in recovery of such
Net Loss Proceeds (including, without limitation, legal, accounting, appraisal
and insurance adjuster fees and any relocation expenses incurred as a result
thereof), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Event
of Loss, and any taxes paid or payable as a result thereof.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non-cash consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale, including, without limitation, legal,
accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case,
119
<PAGE>
after taking into account any available tax credits or deductions and any tax
sharing arrangements, and amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable as a Guarantor or otherwise, or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than the Notes) of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Operating" means, with respect to the Shreveport Casino, the time that (i)
all Gaming Licenses have been granted and have not been revoked or suspended,
(ii) the Shreveport Casino is in a condition (including installation of
furnishings, fixtures and equipment) to receive guests in the ordinary course
of business, (iii) gaming and other operations in accordance with applicable
law are open to the general public and are being conducted at the Shreveport
Casino, (iv) a permanent or temporary certificate of occupancy has been issued
for the Shreveport Casino by the parish in Louisiana in which the Shreveport
Casino will operate, (v) a notice of termination of work relating to the
Shreveport Casino has been duly recorded in accordance with Louisiana law, and
(vi) the Shreveport Casino has been documented by the U.S. Coast Guard in the
name of QNOV or any successor and the U.S. Coast Guard has issued a
Certificate of Inspection for the Shreveport Casino.
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary of the
Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a person engaged in any Gaming Related Business, if as a result
of such Investment:
(a) such person becomes a Restricted Subsidiary of the Company; or
(b) such person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company;
(6) Hedging Obligations;
(7) any Investment by the Company or any of its Restricted Subsidiaries
in persons required in order to secure liquor and/or other licenses or
permits under applicable law incident to the operation by the Company or
any of its Restricted Subsidiaries of a Gaming Related Business, provided
the aggregate amount of such Investment shall at no time exceed $100,000;
120
<PAGE>
(8) any Investment made in settlement of gambling debts incurred by
patrons of any of the Casinos owned or operated by the Company or any of
its Restricted Subsidiaries which settlements have been entered into in the
ordinary course of business;
(9) a Shreveport Casino Investment;
(10) the transfer, sale, contribution or other conveyance to any
Subsidiary of those certain notes by Greate Bay Casino Corporation and PPI
Funding Corp. in favor of the Company; and
(11) Investments not otherwise permitted by the foregoing clauses (1)
through (10) in an aggregate outstanding amount of not more than $250,000.
"Permitted Liens" means:
(1) Liens on the assets of the Company and any guarantor created by the
indenture and the Collateral Documents securing the new notes and the
Guarantees;
(2) Liens in favor of the Company or the guarantors;
(3) Liens on property of a person existing at the time such person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in
existence prior to the contemplation of such merger or consolidation and do
not extend to any assets other than those of the person merged into or
consolidated with the Company or the Restricted Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens to secure Indebtedness permitted by clause (1) of the second
paragraph of the covenant entitled "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" covering only inventory and
accounts receivable;
(7) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant entitled
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock" covering only the assets acquired with such Indebtedness;
(8) Liens existing on the date of the indenture, including Liens related
to the HWCC-Aurora Management Note;
(9) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(10) Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that
do not exceed $5 million at any one time outstanding;
(11) Liens on assets of Unrestricted Subsidiaries that secure Non-
Recourse Debt of Unrestricted Subsidiaries;
(12) Ground leases in respect of the real property on which facilities
owned or leased by the Company or any of its Restricted Subsidiaries are
located;
(13) Liens arising from UCC financing statements regarding property
leased by the Company or any of its Restricted Subsidiaries;
(14) Easements, rights-of-way, navigational servitudes, zoning
restrictions, minor defects or irregularities in title and other similar
charges or encumbrances which do not interfere in any material respect with
the ordinary conduct of business of the Company and its Restricted
Subsidiaries;
121
<PAGE>
(15) Liens incurred and pledges made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and social
security benefits;
(16) Liens of carriers, warehouse men, mechanics, landlords, material
men, repairmen or other like Liens arising by operation of law or in the
ordinary course of business and consistent with industry practices and
Liens on deposits made to obtain the release of such Liens if
(a) the underlying obligations are not overdue for a period of more
than 60 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings by the Company and adequate reserves with respect thereto
are maintained on the books of the Company in accordance with GAAP, and
(c) the Company is in compliance with the terms of the security
documents applicable to such Liens; and
(17) Without limiting the ability of the Company or any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien otherwise
permitted under any of the foregoing clauses, any extension, renewal or
replacement, in whole or in part, of any Lien described in the foregoing
clauses; provided, however, that any such extension, renewal or replacement
Lien is limited to the property or assets covered by the Lien extended,
renewed or replaced or substitute property or assets, the value of which is
(and, for property or assets having an aggregate fair market value of more
than $100,000, as determined by the Board of Directors of the Company to
be) not materially greater than the value of the property or assets for
which the substitute property or assets are substituted.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest thereon
and the amount of all expenses and premiums incurred in connection
therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the new notes,
such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the holders of new notes as
those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Pratt Casino Corporation Acquisition" means the acquisition by the Company
of all of the capital stock of Pratt Casino Corporation pursuant to and in
accordance with the terms set forth in the Voting Agreement by and among the
Company, Pratt Casino Corporation, PRT Funding Corp., New Jersey Management,
Inc., Greate Bay Casino Corporation and certain creditors of PRT Funding named
therein.
"Pratt Casino Corporation Notes" means those certain notes, debt instruments
or other obligations to be issued by Pratt Casino Corporation to its creditors
pursuant to the joint plan of reorganization relating to the bankruptcy
proceedings of Pratt Casino Corporation, PRT Funding Corp. and New Jersey
Management, Inc. under Chapter 11 of the Bankruptcy Code.
122
<PAGE>
"Pratt Management, L.P." means Pratt Management, L.P., a Delaware limited
partnership.
"Principals" means:
(1) Jack Pratt, Edward T. Pratt, Jr., William D. Pratt, Crystal A. Pratt,
Maria A. Pratt and Edward T. Pratt, III, their respective estates and
members of the immediate family (including adopted children) of any of them
who acquire Voting Stock of the Company from any such estates,
(2) C.A. Pratt Partners, Ltd., a Texas limited partnership, provided,
however, that, in each case, the majority of the voting equity interests of
the partnership is Beneficially Owned by a person named in clause (1), and
(3) the WDP, Jr. Family Trust, provided, however, that a person named in
clause (1) is
(a) the Beneficial Owner of a majority of the Voting Stock held by
such trust, or
(b) if the trust is irrevocable, the trustee of the irrevocable trust
is a person named in clause (1).
"QNOV" means QNOV, a Louisiana general partnership.
"Qualified Equity Offering" means an offering of the Company's common stock
which results in net proceeds to the Company of at least $20 million.
"Representative Amount" means a principal amount of not less than U.S.
$1,000,000 for a single transaction in the relevant market at the relevant
time.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a person means any Subsidiary of the referent
person that is not an Unrestricted Subsidiary.
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
The Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service).
"Shreveport Casino" means that certain casino, hotel complex and related
facilities located in Shreveport, Louisiana, and owned, leased or otherwise
held and to be developed and constructed by the Company or any of its
Subsidiaries.
"Shreveport Casino Investment" means an Investment in a Subsidiary solely
for the purpose of developing, constructing and opening the Shreveport Casino
in an amount not to exceed $65 million from the date of the Indenture;
provided, however, that to be eligible to make a Shreveport Casino Investment,
the Company, not later than March 31, 2000, must have obtained substantially
all of the funds for the development and construction, other than financing
for furniture, fixtures or equipment to be incurred prior to opening of the
Shreveport Casino. If in any event the Shreveport Casino is not operating on
or prior to June 1, 2001, any Investment made or to be made by the Company in
the Shreveport Casino, which when taken together with all other Investments
made in the Shreveport Casino, exceeds $25 million in the aggregate, shall
count as a Restricted Payment as of the date the Investment is made for
purposes of determining the aggregate amount of all Restricted Payments made
by the Company since the date of the Indenture as set forth in the first
paragraph of the covenant described under the caption "--Certain Covenants--
Restricted Payments," provided, however, that the amounts treated as
Restricted Payments pursuant to this sentence shall only be treated as
Restricted Payments until the date that the Shreveport Casino is Operating.
Notwithstanding the foregoing, if the Company has made aggregate Investments
of less than $25 million in a Shreveport Casino Investment and the Company at
any time determines by resolution duly adopted by the Board of Directors to
terminate the development of the Shreveport Casino, the Company may make one
or more Investments in an alternative opportunity in a Gaming Related Business
in an amount which shall not exceed $25 million when taken together with all
other Investments made or to be made in the Shreveport Casino and in a Gaming
Related Business pursuant to this sentence.
123
<PAGE>
"Shreveport Management Agreement" means any agreement between the Company or
any of its Affiliates, including, without limitation, HWCC-Shreveport, with
QNOV or any of its Affiliates, relating to the operation and management of the
Shreveport Casino.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such person or one or more of the
other Subsidiaries of that person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such person or a Subsidiary of such person or (b) the
only general partners of which are such person or one or more Subsidiaries
of such person (or any combination thereof).
"Substitute Management Agreement" means any management contract between the
Company and any of its affiliates relating to the operation and management of
a Gaming Related Business in which the Company has made an Investment pursuant
to the last sentence of the definition of "Shreveport Casino Investment."
"Tangible Consolidated Net Worth" means, with respect to a Restricted
Subsidiary, such Restricted Subsidiary's Total Consolidated Net Worth,
adjusted (i) to include the principal amount of all loans and advances made to
such Restricted Subsidiary by the Company or any other Restricted Subsidiary
of the Company and (ii) to exclude the Intangible Assets of such Restricted
Subsidiary and its consolidated subsidiaries. For purposes of this definition,
"Intangible Assets" means the amount (to the extent reflected in computing the
Restricted Subsidiary's Total Consolidated Net Worth) of (a) all Investments
in persons which are not Restricted Subsidiaries of the Company (except, in
each case, Investments which are readily marketable, valued at the lower of
cost or market), and (ii) all unamortized debt discounts and expense,
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, organization and capitalized development expenses and
other intangible assets, all as determined in accordance with GAAP.
"Telerate Page 3750" means the display designated as "Page 3750" on the Dow
Jones Telerate Service (or such other page as may replace Page 3750 on that
service).
"Total Consolidated Net Worth" means, with respect to any person, the
aggregate of capital, surplus and retained earnings of such person and its
consolidated subsidiaries, as would be shown on the consolidated balance sheet
of such person prepared in accordance with GAAP adjusted to exclude (to the
extent included in calculating such equity),
(1)the amount of capital, surplus and accrued but unpaid dividends
attributable to any Disqualified Stock or treasury stock of such person or
any of its consolidated subsidiaries;
(2)all upward revaluations and other write-ups in the book value of any
asset of such person or a consolidated subsidiary of such person subsequent
to the date of the Indenture;
(3)all investments in subsidiaries that are not consolidated subsidiaries
and in persons that are not subsidiaries; and
(4)minority interests.
124
<PAGE>
"Tunica Casino" means that certain casino, hotel complex and related
facilities located in Tunica, Mississippi and owned, leased or otherwise held
by HWCC-Tunica.
"Tunica Consulting Agreement" means the Consulting Agreement dated as of
January 1, 1994, between HWCC-Tunica and Pratt Casino Corporation.
"Tunica Intercompany Note" means that certain amended and restated
promissory note dated as of the date of the Indenture issued by HWCC-Tunica to
the Company.
"Unrestricted Subsidiary" means HWCC-Holdings, HWCC-Golf Course Partners,
HWCC-Louisiana, Pratt Management, L.P., QNOV and any other Subsidiary of the
Company that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a resolution of the Board of Directors, but only to the
extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless the
terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from persons who are not Affiliates of the
Company;
(3) is a person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such person's financial condition or to cause such person to achieve any
specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary
shall be evidenced to the trustee by filing with the trustee a certified copy
of the resolution of the Board of Directors giving effect to such designation
and an officers' certificate certifying that such designation complied with
the preceding conditions and was permitted by the covenant described above
under the caption "--Certain Covenants--Restricted Payments." If, at any time,
any Unrestricted Subsidiary would fail to meet the preceding requirements as
an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," the Company shall be in default of such covenant. The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed
to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company
of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if
(1) such Indebtedness is permitted under the covenant described under the
caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock," calculated on a pro forma basis as if such designation
had occurred at the beginning of the four-quarter reference period; and
(2) no Default or Event of Default would be in existence following such
designation.
"Voting Stock" of any person as of any date means the Capital Stock of such
person that is at the time entitled to vote in the election of the Board of
Directors of such person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
125
<PAGE>
respect thereof, by (b) the number of years (calculated to the nearest one-
twelfth) that will elapse between such date and the making of such payment;
by
(2) the then outstanding principal amount of such Indebtedness; provided,
however, that with respect to any revolving Indebtedness, the foregoing
calculation of Weighted Average Life to Maturity shall be determined based
upon the total available commitments and the required reductions of
commitments in lieu of the outstanding principal amount and the required
payments of principal, respectively.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the material United States federal
income tax considerations relevant to the exchange of your original notes for
registered notes. This discussion is a summary for general information
purposes only, and does not consider all aspects of federal income taxation
that may be relevant to a particular investor in light of his, her or its
personal circumstances.
This discussion is based upon the United States federal tax law now in
effect, which is subject to change, possibly retroactively. The description
does not consider the effect of any applicable foreign, state, local or other
tax laws or estate or gift tax considerations.
You should consult your own tax advisors regarding the particular United
States federal tax consequences to you of exchanging your original notes for
registered notes, as well as any tax consequences that may arise under the
laws of any foreign, state, local or other taxing jurisdiction.
Exchange of Original Notes for Registered Notes
The exchange of your original notes for registered notes pursuant to the
exchange offer should not constitute a sale or an exchange for federal income
tax purposes. Accordingly, not only should the exchange offer have no federal
income tax consequences to you if you exchange your original notes for
registered notes (i.e., there should be no change in your tax basis, and your
holding period should carry over to the registered notes), but the federal
income tax consequences of holding and disposing of the registered notes
should also be the same as those that would apply to your original notes.
PLAN OF DISTRIBUTION
If you are a broker-dealer that receives registered notes for your own
account in exchange for your original notes pursuant to the exchange offer,
where your original notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, you must acknowledge
that you will deliver a prospectus in connection with any resale of your
registered notes. This prospectus, as it may be amended or supplemented from
time to time, may be used by you in connection with resales of registered
notes received in exchange for your original notes where your original notes
were acquired as a result of market-making activities or other trading
activities. We have agreed that, for a period of one year after the
consummation of the exchange offer, we will make this prospectus, as amended
or supplemented, available to you for use in connection with any such resale.
In addition, until , 1999, if you effect a transaction in the new notes
you may be required to deliver a prospectus.
Neither we nor the guarantors will receive any proceeds from any sale of
registered notes by broker-dealers. If you are a broker-dealer, registered
notes you receive for your own account in connection with the exchange offer
may be sold from time to time in one or more transactions in the over-the-
counter market, in negotiated transactions, through the writing of options on
the registered notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. You may make resales directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such registered notes. If you are a broker-dealer that
resells registered notes that we received by you for your own account in
connection with
126
<PAGE>
the exchange offer and you participate in a distribution of your registered
notes, you may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any resale of registered notes and any
commissions or concessions received by you may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that
by acknowledging that you will deliver and by delivering a prospectus, you
will not be deemed to admit that you are an "underwriter" within the meaning
of the Securities Act.
For a period of one year after the registration statement is declared
effective, we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to you, if you are a broker-dealer
that requests these documents in the letter of transmittal or otherwise. We
have agreed to pay all expenses incident to the exchange offer, including the
expenses of one counsel for the holders of the notes, other than commissions
or concessions of any broker-dealers and will indemnify you, including any
broker-dealers, against certain liabilities, including certain liabilities
under the Securities Act.
LEGAL MATTERS
The validity of the registered notes offered by this prospectus will be
passed upon for us by Weil, Gotshal & Manges LLP, Dallas, Texas and New York,
New York.
EXPERTS
The consolidated financial statements of Hollywood Casino Corporation and
subsidiaries (except for GB Holdings, Inc. and subsidiaries for the year ended
December 31, 1996) and of HWCC-Tunica, Inc. and subsidiary and the financial
statements of Hollywood Casino-Aurora, Inc. as of December 31, 1998 and 1997
and for each of the three years in the period ended December 31, 1998 included
in this prospectus and the related financial statement schedules included
elsewhere in the registration statement have been audited by Deloitte & Touche
LLP as stated in their reports appearing herein and elsewhere in the
registration statement (which report on Hollywood Casino Corporation and
subsidiaries expresses an unqualified opinion and contains an explanatory
paragraph regarding the restatement of the Company's 1997 and 1996 financial
statements). The consolidated financial statements of GB Holdings, Inc. and
subsidiaries for the year ended December 31, 1996 (consolidated with those of
Hollywood Casino Corporation) have been audited by Arthur Andersen LLP, as
stated in their report included herein. Such financial statements of the
companies and, where applicable, their consolidated subsidiaries are included
herein in reliance upon the respective reports of such firms given upon their
authority as experts in accounting and auditing. Both of the foregoing firms
are independent auditors.
CHANGES IN ACCOUNTANTS
Subsequent to the filing of our complaint against Arthur Andersen on October
8, 1998, the Audit Committee of our Board of Directors voted on October 16,
1998 to dismiss Arthur Andersen as our accountants. Arthur Andersen's report
on the 1997 financial statements did not contain an adverse opinion or
disclaimer of opinion nor was it modified as to an uncertainty, audit scope or
accounting principle. There was no disagreement with Arthur Andersen of the
type that would require disclosure under Item 304 of Regulation S-K.
WHERE YOU CAN FIND MORE INFORMATION
We file (File No. 000-2075) annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements and other information filed by us at the SEC's public
reference room, at 450 Fifth Street, N.W., Washington, D.C., as well as at
public reference rooms in New York, New York and Chicago, Illinois. Please
call (800) SEC-0330 for further information on the public reference rooms. Our
filings are also available to the public from commercial document retrieval
services and at the internet web site maintained by the SEC at
http://www.sec.gov.
127
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Annual Financial Statements:
Hollywood Casino Corporation and Subsidiaries:
Report of Independent Auditors.......................................... F-2
Report of Independent Public Accountants................................ F-3
Consolidated Balance Sheets as of December 31, 1998 and 1997
(restated)............................................................. F-4
Consolidated Statements of Operations for the Years Ended December 31,
1998, 1997 (restated) and 1996......................................... F-6
Consolidated Statement of Changes in Shareholders' Equity (Deficit) for
the Three Years Ended December 31, 1998 (restated)..................... F-7
Consolidated Statements of Cash Flows for the Years Ended December 31,
1998, 1997 (restated) and 1996......................................... F-8
Notes to Consolidated Financial Statements.............................. F-9
Hollywood Casino-Aurora, Inc.
Report of Independent Auditors.......................................... F-29
Balance Sheets as of December 31, 1998 and 1997......................... F-30
Statements of Operations for the Years Ended December 31, 1998, 1997 and
1996................................................................... F-31
Statement of Changes in Shareholder's Equity for the Three Years Ended
December 31, 1998...................................................... F-32
Statements of Cash Flows for the Years Ended December 31, 1998, 1997,
and 1996............................................................... F-33
Notes to Financial Statements........................................... F-34
HWCC-Tunica, Inc.
Report of Independent Auditors.......................................... F-43
Consolidated Balance Sheets as of December 31, 1998 and 1997............ F-44
Consolidated Statements of Operations for the Years Ended December 31,
1998, 1997 and 1996.................................................... F-46
Consolidated Statement of Changes in Shareholder's Equity for the Three
Years Ended December 31, 1998.......................................... F-47
Consolidated Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996.................................................... F-48
Notes to Consolidated Financial Statements.............................. F-49
Quarterly Financial Statements (unaudited):
Hollywood Casino Corporation and Subsidiaries:
Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998.. F-58
Consolidated Statements of Operations for the Three Month Periods Ended
March 31, 1999 and 1998................................................ F-60
Consolidated Statements of Cash Flows for the Three Month Periods Ended
March 31, 1999 and 1998................................................ F-61
Notes to Consolidated Financial Statements.............................. F-62
Hollywood Casino-Aurora, Inc.
Balance Sheets as of March 31, 1999 and December 31, 1998............... F-72
Statements of Operations for the Three Month Periods Ended March 31,
1999 and 1998.......................................................... F-73
Statements of Cash Flows for the Three Month Periods Ended March 31,
1999 and 1998.......................................................... F-74
Notes to Financial Statements........................................... F-75
HWCC-Tunica, Inc.
Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998.. F-81
Consolidated Statements of Operations for the Three Month Periods Ended
March 31, 1999 and 1998................................................ F-83
Consolidated Statements of Cash Flows for the Three Month Periods Ended
March 31, 1999 and 1998................................................ F-84
Notes to Consolidated Financial Statements.............................. F-85
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To Hollywood Casino Corporation:
We have audited the accompanying consolidated balance sheets of Hollywood
Casino Corporation (the Company and a Delaware corporation) and subsidiaries
as of December 31, 1998 and 1997, and the related consolidated statements of
operations, changes in shareholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1998. 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 did not audit the consolidated financial statements of GB
Holdings, Inc. (a consolidated subsidiary until December 31, 1996 when it was
spun-off to the Company's shareholders, see Note 2), which statements for the
year ended December 31, 1996 reflect net revenues constituting approximately
50% of consolidated net revenues and a net loss (adjusted to exclude
intercompany transactions) constituting approximately 47% of consolidated net
loss for the year then ended. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates
to the amounts included for GB Holdings, Inc. and subsidiaries, is based
solely on the report of such other auditors.
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 and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Hollywood Casino Corporation and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles.
As discussed in Note 3, the accompanying 1997 and 1996 financial statements
have been restated.
Deloitte & Touche LLP
Dallas, Texas
February 23, 1999
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To GB Holdings, Inc.:
We have audited the consolidated statements of operations, changes in
shareholder's deficit and cash flows of GB Holdings, Inc. (the Company and a
Delaware Corporation) and subsidiaries for the year ended December 31, 1996.
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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated statements of operations, changes in
shareholder's deficit and cash flows referred to above present fairly, in all
material respects, the results of operations and cash flows of GB Holdings,
Inc. and subsidiaries for the year ended December 31, 1996 in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Roseland, New Jersey
March 21, 1997
F-3
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
----------------------------
1997
(As Restated--
1998 Note 3)
------------ --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents......................... $ 42,118,000 $ 40,259,000
Short-term investments............................ 3,905,000 3,876,000
Accounts receivable, net of allowances of
$1,468,000 and $1,188,000, respectively.......... 2,368,000 2,747,000
Inventories....................................... 1,385,000 1,454,000
Deferred income taxes............................. 890,000 2,481,000
Refundable deposits and other current assets...... 1,908,000 2,274,000
Due from affiliates, net of valuation allowance... 8,893,000 7,811,000
------------ ------------
Total current assets............................ 61,467,000 60,902,000
------------ ------------
Investment in unconsolidated affiliates............. 4,581,000 2,000,000
------------ ------------
Property and Equipment:
Land.............................................. 7,812,000 6,621,000
Buildings and improvements........................ 120,060,000 119,534,000
Riverboats and barges............................. 40,166,000 39,494,000
Operating equipment............................... 77,192,000 70,390,000
Construction in progress.......................... 3,227,000 1,222,000
------------ ------------
248,457,000 237,261,000
Less--accumulated depreciation and amortization... (80,642,000) (66,099,000)
------------ ------------
Net property and equipment...................... 167,815,000 171,162,000
------------ ------------
Other Assets:
Deferred financing costs.......................... 4,792,000 5,558,000
Notes receivable, net of allowance................ -- 6,000,000
Land rights....................................... 7,250,000 7,454,000
Due from affiliates, net of valuation allowance... 12,359,000 12,322,000
Land held for sale, net of valuation allowance.... 6,232,000 6,264,000
Other assets...................................... 6,244,000 4,556,000
------------ ------------
Total other assets.............................. 36,877,000 42,154,000
------------ ------------
$270,740,000 $276,218,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated balance sheets.
F-4
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
----------------------------
1997
(As Restated--
1998 Note 3)
------------ --------------
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt and capital
lease obligations............................... $ 7,914,000 $ 7,661,000
Accounts payable................................. 4,578,000 3,724,000
Accrued liabilities--
Salaries and wages.............................. 5,023,000 4,916,000
Interest........................................ 4,872,000 4,792,000
Gaming and other taxes.......................... 1,613,000 2,469,000
Insurance....................................... 2,940,000 2,667,000
Other........................................... 4,503,000 2,748,000
Federal income taxes payable..................... -- 6,878,000
Other current liabilities........................ 3,311,000 2,549,000
------------ ------------
Total current liabilities..................... 34,754,000 38,404,000
------------ ------------
Long-Term Debt.................................... 199,667,000 198,420,000
------------ ------------
Capital Lease Obligations......................... 19,948,000 20,841,000
------------ ------------
Other Noncurrent Liabilities...................... 5,755,000 7,180,000
------------ ------------
Commitments and Contingencies
Minority Interest in Limited Partnership.......... 3,104,000 2,256,000
------------ ------------
Shareholders' Equity:
Common Stock--
Class A common stock, $.0001 par value per
share; 50,000,000 shares authorized; 24,950,000
and 24,910,000 shares issued and outstanding,
respectively................................... 2,000 2,000
Class B, non-voting, $.01 par value per share;
10,000,000 shares authorized; no shares
issued......................................... -- --
Additional paid-in capital....................... 216,926,000 216,926,000
Accumulated deficit.............................. (209,416,000) (207,811,000)
------------ ------------
Total shareholders' equity.................... 7,512,000 9,117,000
------------ ------------
$270,740,000 $276,218,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated balance sheets.
F-5
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1997
(As Restated--
1998 Note 3) 1996
------------ -------------- ------------
<S> <C> <C> <C>
Revenues:
Casino............................. $252,863,000 $251,471,000 $487,374,000
Rooms.............................. 9,386,000 9,651,000 18,834,000
Food and beverage.................. 28,810,000 28,533,000 61,620,000
Other.............................. 4,229,000 3,270,000 13,339,000
------------ ------------ ------------
295,288,000 292,925,000 581,167,000
Less--promotional allowances....... (26,528,000) (25,168,000) (50,587,000)
------------ ------------ ------------
Net revenues...................... 268,760,000 267,757,000 530,580,000
------------ ------------ ------------
Expenses:
Casino............................. 184,589,000 171,623,000 393,022,000
Rooms.............................. 1,752,000 1,835,000 6,029,000
Food and beverage.................. 8,778,000 9,210,000 20,708,000
Other.............................. 2,717,000 3,085,000 7,010,000
General and administrative......... 17,778,000 16,790,000 37,169,000
Management and consulting fees..... 1,200,000 3,927,000 --
Depreciation and amortization...... 16,562,000 18,901,000 40,836,000
Development........................ 779,000 1,480,000 1,065,000
------------ ------------ ------------
Total expenses.................... 234,155,000 226,851,000 505,839,000
------------ ------------ ------------
Income from operations before write
down of assets..................... 34,605,000 40,906,000 24,741,000
Write down of assets................ -- (19,678,000) (22,141,000)
------------ ------------ ------------
Income from operations.............. 34,605,000 21,228,000 2,600,000
------------ ------------ ------------
Non-operating income (expenses):
Interest income.................... 2,844,000 1,896,000 3,101,000
Interest expense, net of
capitalized interest of $1,006,000
in 1996........................... (30,260,000) (30,437,000) (59,090,000)
Tax settlement costs............... (1,087,000) -- --
(Loss) gain on disposal of assets.. (61,000) 552,000 (1,841,000)
------------ ------------ ------------
Total non-operating expenses,
net.............................. (28,564,000) (27,989,000) (57,830,000)
------------ ------------ ------------
Income (loss) before income taxes,
extraordinary and other items...... 6,041,000 (6,761,000) (55,230,000)
Income tax provision................ (816,000) (5,359,000) (63,000)
------------ ------------ ------------
Income (loss) before extraordinary
and other items.................... 5,225,000 (12,120,000) (55,293,000)
Minority interest in earnings of
Limited Partnership (Note 1)....... (6,494,000) (5,012,000) --
------------ ------------ ------------
Loss before extraordinary item...... (1,269,000) (17,132,000) (55,293,000)
Extraordinary item:
Loss on early extinguishment of
debt, net of related tax benefit
in 1997........................... (336,000) (215,000) --
------------ ------------ ------------
Net loss............................ $ (1,605,000) $(17,347,000) $(55,293,000)
============ ============ ============
Basic and diluted net loss per
common share:
Loss before extraordinary item..... $ (.05) $ (.69) $ (2.24)
Extraordinary item................. (.01) (.01) --
------------ ------------ ------------
Net loss........................... $ (.06) $ (.70) $ (2.24)
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
F-6
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Three Years Ended December 31, 1998
<TABLE>
<CAPTION>
Class A
Common Stock
-----------------
Additional
Paid-in Accumulated
Shares Amount Capital Deficit
---------- ------ ------------ -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996........ 24,720,000 $2,000 $ 77,936,000 $(135,171,000)
Distribution of Greate Bay
Casino Corporation common
stock(1)...................... -- -- 151,362,000 --
Exercise of stock options...... 40,000 -- -- --
Net loss....................... -- -- -- (55,293,000)
---------- ------ ------------ -------------
Balance, December 31, 1996(1)... 24,760,000 2,000 229,298,000 (190,464,000)
Stock issued for loan
commitment.................... 100,000 -- 375,000 --
Acquisition of general
partnership interest.......... -- -- (12,747,000) --
Exercise of stock options...... 50,000 -- -- --
Net loss(1).................... -- -- -- (17,347,000)
---------- ------ ------------ -------------
Balance, December 31, 1997(1)... 24,910,000 2,000 216,926,000 (207,811,000)
Exercise of stock options...... 40,000 -- -- --
Net loss....................... -- -- -- (1,605,000)
---------- ------ ------------ -------------
Balance, December 31, 1998...... 24,950,000 $2,000 $216,926,000 $(209,416,000)
========== ====== ============ =============
</TABLE>
- --------
(1) Restated--see Note 3.
The accompanying notes to consolidated financial statements
are an integral part of this consolidated statement.
F-7
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1997 1996
(As Restated - (As Restated--
1998 Note 3) Note 3)
----------- -------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss........................... $(1,605,000) $(17,347,000) $(55,293,000)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Extraordinary item............... 336,000 215,000 --
Depreciation and amortization,
including accretion of debt
discount........................ 17,581,000 19,801,000 41,621,000
Write down of assets............. -- 19,678,000 22,141,000
Loss (gain) on disposal of
assets.......................... 61,000 (552,000) 1,841,000
Minority interest in earnings of
Limited Partnership............. 6,494,000 5,012,000 --
Provision for doubtful accounts.. 845,000 698,000 3,031,000
Deferred income tax provision
(benefit)....................... 81,000 592,000 (2,154,000)
Increase in accounts receivable.. (377,000) (305,000) (769,000)
Increase in accounts payable and
accrued expenses................ 2,035,000 116,000 649,000
(Decrease) increase in federal
taxes payable................... (6,878,000) 4,678,000 2,200,000
Net change in other current
assets and liabilities.......... (11,000) (1,107,000) (677,000)
Net change in other noncurrent
assets and liabilities.......... (1,811,000) 134,000 (281,000)
----------- ------------ ------------
Net cash provided by operating
activities.................... 16,751,000 31,613,000 12,309,000
----------- ------------ ------------
INVESTING ACTIVITIES:
Purchases of property and
equipment......................... (12,037,000) (5,101,000) (53,078,000)
Collections on notes receivable.... 6,000,000 -- 9,361,000
Proceeds from sale of assets....... 129,000 12,487,000 2,699,000
Obligatory investments............. -- -- (3,062,000)
Short-term investments............. (29,000) (3,876,000) (2,000,000)
Investments in unconsolidated
affiliates........................ (2,553,000) (2,000,000) (2,946,000)
Increase in cash from purchase of
limited partnership interest...... -- 451,000 --
Distribution of GBCC cash and cash
equivalents....................... -- -- (22,991,000)
Decrease in cash restricted for
construction projects............. -- -- 29,874,000
----------- ------------ ------------
Net cash (used in) provided by
investing activities............ (8,490,000) 1,961,000 (42,143,000)
----------- ------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt.............................. 2,687,000 601,000 2,203,000
Net borrowings on short-term credit
facilities........................ -- -- 2,000,000
Deferred financing costs........... (248,000) (24,000) (126,000)
Repayments of long-term debt....... (2,334,000) (8,548,000) (6,840,000)
Payments on capital lease
obligations....................... (861,000) (1,976,000) (2,453,000)
Limited partnership distributions.. (5,646,000) (4,856,000) --
----------- ------------ ------------
Net cash used in financing
activities...................... (6,402,000) (14,803,000) (5,216,000)
----------- ------------ ------------
Net increase (decrease) in cash
and cash equivalents............ 1,859,000 18,771,000 (35,050,000)
Cash and cash equivalents at
beginning of year............. 40,259,000 21,488,000 56,538,000
----------- ------------ ------------
Cash and cash equivalents at
end of year................... $42,118,000 $ 40,259,000 $ 21,488,000
=========== ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
F-8
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and Business
Hollywood Casino Corporation ("HCC" or the "Company"), is a Delaware
corporation which was organized and incorporated on November 5, 1990.
Approximately 54% of the issued and outstanding stock of HCC is owned by Jack
E. Pratt, Edward T. Pratt, Jr. and William D. Pratt (the "Pratt Brothers"), by
certain general partnerships and trusts controlled by the Pratt Brothers and
by other family members (collectively, the "Pratt Family").
HCC owns all of the outstanding common stock of both Hollywood Casino-
Aurora, Inc. ("HCA") and HWCC-Tunica, Inc. ("HCT"). HCA is an Illinois
corporation organized during 1990 which owns and operates a 32,100 square foot
riverboat gaming operation together with docking and other entertainment
facilities under the service mark Hollywood Casino(R) in Aurora, Illinois (the
"Aurora Casino"). HCT is a Texas corporation formed by HCC during 1993 which
owns and operates a 54,000 square foot gaming facility, adjacent support
facilities and a 506-room hotel complex under the service mark Hollywood
Casino(R) in northern Tunica County, Mississippi (the "Tunica Casino"). The
Aurora Casino and the Tunica Casino commenced operations in June 1993 and
August 1994, respectively.
The Company believes that its two gaming operations derive a significant
amount of their gaming revenues from patrons living in the surrounding areas.
Competition within the Company's gaming markets is intense and management
believes that this competition will continue in the future.
Prior to December 31, 1996, HCC also owned approximately 80% of the common
stock of Greate Bay Casino Corporation ("GBCC"), also a Delaware corporation.
On December 31, 1996, HCC distributed to its shareholders the common stock of
GBCC owned by HCC. As a result of the dividend, GBCC is no longer a subsidiary
of HCC. While owned by HCC, GBCC's principal asset was the Sands Hotel and
Casino in Atlantic City, New Jersey (the "Sands"). GBCC also has a limited
partnership interest in Pratt Management L.P. ("PML"), the limited partnership
which holds the management contract on the Aurora Casino, and has a consulting
contract with the Tunica Casino.
Effective as of April 1, 1997, HCC acquired the general partnership interest
in PML from PPI Corporation, a wholly owned subsidiary of GBCC (see Note 8).
For all periods subsequent to the acquisition date (April 1, 1997), PML is
reflected as a consolidated subsidiary of HCC. The assets and liabilities of
PML were recorded at historical cost at the date of acquisition with the
difference between acquisition cost and the historical net book value
($12,747,000) recorded as a charge to paid-in capital (see Note 13). PML earns
management fees from the Aurora Casino and incurs operating and other expenses
with respect to its management thereof. As general partner, HCC receives 99%
of the first $84,000 of net income earned by PML each month together with 1%
of any income earned above such amount. The remaining limited partnership
interest continues to be held by Pratt Casino Corporation ("PCC"), a wholly
owned subsidiary of GBCC, and is reflected on the accompanying consolidated
financial statements as a minority interest (see Note 15).
The accompanying consolidated financial statements also reflect HCT's
initial one-third investment ($2,000,000) in Tunica Golf Course LLC under the
equity method of accounting. This limited liability company was organized in
1996 to develop and operate a golf course to be used by patrons of the Tunica
Casino and other participating casino/hotel properties. The golf course was
completed in November 1998.
HCC also has an approximate 50% interest in a joint venture which holds a
gaming license for a site in Shreveport, Louisiana. Construction of a casino
and hotel project is scheduled to begin in mid-1999. HCC's investment in the
joint venture ($2,500,000) is reflected on the accompanying consolidated
financial statements under the equity method of accounting (see Note 15).
F-9
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Board of Directors approved the adoption in May 1993 of a Rights
Agreement providing that stockholders of HCC receive rights to acquire Series
A Junior Participating Preferred Stock of HCC at an initial price of $60 per
one one-hundredth of a share, subject to adjustment, for each share of HCC
Common Stock owned. The rights become exercisable if a person (other than the
Pratt Family) acquires 20% or more, or announces a tender offer for 20% or
more, of the Company's Common Stock. If the Company is acquired in a merger or
other business combination, each right will enable the holder to exercise such
right for Common Stock of the acquiring company at a 50% discount. The rights,
which expire on May 7, 2003, may be redeemed by the Company at its option at a
price of $.0001 per right at any time prior to the earlier of 10 days
following the date after which a person has acquired at least 20% of the
Company's outstanding shares or May 7, 2003. Until such time as it becomes
likely that the rights will be exercised, the calculation of basic and diluted
earnings per share does not reflect the retroactive adjustment for the bonus
element of the Rights Agreement.
(2) Summary of Significant Accounting Policies
The significant accounting policies followed in the preparation of the
accompanying consolidated financial statements are discussed below. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Principles of consolidation--
The consolidated financial statements include the accounts of HCC and its
wholly owned subsidiaries and, prior to December 31, 1996, the accounts of
GBCC (which was majority owned) and GBCC's wholly owned subsidiaries. The
accompanying consolidated financial statements include GBCC's operations and
cash flows through the date of disposition (December 31, 1996). The dividend
of GBCC's common stock to HCC's shareholders (adjusted for related
transactions) has been reflected in the accompanying consolidated financial
statements as an adjustment to additional paid-in capital at December 31,
1996. All significant intercompany balances and transactions have been
eliminated. Investments in unconsolidated affiliates including joint ventures
that were 50% or less owned are accounted for by the equity method.
Casino revenues, promotional allowances and departmental expenses--
HCC recognizes the net win from gaming activities (the difference between
gaming wins and losses) as casino revenues. Casino revenues are net of
accruals for anticipated payouts of progressive and certain other slot machine
jackpots and certain progressive table game payouts. Such anticipated jackpots
and payouts are reflected as other accrued liabilities on the accompanying
consolidated balance sheets.
The estimated value of rooms, food and beverage and other items which were
provided to customers without charge has been included in revenues and a
corresponding amount has been deducted as promotional allowances. The costs of
such complimentaries have been included as casino expenses on the accompanying
consolidated statements of operations. Costs of complimentaries allocated from
the rooms, food and beverage and other operating departments to the casino
department during the years ended December 31, 1998, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Rooms.................................... $ 1,940,000 $ 1,870,000 $ 7,332,000
Food and beverage........................ 20,887,000 19,894,000 49,860,000
Other.................................... 1,431,000 1,061,000 5,956,000
----------- ----------- -----------
$24,258,000 $22,825,000 $63,148,000
=========== =========== ===========
</TABLE>
F-10
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Cash and cash equivalents--
Cash and cash equivalents are generally comprised of cash and investments
with original maturities of three months or less, such as commercial paper,
certificates of deposit and fixed repurchase agreements.
Allowance for doubtful accounts--
The allowance for doubtful accounts is maintained at a level considered
adequate to provide for possible future losses. Provisions for doubtful
accounts amounting to $756,000, $698,000 and $3,031,000 were made during the
years ended December 31, 1998, 1997 and 1996, respectively.
Inventories--
Inventories are stated at the lower of cost (on a first-in, first-out basis)
or market.
Property and equipment--
Property and equipment have been recorded at cost and are being depreciated
utilizing the straight-line method over the estimated useful lives of the
assets as follows:
<TABLE>
<S> <C>
Buildings and improvements....................................... 10-40 years
Riverboats and barges............................................ 25-40 years
Operating equipment.............................................. 3-15 years
</TABLE>
On October 1, 1996, HCC revised the estimated useful lives of its buildings,
barges and related land rights (see below) from 25 years to 40 years; of
certain parking facilities under a capital lease from 25 years to 30 years;
and of certain operating equipment from three years to five years. Management
believes the changes in estimated lives more appropriately reflect the timing
of the economic benefits to be received from these assets. For the year ended
December 31, 1996, the effect of these changes reduced depreciation and
amortization expense by $886,000 and net loss by approximately $578,000. Both
basic and diluted net loss per share were reduced by $.02 for 1996.
Interest costs related to property and equipment acquisitions were
capitalized during the development period and are being amortized over the
useful lives of the related assets.
Deferred financing costs--
The costs of issuing long-term debt, including all underwriting, licensing,
legal and accounting fees, have been capitalized and are being amortized over
the term of the related debt issue using the straight-line method which
approximates the effective interest method. Amortization of such costs was
$952,000, $963,000 and $2,044,000 for the years ended December 31, 1998, 1997
and 1996, respectively, and is included in depreciation and amortization
expense on the accompanying consolidated statements of operations. Deferred
financing costs, net of accumulated amortization, amounting to $62,000 and
$68,000, respectively were written off during 1998 and 1997, with respect to
the reacquisition of outstanding debt.
Long-lived assets--
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
requires, among other things, that an entity review its long-lived assets and
certain related intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. Long-lived assets held for sale are carried at the lower of
carrying amount or fair value less cost to sell.
F-11
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During 1996, certain real property held as potential gaming development
sites in Texas was offered for sale; consequently management conducted a
review to determine the estimated fair value of these properties less costs to
sell. As a result of the review, HCC recorded an anticipated loss from the
disposition of assets held for sale of $3,400,000 during 1996. The loss is
included in write down of assets on the accompanying consolidated statement of
operations for the year ended December 31, 1996. During 1997, a parcel of the
real property was sold at a price approximating its net book value;
accordingly, no gain or loss was recognized on the sale. Land held for sale is
shown net of valuation allowances of approximately $3,400,000 on the
accompanying consolidated balance sheets at both December 31, 1998 and 1997.
Accrued insurance--
HCC is self insured for a portion of its general liability, certain health
care and other liability exposures. Accrued insurance includes estimates of
such accrued liabilities based on an evaluation of the merits of individual
claims and historical claims experience; accordingly, HCC's ultimate liability
may differ from the amounts accrued.
Income taxes--
HCC complies with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which utilizes
the liability method and results in the determination of deferred taxes based
on the estimated future tax effects of differences between the financial
statement and tax bases of assets and liabilities.
Interest expense--
Interest expense includes the accretion of debt discount amounting to
$1,019,000, $900,000 and $785,000 during the years ended December 31, 1998,
1997 and 1996, respectively.
Land rights--
Land rights are being amortized on a straight-line basis over the estimated
useful life of the Tunica facility, which is less than the term of the ground
lease including renewals (see Note 12); such amortization commenced with the
opening of the Tunica Casino. The estimated economic benefit of the land
rights was revised from 25 years to 40 years effective on October 1, 1996
consistent with the change in estimated useful life of the Tunica facility as
discussed under "Property and Equipment" above. Management presently intends
to renew the ground lease at least through the estimated 40-year useful life
of the facility. Accumulated amortization of such land rights amounted to
$1,195,000 and $991,000, respectively, at December 31, 1998 and 1997.
Employee Stock Options--
During 1996, HCC adopted the provisions of statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").
SFAS 123 requires that an entity account for employee stock compensation under
a fair value based method. However, SFAS 123 also allows an entity to continue
to measure compensation cost for employee stock-based compensation plans using
the intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("Opinion 25"). Entities electing to remain with the accounting under Opinion
25 are required to make pro forma disclosures of net income and earnings per
share as if the fair value based method of accounting under SFAS 123 had been
applied. HCC has elected to continue to account for employee stock-based
compensation under Opinion 25 with the requisite additional disclosures
included in Note 7.
F-12
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Net (loss) income per common share--
During 1997, HCC adopted the provisions of Financial Accounting Standards
No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 requires the calculation
and disclosure of earnings per common share assuming no dilution (basic
earnings per share) and earnings per common share assuming full dilution
(diluted earnings per share). SFAS 128 requires the restatement of earnings
per share for all prior years presented.
Under SFAS 128, basic earnings per common share is calculated by dividing
the net (loss) income by the weighted average number of shares of common stock
outstanding. Diluted earnings per common share is calculated for periods in
which income from continuing operations was earned by dividing the components
of net income by the weighted average number of shares of common stock and
potential common shares outstanding. All potential common shares are excluded
from the calculation of diluted net loss per share for periods during which a
loss was incurred because the effect of their inclusion would be antidilutive.
The weighted average number of shares of common stock outstanding used for
the calculation of both basic and diluted loss per share before extraordinary
item and basic and diluted net loss per share was 24,946,359, 24,833,393 and
24,721,279 for the years ended December 31, 1998, 1997 and 1996, respectively.
No potential common shares were included in the calculation of diluted
earnings per share for the years ended December 31, 1998, 1997 and 1996 as the
inclusion of such shares would have been antidilutive due to the net losses
incurred in those years. The weighted average number of shares excluded was
962,260, 535,296 and 161,319, respectively, for the years ended December 31,
1998, 1997 and 1996.
Recent Accounting Pronouncements--
The Financial Accounting Standards Board (the "FASB") recently issued a new
standard, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires the
presentation and disclosure of comprehensive income, which is defined as the
change in a company's equity resulting from non-owner transactions and events.
SFAS 130 became effective for fiscal years beginning after December 15, 1997
and requires the reclassification of all prior periods presented. The Company
has adopted the provisions of SFAS 130; however, the statement provides that
an enterprise that has no items of other comprehensive income for any period
presented need only report net income. The Company has no such other
comprehensive income items for any period presented; accordingly, the
presentation and disclosure requirements of SFAS 130 are not applicable.
The FASB has also issued Statement 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131, which became
effective for fiscal years beginning after December 15, 1997, requires
publicly-held companies to report financial and descriptive information
concerning its reportable operating segments. An operating segment is defined
as a component of a business which (i) earns revenues and incurs expenses,
(ii) has its operating results reviewed on a regular basis by the company's
chief operating decision maker to determine how the company's resources should
be allocated and to assess its performance and (iii) has separate financial
information available. Substantially all of HCC's operations consist of its
two casino facilities. Because of the similarity of these operations with
respect to the services provided, the class of customers served and the
regulatory environments in which they operate, the Company believes that these
operations have similar economic characteristics and will exhibit similar
long-term financial performance. Accordingly, these operations are considered
a single operating segment and additional segment information is not presented
herein.
In June 1998, the FASB issued a new statement, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), effective for fiscal years
beginning after June 15, 1999. SFAS 133 requires, among other things, that
derivatives be recorded on the balance sheet at fair value. Changes in the
fair value of derivatives may, depending on circumstances, be recognized in
earnings or deferred as a component of
F-13
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
shareholders' equity until a hedged transaction occurs. The Company does not
believe the adoption of SFAS 133 will have a significant impact on its
financial position or results of operations.
Reclassifications--
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the 1998 consolidated financial statement
presentation.
(3) Restatement of Consolidated Financial Statements
As previously disclosed in HCC's quarterly report on Form 10-Q for the
period ended September 30, 1998, and subsequent to the issuance of the
Company's 1997 consolidated financial statements, the Company has determined
that it should revise its tax treatment of the spin-off of the stock of GBCC
which occurred on December 31, 1996. The 1997 and 1996 consolidated financial
statements have been restated from amounts previously reported to record the
appropriate amounts for income taxes, accrued income taxes, deferred taxes,
interest and penalties due to the recognition of additional taxable income
resulting from the revised tax treatment of the spin-off.
For the year ended December 31, 1996, HCC utilized approximately $9,000,000
of its available net operating loss carryforwards ("NOL's") as a result of the
additional taxable income the Company recognized from the spin-off. For
alternative minimum tax ("AMT") purposes, the revised tax treatment resulted
in the Company utilizing all of its remaining AMT loss carryforwards and being
liable for the payment of approximately $2,200,000 in additional AMT taxes.
HCC paid its $2,200,000 AMT obligation for 1996 plus accrued interest thereon
during the fourth quarter of 1998. As a result of the obligation for AMT
payments and the impact on net deferred tax assets, the Company has restated
its December 31, 1996 consolidated statement of changes in shareholders'
equity (deficit) from amounts previously reported to provide an additional
$6,308,000 charge to paid-in capital consistent with the treatment of the
other effects of the spin-off transaction.
For the year ended December 31, 1997, the revised tax treatment resulted in
HCC's recognition of additional income tax expense of $2,070,000 and the
accrual of interest on the underpayment of its federal tax obligations. HCC
paid $4,678,000 during September 1998 with respect to its revised estimated
1997 federal income tax obligation.
The effect of the restatement on HCC's consolidated financial statements as
of and for the year ended December 31, 1997 is as follows:
<TABLE>
<CAPTION>
As Previously Reported As Restated
---------------------- ------------
<S> <C> <C>
Loss before income taxes,
extraordinary and other items....... $ (6,629,000) $ (6,761,000)
Income tax provision................. (3,289,000) (5,359,000)
Loss before extraordinary and other
items............................... (9,918,000) (12,120,000)
Net loss............................. (15,145,000) (17,347,000)
Basic and diluted net loss per common
share:
Loss before extraordinary item..... $ (.60) $ (.69)
Extraordinary item................. (.01) (.01)
------------ ------------
Net loss............................. $ (.61) $ (.70)
============ ============
</TABLE>
The effects of the restatement on the consolidated balance sheet at December
31, 1997 were to decrease additional paid-in capital by $6,308,000, to
increase taxes payable by $6,878,000, to decrease net deferred tax assets by
$1,500,000, to increase interest payable with respect to the underpayment of
taxes by $132,000 and to increase accumulated deficit by $2,202,000.
F-14
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In connection with the revised tax treatment, HCC has commenced litigation
against its former independent accountants and tax advisors alleging negligent
advice and breach of contract (see Note 10). Tax settlement costs of
$1,087,000 included on the accompanying consolidated statement of operations
for the year ended December 31, 1998 represent both costs incurred to date as
well as management's estimate of probable costs to be incurred arising from
and directly related to the modification of HCC's tax treatment of the spin-
off of GBCC stock.
(4) Long-Term Debt and Pledge of Assets
Substantially all of HCC's assets are pledged in connection with its long-
term indebtedness.
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Indebtedness of HCC:
12 3/4% Senior Secured Notes, due 2003, net of
discount of $7,013,000 and $8,128,000,
respectively(a)..................................... $200,199,000 $199,372,000
Promissory note due to affiliate (Note 8)............ 2,836,000 3,447,000
------------ ------------
203,035,000 202,819,000
------------ ------------
Indebtedness of HCA:
Promissory note to bank(b)........................... 1,900,000 350,000
Equipment loans...................................... -- 413,000
------------ ------------
1,900,000 763,000
------------ ------------
Indebtedness of HCT :
Equipment loans...................................... 1,291,000 1,638,000
Bank credit facility(c).............................. 462,000 --
------------ ------------
1,753,000 1,638,000
------------ ------------
Total indebtedness................................... 206,688,000 205,220,000
Less--current maturities........................... (7,021,000) (6,800,000)
------------ ------------
Total long-term debt............................. $199,667,000 $198,420,000
============ ============
</TABLE>
- --------
(a) During October 1995, HCC completed the refinancing of certain outstanding
indebtedness through a public offering of $210,000,000 of 12 3/4% Senior
Secured Notes (the "Senior Secured Notes") due November 1, 2003,
discounted to yield 13 3/4% per annum. Interest on the Senior Secured
Notes is payable semiannually on May 1 and November 1 of each year.
The Senior Secured Notes are unconditionally guaranteed on a senior
secured basis by HCT and may be guaranteed by certain future subsidiaries
of HCC. HCA is not a guarantor. The Senior Secured Notes and related
guarantees are secured by, among other things, (i) substantially all of the
assets of HCT and future guarantors, (ii) a limited first mortgage on
substantially all of the assets of HCA, (iii) a pledge of the capital stock
of certain subsidiaries of HCC and (iv) the collateral assignment of any
future management contracts entered into by HCC. The limitation on the
first mortgage in (ii) above was originally $39,007,000 and is subject to
reduction for principal payments on an intercompany note between HCC and
HCA. The outstanding balance of the intercompany note was $31,507,000 and
$36,507,000 at December 31, 1998 and 1997, respectively. The note requires
semiannual principal payments of $2,500,000 commencing October 15, 1997
with the balance due November 1, 2003.
The Senior Secured Notes are redeemable at the option of HCC any time on
or after November 1, 1999 at 106.375% of the then outstanding principal
amount, decreasing to 103.1875% and 100%, respectively,
F-15
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
on November 1, 2000 and 2001. Commencing with the November 1, 1997 interest
payment date and at each subsequent interest payment date, HCC is required
to make an offer within 30 business days to purchase not more than
$2,500,000 in principal amount of the Senior Secured Notes at a price of
106.375% of the principal amount tendered. During 1998, HCC made two such
offers resulting in the redemption of $2,788,000 in principal amount of the
Senior Secured Notes of which $2,500,000 was paid in January 1999. The 1998
redemptions of the Senior Secured Notes resulted in an extraordinary loss
of $336,000 consisting of the premium paid ($178,000) together with the
write off of associated deferred finance costs ($62,000) and discount on
the notes ($96,000). During 1997, HCC redeemed $2,500,000 principal amount
of the Senior Secured Notes resulting in an extraordinary loss of $215,000,
net of a related income tax benefit of $111,000, and consisting of the
premium paid ($159,000) together with the write off of associated deferred
finance costs ($68,000) and discount on the notes ($99,000).
The indenture to the Senior Secured Notes contains various provisions
limiting the ability of HCC and certain defined subsidiaries to, among
other things, pay dividends or make other restricted payments; incur
additional indebtedness or issue preferred stock; create liens; create
dividend or other payment restrictions affecting certain defined
subsidiaries; enter into mergers or consolidations or make sales of all or
substantially all assets of HCC, HCT or any future guarantor; and enter
into transactions with certain affiliates.
(b) During September 1998, HCA entered into a bank loan agreement to borrow up
to $2,000,000 on an unsecured basis. Borrowings under the agreement are
payable in 36 monthly installments including interest at the rate of 7.5%
per annum. HCA borrowed $2,000,000 under the agreement during October
1998.
The promissory note outstanding at December 31, 1997 accrued interest at
the bank's prime lending rate plus 1% per annum and was repaid in 1998.
(c) HCT had a bank credit facility in the amount of $1,300,000 available to
borrow against through September 30, 1998. HCT borrowed $541,000 under the
credit facility during 1998 at the rate of 8.875% per annum; no borrowings
were outstanding under the credit facility at December 31, 1997.
Borrowings under the credit facility are to be repaid in monthly
installments over a period of 36 months and are collateralized by
equipment purchased with the loan proceeds. The credit facility was not
renewed by HCT.
Scheduled payments of long-term debt as of December 31, 1998 are set forth
below:
<TABLE>
<S> <C>
1999.......................................................... $ 7,021,000
2000.......................................................... 7,138,000
2001.......................................................... 6,697,000
2002.......................................................... 5,633,000
2003.......................................................... 187,212,000
------------
Total....................................................... $213,701,000
============
</TABLE>
Interest paid, net of capitalized interest in 1996, amounted to $29,161,000,
$29,479,000 and $59,404,000, respectively, during the years ended December 31,
1998, 1997 and 1996.
(5) Capital Leases
HCA leases two parking garages under capital lease agreements. The first
lease has an initial 30-year term ending in June 2023 with the right to extend
the term under renewal options for an additional 67 years. Rental payments
through June 2012 equal the City of Aurora's financing costs related to its
general obligation bond issue used to finance the construction of the parking
garage. The general obligation bond issue includes interest at rates between
7% and 7 5/8% per annum. The second lease has an initial term ending in
September 2026 with
F-16
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the right to extend the lease for up to 20 additional years. Rental payments
during the first 15 years equal the lessor's debt service costs related to the
industrial revenue bond issue used to finance a portion of the construction
costs of the parking garage. The remaining construction costs were funded by
HCA. In addition, HCA pays base rent equal to $15,000 per month, subject to a
credit of $615,000 at the rate of $10,000 per month, for improvements made to
the lessor's North Island Center banquet and meeting facilities. HCA is also
responsible for additional rent, consisting of costs such as maintenance
costs, insurance premiums and utilities, arising out of its operation of both
parking garages.
HCA also leased certain equipment under capital lease agreements which
provided for interest at the rate of 11.2% per annum and expired in 1998. HCT
leased certain gaming and other equipment under capital lease agreements which
provided for interest at rates ranging up to 13 1/4% per annum and expired
during 1997.
The original cost of HCA's parking garages is included in buildings in the
accompanying consolidated balance sheets at both December 31, 1998 and 1997 in
the amount of $27,358,000. Assets under capital leases with an original cost
of $7,260,000, are included in operating equipment on the accompanying
consolidated balance sheets at both December 31, 1998 and 1997. Amortization
expense with respect to these assets amounted to $1,281,000, $2,042,000 and
$2,723,000 during the years ended December 31, 1998, 1997 and 1996,
respectively. Accumulated amortization at December 31, 1998 and 1997 with
respect to these assets amounted to $10,805,000 and $9,524,000, respectively.
Future minimum lease payments under capital lease obligations as of December
31, 1998 are as follows:
<TABLE>
<S> <C>
1999........................................................... $ 2,457,000
2000........................................................... 2,483,000
2001........................................................... 2,532,000
2002........................................................... 2,643,000
2003........................................................... 2,660,000
Thereafter..................................................... 21,417,000
------------
Total minimum lease payments................................... 34,192,000
Less amount representing interest.............................. (13,351,000)
------------
Present value of future minimum lease payments................. 20,841,000
Current capital lease obligation............................... (893,000)
------------
Long-term capital lease obligation............................. $ 19,948,000
============
</TABLE>
F-17
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(6) Income Taxes
As discussed in Note 3, the Company modified its tax treatment of the spin-
off of the stock of GBCC. The tax presentation and other disclosures for the
year ended December 31, 1997 as set forth in this footnote have been restated
accordingly.
Components of HCC's provision for income taxes consist of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997
As Restated
1998 (Note 3) 1996
--------- ----------- ------------
<S> <C> <C> <C>
Current income tax benefit
(provision):
Federal............................ $ -- $(4,678,000) $ (2,272,000)
State.............................. (735,000) (200,000) 55,000
Deferred income tax (provision)
benefit:
Federal............................ 731,000 9,289,000 17,778,000
State.............................. (103,000) (205,000) (46,000)
Change in valuation allowance........ (709,000) (9,565,000) (15,578,000)
--------- ----------- ------------
$(816,000) $(5,359,000) $ (63,000)
========= =========== ============
</TABLE>
Total federal income tax payments of $6,878,000 and $72,000, respectively,
were made during the years ended December 31, 1998 and 1996; no such payments
were made during the year ended December 31, 1997. State tax payments of
$797,000, $683,000 and $151,000, respectively, were made during the years
ended December 31, 1998, 1997 and 1996.
A reconciliation between the calculated tax benefit on income based on the
statutory rates in effect and the effective tax rates follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997
As Restated
1998 (Note 3) 1996
--------- ----------- ------------
<S> <C> <C> <C>
Calculated income tax benefit........ $ 268,000 $ 4,003,000 $ 18,778,000
Valuation allowance change........... (709,000) (9,565,000) (15,578,000)
Amortization of excess purchase
price............................... -- -- (601,000)
Lobbying costs....................... (98,000) (168,000) (306,000)
Disallowance of meals and
entertainment....................... (64,000) (76,000) (404,000)
State income taxes, net of federal
benefit............................. (553,000) (267,000) 6,000
Other................................ 340,000 714,000 (1,958,000)
--------- ----------- ------------
Tax provision as shown on
consolidated statements of
operations.......................... $(816,000) $(5,359,000) $ (63,000)
========= =========== ============
</TABLE>
At December 31, 1998, HCC and its subsidiaries have NOL's for federal income
tax purposes totaling approximately $3,800,000, none of which begin to expire
until the year 2018. Additionally, HCC and its subsidiaries have alternative
minimum and other tax credits available totaling $4,913,000 and $415,000,
respectively. Alternative minimum tax credits do not expire and none of the
other tax credits begin to expire until the year 2010. SFAS 109 requires that
the tax benefit of such NOL's and credit carryforwards, together with the tax
benefit of deferred tax assets resulting from temporary differences, be
recorded as an asset and, to the extent that management can not assess that
the utilization of all or a portion of such NOL's and deferred tax
F-18
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
assets is more likely than not, a valuation allowance should be recorded.
Management believes that it is more likely than not that future consolidated
taxable income of HCC (primarily from the Aurora Casino and the Tunica Casino)
will be sufficient to utilize a portion of the net deferred tax assets.
Accordingly, valuation allowances have been established which result in net
deferred tax assets of $1,843,000 and $1,924,000 at December 31, 1998 and
1997, respectively.
The components of the net deferred tax asset and classification on the
accompanying consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997
As Restated
1998 (Note 3)
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................... $ 1,305,000 $ --
Valuation and other allowances..................... 8,241,000 9,093,000
Alternative minimum tax credit..................... 4,913,000 4,791,000
Investment and jobs tax credits.................... 415,000 311,000
Basis in limited partnership....................... 2,890,000 2,890,000
Other liabilities and accruals..................... 4,145,000 2,749,000
Benefits accrual................................... 1,711,000 1,710,000
Other.............................................. 724,000 733,000
------------ ------------
Total deferred tax assets......................... 24,344,000 22,277,000
------------ ------------
Deferred tax liabilities:
Depreciation and amortization...................... (8,610,000) (6,422,000)
Amortization of note discount...................... -- (621,000)
Basis in debt obligations.......................... (727,000) (855,000)
------------ ------------
Total deferred tax liabilities.................... (9,337,000) (7,898,000)
------------ ------------
Net deferred tax asset.............................. 15,007,000 14,379,000
Valuation allowance................................. (13,164,000) (12,455,000)
------------ ------------
$ 1,843,000 $ 1,924,000
============ ============
Classified as:
Current deferred income tax asset.................. $ 890,000 $ 2,481,000
Other assets....................................... 1,524,000 --
Other noncurrent liabilities....................... (571,000) (557,000)
</TABLE>
No deferred tax benefit was attributed to the extraordinary item in 1998.
The deferred tax benefit attributed to the extraordinary loss on early
extinguishment of debt in 1997 was $111,000.
Sales by HCC or existing shareholders of common stock can cause a "change of
control", as defined in Section 382 of the Internal Revenue Code of 1986, as
amended (the "Code"), which would limit the ability of HCC or its subsidiaries
to utilize these loss carryforwards in later tax periods. Should such a change
of control occur, the amount of loss carryforwards available for use in any
one year would most likely be substantially reduced. Future treasury
regulations, administrative rulings or court decisions may also effect HCC's
utilization of its loss carryforwards.
The Internal Revenue Service is currently examining the consolidated Federal
income tax returns of HCC for the years 1993 through 1996. Management believes
that the results of such examination will not have a material adverse effect
on the consolidated financial position or results of operations of HCC.
F-19
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(7) Stock Options and Compensation Plans
Hollywood Casino Corporation Stock Option Plans--
HCC currently has two employee stock option plans in effect: the Hollywood
Casino Corporation 1996 Long-Term Incentive Plan (the "1996 Plan") and the
Hollywood Casino Corporation 1992 Stock Option Plan (the "1992 Plan"). The
1996 Plan and the 1992 Plan provide for the granting of nonqualified stock
options and incentive stock options that are intended to qualify for the
special tax treatment under the Internal Revenue Code; the 1996 Plan also
provides for the granting of restricted stock. The shares to be offered under
the 1996 Plan and the 1992 Plan consist of shares of Class A Common Stock. The
1996 Plan and the 1992 Plan provide for the granting of 3,000,000 and
1,197,000 shares, respectively, of Class A Common Stock of which 1,910,000 and
147,006, respectively, remain available for future grant as of December 31,
1998.
The 1996 Plan and the 1992 Plan are administered by committees of HCC's
Board of Directors. Options granted under the 1996 Plan become vested at the
discretion of the Committee of the Board of Directors (however, vesting for
certain officers, directors and shareholders may not be less than six months)
and may be exercised for a period of not more than ten years (five years in
the case of incentive stock options) from the date of grant. No more than
150,000 shares may be awarded to any individual during any fiscal year and
incentive stock options are subject to a $100,000 calendar year limitation.
Options granted under the 1992 Plan become vested over a three year period,
are exercisable for a term ending not more than seven years (five years in the
case of incentive stock options) from the date of the grant and incentive
stock options are subject to limitations on the quantity exercised in a
calendar year. All options granted through December 31, 1998 under both the
1996 Plan and the 1992 Plan have been granted at an exercise price equal to
the fair market value as of the date of the grant. As of December 31, 1998,
options to purchase 1,090,000 shares remain outstanding under the 1996 Plan,
of which over 98% are at exercise prices ranging from $1.75 per share to $3.13
per share. The remaining options have an exercise price of $5.25 per share.
Options outstanding under the 1996 plan have a weighted average exercise price
of $2.51 and a weighted average remaining contractual life of 56 months. As of
December 31, 1998, no options are outstanding under the 1992 Plan.
The following table lists the combined activity of the 1996 Plan and the
1992 Plan:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996
------------------- ----------------- -----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
--------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding options at
beginning of year...... 660,008 $ 2.86 410,008 $ 2.54 150,008 $ .80
Options cancelled...... (50,000) 2.06 -- -- (20,000) 6.00
Options granted........ 520,000 1.83 300,000 2.81 320,000 3.26
Options exercised...... (40,008) .0006 (50,000) .0006 (40,000) .0006
--------- ------- -------
Outstanding options at
end of year............ 1,090,000 $ 2.51 660,008 $ 2.86 410,008 $ 2.54
========= ======= =======
Exercisable options at
end of year............ 920,000 $ 2.62 360,008 $ 2.90 110,008 $ .95
</TABLE>
During 1996, HCC also adopted the Hollywood Casino Corporation 1996 Non-
Employee Director Stock Plan (the "Directors' Plan") providing for the grant
of non-qualified stock options of Class A common stock of HCC. The Directors'
Plan provides for the granting of 150,000 shares of Class A common stock of
which 107,500 remain available for future grant as of December 31, 1998. An
initial option grant of 10,000 shares was made to the two non-employee
directors upon adoption of the plan; future outside directors receive an
option
F-20
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
grant of 10,000 shares upon election to the Board of Directors. In addition,
each outside director receives a grant of 2,500 shares on January 15 of each
year. All such grants are at an exercise price equal to the fair market value
as of the date of the grant, vest after six months and expire no later than
ten years from the date of grant. The Directors' Plan is administered by a
Committee of the Board of Directors. As of December 31, 1998, 42,500 shares
remain outstanding at a weighted average exercise price of $1.72 per share.
The following table lists the activity of the Directors' Plan:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1998 1997 1996
------------------- ---------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding options at
beginning of year...... 35,000(1) $4.93 20,000 $6.25 -- $ --
Options granted........ 7,500 1.56 15,000 3.17 20,000 6.25
Options exercised...... -- -- -- -- -- --
------ ------ ------
Outstanding options at
end of year............ 42,500 $1.72 35,000 $4.93 20,000 $6.25
====== ====== ======
Exercisable options at
end of year............ 42,500 $1.72 25,000 $5.78 -- $ --
</TABLE>
- --------
(1) During June 1998, the Board of Directors authorized the repricing of
options to purchase 35,000 shares of common stock granted during 1996 and
1997 to non-employee directors of the Company. The exercise price was
adjusted to $1.75 per share, the fair market value as of the date of the
repricing; all of the repriced options are fully vested. No shareholder
owning 1% or more of the Company's common stock participated in the
repricing.
The Company has elected to apply Opinion 25 with respect to accounting for
options. Based on such election, no compensation expense has been recognized
in the accompanying consolidated financial statements as a result of the
granting of stock options. Had compensation expense been determined consistent
with SFAS 123, the net loss (net of income taxes) for the years ended December
31, 1998 and 1997 would have increased by approximately $138,000 and $251,000,
respectively, increasing both basic and diluted net loss per common share for
each year by $.01. For the year ended December 31, 1996, the net loss would
have increased by approximately $41,000, with no effect on either basic or
diluted net loss per common share.
The fair value of each option grant was estimated on the date of grant using
a method approximating the Black-Scholes option pricing model. The assumptions
applied are set forth below:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1998 1997 1996
--------- ------ ------
<S> <C> <C> <C>
Risk free interest rate........................... 5.4% 5.3% 5.5%
Dividend Yield.................................... -- -- --
Expected Life..................................... 1-4 years 1 year 1 year
Volatility........................................ 45.5% 57.6% 62.1%
Weighted Average Fair Value....................... $ .42 $ .70 $ .91
</TABLE>
Compensation Plan--
HCC has agreements with certain of its principal shareholders and key
executive officers providing for (1) lifetime pension benefits upon the
expiration of existing employment contracts and subsequent consulting
F-21
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
agreements and (2) death benefits to be paid for a period of ten years. The
obligations under these agreements, which are not funded, are being charged to
operations over the remaining terms of the employment agreements. Amounts
charged to expense under the agreements for the years ended December 31, 1998,
1997 and 1996 were $4,000, $18,000 and $660,000, respectively. Obligations
accrued under the agreements at December 31, 1998 and 1997 amounted to
$5,033,000 and $5,029,000, respectively, and are included in other noncurrent
liabilities on the accompanying consolidated balance sheets.
Employee Retirement Savings Plan--
The Company has a retirement savings plan under Section 401(k) of the
Internal Revenue Code covering all of its employees who meet certain
eligibility requirements as to age and period of employment. The plan allows
employees to contribute up to 15% of their salary on a pre-tax basis (subject
to statutory limitations) and invest such monies in a choice of mutual funds
on a tax-deferred basis. The Company matches a portion of the participating
employees' contributions to the plan and may, from time to time, make
additional discretionary contributions. For the years ended December 31, 1998,
1997 and 1996, HCC made company contributions to the plan totaling $778,000,
$559,000 and $1,670,000, respectively.
(8) Transactions with Related Parties
As a result of the distribution by HCC of the GBCC common stock it owned,
GBCC is no longer a consolidated subsidiary. Accordingly, intercompany
transactions between HCC and GBCC and its subsidiaries which eliminated in
consolidation during 1996 are considered transactions with affiliates during
1998 and 1997.
HCC has advanced funds to GBCC totaling $6,750,000 as of both December 31,
1998 and 1997. During the third quarter of 1996, GBCC borrowed $6,500,000 from
HCC on a demand basis with interest at the rate of 13 3/4% per annum payable
quarterly commencing October 1, 1996. An additional $250,000 note became due
on April 1, 1998 for which payment has not been received. This advance
continues to bear interest at the rate of 14% per annum, payable semiannually.
Interest receivable amounting to $1,781,000 and $839,000 is included in due
from affiliates on the accompanying consolidated balance sheets at December
31, 1998 and 1997, respectively. Interest income accrued on loans and advances
to GBCC amounted to $942,000 and $977,000, respectively, during the years
ended December 31, 1998 and 1997.
In connection with its acquisition of the general partnership interest in
PML (see Note 1), HCC issued a five-year note in the original amount of
$3,800,000 and assigned $13,750,000 undiscounted principal amount of PPI
Funding Notes (see below) and $350,000 accrued interest due from GBCC to PPI
Corporation. The $3,800,000 note is payable in monthly installments of
$83,000, including interest at the rate of 14% per annum, commencing on May 1,
1997, with additional quarterly variable principal payments commencing on July
1, 1997 in an amount equal to the general partner's share of quarterly cash
distributions, as defined, from PML. HCC incurred interest expense with
respect to the note amounting to $439,000 and $383,000, respectively, during
the years ended December 31, 1998 and 1997. Accrued interest of $34,000 and
$41,000 is included in interest payable on the accompanying consolidated
balance sheets at December 31, 1998 and 1997, respectively.
On February 17, 1994, PPI Funding Corp., a subsidiary of GBCC, issued
$40,524,000 discounted principal amount of new deferred interest notes (the
"PPI Funding Notes") to HCC in exchange for $38,779,000 principal amount of 15
1/2% unsecured notes (the "PCPI Notes") held by HCC and issued by PCPI Funding
Corp., another subsidiary of GBCC. The PPI Funding Notes were discounted to
yield interest at the rate of 14 7/8% per annum and had an original face value
of $110,636,000. Subsequent principal payments by PPI Funding Corp. reduced
the maturity value of the notes to $98,353,000 at December 31, 1996. During
the second quarter of 1997, HCC assigned $13,750,000 undiscounted principal
amount of the PPI Funding Notes to PPI Corporation as consideration, in part,
for HCC's acquisition of the general partnership interest in PML. Such
assignment reduced
F-22
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the maturity value of the notes to $84,603,000. On January 5, 1998, GBCC's
most significant subsidiary, Greate Bay Hotel and Casino, Inc. ("GBHC"), filed
for protection under Chapter 11 of the United States Bankruptcy Code. It was
anticipated that GBCC's equity ownership of GBHC would be significantly
reduced in the reorganization under Chapter 11 and, as a consequence, HCC
forgave $37,000,000 undiscounted principal amount of the PPI Funding Notes at
December 31, 1997, further reducing the maturity value to $47,603,000. Payment
of interest is deferred through February 17, 2001 at which time interest will
become payable semiannually, with the unpaid principal balance due on February
17, 2006. The PPI Funding Notes are collateralized by a pledge of all of the
common stock of a subsidiary of GBCC.
Prior to December 31, 1996, when GBCC and its subsidiaries were members of
the HCC consolidated group, it was anticipated that one of HCC's primary
methods of realizing the carrying value of the PPI Funding Notes would be
through the utilization of NOL's of GBCC. As a result of HCC's distribution of
GBCC stock at December 31, 1996, GBCC's NOL's are no longer available for
utilization in HCC's consolidated federal income tax returns. Accordingly, HCC
provided a valuation allowance in the amount of $18,741,000 at December 31,
1996 which reduced the carrying amount of the PPI Funding Notes to their
estimated realizable value of $35,597,000 at that date. As a result of GBHC's
January 1998 Chapter 11 filing discussed above, HCC took an additional write
down of $23,275,000 undiscounted principal amount during 1997, further
reducing the carrying amount of the PPI Funding Notes at both December 31,
1998 and 1997 to an estimated realizable value of $12,322,000. The discounted
amount of the 1997 write down ($15,678,000) and the 1996 valuation allowance
($18,741,000) are included in write down of assets on the accompanying
consolidated statements of operations for the years ended December 31, 1997
and 1996, respectively. Management presently anticipates that the remaining
balance will be realized through a combination of repayments from GBCC and
additional asset acquisitions from GBCC and its subsidiaries.
Pursuant to a management services agreement, HCA pays PML a base management
fee equal to 5% of the Aurora Casino's operating revenues (as defined in the
agreement) subject to a maximum of $5,500,000 annually, and an incentive fee
equal to 10% of gross operating profit (as defined in the agreement to
generally include all revenues, less expenses other than depreciation,
interest, amortization and taxes). HCA incurred such fees totaling $2,727,000
during the three month period ended March 31, 1997 while PML was wholly-owned
by subsidiaries of GBCC. Subsequent to March 31, 1997, PML is included in the
consolidated financial statements of HCC; accordingly, HCA's management fee
expense to PML is eliminated in consolidation (see Note 1).
HCT incurs a monthly consulting fee of $100,000 pursuant to a ten-year
consulting agreement with PCC (see Note 15). Such fees amounted to $1,200,000
for the years ended December 31, 1998 and 1997.
Advanced Casino Systems Corporation ("ACSC"), a subsidiary of GBCC provides
computer, marketing and other administrative services to HCC and its
subsidiaries. Computer services provided include hardware, software, and
operator support and, for the most part, such services are billed by ACSC at
its direct costs plus expenses incurred. ACSC and HCT entered into a Computer
Services Agreement dated as of January 1, 1994 and renewed through December
31, 1999 to provide such services and to license or sublicense to HCT computer
software necessary to operate HCT's casino, hotel and related facilities and
business operations. HCT pays ACSC for such equipment and licenses such
software at amounts and on terms and conditions that ACSC provides to
unrelated third parties. HCT also pays ACSC a fixed license fee of $33,600 per
month. ACSC's billings to HCC and its subsidiaries for such products and
services during the year ended December 31, 1998 and 1997 amounted to
$1,147,000 and $809,000, respectively. At December 31, 1998 and 1997, unpaid
charges of $109,000 and $78,000, respectively, are included in due to
affiliates on the accompanying consolidated balance sheets.
Many of the marketing and administrative services now provided by ACSC were
previously provided to HCC and its subsidiaries by GBHC. Charges for such
services amounted to $704,000 during the year ended December 31, 1997.
F-23
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
HCC allocates certain general and administrative costs to GBCC and its
subsidiaries pursuant to services agreements. Such allocated costs and fees
amounted to $1,026,000 and $1,843,000 for the years ended December 31, 1998
and 1997, respectively. In connection with such charges, receivables in the
amount of $179,000 and $156,000 are included in due from affiliates on the
accompanying consolidated balance sheets at December 31, 1998 and 1997,
respectively.
As a result of the revised tax treatment for the spin-off of GBCC stock to
HCC's shareholders at December 31, 1996 (see Note 3), shareholders of the
Company on the distribution date would also have been required to revise their
method of reporting the distribution received on their separate federal income
tax returns. The Company committed to assume the obligation for additional
federal income taxes owed by its shareholders arising from the revised tax
treatment. Consequently, the Company reached an agreement with the Internal
Revenue Service to settle such obligations on behalf of its shareholders,
exclusive of the Pratt Family, for $100,000 and to issue new tax reporting
forms to the Pratt Family. Such forms will require the Pratt Family members to
amend their federal income tax returns for 1996 resulting in substantial
additional tax obligations which total approximately $790,000. The shareholder
obligations assumed by the Company are included in tax settlement costs
totalling $1,087,000 on the accompanying consolidated statement of operations
for the year ended December 31, 1998 and are included in other accrued
liabilities on the accompanying consolidated balance sheet at December 31,
1998.
In September 1994, a subsidiary of HCC entered into an agreement with an
entity owned by a member of the Pratt Family to manage the operation and
maintenance of a Company-owned aircraft and to make such aircraft available
for charter by third parties. The aircraft was sold during the first quarter
of 1997. Subsequent to the sale, HCC has occasionally chartered aircraft from
the maintenance company. Such charter fees amounted to $20,000 during the year
ended December 31, 1998; charter fees, expenses and commissions amounted to
$268,000 and $499,000, respectively, during the years ended December 31, 1997
and 1996.
(9) State Gaming Regulations
Riverboat gaming operations in Illinois are subject to regulatory control by
the Illinois Gaming Board. Under the provisions of the Illinois gaming
regulations, HCA is required to maintain its ownership license. Such license
was renewed in July 1998 for a period of one year and subsequently extended by
the IGB to December 1999. Gaming operations in Mississippi are subject to
regulatory control by the Mississippi Gaming Commission. Under the provisions
of the Mississippi gaming regulations, HCT is required to maintain all
necessary licenses. The ownership license for the Tunica Casino has been
renewed until October 18, 1999.
If it were determined that gaming laws were violated by a licensee, the
gaming licenses held by each licensee could be limited, conditioned, suspended
or revoked. In addition, the licensees and other persons involved could be
subject to substantial fines.
While a subsidiary of HCC, the Sands was required under the New Jersey
Casino Control Act to either make certain approved investments in New Jersey
or pay an investment alternative tax. The Sands elected to satisfy the
investment requirement by purchasing bonds at below-market interest rates from
a governmental agency established to administer such monies. During the year
ended December 31, 1996, the Sands paid $3,062,000 to purchase these
obligatory investments and provided a valuation allowance amounting to
$1,344,000 on such investments.
F-24
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(10) Litigation
Planet Hollywood Litigation--
Planet Hollywood International, Inc., a Delaware corporation, and Planet
Hollywood (Region IV), Inc., a Minnesota corporation (collectively, "PHII"),
filed a complaint in the United States District Court for the Northern
District of Illinois, Eastern Division on July 29, 1996 against HCC, HCA and a
member of the Pratt Family (collectively, the "Original Hollywood
Defendants"). The Original Hollywood Defendants filed with the Court on
September 18, 1996 an answer to PHII's lawsuit, along with numerous
counterclaims against PHII, Robert Earl and Keith Barish (collectively, the
"PHII Defendants"). PHII filed with the Court on January 21, 1997, an
amendment to their complaint which, among other things, added HCT (together
with the Original Hollywood Defendants, the "Hollywood Defendants") and GBCC
as defendants. The Original Hollywood Defendants filed with the Court on
February 4, 1997, and GBCC and HCT filed with the Court on February 20, 1997,
answers and counterclaims to such amended complaint.
In its lawsuit, PHII alleges, among other things, that the Hollywood
Defendants and GBCC have, in opening and operating the Hollywood Casino
concept, infringed on PHII's trademark, service mark and trade dress and have
engaged in unfair competition and deceptive trade practices. In their
counterclaims, the Hollywood Defendants and GBCC allege, among other things,
that the PHII Defendants have, through their planned use of their mark in
connection with casino services, infringed on certain of HCC's service marks
and trade dress and have engaged in unfair competition.
Given the uncertainties inherent in litigation, no assurance can be given
that the Hollywood Defendants will prevail in this litigation; however, the
Hollywood Defendants believe that PHII's claims are without merit and intend
to defend their position and pursue their counterclaims vigorously. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of the uncertainties described above.
Other Litigation--
On October 8, 1998, HCC filed a complaint in the District Court of Dallas
County, Texas against Arthur Andersen LLP, HCC's independent accountants, and
selected partners alleging negligent advice and breach of contract with
respect to the tax consequences resulting from the spin-off of GBCC's stock to
HCC's shareholders on December 31, 1996. The lawsuit is currently in the
initial stages of discovery.
HCC and its subsidiaries are parties in various legal proceedings with
respect to the conduct of casino and hotel operations. Although a possible
range of loss cannot be estimated, in the opinion of management, based upon
the advice of counsel, settlement or resolution of these proceedings should
not have a material adverse impact on the consolidated financial position or
results of operations of HCC and its subsidiaries.
(11) Commitments and Contingencies
HCT entered into a ground lease covering 70 acres of land on which the
Tunica Casino was constructed. The ground lease is for an initial term of five
years from the opening date of the facility and, at HCT's option, may be
renewed for nine additional five-year periods. Obligations under the ground
lease during the initial term include both minimum monthly fixed payments and
percentage rent, which in the aggregate will be the greater of 4% of Gross
Revenues, as defined, or $1,100,000 per year. HCT is responsible for all
operating and other expenses of the property in accordance with the lease
terms. During 1998, 1997 and 1996, HCT expensed $3,899,000, $3,935,000 and
$3,486,000, respectively, in connection with the ground lease.
F-25
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(12) Third Party Notes Receivable
During November 1995, HCC loaned $10,000,000 of the proceeds from the Senior
Secured Notes to an unaffiliated gaming company in the form of two $5,000,000
notes. On February 27, 1998, both parties agreed to settle the outstanding
obligations with the payment of $4,400,000 and the issuance of two new, short-
term obligations totaling $1,600,000, which were paid in April 1998. The
$4,000,000 difference between the $10,000,000 carrying amount of the notes
receivable and the agreed upon settlement was reflected as a write down of the
notes receivable at December 31, 1997 and is included in write down of assets
on the accompanying consolidated statement of operations.
(13) Supplemental Cash Flow Information
During the second quarter of 1997, HCC issued 100,000 shares of its common
stock in exchange for a $10,000,000 loan commitment from unrelated third
parties. The commitment fee was valued at $375,000, the fair market value of
the stock on the date of its issuance, and was expensed during 1997.
Also during the second quarter of 1997, HCC acquired the general partnership
interest in PML (see Notes 1 and 8). The purchase price included the
assignment of certain receivables from GBCC and the issuance of a note to
GBCC. In connection with the acquisition, certain liabilities were assumed as
follows:
<TABLE>
<S> <C>
Assignment of PPI Funding Notes................................ $(7,597,000)
Assignment of interest receivable.............................. (350,000)
Note issued.................................................... (3,800,000)
Charge to paid-in capital (Note 1)............................. 12,747,000
-----------
Net liabilities assumed........................................ $ 1,000,000
===========
</TABLE>
During 1996, HCA entered into a capital lease obligation in the original
amount of $13,195,000 with respect to a new parking garage (see Note 5).
Additional escrowed construction and financing costs totaling $4,163,000 were
capitalized in 1996 as part of the cost of the facility.
At December 31, 1996, HCC contributed certain receivables from GBCC and its
subsidiaries to GBCC. Notes receivable amounting to $8,738,000 together with
accrued interest thereon totaling $1,753,000 and other receivables of
$4,283,000 with respect to pension obligations assumed during 1995 were
contributed to GBCC.
At December 31, 1996, HCC distributed the common stock of GBCC it owned to
its shareholders. The following net liabilities were distributed to HCC's
shareholders in the form of a dividend:
<TABLE>
<S> <C>
Long-term
debt........ $ 326,024,000
Short-term
borrowings.. 8,750,000
Other current
liabilities.. 41,186,000
Other
noncurrent
liabilities.. 4,592,000
Net property
and
equipment... (156,887,000)
Accounts
receivable,
net of
allowance... (10,656,000)
Net book
value of
other assets
distributed
(excluding
cash)....... (30,811,000)
-------------
Net
liabilities
distributed.. $ 182,198,000
=============
</TABLE>
(14) Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
F-26
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Cash and cash equivalents--The carrying amounts approximate fair value
because of the short maturity of these instruments.
Short-term investments--The carrying amounts approximate fair value because
of the short maturity of these investments.
Notes receivable--The fair value of notes receivable is calculated based on
the estimated realizable value.
Interest payable--The carrying amount of interest payable approximates fair
value because of the short maturity of the obligation.
Long-term debt--The fair value of HCC's long-term debt is estimated based on
either the quoted market price of the underlying debt issue or on the
discounted cash flow of future payments utilizing current rates available to
HCC for debt of similar remaining maturities. Debt obligations with a short
remaining maturity are valued at the carrying amount.
The estimated carrying amounts and fair values of HCC's financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------------- -------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial Assets
Cash and cash
equivalents............. $ 42,118,000 $ 42,118,000 $ 40,259,000 $ 40,259,000
Short-term investments... 3,905,000 3,905,000 3,876,000 3,876,000
Notes receivable......... -- -- 6,000,000 6,000,000
Notes receivable--
affiliates.............. 6,750,000 6,750,000 6,750,000 6,750,000
PPI Funding Notes........ 12,322,000 12,322,000 12,322,000 12,322,000
Financial Liabilities
Interest payable......... $ 4,872,000 $ 4,872,000 $ 4,792,000 $ 4,792,000
12 3/4% Senior Secured
Notes................... 207,212,000 220,681,000 207,500,000 223,063,000
Equipment loans.......... 1,291,000 1,335,000 2,051,000 2,063,000
Bank debt................ 1,900,000 1,900,000 350,000 350,000
Bank credit facility..... 462,000 462,000 -- --
Note payable--affiliate.. 2,836,000 2,972,000 3,447,000 3,597,000
</TABLE>
(15) Subsequent Events (Unaudited)
In March 1999, HCC reached an agreement in principle with GBCC, PCC and the
holders of $85,000,000 of senior notes currently in default which were issued
by PRT Funding Corp. ("PRT Funding"), a wholly owned subsidiary of PCC. Under
the terms of the agreement, HCC would purchase the stock of PCC from GBCC for
nominal consideration as part of a debt restructuring (the "Restructuring") of
PRT Funding, PCC and other subsidiaries of PCC. Upon completion of the
Restructuring, PCC's assets will consist of its limited partnership interest
in PML and a consulting contract for the Tunica Casino (see Notes 1 and 8).
These assets will serve as collateral for approximately $39,250,000 of new
notes to be issued by PCC to the holders of the senior notes as part of the
Restructuring. The acquisition of PCC will also result in a charge to expense
by the Company of approximately $39,250,000 during 1999 as no asset value will
be attributed to the management contract and consulting agreement when
acquired.
After the acquisition of PCC, the Company will have incurred additional debt
and associated interest, but will no longer report a minority interest in PML
nor pay the Tunica consulting fee to a subsidiary of GBCC. The minority
interest and consulting fee expense totaled $7,694,000 for the year ended
December 31, 1998.
F-27
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The successful completion of the Restructuring is subject to the execution
of definitive documents and will require that PCC and PRT Funding file for
protection under Chapter 11 with the above transactions included as part of a
pre-negotiated plan of reorganization. Such plan will require approval by the
bankruptcy court as well as by the various gaming regulatory organizations
having jurisdiction over PCC and PRT Funding.
In September 1998, the Company received a preliminary license to develop,
own and operate a Hollywood-themed hotel and casino complex on the Red River
in Shreveport, Louisiana (the "Shreveport Casino"). The Company originally
planned to develop the Shreveport Casino with two partners in a joint venture
in which HCC would have had an interest of approximately 50%. On March 31,
1999, HCC entered into a definitive agreement with one of the joint venture
partners to acquire their interest in the Shreveport Casino for $2,500,000
(the amount the joint venture partner contributed to the project), $1,000 of
which is to be paid at closing and the remainder to be paid six months after
the opening of the Shreveport Casino. Subject to obtaining final approval by
the Louisiana Gaming Control Board, HCC will have a 100% interest in the
Shreveport Casino with the remaining joint venture partner holding a 10%
residual interest in the event the project is sold. The total estimated cost
of the Shreveport Casino is approximately $230,000,000. The Company
anticipates contributing approximately $50,000,000 as an equity investment in
the project with the remaining construction and preopening costs, estimated at
$180,000,000, to come from non-recourse project financing. The Company
anticipates securing financing for a portion of the equity investment and all
of the project financing and commencing construction in the summer of 1999
with a planned opening date approximately 14 months later.
(16) Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Quarter
--------------------------------------------------
First Second Third Fourth
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Year ended December 31,
1998:
Net revenues............... $63,807,000 $66,353,000 $70,848,000 $ 67,752,000
=========== =========== =========== ============
Net income (loss).......... $ 69,000 $ 145,000 $ 204,000 $ (2,023,000)
=========== =========== =========== ============
Basic and diluted net
income (loss) per common
share(1).................. $ .00 $ .01 $ .01 $ (.08)
=========== =========== =========== ============
Year ended December 31,
1997:
Net revenues............... $67,470,000 $66,301,000 $69,839,000 $ 64,147,000
=========== =========== =========== ============
Net income (loss) as
previously reported....... $ 1,491,000 $ 1,193,000 $ 1,701,000 $(19,530,000)
Restatement--Note 3........ -- (44,000) (1,918,000) (240,000)
----------- ----------- ----------- ------------
Net income (loss).......... $ 1,491,000 $ 1,149,000 $ (217,000) $(19,770,000)
=========== =========== =========== ============
Basic and diluted net
income (loss) per common
share as previously
reported.................. $ .06 $ .05 $ .07 $ (.79)
Restatement--Note 3........ -- -- (.08) (.01)
----------- ----------- ----------- ------------
Basic and diluted net
income (loss) per common
share(1).................. $ .06 $ .05 $ (.01) $ (.80)
=========== =========== =========== ============
</TABLE>
- --------
(1) In accordance with the provisions of SFAS 128, earnings per share are
calculated separately for each quarter and the full year. Accordingly,
annual earnings per share will not necessarily equal the total of the
interim periods.
F-28
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To Hollywood Casino-Aurora, Inc.:
We have audited the accompanying balance sheets of Hollywood Casino-Aurora,
Inc. (the Company and an Illinois corporation) as of December 31, 1998 and
1997, and the related statements of operations, changes in shareholder's
equity and cash flows for each of the three years in the period ended December
31, 1998. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Hollywood Casino-Aurora,
Inc. as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Dallas, Texas
February 23, 1999
F-29
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................... $ 9,718,000 $ 11,594,000
Accounts receivable, net of allowances
of $655,000 and $483,000, respectively............. 1,128,000 1,603,000
Inventories......................................... 606,000 794,000
Deferred income taxes............................... 1,540,000 1,336,000
Due from affiliates................................. 428,000 558,000
Prepaid expenses and other current assets........... 1,010,000 932,000
------------ ------------
Total current assets.............................. 14,430,000 16,817,000
------------ ------------
Property and Equipment:
Land improvements................................... 3,167,000 3,165,000
Buildings and improvements.......................... 46,205,000 46,205,000
Riverboats.......................................... 37,642,000 36,970,000
Operating equipment................................. 37,192,000 32,159,000
Construction in progress............................ 615,000 534,000
------------ ------------
124,821,000 119,033,000
Less--accumulated depreciation and amortization..... (41,114,000) (33,919,000)
------------ ------------
Net property and equipment.......................... 83,707,000 85,114,000
------------ ------------
Other Assets......................................... 2,173,000 2,140,000
------------ ------------
$100,310,000 $104,071,000
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt and capital
lease obligations.................................. $ 6,517,000 $ 6,624,000
Accounts payable.................................... 2,199,000 2,023,000
Accrued liabilities--
Salaries and wages.................................. 2,300,000 2,228,000
Interest............................................ 1,058,000 1,192,000
Gaming and other taxes.............................. 981,000 938,000
Insurance........................................... 965,000 1,115,000
Other............................................... 1,374,000 1,120,000
Due to affiliates................................... 2,109,000 2,185,000
Other current liabilities........................... 993,000 1,209,000
------------ ------------
Total current liabilities......................... 18,496,000 18,634,000
------------ ------------
Long-Term Debt....................................... 27,783,000 31,507,000
------------ ------------
Capital Lease Obligations............................ 19,948,000 20,841,000
------------ ------------
Deferred Income Taxes................................ 5,363,000 4,141,000
------------ ------------
Commitments and Contingencies
Shareholder's Equity:
Common stock, $.01 par value per share; 2,000,000
shares authorized;
1,501,000 shares issued and outstanding............ 15,000 15,000
Additional paid-in capital.......................... 25,541,000 24,541,000
Retained earnings................................... 3,164,000 4,392,000
------------ ------------
Total shareholder's equity........................ 28,720,000 28,948,000
------------ ------------
$100,310,000 $104,071,000
============ ============
</TABLE>
The accompanying notes to financial statements are an
integral part of these balance sheets.
F-30
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Casino.................... $156,404,000 $153,965,000 $157,124,000
Food and beverage......... 13,771,000 14,213,000 13,780,000
Other..................... 2,816,000 1,919,000 3,895,000
------------ ------------ ------------
172,991,000 170,097,000 174,799,000
Less--promotional
allowances............... (10,044,000) (9,790,000) (11,408,000)
------------ ------------ ------------
Net revenues.............. 162,947,000 160,307,000 163,391,000
------------ ------------ ------------
Expenses:
Casino.................... 112,272,000 102,127,000 108,014,000
Food and beverage......... 4,855,000 4,885,000 4,926,000
Other..................... 1,332,000 1,641,000 1,066,000
General and
administrative........... 14,136,000 14,673,000 14,645,000
Depreciation and
amortization............. 7,350,000 7,491,000 8,834,000
------------ ------------ ------------
Total expenses.......... 139,945,000 130,817,000 137,485,000
------------ ------------ ------------
Income from operations...... 23,002,000 29,490,000 25,906,000
------------ ------------ ------------
Non-operating income
(expense):
Interest income........... 112,000 156,000 205,000
Interest expense.......... (6,046,000) (6,847,000) (6,704,000)
Gain on disposal of
assets................... 4,000 134,000 --
------------ ------------ ------------
Total non-operating
expense, net........... (5,930,000) (6,557,000) (6,499,000)
------------ ------------ ------------
Income before income taxes.. 17,072,000 22,933,000 19,407,000
Income tax provision........ (6,559,000) (8,419,000) (6,883,000)
------------ ------------ ------------
Net income.................. $ 10,513,000 $ 14,514,000 $ 12,524,000
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
F-31
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
For the Three Years Ended December 31, 1998
<TABLE>
<CAPTION>
Common Stock Additional
----------------- Paid-in Retained
Shares Amount Capital Earnings
--------- ------- ----------- ------------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1996............ 1,501,000 $15,000 $24,541,000 $ 993,000
Net income........................ -- -- -- 12,524,000
Dividends......................... -- -- -- (10,040,000)
--------- ------- ----------- ------------
BALANCE, December 31, 1996.......... 1,501,000 15,000 24,541,000 3,477,000
Net income........................ -- -- -- 14,514,000
Dividends......................... -- -- -- (13,599,000)
--------- ------- ----------- ------------
BALANCE, December 31, 1997.......... 1,501,000 15,000 24,541,000 4,392,000
Capital contributions............. -- -- 1,000,000 --
Net income........................ -- -- -- 10,513,000
Dividends......................... -- -- -- (11,741,000)
--------- ------- ----------- ------------
BALANCE, December 31, 1998.......... 1,501,000 $15,000 $25,541,000 $ 3,164,000
========= ======= =========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
F-32
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income......................... $ 10,513,000 $ 14,514,000 $ 12,524,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization.... 7,350,000 7,491,000 8,834,000
Provision for doubtful accounts.. 273,000 200,000 325,000
Gain on disposal of assets....... (4,000) (134,000) --
Deferred income tax provision.... 1,018,000 2,183,000 1,119,000
Decrease in accounts receivable.. 202,000 92,000 393,000
Increase in accounts payable and
accrued liabilities............. 261,000 151,000 954,000
Increase in due to affiliates.... 54,000 395,000 (770,000)
Net change in other current
assets and liabilities.......... (106,000) 85,000 (1,116,000)
Net change in other noncurrent
assets and liabilities.......... (33,000) (120,000) (442,000)
------------ ------------ ------------
Net cash provided by operating
activities...................... 19,528,000 24,857,000 21,821,000
------------ ------------ ------------
INVESTING ACTIVITIES:
Purchases of property and
equipment......................... (5,986,000) (2,413,000) (10,104,000)
Proceeds from sale of assets....... 47,000 173,000 --
Decrease in cash restricted for
construction projects............. -- -- 1,955,000
------------ ------------ ------------
Net cash used in investing
activities........................ (5,939,000) (2,240,000) (8,149,000)
------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt.............................. 2,000,000 -- --
Capital contributions.............. 1,000,000 -- --
Repayments of long-term debt....... (5,863,000) (5,681,000) (2,870,000)
Payments on capital lease
obligations....................... (861,000) (777,000) (724,000)
Dividends.......................... (11,741,000) (13,599,000) (10,040,000)
------------ ------------ ------------
Net cash used in financing
activities........................ (15,465,000) (20,057,000) (13,634,000)
------------ ------------ ------------
Net (decrease) increase in cash and
cash equivalents.................. (1,876,000) 2,560,000 38,000
Cash and cash equivalents at
beginning of year................. 11,594,000 9,034,000 8,996,000
------------ ------------ ------------
Cash and cash equivalents at end of
year.............................. $ 9,718,000 $ 11,594,000 $ 9,034,000
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
F-33
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Business
Hollywood Casino-Aurora, Inc. ("HCA") is an Illinois corporation and a
wholly owned subsidiary of Hollywood Casino Corporation ("HCC"), a Delaware
corporation. HCA was organized and incorporated during December 1990 by
certain relatives of Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt
(collectively, the "Pratt Family") for the purpose of developing and holding
the ownership interest in a riverboat gaming operation located in Aurora,
Illinois (the "Aurora Casino"). In May 1992, HCC, which was then wholly owned
by members of the Pratt Family or by certain general partnerships and trusts
controlled by the Pratt Family, acquired all of the outstanding stock of HCA
through the issuance of HCC stock. Prior to December 31, 1996, HCC also owned
approximately 80% of Greate Bay Casino Corporation ("GBCC"), a Delaware
corporation. Prior to April 1, 1997, subsidiaries of GBCC held the management
services contract for the Aurora Casino (see Note 6). A GBCC subsidiary
continues to have a limited partnership interest in the entity which holds
such management contract.
The Aurora Casino consists of two, four-level riverboats having a combined
casino space of approximately 32,000 square feet and a four-level pavilion and
docking facility which houses ticketing, food service, passenger waiting, and
various administrative functions. The Aurora Casino also includes two parking
structures with approximately 1,350 parking spaces. HCA was responsible for
the design and construction of the parking garages; however, it leases the
facilities under long-term lease agreements. The leases are treated as capital
leases for financial reporting purposes (see Note 4).
On June 17, 1993, the Illinois Gaming Board (the "IGB") issued HCA a
temporary operating permit and the Aurora Casino commenced operations. The IGB
issued HCA an owner's license on July 20, 1993 pursuant to the Illinois
Riverboat Gambling Act. HCA's current owner's license was renewed in July 1998
for a period of one year and subsequently extended by the IGB to December
1999. Gaming taxes imposed by the state of Illinois are determined using a
graduated tax rate applied to the licensee's gaming revenues. HCA expenses
such gaming taxes based on its anticipated annual effective tax rate.
HCA estimates that a significant amount of the Aurora Casino's revenues are
derived from patrons living in the Chicago area and surrounding northern and
western suburbs. The Aurora Casino faces intense competition from other
riverboat gaming operations in Illinois and Indiana which serve the Chicago
area and management believes that this competition will continue in the
future.
(2) Summary of Significant Accounting Policies
The significant accounting policies followed in the preparation of the
accompanying financial statements are discussed below. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Casino revenues, promotional allowances and departmental expenses--
HCA recognizes the net win from gaming activities (the difference between
gaming wins and losses) as casino revenues. Casino revenues are net of
accruals for anticipated payouts of progressive jackpots. Such anticipated
jackpot payouts are reflected as current liabilities on the accompanying
balance sheets.
F-34
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The estimated value of food and beverage, admissions and other items which
were provided to customers without charge has been included in revenues and a
corresponding amount has been deducted as promotional allowances. The costs of
such complimentaries have been included as casino expenses on the accompanying
statements of operations. Costs of complimentaries allocated from the food and
beverage and other operating departments to the casino department during the
years ended December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Food and beverage.......................... $8,721,000 $9,057,000 $10,280,000
Other...................................... 1,131,000 921,000 1,318,000
---------- ---------- -----------
$9,852,000 $9,978,000 $11,598,000
========== ========== ===========
</TABLE>
Cash and cash equivalents--
Cash and cash equivalents are generally comprised of cash and investments
with original maturities of three months or less, such as treasury bills and
fixed repurchase agreements.
Allowance for doubtful accounts--
The allowance for doubtful accounts is maintained at a level considered
adequate to provide for possible future losses. Provisions for doubtful
accounts amounting to $273,000, $200,000 and $325,000, respectively, were made
during the years ended December 31, 1998, 1997 and 1996.
Inventories--
Inventories are stated at the lower of cost (on a first-in, first-out basis)
or market.
Property and equipment--
Property and equipment have been recorded at cost and are being depreciated
utilizing the straight-line method over the estimated useful lives of the
assets as follows:
<TABLE>
<S> <C>
Land improvements................................................ 20 years
Buildings, riverboats and improvements........................... 25-40 years
Operating equipment.............................................. 3-7 years
</TABLE>
On October 1, 1996, HCA revised the estimated useful life of its pavilion
from 25 years to 40 years, the estimated life of one of its parking garages
under a capital lease from 25 years to 30 years and the estimated life of its
slot machines from three years to five years. Management believes the changes
in estimated lives more appropriately reflect the timing of the economic
benefits to be received from these assets. For the year ended December 31,
1996, the effect of these changes reduced depreciation and amortization
expense by $274,000 and increased net income by approximately $171,000.
Long-lived assets--
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
requires, among other things, that an entity review its long-lived assets and
certain related intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. HCA does not believe that any such events or changes have
occurred.
F-35
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Accrued insurance--
HCA is self insured for a portion of its general liability, certain health
care and other liability exposures. Accrued insurance includes estimates of
such accrued liabilities based on an evaluation of the merits of individual
claims and historical claims experience; accordingly, HCA's ultimate liability
may differ from the amounts accrued.
Income taxes--
HCA is included in HCC's consolidated federal income tax return. Pursuant to
agreements between HCC and HCA, HCA's provision for federal income taxes is
based on the amount of tax which would be provided if a separate federal
income tax return were filed. HCA paid $4,691,000, $5,394,000 and $6,774,000
to HCC in connection with its current federal tax provisions for the years
ended December 31, 1998, 1997 and 1996, respectively. For the years ended
December 31, 1998, 1997 and 1996, HCA paid state income taxes of $781,000,
$682,000 and $28,000, respectively.
Recent Accounting Pronouncements--
The Financial Accounting Standards Board has issued a new standard,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires the
presentation and disclosure of comprehensive income, which is defined as the
change in a company's equity resulting from non-owner transactions and events.
SFAS 130 became effective December 15, 1997 and requires the reclassification
of all prior periods presented. HCA has adopted the provisions of SFAS 130;
however, the statement provides that an enterprise that has no items of other
comprehensive income for any period presented need only report net income. HCA
has no such other comprehensive income items for any period presented;
accordingly, the presentation and disclosure requirements of SFAS 130 are not
applicable.
The FASB has also issued Statement 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131, which became
effective for fiscal years beginning after December 15, 1997, requires
publicly-held companies to report financial and descriptive information
concerning its reportable operating segments. An operating segment is defined
as a component of a business which (i) earns revenues and incurs expenses,
(ii) has its operating results reviewed on a regular basis by the company's
chief operating decision maker to determine how the company's resources should
be allocated and to assess its performance and (iii) has separate financial
information available. HCA's operations consist of its casino and related
facilities. The Aurora Casino is considered a single operating unit due to the
dependence of the food and beverage and other operations on casino patrons.
Such non-casino activities are considered ancillary to the gaming business,
are reviewed as such by management and can not reasonably be presented as
separate operating segments. Accordingly, additional segment information is
not presented herein.
In June 1998, the FASB issued a new statement, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS 133"), effective for fiscal years
beginning after June 15, 1999. SFAS 133 requires, among other things, that
derivatives be recorded on the balance sheet at fair value. Changes in the
fair value of derivatives may, depending on circumstances, be recognized in
earnings or deferred as a component of shareholders' equity until a hedged
transaction occurs. HCA does not believe the adoption of SFAS 133 will have a
significant impact on its financial position or results of operations.
F-36
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(3) Long-Term Debt and Pledge of Assets
HCA's long-term indebtedness consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
12 3/4% Promissory Note to HCC, due on November
1, 2003(a)..................................... $31,507,000 $36,507,000
Promissory note to bank(b)...................... 1,900,000 350,000
Equipment loans(c).............................. -- 413,000
----------- -----------
Total indebtedness.............................. 33,407,000 37,270,000
Less--current maturities........................ (5,624,000) (5,763,000)
----------- -----------
Total long-term debt............................ $27,783,000 $31,507,000
=========== ===========
</TABLE>
- --------
(a) The intercompany note accrues interest at the rate of 12 3/4% per annum
payable semiannually on October 15 and April 15 of each year and requires
semiannual principal repayments of $2,500,000 commencing October 15, 1997
with the balance of the note due November 1, 2003. The note is pledged as
security with respect to HCC's 12 3/4% Senior Secured Notes due in 2003.
HCA is not a guarantor of HCC's indebtedness; however, the indebtedness is
secured, in part, by a first mortgage (limited to the outstanding
principal amount of the intercompany note to HCC) on substantially all of
the assets of HCA and by a pledge of the capital stock of HCA.
(b) During September 1998, HCA entered into a bank loan agreement to borrow up
to $2,000,000 on an unsecured basis. Borrowings under the agreement are
payable in 36 monthly installments including interest at the rate of 7.5%
per annum. HCA borrowed $2,000,000 under the agreement during October
1998.
The promissory note outstanding at December 31, 1997 accrued interest at
the bank's prime lending rate plus 1% per annum and was repaid in 1998.
(c) HCA financed the purchase of certain equipment from vendors through the
issuance of note obligations totaling $2,985,000. The promissory notes
were repaid in 1998.
As of December 31, 1998, future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1999............................................................. $ 5,624,000
2000............................................................. 5,674,000
2001............................................................. 5,602,000
2002............................................................. 5,000,000
2003............................................................. 11,507,000
-----------
$33,407,000
===========
</TABLE>
Interest paid for the years ended December 31, 1998, 1997 and 1996 amounted
to $6,180,000, $6,970,000 and $6,509,000, respectively.
(4) Capital Leases
HCA leases two parking garages under capital lease agreements. The first
lease has an initial 30-year term ending in June 2023 with the right to extend
the term under renewal options for an additional 67 years. Rental payments
through June 2012 equal the City of Aurora's financing costs related to its
general obligation bond issue used to finance the construction of the parking
garage. The general obligation bond issue includes interest at rates between
7% and 7 5/8% per annum. The second lease has an initial term ending in
September 2026 with the right to extend the lease for up to 20 additional
years. Rental payments during the first 15 years equal the
F-37
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
lessor's debt service costs related to the industrial revenue bond issue used
to finance a portion of the construction costs of the parking garage. The
remaining construction costs were funded by HCA. In addition, HCA pays base
rent equal to $15,000 per month, subject to a credit of $615,000 at the rate
of $10,000 per month for improvements made to the lessor's North Island Center
banquet and meeting facilities. HCA is also responsible for additional rent,
consisting of costs such as maintenance costs, insurance premiums and
utilities, arising out of its operation of both parking garages.
HCA also leased certain equipment under capital lease agreements which
provided for interest at the rate of 11.2% and expired in 1998. The original
cost of HCA's parking garages is included in buildings and improvements on the
accompanying balance sheets at both December 31, 1998 and 1997 in the amount
of $27,358,000. Assets under capital leases with an original cost of
$2,446,000 are included in operating equipment on the accompanying balance
sheets at both December 31, 1998 and 1997. Amortization expense with respect
to these assets amounted to $983,000, $1,097,000 and $1,223,000, respectively,
during each of the years ended December 31, 1998, 1997 and 1996. Accumulated
amortization at December 31, 1998 and 1997 with respect to these assets
amounted to $5,991,000 and $5,008,000, respectively.
Future minimum lease payments under capital lease obligations as of December
31, 1998 are as follows:
<TABLE>
<S> <C>
1999........................................................... $ 2,457,000
2000........................................................... 2,483,000
2001........................................................... 2,532,000
2002........................................................... 2,643,000
2003........................................................... 2,660,000
Thereafter..................................................... 21,417,000
------------
Total minimum lease payments................................... 34,192,000
Less--amount representing interest............................. (13,351,000)
------------
Present value of future minimum lease payments................. 20,841,000
Current capital lease obligation............................... (893,000)
------------
Long-term capital lease obligation............................. $ 19,948,000
============
</TABLE>
(5) Income Taxes
HCA's provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Current (provision) benefit:
Federal............................ $(4,856,000) $(5,859,000) $(5,927,000)
State.............................. (685,000) (377,000) 163,000
Deferred (provision) benefit:
Federal............................ (915,000) (1,978,000) (1,125,000)
State.............................. (103,000) (205,000) 6,000
----------- ----------- -----------
$(6,559,000) $(8,419,000) $(6,883,000)
=========== =========== ===========
</TABLE>
F-38
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
A reconciliation between the calculated tax provision on income based on the
statutory rates in effect and the effective tax rates for the years ended
December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Calculated income tax provision at
statutory rate..................... $(5,975,000) $(8,027,000) $(6,792,000)
State income taxes, net of federal
benefit............................ (512,000) (378,000) (110,000)
Political contributions and lobbying
costs.............................. (43,000) (67,000) (89,000)
Other............................... (29,000) 53,000 (112,000)
----------- ----------- -----------
Tax provision as shown on statements
of operations...................... $(6,559,000) $(8,419,000) $(6,883,000)
=========== =========== ===========
</TABLE>
Deferred taxes are computed based on the expected future tax consequences of
temporary differences between the carrying amounts and tax bases of assets and
liabilities, using enacted tax rates. Deferred income taxes result primarily
from the use of the allowance method rather than the direct write-off method
for doubtful accounts, the use of accelerated methods of depreciation for
federal income tax purposes and differences in the timing of deductions taken
between tax and financial reporting purposes for the amortization of
preopening costs and other accruals.
The components of HCA's net deferred tax liability are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts................. $ 246,000 $ 182,000
Other liabilities and reserves.................. 1,420,000 1,271,000
----------- -----------
Total deferred tax assets..................... 1,666,000 1,453,000
----------- -----------
Deferred tax liabilities:
Depreciation and amortization................... (5,489,000) (4,258,000)
----------- -----------
Net deferred tax liability........................ $(3,823,000) $(2,805,000)
=========== ===========
</TABLE>
Receivables and payables to HCC in connection with the aforementioned tax
allocation agreements at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax assets................................ $ 1,373,000 $ 1,194,000
Due from affiliates................................ 347,000 538,000
Deferred tax liabilities........................... (4,793,000) (3,700,000)
</TABLE>
The Internal Revenue Service is currently examining the consolidated Federal
income tax returns of HCC for the years 1993 through 1996. Management believes
that the results of such examination will not have a material adverse effect
on the financial position or results of operations of HCA.
(6) Transactions with Related Parties
Pursuant to a management services agreement, HCA pays base management and
incentive fees to Pratt Management, L.P. ("PML"), a limited partnership which,
prior to April 1, 1997, was wholly owned by GBCC.
F-39
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Effective as of April 1, 1997, HCC acquired the general partnership interest
in PML. The base management fee is equal to 5% of operating revenues (as
defined in the agreement) subject to a maximum of $5,500,000 in any
consecutive twelve month period. The incentive fee is equal to 10% of gross
operating profit (as defined in the agreement to generally include all
revenues less expenses other than depreciation, interest, amortization and
income taxes). HCA incurred such fees totaling $8,872,000, $9,609,000 and
$9,360,000, respectively, during the years ended December 31, 1998, 1997 and
1996. Management and incentive fees payable at December 31, 1998 and 1997
amounting to $2,067,000 and $2,130,000, respectively, are included in due to
affiliates on the accompanying balance sheets.
HCA incurred interest with respect to its promissory note payable to HCC
(see Note 3) amounting to $4,361,000, $4,906,000 and $4,973,000, respectively,
for the years ended December 31, 1998, 1997 and 1996. Interest payable to HCC
on such note amounted to $848,000 and $983,000, respectively, at December 31,
1998 and 1997 and is included in accrued interest payable on the accompanying
balance sheets.
HCA has acquired computer software and hardware from GBCC and has been
allocated certain other expenses from HCC and GBCC. In addition, HCA is
reimbursed by HCC and GBCC for certain administrative and other services it
performs on their behalf. Such transactions resulted in net charges to HCA
during the years ended December 31, 1998, 1997 and 1996 totaling $249,000,
$427,000 and $720,000, respectively. At December 31, 1998 and 1997, HCA had
net receivables of $37,000 and net payables of $36,000, respectively, in
connection with such charges.
(7) Illinois Regulatory Matters
Riverboat gaming operations in Illinois are subject to regulatory control by
the Illinois Gaming Board (the "IGB"). Under the provisions of the Illinois
gaming regulations, HCA is required to maintain its ownership license. HCA's
owner's license was renewed in July 1998 for a period of one year and was
subsequently extended by the IGB to December 1999. Management intends to file
for renewal of HCA's owner's license and anticipates that such renewal will be
approved by the IGB during 1999. If it were determined that gaming laws were
violated by a licensee, the gaming licenses held by each licensee could be
limited, conditioned, suspended, or revoked. In addition, the licensees and
other persons involved could be subject to substantial fines. Limitation or
conditioning or suspension of any gaming license could, and revocation would,
have a materially adverse affect on the operations of HCA.
(8) Commitments and Contingencies
Planet Hollywood Litigation--
Planet Hollywood International, Inc., a Delaware corporation, and Planet
Hollywood (Region IV), Inc., a Minnesota corporation (collectively, "PHII"),
filed a complaint in the United States District Court for the Northern
District of Illinois, Eastern Division on July 29, 1996 against HCC, HCA and a
member of the Pratt Family (collectively, the "Original Hollywood
Defendants"). The Original Hollywood Defendants filed with the Court on
September 18, 1996 an answer to PHII's lawsuit, along with numerous
counterclaims against PHII, Robert Earl and Keith Barish (collectively, the
"PHII Defendants"). PHII filed with the Court on January 21, 1997, an
amendment to their complaint which, among other things, added HWCC-Tunica,
Inc., the HCC subsidiary which owns and operates a casino in Tunica,
Mississippi ("HCT", and together with the Original Hollywood Defendants, the
"Hollywood Defendants"), and GBCC as defendants. The Original Hollywood
Defendants filed with the Court on February 4, 1997, and GBCC and HCT filed
with the Court on February 20, 1997, answers and counterclaims to such amended
complaint.
F-40
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
In its lawsuit, PHII alleges, among other things, that the Hollywood
Defendants and GBCC have, in opening and operating the Hollywood Casino
concept, infringed on PHII's trademark, service mark and trade dress and have
engaged in unfair competition and deceptive trade practices. In their
counterclaims, the Hollywood Defendants and GBCC allege, among other things,
that the PHII Defendants have, through their planned use of their mark in
connection with casino services, infringed on certain of HCC's service marks
and trade dress and have engaged in unfair competition.
Given the uncertainties inherent in litigation, no assurance can be given
that the Hollywood Defendants will prevail in this litigation; however, the
Hollywood Defendants believe that PHII's claims are without merit and intend
to defend their position and pursue their counterclaims vigorously. The
accompanying financial statements do not include any adjustments that might
result from the outcome of the uncertainties described above.
Other Litigation--
HCA is a party in various legal proceedings with respect to the conduct of
casino operations. Although a possible range of loss can not be estimated, in
the opinion of management, based upon the advice of counsel, settlement or
resolution of the proceedings should not have a material adverse impact on the
financial position or results of operations of HCA.
(9) Employee Retirement Savings Plan
HCA participates in a retirement savings plan under Section 401(k) of the
Internal Revenue Code sponsored by HCC which covers all of its employees who
meet certain eligibility requirements as to age and period of employment. The
plan allows employees to contribute up to 15% of their salary on a pre-tax
basis (subject to statutory limitations) and invest such monies in a choice of
mutual funds on a tax-deferred basis. HCA matches a portion of the
participating employees' contributions to the plan and may, from time to time,
make additional discretionary contributions. For the years ended December 31,
1998, 1997 and 1996, HCA made company contributions to the plan totaling
$473,000, $289,000 and $440,000, respectively.
(10) Supplemental Cash Flow Information
During 1996, HCA entered into a capital lease obligation in the original
amount of $13,195,000 with respect to a new parking garage (see Note 4).
Additional escrowed construction and financing costs totaling $4,163,000 were
capitalized in 1996 as part of the cost of the facility.
(11) Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and cash equivalents--The carrying amounts approximate fair value
because of the short maturity of these instruments.
Interest payable--The carrying amount of interest payable approximates fair
value because of the short maturity of the obligation.
Long-term debt--The fair value of HCA's long-term debt is estimated based on
the quoted market price of the underlying debt issue. Debt obligations with a
short remaining maturity are valued at the carrying amount.
F-41
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The estimated carrying amounts and fair values of HCA's financial instruments
are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------- -----------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents....... $9,718,000 $9,718,000 $11,594,000 $11,594,000
Financial Liabilities:
Interest payable................ $1,058,000 $1,058,000 $ 1,192,000 $ 1,192,000
12 3/4% promissory note......... 31,507,000 33,555,000 36,507,000 39,245,000
Promissory note to bank......... 1,900,000 1,900,000 350,000 350,000
Equipment loans................. -- -- 413,000 413,000
</TABLE>
(12) Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Quarter
-------------------------------------------------
First Second Third Fourth
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1998
Net revenues............... $ 38,720,000 $ 40,093,000 $41,712,000 $42,422,000
============ ============ =========== ===========
Net income................. $2,458,000 $ $ 3,061,000 $ 2,782,000 $ 2,212,000
============ ============ =========== ===========
Year Ended December 31, 1997
Net revenues............... $ 40,350,000 $ 38,931,000 $41,741,000 $39,285,000
============ ============ =========== ===========
Net income................. $3,431,000 $ $ 3,852,000 $ 3,894,000 $ 3,337,000
============ ============ =========== ===========
</TABLE>
F-42
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To HWCC-Tunica, Inc.:
We have audited the accompanying consolidated balance sheets of HWCC-Tunica,
Inc. (the Company and a Texas Corporation) and subsidiary as of December 31,
1998 and 1997, and the related consolidated statements of operations, changes
in shareholder's equity and cash flows for each of the three years in the
period ended December 31, 1998. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of HWCC-Tunica,
Inc. and subsidiary as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Dallas, Texas
February 23, 1999
F-43
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................ $ 16,325,000 $ 11,851,000
Short-term investments........................... 3,905,000 3,876,000
Accounts receivable, net of allowances of
$813,000 and $705,000, respectively............. 1,167,000 1,510,000
Inventories...................................... 779,000 660,000
Deferred income taxes............................ 1,451,000 1,632,000
Prepaid expenses and other current assets........ 770,000 1,129,000
------------ ------------
Total current assets........................... 24,397,000 20,658,000
------------ ------------
Property and Equipment:
Land and improvements............................ 4,645,000 3,456,000
Buildings........................................ 73,948,000 73,422,000
Barges........................................... 2,524,000 2,524,000
Operating equipment.............................. 39,169,000 37,588,000
Construction in progress......................... 2,612,000 688,000
------------ ------------
122,898,000 117,678,000
Less--accumulated depreciation and
amortization.................................. (38,910,000) (31,760,000)
------------ ------------
Net property and equipment....................... 83,988,000 85,918,000
------------ ------------
Other Assets:
Land rights...................................... 7,250,000 7,454,000
Other assets..................................... 4,826,000 4,697,000
------------ ------------
Total other assets............................. 12,076,000 12,151,000
------------ ------------
$120,461,000 $118,727,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets.
F-44
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt
and capital lease obligations..................... $ 775,000 $ 485,000
Accounts payable................................... 1,638,000 1,372,000
Accrued liabilities--
Salaries and wages............................... 1,685,000 1,579,000
Interest......................................... 476,000 476,000
Gaming and other taxes........................... 453,000 1,230,000
Insurance........................................ 1,975,000 1,553,000
Other............................................ 1,866,000 1,627,000
Other current liabilities.......................... 1,283,000 1,325,000
------------ ------------
Total current liabilities.......................... 10,151,000 9,647,000
------------ ------------
Long-Term Debt....................................... 85,023,000 85,198,000
------------ ------------
Commitments and Contingencies
Shareholder's Equity:
Common stock, $.01 par value
per share; 100,000 shares authorized;
1,000 shares issued and outstanding............... -- --
Additional paid-in capital......................... 34,637,000 34,637,000
Accumulated deficit................................ (9,350,000) (10,755,000)
------------ ------------
Total shareholder's equity....................... 25,287,000 23,882,000
------------ ------------
$120,461,000 $118,727,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets.
F-45
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Casino.............................. $ 96,459,000 $ 97,506,000 $ 87,361,000
Rooms............................... 9,386,000 9,651,000 5,329,000
Food and beverage................... 15,039,000 14,320,000 11,987,000
Other............................... 1,373,000 1,164,000 1,097,000
------------ ------------ ------------
122,257,000 122,641,000 105,774,000
Less--promotional allowances........ (16,484,000) (15,378,000) (11,250,000)
------------ ------------ ------------
Net revenues........................ 105,773,000 107,263,000 94,524,000
------------ ------------ ------------
Expenses:
Casino.............................. 72,317,000 69,496,000 66,018,000
Rooms............................... 1,752,000 1,835,000 1,573,000
Food and beverage................... 3,923,000 4,325,000 3,752,000
Other............................... 1,336,000 1,402,000 1,259,000
General and administrative.......... 5,813,000 5,769,000 5,962,000
Depreciation and amortization....... 8,123,000 9,916,000 10,906,000
------------ ------------ ------------
Total expenses.................... 93,264,000 92,743,000 89,470,000
------------ ------------ ------------
Income from operations................ 12,509,000 14,520,000 5,054,000
------------ ------------ ------------
Non-operating income (expenses):
Interest income..................... 587,000 281,000 835,000
Interest expense, net of capitalized
interest of $1,006,000 in 1996..... (10,937,000) (10,980,000) (10,060,000)
(Loss) gain on disposal of assets... (65,000) 6,000 (45,000)
------------ ------------ ------------
Total non-operating expenses,
net.............................. (10,415,000) (10,693,000) (9,270,000)
------------ ------------ ------------
Income (loss) before income taxes..... 2,094,000 3,827,000 (4,216,000)
Income tax (provision) benefit........ (689,000) 845,000 --
------------ ------------ ------------
Net income (loss)..................... $ 1,405,000 $ 4,672,000 $ (4,216,000)
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
F-46
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
For the Three Years Ended December 31, 1998
<TABLE>
<CAPTION>
Common Stock Additional
------------- Paid-in Accumulated
Shares Amount Capital Deficit
------ ------ ----------- ------------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1996............... 1,000 $-- $34,637,000 $(11,211,000)
Net loss............................. -- -- -- (4,216,000)
----- ---- ----------- ------------
BALANCE, December 31, 1996............. 1,000 -- 34,637,000 (15,427,000)
Net income........................... -- -- -- 4,672,000
----- ---- ----------- ------------
BALANCE, December 31, 1997............. 1,000 -- 34,637,000 (10,755,000)
Net income........................... -- -- -- 1,405,000
----- ---- ----------- ------------
BALANCE, December 31, 1998............. 1,000 $-- $34,637,000 $ (9,350,000)
===== ==== =========== ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this consolidated statement.
F-47
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).................... $ 1,405,000 $ 4,672,000 $ (4,216,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization...... 8,123,000 9,916,000 10,906,000
Loss (gain) on disposal of assets.. 65,000 (6,000) 45,000
Provision for doubtful accounts.... 483,000 498,000 539,000
Deferred income tax provision
(benefit)......................... 115,000 (1,071,000) --
Increase in accounts receivable.... (140,000) (645,000) (474,000)
Increase (decrease) in accounts
payable and accrued expenses...... 256,000 (2,097,000) 721,000
Net change in other current assets
and liabilities................... 199,000 232,000 (280,000)
Net change in other noncurrent
assets and liabilities............ (223,000) 488,000 (740,000)
----------- ----------- ------------
Net cash provided by operating
activities...................... 10,283,000 11,987,000 6,501,000
----------- ----------- ------------
INVESTING ACTIVITIES:
Purchases of property and equipment.. (5,924,000) (2,635,000) (35,038,000)
Short-term investments............... (29,000) (3,876,000) --
Investment in unconsolidated
affiliate........................... (53,000) (2,000,000) --
Proceeds from sale of assets......... 82,000 16,000 105,000
Decrease in cash restricted for
construction projects............... -- -- 27,919,000
----------- ----------- ------------
Net cash used in investing
activities........................ (5,924,000) (8,495,000) (7,014,000)
----------- ----------- ------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt................................ 687,000 601,000 1,503,000
Repayments of long-term debt......... (572,000) (364,000) (1,469,000)
Payments on capital lease
obligations......................... -- (1,199,000) (1,729,000)
----------- ----------- ------------
Net cash provided by (used in)
financing activities.............. 115,000 (962,000) (1,695,000)
----------- ----------- ------------
Net increase (decrease) in cash and
cash equivalents.................. 4,474,000 2,530,000 (2,208,000)
Cash and cash equivalents at
beginning of year............... 11,851,000 9,321,000 11,529,000
----------- ----------- ------------
Cash and cash equivalents at end
of year......................... $16,325,000 $11,851,000 $ 9,321,000
=========== =========== ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
F-48
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization, Business and Basis of Presentation
HWCC-Tunica, Inc. ("HCT") is a Texas corporation and a wholly owned
subsidiary of Hollywood Casino Corporation ("HCC"), a Delaware corporation.
HCT was incorporated in December 1993 for the purpose of acquiring and
completing a gaming facility in northern Tunica County, Mississippi
approximately 27 miles southwest of Memphis, Tennessee. The facility (the
"Tunica Casino") was completed and commenced operations on August 8, 1994
under the service mark Hollywood Casino(R). The Tunica Casino currently
includes a casino with 54,000 square feet of gaming space, 506 hotel rooms and
suites, a 123-space recreational vehicle park and related amenities. HCT's
gaming license has been renewed by the Mississippi Gaming Commission through
October 18, 1999.
The accompanying consolidated financial statements include the accounts of
HCT and its wholly owned subsidiary, HWCC-Golf Course Partners, Inc. ("Golf").
All significant intercompany balances have been eliminated in consolidation.
Golf, a Delaware corporation, was formed in 1996 to own an initial one-third
interest in Tunica Golf Course LLC, a limited liability company organized to
develop and operate a golf course to be used by patrons of the Tunica Casino
and other participating casino/hotel properties. The golf course opened for
business in November 1998. Golf's investment in Tunica Golf Course, LLC is
accounted for under the equity method of accounting and is included in other
noncurrent assets on the accompanying consolidated balance sheets at December
31, 1998 and 1997.
HCT estimates that a significant amount of the Tunica Casino's revenues are
derived from patrons living in the Memphis, Tennessee area, northern
Mississippi and Arkansas. The Tunica Casino faces intense competition from
other casinos operating in northern Tunica County and management believes that
this competition will continue in the future.
(2) Summary of Significant Accounting Policies
The significant accounting policies followed in the preparation of the
accompanying consolidated financial statements are discussed below. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Casino revenues, promotional allowances and departmental expenses--
The Tunica Casino recognizes the net win from gaming activities (the
difference between gaming wins and losses) as casino revenues. Casino revenues
are net of accruals for anticipated payouts of progressive slot machine
jackpots and certain progressive table game payouts. Such anticipated jackpots
and payouts are reflected as current liabilities on the accompanying
consolidated balance sheets. The estimated value of rooms, food and beverage
and other items which are provided to customers without charge has been
included in revenues and a corresponding amount has been deducted as
promotional allowances. The costs of such complimentaries have been included
as casino expenses on the accompanying consolidated statements of operations.
Costs of complimentaries allocated from the rooms, food and beverage and other
operating departments to the casino department during the years ended December
31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Rooms.................................... $ 1,940,000 $ 1,870,000 $ 1,162,000
Food and beverage........................ 12,166,000 10,837,000 10,223,000
Other.................................... 300,000 140,000 203,000
----------- ----------- -----------
$14,406,000 $12,847,000 $11,588,000
=========== =========== ===========
</TABLE>
F-49
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Cash and cash equivalents--
Cash and cash equivalents are generally comprised of cash and investments
with original maturities of three months or less, such as commercial paper,
certificates of deposit and fixed repurchase agreements.
Allowance for doubtful accounts--
The allowance for doubtful accounts is maintained at a level considered
adequate to provide for possible future losses. Provisions for doubtful
accounts amounting to $483,000, $498,000 and $539,000, respectively, were made
during the years ended December 31, 1998, 1997 and 1996.
Inventories--
Inventories are stated at the lower of cost (on a first-in, first-out basis)
or market.
Property and equipment--
Property and equipment have been recorded at cost and are being depreciated
utilizing the straight-line method over the estimated useful lives of the
assets as follows:
<TABLE>
<S> <C>
Hotel, dockside facilities and improvements...................... 25-40 years
Barges........................................................... 25-40 years
Operating equipment.............................................. 3-7 years
</TABLE>
On October 1, 1996, HCT revised the estimated useful lives of its buildings,
barges and related land rights (see below) from 25 years to 40 years and the
estimated useful life of its slot machines from three years to five years.
Management believes the changes in estimated lives more appropriately reflect
the timing of the economic benefits to be received from these assets. For the
year ended December 31, 1996, such changes reduced depreciation and
amortization expense and net loss by approximately $612,000.
Interest incurred in connection with property and equipment acquisitions
totalling $1,006,000 in 1996 has been capitalized during the development
period and is being amortized over the useful lives of the related assets.
Land rights--
Land rights are being amortized on a straight-line basis over the estimated
useful life of the facility, which is less than the term of the ground lease
including renewals (see Note 8); such amortization commenced with the opening
of the Tunica Casino. The estimated economic benefit of the land rights was
revised from 25 years to 40 years effective on October 1, 1996 consistent with
the change in estimated useful life of the Tunica facility as discussed under
"Property and Equipment" above. Management presently intends to renew the
ground lease at least through the estimated 40-year useful life of the
facility. Accumulated amortization of such land rights amounted to $1,195,000
and $991,000, respectively, at December 31, 1998 and 1997.
Long-lived assets--
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
requires, among other things, that an entity review its long-lived assets and
certain related intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. HCT does not believe that any such events or changes have
occurred.
F-50
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Accrued insurance--
HCT is self insured for a portion of its general liability, certain health
care and other liability exposures. Accrued insurance includes estimates of
such accrued liabilities based on an evaluation of the merits of individual
claims and historical claims experience; accordingly, HCT's ultimate liability
may differ from the amounts accrued.
Income taxes--
HCT is included in HCC's consolidated federal income tax return. HCT's
provision for federal income taxes is based on the amount of tax which would
be provided if a separate federal income tax return were filed. HCT made
payments to HCC in lieu of federal income taxes amounting to $307,000 and
$494,000 during the years ended December 31, 1998 and 1997, respectively; no
such payments were made during the year ended December 31, 1996. HCT paid no
state income taxes during 1998, 1997 or 1996.
Recent Accounting Pronouncements--
The Financial Accounting Standards Board has issued a new standard,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires the
presentation and disclosure of comprehensive income, which is defined as the
change in a company's equity resulting from non-owner transactions and events.
SFAS 130 became effective December 15, 1997 and requires the reclassification
of all prior periods presented. HCT has adopted the provisions of SFAS 130;
however, the statement provides that an enterprise that has no items of other
comprehensive income for any period presented need only report net income. HCT
has no such other comprehensive income items for any period presented;
accordingly, the presentation and disclosure requirements of SFAS 130 are not
applicable.
The FASB has also issued Statement 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131, which became
effective for fiscal years beginning after December 15, 1997, requires
publicly-held companies to report financial and descriptive information
concerning its reportable operating segments. An operating segment is defined
as a component of a business which (i) earns revenues and incurs expenses,
(ii) has its operating results reviewed on a regular basis by the company's
chief operating decision maker to determine how the company's resources should
be allocated and to assess its performance and (iii) has separate financial
information available. HCT's operations consist of its casino, hotel and
related facilities. The Tunica Casino is considered a single operating unit
due to the dependence of the hotel, food and beverage and other operations on
casino patrons. Such non-casino activities are considered ancillary to the
gaming business, are reviewed as such by management and can not reasonably be
presented as separate operating segments. Accordingly, additional segment
information is not presented herein.
In June 1998, the FASB issued a new statement, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS 133"), effective for fiscal years
beginning after June 15, 1999. SFAS 133 requires, among other things, that
derivatives be recorded on the balance sheet at fair value. Changes in the
fair value of derivatives may, depending on circumstances, be recognized in
earnings or deferred as a component of shareholders' equity until a hedged
transaction occurs. HCT does not believe the adoption of SFAS 133 will have a
significant impact on its financial position or results of operations.
F-51
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(3) Long-Term Debt and Pledge of Assets
Substantially all of HCT's assets are pledged in connection with its long-
term indebtedness. Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Promissory notes to HCC due November 1, 2003(a)....... $84,045,000 $84,045,000
Equipment loans(b).................................... 1,291,000 1,638,000
Bank credit facility(c)............................... 462,000 --
----------- -----------
Total indebtedness................................ 85,798,000 85,683,000
Less--current maturities............................ (775,000) (485,000)
----------- -----------
Total long-term debt.............................. $85,023,000 $85,198,000
=========== ===========
</TABLE>
- --------
(a) During October 1995, HCC loaned $54,045,000 to HCT to repay its
outstanding mortgage indebtedness, together with the associated call
premium and certain accrued interest thereon, and loaned an additional
$30,000,000 to HCT to finance construction of a 352-room hotel tower and
related amenities and to fund development and construction of a themed
gaming area. Such intercompany loans were made with a portion of the note
proceeds from HCC's issue of $210,000,000 of 12 3/4% Senior Secured Notes
(the "Senior Secured Notes") due November 1, 2003, discounted to yield 13
3/4% per annum. Interest on the loans from HCC accrues at the rate of 12
3/4% per annum and is payable semiannually on April 15 and October 15 of
each year. The Senior Secured Notes are unconditionally guaranteed on a
senior secured basis by HCT and by certain future subsidiaries of HCC. The
Senior Secured Notes and related guarantees are secured by, among other
things, (i) substantially all of the assets of HCT and other future
guarantors, (ii) a limited first mortgage on substantially all of the
assets of another gaming facility operated by a wholly owned subsidiary of
HCC, (iii) a pledge of the capital stock of HCT and certain other
subsidiaries of HCC and (iv) the collateral assignment of any future
management contracts entered into by HCC. The limitation on the first
mortgage described in (ii) above is currently $31,507,000 subject to
semiannual reductions of $2,500,000.
The indenture to the Senior Secured Notes contains various provisions
limiting the ability of HCC, HCT and certain defined subsidiaries to, among
other things, pay dividends or make other restricted payments; incur
additional indebtedness or issue preferred stock; create liens; create
dividend or other payment restrictions affecting certain defined
subsidiaries; enter into mergers or consolidations or make sales of all or
substantially all assets of HCC, HCT or any future guarantor; and enter
into transactions with certain affiliates.
(b) The loans outstanding at December 31, 1998 are payable monthly including
interest at effective rates ranging from 7.8% to 12.9% per annum and
mature at various dates between 1999 and 2001.
(c) HCT had a bank credit facility in the amount of $1,300,000 available to
borrow against until September 30, 1998. HCT borrowed $541,000 under the
credit facility during 1998 at the rate of 8.875% per annum; no borrowings
were outstanding under the credit facility at December 31, 1997.
Borrowings under the credit facility are to be repaid in monthly
installments over a period of 36 months and are collateralized by
equipment purchased with the loan proceeds. The credit facility was not
renewed by HCT.
Scheduled payments of long-term debt as of December 31, 1998 are set forth
below:
<TABLE>
<S> <C>
1999........................................................... $ 775,000
2000........................................................... 729,000
2001........................................................... 249,000
2002........................................................... --
2003........................................................... 84,045,000
-----------
Total........................................................ $85,798,000
===========
</TABLE>
F-52
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Interest paid, net of amounts capitalized, amounted to $10,937,000,
$12,766,000 and $10,001,000, respectively, during the years ended December 31,
1998, 1997 and 1996.
(4) Capital Leases
HCT leased certain gaming and other equipment under capital lease agreements
which provided for interest at rates ranging up to 13 1/4% per annum and which
expired during 1997. Assets under capital leases with an original cost of
$4,814,000 are included in operating equipment in the accompanying
consolidated balance sheets at both December 31, 1998 and 1997. Amortization
expense for the years ended December 31, 1998, 1997 and 1996 was $298,000,
$945,000 and $1,500,000, respectively. Accumulated amortization at December
31, 1998 and 1997 with respect to these assets amounted to $4,814,000 and
$4,516,000, respectively. No future payment obligations exist with respect to
such capital leases.
(5) Income Taxes
HCT's (provision) benefit for income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1998 1997 1996
--------- ---------- -----------
<S> <C> <C> <C>
Federal income tax (provision) benefit:
Current................................... $(574,000) $ (226,000) $ --
Deferred.................................. (185,000) (812,000) 1,453,000
Change in valuation allowance............... 70,000 1,883,000 (1,453,000)
--------- ---------- -----------
$(689,000) $ 845,000 $ --
========= ========== ===========
</TABLE>
State income taxes have not been provided for since a credit for state
gaming taxes based on gross revenues is allowed to offset income taxes
incurred. The credit is the lesser of total gaming taxes paid or the state
income tax, with no credit carryforward permitted.
A reconciliation between the calculated tax (provision) benefit on income
(loss) based on the statutory rates in effect and the effective tax rates for
the years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1998 1997 1996
--------- ----------- -----------
<S> <C> <C> <C>
Calculated income tax (provision)
benefit................................. $(712,000) $(1,301,000) $ 1,433,000
Valuation allowance change............... 70,000 1,883,000 --
Tax benefit of operating loss not
utilized................................ -- -- (1,400,000)
Disallowance of meals and entertainment.. (32,000) (43,000) (25,000)
Other.................................... (15,000) 306,000 (8,000)
--------- ----------- -----------
Tax (provision) benefit as shown on
statement of operations................. $(689,000) $ 845,000 $ --
========= =========== ===========
</TABLE>
Deferred income taxes result primarily from the use of the allowance method
rather than the direct write-off method for doubtful accounts, the use of
accelerated methods of depreciation for federal income tax purposes and
differences in the timing of deductions taken between tax and financial
reporting purposes for the amortization of preopening costs and other
accruals.
At December 31, 1998, HCT had net operating loss carryforwards ("NOL's")
totaling approximately $15,350,000, which do not begin to expire until the
year 2010. Statement of Financial Accounting Standards No.
F-53
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
109, "Accounting for Income Taxes", requires that the tax benefit of such
NOL's, together with the tax benefit of deferred tax assets resulting from
temporary differences, be recorded as an asset and, to the extent that
management can not assess that the utilization of all or a portion of such
deferred tax assets is more likely than not, a valuation allowance should be
recorded. Based on the taxable income earned by HCT during 1998 and 1997 and
the expectation of future taxable income, management believes that it is more
likely than not that a portion of the NOL's and deferred tax assets will be
utilized. Accordingly, a valuation allowance has been established which has
resulted in the recording of net deferred tax assets of $1,993,000 and
$2,107,000, respectively, at December 31, 1998 and 1997.
The components of HCT's net deferred tax asset are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................. $ 5,221,000 $ 5,200,000
Alternative minimum tax credit carryforward...... 800,000 226,000
Allowance for doubtful accounts.................. 277,000 240,000
Other liabilities and accruals................... 1,286,000 1,108,000
----------- -----------
Total deferred tax assets...................... 7,584,000 6,774,000
Deferred tax liabilities:
Depreciation and amortization.................... (3,092,000) (2,097,000)
----------- -----------
Net deferred tax asset............................. 4,492,000 4,677,000
Valuation allowance................................ (2,500,000) (2,570,000)
----------- -----------
$ 1,992,000 $ 2,107,000
=========== ===========
Receivables from HCC in connection with HCT's federal income taxes are
included in the accompanying consolidated financial statements as follows:
<CAPTION>
December 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Accounts receivable................................ $ -- $ 268,000
Deferred income taxes.............................. 1,451,000 1,632,000
Other noncurrent assets............................ 541,000 475,000
</TABLE>
The Internal Revenue Service is currently examining the consolidated Federal
income tax returns of HCC for the years 1993 through 1996. Management believes
that the results of such examination will not have a material adverse effect
on the financial position or results of operations of HCT.
(6) Transactions with Related Parties
Pursuant to a ten-year consulting agreement with Pratt Casino Corporation,
an affiliated company, HCT incurs a monthly consulting fee of $100,000. Such
fees amounted to $1,200,000 during each of the years ended December 31, 1998,
1997 and 1996.
HCT and Advanced Casino Systems Corporation ("ACSC"), an affiliated company,
entered into a Computer Services Agreement dated as of January 1, 1994 and
renewed through December 31, 1999. The agreement provides, among other things,
that ACSC will sell HCT computer hardware and information systems
F-54
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
equipment and will license or sublicense to HCT computer software necessary to
operate HCT's casino, hotel and related facilities and business operations.
HCT pays ACSC for such equipment and licenses such software at amounts and on
terms and conditions that ACSC provides to unrelated third parties. HCT also
pays ACSC a fixed license fee of $33,600 per month ($30,000 prior to January
1, 1997) and reimburses ACSC for its direct costs and expenses incurred under
the agreement. Since the latter part of 1997, ACSC also performs and bills HCT
for certain administrative and marketing services. Total charges incurred by
HCT amounted to $656,000, $635,000 and $477,000, respectively, for the years
ended December 31, 1998, 1997 and 1996. At both December 31, 1998 and 1997,
HCT had payables of $44,000 included in accounts payable with respect to such
charges.
Prior to 1998, Greate Bay Hotel and Casino, Inc. ("GBHC"), an affiliated
company which owns and operates the Sands Hotel and Casino in Atlantic City,
New Jersey, performed certain administrative and marketing services on behalf
of HCT. During the years ended December 31, 1997 and 1996, fees charged to HCT
by GBHC totaled $428,000 and $653,000, respectively.
HCT is charged for certain legal, accounting, and other expenses incurred by
HCC and its subsidiaries that relate to HCT's business. HCT also bills HCC and
its subsidiaries for services provided to those companies. For the years ended
December 31, 1998, 1997 and 1996, such charges amounted to $167,000, $362,000
and $439,000, respectively. At December 31, 1998 and 1997, HCT had net
receivables of $97,000 and $31,000, respectively, with respect to such
charges.
(7) Mississippi Regulatory Matters
Gaming operations in Mississippi are subject to regulatory control by the
Mississippi Gaming Commission. Under the provisions of the Mississippi gaming
regulations, HCT is required to maintain all necessary licenses. The ownership
license for the Tunica Casino has been renewed through October 18, 1999. If it
were determined that gaming laws were violated by a licensee, the gaming
licenses held by each licensee could be limited, conditioned, suspended or
revoked. In addition, the licensees and other persons involved could be
subject to substantial fines.
(8) Commitments and Contingencies
Ground Lease--
HCT entered into a ground lease covering 70 acres of land on which the
Tunica Casino was constructed. The ground lease is for an initial term of five
years from the opening date of the facility and, at HCT's option, may be
renewed for nine additional five-year periods. Obligations under the ground
lease during the initial term include both minimum monthly fixed payments and
percentage rent, which in the aggregate will be the greater of 4% of Gross
Revenues, as defined, or $1,100,000 per year. HCT is responsible for all
operating and other expenses of the property in accordance with the lease
terms. During 1998, 1997 and 1996, HCT expensed $3,899,000, $3,935,000 and
$3,486,000, respectively, in connection with the ground lease.
Planet Hollywood Litigation--
Planet Hollywood International, Inc., a Delaware corporation, and Planet
Hollywood (Region IV), Inc., a Minnesota corporation (collectively, "PHII"),
filed a complaint in the United States District Court for the Northern
District of Illinois, Eastern Division on July 29, 1996 against HCC, the
wholly owned subsidiary of HCC which owns and operates a casino in Aurora,
Illinois and a member of the Pratt Family (collectively, the "Original
Hollywood Defendants"). The Original Hollywood Defendants filed with the Court
on September 18, 1996 an answer to PHII's lawsuit, along with numerous
counterclaims against PHII, Robert Earl and Keith
F-55
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Barish (collectively, the "PHII Defendants"). PHII filed with the Court on
January 21, 1997, an amendment to their complaint which, among other things,
added HCT (together with the Original Hollywood Defendants, the "Hollywood
Defendants") and Greate Bay Casino Corporation ("GBCC"), an affiliated
company, as defendants. The Original Hollywood Defendants filed with the Court
on February 4, 1997, and GBCC and HCT filed with the Court on February 20,
1997, answers and counterclaims to such amended complaint.
In its lawsuit, PHII alleges, among other things, that the Hollywood
Defendants and GBCC have, in opening and operating the Hollywood Casino
concept, infringed on PHII's trademark, service mark and trade dress and have
engaged in unfair competition and deceptive trade practices. In their
counterclaims, the Hollywood Defendants and GBCC allege, among other things,
that the PHII Defendants have, through their planned use of their mark in
connection with casino services, infringed on certain of HCC's service marks
and trade dress and have engaged in unfair competition.
Given the uncertainties inherent in litigation, no assurance can be given
that the Hollywood Defendants will prevail in this litigation; however, the
Hollywood Defendants believe that PHII's claims are without merit and intend
to defend their position and pursue their counterclaims vigorously. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of the uncertainties described above.
Other--
HCT is a party in various legal proceedings with respect to the conduct of
casino and hotel operations. Although a possible range of loss can not be
estimated, in the opinion of management, based upon the advice of counsel,
settlement or resolution of the proceedings should not have a material adverse
impact on the consolidated financial position or results of operations of HCT.
(9) Employee Retirement Savings Plan--
HCT participates in a retirement savings plan under Section 401(k) of the
Internal Revenue Code sponsored by HCC which covers all of its employees who
meet certain eligibility requirements as to age and period of employment. The
plan allows employees to contribute up to 15% of their salary on a pre-tax
basis (subject to statutory limitations) and invest such monies in a choice of
mutual funds on a tax-deferred basis. HCT matches a portion of the
participating employees' contributions to the plan and may, from time to time,
make additional discretionary contributions. For the years ended December 31,
1998, 1997 and 1996, HCT made company contributions to the plan totaling
$203,000, $198,000 and $97,000, respectively.
(10) Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and cash equivalents--The carrying amounts approximate fair value
because of the short maturity of these instruments.
Short-term investments--The carrying amounts approximate fair value because
of the short maturity of these investments.
Interest payable--The carrying amount of interest payable approximates fair
value because of the short maturity of the obligation.
F-56
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Long-term debt--The fair value of HCT's long-term debt is estimated based on
either the quoted market price of the underlying debt issue or on the
discounted cash flow of future payments utilizing current rates available to
HCT for debt of similar remaining maturities. Debt obligations with a short
remaining maturity are valued at the carrying amount.
The estimated carrying amounts and fair values of HCT's financial instruments
are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------------- -----------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial Assets
Cash and cash
equivalents............ $16,325,000 $16,325,000 $11,851,000 $11,851,000
Short-term investments.. 3,905,000 3,905,000 3,876,000 3,876,000
Financial Liabilities
Interest payable........ $ 476,000 $ 476,000 $ 476,000 $ 476,000
Promissory notes to
HCC.................... 84,045,000 89,508,000 84,045,000 90,348,000
Equipment loans......... 1,291,000 1,335,000 1,638,000 1,649,000
Bank credit facility.... 462,000 462,000 -- --
(11) Selected Quarterly Financial Data (Unaudited)
<CAPTION>
Quarter
-----------------------------------------------
First Second Third Fourth
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31,
1998:
Net revenues............ $25,072,000 $26,245,000 $29,126,000 $25,330,000
=========== =========== =========== ===========
Net income (loss)....... $ 732,000 $ 153,000 $ 639,000 $ (119,000)
=========== =========== =========== ===========
Year Ended December 31,
1997:
Net revenues............ $26,979,000 $27,354,000 $28,084,000 $24,846,000
=========== =========== =========== ===========
Net income.............. $ 1,431,000 $ 1,781,000 $ 1,442,000 $ 18,000
=========== =========== =========== ===========
</TABLE>
F-57
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(Unaudited) 1998
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................ $ 53,481,000 $ 42,118,000
Short-term investments........................... 978,000 3,905,000
Accounts receivable, net of allowances of
$1,552,000 and $1,468,000, respectively......... 2,818,000 2,368,000
Inventories...................................... 1,149,000 1,385,000
Deferred income taxes............................ 845,000 890,000
Refundable deposits and other current assets..... 1,971,000 1,908,000
Due from affiliates, net of valuation
allowances...................................... 8,671,000 8,893,000
------------ ------------
Total current assets........................... 69,913,000 61,467,000
------------ ------------
Investment in unconsolidated affiliates............ 4,659,000 4,581,000
------------ ------------
Property and Equipment:
Land............................................. 7,812,000 7,812,000
Buildings and improvements....................... 120,060,000 120,060,000
Riverboats and barges............................ 40,353,000 40,166,000
Operating equipment.............................. 79,631,000 77,192,000
Construction in progress......................... 4,250,000 3,227,000
------------ ------------
252,106,000 248,457,000
Less--accumulated depreciation and amortization.... (84,292,000) (80,642,000)
------------ ------------
Net property and equipment....................... 167,814,000 167,815,000
------------ ------------
Other Assets:
Deferred financing costs......................... 4,582,000 4,792,000
Land rights...................................... 7,199,000 7,250,000
Due from affiliates, net of valuation
allowances...................................... 12,359,000 12,359,000
Land held for sale, net of valuation allowances.. 5,504,000 6,232,000
Other assets..................................... 6,360,000 6,244,000
------------ ------------
Total other assets............................. 36,004,000 36,877,000
------------ ------------
$278,390,000 $270,740,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets.
F-58
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(Unaudited) 1998
------------- -------------
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt and capital
lease obligations.............................. $ 8,517,000 $ 7,914,000
Accounts payable................................ 3,823,000 4,578,000
Accrued liabilities--
Salaries and wages............................. 3,558,000 5,023,000
Interest....................................... 11,503,000 4,872,000
Gaming and other taxes......................... 6,500,000 1,613,000
Insurance...................................... 3,014,000 2,940,000
Other.......................................... 3,828,000 4,503,000
Other current liabilities...................... 2,984,000 3,311,000
------------- -------------
Total current liabilities.................... 43,727,000 34,754,000
------------- -------------
Long-Term Debt................................... 198,138,000 199,667,000
------------- -------------
Capital Lease Obligations........................ 19,800,000 19,948,000
------------- -------------
Other Noncurrent Liabilities..................... 5,774,000 5,755,000
------------- -------------
Commitments and Contingencies
Minority Interest in Limited Partnership......... 3,109,000 3,104,000
------------- -------------
Shareholders' Equity:
Common Stock--
Class A common stock, $.0001 par value per
share; 50,000,000 shares authorized;
24,950,000 shares issued and outstanding...... 2,000 2,000
Class B, non-voting, $.01 par value per share;
10,000,000 shares authorized; no shares
issued........................................ -- --
Additional paid-in capital..................... 216,926,000 216,926,000
Accumulated deficit............................ (209,086,000) (209,416,000)
------------- -------------
Total shareholders' equity................... 7,842,000 7,512,000
------------- -------------
$ 278,390,000 $ 270,740,000
============= =============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
F-59
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Casino............................................ $66,345,000 $59,906,000
Rooms............................................. 2,394,000 2,007,000
Food and beverage................................. 6,984,000 6,781,000
Other............................................. 970,000 917,000
----------- -----------
76,693,000 69,611,000
Less--promotional allowances...................... (6,920,000) (5,804,000)
----------- -----------
Net revenues.................................... 69,773,000 63,807,000
----------- -----------
Expenses:
Casino............................................ 48,134,000 42,372,000
Rooms............................................. 269,000 445,000
Food and beverage................................. 2,187,000 2,173,000
Other............................................. 495,000 683,000
General and administrative........................ 4,585,000 4,305,000
Consulting fees................................... 300,000 300,000
Depreciation and amortization..................... 4,000,000 4,214,000
Development....................................... 215,000 255,000
----------- -----------
Total expenses.................................. 60,185,000 54,747,000
----------- -----------
Income from operations.............................. 9,588,000 9,060,000
----------- -----------
Non-operating income (expense):
Interest income..................................... 359,000 672,000
Interest expense.................................... (7,389,000) (7,451,000)
Loss on disposal of assets.......................... (1,000) (1,000)
----------- -----------
Total non-operating expense, net................ (7,031,000) (6,780,000)
----------- -----------
Income before income taxes and other item........... 2,557,000 2,280,000
Income tax provision................................ (205,000) (291,000)
----------- -----------
Income before other item............................ 2,352,000 1,989,000
Minority interest in earnings of Limited
Partnership (Note 1)............................... (2,022,000) (1,920,000)
----------- -----------
Net income.......................................... $ 330,000 $ 69,000
=========== ===========
Basic and diluted net income per common share....... $ .01 $ .00
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-60
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income......................................... $ 330,000 $ 69,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization, including
accretion of debt discount...................... 4,274,000 4,456,000
Loss on disposal of assets....................... 1,000 1,000
Minority interest in earnings of Limited
Partnership..................................... 2,022,000 1,920,000
Provision for doubtful accounts.................. 124,000 240,000
Deferred income tax provision.................... 2,000 162,000
Increase in accounts receivable.................. (574,000) (18,000)
Increase in accounts payable and accrued
expenses........................................ 8,907,000 12,376,000
Net change in other current assets and
liabilities..................................... 68,000 455,000
Net change in other noncurrent assets and
liabilities..................................... 399,000 (399,000)
----------- -----------
Net cash provided by operating activities........ 15,553,000 19,262,000
----------- -----------
INVESTING ACTIVITIES:
Purchases of property and equipment................ (3,698,000) (1,899,000)
Short-term investments............................. 2,927,000 (917,000)
Collections on notes receivable.................... -- 4,400,000
Proceeds from disposal of assets................... 37,000 --
Investments in unconsolidated affiliates........... (66,000) --
----------- -----------
Net cash (used in) provided by investing
activities........................................ (800,000) 1,584,000
----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt........... 1,876,000 --
Deferred financing costs........................... (25,000) --
Repayments of long-term debt....................... (3,086,000) (944,000)
Payments on capital lease obligations.............. (138,000) (139,000)
Limited partnership distributions.................. (2,017,000) (2,159,000)
----------- -----------
Net cash used in financing activities.............. (3,390,000) (3,242,000)
----------- -----------
Net increase in cash and cash equivalents............ 11,363,000 17,604,000
Cash and cash equivalents at beginning of period..... 42,118,000 38,156,000
----------- -----------
Cash and cash equivalents at end of period........... $53,481,000 $55,760,000
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-61
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Organization and Business
Hollywood Casino Corporation ("HCC" or the "Company"), is a Delaware
corporation which was organized and incorporated on November 5, 1990.
Approximately 54% of the issued and outstanding stock of HCC is owned by Jack
E. Pratt, Edward T. Pratt, Jr. and William D. Pratt (the "Pratt Brothers"), by
certain general partnerships and trusts controlled by the Pratt Brothers and
by other family members (collectively, the "Pratt Family").
HCC owns all of the outstanding common stock of both Hollywood Casino--
Aurora, Inc. ("HCA") and HWCC--Tunica, Inc. ("HCT"). HCA is an Illinois
corporation organized during 1990 which owns and operates a riverboat gaming
operation with approximately 30,000 square feet of gaming space together with
docking and other entertainment facilities under the service mark Hollywood
Casino(R) in Aurora, Illinois (the "Aurora Casino") approximately 35 miles
west of Chicago. HCT is a Texas corporation formed by HCC during 1993 which
owns and operates a 54,000 square foot gaming facility, adjacent support
facilities and a 506-room hotel complex under the service mark Hollywood
Casino(R) in northern Tunica County, Mississippi (the "Tunica Casino")
approximately 30 miles south of Memphis, Tennessee. The Aurora Casino and the
Tunica Casino commenced operations in June 1993 and August 1994, respectively.
The Company believes that its two gaming operations derive a significant
amount of their gaming revenues from patrons living in the surrounding areas.
Competition within the Company's gaming markets is intense and management
believes that this competition will continue or intensify in the future.
Prior to December 31, 1996, HCC also owned approximately 80% of the common
stock of Greate Bay Casino Corporation ("GBCC"), also a Delaware corporation.
On December 31, 1996, HCC distributed to its shareholders the common stock of
GBCC owned by HCC. As a result of the dividend, GBCC is no longer a subsidiary
of HCC. While owned by HCC, GBCC's principal asset was the Sands Hotel and
Casino in Atlantic City, New Jersey (the "Sands").
Effective as of April 1, 1997, HCC acquired the general partnership interest
in Pratt Management L.P. ("PML") from PPI Corporation, a wholly owned
subsidiary of GBCC. PML holds the management contract on and earns management
fees from the Aurora Casino and incurs operating and other expenses with
respect to its management thereof. As general partner, HCC receives 99% of the
first $84,000 of net income earned by PML each month together with 1% of any
income earned above such amount. The remaining limited partnership interest
continues to be held by Pratt Casino Corporation ("PCC"), a wholly owned
subsidiary of GBCC, and is reflected on the accompanying consolidated
financial statements as a minority interest. PCC also has a consulting
contract with the Tunica Casino (see Notes 6 and 8).
The accompanying consolidated financial statements also reflect HCT's one-
third investment in Tunica Golf Course LLC under the equity method of
accounting. This limited liability company was organized in 1996 to develop
and operate a golf course to be used by patrons of the Tunica Casino and other
participating casino/hotel properties. The golf course was completed and
opened for play in November 1998.
In September 1998, the Company received a preliminary license to develop,
own and operate a Hollywood-themed hotel and casino complex on the Red River
in Shreveport, Louisiana (the "Shreveport Casino"). The Company originally
planned to develop the Shreveport Casino with two partners in a joint venture
in which HCC would have had an interest of approximately 50%. HCC's 50%
investment in the joint venture ($2,500,000) is reflected on the accompanying
consolidated balance sheets as investment in unconsolidated affiliate (see
Note 8).
F-62
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
HCC is self insured for a portion of its general liability, certain health
care and other liability exposures. Accrued insurance includes estimates of
such accrued liabilities based on an evaluation of the merits of individual
claims and historical claims experience; accordingly, HCC's ultimate liability
may differ from the amounts accrued.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
requires, among other things, that an entity review its long-lived assets and
certain related intangibles for impairment whenever changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable.
Land held for sale is shown net of a valuation allowance in the amount of
$3,464,000 and $3,432,000, respectively, on the accompanying consolidated
balance sheets at March 31, 1999 and December 31, 1998.
In June 1998, the FASB issued a new statement, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), effective for fiscal years
beginning after June 15, 1999. SFAS 133 requires, among other things, that
derivatives be recorded on the balance sheet at fair value. Changes in the
fair value of derivatives may, depending on circumstances, be recognized in
earnings or deferred as a component of shareholders' equity until a hedged
transaction occurs. The Company does not believe the adoption of SFAS 133 will
have a significant impact on its financial position or results of operations.
The consolidated financial statements as of March 31, 1999 and for the three
month periods ended March 31, 1999 and 1998 have been prepared by HCC without
audit. In the opinion of management these consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the consolidated financial position of HCC as of
March 31, 1999, and the results of its operations and cash flows for the three
month periods ended March 31, 1999 and 1998.
(2) Earnings per common share -
Basic earnings per common share is calculated by dividing the net income by
the weighted average number of shares of common stock outstanding. Diluted
earnings per common share is calculated for periods in which income from
continuing operations was earned by dividing the components of net income by
the weighted average number of shares of common stock and potential common
shares outstanding. All potential common shares are excluded from the
calculation of diluted net loss per share for periods during which a loss was
incurred because the effect of their inclusion would be antidilutive.
The weighted average number of shares of common stock and potential common
shares outstanding used for the calculation of earnings per share is as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1999 1998
---------- ----------
<S> <C> <C>
Shares used in the calculation of:
Basic net income per share.............................. 24,949,976 24,935,306
Diluted net income per share............................ 24,950,730 24,950,781
</TABLE>
F-63
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
The number of shares used in the calculation of diluted earnings per share
for the three month periods ended March 31, 1999 and 1998 has been adjusted to
include potential common shares arising from stock options held by certain
employees and directors. The calculation of diluted earnings per share
excludes certain options to purchase common stock. These options have been
excluded as they would be antidilutive to the diluted earnings per share
calculation. The weighted average number of options excluded was 1,132,000 and
688,334, respectively, for the three month periods ended March 31, 1999 and
1998.
(3) Long-Term Debt and Pledge of Assets
Substantially all of HCC's assets are pledged in connection with its long-
term indebtedness.
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Indebtedness of HCC:
12 3/4% Senior Secured Notes, due 2003, net of
discount of $6,739,000 and $7,013,000,
respectively (a)................................ $197,973,000 $200,199,000
Promissory note due to affiliate (Note 6)........ 2,662,000 2,836,000
------------ ------------
200,635,000 203,035,000
------------ ------------
Indebtedness of HCA:
Promissory note to bank (b)...................... 1,748,000 1,900,000
------------ ------------
Indebtedness of HCT:
Equipment loans (c).............................. 2,959,000 1,291,000
Bank credit facility (d)......................... 410,000 462,000
------------
3,369,000 1,753,000
------------ ------------
Total indebtedness................................. 205,752,000 206,688,000
Less--current maturities......................... (7,614,000) (7,021,000)
------------ ------------
Total long-term debt........................... $198,138,000 $199,667,000
============ ============
</TABLE>
- --------
(a) During October 1995, HCC issued $210,000,000 of 12 3/4% Senior Secured
Notes (the "Senior Secured Notes") due November 1, 2003, discounted to
yield 13 3/4% per annum. Interest on the Senior Secured Notes is payable
semiannually on May 1 and November 1 of each year.
The Senior Secured Notes are unconditionally guaranteed on a senior secured
basis by HCT and may be guaranteed by certain future subsidiaries of HCC.
HCA is not a guarantor. The Senior Secured Notes and related guarantees are
secured by, among other things, (i) substantially all of the assets of HCT
and future guarantors, (ii) a lien on substantially all of the assets of
HCA, (iii) a pledge of the capital stock of certain subsidiaries of HCC and
(iv) the collateral assignment of any future management contracts entered
into by HCC. The limitation on the lien (ii) above was originally
$39,007,000 and is subject to reduction for principal payments on an
intercompany note between HCC and HCA. The outstanding balance of the
intercompany note was $31,507,000 at both March 31, 1999 and December 31,
1998. The intercompany note requires semiannual principal payments of
$2,500,000 commencing October 15, 1997 with the balance due November 1,
2003.
The Senior Secured Notes are redeemable at the option of HCC any time on or
after November 1, 1999 at 106.375% of the then outstanding principal
amount, decreasing to 103.1875% and 100%, respectively, on November 1, 2000
and 2001. Commencing with the November 1, 1997 interest payment date and at
each subsequent interest payment date, HCC is required to make an offer
within 30 business days to purchase not more than $2,500,000 in principal
amount of the Senior Secured Notes at a price of 106.375% of the
F-64
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
principal amount tendered. During December 1998, HCC made such an offer
resulting in the redemption of $2,500,000 in principal amount of the Senior
Secured Notes in January 1999. On April 21, 1999, HCC announced plans to
purchase and discharge the Senior Secured Notes (see Note 8).
The indenture to the Senior Secured Notes contains various provisions
limiting the ability of HCC and certain defined subsidiaries to, among
other things, pay dividends or make other restricted payments; incur
additional indebtedness or issue preferred stock; create liens; create
dividend or other payment restrictions affecting certain defined
subsidiaries; enter into mergers or consolidations or make sales of all or
substantially all assets of HCC, HCT or any future guarantor; and enter
into transactions with certain affiliates.
(b) During September 1998, HCA entered into a bank loan agreement to borrow up
to $2,000,000 on an unsecured basis. Borrowings under the agreement are
payable in 36 monthly installments including interest at the rate of 7.5%
per annum. HCA borrowed $2,000,000 under the agreement during October
1998.
(c) The equipment loans are payable monthly including interest at effective
rates ranging from 7.8% to 12.9% per annum and mature at various dates
between 1999 and 2002.
(d) HCT had a bank credit facility in the amount of $1,300,000 available to
borrow against through September 30, 1998. HCT borrowed $541,000 under the
credit facility during 1998 at the rate of 8.875% per annum. Borrowings
under the credit facility are to be repaid in monthly installments over a
period of 36 months and are collateralized by equipment purchased with the
loan proceeds. The credit facility was not renewed by HCT.
Scheduled payments of long-term debt as of March 31, 1999 are set forth
below:
<TABLE>
<S> <C>
1999 (nine months)........................................... $ 4,422,000
2000......................................................... 7,759,000
2001......................................................... 7,370,000
2002......................................................... 5,728,000
2003......................................................... 187,212,000
------------
Total...................................................... $212,491,000
============
</TABLE>
Interest paid amounted to $484,000 and $428,000, respectively, during the
three month periods ended March 31, 1999 and 1998.
(4) Capital Leases
HCA leases two parking garages under capital lease agreements. The first
lease has an initial 30-year term ending in June 2023 with the right to extend
the term under renewal options for an additional 67 years. Rental payments
through June 2012 equal the City of Aurora's financing costs related to its
general obligation bond issue used to finance the construction of the parking
garage. The general obligation bond issue includes interest at rates between
7% and 7 5/8% per annum. The second lease has an initial term ending in
September 2026 with the right to extend the lease for up to 20 additional
years. Rental payments during the first 15 years equal the lessor's debt
service costs related to the industrial revenue bond issue used to finance a
portion of the construction costs of the parking garage. The remaining
construction costs were funded by HCA. In addition, HCA pays base rent equal
to $15,000 per month, subject to a credit of $615,000 at the rate of $10,000
per month, for improvements made to the lessor's North Island Center banquet
and meeting facilities. HCA is also responsible for additional rent,
consisting of costs such as maintenance costs, insurance premiums and
utilities arising out of its operation of both parking garages.
HCA also leased certain equipment under capital lease agreements which
provided for interest at the rate of 11.2% per annum and expired in 1998.
F-65
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
The original cost of HCA's parking garages is included in buildings on the
accompanying consolidated balance sheets at both March 31, 1999 and December
31, 1998 in the amount of $27,358,000. Assets under capital leases with an
original cost of $7,260,000, are included in operating equipment on the
accompanying consolidated balance sheets at both March 31, 1999 and December
31, 1998. Amortization expense with respect to these assets amounted to
$245,000 and $332,000 during the three month periods ended March 31, 1999 and
1998, respectively. Accumulated amortization at March 31, 1999 and December
31, 1998 with respect to these assets amounted to $11,050,000 and $10,805,000,
respectively.
Future minimum lease payments under capital lease obligations as of March
31, 1999 are as follows:
<TABLE>
<S> <C>
1999 (nine months)............................................. $ 2,088,000
2000........................................................... 2,483,000
2001........................................................... 2,532,000
2002........................................................... 2,643,000
2003........................................................... 2,660,000
Thereafter..................................................... 21,417,000
------------
Total minimum lease payments................................... 33,823,000
Less amount representing interest.............................. (13,120,000)
------------
Present value of future minimum lease payments................. 20,703,000
Current capital lease obligation............................... (903,000)
------------
Long-term capital lease obligation............................. $ 19,800,000
============
</TABLE>
(5) Income Taxes
Components of HCC's provision for income taxes consist of the following:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
Current:
Federal............................................. $ -- $ --
State............................................... (203,000) (129,000)
Deferred:
Federal............................................. (153,000) (107,000)
State............................................... (2,000) (41,000)
Change in valuation allowance......................... 153,000 (14,000)
--------- ---------
$(205,000) $(291,000)
========= =========
</TABLE>
Federal tax payments of $150,000 were made during the three month period
ended March 31, 1999; no such payments were made during the three month period
ended March 31, 1998. No state tax payments were made during either of the
three month periods ended March 31, 1999 or 1998.
Federal and state income tax provisions or benefits are based upon estimates
of the results of operations for the current period and reflect the
nondeductibility for income tax purposes of certain items, including certain
lobbying, meals and entertainment and other expenses. Deferred taxes are
computed based on the expected future tax effects of differences between the
financial statement and tax bases of assets and liabilities, using enacted tax
F-66
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
rates. Deferred income taxes result primarily from the use of the allowance
method rather than the direct write-off method for doubtful accounts, the use
of accelerated methods of depreciation for federal income tax purposes and
differences in the timing of deductions taken between tax and financial
reporting purposes for the amortization of preopening costs and other
accruals.
At March 31, 1999, HCC and its subsidiaries have tax net operating loss
carryforwards ("NOL's") totaling approximately $4,300,000, none of which begin
to expire until the year 2018. Additionally, HCC and its subsidiaries have
alternative minimum and other tax credits available totaling $4,913,000 and
$415,000, respectively. Alternative minimum tax credits do not expire and none
of the other tax credits begin to expire until the year 2010. Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109") requires that the tax benefit of such NOL's and credit carryforwards,
together with the tax benefit of deferred tax assets resulting from temporary
differences, be recorded as an asset and, to the extent that management can
not assess that the utilization of all or a portion of such NOL's and deferred
tax assets is more likely than not, a valuation allowance should be recorded.
Management believes that it is more likely than not that future consolidated
taxable income of HCC (primarily from the Aurora Casino and the Tunica Casino)
will be sufficient to utilize a portion of the net deferred tax assets.
Accordingly, valuation allowances have been established which result in net
deferred tax assets of $1,841,000 and $1,843,000 at March 31, 1999 and
December 31, 1998, respectively.
The components of the net deferred tax asset and classification on the
accompanying consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................. $ 1,469,000 $ 1,305,000
Valuation and other allowances.................... 8,271,000 8,241,000
Alternative minimum tax credit.................... 4,913,000 4,913,000
Investment and jobs tax credits................... 415,000 415,000
Basis in limited partnership...................... 2,890,000 2,890,000
Other liabilities and accruals.................... 3,981,000 4,145,000
Benefits accrual.................................. 1,711,000 1,711,000
Other............................................. 894,000 724,000
------------ ------------
Total deferred tax assets....................... 24,544,000 24,344,000
------------ ------------
Deferred tax liabilities:
Depreciation and amortization..................... (8,842,000) (8,610,000)
Basis in debt obligations......................... (850,000) (727,000)
------------ ------------
Total deferred tax liabilities.................. (9,692,000) (9,337,000)
------------ ------------
Net deferred tax asset.............................. 14,852,000 15,007,000
Valuation allowance................................. (13,011,000) (13,164,000)
------------ ------------
$ 1,841,000 $ 1,843,000
============ ============
Classified as:
Current deferred income tax asset................. $ 845,000 $ 890,000
Other assets...................................... 1,580,000 1,524,000
Other noncurrent liabilities...................... (584,000) (571,000)
</TABLE>
F-67
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Sales by HCC or existing shareholders of common stock can cause a "change of
control", as defined in Section 382 of the Internal Revenue Code of 1986, as
amended (the "Code"), which would limit the ability of HCC or its subsidiaries
to utilize these loss carryforwards in later tax periods. Should such a change
of control occur, the amount of loss carryforwards available for use in any
one year would most likely be substantially reduced. Future treasury
regulations, administrative rulings or court decisions may also effect HCC's
utilization of its loss carryforwards.
The Internal Revenue Service is currently examining the consolidated Federal
income tax returns of HCC for the years 1993 through 1996. Management believes
that the results of such examination will not have a material adverse effect
on the consolidated financial position or results of operations of HCC.
(6) Transactions with Related Parties
HCC has advanced funds to GBCC totaling $6,750,000 as of both March 31, 1999
and December 31, 1998. During the third quarter of 1996, HCC loaned $6,500,000
to GBCC on a demand basis with interest at the rate of 13 3/4% per annum
payable quarterly commencing October 1, 1996. An additional $250,000 note
became due on April 1, 1998 for which payment has not been received. This
advance continues to bear interest at the rate of 14% per annum, payable
semiannually. Effective as of January 1, 1999, interest earned on the
outstanding obligations from GBCC is being fully reserved. Interest receivable
amounting to $1,781,000, net of a valuation allowance of $232,000 in 1999, is
included in due from affiliates on the accompanying consolidated balance
sheets at both March 31, 1999 and December 31, 1998. Interest income earned on
loans and advances to GBCC amounted to $232,000 during the three month period
ended March 31, 1998.
In connection with its acquisition of the general partnership interest in
PML (see Note 1), HCC issued a five-year note in the original amount of
$3,800,000 and assigned $13,750,000 undiscounted principal amount of PPI
Funding Notes (see below) and $350,000 accrued interest due from GBCC to PPI
Corporation. The $3,800,000 note is payable in monthly installments of
$83,000, including interest at the rate of 14% per annum, commencing on May 1,
1997, with additional quarterly variable principal payments commencing on July
1, 1997 in an amount equal to the general partner's share of quarterly cash
distributions, as defined, from PML. HCC incurred interest expense with
respect to the note amounting to $94,000 and $116,000, respectively, during
the three month periods ended March 31, 1999 and 1998. Accrued interest of
$32,000 and $34,000 with respect to the note is included in interest payable
on the accompanying consolidated balance sheets at March 31, 1999 and December
31, 1998, respectively.
On February 17, 1994, PPI Funding Corp., a subsidiary of GBCC, issued
$40,524,000 discounted principal amount of new deferred interest notes (the
"PPI Funding Notes") to HCC in exchange for $38,779,000 principal amount of 15
1/2% unsecured notes (the "PCPI Notes") held by HCC and issued by PCPI Funding
Corp., another subsidiary of GBCC. The PPI Funding Notes were discounted to
yield interest at the rate of 14 7/8% per annum and had an original face value
of $110,636,000. Subsequent principal payments by PPI Funding Corp. reduced
the maturity value of the notes to $98,353,000 at December 31, 1996. During
the second quarter of 1997, HCC assigned $13,750,000 undiscounted principal
amount of the PPI Funding Notes to PPI Corporation as consideration, in part,
for HCC's acquisition of the general partnership interest in PML. Such
assignment reduced the maturity value of the notes to $84,603,000. On January
5, 1998, GBCC's most significant subsidiary, Greate Bay Hotel and Casino, Inc.
("GBHC"), filed for protection under Chapter 11 of the United States
Bankruptcy Code. It was anticipated that GBCC's equity ownership of GBHC would
be significantly reduced in the reorganization under Chapter 11 and, as a
consequence, HCC forgave $37,000,000 undiscounted principal amount of the PPI
Funding Notes at December 31, 1997, further reducing the maturity value to
$47,603,000. Payment of interest is deferred through February 17, 2001 at
which time interest will become payable semiannually, with the unpaid
principal balance due on February 17, 2006. The PPI Funding Notes are
collateralized by a pledge of all of the common stock of a subsidiary of GBCC.
F-68
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Prior to December 31, 1996, when GBCC and its subsidiaries were members of
the HCC consolidated group, it was anticipated that one of HCC's primary
methods of realizing the carrying value of the PPI Funding Notes would be
through the utilization of NOL's of GBCC. As a result of HCC's distribution of
GBCC stock at December 31, 1996, GBCC's NOL's are no longer available for
utilization in HCC's consolidated federal income tax returns. Accordingly, HCC
provided a valuation allowance in the amount of $18,741,000 at December 31,
1996 which reduced the carrying amount of the PPI Funding Notes to their
estimated realizable value of $35,597,000 at that date. As a result of the
1997 forgiveness of debt discussed above, the carrying amount of the PPI
Funding Notes has been further reduced to an estimated realizable value of
$12,322,000. Management presently anticipates that the remaining balance will
be realized through a combination of repayments from GBCC and additional asset
acquisitions from GBCC and its subsidiaries.
HCT incurs a monthly consulting fee of $100,000 pursuant to a consulting
agreement expiring December 31, 2003 with PCC. Such fees amounted to $300,000
during each of the three month periods ended March 31, 1999 and 1998.
Advanced Casino Systems Corporation ("ACSC"), a subsidiary of GBCC, provides
computer, marketing and other administrative services to HCC and its
subsidiaries. Computer services provided include hardware, software, and
operator support and, for the most part, such services are billed by ACSC at
its direct costs plus expenses incurred. ACSC and HCT entered into a Computer
Services Agreement dated as of January 1, 1994 and renewed through December
31, 1999 to provide such services and to license or sublicense to HCT computer
software necessary to operate HCT's casino, hotel and related facilities and
business operations. HCT pays ACSC for such equipment and licenses such
software at amounts and on terms and conditions that ACSC provides to
unrelated third parties. HCT also pays ACSC a fixed license fee of $33,600 per
month. ACSC's billings to HCC and its subsidiaries for such products and
services during the three month periods ended March 31, 1999 and 1998 amounted
to $289,000 and $297,000, respectively. At March 31, 1999 and December 31,
1998, unpaid charges of $166,000 and $109,000, respectively, are included in
due to affiliates on the accompanying consolidated balance sheets.
HCC allocates certain general and administrative costs to GBCC and its
subsidiaries pursuant to services agreements. Such allocated costs and fees
amounted to $157,000 and $296,000, respectively, for the three month periods
ended March 31, 1999 and 1998. Net receivables from GBCC and its subsidiaries
in the amount of $107,000 and $179,000 are included in due from affiliates on
the accompanying consolidated balance sheets at March 31, 1999 and December
31, 1998, respectively.
During 1998, the Company determined that it should revise its tax treatment
of the spin-off of the stock of GBCC which occurred on December 31, 1996. As a
result of the revised tax treatment for the spin-off of GBCC stock to HCC's
shareholders, shareholders of the Company on the distribution date would also
have been required to revise their method of reporting the distribution
received on their separate federal income tax returns. The Company committed
to assume the obligation for additional federal income taxes owed by its
shareholders arising from the revised tax treatment. Consequently, the Company
reached an agreement with the Internal Revenue Service to settle such
obligations on behalf of its shareholders, exclusive of the Pratt Family, for
$100,000 and to issue new tax reporting forms to the Pratt Family. Such forms
required the Pratt Family members to amend their federal income tax returns
for 1996 resulting in substantial additional tax obligations totaling
approximately $790,000. The shareholder obligations assumed by the Company are
included in other accrued liabilities on the accompanying consolidated balance
sheet at December 31, 1998; substantially all of these obligations were
settled during the three month period ended March 31, 1999.
F-69
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
(7) Commitments and Contingencies
Ground Lease -
HCT entered into a ground lease covering 70 acres of land on which the
Tunica Casino was constructed. The ground lease is for an initial term of five
years from the opening date of the facility and, at HCT's option, may be
renewed for nine additional five-year periods. Obligations under the ground
lease during the initial term include both minimum monthly fixed payments and
percentage rent, which in the aggregate will be the greater of 4% of Gross
Revenues, as defined, or $1,100,000 per year. HCT is responsible for all
operating and other expenses of the property in accordance with the lease
terms. During the three month periods ended March 31, 1999 and 1998, HCT
expensed $995,000 and $940,000, respectively, in connection with the ground
lease.
Planet Hollywood Litigation -
Planet Hollywood International, Inc., a Delaware corporation, and Planet
Hollywood (Region IV), Inc., a Minnesota corporation (collectively, "PHII"),
filed a complaint in the United States District Court for the Northern
District of Illinois, Eastern Division on July 29, 1996 against HCC, HCA and a
member of the Pratt Family (collectively, the "Original Hollywood
Defendants"). The Original Hollywood Defendants filed with the Court on
September 18, 1996 an answer to PHII's lawsuit, along with numerous
counterclaims against PHII, Robert Earl and Keith Barish (collectively, the
"PHII Defendants"). PHII filed with the Court on January 21, 1997, an
amendment to their complaint which, among other things, added HCT (together
with the Original Hollywood Defendants, the "Hollywood Defendants") and GBCC
as defendants. The Original Hollywood Defendants filed with the Court on
February 4, 1997, and GBCC and HCT filed with the Court on February 20, 1997,
answers and counterclaims to such amended complaint.
In its lawsuit, PHII alleges, among other things, that the Hollywood
Defendants and GBCC have, in opening and operating the Hollywood Casino
concept, infringed on PHII's trademark, service mark and trade dress and have
engaged in unfair competition and deceptive trade practices. In their
counterclaims, the Hollywood Defendants and GBCC allege, among other things,
that the PHII Defendants have, through their planned use of their mark in
connection with casino services, infringed on certain of HCC's service marks
and trade dress and have engaged in unfair competition.
Given the uncertainties inherent in litigation, no assurance can be given
that the Hollywood Defendants will prevail in this litigation; however, the
Hollywood Defendants believe that PHII's claims are without merit and intend
to defend their position and pursue their counterclaims vigorously. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of the uncertainties described above.
Other Litigation -
On October 8, 1998, HCC filed a complaint in the District Court of Dallas
County, Texas against Arthur Andersen LLP, HCC's independent accountants, and
selected partners alleging negligent advice and breach of contract with
respect to the tax consequences resulting from the spin-off of GBCC's stock to
HCC's shareholders on December 31, 1996. The lawsuit is currently in the
initial stages of discovery.
HCC and its subsidiaries are parties in various legal proceedings with
respect to the conduct of casino and hotel operations. Although a possible
range of loss cannot be estimated, in the opinion of management, based upon
the advice of counsel, settlement or resolution of these proceedings should
not have a material adverse impact on the consolidated financial position or
results of operations of HCC and its subsidiaries.
F-70
<PAGE>
HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
(8) Subsequent Events
On March 31, 1999, HCC entered into a definitive agreement with one of the
joint venture partners to acquire their interest in the Shreveport Casino for
$2,500,000 (the amount the joint venture partner contributed to the project),
$1,000 of which is to be paid at closing and the remainder to be paid six
months after the opening of the Shreveport Casino. The revised structure of
the joint venture received approval by the Louisiana Gaming Control Board on
April 20, 1999. As a result, HCC now has a 100% interest in the Shreveport
Casino with the remaining joint venture partner holding a 10% residual
interest in the event the project is sold. Effective with the April 23, 1999
closing of HCC's acquisition of the additional joint venture interest, the
joint venture will be reflected on a consolidated basis in the financial
statements of HCC. The total estimated cost of the Shreveport Casino is
approximately $230,000,000. The Company anticipates contributing approximately
$50,000,000 as an equity investment in the project with the remaining
construction and preopening costs, estimated at $180,000,000, to come from
project specific financing that will be non-recourse to HCC. The Company
anticipates securing financing for a portion of the equity investment (see
below) and all of the project financing and commencing construction in the
summer of 1999 with a planned opening date approximately 14 months later.
On April 21, 1999, the Company announced the commencement of a tender offer
for the outstanding Senior Secured Notes at an effective price of
approximately 109.7% of face value. The tender offer expires on May 18, 1999;
accordingly, the total principal amount of Senior Secured Notes tendered by
noteholders can not yet be determined. However, in excess of 96% of the total
principal amount outstanding has been tendered to date. Net proceeds of a
proposed offering would be used, among other things, to purchase and discharge
the currently outstanding Senior Secured Notes, to expand the Aurora Casino's
operations, to purchase and terminate the management and consulting agreements
on the Aurora and Tunica casinos by acquiring PCC (see below) and to fund a
portion of HCC's equity investment in the Shreveport Casino.
On April 28, 1999, HCC entered into a voting agreement with GBCC and certain
of its wholly owned subsidiaries, including PCC and PRT Funding Corp. ("PRT
Funding"), and the holders of substantially all of the $85,000,000 of
unsecured senior notes (the "PRT Funding Notes") issued by PRT Funding and
guaranteed by PCC. The PRT Funding Notes are currently in default. Under the
terms of the agreement, HCC would purchase the stock of PCC from GBCC for
nominal consideration and satisfy PCC's obligations as part of a debt
restructuring (the "Restructuring") of PRT Funding, PCC and other subsidiaries
of PCC. When acquired by HCC, PCC's assets will consist of its limited
partnership interest in PML and a consulting contract for the Tunica Casino
and its liabilities will consist of a newly issued promissory note payable to
the Trustee for the PRT Funding Notes. The Company currently plans to satisfy
PCC's obligations by redeeming the newly issued note for approximately
$40,300,000; such payment will result in a charge to expense by the Company as
no asset value will be attributed to the management contract and consulting
agreement when acquired.
After the acquisition of PCC, the Company will have incurred additional debt
and associated interest with respect to its refinancing (see above) but will
no longer report a minority interest in PML nor pay the Tunica consulting fee
to a subsidiary of GBCC. The minority interest and consulting fee expense
totaled $2,322,000 for the three month period ended March 31, 1999 and
$7,694,000 for the year ended December 31, 1998.
The successful completion of the Restructuring will require that PCC and PRT
Funding file for protection under Chapter 11 with the above transactions
included as part of a pre-negotiated plan of reorganization. Such plan will
require approval by the bankruptcy court as well as by various gaming
regulatory organizations.
F-71
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(Unaudited) 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 20,302,000 $ 9,718,000
Accounts receivable, net of allowances of
$728,000 and $655,000, respectively.............. 1,108,000 1,128,000
Inventories....................................... 532,000 606,000
Deferred income taxes............................. 1,636,000 1,540,000
Due from affiliates............................... 78,000 428,000
Prepaid expenses and other current assets......... 697,000 1,010,000
------------ ------------
Total current assets............................ 24,353,000 14,430,000
------------ ------------
Property and Equipment:
Land improvements................................. 3,167,000 3,167,000
Buildings and improvements........................ 46,205,000 46,205,000
Riverboats........................................ 37,829,000 37,642,000
Operating equipment............................... 37,494,000 37,192,000
Construction in progress.......................... 654,000 615,000
------------ ------------
125,349,000 124,821,000
Less--accumulated depreciation and amortization... (42,898,000) (41,114,000)
Net property and equipment...................... 82,451,000 83,707,000
------------ ------------
Other Assets....................................... 2,177,000 2,173,000
------------ ------------
$108,981,000 $100,310,000
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt and capital
lease obligations................................ $ 6,539,000 $ 6,517,000
Accounts payable.................................. 1,796,000 2,199,000
Accrued liabilities--
Salaries and wages.............................. 1,358,000 2,300,000
Interest........................................ 2,224,000 1,058,000
Gaming and other taxes.......................... 5,515,000 981,000
Insurance....................................... 1,123,000 965,000
Other........................................... 1,663,000 1,374,000
Due to affiliates................................. 3,401,000 2,109,000
Other current liabilities......................... 773,000 993,000
------------ ------------
Total current liabilities....................... 24,392,000 18,496,000
------------ ------------
Long-Term Debt..................................... 27,619,000 27,783,000
------------ ------------
Capital Lease Obligations.......................... 19,800,000 19,948,000
------------ ------------
Deferred Income Taxes.............................. 5,494,000 5,363,000
------------ ------------
Commitments and Contingencies
Shareholder's Equity:
Common stock, $.01 par value per share; 2,000,000
shares authorized; 1,501,000 shares issued and
outstanding...................................... 15,000 15,000
Additional paid-in capital........................ 25,541,000 25,541,000
Retained earnings................................. 6,120,000 3,164,000
------------ ------------
Total shareholder's equity...................... 31,676,000 28,720,000
------------ ------------
$108,981,000 $100,310,000
============ ============
</TABLE>
The accompanying notes to financial statements are an
integral part of these balance sheets.
F-72
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Casino.............................................. $41,809,000 $37,103,000
Food and beverage................................... 3,348,000 3,233,000
Other............................................... 654,000 622,000
----------- -----------
45,811,000 40,958,000
Less--promotional allowances........................ (2,418,000) (2,238,000)
----------- -----------
Net revenues........................................ 43,393,000 38,720,000
----------- -----------
Expenses:
Casino.............................................. 30,150,000 25,961,000
Food and beverage................................... 1,282,000 1,202,000
Other............................................... 222,000 322,000
General and administrative.......................... 3,806,000 3,781,000
Depreciation and amortization....................... 1,785,000 1,924,000
----------- -----------
Total expenses.................................... 37,245,000 33,190,000
----------- -----------
Income from operations................................ 6,148,000 5,530,000
----------- -----------
Non-operating income (expense):
Interest income..................................... 64,000 36,000
Interest expense.................................... (1,434,000) (1,590,000)
Gain on disposal of assets.......................... 1,000 2,000
----------- -----------
Total non-operating expense, net.................. (1,369,000) (1,552,000)
----------- -----------
Income before income taxes............................ 4,779,000 3,978,000
Income tax provision.................................. (1,823,000) (1,520,000)
----------- -----------
Net income............................................ $ 2,956,000 $ 2,458,000
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
F-73
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income......................................... $ 2,956,000 $ 2,458,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 1,785,000 1,924,000
Provision for doubtful accounts.................. 75,000 88,000
Gain on disposal of assets....................... (1,000) (2,000)
Deferred income tax provision.................... 35,000 395,000
(Increase) decrease in receivables............... (55,000) 181,000
Increase in accounts payable and accrued
liabilities..................................... 4,802,000 7,994,000
Net change in affiliate accounts................. 1,642,000 1,032,000
Net change in other current assets and
liabilities..................................... 167,000 481,000
Net change in other assets and liabilities....... (4,000) (42,000)
----------- -----------
Net cash provided by operating activities........ 11,402,000 14,509,000
----------- -----------
INVESTING ACTIVITIES:
Purchases of property and equipment................ (529,000) (1,344,000)
Proceeds from sale of assets....................... 1,000 --
----------- -----------
Net cash used in investing activities.............. (528,000) (1,344,000)
----------- -----------
FINANCING ACTIVITIES:
Repayments of debt................................. (152,000) (636,000)
Payments on capital lease obligations.............. (138,000) (139,000)
Dividends.......................................... -- (5,079,000)
----------- -----------
Net cash used in financing activities.............. (290,000) (5,854,000)
----------- -----------
Net increase in cash and cash equivalents............ 10,584,000 7,311,000
Cash and cash equivalents at beginning of period..... 9,718,000 11,594,000
----------- -----------
Cash and cash equivalents at end of period........... $20,302,000 $18,905,000
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
F-74
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) Organization and Business
Hollywood Casino--Aurora, Inc. ("HCA") is an Illinois corporation and a
wholly owned subsidiary of Hollywood Casino Corporation ("HCC"), a Delaware
corporation. HCA was organized and incorporated during December 1990 by
certain relatives of Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt
(collectively, the "Pratt Family") for the purpose of developing and holding
the ownership interest in a riverboat gaming operation located in Aurora,
Illinois (the "Aurora Casino") approximately 35 miles west of Chicago. In May
1992, HCC, which was then wholly owned by members of the Pratt Family or by
certain general partnerships and trusts controlled by the Pratt Family,
acquired all of the outstanding stock of HCA through the issuance of HCC
stock. Prior to December 31, 1996, HCC also owned approximately 80% of Greate
Bay Casino Corporation ("GBCC"), a Delaware corporation. A GBCC subsidiary
continues to have a limited partnership interest in the entity which holds the
management services contract for the Aurora Casino (see Note 5).
The Aurora Casino consists of two, four-level riverboats having a combined
gaming space of approximately 30,000 square feet and a four-level pavilion and
docking facility which houses ticketing, food service, passenger waiting, and
various administrative functions. The Aurora Casino also includes two parking
structures with approximately 1,350 parking spaces. HCA was responsible for
the design and construction of the parking garages; however, it leases the
facilities under long-term lease agreements. The leases are treated as capital
leases for financial reporting purposes (see Note 3).
The Aurora Casino commenced operations on June 17, 1993. HCA's current
owner's license was renewed by the Illinois Gaming Board in July 1998 for a
period of one year and subsequently extended to December 1999. Gaming taxes
imposed by the state of Illinois are determined using a graduated tax rate
applied to the licensee's adjusted gaming revenues. HCA expenses such gaming
taxes based on its anticipated annual effective tax rate.
HCA estimates that a significant amount of the Aurora Casino's revenues are
derived from patrons living in the Chicago area and surrounding northern and
western suburbs. The Aurora Casino faces intense competition from other
riverboat gaming operations in Illinois and Indiana which serve the Chicago
area and management believes that this competition will intensify in the
future.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
HCA is self insured for a portion of its general liability, certain health
care and other liability exposures. Accrued insurance includes estimates of
such accrued liabilities based on an evaluation of the merits of individual
claims and historical claims experience; accordingly, HCA's ultimate liability
may differ from the amounts accrued.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of"
requires, among other things, that an entity review its long-lived assets and
certain related intangibles for impairment whenever changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. As
a result of its review, HCA does not believe that any such changes have
occurred.
F-75
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)
In June 1998, the FASB issued a new statement, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS 133"), effective for fiscal years
beginning after June 15, 1999. SFAS 133 requires, among other things, that
derivatives be recorded on the balance sheet at fair value. Changes in the
fair value of derivatives may, depending on circumstances, be recognized in
earnings or deferred as a component of shareholders' equity until a hedged
transaction occurs. HCA does not believe the adoption of SFAS 133 will have a
significant impact on its financial position or results of operations.
The financial statements as of March 31, 1999 and for the three month
periods ended March 31, 1999 and 1998 have been prepared by HCA without audit.
In the opinion of management, these financial statements contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position of HCA as of March 31, 1999 and the
results of its operations and cash flows for the three month periods ended
March 31, 1999 and 1998.
(2) Long-Term Debt and Pledge of Assets
HCA's long-term indebtedness consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
12 3/4% Promissory Note to HCC, due on November
1, 2003(a)..................................... $31,507,000 $31,507,000
Promissory note to bank(b)...................... 1,748,000 1,900,000
----------- -----------
Total indebtedness.............................. 33,255,000 33,407,000
Less--current maturities........................ (5,636,000) (5,624,000)
----------- -----------
Total long-term debt............................ $27,619,000 $27,783,000
=========== ===========
</TABLE>
- --------
(a) The intercompany note accrues interest at the rate of 12 3/4% per annum
payable semiannually on October 15 and April 15 of each year and requires
semiannual principal repayments of $2,500,000 commencing October 15, 1997
with the balance of the note due November 1, 2003. The note is pledged as
security with respect to HCC's 12 3/4% Senior Secured Notes due in 2003.
HCA is not a guarantor of HCC's indebtedness; however, the indebtedness is
secured, in part, by a lien (limited to the outstanding principal amount
of the intercompany note to HCC) on substantially all of the assets of HCA
and by a pledge of the capital stock of HCA.
(b) During September 1998, HCA entered into a bank loan agreement to borrow up
to $2,000,000 on an unsecured basis. Borrowings under the agreement are
payable in 36 monthly installments including interest at the rate of 7.5%
per annum. HCA borrowed $2,000,000 under the agreement during October
1998.
As of March 31, 1999, future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1999 (nine months)............................................. $ 5,472,000
2000........................................................... 5,674,000
2001........................................................... 5,602,000
2002........................................................... 5,000,000
2003........................................................... 11,507,000
-----------
$33,255,000
===========
</TABLE>
Interest paid for the three month periods ended March 31, 1999 and 1998
amounted to $268,000 and $257,000, respectively.
F-76
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)
(3) Capital Leases
HCA leases two parking garages under capital lease agreements. The first
lease has an initial 30-year term ending in June 2023 with the right to extend
the term under renewal options for an additional 67 years. Rental payments
through June 2012 equal the City of Aurora's financing costs related to its
general obligation bond issue used to finance the construction of the parking
garage. The general obligation bond issue includes interest at rates between
7% and 7 5/8% per annum. The second lease has an initial term ending in
September 2026 with the right to extend the lease for up to 20 additional
years. Rental payments during the first 15 years equal the lessor's debt
service costs related to the industrial revenue bond issue used to finance a
portion of the construction costs of the parking garage. The remaining
construction costs were funded by HCA. In addition, HCA pays base rent equal
to $15,000 per month, subject to a credit of $615,000 at the rate of $10,000
per month for improvements made to the lessor's North Island Center banquet
and meeting facilities. HCA is also responsible for additional rent,
consisting of costs such as maintenance costs, insurance premiums and
utilities arising out of its operation of both parking garages.
HCA also leased certain equipment under capital lease agreements which
provided for interest at the rate of 11.2% and expired in 1998.
The original cost of HCA's parking garages is included in buildings and
improvements on the accompanying balance sheets at both March 31, 1999 and
December 31, 1998 in the amount of $27,358,000. Assets under capital leases
with an original cost of $2,446,000 are included in operating equipment on the
accompanying balance sheets at both March 31, 1999 and December 31, 1998.
Amortization expense with respect to these assets amounted to $245,000 during
each of the three month periods ended March 31, 1999 and 1998. Accumulated
amortization at March 31, 1999 and December 31, 1998 with respect to these
assets amounted to $6,236,000 and $5,991,000, respectively.
Future minimum lease payments under capital lease obligations as of March
31, 1999 are as follows:
<TABLE>
<S> <C>
1999 (nine months)............................................. $ 2,088,000
2000........................................................... 2,483,000
2001........................................................... 2,532,000
2002........................................................... 2,643,000
2003........................................................... 2,660,000
Thereafter..................................................... 21,417,000
------------
Total minimum lease payments................................... 33,823,000
Less--amount representing interest............................. (13,120,000)
------------
Present value of future minimum lease payments................. 20,703,000
Current capital lease obligation............................... (903,000)
------------
Long-term capital lease obligation............................. $ 19,800,000
============
</TABLE>
F-77
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)
(4) Income Taxes
HCA's provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Current:
Federal.......................................... $(1,589,000) $(1,005,000)
State............................................ (199,000) (120,000)
Deferred:
Federal.......................................... (32,000) (353,000)
State............................................ (3,000) (42,000)
----------- -----------
$(1,823,000) $(1,520,000)
=========== ===========
</TABLE>
HCA is included in HCC's consolidated federal income tax return. Pursuant to
agreements between HCC and HCA, HCA's current provision for federal income
taxes is based on the amount of tax which would be provided if a separate
federal income tax return were filed. HCA paid no federal or state taxes
during the three month periods ended March 31, 1999 and 1998.
Deferred taxes are computed based on the expected future tax effects of
differences between the financial statement and tax bases of assets and
liabilities, using enacted tax rates. Deferred income taxes result primarily
from the use of the allowance method rather than the direct write-off method
for doubtful accounts, the use of accelerated methods of depreciation for
federal income tax purposes and differences in the timing of deductions taken
between tax and financial reporting purposes for other accruals.
The components of HCA's net deferred tax liability are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts................. $ 274,000 $ 246,000
Other liabilities and reserves.................. 1,489,000 1,420,000
----------- -----------
Total deferred tax assets..................... 1,763,000 1,666,000
----------- -----------
Deferred tax liabilities:
Depreciation and amortization................... (5,621,000) (5,489,000)
----------- -----------
Net deferred tax liability........................ $(3,858,000) $(3,823,000)
=========== ===========
</TABLE>
Receivables and payables to HCC in connection with the aforementioned tax
allocation agreements at March 31, 1999 and December 31, 1998 are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
Deferred tax assets............................... $ 1,457,000 $ 1,373,000
Due (to) from affiliates.......................... (1,242,000) 347,000
Deferred tax liabilities.......................... (4,910,000) (4,793,000)
</TABLE>
F-78
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)
The Internal Revenue Service is currently examining the consolidated Federal
income tax returns of HCC for the years 1993 through 1996. Management believes
that the results of such examination will not have a material adverse effect
on the financial position or results of operations of HCA.
(5) Transactions with Related Parties
Pursuant to a management services agreement, HCA pays base management and
incentive fees to Pratt Management, L.P. ("PML"), a limited partnership of
which HCC is the general partner and a subsidiary of GBCC is the limited
partner. The base management fee is equal to 5% of operating revenues (as
defined in the agreement) subject to a maximum of $5,500,000 in any
consecutive twelve month period. The incentive fee is equal to 10% of gross
operating profit (as defined in the agreement to generally include all
revenues less expenses other than depreciation, interest, amortization and
income taxes). HCA incurred such fees totaling $2,600,000 and $2,546,000,
respectively, during the three month periods ended March 31, 1999 and 1998.
Management and incentive fees payable at March 31, 1999 and December 31, 1998
amounting to $2,094,000 and $2,067,000, respectively, are included in due to
affiliates on the accompanying balance sheets.
HCA incurred interest with respect to its promissory note payable to HCC
(see Note 2) amounting to $1,004,000 and $1,163,000, respectively, for the
three month periods ended March 31, 1999 and 1998. Interest payable to HCC on
such note amounted to $1,852,000 and $848,000, respectively, at March 31, 1999
and December 31, 1998 and is included in accrued interest payable on the
accompanying balance sheets.
HCA has acquired computer software and hardware from GBCC and has been
allocated certain other expenses from HCC and GBCC. In addition, HCA is
reimbursed by HCC and GBCC for certain administrative and other services it
performs on their behalf. Such transactions resulted in net charges to HCA
during the three month periods ended March 31, 1999 and 1998 totaling $49,000
and $123,000, respectively. At March 31, 1999 and December 31, 1998, HCA had
net receivables of $12,000 and $37,000, respectively, in connection with such
charges.
(6) Commitments and Contingencies
Planet Hollywood Litigation--
Planet Hollywood International, Inc., a Delaware corporation, and Planet
Hollywood (Region IV), Inc., a Minnesota corporation (collectively, "PHII"),
filed a complaint in the United States District Court for the Northern
District of Illinois, Eastern Division on July 29, 1996 against HCC, HCA and a
member of the Pratt Family (collectively, the "Original Hollywood
Defendants"). The Original Hollywood Defendants filed with the Court on
September 18, 1996 an answer to PHII's lawsuit, along with numerous
counterclaims against PHII, Robert Earl and Keith Barish (collectively, the
"PHII Defendants"). PHII filed with the Court on January 21, 1997, an
amendment to their complaint which, among other things, added HWCC-Tunica,
Inc., the HCC subsidiary which owns and operates a casino in Tunica,
Mississippi ("HCT", and together with the Original Hollywood Defendants, the
"Hollywood Defendants"), and GBCC as defendants. The Original Hollywood
Defendants filed with the Court on February 4, 1997, and GBCC and HCT filed
with the Court on February 20, 1997, answers and counterclaims to such amended
complaint.
In its lawsuit, PHII alleges, among other things, that the Hollywood
Defendants and GBCC have, in opening and operating the Hollywood Casino
concept, infringed on PHII's trademark, service mark and trade dress and have
engaged in unfair competition and deceptive trade practices. In their
counterclaims, the Hollywood
F-79
<PAGE>
HOLLYWOOD CASINO--AURORA, INC.
(wholly owned by Hollywood Casino Corporation)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Defendants and GBCC allege, among other things, that the PHII Defendants have,
through their planned use of their mark in connection with casino services,
infringed on certain of HCC's service marks and trade dress and have engaged
in unfair competition.
Given the uncertainties inherent in litigation, no assurance can be given
that the Hollywood Defendants will prevail in this litigation; however, the
Hollywood Defendants believe that PHII's claims are without merit and intend
to defend their position and pursue their counterclaims vigorously. The
accompanying financial statements do not include any adjustments that might
result from the outcome of the uncertainties described above.
Other Litigation--
HCA is a party in various legal proceedings with respect to the conduct of
casino operations. Although a possible range of loss can not be estimated, in
the opinion of management, based upon the advice of counsel, settlement or
resolution of the proceedings should not have a material adverse impact on the
financial position or results of operations of HCA.
F-80
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................ $ 12,475,000 $ 16,325,000
Short-term investments........................... 978,000 3,905,000
Accounts receivable, net of allowances of
$824,000 and $813,000, respectively............. 1,791,000 1,167,000
Inventories...................................... 617,000 779,000
Deferred income taxes............................ 1,402,000 1,451,000
Prepaid expenses and other current assets........ 973,000 770,000
------------ ------------
Total current assets........................... 18,236,000 24,397,000
------------ ------------
Property and Equipment:
Land and improvements............................ 4,645,000 4,645,000
Buildings........................................ 73,948,000 73,948,000
Barges........................................... 2,524,000 2,524,000
Operating equipment.............................. 41,279,000 39,169,000
Construction in progress......................... 3,596,000 2,612,000
------------ ------------
125,992,000 122,898,000
Less--accumulated depreciation and
amortization.................................. (40,759,000) (38,910,000)
------------ ------------
Net property and equipment....................... 85,233,000 83,988,000
------------ ------------
Other Assets:
Land rights...................................... 7,199,000 7,250,000
Other assets..................................... 4,886,000 4,826,000
------------ ------------
Total other assets............................. 12,085,000 12,076,000
------------ ------------
$115,554,000 $120,461,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
F-81
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt and capital
lease obligations............................... $ 1,310,000 $ 775,000
Accounts payable................................. 1,636,000 1,638,000
Accrued liabilities--
Salaries and wages............................. 1,886,000 1,685,000
Interest....................................... 476,000 476,000
Gaming and other taxes......................... 887,000 453,000
Insurance...................................... 1,889,000 1,975,000
Other.......................................... 2,035,000 1,866,000
Other current liabilities........................ 1,152,000 1,283,000
------------ ------------
Total current liabilities........................ 11,271,000 10,151,000
------------ ------------
Long-Term Debt..................................... 86,104,000 85,023,000
------------ ------------
Commitments and Contingencies
Shareholder's Equity:
Common stock, $.01 par value per share;
100,000 shares authorized;
1,000 shares issued and outstanding............. -- --
Additional paid-in capital....................... 26,637,000 34,637,000
Accumulated deficit.............................. (8,458,000) (9,350,000)
------------ ------------
Total shareholder's equity..................... 18,179,000 25,287,000
------------ ------------
$115,554,000 $120,461,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
F-82
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Casino.............................................. $24,536,000 $22,803,000
Rooms............................................... 2,394,000 2,007,000
Food and beverage................................... 3,636,000 3,548,000
Other............................................... 311,000 280,000
----------- -----------
30,877,000 28,638,000
Less--promotional allowances........................ (4,502,000) (3,566,000)
----------- -----------
Net revenues........................................ 26,375,000 25,072,000
----------- -----------
Expenses:
Casino.............................................. 17,984,000 16,411,000
Rooms............................................... 269,000 445,000
Food and beverage................................... 905,000 971,000
Other............................................... 273,000 324,000
General and administrative.......................... 1,479,000 1,557,000
Depreciation and amortization....................... 1,966,000 2,020,000
----------- -----------
Total expenses.................................... 22,876,000 21,728,000
----------- -----------
Income from operations................................ 3,499,000 3,344,000
----------- -----------
Non-operating income (expenses):
Interest income..................................... 135,000 122,000
Interest expense.................................... (2,740,000) (2,731,000)
Loss on disposal of assets.......................... (2,000) (3,000)
----------- -----------
Total non-operating expenses, net................. (2,607,000) (2,612,000)
----------- -----------
Income before income taxes............................ 892,000 732,000
Income tax provision.................................. -- --
----------- -----------
Net income............................................ $ 892,000 $ 732,000
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-83
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income..................................... $ 892,000 $ 732,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................ 1,966,000 2,020,000
Provision for doubtful accounts.............. 49,000 152,000
Loss on disposal of assets................... 2,000 3,000
Increase in accounts receivable.............. (673,000) (211,000)
Increase (decrease) in accounts payable and
accrued expenses............................ 716,000 (450,000)
Net change in other current assets and
liabilities................................. (172,000) (20,000)
Net change in other noncurrent assets and
liabilities................................. 2,000 4,000
----------- -----------
Net cash provided by operating activities.... 2,782,000 2,230,000
----------- -----------
INVESTING ACTIVITIES:
Purchases of property and equipment............ (3,145,000) (511,000)
Short-term investments......................... 2,927,000 --
Investment in unconsolidated affiliate......... (66,000) --
Proceeds from sale of assets................... 36,000 --
----------- -----------
Net cash used in investing activities.......... (248,000) (511,000)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt....... 1,876,000 --
Repayments of long-term debt................... (260,000) (154,000)
Dividends...................................... (8,000,000) --
----------- -----------
Net cash used in financing activities.......... (6,384,000) (154,000)
----------- -----------
Net (decrease) increase in cash and cash
equivalents..................................... (3,850,000) 1,565,000
Cash and cash equivalents at beginning of
period.......................................... 16,325,000 11,851,000
----------- -----------
Cash and cash equivalents at end of period....... $12,475,000 $13,416,000
=========== =========== ===
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-84
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Organization, Business and Basis of Presentation
HWCC--Tunica, Inc. ("HCT") is a Texas corporation and a wholly owned
subsidiary of Hollywood Casino Corporation ("HCC"), a Delaware corporation.
HCT was incorporated in December 1993 for the purpose of acquiring and
completing a gaming facility in northern Tunica County, Mississippi
approximately 30 miles south of Memphis, Tennessee. The facility (the "Tunica
Casino") was completed and commenced operations on August 8, 1994 under the
service mark Hollywood Casino(R). The Tunica Casino currently includes a
casino with 54,000 square feet of gaming space, 506 hotel rooms and suites, a
123-space recreational vehicle park and related amenities. HCT's gaming
license has been renewed by the Mississippi Gaming Commission through October
18, 1999.
The accompanying consolidated financial statements include the accounts of
HCT and its wholly owned subsidiary, HWCC-Golf Course Partners, Inc. ("Golf").
All significant intercompany balances have been eliminated in consolidation.
Golf, a Delaware corporation, was formed in 1996 to own an initial one-third
interest in Tunica Golf Course LLC, a limited liability company organized to
develop and operate a golf course to be used by patrons of the Tunica Casino
and other participating casino/hotel properties. The golf course opened for
business in November 1998. Golf's investment in Tunica Golf Course, LLC is
accounted for under the equity method of accounting and is included in other
noncurrent assets on the accompanying consolidated balance sheets at March 31,
1999 and December 31, 1998.
HCT estimates that a significant amount of the Tunica Casino's revenues are
derived from patrons living in the Memphis, Tennessee area, northern
Mississippi and Arkansas. The Tunica Casino faces intense competition from
other casinos operating in northern Tunica County and management believes that
this competition will continue in the future.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
HCT is self insured for a portion of its general liability, certain health
care and other liability exposures. Accrued insurance includes estimates of
such accrued liabilities based on an evaluation of the merits of individual
claims and historical claims experience; accordingly, HCT's ultimate liability
may differ from the amounts accrued.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of"
requires, among other things, that an entity review its long-lived assets and
certain related intangibles for impairment whenever changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. As
a result of its review, HCT does not believe that any such changes have
occurred.
In June 1998, the FASB issued a new statement, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS 133"), effective for fiscal years
beginning after June 15, 1999. SFAS 133 requires, among other things, that
derivatives be recorded on the balance sheet at fair value. Changes in the
fair value of derivatives may, depending on circumstances, be recognized in
earnings or deferred as a component of
F-85
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
shareholders' equity until a hedged transaction occurs. HCT does not believe
the adoption of SFAS 133 will have a significant impact on its financial
position or results of operations.
The consolidated financial statements as of March 31, 1999 and for the three
month periods ended March 31, 1999 and 1998 have been prepared by HCT without
audit. In the opinion of management, these consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the consolidated financial position of HCT as of
March 31, 1999 and the results of its operations and cash flows for the three
month periods ended March 31, 1999 and 1998.
(2) Long-Term Debt and Pledge of Assets
Substantially all of HCT's assets are pledged in connection with its long-
term indebtedness. Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
Promissory notes to HCC due November 1,
2003(a)........................................ $84,045,000 $84,045,000
Equipment loans(b).............................. 2,959,000 1,291,000
Bank credit facility(c)......................... 410,000 462,000
----------- -----------
Total indebtedness.......................... 87,414,000 85,798,000
Less--current maturities...................... (1,310,000) (775,000)
----------- -----------
Total long-term debt........................ $86,104,000 $85,023,000
=========== ===========
</TABLE>
- --------
(a) During October 1995, HCC loaned $54,045,000 to HCT to repay its
outstanding mortgage indebtedness, together with the associated call
premium and certain accrued interest thereon, and loaned an additional
$30,000,000 to HCT to finance construction of a 352-room hotel tower and
related amenities and to fund development and construction of a themed
gaming area. Such intercompany loans were made with a portion of the note
proceeds from HCC's issue of $210,000,000 of 12 3/4% Senior Secured Notes
(the "Senior Secured Notes") due November 1, 2003, discounted to yield 13
3/4% per annum. Interest on the loans from HCC accrues at the rate of 12
3/4% per annum and is payable semiannually on April 15 and October 15 of
each year. The Senior Secured Notes are unconditionally guaranteed on a
senior secured basis by HCT and by certain future subsidiaries of HCC. The
Senior Secured Notes and related guarantees are secured by, among other
things, (i) substantially all of the assets of HCT and other future
guarantors, (ii) a limited lien on substantially all of the assets of
another gaming facility operated by a wholly owned subsidiary of HCC,
(iii) a pledge of the capital stock of HCT and certain other subsidiaries
of HCC and (iv) the collateral assignment of any future management
contracts entered into by HCC. The limitation on the lien described in
(ii) above is currently $31,507,000 subject to semiannual reductions of
$2,500,000.
The indenture to the Senior Secured Notes contains various provisions
limiting the ability of HCC, HCT and certain defined subsidiaries to, among
other things, pay dividends or make other restricted payments; incur
additional indebtedness or issue preferred stock; create liens; create
dividend or other payment restrictions affecting certain defined
subsidiaries; enter into mergers or consolidations or make sales of all or
substantially all assets of HCC, HCT or any future guarantor; and enter
into transactions with certain affiliates.
F-86
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
(b) The equipment loans are payable monthly including interest at effective
rates ranging from 7.8% to 12.9% per annum and mature at various dates
between 1999 and 2002.
(c) HCT had a bank credit facility in the amount of $1,300,000 available to
borrow against until September 30, 1998. HCT borrowed $541,000 under the
credit facility during 1998 at the rate of 8.875% per annum. Borrowings
under the credit facility are to be repaid in monthly installments over a
period of 36 months and are collateralized by equipment purchased with the
loan proceeds. The credit facility was not renewed by HCT.
Scheduled payments of long-term debt as of March 31, 1999 are set forth
below:
<TABLE>
<S> <C>
1999 (nine months)............................................. $ 958,000
2000........................................................... 1,343,000
2001........................................................... 915,000
2002........................................................... 153,000
2003........................................................... 84,045,000
-----------
Total........................................................ $87,414,000
===========
</TABLE>
Interest paid, net of amounts capitalized, amounted to $2,740,000 and
$2,731,000, respectively, during the three month periods ended March 31, 1999
and 1998.
(3) Capital Leases
HCT leased certain gaming and other equipment under capital lease agreements
which provided for interest at rates ranging up to 13 1/4% per annum and which
expired during 1997. Assets under capital leases with an original cost of
$4,814,000 are included in operating equipment in the accompanying
consolidated balance sheets at both March 31, 1999 and at December 31, 1998
and are fully amortized. Amortization expense for the three month period ended
March 31, 1998 was $87,000. No future payment obligations exist with respect
to such capital leases.
(4) Income Taxes
HCT's provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
Provision for deferred federal income taxes............ $ 429,000 $ 264,000
Valuation allowance.................................... (429,000) (264,000)
--------- ---------
$ -- $ --
========= =========
</TABLE>
State income taxes have not been provided for since a credit for state
gaming taxes based on gross revenues is allowed to offset income taxes
incurred. The credit is the lesser of total gaming taxes paid or the state
income tax, with no credit carryforward permitted.
HCT is included in HCC's consolidated federal income tax return. HCT's
provision for federal income taxes is based on the amount of tax which would
be provided if a separate federal income tax return were filed. HCT paid no
federal or state taxes during either of the three month periods ended March
31, 1999 or 1998.
F-87
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Deferred taxes are computed based on the expected future tax effects of
differences between the financial statement and tax bases of assets and
liabilities, using enacted tax rates. Deferred income taxes result primarily
from the use of the allowance method rather than the direct write-off method
for doubtful accounts, the use of accelerated methods of depreciation for
federal income tax purposes and differences in the timing of deductions taken
between tax and financial reporting purposes for the amortization of
preopening costs and other accruals.
At March 31, 1999, HCT had net operating loss carryforwards ("NOL's")
totaling approximately $15,000,000, which do not begin to expire until the
year 2010. Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", requires that the tax benefit of such NOL's, together with
the tax benefit of deferred tax assets resulting from temporary differences,
be recorded as an asset and, to the extent that management can not assess that
the utilization of all or a portion of such deferred tax assets is more likely
than not, a valuation allowance should be recorded. Based on the taxable
income currently being earned by HCT and the expectation of future taxable
income, management believes that it is more likely than not that a portion of
the NOL's and deferred tax assets will be utilized. Accordingly, a valuation
allowance has been established which has resulted in the recording of a net
deferred tax asset of $1,992,000 at both March 31, 1999 and December 31, 1998.
The components of HCT's net deferred tax asset are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............... $ 5,104,000 $ 5,221,000
Alternative minimum tax credit carryforward.... 688,000 800,000
Allowance for doubtful accounts................ 280,000 277,000
Other liabilities and accruals................. 1,188,000 1,286,000
----------- -----------
Total deferred tax assets.................... 7,260,000 7,584,000
Deferred tax liabilities:
Depreciation and amortization.................. (3,197,000) (3,092,000)
----------- -----------
Net deferred tax asset........................... 4,063,000 4,492,000
Valuation allowance.............................. (2,071,000) (2,500,000)
----------- -----------
$ 1,992,000 $ 1,992,000
=========== ===========
Receivables from HCC in connection with HCT's federal income taxes are
included in the accompanying consolidated financial statements as follows:
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
Deferred income taxes............................ $1,402,000 $1,451,000
Other noncurrent assets.......................... 590,000 541,000
</TABLE>
The Internal Revenue Service is currently examining the consolidated Federal
income tax returns of HCC for the years 1993 through 1996. Management believes
that the results of such examination will not have a material adverse effect
on the financial position or results of operations of HCT.
F-88
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
(5) Transactions with Related Parties
Pursuant to a consulting agreement expiring December 31, 2003 with Pratt
Casino Corporation, an affiliated company, HCT incurs a monthly consulting fee
of $100,000. Such fees amounted to $300,000 during each of the three month
periods ended March 31, 1999 and 1998.
HCT and Advanced Casino Systems Corporation ("ACSC"), an affiliated company,
entered into a Computer Services Agreement dated as of January 1, 1994 and
renewed through December 31, 1999. The agreement provides, among other things,
that ACSC will sell HCT computer hardware and information systems equipment
and will license or sublicense to HCT computer software necessary to operate
HCT's casino, hotel and related facilities and business operations. HCT pays
ACSC for such equipment and licenses such software at amounts and on terms and
conditions that ACSC provides to unrelated third parties. HCT also pays ACSC a
fixed license fee of $33,600 per month and reimburses ACSC for its direct
costs and expenses incurred under the agreement. ACSC also performs and bills
HCT for certain administrative and marketing services. Total charges incurred
by HCT amounted to $198,000 and $146,000, respectively, for the three month
periods ended March 31, 1999 and 1998. At March 31, 1999 and December 31,
1998, HCT had payables of $94,000 and $44,000, respectively, included in
accounts payable with respect to such charges.
HCT is charged for certain legal, accounting, and other expenses incurred by
HCC and its subsidiaries that relate to HCT's business. HCT also bills HCC and
its subsidiaries for services provided to those companies. For the three month
periods ended March 31, 1999 and 1998 net charges incurred by HCT amounted to
$45,000 and $38,000, respectively. The accompanying consolidated balance
sheets at March 31, 1999 and December 31, 1998 include net receivables from
affiliates of $130,000 and $97,000, respectively, for such charges.
(6) Commitments and Contingencies
Ground Lease--
HCT entered into a ground lease covering 70 acres of land on which the
Tunica Casino was constructed. The ground lease is for an initial term of five
years from the opening date of the facility and, at HCT's option, may be
renewed for nine additional five-year periods. Obligations under the ground
lease during the initial term include both minimum monthly fixed payments and
percentage rent, which in the aggregate will be the greater of 4% of Gross
Revenues, as defined, or $1,100,000 per year. HCT is responsible for all
operating and other expenses of the property in accordance with the lease
terms. During the three month periods ended March 31, 1999 and 1998, HCT
expensed $995,000 and $940,000, respectively, in connection with the ground
lease.
Planet Hollywood Litigation--
Planet Hollywood International, Inc., a Delaware corporation, and Planet
Hollywood (Region IV), Inc., a Minnesota corporation (collectively, "PHII"),
filed a complaint in the United States District Court for the Northern
District of Illinois, Eastern Division on July 29, 1996 against HCC, the
wholly owned subsidiary of HCC which owns and operates a casino in Aurora,
Illinois and a member of the Pratt Family (collectively, the "Original
Hollywood Defendants"). The Original Hollywood Defendants filed with the Court
on September 18, 1996 an answer to PHII's lawsuit, along with numerous
counterclaims against PHII, Robert Earl and Keith Barish (collectively, the
"PHII Defendants"). PHII filed with the Court on January 21, 1997, an
amendment to their complaint which, among other things, added HCT (together
with the Original Hollywood Defendants, the "Hollywood Defendants") and Greate
Bay Casino Corporation ("GBCC"), an affiliated company, as defendants. The
Original Hollywood Defendants filed with the Court on February 4, 1997, and
GBCC and HCT filed with the Court on February 20, 1997, answers and
counterclaims to such amended complaint.
F-89
<PAGE>
HWCC--TUNICA, INC. AND SUBSIDIARY
(wholly owned by Hollywood Casino Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
(Unaudited)
In its lawsuit, PHII alleges, among other things, that the Hollywood
Defendants and GBCC have, in opening and operating the Hollywood Casino
concept, infringed on PHII's trademark, service mark and trade dress and have
engaged in unfair competition and deceptive trade practices. In their
counterclaims, the Hollywood Defendants and GBCC allege, among other things,
that the PHII Defendants have, through their planned use of their mark in
connection with casino services, infringed on certain of HCC's service marks
and trade dress and have engaged in unfair competition.
Given the uncertainties inherent in litigation, no assurance can be given
that the Hollywood Defendants will prevail in this litigation; however, the
Hollywood Defendants believe that PHII's claims are without merit and intend
to defend their position and pursue their counterclaims vigorously. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of the uncertainties described above.
Other--
HCT is a party in various legal proceedings with respect to the conduct of
casino and hotel operations. Although a possible range of loss can not be
estimated, in the opinion of management, based upon the advice of counsel,
settlement or resolution of the proceedings should not have a material adverse
impact on the consolidated financial position or results of operations of HCT.
F-90
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must
not rely on any unauthorized information. This prospectus does not constitute
an offer to sell or buy any securities in any jurisdiction where it is unlaw-
ful. The information in this prospectus is current as of , 1999.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 12
Use of Proceeds.......................................................... 23
Capitalization........................................................... 24
Selected Consolidated Financial Information.............................. 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 34
Business................................................................. 49
Management............................................................... 66
Security Ownership of Certain Beneficial Owners and Management........... 73
Certain Relationships and Related Transactions........................... 74
Description of the Exchange Offer........................................ 76
Description of the Registered Notes...................................... 83
United States Federal Income Tax Considerations.......................... 126
Plan of Distribution..................................................... 129
Legal Matters............................................................ 130
Experts.................................................................. 130
Changes in Accountants................................................... 130
Where You Can Find More Information...................................... 130
Index to Financial Statements............................................ F-1
</TABLE>
Until , 1999, all dealers effecting transactions in the registered
notes, whether or not participating in this distributing may be required to
deliver a prospectus. This is in addition to the obligation of dealers to de-
liver a prospectus when acting as underwriters and with respect to their un-
sold allotments or subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[HOLLYWOOD LOGO APPEARS HERE]
Offer to Exchange all Outstanding
Original 11 1/4% Senior Secured Notes due 2007
for
Registered 11 1/4% Senior Secured Notes due 2007
and
Original Floating Rate Senior Secured Notes due 2006
for
Registered Floating Rate Senior Secured Notes due 2006
---------------
PROSPECTUS
---------------
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers.
Hollywood Casino Corporation
Hollywood Casino Corporation (the "Company") is incorporated under the laws
of the State of Delaware. Section 145 of the General Corporation Law of the
State of Delaware (the "DGCL"), provides that a Delaware corporation may
indemnify any persons who were, are or are threatened to be made, parties to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of such corporation), by reason of the fact that such person is
or was an officer, director, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal.
A Delaware corporation may indemnify officers and directors in an action by
or in the right of a corporation under the same conditions, provided that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer,
director, employee or agent is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses which such officer or director has actually and
reasonably incurred.
The Company's Amended and Restated Certificate of Incorporation (the
"Restated Certificate") and Bylaws provide for the indemnification of
directors, officers, employees and agents of the Company to the fullest extent
permitted by the DGCL, as it currently exists or may hereafter be amended. In
addition, the Restated Certificate provides that to the fullest extent
permitted by the DGCL, as it currently exists or may hereafter be amended, no
director of the Company will be liable to the Company or its stockholders for
monetary damages arising from a breach of fiduciary duty owed to the Company.
The above discussion of the Restated Certificate and Bylaws of the Company
and of Section 145 of the DGCL is not intended to be exhaustive and is
qualified in its entirety by the Restated Certificate and Bylaws of the
Company and the DGCL.
HWCC-Tunica, Inc.
The Articles of Incorporation and the Bylaws of HWCC-Tunica, Inc., a Texas
corporation ("Tunica"), provide for indemnification of directors and officers
to the fullest extent permitted by the Texas Business Corporation Act
("TBCA"). Pursuant to Article 2.02-1 of the TBCA, Tunica has the power to
indemnify its present and former directors and officers who are or were a
party, or are threatened to be made a party, to any proceeding, by reason of
their serving in such positions against expenses actually incurred in respect
of any proceeding in which the director or officer was not found liable for
willful intentional misconduct in the performance of his duty to Tunica. Such
power to indemnify only exists if the person conducted himself in good faith,
reasonably believed in the case of conduct in his official capacity as an
officer or director was in Tunica's best interests and in all other cases,
that his conduct was at least not opposed to Tunica's best interests and in
the case of any criminal proceedings, had no reasonable cause to believe that
his conduct was unlawful.
Indemnification is not available if any such person has been adjudged to
have been liable to Tunica or such person was found liable on the basis that
personal benefit was improperly received by him, whether or not the personal
benefit resulted from an action taken in the person's official capacity,
unless and only to the extent the
II-1
<PAGE>
court in which such action was brought determines that, despite the
adjudication of liability, but in view of all the circumstances, the person is
reasonable and fairly entitled to indemnification for such expenses as the
court shall deem proper.
Tunica has the power to purchase and maintain insurance for such persons.
The TBCA also expressly provides that the power to indemnify authorized
thereby is not exclusive of any rights granted under any bylaw, agreement,
vote of shareholders or disinterested directors or otherwise.
The above discussion of the Articles of Incorporation and Bylaws of Tunica
and of Article 2.02-1 of the TBCA is not intended to be exhaustive and is
qualified in its entirety by the Articles of Incorporation and Bylaws of
Tunica and the TBCA.
HWCC-Shreveport, Inc.
The Articles of Incorporation and the Bylaws of HWCC-Shreveport, Inc., a
Louisiana corporation ("Shreveport"), provide for the indemnification of
directors and officers to the fullest extent permitted by the Louisiana
Business Corporation Law ("LBCL"). Pursuant to Section 12:83 of the LBCL,
Shreveport has the power to indemnify its present and former directors and
officers who were or are a party, or are threatened to be made a party, to any
proceeding, by reason of their serving in such positions, against expenses
actually and reasonably believed to be in, or not opposed to, the best
interests of Shreveport.
Indemnification is not available if any such person has been adjudged to
have been liable to Shreveport, unless and only to the extent the court in
which such action was brought determines that, despite the adjudication of
liability, but in view of all the circumstances, the person is reasonably and
fairly entitled to indemnification for such expenses as the court shall deem
proper. Shreveport has the power to purchase and maintain insurance for such
persons. The LBCL also expressly provides that the power to indemnify
authorized thereby is not exclusive of any rights granted under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise.
The above discussion of the Articles of Incorporation and Bylaws of
Shreveport and of Section 12:83 of the LBCL is not intended to be exhaustive
and is qualified in its entirety by the Articles of Incorporation and Bylaws
of Shreveport and the LBCL.
II-2
<PAGE>
ITEM 21. Exhibits and Financial Statement Schedules.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
3.1 --Certificate of Incorporation of Hollywood Casino Corporation, as
amended.(1)
3.2 --Amended Bylaws of Hollywood Casino Corporation.(1)
3.3 --Articles of Incorporation of HWCC-Tunica, Inc. (7)
3.4 --Bylaws of HWCC-Tunica, Inc. (7)
3.5 --Articles of Incorporation of HWCC-Shreveport, Inc.+
3.6 --Bylaws of HWCC-Shreveport, Inc.+
4.1 --Indenture among Hollywood Casino Corporation as Issuer, and
HWCC-Shreveport, Inc., HWCC-Tunica, Inc. as Guarantors, and State
Street Bank and Trust Company, as Trustee, dated as of May 19,
1999.+
4.2 --Security Agreement made by Hollywood Casino Corporation, as
Debtor, to State Street Bank and Trust Company, as Trustee and
Secured Party, dated as of May 19, 1999.+
4.3 --Stock Pledge Agreement made by Hollywood Casino Corporation, as
Pledgor, in favor of State Street Bank and Trust Company, as
Trustee and Secured Party, dated as of May 19, 1999.+
4.4 --Trademark Security Agreement made by Hollywood Casino
Corporation, as Grantor, to State Street Bank and Trust Company,
as Trustee and Secured Party, dated as of May 19, 1999.+
4.5 --Escrow and Control Agreement by and among Hollywood Casino
Corporation, State Street Bank and Trust Company, as Trustee and
Escrow Agent, dated as of May 19, 1999.+
4.6 --Control Agreement dated as of May 19, 1999 by and among
Hollywood Casino Corporation and State Street Bank and Trust
Company, as Trustee.+
4.7 --Security Agreement made by HWCC-Tunica, Inc., as Debtor, to
State Street Bank and Trust Company, as Trustee and Secured
Party, dated as of May 19, 1999.+
4.8 --First Leasehold Deed of Trust, Security Agreement, Assignment of
Leases and Rents, Fixture Filing, and Financing Statement made by
HWCC-Tunica, Inc. in favor of Phillip A. Poitevin, as Trustee for
the benefit of State Street Bank and Trust Company, as Indenture
Trustee, dated as of May 19, 1999.+
4.9 --First Preferred Ship Mortgage made and given by HWCC-Tunica,
Inc., as Mortgagor, in favor of State Street Bank and Trust
Company, as Trustee and Mortgagee (relating to Vessel No.
534006), dated as of May 19, 1999.+
4.10 --Amended and Restated Promissory Note in the aggregate principal
amount of $87,045,000 issued by HWCC-Tunica, Inc. to Hollywood
Casino Corporation.+
4.11 --Intercompany Security Agreement made by HWCC-Tunica, Inc., as
Debtor, to Hollywood Casino Corporation, as Secured Party, and
collaterally assigned to State Street Bank and Trust Company, as
Trustee, dated as of May 19, 1999.+
4.12 --Second Leasehold Deed of Trust, Security Agreement, Fixture
Filing, and Financing Statement from HWCC-Tunica, Inc., as
Grantor, in favor of Jim B. Tobhill, Trustee, for the benefit of
Hollywood Casino Corporation, dated as of May 19, 1999.+
4.13 --Collateral Assignment of Second Leasehold Deed of Trust,
Security Agreement, Assignment of Leases and Rents, Fixture
Filing and Financing Statement made by Hollywood Casino
Corporation, as Mortgagee and Assignor, in favor of State Street
Bank and Trust Company, as Trustee and Assignee, dated as of May
19, 1999.+
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
4.14 --Second Preferred Ship Mortgage made by HWCC-Tunica., as
Mortgagor, in favor of Hollywood Casino Corporation, as Mortgagee
(relating to Vessel No. 534006), dated as of May 19, 1999.+
4.15 --Assignment of Second Preferred Fleet Mortgage by Hollywood
Casino Corporation, as Mortgagee and Assignor (relating to Vessel
No. 534006) in favor of State Street Bank and Trust Company, as
Trustee and Assignee, dated as of May 19, 1999.+
4.16 --Promissory Note in the aggregate principal amount of $108
million issued by Hollywood Casino-Aurora, Inc. to Hollywood
Casino Corporation, endorsed by Hollywood Casino Corporation,
dated May 19, 1999.+
4.17 --Intercompany Security Agreement dated as of May 19, 1999 made by
Hollywood Casino-Aurora, Inc., as Debtor, to Hollywood Casino
Corporation, as Secured Party, and collaterally assigned to State
Street Bank and Trust Company, as Trustee.+
4.18 --Mortgage, Leasehold Mortgage, Security Agreement, Assignment of
Leases and Rents, Fixture Filing, and Financing Statement made by
Hollywood Casino-Aurora, Inc., as Mortgagee, for the benefit of
Hollywood Casino Corporation, as Mortgagee, dated as of May 19,
1999.+
4.19 --Collateral Assignment of Mortgage, Leasehold Mortgage, Security
Agreement, Assignment of Leases and Rents, Fixture Filing and
Financing Statement made by Hollywood Casino Corporation, as
Mortgagee and Assignor, in favor of State Street Bank and Trust
Company, as Trustee and Assignee, dated as of May 19, 1999.+
4.20 --First Preferred Fleet Mortgage made and given by Hollywood
Casino-Aurora, Inc., as Mortgagor, in favor of Hollywood Casino
Corporation, as Mortgagee (relating to Vessel Nos. 993836, 993837
and 1029229), dated as of May 19, 1999.+
4.21 --Assignment of First Preferred Fleet Mortgage by Hollywood Casino
Corporation, as Mortgagee and Assignor (relating to Vessel Nos.
993836, 993837 and 1029229) in favor of State Street Bank and
Trust Company, as Trustee and Assignee, dated as of May 19,
1999.+
4.22 --Security Agreement made HWCC-Shreveport, Inc., as Debtor, to
State Street Bank and Trust Company, as Trustee and Secured
Party, dated as of May 19, 1999.+
4.23 --A/B Exchange Registration Rights Agreement, dated as of May 19,
1999, by and among Hollywood Casino Corporation, the Guarantors
named therein and the Initial Purchases.+
5.1 --Opinion of Weil, Gotshal & Manges LLP.*
9.1 --Voting Trust Agreement dated as of December 29, 1998 by and
among Jill Pratt LaFerney, formerly Jill A. Pratt, and John R.
Pratt and Jack E. Pratt, Sr. (8)
9.2 --Voting Trust Agreement dated as of December 29, 1998 by and
among Shawn Denise Bradshaw and Michael Shannon Pratt and William
D. Pratt, Sr. (8)
9.3 --Voting Trust Agreement dated as of December 29, 1998 by and
among Carolyn S. Hickey, Diana Pratt-Wyatt, formerly Diana L.
Heisler, and Sharon A. Naftel, formerly Sharon R. Nash, and
Edward T. Pratt III. (8)
10.1 --Sixth Amendment to Employment Agreement dated January 1, 1998,
between Hollywood Casino Corporation and Jack E. Pratt. (2)
10.2 --Sixth Amendment to Employment Agreement dated January 1, 1998,
between Hollywood Casino Corporation and Edward T. Pratt, Jr. (2)
10.3 --Sixth Amendment to Employment Agreement dated January 1, 1998,
between Hollywood Casino Corporation and William D. Pratt. (2)
10.4 --Employment Agreement dated May 1, 1996, between Hollywood Casino
Corporation and Edward T. Pratt III. (9)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.5 --Agreement dated as of September 2, 1998 by and among Greate Bay
Holdings Corp., GB Holdings, Inc., and GB Property Funding Corp.,
on the one hand, and Greate Bay Casino Corporation, PHC
Acquisition Corp., Lieber Check Cashing, LLC, Jack E. Pratt,
William D. Pratt, Edward T. Pratt, Jr. and HCC, on the other.
(11)
10.6 --Development Agreement dated as of June 4, 1991, between the City
of Aurora, Illinois and Hollywood Casino-Aurora, Inc. (3)
10.7 --Management Services Agreement dated as of June 21, 1991, between
Hollywood Casino-Aurora, Inc. and Greate Bay Casino Corporation
(the "Management Services Agreement"). (3)
10.8 --First Amendment to the Management Services Agreement dated as of
May 14, 1992. (3)
10.9 --Tax Sharing Agreement dated May 13, 1992, by and among Hollywood
Casino Corporation, Hollywood Casino-Aurora, Inc. and Pratt Hotel
Corporation ("PHC," now known as
GBCC). (3)
10.10 --Parking lease Agreement dated June 4, 1991, between the City of
Aurora, Illinois and Hollywood Casino-Aurora, Inc. (3)
10.11 --Purchase and Sale Agreement dated June 4, 1991, between the City
of Aurora, Illinois and Hollywood Casino-Aurora, Inc. (3)
10.12 --Technical Services Agreement dated February 21, 1992, between
Hollywood Casino-Aurora, Inc. and Pratt Hotel Corporation (the
"Technical Services Agreement"). (3)
10.13 --First Amendment to the Technical Services Agreement dated May
14, 1992. (3)
10.14 --Rights Agreement, dated as of May 7, 1993 between Hollywood
Casino Corporation and Continental Stock Transfer & Trust
Company, as Rights Agent. (6)
10.15 --Hollywood Casino Corporation Stock Option Plan. (1)
10.16 --Agreement of Limited Partnership of Pratt Management, L.P. (6)
10.17 --Ground Lease dated as of October 11, 1993 between R.M.
Leatherman and Hugh M. Mageveney, III, as Landlord, and SRCT, as
Tenant. (7)
10.18 --Letter Agreement dated as of October 11, 1993 between R.M.
Leatherman and Hugh M. Mageveney, III, as Landlord, and SRCT, as
Tenant (relating to Ground Lease). (7)
10.19 --Blanket Conveyance, Bill of Sale and Assignment and Assumption
Agreement dated as of May 31, 1994 between SRCT and STP. (7)
10.20 --Assignment of Lease and Assumption Agreement dated as of May 31,
1994 between SRCT and STP (relating to Ground Lease). (7)
10.21 --Consulting Agreement dated as of January 1, 1994 between Pratt
Casino Corporation, as the Consultant, and HCT. (7)
10.22 --Computer Services Agreement dated as of January 1, 1994 between
STP and Advanced Casino Systems Corporation. (7)
10.23 --North Island Center Expansion and Redevelopment Agreement dated
June 12, 1995 between HCA, the Aurora Metropolitan Exposition,
Auditorium and Office Building Authority and the City of Aurora.
(1)
10.24 --Hollywood Casino Corporation 1996 Long-Term Incentive Plan, as
amended. (9)
10.25 --Hollywood Casino Corporation 1996 Non-Employee Director Stock
Plan. (9)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.26 --General Partnership Interest Purchase Agreement dated as of
April 1, 1997 by and between HWCC-Aurora Management, Inc. and PPI
Corporation. (9)
10.2 --Amended and Restated Joint Venture Agreement by and among
Shreveport Paddlewheels, L.L.C., Sodak Louisiana, L.L.C. and
HWCC-Louisiana, Inc. dated July 31, 1998. (11)
10.2 --September 1998 Amendment to the July Amended and Restated Joint
Venture Agreement. (11)
10.29 --Employment Agreement dated as of May 11, 1998 by and between
Hollywood Casino Corporation and Paul C. Yates. (8)
10.30 --Amended and Restated Services Agreement dated as of October 1,
1998 by and between Hollywood Casino Corporation and Pratt
Management, L.P. (8)
10.31 --Management and Administrative Services Agreement dated as of
October 1, 1998 by and between Hollywood Casino Corporation and
Greate Bay Casino Corporation. (8)
10.32 --Membership Interest Purchase Agreement dated as of March 31,
1999 by and among HWCC- Louisiana, Inc., Sodak Gaming, Inc. and
Sodak Louisiana, L.L.C. (8)
10.34 --Voting Agreement dated as of April 28, 1999 by and among Greate
Bay Casino Corporation, Pratt Casino Corporation, PRT Funding
Corp., New Jersey Management, Inc., Hollywood Casino Corporation
and the Consenting Holders party thereto.(12)
21.1 --Subsidiaries of Hollywood Casino Corporation.+
23.1 --Consent of Deloitte & Touche LLP.+
23.2 --Consent of Arthur Andersen LLP.+
23.3 --Consent of Weil, Gotshal & Manges LLP (to be included in Exhibit
5.1)
25.1 --Statement of Eligibility and Qualification of State Street Bank
and Trust Company, as trustee under the Indenture listed as
Exhibit 4.1 hereto on Form T-1. (+)
99.1 --Petition filed on October 8, 1998 in the District Court of
Dallas County, Texas by Hollywood Casino Corporation and Greate
Bay Casino Corporation ("Plaintiffs") against Arthur Andersen
L.L.P., Richard L. Robbins, Michael E. Gamache, Daniel J. Meehan,
and Brent A. Railsback ("Defendants") (5)
99.2 --Form of Letter of Transmittal.+
99.3 --Form of Notice of Guaranteed Delivery.+
</TABLE>
- --------
+ Field herewith.
* To be filed.
(1) Incorporated by reference from the exhibit shown in parenthesis to Form
S-1 Registration Statement (Registration 33-58732) for Hollywood Casino
Corporation as filed with the SEC on May 27, 1993.
(2) Incorporated by reference from the exhibit shown in parenthesis filed in
Hollywood Casino Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.
(3) Incorporated by reference from the exhibit shown in parenthesis to that
Registration Statement on Form 10 filed with the SEC on May 28, 1992 by
PRT Corporation (now know as Hollywood Casino Corporation).
(4) Incorporated by reference from the exhibit shown in parenthesis to that
Registration Statement on Form 10, as amended, filed with the SEC on
August 13, 1992 by Hollywood Casino Corporation.
(5) Incorporated by reference from the exhibit shown in parenthesis to the
Form 8-K for Hollywood Casino Corporation as filed with the SEC on
October 22, 1998.
(6) Incorporated by reference from the exhibit shown in parenthesis to Form
S-1 Registration Statement (Registration No. 33-77502) for Hollywood
Casino Corporation as filed with the SEC on April 8, 1994.
II-6
<PAGE>
(7) Incorporated by reference from the exhibits filed in parenthesis to Form
S-1 Registration Statement (Registration No. 33-82182) for HWCC-Tunica,
Inc. as filed with the SEC on September 29, 1994.
(8) Incorporated by reference from the exhibits filed in Hollywood Casino
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.
(9) Incorporated by reference from the exhibits filed in Hollywood Casino
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
(10) Incorporated by reference from the exhibits filed in Hollywood Casino
Corporation's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 as filed with the SEC on August 13, 1997.
(11) Incorporated by reference to the exhibits filed in Hollywood Casino
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 as filed with the SEC on November 13, 1998.
(12) Incorporated by reference to the exhibits filed in Hollywood Casino
Corporation's Quarterly Report on Form 10-Q for the quarter ended March
31, 1999 as filed with the SEC on May 12, 1999.
(b) Financial Statement Schedules:
All schedules have been omitted since the required information is either
not present or not in amounts sufficient to require submission of the
schedule, or because the information required is included in the
consolidated financial statements or notes thereof.
ITEM 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of
this form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration
statement when it became effective.
(3) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Co-Registrants' annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(4) 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 provisions described under
Item 20 above, or otherwise, the Co-Registrants have been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Co-Registrants of expense incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suite or proceeding) is asserted against the registrant by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-
Registrant certifies that it has reasonable grounds to believe that it meets
all requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, Sate of Texas, on July 16 , 1999.
HOLLYWOOD CASINO CORPORATION
/s/ PAUL C. YATES
By: _________________________________
POWER OF ATTORNEY
Know all those by these presents, that each person whose signature appears
below constitutes and appoints each of Edward T. Pratt III and Paul C. Yates,
or any of them, each acting alone, his true and lawful attorney-in-fact and
agent, with full Power of Substitution and Resubstitution, for such person and
in his name, place and stead, in any and all capacities, in connection with
the Registration Statement on Form S-4 of Hollywood Casino Corporation under
the Securities Act of 1933, including, the generality of the foregoing, to
sign the Registration Statement in the name and on behalf of Hollywood Casino
Corporation, or on behalf of the undersigned as a director or officer of
Hollywood Casino Corporation, and any and all amendments or supplements to the
Registration Statement, including any and all stickers and post-effective
amendments to the Registration Statement, and to sign any and all additional
Registration Statements relating to the same offering of Securities as the
Registration Statement that are filed pursuant to Rule 462 under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission and any applicable securities exchange or securities self-
regulatory body, granting unto said attorneys-in-fact and agents, each acting
alone, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ JACK E. PRATT Chief Executive Officer July 16, 1999
______________________________________ and Director
Jack E. Pratt
/s/ EDWARD T. PRATT, JR. Vice President, Treasurer July 16, 1999
______________________________________ and Director
Edward T. Pratt, Jr.
/s/ WILLIAM D. PRATT Executive Vice President, July 16, 1999
______________________________________ Secretary, General
William D. Pratt Counsel and Director
/s/ EDWARD T. PRATT III President, Chief Operating July 16, 1999
______________________________________ Officer and Director
Edward T. Pratt III
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ PAUL C. YATES Executive Vice President July 16, 1999
______________________________________ and Chief Financial
Paul C. Yates Officer
/s/ CHARLES F. LAFRANO III Vice President--Finance July 16, 1999
______________________________________ and Principal Accounting
Charles F. LaFrano III Officer
/s/ JAMES A. COLQUITT Director July 16, 1999
______________________________________
James A. Colquitt
/s/ THEODORE H. STRAUSS Director July 16, 1999
______________________________________
Theodore H. Strauss
/s/ OLIVER B. REVELL III Director July 16, 1999
______________________________________
Oliver B. Revell III
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-
Registrant certifies that it has reasonable grounds to believe that it meets
all requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on July 16, 1999.
HWCC-TUNICA, INC.
/s/ PAUL C. YATES
By: _________________________________
POWER OF ATTORNEY
Know all those by these presents, that each person whose signature appears
below constitutes and appoints each of Edward T. Pratt III and Paul C. Yates,
or any of them, each acting alone, his true and lawful attorney-in-fact and
agent, with full Power of Substitution and Resubstitution, for such person and
in his name, place and stead, in any and all capacities, in connection with
the Registration Statement on Form S-4 of HWCC-Tunica, Inc. under the
Securities Act of 1933, including, the generality of the foregoing, to sign
the Registration Statement in the name and on behalf of HWCC-Tunica, Inc., or
on behalf of the undersigned as a director or officer of HWCC-Tunica, Inc.,
and any and all amendments or supplements to the Registration Statement,
including any and all stickers and post-effective amendments to the
Registration Statement, and to sign any and all additional Registration
Statements relating to the same offering of Securities as the Registration
Statement that are filed pursuant to Rule 462 under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and any
applicable securities exchange or securities self-regulatory body, granting
unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or their substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ JACK E. PRATT Chief Executive Officer July 16, 1999
______________________________________ and Director
Jack E. Pratt
/s/ EDWARD T. PRATT, JR. Director July 16, 1999
______________________________________
Edward T. Pratt, Jr.
/s/ WILLIAM D. PRATT Executive Vice President, July 16, 1999
______________________________________ Secretary, General
William D. Pratt Counsel and Director
/s/ EDWARD T. PRATT III President and Director July 16, 1999
______________________________________
Edward T. Pratt III
/s/ JOHN R. OSBORNE Vice President of July 16, 1999
______________________________________ Operations
John R. Osborne
/s/ PAUL C. YATES Executive Vice President July 16, 1999
______________________________________ and Chief Financial
Paul C. Yates Officer
/s/ CHARLES F. LAFRANO III Vice President, Assistant July 16, 1999
______________________________________ Secretary and Principal
Charles F. LaFrano III Accounting Officer
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-
Registrant certifies that it has reasonable grounds to believe that it meets
all requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on July 16, 1999.
HWCC-SHREVEPORT, INC.
/s/ PAUL C. YATES
By: _________________________________
POWER OF ATTORNEY
Know all those by these presents, that each person whose signature appears
below constitutes and appoints each of Edward T. Pratt III and Paul C. Yates,
or any of them, each acting alone, his true and lawful attorney-in-fact and
agent, with full Power of Substitution and Resubstitution, for such person and
in his name, place and stead, in any and all capacities, in connection with
the Registration Statement on Form S-4 of HWCC-Shreveport, Inc. under the
Securities Act of 1933, including, the generality of the foregoing, to sign
the Registration Statement in the name and on behalf of HWCC-Shreveport, Inc.,
or on behalf of the undersigned as a director or officer of HWCC-Shreveport,
Inc., and any and all amendments or supplements to the Registration Statement,
including any and all stickers and post-effective amendments to the
Registration Statement, and to sign any and all additional Registration
Statements relating to the same offering of Securities as the Registration
Statement that are filed pursuant to Rule 462 under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and any
applicable securities exchange or securities self-regulatory body, granting
unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or their substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ JACK E. PRATT Chief Executive Officer July 16, 1999
______________________________________ and Director
Jack E. Pratt
/s/ EDWARD T. PRATT, JR. Director July 16, 1999
______________________________________
Edward T. Pratt, Jr.
/s/ WILLIAM D. PRATT Executive Vice President, July 16, 1999
______________________________________ Secretary, General
William D. Pratt Counsel and Director
/s/ EDWARD T. PRATT III President July 16, 1999
______________________________________
Edward T. Pratt III
/s/ PAUL C. YATES Executive Vice President July 16, 1999
______________________________________ and Chief Financial
Paul C. Yates Officer
/s/ CHARLES F. LAFRANO III Vice President, Assistant July 16, 1999
______________________________________ Secretary and Principal
Charles F. LaFrano III Accounting Officer
</TABLE>
II-11
<PAGE>
EXHIBIT 3.5
ARTICLES OF INCORPORATION
OF
HWCC-SHREVEPORT, INC.
---------------------
The undersigned, being a natural person capable of contracting and acting
as the incorporator to form a corporation for one or more lawful business
purposes under the provisions of the Business Corporation Law of the State of
Louisiana (the "Business Corporation Law"), does hereby adopt and sign the
following Articles of Incorporation:
ARTICLE I
NAME
----
The name of the corporation (the "Corporation") is HWCC-Shreveport, Inc.
ARTICLE II
DURATION
--------
The period of duration of the Corporation is perpetual.
ARTICLE III
PURPOSES
--------
The purpose for which the Corporation is organized is to engage in any
lawful activity for which corporations may be formed under the Business
Corporation Law.
ARTICLE IV
CAPITAL STOCK
-------------
The aggregate number of shares of capital stock which the Corporation shall
have the authority to issue shall be 1,000, all of which shall have a par value
of $1.00 per share and all of which shall be of the same class and shall be
designated as common stock.
ARTICLE V
PREEMPTIVE RIGHTS
-----------------
No shareholder of the Corporation shall, by reason of being a shareholder,
have any preemptive right to acquire additional, unissued or treasury shares of
the Corporation, or securities convertible into or carrying a right to subscribe
to or to acquire any shares of any class of the
<PAGE>
Corporation now or hereafter authorized.
ARTICLE VI
CUMULATIVE VOTING DENIED
------------------------
Cumulative voting shall not be allowed in the election of directors or for
any other purpose.
ARTICLE VII
LIMITATION OF LIABILITY
-----------------------
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for such liability as is expressly not subject to
limitation under the Business Corporation Law, as the same exists on the
effective date of these Articles of Incorporation or may hereafter be amended to
further limit or eliminate such liability. Any repeal or modification of this
Article VII by the shareholders of the Corporation shall be prospective only and
shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
ARTICLE VIII
DIVIDENDS, RECLASSIFICATIONS OR
REDEMPTIONS OF STOCK
--------------------
Cash, property or share dividends, shares issuable to shareholders in
connection with a reclassification of stock, and the redemption price of
redeemed shares, if any, which are not claimed by the shareholders entitled
thereto within a reasonable time as determined by the Board of Directors (not
less than one year in any event) after the dividend or redemption price, if any,
became payable or the shares became issuable, despite reasonable efforts by the
Corporation to pay the dividend or redemption price, if any, or deliver the
certificates for the shares to such shareholders within such time, shall, at the
expiration of such time, revert in full ownership to the Corporation, and the
Corporation's obligation to pay such dividend or redemption price, if any, or
issue such shares, as the case may be, shall thereupon cease; provided that the
Board of Directors may, at any time, for any reason satisfactory to it, but need
not, authorize (a) payment of the amount of any cash or property dividend or
redemption price, if any, or (b) issuance of any shares, ownership of which has
reverted to the Corporation pursuant to this Article VIII, to the entity who or
which would be entitled thereto had such reversion not occurred.
2
<PAGE>
ARTICLE IX
INDEMNIFICATION AND INSURANCE
-----------------------------
The Corporation shall, to the fullest extent permitted by law, indemnify,
and may, to the fullest extent permitted by law or to such lesser extent as is
determined in the discretion of the Board of Directors, advance expenses to, any
and all officers and directors of the Corporation in whatever capacities they
serve, and may, to the fullest extent permitted by law or to such lesser extent
as is determined in the discretion of the Board of Directors, indemnify, and
advance expenses to, any and all other persons whom it shall have power to
indemnify, with respect to all matters arising out of their status as such or
their acts, omissions or services rendered in such capacities. The Corporation
shall have the power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability. Any
repeal or modification of this Article IX by the shareholders of the Corporation
shall be prospective only and shall not adversely affect any rights set forth in
this Article IX existing at the time of such repeal or modification.
ARTICLE X
INITIAL BOARD OF DIRECTORS
--------------------------
The number of directors shall be fixed by the Bylaws of the Corporation and
until changed in accordance with the manner prescribed by the Bylaws shall be
three (3). The names and addresses of those persons who are to serve as
directors until the first annual meeting of shareholders, or until their
successors be elected and qualified, shall be as specified in the initial report
or supplemental report of the Corporation filed pursuant to Section 12:101 of
the Business Corporation Law.
ARTICLE XI
ACTION BY CONSENT OF SHAREHOLDERS
---------------------------------
Whenever the affirmative vote of shareholders at a meeting is required to
authorize or constitute corporate action under any provision of the Business
Corporation Law or of the Articles of Incorporation or Bylaws of the
Corporation, any such action may be authorized or constituted by a consent in
writing, without a meeting, signed by the shareholders having at least that
proportion of voting power which would be necessary under any such provision to
authorize or constitute the action by the affirmative vote at a meeting;
provided, however, that any such written consent shall be filed with the record
of proceedings of the shareholders; and provided, further, that prompt notice
shall be given to all of the shareholders entitled thereto of the action taken
pursuant to such written consent.
3
<PAGE>
ARTICLE XII
INCORPORATOR
------------
The name and address of the incorporator is:
Name Address
---- -------
Roberta J. Hamann Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of November,
1997.
__________________________________
Roberta J. Hamann
THE STATE OF TEXAS
COUNTY OF DALLAS
I, Evelyn Johnstone, a Notary Public, do hereby certify that on this 19th
day of November, 1997, personally appeared before me Roberta J. Hamann, who
being by me first duly sworn, declared to me that she is the person who signed
the foregoing document as incorporator, and that the statements therein
contained are true.
_______________________________________
Notary Public, State of Texas
Name: Evelyn Johnstone
My Commission Expires: ________
4
<PAGE>
EXHIBIT 3.6
HWCC-SHREVEPORT, INC.
BYLAWS
------
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office shall be c/o C T
-----------------
Corporation System, 8550 United Plaza Boulevard, Baton Rouge, Louisiana 70809,
or such other place as the board of directors may from time to time determine.
Section 1.2. Other Offices. The corporation may also have offices, and
-------------
keep the books and records of the corporation at such other places, either
within or without the State of Louisiana, as the board of directors may from
time to time determine or as the business of the corporation may require.
ARTICLE 2
MEETINGS OF SHAREHOLDERS
Section 2.1. Place of Meetings. All meetings of the shareholders shall be
-----------------
held at the office of the corporation or at such other places as may be fixed
from time to time by the board of directors, either within or without the State
of Louisiana, and stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2.2. Annual Meetings. Annual meetings of shareholders, commencing
---------------
with the year 1998, shall be held at the time and place to be selected by the
board of directors. If the day is a legal holiday, then the meeting shall be
held on the next following business day. At the meeting, the shareholders shall
elect a board of directors by written ballot and transact such other business as
may properly be brought before the meeting.
Section 2.3. Notice of Annual Meeting. Except as otherwise provided by
------------------------
statute, written notice of the annual meeting stating the place, date and hour
of the meeting shall be given to each shareholder entitled to vote at such
meeting at his or her last known address not less than ten (10) (unless a longer
period is required by law) nor more than sixty (60) days before the date of the
meeting.
Section 2.4. Voting List. The officer or agent who has charge of the
-----------
stock ledger of the corporation shall prepare and make, at least ten (10) days
before every meeting of shareholders, a complete list of the shareholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each shareholder and the number of shares registered in the name of
each shareholder. Such list shall be open to the examination of any shareholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be
<PAGE>
specified in the notice of the meeting, or, if not so specified, at the
registered office or the principal place of business of the corporation. The
list shall also be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any shareholder who is present.
The original stock transfer books shall be prima-facie evidence as to who are
the shareholders entitled to examine such list or transfer books or to vote at
any meeting of shareholders. Failure to comply with the requirements of this
section shall not affect the validity of any action taken at said meeting.
Section 2.5. Special Meetings. Special meetings of the shareholders, for
----------------
any purpose or purposes, unless otherwise prescribed by statute or by the
articles of incorporation or these Bylaws, may be called by the president or a
majority of the board of directors of the corporation and shall be called by the
secretary at the request in writing of the holders of twenty percent (20%) or
more of the outstanding shares of stock of the corporation. Such request shall
state the purpose or purposes of the proposed meeting.
Section 2.6. Notice of Special Meetings. Except as otherwise provided by
--------------------------
statute, written notice of a special meeting stating the place, date and hour of
the meeting and the purpose or purposes for which the meeting is called, shall
be given not less than ten (10) (unless a longer period is required by law) nor
more than sixty (60) days before the date of the meeting, to each shareholder
entitled to vote at such meeting.
Section 2.7. Quorum. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business, except as otherwise provided by statute or by the
articles of incorporation.
If a quorum is present at a meeting of shareholders, a majority of the
shareholders represented in person or by proxy at the meeting may conduct such
business as may be properly brought before the meeting until it is finally
adjourned, and the subsequent withdrawal from the meeting of any shareholder or
the refusal of any shareholder represented in person or by proxy to vote shall
not affect the presence of a quorum at the meeting, except as may otherwise be
provided by law or by the articles of incorporation or these Bylaws.
If, however, such quorum shall not be present or represented at any meeting
of the shareholders, a majority of the shareholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement of the time
and place of the adjourned meeting at the meeting at which the adjournment is
taken, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, or if these
Bylaws otherwise require, a notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting.
2
<PAGE>
Section 2.8. Order of Business. At each meeting of the shareholders, one
-----------------
of the following persons, in the order in which they are listed (and in the
absence of the first, the next, and so on), shall serve as chairman of the
meeting: chairman of the board, vice chairman of the board, president, vice
presidents (in the order of their seniority if more than one) and secretary.
The order of business at each such meeting shall be as determined by the
chairman of the meeting. Except as may otherwise be provided by statute, the
articles of incorporation or these Bylaws, the chairman of the meeting shall
have, in his sole discretion, the right and authority to prescribe such rules,
regulations and procedures and to do all such acts and things as are necessary
or desirable for the proper conduct of the meeting, including, without
limitation, the establishment of procedures for the maintenance of order and
safety, limitations on the time allotted to questions or comments on the affairs
of the corporation, restrictions on entry to such meeting after the time
prescribed for the commencement thereof, and the opening and closing of the
voting polls. Only shareholders of record will be permitted to present motions
from the floor at any meeting of shareholders.
Section 2.9. Majority Vote. When a quorum is present at any meeting, the
-------------
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of the
statutes, the articles of incorporation or these Bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 2.10. Method of Voting. Unless otherwise provided by statute or in
----------------
the articles of incorporation, each shareholder shall at every meeting of the
shareholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such shareholder (i) at the time fixed
pursuant to Section 8.5 of these Bylaws as the record date for the determination
of shareholders entitled to vote at such meeting, or (ii) if no such record date
shall have been fixed, then at the close of business on the date next preceding
the day on which notice thereof shall be given, or, if notice is waived, at the
close of business on the date next preceding the day on which the meeting is
held, but no proxy shall be voted on or after eleven (11) months from its date,
unless the proxy provides for a longer period.
Section 2.11. Action of Shareholders by Written Consent Without Meetings.
----------------------------------------------------------
Whenever the affirmative vote of shareholders at a meeting is required to
authorize or constitute corporate action under any provision of law, the
articles of incorporation or these Bylaws, any such action may be authorized or
constituted by a consent or consents in writing, without a meeting, (i) setting
forth the action so taken, (ii) signed and dated by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and (iii) delivered to the corporation by
delivery to its registered office in the State of Louisiana, its principal place
of business or an officer or agent of the corporation having custody of the book
in which proceedings of shareholders are recorded. Delivery shall be by hand or
by certified or registered mail, return receipt requested. Every written
consent shall bear the date of signature of each shareholder who signs the
consent.
If action is taken by less than unanimous consent of shareholders and in
accordance with the
3
<PAGE>
foregoing, there shall be filed with the records of the meetings of shareholders
the writing or writings comprising such less than unanimous consent. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous consent shall be given to those who have not consented in writing, and
a certificate signed and attested to by the secretary that such notice was given
shall be filed with the records of the meetings of the shareholders.
If action is taken by unanimous consent of shareholders, the writing or
writings comprising such unanimous consent shall be filed with the records of
the meetings of shareholders.
2.12. Telephone Meeting. Subject to the provisions of applicable law and
-----------------
these Bylaws, shareholders may participate in and hold a meeting by means of
conference telephone or similar communications equipment by which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this section shall constitute presence in person at such meeting,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
ARTICLE 3
DIRECTORS
Section 3.1. General Powers. Subject to the provisions of the Louisiana
--------------
Business Corporation Law, the articles of incorporation and these Bylaws, all
corporate powers shall be vested in, and the business and affairs of the
corporation shall be managed by or under the direction of, the board of
directors, which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by law or by the articles of incorporation of
the corporation or by these Bylaws directed or required to be exercised or done
by the shareholders.
Section 3.2. Number of Directors. The board of directors shall have not
-------------------
less that three (3) nor more than nine (9) directors. The number of directors
constituting the board shall be such number as shall be from time to time
specified by resolution of the board of directors; provided, however, that no
director's term shall be shortened by reason of a resolution reducing the number
of directors; and further provided that the number of directors constituting the
initial board of directors shall be three (3) and shall remain such number
unless and until changed by resolution of the board of directors aforesaid.
Section 3.3. Election, Qualification and Term of Office of Directors.
--------------------------------------------- ---------
Directors shall be elected at each annual meeting of shareholders to hold office
until the next annual meeting. The persons receiving a plurality of the votes
of the shares represented in person or by proxy and entitled to vote on the
election of directors shall be elected directors. Directors need not be
shareholders or residents of the State of Louisiana, unless so required by the
articles of incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Except as may otherwise be provided by law, the
articles of incorporation or these Bylaws, each director, including a director
elected to fill a vacancy, shall hold office until his successor is elected and
qualified or until his earlier death,
4
<PAGE>
disqualification, resignation or removal.
Section 3.4. Notification of Nominations. Subject to the rights of the
---------------------------
holders of any class or series of stock having a preference over the common
stock as to dividends or upon liquidation, nominations for the election of
directors may be made by the board of directors or by any shareholder entitled
to vote for the election of directors. Any shareholder entitled to vote for the
election of directors at a meeting may nominate persons for election as
directors only if written notice of such shareholder's intent to make such
nomination is given, either by personal delivery or by United States mail,
postage prepaid, to the secretary of the corporation not later than (i) with
respect to an election to be held at an annual meeting of shareholders, ninety
(90) days in advance of such meeting, and (ii) with respect to an election to be
held at a special meeting of shareholders for the election of directors, the
close of business on the seventh (7th) day following the date on which notice of
such meeting is first given to shareholders. Each such notice shall set forth:
(a) the name and address of the shareholder who intends to make the nomination
and of the person or persons intended to be nominated; (b) a representation that
the shareholder is a holder of record of stock of the corporation entitled to
vote at such meeting and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the shareholder; (d) such other
information regarding each nominee proposed by such shareholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been nominated,
or intended to be nominated, by the board of directors; and (e) the consent of
each nominee to serve as a director of the corporation if so elected. The
chairman of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure.
Section 3.5. First Meetings. The first meeting of each newly elected board
--------------
of directors shall be held at such time and place as shall be fixed by the vote
of the shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting provided a quorum shall be present. In the event of the failure of the
shareholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the shareholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors. At each such first meeting, or
any subsequent meeting called for the purpose, the directors shall elect the
officers of the corporation.
Section 3.6. Regular Meetings. Regular meetings of the board of directors
----------------
may be held without notice (except as may otherwise be required by law or these
Bylaws) at such times and at such places as shall from time to time be
determined by the board.
Section 3.7. Special Meetings. Special meetings of the board of directors
----------------
may be called by the chairman of the board or the president, and shall be called
by the president or secretary on the
5
<PAGE>
written request of two (2) or more directors.
Section 3.8. Quorum; Majority Vote. At all meetings of the board, a
---------------------
majority of the entire board of directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
articles of incorporation or these Bylaws. If a quorum shall not be present at
any meeting of the board of directors, a majority of the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting at which the adjournment is taken, until a quorum
shall be present. At any such adjourned meeting any business may be transacted
which might have been transacted at the meeting as originally notified. If a
quorum shall be present when a meeting is convened, the directors present may
continue to do business, taking action by vote of a majority of a quorum as
fixed above, until adjournment, notwithstanding the withdrawal of enough
directors to leave less than a quorum as fixed above, or the refusal of any
director present to vote.
Section 3.9. Action Without Meeting. Unless otherwise restricted by the
----------------------
articles of incorporation or these Bylaws, any action required or permitted to
be taken at any meeting of the board of directors may be taken without a
meeting, if all members of the board consent thereto in writing to the adoption
of a resolution or authorizing the action, and the writing or writings are filed
with the minutes of the proceedings of the board. Any action taken under this
Section 3.9 is effective when the last director signs the consent, unless the
consent specifies a different effective date.
Section 3.10. Telephone and Similar Meetings. Subject to applicable law,
------------------------------
unless otherwise restricted by the articles of incorporation or these Bylaws,
members of the board of directors may participate in a meeting of the board of
directors by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting of
the board, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Section 3.11. Notice of Meetings. Unless otherwise required by law or
------------------
specified herein, notice of regular meetings of the board of directors or of any
adjourned meeting thereof need not be given. Notice of each special meeting of
the board (and each regular meeting for which notice shall be required) shall be
mailed to each director, addressed to such director at such director's residence
or usual place of business, at least two (2) days before the day on which the
meeting is to be held or shall be sent to such director at such place by telex,
cable, facsimile or telegram or be given personally or by telephone, not later
than the day before the meeting is to be held, but notice need not be given to
any director who shall, either before or after the meeting, submit a signed
written waiver of such notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of notice to such
director. Every such notice shall state the time and place but need not state
the purpose of the meeting except as may otherwise be required by statute or
these Bylaws.
Section 3.12. Rules and Regulations. The board of directors may adopt
---------------------
such rules and
6
<PAGE>
regulations not inconsistent with the provisions of law, the articles of
incorporation of the corporation or these Bylaws for the conduct of its meetings
and management of the affairs of the corporation as the board may deem proper.
Section 3.13. Resignations. Any director of the corporation may at any
------------
time resign by giving written notice to the board of directors, the chairman of
the board, the president or the secretary of the corporation. Such resignation
shall take effect at the time specified therein or, if the time be not
specified, upon receipt thereof; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 3.14. Removal of Directors. Unless otherwise restricted by
--------------------
statute, the articles of incorporation or these Bylaws, any director or the
entire board of directors may be removed, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election of directors;
provided, however, that when the holders of any class or series are entitled by
the articles of incorporation to elect one (1) or more directors, then, in
respect to the removal without cause of a director or directors so elected, the
required majority vote shall be of the holders of the outstanding shares of such
class or series and not of the outstanding shares as a whole.
Section 3.15. Vacancies. Except as may otherwise be provided by law, the
---------
articles of incorporation or these Bylaws, any vacancies on the board of
directors resulting from death, disqualification, resignation, removal or other
cause, and newly created directorships resulting from any increase in the number
of directors, may be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the board
of directors, or by a sole remaining director. Any director elected or chosen
in accordance with the preceding sentence of this Section 3.15 shall hold office
for the remainder of the term of the directorship to which he was appointed or
until his successor shall have been elected and qualified or until his earlier
death, resignation or removal. Unless the applicable statute, the articles of
incorporation or these Bylaws provide otherwise, when one or more directors
shall resign from the board of directors, effective at a future date, the
majority of directors then in office, including those who have so resigned,
shall have the power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective. Any
directorship not filled by the board as provided above may be filled by the
shareholders at an annual meeting or at a special meeting of shareholders called
for that purpose.
Section 3.16. Compensation of Directors. Unless otherwise restricted by
-------------------------
the articles of incorporation or these Bylaws, the board of directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of
directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
ARTICLE 4
7
<PAGE>
EXECUTIVE AND OTHER COMMITTEES
Section 4.1. Executive and Other Committees. The board of directors may,
------------------------------
by resolution adopted by a majority of the entire board, designate from time to
time two (2) or more of its members to constitute members or alternate members
of an executive committee or one or more other committees, which committees
shall have and may exercise, between meetings of the board, all the powers and
authority of the board in the management of the business and affairs of the
corporation, including, if such committee is so empowered and authorized by
resolution adopted by a majority of the entire board and the Louisaina Business
Corporation Law permits, the power and authority to declare a dividend and to
authorize the issuance of stock, and may authorize the seal of the corporation
to be affixed to all papers which may require it, except that no such committee
shall have such power or authority with reference to:
(a) amending the articles of incorporation of the corporation (except
that a committee may, to the extent permitted by law and authorized in the
resolution or resolutions providing for the issuance of shares of stock
adopted by the board of directors pursuant to authority, if any, expressly
vested in the board by the provisions of the articles of incorporation, (i)
fix the designations and any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets
of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the corporation, or (ii) fix the
number of shares of any series of stock or authorize the increase or
decrease of the shares of any series);
(b) adopting an agreement of merger or consolidation involving the
corporation;
(c) recommending to the shareholders the sale, lease or exchange of
all or substantially all of the property and assets of the corporation
otherwise than in the usual and regular course of business;
(d) recommending to the shareholders a voluntary dissolution of the
corporation or a revocation of a dissolution;
(e) adopting, amending or repealing any Bylaw;
(f) filling vacancies on the board or on any committee of the board,
including the executive committee;
(g) fixing the compensation of directors for serving on the board or
on any committee of the board, including the executive committee; or
(h) amending or repealing any resolution of the board which by its
terms may be amended or repealed only by the board.
8
<PAGE>
Section 4.2. Procedure; Meetings; Quorum. Regular meetings of the
---------------------------
executive committee or any other committee of the board of directors, of which
no notice shall be necessary, may be held at such times and places as shall be
fixed by resolution adopted by a majority of the members thereof. Special
meetings of the executive committee or any other committee of the board shall be
called at the request of any member thereof. Notice of each special meeting of
the executive committee or any other committee of the board shall be sent by
mail, telex, cable, facsimile, telegram or telephone, or be delivered personally
to each member thereof not later than the day before the day on which the
meeting is to be held, but notice need not be given to any member who shall,
either before or after the meeting, submit a signed written waiver of such
notice or who shall attend such meeting without protesting, prior to or at its
commencement, the lack of such notice to such member. Any special meeting of the
executive committee or any other committee of the board shall be a legal meeting
without any notice thereof having been given, if all members thereof shall be
present thereat. Notice of any adjourned meeting of any committee of the board
need not be given. The executive committee or any other committee of the board
may adopt such rules and regulations not inconsistent with the provisions of
law, the articles of incorporation of the corporation or these Bylaws for the
conduct of its meetings as the executive committee or any other committee of the
board may deem proper. Except as may be otherwise required by statute, a
majority of the executive committee or any other committee of the board shall
constitute a quorum for the transaction of business at any meeting, and the vote
of a majority of the members thereof present at any meeting at which a quorum is
present shall be the act of such committee. The executive committee or any other
committee of the board of directors shall keep written minutes of its
proceedings, a copy of which is to be filed with the secretary of the
corporation, and shall report on such proceedings to the board.
Section 4.3. Compensation Members of special or standing committees may
------------
be allowed compensation if the board of directors shall so determine pursuant to
Section 3.16 of these Bylaws.
Section 4.4 Action by Consent; Participation by Telephone or Similar
--------------------------------------------------------
Equipment. Unless the board of directors, the articles of incorporation or
- ---------
these Bylaws shall otherwise provide, any action required or permitted to be
taken by any committee may be taken without a meeting if all members of the
committee consent in writing to the adoption of a resolution authorizing the
action, and the writing or writings are filed with the minutes of the
proceedings of the committee. Unless the board of directors, the articles of
incorporation or these Bylaws shall otherwise provide, any one or more members
of any such committee may participate in any meeting of the committee by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation by
such means shall constitute presence in person at a meeting of the committee,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
Section 4.5. Changes in Committees; Resignations; Removals. The board
---------------------------------------------
shall have powers, by the affirmative vote of a majority of the authorized
number of directors, at any time to change the members of, to fill vacancies in,
and to discharge any committee of the board. Any member of any such committee
may resign at any time by giving notice to the corporation, provided, however,
that
9
<PAGE>
notice to the board, the chairman of the board, the president, the chairman of
such committee or the secretary shall be deemed to constitute notice to the
corporation. Such resignation shall take effect upon receipt of such notice or
at any later time specified therein; and, unless otherwise specified therein,
acceptance of such resignation shall not be necessary to make it effective. Any
member of any such committee may be removed at any time, with or without cause,
by the affirmative vote of a majority of the authorized number of directors at
any meeting of the board called for that purpose.
ARTICLE 5
NOTICES
Section 5.1. Method. Whenever, under the provisions of the statutes, the
------
articles of incorporation or these Bylaws, notice is required to be given to any
director or shareholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such director or
shareholder, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Unless
otherwise prohibited by statute, notice to directors may also be given by telex,
cable, facsimile or telegram.
Section 5.2. Waiver. Whenever any notice is required to be given under
------
the provisions of the statutes, the articles of incorporation or these Bylaws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the stockholders, directors, or members of
a committee of directors need be specified in any written waiver of notice
unless so required by the articles of incorporation or these Bylaws.
ARTICLE 6
OFFICERS
Section 6.1. Election; Qualification. The officers of the corporation
-----------------------
shall be chosen by the board of directors and shall be a president, one or more
vice presidents, a secretary and a treasurer. The board of directors may also
choose as officers a chairman of the board, one or more vice chairmen of the
board, one or more assistant secretaries and assistant treasurers and such other
officers and agents as it shall deem necessary. Any number of offices may be
held by the same person, unless the articles of incorporation or these Bylaws
otherwise provide.
Section 6.2. Salary. The salaries of all officers and agents of the
------
corporation shall be fixed by the board of directors.
Section 6.3. Term; Removal. The officers of the corporation shall hold
-------------
office until their successors are chosen and qualify. Any officer elected or
appointed by the board of directors may be
10
<PAGE>
removed, with or without cause, at any time by the affirmative vote of a
majority of the board of directors without prejudice, however, to the contract
rights of the person so removed. Any vacancy occurring in any office of the
corporation shall be filled for the unexpired portion of the term by the
affirmative vote of a majority of the board of directors.
Section 6.4. Resignation. Subject at all times to the right of removal as
-----------
provided in Section 6.3 of this Article 6, any officer may resign at any time by
giving notice to the board of directors, the president or the secretary of the
corporation. Any such resignation shall take effect at the date of receipt of
such notice or at any later date specified therein; provided that the president
or, in the event of the resignation of the president, the board of directors may
designate an effective date for such resignation which is earlier than the date
specified in such notice but which is not earlier than the date of receipt of
such notice; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 6.5. Vacancies. A vacancy in any office because of death,
---------
resignation, removal or any other cause may be filled for the unexpired portion
of the term in the manner prescribed in these Bylaws for election to such
office.
Section 6.6. Chairman of the Board. The chairman of the board shall, if
---------------------
there be such an officer, preside at meetings of the board of directors and
preside at meetings of the shareholders. The chairman of the board shall
counsel with and advise the president and perform such other duties as the
president or the board or the executive committee may from time to time
determine. Except as otherwise provided by resolution of the board, the chairman
of the board shall be ex-officio a member of all committees of the board. The
chairman of the board may sign and execute in the name of the corporation any
and all deeds, mortgages, bonds, contracts, agreements, certificates or other
instruments or documents authorized by the board or any committee thereof
empowered to authorize the same.
Section 6.7. Vice Chairman of the Board. In the absence of the chairman
--------------------------
of the board or, in the event of his inability or refusal to act, the vice
chairman (or in the event there be more than one vice chairman, the vice
chairmen in the order designated by the directors, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the chairman of the board, and when so acting shall have all the powers of and
be subject to all the restrictions upon the chairman of the board. The vice
chairmen shall perform such other duties and have such other powers as the board
of directors may from time to time prescribe. Any vice chairman may sign and
execute in the name of the corporation any and all deeds, mortgages, bonds,
contracts, agreements, certificates or other instruments or documents authorized
by the board or any committee thereof empowered to authorize the same.
Section 6.8. President. The president shall be the chief executive officer
---------
of the corporation, shall preside at all meetings of the shareholders and the
board of directors if there shall be no chairman or vice chairman of the board
or if the chairman or vice chairman of the board shall not be present or shall
be unable or unwilling to act at any such meeting, shall have general and active
management of
11
<PAGE>
the business of the corporation and shall see that all orders and resolutions of
the board of directors are carried into effect. He shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation.
Section 6.9. Vice Presidents. In the absence of the president, the
---------------
chairman of the board and the vice chairmen of the board or, in the event of
their inability or refusal to act, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated by the
directors or, in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
Section 6.10. Secretary. The secretary shall attend all meetings of the
---------
board of directors and all meetings of the shareholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 6.11. Assistant Secretary. The assistant secretary, or if there
-------------------
shall be more than one, the assistant secretaries in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election) shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
Section 6.12. Treasurer. The treasurer shall have the custody of the
---------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and shall
render to the president and the board of directors, at its regular meetings, or
when the board of directors so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation. If required by the
board of directors, he shall give the corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
12
<PAGE>
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 6.13. Assistant Treasurer. The assistant treasurer, or if there
-------------------
shall be more than one, the assistant treasurers in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE 7
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
Section 7.1. Third-Party Actions. The corporation shall indemnify any
-------------------
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that such person is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, against all expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, that such
person had reasonable cause to believe that his or her conduct was unlawful.
The corporation may indemnify any employee or agent of the corporation, or
any employee or agent serving at the request of the corporation as an employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, in the manner and to the extent that it shall indemnify any director
or officer under this Section 7.1.
Section 7.2. Derivative Actions. The corporation may indemnify any person
------------------
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person is or was
a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership,
13
<PAGE>
joint venture, trust or other enterprise, against all expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
shall be made with respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of such person's duty to the corporation unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as such court shall deem proper.
Section 7.3. Determination of Indemnification. Any indemnification under
--------------------------------
Section 7.1 or 7.2 of this Article 7 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because such person has met the applicable standard of conduct
set forth in Section 7.1 or 7.2 of this Article 7. Such determination shall be
made (i) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the shareholders.
Section 7.4. Right to Indemnification. Notwithstanding the other
------------------------
provisions of this Article 7, to the extent that a director, officer, employee
or agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 7.1 or 7.2 of
this Article 7, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
Section 7.5. Advance of Expenses. Expenses incurred in defending a civil
-------------------
or criminal action, suit or proceeding may be paid by the corporation on behalf
of a director, officer, employee or agent in advance of the final disposition of
such action, suit or proceeding as authorized by the board of directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that such person is entitled to be indemnified by the corporation as
authorized in this Article 7.
Section 7.6. Indemnification Not Exclusive. The indemnification provided
-----------------------------
by this Article 7 shall not be deemed exclusive of any other rights to which any
person seeking indemnification may be entitled under any law, any agreement, the
articles of incorporation, any vote of shareholders or disinterested directors
or otherwise, both as to action in such person's official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 7.7. Insurance. The corporation may purchase and maintain
---------
insurance or other similar arrangements on behalf of any person who is or was a
director, officer, employee or agent of the
14
<PAGE>
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against liability under the provisions of this Article 7.
Section 7.8. Definitions of Certain Terms. For purposes of this Article 7,
-----------------------------
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article 7 with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
For purposes of this Article 7, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; references
to "serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this Article 7.
Section 7.9. Liability of Directors. Notwithstanding any provision of the
----------------------
articles of incorporation or any other provision herein, no director shall be
personally liable to the corporation or any shareholder for monetary damages for
breach of fiduciary duty as a director, except for any matter in respect of
which such director shall be liable under applicable statute or shall be liable
by reason that, in addition to any and all other requirements for such
liability, he (i) shall have breached his duty of loyalty to the corporation or
its shareholders, (ii) shall not have acted in good faith, (iii) shall have
acted in a manner involving intentional misconduct or a knowing violation of law
or, in failing to act, shall have acted in a manner involving intentional
misconduct or a knowing violation of law or (iv) shall have derived an improper
personal benefit.
Section 7.10. Continuity. The indemnification and advancement of expenses
----------
provided for in this Article 7 shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent of the corporation and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE 8
15
<PAGE>
CERTIFICATES OF STOCK
Section 8.1. Certificates. Every holder of stock in the corporation shall
------------
be entitled to have a certificate, signed by, or in the name of the corporation
by, the chairman or vice chairman of the board of directors or the president or
a vice president, and by the treasurer or an assistant treasurer or the
secretary or an assistant secretary, of the corporation, certifying the number
of shares owned by him in the corporation.
Section 8.2. Facsimile Signatures. Any or all of the signatures on the
--------------------
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 8.3. Lost Certificates. The board of directors may direct a new
-----------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 8.4. Transfers of Stock. Upon surrender to the corporation or the
------------------
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 8.5. Fixing Record Date. In order that the corporation may
------------------
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of shareholders of record entitled
to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting; provided, however, that the board of directors may
fix a new record date for the adjourned meeting.
In order that the corporation may determine the shareholders entitled to
consent to corporate action in writing without a meeting, the board of directors
may fix a record date, which record date shall (i) not precede the date upon
which the resolution fixing the record date is adopted by the board
16
<PAGE>
and (ii) not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board.
Section 8.6. Registered Shareholders. The corporation shall be entitled to
-----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Louisiana.
17
<PAGE>
ARTICLE 9
AFFILIATED TRANSACTIONS
Section 9.1. Validity. Except as otherwise provided in the articles of
--------
incorporation and except as otherwise provided in this Bylaw, if Section 9.2 is
satisfied, no contract or transaction between the corporation and any of its
directors, officers or security holders, or any corporation, partnership,
association or other organization in which any of such directors, officers or
security holders are directly or indirectly financially interested, shall be
void or voidable solely because of this relationship, or solely because of the
presence of the director, officer or security holder at the meeting authorizing
the contract or transaction, or solely because of his or their participation in
the authorization of such contract or transaction or vote at the meeting
therefor, whether or not such participation or vote was necessary for the
authorization of such contract or transaction.
Section 9.2. Disclosure; Approval; Fairness. Section 9.1 shall apply only
------------------------------
if:
(a) the material facts as to the relationship or interest and as to
the contract or transaction are disclosed or are known:
(i) to the board of directors (or committee thereof) and it
nevertheless in good faith authorizes or ratifies the contract or
transaction by a majority of the directors present, each such
interested director to be counted in determining whether a quorum is
present but not in calculating the majority necessary to carry the
vote; or
(ii) to the shareholders and they nevertheless authorize or
ratify the contract or transaction by a majority of the shares present
at a meeting considering such contract or transaction, each such
interested person (shareholder) to be counted in determining whether a
quorum is present and for voting purposes; or
(b) the contract or transaction is fair to the corporation as of the
time it is authorized or ratified by the board of directors (or committee
thereof) or the shareholders.
Section 9.3. Nonexclusive. This provision shall not be construed to
------------
invalidate a contract or transaction which would be valid in the absence of this
provision.
ARTICLE 10
GENERAL PROVISIONS
Section 10.1. Dividends. Dividends upon the capital stock of the
---------
corporation, subject to the provisions of the articles of incorporation, if any,
may be declared by the board of directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the articles of incorporation
and applicable law.
18
<PAGE>
Section 10.2. Reserves. Before payment of any dividend, there may be set
--------
aside out of any funds of the corporation available for dividends such sum or
sums as the directors may from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 10.3. Annual Statement. The board of directors shall present at
----------------
each annual meeting, and at any special meeting of the shareholders when called
for by vote of the shareholders, a full and clear statement of the business and
condition of the corporation.
Section 10.4. Checks. All checks or demands for money and notes of the
------
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 10.5. Fiscal Year. The fiscal year of the corporation shall be
-----------
fixed by resolution of the board of directors.
Section 10.6. Seal. The corporate seal shall have inscribed thereon the
----
name of the corporation and the words "Corporate Seal." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
Section 10.7. Conflicts with Articles of Incorporation. In the event of a
----------------------------------------
conflict between the provisions of these Bylaws and the articles of
incorporation, the provisions of the articles of incorporation shall control.
ARTICLE 11
LOUISIANA AND OTHER REGULATORY CONTROL
To the extent required by applicable law, these Bylaws shall be generally
subject to the laws and regulations of the State of Louisiana and other
jurisdictions in which the corporation may seek or obtain certain licenses,
franchises or approvals (including, without limitation, applicable gaming laws
and regulations), including, without limitation, restrictions on the ability of,
or required approvals for, a holder to transfer, receive or hold shares,
securities or other interests in the corporation; provided, however, that,
notwithstanding any other provision of law to the contrary, nothing herein shall
be deemed to require that any share, security or interest of the corporation
bear any legend to this effect.
ARTICLE 12
AMENDMENTS
19
<PAGE>
Section 12.1. Amendments. Unless otherwise provided by statute or the
----------
articles of incorporation, these Bylaws may be altered, amended or repealed or
new Bylaws may be adopted by the affirmative vote of a majority of the board of
directors at any meeting of the board of directors at which a quorum is present,
subject to the power of the shareholders to change or repeal any Bylaws so made.
20
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 4.1
HOLLYWOOD CASINO CORPORATION
As Issuer,
HWCC-SHREVEPORT, INC.
HWCC-TUNICA, INC.
as Guarantors
SERIES A AND SERIES B
$310,000,000 11 1/4% SENIOR SECURED NOTES DUE 2007
$50,000,000 FLOATING RATE SENIOR SECURED NOTES DUE 2006
_____________________________
INDENTURE
Dated as of May 19, 1999
_____________________________
State Street Bank and Trust Company
as Trustee
_____________________________
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1)............................................................... 7.10
(a)(2)............................................................... 7.10
(a)(3)............................................................... N.A.
(a)(4)............................................................... N.A.
(a)(5)............................................................... 7.10
(b).................................................................. 7.10
(c).................................................................. N.A.
311 (a).................................................................. 7.11
(b).................................................................. 7.11
(c).................................................................. N.A.
312 (a).................................................................. 2.05
(b).................................................................. 11.03
(c).................................................................. 11.03
313 (a).................................................................. 7.06
(b)(1)............................................................... 10.03
(b)(2)............................................................... 7.07
(c).................................................................. 7.06;11.02
(d).................................................................. 7.06
314 (a).................................................................. 4.03;11.02
(b).................................................................. 10.02
(c)(1)............................................................... 11.04
(c)(2)............................................................... 11.04
(c)(3)............................................................... N.A.
(d).................................................................. 10.03, 10.04, 10.05
(e).................................................................. 11.05
(f).................................................................. N.A.
315 (a).................................................................. 7.01
(b).................................................................. 7.05,11.02
(c).................................................................. 7.01
(d).................................................................. 7.01
(e).................................................................. 6.11
316 (a) (last sentence).................................................. 2.09
(a)(1)(A)............................................................ 6.05
(a)(1)(B)............................................................ 6.04
(a)(2)............................................................... N.A.
(b).................................................................. 6.07
(c).................................................................. 2.12
317 (a)(1)............................................................... 6.08
(a)(2)............................................................... 6.09
(b).................................................................. 2.04
318 (a).................................................................. 11.01
(b).................................................................. N.A.
(c).................................................................. 11.01
</TABLE>
N.A. means not applicable.
* This Cross Reference Table is not part of this Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE............................. 1
Section 1.01. Definitions...................................................... 1
Section 1.02. Other Definitions................................................ 22
Section 1.03. Incorporation by Reference of Trust Indenture Act................ 22
Section 1.04. Rules of Construction............................................ 23
ARTICLE 2 THE NOTES.............................................................. 23
Section 2.01. Form and Dating.................................................. 23
Section 2.02. Execution and Authentication..................................... 24
Section 2.03. Registrar and Paying Agent....................................... 25
Section 2.04. Paying Agent to Hold Money in Trust.............................. 25
Section 2.05. Holder Lists..................................................... 25
Section 2.06. Transfer and Exchange............................................ 25
Section 2.07. Replacement Notes................................................ 36
Section 2.08. Outstanding Notes................................................ 37
Section 2.09. Treasury Notes................................................... 37
Section 2.10. Temporary Notes.................................................. 37
Section 2.11. Cancellation..................................................... 37
Section 2.12. Defaulted Interest............................................... 38
ARTICLE 3 REDEMPTION AND PREPAYMENT.............................................. 38
Section 3.01. Notices to Trustee............................................... 38
Section 3.02. Selection of Notes to Be Redeemed................................ 38
Section 3.03. Notice of Redemption............................................. 39
Section 3.04. Effect of Notice of Redemption................................... 39
Section 3.05. Deposit of Redemption Price...................................... 40
Section 3.06. Notes Redeemed in Part........................................... 40
Section 3.07. Optional Redemption.............................................. 40
Section 3.08. Mandatory Redemption............................................. 41
Section 3.09. Repurchase Offers................................................ 42
ARTICLE 4 COVENANTS.............................................................. 44
Section 4.01. Payment of Notes................................................. 44
Section 4.02. Maintenance of Office or Agency.................................. 44
Section 4.03. Reports.......................................................... 45
Section 4.04. Compliance Certificate........................................... 45
Section 4.05. Taxes............................................................ 46
Section 4.06. Stay, Extension and Usury Laws................................... 46
Section 4.07. Restricted Payments.............................................. 46
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries... 48
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock....... 49
Section 4.10. Asset Sales...................................................... 51
Section 4.11. Event of Loss.................................................... 52
Section 4.12. Transactions with Affiliates..................................... 53
Section 4.13. Liens............................................................ 54
Section 4.14. Business Activities.............................................. 54
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.15. Corporate Existence...................................................... 54
Section 4.16. Offer to Repurchase Upon Change of Control............................... 54
Section 4.17. Additional Subsidiary Guarantees......................................... 55
Section 4.18. Designation of Restricted and Unrestricted Subsidiaries.................. 55
Section 4.19. Limitation on Issuances and Sales of Equity Interests in Subsidiaries.... 55
Section 4.20. Change in Management Contracts........................................... 55
Section 4.21. Advances to Restricted Subsidiaries...................................... 56
Section 4.23. Compliance with Securities Laws.......................................... 56
Section 4.24. Payments for Consent..................................................... 56
Section 4.25. Further Assurances....................................................... 56
Section 4.26. Gaming Licenses.......................................................... 57
ARTICLE 5 SUCCESSORS..................................................................... 57
Section 5.01. Merger, Consolidation, or Sale of Assets................................. 57
Section 5.02. Successor Corporation Substituted........................................ 58
ARTICLE 6 DEFAULTS AND REMEDIES.......................................................... 58
Section 6.01. Events of Default........................................................ 58
Section 6.02. Acceleration............................................................. 60
Section 6.03. Other Remedies........................................................... 60
Section 6.04. Waiver of Past Defaults.................................................. 61
Section 6.05. Control by Majority...................................................... 61
Section 6.06. Limitation on Suits...................................................... 61
Section 6.07. Rights of Holders of Notes to Receive Payment............................ 62
Section 6.08. Collection Suit by Trustee............................................... 62
Section 6.09. Trustee May File Proofs of Claim......................................... 62
Section 6.10. Priorities............................................................... 62
Section 6.11. Undertaking for Costs.................................................... 63
Section 6.12. Management of Casinos.................................................... 63
Section 6.13. Restoration of Rights and Remedies....................................... 63
ARTICLE 7 TRUSTEE........................................................................ 64
Section 7.01. Duties of Trustee........................................................ 64
Section 7.02. Rights of Trustee........................................................ 65
Section 7.03. Individual Rights of Trustee............................................. 65
Section 7.04. Trustee's Disclaimer..................................................... 65
Section 7.05. Notice of Defaults....................................................... 66
Section 7.06. Reports by Trustee to Holders of the Notes............................... 66
Section 7.07. Reports by Trustee to Gaming Authorities................................. 66
Section 7.08. Compensation and Indemnity............................................... 67
Section 7.09. Replacement of Trustee................................................... 68
Section 7.10. Successor Trustee by Merger, etc......................................... 69
Section 7.11. Eligibility; Disqualification............................................ 69
Section 7.12. Preferential Collection of Claims Against Company........................ 69
Section 7.13. Authorization of Trustee to Take Other Actions........................... 69
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE....................................... 69
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance................. 69
Section 8.02. Legal Defeasance and Discharge........................................... 70
Section 8.03. Covenant Defeasance...................................................... 70
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 8.04. Conditions to Legal or Covenant Defeasance................................. 70
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions........................................... 72
Section 8.06. Repayment to Company....................................................... 72
Section 8.07. Reinstatement.............................................................. 72
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER................................................. 73
Section 9.01. Without Consent of Holders of Notes........................................ 73
Section 9.02. With Consent of Holders of Notes........................................... 73
Section 9.03. Compliance with Trust Indenture Act........................................ 75
Section 9.04. Revocation and Effect of Consents.......................................... 75
Section 9.05. Notation on or Exchange of Notes........................................... 75
Section 9.06. Trustee to Sign Amendments, etc............................................ 75
ARTICLE 10 COLLATERAL AND SECURITY.......................................................... 76
Section 10.01. Security.................................................................. 76
Section 10.02. Recording and Opinions.................................................... 76
Section 10.03. Release of Collateral..................................................... 77
Section 10.04. Protection of the Trust Estate............................................ 78
Section 10.05. Certificates of the Company............................................... 78
Section 10.06. Certificates of the Trustee............................................... 79
Section 10.07. Authorization of Actions to Be Taken by the Trustee Under the
Collateral Documents..................................................... 79
Section 10.08. Trustee's Duties.......................................................... 79
Section 10.09. Authorization of Receipt of Funds by the Trustee Under the
Collateral Documents..................................................... 79
Section 10.10. Termination of Security Interest.......................................... 80
Section 10.11. Cooperation of Trustee.................................................... 80
Section 10.12. Collateral Agent.......................................................... 81
ARTICLE 11 NOTE GUARANTEES.................................................................. 81
Section 11.01. Guarantee................................................................. 81
Section 11.02. Additional Note Guarantees................................................ 82
Section 11.03. Limitation on Guarantor Liability......................................... 83
Section 11.04. Execution and Delivery of Note Guarantee.................................. 83
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms........................ 84
Section 11.06. Releases Following Sale of Assets......................................... 84
ARTICLE 12 SATISFACTION AND DISCHARGE....................................................... 85
Section 12.01 Satisfaction and Discharge................................................. 85
Section 12.02. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions........................................... 85
Section 12.03. Repayment to Company...................................................... 86
ARTICLE 13 MISCELLANEOUS.................................................................... 86
Section 13.01. Trust Indenture Act Controls.............................................. 86
Section 13.02. Notices................................................................... 86
Section 13.03. Communication by Holders of Notes with Other Holders of Notes............. 87
Section 13.04. Certificate and Opinion as to Conditions Precedent........................ 88
Section 13.05. Statements Required in Certificate or Opinion............................. 88
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 13.06. Rules by Trustee and Agents......................................... 88
Section 13.07. No Personal Liability of Directors, Officers, Employees and
Stockholders....................................................... 88
Section 13.08. Governing Law....................................................... 89
Section 13.09. No Adverse Interpretation of Other Agreements....................... 89
Section 13.10. Successors.......................................................... 89
Section 13.11. Severability........................................................ 89
Section 13.12. Counterpart Originals............................................... 89
Section 13.13. Acts of Holders..................................................... 89
Section 13.14. Benefit of Indenture................................................ 90
Section 13.15. Casino Control Act.................................................. 90
Section 13.16. Mississippi Gaming Control Act...................................... 91
Section 13.17. Louisiana Riverboat Economic Development and Gaming Control
Act................................................................ 91
Section 13.18. Table of Contents, Headings, etc.................................... 91
</TABLE>
EXHIBITS
Exhibit A1 FORM OF FIXED RATE NOTE
Exhibit A2 FORM OF FLOATING RATE NOTE
Exhibit A3 FORM OF REGULATION S TEMPORARY SENIOR SECURED NOTE
Exhibit A4 FORM OF REGULATION S TEMPORARY FIXED RATE NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM ON NOTATION ON NOTE RELATING TO GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
Exhibit G FORM OF GENERAL SECURITY AGREEMENT
Exhibit H FORM OF INTERCOMPANY SECURITY AGREEMENT
Exhibit I FORM OF STOCK PLEDGE AGREEMENT
Exhibit J FORM OF ESCROW AND SECURITY AGREEMENT
Exhibit K FORM OF CASH COLLATERAL ACCOUNT AGREEMENT
Exhibit L FORM OF TRADEMARK SECURITY AGREEMENT
Exhibit M FORM OF LEASEHOLD DEED OF TRUST, SECURITY AGREEMENT, FIXTURE FILING,
AND FILING STATEMENT OF HWCC-TUNICA, INC.
Exhibit N FORM OF MORTGAGE, LEASEHOLD MORTGAGE, SECURITY AGREEMENT, FIXTURE
FILING, AND FINANCING STATEMENT OF HOLLYWOOD CASINO-AURORA, INC.
Exhibit O FORM OF FIRST PREFERRED FLEET MORTGAGE
Exhibit P FORM OF FIRST PREFERRED SHIP MORTGAGE
Exhibit Q FORM OF INTERCREDITOR AGREEMENT
iv
<PAGE>
INDENTURE dated as of May 19, 1999 among Hollywood Casino Corporation, a
Delaware corporation, HWCC-Shreveport, Inc., a Louisiana corporation, HWCC-
Tunica, Inc., a Texas corporation, and State Street Bank and Trust Company, as
trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 11 1/4% Series A Senior Secured Notes due 2007 and the Floating Rate Series
A Senior Secured Notes due 2006 (collectively, the "Series A Notes") and the 11
1/4% Series B Senior Secured Notes due 2007 and the Floating Rate Series B
Senior Secured Notes due 2006 (collectively, the "Series B Notes" and, together
with the Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a Global Note substantially in the form of
Exhibits A1 and A2 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of, and registered in the name
of, the Depositary or its nominee that will be issued in a denomination equal to
the outstanding principal amount of the Notes sold or resold in reliance on Rule
144A.
"Acquired Debt" means, with respect to any specified Person: (a)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, whether or
not such Indebtedness is incurred in connection with, or in contemplation of,
such other Person merging with or into, or becoming a Subsidiary of, such
specified Person; and (b) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
``control,'' as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided, however, that beneficial
ownership of 10% or more of the Voting Stock of a Person shall be deemed to be
control. For purposes of this definition, the terms "controlling," "controlled
by" and "under common control with" shall have correlative meanings.
"Agent" means any Registrar or Paying Agent.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Sale" means: (a) the sale, lease, conveyance or other disposition
of any assets or rights for value, other than sales of inventory in the ordinary
course of business consistent with past practices; provided, however, that the
sale, conveyance or other disposition of all or substantially all of the assets
of the Company and its Subsidiaries taken as a whole will be governed by Section
4.16 and/or Section 5.01
<PAGE>
and not by the provisions of the Section 4.10; and (b) the issuance of Equity
Interests in any of the Company's Restricted Subsidiaries or the sale of Equity
Interests in any of its Subsidiaries. Notwithstanding the preceding, the
following items shall not be deemed to be Asset Sales: (1) the sale or other
disposition of either or both of the vessels owned by Hollywood Casino-Aurora as
of the date hereof, City of Lights I and/or City of Lights II, in connection
with the replacement or expansion of the Aurora Casino, to the extent of the
non-cash proceeds received; (2) any single transaction or series of related
transactions that involves assets having a fair market value of $1.0 million or
less as determined by the Boards of Directors of the Company and any Restricted
Subsidiary; (3) a transfer of assets between or among the Company and its
Restricted Subsidiaries; (4) an issuance of Equity Interests by a Restricted
Subsidiary to the Company or to another Restricted Subsidiary; (5) the sale or
lease of equipment, inventory, accounts receivable, memorabilia or other assets
in the ordinary course of business; (6) the sale or other disposition of cash or
Cash Equivalents; and (7) a Restricted Payment or Permitted Investment that is
permitted under Section 4.07.
"Aurora Casino" means that certain riverboat casino complex and related
facilities located in Aurora, Illinois and owned by Hollywood Casino-Aurora.
"Aurora Expansion Cash Account" means one or more segregated accounts
initially comprised of $40,000,000 of the proceeds from the initial issuance and
sale of the Series A Notes by the Company and governed by the Control Agreement.
"Aurora Fleet Mortgage" means the First Preferred Fleet Mortgage made by
Aurora, as Mortgagor, to the Company, as assigned to the Trustee, as Mortgagee
(relating to Vessel Nos. 993836, 993837, and 1029229).
"Aurora Intercompany Note" means that certain promissory note dated as of
the date hereof issued by Hollywood Casino-Aurora to the Company in an original
principal amount of $108.0 million, with an initial outstanding principal
balance of $31.5 million, as may be increased from time to time upon advances to
Hollywood Casino-Aurora from the Company, subject to the approval of Gaming
Authorities for aggregate amounts in excess of $108 million.
"Aurora Mortgage" means the Mortgage, Leasehold Mortgage, Security
Agreement, Fixture Filing and Financing Statement made by Hollywood Casino-
Aurora, as Mortgagor, for the benefit of the Company, as assigned to the
Trustee, as Mortgagee.
"Aurora Management Agreement" means the Management Services Agreement
dated as of June 21, 1991, and as amended through the date hereof, between
Hollywood Casino-Aurora and Pratt Management, L.P.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular ``person'' (as that term is used in Section 13(d)(3)
of the Exchange Act), such ``person'' shall be deemed to have beneficial
ownership of all securities that such ``person'' has the right to acquire by
conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition. The terms ``Beneficially Owns'' and ``Beneficially Owned'' shall have
a corresponding meaning.
2
<PAGE>
"Board of Directors" means: (a) with respect to a corporation, the Board
of Directors of the corporation; (b) with respect to a partnership, the Board of
Directors of the general partner of the partnership; and (c) with respect to any
other Person, the board or committee of such Person serving a similar function.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Calculation Agent" means the Person appointed by the Company to calculate
the interest rate under the Floating Rate Notes.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means: (a) in the case of a corporation, corporate stock;
(b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means: (a) United States dollars; (b) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided, however, that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than one year from the date of acquisition; (c)
certificates of deposit and eurodollar time deposits with maturities of one year
or less from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case, with any lender
party to any Credit Facility or with any domestic commercial bank having capital
and surplus in excess of $500 million and a Thomson Bank Watch Rating of "B" or
better; (d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (b) and (c) above
entered into with any financial institution meeting the qualifications specified
in clause (c) above; (d) commercial paper rated at least P-1 or the equivalent
thereof by Moody's Investors Service, Inc. or at least A-1 or the equivalent
thereof by Standard & Poor's Rating Services and in each case maturing within
one year after the date of acquisition; and (e) money market funds at least 95%
of the assets of which constitute Cash Equivalents of the kinds described in
clauses (a) through (d) of this definition.
"Casino" means any gaming establishment and other property or assets
directly ancillary thereto or used in connection therewith, including any
buildings, restaurants, hotels, theaters, parking facilities, retail shops,
land, golf courses and other recreation and entertainment facilities, vessels,
barges, ships and equipment.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following events:
(a) the sale, lease, transfer, conveyance or other disposition (other than to
the Company), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries, taken as a
whole; (b) the liquidation or dissolution of the Company; (c) the Company
becoming aware of (by way of
3
<PAGE>
a report or any other filing pursuant to Section 13(d) of the Exchange Act,
proxy vote, written notice or otherwise) the acquisition by any Person or
related group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act, or any successor provision to either of the foregoing, including
any ``group'' acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than the Principals, in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business combination or
purchase of beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act, or any successor provision) of 30% or more of the total voting
power entitled to vote in the election of the Board of Directors of the Company
or such other Person surviving the transaction and, at such time, the Principals
collectively shall fail to beneficially own, directly or indirectly, securities
representing greater than the combined voting power of the Company's or such
other Person's Voting Stock as is beneficially owned by such Person or group;
(d) during any period of two consecutive years, individuals who at the beginning
of such period constituted the Company's Board of Directors (together with any
new directors whose election or appointment by such board or whose nomination
for election by the stockholders of the Company was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) ceasing for any reason to constitute a majority of the
Company's Board of Directors then in office; or (e) the Company consolidates
with, or merges with or into, any Person, or any Person consolidates with, or
merges with or into, the Company, in any such event pursuant to a transaction in
which any of the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of the Company outstanding immediately prior
to such transaction is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such surviving or
transferee Person immediately after giving effect to such issuance.
"Collateral" means all "collateral" referred to in the Collateral
Documents and all other property or assets that become subject to a Lien in
favor of the Trustee or the Holders of the Notes.
"Collateral Agent" shall have the meaning set forth in the Collateral
Documents.
"Collateral Documents" means each security agreement between the Trustee
and each of the Company, HWCC-Tunica, HWCC-Shreveport and any other Guarantor,
as the case may be, and each stock pledge, deed of trust, mortgage and fleet
mortgage executed by the Company or any of its Restricted Subsidiaries creating
a lien that secures the Notes and the Note Guarantees, each collateral
assignment of any other documents creating a Lien that, after giving effect to
such collateral assignment, secures the Notes or any Note Guarantee, the Escrow
and Control Agreement, the Control Agreement and any other document creating a
Lien that secures the Notes or any Note Guarantee.
"Company" means Hollywood Casino Corporation, a Delaware corporation, and
any and all successors thereto.
"Consolidated Cash Flow" means with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus:
(a) an amount equal to any extraordinary loss plus any net loss realized by such
Person or any of its Restricted Subsidiaries in connection with an Asset Sale,
to the extent such losses were deducted in computing such Consolidated Net
Income; plus (b) provision for taxes based on income or profits of such Person
and its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income; plus
(c) consolidated interest expense of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued and whether or not capitalized
(including, without limitation,
4
<PAGE>
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net of the
effect of all payments made or received pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income; plus (d) any preopening expenses to the extent that such preopening
expenses were deducted in computing Consolidated Net Income on a consolidated
basis and determined in accordance with GAAP; and (e) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; minus (f) non-cash items increasing such
Consolidated Net Income for such period, other than the accrual of revenue in
the ordinary course of business, in each case, on a consolidated basis and
determined in accordance with GAAP. Notwithstanding the preceding, the provision
for taxes based on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Restricted Subsidiary of the
Company shall be added to Consolidated Net Income to compute Consolidated Cash
Flow of the Company only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that: (a) the Net Income (but not loss) of any
Person that is not a Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Restricted Subsidiary
thereof; (b) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders; (c) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded; (d) the cumulative effect of a change in accounting principles
shall be excluded; (e) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the specified Person or one of its
Restricted Subsidiaries; and (f) Extraordinary Non-Cash Items shall be excluded.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who: (a) was a member of such Board of
Directors on the date hereof; or (b) was nominated or ratified for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Control Agreement" means that certain agreement dated as of the date
hereof between the Trustee, the Company and the Securities Intermediary relating
to the Aurora Expansion Cash Account, as assigned from time to time.
5
<PAGE>
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 13.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facilities" means one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Custodian" means, with respect to the Notes issued in whole or in part in
global form, the person specified in Section 2.01 hereof as the Custodian for
the Depositary with respect to the Notes, and any and all successors thereto,
appointed as Custodian hereunder and having become such pursuant to the
applicable provision of this Indenture for so long as the Notes are eligible to
be held by the Custodian pursuant to the policies of the Depositary.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, substantially
in the form of Exhibits A1 and A2 hereto except that such Note shall not bear
the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as Depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Determination Date," with respect to an Interest Period, means the second
London Banking Day preceding the first day of the Interest Period.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which any outstanding Notes mature. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the Company to repurchase
such Capital Stock upon the occurrence of a "change of control" or an "asset
sale" shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Company may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
Section 4.7 hereof.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Escrow and Control Agreement" means that certain agreement dated as of
the date hereof between the Trustee and the Company with respect to the Escrowed
Funds.
6
<PAGE>
"Escrowed Funds" means the $40,733,300 of the net proceeds from the sale
of the Notes deposited into escrow with the Trustee under the Escrow and Control
Agreement.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Loss" means, with respect to any property or asset, any (a)
loss, destruction or damage of such property or asset or (b) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Series B Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the date hereof, until such amounts are repaid.
"Extraordinary Non-Cash Items" means any loss from the purchase of the
Aurora Management Agreement and the Tunica Consulting Agreement, loss from the
early retirement of the 12 3/4% Senior Secured Notes due 2003 (the "12 3/4%
Notes"), loss from the write-off of the original issue discount on the 12 3/4% %
Notes, loss from the write-off of unamortized deferred charges and financing
fees from the 12 3/4% % Notes, loss from any write-downs associated with the
disposition of certain real estate assets currently owned by the Company in
Houston, Texas, any losses from the write-down from receivables on the Greate
Bay Casino Corporation and PPI Funding Corp. notes in favor of the Company and
the loss from the retirement or disposition of the riverboats comprising the
Aurora Casino in connection with the replacement or expansion of the Aurora
Casino.
"FF&E" means furniture, fixtures or equipment.
"FF&E Financing" means Indebtedness, the proceeds of which are used solely
to finance the acquisition or lease by the Company or any of its Restricted
Subsidiaries of FF&E used in the ordinary course of the operation of the
business of the Company or its Restricted Subsidiaries.
"Fixed Charges" means, with respect to any specified Person for any
period, the sum, without duplication, of: (a) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued, including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net of the effect of all payments made or received pursuant to
Hedging Obligations; plus (b) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period; plus (c) any
interest expense on Indebtedness of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such
7
<PAGE>
Person or one of its Restricted Subsidiaries, whether or not such guarantee or
Lien is called upon; plus (d) the product of (1) all dividends, whether paid or
accrued and whether or not in cash, on any series of preferred stock of such
Person or any of its Restricted Subsidiaries, other than dividends on Equity
Interests payable solely in Equity Interests of the Company (other than
Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company,
times (2) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person and any of its Restricted Subsidiaries, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP. In
calculating Fixed Charges on a pro forma basis, any Indebtedness bearing a
floating interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person for
such period. In the event that the specified Person or any of its Restricted
Subsidiaries incurs, assumes, guarantees, repays, repurchases or redeems any
Indebtedness (other than ordinary working capital borrowings) or issues,
repurchases or redeems preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated and on or
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the ``Calculation Date''), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee, repayment, repurchase or redemption of Indebtedness, or
such issuance, repurchase or redemption of preferred stock, and the use of the
proceeds therefrom as if the same had occurred at the beginning of the
applicable four-quarter reference period. In addition, for purposes of
calculating the Fixed Charge Coverage Ratio: (a) acquisitions that have been
made by the specified Person or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be given pro
forma effect as if they had occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated on a pro forma basis in accordance with Regulation S-X under the
Securities Act, but without giving effect to clause (c) of the proviso set forth
in the definition of Consolidated Net Income; (b) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded; and (c) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
specified Person or any of its Restricted Subsidiaries following the Calculation
Date.
"Fixed Rate Notes" means the Company's 11 1/4% Series A Senior Secured
Notes due 2007 and 11 1/4% Series B Senior Secured Notes due 2007.
"Floating Rate Notes" means the Company's Series A Floating Rate Notes due
2006 and Series B Floating Rate Notes due 2006 bearing interest at a rate per
annum equal to LIBOR plus 628 basis points, which is initially equal to 11.360%
and is reset semi-annually, as determined by the Calculation Agent in accordance
with the provisions set forth in the form of Exhibit A2 hereto.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
8
<PAGE>
"Gaming Authority" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or any foreign government, any state, province or any city or other
political subdivision or otherwise and whether now or hereafter in existence, or
any officer or official thereof, including, without limitation, the Illinois
Gaming Board, the Louisiana Gaming Control Board and the Mississippi Gaming
Commission, with authority to regulate any gaming operation (or proposed gaming
operation) owned, managed or operated by the Company or any of its Subsidiaries.
"Gaming Licenses" means, with respect to any Person, every license,
franchise or other authorization required to own, lease, operate or otherwise
conduct the present and future gaming activities of such Person.
"Gaming Related Business" means the gaming business and other businesses
necessary for, incident to, connected with, arising out of, or developed or
operated to permit or facilitate the conduct or pursuit of the gaming business
(including developing and operating lodging facilities, restaurants, sports or
entertainment facilities, transportation services or other related activities or
enterprises and any additions or improvements thereto) and potential
opportunities in the gaming business.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, substantially in the
form of Exhibits A1 and A2 hereto issued in accordance with Section 2.01,
2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever
(including, without limitation, any Gaming Authority) of the United States or
foreign government, any state, any province or any city or other political
subdivision or otherwise and whether now or hereafter in existence, or any
officer or official thereof, and any maritime authority.
"Government Securities" means securities that are (a) direct obligations
of the United States of America for the timely payment of which its full faith
and credit is pledged or (b) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and also includes a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act), as custodian with respect to any such Government Security or a
specific payment of principal of or interest on any such Government Security
held by such custodian for the account of the holder of such depository receipt;
provided, however, that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
Government Security or the specific payment of principal of or interest on the
Government Security evidenced by such depository receipt.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
9
<PAGE>
"Guarantors" means each of: (a) HWCC-Tunica; (b) HWCC-Shreveport; and (c)
any other Restricted Subsidiary that executes a Note Guarantee in accordance
with the provisions of this Indenture and its respective successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under: (a) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements; and (b) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"Hollywood Casino-Aurora" means Hollywood Casino-Aurora, Inc., an Illinois
corporation, all of the Capital Stock of which is owned by the Company.
"HWCC-Aurora Management" means HWCC-Aurora Management, Inc., an Illinois
corporation, all of the Capital Stock of which is owned by the Company.
"HWCC-Aurora Management Note" means that certain promissory note, dated as
of April 1, 1997, in the original aggregate principal amount of $3.8 million,
issued by HWCC-Aurora Management to PPI Corporation.
"HWCC-Golf Course Partners" means HWCC-Golf Course Partners, Inc., a
Delaware corporation, all of the Capital Stock of which is owned by HWCC-Tunica.
"HWCC-Holdings" means HWCC-Holdings, Inc., a Texas corporation, all of the
Capital Stock of which is owned by the Company.
"HWCC-Louisiana" means HWCC-Louisiana, Inc., a Louisiana corporation, all
of the Capital Stock of which is owned by the Company.
"HWCC-Shreveport" means HWCC-Shreveport, Inc., a Louisiana corporation,
all of the Capital Stock of which is owned by the Company.
"HWCC-Tunica" means HWCC-Tunica, Inc., a Texas corporation, all of the
capital stock of which is owned by the Company.
"IAI Global Note" means the Global Note substantially in the form of
Exhibit A1 and A2 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee that will be issued in a denomination equal to
the outstanding principal amount of the Notes sold to Institutional Accredited
Investors.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of: (a)
borrowed money; (b) obligations evidenced by bonds, Notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof); (c) banker's acceptances; (d) Capital Lease Obligations; (e) the
balance deferred and unpaid of the purchase price of any property, except any
such balance that constitutes an accrued expense or trade payable or other
amounts (other than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than 90 days past their original due date
or that are being contested in good faith and for which adequate reserves have
been made) incurred in the ordinary course of business that
10
<PAGE>
ordinarily would constitute a trade payable to trade creditors; (f) any Hedging
Obligations; (g) all Indebtedness of others secured by a Lien on any asset of
the specified Person (whether or not such Indebtedness is assumed by the
specified Person); provided, however, that the amount of such Indebtedness shall
be limited to the lesser of the fair market value of the assets or property to
which such Lien attaches and the amount of the Indebtedness so secured; and (h)
to the extent not otherwise included, the Guarantee by the specified Person of
any Indebtedness of any other Person, and any and all deferrals, renewals,
extensions, refinancings and refundings (whether direct or indirect) thereof and
any amendments, modifications or supplements thereto, if and to the extent any
of the preceding items (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of the specified Person
prepared in accordance with GAAP.
The amount of any Indebtedness outstanding as of any date shall be: (a)
the accreted value thereof, in the case of any Indebtedness issued with original
issue discount; and (b) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Intercompany Notes" means (a) the Aurora Intercompany Note, (b) the
Tunica Intercompany Note and (c) any other promissory notes issued by Restricted
Subsidiaries of the Company in favor of the Company or a Guarantor to evidence
advances by the Company or such Guarantor.
"Interest Period" means the period commencing on and including an interest
payment date and ending on and including the day immediately preceding the next
succeeding interest payment date.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in Section 4.07 hereof. The acquisition by the
Company or any Subsidiary of the Company of a Person that holds an Investment in
a third Person shall be deemed to be an Investment by the Company or such
Subsidiary in such third Person in an amount equal to the fair market value of
the Investment held by the acquired Person in such third Person in an amount
determined as provided in Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the Commonwealth of Massachusetts or at a
place of payment are authorized by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue on such payment for the intervening period.
11
<PAGE>
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and the Guarantors and sent to all Holders of the Notes for use by
such Holders in connection with the Exchange Offer.
"LIBOR" means, with respect to an Interest Period, the rate (expressed as
a percentage per annum) for deposits in United States dollars for a six-month
period beginning on the second London Banking Day after the Determination Date
that appears on Telerate Page 3750 as of 11:00 a.m., London time, on the
Determination Date. If Telerate Page 3750 does not include such a rate or is
unavailable on a Determination Date, LIBOR for the Interest Period shall be the
arithmetic mean of the rates (expressed as a percentage per annum) for deposits
in a Representative Amount in United States dollars for a six-month period
beginning on the second London Banking Day after the Determination Date that
appears on Reuters Screen LIBO Page as of 11:00 a.m., London time, on the
Determination Date. If Reuters Screen LIBO Page does not include two or more
rates or is unavailable on a Determination Date, the Calculation Agent shall
request the principal London office of each of four major banks in the London
interbank market, as selected by the Calculation Agent, to provide such bank's
offered quotation (expressed as a percentage per annum), as of approximately
11:00 a.m., London time, on such Determination Date, to provide banks in the
London interbank market for deposits in a Representative Amount in United States
dollars for a six-month period beginning on the second London Banking Day after
the Determination Date. If as least two such offered quotations are so
provided, LIBOR for the Interest Period shall be the arithmetic mean of such
quotations. If fewer than two such quotations are so provided, the Calculation
Agent shall request each of three major banks in New York City, as selected by
the Calculation Agent, to provide such bank's rate (expressed as a percentage
per annum), as of approximately 11:00 a.m., New York City time, on such
Determination Date, for loans in a Representative Amount in United States
Dollars to leading European banks for a six-month period beginning on the second
London Banking Day after the Determination Date. If at least two such rates are
provided, LIBOR for the Interest Period will be the arithmetic mean of such
rates. If fewer than two such rates are so provided, then LIBOR for the
Interest Period will be LIBOR in effect with respect to the immediately
preceding Interest Period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"London Banking Day" means any day in which dealings in United States
dollars are transacted or, with respect to any future date, are expected to be
transacted in the London interbank market.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however: (a) any
gain (but not loss), net of any related provision for taxes on such gain (but
not loss), realized in connection with: (1) any Asset Sale or (2) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries; and (b) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss).
12
<PAGE>
"Net Loss Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Event of Loss,
including, without limitation, insurance proceeds from condemnation awards or
damages awarded by any judgment, net of the direct costs in recovery of such Net
Loss Proceeds (including, without limitation, legal, accounting, appraisal and
insurance adjuster fees and any relocation expenses incurred as a result
thereof), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Event of
Loss, and any taxes paid or payable as a result thereof.
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, in each
case, after taking into account any available tax credits or deductions and any
tax sharing arrangements, and amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness: (a) as to which neither the
Company nor any of its Restricted Subsidiaries (1) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (2) is directly or indirectly liable as a Guarantor or
otherwise, or (3) constitutes the lender; (b) no default with respect to which
(including any rights that the Holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit upon notice, lapse of
time or both any Holder of any other Indebtedness (other than the Notes) of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (c) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person under Regulation
S.
"Note Guarantee" means the Guarantee by each Guarantor of the Company's
payment obligations under this Indenture and on the Notes, executed pursuant to
the provisions of this Indenture.
"Notes" has the meaning assigned to it in the preamble to this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 13.05 hereof.
13
<PAGE>
"Operating" means, with respect to the Shreveport Casino, the time that
(a) all Gaming Licenses have been granted and have not been revoked or
suspended, (b) the Shreveport Casino is in a condition (including installation
of FF&E) to receive guests in the ordinary course of business, (c) gaming and
other operations in accordance with applicable law are open to the general
public and are being conducted at the Shreveport Casino, (d) a permanent or
temporary certificate of occupancy has been issued for the Shreveport Casino by
the parish or parishes in Louisiana in which the Shreveport Casino will operate,
(e) a notice of termination of work relating to the Shreveport Casino has been
duly recorded in accordance with Louisiana law, and (f) the Shreveport Casino
has been documented by the U.S. Coast Guard in the name of QNOV or any successor
and the U.S. Coast Guard has issued a certificate of inspection for the
Shreveport Casino.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 13.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Investments" means: (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the Company in
a Person engaged in any Gaming Related Business, if as a result of such
Investment: (1) such Person becomes a Restricted Subsidiary of the Company or
(2) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Restricted Subsidiary of the Company; (d) any Investment made
as a result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with Section 4.10 hereof; (e) any acquisition
of assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) Hedging Obligations; (g) any Investment
by the Company or any of its Restricted Subsidiaries in Persons required in
order to secure liquor and/or other licenses or permits under applicable law
incident to the operation by the Company or any of its Restricted Subsidiaries
of a Gaming Related Business, provided the aggregate amount of such Investment
shall at no time exceed $100,000; (h) any Investment made in settlement of
gambling debts incurred by patrons of any of the Casinos owned or operated by
the Company or any of its Restricted Subsidiaries which settlements have been
entered into in the ordinary course of business; (i) a Shreveport Casino
Investment; (j) the transfer, sale, contribution or other conveyance to any
Subsidiary of those certain notes by Greate Bay Casino Corporation and PPI
Funding Corp. in favor of the Company; and (k) Investments not otherwise
permitted by the foregoing clauses (a) through (j) in an aggregate outstanding
amount of not more than $250,000.
"Permitted Liens" means: (a) Liens on the assets of the Company and any
Guarantor created by this Indenture and the Collateral Documents securing the
Notes and the Note Guarantees; (b) Liens in favor of the Company or the
Guarantors; (c) Liens on property of a Person existing at the time such Person
is merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary; (d) Liens on property existing at the time
of acquisition thereof by the Company or any Restricted Subsidiary of the
Company, provided that such Liens were in existence prior to the contemplation
of such acquisition; (e) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business; (f) Liens to secure
Indebtedness permitted by
14
<PAGE>
clause (a) of Section 4.09 covering only inventory and accounts receivable; (g)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (d) of the second paragraph of Section 4.09 hereof covering only the
assets acquired with such Indebtedness (except as to Permitted Vessel Liens);
(h) Liens existing on the date hereof, including Liens related to the HWCC-
Aurora Management Note; (i) Liens for taxes, assessments or governmental charges
or claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (j) Liens incurred in the
ordinary course of business of the Company or any Restricted Subsidiary of the
Company with respect to Obligations that do not exceed $5 million at any one
time outstanding; (k) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries; (l) Ground leases in respect of
the real property on which facilities owned or leased by the Company or any of
its Restricted Subsidiaries are located; (m) Liens arising from UCC financing
statements regarding property leased by the Company or any of its Restricted
Subsidiaries; (n) Easements, rights-of-way, navigational servitudes, zoning
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances which do not interfere in any material respect with the ordinary
conduct of business of the Company and its Restricted Subsidiaries; (o) Liens
incurred and pledges made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and social security benefits; (p)
Liens of carriers, warehousemen, mechanics, landlords, materialmen, repairmen or
other like Liens arising by operation of law or in the ordinary course of
business and consistent with industry practices and Liens on deposits made to
obtain the release of such Liens if (1) the underlying Obligations are not
overdue for a period of more than 60 days, or (2) such Liens are being contested
in good faith and by appropriate proceedings by the Company and adequate
reserves with respect thereto are maintained on the books of the Company in
accordance with GAAP, and (3) the Company is in compliance with the terms of the
security documents applicable to such Liens; (q) Liens permitted under the
Collateral Documents; (r) Permitted Vessel Liens; (s) without limiting the
ability of the Company or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien otherwise permitted under any of the foregoing clauses
(a) through (r), any extension, renewal or replacement, in whole or in part, of
any Lien described in the foregoing clauses, provided, however, that any such
extension, renewal or replacement Lien is limited to the property or assets
covered by the Lien being extended, renewed or replaced or substitute property
or assets, the value of which is (and, for property or assets having an
aggregate fair market value of more than $100,000, as determined by the Board of
Directors of the Company to be) not materially greater than the value of the
property or assets for which the substitute property or assets are substituted.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (a) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount (or accreted value, if applicable) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus all accrued interest thereon and the amount of all expenses and premiums
incurred in connection therewith); (b) such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (c) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (d)
15
<PAGE>
such Indebtedness is incurred either by the Company or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Permitted Vessel Liens" means a Lien on a vessel to secure FF&E Financing
or Capital Lease Obligations in accordance with Section 4.09(d) hereof where (a)
the creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
and other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Pratt Casino Corporation Acquisition" means the acquisition by the
Company of all of the capital stock of Pratt Casino Corporation pursuant to and
in accordance with the terms set forth in that certain Voting Agreement, dated
as of April 29, 1999, by and among the Company, Pratt Casino Corporation, PRT
Funding Corp., New Jersey Management, Inc., Greate Bay Casino Corporation and
certain creditors of PRT Funding Corp. named therein.
"Pratt Casino Corporation" means Pratt Casino Corporation, a Delaware
corporation.
"Pratt Casino Corporation Notes" means those certain notes, debt
instruments or other obligations to be issued by Pratt Casino Corporation to its
creditors pursuant to the joint plan of reorganization relating to the
bankruptcy proceedings of Pratt Casino Corporation, PRT Funding Corp. and New
Jersey Management, Inc. under Chapter 11 of the Bankruptcy Code.
"Pratt Management, L.P." means Pratt Management, L.P., a Delaware limited
partnership.
"Principals" means (a) Jack Pratt, Edward T. Pratt, Jr., William D. Pratt,
Crystal A. Pratt, Maria A. Pratt and Edward T. Pratt, III, their respective
estates and members of the immediate family (including adopted children) of any
of them who acquire Voting Stock of the Company from any such estates; (b) C.A.
Pratt Partners, Ltd., a Texas limited partnership, provided that the majority of
the voting equity interests of the partnership is Beneficially Owned by a Person
named in clause (a); and (c) the WDP, Jr. Family Trust, provided that a Person
named in clause (a) is (1) the Beneficial Owner of a majority of the Voting
Stock held by such trust, or (2) if the trust is irrevocable, the trustee of the
irrevocable trust is a Person named in clause (a).
16
<PAGE>
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"QNOV" means QNOV, a Louisiana general partnership.
"Qualified Equity Offering" means an offering of the Company's common
stock which results in net proceeds to the Company of at least $20 million.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in the
form of Exhibits A-1 and A-2 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in the
form of Exhibit A-3 hereto bearing the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its
nominee, issued in a denomination equal to the outstanding principal amount of
the Notes initially sold in reliance on Rule 903 of Regulation S.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date hereof, by and among the Company, the Guarantors and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Representative Amount" means a principal amount of not less than U.S.
$1,000,000 for a single transaction in the relevant market at the relevant time.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day distribution compliance period as
defined in Rule 903(b) of Regulation S.
17
<PAGE>
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
The Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service).
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Intermediary" means the financial institution(s) at which the
Aurora Expansion Cash Account is maintained.
"Series A Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Series B Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Shelf Registration Statement" has the meaning given it in the
Registration Rights Agreement.
"Shreveport Casino" means that certain casino, hotel complex and related
facilities located in Shreveport, Louisiana, and owned, leased or otherwise held
and to be developed and constructed by the Company or any of its Subsidiaries.
"Shreveport Casino Investment" means an Investment in a Subsidiary solely
for the purpose of developing, constructing and opening the Shreveport Casino in
an amount not to exceed $65 million from the date hereof; provided, however,
that to be eligible to make a Shreveport Casino Investment, the Company, not
later than March 31, 2000, must have obtained substantially all of the funds for
the development and construction, other than FF&E Financing to be incurred prior
to opening of the Shreveport Casino. If in any event the Shreveport Casino is
not Operating on or prior to June 1, 2001, any Investment made or to be made by
the Company in the Shreveport Casino, which when taken together with all other
Investments made in the Shreveport Casino, exceeds $25 million in the aggregate,
shall count as a Restricted Payment as of the date the Investment is made for
purposes of determining the aggregate amount of all Restricted Payments made by
the Company since the date of this Indenture as set forth in the first paragraph
of Section 4.07 hereof; provided, however, that the amounts treated as
Restricted Payments pursuant to this sentence shall only be treated as
Restricted Payments until the date that the Shreveport Casino is Operating.
Notwithstanding the foregoing, if the Company has made aggregate Investments of
less than $25 million in a Shreveport Casino Investment and the Company at any
time determines by resolution duly adopted by the Board of Directors to
terminate the development of the Shreveport Casino, the Company may make one or
more Investments in an alternative opportunity in a Gaming Related Business in
an amount which shall not exceed $25 million when taken together with all other
Investments made or to be made in the Shreveport Casino and in a Gaming Related
Business pursuant to this sentence.
18
<PAGE>
"Shreveport Management Agreement" means any agreement between the Company
or any of its Affiliates, including, without limitation, HWCC-Shreveport, with
QNOV or any of its Affiliates, relating to the operation and management of the
Shreveport Casino.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
this Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person: (a) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof); and (b) any partnership (1) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (2) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Substitute Management Agreement" means any management contract between
the Company and any of its Affiliates relating to the operation and management
of a Gaming Related Business in which the Company has made an Investment
pursuant to the last sentence of the definition of ``Shreveport Casino
Investment.''
"Tangible Consolidated Net Worth" means, with respect to a Restricted
Subsidiary, such Restricted Subsidiary's Total Consolidated Net Worth, adjusted
(a) to include the principal amount of all loans and advances made to such
Restricted Subsidiary by the Company or any other Restricted Subsidiary of the
Company and (b) to exclude the Intangible Assets of such Restricted Subsidiary
and its consolidated subsidiaries. For purposes of this definition, ``Intangible
Assets'' means the amount (to the extent reflected in computing the Restricted
Subsidiary's Total Consolidated Net Worth) of (1) all Investments in Persons
which are not Restricted Subsidiaries of the Company (except, in each case,
Investments which are readily marketable, valued at the lower of cost or
market), and (2) all unamortized debt discounts and expense, unamortized
deferred charges, goodwill, patents, trademarks, service marks, trade names,
copyrights, organization and capitalized development expenses and other
intangible assets, all as determined in accordance with GAAP.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service (or such other page as may replace Page 3750 on that
service).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Total Consolidated Net Worth" means, with respect to any Person, the
aggregate of capital, surplus and retained earnings of such Person and its
consolidated subsidiaries, as would be shown on the consolidated balance sheet
of such Person prepared in accordance with GAAP adjusted to exclude (to the
extent included in calculating such equity), (a) the amount of capital, surplus
and accrued but unpaid
19
<PAGE>
dividends attributable to any Disqualified Stock or treasury stock of such
Person or any of its consolidated subsidiaries; (b) all upward revaluations and
other write-ups in the book value of any asset of such Person or a consolidated
subsidiary of such Person subsequent to the date of this Indenture; (c) all
investments in subsidiaries that are not consolidated subsidiaries and in
Persons that are not subsidiaries; and (d) minority interests.
"Trustee" means the party named as such in the preamble to this Indenture
until a successor replaces it in accordance with the applicable provisions of
this Indenture and thereafter means the successor serving hereunder.
"Tunica Casino" means that certain casino, hotel complex and related
facilities located in Tunica, Mississippi and owned, leased or otherwise held by
HWCC-Tunica.
"Tunica Consulting Agreement" means the Consulting Agreement dated as of
January 1, 1994, between HWCC-Tunica and Pratt Casino Corporation.
"Tunica First Lien Deed of Trust" means the Leasehold Deed of Trust,
Security Agreement, Fixture Filing and Financing Statement made by HWCC-Tunica,
as Grantor, for the benefit of the Trustee, as Beneficiary (relating to a first-
lien Leasehold Deed of Trust securing this Indenture).
"Tunica First Lien Ship Mortgage" means the First Preferred Ship Mortgage
made by HWCC-Tunica, as mortgagor, to the Trustee, as mortgagee (relating to
Vessel No. 534006).
"Tunica Intercompany Note" means that certain amended and restated
promissory note dated as of the date hereof issued by HWCC-Tunica to the
Company.
"Tunica Second Lien Deed of Trust" means the Leasehold Deed of Trust,
Security Agreement, Fixture Filing and Financing Statement made by HWCC-Tunica,
as Grantor, for the benefit of the Company, as assigned to the Trustee, as
Beneficiary (relating to a second-lien Leasehold Deed of Trust securing the
Tunica Intercompany Note).
"Tunica Second Lien Ship Mortgage" means the Second Preferred Ship
Mortgage made by HWCC-Tunica, as mortgagor, to the Company, as assigned to the
Trustee, as Mortgagee (relating to Vessel No. 534006).
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent Global Note substantially in
the form of Exhibits A1 and A2 attached hereto that bears the Global Note Legend
and that has the "Schedule of Exchanges of Interests in the Global Note"
attached thereto, and that is deposited with or on behalf of and registered in
the name of the Depositary, representing a series of Notes that do not bear the
Private Placement Legend.
"Unrestricted Subsidiary" means HWCC-Holdings, HWCC-Golf Course Partners,
HWCC-Louisiana, Pratt Management, L.P., QNOV and any other Subsidiary of the
Company that is designated by the Boards of Directors of the Company and any
Restricted Subsidiaries as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement,
20
<PAGE>
contract, arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (1) to subscribe for additional Equity Interests or (2)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; and (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries. Any
designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall
be evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the preceding conditions and was
permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary
would fail to meet the preceding requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Company as of such date and, if such
Indebtedness is not permitted to be incurred as of such date under Section 4.09
hereof, the Company shall be in default of such covenant. The Board of Directors
of the Company may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that such designation shall be deemed
to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (A) such Indebtedness is permitted under
Section 4.09 hereof, calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period; and (B) no
Default or Event of Default would be in existence following such designation.
"U.S. Person" means a U.S. Person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing: (a) the sum
of the products obtained by multiplying (1) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (2) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment; by (b) the then outstanding principal
amount of such Indebtedness; provided, however, that with respect to any
revolving Indebtedness, the foregoing calculation of Weighted Average Life to
Maturity shall be determined based upon the total available commitments and the
required reductions of commitments in lieu of the outstanding principal amount
and the required payments of principal, respectively.
21
<PAGE>
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Affiliate Transaction"............................................ 4.12
"Asset Sale Offer"................................................. 4.10
"Authentication Order"............................................. 2.02
"Benefitted Party"................................................. 11.01
"Change of Control Offer".......................................... 4.16
"Change of Control Payment"........................................ 4.16
"Change of Control Payment Date"................................... 4.16
"Covenant Defeasance".............................................. 8.03
"DTC".............................................................. 2.03
"Event of Default"................................................. 6.01
"Excess Proceeds".................................................. 4.10
"Event of Loss Offer".............................................. 4.11
"Excess Loss Proceeds.............................................. 4.11
"incur"............................................................ 4.09
"Legal Defeasance"................................................. 8.02
"Offer Amount"..................................................... 3.09
"Offer Period"..................................................... 3.09
"Paying Agent"..................................................... 2.03
"Payment Default".................................................. 6.01
"Permitted Debt"................................................... 4.09
"Purchase Date".................................................... 3.09
"Registrar"........................................................ 2.03
"Repurchase Offer"................................................. 3.09
"Restricted Payments".............................................. 4.07
"Special Mandatory Redemption"..................................... 3.08
"Unit Legend"...................................................... 2.06
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Note Guarantees means the Company and the
Guarantors, respectively, and any successor obligor upon the Notes and the Note
Guarantees, respectively.
22
<PAGE>
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act or the
Exchange Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Fixed Rate Notes and the Trustee's certificate of
authentication, and the Floating Rate Notes and the Trustee's certificate of
authentication, shall be substantially in the form of Exhibits A1 and A2,
respectively, hereto. Except as otherwise set forth herein and in the Notes,
the terms of the Fixed Rate Notes and the Floating Rate Notes are identical.
The Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company, the Guarantors
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby. However, to the
extent any provision of any Note conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Fixed Rate Notes and Floating Rate Notes issued in
global form shall be substantially in the form of Exhibits A1, A2, A3 and A4
hereto, as applicable (including the Global Note Legend thereon and the
"Schedule of Exchanges of Interests in the Global Note" attached thereto).
Notes issued in definitive form shall be substantially in the form of Exhibits
A1 and A2 attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
23
<PAGE>
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Custodian, and registered in the name of the
Depositary or the nominee of the Depositary for the accounts of designated
agents holding on behalf of Euroclear or Cedel Bank, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depositary, together with copies of certificates
from Euroclear and Cedel Bank certifying that they have received certification
of non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Note or an IAI Global Note bearing a Private Placement Legend, all as
contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate
and an authentication order pursuant to Section 2.02 hereof from the Company.
Following the termination of the Restricted Period, the Company shall instruct
the Trustee that the Restricted Period has expired and shall instruct the
Trustee to exchange beneficial interests in the Regulation S Temporary Global
Note for beneficial interests in Regulation S Permanent Global Notes pursuant to
the Applicable Procedures. Simultaneously with the authentication of Regulation
S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary
Global Note. The aggregate principal amount of the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee, as the case may be, in connection with transfers of
interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
24
<PAGE>
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with Holders or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Agent.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian for the Depositary with respect to the
Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the
25
<PAGE>
Depositary or to another nominee of the Depositary, or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Company for Definitive
Notes if (i) the Company delivers to the Trustee notice from the Depositary that
it is unwilling or unable to continue to act as Depositary or that it is no
longer a clearing agency registered under the Exchange Act and, in either case,
a successor Depositary is not appointed by the Company within 120 days after the
date of such notice from the Depositary or (ii) the Company in its sole
discretion determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such effect to
the Trustee; provided that in no event shall the Regulation S Temporary Global
Note be exchanged by the Company for Definitive Notes prior to the expiration of
the Restricted Period. Upon the occurrence of either of the preceding events in
(i) or (ii) above, Definitive Notes shall be issued in such names as the
Depositary shall instruct the Trustee. Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Every Note authenticated and delivered in exchange for, or in lieu of, a Global
Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or
2.10 hereof, shall be authenticated and delivered in the form of, and shall be,
a Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a), however, beneficial interests in a Global Note
may be transferred and exchanged as provided in Section 2.06(b), (c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in the
same Restricted Global Note in accordance with the transfer restrictions set
forth in the Private Placement Legend; provided, however, that prior to the
expiration of the Restricted Period, transfers of beneficial interests in the
Temporary Regulation S Global Note may not be made to a U.S. Person or for
the account or benefit of a U.S. Person (other than an Initial Purchaser).
Beneficial interests in any Unrestricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers described
in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor of
such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in another
Global Note in an amount equal to the beneficial interest to be transferred
or exchanged and (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to be
credited with such increase or (B) (1) a written order from a Participant or
an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to the
Registrar containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above;
26
<PAGE>
provided, however, that in no event shall Definitive Notes be issued upon the
transfer or exchange of beneficial interests in the Regulation S Temporary
Global Note prior to the expiration of the Restricted Period. Upon
consummation of an Exchange Offer by the Company in accordance with Section
2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed
to have been satisfied upon receipt by the Registrar of the instructions
contained in the Letter of Transmittal delivered by the Holder of such
beneficial interests in the Restricted Global Notes. Upon satisfaction of all
of the requirements for transfer or exchange of beneficial interests in
Global Notes contained in this Indenture and the Notes or otherwise
applicable under the Securities Act, the Trustee shall adjust the principal
amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be transferred
to a Person who takes delivery thereof in the form of a beneficial interest
in another Restricted Global Note if the transfer complies with the
requirements of Section 2.06(b)(ii) above and the Registrar receives the
following:
(A) if the transferee will take delivery in the form of a beneficial
interest in a 144A Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
in item (1) thereof;
(B) if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Temporary Global Note or the Regulation S
Global Note, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a beneficial
interest in the IAI Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
and certificates and Opinion of Counsel required by item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in Restricted
Global Notes for Beneficial Interests in Unrestricted Global Notes. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of the beneficial interest to be transferred, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration
Rights Agreement; or
27
<PAGE>
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Company
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Company and the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein and
in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule 904
under Regulation S, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (2) thereof;
28
<PAGE>
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company
or any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications
in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and
the Company shall execute and the Trustee shall authenticate and deliver to
the Person designated in the instructions a Definitive Note in the
appropriate principal amount. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this Section
2.06(c) shall be registered in such name or names and in such authorized
denomination or denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so registered.
Any Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the
Private Placement Legend and shall be subject to all restrictions on transfer
contained therein.
(ii) Beneficial Interests in Regulation S Temporary Global Note to
Definitive Notes. Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes delivery
thereof in the form of a Definitive Note prior to the expiration of the
Restricted Period.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable Letter
of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
29
<PAGE>
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a Definitive Note that
does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Company so
requests or if the Applicable Procedures so require, an Opinion of Counsel in
form reasonably acceptable to the Company and the Registrar to the effect
that such exchange or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance with
the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute
and the Trustee shall authenticate and deliver to the Person designated in
the instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iv) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial interest
pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement
Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
30
<PAGE>
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note,
a certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in
item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under Regulation S, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant
to an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (3)(b) thereof;
or
(G) if such Restricted Definitive Note is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause to
be increased the aggregate principal amount of, in the case of clause (A)
above, the appropriate Restricted Global Note, in the case of clause (B)
above, the 144A Global Note, in the case of clause (C) above, the Regulation
S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the Holder,
in the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
31
<PAGE>
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange
such Notes for a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer
such Notes to a Person who shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Company
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Company and the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein and
in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any time.
Upon receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to
be increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
32
<PAGE>
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904
under Regulation S, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (2)
thereof; and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel required
by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the Holder,
in the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes
to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery thereof in
the form of an Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Company
so requests, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
33
<PAGE>
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes.
A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from
the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not broker-
dealers, (y) they are not participating in a distribution of the Exchange Notes
and (z) they are not affiliates (as defined in Rule 144) of the Company, and
(ii) Definitive Notes in an aggregate principal amount equal to the principal
amount of the Restricted Definitive Notes accepted for exchange in the Exchange
Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the following
form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES (A) TO OFFER, SELL,
PLEDGE OR OTHERWISE TRANSFER THIS NOTE ONLY (1) TO THE COMPANY, (2) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(4) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, OR (6) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT (AND BASED ON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO
34
<PAGE>
APPLICABLE JURISDICTION, AND (B) THAT IT WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE NOTE EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), (d)(ii),
(d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes
issued in exchange therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THIS INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THIS INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THIS
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THIS INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT
OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
35
<PAGE>
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and Definitive
Notes upon the Company's written order or at the Registrar's request, in each
case in accordance with the provisions of Section 2.02 hereof.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment of
a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 2.10, 3.06, 3.09, 4.10, 4.11, 4.16 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Global Notes or
Definitive Notes surrendered upon such registration of transfer or exchange.
(v) Neither the Company nor the Trustee shall be required (A) to
issue, to register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any selection
of Notes for redemption under Section 3.02 hereof and ending at the close of
business on the day of selection, (B) to register the transfer of or to
exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part or (C) to register the
transfer of or to exchange a Note between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent or
the Company shall be affected by notice to the contrary.
(vii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Holder or
Company satisfies the reasonable requirements of the Trustee. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
36
<PAGE>
Every replacement Note is an additional obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note; provided, however, Notes held by the Company or a Subsidiary of the
Company shall not be deemed to be outstanding for purposes of Section 3.07(b)
hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the
form of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the
37
<PAGE>
record retention requirement of the Exchange Act). Certification of the
destruction of all canceled Notes shall be delivered to the Company. The Company
may not issue new Notes to replace Notes that it has paid or that have been
delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
days or such shorter period as is satisfactory to the Trustee but not more than
60 days before a redemption date, an Officers' Certificate setting forth (a) the
clause of this Indenture pursuant to which the redemption shall occur, (b) the
redemption date, (c) the principal amount of Notes to be redeemed, (d) the
redemption price and (e) whether the optional redemption is in connection with a
refinancing, as described in Section 3.03 hereof.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee shall select the Notes for redemption or
repurchase as follows: (i) if the Notes are listed, in compliance with the
requirements of the principal national securities exchange on which the Notes
are listed; or (ii) if the Notes are not so listed, on a pro rata basis between
the Fixed Rate Notes and the Floating Rate Notes, if applicable, and on a pro
rata basis among the Fixed Rate Notes and among the Floating Rate Notes, by lot
or by such method as the Trustee shall deem fair and appropriate.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption or repurchase and, in the case of any Note selected for
partial redemption or repurchase, the principal amount thereof to be redeemed or
repurchased. Notes and portions of Notes selected shall be in amounts of $1,000
or whole multiples of $1,000, except that if all of the Notes of a Holder are to
be redeemed or repurchased, the entire outstanding amount of Notes held by such
Holder, even if not a multiple of $1,000, shall be redeemed or repurchased.
Except as provided in the preceding sentence, provisions of this Indenture that
apply to Notes called for redemption or purchase also apply to portions of Notes
called for redemption or purchased.
38
<PAGE>
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address; provided, however, that in
the case of an optional redemption under Section 3.07(a) or (b) hereof in which
the Company has called for redemption of all outstanding Notes in connection
with a refinancing of such Notes, the Company shall be permitted to (a) specify
a proposed redemption date, (b) change the proposed redemption date not more
than two times prior to a final redemption date by notice mailed to Holders not
later than five Business Days prior to the final redemption date, (c) establish
the final redemption date as a date not more than 90 days after the first notice
from the Company calling the Notes for optional redemption was mailed to the
Holders and (d) rescind the redemption offer at any time prior to the final
redemption date, which recision shall not cause the maturity of the Notes to
have changed.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed;
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes; and
(i) whether optional redemption is being made in a refinancing in
accordance with Section 3.07 hereof.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days, or such shorter period as
is satisfactory to the Trustee, prior to the redemption date, an Officers'
Certificate requesting that the Trustee give such notice and setting forth the
information to be stated in such notice as provided in the preceding paragraph.
39
<PAGE>
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price, other than as expressly set forth in such notice
as provided in the first paragraph of Section 3.03 hereof. Except as provided in
Section 3.03 hereof, notices of redemption may not be conditional.
Section 3.05. Deposit of Redemption Price.
On or prior to the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Notes to be redeemed on that date. The Trustee or
the Paying Agent shall promptly return to the Company any money deposited with
the Trustee or the Paying Agent by the Company in excess of the amounts
necessary to pay the redemption price of, and accrued interest and Liquidated
Damages, if any, on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption whether such redeemed Notes have
been delivered to the Paying Agent for payment. If a Note is redeemed on or
after an interest record date but on or prior to the related interest payment
date, then any accrued and unpaid interest and Liquidated Damages, if any, shall
be paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption shall not be so
paid upon surrender for redemption because of the failure of the Company to
comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case at
the rate provided in the Notes and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Fixed Rate Notes. At any time prior to May 1, 2002, the Company may
on any one or more occasions redeem up to 35% of the original aggregate
principal amount of Fixed Rate Notes issued under this Indenture at a redemption
price of 111.250% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date, with the net
cash proceeds of one or more Qualified Equity Offerings; provided, however that:
(i) at least 65% of the original aggregate principal amount of the Fixed Rate
Notes issued under this Indenture remains outstanding immediately after the
occurrence of such redemption (excluding Fixed Rate Notes held by the Company
and its Subsidiaries); and (ii) the redemption must occur within 60 days of the
date of the closing of such Qualified Equity Offering. Except as provided
herein, the Fixed Rate Notes will not be redeemable at the Company's option
prior to May 1, 2003. After May 1, 2003, the Company may redeem all or a part of
the Fixed Rate Notes upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount) plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on May 1 of the years indicated below:
40
<PAGE>
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003..................... 107.000%
2004..................... 104.666%
2005..................... 102.333%
2006 and thereafter...... 100.000%
</TABLE>
(b) Floating Rate Notes. The Floating Rate Notes may be redeemed, in
whole or in part, at any time and from time to time, at the option of the
Company upon not less than 30 nor more than 60 days' prior notice, at the
following redemption prices (expressed as percentages of principal amount), plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the twelve-month period beginning on May 1 of the
years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999...................... 105.000%
2000...................... 104.000%
2001...................... 103.000%
2002...................... 102.000%
2003...................... 101.000%
2004 and thereafter....... 100.000%
</TABLE>
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
(a) Redemption Pursuant to Gaming Authority. Notwithstanding any other
provision of this Article 3, if any Gaming Authority requires that a Person who
is a Holder or the Beneficial Owner of the Notes be licensed, qualified or found
suitable under applicable gaming laws, the Holder or Beneficial Owner, as the
case may be, shall apply for a license, qualification or a finding of
suitability within the required time period. If the Holder or Beneficial Owner
fails to apply for such license, qualification or finding of suitability within
the required time period, such Holder or Beneficial Owner, as the case may be,
shall be required to dispose of its Notes within the specified time and the
Company shall have the right to redeem the Notes of such Holder or Beneficial
Owner, subject to approval of any applicable Gaming Authority, at the lesser of
(i) the principal amount thereof, (ii) the amount that such Holder or Beneficial
Owner paid for the Notes or (iii) the fair market value of the Notes. Any
Holder of Notes required to apply for a finding of suitability must pay all
investigative fees and costs of the applicable Gaming Authorities in connection
with such investigation. Immediately upon the imposition of a requirement to
dispose of Notes by a Gaming Authority, such Holder or Beneficial Owner shall,
to the extent required by applicable law, have no further right (i) to exercise,
directly or indirectly, through any trustee or nominee or any other Person, any
right conferred by the Notes or (ii) to receive any interest, dividends,
economic interests or any other distributions or payments with respect to the
Notes or any remuneration in any form with respect to the Notes from the Company
or the Trustee. The Company is not required to pay or reimburse any Holder of
the Notes or Beneficial Owner who is required to apply for such license,
qualification or finding of suitability for the costs of the licensure or
investigation for such qualification or finding of suitability. Such expense
will be the obligation of such Holder or Beneficial Owner. The Company shall
notify the Trustee in writing of any such redemption as soon as practicable;
provided, however, that until such time as the Trustee receives notice from the
Company of such redemption in accordance with Section 13.02 hereof, the Trustee
shall be entitled to treat the Holder
41
<PAGE>
or Beneficial Owner as having all of its rights under the Indenture. The Company
shall not be responsible for any costs or expenses any such Holder may incur in
connection with its application or a license, qualification or a finding or
suitability. The Trustee shall report the names of the record Holders of the
Notes to any Gaming Authority when required by law.
(b) Special Mandatory Redemption. If, prior to January 31, 2000, the
Company determines in its sole discretion (as evidenced by a resolution of the
Company's Board of Directors certified by an Officer of the Company and
delivered to the Trustee) that it is unable to consummate the Pratt Casino
Corporation Acquisition by January 31, 2000, the Company shall redeem
$40,330,000 aggregate principal amount of Notes (the "Special Mandatory
Redemption") at a redemption price equal to 101% of the principal amount of the
Notes, plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the date of redemption; provided, however, that such redemption will occur on
January 31, 2000 if the Pratt Casino Corporation Acquisition has not been
consummated and the Company has not by January 31, 2000 delivered to the Trustee
an Officers' Certificate certifying as to the conditions required for the
release of the Escrowed Funds, in accordance with the terms and conditions set
forth in the Escrow Agreement. The redemption date for the Special Mandatory
Redemption shall be the earlier of (a) five days after the date that the
certified resolutions are delivered to the Trustee pursuant to the preceding
sentence, or (b) January 31, 2000. Any such redemption shall be made on a pro
rata basis between the Floating Rate Notes and the Fixed Rate Notes. Notice of
any Special Mandatory Redemption will be mailed to each Holder not less than
five days prior to the redemption date.
(c) Other than as specifically provided in this Section 3.08, any
redemption made pursuant to this Section 3.08 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.
(d) Except as described in this Section 3.08, the Company is not required
to make mandatory redemption or sinking fund payments with respect to the Notes.
Section 3.09. Repurchase Offers.
In the event that, pursuant to Section 4.10, 4.11 or 4.16 hereof, the
Company shall be required to commence an offer to all Holders to purchase Notes
(a "Repurchase Offer"), it shall follow the procedures specified below.
The Repurchase Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase at the Purchase Price (as determined in accordance
with Section 4.10, 4.11 or 4.16 hereof, as the case may be) the principal amount
of Notes required to be purchased pursuant to Section 4.10, 4.11 or 4.16 hereof,
as the case may be, in the aggregate (the "Offer Amount") or, if less than the
Offer Amount has been tendered, all Notes tendered in response to such
Repurchase Offer. Payment for any Notes so purchased shall be made in the same
manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no additional
interest shall be payable to Holders who tender Notes pursuant to such
Repurchase Offer.
Upon the commencement of a Repurchase Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all
42
<PAGE>
instructions and materials necessary to enable such Holders to tender Notes
pursuant to such Repurchase Offer. The Repurchase Offer shall be made to all
Holders. The notice, which shall govern the terms of such Repurchase Offer,
shall state:
(a) that the Repurchase Offer is being made pursuant to this Section 3.09
and Section 4.10, 4.11 or 4.16 hereof, as the case may be and the length of time
the Repurchase Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest and Liquidated Damages, if any;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Repurchase Offer shall cease to accrue
interest and Liquidated Damages, if any after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to any
Repurchase Offer may elect to have Notes purchased in integral multiples of
$1,000 only;
(f) that Holders electing to have a Note purchased pursuant to any
Repurchase Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a Depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice before the
Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased; and
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Notes shall be selected for purchase
pursuant to the terms of Section 3.02 hereof, and that Holders whose Notes were
purchased only in part shall be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered (or transferred by book-entry
transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, pursuant to the terms of Section 3.02 hereof, the Offer
Amount of Notes or portions thereof tendered pursuant to the Repurchase Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five Business
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Repurchase Offer on the Purchase
Date.
43
<PAGE>
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act, and any other securities laws and regulations thereunder to the
extent that such laws or regulations are applicable in connection with the
repurchase of the Notes pursuant to the Repurchase Offer. To the extent that
the provisions of Rule 14e-1 under the Exchange Act or any securities laws or
regulations conflict with the provisions of Sections 3.09, 4.10, 4.11 or 4.16 of
this Indenture, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under those
sections of this Indenture.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 12:00 noon Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an Affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
44
<PAGE>
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
(a) Whether required by the rules and regulations of the SEC, so long as
any Notes are outstanding, the Company shall furnish to the Holders of Notes (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by the Company's independent public
accountants and (ii) all current reports that would be required to be filed with
the SEC on Form 8-K if the Company were required to file such reports, in each
case, within 15 days following the time periods specified in the SEC's rules and
regulations. In addition, following consummation of the Exchange Offer, whether
or not required by the rules and regulations of the SEC, the Company shall file
a copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall
at all times comply with TIA (S) 314(a).
(b) For so long as any Notes remain outstanding, the Company and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(c) Whether required by the SEC, for so long as HWCC-Louisiana, or any
successor thereto, is an Unrestricted Subsidiary, the quarterly and annual
financial information required by Section 4.03(a) hereof shall include a
reasonably detailed presentation, either on the face of the financial statements
or in the footnotes thereto, of the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operations of HWCC-Louisiana, or any
successor thereto, and its consolidated subsidiaries, with an indication that
such entities are Unrestricted Subsidiaries and that any Indebtedness of such
entities is non-recourse to the Company.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor is
so required under the TIA) shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and the Collateral Documents, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and the Collateral Documents
and is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture or the Collateral Documents (or, if
a Default or Event of Default shall have occurred, describing all such Defaults
or Events of Default of which he or she may have knowledge and what action the
Company is taking or proposes to take with respect thereto) and that to the best
of his or her knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal of or interest, if any, on the
Notes is prohibited or if such event has occurred, a description of the event
and what action the Company is taking or proposes to take with respect thereto.
45
<PAGE>
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (a) declare or pay any dividend or
make any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect Holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable (1) in Equity
Interests (other than Disqualified Stock) of the Company or (2) to the Company
or a Restricted Subsidiary of the Company); (b) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company or any direct or indirect parent of the Company; (c) make any payment on
or with respect to, or purchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness that is subordinated to the Notes or that is
subordinated to the Note Guarantees, except (1) a payment of interest or
principal at the Stated Maturity thereof and (2) a payment of interest or
principal of intercompany Indebtedness permitted by clause (f) of the second
paragraph of Section 4.09 hereof, or (d) make any Restricted Investment (all
such payments and other actions set forth in clauses (a) through (d)
46
<PAGE>
above being collectively referred to as ``Restricted Payments''), unless, at the
time of and after giving effect to such Restricted Payment:
(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(ii) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and
(iii) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments and any Shreveport Casino Investment treated as a
Restricted Payment as set forth in the definition of "Shreveport Casino
Investment" as set forth in Section 1.01 hereof, made by the Company and its
Restricted Subsidiaries after the date hereof (excluding Restricted Payments
permitted by clauses (w) and (x) of the next succeeding paragraph) is less than
the sum, without duplication, of:
(A) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the date hereof to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus
(B) 100% of the aggregate net cash proceeds received by the Company
since the date hereof as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt
securities of the Company that have been converted into or exchanged for
such Equity Interests (other than Equity Interests (or Disqualified Stock
or debt securities) sold to any Subsidiary of the Company), plus
(C) 50% of any cash dividends received by the Company, Hollywood
Casino-Aurora or any other Restricted Subsidiary that is a Guarantor after
the date hereof from an Unrestricted Subsidiary of the Company, to the
extent such dividends were not otherwise included in Consolidated Net
Income of the Company for such period, plus
(D) to the extent that any Restricted Investment that was made after
the date hereof is sold for cash or otherwise liquidated or repaid for
cash, the sum of (I) 50% of the cash proceeds with respect to such
Restricted Investment in excess of the aggregate amount invested in such
Restricted Investment (less the cost of disposition, if any) and (II) the
aggregate amount invested in such Restricted Investment, plus
(E) to the extent that any Subsidiary that was designated as an
Unrestricted Subsidiary after the date hereof is redesignated as a
Restricted Subsidiary, the lesser of (I) the amount of the Investment in
the Subsidiary treated as a Restricted Payment at and since the time that
the Subsidiary was designated as an Unrestricted Subsidiary, as determined
by the last paragraph of this covenant, and (II) the fair market value of
the Investment in the Subsidiary as of the date that it is redesignated as
a Restricted Subsidiary.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
47
<PAGE>
(v) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(w) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any Guarantor or
of any Equity Interests of the Company in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of, Equity Interests of the Company (other than Disqualified Stock);
provided, however, that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (iii)(B) of the preceding paragraph;
(x) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any Guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(y) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary of the
Company held by any member of the Company's (or any of its Restricted
Subsidiaries') management (or the estate or trust for the benefit of any such
member of management) pursuant to any management equity subscription agreement
or stock option agreement; provided, however, that the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $250,000 in any calendar year and $1.0 million in the aggregate; and
(z) the redemption or repurchase of any debt or equity securities of the
Company or any Restricted Subsidiary required by, and in accordance with, any
order of any Gaming Authority, provided, however, that the Company has used its
reasonable best efforts to effect a disposition of such securities to a third-
party and has been unable to do so.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee. Not later than the date of
making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this section
were computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to: (a) pay dividends or make any other distributions on
its Capital Stock to the Company or any of its Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured by, its profits,
or pay any Indebtedness owed to the Company or any of its Restricted
Subsidiaries; (b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or (c) transfer any of its properties or assets to the Company or
any of its Restricted Subsidiaries.
The preceding restrictions will not apply to encumbrances or restrictions
existing under or by reason of: (1) Existing Indebtedness as in effect on the
date hereof and any amendments, modifications,
48
<PAGE>
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in such Existing
Indebtedness, as in effect on the date hereof; (2) this Indenture, the Notes,
the Note Guarantees and the Collateral Documents; (3) applicable law; (4) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided, however, that, in the case of Indebtedness, such Indebtedness incurred
pursuant to Section 4.09 hereof; (5) customary non-assignment provisions in
leases entered into in the ordinary course of business and consistent with past
practices; (6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of the
nature described in clause (c) of the preceding paragraph; (7) any agreement for
the sale or other disposition of a Restricted Subsidiary that restricts
distributions by that Restricted Subsidiary pending its sale or other
disposition; (8) Permitted Refinancing Indebtedness, provided, however, that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced; (9) Liens securing
Indebtedness that limit the right of the debtor to dispose of the assets subject
to such Lien; (10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, asset sale agreements, stock
sale agreements and other similar agreements entered into in the ordinary course
of business; and (11) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and the Company shall not issue any Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness (including
Acquired Debt) or issue Disqualified Stock, and the Company's Restricted
Subsidiaries may incur Indebtedness, if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 2 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred or the preferred stock or Disqualified
Stock had been issued, as the case may be, at the beginning of such four-quarter
period.
The first paragraph of this Section 4.09 shall not prohibit the incurrence
of any of the following items of Indebtedness (collectively, "Permitted Debt"):
(a) the incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount at any one time
outstanding under this clause (a), including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (a), not to exceed $12.5 million at any one time
outstanding;
49
<PAGE>
(b) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(c) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes and the related Note Guarantees to be issued on the
date hereof and the exchange Notes and the related Guarantees to be issued
pursuant to the Registration Rights Agreement;
(d) the incurrence by the Company or any of its Restricted Subsidiaries of
FF&E Financing or Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case, incurred for
the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in any Casino
owned and either operated or to be operated by the Company or such Restricted
Subsidiary, in an aggregate principal amount (including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (d)) with respect to any such
Casino not to exceed $7.0 million in aggregate principal amount for each Casino
owned or operated by the Company at any time outstanding;
(e) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by this Indenture to be incurred under the
first paragraph of this Section 4.09 or clauses (b), (c), (d) or (e) of this
paragraph;
(f) the issuance by any Restricted Subsidiary of preferred stock to the
Company or the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries as provided in Section 4.21 hereof, provided, however,
that with respect to any such intercompany Indebtedness: (1) any subsequent
issuance or transfer of Equity Interests that results in any such Indebtedness
being held by a Person other than the Company or a Restricted Subsidiary thereof
and (2) any sale or other transfer of any such Indebtedness to a Person that is
not either the Company or a Restricted Subsidiary thereof, shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be, that was not permitted by this
clause (f);
(g) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that was
incurred pursuant to this Section 4.09 or is otherwise permitted to be
outstanding pursuant to this Indenture;
(h) the guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Restricted Subsidiary of the Company that was otherwise
incurred pursuant to this Section 4.09;
(i) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of this covenant; provided, however,
in each such case, that the amount thereof is included in Fixed Charges of the
Company as accrued;
(j) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness in respect of performance, surety or appeal bonds provided in the
ordinary course of business; and
50
<PAGE>
(k) the assumption of the obligations under the Pratt Casino Corporation
Notes in connection with the Pratt Casino Corporation Acquisition, provided,
however, that such Indebtedness is retired or repaid within five Business Days
following the assumption of such Indebtedness.
The Company shall not incur any Indebtedness (including Permitted Debt)
that is contractually subordinated in right of payment to any other Indebtedness
of the Company unless such Indebtedness is also contractually subordinated in
right of payment to the Notes on substantially identical terms; provided,
however, that no Indebtedness of the Company shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Company solely
by virtue of being unsecured. For purposes of determining compliance with this
section, in the event that an item of proposed Indebtedness meets the criteria
of more than one of the categories of Permitted Debt described in clauses (a)
through (k) above, or is entitled to be incurred pursuant to the first paragraph
of this Section 4.09, the Company will be permitted to classify such item of
Indebtedness on the date of its incurrence, or later reclassify all or a portion
of such item of Indebtedness, in any manner that complies with this Section
4.09.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless: (a) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value of the assets or Equity
Interests issued or sold or otherwise disposed of; (b) such fair market value is
determined and evidenced by a resolution of the Company's Board of Directors set
forth in an Officers' Certificate delivered to the Trustee; and (c) at least 75%
of the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash. For purposes of this provision and not for
purposes of the definition of "Net Proceeds" (except to the extent set forth in
such definition with respect to the conversion of non-cash proceeds to cash),
each of the following shall be deemed to be cash: (1) the assumption of
Indebtedness or liabilities of the Company (as shown on the Company's most
recent balance sheet) that are pari passu in right of payment to the Notes or,
in the case of an Asset Sale by any Restricted Subsidiary, the assumption of
Indebtedness or liabilities of such Restricted Subsidiary (as shown on the
Restricted Subsidiary's most recent balance sheet) that are pari passu in right
of payment with the Note Guarantees that are assumed by the transferee of any
such assets, in each case, pursuant to a customary novation agreement that
releases the Company or such Restricted Subsidiary from further liability; and
(2) any securities, Notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are contemporaneously
(subject to ordinary settlement periods) converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received in that
conversion).
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the Restricted Subsidiary may apply such Net Proceeds: (A) to
acquire all or substantially all of the assets of, or a majority of the Voting
Stock of, a Gaming Related Business; (B) to make a capital expenditure with
respect to the then existing operations of the Company or any of its Restricted
Subsidiaries; or (C) to acquire other long-term assets that are used or useful
in a Gaming Related Business; provided, however, that the Company or the
Restricted Subsidiary, as the case may be, grants to the Collateral Agent, on
behalf of the Holders, a first priority perfected security interest, subject to
Permitted Liens, on any property or assets (including a pledge of any Voting
Stock pursuant to the Collateral Documents) acquired or constructed with the Net
Proceeds of any Asset Sale on the terms set forth herein and the Collateral
Documents to the extent permitted by applicable Gaming Authorities. Pending the
final application of any Net Proceeds, the Company or the Restricted Subsidiary
shall invest, within five Business Days following the date of receipt, the Net
Proceeds in Cash Equivalents held in an account in
51
<PAGE>
which the Trustee shall have a first priority perfected security interest
(subject to Permitted Liens) for the benefit of the Holders of the Notes. Net
Proceeds will be released to the Company for an application permitted by the
first sentence of this paragraph, or in connection with an Asset Sale Offer
pursuant to the terms of the Collateral Documents relating to the respective
Casino property, as described in the following paragraph.
Any Net Proceeds from Asset Sales that are not applied as provided in the
preceding paragraph will constitute "Excess Proceeds." Within ten days
following the date that the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will make an offer (an "Asset Sale Offer") to all Holders
of Notes to purchase with all of the Excess Proceeds an amount equal to the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of
principal amount plus accrued and unpaid interest and Liquidated Damages, if
any, to the date of purchase, and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by this Indenture
or the Collateral Documents. If the aggregate principal amount of Notes
tendered in such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased in the manner described under
Section 3.02 hereof. Upon completion of each Asset Sale Offer, the amount of
Excess Proceeds shall be reset at zero.
Section 4.11. Event of Loss.
Within 270 days after any Event of Loss with respect to any Collateral
comprising the Aurora Casino or the Tunica Casino with a fair market value (or
replacement cost, if greater) in excess of $1.0 million, the Company or the
affected Restricted Subsidiary of the Company, as the case may be, may apply the
Net Loss Proceeds for such Event of Loss: (i) to acquire all or substantially
all of the assets of or a majority of the Voting Stock in a Gaming Related
Business; (ii) to make a capital expenditure with respect to the then existing
operations of the Company or any of its Restricted Subsidiaries; or (iii) to
acquire other long-term assets that are used or useful in a Gaming Related
Business.
In addition, within 360 days after any Event of Loss with respect to any
Collateral comprising the Aurora Casino or the Tunica Casino with a fair market
value (or replacement cost, if greater) in excess of $1.0 million, the Company
or the affected Restricted Subsidiary of the Company, as the case may be, may
apply the Net Loss Proceeds for such Event of Loss to the rebuilding, repair,
replacement or construction of improvements to the respective casino, with no
concurrent obligation to make any purchase of any Notes. Any Net Loss Proceeds
for an Event of Loss with respect to any Collateral that are not reinvested as
provided in the first or second sentences of this Section 4.11 will be deemed
"Excess Loss Proceeds." Within ten days following the date that the aggregate
amount of Excess Loss Proceeds exceeds $10.0 million, the Company shall make an
offer to all Holders of Notes to purchase with the Excess Loss Proceeds from any
Event of Loss (an ``Event of Loss Offer'') in an amount equal to the maximum
principal amount of Notes that may be purchased out of all of such Excess Loss
Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase, in accordance with the
procedures set forth under Section 3.09 hereof. To the extent that the
aggregate amount of Notes and other pari passu Indebtedness tendered pursuant to
any Event of Loss Offer is less than the Excess Loss Proceeds, the Company may,
subject to the other provisions of this Indenture and the Collateral Documents,
use any remaining Excess Loss Proceeds for any purpose not prohibited by this
Indenture or the Collateral Documents. Upon completion of any such Event of
Loss Offer, the amount of Excess Loss Proceeds shall be reset at zero. Pending
the final application of such Net Loss Proceeds, such proceeds shall be
invested, within five Business Days of the date of receipt, in Cash Equivalents
held in an account in which the Trustee shall have a first priority perfected
security interest (subject to Permitted Liens) for
52
<PAGE>
the benefit of the Holders of the Notes. The Net Loss Proceeds will be released
to the Company to pay for or reimburse the Company for the actual cost of such
permitted application of Net Loss Proceeds as provided above or permitted
rebuilding, repair, replacement or construction, or such Event of Loss Offer,
pursuant to the terms of the Collateral Documents relating to the respective
Casino property. The Company or such Restricted Subsidiary shall grant to the
Trustee, on behalf of the Holders, a first priority perfected security interest,
subject to liens permitted by the Collateral Documents, on any property or
assets (including a pledged of any Voting Stock acquired pursuant to this
Section 4.11) acquired or constructed with the Net Loss Proceeds pursuant to the
terms set forth in this Section 4.11 and the Collateral Documents to the extent
permitted by applicable Gaming Authorities.
Section 4.12. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless: (a) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person; and (b) the Company delivers to the Trustee:
(1) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with this
covenant and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors; and
(2) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing,
other than in connection with (A) any transaction or series of
transactions involving the approval, amendment, restatement, replacement
or modification of a management or consulting agreement between the
Company or any Restricted Subsidiary of the Company, on the one hand, and
an Unrestricted Subsidiary, on the other hand, so long as such agreement
is on terms and conditions comparable to those that each of the Company or
such Restricted Subsidiary and such Unrestricted Subsidiary would
negotiate on an arm's-length basis with third parties, as determined by
the Board of Directors of the Company, and (B) any transaction or series
of transactions involving the approval, amendment, restatement,
replacement or modification of a management or consulting agreement
between the Company or any Restricted Subsidiary of the Company, on the
one hand, and any Affiliate, on the other hand, other than a Subsidiary of
the Company.
The foregoing paragraph shall not apply to the following: (a) any
employment agreement or arrangement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
the past practice of the Company or such Restricted Subsidiary; (b) transactions
between or among the Company and/or its Restricted Subsidiaries; (c) payment of
reasonable directors fees and expenses to Persons who are not otherwise
Affiliates of the Company; (d) sales of Equity Interests (other than
Disqualified Stock) to Affiliates of the Company; (e) Restricted Payments that
are permitted by the Section 4.07 hereof; (f) existing agreements as in effect
on the date
53
<PAGE>
hereof between the Company and its Affiliates, as such agreements may be
amended, restated, replaced or otherwise modified, as long as the amendment,
restatement, replacement or modified agreement is neither materially more
favorable to the Affiliate nor materially less favorable to the Company, as
determined by a majority of the non-interested members of the Board of Directors
of the Company; and (g) any other transactions that do not involve, in the
aggregate for all such transactions, the payment of more than $250,000 in
consideration in any one calendar year.
Section 4.13. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind on any asset now owned or hereafter acquired, except
Permitted Liens.
Section 4.14. Business Activities.
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than a Gaming Related Business, except to such
extent as would not be material to the Company and its Subsidiaries taken as a
whole.
Section 4.15. Corporate Existence.
Subject to Article 5 and Section 11.05 hereof, the Company and the
Guarantors shall do or cause to be done all things necessary to preserve and
keep in full force and effect (a) its corporate existence, and the corporate,
partnership or other existence of each of its Subsidiaries, in accordance with
the respective organizational documents (as the same may be amended from time to
time) of the Company or any such Subsidiary and (b) the rights (charter and
statutory), licenses and franchises of the Company and its Subsidiaries;
provided, however, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any of its Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries, taken as a whole, and that the loss thereof is
not adverse in any material respect to the Holders of the Notes.
Section 4.16. Offer to Repurchase Upon Change of Control.
If a Change of Control occurs, each Holder of Notes shall have the right
to require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that Holder's Notes pursuant to an offer described
below (a "Change of Control Offer"). In the Change of Control Offer, the
Company shall offer a payment (the "Change of Control Payment") in cash equal to
101% of the aggregate principal amount of Notes repurchased plus accrued and
unpaid interest and Liquidated Damages, if any, thereon, to the date of
purchase. Within ten days following any Change of Control, the Company shall
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the date
(the "Change of Control Payment Date") specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed, pursuant to the procedures set forth in Section 3.09 hereof,
and described in such notice.
On the Change of Control Payment Date, the Company will, to the extent
lawful: (a) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer; (b) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered; and (c) deliver or cause to be delivered to the
Trustee the Notes so
54
<PAGE>
accepted together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to each Holder of Notes so tendered the Change of
Control Payment for such Notes, and the Trustee shall promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a new Note equal
in principal amount to any unpurchased portion of the Notes surrendered, if any;
provided, however that each such new Note shall be in a principal amount of
$1,000 or an integral multiple thereof.
Section 4.17. Additional Subsidiary Guarantees.
The Company shall, and shall cause each of their Restricted Subsidiaries
to, comply with Section 11.02 hereof.
Section 4.18. Designation of Restricted and Unrestricted Subsidiaries.
The Company's Board of Directors may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if that designation would not cause a Default;
provided, however, that in no event shall the business currently operated by
Hollywood Casino-Aurora or HWCC-Tunica be transferred to or held by an
Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an
Unrestricted Subsidiary, the aggregate fair market value of all outstanding
Investments owned by the Company and its Restricted Subsidiaries in the
Restricted Subsidiary so designated will be deemed to be an Investment made as
of the time of such designation and will either reduce the amount available for
Restricted Payments under clause (iii) of Section 4.07 hereof or reduce the
amount available for future Investments under one or more clauses of the
definition of "Permitted Investments," as the Company shall determine. The
designation of any such Restricted Subsidiary as an Unrestricted Subsidiary
shall only be permitted if such Investment would be permitted at that time and
if such Restricted Subsidiary otherwise meets the definition of an "Unrestricted
Subsidiary" set forth in Section 1.01 hereof. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such
redesignation would not cause a Default hereunder.
Section 4.19. Limitation on Issuances and Sales of Equity Interests in
Subsidiaries.
All of the Company's Restricted Subsidiaries shall be wholly owned by the
Company, by one or more of its Restricted Subsidiaries or by the Company and one
or more of its Restricted Subsidiaries. The Company shall not, and shall not
permit any of its Restricted Subsidiaries to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Restricted Subsidiary of the
Company to any Person (other than the Company or a Restricted Subsidiary of the
Company), unless: (a) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Restricted Subsidiary; and
(b) the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with Section 4.10 hereof. In addition,
the Company shall not permit any Restricted Subsidiary of the Company to issue
any of its Equity Interests (other than, if necessary, shares of its Capital
Stock constituting directors' qualifying shares) to any Person other than to the
Company or a Restricted Subsidiary of the Company.
Section 4.20. Change in Management Contracts.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any amendment to the Aurora Management Agreement or
the Tunica Consulting Agreement or grant any consent with respect to, or waiver
of, any of the terms of these agreements, except amendments, consents and
waivers to cure ambiguities, defects or inconsistencies, or make changes that do
not adversely affect the rights of any Holder of the Notes; provided, however,
that the Aurora Management Agreement and
55
<PAGE>
the Tunica Consulting Agreement may be terminated in connection with or
subsequent to the Pratt Casino Corporation Acquisition.
Section 4.21. Advances to Restricted Subsidiaries.
Any advance to Restricted Subsidiaries made by the Company or any of its
Restricted Subsidiaries shall be evidenced by an Intercompany Note in favor of
the Company, other than equity contributions made by the Company to any of its
Restricted Subsidiaries. Any such Intercompany Note shall be pledged pursuant
to the Collateral Documents as Collateral to secure the Notes. Each
Intercompany Note other than the Aurora Intercompany Note shall be payable upon
demand and shall bear interest at the same rate as the Notes. The Company shall
not permit Hollywood Casino-Aurora to prepay principal under the Aurora
Intercompany Note for so long as Hollywood Casino-Aurora is not a Guarantor of
the Notes unless otherwise required by Government Authorities.
Section 4.23. Compliance with Securities Laws.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with each
repurchase of Notes pursuant to Sections 4.10, 4.11 or 4.16 hereof. To the
extent that the provisions of any securities laws or regulations conflict with
Sections 3.09, 4.10, 4.11 and 4.16 hereof, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under this Indenture by virtue of such conflict.
Section 4.24. Payments for Consent.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder of Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
and is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Section 4.25. Further Assurances.
The Company shall (and shall cause each of their Restricted Subsidiaries
to) do, execute, acknowledge, deliver, record, re-record, file, re-file,
register and re-register, any and all such further acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments as may
reasonably be required from time to time in order (i) to carry out more
effectively the express purposes of the Collateral Documents, (ii) to subject to
the Liens created by any of the Collateral Documents any of the properties,
rights or interests required to be encumbered thereby and contemplated thereby,
(iii) to perfect and maintain the validity, effectiveness and priority of any of
the Collateral Documents and the Liens intended to be created thereby and
contemplated thereby, and (iv) to better assure, convey, grant, assign,
transfer, preserve, protect and confirm to the Trustee any of the rights granted
or now or hereafter intended by the parties thereto to be granted to the Trustee
or under any other instrument executed in connection therewith or granted to the
Company under the Collateral Documents or under any other instrument executed in
connection therewith.
56
<PAGE>
Section 4.26. Gaming Licenses.
The Company shall use its best efforts to obtain and retain in full force
and effect at all times all Gaming Licenses necessary for the operation of the
Aurora Casino, the Tunica Casino and the Shreveport Casino.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
Neither the Company nor any Guarantor may, directly or indirectly: (a)
consolidate or merge with or into another Person (whether the Company or the
Guarantor is the surviving corporation); or (b) sell, assign, transfer, convey
or otherwise dispose of all or substantially all of the properties or assets of
the Company and its Subsidiaries taken as a whole, in one or more related
transactions, to another Person; unless:
(1) either (A) the Company or the Guarantor is the surviving corporation
or (B) the Person formed by or surviving any such consolidation or merger (if
other than the Company or the Guarantor) or to which such sale, assignment,
transfer, conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if
other than the Company or the Guarantor) or the Person to which such sale,
assignment, transfer, conveyance or other disposition shall have been made
assumes all the obligations of the Company or the Guarantor under the Notes,
this Indenture, the Registration Rights Agreement and the Collateral Documents
pursuant to agreements reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) the Company or the Guarantor, as the case may be, or the Person formed
by or surviving any such consolidation or merger (if other than the Company or
such Guarantor), or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made will, on the date of such transaction
after giving pro forma effect thereto and any related financing transactions as
if the same had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof.
This section will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among the Company and any of its
Restricted Subsidiaries or any of the Guarantors. Moreover, in any event, no
merger or other dissolution of HWCC-Aurora Management, Pratt Management, L.P. or
Pratt Casino Corporation in connection with the Company's acquisition of Pratt
Casino Corporation and the termination of the Aurora Management Agreement and
the Tunica Consulting Agreement shall constitute a breach of the provisions of
this Section 5.01.
57
<PAGE>
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
(a) the surviving entity or acquiring corporation shall (1) assume all of the
Obligations of the acquired Person incurred under this Indenture, the Notes, the
Guarantees and the Collateral Documents, as applicable, (2) acquire and own and
operate, directly or through Subsidiaries, all or substantially all of the
properties and assets then constituting the assets of the Company or any of its
Restricted Subsidiaries, as the case may be, (3) have been issued, or have a
consolidated Subsidiary which has been issued, Gaming Licenses to operate the
acquired casino operations and entities substantially in the manner and scope
operated prior to such transaction, which Gaming Licenses are in full force and
effect and (4) be in compliance fully with Section 5.01 hereof and (b) the
Company shall deliver to the Trustee an Officers' Certificate and Opinion of
Counsel, subject to customary assumptions and exclusions, stating that the
proposed transaction complies with this Article 5; provided, further, however,
that the predecessor Person shall not be relieved from the obligation to pay the
principal of, premium and Liquidated Damages, if any, and interest on, the Notes
except in the case of a sale of all of one or the Company's assets that meets
the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
Each of the following is an Event of Default:
(a) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes;
(b) default in payment when due of the principal of, or premium, if any,
on the Notes;
(c)(1) default in the payment of principal of, premium, if any, and
interest on Notes required to be purchased pursuant to Sections 3.07(b), 4.10,
4.11 and 4.16 hereof, when due and payable; or (2) failure to perform or comply
with the provisions described under (A) Section 5.01 hereof or (B) Section 4.07
hereof (but only if the failure under this clause (B) is caused by a Restricted
Payment described in clauses (a) through (c) of Section 4.07 hereof;
(d) failure by the Company or any of its Restricted Subsidiaries for 60
days after notice to comply with any of the other agreements in this Indenture
or the Collateral Documents;
(e) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
58
<PAGE>
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date hereof, if that default:
(i) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default"); or
(ii) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $8.0 million or more;
(f) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $8.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days;
(g) failure to perform or breach by the Company or any Guarantor of any
material representation or warranty or agreement in the Collateral Documents,
the repudiation by any party of any of its obligations under any of the
Collateral Documents or the unenforceability of any of the Collateral Documents
against any party for any reason, continued for 30 days after written notice
from the Trustee or Holders of at least 25% in principal amount of the
outstanding Notes pursuant to Section 6.06 hereof;
(h) except as otherwise permitted by this Indenture, a default by any
Guarantor of the obligations of such Guarantor under its Note Guarantee, any
Note Guarantee by HWCC-Tunica, HWCC-Shreveport or any other Guarantor that has a
Tangible Consolidated Net Worth of $8 million shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any such Guarantor, or any Person acting on behalf of
any such Guarantor, shall deny or disaffirm its obligations under its Note
Guarantee;
(i) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in an
involuntary case;
(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors; or
(v) generally is not paying its debts as they become due; or
(j) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(1) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an involuntary case;
59
<PAGE>
(2) appoints a custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary; or
(3) orders the liquidation of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
and
(k) any revocation, suspension or loss of any gaming license which results
in the cessation or suspension of business at any Casino owned by the Company or
any of its Restricted Subsidiaries for a period of more than 120 consecutive
days.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (i) or (j) of Section 6.01 hereof with respect to the Company, any
Restricted Subsidiary that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable immediately. Upon any such declaration, the Notes shall
become due and payable immediately. Notwithstanding the foregoing, if an Event
of Default specified in clauses (i) or (j) of Section 6.01 hereof occurs with
respect to the Company, any Restricted Subsidiary that is a Significant
Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute
a Significant Subsidiary, all outstanding Notes shall be due and payable
immediately without further action or notice. The Holders of a majority in
aggregate principal amount of the then outstanding Notes by written notice to
the Trustee may on behalf of all of the Holders rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest,
premium or Liquidated Damages, if any, that has become due solely because of the
acceleration) have been cured or waived.
Notwithstanding the foregoing, the Trustee shall have no obligation to
accelerate the Notes if in the best judgment of the Trustee acceleration is not
in the best interest of the Holders of the Notes.
If an Event of Default occurs by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding payment of the premium that the Company would have had to pay if the
Company then had elected to redeem the Fixed Rate Notes pursuant to Section
3.07(a) hereof, or the Floating Rate Notes pursuant to Section 3.07(b) hereof,
then upon acceleration of the Notes, an equivalent premium to the premium that
the Company would have had to pay pursuant to Section 3.07(a) hereof, in the
case of the Fixed Rate Notes, and Section 3.07(b) hereof, in the case of the
Floating Rate Notes, shall also become and be immediately due and payable, to
the extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium and Liquidated
Damages, if any, and interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
60
<PAGE>
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related Payment Default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it, including the exercise of any remedy under any of the
Collateral Documents. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture that the Trustee reasonably determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity reasonably satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a written direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
61
<PAGE>
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder;
provided, however, that a Holder shall not have the right to institute any such
suit for the enforcement of payment if and to the extent that the institution or
prosecution thereof or the entry of judgment therein would, under applicable
law, result in the surrender, impairment, waiver or loss of the Lien of this
Indenture upon any property subject to such Lien.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
62
<PAGE>
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any
and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of
a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
Section 6.12. Management of Casinos.
Notwithstanding any provision of this Article 6 to the contrary, following
an Event of Default which permits the taking of possession of any Casino that is
owned by the Company or a Guarantor, the appointment of a receiver of either the
Collateral or any part thereof pursuant to any of the Collateral Documents, or
after such taking of possession of such appointment, the Trustee or any such
receiver shall be authorized, in addition to the rights and powers of the
Trustee and such receiver set forth in this Indenture and the Collateral
Documents, to retain one or more experienced operators of casinos to manage such
Casino on behalf of the Holders of the Notes, provided, however, that any such
operator shall have all necessary legal qualifications, including all applicable
Gaming Licenses to manage any such Casino.
Section 6.13. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any judicial proceeding to
enforce any right or remedy under this Indenture or any Collateral Document and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case the Company, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding has been
instituted.
63
<PAGE>
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee in writing and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity reasonably satisfactory to it against any loss, liability
or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
(g) Subject to applicable laws, the Trustee and its directors, officers,
employees and Affiliates shall cooperate with all Gaming Authorities by
providing such information and documentation
64
<PAGE>
concerning the Indenture, the Notes and the Collateral Documents in the
Trustee's control as may from time to time be requested by such Gaming
Authorities.
Section 7.02. Rights of Trustee.
Subject to the provisions of Section 7.01:
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company or any Affiliate of
the Company with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture, the Collateral Documents or the
Notes, it shall not be accountable for the Company's use of the proceeds from
the Notes or any money paid to the Company or upon the Company's direction under
any provision of this Indenture or the Collateral Documents, it shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Trustee, and it shall not be responsible for any statement or
recital herein or any statement in the Notes or any
65
<PAGE>
other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium and
Liquidated Damages, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA (S) 313(a) (but if no event described in TIA (S)
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA (S)
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company. The Company shall file a copy of each report
with the SEC and each stock exchange on which the Notes are listed in accordance
with TIA (S) 313(d). The Company shall promptly notify the Trustee when the
Notes are listed on any stock exchange.
Section 7.07. Reports by Trustee to Gaming Authorities.
(a) The Trustee shall transmit by mail to the Casino Control Commission,
the Louisiana Gaming Control Board and the Mississippi Gaming Commission (i) an
initial list of the Holders promptly after the issuance of the Notes, (ii)
current lists of the Holders appearing in the register of the Notes on a twice-
per-year basis, no later than March 1 and September 1 of each year, and (iii)
upon request by the Casino Control Commission, the Louisiana Gaming Control
Board, the Mississippi Gaming Commission or other Gaming Authorities, such
additional information with respect to the Holders as the Trustee may obtain
through its good faith efforts.
(b) The Trustee shall notify the Casino Control Commission, the Louisiana
Gaming Control Board, and the Mississippi Gaming Commission of (i) the amount of
the proceeds from the sale of the Notes, (ii) the interest rate applicable to
the Notes, and (iii) promptly after any change thereto, notice of any change(s)
to the foregoing.
(c) The Trustee shall notify the Casino Control Commission, the Louisiana
Gaming Control Board, and the Mississippi Gaming Commission, simultaneously with
any notice given to the Holders, of any Default or acceleration under the Notes,
this Indenture, the Collateral Documents, or any other documents, instrument,
agreement, covenant, or condition related to the issuance of the Notes, whether
declared or effectuated by the Trustee or the Holders. The Trustee shall notify
the Casino Control Commission, the Louisiana Gaming Control Board, and the
Mississippi Gaming Commission on a continuing basis and in writing, of any
actions taken by the Trustee or the Holders with regard to such default,
acceleration or similar matters related thereto.
66
<PAGE>
(d) The Trustee shall notify the Casino Control Commission, the Louisiana
Gaming Control Board and the Mississippi Gaming Commission of the removal or
resignation of the Trustee promptly after such removal or resignation.
(e) The Trustee shall notify the Casino Control Commission, the Louisiana
Gaming Control Board and the Mississippi Gaming Commission of any transfer or
assignment of any rights under this Indenture, the Collateral Documents, or any
other documents, instrument, agreement, covenant or condition related to the
issuance of the Notes by the Company promptly after such transfer or agreement.
(f) The Trustee shall provide to the Casino Control Commission, the
Louisiana Gaming Control Board and the Mississippi Gaming Commission promptly
after its execution of the same, copies of any and all amendments or
modifications to this Indenture, the Notes, the Collateral Documents, or any
other documents, instrument, agreement, covenant or condition related to the
issuance of the Notes.
(g) The Company agrees to provide such information as the Trustee shall
request, including the mailing address of the Gaming Authorities named in this
Section 7.07, in order to permit the Trustee to mail the reports described
herein. The Company shall promptly provide written notice to the Trustee of the
occurrence of any the events described in this Section 7.07. Any failure by the
Trustee to fulfill the reporting obligations in this Section 7.07 shall not be
deemed to be negligence on the part of the Trustee, and the Trustee shall have
no liability to the Company, the Guarantors or the Holders for any failure to
comply with the reporting obligations in this Section 7.07.
Section 7.08. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel, except for such disbursements, advances and
expenses as are attributable to the Trustee's negligence, willful misconduct or
bad faith.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.08) and defending itself against any claim (whether asserted by
the Company or any Holder or any other Person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence, willful misconduct or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need
not pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Company under this Section 7.08 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to
67
<PAGE>
pay principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(i) or (j) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.09. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company and applicable Gaming
Authorities. Subject to applicable gaming laws, the Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.11 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a Holder
for at least six months, fails to comply with Section 7.11, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall take all steps necessary, as identified by the
Company, to be approved by applicable Gaming Authorities, if required, and
deliver a written acceptance of its appointment to the retiring Trustee and to
the Company. Thereupon, the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. The successor Trustee
shall mail a notice of its succession to Holders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
provided all sums owing to the Trustee hereunder have been paid and subject to
the Lien
68
<PAGE>
provided for in Section 7.08 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.09, the Company's obligations under Section 7.08
hereof shall continue for the benefit of the retiring Trustee.
Section 7.10. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee;
provided, however, such corporation shall be otherwise eligible and qualified
under this Article and in accordance with any applicable rules or regulations of
Gaming Authorities.
Section 7.11. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.12. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
Section 7.13. Authorization of Trustee to Take Other Actions.
The Trustee is hereby authorized to enter into and take any actions or
deliver such consents required by or requested under each of the Collateral
Documents and such other documents as directed in writing by the Holders of a
majority of outstanding aggregate principal amount of the Notes. If at any time
any action by or the consent of the Trustee is required under any of the
Collateral Documents or any other document entered into by the Trustee at the
direction of a majority of the Holders of outstanding aggregate principal amount
of the Notes, such action or consent shall be taken or given by the Trustee upon
the consent to such action by the Holders of a majority of outstanding aggregate
principal amount of the Notes.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate delivered to the Trustee, at
any time, elect to have either Section 8.02 or 8.03 hereof be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article 8.
69
<PAGE>
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders
of outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium and Liquidated Damages, if any, and interest on such
Notes when such payments are due, (b) the Company's obligations with respect to
such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article 8. Subject to
compliance with this Article 8, the Company may exercise its option under this
Section 8.02 notwithstanding the prior exercise of its option under Section 8.03
hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.14, 4.16, 4.17, 4.18. 4.19, 4.20, 4.21, 4.22, 4.23, 4.24 and
4.26 hereof and clause (iv) of Section 5.01 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 8.04
are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.01 hereof of the option applicable to this Section 8.03, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(c) through 6.01(f) and Section 6.01(k) hereof shall not constitute Events
of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
70
<PAGE>
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on the outstanding Notes on the stated date for payment thereof or
on the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Notes pursuant to this Article 8 concurrently with
such incurrence) or insofar as Sections 6.01(i) or 6.01(j) hereof is concerned,
at any time in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
(which may be subject to customary exceptions) to the effect that on the 91st
day following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
71
<PAGE>
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium and Liquidated Damages, if
any, and interest, but such money need not be segregated from other funds except
to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium and
Liquidated Damages, if any, or interest on any Note and remaining unclaimed for
two years after such principal, and premium, if any, or interest has become due
and payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in the New York Times and The Wall Street Journal (national edition),
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such notification
or publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the
72
<PAGE>
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Notes,
the Note Guarantees or the Collateral Documents without the consent of any
Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes in case of a merger or consolidation or sale of all or
substantially all of the Company's assets;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any such Holder;
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA; or
(f) to enter into additional or supplemental Collateral Documents
contemplated by Section 4.10, 4.11 and 10.01 hereof.
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture (including Sections 3.09, 4.10, 4.11 and
4.16 hereof), the Notes, the Note Guarantees and the Collateral Documents with
the consent of the Holders of at least a majority in principal amount of the
Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
compliance with any provision of this Indenture, the Notes, the Note Guarantees
or the Collateral Documents may be waived with the consent of the Holders of a
majority in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes).
73
<PAGE>
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding voting as a
single class may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver under this Section 9.02 may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes except as
provided above with respect to Sections 3.09, 4.10, 4.11 and 4.16 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of, or
interest or premium, or Liquidated Damages, if any, or interest on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes and a
waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of, of or interest or premium or Liquidated Damages, if any, on the
Notes;
(g) waive a redemption payment with respect to any Note except as provided
above with respect to Sections 3.09, 4.10, 4.11 and 4.16 hereof;
(h) release any Guarantor from any of its obligations under its Note
Guarantee or this Indenture, except in accordance with the terms of this
Indenture;
74
<PAGE>
(i) release all or substantially all of the Collateral from the Lien of
this Indenture or the Collateral Documents (except in accordance with the
provisions thereof); or
(j) make any change in the preceding amendment and waiver provisions.
Any amendment to, or waiver of the provisions of any of the Collateral
Documents relating to Section 4.13 or Article 10 hereof shall require the
consent of the Holders of at least 85% in aggregate principal amount of Notes
then outstanding.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Company may not sign an amendment or supplemental Indenture until its Board of
Directors approves it. In executing any amended or supplemental indenture, the
Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall
be fully protected in relying upon, in addition to the documents required by
Section 13.04 hereof, an Officer's Certificate and an Opinion of Counsel stating
that the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
75
<PAGE>
ARTICLE 10
COLLATERAL AND SECURITY
Section 10.01. Security.
The due and punctual payment of the principal of, premium and Liquidated
Damages, if any, and interest on the Notes when and as the same shall be due and
payable, whether on an interest payment date, at maturity, by acceleration,
repurchase, redemption or otherwise, and interest on the overdue principal of,
premium and Liquidated Damages, if any, and interest on the Notes and
performance of all other obligations of the Company and the Guarantors to the
Holders of Notes or the Trustee under this Indenture, the Notes and the Note
Guarantees, according to the terms hereunder or thereunder, shall be secured by
the Collateral, as provided in the Collateral Documents which the Company and
the Guarantors have entered into simultaneously with the execution of this
Indenture for the benefit of the Holders of Notes. Each Holder of Notes, by its
acceptance thereof, consents and agrees to the terms of the Collateral Documents
and the Intercreditor Agreement as the same may be in effect or may be amended
from time to time in accordance with its terms and authorizes and directs the
Trustee to enter into the Collateral Documents and to perform its obligations
and exercise its rights thereunder in accordance therewith. The Company and the
Guarantors shall deliver to the Trustee copies of all documents executed
pursuant to this Indenture and the Collateral Documents and the Intercreditor
Agreement and shall do or cause to be done all such acts and things as may be
necessary or proper, or as may be required by the provisions of the Collateral
Documents to assure and confirm to the Trustee the security interest in the
Collateral contemplated hereby, by the Collateral Documents, or any part
thereof, as from time to time constituted, so as to render the same available
for the security and benefit of this Indenture and of the Notes and the Note
Guarantees secured hereby, according to the intent and purposes herein and
therein expressed. The Company shall take, or shall cause its Restricted
Subsidiaries to take, upon request of the Trustee, any and all actions
reasonably required to cause the Collateral Documents to create and maintain, as
security for the obligations of the Company hereunder, a valid and enforceable
perfected Lien on the Collateral, subject to Liens permitted by the Collateral
Documents.
Section 10.02. Recording and Opinions.
The Company and the Guarantors will cause the applicable Collateral
Documents and any financing statements, and all amendments or supplements to
each of the foregoing and any other similar security documents as necessary, to
be registered, recorded and filed and/or re-recorded, re-filed and renewed in
such manner and in such place or places, if any, as may be required by law or
reasonably requested by the Trustee in order fully to preserve and protect the
Lien securing the obligations under the Notes and the Note Guarantees pursuant
to the Collateral Documents.
The Company, the Guarantors and any other obligor shall furnish to the
Trustee:
(a) promptly after the execution and delivery of this Indenture, and
promptly after the execution and delivery of any other instrument of further
assurance or amendment, an Opinion of Counsel in the United States either (i)
stating that, subject to customary assumptions and exclusions, in the opinion of
such counsel, this Indenture, the Aurora Mortgage, the Aurora Fleet Mortgage,
the Tunica First Lien Deed of Trust, the Tunica Second Lien Deed of Trust, the
Tunica First Lien Ship Mortgage and the Tunica Second Lien Ship Mortgage and
other applicable Collateral Documents and all other instruments of further
assurance or amendment have been properly recorded, registered and filed to the
extent necessary to make effective the Liens intended to be created by the
Collateral Documents and reciting the details of such action or referring to
prior Opinions of Counsel in which such details are given or (ii) stating that,
subject to customary assumptions and exclusions, in the opinion of such
76
<PAGE>
counsel, no such action is necessary to make any other Lien created under any of
the Collateral Documents effective as intended by such Collateral Documents; and
(b) within 30 days after January 1, in each year beginning with the year
2000, an Opinion of Counsel, dated as of such date, either (i) stating that,
subject to customary assumptions and exclusions, in the opinion of such counsel,
such action has been taken with respect to the recording, registering, filing,
re-recording, re-registering and re-filing of this Indenture and all
supplemental indentures, financing statements, continuation statements or other
instruments of further assurance as is necessary to maintain the Lien of this
Indenture and the Collateral Documents until the next Opinion of Counsel is
required to be rendered pursuant to this paragraph and reciting the details of
such action or referring to prior Opinions of Counsel in which such details are
given or (ii) stating that, subject to customary assumptions and exclusions, in
the opinion of such counsel, no such action is necessary to maintain such Lien,
until the next Opinion of Counsel is required to be rendered pursuant to this
paragraph.
(c) The Company shall furnish to the Trustee the certificates or opinions,
as the case may be, required by TIA Section 314(d). Such certificates or
opinions will be subject to the terms of TIA Section 314(e).
Section 10.03. Release of Collateral.
(a) Subject to subsections (b), (c) and (d) of this Section 10.03,
Collateral may be released from the Lien and security interest created by this
Indenture and the Collateral Documents at any time or from time to time upon the
request of the Company pursuant to an Officers' Certificate certifying that all
terms for release and conditions precedent hereunder and under any applicable
Collateral Document have been met and specifying (i) the identity of the
Collateral to be released and (ii) the provision of this Indenture which
authorizes such release. The Trustee shall release (at the sole cost and expense
of the Company) (i) all Collateral that is contributed, sold, leased, conveyed,
transferred or otherwise disposed of (including, without limitation, any
Collateral that is contributed, sold, leased, conveyed, transferred or otherwise
disposed of to an Unrestricted Subsidiary, but excluding any such contribution,
sale, lease, conveyance, transfer or other distribution to the Company or a
Restricted Subsidiary); provided, such contribution, sale, lease, conveyance,
transfer or other distribution is or will be made in accordance with the
provisions of this Indenture, including, without limitation, the requirement
that the net proceeds from such contribution, sale, lease, conveyance, transfer
or other distribution are or will be applied in accordance with this Indenture
and that no Default or Event of Default has occurred and is continuing or would
occur immediately following such release; (ii) Collateral that is condemned,
seized or taken by the power of eminent domain or otherwise confiscated pursuant
to an Event of Loss; provided that the Net Loss Proceeds, if any, from such
Event of Loss are or will be applied in accordance with Section 4.11 hereof and
that no Default or Event of Default has occurred and is continuing or would
occur immediately following such release; (iii) Collateral which may be released
with the consent of Holders pursuant to Article 9 hereof; (iv) all Collateral
(except as provided in Article 8 hereof and, in particular, the funds in the
trust fund described in Section 8.04 hereof) upon discharge or defeasance of
this Indenture in accordance with Article 8 hereof; (v) all Collateral upon the
payment in full of all obligations of the Company with respect to the Notes;
(vi) Collateral of a Guarantor whose Mortgage Note Guaranty is released pursuant
to Section 11.06 hereof; and (vii) Collateral that is expressly required to be
released by any Collateral Document. Upon receipt of such Officers' Certificate
the Trustee shall execute, deliver or acknowledge any necessary or proper
instruments of termination, satisfaction or release to evidence the release of
any Collateral permitted to be released pursuant to this Indenture or the
Collateral Documents. The Trustee is hereby authorized and shall, from time to
time upon request of the Company, execute and deliver UCC-3 partial release or
termination statements and such other documents evidencing release of Collateral
available for release pursuant to clauses (i) through (x) above.
77
<PAGE>
(b) Except pursuant to Section 10.03(a), no Collateral shall be released
from the Lien and security interest created by the Collateral Documents pursuant
to the provisions of the Collateral Documents unless there shall have been
delivered to the Trustee the certificate required by this Section 10.03.
(c) The Trustee may release Collateral from the Lien and security interest
created by this Indenture and the Collateral Documents upon the sale or
disposition of Collateral pursuant to the Trustee's powers, rights and duties
with respect to remedies provided under any of the Collateral Documents.
(d) The release of any Collateral from the terms of this Indenture and the
Collateral Documents shall not be deemed to impair the security under this
Indenture in contravention of the provisions hereof if and to the extent the
Collateral is released pursuant to the terms hereof. To the extent applicable,
the Company shall cause TIA (S) 313(b), relating to reports, and TIA (S) 314(d),
relating to the release of property or securities from the Lien and security
interest of the Collateral Documents and relating to the substitution therefor
of any property or securities to be subjected to the Lien and security interest
of the Collateral Documents to be complied with. Any certificate or opinion
required by TIA (S) 314(d) may be made by an Officer of the Company except in
cases where TIA (S) 314(d) requires that such certificate or opinion be made by
an independent Person, which Person shall be an independent engineer, appraiser
or other expert selected or approved by the Trustee in the exercise of
reasonable care.
Section 10.04. Protection of the Trust Estate.
Subject to the terms of the Collateral Documents, upon prior written
notice to the Company and the Guarantors, the Trustee shall have the power (i)
to institute and maintain such suits and proceedings as it may deem expedient,
to prevent any impairment of the Collateral under any of the Collateral
Documents and in the profits, rents, revenues and other income arising
therefrom, including the power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair any Collateral or be prejudicial to the interests of the Holders of
Notes or the Trustee, to the extent permitted thereunder; and (ii) to enforce
the obligations of the Company, the Guarantors or any Restricted Subsidiary
under this Indenture or the Collateral Documents. Upon receipt of notice that a
Restricted Subsidiary or a Guarantor is not in compliance with any of the
requirements of Aurora Mortgage, the Aurora Fleet Mortgage, the Tunica First
Lien Deed of Trust, the Tunica Second Lien Deed of Trust, the Tunica First Lien
Ship Mortgage or the Tunica Second Lien Ship Mortgage, the Trustee may, but
shall have no obligation to purchase, at the Company' expense, such insurance
coverage necessary to comply with the appropriate section of the mortgage.
Section 10.05. Certificates of the Company.
The Company shall furnish to the Trustee, prior to each proposed release
of Collateral pursuant to the Collateral Documents (i) all documents required by
TIA (S)314(d) and (ii) an Opinion of Counsel in the United States, which may be
rendered by internal counsel to the Company, to the effect that, subject to
customary assumptions and exclusions, such accompanying documents constitute all
documents required by TIA (S)314(d). The Trustee may, to the extent permitted
by Sections 7.01 and 7.02 hereof, accept as conclusive evidence of compliance
with the foregoing provisions the appropriate statements contained in such
documents and such Opinion of Counsel.
78
<PAGE>
Section 10.06. Certificates of the Trustee.
In the event that the Company wishes to release Collateral in accordance
with the Collateral Documents and has delivered the certificates and documents
required by the Collateral Documents and Sections 10.03 and 10.04 hereof, the
Trustee shall determine whether it has received all documentation required by
TIA (S)314(d) in connection with such release and, based on such determination
and the Opinion of Counsel delivered pursuant to Section 10.05(ii), shall
deliver a certificate to the Company setting forth such determination.
Section 10.07. Authorization of Actions to Be Taken by the Trustee Under the
Collateral Documents.
Subject to the provisions of Section 7.01, 7.02 and 7.12 hereof, the
Trustee may, in its sole discretion and without the consent of the Holders of
Notes, on behalf of the Holders of Notes, take all actions it deems necessary or
appropriate in order to (a) enforce any of the terms of the Collateral Documents
and (b) collect and receive any and all amounts payable in respect of the
Obligations of the Company hereunder, including but not limited to the
appointment and approval of collateral agents and the appointment and approval
of an insurance trustee. The Trustee shall have power to institute and maintain
such suits and proceedings as it may deem expedient to prevent any impairment of
the Collateral by any acts that may be unlawful or in violation of the
Collateral Documents or this Indenture, and such suits and proceedings as the
Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders of Notes in the Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
interest hereunder or be prejudicial to the interests of the Holders of Notes or
of the Trustee).
Section 10.08. Trustee's Duties.
The powers and duties conferred upon the Trustee by this Article 11 are
solely to protect the Collateral and shall not impose any duty upon the Trustee
to exercise any such powers and duties, except as expressly provided in this
Indenture. The Trustee shall be under no duty to the Company or any Guarantor
whatsoever to make or give any presentment, demand for performance, notice or
nonperformance, protest, notice of protest, notice of dishonor, or other notice
or demand in connection with any Collateral, or to take any steps necessary to
preserve this Indenture. The Trustee shall not be liable to the Company or any
Guarantor for failure to collect or realize upon any or all of the Collateral,
or for any delay in doing so, nor shall the Trustee be under any duty to the
Company or any Guarantor to take any action whatsoever with regard thereto. The
Trustee shall have no duty to the Company, the Guarantor or any Holder to comply
with any recording, filing or other legal requirements necessary to establish or
maintain the validity, priority or enforceability of the Liens in, or the
Trustee's rights in or to, any of the Collateral.
Section 10.09. Authorization of Receipt of Funds by the Trustee Under the
Collateral Documents.
Upon an Event of Default and so long as such Event of Default continues,
the Trustee may exercise in respect of the Collateral, in addition to the other
rights and remedies provided for herein, in the Collateral Documents or
otherwise available to it, all of the rights and remedies of a secured party
under the Uniform Commercial Code or other applicable law, and the Trustee may
also upon obtaining possession of the Collateral as set forth herein, without
notice to the Company, except as specified
79
<PAGE>
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any exchange, broker's board or at any of the Trustee's
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Trustee may deem commercially reasonable. The Company
acknowledge and agree that any such private sale may result in prices and other
terms less favorable to the seller than if such a sale were a public sale. The
Company agree that, to the extent notice of sale shall be required by law, at
least 10 days' notice to the Company of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. The Trustee shall not be obligated to make any sale regardless of
notice of sale having been given. The Trustee may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned.
Any cash that is Collateral held by the Trustee and all cash proceeds
received by the Trustee in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied (unless
otherwise provided for in the Collateral Documents and after payment of any and
all amounts payable to the Trustee pursuant to this Indenture), as the Trustee
shall determine or as the Holders of the Notes shall direct pursuant to Section
6.05 hereof, (i) against the obligations for the ratable benefit of the Holders
of the Notes, (ii) to maintain, repair or otherwise protect the Collateral or
(iii) to take such other action to protect the other rights of the Holders of
the Notes or to take any other appropriate action or remedy for the benefit of
the Holders of the Notes. Any surplus of such cash or cash proceeds held by the
Trustee and remaining after payment in full of all the obligations shall be paid
over to the Company or to whomsoever may be lawfully entitled to receive such
surplus or as a court of competent jurisdiction may direct.
Section 10.10. Termination of Security Interest.
Upon the payment in full of all Obligations of the Company under this
Indenture and the Notes, the Trustee shall (at the request of the Company
accompanied by (i) an Officers' Certificate of the Company to the Trustee
stating that such Obligations have been paid in full, and (ii) instructions from
the Company to the Trustee to release the Liens pursuant to this Indenture and
the Collateral Documents) release the Liens securing the Collateral.
Section 10.11. Cooperation of Trustee.
In the event the Company or any Mortgage Note Guarantor pledge or grant a
security interest in additional Collateral, the Trustee shall cooperate with the
Company or such Mortgage Note Guarantor in reasonably and promptly agreeing to
the form of, and executing as required, any instruments or documents necessary
to make effective the security interest in the Collateral to be so substituted
or pledged. To the extent practicable, the terms of any security agreement or
other instrument or document necessitated by any such substitution or pledge
shall be comparable to the provisions of the existing Collateral Documents.
Subject to, and in accordance with the requirements of this Article 10 and the
terms of the Collateral Documents, in the event that the Company or any Mortgage
Note Guarantor engages in any transaction pursuant to Section 10.03, the Trustee
shall cooperate with the Company or such Mortgage Note Guarantor in order to
facilitate such transaction in accordance with any reasonable time schedule
proposed by the Company, including by delivering and releasing the Collateral in
a prompt and reasonable manner.
80
<PAGE>
Section 10.12. Collateral Agent.
The Trustee may, from time to time, appoint one or more Collateral Agents
hereunder. Each of such Collateral Agents may be delegated any one or more of
the duties or rights of the Trustee hereunder or under the Collateral Documents
or Intercreditor Agreement or which are specified in any Collateral Documents or
Intercreditor Agreement, including without limitation, the right to hold any
Collateral in the name of, registered to, or in the physical possession of, such
Collateral Agent, for the rateable benefit of the Holders of the Notes. Each
such Collateral Agent shall have such rights and duties as may be specified in
an agreement between the Trustee and such Collateral Agent. The Trustee and any
Collateral Agent shall be authorized hereunder to give any acknowledgment
reasonably requested by any party under the Intercreditor Agreement to confirm
the rights and obligations of the parties under the Intercreditor Agreement.
ARTICLE 11
NOTE GUARANTEES
Section 11.01. Guarantee.
Subject to this Article 11, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes,
the Collateral Documents or the obligations of the Company hereunder or
thereunder, that: (a) the principal of premium and Liquidated Damages, if any,
and interest on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration pursuant to
Section 6.02 hereof or otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for whatever reason, the Guarantors
shall be jointly and severally obligated to pay the same immediately. Each
Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.
Each Guarantor hereby agrees that its obligations with regard to this Note
Guarantee shall be joint and several, unconditional, irrespective of the
validity or enforceability of the Notes or the obligations of the Company under
this Indenture, the absence of any action to enforce the same, the recovery of
any judgment against the Company or any other obligor with respect to this
Indenture, the Notes or the Obligations of the Company under this Indenture or
the Notes, any action to enforce the same or any other circumstances (other than
complete performance) which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Each Guarantor further, to the extent
permitted by law, waives and relinquishes all claims, rights and remedies
accorded by applicable law to guarantors and agrees not to assert or take
advantage of any such claims, rights or remedies, including but not limited to:
(a) any right to require any of the Trustee, the Holders or the Company (each a
"Benefitted Party"), as a condition of payment or performance by such Guarantor,
to (1) proceed against the Company, any other guarantor (including any other
Guarantor) of the Obligations under the Note Guarantees or any other Person, (2)
proceed against or exhaust any security held from the Company, any such other
guarantor or any other Person, (3) proceed against or have resort to any balance
of any deposit account or credit on the books of any Benefitted Party in favor
of the Company or any other Person, or
81
<PAGE>
(4) pursue any other remedy in the power of any Benefitted Party whatsoever; (b)
any defense arising by reason of the incapacity, lack of authority or any
disability or other defense of the Company including any defense based on or
arising out of the lack of validity or the unenforceability of the Obligations
under the Note Guarantees or any agreement or instrument relating thereto or by
reason of the cessation of the liability of the Company from any cause other
than payment in full of the Obligations under the Note Guarantees; (c) any
defense based upon any statute or rule of law which provides that the obligation
of a surety must be neither larger in amount nor in other respects more
burdensome than that of the principal; (d) any defense based upon any Benefitted
Party's errors or omissions in the administration of the Obligations under the
Note Guarantees, except behavior which amounts to bad faith; (e)(1) any
principles or provisions of law, statutory or otherwise, which are or might be
in conflict with the terms of the Note Guarantees and any legal or equitable
discharge of such Guarantor's obligations hereunder, (2) the benefit of any
statute of limitations affecting such Guarantor's liability hereunder or the
enforcement hereof, (3) any rights to set-offs, recoupments and counterclaims
and (4) promptness, diligence and any requirement that any Benefitted Party
protect, secure, perfect or insure any security interest or lien or any property
subject thereto; (f) notices, demands, presentations, protests, notices of
protest, notices of dishonor and notices of any action or inaction, including
acceptance of the Note Guarantees, notices of default under the Notes or any
agreement or instrument related thereto, notices of any renewal, extension or
modification of the Obligations under the Note Guarantees or any agreement
related thereto, and notices of any extension of credit to the Company and any
right to consent to any thereof; (g) to the extent permitted under applicable
law, the benefits of any "One Action" rule and (h) any defenses or benefits that
may be derived from or afforded by law which limit the liability of or exonerate
guarantors or sureties, or which may conflict with the terms of the Note
Guarantees. Each Guarantor hereby covenants that its Note Guarantee will not be
discharged except by complete performance of the obligations contained in its
Note Guarantee and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Section 6.02
hereof for the purposes of this Note Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby and (y) in the event of any declaration of
acceleration of such obligations as provided in Section 6.02 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Note Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Note Guarantee.
Section 11.02. Additional Note Guarantees.
If any Restricted Subsidiary attains, or if the Company or any of its
Restricted Subsidiaries acquires or creates a Restricted Subsidiary that has,
after the date hereof, a Tangible Consolidated Net Worth of at least $2.5
million, then the Company shall cause any such Restricted Subsidiary to, within
20 Business Days of the date on which any such Restricted Subsidiary attained a
Tangible Consolidated Net Worth of at least $2.5 million or was acquired or
created, (a) execute and deliver to the Trustee a supplemental indenture and
supplemental Collateral Documents in form reasonably satisfactory to the
82
<PAGE>
Trustee pursuant to which such Restricted Subsidiary shall unconditionally
guarantee, on a senior secured basis, all of the Company's obligations under the
Notes, this Indenture and the Collateral Documents on the terms set forth in
this Indenture and (b) deliver to the Trustee an Opinion of Counsel that,
subject to customary assumptions and exclusions, such supplemental indenture and
supplemental Collateral Documents have been duly executed and delivered by such
Restricted Subsidiary. Any Restricted Subsidiary that becomes a Guarantor shall
remain a Guarantor unless designated an Unrestricted Subsidiary by the Company
in accordance with this Indenture or is otherwise released from its obligations
as a Guarantor pursuant to Section 11.06 hereof. Any Note Guarantee executed and
delivered in accordance with this Section 11.02 shall be secured by a Lien or
charge on all Collateral of such Guarantor. Any such Note Guarantee shall be
released if the Company or its Restricted Subsidiaries cease to own any Equity
Interests in such Restricted Subsidiary or if such Restricted Subsidiary becomes
an Unrestricted Subsidiary in accordance with the terms of this Indenture or is
otherwise released from its obligations as a Guarantor pursuant to Section 11.06
hereof.
Section 11.03. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Note Guarantee of
such Guarantor not constitute a fraudulent transfer or conveyance for purposes
of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any
Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders
and the Guarantors hereby irrevocably agree that the obligations of such
Guarantor under this Article 11 shall be limited to the maximum amount as will,
after giving effect to such maximum amount and all other contingent and fixed
liabilities of such Guarantor that are relevant under such laws, and after
giving effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Article 11, result in the
obligations of such Guarantor under its Note Guarantee not constituting a
fraudulent transfer or conveyance.
Section 11.04. Execution and Delivery of Note Guarantee.
To evidence its Note Guarantee set forth in Section 11.01 hereof, each
Guarantor hereby agrees that a notation of such Note Guarantee substantially in
the form included in Exhibit D shall be endorsed by an Officer of such Guarantor
on each Note authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of such Guarantor by its President or one of its
Vice Presidents.
Each Guarantor hereby agrees that its Note Guarantee set forth in Section
11.01 hereof shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Note Guarantee.
If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Note Guarantee set forth in this
Indenture on behalf of the Guarantors.
83
<PAGE>
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 11.06 hereof, no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person whether or not affiliated with such Guarantor
unless:
(a) subject to Section 11.06 hereof, the Person formed by or surviving any
such consolidation or merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such Guarantor, pursuant to a
supplemental indenture and supplemental Collateral Documents in form and
substance reasonably satisfactory to the Trustee, under the Notes, this
Indenture, the Collateral Documents and the Note Guarantee on the terms set
forth herein or therein; and
(b) the Guarantor complies with the requirements of Article 5 hereof.
In case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the Note
Guarantee endorsed upon the Notes and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Guarantor,
such successor Person shall succeed to and be substituted for the Guarantor with
the same effect as if it had been named herein as a Guarantor. Such successor
Person thereupon may cause to be signed any or all of the Note Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All the Note
Guarantees so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Note Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Note
Guarantees had been issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
Section 11.06. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of any Guarantor, in each case to a
Person that is not (either before or after giving effect to such transactions) a
Restricted Subsidiary of the Company, then such Guarantor (in the event of a
sale or other disposition, by way of merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Guarantor) will be released and relieved of any
obligations under its Note Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10 hereof.
Upon delivery by the Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such sale or other disposition was made by
the Company in accordance with the provisions of this Indenture, including
without limitation Section 4.10 hereof, the Trustee shall execute any documents
reasonably required in order to evidence the release of any Guarantor from its
obligations under its Note Guarantee.
84
<PAGE>
Any Guarantor not released from its obligations under its Note Guarantee
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Guarantor under this Indenture and
the Collateral Documents as provided in this Article 11.
ARTICLE 12
SATISFACTION AND DISCHARGE
Section 12.01 Satisfaction and Discharge.
This Indenture will be discharged and will cease to be of further effect
as to all Notes issued hereunder, when:
(a) either:
(i) all Notes that have been authenticated (except lost, stolen or
destroyed Notes that have been replaced or paid and Notes for whose payment
money has theretofore been deposited in trust and thereafter repaid to the
Company) have been delivered to the Trustee for cancellation; or
(ii) all Notes that have not been delivered to the Trustee for
cancellation have become due and payable by reason of the making of a
notice of redemption or otherwise or will become due and payable within one
year and the Company or any Guarantor has irrevocably deposited or caused
to be deposited with the Trustee as trust funds in trust solely for the
benefit of the Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient
without consideration of any reinvestment of interest, to pay and discharge
the entire indebtedness on the Notes not delivered to the Trustee for
cancellation for principal, premium and Liquidated Damages, if any, and
accrued interest to the date of maturity or redemption;
(b) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or shall occur as a result of such deposit and such
deposit will not result in a breach or violation of, or constitute a default
under, any other instrument to which the Company or any Guarantor is a party or
by which the Company or any Guarantor is bound;
(c) the Company or any Guarantor has paid or caused to be paid all sums
payable by it under this Indenture; and
(d) the Company has delivered irrevocable instructions to the Trustee
under this Indenture to apply the deposited money and/or Government Securities
toward the payment of the Notes at maturity or the redemption date, as the case
may be.
The Company shall deliver an Officers' Certificate and an Opinion of Counsel to
the Trustee stating that all conditions precedent to satisfaction and discharge
have been satisfied.
Section 12.02. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 12.03 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of
85
<PAGE>
this Section 12.02, the "Trustee") pursuant to Section 12.01 hereof in respect
of the outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium and
Liquidated Damages, if any, and interest, but such money need not be segregated
from other funds except to the extent required by law.
Section 12.03. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium and
Liquidated Damages, if any, or interest on any Note and remaining unclaimed for
two years after such principal, and premium, if any, or interest has become due
and payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
ARTICLE 13
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S)318(c), the imposed duties shall control.
Section 13.02. Notices.
Any notice or communication by the Company, any Guarantor or the Trustee
to the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company and/or any Guarantor:
c/o Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
Telecopier No.: (972) 386-7411
With a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
86
<PAGE>
Dallas, Texas 75201
Telecopier No.: (214) 746-7777
If to the Trustee (By mail):
State Street Bank and Trust Company
P.O. Box 778
Boston, Massachusetts 02110
Attention: Corporate Trust Administration
Re: Hollywood Casino
(By hand or Overnight Delivery)
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts, 02110
Attention: Corporate Trust Administration
Re: Hollywood Casino
Telecopier No: (617) 664-5151
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company or any Guarantor mails a notice or communication to
Holders, it shall mail a copy to the Trustee and each Agent at the same time.
Section 13.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Guarantors, the Trustee, the Registrar and anyone else shall have the protection
of TIA (S) 312(c).
87
<PAGE>
Section 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company and the Guarantors, as applicable,
shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 13.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 13.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
Section 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied; provided, however, that with respect
to matters of fact, an Opinion of Counsel may rely on certificates from relevant
corporate officers or public officials.
Section 13.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 13.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or the Guarantors under the Notes, this Indenture, the Note Guarantees,
the Collateral Documents or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
88
<PAGE>
Section 13.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 13.10. Successors.
All agreements of the Company in this Indenture, each of the Collateral
Documents to which it is a party and the Notes shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors. All
agreements of each Guarantor in this Indenture, each of the Collateral Documents
to which it is a party and its Note Guarantee shall bind its successors, except
as otherwise provided in Section 11.05.
Section 13.11. Severability.
In case any provision in this Indenture, the Notes or in the Note
Guarantees shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 13.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 13.13. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by the Holders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by agents duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Company and the
Guarantors. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and conclusive in favor of the Trustee, the Company
and the Guarantors, if made in the manner provided in this Section 13.13.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to such witness, notary or officer the
execution thereof. Where such
89
<PAGE>
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) Notwithstanding anything to the contrary contained in this section,
the principal amount and serial numbers of Notes held by any Holder, and the
date of holding the same, shall be proved by the register of the Notes
maintained by the Registrar as provided in Section 2.03.
(d) If the Company shall solicit from the Holders of the Notes any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a resolution of the Company's
Board of Directors, fix in advance a record date for the determination of
Holders entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
Notwithstanding TIA (S) 316(c), such record date shall be the record date
specified in or pursuant to such resolution, which shall be a date not earlier
than the date 30 days prior to the first solicitation of Holders generally in
connection therewith or the date of the most recent list of Holders forwarded to
the Trustee prior to such solicitation pursuant to Section 2.05 and not later
than the date such solicitation is completed. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, waiver or other
Act may be given before or after such record date, but only the Holders of
record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of the then outstanding Notes have authorized or agreed or consented
to such request, demand, authorization, direction, notice, consent, waiver or
other Act, and for that purpose the then outstanding Notes shall be computed as
of such record date; provided, however, that no such authorization, agreement or
consent by the Holders on such record date shall be deemed effective unless it
shall become effective pursuant to the provisions of this Indenture not later
than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Note shall bind every future Holder of the
same Note and the Holder of every Note issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Note.
(f) Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Note may do so itself with
regard to all or any part of the principal amount of such Note or by one or more
duly appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
Section 13.14. Benefit of Indenture.
Nothing, in this Indenture or in the Notes, express or implied, shall give
to any Person, other than the parties hereto, any Paying Agent, any Registrar
and their successors hereunder, and the Holders, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 13.15. Casino Control Act.
Notwithstanding the provisions of Section 13.08, Section 13.16 and Section
13.17, each of the provisions of this Indenture is subject to and shall be
enforced in compliance with the provisions of the Casino Control Act, to the
extent applicable, and the regulations promulgated thereunder, unless such
provisions are in conflict with the TIA, in which case the TIA shall control.
The Notes are to be held
90
<PAGE>
subject to the condition that if a Holder is found to be disqualified by the
Casino Control Commission pursuant to the provisions of the Casino Control Act,
such Holder shall dispose of the Notes in accordance with the provisions of
Section 3.08(a) and the Company shall have the right to repurchase the Notes at
the lowest of (a) the principal amount thereof, (b) the amount which such Holder
or beneficial owner paid for the Notes, together with accrued interest up to the
date of the determination of disqualification, or (c) the fair market value of
such Notes.
Section 13.16. Mississippi Gaming Control Act.
Notwithstanding the provisions of Section 13.08, Section 13.15 and Section
13.17, each of the provisions of this Indenture is subject to and shall be
enforced in compliance with the provisions of the Mississippi Gaming Control
Act, to the extent applicable, and the regulations promulgated thereunder,
unless such provisions are in conflict with the TIA, in which case the TIA shall
control. Each Holder by accepting a Note agrees that all Holders, whether
initial Holders or subsequent transferees, shall be subject to the
qualifications or suitability provisions of the Mississippi Gaming Control Act.
Section 13.17. Louisiana Riverboat Economic Development and Gaming Control Act.
Notwithstanding the provisions of Section 13.08, Section 13.15 and Section
13.16, each of the provisions of this Indenture is subject to and shall be
enforced in compliance with the provisions of the Louisiana Riverboat Economic
Development and Gaming Control Act, to the extent applicable, and the
regulations promulgated thereunder, unless such provisions are in conflict with
the TIA, in which case the TIA shall control. Each Holder by accepting a Note
agrees that all Holders, whether initial Holders or subsequent transferees,
shall be subject to the qualifications or suitability provisions of the
Louisiana Riverboat Economic Development and Gaming Control Act.
Section 13.18. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
(Signatures on following page)
91
<PAGE>
SIGNATURES
Dated as of May 19, 1999 HOLLYWOOD CASINO CORPORATION
By: /s/ Paul C. Yates
------------------------------------
Paul C. Yates
Executive Vice President and
Chief Financial Officer
Attest:
By:_________________________________
Dated as of May 19, 1999 HWCC-SHREVEPORT, INC.
By: /s/ William D. Pratt
------------------------------------
William D. Pratt
Vice President and Secretary
Attest:
By:_________________________________
Dated as of May 19, 1999 HWCC-TUNICA, INC.
By: /s/ William D. Pratt
------------------------------------
William D. Pratt
Executive Vice President, General
Counsel and Secretary
Attest:
By:_________________________________
<PAGE>
Dated as of May 19, 1999 STATE STREET BANK AND TRUST COMPANY
By: /s/ Robert J. Dunn
------------------------------------
Robert J. Dunn
Vice President
Attest:
By:_________________________________
<PAGE>
EXHIBIT A1
[Face of Note]
________________________________________________________________________________
CUSIP/CINS ____________
11 1/4% [Series A] [Series B] Senior Secured Notes due 2007
No. ___ $_____________
HOLLYWOOD CASINO CORPORATION
promises to pay to______________________________________________________________
or registered assigns,
the principal sum of____________________________________________________________
Dollars on May 1, 2007.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Dated: _______________, ____
HOLLYWOOD CASINO CORPORATION
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: __________________________________
Authorized Signatory
________________________________________________________________________________
A1-1
<PAGE>
[Back of Note]
11 1/4% [Series A] [Series B] Senior Secured Notes due 2007
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES (A) TO OFFER, SELL,
PLEDGE OR OTHERWISE TRANSFER THIS NOTE ONLY (1) TO THE COMPANY, (2) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(4) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, OR (6) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT (AND BASED ON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO
APPLICABLE JURISDICTION, AND (B) THAT IT WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE NOTE EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Hollywood Casino Corporation, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 11 1/4% per annum from May 19, 1999 until maturity and shall pay any
Liquidated Damages payable pursuant to
A1-2
<PAGE>
Section 5 of the Registration Rights Agreement referred to below. The Company
will pay interest and Liquidated Damages, if any, semi-annually in arrears on
May 1 and November 1 of each year, or if any such day is not a Business Day, on
the next succeeding Business Day (each an "Interest Payment Date"). Interest on
the 11 1/4% Series A Senior Secured Notes (the "Notes") will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance; provided, however, that if there is no existing
Default in the payment of interest, and if this Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be November
1, 1999. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the April 15 or
October 15 next preceding each Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages, if any, may
be made by check mailed to the Holders at their addresses set forth in the
register of Holders, and provided that payment by wire transfer of immediately
available funds will be required with respect to principal, premium, Liquidated
Damages, if any, and interest on all Global Notes and all other Notes the
Holders of which shall have provided wire transfer instructions to the Company
or the Paying Agent. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE AND SECURITY DOCUMENTS. The Company issued the Notes
under an Indenture dated as of May 19, 1999 ("Indenture") between the Company
and the Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to
all such terms and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts
with the express provisions of the Indenture, the provisions of the Indenture
shall govern and be controlling. The Notes are secured obligations of the
Company limited to $310.0 million in
A1-3
<PAGE>
aggregate principal amount. The Notes are secured by the collateral named in the
Security Documents.
5. OPTIONAL REDEMPTION. At any time prior to May 1, 2002, the
Company may on any one or more occasions redeem up to 35% of the original
aggregate principal amount of Notes issued under the Indenture at a redemption
price of 111.250% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date, with the net
cash proceeds of one or more Qualified Equity Offerings; provided, however that:
(i) at least 65% of the original aggregate principal amount of the notes issued
under the Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company and its Subsidiaries); and (ii)
the redemption must occur within 60 days of the date of the closing of such
Qualified Equity Offering. Except as provided herein, the Notes will not be
redeemable at the Company's option prior to May 1, 2003. After May 1, 2003, the
Company may redeem all or a part of the Notes upon not less than 30 nor more
than 60 days' notice, at the following redemption prices (expressed as
percentages of principal amount) plus accrued and unpaid interest and Liquidated
Damages, if any, thereon, to the applicable redemption date, if redeemed during
the twelve-month period beginning on May 1 of the years indicated below:
Year Percentage
---- ----------
2003....................... 107.000%
2004....................... 104.666%
2005....................... 102.333%
2006 and thereafter........ 100.000%
6. MANDATORY REDEMPTION.
(a) Except as described in paragraphs 6(b), 6(c) and 7 below, the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
(b) If any Gaming Authority requires that a Person who is a Holder
or the Beneficial Owner of the Notes be licensed, qualified or found suitable
under applicable gaming laws, the Holder or Beneficial Owner, as the case may
be, shall apply for a license, qualification or a finding of suitability within
the required time period. If the Holder or Beneficial Owner fails to apply for
such license, qualification or finding of suitability within the required time
period, such Holder or Beneficial Owner, as the case may be, shall be required
to dispose of its Notes within the specified time and the Company shall have the
right to redeem the Notes of such Holder or Beneficial Owner, subject to
approval of any applicable Gaming Authority, at the lesser of (i) the principal
amount thereof, (ii) the amount that such Holder or Beneficial Owner paid for
the Notes or (iii) the fair market value of the Notes. Any Holder of Notes
required to apply for a finding of suitability must pay all investigative fees
and costs of the applicable Gaming Authorities in connection with such
investigation. Immediately upon the imposition of a requirement to dispose of
Notes by a Gaming Authority, such Holder or Beneficial Owner shall, to the
extent required by applicable law, have no further right (i) to exercise,
directly or indirectly, through any trustee or nominee or any other Person or
entity, any right conferred by the Notes or (ii) to receive any interest,
dividends, economic interests or any other distributions or payments with
respect to the Notes or any remuneration in any form with respect to the Notes
A1-4
<PAGE>
from the Company or the Trustee. The Company is not required to pay or
reimburse any Holder of the Notes or Beneficial Owner who is required to apply
for such license, qualification or finding of suitability for the costs of the
licensure or investigation for such qualification or finding of suitability.
Such expense will be the obligation of such Holder or Beneficial Owner. The
Company shall notify the Trustee in writing of any such redemption as soon as
practicable; provided, however, that until such time as the Trustee receives
notice from the Company of such redemption in accordance with Section 13.02 of
the Indenture, the Trustee shall be entitled to treat the Holder or Beneficial
Owner as having all of its rights under the Indenture. The Company shall not be
responsible for any costs or expenses any such Holder may incur in connection
with its application or a license, qualification or a finding or suitability.
The Trustee shall report the names of the record Holders of the Notes to any
Gaming Authority when required by law.
(c) If, prior to January 31, 2000, the Company determines in its
sole discretion (as evidenced by a resolution of the Company's Board of
Directors certified by an Officer of the Company and delivered to the Trustee)
that it is unable to consummate the Pratt Casino Corporation Acquisition by
January 31, 2000, the Company shall redeem $40,330,000 aggregate principal
amount of Notes (the ``Special Mandatory Redemption'') at a redemption price
equal to 101% of the principal amount of the Notes, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of redemption;
provided, however, that such redemption will occur on January 31, 2000 if the
Pratt Casino Corporation Acquisition has not been consummated and the Company
has not by January 31, 2000 delivered to the Trustee an Officers' Certificate
certifying as to the conditions required for the release of the Escrowed Funds,
in accordance with the terms and conditions set forth in the Escrow Agreement.
The redemption date for the Special Mandatory Redemption shall be the earlier of
(a) five days after the date that the certified resolutions are delivered to the
Trustee pursuant to the preceding sentence, or (b) January 31, 2000. Any such
redemption shall be made on a pro rata basis between the Floating Rate Notes and
the Fixed Rate Notes. Notice of any Special Mandatory Redemption will be mailed
to each Holder not less than five days prior to the redemption date.
7. Repurchase at Option of Holder.
(a) If a Change of Control occurs, each Holder of Notes shall have the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of that Holder's Notes pursuant to an offer
described below (a "Change of Control Offer"). In the Change of Control Offer,
the Company shall offer a payment (the "Change of Control Payment") in cash
equal to 101% of the aggregate principal amount of Notes repurchased plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date
of purchase. Within ten days following any Change of Control, the Company shall
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the date
(the "Change of Control Payment Date") specified in such notice, which date
shall be no earlier than 30 days or such shorter period as is satisfactory to
the Trustee but no later than 60 days from the date such notice is mailed,
pursuant to the procedures set forth in Section 3.09 of the Indenture, and
described in such notice.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
ten days following the date that the aggregate amount of Excess Proceeds exceeds
$10.0 million, the
A1-5
<PAGE>
Company shall make an offer (an "Asset Sale Offer") pursuant to Section 3.09 of
the Indenture to all Holders of Notes to purchase with all of the Excess
Proceeds an amount equal to the maximum principal amount of Notes that may be
purchased out of such Excess Proceeds. The offer price in any Asset Sale Offer
will be equal to 100% of principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase, and
will be payable in cash. If any Excess Proceeds remain after consummation of an
Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by the Indenture or the Collateral Documents. If the
aggregate principal amount of Notes tendered in such Asset Sale Offer exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased in accordance with the procedures set forth in Section 3.02 to the
Indenture. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
(c) If the Company or its Restricted Subsidiaries experience an Event
of Loss, within ten days following the date that the aggregate amount of Excess
Loss Proceeds exceeds $10.0 million, the Company shall make an offer (an ``Event
of Loss Offer'') pursuant to Section 3.09 of the Indenture to all Holders of
Notes to purchase with all of the Excess Loss Proceeds from any Event of Loss an
amount equal to the maximum principal amount of Notes that may be purchased out
of such Excess Loss Proceeds. The offer price in any Event of Loss Offer will
be equal to 100% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase and
will be payable in cash. To the extent that the aggregate amount of Notes
tendered pursuant to any Event of Loss Offer is less than the Excess Loss
Proceeds, the Company may, subject to the other provisions of the Indenture and
the Collateral Documents, use any remaining Excess Loss Proceeds for any purpose
not prohibited by the Indenture or the Collateral Documents.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days or such shorter period as is satisfactory to the Trustee but not
more than 60 days before the redemption date to each Holder whose Notes are to
be redeemed at its registered address. Notes in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000, unless all
of the Notes held by a Holder are to be redeemed. On and after the redemption
date, interest ceases to accrue on Notes or portions thereof called for
redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
A1-6
<PAGE>
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes, including the Floating Rate Notes, voting as a
single class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes,
including the Floating Rate Notes, voting as a single class. Without the
consent of any Holder of a Note, the Indenture, the Note Guarantees or the Notes
may be amended or supplemented to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or Guarantor's obligations
to Holders of the Notes in case of a merger or consolidation or sale of all or
substantially all of the Company's assets, to make any change that would provide
any additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act, or to enter into
additional or supplemental Collateral Documents.
Any amendment to, or waiver of the provisions of any of the Collateral
Documents relating to Section 4.13 or Article 10 of the Indenture shall require
the consent of the Holders of at least 85% in aggregate principal amount of
Notes, including the Floating Rate Notes, then outstanding voting as a single
class.
12. Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes; (ii) default in payment when due of principal of or
premium, if any, on the Notes, (iii)(A) default in the payment of principal of,
premium, if any, and interest on Notes required to be purchased pursuant to
Sections 3.07(b), 4.10, 4.11 and 4.16 of the Indenture, when due and payable; or
(B) failure to perform or comply with the provisions described under (1) Section
5.01 of the Indenture or (2) Section 4.07 of the Indenture (but only if the
failure under this clause (2) is caused by a Restricted Payment described in
clauses (a) through (c) of the first paragraph of Section 4.07 of the Indenture;
(iv) failure by the Company or any of its Restricted Subsidiaries for 60 days
after notice to comply with any of the other agreements in the Indenture or the
Collateral Documents; (v) default under certain other agreements relating to
Indebtedness of the Company which default (A) is caused by a failure to pay
principal of, or interest or premium, if any, on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default or (B) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $8.0 million or more; (vi) failure to perform or
breach by the Company or any Guarantor of any material representation or
warranty or agreement in the Collateral Documents, the repudiation by any party
of any of its obligations under any of the Collateral Documents or the
unenforceability of any of the Collateral Documents against any party for any
reason, continued for 30 days after written notice from the Trustee or Holders
of at least 25% in principal amount of the outstanding
A1-7
<PAGE>
Notes pursuant to Section 6.06 hereof; (vii) except as otherwise permitted by
the Indenture, a default by any Guarantor of the obligations of such Guarantor
under its Guarantee, any Note Guarantee by HWCC-Tunica, HWCC-Shreveport or any
other Guarantor that has a Tangible Consolidated Net Worth of $8 million shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any such Guarantor, or any
Person acting on behalf of any such Guarantor, shall deny or disaffirm its
obligations under its Note Guarantee; (viii) certain final judgments for the
payment of money that remain undischarged for a period of 60 days; (ix) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Material Subsidiaries; and (x) any revocation, suspension or loss of any gaming
license which results in the cessation or suspension of business at any Casino
owned by the Company or any of its Restricted Subsidiaries for a period of more
than 120 consecutive days. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of principal of, and premium and Liquidated Damages, if any, and
interest on the Notes. The Company is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture and the Collateral
Documents, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the
A1-8
<PAGE>
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of May 19, 1999, between the Company and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
Telecopier No.: (214) 386-7411
A1-9
<PAGE>
Assignment Form
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:___________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:______________________
Your Signature:_______________________________________
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee*:___________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A1-10
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10, Section 4.11 or 4.16 of the Indenture, check the appropriate
box below:
[_] ERROR! SWITCH ARGUMENT NOT SPECIFIED. Section 4.10 [_] ERROR! SWITCH
ARGUMENT NOT SPECIFIED. Section 4.11 [_] ERROR! SWITCH ARGUMENT NOT SPECIFIED.
Section 4.16
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10, Section 4.11 or Section 4.16 of the Indenture,
state the amount you elect to have purchased:
$_______________
Date:________________
Your Signature:___________________________________
Sign exactly as your name appears on the
face of this Note)
Tax Identification No.:___________________________
Signature Guarantee*:___________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A1-11
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase [at maturity] of Signature of
in in this Global Note authorized
Principal Amount Principal Amount following such officer of
[at maturity] of [at maturity] of decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ----------------- ------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
A1-12
<PAGE>
EXHIBIT A2
[Face of Note]
- --------------------------------------------------------------------------------
CUSIP/CINS ____________
[Series A] [Series B] Senior Secured Notes due 2006
No. ___ $___________
HOLLYWOOD CASINO CORPORATION
promises to pay to______________________________________________________________
or registered assigns,
the principal sum of____________________________________________________________
Dollars on May 1, 2007.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Dated: _______________, ____
HOLLYWOOD CASINO CORPORATION
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: __________________________________
Authorized Signatory
________________________________________________________________________________
A2-1
<PAGE>
[Back of Note]
[Series A] [Series B] Senior Secured Notes due 2007
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES (A) TO OFFER, SELL,
PLEDGE OR OTHERWISE TRANSFER THIS NOTE ONLY (1) TO THE COMPANY, (2) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(4) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, OR (6) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT (AND BASED ON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO
APPLICABLE JURISDICTION, AND (B) THAT IT WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE NOTE EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Hollywood Casino Corporation, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 11 1/4% per annum from May 19, 1999 until maturity and shall pay any
Liquidated Damages
A2-2
<PAGE>
payable pursuant to Section 5 of the Registration Rights Agreement referred to
below. The Company will pay interest and Liquidated Damages, if any, semi-
annually in arrears on May 1 and November 1 of each year, or if any such day is
not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the 11 1/4% Series A Senior Secured Notes (the
"Notes") will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of issuance; provided, however,
that if there is no existing Default in the payment of interest, and if this
Note is authenticated between a record date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be November 1, 1999. The Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
that is 1% per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Floating Rate Notes will bear interest at a rate per annum equal
to LIBOR plus 628 basis points, which will be reset semi-annually, as determined
by the Calculation Agent. The amount of interest for each 30-day month that the
Floating Rate Notes are outstanding (the "Daily Interest Amount") will be
calculated by dividing the interest rate in effect for such day by 360 and
multiplying the result by the principal amount of the Floating Rate Notes. The
amount of interest to be paid on the Floating Rate Notes for each Interest
Period will be calculated by adding the Daily Interest Amounts for each day in
the Interest Period. All percentages resulting from any of the above
calculations will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millions of a percentage
point rounded upwards (e.g., 9.876545 being rounded to 9.87655%) and all dollar
amount used in or resulting from such calculations will be rounded to the
nearest cent (with one-half cent being rounded upwards). The Calculation Agent
will, upon the request of the Holder of any Floating Rate Note, provide the
interest rate then in effect with respect to the Floating Rate Notes. All
calculations made by the Calculation Agent in the absence of manifest error will
conclusive for all purposes and binding on the Company and the Holders of the
Floating Rate Notes.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the April 15 or
October 15 next preceding each Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages, if any, may
be made by check mailed to the Holders at their addresses set forth in the
register of Holders, and provided that payment by wire transfer of immediately
available funds will be required with respect to principal, premium, Liquidated
Damages, if any, and interest on all Global Notes and all other Notes the
Holders of which shall have provided wire transfer instructions to the Company
or the Paying Agent. Such payment shall be in such
A2-3
<PAGE>
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture and Security Documents. The Company issued the Notes
under an Indenture dated as of May 19, 1999 ("Indenture") between the Company
and the Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to
all such terms and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts with
the express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are secured obligations of the Company
limited to $310.0 million in aggregate principal amount. The Notes are secured
by the collateral named in the Security Documents.
5. Optional Redemption. At any time prior to May 1, 2002, the Company
may on any one or more occasions redeem up to 35% of the original aggregate
principal amount of Notes issued under the Indenture at a redemption price of
111.250% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date, with the net cash proceeds
of one or more Qualified Equity Offerings; provided, however that: (i) at least
65% of the original aggregate principal amount of the notes issued under the
Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company and its Subsidiaries); and (ii)
the redemption must occur within 60 days of the date of the closing of such
Qualified Equity Offering. Except as provided herein, the Notes will not be
redeemable at the Company's option prior to May 1, 2003. After May 1, 2003, the
Company may redeem all or a part of the Notes upon not less than 30 nor more
than 60 days' notice, at the following redemption prices (expressed as
percentages of principal amount) plus accrued and unpaid interest and Liquidated
Damages, if any, thereon, to the applicable redemption date, if redeemed during
the twelve-month period beginning on May 1 of the years indicated below:
Year Percentage
---- ----------
2003................... 107.000%
2004................... 104.666%
2005................... 102.333%
2006 and thereafter.... 100.000%
6. Mandatory Redemption.
(a) Except as described in paragraphs 6(b), 6(c) and 7 below, the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
(b) If any Gaming Authority requires that a Person who is a Holder or
the Beneficial Owner of the Notes be licensed, qualified or found suitable under
applicable gaming laws, the Holder or Beneficial Owner, as the case may be,
shall apply for a license, qualification or a finding of suitability within the
required time period. If the Holder or Beneficial Owner fails to apply for such
license, qualification or finding of suitability within the required time
period, such Holder or Beneficial Owner, as the case may be, shall be required
to dispose of its Notes within the specified time and the Company shall have the
right to redeem the Notes of such Holder or Beneficial Owner, subject to
approval of any applicable Gaming Authority, at the
A2-4
<PAGE>
lesser of (i) the principal amount thereof, (ii) the amount that such Holder or
Beneficial Owner paid for the Notes or (iii) the fair market value of the Notes.
Any Holder of Notes required to apply for a finding of suitability must pay all
investigative fees and costs of the applicable Gaming Authorities in connection
with such investigation. Immediately upon the imposition of a requirement to
dispose of Notes by a Gaming Authority, such Holder or Beneficial Owner shall,
to the extent required by applicable law, have no further right (i) to exercise,
directly or indirectly, through any trustee or nominee or any other Person or
entity, any right conferred by the Notes or (ii) to receive any interest,
dividends, economic interests or any other distributions or payments with
respect to the Notes or any remuneration in any form with respect to the Notes
from the Company or the Trustee. The Company is not required to pay or reimburse
any Holder of the Notes or Beneficial Owner who is required to apply for such
license, qualification or finding of suitability for the costs of the licensure
or investigation for such qualification or finding of suitability. Such expense
will be the obligation of such Holder or Beneficial Owner. The Company shall
notify the Trustee in writing of any such redemption as soon as practicable;
provided, however, that until such time as the Trustee receives notice from the
Company of such redemption in accordance with Section 13.02 of the Indenture,
the Trustee shall be entitled to treat the Holder or Beneficial Owner as having
all of its rights under the Indenture. The Company shall not be responsible for
any costs or expenses any such Holder may incur in connection with its
application or a license, qualification or a finding or suitability. The Trustee
shall report the names of the record Holders of the Notes to any Gaming
Authority when required by law.
(c) If, prior to January 31, 2000, the Company determines in its sole
discretion (as evidenced by a resolution of the Company's Board of Directors
certified by an Officer of the Company and delivered to the Trustee) that it is
unable to consummate the Pratt Casino Corporation Acquisition by January 31,
2000, the Company shall redeem $40,330,000 aggregate principal amount of Notes
(the ``Special Mandatory Redemption'') at a redemption price equal to 101% of
the principal amount of the Notes, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of redemption; provided,
however, that such redemption will occur on January 31, 2000 if the Pratt Casino
Corporation Acquisition has not been consummated and the Company has not by
January 31, 2000 delivered to the Trustee an Officers' Certificate certifying as
to the conditions required for the release of the Escrowed Funds, in accordance
with the terms and conditions set forth in the Escrow Agreement. The redemption
date for the Special Mandatory Redemption shall be the earlier of (a) five days
after the date that the certified resolutions are delivered to the Trustee
pursuant to the preceding sentence, or (b) January 31, 2000. Any such
redemption shall be made on a pro rata basis between the Floating Rate Notes and
the Fixed Rate Notes. Notice of any Special Mandatory Redemption will be mailed
to each Holder not less than five days prior to the redemption date.
7. Repurchase at Option of Holder.
(a) If a Change of Control occurs, each Holder of Notes shall have the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of that Holder's Notes pursuant to an offer
described below (a "Change of Control Offer"). In the Change of Control Offer,
the Company shall offer a payment (the "Change of Control Payment") in cash
equal to 101% of the aggregate principal amount of Notes repurchased plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
A2-5
<PAGE>
date of purchase. Within ten days following any Change of Control, the Company
shall mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes on the
date (the "Change of Control Payment Date") specified in such notice, which date
shall be no earlier than 30 days or such shorter period as is satisfactory to
the Trustee but no later than 60 days from the date such notice is mailed,
pursuant to the procedures set forth in Section 3.09 of the Indenture, and
described in such notice.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within ten days following the date that the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company shall make an offer (an "Asset Sale Offer")
pursuant to Section 3.09 of the Indenture to all Holders of Notes to purchase
with all of the Excess Proceeds an amount equal to the maximum principal amount
of Notes that may be purchased out of such Excess Proceeds. The offer price in
any Asset Sale Offer will be equal to 100% of principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by the Indenture or the Collateral
Documents. If the aggregate principal amount of Notes tendered in such Asset
Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased in accordance with the procedures set forth in Section
3.02 to the Indenture. Holders of Notes that are the subject of an offer to
purchase will receive an Asset Sale Offer from the Company prior to any related
purchase date and may elect to have such Notes purchased by completing the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes.
(c) If the Company or its Restricted Subsidiaries experience an
Event of Loss, within ten days following the date that the aggregate amount of
Excess Loss Proceeds exceeds $10.0 million, the Company shall make an offer (an
"Event of Loss Offer") pursuant to Section 3.09 of the Indenture to all
Holders of Notes to purchase with all of the Excess Loss Proceeds from any Event
of Loss an amount equal to the maximum principal amount of Notes that may be
purchased out of such Excess Loss Proceeds. The offer price in any Event of Loss
Offer will be equal to 100% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of purchase
and will be payable in cash. To the extent that the aggregate amount of Notes
tendered pursuant to any Event of Loss Offer is less than the Excess Loss
Proceeds, the Company may, subject to the other provisions of the Indenture and
the Collateral Documents, use any remaining Excess Loss Proceeds for any purpose
not prohibited by the Indenture or the Collateral Documents.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days or such shorter period as is satisfactory to the Trustee but not
more than 60 days before the redemption date to each Holder whose Notes are to
be redeemed at its registered address. Notes in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000, unless all
of the Notes held by a Holder are to be redeemed. On and after the redemption
date, interest ceases to accrue on Notes or portions thereof called for
redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The
A2-6
<PAGE>
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company need not exchange or register the transfer of any Note or portion of
a Note selected for redemption, except for the unredeemed portion of any Note
being redeemed in part. Also, the Company need not exchange or register the
transfer of any Notes for a period of 15 days before a selection of Notes to be
redeemed or during the period between a record date and the corresponding
Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes, including the Floating Rate Notes, voting as a
single class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes,
including the Floating Rate Notes, voting as a single class. Without the consent
of any Holder of a Note, the Indenture, the Note Guarantees or the Notes may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or Guarantor's obligations
to Holders of the Notes in case of a merger or consolidation or sale of all or
substantially all of the Company's assets, to make any change that would provide
any additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act, or to enter into
additional or supplemental Collateral Documents.
Any amendment to, or waiver of the provisions of any of the Collateral
Documents relating to Section 4.13 or Article 10 of the Indenture shall require
the consent of the Holders of at least 85% in aggregate principal amount of
Notes, including the Floating Rate Notes, then outstanding voting as a single
class.
12. Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes; (ii) default in payment when due of principal of or
premium, if any, on the Notes, (iii)(A) default in the payment of principal of,
premium, if any, and interest on Notes required to be purchased pursuant to
Sections 3.07(b), 4.10, 4.11 and 4.16 of the Indenture, when due and payable; or
(B) failure to perform or comply with the provisions described under (1) Section
5.01 of the Indenture or (2) Section 4.07 of the Indenture (but only if the
failure under this clause (2) is caused by a Restricted Payment described in
clauses (a) through (c) of the first paragraph of Section 4.07 of the Indenture;
(iv) failure by the Company or any of its Restricted Subsidiaries for 60 days
after notice to comply with any of the other agreements in the Indenture or the
Collateral Documents; (v) default under certain other agreements relating to
Indebtedness of the Company which default (A) is caused by a failure to pay
principal of, or interest or premium, if any, on such Indebtedness prior to the
expiration of the grace period provided in such
A2-7
<PAGE>
Indebtedness on the date of such default or (B) results in the acceleration of
such Indebtedness prior to its express maturity, and, in each case, the
principal amount of any such Indebtedness, together with the principal amount of
any other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $8.0 million or more; (vi)
failure to perform or breach by the Company or any Guarantor of any material
representation or warranty or agreement in the Collateral Documents, the
repudiation by any party of any of its obligations under any of the Collateral
Documents or the unenforceability of any of the Collateral Documents against any
party for any reason, continued for 30 days after written notice from the
Trustee or Holders of at least 25% in principal amount of the outstanding Notes
pursuant to Section 6.06 hereof; (vii) except as otherwise permitted by the
Indenture, a default by any Guarantor of the obligations of such Guarantor under
its Guarantee, any Note Guarantee by HWCC-Tunica, HWCC-Shreveport or any other
Guarantor that has a Tangible Consolidated Net Worth of $8 million shall be held
in any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any such Guarantor, or any Person
acting on behalf of any such Guarantor, shall deny or disaffirm its obligations
under its Note Guarantee; (viii) certain final judgments for the payment of
money that remain undischarged for a period of 60 days; (ix) certain events of
bankruptcy or insolvency with respect to the Company or any of its Material
Subsidiaries; and (x) any revocation, suspension or loss of any gaming license
which results in the cessation or suspension of business at any Casino owned by
the Company or any of its Restricted Subsidiaries for a period of more than 120
consecutive days. If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of principal of,
and premium and Liquidated Damages, if any, and interest on the Notes. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture and the Collateral Documents, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in
A2-8
<PAGE>
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of May 19, 1999, between the Company and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
Telecopier No.: (214) 386-7411
A2-9
<PAGE>
Assignment Form
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:___________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:_______________
Your Signature:_______________________________________
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee*:_________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A2-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10, Section 4.11 or 4.16 of the Indenture, check the appropriate
box below:
[ ]Error! Switch argument not specified. Section 4.10 [ ]Error! Switch
Argument not specified. Section 4.11 [ ]Error! Switch argument not specified.
Section 4.16
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10, Section 4.11 or Section 4.16 of the Indenture,
state the amount you elect to have purchased:
$_________________
Date:__________________
Your Signature:___________________________________
Sign exactly as your name appears
on the face of this Note)
Tax Identification No.:___________________________
Signature Guarantee*:____________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A2-11
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase [at maturity] of Signature of
in in this Global Note authorized
Principal Amount Principal Amount following such officer of
[at maturity] of [at maturity] of decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ----------------- ------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
A2-12
<PAGE>
EXHIBIT A3
[Face of Regulation S Temporary Global Note]
- --------------------------------------------------------------------------------
CUSIP/CINS ____________
11 1/4% [Series A] [Series B] Senior Secured Notes due 2007
No. ___ $____________
HOLLYWOOD CASINO CORPORATION
promises to pay to______________________________________________________________
or registered assigns,
the principal sum of___________________________________________________________
Dollars on May 1, 2007.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Dated: _______________, ____
HOLLYWOOD CASINO CORPORATION
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: __________________________________
Authorized Signatory
- --------------------------------------------------------------------------------
A3-1
<PAGE>
[Back of Regulation S Temporary Global Note]
11 1/4% [Series A] [Series B] Senior Secured Notes due 2007
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE
HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
A3-2
<PAGE>
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (1) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Hollywood Casino Corporation, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 11 1/4% per annum from May 19, 1999 until maturity and shall pay any
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, semi-annually in arrears on May 1 and November 1 of each year,
or if any such day is not a Business Day, on the next succeeding Business Day
(each an "Interest Payment Date"). Interest on the 11 1/4% Series A Senior
Secured Notes (the "Notes") will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided, however, that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be November 1, 1999. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Senior Subordinated Notes under the Indenture.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the April 15 or
October 15 next preceding each Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages, if any, may
be made by check mailed to the Holders at their addresses set forth in the
register of Holders, and provided that payment by wire transfer of immediately
available funds will be required with respect to principal, premium, Liquidated
Damages, if any, and interest on all Global Notes and all other Notes the
Holders of which shall have provided wire transfer instructions to the Company
or the Paying Agent. Such payment shall be in such
A3-3
<PAGE>
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, State Street Bank and
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture and Security Documents. The Company issued the Notes
under an Indenture dated as of May 19, 1999 ("Indenture") between the Company
and the Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to
all such terms and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts
with the express provisions of the Indenture, the provisions of the Indenture
shall govern and be controlling. The Notes are secured obligations of the
Company limited to $310.0 million in aggregate principal amount. The Notes are
secured by the collateral named in the Security Documents.
5. Optional Redemption. At any time prior to May 1, 2002, the
Company may on any one or more occasions redeem up to 35% of the original
aggregate principal amount of Notes issued under the Indenture at a redemption
price of 111.250% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date, with the net
cash proceeds of one or more Qualified Equity Offerings; provided, however that:
(i) at least 65% of the original aggregate principal amount of the notes issued
under the Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company and its Subsidiaries); and (ii)
the redemption must occur within 60 days of the date of the closing of such
Qualified Equity Offering. Except as provided herein, the Notes will not be
redeemable at the Company's option prior to May 1, 2003. After May 1, 2003, the
Company may redeem all or a part of the Notes upon not less than 30 nor more
than 60 days' notice, at the following redemption prices (expressed as
percentages of principal amount) plus accrued and unpaid interest and Liquidated
Damages, if any, thereon, to the applicable redemption date, if redeemed during
the twelve-month period beginning on May 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003............................. 107.000%
2004............................. 104.666%
2005............................. 102.333%
2006 and thereafter.............. 100.000%
</TABLE>
6. Mandatory Redemption.
(a) Except as described in paragraphs 6(b), 6(c) and 7 below, the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
(b) If any Gaming Authority requires that a Person who is a
Holder or the Beneficial Owner of the Notes be licensed, qualified or found
suitable under applicable gaming
A3-4
<PAGE>
laws, the Holder or Beneficial Owner, as the case may be, shall apply for a
license, qualification or a finding of suitability within the required time
period. If the Holder or Beneficial Owner fails to apply for such license,
qualification or finding of suitability within the required time period, such
Holder or Beneficial Owner, as the case may be, shall be required to dispose of
its Notes within the specified time and the Company shall have the right to
redeem the Notes of such Holder or Beneficial Owner, subject to approval of any
applicable Gaming Authority, at the lesser of (i) the principal amount thereof,
(ii) the amount that such Holder or Beneficial Owner paid for the Notes or (iii)
the fair market value of the Notes. Any Holder of Notes required to apply for a
finding of suitability must pay all investigative fees and costs of the
applicable Gaming Authorities in connection with such investigation. Immediately
upon the imposition of a requirement to dispose of Notes by a Gaming Authority,
such Holder or Beneficial Owner shall, to the extent required by applicable law,
have no further right (i) to exercise, directly or indirectly, through any
trustee or nominee or any other Person or entity, any right conferred by the
Notes or (ii) to receive any interest, dividends, economic interests or any
other distributions or payments with respect to the Notes or any remuneration in
any form with respect to the Notes from the Company or the Trustee. The Company
is not required to pay or reimburse any Holder of the Notes or Beneficial Owner
who is required to apply for such license, qualification or finding of
suitability for the costs of the licensure or investigation for such
qualification or finding of suitability. Such expense will be the obligation of
such Holder or Beneficial Owner. The Company shall notify the Trustee in writing
of any such redemption as soon as practicable; provided, however, that until
such time as the Trustee receives notice from the Company of such redemption in
accordance with Section 13.02 of the Indenture, the Trustee shall be entitled to
treat the Holder or Beneficial Owner as having all of its rights under the
Indenture. The Company shall not be responsible for any costs or expenses any
such Holder may incur in connection with its application or a license,
qualification or a finding or suitability. The Trustee shall report the names of
the record Holders of the Notes to any Gaming Authority when required by law.
(c) If, prior to January 31, 2000, the Company determines in its sole
discretion (as evidenced by a resolution of the Company's Board of Directors
certified by an Officer of the Company and delivered to the Trustee) that it is
unable to consummate the Pratt Casino Corporation Acquisition by January 31,
2000, the Company shall redeem $40,330,000 aggregate principal amount of Notes
(the "Special Mandatory Redemption") at a redemption price equal to 101% of
the principal amount of the Notes, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of redemption; provided,
however, that such redemption will occur on January 31, 2000 if the Pratt Casino
Corporation Acquisition has not been consummated and the Company has not by
January 31, 2000 delivered to the Trustee an Officers' Certificate certifying as
to the conditions required for the release of the Escrowed Funds, in accordance
with the terms and conditions set forth in the Escrow Agreement. The redemption
date for the Special Mandatory Redemption shall be the earlier of (a) five days
after the date that the certified resolutions are delivered to the Trustee
pursuant to the preceding sentence, or (b) January 31, 2000. Any such
redemption shall be made on a pro rata basis between the Floating Rate Notes and
the Fixed Rate Notes. Notice of any Special Mandatory Redemption will be mailed
to each Holder not less than five days prior to the redemption date.
A3-5
<PAGE>
7. Repurchase at Option of Holder.
(a) If a Change of Control occurs, each Holder of Notes shall
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of that Holder's Notes pursuant to an
offer described below (a "Change of Control Offer"). In the Change of Control
Offer, the Company shall offer a payment (the "Change of Control Payment") in
cash equal to 101% of the aggregate principal amount of Notes repurchased plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date
of purchase. Within ten days following any Change of Control, the Company shall
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the date
(the "Change of Control Payment Date") specified in such notice, which date
shall be no earlier than 30 days or such shorter period as is satisfactory to
the Trustee but no later than 60 days from the date such notice is mailed,
pursuant to the procedures set forth in Section 3.09 of the Indenture, and
described in such notice.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within ten days following the date that the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company shall make an offer (an "Asset Sale Offer")
pursuant to Section 3.09 of the Indenture to all Holders of Notes to purchase
with all of the Excess Proceeds an amount equal to the maximum principal amount
of Notes that may be purchased out of such Excess Proceeds. The offer price in
any Asset Sale Offer will be equal to 100% of principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by the Indenture or the Collateral
Documents. If the aggregate principal amount of Notes tendered in such Asset
Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased in accordance with the procedures set forth in Section
3.02 to the Indenture. Holders of Notes that are the subject of an offer to
purchase will receive an Asset Sale Offer from the Company prior to any related
purchase date and may elect to have such Notes purchased by completing the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes.
(c) If the Company or its Restricted Subsidiaries experience an
Event of Loss, within ten days following the date that the aggregate amount of
Excess Loss Proceeds exceeds $10.0 million, the Company shall make an offer (an
"Event of Loss Offer") pursuant to Section 3.09 of the Indenture to all
Holders of Notes to purchase with all of the Excess Loss Proceeds from any Event
of Loss an amount equal to the maximum principal amount of Notes that may be
purchased out of such Excess Loss Proceeds. The offer price in any Event of Loss
Offer will be equal to 100% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of purchase
and will be payable in cash. To the extent that the aggregate amount of Notes
tendered pursuant to any Event of Loss Offer is less than the Excess Loss
Proceeds, the Company may, subject to the other provisions of the Indenture and
the Collateral Documents, use any remaining Excess Loss Proceeds for any purpose
not prohibited by the Indenture or the Collateral Documents.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days or such shorter period as is satisfactory to the Trustee but not
more than 60 days before the
A3-6
<PAGE>
redemption date to each Holder whose Notes are to be redeemed at its registered
address. Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Notes held by a Holder are
to be redeemed. On and after the redemption date, interest ceases to accrue on
Notes or portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Global Notes only (i) on or after the termination of the
40-day restricted period (as defined in Regulation S) and (ii) upon presentation
of certificates (accompanied by an Opinion of Counsel, if applicable) required
by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary
Global Note for one or more Global Notes, the Trustee shall cancel this
Regulation S Temporary Global Note.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes, including the Floating Rate Notes, voting as a
single class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes,
including the Floating Rate Notes, voting as a single class. Without the
consent of any Holder of a Note, the Indenture, the Note Guarantees or the Notes
may be amended or supplemented to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or Guarantor's obligations
to Holders of the Notes in case of a merger or consolidation or sale of all or
substantially all of the Company's assets, to make any change that would provide
any additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act, or to enter into
additional or supplemental Collateral Documents.
Any amendment to, or waiver of the provisions of any of the Collateral
Documents relating to Section 4.13 or Article 10 of the Indenture shall require
the consent of the
A3-7
<PAGE>
Holders of at least 85% in aggregate principal amount of Notes, including the
Floating Rate Notes, then outstanding voting as a single class.
12. Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes; (ii) default in payment when due of principal of or
premium, if any, on the Notes, (iii)(A) default in the payment of principal of,
premium, if any, and interest on Notes required to be purchased pursuant to
Sections 3.07(b), 4.10, 4.11 and 4.16 of the Indenture, when due and payable; or
(B) failure to perform or comply with the provisions described under (1) Section
5.01 of the Indenture or (2) Section 4.07 of the Indenture (but only if the
failure under this clause (2) is caused by a Restricted Payment described in
clauses (a) through (c) of the first paragraph of Section 4.07 of the Indenture;
(iv) failure by the Company or any of its Restricted Subsidiaries for 60 days
after notice to comply with any of the other agreements in the Indenture or the
Collateral Documents; (v) default under certain other agreements relating to
Indebtedness of the Company which default (A) is caused by a failure to pay
principal of, or interest or premium, if any, on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default or (B) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $8.0 million or more; (vi) failure to perform or
breach by the Company or any Guarantor of any material representation or
warranty or agreement in the Collateral Documents, the repudiation by any party
of any of its obligations under any of the Collateral Documents or the
unenforceability of any of the Collateral Documents against any party for any
reason, continued for 30 days after written notice from the Trustee or Holders
of at least 25% in principal amount of the outstanding Notes pursuant to Section
6.06 hereof; (vii) except as otherwise permitted by the Indenture, a default by
any Guarantor of the obligations of such Guarantor under its Guarantee, any Note
Guarantee by HWCC-Tunica, HWCC-Shreveport or any other Guarantor that has a
Tangible Consolidated Net Worth of $8 million shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any such Guarantor, or any Person acting on behalf of
any such Guarantor, shall deny or disaffirm its obligations under its Note
Guarantee; (viii) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; (ix) certain events of bankruptcy or
insolvency with respect to the Company or any of its Material Subsidiaries; and
(x) any revocation, suspension or loss of any gaming license which results in
the cessation or suspension of business at any Casino owned by the Company or
any of its Restricted Subsidiaries for a period of more than 120 consecutive
days. If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the
A3-8
<PAGE>
Holders of all of the Notes waive any existing Default or Event of Default and
its consequences under the Indenture except a continuing Default or Event of
Default in the payment of principal of, and premium and Liquidated Damages, if
any, and interest on the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture and the
Collateral Documents, and the Company is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of May 19, 1999, between the Company and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
A3-9
<PAGE>
Dallas, Texas 75240
Telecopier No.: (214) 386-7411
A3-10
<PAGE>
Assignment Form
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:__________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:_______________
Your Signature:_____________________________________
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee*:____________________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A3-11
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10, Section 4.11 or 4.16 of the Indenture, check the appropriate
box below:
[_]Error! switch argument not specified. Section 4.10 [_]Error!
switch argument not specified. Section 4.11 [_]Error! switch argument not
specified. Section 4.16
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10, Section 4.11 or Section 4.16 of the Indenture,
state the amount you elect to have purchased:
$__________________________________
Date:___________________________
Your Signature:__________________________________
Sign exactly as your name appears
on the face of this Note)
Tax Identification No.:__________________________
Signature Guarantee*:___________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A3-12
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase [at maturity] of Signature of
in in this Global Note authorized
Principal Amount Principal Amount following such officer of
[at maturity] of [at maturity] of decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ----------------- ------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
A-13
<PAGE>
EXHIBIT A4
[Face of Regulation S Temporary Global Note]
- --------------------------------------------------------------------------------
CUSIP/CINS ____________
[Series A] [Series B] Floating Rate Senior Secured Notes due 2006
No. ___ $____________
HOLLYWOOD CASINO CORPORATION
promises to pay to _____________________________________________________________
or registered assigns,
the principal sum of ___________________________________________________________
Dollars on May 1, 2007.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Dated: _______________, ____
HOLLYWOOD CASINO CORPORATION
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: __________________________________
Authorized Signatory
- --------------------------------------------------------------------------------
A4-1
<PAGE>
[Back of Regulation S Temporary Global Note]
[Series A] [Series B] Floating Rate Senior Secured Notes due 2006
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE
HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
A4-2
<PAGE>
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (1) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Hollywood Casino Corporation, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at the rate set forth in the following paragraph from May 19, 1999 until
maturity and shall pay any Liquidated Damages payable pursuant to Section 5 of
the Registration Rights Agreement referred to below. The Company will pay
interest and Liquidated Damages, if any, semi-annually in arrears on May 1 and
December 1 of each year, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on the
Series A Floating Rate Notes (the "Notes") will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from the date
of issuance; provided, however, that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be November 1, 1999. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Floating Rate Notes will bear interest at a rate per annum equal
to LIBOR plus 628 basis points, which will be reset semi-annually, as determined
by the Calculation Agent. The amount of interest for each 30-day month that the
Floating Rate Notes are outstanding (the "Daily Interest Amount") will be
calculated by dividing the interest rate in effect for such day by 360 and
multiplying the result by the principal amount of the Floating Rate Notes. The
amount of interest to be paid on the Floating Rate Notes for each Interest
Period will be calculated by adding the Daily Interest Amounts for each day in
the Interest Period. All percentages resulting from any of the above
calculations will be rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point, with five one-millions of a percentage point
rounded upwards (e.g., 9.876545 being rounded to 9.87655%) and all dollar amount
used in or resulting from such calculations will be rounded to the nearest cent
(with one-half cent being rounded upwards). The Calculation Agent will, upon the
request of the Holder of any Floating Rate Note, provide the interest rate then
in effect with respect to the Floating Rate Notes. All calculations made by the
Calculation Agent in the absence of manifest error will be conclusive for all
purposes and binding on the Company and the Holders of the Floating Rate Notes.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the April 15 or
October 15 next preceding each
A4-3
<PAGE>
Interest Payment Date, even if such Notes are canceled after such record date
and on or before such Interest Payment Date, except as provided in Section 2.12
of the Indenture with respect to defaulted interest. The Notes will be payable
as to principal, premium and Liquidated Damages, if any, and interest at the
office or agency of the Company maintained for such purpose within or without
the City and State of New York, or, at the option of the Company, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders at their addresses set forth in the register of Holders, and provided
that payment by wire transfer of immediately available funds will be required
with respect to principal, premium, Liquidated Damages if any, and interest on
all Global Notes and all other Notes the Holders of which shall have provided
wire transfer instructions to the Company or the Paying Agent. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Senior Subordinated Notes under the Indenture.
3. Paying Agent and Registrar. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture and Security Documents. The Company issued the Notes
under an Indenture dated as of May 19, 1999 ("Indenture") between the Company
and the Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to
all such terms and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts with
the express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are secured obligations of the Company
limited to $50.0 million in aggregate principal amount. The Notes are secured by
the collateral named in the Security Documents.
5. Optional Redemption. The Notes may be redeemed, in whole or in
part, at any time and from time to time, at the option of the Company upon not
less than 30 nor more than 60 days' prior notice, at the following redemption
prices (expressed as percentages of principal amount), plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the twelve-month period beginning on May 1 of the years indicated below:
A4-4
<PAGE>
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999......................... 105.000%
2000......................... 104.000%
2001......................... 103.000%
2002......................... 102.000%
2003......................... 101.000%
2004 and thereafter.......... 100.000%
</TABLE>
6. Mandatory Redemption.
(a) Except as described in paragraphs 6(b), 6(c) and 7 below, the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
(b) If any Gaming Authority requires that a Person who is a Holder or
the Beneficial Owner of the Notes be licensed, qualified or found suitable under
applicable gaming laws, the Holder or Beneficial Owner, as the case may be,
shall apply for a license, qualification or a finding of suitability within the
required time period. If the Holder or Beneficial Owner fails to apply for such
license, qualification or finding of suitability within the required time
period, such Holder or Beneficial Owner, as the case may be, shall be required
to dispose of its Notes within the specified time and the Company shall have the
right to redeem the Notes of such Holder or Beneficial Owner, subject to
approval of any applicable Gaming Authority, at the lesser of (i) the principal
amount thereof, (ii) the amount that such Holder or Beneficial Owner paid for
the Notes or (iii) the fair market value of the Notes. Any Holder of Notes
required to apply for a finding of suitability must pay all investigative fees
and costs of the applicable Gaming Authorities in connection with such
investigation. Immediately upon the imposition of a requirement to dispose of
Notes by a Gaming Authority, such Holder or Beneficial Owner shall, to the
extent required by applicable law, have no further right (i) to exercise,
directly or indirectly, through any trustee or nominee or any other Person or
entity, any right conferred by the Notes or (ii) to receive any interest,
dividends, economic interests or any other distributions or payments with
respect to the Notes or any remuneration in any form with respect to the Notes
from the Company or the Trustee. The Company is not required to pay or
reimburse any Holder of the Notes or Beneficial Owner who is required to apply
for such license, qualification or finding of suitability for the costs of the
licensure or investigation for such qualification or finding of suitability.
Such expense will be the obligation of such Holder or Beneficial Owner. The
Company shall notify the Trustee in writing of any such redemption as soon as
practicable; provided, however, that until such time as the Trustee receives
notice from the Company of such redemption in accordance with Section 13.02 of
the Indenture, the Trustee shall be entitled to treat the Holder or Beneficial
Owner as having all of its rights under the Indenture. The Company shall not be
responsible for any costs or expenses any such Holder may incur in connection
with its application or a license, qualification or a finding or suitability.
The Trustee shall report the names of the record Holders of the Notes to any
Gaming Authority when required by law.
(c) If, prior to January 31, 2000, the Company determines in its sole
discretion (as evidenced by a resolution of the Company's Board of Directors
certified by an Officer of the Company and delivered to the Trustee) that it is
unable to consummate the Pratt Casino Corporation Acquisition by January 31,
2000, the Company shall redeem $40,330,000
A4-5
<PAGE>
aggregate principal amount of Notes (the ``Special Mandatory Redemption'') at a
redemption price equal to 101% of the principal amount of the Notes, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of redemption; provided, however, that such redemption will occur on January 31,
2000 if the Pratt Casino Corporation Acquisition has not been consummated and
the Company has not by January 31, 2000 delivered to the Trustee an Officers'
Certificate certifying as to the conditions required for the release of the
Escrowed Funds, in accordance with the terms and conditions set forth in the
Escrow Agreement. The redemption date for the Special Mandatory Redemption shall
be the earlier of (a) five days after the date that the certified resolutions
are delivered to the Trustee pursuant to the preceding sentence, or (b) January
31, 2000. Any such redemption shall be made on a pro rata basis between the
Floating Rate Notes and the Fixed Rate Notes. Notice of any Special Mandatory
Redemption will be mailed to each Holder not less than five days prior to the
redemption date.
7. Repurchase at Option of Holder.
(a) If a Change of Control occurs, each Holder of Notes shall have the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of that Holder's Notes pursuant to an offer
described below (a "Change of Control Offer"). In the Change of Control Offer,
the Company shall offer a payment (the "Change of Control Payment") in cash
equal to 101% of the aggregate principal amount of Notes repurchased plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date
of purchase. Within ten days following any Change of Control, the Company shall
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the date
(the "Change of Control Payment Date") specified in such notice, which date
shall be no earlier than 30 days or such shorter period as is satisfactory to
the Trustee but no later than 60 days from the date such notice is mailed,
pursuant to the procedures set forth in Section 3.09 of the Indenture, and
described in such notice.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
ten days following the date that the aggregate amount of Excess Proceeds exceeds
$10.0 million, the Company shall make an offer (an "Asset Sale Offer") pursuant
to Section 3.09 of the Indenture to all Holders of Notes to purchase with all of
the Excess Proceeds an amount equal to the maximum principal amount of Notes
that may be purchased out of such Excess Proceeds. The offer price in any Asset
Sale Offer will be equal to 100% of principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of purchase,
and will be payable in cash. If any Excess Proceeds remain after consummation
of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by the Indenture or the Collateral Documents. If the
aggregate principal amount of Notes tendered in such Asset Sale Offer exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased in accordance with the procedures set forth in Section 3.02 to the
Indenture. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
(c) If the Company or its Restricted Subsidiaries experience an Event
of Loss, within ten days following the date that the aggregate amount of Excess
Loss Proceeds exceeds
A4-6
<PAGE>
$10.0 million, the Company shall make an offer (an ``Event of Loss Offer'')
pursuant to Section 3.09 of the Indenture to all Holders of Notes to purchase
with all of the Excess Loss Proceeds from any Event of Loss an amount equal to
the maximum principal amount of Notes that may be purchased out of such Excess
Loss Proceeds. The offer price in any Event of Loss Offer will be equal to 100%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase and will be payable in cash. To
the extent that the aggregate amount of Notes tendered pursuant to any Event of
Loss Offer is less than the Excess Loss Proceeds, the Company may, subject to
the other provisions of the Indenture and the Collateral Documents, use any
remaining Excess Loss Proceeds for any purpose not prohibited by the Indenture
or the Collateral Documents.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days or such shorter period as is satisfactory to the Trustee but not
more than 60 days before the redemption date to each Holder whose Notes are to
be redeemed at its registered address. Notes in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000, unless all
of the Notes held by a Holder are to be redeemed. On and after the redemption
date, interest ceases to accrue on Notes or portions thereof called for
redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Global Notes only (i) on or after the termination of the
40-day restricted period (as defined in Regulation S) and (ii) upon presentation
of certificates (accompanied by an Opinion of Counsel, if applicable) required
by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary
Global Note for one or more Global Notes, the Trustee shall cancel this
Regulation S Temporary Global Note.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes, including the Fixed Rate Notes, voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes,
including the Fixed Rate Notes, voting as a single class. Without the consent of
any Holder of a Note, the Indenture,
A4-7
<PAGE>
the Note Guarantees or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's or Guarantor's obligations to Holders of the Notes in case of a
merger or consolidation or sale of all or substantially all of the Company's
assets, to make any change that would provide any additional rights or benefits
to the Holders of the Notes or that does not adversely affect the legal rights
under the Indenture of any such Holder, to comply with the requirements of the
SEC in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act, or to enter into additional or supplemental Collateral
Documents.
Any amendment to, or waiver of the provisions of any of the Collateral
Documents relating to Section 4.13 or Article 10 of the Indenture shall require
the consent of the Holders of at least 85% in aggregate principal amount of
Notes, including the Fixed Rate Notes, then outstanding voting as a single
class.
12. Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes; (ii) default in payment when due of principal of or
premium, if any, on the Notes, (iii)(A) default in the payment of principal of,
premium, if any, and interest on Notes required to be purchased pursuant to
Sections 3.07(b), 4.10, 4.11 and 4.16 of the Indenture, when due and payable; or
(B) failure to perform or comply with the provisions described under (1) Section
5.01 of the Indenture or (2) Section 4.07 of the Indenture (but only if the
failure under this clause (2) is caused by a Restricted Payment described in
clauses (a) through (c) of the first paragraph of Section 4.07 of the Indenture;
(iv) failure by the Company or any of its Restricted Subsidiaries for 60 days
after notice to comply with any of the other agreements in the Indenture or the
Collateral Documents; (v) default under certain other agreements relating to
Indebtedness of the Company which default (A) is caused by a failure to pay
principal of, or interest or premium, if any, on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default or (B) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $8.0 million or more; (vi) failure to perform or
breach by the Company or any Guarantor of any material representation or
warranty or agreement in the Collateral Documents, the repudiation by any party
of any of its obligations under any of the Collateral Documents or the
unenforceability of any of the Collateral Documents against any party for any
reason, continued for 30 days after written notice from the Trustee or Holders
of at least 25% in principal amount of the outstanding Notes pursuant to Section
6.06 hereof; (vii) except as otherwise permitted by the Indenture, a default by
any Guarantor of the obligations of such Guarantor under its Guarantee, any Note
Guarantee by HWCC-Tunica, HWCC-Shreveport or any other Guarantor that has a
Tangible Consolidated Net Worth of $8 million shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any such Guarantor, or any Person acting on behalf of
any such Guarantor, shall deny or disaffirm its obligations under its Note
Guarantee; (viii) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; (ix) certain events of bankruptcy or
insolvency with respect to the Company or any of its Material Subsidiaries; and
(x) any revocation, suspension or loss of any gaming license which results in
the cessation or suspension of business at any Casino
A4-8
<PAGE>
owned by the Company or any of its Restricted Subsidiaries for a period of more
than 120 consecutive days. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of principal of, and premium and Liquidated Damages, if any, and
interest on the Notes. The Company is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture and the Collateral
Documents, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of May 19, 1999, between the Company and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
A4-9
<PAGE>
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
Telecopier No.: (214) 386-7411
A4-10
<PAGE>
Assignment Form
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:___________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:_______________
Your Signature:_______________________________________
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee*:_____________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A4-11
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10, Section 4.11 or 4.16 of the Indenture, check the appropriate
box below:
[ ]ERROR! SWITCH ARGUMENT NOT SPECIFIED. Section 4.10 [ ]ERROR! SWITCH
ARGUMENT NOT SPECIFIED. Section 4.11 [ ]ERROR! SWITCH ARGUMENT NOT SPECIFIED.
Section 4.16
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10, Section 4.11 or Section 4.16 of the Indenture,
state the amount you elect to have purchased:
$___________________________
Date:___________________
Your Signature:___________________________________
Sign exactly as your name appears on the face
of this Note)
Tax Identification No.:___________________________
Signature Guarantee*:_____________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A4-12
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount
[at maturity] of Signature of
Amount of decrease in Amount of increase in this Global Note authorized
Principal Amount Principal Amount following such officer of
[at maturity] of [at maturity] of decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ----------------- ------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
A4-13
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, TX 75240
State Street Bank and Trust Company
P. O. Box 778
Boston, Massachusetts 02110
Re: Hollywood Casino Corporation Series A and Series B $310,000,000 11
1/4% Senior Secured Notes due 2007; $50,000,000 Floating Rate Notes
-------------------------------------------------------------------
due 2006
--------
Reference is hereby made to the Indenture, dated as of May 19, 1999
(the "Indenture"), between Hollywood Casino Corporation, a Delaware corporation,
as issuer (the "Company"), HWCC-Tunica, Inc. and HWCC-Shreveport, Inc., as
guarantors and State Street Bank and Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
___________________, (the "Transferor") owns and proposes to transfer
the Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in
Annex A hereto. In connection with the Transfer, the Transferor hereby
certifies that:
[CHECK ALL THAT APPLY]
1. [_] Check if Transferee will take delivery of a beneficial interest
---------------------------------------------------------------
in the 144a Global Note or a Definitive Note Pursuant to Rule 144a. The
- ------------------------------------------------------------------
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Note and/or the Definitive
Note and in the Indenture and the Securities Act.
2. [_] Check if Transferee will take delivery of a beneficial interest
---------------------------------------------------------------
in the Regulation S Global Note or a Definitive Note Pursuant to Regulation S.
- -----------------------------------------------------------------------------
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and, accordingly, the Transferor hereby
further certifies that (i) the Transfer is not being made to
B-1
<PAGE>
a Person in the United States and (x) at the time the buy order was originated,
the Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Upon consummation of the proposed transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Note and/or the Definitive
Note and in the Indenture and the Securities Act.
3. [_] Check and complete if Transferee will take delivery of a
--------------------------------------------------------
beneficial interest in the IAI Global Note or a Definitive Note pursuant to any
- -------------------------------------------------------------------------------
provision of the Securities Act other than Rule 144a or Regulation S. the
- --------------------------------------------------------------------
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [_] such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [_] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [_] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of
the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the
Transferor hereby further certifies that it has not engaged in any general
solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive
Notes and the requirements of the exemption claimed, which certification is
supported by (1) a certificate executed by the Transferee in the form of
Exhibit D to the Indenture and (2) an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the
B-2
<PAGE>
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the IAI Global Note and/or the Definitive Notes and in the Indenture and
the Securities Act.
4. [_] This certificate is in connection with a transfer of Fixed
----------------------------------------------------------
Rates Notes; or
- -----------
[_] This certificate is in connection with a transfer of
----------------------------------------------------
Floating Rate Notes.
- -------------------
5. [_] Check if Transferee will take delivery of a beneficial interest
---------------------------------------------------------------
in an Unrestricted Global Note or of an Unrestricted Definitive Note.
- --------------------------------------------------------------------
(a) [_] Check if Transfer is pursuant to Rule 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [_] Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [_] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
B-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
________________________________________
[Insert Name of Transferor]
By:_____________________________________
Name:
Title:
Dated:______________
B-4
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP _____________), or
(ii) [_] Regulation S Global Note (CUSIP _____), or
(iii) [_] IAI Global Note (CUSIP ______________); or
(b) [_] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP __________), or
(ii) [_] Regulation S Global Note (CUSIP __), or
(iii) [_] IAI Global Note (CUSIP ___________); or
(iv) [_] Unrestricted Global Note (CUSIP __); or
(b) [_] a Restricted Definitive Note; or
(c) [_] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, TX 75240
State Street Bank and Trust Company
P. O. Box 778
Boston, Massachusetts 02110
Re: Hollywood Casino Corporation Series A and Series B
$310,000,000 11 1/4% Senior Secured Notes due 2007;
$50,000,000 Floating Rate Notes Senior Secured Notes due 2006
-------------------------------------------------------------
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of May 19, 1999
(the "Indenture"), between Hollywood Casino Corporation, a Delaware corporation,
as issuer (the "Company"), HWCC-Tunica, Inc. and HWCC-Shreveport, Inc., as
guarantors and State Street Bank and Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
__________________________, (the "Owner") owns and proposes to
exchange the Note[s] or interest in such Note[s] specified herein, in the
principal amount of $____________ in such Note[s] or interests (the "Exchange").
In connection with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in
------------------------------------------------------------------
a Restricted Global Note for Unrestricted Definitive Notes or Beneficial
- ------------------------------------------------------------------------
Interests in an Unrestricted Global Note
- ----------------------------------------
(a) [_] Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [_] Check if Exchange is from Beneficial Interest in a Restricted
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner
C-1
<PAGE>
hereby certifies (i) the Definitive Note is being acquired for the Owner's own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Restricted Global Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Definitive Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
(c) [_] Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Note. In connection with the Owner's
Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [_] Check if Exchange is from Beneficial Definitive Note to
Unrestricted Note. In connection with the Owner's Exchange of a Restricted
Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies
(i) the Unrestricted Definitive Note is being acquired for the Owner's own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
------------------------------------------------------------------
a Restricted Global Notes for Restricted Definitive Notes or Beneficial Interest
- -------------------------------------------------------------------------------
in an Unrestricted Global Note
- ------------------------------
(a) [_] Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) Check if Exchange is from Restricted Definitive Note to
Beneficial Interest in a Restricted Global Note. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] [_] 144A Global Note, [_] Regulation S Global Note, [_] IAI Global
Note with an equal principal amount, the Owner
C-2
<PAGE>
hereby certifies (i) the beneficial interest is being acquired for the Owner's
own account without transfer and (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted Global
Notes and pursuant to and in accordance with the Securities Act, and in
compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Exchange in accordance with the
terms of the Indenture, the beneficial interest issued will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the relevant Restricted Global Note and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
________________________________________
[Insert Name of Transferor]
By:_____________________________________
Name:
Title:
Dated: ___________________________
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, TX 75240
State Street Bank and Trust Company
P. O. Box 778
Boston, Massachusetts 02110
Re: Hollywood Casino Corporation Series A and Series B
$310,000,000 Senior Secured Notes due 2007; $50,000,000
Floating Rate Senior Secured Notes due 2006
-------------------------------------------
Reference is hereby made to the Indenture, dated as of May 19, 1999
(the "Indenture"), between Hollywood Casino Corporation, a Delaware corporation,
as issuer (the "Company"), HWCC-Tunica, Inc. and HWCC-Shreveport, Inc., as
guarantors and State Street Bank and Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [_] a beneficial interest in a Global Note, or
(b) [_] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is in
compliance with the
D-1
<PAGE>
Securities Act, (D) outside the United States in accordance with Rule 904
of Regulation S under the Securities Act, (E) pursuant to the provisions of
Rule 144(k) under the Securities Act or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any Person purchasing the Definitive Note or beneficial interest
in a Global Note from us in a transaction meeting the requirements of
clauses (A) through (E) of this paragraph a notice advising such purchaser
that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by
us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
________________________________________
[Insert Name of Accredited Investor]
By:_____________________________________
Name:
Title:
Dated: _____________________
D-2
<PAGE>
EXHIBIT E
[FORM OF NOTATION OF NOTE GUARANTEE]
For value received, each Guarantor (which term includes any successor
Person under the Indenture and the Collateral Documents (as defined in the
Indenture)) has, jointly and severally, unconditionally guaranteed, to the
extent set forth in the Indenture and subject to the provisions in the Indenture
dated as of May 19, 1999 (the "Indenture") among Hollywood Casino Corporation, a
Delaware corporation, the Guarantors listed on Schedule I thereto and State
Street Bank and Trust Company, as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium and Liquidated Damages, if any,
and interest on the Notes (as defined in the Indenture), whether at maturity, by
acceleration, redemption or otherwise, the due and punctual payment of interest
on overdue principal and premium and Liquidated Damages, and, to the extent
permitted by law, interest, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms of the Indenture and the Collateral Documents and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to
the Holders of Notes and to the Trustee pursuant to the Note Guarantee, and the
Indenture and the Collateral Documents are expressly set forth in Article 11 of
the Indenture and reference is hereby made to the Indenture for the precise
terms of the Note Guarantee. Each Holder of a Note, by accepting the same,
agrees to and shall be bound by such provisions.
[Name of Guarantor(s)]
By: ________________________________________
Name:
Title:
E-1
<PAGE>
EXHIBIT F
[FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS]
Supplemental Indenture (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Hollywood Casino Corporation (or its permitted successor), a
Delaware corporation (the "Company"), the Company, the other Guarantors (as
defined in the Indenture referred to herein) and State Street Bank and Trust
Company, as trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of May 19, 1999 providing for
the issuance of an aggregate principal amount of up to $310,000,000 of 11 1/4%
Senior Secured Notes due 2007, and $50,000,000 of Floating Rate Senior Secured
Notes due 2006 (collectively, the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes, the Indenture and
the Collateral Documents on the terms and conditions set forth herein (the "Note
Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby
agrees as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and delivered by
the Trustee and to the Trustee and its successors and assigns, the Notes or
the obligations of the Company hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be promptly paid
in full when due, whether at maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal of and interest on the
Notes, if any, if lawful, and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof and thereof; and
F-1
<PAGE>
(ii) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and
severally obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Notes, the Indenture or the
Collateral Documents, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any
action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against
the Company, protest, notice and all demands whatsoever.
(d) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes, the Indenture and
the Collateral Documents, and the Guaranteeing Subsidiary accepts all
obligations of a Guarantor under the Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors, or any Custodian, Trustee,
liquidator or other similar official acting in relation to either the
Company or the Guarantors, any amount paid by either to the Trustee or such
Holder, this Note Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed
hereby.
(g) As between the Guarantors, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article 6 of the Indenture for the
purposes of this Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6 of the Indenture,
such obligations (whether or not due and payable) shall forthwith become
due and payable by the Guarantors for the purpose of this Note Guarantee.
(h) The Guarantors shall have the right to seek contribution from any non-
paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under the Guarantee.
(i) Pursuant to Section 11.02 of the Indenture, after giving effect to any
maximum amount and any other contingent and fixed liabilities that are
relevant under any
F-2
<PAGE>
applicable Bankruptcy or fraudulent conveyance laws, and after giving
effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under Article 11 of the Indenture, this
new Note Guarantee shall be limited to the maximum amount permissible such
that the obligations of such Guarantor under this Note Guarantee will not
constitute a fraudulent transfer or conveyance.
3. Execution and Delivery. Each Guaranteeing Subsidiary agrees that
the Note Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such Guarantor
unless:
(i) subject to Sections 11.05 and 11.06 of the Indenture, the Person
formed by or surviving any such consolidation or merger (if other than a
Guarantor or the Company) unconditionally assumes all the obligations of
such Guarantor, pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes, the Indenture, the
Note Guarantee and the Collateral Documents on the terms set forth herein
or therein; and
(ii) immediately after giving effect to such transaction, no Default or
Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Note Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of the Indenture and the
Collateral Documents to be performed by the Guarantor, such successor
corporation shall succeed to and be substituted for the Guarantor with the same
effect as if it had been named herein as a Guarantor. Such successor
corporation thereupon may cause to be signed any or all of the Note Guarantees
to be endorsed upon all of the Notes issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Trustee. All the Note
Guarantees so issued shall in all respects have the same legal rank and benefit
under the Indenture and the Collateral Documents as the Note Guarantees
theretofore and thereafter issued in accordance with the terms of the Indenture
as though all of such Note Guarantees had been issued at the date of the
execution hereof.
(c) Except as set forth in Articles 4 and 5 and Section 11.06 of
Article 11 of the Indenture, and notwithstanding clauses (a) and (b) above,
nothing contained in the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or another
Guarantor, or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor.
F-3
<PAGE>
5. Releases.
(a) In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all to the capital stock of any Guarantor, in each case to
a Person that is not (either before or after giving effect to such transaction)
a Restricted Subsidiary of the Company, then such Guarantor (in the event of a
sale or other disposition, by way of merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Guarantor) will be released and relieved of any
obligations under its Note Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the applicable
provisions of the Indenture, including without limitation Sections 4.10 and 4.11
of the Indenture. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of the
Indenture, including without limitation Sections 4.10 and 4.11 of the Indenture,
the Trustee shall execute any documents reasonably required in order to evidence
the release of any Guarantor from its obligations under its Note Guarantee.
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under the Indenture
and the Collateral Documents as provided in Article 11 of the Indenture.
6. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the SEC that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. Counterparts The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
F-4
<PAGE>
10. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
F-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: _______________, ____
[Guaranteeing Subsidiary]
By: _______________________________
Name:
Title:
[Company]
By: _______________________________
Name:
Title:
[Existing Guarantors]
By:_________________________________
Name:
Title:
[Trustee],
as Trustee
By:________________________________
Authorized Signatory
F-6
<PAGE>
SCHEDULE I
SCHEDULE OF GUARANTORS
The following schedule lists each Guarantor under the Indenture as of
the Issue Date:
HWCC-Tunica, Inc., a Texax corporation
HWCC-Shreveport, Inc., a Louisiana corporation
F-7
<PAGE>
EXHIBIT 4.2
SECURITY AGREEMENT
------------------
Made by
HWCC-SHREVEPORT, INC.,
as Debtor
to
STATE STREET BANK AND TRUST COMPANY,
as Trustee and Secured Party
Acting on behalf of the Holders of the Notes
May 19, 1999
<PAGE>
EXHIBIT 4.2
SECURITY AGREEMENT
------------------
Made by
HOLLYWOOD CASINO CORPORATION,
as Debtor
to
STATE STREET BANK AND TRUST COMPANY,
as Trustee and Secured Party
Acting on behalf of the Holders of the Notes
May 19, 1999
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (this "Agreement") is made as of May 19, 1999, by
---------
HOLLYWOOD CASINO CORPORATION, a Delaware corporation, with its chief executive
office at Two Galleria Tower, Suite 2200, 13455 Noel Road LB48, Dallas, Texas
75240 ("Debtor"), in favor of STATE STREET BANK AND TRUST COMPANY, a
------
Massachusetts chartered trust company, with offices at Two International Place,
4th Floor, Boston, Massachusetts 02110, as Trustee acting on behalf of the
Holders of the Notes under (and as defined in) the Indenture described below
(the "Secured Party").
-------------
RECITALS
--------
A. Debtor, HWCC-Tunica, Inc., HWCC-Shreveport, Inc., and Secured Party,
as Trustee, have entered into an Indenture dated as of May 19, 1999 (as the same
may be amended, supplemented, restated or otherwise modified from time to time,
the "Indenture"), pursuant to which Debtor will issue up to $310,000,000 of its
---------
11 1/4% Series A and Series B Senior Secured Notes due 2007 and up to
$50,000,000 of its Floating Rate Series A and Series B Senior Secured Notes due
2006 (as the same may be amended, supplemented, restated, exchanged, replaced or
otherwise modified from time to time, collectively, the "Notes").
-----
B. It is a condition precedent to the purchase of the Notes under the
Indenture that Debtor shall have executed and delivered this Agreement.
C. Therefore, in order to comply with the terms and conditions of the
Indenture and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor hereby agrees with Secured
Party as follows:
ARTICLE 1
---------
SECURITY INTEREST
-----------------
Section 1.01. Grant of Security Interest.
--------------------------
Debtor hereby assigns, endorses, delivers, pledges and grants to Secured
Party a continuing security interest in, Lien upon, and right of set-off against
the assets referred to in Section 1.02 hereof (the "Collateral") to secure the
------------ ----------
prompt and complete payment and performance of the Obligations (as defined in
Section 2.02 hereof) and the performance by Debtor of this Agreement.
- ------------
1
<PAGE>
Section 1.02. Collateral.
----------
The Collateral consists of the following types or items of property
(including property hereafter acquired by Debtor as well as property which
Debtor now owns or in which Debtor has rights), but subject to the exceptions
and provisos set forth herein:
(a) The contracts described or referred to in Exhibit A attached
---------
hereto and made a part hereof and each management contract to which Debtor
may hereafter become a party, in each case as such agreements may be
amended or otherwise modified from time to time, including, without
limitation, (i) all rights of Debtor to receive monies due and to become
due under or pursuant to such contracts, (ii) all rights of Debtor to
receive proceeds of any insurance, indemnity, warranty, or guaranty with
respect to such contracts, (iii) claims of Debtor for damages arising out
of or for breach of or default under such contracts, (iv) the right of
Debtor to terminate such contracts, to perform thereunder and to compel
performance and to otherwise exercise all remedies thereunder, and (v) all
proceeds of the foregoing Collateral.
(b) All of Debtor's inventory (if any).
(c) All Intercompany Notes (including, but not limited to, the
Intercompany Notes described or referred to in Exhibit B attached hereto
---------
and made a part hereof), together with all liens and security interests
securing such Intercompany Notes.
(d) The Aurora Expansion Cash Account.
(e) (i) Any and all trade secrets, ideas, information, procedures,
processes, systems, methods of operation, concepts, principles of
discoveries, whether or not patentable, and all of the intellectual
property rights therein provided by state or federal laws of the United
States, such as, the right of first publication and, if applicable, the
right to file applications for United States patent protection on the
preferred embodiments thereof; (ii) any and all applications for United
States patents and issued United States Patents, including, without
limitation, those listed on Exhibit C attached hereto and made a part
---------
hereof; (iii) any and all names, trade names, trademarks, service marks,
business names, designs, logos, indicia and other source and/or business
indentifiers, and the good will of the Debtor's business, goods or services
represented thereby, and all applications to register such names or marks
on state registrars or with the United States Patent and Trademark Office
and all issued state or United States registrations thereon, including,
without limitation, those listed on Exhibit C attached hereto and made a
---------
part hereof; (iv) all expressions embodied in a tangible medium that are
the subject matter of copyright and the intangible rights of copyright
therein, including, without limitation, both non-registered copyrighted
works and registered copyrighted works, including, without limitation,
those listed on Exhibit C attached hereto and made a part hereof; (v) all
---------
rights arising out of licenses (in cases where Debtor is the licensee) to
use patents, trademarks, copyrights, trade secrets and other intellectual
property rights, including, without limitation, those listed on Exhibit C
---------
attached hereto and made a part hereof; (vi) all rights and proceeds
arising out of licenses (in cases where the Debtor is the licensor) to use
Debtor's United States patents, trademarks, copyrights, trade secrets and
other
2
<PAGE>
intellectual property, and (vii) in all cases, the rights to prosecute such
intellectual property rights referred to in this Section 1.02(e), and to
---------------
recover the proceeds of past, present and future infringement of such
rights by third parties; provided, however, that the Debtor shall at all
-------- -------
times have the right in the conduct of its business to make and carry out
decisions that affect such intangible personal property and the
intellectual property rights therein, such as, the Debtor shall have the
right to exercise the right of first publication with respect to its ideas,
information, procedures, processes, systems, methods of operation,
concepts, principles or discoveries; to determine whether applications for
patent protection will be filed or abandoned on the preferred embodiment
thereof, to determine which terms shall be used as names and marks for its
business, goods or services, when the use of such terms will be
discontinued, and the efforts, if any, that will be made to register such
terms and to maintain or in its discretion, to abandon such registration or
application therefor; to determine if and when copyrighted works will be
registered; to determine whether aspects of such intellectual property will
be sold, assigned, licensed to others in connection with operation of the
Debtor's business; and to determine the actions that will be taken to
maintain and prosecute the Debtor's intellectual property rights in such
intangible personal property.
(f) The Escrow Account.
(g) The Accounts.
(h) (i) All proceeds, products, replacements, additions to,
substitutions for, and accessions to any property referred to in this
Section 1.02; and (ii) all books and records related to any of the property
------------
referred to in this Section 1.02.
------------
(i) All general intangibles related to any property referred to in
this Section 1.02, including, without limitation, all letters of credit,
------------
bonds, guaranties, purchase or sales agreements and other contractual
rights, rights to performance, and claims for damages or other monies due
or to become due;
provided that, the Collateral described in this Section 1.02 shall not include
- -------- ---- ------------
(i) tort claims, (ii) rights represented by judgments, and (iii) any of the
foregoing property that is, pursuant to restrictions enforceable under
applicable law, prohibited from being pledged as security; provided that, with
respect to this clause (iii), upon the termination of such prohibitions for any
reason whatsoever or in the event such prohibitions are or become unenforceable
under applicable law, such foregoing property shall automatically be Collateral
hereunder. Notwithstanding the foregoing, it is expressly agreed that so long
as no Event of Default shall have occurred and be continuing, all dividends,
distributions, interest and principal payments, cash, instruments and other
property and proceeds made upon or with respect to or of the Collateral (other
than the Aurora Expansion Cash Account and the Escrow Account) shall not
constitute Collateral and may be used by the Debtor subject to the terms and
conditions of the Indenture. Upon the occurrence and during the continuance of
an Event of Default all rights of the Debtor to receive all such dividends,
distributions, interest or principal payments, cash, instruments and other
property and proceeds shall cease, and such dividends, distributions, interest
and principal payments, cash, instruments and other property and proceeds shall
constitute Collateral, and shall be paid or otherwise delivered to the Secured
Party.
3
<PAGE>
Section 1.03. Collateral Assignment.
---------------------
For value received, Debtor does hereby sell, assign, transfer and set over
unto Secured Party and its successors and assigns all of Debtor's right, title
and interest in and to the Intercompany Notes described or referred to in
Exhibit B attached hereto, together with all Liens and security interests
- ---------
securing the Intercompany Notes and all amounts that may now be or may hereafter
become due and payable by the makers of the Intercompany Notes, and the interest
thereon, together with all of the rights, powers, privileges and remedies of
Debtor thereunder. Said assignment is made as security for the Obligations.
ARTICLE 2
---------
DEFINITIONS
-----------
Section 2.01. Terms Defined Above or in the Indenture.
---------------------------------------
As used in this Agreement, the terms defined above shall have the meanings
respectively assigned to them. Other capitalized terms which are defined in the
Indenture but which are not defined herein shall have the same meanings as
defined in the Indenture.
Section 2.02. Certain Definitions.
-------------------
As used in this Agreement, the following terms shall have the following
meanings, unless the context otherwise requires:
"Accounts" means all accounts, chattel paper and instruments (as such
--------
terms are defined in the Code) at any time included in the Collateral.
"Account Debtor" means any Person liable (whether directly or
--------------
indirectly, primarily or secondarily) for the payment or performance of any
obligations included in the Collateral, whether as an account debtor (as
defined in the Code), obligor on an instrument, issuer of documents or
securities, guarantor or otherwise.
"Agreement" means this Security Agreement, as the same may from time
---------
to time be amended or supplemented.
"Aurora Expansion Cash Account" means collectively (i) account number
-----------------------------
102449-030 established with Securities Intermediary pursuant to the Control
Agreement, and any and all cash, cash equivalents, certificated securities,
documents, financial assets, instruments, investment property, securities,
securities entitlements, uncertificated securities, and, to the extent not
included in the foregoing, other personal property of any kind or
description deposited in such Aurora Expansion Cash Account, and all
interest, dividends or other proceeds therefrom and (ii) any other account
established pursuant to a control agreement on essentially the terms of the
Control Agreement to which assets from the account established in (i) above
have been transferred, and any and all cash, cash equivalents, certificated
securities, documents, financial assets, instruments, investment property,
securities, securities entitlements, uncertificated securities, and, to the
extent not included in the foregoing, other personal property of any kind
or description deposited in such account, and all interest, dividends or
other proceeds therefrom.
4
<PAGE>
"Code" means the Uniform Commercial Code as presently in effect in the
----
State of New York; provided that, if by reason of mandatory provisions of
-------- ----
law, the perfection or the effect of perfection or non-perfection of the
security interests in any Collateral is governed by the Uniform Commercial
Code as in effect in any jurisdiction other than the State of New York,
"Code" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or the effect of perfection or non-perfection. Unless otherwise
indicated by the context herein, all uncapitalized terms which are defined
in the Code shall have their respective meanings as used in Article 9 of
the Code.
"Control Agreement" means that certain Control Agreement dated as of
-----------------
May 19, 1999 by and among Securities Intermediary, Debtor and Secured
Party.
"Designated Intercompany Notes" means those Intercompany Notes set
-----------------------------
forth on Exhibit B hereto.
---------
"Escrow Account" means account number 102449-020 established with
--------------
Escrow Agent pursuant to the Escrow Agreement, and any and all cash, cash
equivalents, certificated securities, documents, financial assets,
instruments, investment property, securities, securities entitlements,
uncertificated securities, and, to the extent not included in the
foregoing, other personal property of any kind or description deposited in
such Escrow Account, and all interest, dividends or other proceeds
therefrom.
"Escrow Agent" means State Street Bank and Trust Company, a
------------
Massachusetts chartered trust company.
"Escrow Agreement" means that certain Escrow and Control Agreement
----------------
dated as of May 19, 1999 by and among Escrow Agent, Debtor and Secured
Party.
"Event of Default" means any event specified in Section 6.01 hereof.
---------------- ------------
"Inventory" means all inventory (as defined in the Code) at any time
---------
included in the Collateral, including, without limitation, motion picture
memorabilia.
"Obligations" means payment when due of indebtedness evidenced by the
-----------
Notes in the principal sum not to exceed at any time outstanding of
$360,000,000, interest (including post-petition interest) as set forth in
the Indenture and the Notes, and premiums, penalties, and late charges
thereon; and (ii) all other indebtedness and other sums (including, without
limitation, all expenses, attorneys' fees, other fees, indemnifications,
reimbursements, damages, other monetary liabilities, and other charges) and
obligations that may or shall become due hereunder or under the Notes, the
Guarantees, the Indenture, or the other Collateral Documents, and (iii) any
and all renewals, modifications, amendments, extensions for any period,
supplements or restatements of any of the foregoing.
"Obligor" means any Person, other than Debtor, liable (whether
-------
directly or indirectly, primarily or secondarily) for the payment or
performance of any of the Obligations whether as maker, co-maker, endorser,
guarantor, accommodation party, general partner or otherwise.
"Permitted Encumbrances" means the items set forth on Exhibit F
---------------------- ---------
hereto.
"Securities Intermediary" means State Street Bank and Trust Company, a
-----------------------
Massachusetts chartered trust company.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
5
<PAGE>
In order to induce Secured Party to accept this agreement, Debtor
represents and warrants to Secured Party (which representations and warranties
will survive the creation and payment of the Obligations) that:
Section 3.01. Ownership of Collateral; Absence of Encumbrances and
----------------------------------------------------
Restrictions.
- ------------
After giving effect to the use of proceeds of the Notes, Debtor is, and in
the case of property acquired after the date hereof, will be, the sole legal and
beneficial owner of the Collateral, holding good and indefeasible title to the
same, free and clear of all Liens except for Permitted Encumbrances and Debtor
has full right, power and authority to assign and grant a security interest in
the Collateral to Secured Party.
Section 3.02. No Required Consent.
-------------------
Except for such authorizations, consents or approvals previously obtained
and in effect, no authorization, consent, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body (other
than the filing of financing statements and the other documents required to
perfect or maintain the perfection of the Liens granted hereby) is required for
(i) the due execution, delivery and performance by Debtor of this Agreement,
(ii) the grant by Debtor of the security interest granted by this Agreement
(iii) the perfection of such security interest or (iv) the exercise by Secured
Party of its rights and remedies under this Agreement, except as may be required
by applicable gaming laws or in connection with the disposition of Collateral or
by federal or state securities laws or antitrust laws.
Section 3.03. Security Interest.
-----------------
After giving effect to the use of proceeds of the Notes, the grant of the
security interest in and Lien on the Collateral pursuant to this Agreement
creates a valid and continuing security interest in and Lien on the Collateral,
enforceable against Debtor, and, upon the filing of financing statements in the
appropriate offices for the locations of Collateral listed on Exhibit D hereof,
---------
possession of the Intercompany Notes by Secured Party, and the making of
appropriate filings with respect to the registered patents, trademarks and
copyrights, if any, constituting Collateral, the security interests granted
hereby will be perfected, prior to all other Liens except Permitted
Encumbrances, enforceable against third parties and securing payment of the
Obligations.
Section 3.04. No Fillings By Third Parties.
----------------------------
After giving effect to the use of proceeds of the Notes and other than any
financing statement or other public notice or recording naming Secured Party as
the secured party therein or financing statements with respect to Liens
permitted hereunder, no financing statement or other public notice or recording
covering the Collateral is on file in any public office and Debtor has not
signed any document or agreement authorizing the filing of any such financing
statement or other public notice or recording so long as any of the Obligations
are outstanding.
Section 3.05. Name; No Name Changes.
---------------------
6
<PAGE>
The name of the Debtor set forth on Exhibit D hereto is the true and
---------
correct legal name of Debtor, and, except as described on Exhibit D hereto,
---------
Debtor has not, during the preceding five (5) years, entered into any contract,
agreement, security instrument or other document using a name other than, or
been known by or otherwise used any name other than, the name used by Debtor
herein.
Section 3.06. Location of Debtor and Collateral.
---------------------------------
Debtor's chief executive office, principal place of business and the
locations of Debtor's records concerning the Collateral are as set forth on
Exhibit D hereto. Except as disclosed on Exhibit D, all tangible Collateral of
- --------- ---------
Debtor other than Collateral in the Escrow Account and Aurora Expansion Cash
Account are located in the locations set forth on Exhibit D hereto.
---------
Section 3.07. Collateral.
----------
All statements or other information provided by Debtor to Secured Party
describing or with respect to the Collateral is, (or, in the case of
subsequently furnished information, will be when provided) correct and complete
in all material respects. The delivery at any time by Debtor to Secured Party
of additional descriptions of Collateral shall constitute a representation and
warranty by Debtor to Secured Party hereunder that the representations and
warranties of this Article 3 are correct insofar as they would pertain to such
---------
Collateral or the descriptions thereof, except as indicated thereon.
Section 3.08. Delivery of Documents.
---------------------
With respect to any Collateral (if any) covered by one or more
certificates of title or other documents of title evidencing ownership or
possession thereof, each of such certificates or documents of title shall, after
the occurrence and during the continuance of an Event of Default and at the
request of the Secured Party, be delivered to Secured Party (provided that all
certificates and documents of title referred to in Section 1.02 shall be subject
------------
to the security interest created by this Agreement irrespective of whether or
not such delivery shall have been made).
Section 3.09. Intercompany Notes.
------------------
Debtor warrants that: (a) Debtor is the sole owner of its entire interest
in the Intercompany Notes; (b) the Intercompany Notes and the documents securing
the Intercompany Notes are valid and enforceable (except that (i) the
enforceability of any rights to indemnity and contribution may be limited by
federal or state securities laws or principles of public policy, (ii) the
enforceability thereof may be subject to applicable bankruptcy, insolvency,
fraudulent conveyance or transfer, reorganization, moratorium and similar laws
affecting creditors' and remedies generally and (iii) the enforceability thereof
may be subject to general principals of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity); (c) except for the
Intercompany Note described in paragraph 1 of Exhibit B attached hereto, the
---------
Intercompany Notes have not been altered, modified or amended in any manner
whatsoever; (d) none of the respective parties named in the Intercompany Notes
are in default under any of the terms, covenants or conditions thereof or under
the documents securing the Intercompany Notes;
7
<PAGE>
and (e) Debtor's interest under the Intercompany Notes is assignable pursuant to
the terms hereof and thereof.
ARTICLE 4
---------
COVENANTS AND AGREEMENTS
------------------------
Debtor will at all times comply with the covenants and agreements contained
in this Article 4, from the date hereof and for so long as any part of the
---------
Obligations are outstanding.
Section 4.01. Change in Location of Collateral or Debtor.
------------------------------------------
Except with respect to Collateral under repair or temporarily in transit
between locations (and in any such case, for a period not to exceed four (4)
months), Debtor will not change the location of the Collateral to any state,
county or other jurisdiction in which Secured Party has not already filed a
financing statement or taken other necessary steps to perfect or maintain its
security interests in the Collateral without Secured Party's prior written
consent and the delivery of such new financing statements or other documentation
as may be reasonably necessary or required by Secured Party to ensure the
continued perfection and priority of its security interest in the Collateral.
Debtor will not change the location of Debtor's chief executive office,
principal place of business or the locations of Debtor's records concerning the
Collateral unless Debtor shall have given Secured Party at least thirty (30)
days prior written notice thereof and shall have delivered to Secured Party such
new financing statements or other documentation as may be reasonably necessary
or required by Secured Party to ensure the continued perfection and priority of
its security interest in the Collateral.
Section 4.02. Change in Debtor's Name or Corporate Structure.
----------------------------------------------
Debtor will not change its name, identity or corporate structure
(including, without limitation, any merger, consolidation or sale of
substantially all of its assets) unless Debtor shall have given Secured Party at
least thirty (30) days prior written notice thereof and shall have delivered to
Secured Party such new financing statements or other documentation as may be
reasonably necessary or required by Secured Party to ensure the continued
perfection and priority of its security interest in the Collateral.
Section 4.03. Documents: Collateral in Possession of Third Parties.
----------------------------------------------------
If certificates of title or other documents evidencing ownership or
possession of the Collateral are issued or outstanding, Debtor will, after the
occurrence and during the continuance or an Event of Default and at the request
of the Secured Party, cause the interest of Secured Party to be properly noted
thereon and will, forthwith upon receipt, deliver same to Secured Party. If any
material portion of the Collateral is at any time in the possession or control
of any warehouseman, bailee, agent or independent contractor, Debtor shall
notify such Person of Secured Party's security interest in such Collateral. Upon
Secured Party's request, Debtor shall instruct any such Person to hold all such
Collateral for Secured Party's account subject to Debtor's instructions, or, if
an Event of Default shall have occurred, subject to Secured Party's
instructions.
8
<PAGE>
Section 4.04. Delivery of Letters of Credit and Instruments.
---------------------------------------------
After the occurrence and during the continuance of an Event of Default and
upon the request of the Secured Party, Debtor will deliver each letter of
credit, if any, included in the Collateral to Secured Party, in each case
forthwith upon receipt by or for the account of Debtor. After the occurrence
and during the continuance of an Event of Default and upon the request of the
Secured Party, if any Account becomes evidenced by a promissory note, trade
acceptance or any other instrument for the payment of money (other than checks
or drafts in payment of Accounts collected by Debtor in the ordinary course of
business prior to notification by Secured Party under Section 6.02(h)), Debtor
--------------
will immediately deliver such instrument to Secured Party appropriately endorsed
and, regardless of the form of presentment, demand, notice of dishonor, protest
and notice of protest with respect thereto, Debtor will remain liable thereon
until such instrument is paid in full.
Section 4.05. Sale, Disposition or Encumbrance of Collateral.
----------------------------------------------
Except as permitted pursuant to the provisions of the Indenture, by
Section 4.09 of this Agreement or with Secured Party's prior written consent,
- ------------
Debtor will not in any way encumber any of the Collateral (or permit or suffer
any of the Collateral to be encumbered) or sell, assign, lend, rent, lease or
otherwise dispose of or transfer any of the Collateral to or in favor of any
Person other than Secured Party.
Section 4.06. Records and Information.
-----------------------
Debtor shall keep accurate and complete records of the Collateral
(including proceeds). Secured Party may at any time upon reasonable prior notice
have access during normal business hours to, examine, audit, make extracts from
and inspect without hindrance or delay Debtor's records, files and the
Collateral. Debtor will promptly provide written notice to Secured Party of all
information which in any way relates to or affects the filing of any financing
statement or other public notices or recordings, or the delivery and possession
of items of Collateral, for the purpose of perfecting a security interest in the
Collateral. Debtor will also promptly furnish such information as Secured Party
may from time to time reasonably request regarding the Collateral or Secured
Party's rights or remedies with respect thereto.
Section 4.07. Reimbursement of Expenses.
-------------------------
Debtor hereby assumes all liability for the Collateral, the security
interests created hereunder and any use, possession, maintenance, management,
enforcement or collection of any or all of the Collateral. Debtor agrees to
indemnify and hold Secured Party harmless from and against and covenants to
defend Secured Party against any and all losses, damages, claims, costs,
penalties, liabilities and expenses, including, without limitation, court costs
and reasonable attorneys' fees, incurred because of, incident to, or with
respect to the Collateral (including, without limitation, any use, possession,
maintenance or management thereof, or any injuries to or deaths of persons or
damage to property, except to the extent caused by the gross negligence or
willful misconduct of the Secured Party). All amounts for which Debtor is liable
pursuant to this Section 4.07 shall be due and payable by Debtor to Secured
------------
Party upon demand. If Debtor fails to make such payment upon demand (or if
demand is not made due to an injunction or stay
9
<PAGE>
arising from bankruptcy or other proceedings) and Secured Party pays such
amount, the same shall be due and payable by Debtor to Secured Party, plus
interest thereon from the date of Secured Party's demand (or from the date of
Secured Party's payment if demand is not made due to such proceedings) at the
interest rate applicable to overdue principal as provided in the Notes.
Section 4.08. Further Assurances.
------------------
Upon the request of Secured Party, Debtor shall (at Debtor's expense)
execute and deliver all such assignments, certificates, financing statements or
other documents and give further assurances and do all other acts and things as
Secured Party may reasonably request to perfect Secured Party's interest in the
Collateral or to protect, enforce or otherwise effect Secured Party's rights and
remedies hereunder.
Section 4.09. Inventory.
---------
Debtor may use the Inventory in any lawful manner not inconsistent with
this Agreement and the Indenture and with the terms of insurance thereon.
Section 4.10. Use of Collateral.
-----------------
Debtor will not use any Collateral in violation in any material respect of
any law, statute, ordinance, regulation or administrative order, or suffer it to
be so used.
Section 4.11. Collateral Attached to Other Property.
-------------------------------------
In the event that the Collateral is to be attached or affixed to any real
property, Debtor hereby agrees that this Agreement may be filed for record in
any appropriate real estate records as a financing statement which is a fixture
filing. In connection therewith, Debtor will take whatever action is required
by Section 4.08 hereof. If Debtor is not the record owner of such real
------------
property, Debtor will provide Secured Party with any additional security
agreements or financing statements necessary for the perfection of Secured
Party's security interest in the Collateral. If the Collateral is wholly or
partly affixed to real estate or installed in or affixed to other goods, Debtor
will, on demand of Secured Party, use commercially reasonable efforts to furnish
Secured Party with landlord's waivers, signed by all Persons having an interest
in the real estate or other goods to which the Collateral may have become
affixed, permitting the Secured Party access to the Collateral at all reasonable
times and granting the Secured Party a reasonable period of time after which to
remove the Collateral after an Event of Default.
Section 4.12. Intercompany Notes.
------------------
Debtor covenants with Secured Party to properly endorse (using the form of
endorsement attached hereto as Exhibit E) and deliver the Intercompany Notes to
---------
Secured Party contemporaneously with the execution of this Agreement. Debtor
covenants with Secured Party to observe and perform all the material obligations
imposed upon it under the Designated Intercompany Notes and the documents
securing such Designated Intercompany Notes and, except as permitted by such
security documents securing such Designated Intercompany Notes, this Agreement,
or the Indenture, not to do or permit to be done anything to impair the security
thereof; not to execute any other assignment of its interest in the Designated
Intercompany Notes
10
<PAGE>
except as may be otherwise agreed to in writing by Secured Party and except as
provided herein; not to alter, modify or change the terms of the Designated
Intercompany Notes and the documents securing such Designated Intercompany Notes
without the prior written consent of Secured Party, or, except as permitted by
the security documents creating such security (the conditions for release of
Liens of the Collateral Documents (as defined in the Indenture) being likewise
applicable to such security documents), and, except as expressly permitted by
the terms of any Designated Intercompany Note, cancel, terminate or prepay any
Designated Intercompany Note or any of the security for such Designated
Intercompany Note or accept a surrender thereof so as to effect directly or
indirectly, proximately or remotely, a cancellation, termination, prepayment or
diminution of the obligations of the parties thereunder; and to execute and
deliver, at the request of Secured Party, all such further assurances,
acknowledgments, and certificates for the purposes hereof as Secured Party shall
from time to time reasonably require.
ARTICLE 5
---------
RIGHTS, DUTIES AND POWERS OF SECURED PARTY
------------------------------------------
Secured Party shall have the following rights, duties and powers:
Section 5.01. Discharge Encumbrances.
----------------------
After the occurrence and during the continuance of an Event of Default,
Secured Party may, at its option, discharge any taxes, Liens, security interests
or other encumbrances at any time levied or placed on the Collateral and may pay
for insurance on the Collateral to the extent required by this Agreement or the
Indenture and not obtained by Debtor. Debtor agrees to reimburse Secured Party
upon demand for any payment so made, plus interest thereon from the date of
Secured Party's demand at the interest rate applicable to overdue principal as
provided in the Notes.
Section 5.02. Licenses and Rights to Use Collateral.
-------------------------------------
After the occurrence and during the continuance of an Event of Default, in
connection with any transfer or sale (to Secured Party or any other Person) of
the Collateral, Secured Party is hereby granted a transferable license or other
right to use, without any charge, any of Debtor's labels, patents, copyrights,
trade names, trade secrets, trademarks or other similar property in completing
production, advertising or selling such Collateral except any of the foregoing
property which is expressly prohibited by its terms from being assigned or
licensed. After the occurrence and during the continuance of an Event of
Default, Debtor's rights under all licenses and franchise agreements shall inure
to the benefit of Secured Party and any transferee of all or any part of the
Collateral.
Section 5.03. Cumulative and Other Rights.
---------------------------
The rights, powers and remedies of Secured Party hereunder are in addition
to all rights, powers and remedies given by law or in equity. The exercise by
Secured Party of any one or more of the rights, powers and remedies herein shall
not be construed as a waiver of any other rights, powers and remedies,
including, without limitation, any other rights of set-off (which set-off rights
may be exercised only after the occurrence and during the continuance of an
Event of
11
<PAGE>
Default). If any of the Obligations are given in renewal, extension for any
period or rearrangement, or applied toward the payment of debt secured by any
Lien, Secured Party shall be, and is hereby, subrogated to all the rights,
titles, interests and liens securing the debt so renewed, extended, rearranged
or paid.
Section 5.04. Disclaimer of Certain Duties.
----------------------------
(a) The powers conferred upon Secured Party by this Agreement are to
protect its interest in the Collateral and shall not impose any duty upon
Secured Party to exercise any such powers. Debtor hereby agrees that
Secured Party shall not be liable for, nor shall the indebtedness evidenced
by the Obligations be diminished by, Secured Party's delay or failure to
collect upon, foreclose, sell, take possession of or otherwise obtain value
for the Collateral. Nothing herein shall affect any obligation of Secured
Party to the Holders under the Indenture or under applicable law.
(b) To the fullest extent permitted by applicable law and except as
may be required by the Indenture, Secured Party shall be under no duty
whatsoever to make or give any presentment, notice of dishonor, protest,
demand for performance, notice of non-performance, notice of intent to
accelerate, notice of acceleration, or other notice or demand in connection
with any Collateral or the Obligations, or to take any steps reasonably
necessary to preserve any rights against any Obligor, Account Debtor or
other Person. Debtor waives any right of marshaling in respect of any and
all Collateral, and waives any right to require Secured Party to proceed
against any Obligor, Account Debtor or other Person, exhaust any Collateral
or enforce any other remedy which Secured Party now has or may hereafter
have against any Obligor or other Person.
Section 5.05. Modification of Obligations; Other Security.
-------------------------------------------
Except as specifically provided for in the Indenture, Debtor waives (i) any
and all notice of acceptance, creation, modification, rearrangement, renewal or
extension for any period of any instrument executed by any Obligor in connection
with the Obligations and (ii) any defense of any Obligor by reason of
disability, lack of authorization, cessation of the liability of any Obligor or
for any other reason. Debtor authorizes Secured Party, without notice or demand
and without any reservation of rights against Debtor and without affecting
Debtor's liability hereunder or on the Obligations, from time to time to (x)
after the occurrence and during the continuance of an Event of Default and after
the acceleration of the Notes, apply the Collateral in the manner permitted by
this Agreement or Indenture and (y) after the occurrence and during the
continuance of an Event of Default and after the acceleration of the Notes,
renew, extend for any period, accelerate, amend or modify, supplement, enforce,
compromise, settle, waive or release the obligations of any Obligor or any
instrument or agreement of such other Person with respect to any or all of the
Obligations or Collateral.
ARTICLE 6
---------
EVENTS OF DEFAULT
-----------------
Section 6.01. Events.
------
12
<PAGE>
It shall constitute an Event of Default under this Agreement if an "Event
of Default" occurs and is continuing under the Indenture.
Section 6.02. Remedies.
--------
Upon the occurrence and during the continuance of any Event of Default,
Secured Party may take any or all of the following actions without notice
(except where expressly required below or in the Indenture) or demand to Debtor:
(a) Take possession of the Collateral, or at Secured Party's request,
Debtor shall, at Debtor's cost, assemble the Collateral and make it
available at a location to be specified by Secured Party which is
reasonably convenient to Debtor and Secured Party. In any event, Debtor
shall bear the risk of accidental loss or damage to or diminution in value
of the Collateral, and Secured Party shall have no liability whatsoever for
failure to obtain or maintain insurance, nor to determine whether any
insurance ever in force is adequate as to amount or as to risk insured.
(b) Sell, in one or more sales and in one or more parcels, or
otherwise dispose of any or all of the Collateral in its then condition or
in any other commercially reasonable manner as Secured Party may elect, in
a public or private transaction, at any location as deemed reasonable by
Secured Party (including, without limitation, Debtor's premises), for cash
at such price as Secured Party may deem fair, and (unless prohibited by the
Code, as adopted in any applicable jurisdiction) Secured Party may be the
purchaser of any or all Collateral so sold and may apply upon the purchase
price therefor any Obligations secured hereby. Any such sale or transfer
by Secured Party either to itself or to any other Person shall be
absolutely free from any claim of right by Debtor, including any equity or
right of redemption, stay or appraisal which Debtor has or may have under
any rule of law, regulation or statute now existing or hereafter adopted.
Upon any such sale or transfer, Secured Party shall have the right to
deliver, assign and transfer to the purchaser or transferee thereof the
Collateral so sold or transferred. It shall not be necessary that the
Collateral or any part thereof be present at the location of any such sale
or transfer. Secured Party may, at its discretion, provide for a public
sale, and any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as Secured Party may
fix in the notice of such sale. Secured Party shall not be obligated to
make any sale pursuant to any such notice. Secured Party may, without
notice or publication, adjourn any public or private sale by announcement
at any time and place fixed for such sale, and such sale may be made at any
time or place to which the same may be so adjourned. In the event any sale
or transfer hereunder is not completed or is defective in the opinion of
Secured Party, such sale or transfer shall not exhaust the rights of
Secured Party hereunder, and Secured Party shall have the right to cause
one or more subsequent sales or transfers to be made hereunder. If only
part of the Collateral is sold or transferred such that the Obligations
remain outstanding (in whole or in part), Secured Party's rights and
remedies hereunder shall not be exhausted, waived or modified, and Secured
Party is specifically empowered to make one or more successive sales or
transfers until all the Collateral shall be sold or transferred and all the
Obligations are paid. In the event that Secured Party elects not to sell
the Collateral, Secured Party retains its rights to lease or otherwise
dispose of or utilize the Collateral or any part or
13
<PAGE>
parts thereof in any manner authorized or permitted by law or in equity,
and to apply the proceeds of the same towards payment of the Obligations.
Each and every method of disposition of the Collateral described in this
subsection or in subsection (f) shall constitute disposition in a
--
commercially reasonable manner.
(c) Take possession of all books and records of Debtor pertaining to
the Collateral. Secured Party shall have the authority to enter upon any
real property or improvements thereon in order to obtain any such books or
records, or any Collateral located thereon, and remove the same therefrom
without liability.
(d) Apply proceeds of the disposition of the Collateral to the
Obligations in accordance with the Indenture. Such application may
include, without limitation, the reasonable expenses of retaking, holding,
preparing, for sale or other disposition, and the reasonable attorneys'
fees and legal expenses incurred by Secured Party.
(e) Appoint any Person as agent to perform any act or acts necessary
or incident to any sale or transfer by Secured Party of the Collateral.
Additionally, any sale or transfer hereunder may be conducted by an
auctioneer or any officer or agent of Secured Party.
(f) Execute, assign and endorse negotiable and other instruments for
the payment of money, documents of title or other evidences of payment,
shipment or storage for any form of Collateral on behalf of and in the name
of Debtor.
(g) Notify or require Debtor to notify Account Debtors that the
Accounts have been assigned to Secured Party and direct such Account
Debtors to make payments on the Accounts directly to Secured Party. To the
extent Secured Party does not so elect, Debtor shall continue to collect
the Accounts. Secured Party or its designee shall also have the right, in
its own name or in the name of Debtor, to do any of the following: (i) to
demand, collect, receipt for, settle, compromise any amounts due, give
acquittances for, prosecute or defend any action which may be in relation
to any monies due, or to become due by virtue of, the Accounts; (ii) to
sell, transfer or assign or otherwise deal in the Accounts or the proceeds
thereof or the related goods, as fully and effectively as if Secured Party
were the absolute owner thereof, (iii) to extend the time of payment of any
of the Accounts, to grant waivers and make any allowance or other
adjustment with reference thereto; (iv) to take control of cash and other
proceeds of any Collateral; (v) to send a request for verification of
Accounts to any Account Debtor; and (vi) to do all other acts and things
necessary to carry out the intent of this Agreement. After the occurrence
and during the continuance of an Event of Default and the acceleration of
the Notes, Secured Party shall also have the rights to receive and collect
payment directly from the makers of the Intercompany Notes of all sums and
amounts payable on or with respect to the Intercompany Notes; provided that
all such sums so paid to and received by Secured Party shall be applied by
Secured Party as a credit on any sums owing under the Obligations, and to
exercise and enforce all of the other rights, powers and remedies of the
holder and owner of the Intercompany Notes and the liens securing the
payment thereof.
14
<PAGE>
(h) Exercise all other rights and remedies permitted by law or in
equity.
Section 6.03. Attorney-in-Fact.
----------------
Debtor hereby irrevocably appoints Secured Party as Debtor's attorney-in-
fact, with full authority in the place and stead of Debtor and in the name of
Debtor or otherwise, from time to time in Secured Party's discretion upon the
occurrence and during the continuance of an Event of Default, but at Debtor's
cost and expense and without notice to Debtor:
(a) To obtain, adjust, sell and cancel any insurance with respect to
the Collateral, and endorse any draft drawn by insurers of the Collateral.
Secured Party may apply any proceeds or unearned premiums of such insurance
to the Obligations (whether or not due).
(b) To take any action and to execute any assignment, certificate,
financing statement, notification, document or instrument which Secured
Party may reasonably deem necessary or advisable to accomplish the purposes
of this Agreement, including, without limitation, to receive, endorse and
collect all instruments made payable to Debtor representing any payment or
other distribution in respect of the Collateral or any part thereof and to
give full discharge for the same.
Section 6.04. Account Debtors.
---------------
Any payment or settlement of an Account made by an Account Debtor will be,
to the extent of such payment or to the extent provided under such settlement, a
release, discharge and acquittance of the Account Debtor with respect to such
Account, and Debtor shall take any action as may reasonably be required by
Secured Party in connection therewith. No Account Debtor on any Account will
ever be bound to make inquiry as to the termination of this Agreement or the
rights of Secured Party to act hereunder, but shall be fully protected by Debtor
in making payment directly to Secured Party.
Section 6.05. Liability for Deficiency.
------------------------
If any sale or other disposition of Collateral by Secured Party or any
other action of Secured Party hereunder results in reduction of the Obligations,
such action will not release Debtor from its liability to Secured Party for any
unpaid Obligations, including costs, charges and expenses incurred in the
liquidation of Collateral, together with interest thereon at the rate then
applicable under the Indenture, and the same shall be immediately due and
payable to Secured Party at Secured Party's address set forth in the Indenture.
Section 6.06. Reasonable Notice.
-----------------
If any applicable provision of any law requires Secured Party to give
reasonable notice of any sale or disposition or other action, Debtor hereby
agrees that ten (10) days' prior written notice shall constitute reasonable
notice thereof. Such notice, in the case of public sale, shall state the time
and place fixed for such sale and, in the case of private sale, the time after
which such sale is to be made.
15
<PAGE>
Section 6.07. Non-judicial Enforcement. Secured Party may enforce its
------------------------
rights hereunder without prior judicial process or judicial hearing, and to the
extent permitted by law Debtor expressly waives any and all legal rights which
might otherwise require Secured Party to enforce its rights by judicial process.
ARTICLE 7
---------
MISCELLANEOUS PROVISIONS
------------------------
Section 7.01. Notices.
-------
Any notice required or permitted to be given under or in connection with
this Agreement shall be given in accordance with the notice provisions of the
Indenture.
Section 7.02. Amendments and Waivers.
----------------------
Secured Party's acceptance of partial or delinquent payments or any
forbearance, failure or delay by Secured Party in exercising any right, power or
remedy hereunder shall not be deemed a waiver of any obligation of Debtor or any
Obligor, or of any right, power or remedy of Secured Party; and no partial
exercise of any right, power or remedy shall preclude any other or further
exercise thereof. Secured Party may remedy any Event of Default hereunder or in
connection with the Obligations without waiving the Event of Default so
remedied. Debtor hereby agrees that if Secured Party agrees to a waiver of any
provision hereunder, or an exchange of or release of the Collateral, or the
addition or release of any Obligor or other Person, any such action shall not
constitute a waiver of any of Secured Party's other rights or of Debtor's
obligations hereunder. This Agreement may be amended only by an instrument in
writing executed jointly by Debtor and Secured Party and may be supplemented
only by documents delivered or to be delivered in accordance with the express
terms hereof.
Section 7.03. Copy as Financing Statement.
---------------------------
A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral is sufficient as a financing statement, and
the same may be filed with any appropriate filing authority for the purpose of
perfecting Secured Party's security interest in the Collateral.
Section 7.04. Possession of Collateral.
------------------------
Secured Party shall be deemed to have possession of any Collateral in
transit to it or set apart for it (or, in either case, any of its agents,
affiliates or correspondents).
Section 7.05. Redelivery of Collateral.
------------------------
If any sale or transfer of Collateral by Secured Party results in full
satisfaction of the Obligations, and after such sale or transfer and discharge
there remains a surplus of proceeds, Secured Party will deliver to Debtor such
excess proceeds in a commercially reasonable time; provided, however, that
Secured Party shall not be liable for any interest, cost or expense in
connection with any reasonable delay in delivering such proceeds to Debtor.
16
<PAGE>
Section 7.06. Governing Law; Jurisdiction.
---------------------------
This Agreement and the security interest granted hereby shall be construed
in accordance with and governed by the laws of the State of New York (except to
the extent that the laws of any other jurisdiction govern the perfection and
priority of the security interests granted hereby).
Section 7.07. Gaming Authority.
----------------
Each of the provisions of this Agreement is subject to, and shall be
enforced in compliance with, any requirements imposed by any applicable Gaming
Authority.
Section 7.08. Continuing Security Agreement.
-----------------------------
(a) Except as may be expressly applicable pursuant to Section 9-505
of the Code, no action taken or omission to act by Secured Party hereunder,
including, without limitation, any action taken or inaction pursuant to
Section 6.02 hereof, shall be deemed to constitute a retention of the
------------
Collateral in satisfaction of the Obligations or otherwise to be in full
satisfaction of the Obligations, and the Obligations shall remain in full
force and effect, until Secured Party shall have applied payments
(including, without limitation, collections from Collateral) towards the
Obligations in the full amount then outstanding or until such subsequent
time as is hereinafter provided in Section 7.08(b) below.
--------------
(b) To the extent that any payments on the Obligations or proceeds of
the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law
or equitable cause, then to such extent the Obligations so satisfied shall
be revived and continue as if such payment or proceeds had not been
received by Secured Party, and Secured Party's security interests, rights,
powers and remedies hereunder shall continue in full force and effect. In
such event, this Agreement shall be automatically reinstated if it shall
theretofore have been terminated pursuant to Section 7.09 hereof.
------------
Section 7.09. Termination.
-----------
The grant of a security interest hereunder and all of Secured Party's
rights, powers and remedies in connection therewith shall unless otherwise
provided in the Indenture or this Agreement, remain in full force and effect
until payment in full of (A) the Notes under the terms of the Indenture and (B)
all obligations then due and owing under the Indenture, the Notes and the
Collateral Documents; provided, however, that after receipt from the Debtor by
-------- -------
the Trustee of a request for a release of any Collateral not prohibited under
the Indenture upon the sale, transfer, assignment, exchange or other disposition
of such Collateral permitted by the Indenture (and upon receipt by the Trustee
of all proceeds of such sale, transfer, assignment, exchange or other
disposition to the extent required to be remitted to the Trustee under the
Indenture or otherwise), such Collateral shall be released from the lien and
security interest created hereunder in accordance with the provisions of the
Indenture and shall no longer constitute Collateral. Upon the payment in full of
(A) the Notes under the terms of the Indenture and (B) all obligations then due
and owing under the Indenture and the Collateral Documents, the Debtor shall be
entitled to
17
<PAGE>
the return, upon its request and at its expense, of such of the Collateral
pledged by it as shall not have been sold or otherwise applied pursuant to the
terms hereof. Notwithstanding the foregoing, the reimbursement and
indemnification provisions of Section 4.07 and the provisions of subsection
------------ ----------
7.08(b) shall survive the termination of this Agreement.
- -------
Upon any termination of this Agreement or release of any Collateral as
permitted by the Indenture the Trustee will, at the expense of the Debtor,
execute and deliver to the Debtor such documents and take such other actions as
the Debtor shall reasonably request to evidence the termination of this
Agreement or the release of such collateral, as the case may be. Any such
action taken by the Trustee shall be without warranty by or recourse to the
Trustee, except as to the absence of any prior assignments by the Trustee of its
interests in the Collateral, and shall be at the expense of the Debtor. The
Trustee may conclusively rely on any certificate delivered to it by the Debtor
stating that the execution of such documents and release of the Collateral is in
accordance with and permitted by the terms of the Indenture and this Agreement.
Section 7.10. Counterparts, Effectiveness.
---------------------------
This Agreement may be executed in two or more counterparts. Each
counterpart is deemed an original, but all such counterparts taken together
constitute one and the same instrument This Agreement becomes effective upon the
execution hereof by Debtor and delivery of the same to Secured Party, and it is
not necessary for Secured Party to execute any acceptance hereof or otherwise
signify or express its acceptance hereof.
Section 7.11. Indenture.
---------
This Agreement is subject to the terms, conditions and provisions of the
Indenture. To the extent a term or provision of this Agreement conflicts with
the Indenture, the Indenture shall control with respect to the subject matter of
such term or provision.
Section 7.12. Rights of Noteholders.
---------------------
No Holder of a Note shall have any independent rights hereunder other than
those rights granted to individual Holders of Notes pursuant to the Indenture;
provided that nothing in this Section 7.12 shall limit any rights granted to the
- -------- ---- ------------
Trustee under the Notes, the Indenture or the Collateral Documents.
Section 7.13. No Personal Liability of Directors, Officers, Employees and
-----------------------------------------------------------
Stockholders.
- ------------
No past, present or future director, officer, employee, incorporator or
stockholder of the Debtor as such or any successor Person, as such, shall have
any liability for any obligations of the Debtor under the Notes, the Collateral
Documents, this Agreement or for any claim based on, in respect of, or by reason
of, such obligations or their creation.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, Debtor has caused this Security Agreement to be
executed as of the date first above written.
DEBTOR: HOLLYWOOD CASINO CORPORATION
- ------
/s/ Paul C. Yates
-------------------
Paul C. Yates
Executive Vice President and
Chief Financial Officer
18
<PAGE>
By:
Name:
Title:
EXHIBIT A
---------
CONTRACTS
---------
1. Escrow and Control Agreement dated as of May 19, 1999, by and among
State Street Bank and Trust Company, as Escrow Agent and Securities
Intermediary, Debtor and Secured Party.
2. Control Agreement dated as of May 19, 1999, by and among State Street
Bank and Trust Company, as Securities Intermediary, Debtor and Secured Party.
3. License Agreement dated as of November 16, 1994, by and between Debtor
and Summit Tunica Partnership, a Mississippi limited partnership.
4. License Agreement dated as of November 16, 1994, by and between Debtor
and Hollywood Casino-Aurora, Inc., an Illinois corporation.
<PAGE>
EXHIBIT B
---------
INTERCOMPANY NOTES
------------------
1. Amended and Restated Promissory Note executed by HWCC-Tunica, Inc.
payable to the order of Debtor, dated of even date herewith, in the original
principal amount of $87,045,000, which Note is secured by, among other things,
the liens and security interests granted by the following security documents
executed by HWCC-Tunica, Inc. in favor of Debtor and dated of even date
herewith: Intercompany Security Agreement; Leasehold Deed of Trust, Security
Agreement, Assignment of Leases and Rents, Fixture Filing and Financing
Statement; and Second Preferred Ship Mortgage.
2. Promissory Note dated of even date herewith in the original principal
amount of $108,000,000 executed by Hollywood Casino-Aurora, Inc., payable to the
order of Debtor, which Note is secured, among other things, by the following
security documents executed by Hollywood Casino-Aurora, Inc. in favor of Debtor
and dated of even date herewith: Intercompany Security Agreement; Mortgage,
Leasehold Mortgage, Security Agreement, Assignment of Leases and Rents, Fixture
Filing and Financing Statement; and First Preferred Fleet Mortgage.
<PAGE>
EXHIBIT C
---------
to
SECURITY AGREEMENT
TRADEMARK REGISTRATIONS
-----------------------
MARK REG. NO. REG. DATE
- --------------------------------------------------------------------------------
HOLLYWOOD CASINO & DESIGN 1,849,650 08/09/94
HOLLYWOOD CASINO 1,851,759 08/30/94
RUDOLFO'S 1,865,043 11/29/94
HOLLYWOOD DIRECTOR'S LOUNGE & DESIGN 1,874,322 01/17/95
HOLLYWOOD DIRECTOR'S LOUNGE 1,880,151 02/21/95
CAFE HARLOW 1,880,969 02/28/95
CLUB HARLOW & DESIGN 1,882,606 03/07/95
CAFE HARLOW CUISINE AMERICAIN & DESIGN 1,884,060 03/14/95
CLUB HARLOW 1,885,408 03/21/95
HOLLYWOOD TAKE TWO & DESIGN 1,885,409 03/21/95
HOLLYWOOD TAKE TWO 1,885,410 03/21/95
HOLLYWOOD TAKE ONE & DESIGN 1,885,411 03/21/95
HOLLYWOOD TAKE ONE 1,885,412 03/21/95
RUDOLFO'S RISTORANTE 1,927,611 10/17/95
RUDOLFO'S ROMANTIC ITALIAN DINING & DESIGN 1,891,855 04/25/95
HOLLYWOOD EPIC BUFFET 1,902,030 06/27/95
HOLLYWOOD EPIC BUFFET & DESIGN 1,903,176 07/04/95
HOLLYWOOD CASINO 1,903,858 07/04/95
HOLLYWOOD MARQUEE 1,904,686 07/11/95
HOLLYWOOD SCREEN TEST 1,904,687 07/11/95
HOLLYWOOD MARQUEE and Design 1,990,629 08/06/96
(Serial No. 74-395727)
FAIRBANKS A SWASHBUCKLING 1,926,892 10/17/95
STEAKHOUSE and Design (Serial No. 74-395732)
FAIRBANKS (Serial No. 74-395734) 1,974,466 05/21/96
HOLLYWOOD SCREEN TEST & Design 1,928,914 10/24/95
(Serial No. 74-395740)
HOLLYWOOD CASINO (Stylized) 1,949,319 01/16/96
(Serial No. 74-298908)
ADVENTURE SLOTS (Stylized) 2,043,723 03/11/97
ADVENTURE SLOTS & DESIGN 2,049,113 04/01/97
ADVENTURE SLOTS (Stylized) 2,050,964 04/08/97
ADVENTURE SLOTS 2,101,971 09/30/97
TRADEMARK APPLICATIONS
----------------------
MARK SERIAL NO. FILING DATE
- -------------------------------------------------------------------------------
HOLLYWOOD BOX OFFICE BAR 74/395,742 05/26/93
HOLLYWOOD BOX OFFICE BAR & DESIGN 74/395,743 05/26/93
HOLLYWOOD CASINO HOTEL 74/479,112 01/13/94
HOLLYWOOD CASINO STUDIO STORE 74/687,479 06/12/95
HOLLYWOOD STUDIO WORLD 75/063,112 02/26/96
HOLLYWOOD KIDZ 75/124,091 06/24/96
HOLLYWOOD CASINO & DESIGN 75/261,553 03/21/97
HOLLYWOOD CASINO & DESIGN 75/261,554 03/21/97
HOLLYWOOD CASINO & DESIGN 75/261,555 03/21/97
HOLLYWOOD CASINO & DESIGN 75/261,556 03/21/97
TRADEMARK LICENSES
------------------
COPYRIGHTS
----------
PATENTS
-------
<PAGE>
<PAGE>
EXHIBIT D
---------
Perfection
----------
(a) Legal Name of Debtor: Hollywood Casino Corporation
--------------------
(b) Other Names: None
-----------
(c) (i) Chief Executive Office and Principal Place of Business of Debtor:
----------------------------------------------------------------
Dallas County, Texas
(ii) Other Premises at which Collateral is Stored or Located:
-------------------------------------------------------
None
(iii) Locations of Records Concerning Collateral:
------------------------------------------
Dallas County, Texas
<PAGE>
EXHIBIT E
---------
Form of Endorsement
-------------------
Reference is made to the foregoing Promissory Note (the "Note") made by
----
[HWCC-TUNICA, INC.] [HOLLYWOOD CASINO-AURORA, INC.] and payable to HOLLYWOOD
CASINO CORPORATION.
This Note is payable to the order of__________________________.
HOLLYWOOD CASINO CORPORATION
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT F
---------
Permitted Encumbrances
----------------------
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09
of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of business and consistent with industry practices and Liens on deposits
made to obtain the release of such Liens if:
<PAGE>
(a) the underlying Obligations are not overdue for a period of
more than 60 days, or
(b) such Liens are being contested in good faith and by
appropriate proceedings by the Company or applicable Restricted
Subsidiary and adequate reserves with respect thereto are maintained
on the books of the Company in accordance with GAAP, and
(c) the Company or applicable Restricted Subsidiary is in
compliance with the terms of the security documents applicable to such
Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
or other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to Obligations that do not
exceed Five Million Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and Social
Security benefits.
<PAGE>
EXHIBIT 4.3
STOCK PLEDGE AGREEMENT
----------------------
Made by
HOLLYWOOD CASINO CORPORATION
in favor of
STATE STREET BANK AND TRUST COMPANY,
as Trustee and Secured Party
May 19, 1999
<PAGE>
STOCK PLEDGE AGREEMENT
----------------------
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made as of May 19, 1999
---------
by HOLLYWOOD CASINO CORPORATION, a Delaware corporation, with principal offices
at Two Galleria Tower, Suite 2200, 13455 Noel Road, LB 48, Dallas, Texas 75240
("Pledgor"), in favor of STATE STREET BANK AND TRUST COMPANY, Massachusetts
-------
chartered trust company, with offices at Two International Place, 4th Floor,
Boston, Massachusetts 02110, as Trustee acting on behalf of the Holders of the
Notes under (and as defined in) the Indenture described below ("Secured Party").
-------------
RECITALS
--------
A. Pledgor, HWCC-Tunica, Inc., HWCC-Shreveport, Inc., and Secured Party,
as Trustee, have entered into an Indenture dated as of May 19, 1999 (as the same
may be amended, supplemented, restated or otherwise modified from time to time,
the "Indenture"), pursuant to which Debtor will issue up to $310,000,000 of its
---------
11 1/4% Series A and Series B Senior Secured Notes due 2007 and up to
$50,000,000 of its Floating Rate Series A and Series B Senior Secured Notes due
2006 (as the same may be amended, supplemented, restated, exchanged, replaced or
otherwise modified from time to time, collectively, the "Notes").
-----
<PAGE>
B. The Trustee has requested pursuant to the terms of the Indenture that
Pledgor execute and deliver this Agreement, and Pledgor has agreed to enter into
this Agreement.
C. Therefore, in order to comply with the terms and conditions of the
Indenture and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Section 1.01. Terms Defined Above or in the Indenture.
---------------------------------------
As used in this Agreement, the terms defined above shall have the meanings
respectively assigned to them. Other capitalized terms which are defined in the
Indenture but which are not defined herein shall have the same meanings as
defined in the Indenture.
Section 1.02. Certain Definitions.
-------------------
As used in this Agreement, the following terms shall have the following
meanings, unless the context otherwise requires:
"Code" shall mean the Uniform Commercial Code as presently in effect in the
----
State of New York. Unless otherwise indicated by the context herein, all
uncapitalized terms which are defined in the Code shall have their respective
meanings as used in Articles 8 and 9 of the Code; provided that, if by reason
-------- ----
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interests in any Collateral is governed by the
Uniform Commercial Code as in effect in any jurisdiction other than the State of
New York, "Code" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or the effect of perfection or non-perfection.
"Collateral" shall mean the following types or items of property, whether
----------
now owned or hereafter acquired:
(a) The securities of the Issuers described or referred to in Exhibit A
------- -
attached hereto and made a part hereof (as the same may hereafter be amended,
supplemented or otherwise modified); and
(b) (i) all shares of, all securities convertible or exchangeable into,
and all warrants, options or other rights to purchase shares of, stock of the
Issuers; (ii) all certificates or instruments representing such additional
shares, convertible or exchangeable securities, warrants, and other rights;
(iii) except as otherwise provided herein, all proceeds, income and profits
thereon, and all interest, dividends and other payments, property and
distributions with respect thereto; (iv) except as otherwise provided herein,
all proceeds received or receivable by the Pledgor, in cash, stock or otherwise,
from any recapitalization, reclassification, merger, dissolution, liquidation or
other termination of the existence of the Issuers; (v) except as otherwise
provided herein, any proceeds of any of the foregoing; provided that with
respect to any Issuers that are incorporated outside of the United States, no
more than sixty-five percent (65%) of the capital stock of such Issuers shall be
pledged to secure the Obligations pursuant to the provisions hereof.
(c) It is expressly contemplated that pursuant to clause (b) above,
additional securities or other property may from time to time be pledged,
assigned or granted to Secured Party as
2
<PAGE>
additional security for the Obligations, and the term "Collateral" as used
----------
herein shall be deemed for all purposes hereof to include all such additional
securities and property, together with all other property of the types described
above related thereto.
"Event of Default" shall mean any event specified in Section 6.01
---------------- ------------
hereof.
"Issuers" shall mean each of the Subsidiaries of Pledgor named on Exhibit
------- -------
A attached hereto and made a part hereof, and any other Restricted Subsidiary
- -
of Pledgor required to become a Guarantor pursuant to Section 11.02 of the
Indenture, and which pledge to the Trustee hereunder has been approved by
applicable Gaming Authorities, subject to the proviso contained in clause (b) of
the definition of Collateral. To the extent that any Restricted Subsidiary of
Pledgor is required to be designated an Issuer, Exhibit A shall be hereafter
amended, supplemented or modified.
"Obligations" shall mean: (i) the payment when due of indebtedness
-----------
evidenced by the Notes in the aggregate principal sum not to exceed at any time
outstanding of $360,000,000, interest as set forth in the Indenture and the
Notes, and premiums, penalties, and late charges thereon; (ii) all other
indebtedness and other sums (including, without limitation, all expenses,
attorneys' fees, other fees, indemnifications, reimbursements, damages, other
monetary liabilities, and other charges) and obligations that may or shall
become due hereunder or under the Notes, the Guarantees, the Indenture, or the
other Collateral Documents, and (iii) any and all renewals, modifications,
amendments, extensions for any period, supplements or restatements of any of the
foregoing.
"Obligor" shall mean any Person, other than Pledgor, liable (whether
-------
directly or indirectly, primarily or secondarily) for the payment or performance
of any of the Obligations whether as maker, co-maker, endorser, guarantor,
accommodation party, general partner or otherwise.
"Pledged Securities" shall mean all of the securities referred to in the
------------------
definition of Collateral and all additional securities (as that term is defined
in the Code), if any, constituting Collateral under this Agreement.
"Permitted Encumbrances" shall mean the items set forth on Exhibit B
----------------------
hereto.
ARTICLE II
SECURITY INTEREST
-----------------
Section 2.01. Pledge.
------
Pledgor hereby assigns, endorses, delivers, pledges, and grants to Secured
Party, a continuing security interest in, and Lien upon, the Collateral to
secure the prompt and complete payment and performance of the Obligations and
the performance by Debtor of this Agreement. This security interest is granted
as security only and shall not subject Secured Party to, or transfer or in any
way affect or modify, any obligation or liability of the Pledgor or any Obligor
with respect to any of the Collateral, the Obligations or any transaction in
connection therewith.
3
<PAGE>
Section 2.02. Transfer of Collateral.
----------------------
All certificates or instruments representing or evidencing the Pledged
Securities shall be delivered to and held by Secured Party or a Person
designated by Secured Party pursuant hereto. All Pledged Securities shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, and accompanied by any required
transfer tax stamps, or (in the case of either certificated or uncertificated
securities) Secured Party shall have been provided with (i) evidence that
entries have been made on the books of a clearing corporation (as defined in
Section 8-103 of the Code) to effect the pledge of the Pledged Securities to
Secured Party, as provided in, and in accordance with, Section 8-320 of the
Code, or (ii) evidence that a final intermediary has identified the Pledged
Securities as having been pledged to Secured Party, as provided in, and in
accordance with, Sections 8-313(1)(4) of the Code, or (iii) evidence that the
Pledged Securities have been otherwise transferred to Secured Party in
accordance with Section 8-313(1) of the Code, all in form and substance
satisfactory to Secured Party. Notwithstanding the preceding sentence, at
Secured Party's discretion, all Pledged Securities must be delivered or
transferred in such manner as to permit Secured Party to be a "bona fide
purchaser" to the extent of its security interest as provided in Sections 8-
3302(1) and 8-320(3) of the Code (if Secured Party otherwise qualifies as a bona
fide purchaser). Upon the occurrence and continuance of an Event of Default,
Secured Party shall have the right, at any time in its discretion and without
notice to Pledgor, to transfer to or to register in the name of Secured Party or
any of its nominees any or all of the Collateral. In addition, upon the
occurrence and continuance of an Event of Default, Secured Party shall have the
right at any time to exchange certificates or instruments representing or
evidencing Pledged Securities for certificates or instruments of smaller or
larger denominations.
Section 2.03. Ratable Benefit of Holders of the Notes.
---------------------------------------
Pledgor and Secured Party agree that the security interest and lien granted
hereby are for the benefit of the Trustee for the equal and ratable benefit of
the Holders of the Notes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Secured Party to accept this Agreement, Pledgor
represents and warrants to Secured Party (which representations and warranties
will survive the creation and payment of the Obligations) that:
Section 3.01. Ownership of Collateral; Absence of Encumbrances and
----------------------------------------------------
Restrictions.
- ------------
After giving effect to the use of proceeds of the Notes, Pledgor is, and in
the case of Collateral acquired after the date hereof, will be, the legal and
sole holder of record and the sole beneficial owner of the Collateral, free and
clear of all Liens except for Permitted Encumbrances, and Pledgor has full
right, power and authority to pledge, assign and grant a security interest in
the Collateral to Secured Party. All of the Pledged Shares are presently
represented by the certificates listed on Exhibit A hereto. As of the date
---------
hereof, there are no existing options, warrants, calls or commitments of any
character whatsoever relating to the Pledged Securities.
Section 3.02. No Required Consent.
-------------------
4
<PAGE>
Except for such authorizations, consents and other actions as shall have
been obtained and shall be in effect, no authorization, consent, approval or
other action by, and no notice to or registration, recordation or filing with,
any Governmental Authority is required for (i) the due execution, delivery and
performance by Pledgor of this Agreement, (ii) the grant by Pledgor of the
security interest granted by this Agreement, (iii) the perfection of such
security interest (except for the filing of any appropriate financing
statements) or (iv) except as may be required by applicable gaming laws or
except as may be required in connection with the disposition of Collateral by
federal and state securities laws or antitrust laws and the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, the exercise by Secured Party of its rights
and remedies under this Agreement. Neither the Pledgor nor any of its
Subsidiaries has performed or will perform any acts which might prevent Secured
Party from enforcing any of the terms and conditions of this Agreement or which
would limit Secured Party in any such enforcement. None of the Pledged
Securities have been issued or transferred in violation of the securities
registration, securities disclosure or similar laws of any jurisdiction to which
such issuance or transfer may be subject.
Section 3.03. Pledged Securities.
------------------
The Pledged Securities have been duly authorized and validly issued, and
are fully paid and non-assessable. The Pledged Securities constitute 100% of the
issued and outstanding shares of capital stock of the Issuers subject to the
proviso contained in clause (b) of the definition of Collateral in Section 1.02
hereof. Contemporaneously with the issuance of the Notes, the Pledgor is
delivering to Secured Party in pledge hereunder the certificates and other
instruments evidencing all Pledged Securities owned by the Pledgor as of the
date hereof.
Section 3.04. First Priority Security Interest.
--------------------------------
Upon the delivery of Pledged Securities to the Secured Party, this
Agreement creates a valid and perfected first priority security interest in the
Collateral, enforceable against Pledgor and all third parties and securing
payment of the Obligations, except that (a) the enforceability of any rights to
indemnity and contribution hereunder may be limited by federal or state
securities laws or principles of public policy, (b) the enforceability hereof
may be subject to applicable bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and (c) the enforceability hereof may be subject
to general principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity).
ARTICLE IV
----------
COVENANTS AND AGREEMENTS
------------------------
Pledgor will at all times comply with the covenants and agreements
contained in this Article IV from the date hereof and for so long as any part of
----------
the Obligations are outstanding.
Section 4.01. Sale, Disposition or Encumbrance of Collateral.
----------------------------------------------
Except as may be permitted by the provisions hereof or of the Indenture,
Pledgor will not in any way encumber any of its rights in or to any of
5
<PAGE>
the Collateral (or permit or suffer any of the Collateral to be encumbered) or
sell, pledge, assign, lend or otherwise dispose of or transfer any of the
Collateral to or in favor of any Person other than Secured Party. The Pledgor is
not, and will not become, a party to or be otherwise bound by any agreement,
other than this Agreement or as permitted by the Indenture, which restricts in
any manner the rights of any present or future holder of any of the Pledged
Securities.
Section 4.02. Dividends or Distributions.
--------------------------
So long as no Event of Default shall have occurred and be continuing,
Pledgor shall be entitled to receive and retain free and clear of the Lien of
this Agreement any and all dividends, distributions, interest and principal
payments, cash, instruments and other property and proceeds made upon or with
respect to the Collateral, which shall not constitute Collateral and may be used
by Pledgor subject to the terms and conditions of the Indenture; provided,
--------
however, that any and all dividends paid or payable in securities of the
- -------
Issuers, including all securities convertible into any Collateral, and warrants,
options or other rights to purchase stock or equity interests, in any of the
Issuers, receivable or otherwise distributed in respect of, or in exchange for
(including, without limitation, any certificate or share purchased or exchanged
in connection with a tender offer or merger agreement) any Collateral, shall be,
and shall be forthwith delivered to Secured Party to hold as, Collateral and
shall, if received by Pledgor, be received in trust for the benefit of Secured
Party, be segregated from the other Property or funds of Pledgor, and be
forthwith delivered to Secured Party as Collateral in the same form as so
received (with any necessary endorsement). Upon the occurrence and during the
continuance of an Event of Default, all rights of Pledgor to receive all
dividends, distributions, interest and principal payments, cash, instruments and
other property and proceeds shall cease, and such dividends, distributions,
interests and principal payments, cash, instruments and other property and
proceeds shall constitute Collateral and shall be paid or otherwise delivered to
the Secured Party. In the event that Pledgor is required by the provisions
hereof or of the Indenture to pledge additional capital stock (including,
without limitation, the capital stock of any newly acquired or formed Restricted
Subsidiary of Pledgor) as collateral for the Obligations, then Pledgor and
Secured Party shall execute an amendment to this Agreement attaching an amended,
supplemented or modified Exhibit A hereto.
---------
Section 4.03. Records and Information.
-----------------------
Pledgor shall keep accurate and complete records of the Collateral
(including proceeds, payments, distributions, income and profits). Upon
reasonable notice and without undue interference with the Pledgor's business,
Secured Party may at any time have access to, examine, audit, make extracts from
and inspect without hindrance or delay Pledgor's records, files and the
Collateral.
Section 4.04. Further Assurances.
------------------
Upon the request of Secured Party, Pledgor shall (at Pledgor's expense)
execute and deliver all such assignments, certificates, instruments, securities,
financing statements, notifications to financial intermediaries, clearing
corporations, the Issuers of the Pledged Securities or other third parties or
other documents and give further assurances and do all other acts and things as
Secured Party may reasonably request to perfect Secured Party's interest in the
6
<PAGE>
Collateral or which is necessary to protect, enforce or otherwise effect Secured
Party's rights and remedies hereunder.
Section 4.05. Stock Powers.
------------
Pledgor shall furnish to Secured Party such stock powers and other
instruments as may reasonably be required by Secured Party to assure the
transferability of the Collateral when and as often as may be requested by
Secured Party.
Section 4.06. Rights to Sell.
--------------
(a) If Secured Party shall determine to exercise its rights to sell
all or any of the Collateral pursuant to its rights hereunder, Pledgor agrees
that, upon request of Secured Party, Pledgor will, at its own expense:
(i) use its best efforts to qualify the Collateral under the
state securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by Secured Party; and
(ii) use its commercially reasonable best efforts to do or cause
to be done all such other acts and things as may be necessary to make such sale
of the Collateral or any part thereof valid and binding and in compliance with
applicable law.
(b) Pledgor further acknowledges the impossibility of ascertaining
the amount of damages which would be suffered by Secured Party and the Holders
of the Notes by reason of the failure by Pledgor to perform any of the covenants
contained in this Section 4.06 and consequently agrees that if Pledgor shall
------------
fail to perform any of such covenants, it shall be subject to a suit for
specific performance of such covenants.
Section 4.07. Voting and Other Consensual Rights.
----------------------------------
Except to the extent otherwise provided in Section 6.06(d) hereof, Pledgor
---------------
shall be entitled to exercise any and all voting and other consensual rights
pertaining to the Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement or the Indenture or any other
Collateral Document.
ARTICLE V
---------
RIGHT, DUTIES, AND POWERS OF SECURED PARTY
------------------------------------------
Secured Party shall have the following rights, duties and powers:
Section 5.01. Discharge Encumbrances.
----------------------
After the occurrence and during, the continuance of an Event of Default,
Secured Party may, at its option, discharge any taxes, Liens, security interests
or other encumbrances at any time levied or placed on the Collateral. Pledgor
agrees to reimburse Secured Party as provided in the Indenture.
7
<PAGE>
Section 5.02. Cumulative and Other Rights.
---------------------------
The rights, powers and remedies of Secured Party hereunder are in addition
to all rights, powers and remedies given by law or in equity. The exercise by
Secured Party of any one or more of the rights, powers and remedies herein shall
not be construed as a waiver of any other rights, powers and remedies,
including, without limitation, any other rights of set-off (provided that set-
off rights may not be exercised prior to the acceleration of the Notes).
Section 5.03. Disclaimer of Certain Duties.
----------------------------
(a) The powers conferred upon Secured Party by this Agreement are to
protect its interest in the Collateral and shall not impose any duty upon
Secured Party to exercise any such powers. Pledgor hereby agrees that Secured
Party shall not be liable for, nor shall the indebtedness evidenced by the
Obligations be diminished by, Secured Party's delay or failure to collect upon,
foreclose, sell, take possession of or otherwise obtain value for the
Collateral.
(b) Except as may be required by the provisions of the Indenture, and
to the fullest extent permitted by applicable law, Secured Party shall be under
no duty whatsoever to make or give any presentment, notice of dishonor, protest,
demand for performance, notice of non-performance, notice of intent to
accelerate, notice of acceleration, or other notice or demand in connection with
any Collateral or the Obligations, or to take any steps necessary to preserve
any rights against any Obligor or other Person. Pledgor waives any right of
marshaling in respect of any and all Collateral, and waives any right to require
Secured Party to proceed against any Obligor or other Person, exhaust any
Collateral or enforce any other remedy which Secured Party now has or may
hereafter have against any Obligor or other Person.
Section 5.04. Modification of Obligations; Other Security.
-------------------------------------------
Except as specifically provided for in the Indenture, Pledgor waives (i)
any and all notice of acceptance, creation, modification, rearrangement, renewal
or extension for any period of any instrument executed by any Obligor in
connection with the Obligations, and (ii) to the fullest extent permitted by
applicable law, any defense of any Obligor by reason of disability, lack of
authorization, cessation of the liability of any Obligor or for any other
reason. Pledgor authorizes Secured Party, without notice or demand and without
any reservation of rights against Pledgor and without affecting Pledgor's
liability hereunder or on the Obligations, from time to time after the
occurrence and during the continuance of an Event of Default, to (x) apply the
Collateral in the manner permitted by this Agreement, and (y) after the
occurrence and during the continuance of an Event of Default, renew, extend for
any period, accelerate, amend or modify, supplement, enforce, compromise,
settle, waive or release the obligations of any Obligor or any instrument or
agreement of such other Person with respect to any or all of the Obligations or
Collateral.
Section 5.05. Custody and Preservation of the Collateral.
------------------------------------------
Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which comparable secured
parties accord comparable collateral, it being understood and agreed, however,
that Secured Party shall not have responsibility for (i)
8
<PAGE>
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
Secured Party has or is deemed to have knowledge of such matters, or (ii) taking
any necessary steps to preserve rights against Persons or entities with respect
to any Collateral.
ARTICLE VI
----------
EVENTS OF DEFAULT
-----------------
Section 6.01. Events.
------
It shall constitute an Event of Default under this Agreement if an "Event
of Default" occurs and is continuing under the Indenture.
Section 6.02. Remedies.
--------
Upon the occurrence and during the continuance of any Event of Default,
Secured Party may take any or all of the following actions without notice
(except where expressly required below or in the Indenture) or demand to
Pledgor:
(a) Sell, in one or more sales and in one or more parcels, or
otherwise dispose of any or all of the Collateral in any commercially reasonable
manner as Secured Party may elect, in a public or private transaction, at any
location as deemed reasonable by Secured Party for cash at such price as Secured
Party may deem fair; and (unless prohibited by the Code, as adopted in any
applicable jurisdiction) Secured Party may be the purchaser of any or all
Collateral so sold and may apply upon the purchase price therefor any
Obligations secured hereby. Any such sale or transfer by Secured Party either to
itself or to any other Person shall be absolutely free from any claim of right
by Pledgor, including any equity or right of redemption, stay or appraisal which
Pledgor has or may have under any rule of law, regulation or statute now
existing or hereafter adopted. Upon any such sale or transfer, Secured Party
shall have the right to deliver, assign and transfer to the purchaser or
transferee thereof the Collateral so sold or transferred. If Secured Party deems
it advisable to do so, it may restrict the bidders or purchasers of any such
sale or transfer to Persons or entities who will represent and agree that they
are purchasing the Collateral for their own account and not with the view to the
distribution or resale of any of the Collateral. Secured Party may, at its
discretion, provide for a public sale, and any such public sale shall be held at
such time or times within ordinary business hours and at such place or places as
Secured Party may fix in the notice of such sale. Secured Party shall not be
obligated to make any sale pursuant to any such notice. Secured Party may,
without notice or publication, adjourn any public or private sale by
announcement at any time and place fixed for such sale, and such sale may be
made at any time or place to which the same may be so adjourned. In the event
any sale or transfer hereunder is not completed or is defective in the opinion
of Secured Party, such sale or transfer shall not exhaust the rights of Secured
Party hereunder, and Secured Party shall have the right to cause one or more
subsequent sales or transfers to be made hereunder. If only part of the
Collateral is sold or transferred such that the Obligations remain outstanding
(in whole or in part), Secured Party's rights and remedies hereunder shall not
be exhausted, waived or modified, and Secured Party is specifically empowered to
make one or more successive sales or transfers until all the Collateral shall be
sold
9
<PAGE>
or transferred and all the Obligations are paid. In the event that Secured Party
elects not to sell the Collateral, Secured Party retains its rights to dispose
of or utilize the Collateral or any part or parts thereof in any manner
authorized or permitted by law or in equity, and to apply the proceeds of the
same towards payment of the Obligations. Each and every method of disposition of
the Collateral described in this Section 6.02 shall constitute disposition in
------------
a commercially reasonable manner.
(b) Apply proceeds of the disposition of the Collateral to the
Obligations as provided by the Indenture. Such application may include, without
limitation, the reasonable attorneys' fees and legal expenses incurred by
Secured Party.
(c) Appoint any Person as agent to perform any act or acts necessary
or incident to any sale or transfer by Secured Party of the Collateral.
(d) Execute, assign and endorse negotiable and other instruments for
the payment of money, documents of title or other evidences of payment, shipment
or storage for any form of Collateral on behalf of and in the name of Pledgor.
(e) Exercise all other rights and remedies permitted by law or in
equity.
Section 6.03. Attorney-in-Fact.
----------------
Pledgor hereby irrevocably appoints Secured Party as Pledgor's attorney-in-
fact, with full authority in the place and stead of Pledgor and in the name of
Pledgor or otherwise, from time to time in Secured Party's reasonable discretion
upon the occurrence and during the continuance of an Event of Default, but at
Pledgor's cost and expense, to take any action and to execute any assignment,
certificate, financing statement, stock power, notification, document or
instrument which Secured Party may reasonably deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to Pledgor
representing any dividend, interest payment or other distribution in respect of
the Collateral or any part thereof and to give full discharge for the same.
Section 6.04. Liability for Deficiency.
------------------------
If any sale or other disposition of Collateral by Secured Party or any
other action of Secured Party hereunder results in reduction of the Obligations,
such action will not release Pledgor from its liability to Secured Party for any
unpaid Obligations, including reasonable costs, charges and expenses incurred in
the liquidation of Collateral and the same shall be immediately due and payable
to Secured Party at Secured Party's address set forth in the opening paragraph
hereof.
Section 6.05. Reasonable Notice.
-----------------
If any applicable provision of any law requires Secured Party to give
reasonable notice of any sale or disposition or other action, Pledgor hereby
agrees that ten (10) days' prior written notice shall constitute reasonable
notice thereof. Such notice, in the case of public sale, shall state the time
and place fixed for such sale and, in the case of private sale, the time after
which such sale is to be made.
10
<PAGE>
Section 6.06. Pledged Securities.
------------------
Upon the occurrence and during the continuance of an Event of Default:
(a) All rights of Pledgor to receive the property which it would
otherwise be authorized to receive and retain pursuant to Section 4.02 hereof
------------
shall cease, and all such rights shall thereupon become vested in Secured Party
who shall thereupon have the sole right to receive and hold as Collateral such
property, but Secured Party shall have no duty to receive and hold such property
and shall not be responsible for any failure to do so or delay in so doing.
(b) All property which is received by Pledgor contrary to the
provisions of this Section 6.06 shall be received in trust for the benefit of
------------
Secured Party, shall be segregated from other funds of Pledgor and shall be
forthwith paid over to Secured Party as Collateral in the same form as so
received (with any necessary endorsement).
(c) Secured Party may exercise any and all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining to
any of the Pledged Securities as if it were the absolute owner thereof,
including without limitation, the right to exchange at its discretion, any and
all of the Pledged Securities upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the Issuers or upon the exercise by
the Issuers or Secured Party of any right, privilege or option pertaining to any
of the Pledged Securities, and in connection therewith, to deposit and deliver
any and all of the Pledged Securities with any committee, depository, transfer
agent, registrar or other designated agency upon such terms and conditions as it
may determine, all without liability except to account for property actually
received by it, but Secured Party shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be responsible for any
failure to do so or delay in so doing.
(d) All rights of Pledgor to exercise the voting and other consensual
rights which Pledgor would otherwise be entitled to exercise pursuant to Section
-------
4.07 hereof with respect to the Pledged Securities issued by the Issuers shall
- ----
cease, and all such rights shall thereupon become vested in Secured Party who
shall thereupon have the sole right to exercise such voting and other consensual
rights, but Secured Party shall have no duty to exercise any such voting or
other consensual rights and shall not be responsible for any failure to do so or
delay in so doing.
Section 6.07. Non-judicial Enforcement.
------------------------
Secured Party may enforce its rights hereunder without prior judicial
process or judicial hearing, and to the extent permitted by law, Pledgor
expressly waives any and all legal rights which might otherwise require Secured
Party to enforce its rights by judicial process.
Section 6.08. Private Sale of Securities.
--------------------------
Pledgor recognizes that Secured Party may deem it impracticable to effect a
public sale of all or any part of the Securities and that Secured Party may,
therefore, determine to make one or more private sales of any such Securities to
a restricted group of purchasers who will be obligated to agree, among other
things, to acquire such Securities for their own account, for investment and not
with a view to the distribution or resale thereof. Pledgor acknowledges that
11
<PAGE>
any such private sale may be at prices and on terms less favorable to the seller
than the prices and other terms which might have been obtained at a public sale
and, notwithstanding the foregoing, agrees that such private sale shall be
deemed to have been made in a commercially reasonably manner and that Secured
Party shall have no obligation to delay sale of any such securities for the
period of time necessary to permit Pledgor to register such Securities for
public sale under the Securities Act of 1933, as amended (the "Securities Act").
--------------
Pledgor further acknowledges and agrees that any offer to sell such Securities
which has been (i) publicly advertised on a bona fide basis in a newspaper or
---- ----
other publication of general circulation in the financial community of New York,
New York (to the extent that such an offer may be so advertised without prior
registration under the Securities Act), or (ii) made privately in the manner
described above to not less than fifteen (15) bona fide offerees shall be deemed
---- ----
to involve a "public sale" for the purposes of Section 9-504(c) of the Code (or
any successor or similar, applicable statutory provision) as then in effect in
the State of New York, notwithstanding that such sale may not constitute a
"public offering" under the Securities Act and that Secured Party may, in such
event, bid for the purchase of such Securities.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
Section 7.01. Notices.
-------
Any notice required or permitted to be given under or in connection with
this Agreement shall be given in accordance with the notice provisions of the
Indenture.
Section 7.02. Amendments and Waivers.
----------------------
Secured Party's acceptance of partial or delinquent payments or any
forbearance, failure or delay by Secured Party in exercising any right, power or
remedy hereunder shall not be deemed a waiver of any obligation of Pledgor or
any Obligor, or of any right, power or remedy of Secured Party, and no partial
exercise of any right, power or remedy shall preclude any other or further
exercise thereof. Secured Party may remedy any Event of Default hereunder or in
connection with the Obligations without waiving the Event of Default so
remedied. Pledgor hereby agrees that if Secured Party and the Holders of the
Notes agree to a waiver of any provision hereunder, as provided by the
Indenture, or an exchange of or release of the Collateral, or the addition or
release of any Obligor or other Person, any such action shall not constitute a
waiver of any of Secured Party's other rights or of Pledgor's obligations
hereunder. This Agreement may be amended only by an instrument in writing in the
manner set forth in the Indenture and may be supplemented only by documents
delivered or to be delivered in accordance with the express terms hereof.
Section 7.03. Redelivery of Collateral.
------------------------
If any sale or transfer of Collateral by Secured Party results in full
satisfaction of the Obligations, and after such sale or transfer and discharge
there remains a surplus of proceeds, Secured Party will deliver to Pledgor or
such other Person as may be required by a Governmental
12
<PAGE>
Authority such excess proceeds in a commercially reasonable time; provided,
--------
however, that neither Secured Party nor any Holders of the Notes shall have any
- -------
liability for any interest, cost or expense in connection with any reasonable
delay in delivering such proceeds to Pledgor.
Section 7.04. Gaming Authority.
----------------
Each of the provisions of this Agreement is subject to, and shall be
enforced in compliance with, the requirements of any applicable Gaming
Authority.
Section 7.05. Governing Law; Jurisdiction.
---------------------------
This Agreement and the security interest granted hereby shall be construed
in accordance with and governed by the laws of the State of New York (except to
the extent that the laws of any other jurisdiction govern the perfection and
priority of the security interests granted hereby).
Section 7.06. Continuing Security Agreement.
-----------------------------
(a) Except as may be expressly applicable pursuant to Section 9-505
of the Code, no action taken or omission to act by Secured Party hereunder,
including, without limitation, any exercise of voting or consensual rights
pursuant to Section 6.06(d) hereof or any other action taken or inaction
---------------
pursuant to Section 6.02 hereof, shall be deemed to constitute a retention of
------------
the Collateral in satisfaction of the Obligations or otherwise to be in full
satisfaction of the Obligations, and the Obligations shall remain in full force
and effect until Secured Party shall have applied payments (including, without
limitation, collections from Collateral) towards the Obligations in the full
amount then outstanding or until such subsequent time as is hereinafter provided
in Section 7.06(b) hereof.
---------------
(b) To the extent that any payments on the Obligations or proceeds of
the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent the Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Secured Party, and Secured Party's security interests, rights, powers and
remedies hereunder shall continue in full force and effect. In such event, this
Agreement shall be automatically reinstated if it shall theretofore have been
terminated pursuant to Section 7.07 hereof.
------------
Section 7.07. Termination.
-----------
The grant of a security interest hereunder and all of Secured Party's
rights, powers and remedies in connection therewith shall, unless otherwise
provided in the Indenture or in this Agreement, remain in full force and effect
until the payment in full of (a) the Notes under the terms of the Indenture and
(b) all Obligations then due and owing under the Indenture, the Notes and the
Collateral Documents; provided, however, that after receipt from the Pledgor by
--------- -------
the Secured Party of a request for a release of any Collateral permitted under
the Indenture upon the sale, transfer, assignment, exchange or other disposition
of the Collateral not prohibited by the Indenture (and upon receipt by the
Secured Party of all proceeds of such sale, transfer, assignment, exchange or
other disposition to the extent required to be remitted to the Secured
13
<PAGE>
Party under the Indenture), such Collateral shall be released from the Lien and
security interest created hereunder in accordance with the provisions of the
Indenture and no longer constitute Collateral. Notwithstanding the foregoing,
the provisions of Section 7.06(b) hereof shall survive the termination of this
---------------
Agreement.
Section 7.08. Release.
-------
Subject to the provisions of Section 7.06(b) hereof, this Agreement shall
---------------
terminate upon payment in full of (a) the Notes under the terms of the Indenture
and (b) all Obligations then due and owing under the Indenture, the Notes and
the Collateral Documents. At such time, the Secured Party shall, at the request
of the Pledgor, reassign and redeliver to the Pledgor all of the Collateral
hereunder that has not been sold, disposed of, retained or applied by the
Secured Party in accordance with the terms of the Indenture or the Collateral
Documents. Such reassignment and redelivery shall be without warranty by or
recourse to the Secured Party, except as to the absence of any prior assignments
by the Secured Party of its interest in the Collateral, and shall be at the
expense of the Pledgor.
Section 7.09. Counterparts, Effectiveness.
---------------------------
This Agreement becomes effective upon the execution hereof by Pledgor and
delivery of the same to Secured Party, and it is not necessary for Secured Party
to execute any acceptance hereof or otherwise signify or express its acceptance
hereof.
Section 7.10. Interpretation of Agreement.
---------------------------
To the extent a term or provision of this Agreement conflicts with the
Indenture, the Indenture shall control with respect to the subject matter of
such term or provision.
Section 7.11. Rights of Holders.
-----------------
No Holder of Notes shall have any independent rights hereunder other than
those rights granted to individual Holders of Notes pursuant to the Indenture;
provided that, nothing in this Section 7.11 shall limit any rights granted to
- -------- ---- ------------
the Secured Party under the Notes, the Indenture or the Collateral Documents.
Section 7.12. No Personal Liability of Directors, Officer, Employees,
-------------------------------------------------------
and Stockholders.
- ----------------
No past, present or future director, officer, employee, incorporator or
stockholder of the Pledgor, as such or any successor Person, as such, shall have
any liability for any obligations of the Pledgor under this Agreement or for any
claim based on, in respect of, or by reason of, such Obligations or their
creation.
[SIGNATURE PAGE FOLLOWS]
14
<PAGE>
IN WITNESS WHEREOF, Pledgor has caused this Stock Pledge Agreement to be
executed as of the date first above written.
Pledgor: HOLLYWOOD CASINO CORPORATION
- -------
By: /s/ Paul C. Yates
-------------------
Paul C. Yates
Executive Vice President and
Chief Financial Officer
15
<PAGE>
EXHIBIT A
---------
PLEDGED SECURITIES
<TABLE>
<CAPTION>
Stock % of
Issuer Class of Stock Certificate No. No. of Shares Outstanding
------ -------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
1. HWCC-Tunica, Inc., Common 1 1,000 100%
a Texas corporation
2. HWCC-Shreveport, Common 1 1,000 100%
Inc., a Louisiana
corporation
3. HWCC-Louisiana, Common 1 1,000 100%
Inc., a Louisiana
corporation
4. Hollywood Common 11 1,501,000 100%
Casino-Aurora, Inc.,
an Illinois
corporation
</TABLE>
A-1
<PAGE>
EXHIBIT B
---------
PERMITTED ENCUMBRANCES
----------------------
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09
of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of
<PAGE>
business and consistent with industry practices and Liens on deposits made to
obtain the release of such Liens if:
(a) the underlying Obligations are not overdue for a period of more than
60 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings by the Company and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP, and
(c) the Company is in compliance with the terms of the security documents
applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
or other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that do not
exceed Five Million Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and Social
Security benefits.
B-2
<PAGE>
EXHIBIT 4.4
TRADEMARK SECURITY AGREEMENT
----------------------------
THIS TRADEMARK SECURITY AGREEMENT (this "Agreement") is made as of
---------
May 19 1999, by HOLLYWOOD CASINO CORPORATION, a Delaware corporation, with its
chief executive office at Two Galleria Tower, Suite 2200, 13455 Noel Road LB48,
Dallas, Texas 75240 ("Grantor"), in favor of STATE STREET BANK AND TRUST
-------
COMPANY, a Massachusetts chartered trust company, with offices at Two
International Place, 4th Floor, Boston, Massachusetts 02110, as Trustee acting
on behalf of the Holders of the Notes under (and as defined in) the Indenture
described below (the "Secured Party").
-------------
RECITALS
--------
WHEREAS, Grantor, HWCC Tunica, Inc., HWCC-Shreveport, Inc., and
Secured Party, as Trustee, have entered into an Indenture dated as of the date
hereof (as the same may be amended, supplemented, restated or otherwise modified
from time to time, the "Indenture"), pursuant to which Grantor will issue up to
---------
$310,000,000 of its 11 1/4% Series A and Series B Senior Secured Notes due 2007
and up to $50,000,000 of its Floating Rate Series A and Series B Senior Secured
Notes due 2006 (as the same may be amended, supplemented, restated, exchanged,
replaced or otherwise modified from time to time, collectively, the "Notes").
-----
WHEREAS, to satisfy one of the terms and conditions of the Indenture,
Grantor has entered into that certain Security Agreement dated as of the date
hereof (the "Security Agreement") in favor of Secured Party, which is
------------------
incorporated herein by reference; and
WHEREAS, the Security Agreement provides, inter alia, for the
----- ----
assignment and grant of a security interest in certain intellectual property of
Grantor; and
WHEREAS, it is the purpose of this document to perfect and memorialize
the security interests granted to Secured Party in the Security Agreement in the
United States trademark registrations and applications for registration of
Grantor described or referred to in the attached Exhibit A, in a form suitable
---------
for recording in the United States Patent and Trademark Office;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is acknowledged, and subject to the terms and conditions of the Security
Agreement, Grantor hereby assigns and grants to Secured Party a continuing first
priority security interest in all of Grantor's right, title and interest in, to
and under each trademark registration and application for trademark registration
described or referred to in the attached Exhibit A, whether presently existing
---------
or hereafter created or acquired, and a security interest in the good will of
the business symbolized by the respective marks of said registrations and
applications.
<PAGE>
The provisions of this Agreement shall be governed by the internal
laws of the State of New York.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Trademark Security
Agreement to be executed and delivered as of the date first set forth above.
HOLLYWOOD CASINO CORPORATION
By: /s/ Paul C. Yates
----------------------------
Paul C. Yates
Executive Vice President and
Chief Financial Officer
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF COOK )
BEFORE ME, the undersigned authority, on this day personally
appeared Paul C. Yates, and having been duly sworn by me, upon his/her oath
states that he/she is Executive Vice President and CFO of Hollywood Casino
Corporation, that he/she has read and understands the foregoing instrument, that
he/she is authorized to execute said instrument, and acknowledged to me that
he/she executed same for the purposes and consideration therein expressed, in
the capacity therein stated, and as the act and deed of said corporation.
SUBSCRIBED AND SWORN TO BEFORE ME, this 19th day of May, 1999.
/s/ Joyce A. Kiel
NOTARY PUBLIC
My Commission Expires: 3/12/2002
<PAGE>
EXHIBIT A
---------
to
TRADEMARK SECURITY AGREEMENT
Trademark Registrations:
-----------------------
Mark Reg No. Date
- -------------------------------------------------------------------------
HOLLYWOOD CASINO & DESIGN 1,849,650 08/09/94
HOLLYWOOD CASINO 1,851,759 08/30/94
RUDOLFO'S 1,865,043 11/29/94
HOLLYWOOD DIRECTOR'S LOUNGE & DESIGN 1,874,322 01/17/95
HOLLYWOOD DIRECTOR'S LOUNGE 1,880,151 02/21/95
CAFE HARLOW 1,880,969 02/28/95
CLUB HARLOW & DESIGN 1,882,606 03/07/95
CAFE HARLOW CUISINE AMERICAIN & DESIGN 1,884,060 03/14/95
CLUB HARLOW 1,885,408 03/21/95
HOLLYWOOD TAKE TWO & DESIGN 1,885,409 03/21/95
HOLLYWOOD TAKE TWO 1,885,410 03/21/95
HOLLYWOOD TAKE ONE & DESIGN 1,885,411 03/21/95
HOLLYWOOD TAKE ONE 1,885,412 03/21/95
RUDOLFO'S RISTORANTE 1,927,611 10/17/95
RUDOLFO'S ROMANTIC ITALIAN DINING & DESIGN 1,891,855 04/25/95
HOLLYWOOD EPIC BUFFET 1,902,030 06/27/95
HOLLYWOOD EPIC BUFFET & DESIGN 1,903,176 07/04/95
HOLLYWOOD CASINO 1,903,858 07/04/95
HOLLYWOOD MARQUEE 1,904,686 07/11/95
HOLLYWOOD SCREEN TEST 1,904,687 07/11/95
<PAGE>
MARK REG. NO. REG. DATE
- ------------------------------------------------------------------------
HOLLYWOOD MARQUEE and Design 1,990,629 08/06/96
(Serial No. 74-395727)
FAIRBANKS A SWASHBUCKLING 1,926,892 10/17/95
STEAKHOUSE and Design (Serial No. 74-395732)
FAIRBANKS (Serial No. 74-395734) 1,974,466 05/21/96
HOLLYWOOD SCREEN TEST & Design 1,928,914 10/24/95
(Serial No. 74-395740)
HOLLYWOOD CASINO (Stylized) 1,949,319 01/16/96
(Serial No. 74-298908)
ADVENTURE SLOTS (Stylized) 2,043,723 03/11/97
ADVENTURE SLOTS & DESIGN 2,049,113 04/01/97
ADVENTURE SLOTS (Stylized) 2,050,964 04/08/97
ADVENTURE SLOTS 2,101,971 09/30/97
TRADEMARK APPLICATIONS
----------------------
MARK SERIAL NO. FILING DATE
- --------------------------------------------------------------------------
HOLLYWOOD BOX OFFICE BAR 74/395,742 05/26/93
HOLLYWOOD BOX OFFICE BAR & DESIGN 74/395,743 05/26/93
HOLLYWOOD CASINO HOTEL 74/479,112 01/13/94
HOLLYWOOD CASINO STUDIO STORE 74/687,479 06/12/95
HOLLYWOOD STUDIO WORLD 75/063,112 02/26/96
HOLLYWOOD KIDZ 75/124,091 06/24/96
HOLLYWOOD CASINO & DESIGN 75/261,553 03/21/97
HOLLYWOOD CASINO & DESIGN 75/261,554 03/21/97
HOLLYWOOD CASINO & DESIGN 75/261,555 03/21/97
HOLLYWOOD CASINO & DESIGN 75/261,556 03/21/97
C-2
<PAGE>
EXHIBIT 4.5
ESCROW AND CONTROL AGREEMENT
----------------------------
THIS ESCROW AND CONTROL AGREEMENT (this "Agreement"), dated as of May
---------
19, 1999, is by and among HOLLYWOOD CASINO CORPORATION, a Delaware corporation
(the "Company"), STATE STREET BANK AND TRUST COMPANY, a Massachusetts chartered
-------
trust company, as the Trustee under the Indenture (as defined below) (the
"Trustee"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts chartered
- --------
trust company (in its capacity as escrow agent and securities intermediary, the
"Escrow Agent" or "Securities Intermediary"). Capitalized terms used herein and
------------ -----------------------
not otherwise defined have the meanings assigned to them in the Indenture
described below.
WITNESSETH:
WHEREAS, the Company, HWCC-Tunica, Inc., a Texas corporation, HWCC-
Shreveport, Inc., a Louisiana corporation, and Trustee have entered into an
Indenture dated as of the date hereof (as amended, supplemented, restated or
otherwise modified from time to time, the "Indenture") pursuant to which the
---------
Company will issue up to $310,000,000 of its 11 1/4% Series A and Series B
Senior Secured Notes due 2007 and up to $50,000,000 of its Floating Rate Series
A and Series B Senior Secured Notes due 2006 (as amended, supplemented,
restated, exchanged, replaced or otherwise modified from time to time,
collectively, the "Notes");
-----
WHEREAS, the Company has agreed to place in escrow the Deposits (as
defined below), to be held pursuant to the terms of this Agreement and the
Indenture;
WHEREAS, it is a condition precedent to the purchase of the Notes
under the Indenture that the Deposits be delivered into escrow pursuant to this
Agreement;
WHEREAS, Securities Intermediary and the Company have entered into a
customer agreement, a copy of which is attached hereto as Exhibit A (the
---------
"Customer Agreement"), pursuant to which Securities Intermediary has established
- -------------------
its securities account number 102449-020 in the name of Debtor (the "Account");
-------
WHEREAS, the Company has entered into a Security Agreement (as from
time to time amended, restated, supplemented or otherwise modified, the
"Security Agreement"), in which inter alia, the Company has granted to Trustee
- -------------------
on behalf of the holders of the Notes a security interest in the Account and the
financial assets and any free credit balance carried therein; and
WHEREAS, the Company and the Securities Intermediary are entering into
this Agreement to provide for the control of the Account and to perfect the
security interest of the Trustee in the Account and the financial assets and any
free credit balance carried therein as more fully described in the Security
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
<PAGE>
1. Deposits; Interest
------------------
1.1. Deposits by the Company. On the date hereof, the Company shall
-----------------------
deliver to the Escrow Agent a portion of the net proceeds from the sale of the
Notes consisting of $40,700,000 in immediately available funds (the "Deposits").
--------
1.2. Interest. Any interest or other profit resulting from the
--------
Deposits shall become part of the Deposits and treated hereunder as though a
part of the original Deposits.
2. Release of Deposits.
-------------------
The Escrow Agent shall hold the Deposits in escrow pursuant to this
Agreement until authorized hereunder to deliver them as follows:
(a) Release to Facilitate Pratt Casino Corporation Acquisition.
----------------------------------------------------------
Except as set forth in Section 5 hereof, the Escrow Agent shall release the
Deposits to the Company upon receipt of an opinion of counsel stating that
all of the conditions for the release of the Deposits have been satisfied,
together with an officer's certificate from the Company addressed to Escrow
Agent and Trustee certifying that:
(i) the final order of the United States Bankruptcy Court
has been approved providing for the Pratt Casino Corporation
Acquisition;
(ii) all necessary approvals from Gaming Authorities for
the consummation of the Pratt Casino Corporation Acquisition have been
obtained;
(iii) substantially concurrently with the release of such
Deposits, not less than $37,000,000 of the Deposits shall be loaned to
Hollywood Casino-Aurora, and the Aurora Intercompany Note will be
increased by an amount equal to such loan in connection with the Pratt
Casino Corporation Acquisition, and the Company agrees to execute such
documentation as Trustee shall reasonably require to ensure the
continued priority and perfection of the security interests in the
collateral securing the obligations under such Aurora Intercompany
Note, as collaterally assigned to Trustee for the benefit of the
holders of the Notes; and
(iv) HWCC-Aurora Management, Inc., Pratt Casino
Corporation, and Pratt Management, L.P. will be designated as
Restricted Subsidiaries pursuant to the Indenture (collectively, the
"New Restricted Subsidiaries"), and that the Board of Directors of the
---------------------------
Company has approved that, within five (5) Business Days following the
consummation of the Pratt Casino Corporation Acquisition, and subject
to the approval of the applicable Gaming Authorities, (A)(x) each New
Restricted Subsidiary shall become a Guarantor and shall execute a
supplemental indenture and deliver an opinion of counsel to the
Trustee to such effect, and will grant a first priority security
interest in substantially all of its assets to secure its obligations
under its Guarantee, subject to Permitted Encumbrances set forth on
Exhibit D hereto and (y) the Company shall pledge the Capital Stock of
each New Restricted Subsidiary to the Trustee for the benefit of the
holders of the Notes to secure the Company's obligations under the
Notes, or (B) the New Restricted Subsidiaries will be dissolved,
2
<PAGE>
terminated or otherwise merged out of existence, with the Company or
any other Restricted Subsidiary as the successor entity, and the
Tunica Consulting Agreement and the Aurora Management Agreement will
be terminated.
(b) Release to Facilitate Special Mandatory Redemption.
--------------------------------------------------
Following receipt of written notice from the Trustee of the Special
Mandatory Redemption and the redemption date therefor, the Escrow Agent
shall release the Deposits to the Trustee for the purpose of the Special
Mandatory Redemption.
3. Certain Additional Agreements.
-----------------------------
The Company and the Trustee shall, upon request by the Escrow Agent,
execute and deliver to the Escrow Agent such additional written instructions and
certificates hereunder as may be reasonably required by the Escrow Agent to give
effect to the provisions of Sections 1 and 2 hereof.
4. The Account. The Parties agree and represent that (a) the Account has
-----------
been established in the name of the Company as recited above, (b) the
Account has no financial assets which are registered in the name of the
Company, payable to its order, or specially endorsed to it, which have not
been endorsed to Securities Intermediary or in blank, (c) the Customer
Agreement, the security entitlements arising out of the financial assets
carried in the Account and such free credit balance are valid and legally
binding obligations of Securities Intermediary, and (d) except for the
claims and interests of Trustee and of the Company in the Account,
Securities Intermediary does not know of any claim to or interest in the
Account or in any financial asset carried therein. Securities Intermediary
will treat all property held by it in the Account as financial assets under
Article 8 of the Uniform Commercial Code of the State of New York (the
"Code").
----
5. No Withdrawals.
--------------
Securities Intermediary shall neither accept nor comply with any
entitlement order from the Company withdrawing any financial assets from the
Account nor deliver any such financial assets to the Company nor pay any free
credit balance or other amount owing from Securities Intermediary to the Company
with respect to the Account following a Notice of Exclusive Control (as defined
below) from Trustee.
6. Priority of Lien.
----------------
The Company hereby grants to the Trustee for the benefit of the
holders of the Notes a security interest in the Account, all financial assets
carried therein and any free credit balance therein. Securities Intermediary
consents to such security interest. Securities Intermediary hereby confirms
that the Account is a cash account and that it will not advance any margin or
other credit to the Company therein, either directly or indirectly by executing
purchase orders in excess of any credit balance or money market mutual funds
held in the Account, executing sell orders on securities not held in the Account
or by executing trades in instruments such as options and commodities contracts
that create similar obligations, nor shall Securities Intermediary hypothecate
any securities carried in the Account. Securities Intermediary hereby
3
<PAGE>
waives and releases all liens, encumbrances, claims and rights of setoff
Securities Intermediary may have against the Account or any financial asset
carried in the Account or any credit balance in the Account and agrees that,
except for payment of its customary fees and commissions pursuant to the
Customer Agreement, it will not assert any such lien, encumbrance, claim or
right or the priority thereof against the Account or any financial asset carried
in the Account or any credit balance in the Account. Securities Intermediary
will not agree with any third party that Securities Intermediary will comply
with entitlement orders concerning the Account originated by such third party
without the prior written consent of Trustee and the Company.
7. Control.
-------
Securities Intermediary will comply with entitlement orders originated
by Trustee concerning the Account without further consent by the Company.
Except as otherwise provided in Section 5 and 6 above, Securities Intermediary
shall make trades of financial assets held in the Account at the instruction of
the Company, or its authorized representatives, and comply with entitlement
orders concerning such trades from the Company, or its authorized
representatives in any of the permitted investments set forth on Exhibit B
---------
hereto, until such time as Trustee delivers a written notice to Securities
Intermediary which states that Trustee is exercising exclusive control over the
Account. Such notice is referred to herein as the "Notice of Exclusive
Control." After Securities Intermediary receives a Notice of Exclusive Control,
it will immediately cease complying with all instructions or entitlement orders
concerning the Account originated by the Company or its representatives.
8. Statements, Confirmations and Notices of Adverse Claims.
-------------------------------------------------------
Securities Intermediary will send copies of all statements,
confirmations and other correspondence concerning the Account simultaneously to
each of the Company and Trustee at the addresses set forth in the heading of
this Agreement. If any person asserts any lien, encumbrance or adverse claim
against the Account or in any financial asset carried therein, Securities
Intermediary will promptly notify the Company and Trustee thereof.
9. Securities Intermediary and Escrow Agent
----------------------------------------
(a) Except for advancing margin or other credit to the Company
in violation of Section 6 above, Securities Intermediary shall have no
responsibility or liability to Trustee for making trades of financial
assets held in the Account at the instruction of the Company, or its
authorized representatives, or complying with entitlement orders in
accordance with Section 5 above concerning the Account from the Company, or
its authorized representatives, which are received by Securities
Intermediary before Securities Intermediary receives a Notice of Exclusive
Control. Securities Intermediary shall have no responsibility or liability
to the Company for complying with a Notice of Exclusive Control or
complying with entitlement orders concerning the Account originated by
Trustee. Securities Intermediary shall have no duty to investigate or make
any determination as to whether the conditions for the issuance of a Notice
of Exclusive Control contained in any agreement between the Company and the
Trustee have occurred. Neither this Agreement nor the Security
4
<PAGE>
Agreement imposes or creates any obligation or duty of Securities
Intermediary other than those expressly set forth herein.
(b) The Escrow Agent, in its capacity as such, shall have no
duties or responsibilities, including, without limitation, a duty to review
or interpret the Indenture, except those expressly set forth herein.
Except for this Agreement, the Escrow Agent, in its capacity as such, is
not a party to, or bound by, any agreement that may be required under,
evidenced by, or arise out of the Indenture.
(c) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions from any of the undersigned
with respect to the Deposits, which, in its opinion, are in conflict with
any of the provisions of this Agreement, it shall be entitled to refrain
from taking any action until it shall be directed otherwise in writing by a
joint written instruction of the Company and the Trustee or by order of a
court of competent jurisdiction. The Escrow Agent shall be protected in
acting upon any notice, request, waiver, consent, receipt or other document
reasonably believed by the Escrow Agent to be signed by the proper party or
parties.
(d) The Escrow Agent, in its capacity as such, shall not be
liable for any error or judgment or for any act done or step taken or
omitted by it in good faith or for any mistake of fact or law, or for
anything that it may do or refrain from doing in connection herewith,
except for its own gross negligence or willful misconduct, and the Escrow
Agent shall have no duties to anyone except the Company and the Trustee and
their respective successors and permitted assigns.
(e) The Escrow Agent may consult legal counsel in the event of
any dispute or question as to the construction of this Agreement, or the
Escrow Agent's duties hereunder, and the Escrow Agent shall incur no
liability and shall be fully protected with respect to any action taken or
omitted in good faith in accordance with the opinion and instructions of
counsel.
(f) In the event of any disagreement between the undersigned or
any of them, and/or any other person, resulting in adverse claims and
demands being made in connection with or for the Deposits, the Escrow Agent
shall be entitled at its option to refuse to comply with any such claim or
demand, so long as such disagreement shall continue, and in so doing the
Escrow Agent shall not be or become liable for damages or interest to the
undersigned or any of them or to any person named herein for its failure or
refusal to comply with such conflicting or adverse demands. The Escrow
Agent shall be entitled to continue so to refrain and refuse so to act
until all differences shall have been resolved by agreement and the Escrow
Agent shall have been notified thereof in writing signed by the Company and
the Trustee. In the event of such disagreement which continues for ninety
(90) days or more, the Escrow Agent in its discretion may, but shall be
under no obligation to, file a suit in interpleader for the purpose of
having the respective rights of the claimants adjudicated and may deposit
with the court all documents and property held hereunder. The Company
agrees to pay all reasonable out-of-pocket costs and expenses incurred by
the Escrow Agent in such action, including reasonable attorneys' fees and
disbursements.
5
<PAGE>
(g) The Escrow Agent is hereby indemnified by the Company from
all losses, costs and expenses of any nature incurred by the Escrow Agent
arising out of or in connection with this Agreement or with the
administration of its duties hereunder, unless such losses, costs or
expenses shall have been caused by the Escrow Agent's willful misconduct or
gross negligence. Such indemnification shall survive termination of this
Agreement until extinguished by any applicable statute of limitations.
(h) The Escrow Agent, in its capacity as such, does not have any
interest in the Deposits deposited hereunder but is serving as escrow
holder only and having only possession thereof. This paragraph shall
survive notwithstanding any termination of this Agreement or the
resignation of the Escrow Agent.
(i) The Escrow Agent (and any successor Escrow Agent) may at any
time resign as such by giving written notice of its resignation to the
parties hereto at least thirty (30) days prior to the date specified for
such resignation to take effect. Upon the effective date of such
resignation, the Deposits shall be delivered by it to such successor escrow
agent or as otherwise shall be instructed in writing by the Company and the
Trustee, whereupon the Escrow Agent shall be discharged of and from any and
all further obligations arising in connection with this Agreement. If at
that time the Escrow Agent has not received such instruction, the Escrow
Agent's sole responsibility after that time shall be to safekeep the
Deposits until receipt of a designation of successor Escrow Agent, or a
joint written instruction as to disposition of the Deposits by the Company
and the Trustee or a final order of a court of competent jurisdiction
mandating disposition of the Deposits.
(j) The Escrow Agent hereby accepts its appointment and agrees
to act as escrow agent under the terms and conditions of this Agreement and
acknowledges receipt of the Deposits. The Company agrees to pay to the
Escrow Agent as payment in full for its services hereunder the Escrow
Agent's compensation set forth in Exhibit C hereto. The Company further
---------
agrees to reimburse the Escrow Agent for all reasonable out-of-pocket
expenses, disbursements and advances incurred or made by the Escrow Agent
in the performance of its duties hereunder (including reasonable fees, and
out-of-pocket expenses and disbursements, of its counsel).
10. Tax Reporting.
-------------
All items of income, gain, expense and loss recognized in the Account
shall be reported to the Internal Revenue Service and all state and local taxing
authorities under the name and taxpayer identification number of the Company.
11. Customer Agreement.
------------------
This Agreement supplements the Customer Agreement between Securities
Intermediary and the Company. In the event of a conflict between this Agreement
and the Customer Agreement, the terms of this Agreement will prevail.
Regardless of any provision in the Customer Agreement, New York shall be deemed
to be the Securities Intermediary's location
6
<PAGE>
for the purposes of this Agreement and the perfection and priority of Trustee's
security interest in the Account.
12. Termination.
-----------
The rights and powers granted herein to Trustee have been granted in
order to perfect its security interest in the Account, are powers coupled with
an interest and will neither be affected by the bankruptcy or insolvency of the
Company nor by the lapse of time. The obligations of Securities Intermediary
under Sections 5, 6, 7 and 8 above shall continue in effect until the security
interest of Trustee in the Account has been terminated pursuant to the terms of
the Security Agreement and Trustee has notified Securities Intermediary of such
termination in writing. Upon receipt of such notice, the obligations of
Securities Intermediary under Sections 5, 6, 7 and 8 above with respect to the
operation and maintenance of the Account after the receipt of such notice shall
terminate, Trustee shall have no further right to originate entitlement orders
concerning the Account and Securities Intermediary may take such steps as the
Company may request to vest full ownership and control of the Account in the
Company, including, but not limited to, transferring all of the financial assets
and credit balances in the Account to another securities account in the name of
the Company or its designee.
13. Miscellaneous
-------------
13.1. This Agreement. This Agreement, the schedules and exhibits
--------------
hereto and the agreements and instruments required to be executed and delivered
hereunder set forth the entire agreement of the parties hereto with respect to
the subject matter hereof and supersede and discharge all prior agreements
(written or oral) and negotiations and all contemporaneous oral agreements
concerning such subject matter and negotiations. There are no oral conditions
precedent to the effectiveness of this Agreement.
13.2. Amendments. No amendment, modification or termination of this
----------
Agreement or waiver of any right hereunder shall be binding on any party hereto
unless it is in writing and is signed by the party to be charged.
13.3. Severability. If any term or provision set forth in this
------------
Agreement shall be invalid or unenforceable, the remainder of this Agreement, or
the application of such terms or provisions to persons or circumstances, other
than those to which it is held invalid or unenforceable, shall be construed in
all respects as if such invalid or unenforceable term or provision were omitted.
13.4. Successors. The terms of this Agreement shall be binding upon,
----------
and shall inure to the benefit of, the parties hereto and their respective
corporate successors or assigns.
13.5. Rules of Construction. In this Agreement, words in the
---------------------
singular number include the plural, and in the plural include the singular;
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates words of the neuter gender may refer to any gender and the
word "or" is disjunctive but not exclusive. The captions and section numbers
appearing in this Agreement are inserted only as a matter of convenience. They
do not define, limit or describe the scope or intent of the provisions of this
Agreement. Except as
7
<PAGE>
otherwise defined herein all terms herein shall have the meanings ascribed
thereto in Article 8 of the Code.
13.6. Notices. Notices. Any notice other communication by the
-------
Company, the Trustee or the Securities Intermediary to the others is duly given
if in writing and delivered in Person or mailed by first class mail (registered
or certified, return receipt requested) telex, telecopier or overnight air
courier guaranteeing next day delivery, to the others' address:
If to the Company:
c/o Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
Telecopier No.: (214) 386-7411
With a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopier No.: (214) 746-7777
If to the Trustee:
State Street Bank and Trust Company
Two International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Administration
If to the Securities Intermediary:
State Street Bank and Trust Company
Two International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Administration
The Company, the Trustee or the Securities Intermediary by notice to
the others may designate additional or different addresses for subsequent
notices or communications.
All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
8
<PAGE>
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
13.7. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing and delivering one or more
counterparts.
13.8. Choice of Law. The parties hereto agree that certain material
-------------
events, occurrences and transactions relating to this Agreement bear a
reasonable relationship to the State of New York. The validity, terms,
performance and enforcement of this Agreement shall be governed by the laws of
the State of New York which are applicable to agreements which are executed,
delivered and performed in that State.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Escrow and
Control Agreement to be duly executed as of the day and year first above
written.
HOLLYWOOD CASINO CORPORATION
By: /s/ Paul C. Yates
-------------------------------
Paul C. Yates
Executive Vice President and
and Chief Financial Officer
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Robert J. Dunn
-------------------------------
Robert J. Dunn
Vice President
STATE STREET BANK AND TRUST COMPANY,
as Escrow Agent and Securities
Intermediary
By: /s/ Robert J. Dunn
-------------------------------
Robert J. Dunn
Vice President
<PAGE>
EXHIBIT A
---------
Customer Agreement
(attached)
[LETTERHEAD OF STATE STREET APPEARS HERE]
April 20, 1999
Donald A. Shapiro
Associate General Counsel
Hollywood Casino Corporation
Via Fax 972/716-3903
Re: Trustee, Registrar, Paying, Depositary/Tender and Escrow Agent
$350,000,000 Secured Notes
Hollywood Casino Corporation
Dear Donald:
State Street Bank and Trust Company is pleased to serve as Trustee on the above
referenced note issue. Our fees will follow on the attached pages.
Please add to the distribution of the Offering Memorandum and documents the
following individuals:
Robert Dunn Leslie Davenport, Esq.
State Street Bank and Trust Company Shipman & Goodwin
Two International Place One American Row
Boston, MA 02110 Hartford, CT 06103
617/664-5219 860/251-5918
617/664-5151 fax 860/251-5999 fax
Also, please send the Offering Memorandum to myself and Steve Caron, State
Street Bank and Trust Company, Two International Place, Boston, MA 02110.
The transaction underlying this proposal, and all related legal documentation,
is subject to review and acceptance by State Street in accordance with its
policies and procedures. Should the actual transaction materially differ from
the assumptions used herein, State Street reserves the right to modify this
proposal. In the event that the subject transaction fails to close for reasons
beyond the control of State Street, the party requesting these services agrees
to pay State Street's acceptance fees, legal fees and out-of-pocket expenses.
Should you have any questions you may contact me at 860/244-1872.
Very truly yours,
/s/ F W McDonald
Frank W. McDonald
Vice President
cc: Pamela Kelley, Esq., Latham & Watkins
Rod Miller, Esq., Weil, Gotschal
<PAGE>
[STATE STREET LETTERHEAD LOGO APPEARS HERE]
Hollywood Casino Corporation
Schedule of Fees
page 2
State Stret Bank and Trust Company
Fee Proposal for acting as Trustee, Registrar, Paying,
Depositary/Tender and Escrow Agent
$350,000,000 Secured Notes
Hollywood Casino Corporation
Acceptance Fee $5,000
- -------------
Our Acceptance Fee encompasses all administrative and operational activities
necessary to close the transaction. It includes but is not limited to the
following:
. Review and comment on all agreements and documents delivered at the
closing.
. Preparation and delivery of any closing documents requested of the
Trustee.
. Establishment of the files and records necessary to carry out the
duties of the Trustee throughout the life of the transaction.
. Attendance at the pre-closing and closing. Please note tht out-of
pocket for transportation, meals and accommodations will be billed as
incurred in addition to the quoted acceptance fee.
. Assistance to all professionals involved in the transaction to assure
a timely and successful closing.
Annual Administrative Fee $8,000
- -------------------------
Our Annual Administrative Fee encompasses the day to day discharge of our duties
and responsibilities in acting as Trustee. It includes but is not limited to
the following:
. Maintenance of all records and files required of the Trustee pursuant
to the operative documents.
. Compliance with all Indenture provisions which require Trustee
action.
. Establishment of cash accounts and the proper administration of such
as described by the agreements.
. Prompt response to inquiries from bondholders and other interested
parties to the financing.
. Rendering of periodic statements and reports as required.
<PAGE>
[STATE STREET LETTERHEAD LOGO APPEARS HERE]
Hollywood Casino Corporation
Schedule of Fees
page 3
. Receipt and appropriate distribution of certificates and financial
statements as required.
. Preparation and delivery of Trustee reports required by the Trust
Indenture Act of 1939 as amended.
Annual Registrar and Paying Agent Fee Waived
- -------------------------------------
Our Registrar Fee includes the following services:
. Maintenance of bondholder name, address, and tax payer identification
number
. Distribution of debt service payments
. Reconciliation of paying agent accounts
. Issuance and mailing of 1099, 1099 B's and other required tax
information
. Completion and delivery of all necessary SEC reports
Depositary Agent Fee $4,000
- -------------------
Escrow Agent Fee $1,500
- ----------------
Investment Fee $65 per security purchased
- -------------- (i.e. Treasuries, Agencies, etc.)
Investment in State Street
Investment Vehicles 40 Basis Points (.0040) of the
average daily net assets
Investment Vehicles
-------------------
SSgA Prime Money Market Fund
SSgA US Treasury Money Market Fund
SSgA Tax Free Money Market Fund
State Street Insured Money No transaction fee
Market (1MMA)
Notes
- -----
Trustee counsel fees and out of pocket expenses will be billed as incurred.
<PAGE>
EXHIBIT B
---------
Permitted Investments
1. Securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities no later than the earlier of one year from the date of acquisition
thereof and January 31, 2000.
2. Certificates of deposit and eurodollar time deposits with maturities no
later than the earlier of one year from the date of acquisition thereof and
January 31, 2000, bankers' acceptances with maturities not exceeding the lesser
of six months and the number of days prior to January 31, 2000, and overnight
bank deposits, in each case, with any lender party to any Credit Facility or
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thomson Bank Watch Rating of "B" or better.
3. Repurchase obligations with a term of not more than seven days (but in no
event to be outstanding beyond January 31, 2000) for underlying securities of
the types described in 1 and 2 above entered into with any financial institution
meeting the qualifications in 2 above.
4. Commercial paper rated at least P-1 or the equivalent thereof by Moody's
Investors Service, Inc. or at least A-1 or the equivalent thereof by Standard &
Poor's Rating Services and in each case maturing no later than one year after
the date of acquisition thereof and January 31, 2000.
5. Money market funds at least 95% of which constitute investments of the
types described in 1-4 above.
<PAGE>
EXHIBIT C
Escrow Agent's Fee
------------------
$1500.00
<PAGE>
EXHIBIT D
PERMITTED ENCUMBRANCES
----------------------
1. Liens on the assets of the Company and any Guarantor created by
the Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section
4.09 of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (d) of the second paragraph of Section 4.09 of
the Indenture covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provisions as shall be required in
conformity with GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property
leased by the Company or any of its Restricted Subsidiaries;
11. Liens of carriers, warehousemen, mechanics, landlords,
materialmen, repairmen or other like Liens arising by operation of law or in the
ordinary course of business and consistent with industry practices and Liens on
deposits made to obtain the release of such Liens if:
<PAGE>
(a) the underlying Obligations are not overdue for a period of more
than 60 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings by the Company and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP, and
(c) the Company is in compliance with the terms of the security
documents applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
or other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary of the Company with respect to Obligations that do
not exceed Five Million Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
Social Security benefits.
<PAGE>
EXHIBIT 4.6
-----------
CONTROL AGREEMENT
-----------------
This CONTROL AGREEMENT (this "Agreement") is made as of the 19th day
---------
of May, 1999 by and among HOLLYWOOD CASINO CORPORATION, a Delaware corporation
(the "Company") with an office at the address set forth in Section 15 hereof,
-------
and STATE STREET BANK AND TRUST COMPANY, a Massachusetts chartered trust company
with offices as set forth in Section 15 hereof, as Trustee and Securities
Intermediary ("Trustee" or "Securities Intermediary"). Capitalized terms used
------- -----------------------
herein and not otherwise defined herein have the meanings assigned to them in
the Indenture described below.
RECITALS:
A. The Company, HWCC-Tunica, Inc., HWCC-Shreveport, Inc. and Trustee
have entered into an Indenture dated as of May 19, 1999 (as the same may be
amended, supplemented, restated or otherwise modified from time to time, the
"Indenture"), pursuant to which the Company will issue up to $310,000,000 of its
- ----------
11 1/4% Series A and Series B Senior Secured Notes due 2007 and up to
$50,000,000 of its Floating Rate Series A and Series B Senior Secured Notes due
2006 (as the same may be amended, supplemented, restated, exchanged, replaced or
otherwise modified from time to time, collectively, the "Notes").
-----
B. Securities Intermediary and Company have entered into a customer
agreement, a copy of which is attached hereto as Exhibit A (the "Customer
--------- --------
Agreement"), pursuant to which Securities Intermediary has established its
- ---------
securities account number 102449-030 in the name of Company (the "Account").
-------
C. Company has entered into a Security Agreement of even date
herewith (as from time to time amended, restated, supplemented or otherwise
modified, the "Security Agreement"), in which inter alia, Company has granted to
------------------
Trustee on behalf of the holders of the Notes a security interest in the Account
and the financial assets and any free credit balance carried therein.
D. Company and Securities Intermediary are entering into this
Agreement to provide for the control of the Account and to perfect the security
interest of Trustee in the Account and the financial assets and any free credit
balance carried therein as more fully described in the Security Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
AGREEMENT
---------
Section 1. The Account. The parties hereby agree and represent that (a) the
Account has been established in the name of Company as recited above, (b) the
Account does not hold any financial assets which are registered in the name of
Company, payable to its order, or specially endorsed to it, which have not been
endorsed to Securities Intermediary or in blank, (c) the Customer Agreement, the
security entitlements arising out of the financial assets carried in
<PAGE>
the Account and such free credit balance are valid and legally binding
obligations of Securities Intermediary, and (d) except for the claims and
interests of Trustee and of Company in the Account, Securities Intermediary does
not know of any claim to or interest in the Account or in any financial asset
carried therein. Securities Intermediary will treat all property held by it in
the Account as financial assets under Article 8 of the Uniform Commercial Code
of the State of New York (the "Code").
----
Section 2. Withdrawals. The Securities Intermediary shall accept and
comply with any entitlement order from the Company (a) to withdraw any financial
asset from the Account, (b) to deliver any financial assets to the Company, or
(c) to pay to the Company any free credit balance or other amount with respect
to the Account. Notwithstanding the foregoing sentence, following receipt of a
Notice of Exclusive Control (as defined below) from Trustee, the Securities
Intermediary shall neither accept nor comply with any entitlement order from the
Company.
Section 3. Priority of Lien. Company hereby grants to Trustee for the
benefit of the holders of the Notes a security interest in the Account, all
financial assets carried therein and any free credit balance therein. Securities
Intermediary consents to such security interest. Securities Intermediary hereby
confirms that the Account is a cash account and that it will not advance any
margin or other credit to Company therein, either directly or indirectly by
executing purchase orders in excess of any credit balance or money market mutual
funds held in the Account, executing sell orders on securities not held in the
Account or by executing trades in instruments such as options and commodities
contracts that create similar obligations, nor shall Securities Intermediary
hypothecate any securities carried in the Account. Securities Intermediary
hereby waives and releases all liens, encumbrances, claims and rights of setoff
Securities Intermediary may have against the Account or any financial asset
carried in the Account or any credit balance in the Account and agrees that,
except for payment of its customary fees and commissions pursuant to the
Customer Agreement, it will not assert any such lien, encumbrance, claim or
right or the priority thereof against the Account or any financial asset carried
in the Account or any credit balance in the Account. Securities Intermediary
will not agree with any third party that Securities Intermediary will comply
with entitlement orders concerning the Account originated by such third party
without the prior written consent of Trustee and Company.
Section 4. Control. Securities Intermediary will comply with entitlement
orders originated by Trustee concerning the Account without further consent by
Company. Except as otherwise provided in Sections 2 and 3 above, Securities
Intermediary shall make trades of financial assets held in the Account at the
instruction of Company, or its authorized representatives, and comply with
entitlement orders concerning such trades from Company, or its authorized
representatives in any of the permitted investments set forth on Exhibit B
---------
hereto, until such time as Trustee delivers a written notice to Securities
Intermediary which states that an Event of Default under the Indenture has
occurred and is continuing, and Trustee is exercising exclusive control over the
Account. Such notice is referred to herein as the "Notice of Exclusive
Control." After Securities Intermediary receives a Notice of Exclusive Control,
it will immediately cease complying with all instructions or entitlement orders
concerning the Account originated by Company or its representatives.
2
<PAGE>
Section 5. Statements, Confirmations and Notices of Adverse Claims.
Securities Intermediary will send copies of all statements, confirmations and
other correspondence concerning the Account simultaneously to each of Company
and Trustee at the addresses set forth in the heading of this Agreement. If any
person asserts any lien, encumbrance or adverse claim against the Account or in
any financial asset carried therein, Securities Intermediary will promptly
notify Trustee and Company thereof.
Section 6. Responsibility of Securities Intermediary. Except for
advancing margin or other credit to Company in violation of Section 3 above,
Securities Intermediary shall have no responsibility or liability to Trustee for
making trades of financial assets held in the Account at the instruction of
Company, or its authorized representatives, or complying with entitlement orders
in accordance with Section 4 above concerning the Account from Company, or its
authorized representatives, which are received by Securities Intermediary before
Securities Intermediary receives a Notice of Exclusive Control. Securities
Intermediary shall have no responsibility or liability to Company for complying
with a Notice of Exclusive Control or complying with entitlement orders
concerning the Account originated by Trustee. Securities Intermediary shall have
no duty to investigate or make any determination as to whether the conditions
for the issuance of a Notice of Exclusive Control contained in any agreement
between Company and Trustee have occurred. Neither this Agreement nor the
Security Agreement imposes or creates any obligation or duty of Securities
Intermediary other than those expressly set forth herein.
Section 7. Tax Reporting. All items of income, gain, expense and loss
recognized in the Account shall be reported to the Internal Revenue Service and
all state and local taxing authorities under the name and taxpayer
identification number of Company.
Section 8. Customer Agreement. This Agreement supplements the Customer
Agreement between Securities Intermediary and Customer. In the event of a
conflict between this Agreement and the Customer Agreement, the terms of this
Agreement will prevail. Regardless of any provision in the Customer Agreement,
New York shall be deemed to be the Securities Intermediary's location for the
purposes of this Agreement and the perfection and priority of Trustee's security
interest in the Account.
Section 9. Termination. The rights and powers granted herein to Trustee
have been granted in order to perfect its security interest in the Account, are
powers coupled with an interest and will neither be affected by the bankruptcy
or insolvency of Company nor by the lapse of time. The obligations of Securities
Intermediary under Sections 2, 3, 4 and 5 above shall continue in effect until
the security interest of Trustee in the Account has been terminated pursuant to
the terms of the Security Agreement and Trustee has notified Securities
Intermediary of such termination in writing. Upon receipt of such notice, the
obligations of Securities Intermediary under Sections 2, 3, 4 and 5 above with
respect to the operation and maintenance of the Account after the receipt of
such notice shall terminate, Trustee shall have no further right to originate
entitlement orders concerning the Account and Securities Intermediary may take
such steps as Company may request to vest full ownership and control of the
Account in Company, including, but not limited to, transferring all of the
financial assets and credit balances in the Account to another securities
account in the name of Company or its designee.
3
<PAGE>
Section 10. This Agreement. This Agreement, the schedules and exhibits
hereto and the agreements and instruments required to be executed and delivered
hereunder set forth the entire agreement of the parties hereto with respect to
the subject matter hereof and supersede and discharge all prior agreements
(written or oral) and negotiations and all contemporaneous oral agreements
concerning such subject matter and negotiations. There are no oral conditions
precedent to the effectiveness of this Agreement.
Section 11. Amendments. No amendment, modification or termination of
this Agreement or waiver of any right hereunder shall be binding on any party
hereto unless it is in writing and is signed by the party to be charged.
Section 12. Severability. If any term or provision set forth in this
Agreement shall be invalid or unenforceable, the remainder of this Agreement, or
the application of such terms or provisions to persons or circumstances, other
than those to which it is held invalid or unenforceable, shall be construed in
all respects as if such invalid or unenforceable term or provision were omitted.
Section 13. Successors, Assignment, Additional Accounts. The terms of
this Agreement shall be binding upon, and shall inure to the benefit of, the
parties hereto and their respective corporate successors or assigns. The Company
may open additional accounts with Securities Intermediary or any other
securities intermediary pursuant to a control agreement on substantially the
same terms as this Agreement.
Section 14. Rules of Construction. In this Agreement, words in the
singular number include the plural, and in the plural include the singular;
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates words of the neuter gender may refer to any gender and the
word "or" is disjunctive but not exclusive. The captions and section numbers
appearing in this Agreement are inserted only as a matter of convenience. They
do not define, limit or describe the scope or intent of the provisions of this
Agreement. Except as otherwise defined herein all terms herein shall have the
meanings ascribed thereto in Article 8 of the Code.
Section 15. Notices. Any notice other communication by the Company, the
Trustee or the Securities Intermediary to the others is duly given if in writing
and delivered in Person or mailed by first class mail (registered or certified,
return receipt requested) telex, telecopier or overnight air courier
guaranteeing next day delivery, to the others' address:
If to the Company:
c/o Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
Telecopier No.: (214) 386-7411
4
<PAGE>
With a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopier No.: (214) 746-7777
If to the Trustee:
State Street Bank and Trust Company
Two International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Administration
If to the Securities Intermediary:
State Street Bank and Trust Company
Two International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Administration
The Company, the Trustee or the Securities Intermediary by notice to
the others may designate additional or different addresses for subsequent
notices or communications.
All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
Section 16. Counterparts. This Agreement may be executed in any number
of counterparts, all of which shall constitute one and the same instrument, and
any party hereto may execute this Agreement by signing and delivering one or
more counterparts.
Section 17. Choice of Law. The parties hereto agree that certain
material events, occurrences and transactions relating to this Agreement bear a
reasonable relationship to the State of New York. The validity, terms,
performance and enforcement of this Agreement shall be governed by the laws of
the State of New York which are applicable to agreements which are executed,
delivered and performed in that State.
[SIGNATURE PAGE FOLLOWS]
5
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Control
Agreement to be duly executed as of the day and year first above written.
HOLLYWOOD CASINO CORPORATION
By: /s/ Paul C. Yates
------------------------------------
Name: Paul C. Yates
Title: Executive Vice President and
Chief Financial Officer
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Robert J. Dunn
------------------------------------
Name: Robert J. Dunn
Title: Vice President
STATE STREET BANK AND TRUST COMPANY,
as Securities Intermediary
By: /s/ Robert J. Dunn
-------------------------------------
Name: Robert J. Dunn
Title: Vice President
S-1
<PAGE>
EXHIBIT A
---------
Customer Agreement
(attached)
<PAGE>
EXHIBIT A
---------
Customer Agreement
(attached)
[LETTERHEAD OF STATE STREET APPEARS HERE]
April 20, 1999
Donald A. Shapiro
Associate General Counsel
Hollywood Casino Corporation
Via Fax 972/716-3903
Re: Trustee, Registrar, Paying, Depositary/Tender and Escrow Agent
$350,000,000 Secured Notes
Hollywood Casino Corporation
Dear Donald:
State Street Bank and Trust Company is pleased to serve as Trustee on the above
referenced note issue. Our fees will follow on the attached pages.
Please add to the distribution of the Offering Memorandum and documents the
following individuals:
Robert Dunn Leslie Davenport, Esq.
State Street Bank and Trust Company Shipman & Goodwin
Two International Place One American Row
Boston, MA 02110 Hartford, CT 06103
617/664-5219 860/251-5918
617/664-5151 fax 860/251-5999 fax
Also, please send the Offering Memorandum to myself and Steve Caron, State
Street Bank and Trust Company, Two International Place, Boston, MA 02110.
The transaction underlying this proposal, and all related legal documentation,
is subject to review and acceptance by State Street in accordance with its
policies and procedures. Should the actual transaction materially differ from
the assumptions used herein, State Street reserves the right to modify this
proposal. In the event that the subject transaction fails to close for reasons
beyond the control of State Street, the party requesting these services agrees
to pay State Street's acceptance fees, legal fees and out-of-pocket expenses.
Should you have any questions you may contact me at 860/244-1872.
Very truly yours,
/s/ F W McDonald
Frank W. McDonald
Vice President
cc: Pamela Kelley, Esq., Latham & Watkins
Rod Miller, Esq., Weil, Gotschal
<PAGE>
[STATE STREET LETTERHEAD LOGO APPEARS HERE]
Hollywood Casino Corporation
Schedule of Fees
page 2
State Stret Bank and Trust Company
Fee Proposal for acting as Trustee, Registrar, Paying,
Depositary/Tender and Escrow Agent
$350,000,000 Secured Notes
Hollywood Casino Corporation
Acceptance Fee $5,000
- -------------
Our Acceptance Fee encompasses all administrative and operational activities
necessary to close the transaction. It includes but is not limited to the
following:
. Review and comment on all agreements and documents delivered at the
closing.
. Preparation and delivery of any closing documents requested of the
Trustee.
. Establishment of the files and records necessary to carry out the
duties of the Trustee throughout the life of the transaction.
. Attendance at the pre-closing and closing. Please note tht out-of
pocket for transportation, meals and accommodations will be billed as
incurred in addition to the quoted acceptance fee.
. Assistance to all professionals involved in the transaction to assure
a timely and successful closing.
Annual Administrative Fee $8,000
- -------------------------
Our Annual Administrative Fee encompasses the day to day discharge of our duties
and responsibilities in acting as Trustee. It includes but is not limited to
the following:
. Maintenance of all records and files required of the Trustee pursuant
to the operative documents.
. Compliance with all Indenture provisions which require Trustee
action.
. Establishment of cash accounts and the proper administration of such
as described by the agreements.
. Prompt response to inquiries from bondholders and other interested
parties to the financing.
. Rendering of periodic statements and reports as required.
<PAGE>
[STATE STREET LETTERHEAD LOGO APPEARS HERE]
Hollywood Casino Corporation
Schedule of Fees
page 3
. Receipt and appropriate distribution of certificates and financial
statements as required.
. Preparation and delivery of Trustee reports required by the Trust
Indenture Act of 1939 as amended.
Annual Registrar and Paying Agent Fee Waived
- -------------------------------------
Our Registrar Fee includes the following services:
. Maintenance of bondholder name, address, and tax payer identification
number
. Distribution of debt service payments
. Reconciliation of paying agent accounts
. Issuance and mailing of 1099, 1099 B's and other required tax
information
. Completion and delivery of all necessary SEC reports
Depositary Agent Fee $4,000
- -------------------
Escrow Agent Fee $1,500
- ----------------
Investment Fee $65 per security purchased
- -------------- (i.e. Treasuries, Agencies, etc.)
Investment in State Street
Investment Vehicles 40 Basis Points (.0040) of the
average daily net assets
Investment Vehicles
-------------------
SSgA Prime Money Market Fund
SSgA US Treasury Money Market Fund
SSgA Tax Free Money Market Fund
State Street Insured Money No transaction fee
Market (1MMA)
Notes
- -----
Trustee counsel fees and out of pocket expenses will be billed as incurred.
<PAGE>
EXHIBIT B
---------
Permitted Investments
1. Securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that
the full faith and credit of the United States is pledged in support
thereof) having maturities no later than one year from the date of
acquisition thereof.
2. Certificates of deposit and eurodollar time deposits with maturities no
later than one year from the date of acquisition thereof, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any lender party to any Credit Facility or
with any domestic commercial bank having capital and surplus in excess of
$500 million and a Thomson Bank Watch Rating of "B" or better.
3. Repurchase obligations with a term of not more than seven days for
underlying securities of the types described in 1 and 2 above entered into
with any financial institution meeting the qualifications in 2 above.
4. Commercial paper rated at least P-1 or the equivalent thereof by Moody's
Investors Service, Inc. or at least A-1 or the equivalent thereof by
Standard & Poor's Rating Services and in each case maturing within one year
after the date of acquisition.
5. Money market funds at least 95% of which constitute investments of the
types described in 1-4 above.
<PAGE>
EXHIBIT 4.7
SECURITY AGREEMENT
------------------
(Accounts, Inventory, Equipment, Chattel Paper, Documents,
Instruments, General Intangibles and Other Property)
Made by
HWCC-TUNICA, INC.,
as Debtor
to
STATE STREET BANK AND TRUST COMPANY,
as Trustee and Secured Party
Acting on behalf of the Holders of the Notes
May 19, 1999
<PAGE>
SECURITY AGREEMENT
------------------
Accounts, Inventory, Equipment, Chattel Paper, Documents,
Instruments, General Intangibles and Other Property
THIS SECURITY AGREEMENT (this "Agreement") is made as of May 19, 1999, by
---------
HWCC-Tunica, Inc., a Texas corporation with its chief executive office at Two
Galleria Tower, Suite 2200, 13455 Noel Road, LB 48, Dallas, Texas 75240
("Debtor") in favor of State Street Bank and Trust Company, a Massachusetts
------
trust company, with offices at Two International Place, 4th Floor, Boston,
Massachusetts 02110, as Trustee acting on behalf of the Holders of the Notes
under the Indenture (the "Secured Party").
-------------
RECITALS
--------
A. Hollywood Casino Corporation, a Delaware corporation (the "Borrower"),
--------
the Debtor, HWCC-Shreveport, Inc. and State Street Bank and Trust Company, as
Trustee, and certain other parties have entered into an Indenture dated as of
May 19, 1999 (as the same may be amended, supplemented, restated or otherwise
modified from time to time, the "Indenture"), pursuant to which the Borrower
---------
will issue up to (i) $310,000,000 of its 11 1/4 % Series A and Series B Senior
Secured Notes due 2007 and (ii) $50,000,000 of its Floating Rate Series A and
Series B Senior Secured Notes due 2006 (as the same may be amended,
supplemented, restated, exchanged, replaced or otherwise modified from time to
time, collectively, the "Notes"). Debtor is an affiliate of Borrower and as
-----
such will derive direct and indirect benefits from the issuance of the Notes
pursuant to the Indenture.
B. It is a condition precedent to the purchase of the Notes under the
Indenture that Debtor shall have executed and delivered this Agreement.
C. Therefore, in order to comply with the terms and conditions of the
Indenture and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor hereby agrees with Secured
Party as follows:
ARTICLE 1.
Security Interest
-----------------
Section 1.01. Grant of Security Interest. Debtor hereby assigns,
--------------------------
endorses, delivers, pledges and grants to Secured Party a continuing security
interest in, Lien upon, and right of set-off against the assets referred to in
Section 1.02 hereof (the "Collateral") to secure the prompt and complete payment
----------
and performance of the Obligations (as defined in Section 2.02 hereof) and the
performance by Debtor of this Agreement.
Section 1.02. Collateral. The Collateral consists of the following types
----------
or items of property (including property hereafter acquired by Debtor as well as
property which Debtor now owns or in which Debtor has rights), but subject to
the exceptions and provisos as set forth herein:
1
<PAGE>
(a) All of Debtor's accounts, equipment, chattel paper, documents,
instruments, general intangibles and personal property, including, without
limitation, any of the foregoing which may be more specifically indicated
in the remainder of this Section 1.02 and including all of the Debtor's
vessel The Hollywood-Tunica, Official No. 534006 (the "Vessel"), duly
documented in the name of the Debtor under the laws of the United States,
whether or not such Vessel is a vessel within the meaning of 46 U.S.C. (S)
31322(a), and all rights of the Debtor therein, including all equipment,
parts and accessories, including, but not limited to, all of its boilers,
engines, generators, air compressors, machinery, masts, spars, sails,
riggings, boats, anchors, cables, chains, tackle, tools, pumps and pumping
equipment, motors, apparel, furniture, computer equipment, electronic
equipment used in connection with the operation of the Vessel and belonging
to the Vessel, all machinery, equipment, engines, appliances and fixtures
for generating or distributing air, water, heat, electricity, light, fuel
or refrigeration, or for ventilating or sanitary purposes, fittings and
equipment, supplies, spare parts, fuel, and all other appurtenances
thereunto appertaining or belonging, whether now owned or hereafter
acquired, whether or not on board said Vessel, and all extensions,
additions, accessions, improvements, renewals, substitutions, and
replacements hereafter made in or to said Vessel or any part thereof, or in
or to any said appurtenances;
(b) All of Debtor's inventory in all of its forms, wherever located,
now or hereafter existing (including, but not limited to, (i) all food
services products including beef, chicken, veal, pork, fish, eggs, dairy
products, salads, soups, herbs, condiments, canned foods, dried foods,
coffee, tea, jams, flour, sugar, canned and bottled sodas, confectioneries
and liquor inventory and raw materials and work in process therefor,
finished goods thereof and materials used or consumed in the manufacture or
production thereof, (ii) goods in which Debtor has an interest in mass or
in joint or other interest or right of any kind (including without
limitation, goods in which Debtor has an interest or right as consignee),
and all accessions thereto and products thereof and documents therefor, and
(iii) all motion picture memorabilia);
(c) All contracts of Debtor, including, without limitation, the
contracts described or referred to in Exhibit A attached hereto and made a
---------
part hereto, and each contract in which Debtor may hereafter become a
party, in each case as such agreements may be amended or otherwise modified
from time to time, including, without limitation, (i) all rights of Debtor
to receive moneys due and to become due under or pursuant to the contracts,
(ii) all rights of Debtor to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the contracts, (iii) claims of Debtor
for damages arising out of or for breach of or default under the contracts,
(iv) the right of Debtor to terminate the contracts, to perform thereunder
and to compel performance and to otherwise exercise all remedies thereunder
and (v) all proceeds of the foregoing Collateral;
(d) All of Debtor's general intangibles of any kind whether now
existing or hereafter arising; all chattel papers, documents and
instruments relating to such general intangibles; and all rights now or
hereafter existing in and to all security agreements, leases (excluding
real property leases), and other contracts securing or otherwise relating
to any such general intangibles or any such chattel papers, documents and
instruments.
2
<PAGE>
The Debtor's general intangibles that are the subject of this Agreement and
are included as part of the Collateral covered by this Agreement include,
without limitation, the following intangible personal property in which the
Debtor presently or in the future will own any right, title or interest (to
the extent that the granting of this security interest does not violate a
valid and enforceable restriction on such grant created in the agreement by
which the Debtor acquired its right, title or interest from the prior owner
or from the lessor or licensor thereof): (i) any and all trade secrets,
ideas, information, procedures, processes, systems, methods of operation,
concepts, principles or discoveries, whether or not patentable, and all of
the intellectual property rights therein provided by State or federal laws
of the United States, such as the right of first publication and, if
applicable, the right to file applications for United States patent
protection on the preferred embodiments thereof; (ii) any and all
applications for United States patents and issued United States patents;
(iii) any and all names, tradenames, trademarks or service marks and the
goodwill of the Debtor's business, goods or services represented by such
names and marks, and all applications to register such names or marks on
State registrars or with the United States Patent and Trademark Office and
all issued State or United States registrations thereon, including, without
limitation, those listed on Exhibit B attached hereto and made a part
---------
hereof; (iv) all expressions embodied in a tangible medium that are the
subject matter of copyright and the intangible rights of copyright therein,
including, without limitation, both nonregistered copyrighted works and
registered copyrighted works; (v) all rights arising out of licenses (in
cases where Debtor is the licensee) to use patents, trademarks, copyrights,
trade secrets and other intellectual property rights; (vi) all rights and
proceeds arising out of licenses (in cases where Debtor is the licensor) to
use Debtor's United States patents, trademarks, copyrights, trade secrets
and other intellectual property; and (vii) in all cases, the rights to
prosecute such intellectual property rights referred to in this subsection
1.02(d), and to recover the proceeds of past, present and future
infringement of such rights by third parties; provided, however, that the
Debtor shall at all times have the right in the conduct of its business to
make and carry out decisions that affect such intangible personal property
and the intellectual property rights therein, such as, the Debtor shall
have the right to exercise the right of first publication with respect to
its ideas, information, procedures, processes, systems, methods of
operation, concepts, principles or discoveries; to determine whether
applications for patent protection will be filed or abandoned on the
preferred embodiments thereof; to determine which terms shall be used as
names and marks for its business, goods or services, when the use of such
terms will be discontinued, and the efforts, if any, that will be made to
register such terms and to maintain, or in its discretion, to abandon such
registrations or applications therefor; to determine if and when
copyrighted works will be registered; to determine whether aspects of such
intellectual property will be sold, assigned, or licensed to others in
connection with operation of the Debtor's business; and to determine the
actions that will be taken to maintain and prosecute the Debtor's
intellectual property rights in such intangible personal property;
(e) (i) Any related or additional property from time to time
delivered to or deposited with Secured Party by or for the account of
Debtor; (ii) all certificates of title or other documents evidencing
ownership or possession of or otherwise relating to any property referred
to in this Section 1.02; (iii) all property used or usable in connection
3
<PAGE>
with any property referred to in this Section 1.02; (iv) all goods which
were at any time included in the Collateral and which are returned to or
for the account of Debtor following their sale, lease or other disposition;
(v) all proceeds, products, replacements, additions to, substitutions for,
accessions to, and property necessary for the operation of any of the
property referred to in this Section 1.02, including, without limitation,
insurance payable as a result of loss or damage to any of the property
referred to in this Section 1.02, refunds of unearned premiums of any such
insurance policy and claims against third parties; and (vi) all books and
records related to any of the property referred to in this Section 1.02,
including, without limitation, any and all books of account, customer lists
and other records relating in any way to the accounts, chattel paper,
instruments or inventory referred to in this Section 1.02;
(f) All general intangibles related to any property referred to in
this Section 1.02, including, without limitation, all (i) letters of
credit, bonds, guaranties, purchase or sales agreements and other
contractual rights, rights to performance, and claims for damages, refunds
(including tax refunds, but only to the extent such refunds are assignable
under 31 U.S.C. (S) 3727) or other monies due or to become due; (ii)
orders, franchises, permits, certificates, licenses, consents, exemptions,
variances, authorizations or other approvals by any governmental agency or
court, to the extent but only to the extent permitted by applicable law to
be pledged and assigned and to the extent but only to the extent that the
perfection of the security interests therein may be obtained by the filing
of a financing statement pursuant to the applicable provisions of the Code;
(iii) books, business records, data bases, computer tapes and computer
software; (iv) goodwill; and (v) other intangible personal property,
whether similar or dissimilar to the property referred to in this Section
1.02;
provided that, the Collateral described in this Section 1.02 shall not
include (i) tort claims, (ii) rights represented by judgments, and (iii) any of
the foregoing property that is, pursuant to restrictions enforceable under
applicable law, prohibited from being pledged as security; provided that, with
respect to this clause (iii), upon the termination of such prohibitions for any
reason whatsoever or in the event such prohibitions are or become unenforceable
under applicable law, such foregoing property shall automatically be Collateral
hereunder. Notwithstanding the foregoing, so long as no Event of Default shall
have occurred and be continuing, all dividends, distributions, interest and
principal payments, cash, instruments, and other property and proceeds made upon
or with respect to or of the Collateral shall not constitute Collateral and may
be used by the Debtor subject to the terms and conditions of the Indenture. Upon
the occurrence and during the continuance of an Event of Default, all rights of
the Debtor to receive all such dividends, distributions, interest and principal
payments, cash, instruments and other property and proceeds shall cease, and
such dividends, distributions, interest and principal payments, cash,
instruments and other property and proceeds shall constitute Collateral, and
shall be paid or otherwise delivered to the Secured Party. It is expressly
contemplated that additional property may from time to time be pledged, assigned
or granted to Secured Party as additional security for the Obligations, and the
term "Collateral" as used herein shall be deemed for all purposes hereof to
include all such additional property, together with all other property of the
types described above related thereto.
4
<PAGE>
ARTICLE 2.
DEFINITIONS
-----------
Section 2.01. Terms Defined Above or in the Indenture. As used in this
---------------------------------------
Agreement, the terms defined above shall have the meanings respectively assigned
to them. Other capitalized terms which are defined in the Indenture but which
are not defined herein shall have the same meanings as defined in the Indenture.
Section 2.02. Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the following meanings, unless the context otherwise
requires:
"Accounts" means all accounts, chattel paper and instruments (as such
--------
terms are defined in the Code) at any time included in the Collateral.
"Account Debtor" means any Person liable (whether directly or
--------------
indirectly, primarily or secondarily) for the payment or performance of any
obligations included in the Collateral, whether as an account debtor (as
defined in the Code), obligor on an instrument, issuer of documents or
securities, guarantor or otherwise.
"Agreement" means this Security Agreement, as the same may from time
---------
to time be amended or supplemented.
"Code" means the Uniform Commercial Code as presently in effect in the
----
State of New York; provided that, if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
security interests in any Collateral is governed by the Uniform Commercial
Code as in effect in any jurisdiction other than the State of New York,
"Code" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or the effect of perfection or non-perfection. Unless otherwise
indicated by the context herein, all uncapitalized terms which are defined
in the Code shall have their respective meanings as used in Article 9 of
the Code.
"Event of Default" means any event specified in Section 6.01.
----------------
"Inventory" means all inventory (as defined in the Code) at any time
---------
included in the Collateral, including, without limitation, motion picture
memorabilia.
"Obligations" means (i) the payment when due of indebtedness evidenced
-----------
by the Notes in the principal sum not to exceed at any time outstanding of
$360,000,000, interest (including post-petition interest) as set forth in
the Indenture and the Notes, and premiums, penalties, and late charges
thereon; (ii) all other indebtedness and other sums (including, without
limitation, all expenses, attorneys' fees, other fees, indemnifications,
reimbursements, damages, other monetary liabilities, and other charges) and
obligations that may or shall become due hereunder or under the Notes, the
Guarantees, the Indenture, or the other Collateral Documents; and (iii) any
and all renewals, modifications, amendments, extensions for any period,
supplements or restatements of any of the foregoing.
5
<PAGE>
"Obligor" means any Person, other than Debtor, liable (whether
-------
directly or indirectly, primarily or secondarily) for the payment or
performance of any of the Obligations whether as maker, co-maker, endorser,
guarantor, accommodation party, general partner or otherwise.
"Permitted Encumbrances" means the items set forth on Exhibit D
---------------------- ---------
hereto.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Secured Party to accept this Agreement, Debtor
represents and warrants to Secured Party (which representations and warranties
will survive the creation and payment of the Obligations) that:
Section 3.01. Ownership of Collateral; Absence of Encumbrances and
----------------------------------------------------
Restrictions. After giving effect to the use of the proceeds of the Notes,
- ------------
Debtor is, and in the case of property acquired after the date hereof, will be,
the sole legal and beneficial owner of the Collateral holding good and
indefeasible title to the same, free and clear of all Liens except for Permitted
Encumbrances and Debtor has full right, power and authority to assign and grant
a security interest in the Collateral to Secured Party.
Section 3.02. No Required Consent. Except for such authorizations,
-------------------
consents or approvals previously obtained and in effect, no authorization,
consent, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body (other than the filing of financing
statements and the other documents required to perfect or maintain the
perfection of the Liens granted hereby) is required for (i) the due execution,
delivery and performance by Debtor of this Agreement, (ii) the grant by Debtor
of the security interest granted by this Agreement, (iii) the perfection of such
security interest or (iv) the exercise by Secured Party of its rights and
remedies under this Agreement, except as may be required by applicable gaming
laws or in connection with the disposition of Collateral or by federal or state
securities laws or antitrust laws.
Section 3.03. Security Interest. After giving effect to the use of
-----------------
proceeds of the Notes, the grant of the security interest in and Lien on the
Collateral pursuant to this Agreement creates a valid and continuing security
interest in and Lien on the Collateral, enforceable against Debtor, and, upon
the filing of financing statements in the appropriate office for the locations
of the Collateral listed on Exhibit C hereof, the security interests granted
---------
hereby will be perfected, prior to all other Liens except Permitted
Encumbrances, enforceable against third parties and securing payment of the
Obligations.
Section 3.04. No Filings By Third Parties. After giving effect to the use
---------------------------
of proceeds of the Notes, and other than any financing statement or other public
notice or recording naming Secured Party as the secured party therein or
financing statements with respect to Liens permitted hereunder, no financing
statement or other public notice or recording covering the Collateral is on file
in any public office and Debtor has not signed any document or agreement
authorizing the filing of any such financing statement or other public notice or
recording so long as any of the Obligations are outstanding.
6
<PAGE>
Section 3.05. Name; No Name Changes. The name of the Debtor set forth on
---------------------
Exhibit C hereto is the true and correct legal name of the Debtor, and, except
- ---------
as described on Exhibit C hereto, Debtor has not, during the preceding five (5)
---------
years, entered into any contract, agreement, security instrument or other
document using a name other than, or been known by or otherwise used any name
other than, the name used by Debtor herein.
Section 3.06. Location of Debtor and Collateral. Debtor's chief executive
---------------------------------
office, principal place of business and the locations of Debtor's records
concerning the Collateral are set forth on Exhibit C hereto. Any Collateral not
---------
at such location(s) nevertheless remains subject to Secured Party's security
interest. Except as disclosed on Exhibit C hereto, all tangible Collateral of
---------
Debtor are located at the locations set forth on Exhibit C hereto.
---------
Section 3.07. Collateral. All statements or other information provided by
----------
Debtor to Secured Party describing or with respect to the Collateral is (or, in
the case of subsequently furnished information, will be when provided) correct
and complete in all material respects. The delivery at any time by Debtor to
Secured Party of additional descriptions of Collateral shall constitute a
representation and warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Article 3 are correct insofar as they
would pertain to such Collateral or the descriptions thereof, except as
indicated therein.
Section 3.08. Delivery of Documents. With respect to any Collateral
---------------------
covered by one or more certificates of title or other documents of title
evidencing ownership or possession thereof, each of such certificates or
documents of title shall, after the occurrence and during the continuance of an
Event of Default and upon the request of the Secured Party, be delivered to
Secured Party (provided that all certificates of title and documents of title
referred to in Section 1.02 shall be subject to the security interest created by
this Agreement irrespective of whether or not such delivery shall have been
made).
ARTICLE 4.
COVENANTS AND AGREEMENTS
------------------------
Debtor will at all times comply with the covenants and agreements contained
in this Article 4, from the date hereof and for so long as any part of the
Obligations are outstanding.
Section 4.01. Change in Location of Collateral or Debtor. Except with
------------------------------------------
respect to Collateral under repair or temporarily in transit between locations
(and in any such case, for a period not to exceed four (4) months), Debtor will
not change the location of the Collateral (except for (a) Collateral held by the
Trustee, (b) motor vehicles and rolling stock, and (c) Collateral temporarily in
transit between locations) to any state, county or other jurisdiction in which
Secured Party has not already filed a financing statement or taken other
necessary steps to perfect or maintain its security interests in the Collateral
without Secured Party's prior written consent and the delivery of such new
financing statements or other documentation as may be reasonably necessary or
required by Secured Party to ensure the continued perfection and priority of its
security interest in the Collateral. Debtor will not change the location of
Debtor's chief executive office, principal place of business or the locations of
Debtor's records concerning the Collateral unless Debtor shall have given
Secured Party at least thirty (30) days prior written notice thereof and shall
have delivered to Secured Party such new financing statements or other
7
<PAGE>
documentation as may be reasonably necessary or required by Secured Party to
ensure the continued perfection and priority of its security interest in the
Collateral.
Section 4.02. Change in Debtor's Name or Corporate Structure. Debtor will
----------------------------------------------
not change its name, identity or corporate structure (including, without
limitation, any merger, consolidation or sale of substantially all of its
assets) unless Debtor shall have given Secured Party at least thirty (30) days
prior written notice thereof and shall have delivered to Secured Party such new
financing statements or other documentation as may be reasonably necessary or
required by Secured Party to ensure the continued perfection and priority of its
security interest on the Collateral.
Section 4.03. Documents; Collateral in Possession of Third Parties. If
----------------------------------------------------
certificates of title or other documents evidencing ownership or possession of
the Collateral are issued or outstanding, Debtor will, after the occurrence and
during the continuance of an Event of Default and upon the request of the
Secured Party, cause the interest of Secured Party to be properly noted thereon
and will, forthwith upon receipt, deliver same to Secured Party. If any
material portion of the Collateral is at any time in the possession or control
of any warehouseman, bailee, agent or independent contractor, Debtor shall
notify such Person of Secured Party's security interest in such Collateral.
Upon Secured Party's request, Debtor shall instruct any such Person to hold all
such Collateral for Secured Party's account subject to Debtor's instructions,
or, if an Event of Default shall have occurred, subject to Secured Party's
instructions.
Section 4.04. Delivery of Letters of Credit and Instruments. After the
---------------------------------------------
occurrence and during the continuance of an Event of Default and upon the
request of the Secured Party, Debtor will deliver each letter of credit, if any,
included in the Collateral to Secured Party, in each case forthwith upon receipt
by or for the account of Debtor. After the occurrence and during the
continuance of an Event of Default and upon the request of the Secured Party, if
any Account becomes evidenced by a promissory note, trade acceptance or any
other instrument for the payment of money (other than checks or drafts in
payment of Accounts collected by Debtor in the ordinary course of business prior
to notification by Secured Party under Section 6.02(g)), Debtor will immediately
deliver such instrument to Secured Party appropriately endorsed and, regardless
of the form of presentment, demand, notice of dishonor, protest and notice of
protest with respect thereto, Debtor will remain liable thereon until such
instrument is paid in full.
Section 4.05. Sale, Disposition or Encumbrance of Collateral. Except as
----------------------------------------------
permitted pursuant to the provisions of the Indenture and by Section 4.09 of
this Agreement or with Secured Party's prior written consent, Debtor will not in
any way encumber any of the Collateral (or permit or suffer any of the
Collateral to be encumbered) or sell, assign, lend, rent, lease or otherwise
dispose of or transfer any of the Collateral to or in favor of any Person other
than Secured Party.
Section 4.06. Records and Information. Debtor shall keep accurate and
-----------------------
complete records of the Collateral (including proceeds). Secured Party may at
any time upon reasonable prior notice have access during normal business hours
to examine, audit, make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral. Debtor will promptly provide
written notice to Secured Party of all information which in any way relates to
or affects the filing of any financing statement or other public notices or
recordings, or the
8
<PAGE>
delivery and possession of items of Collateral, for the purpose of perfecting a
security interest in the Collateral. Debtor will also promptly furnish such
information as Secured Party may from time to time reasonably request regarding
the Collateral or Secured Party's rights or remedies with respect thereto.
Section 4.07. Reimbursement of Expenses. Debtor hereby assumes all
-------------------------
liability for the Collateral, the security interests created hereunder and any
use, possession, maintenance, management, enforcement or collection of any or
all of the Collateral. Debtor agrees to indemnify and hold Secured Party
harmless from and against and covenants to defend Secured Party against any and
all losses, damages, claims, costs, penalties, liabilities and expenses,
including, without limitation, court costs and reasonable attorneys' fees,
incurred because of, incident to, or with respect to the Collateral (including,
without limitation, any use, possession, maintenance or management thereof, or
any injuries to or deaths of Persons or damage to property, except to the extent
caused by the gross negligence or willful misconduct of the Secured Party). All
amounts for which Debtor is liable pursuant to this Section 4.07 shall be due
and payable by Debtor to Secured Party upon demand. If Debtor fails to make
such payment upon demand (or if demand is not made due to an injunction or stay
arising from bankruptcy or other proceedings) and Secured Party pays such
amount, the same shall be due and payable by Debtor to Secured Party, plus
interest thereon from the date of Secured Party's demand (or from the date of
Secured Party's payment if demand is not made due to such proceedings) at the
interest rate applicable to overdue principal as provided in the Notes.
Section 4.08. Further Assurances. Upon the request of Secured Party,
------------------
Debtor shall (at Debtor's expense) execute and deliver all such assignments,
certificates, financing statements or other documents and give further
assurances and do all other acts and things as Secured Party may reasonably
request to perfect Secured Party's interest in the Collateral or to protect,
enforce or otherwise effect Secured Party's rights and remedies hereunder.
Section 4.09. Inventory. Debtor may use the Inventory in any lawful
---------
manner not inconsistent with this Agreement and the Indenture and with the terms
of insurance thereon.
Section 4.10. Use of Collateral. Debtor will not use any Collateral in
-----------------
violation in any material respect of any law, statute, ordinance, regulation or
administrative order, or suffer it to be so used.
Section 4.11. Collateral Attached to Other Property. In the event that
-------------------------------------
the Collateral is to be attached or affixed to any real property, Debtor hereby
agrees that this Agreement may be filed for record in any appropriate real
estate records as a financing statement which is a fixture filing. In
connection therewith, Debtor will take whatever action is required by Section
4.08. If Debtor is not the record owner of such real property, Debtor will
provide Secured Party with any additional security agreements or financing
statements necessary for the perfection of Secured Party's security interest in
the Collateral. If the Collateral is wholly or partly affixed to real estate or
installed in or affixed to other goods, Debtor will, on demand of Secured Party,
use its commercially reasonable efforts to furnish Secured Party with landlord's
waivers, signed by all Persons or entities having an interest in the real estate
or other goods to which the Collateral may have become affixed, permitting the
Secured Party to have access to the Collateral at all
9
<PAGE>
reasonable times and granting the Secured Party a reasonable period of time in
which to remove the Collateral after an Event of Default.
ARTICLE 5.
RIGHTS, DUTIES AND POWERS OF SECURED PARTY
Secured Party shall have the following rights, duties and powers:
Section 5.01. Discharge Encumbrances. After the occurrence and during the
----------------------
continuance of an Event of Default, Secured Party may, at its option, discharge
any taxes, Liens, security interests or other encumbrances at any time levied or
placed on the Collateral, and may pay for insurance on the Collateral to the
extent required by this Agreement or the Indenture and not obtained by Debtor.
Debtor agrees to reimburse Secured Party upon demand for any payment so made,
plus interest thereon from the date of Secured Party's demand at the interest
rate applicable to overdue principal as provided in the Notes.
Section 5.02. Licenses and Rights to Use Collateral. After the occurrence
-------------------------------------
and during the continuance of an Event of Default, in connection with any
transfer or sale (to Secured Party or any other Person) of the Collateral,
Secured Party is hereby granted a transferable license or other right to use,
without any charge, any of Debtor's labels, patents, copyrights, tradenames,
trade secrets, trademarks or other similar property in completing production,
advertising or selling such Collateral except any of the foregoing property
which is expressly prohibited by its terms from being assigned or licensed.
After the occurrence and during the continuance of an Event of Default, Debtor's
rights under all licenses and franchise agreements shall inure to the benefit of
Secured Party and any transferee of all or any part of the Collateral.
Section 5.03. Cumulative and Other Rights. The rights, powers and
---------------------------
remedies of Secured Party hereunder are in addition to all rights, powers and
remedies given by law or in equity. The exercise by Secured Party of any one or
more of the rights, powers and remedies herein shall not be construed as a
waiver of any other rights, powers and remedies, including, without limitation,
any other rights of set-off (which set-off rights may be exercised only after
the occurrence and during the continuance of an Event of Default). If any of
the Obligations are given in renewal, extension for any period or rearrangement,
or applied toward the payment of debt secured by any Lien, Secured Party shall
be, and is hereby, subrogated to all the rights, titles, interests and liens
securing the debt so renewed, extended, rearranged or paid.
Section 5.04. Disclaimer of Certain Duties.
----------------------------
(a) The powers conferred upon Secured Party by this Agreement
are to protect its interest in the Collateral and shall not impose any duty
upon Secured Party to exercise any such powers. Debtor hereby agrees that
Secured Party shall not be liable for, nor shall the indebtedness evidenced
by the Obligations be diminished by, Secured Party's delay or failure to
collect upon, foreclose, sell, take possession of or otherwise obtain value
for the Collateral. Nothing herein shall affect any obligation of Secured
Party to the Holders under the Indenture or under applicable law.
(b) Except as may be required by the Indenture, and to the
fullest extent permitted by applicable law, Secured Party shall be under no
duty whatsoever to make or
10
<PAGE>
give any presentment, notice of dishonor, protest, demand for performance,
notice of non-performance, notice of intent to accelerate, notice of
acceleration, or other notice or demand in connection with any Collateral
or the Obligations, or to take any steps reasonably necessary to preserve
any rights against any Obligor, Account Debtor or other Person. Debtor
waives any right of marshaling in respect of any and all Collateral, and
waives any right to require Secured Party to proceed against any Obligor,
Account Debtor or other Person, exhaust any Collateral or enforce any other
remedy which Secured Party now has or may hereafter have against any
Obligor or other Person.
Section 5.05. Modification of Obligations; Other Security. Except as
-------------------------------------------
specifically provided for in the Indenture, Debtor waives (i) any and all notice
of acceptance, creation, modification, rearrangement, renewal or extension for
any period of any instrument executed by any Obligor in connection with the
Obligations and (ii) any defense of any Obligor by reason of disability, lack of
authorization, cessation of the liability of any Obligor or for any other
reason. Debtor authorizes Secured Party, without notice or demand and without
any reservation of rights against Debtor and without affecting Debtor's
liability hereunder or on the Obligations, from time to time to (x) after the
occurrence and during the continuance of an Event of Default and after the
acceleration of the Notes, apply the Collateral in the manner permitted by this
Agreement or Indenture and (y) after the occurrence and during the continuance
of an Event of Default and after the acceleration of the Notes, renew, extend
for any period, accelerate, amend or modify, supplement, enforce, compromise,
settle, waive or release the obligations of any Obligor or any instrument or
agreement of such other Person with respect to any or all of the Obligations or
Collateral.
ARTICLE 6.
EVENTS OF DEFAULT
-----------------
Section 6.01. Events. It shall constitute an Event of Default under this
------
Agreement if an Event of Default occurs and is continuing under the Indenture.
Section 6.02. Remedies. Upon the occurrence and during the continuance of
--------
any Event, of Default, Secured Party may take any or all of the following
actions without notice (except where expressly required below or in the
Indenture) or demand to Debtor:
(a) Take possession of the Collateral, or at Secured Party's
request Debtor shall, at Debtor's cost, assemble the Collateral and make it
available at a location to be specified by Secured Party which is
reasonably convenient to Debtor and Secured Party. In any event, Debtor
shall bear the risk of accidental loss or damage to or diminution in value
of the Collateral, and Secured Party shall have no liability whatsoever for
failure to obtain or maintain insurance, nor to determine whether any
insurance ever in force is adequate as to amount or as to risk insured.
(b) Sell, in one or more sales and in one or more parcels, or
otherwise dispose of any or all of the Collateral in its then condition or
in any other commercially reasonable manner as Secured Party may elect, in
a public or private transaction, at any location as deemed reasonable by
Secured Party (including, without limitation, Debtor's premises), for cash
at such price as Secured Party may deem fair, and (unless prohibited
11
<PAGE>
by the Code, as adopted in any applicable jurisdiction) Secured Party may
be the purchaser of any or all Collateral so sold and may apply upon the
purchase price therefor any Obligations secured hereby. Any such sale or
transfer by Secured Party either to itself or to any other Person shall be
absolutely free from any claim of right by Debtor, including any equity or
right of redemption, stay or appraisal which Debtor has or may have under
any rule of law, regulation or statute now existing or hereafter adopted.
Upon any such sale or transfer, Secured Party shall have the right to
deliver, assign and transfer to the purchaser or transferee thereof the
Collateral so sold or transferred. It shall not be necessary that the
Collateral or any part thereof be present at the location of any such sale
or transfer. Secured Party may, at its discretion, provide for a public
sale, and any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as Secured Party may
fix in the notice of such sale. Secured Party shall not be obligated to
make any sale pursuant to any such notice. Secured Party may, without
notice or publication, adjourn any public or private sale by announcement
at any time and place fixed for such sale, and such sale may be made at any
time or place to which the same may be so adjourned. In the event any sale
or transfer hereunder is not completed or is defective in the opinion of
Secured Party, such sale or transfer shall not exhaust the rights of
Secured Party hereunder, and Secured Party shall have the right to cause
one or more subsequent sales or transfers to be made hereunder. If only
part of the Collateral is sold or transferred such that the Obligations
remain outstanding (in whole or in part), Secured Party's rights and
remedies hereunder shall not be exhausted, waived or modified, and Secured
Party is specifically empowered to make one or more successive sales or
transfers until all the Collateral shall be sold or transferred and all the
Obligations are paid. In the event that Secured Party elects not to sell
the Collateral, Secured Party retains its rights to lease or otherwise
dispose of or utilize the Collateral or any part or parts thereof in any
manner authorized or permitted by law or in equity, and to apply the
proceeds of the same towards payment of the Obligations. Each and every
method of disposition of the Collateral described in this subsection or in
subsection (e) shall constitute disposition in a commercially reasonable
manner.
(c) Take possession of all books and records of Debtor pertaining to
the Collateral. Secured Party shall have the authority to enter upon any
real property or improvements thereon in order to obtain any such books or
records, or any Collateral located thereon, and remove the same therefrom
without liability.
(d) Apply proceeds of the disposition of the Collateral to the
Obligations in any manner elected by Secured Party and permitted by the
Code or otherwise permitted by law or in equity and in accordance with the
provisions of the Indenture. Such application may include, without
limitation, the reasonable expenses of retaking, holding, preparing for
sale or other disposition, and the reasonable attorneys' fees and legal
expenses incurred by Secured Party.
(e) Appoint any Person as agent to perform any act or acts necessary
or incident to any sale or transfer by Secured Party of the Collateral.
Additionally, any sale or transfer hereunder may be conducted by an
auctioneer or any officer or agent of Secured Party.
12
<PAGE>
(f) Execute, assign and endorse negotiable and other instruments
for the payment of money, documents of title or other evidences of payment,
shipment or storage for any form of Collateral on behalf of and in the name
of Debtor.
(g) Notify or require Debtor to notify Account Debtors that the
Accounts have been assigned to Secured Party and direct such Account
Debtors to make payments on the Accounts directly to Secured Party. To the
extent Secured Party does not so elect, Debtor shall continue to collect
the Accounts. Secured Party or its designee shall also have the right, in
its own name or in the name of Debtor, to do any of the following: (i) to
demand, collect, receipt for, settle, compromise any amounts due, give
acquittances for, prosecute or defend any action which may be in relation
to any monies due, or to become due by virtue of, the Accounts; (ii) to
sell, transfer or assign or otherwise deal in the Accounts or the proceeds
thereof or the related goods, as fully and effectively as if Secured Party
were the absolute owner thereof; (iii) to extend the time of payment of any
of the Accounts, to grant waivers and make any allowance or other
adjustment with reference thereto; (iv) to take control of cash and other
proceeds of any Collateral; (v) to send a request for verification of
Accounts to any Account Debtor; and (vi) to do all other acts and things
necessary to carry out the intent of this Agreement.
(h) Exercise all other rights and remedies permitted by law or
in equity.
Section 6.03. Attorney-in-Fact. Debtor hereby irrevocably appoints
----------------
Secured Party as Debtor's attorney-in-fact, with full authority in the place and
stead of Debtor and in the name of Debtor or otherwise, from time to time in
Secured Party's discretion upon the occurrence and during the continuance of an
Event of Default, but at Debtor's cost and expense and without notice to Debtor:
(a) To obtain, adjust, sell and cancel any insurance with
respect to the Collateral, and endorse any draft drawn by insurers of the
Collateral. Secured Party may apply any proceeds or unearned premiums of
such insurance to the Obligations (whether or not due).
(b) To take any action and to execute any assignment,
certificate, financing statement, notification, document or instrument
which Secured Party may reasonably deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation,
to receive, endorse and collect all instruments made payable to Debtor
representing any payment or other distribution in respect of the Collateral
or any part thereof and to give full discharge for the same.
Section 6.04. Account Debtors. Any payment or settlement of an Account
---------------
made by an Account Debtor will be, to the extent of such payment or to the
extent provided under such settlement, a release, discharge and acquittance of
the Account Debtor with respect to such Account, and Debtor shall take any
action as may reasonably be required by Secured Party in connection therewith.
No Account Debtor on any Account will ever be bound to make inquiry as to the
termination of this Agreement or the rights of Secured Party to act hereunder,
but shall be fully protected by Debtor in making payment directly to Secured
Party.
13
<PAGE>
Section 6.05. Liability for Deficiency. If any sale or other disposition
------------------------
of Collateral by Secured Party or any other action of Secured Party hereunder
results in reduction of the Obligations, such action will not release Debtor
from its liability to Secured Party for any unpaid Obligations, including costs,
charges and expenses incurred in the liquidation of Collateral, together with
interest thereon at the rate then applicable under the Indenture, and the same
shall be immediately due and payable to Secured Party at Secured Party's address
set forth in the Indenture.
Section 6.06. Reasonable Notice. If any applicable provision of any law
-----------------
requires Secured Party to give reasonable notice of any sale or disposition or
other action, Debtor hereby agrees that ten days' prior written notice shall
constitute reasonable notice thereof. Such notice, in the case of public sale,
shall state the time and place fixed for such sale and in the case of private
sale, the time after which such sale is to be made.
Section 6.07. Non-judicial Enforcement. Secured Party may enforce its
------------------------
rights hereunder without prior judicial process or judicial hearing, and to the
extent permitted by law Debtor expressly waives any and all legal rights which
might otherwise require Secured Party to enforce its rights by judicial process.
ARTICLE 7.
MISCELLANEOUS PROVISIONS
------------------------
Section 7.01. Notices. Any notice required or permitted to be given under
-------
or in connection with this Agreement shall be given in accordance with the
notice provisions of the Indenture.
Section 7.02. Amendments and Waivers. Secured Party's acceptance of
----------------------
partial or delinquent payments or any forbearance, failure or delay by Secured
Party in exercising any right, power or remedy hereunder shall not be deemed a
waiver of any obligation of Debtor or any Obligor, or of any right, power or
remedy of Secured Party, and no partial exercise of any right, power or remedy
shall preclude any other or further exercise thereof Secured Party may remedy
any Event of Default hereunder or in connection with the Obligations without
waiving the Event of Default so remedied. Debtor hereby agrees that if Secured
Party agrees to a waiver of any provision hereunder, or an exchange of or
release of the Collateral or the addition or release of any Obligor or other
Person, any such action shall not constitute a waiver of any of Secured Party's
other rights or of Debtor's obligations hereunder. This Agreement may be
amended only by an instrument in writing executed jointly by Debtor and Secured
Party and may be supplemented only by documents delivered or to be delivered in
accordance with the express terms hereof.
Section 7.03. Copy as Financing Statement. A photocopy or other
---------------------------
reproduction of this Agreement or any financing statement covering the
Collateral is sufficient as a financing statement, and the same may be filed
with any appropriate filing authority for the purpose of perfecting Secured
Party's security interest in the Collateral.
14
<PAGE>
Section 7.04. Possession of Collateral. Secured Party shall be deemed to
------------------------
have possession of any Collateral in transit to it or set apart for it (or, in
either case, any of its agents, affiliates or correspondents).
Section 7.05. Redelivery of Collateral. If any sale or transfer of
------------------------
Collateral by Secured Party results in full satisfaction of the Obligations, and
after such sale or transfer and discharge there remains a surplus of proceeds,
Secured Party will deliver to Debtor such excess proceeds in a commercially
reasonable time; provided, however, that Secured Party shall not be liable for
any interest, cost or expense in connection with any reasonable delay in
delivering such proceeds to Debtor.
Section 7.06. Governing Law; Jurisdiction. This Agreement and the
---------------------------
security interest granted hereby shall be construed in accordance with and
governed by the laws of the State of New York (except to the extent that the
laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby).
Section 7.07. Gaming Authority. Each of the provisions of this Agreement
----------------
is subject to, and shall be enforced in compliance with, any requirements
imposed by any applicable Gaming Authority.
Section 7.08. Continuing Security Agreement
-----------------------------
(a) Except as may be expressly applicable pursuant to Section 9-
505 of the Code, no action taken or omission to act by Secured Party
hereunder, including, without limitation, any action taken or inaction
pursuant to Section 6.02 hereof, shall be deemed to constitute a retention
of the Collateral in satisfaction of the Obligations or otherwise to be in
full satisfaction of the Obligations, and the Obligations shall remain in
full force and effect, until Secured Party shall have applied payments
(including, without limitation, collections from Collateral) towards the
Obligations in the full amount then outstanding or until such subsequent
time as is hereinafter provided in subsection (b) below.
(b) To the extent that any payments on the Obligations or
proceeds of the Collateral are subsequently invalidated, declared to be
fraudulent or preferential set aside or required to be repaid to a trustee,
debtor in possession, receiver or other Person under any bankruptcy law,
common law or equitable cause, then to such extent the Obligations so
satisfied shall be revived and continue as if such payment or proceeds had
not been received by Secured Party, and Secured Party's security interests,
rights, powers and remedies hereunder shall continue in full force and
effect. In such event, this Agreement shall be automatically reinstated if
it shall theretofore have been terminated pursuant to Section 7.09.
Section 7.09. Termination. The grant of a security interest hereunder and
-----------
all of Secured Party's rights, powers and remedies in connection therewith shall
unless otherwise provided in the Indenture or this Agreement, remain in full
force and effect until payment in full of (A) the Notes under the terms of the
Indenture, (B) all obligations then due and owing under the Indenture, the Notes
and the Collateral Documents and (C) all other Obligations; provided, however,
-------- -------
that after receipt from the Debtor by the Trustee of a request for a release of
any
15
<PAGE>
Collateral permitted under the Indenture upon the sale, transfer, assignment,
exchange or other disposition of such Collateral not prohibited by the Indenture
(and upon receipt by the Trustee of all proceeds of such sale, transfer,
assignment, exchange or other disposition to the extent required to be remitted
to the Trustee under the Indenture or otherwise), such Collateral shall be
released from the lien and security interest created hereunder in accordance
with the provisions of the Indenture and shall-no longer constitute Collateral.
Upon the payment in full of (A) the Notes under the terms of the Indenture (B)
all obligations then due and owing under the Indenture and the Collateral
Documents, and (C) all other Obligations, the Debtor shall be entitled to the
return, upon its request and at its expense, of such of the Collateral pledged
by it as shall not have been sold or otherwise applied pursuant to the terms
hereof. Notwithstanding the foregoing, the reimbursement and indemnification
provisions of Section 4.07 and the provisions of subsection 7.08(b) shall
survive the termination of this Agreement.
Upon any termination of this Agreement or release of any Collateral as
permitted by the Indenture the Trustee will, at the expense of the Debtor,
execute and deliver to the Debtor such documents and take such other actions as
the Debtor shall reasonably request to evidence the termination of this
Agreement or the release of such Collateral, as the case may be. Any such
action taken by the Trustee shall be without warranty by or recourse to the
Trustee, except as to the absence of any prior assignments by the Trustee of its
interests in the Collateral, and shall be at the expense of the Debtor. The
Trustee may conclusively rely on any certificate delivered to it by the Debtor
stating that the execution of such documents and release of the Collateral is in
accordance with and permitted by the terms of the Indenture and this Agreement.
Section 7.10. Counterparts; Effectiveness. This Agreement may be executed
---------------------------
in two or more counterparts. Each counterpart is deemed an original, but all
such counterparts taken together constitute one and the same instrument. This
Agreement becomes effective upon the execution hereof by Debtor and delivery of
the same to Secured Party, and it is not necessary for Secured Party to execute
any acceptance hereof or otherwise signify or express its acceptance hereof.
Section 7.11. Indenture. This Agreement is subject to the terms,
---------
conditions and provisions of the Indenture. To the extent a term or provision
of this Agreement conflicts with the Indenture, the Indenture shall control with
respect to the subject matter of such term or provision.
Section 7.12. Rights of Noteholders. No Holder of a Note shall have any
---------------------
independent rights hereunder other than those rights granted to individual
Holders of Notes pursuant to Section 6.07 of the Indenture; provided that
nothing in this Section 7.12 shall limit any rights granted to the Trustee under
the Notes, the Indenture or the Collateral Documents.
Section 7.13. No Personal Liability of Directors, Officers, Employees and
-----------------------------------------------------------
Stockholders. No past, present or future director, officer, employee,
- ------------
incorporator or stockholder of the Debtor as such or any successor Person, as
such, shall have any liability for any obligations of the Debtor under the
Notes, the Collateral Documents, this Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation.
16
<PAGE>
Section 7.14. Fraudulent Conveyance Savings Clause. Notwithstanding any
------------------------------------
provision of this Agreement to the contrary, it is intended that neither this
Agreement nor any Lien granted by Debtor to secure the Obligations shall
constitute a "Fraudulent Conveyance" (as defined below). Consequently, Debtor
agrees that if the Agreement or any Liens securing this Agreement, would, but
for the application of this sentence, constitute a Fraudulent Conveyance, this
Agreement and each such Lien shall be valid and enforceable only to the maximum
extent that would not cause this Agreement or such Lien to constitute a
Fraudulent Conveyance, and this Agreement shall automatically be deemed to have
been amended accordingly at all relevant times. For purposes hereof, a
"Fraudulent Conveyance" means a fraudulent conveyance under Section 548 of Title
11, United States Code, as amended (or any successor section) or a fraudulent
conveyance or fraudulent transfer under the provisions of any applicable
fraudulent conveyance or fraudulent transfer law or similar law of any state,
nation or other governmental unit, as in effect from time to time.
[SIGNATURE PAGE FOLLOWS]
17
<PAGE>
IN WITNESS WHEREOF, Debtor has caused this Security Agreement to be
executed and delivered as of the date first set forth above.
DEBTOR: HWCC-TUNICA, INC.
- ------
By: /s/ William D. Pratt
-----------------------
William D. Pratt
Executive Vice President, General
Council and Secretary
18
<PAGE>
EXHIBIT A
---------
CONTRACTS
---------
1. Computer Services Agreement dated as of January 1, 1994, by and
between HWCC-Tunica, Inc., as assignee of the Summit Tunica Partnership, a
Mississippi limited partnership, and Advanced Casino Systems Corporation.
2. Consulting Agreement dated as of January 1, 1994, by and between HWCC-
Tunica, Inc. and Pratt Casino Corporation.
<PAGE>
EXHIBIT B
---------
TRADEMARKS
----------
None
<PAGE>
EXHIBIT C
---------
PERFECTION
----------
(a) Legal Name of Debtor:
--------------------
TWCC-Tunica, Inc., a Texas corporation
(b) Other Names:
-----------
Summit Tunica Partnership, A Mississippi Limited Partnership
Summit Riverboat Casinos-Tunica, Inc., a Mississippi corporation
Hollywood Casino Tunica
(c) (i) Chief Executive Office and Principal Place of Business of Debtor:
----------------------------------------------------------------
Chief Executive Office--Dallas County, Texas
Principal Place of Business--Tunica County, Mississippi
(ii) Other Premises at which Collateral is Stored or Located:
-------------------------------------------------------
None
(iii) Locations of Records Concerning Collateral:
------------------------------------------
Tunica County, Mississippi; Dallas County, Texas
<PAGE>
EXHIBIT D
---------
PERMITTED ENCUMBRANCES
----------------------
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
<PAGE>
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09
of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of business and consistent with industry practices and Liens on deposits
made to obtain the release of such Liens if:
(a) the underlying Obligations are not overdue for a period of more than
60 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings by the Company and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP, and
(c) the Company is in compliance with the terms of the security documents
applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the
<PAGE>
Obligations under such FF&E Financing or Capital Lease Obligations, (b) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon payment of the proceeds from the sale of such vessel
attributable to such FF&E Financing or Capital Lease Obligations, (c) the
creditor under such FF&E Financing or Capital Lease Obligations acknowledges
that such Lien does not create rights on the hull or other equipment
constituting such vessel, but shall be limited to the FF&E specifically
identified in such creditor's financing or lease and Lien documents, (d) such
Lien is expressly subject and subordinate to the Liens granted in favor of the
Trustee, (e) the creditor under such FF&E Financing or Capital Lease Obligations
agrees to promptly notify the Trustee of the occurrence of any event of default
under such creditor's financing or lease documents, and (f) the creditor under
such FF&E Financing or Capital Lease Obligations acknowledges and agrees that it
has no right to possess or use such vessel or anything on board such vessel,
except for its right to come on board the vessel to inspect the related FF&E
and, after the occurrence and continuance of an event of default under such
creditor's financing or lease documents, to remove or repossess the subject
FF&E, provided that such creditor's efforts to remove or repossess such FF&E
shall be commercially reasonable and shall not damage the vessel, its hull or
any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to Obligations that do not
exceed Five Million Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and Social
Security benefits.
<PAGE>
EXHIBIT 4.8
To the Chancery Clerk of the N/A Judicial District of Tunica County,
---
Mississippi, the real property described herein is situated in the NE 1/4 and N
1/2 of the SE 1/4 of Section 24, Township 3 South, Range 12 West of Tunica
County, Mississippi.
PREPARED BY AND WHEN [State of Mississippi]
RECORDING RETURN TO:
Sarah M. Ekdahl
LATHAM & WATKINS
Sears Tower, Suite 5800
233 South Wacker Drive
Chicago, IL 60606
Telephone: (312) 876-7700
FIRST LEASEHOLD DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS,
FIXTURE FILING, AND FINANCING STATEMENT
FROM
HWCC-TUNICA, INC.
IN FAVOR OF
PHILLIP A. POITEVIN, TRUSTEE
FOR THE BENEFIT OF
STATE STREET BANK AND TRUST COMPANY, AS INDENTURE TRUSTEE
ATTENTION: FILING OFFICER--INSTRUMENT COVERS GOODS THAT ARE OR ARE TO BECOME
FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR RECORD IN
THE RECORDS WHERE DEEDS OF TRUST ON REAL ESTATE ARE RECORDED. ADDITIONALLY, THIS
INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT ONLY AS A DEED OF TRUST, BUT
ALSO AS A FIXTURE FILING AND FINANCING STATEMENT COVERING GOODS THAT ARE OR ARE
TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE MAILING ADDRESSES
OF THE GRANTOR (DEBTOR) AND BENEFICIARY (SECURED PARTY) ARE SET FORTH IN THIS
INSTRUMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1.................................................................................................... 2
DEFINITIONS.................................................................................................. 2
Section 1.01. Terms Defined Above................................................................... 2
Section 1.02. Definitions........................................................................... 2
Section 1.03. Articles and Sections................................................................. 5
Section 1.04. Singular and Plural................................................................... 5
Section 1.05. References............................................................................ 6
Section 1.06. Other Defined Terms................................................................... 6
ARTICLE 2.................................................................................................... 6
GRANT........................................................................................................ 6
Section 2.01. Grant................................................................................. 6
Section 2.02. Security Interest..................................................................... 7
Section 2.03. Grantor's License to Collect Rents Until Default...................................... 7
Section 2.04. No Obligation of Beneficiary.......................................................... 8
Section 2.05. Fixture Filing........................................................................ 8
ARTICLE 3.................................................................................................... 8
WARRANTIES AND REPRESENTATIONS............................................................................... 8
Section 3.01. Title to Mortgaged Property and Lien of this Instrument............................... 8
ARTICLE 4.................................................................................................... 8
AFFIRMATIVE COVENANTS........................................................................................ 8
Section 4.01. Lien Status........................................................................... 8
Section 4.02. Payment of Impositions................................................................ 9
Section 4.03. Repair................................................................................ 9
Section 4.04. Insurance............................................................................. 9
Section 4.05. Application of Insurance Proceeds..................................................... 10
Section 4.06. Performance of Leases................................................................. 10
Section 4.07. Inspection............................................................................ 10
Section 4.08. Books and Records..................................................................... 10
Section 4.09. Maintenance of Rights of Way, Easements, and Licenses................................. 10
Section 4.10. Environmental Indemnification and Hold Harmless....................................... 11
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE 5.................................................................................................... 12
NEGATIVE COVENANTS........................................................................................... 12
Section 5.01. Use Violations........................................................................ 12
Section 5.02. Alterations........................................................................... 12
Section 5.03. Replacement of Fixtures and Personalty................................................ 12
Section 5.04. No Further Encumbrances............................................................... 13
ARTICLE 6.................................................................................................... 13
EVENTS OF DEFAULT AND REMEDIES............................................................................... 13
Section 6.01. Event of Default...................................................................... 13
Section 6.02. Remedies.............................................................................. 13
Section 6.03. Separate Sales........................................................................ 16
Section 6.04. Remedies Cumulative, Concurrent and Nonexclusive...................................... 16
Section 6.05. No Conditions Precedent to Exercise of Remedies....................................... 16
Section 6.06. Release of and Resort to Collateral................................................... 16
Section 6.07. Waiver of Redemption, Notice and Marshalling of Assets................................ 17
Section 6.08. Discontinuance of Proceedings......................................................... 17
Section 6.09. Application of Proceeds............................................................... 17
Section 6.10. Acceleration Following Certain Events................................................. 18
Section 6.11. Indemnity............................................................................. 18
Section 6.12. Environmental Matters................................................................. 19
ARTICLE 7.................................................................................................... 19
CONDEMNATION................................................................................................. 19
Section 7.01. General............................................................................... 20
ARTICLE 8.................................................................................................... 20
CONCERNING THE DEED TRUSTEE.................................................................................. 20
Section 8.01. No Required Action.................................................................... 20
Section 8.02. Certain Rights........................................................................ 20
Section 8.03. Retention of Moneys................................................................... 21
Section 8.04. Successor Deed Trustees............................................................... 21
Section 8.05. Perfection of Appointment............................................................. 21
Section 8.06. Succession Instruments................................................................ 22
Section 8.07. No Representation by Deed Trustee..................................................... 22
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 9.................................................................................................... 22
MISCELLANEOUS................................................................................................ 22
Section 9.01. Performance at Grantor's Expense...................................................... 22
Section 9.02. Survival of Obligations............................................................... 22
Section 9.03. Further Assurances.................................................................... 22
Section 9.04. Notices............................................................................... 23
Section 9.05. No Waiver............................................................................. 23
Section 9.06. Beneficiary's Right to Perform the Obligations........................................ 23
Section 9.07. Covenants Running with the Land....................................................... 24
Section 9.08. Successors and Assigns................................................................ 24
Section 9.09. Severability.......................................................................... 24
Section 9.10. Modification.......................................................................... 24
Section 9.11. Counterparts.......................................................................... 24
Section 9.12. Applicable Law........................................................................ 24
Section 9.13. Subrogation........................................................................... 24
Section 9.14. No Partnership........................................................................ 25
Section 9.15. Headings.............................................................................. 25
Section 9.16. Leasehold Provisions.................................................................. 25
Section 9.17. Gaming Authorities.................................................................... 28
Section 9.18. Indenture............................................................................. 29
Section 9.19. Rights of Holders..................................................................... 29
Section 9.20. No Personal Liability of Directors, Officers, Employees and Stockholders.............. 29
Section 9.21. Exculpation Provisions................................................................ 29
Section 9.22. Fraudulent Conveyance Savings Clause.................................................. 29
</TABLE>
iii
<PAGE>
FIRST LEASEHOLD DEED OF TRUST,
SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS
FIXTURE FILING AND FINANCING STATEMENT
THIS FIRST LEASEHOLD DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS, FIXTURE FILING AND FINANCING STATEMENT (hereinafter together
with any and all amendments, supplements, restatements or
<PAGE>
modifications of any kind referred to as the "Deed of Trust"), entered into as
-------------
of May 19,1999, by HWCC-TUNICA, INC., a Texas corporation (hereinafter whether
one or more, and any and all subsequent owners of the Mortgaged Property or any
part thereof referred to as "Grantor"), whose address for notice hereunder is
-------
Two Galleria Tower, Suite 2200, 13455 Noel Road, LB48, Dallas, Texas 75240, to
Phillip A. Poitevin, Trustee (hereinafter together with any successor or
substitute referred to in such capacity as "Deed Trustee"), whose address is
------------
1675 Lakeland Drive, Riverhill Tower, Jackson, Mississippi 39216, for the
benefit of STATE STREET BANK AND TRUST COMPANY, a Massachusetts chartered trust
company, as Trustee for the holders of the Notes hereinafter referred to, whose
address for notice hereunder is Two International Place, 4th Floor, Boston,
Massachusetts 02110, Attention: Corporate Trust Administration (the
"Beneficiary" or the "Indenture Trustee"). Any reference herein to the
----------- -----------------
Beneficiary and/or the Indenture Trustee shall be deemed to be a reference to
State Street Bank & Trust Company in its capacity as trustee under the Indenture
(as such term is hereinafter defined).
RECITALS
--------
A. Hollywood Casino Corporation, a Delaware corporation (the
"Borrower"), the Grantor, HWCC-Shreveport, Inc., a Louisiana corporation, and
Indenture Trustee have entered into an Indenture dated as of May 19, 1999 (as
the same may be amended, supplemented, restated or otherwise modified from time
to time, the "Indenture") pursuant to which the Borrower will issue up to
$310,000,000 of its 11 1/4% Series A and Series B Senior Secured Notes due 2007
and up to $50,000,000 of its Floating Rate Series A and Series B Senior Secured
Notes due 2006 (as the same may be amended, supplemented, restated, exchanged,
replaced or otherwise modified from time to time, collectively the "Notes") the
payment of which has been guaranteed by Grantor pursuant to the terms of the
Note Guarantee (as defined in the Indenture). The Grantor acknowledges that it
will derive substantial benefits from the transactions contemplated herein and
in the Indenture.
B. It is a condition precedent to the purchase of the Notes under
the Indenture that the Grantor shall have executed and delivered this Deed of
Trust.
C. Therefore, in order to comply with the terms and conditions of
the Indenture and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor hereby agrees with
Beneficiary as follows:
ARTICLE 1
DEFINITIONS
-----------
Section 1.01. Terms Defined Above. As used in this Deed of Trust, the
terms "Deed of Trust", "Grantor", "Deed Trustee", "Beneficiary", "Indenture
------------- ------- ------------ ----------- ---------
Trustee", and "Notes" shall have the meanings assigned to them above.
- ------- -----
2
<PAGE>
Section 1.02. Definitions. As used herein, the following terms shall
have the following meanings:
"Buildings": Any and all buildings, covered garages, utility sheds, workrooms,
---------
air conditioning towers, open parking areas and other improvements, and any and
all additions, alterations, betterments or appurtenances thereto, now or at any
time hereafter situated, placed or constructed upon the Land or any part
thereof.
"Environmental Law": Any federal, state or local statute, law, rule, regulation,
-----------------
ordinance, code, policy or rule of common law now or hereafter in effect and in
each case as amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or judgment,
relating to the environment, health, safety or Hazardous Materials including,
without limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. (S)(S).9601 et seq.; the Resource Conservation
and Recovery Act, 42 U.S.C. (S)(S).6901 et seq.; the Hazardous Materials
Transportation Act, 49 U.S. (S)(S). 1801 et seq.; the Clean Water Act, 33
U.S.C. (S)(S).1251 et seq.; the Toxic Substance Control Act, 15 U.S.C. (S)
(S).2601 et seq.; the Clean Air Act, 42 U.S.C. (S)(S).7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. (S)(S).300f et seq.; the Atomic Energy Act, 42
U.S.C. (S)(S).2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. (S)(S).136 et seq.; and the Occupational and Safety and Health
Act, 29 U.S.C. (S)(S).651 et. seq.
"Event of Default": As defined in Section 6.01 hereof.
---------------- ------------
"Fixtures": All materials, supplies, equipment, apparatus, fixtures and other
--------
items now or hereafter acquired by Grantor and now or hereafter attached to,
installed in or used or procured for use in connection with (temporarily or
permanently) any of the Buildings or the Land, insofar as the same are, or can
by agreement of the parties be made, a part of the real estate, including but
not limited to any and all partitions, dynamos, window screens and shades,
drapes, rugs and other floor coverings, awnings, motors, engines, boilers,
furnaces, pipes, plumbing, cleaning, call and sprinkler systems, fire
extinguishing apparatus and equipment, water tanks, swimming pools, heating,
ventilating, plumbing, laundry, incinerating, air conditioning and air cooling
equipment and systems, gas and electric machinery, appurtenances and equipment,
disposals, dishwashers, refrigerators and ranges, recreational equipment and
facilities of all kinds, and water, gas, electrical, storm and sanitary sewer
facilities and all other utilities whether or not situated in easements,
together with all accessions, replacements, betterments and substitutions for
any of the foregoing and the proceeds thereof.
"Hazardous Materials": Any (i) petroleum products, natural or synthetic gas,
-------------------
asbestos in any form that is or could be friable, urea formaldehyde foam
insulation and radon gas; (ii) substances defined as or included in the
definition of "hazardous substances," "hazardous waste," "hazardous materials,"
"extremely hazardous waste," "restrictive hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of similar import,
under any applicable Environmental Law; and (iii) any other substance exposure
to which is regulated by any governmental authority.
"Impositions": All real estate and personal property taxes; water, gas, sewer,
-----------
electricity and other utility rates and charges; charges for any easement,
license or agreement maintained for the benefit of the Mortgaged Property; and
all other taxes, charges and assessments and any interest, costs or penalties
with respect thereto, general and special, ordinary and extraordinary, foreseen
and unforeseen, of any kind and nature whatsoever which at any time prior to or
after the
3
<PAGE>
execution hereof may be assessed, levied or imposed upon the Mortgaged Property
or the Rents or the ownership, use, occupancy or enjoyment thereof.
"Indemnified Parties": Deed Trustee, Indenture Trustee, Beneficiary and the
-------------------
holders of the Notes and their respective officers, directors, employees,
agents, and attorneys.
"Land": The real estate or interest therein described in Exhibit A attached
----
hereto, and all rights, titles and interests appurtenant thereto.
"Leases": Any and all leases, subleases, licenses, concessions or other
------
agreements (written or oral, now or hereafter in effect, and whether one or
more) which grant a possessory interest in and to, or the right to use, the
Mortgaged Property, and all other agreements, including without limitation,
utility contracts, maintenance agreements and service contracts, which in any
way relate to the use, occupancy, operation, maintenance, enjoyment or ownership
of the Mortgaged Property, including, but not limited to, the Lease referred to
in Section 9.16 hereof.
------------
"Legal Requirements": (i) any and all present and future judicial decisions,
------------------
statutes, rulings, rules, regulations, permits, certificates or ordinances of
any governmental authority in any way applicable to Grantor or the Mortgaged
Property, including the ownership, use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction thereof; (ii) Grantor's
presently or subsequently effective bylaws and articles of incorporation or
partnership, limited partnership, joint venture, trust or other form of business
association agreement; (iii) any and all Leases; and (iv) any and all leases and
other contracts (written or oral) of any nature to which Grantor may be bound,
including without limitation, any lease or other contract pursuant to which
Grantor is granted a possessory interest in the Land.
"Mortgaged Property": The Land, Buildings, Fixtures, Permits (to the extent
------------------
assignable) Personalty, Leases and, subject to the rights of Grantor under
Section 2.03 hereof, Rents, together with:
- ------------
(i) all rights, privileges, tenements, hereditaments,
rights-of-way, easements, appendages and appurtenances in anywise
appertaining thereto, and all right, title and interest of
Grantor in and to any streets, ways, alleys, strips or gores of
land adjoining the Land or any part thereof, together with all of
Grantor's vessel, The Hollywood Tunica, Official No. 534006 (the
"Vessel"), whether or not such Vessel is a vessel within the
meaning of 46 U.S.C. (S) 31322(a), and all rights of Grantor
therein; and
(ii) all betterments, additions, alterations, appurtenances,
substitutions, replacements and revisions thereof and thereto and
all reversions and remainders therein; and
(iii) all of Grantor's right, title and interest in and to any
awards, remuneration, settlements or compensation heretofore made
or hereafter to be made by any Governmental Authority pertaining
to the Land, Buildings, Fixtures or Personalty, including those
for any vacation of, or change of grade in, any streets affecting
the Land or the Buildings.
provided, however, that so long as no Event of Default shall occur and be
- -------- -------
continuing, all dividends, distributions, interests and principal payments,
cash, instruments, and other property and proceeds made upon or with respect to
or of the Mortgaged Property (including Rents) may be used by the Grantor
subject to the terms and conditions of Indenture. Upon the occurrence and during
the continuance of an Event of Default, all rights of the Grantor to receive all
4
<PAGE>
dividends, distributions, interest or principal payments, cash, instruments and
other property and proceeds (including Rents) shall cease and such dividends,
distributions, interest and principal payments, cash, instruments and other
property and proceeds (including Rents) shall be paid or otherwise delivered the
Beneficiary or the Indenture Trustee. As used in this Deed of Trust, the term
"Mortgaged Property" shall be expressly defined as meaning all or, where the
------------------
context permits or requires, any portion of the above, and all or, where the
context permits or requires, any interest therein.
"Obligations": (i) the payment when due of indebtedness evidenced by the Notes
-----------
in the aggregate principal sum not to exceed at any time outstanding of
$360,000,000, interest (including post-petition interest) as set forth in the
Indenture and the Notes, and premiums, penalties, and late charges thereon; (ii)
all other indebtedness and other sums (including, without limitation, all
expenses, attorneys' fees, other fees, indemnifications, reimbursements,
damages, other monetary liabilities, and other charges) and obligations that may
or shall become due hereunder or under the Notes, the Note Guarantees, the
Indenture or the other Collateral Documents, and (iii) any and all renewals,
modifications, amendments, extensions for any period, supplements or
restatements of any of the foregoing.
"Permits": All applicable authorizations, consents, licenses, approvals,
-------
indemnification numbers and permits required under Legal Requirements
(including, without limitation, Environmental Laws) required for construction,
operation and occupancy of the Mortgaged Property.
"Permitted Encumbrances": The items set forth on Exhibit B hereto.
---------------------- ---------
"Personalty": All of the right title and interest of Grantor in and to all
----------
furniture, furnishings (other than Fixtures), insurance proceeds relating to the
Mortgaged Property and deposits or other funds or evidences of credit or
indebtedness deposited by or on behalf of Grantor with any governmental
agencies, boards, corporations and other providers of utility services, public
or private, including specifically but without limitation, all refundable,
returnable or reimbursable tap fees, utility deposits, commitment fees and
development costs, and all other personal property on which a security interest
may be granted under the UCC, together with accessories and replacements thereto
or therefor and the proceeds thereof.
"Post-Default Rate": The interest rate applicable to overdue principal pursuant
-----------------
to the provisions of the Indenture.
"Prior Liens": As defined in Section 9.13 hereof.
----------- ------------
"Rents": All of the rents, revenues, income, proceeds, profits, security and
-----
other types of deposits, and other benefits paid or payable by parties to the
Leases other than Grantor for using, leasing, licensing, possessing, operating
from, residing in, selling or otherwise enjoying the Mortgaged Property,
including all rents, revenues, bonus money, royalties, rights and benefits
accruing to Grantor under all present and future oil, gas and mineral leases on
any part of the Land.
"UCC": The Uniform Commercial Code as presently in effect in the state of New
---
York (except to the extent that the laws of any other jurisdiction govern the
perfection and priority of the security interests granted hereby).
Section 1.03. Articles and Sections. References to Articles and
Sections shall mean the corresponding Article or Section of this Deed of Trust
unless the context requires otherwise.
5
<PAGE>
Section 1.04. Singular and Plural. Words used herein in the singular,
where the context so permits, shall be deemed to include the plural and vice
versa. The definitions of words in the singular herein shall apply to such words
when used in the plural where the context so permits and vice versa.
Section 1.05. References. The words "herein," "hereof," "hereunder,"
and other words of similar import when used in this Deed of Trust refer to this
Deed of Trust as a whole, and not to any particular Article or Section.
Section 1.06. Other Defined Terms. Any capitalized term used in this
Deed of Trust and not defined herein shall have the meaning assigned to such
term in the Indenture.
ARTICLE 2
GRANT
Section 2.01. Grant. To secure the full and timely payment of and the
full and timely performance and discharge of the Obligations, Grantor has
GRANTED, BARGAINED, SOLD and CONVEYED, and by these presents does GRANT,
BARGAIN, SELL and CONVEY, unto Deed Trustee the Mortgaged Property, subject,
however, to the Permitted Encumbrances, for the benefit of the Beneficiary, TO
HAVE AND TO HOLD the Mortgaged Property unto Deed Trustee, forever, and Grantor
does hereby bind itself, its successors and assigns to WARRANT AND FOREVER
DEFEND the title to the Mortgaged Property unto Deed Trustee against every
person whomsoever lawfully claiming or to claim the same or any part thereof;
provided that, the Liens, security interests, estates and rights granted
hereunder and all of Grantor's rights, powers, and remedies in connection
therewith shall, unless otherwise provided in the Indenture or this Deed of
Trust, remain in full force and effect until payment in full, or provision for
payment in full, of (A) the Notes under the terms of the Indenture and (B) all
Obligations then due and owing under the Indenture, the Notes and the Collateral
Documents; provided, however, that after receipt from the Grantor by the
-------- -------
Indenture Trustee of a request for a release of any Mortgaged Property permitted
under the Indenture upon the sale, transfer, assignment, exchange or other
disposition of such Mortgaged Property not prohibited by the Indenture (and upon
receipt of the Beneficiary of all proceeds of such sale, transfer, assignment,
exchange or other disposition to the extent required to be remitted to the
Beneficiary under the Indenture or otherwise), such Mortgaged Property shall be
released from the Liens, security interests, estates and rights granted by this
Deed of Trust and no longer constitute Mortgaged Property. Upon the payment in
full, or provision for payment in full, of (A) the Notes under the terms of the
Indenture and (B) all Obligations then due and
6
<PAGE>
owing under the Indenture and the Collateral Documents, the Grantor shall be
entitled to the return, upon its request and at its expense, of such of the
Mortgaged Property as shall not have been sold or otherwise applied pursuant to
the terms hereof, and the Liens, security interests, estates and rights granted
by this Deed of Trust shall terminate, otherwise same shall remain in full force
and effect. Upon any termination of this Deed of Trust or release of any
Mortgaged Property as permitted by the Indenture, the Indenture Trustee will, at
the expense of the Grantor, execute and deliver to the Grantor such documents
and take such other actions as the Grantor shall reasonably request to evidence
the termination of this Deed of Trust or the release of such Mortgaged Property,
as the case may be. Any such action taken by the Indenture Trustee shall be
without warranty by or recourse to the Indenture Trustee, except as to the
absence of any prior assignments by the Indenture Trustee of its interests in
the Mortgaged Property, and shall be at the expense of the Grantor. The
Indenture Trustee may conclusively rely on any certificate delivered to it by
the Grantor stating that the execution of such documents and release of the
Mortgaged Property is in accordance with and permitted by the terms of the
Indenture and this Deed of Trust.
Section 2.02. Security Interest. This Deed of Trust shall be construed
as a deed of trust on real property and it shall also constitute and serve (a)
as a "Security Agreement" on personal property within the meaning of, and shall
constitute a first and prior security interest under, the UCC with respect to
the Personalty, Fixtures and Leases (subject to Permitted Encumbrances), and (b)
as an "Assignment of Leases and Rents" of the Leases (subject to Permitted
Encumbrances). To this end, Grantor has GRANTED, BARGAINED, CONVEYED, ASSIGNED,
TRANSFERRED, AND SET OVER, and by these presents does GRANT, BARGAIN, CONVEY,
ASSIGN, TRANSFER AND SET OVER, unto Deed Trustee and unto Beneficiary the Rents,
and a first and prior security interest and all of Grantor's right, title and
interest in, to and under the Personalty, Fixtures and Leases to secure the full
and timely payment of and the full and timely performance and discharge of the
Obligations, subject to Permitted Encumbrances.
Section 2.03. Grantor's License to Collect Rents Until Default. Grantor
and Beneficiary agree that this Deed of Trust is an absolute and present
assignment of Leases and Rents. Provided there exists no Event of Default,
Grantor shall have the right under a license granted hereby and Beneficiary
hereby grants to Grantor a license (but limited by the remedies of Beneficiary
set forth herein and in the Indenture) to collect, but not more than one (1)
month in advance, all of the Rents due or to become due under the Leases, and,
subject to the restrictions set forth in the Indenture, if any, to exercise the
rights of landlord under the Leases. The license granted hereby may be revoked
at Beneficiary's option upon written notice from Beneficiary to Grantor after
the occurrence and during the continuance of an Event of Default. Grantor hereby
agrees with Beneficiary that the other parties under the Leases may, upon notice
from Indenture Trustee or Beneficiary of the occurrence of an Event of Default
that is then continuing, thereafter pay direct to Beneficiary the Rents due and
to become due under the Leases and attorn all other obligations thereunder
directly to Beneficiary without any
7
<PAGE>
obligation on their part to determine whether an Event of Default does in fact
exist. Additionally, upon the occurrence and during the continuance of an Event
of Default, Grantor hereby constitutes and appoints Beneficiary its true and
lawful attorney-in-fact with full power of substitution to collect Rents and
other sums due and to become due under the Leases and to endorse, either in the
name of Grantor or in the name of Beneficiary, any check made payable to Grantor
or any assumed business name of Grantor representing Rents and other sums due
and to become due under the Leases. Following the occurrence and during the
continuance of an Event of Default and the acceleration of the Notes, any such
Rent and other sums shall be applied in accordance with the provisions of the
Indenture. It is understood and agreed that this power is coupled with an
interest which cannot be revoked.
Section 2.04. No Obligation of Beneficiary. The assignment and security
interest herein granted shall not be deemed or construed to constitute
Beneficiary as a mortgagee in possession of the Mortgaged Property, to obligate
Beneficiary to lease the Mortgaged Property or attempt to do same, or to take
any action, incur any expense or perform or discharge any obligation, duty or
liability whatsoever.
Section 2.05. Fixture Filing. This Deed of Trust shall constitute a
"fixture filing" for all purposes of the UCC. All or part of the Mortgaged
Property are or are to become fixtures on the Land; information concerning the
security interest herein granted may be obtained at the addresses set forth on
the signature page hereof. The addresses of the Secured Party (Beneficiary) and
of the Debtor (Grantor) are set forth on the signature page hereof.
ARTICLE 3
WARRANTIES AND REPRESENTATIONS
Grantor hereby unconditionally warrants and represents to Beneficiary
as follows:
Section 3.01. Title to Mortgaged Property and Lien of this Instrument.
Grantor has good and indefeasible title to the Land (in fee simple, if the Lien
created hereunder be on the fee, or a first and prior leasehold estate, if it be
created on the leasehold estate) and Buildings, and good and indefeasible title
to the Fixtures and Personalty, free and clear in each case of any liens,
charges, encumbrances, security interests and adverse claims whatsoever except
the Permitted Encumbrances. This Deed of Trust constitutes a valid and
subsisting first Lien deed of trust on the Land, the Buildings and the Fixtures
and a valid, subsisting first security interest in and to, and a valid first
(subject to Permitted Encumbrances) assignment of, the Personalty and Leases and
Rents (subject to the rights of Grantor under Section 2.03 hereof), all in
------------
accordance with the terms hereof.
8
<PAGE>
ARTICLE 4
AFFIRMATIVE COVENANTS
Grantor hereby unconditionally covenants and agrees with Beneficiary as
follows:
Section 4.01. Lien Status. Grantor will protect the first Lien and
security interest status (subject to Permitted Encumbrances) of this Deed of
Trust and, except to the extent permitted by the provisions of the Indenture or
hereunder, will not place, or permit to be placed, or otherwise mortgage,
hypothecate or encumber the Mortgaged Property with, any other Lien or security
interest of any nature whatsoever (statutory, constitutional or contractual)
regardless of whether same is allegedly or expressly inferior to the Lien and
security interest created by this Deed of Trust, and, if any such Lien or
security interest is asserted against the Mortgaged Property (unless such Lien
or encumbrance constitutes a Permitted Encumbrance), Grantor will promptly, at
its own cost and expense, (a) pay the underlying claim in full or take such
other action so as to cause same to be released or bonded around and (b) within
five (5) days from the date such Lien or security interest is so asserted, give
Beneficiary notice of such Lien or security interest. Such notice shall specify
who is asserting such Lien or security interest and shall detail the origin and
nature of the underlying claim giving rise to such asserted Lien or security
interest.
Section 4.02. Payment of Impositions. Grantor will duly pay and
discharge, or cause to be paid and discharged, all material Impositions not
later than the day any fine or penalty may be added thereto or imposed, except
such as are contested in good faith and by appropriate proceedings or where the
failure to effect such payment is not adverse in any material respect to the
Holders; provided, however, that Grantor may, if permitted by law and if such
-------- -------
installment payment would not create or permit the filing of a Lien against the
Mortgaged Property, pay such Impositions in installments whether or not interest
shall accrue on the unpaid balance of such Impositions.
Section 4.03. Repair. Grantor will keep the Mortgaged Property in good
condition, ordinary wear and tear excepted, and will make all necessary repairs,
replacements, renewals, betterments and improvements and alterations thereof and
thereto, interior and exterior, structural and non-structural, ordinary and
extraordinary, foreseen and unforeseen all as in the judgment of the Grantor may
be reasonably necessary for the proper conduct of the business carried in
connection therewith, provided that nothing in this Section 4.03 shall prevent
------------
the Grantor from discontinuing the maintenance of any of such properties if such
discontinuance is, in the judgment of the Grantor, desirable in the conduct of
the business of the Grantor and its Subsidiaries taken as a whole.
Notwithstanding the foregoing, nothing contained in this Section 4.03 shall
------------
limit the right of the Grantor to dispose of properties in any manner otherwise
permitted by the Indenture.
9
<PAGE>
Section 4.04. Insurance. Grantor will obtain and maintain insurance
upon and relating to the Mortgaged Property insuring against personal injury and
death, loss by fire and such other hazards, casualties and contingencies
(including business interruptions insurance and builder's all risk coverage) as
are normally and usually covered by extended coverage policies in effect where
the Land is located and with such insurers typical and prudent for properties
similar to the Mortgaged Property. Each insurance policy issued in connection
therewith shall provide by way of endorsements, riders or otherwise that (a)
proceeds will be payable to Beneficiary as its interest may appear, it being
agreed by Grantor that such payments shall be applied in accordance with the
provisions of the Indenture; (b) the coverage of Beneficiary shall not be
terminated, reduced or affected in any manner regardless of any breach or
violation by Grantor of any warranties, declarations or conditions in such
policy; (c) no such insurance policy shall be cancelled unless such insurer
shall have first given Beneficiary thirty (30) days prior written notice
thereof; and (d) Beneficiary may, but shall not be obliged to, make premium
payments to prevent any cancellation, endorsement, alteration or reissuance and
such payments shall be accepted-by the insurer to prevent same. Beneficiary
shall be furnished with photocopies of each renewal policy evidencing the
appropriate coverages as required not later than fifteen (15) days after the
renewals have been completed, together with receipts or other evidence that the
premiums thereon have been paid.
Section 4.05. Application of Insurance Proceeds. The proceeds of the
insurance of Grantor shall be applied in accordance with the provisions of the
Indenture.
Section 4.06. Performance of Leases. Grantor covenants (a) not to
assign or grant a security interest in and to any of the Leases to any party
other than Beneficiary without the prior written consent of Beneficiary, (b) at
the request of Beneficiary, to execute and deliver all such further assurances
and assignments in and to the Mortgaged Property as Beneficiary shall from time
to time reasonably require, and (c) to deliver to Beneficiary copies of all
Leases, regardless of whether such Leases were or are executed before or after
the date hereof.
Section 4.07. Inspection. Grantor, at all reasonable times and upon
reasonable prior notice, will permit the Indenture Trustee and Beneficiary and
their agents, representatives and employees to inspect the Mortgaged Property.
Section 4.08. Books and Records. Grantor will maintain full and
accurate books of account and other records reflecting in all material respects
the results of its operations of the Mortgaged Property. At any time and
10
<PAGE>
from time to time Grantor shall deliver to Beneficiary such other financial data
as Beneficiary shall reasonably request with respect to the ownership,
maintenance, use and operation of the Mortgaged Property, and Beneficiary shall
have the right, at reasonable times and upon reasonable notice, to audit,
examine and make copies or extracts of Grantor's books of account and records
relating to the Mortgaged Property.
Section 4.09. Maintenance of Rights of Way, Easements, and Licenses.
-----------------------------------------------------
Grantor will maintain, preserve and renew all rights of way, easements,
grants, privileges, licenses and franchises reasonably necessary for the use of
the Mortgaged Property from time to time. Grantor shall comply in all material
respects with all restrictive covenants which may at any time affect the
Mortgaged Property, zoning ordinances and other public or private restrictions
as to the use of the Mortgaged Property.
(a) Grantor shall (i) comply in all material respects with all applicable
Environmental Laws and obtain, keep and comply with Permits applicable to
the operations of Grantor and the ownership, lease, or use of any Mortgaged
Property; (ii) use commercially reasonable efforts to cause all Persons
occupying any Mortgaged Property to comply with all such Environmental Laws
and Permits; (iii) keep or cause to be kept all such Mortgaged Property
free and clear of any Liens imposed pursuant to such Environmental Laws;
and (iv) obtain and renew all material Permits required for ownership or
use of any Mortgaged Property.
(b) Grantor shall conduct any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other action necessary to
remove and cleanup all Hazardous Materials from any Mortgaged Property in
accordance in all material respects with the requirements of all applicable
Environmental Laws and any Legal Requirements.
Section 4.10. Environmental Indemnification and Hold Harmless.
-----------------------------------------------
(a) Grantor agrees to defend, indemnify and hold harmless the Indemnified
Parties from and against any and all claims, demands, judgments,
settlements, damages, actions, causes of action, injuries, administrative
orders, consent agreements and orders, liabilities, penalties, costs,
including but not limited to any cleanup costs, mediation costs, response
costs, and all expenses of any kind whatsoever, including claims arising
out of loss of life, injury to persons, property, or business or damage to
natural resources in connection with the activities of Grantor, its
predecessors in interest, third parties who have trespassed on the
Mortgaged Property, or parties in a contractual relationship with Grantor,
or any of them, whether or not occasioned wholly or in part by any
condition, accident or event caused by any act or omission of Indemnified
Parties, which:
(i) Arises out of the actual, alleged or threatened migration, spill,
leach, pour, empty, inject, discharge, dispersal, release, storage,
treatment, generation, disposal or escape of pollutants or other toxic
or hazardous substances, including any solid, liquid, gaseous or
thermal irritant or contaminant, including smoke,
11
<PAGE>
vapor, soot, fumes, acids, alkalis, chemicals, and waste (including
materials to be recycled, reconditioned or reclaimed); or
(ii) Actually or allegedly arises out of the use, specification, or
inclusion of any product, material or process containing chemicals,
the failure to detect the existence or proportion of chemicals in the
soil, air, surface water or ground water, or the performance or
failure to perform the abatement of any pollution source or the
replacement or removal of any soil, water, surface water, or ground
water containing chemicals.
(iii) Arises out of the breach of any covenant, warranty, or
representation of Grantor as it relates to the provisions of this
Section 4.10.
------------
(iv) Arises out of a judicial or administrative action brought
pursuant to any Environmental Law that relates to the Mortgaged
Property.
(b) Grantor, its successors and assigns, shall bear, pay and discharge
when and as the same become due and payable, any and all such judgments or
claims for damages, penalties or otherwise against Indemnified Parties,
shall hold Indemnified Parties harmless for those judgments or claims, and
shall assume the burden and expense of defending all suits, administrative
proceedings, and negotiations of any description with any and all persons,
political subdivisions or Governmental Authorities arising out of
indemnified matters as set forth in Section 4.10(a) above.
(c) Grantor's indemnifications and representations made herein shall
survive any termination or expiration of the documents relating to the
Notes and/or the repayment of the Obligations, including, but not limited
to, any foreclosure under this Deed of Trust or deed-in-lieu of
foreclosure, it being understood and agreed that the indemnity given herein
is independent of the Obligations and the Notes, the Indenture, the Note
Guarantees or any of the Collateral Documents.
ARTICLE 5
NEGATIVE COVENANTS
------------------
Grantor hereby covenants and agrees with Beneficiary that, until the entire
Obligations shall have been paid in full and shall have been fully performed and
discharged:
Section 5.01. Use Violations.
--------------
Grantor will not use, maintain, operate or occupy, or allow the use,
maintenance, operation or occupancy of, the Mortgaged Property in any manner
which violates in any material respect any Governmental Requirement.
12
<PAGE>
Section 5.02. Alterations.
-----------
Grantor will not commit or permit any waste of the Mortgaged Property that
materially impairs Beneficiary's security hereunder.
Section 5.03. Replacement of Fixtures and Personalty.
--------------------------------------
Except as permitted by this Deed of Trust and the Indenture and except in
the ordinary course of its business, Grantor will not, without the prior written
consent of Beneficiary, permit any of the Fixtures or Personalty to be removed
at any time from the Land or Buildings unless the removed item is removed
temporarily for maintenance and repair or, if removed permanently, such removal
and disposition does not affect materially and adversely the value of Grantor's
casino and the Mortgaged Property taken as a whole or the removed item is
replaced by an article of substantially equal utility and value, owned by
Grantor and subject to the Liens created hereby, and free and clear of any other
Lien or security interest except Permitted Encumbrances or such as may be first
approved in writing by Beneficiary.
Section 5.04. No Further Encumbrances.
-----------------------
Except to the extent permitted by the provisions of the Indenture, Grantor
will not, without the prior written consent of Beneficiary, create, place or
permit to be created or placed, or through any act or failure to act, acquiesce
in the placing of, or allow to remain, any mortgage, pledge, Lien (statutory,
constitutional or contractual), security interest, encumbrance or charge on, or
conditional sale or other title retention agreement (regardless of whether same
are expressly subordinate to the Liens of this Deed of Trust) with respect to
the Mortgaged Property, other than the Permitted Encumbrances.
ARTICLE 6
EVENTS OF DEFAULT AND REMEDIES
Section 6.01. Event of Default.
----------------
The term "Event of Default", as used in this Deed of Trust, shall mean the
----------------
occurrence or happening, at any time and from time to time, of an Event of
Default (as such term is defined thereunder) under the Indenture.
Section 6.02. Remedies.
--------
If an Event of Default shall occur and be continuing, Beneficiary may, at
Beneficiary's election and by or through Deed Trustee or otherwise, exercise any
or all of the following rights, remedies and recourses:
13
<PAGE>
(a) Entry Upon Mortgaged Property. Enter upon the Mortgaged Property and
-----------------------------
take exclusive possession thereof and of all books, records and accounts
relating thereto. If Grantor remains in possession of all or any part of
the Mortgaged Property during the continuance of an Event of Default and
without Beneficiary's prior written consent thereto, Beneficiary may invoke
any and all legal remedies to dispossess Grantor, including specifically
one or more actions for forcible entry and detainer, trespass to try title
and writ of restitution. Nothing contained in the foregoing sentence shall,
however, be construed to impose any greater obligation or any prerequisites
to acquiring possession of the Mortgaged Property during the continuance of
an Event of Default than would have existed in the absence of such
sentence.
(b) Operation of Mortgaged Property. Hold, lease, manage, operate or
-------------------------------
otherwise use or permit the use of the Mortgaged Property, either itself or
by other persons, firms or entities, in such manner, for such time and upon
such other terms as Beneficiary may deem to be prudent and reasonable under
the circumstances (making such repairs, alterations, additions and
improvements thereto and taking any and all other action with reference
thereto, from time to time, as Beneficiary shall deem reasonably necessary
or desirable), and after the occurrence and continuance of an Event of
Default, apply all Rents and other amounts collected by Deed Trustee or
Indenture Trustee or Beneficiary in connection therewith in accordance with
the provisions of the Indenture.
(c) Foreclosure and Sale. Beneficiary shall have the right and option to
--------------------
proceed with foreclosure by directing the Deed Trustee, or his successors
or substitutes in trust, to proceed with foreclosure and to sell, to the
extent permitted by law, all or any portion of the Mortgaged Property at
one or more sales, as an entirety or in parcels, at such place or places in
otherwise such manner and upon such notice as may be required by law, or,
in the absence of any such requirement, as the Beneficiary may deem
appropriate, and to make conveyance to the purchaser or purchasers. Where
the Mortgaged Property is situated in more than one county, notice as above
provided shall be posted and filed in all such counties (if such notices
are required by law), and all such Mortgaged Property may be sold in any
such county and any such notice shall designate the county where such
Mortgaged Property is to be sold. Nothing contained in this Section 6.02(c)
---------------
shall be construed so as to limit in any way the Deed Trustee's rights to
sell the Mortgaged Property, or any portion thereof, by private sale if,
and to the extent that, such private sale is permitted under the laws of
the applicable jurisdiction or by public or private sale after entry of a
judgment by any court of competent jurisdiction so ordering. Grantor hereby
irrevocably appoints the Deed Trustee to be the attorney of Grantor and in
the name and on behalf of Grantor to execute and deliver any deeds,
transfers, conveyances, assignments, assurances and notices which Grantor
ought to execute and deliver and do and perform any and all such acts and
things which Grantor ought to do and perform under the covenants herein
contained and generally, to use the name of Grantor in the exercise of all
or any of the powers hereby conferred on the Deed Trustee. At any such
sale: (i) whether made under the power herein contained or any other legal
enactment, or by virtue of any judicial proceedings or any other legal
right, remedy or recourse, it shall not be necessary for Deed Trustee to
have physically present or to have constructive possession of, the
Mortgaged Property (Grantor hereby covenanting and agreeing to deliver to
Deed Trustee any portion of the Mortgaged Property not actually or
14
<PAGE>
constructively possessed by Deed Trustee immediately upon demand by Deed
Trustee) and the title to and right of possession of any such property
shall pass to the purchaser thereof as completely as if the same had been
actually present and delivered to purchaser at such sale, (ii) each
instrument of conveyance executed by Deed Trustee shall contain a general
warranty of title, binding upon Grantor and its successors and assigns,
(iii) each and every recital contained in any instrument of conveyance made
by Deed Trustee shall conclusively establish the truth and accuracy of the
matters recited therein, including, without limitation, nonpayment of the
Obligations, advertisement and conduct of such sale in the manner provided
herein and otherwise by law and appointment of any successor Deed Trustee
hereunder, (iv) any and all prerequisites to the validity thereof shall be
conclusively presumed to have been performed, (v) the receipt of Deed
Trustee or of such other party or officer making the sale shall be a
sufficient discharge to the purchaser or purchasers for its purchase money
and no such purchaser or purchasers, or its assigns or personal
representatives, shall thereafter be obligated to see to the application of
such purchase money, or be in any way answerable for any loss,
misapplication or nonapplication thereof, (vi) to the fullest extent
permitted by law, Grantor shall be completely and irrevocably divested of
all of its right, title, interest, claim and demand whatsoever, either at
law or in equity, in and to the property sold and such sale shall be a
perpetual bar both at law and in equity against Grantor, and against any
and all other persons claiming or to claim the property sold or any part
thereof, by, through or under Grantor, and (vii) to the extent and under
such circumstances as are permitted by law, Beneficiary may be a purchaser
at any such sale, and shall have the right, after paying or accounting for
all costs of said sale or sales, to credit the amount of the bid upon the
amount of the Obligations (in the order of priority set forth in Section
-------
6.09 hereof) in lieu of cash payment.
----
(d) Judicial Foreclosure: Receivership. Proceed by a suit or suits in
-----------------------------------
equity or at law, whether for the specific performance of any covenant or
agreement herein contained or in aid of the execution of any power herein
granted, or for any foreclosure hereunder or for the sale of the Mortgaged
Property under the judgment or decree of any court or courts of competent
jurisdiction, or for the appointment of a receiver pending any foreclosure
hereunder or the sale of the Mortgaged Property under the order of a court
or courts of competent jurisdiction or under executory or other legal
process, or for the enforcement of any other appropriate legal or equitable
remedy. Any money advanced by the Deed Trustee and/or the Indenture Trustee
and/or Beneficiary in connection with any such receivership shall be a
demand obligation (which obligation Grantor hereby expressly promises to
pay) owing by Grantor to the Deed Trustee and/or Indenture Trustee and/or
Beneficiary and shall bear interest from the date of making such advance by
the Deed Trustee and/or Indenture Trustee and/or Beneficiary until paid at
the Post-Default Rate.
(e) Trustee or Receiver. Prior to, upon or at any time after,
-------------------
commencement of foreclosure of the Lien and security interest provided for
herein or any legal proceedings hereunder, make application to a court of
competent jurisdiction as a matter of strict right and without notice to
Grantor or regard to the adequacy of the Mortgaged Property for the
repayment of the Obligations for appointment of a receiver of the Mortgaged
Property, and Grantor does hereby irrevocably consent to such appointment
Any such receiver shall have all the usual powers and duties of receivers
in similar cases, including
15
<PAGE>
the full power to rent, maintain and otherwise operate the Mortgaged
Property upon such terms as may be approved by the court, and shall apply
the Rents in accordance with the provisions of Section 6.09 hereof.
------------
(f) Other. Exercise any and all other rights, remedies and recourses
-----
granted hereunder or under the Indenture, or now or hereafter existing in
equity or at law, by virtue of statute or otherwise.
Section 6.03. Separate Sales.
--------------
The Mortgaged Property may be sold in one or more parcels and in such
manner and order as Deed Trustee, in his sole discretion, may elect, it being
expressly understood and agreed that the right of sale arising out of any Event
of Default shall not be exhausted by any one or more sales.
Section 6.04. Remedies Cumulative, Concurrent and Nonexclusive.
------------------------------------------------
Beneficiary shall have all rights, remedies and recourses granted in the
Notes, the Indenture, this Deed of Trust and the other Collateral Documents and
available at law or equity, including specifically those granted by the UCC, and
same (a) shall be cumulative and concurrent; (b) may be pursued separately,
successively or concurrently against Grantor or others obligated under the
Notes, or against the Mortgaged Property, or against any one or more of them, at
the sole discretion of Beneficiary; (c) may be exercised as often as occasion
therefor shall arise, it being agreed by Grantor that the exercise or failure to
exercise any of same shall in no event be construed as a waiver or release
thereof or of any other right, remedy or recourse; and (d) are intended to be,
and shall be, nonexclusive.
Section 6.05. No Conditions Precedent to Exercise of Remedies.
-----------------------------------------------
Neither Grantor nor any other person hereafter obligated for payment of all
or any part of the Indebtedness or fulfillment of all or any of the Obligations
shall be relieved of such obligation by reason of (a) the failure of Deed
Trustee to comply with any request of Grantor or any other person so obligated
to foreclose the Lien of this Deed of Trust or to enforce any provisions of the
other Collateral Documents; (b) the release, regardless of consideration, of the
Mortgaged Property or the addition of any other property to the Mortgaged
Property; (c) any agreement or stipulation between any subsequent owner of the
Mortgaged Property and Beneficiary extending, renewing, rearranging or in any
other way modifying the terms of this Deed of Trust without first having
obtained the consent of, given notice to or paid any consideration to Grantor,
or such other person, and in such event Grantor and all such other persons shall
continue to be liable to make payment according to the terms of any such
extension or modification agreement unless expressly released and discharged in
writing by Beneficiary; or (d) by any other act or occurrence save and except
the complete payment of and the complete fulfillment of all of the Obligations.
16
<PAGE>
Section 6.06. Release of and Resort to Collateral.
-----------------------------------
Beneficiary may release, regardless of consideration, any part of the
Mortgaged Property without, as to the remainder, in any way impairing,
affecting, subordinating or releasing the Lien or security interest created in
or evidenced by this Deed of Trust or their stature as a first and prior Lien
and security interest (subject to Permitted Encumbrances) in and to the
Mortgaged Property. For payment of the Obligations, Beneficiary may resort to
any other security therefor held by Deed Trustee in such order and manner as
Beneficiary may elect.
Section 6.07. Waiver of Redemption, Notice and Marshalling of Assets.
------------------------------------------------------
To the fullest extent permitted by law, Grantor hereby irrevocably and
unconditionally waives and releases (a) all benefits that might accrue to
Grantor by virtue of any present or future law exempting the Mortgaged Property
from attachment, levy or sale on execution or providing for any appraisement,
valuation, stay of execution, exemption from civil process, redemption or
extension of time for payment; (b) except as herein expressly provided and in
the Notes, the Indenture and the other Collateral Documents, all notices of (i)
any Event of Default, (ii) intent to accelerate the Obligations, (iii)
acceleration of the Obligations, or (iv) Deed Trustee's election to exercise or
his actual exercise of any right, remedy or recourse provided for under this
Deed of Trust; and (c) any right to a marshalling of assets or a sale in inverse
order of alienation. Grantor agrees, to the full extent that it may lawfully do
so, that it will not at any time insist upon or plead or in any way take
advantage of any appraisement, valuation, stay, marshalling of assets,
extension, redemption or moratorium law now or hereafter in force and effect so
as to prevent or hinder the enforcement of the provisions of this Deed of Trust
or the indebtedness secured hereby, or any agreement between Grantor and
Beneficiary or any rights or remedies Beneficiary may have thereunder, hereunder
or by law.
Section 6.08. Discontinuance of Proceedings.
-----------------------------
In case Beneficiary shall have proceeded to invoke any right, remedy or
recourse permitted hereunder or under the Indenture or the other Collateral
Documents and shall thereafter elect to discontinue or abandon same for any
reason, Beneficiary shall have the unqualified right so to do and, in such an
event, Grantor and Beneficiary shall be restored to their former positions with
respect to the Obligations, the Collateral Documents, the Mortgaged Property and
otherwise, and the rights, remedies, recourses and powers of Beneficiary shall
continue as if same had never been invoked.
Section 6.09. Application of Proceeds.
-----------------------
The proceeds of any sale of, and the Rents and other amounts generated by
the holding, leasing, operating or other use of, the Mortgaged Property or the
Leases shall be applied upon the occurrence and during the continuance of an
Event of Default by Deed Trustee or Beneficiary (or
17
<PAGE>
the receiver, if one is appointed) to the extent that funds are so available
therefrom in the following orders of priority:
(a) first, to the payment of the reasonable costs and expenses of taking
-----
possession of the Mortgaged Property and of holding, using, leasing,
repairing, improving and selling the same, including without limitation (i)
reasonable trustees' and receivers' fees, (ii) court costs, (iii)
reasonable attorneys' and accountants' fees, (iv) costs of advertisement
and (v) the payment of any and all Impositions, Liens, security interests
or other rights, titles or interests equal or superior to the Lien and
security interest of this Deed of Trust (except those to which the
Mortgaged Property has been sold subject and without in anyway implying
Beneficiary's prior consent to the creation thereof);
(b) second to payment of the Obligations in such order and manner as
------
Beneficiary may elect; and
(c) third, to Grantor; or as otherwise required by any Governmental
-----
Requirement.
Section 6.10. Acceleration Following Certain Events.
-------------------------------------
Notwithstanding anything to the contrary contained in or inferable from
any provision hereof, upon the occurrence of an Event of Default as defined in
Section 6.01(i) or Section 6.01(j) of the Indenture, any accrued but unpaid
portion of the Obligations shall be automatically and immediately due and
payable in full without the necessity of any notice or any other action on the
part of Deed Trustee or Beneficiary or any other party.
Section 6.11. Indemnity.
---------
IN CONNECTION WITH ANY ACTION TAKEN BY THE DEED TRUSTEE AND/OR INDENTURE
TRUSTEE AND/OR BENEFICIARY PURSUANT TO THIS DEED OF TRUST, THE INDEMNIFIED
PARTIES SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY GRANTOR RESULTING FROM ANY
ACT OR OMISSION OF ANY INDEMNIFIED PARTY IN ADMINISTERING, MANAGING, OPERATING
OR CONTROLLING THE MORTGAGED PROPERTY UNLESS SUCH LOSS IS CAUSED BY THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF AN INDEMNIFIED PARTY, NOR SHALL THE DEED
TRUSTEE AND/OR INDENTURE TRUSTEE AND/OR BENEFICIARY BE OBLIGATED TO PERFORM OR
DISCHARGE ANY OBLIGATION, DUTY OR LIABILITY OF GRANTOR. GRANTOR SHALL AND DOES
HEREBY AGREE TO INDEMNIFY EACH INDEMNIFIED PARTY FOR, AND TO HOLD EACH
INDEMNIFIED PARTY HARMLESS FROM, ANY AND ALL LIABILITY, LOSS OR DAMAGE WHICH MAY
OR MIGHT BE INCURRED BY ANY INDEMNIFIED PARTY BY REASON OF THIS DEED OF TRUST OR
THE EXERCISE OF RIGHTS OR REMEDIES HEREUNDER UNLESS SUCH LIABILITY, LOSS OR
DAMAGE IS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AN INDEMNIFIED
PARTY; SHOULD THE DEED TRUSTEE AND/OR THE INDENTURE TRUSTEE AND/OR BENEFICIARY
MAKE ANY EXPENDITURE ON ACCOUNT OF ANY SUCH LIABILITY, LOSS OR DAMAGE, THE
AMOUNT THEREOF, INCLUDING COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, SHALL
BE A DEMAND OBLIGATION (WHICH
18
<PAGE>
OBLIGATION GRANTOR HEREBY EXPRESSLY PROMISES TO PAY) OWING BY GRANTOR TO THE
DEED TRUSTEE AND/OR THE INDENTURE TRUSTEE AND/OR BENEFICIARY AND SHALL BEAR
INTEREST FROM THE DATE EXPENDED UNTIL PAID AT THE POST-DEFAULT RATE, SHALL BE A
PART OF THE OBLIGATIONS AND SHALL BE SECURED BY THIS DEED OF TRUST AND ANY OTHER
SECURITY INSTRUMENT. THE LIABILITIES OF THE GRANTOR AS SET FORTH IN THIS SECTION
6.11 SHALL SURVIVE THE TERMINATION OF THIS DEED OF TRUST.
If any claim for indemnification by any of the Indemnified Parties arises
out of a claim by a person other than the Indemnified Parties, Grantor shall
conduct any proceedings or negotiations in connection therewith which are
necessary to defend such Indemnified Party and shall take all such steps and
proceedings as Grantor in good faith deems necessary to settle or defeat any
such claims, and Grantor shall employ counsel to contest any such claims;
provided, however, that Grantor shall reasonably consider the advice of the
Indemnified Party as to the defense of such claims, and the Indemnified Party
shall have the right to participate, including the right to retain its own
counsel at its expense, in such defense (unless the Indemnified Party reasonably
determines that a conflict exists between the interests of the Grantor and the
interests of the Indemnified Party, in which case such independent counsel
selected by the Indemnified Party shall be paid for by the Grantor). Reasonable
counsel and auditor fees, filing fees and court fees of all proceedings,
contests or lawsuits with respect to any such claims or asserted liability shall
be borne by the Grantor and shall be part of the Obligations, except in the case
where the Indemnified Party hires independent counsel without a reasonable
determination that a conflict exists between the interests of the Grantor and
the interests of the Indemnified Party and unless such claims or liability is
caused by the negligence or willful misconduct of the Indemnified Party. If any
such claim is made hereunder and the Grantor does not undertake the defense
thereof, the Indemnified Party shall be entitled to undertake such litigation
and settlement and shall be entitled to indemnity with respect thereto as
provided herein.
Section 6.12. Environmental Matters.
---------------------
Beneficiary or Indenture Trustee, in its sole discretion, may require, as
a prerequisite to the commencement of any proceeding or the exercise of any
remedy with respect to the Mortgaged Property, that it be provided evidence
reasonably satisfactory to Beneficiary or Indenture Trustee that the Mortgaged
Property is not contaminated by Hazardous Materials and that Beneficiary or
Indenture Trustee shall not be subject to any material liability for any
contamination if it undertakes such proceeding or remedy. Beneficiary or
Indenture Trustee shall have the authority (but shall not be required) to (i)
conduct environmental assessments, audits and site monitoring to determine
compliance with Environmental Laws; (ii) take all appropriate remedial action to
contain, clean up and remove any Hazardous Materials either on its own or in
response to an actual violation of any environmental laws or proceeding with
respect thereto; (iii) institute legal proceedings concerning environmental
damage or contest and settle proceedings brought by any local, state or federal
agency litigant; (iv) comply with any local, state or federal agency or court
order directing an assessment, abatement or cleanup of Hazardous Materials; and
(v) employ agents, consultants and legal counsel to assist or perform the above
undertakings or actions. Grantor shall indemnify Beneficiary and Indenture
Trustee for all reasonable costs, expenses and liabilities reasonably incurred
by Beneficiary and
19
<PAGE>
Indenture Trustee in connection with any such undertaking or action unless such
costs, expenses and liabilities are caused by the gross negligence or willful
misconduct of the Beneficiary or the Indenture Trustee.
ARTICLE 7
---------
CONDEMNATION
------------
Section 7.01. General.
-------
Promptly upon its obtaining knowledge of the institution or the threatened
institution of any proceeding for the condemnation of the Mortgaged Property,
Grantor shall notify Indenture Trustee and Beneficiary of such fact. Grantor
shall then, if requested by Beneficiary, file or defend its claim thereunder and
prosecute same with due diligence to its final disposition and shall cause any
awards or settlements to be paid over to Beneficiary for disposition pursuant to
the terms of this Deed of Trust and the Indenture. Grantor may be the nominal
party in such proceeding but Beneficiary shall be entitled to participate in and
to control same and to be represented therein by counsel of its own choice, and
Grantor will deliver or cause to be delivered to Beneficiary such instruments as
may be requested by it from time to time to permit such participation. If the
Mortgaged Property is taken or diminished in value, or if a consent settlement
is entered, by or under threat of such proceeding, the award or settlement
payable to Grantor by virtue of its interest in the Mortgaged Property shall be
paid to Beneficiary to be held by it, subject to the Lien and security interest
of this Deed of Trust, and disbursed pursuant to the terms of the Indenture.
ARTICLE 8
---------
CONCERNING THE DEED TRUSTEE
---------------------------
Section 8.01. No Required Action.
------------------
Deed Trustee shall not be required to take any action toward the execution
and enforcement of the trust hereby created or to institute, appear in or defend
any action, suit or other proceeding in connection therewith where in his
opinion such action will be likely to involve him in expense or liability,
unless requested so to do by a written instrument signed by Beneficiary and, if
Deed Trustee so requests, unless Deed Trustee is tendered security and indemnity
satisfactory to him against any and all costs, expense and liabilities arising
therefrom. Deed Trustee shall not be responsible for the execution,
acknowledgment or validity of this Deed of Trust, or for the proper
authorization thereof, or for the sufficiency of the Lien and security interest
purported to be created hereby, and makes no representation in respect thereof
or in respect of the rights, remedies and recourses of Beneficiary.
20
<PAGE>
Section 8.02. Certain Rights.
--------------
With the approval of Beneficiary, Deed Trustee shall have the right to take
any and all of the following actions: (a) to select, employ and advise with
counsel (who may be, but need not be, counsel for Beneficiary) upon any matters
arising hereunder, including the preparation, execution and interpretation of
this Deed of Trust, and shall be fully protected in relying as to legal matters
on the advice of counsel; (b) to execute any of the trusts and powers hereof and
to perform any duty hereunder either directly or through his agents or
attorneys; (c) to select and employ, in and about the execution of his duties
hereunder, suitable accountants, engineers and other experts, agents and
attorneys-in-fact, either corporate or individual, not regularly in the employ
of Deed Trustee, and Deed Trustee shall not be answerable for any act, default
or misconduct of any such accountant, engineer or other expert, agent or
attorney-in-fact, if selected with reasonable care, or for any error of judgment
or act done by Deed Trustee in good faith, or be otherwise responsible or
accountable under any circumstances whatsoever, except for Deed Trustee's
negligence or bad faith; and (d) to take any and all other lawful action as
Beneficiary may instruct Deed Trustee to take to protect or enforce
Beneficiary's rights hereunder. Deed Trustee shall not be personally liable in
case of entry by him, or anyone entering by virtue of the powers herein granted
him, upon the Mortgaged Property for debts contracted or liability or damages
incurred in the management or operation of the Mortgaged Property. Deed Trustee
shall have the right to rely on any instrument, document or signature
authorizing or supporting any action taken or proposed to be taken by him
hereunder, believed by him in good faith to be genuine. Deed Trustee shall be
entitled to reimbursement for expenses incurred by him in the performance of his
duties hereunder and to reasonable compensation for such of his services
hereunder as shall be rendered. Grantor will, from time to time, pay the
compensation due to Deed Trustee hereunder and reimburse Deed Trustee for, and
save him harmless against, any and all liability and expenses which may be
incurred by him in the performance of his duties other than as a result of Deed
Trustee's negligence or willful misconduct.
Section 8.03. Retention of Moneys.
-------------------
All moneys received by Deed Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
need not be segregated in any manner from any other moneys (except to the extent
required by law) and Deed Trustee shall be under no liability for interest on
any moneys received by him hereunder.
Section 8.04. Successor Deed Trustees.
-----------------------
Deed Trustee may resign by the giving of notice of such resignation in
writing to Beneficiary. If Deed Trustee shall die, resign or become disqualified
from acting in the execution of this trust, or shall fail or refuse to execute
the same when requested by Beneficiary so to do, or if, for any reason,
Beneficiary shall prefer to appoint a substitute trustee to act instead of the
aforenamed Deed Trustee, Beneficiary shall have full power to appoint a
substitute trustee and, if preferred, several substitute trustees in succession
who shall succeed to all the estates, properties, rights, powers and duties of
the aforenamed Deed Trustee. Such appointment may be executed by any authorized
agent of Beneficiary, and if such Beneficiary be a corporation and such
appointment be executed in its behalf by any officer of such corporation,
21
<PAGE>
such appointment shall be conclusively presumed to be executed with authority
and shall be valid and sufficient without proof of any action by the Board of
Directors or any superior officer of the corporation. Grantor hereby ratifies
and confirms any and all acts which the aforenamed Deed Trustee, or his
successor or successors in this trust, shall do lawfully by virtue hereof.
Section 8.05. Perfection of Appointment.
-------------------------
Should any deed, conveyance or instrument of any nature be required from
Grantor by any successor Deed Trustee to more fully and certainly vest in and
confirm to such new Deed Trustee such estates, rights, powers and duties, then,
upon request by such Deed Trustee, any and all such deeds, conveyances and
instruments shall be made, executed, acknowledged and delivered and shall be
caused to be recorded and/or filed by Grantor.
Section 8.06. Succession Instruments.
----------------------
Any new Deed Trustee appointed pursuant to any of the provisions hereof
shall, without any further act, deed or conveyance, become vested with all the
estates, properties, rights, powers and trusts of its or his predecessor in the
rights hereunder with like effect as if originally named as Deed Trustee herein;
but nevertheless, upon the written request of Beneficiary or of the successor
Deed Trustee, the Deed Trustee ceasing to act shall execute and deliver an
instrument transferring to such successor Deed Trustee, upon the trusts herein
expressed, all the estates, properties, rights, powers and trusts of the Deed
Trustee so ceasing to act, and shall duly assign, transfer and deliver any of
the property and moneys held by such Deed Trustee to the successor Deed Trustee
so appointed in its or his place.
Section 8.07. No Representation by Deed Trustee.
---------------------------------
By accepting or approving anything required to be observed, performed or
fulfilled or to be given to Deed Trustee or Beneficiary pursuant to this Deed of
Trust, including but not limited to, any officer's certificate, balance sheet,
statement of profit and loss or other financial statement, survey, appraisal or
insurance policy, neither Deed Trustee nor Beneficiary shall be deemed to have
warranted, consented to, or affirmed 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 be or constitute any warranty,
consent or affirmation with respect thereto by Deed Trustee or Beneficiary.
ARTICLE 9
---------
MISCELLANEOUS
-------------
22
<PAGE>
Section 9.01. Performance at Grantor's Expense.
--------------------------------
The cost and expense of performing or complying with any and all of the
Obligations shall be borne solely by Grantor, and no portion of such cost and
expense shall be, in any way or to any extent, credited against any installment
on or portion of the Obligations.
Section 9.02. Survival of Obligations. Each and all of the Obligations
-----------------------
shall survive the execution and delivery of this Deed of Trust and shall
continue in full force and effect until the Obligations shall have been paid in
full.
Section 9.03. Further Assurances.
------------------
Grantor, upon the request of Deed Trustee or Indenture Trustee or
Beneficiary, will execute, acknowledge, deliver and record and/or file such
further instruments and do such further acts as may be reasonably necessary,
desirable or proper to carry out more effectively the purpose of this Deed of
Trust and to subject to the Liens and security interests thereof any property
intended by the terms thereof to be covered thereby, including specifically but
without limitation, any renewals, additions, substitutions, replacements,
betterments or appurtenances to the then Mortgaged Property.
Section 9.04. Notices.
-------
All notices or other communications required or permitted to be given
pursuant to this Deed of Trust shall be in writing and shall be considered as
properly given if mailed by first-class United States mail, postage prepaid,
registered or certified with return receipt requested, or by delivering same in
person to the intended addressee or by prepaid telegram. Notice so mailed shall
be effective upon its deposit. Notice given in any other manner shall be
effective only if and when received by the addressee. For purposes of notice,
the addresses of Beneficiary and Grantor shall be as set forth for each party on
the signature page hereof; provided, however, that either party shall have the
-------- -------
right to change its address for notice hereunder to any other location within
the continental United States by the giving of thirty (30) days' notice to the
other party in the manner set forth above.
Section 9.05. No Waiver.
---------
Any failure by Deed Trustee or Indenture Trustee or Beneficiary to insist,
or any election by Deed Trustee or Indenture Trustee or Beneficiary not to
insist, upon strict performance by Grantor of any of the terms, provisions or
conditions of this Deed of Trust shall not be deemed to be a waiver of same or
of any other terms, provision or condition thereof and Deed Trustee or Indenture
Trustee or Beneficiary shall have the right at any time or times thereafter to
insist upon strict performance by Grantor of any and all of such terms,
provisions and conditions.
23
<PAGE>
Section 9.06. Beneficiary's Right to Perform the Obligations.
----------------------------------------------
If Grantor shall fail, refuse or neglect to make any payment or perform
any act required by this Deed of Trust, then at any time thereafter, and without
notice to or demand upon Grantor and without waiving or releasing any other
right, remedy or recourse Beneficiary may have because of same, Beneficiary may
(but shall not be obligated to) make such payment or perform such act for the
account of and at the expense of Grantor, and shall have the right to enter upon
or in the Land and Buildings for such purpose and to take all such action
thereon and with respect to the Mortgaged Property as it may deem reasonably
necessary or appropriate. If Beneficiary shall elect to pay any Imposition or
other sums due with reference to the Mortgaged Property, Beneficiary may do so
in reliance on any bill, statement or assessment procured from the appropriate
Governmental Authority or other issuer thereof without inquiring into the
accuracy or validity thereof. Similarly, in making any payments to protect the
security intended to be created by this Deed of Trust, Beneficiary shall not be
bound to inquire into the validity of any apparent or threatened adverse title,
Lien, encumbrance, claim or charge before making an advance for the purpose of
preventing or removing the same. Grantor shall indemnify Beneficiary for all
losses, expenses, damage, claims and causes of action, including reasonable
attorneys' fees, incurred or accruing by reason of any acts performed by
Beneficiary pursuant to the provisions of this Section 9.06 or by reason of any
------------
other provision in this Deed of Trust unless such losses, expenses, damage,
claims or causes of action are caused by Beneficiary's negligence or willful
misconduct. All sums paid by Beneficiary pursuant to this Section 9.06 and all
------------
other sums expended by Beneficiary to which it shall be entitled to be
indemnified, together with interest thereon Post-Default Rate from the date of
such payment or expenditure, shall constitute additions to the Obligations,
shall be secured by this Deed of Trust and shall be paid by Grantor to
Beneficiary upon demand.
Section 9.07. Covenants Running with the Land.
-------------------------------
All Obligations contained in the Notes and the Collateral Documents are
intended by the parties to be, and shall be construed as, covenants running with
the Mortgaged Property.
Section 9.08. Successors and Assigns.
----------------------
All of the terms hereof shall apply to, be binding upon and inure to the
benefit of the parties hereto, their successors, assigns, heirs and legal
representatives, and all other persons claiming by, through or under them.
Section 9.09. Severability.
------------
This Deed of Trust is intended to be performed in accordance with, and only
to the extent permitted by, all applicable laws and regulations of applicable
Governmental Authorities. If any provision of any of this Deed of Trust or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable neither the remainder of the instrument
in which such provision is contained nor the application of such provision to
other persons or circumstances nor the other instruments referred to shall be
affected thereby, but rather shall be enforced to the greatest extent permitted
by law.
24
<PAGE>
Section 9.10. Modification.
------------
This Deed of Trust may not be amended, revised, waived, discharged,
released or terminated orally, but only by a written instrument or instruments
executed by the party against which enforcement of the amendment, revision,
waiver, discharge, release or termination is asserted. Any alleged amendment,
revision, waiver, discharge, release or termination which is not so documented
shall not be effective as to any party.
Section 9.11. Counterparts.
------------
This Deed of Trust may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute but one
instrument.
Section 9.12. Applicable Law.
--------------
THIS DEED OF TRUST SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS
OF THE JURISDICTION WHERE THE MORTGAGED PROPERTY IS LOCATED.
Section 9.13. Subrogation.
-----------
If any or all of the proceeds of the Notes have been used to extinguish,
extend or renew any indebtedness heretofore existing against the Mortgaged
Property, then, to the extent of such funds so used, the Obligations and this
Deed of Trust shall be subrogated to all of the rights, claims, Liens, titles
and interests (herein collectively referred to as the "Prior Liens") heretofore
-----------
existing against the Mortgaged Property to secure the indebtedness so
extinguished, extended or renewed and the Prior Liens, if any, are not waived
but rather are continued in full force and effect in favor of Beneficiary and
are merged with the Lien and security interest created herein as cumulative
security for the repayment of the Obligations and the satisfaction of the
Obligations. Foreclosure of the Liens created by this Deed of Trust shall also
constitute foreclosure of the Prior Liens; provided, however, if, as a matter of
--------- -------
law, foreclosure under this Deed of Trust may not also constitute the
foreclosure of the Prior Liens, then notwithstanding a foreclosure under this
Deed of Trust, Beneficiary, Deed Trustee, and Indenture Trustee shall have, and
they hereby reserve, all rights with respect to and the Prior Liens, including
without limitation, the right after foreclosure under this Deed of Trust to seek
a judicial foreclosure of any of the Prior Liens.
Section 9.14. No Partnership.
--------------
Nothing contained in this Deed of Trust is intended to, or shall be
construed as, creating to any extent and in any manner whatsoever, any
partnership, joint venture, or association between Grantor, Deed Trustee,
Indenture Trustee, Beneficiary and any holder of the Notes, or in any way make
Beneficiary or Deed Trustee, Indenture Trustee or any holder of the Notes, co-
principals with Grantor with reference to the Mortgaged Property, and any
inferences to the contrary are hereby expressly negated.
25
<PAGE>
Section 9.15. Headings.
--------
The Article, Section and Subsection entitlements hereof are inserted for
convenience of reference only and shall in no way alter, modify or define, or be
used in construing, the text of such Articles, Sections or Subsections.
Section 9.16. Leasehold Provisions.
--------------------
(a) Grantor has entered into that certain Ground Lease dated as of October
11, 1993, executed by R.M. Leatherman and Hugh M. Magevney, III (collectively,
together with any successor, "Lessor") and Grantor, as Lessee, covering the
------
premises (the "Lease", which term shall include any and all amendments and
-----
renewals of said lease). Grantor will at all times fully perform and comply in
all material respects with all agreements, covenants, terms and conditions
imposed upon or assumed by it as lessee under the Lease and Grantor further
covenants that it will not do or permit anything to be done, the doing of which,
or refrain from doing anything, the omission of which, will impair or would
reasonably be expected to impair the security of this Deed of Trust. If Grantor
shall fail so to do Beneficiary may (but shall not be obligated to) take any
action Beneficiary deems reasonably necessary or desirable to prevent or to cure
any default by Grantor in the performance of or compliance with any of Grantor's
covenants or obligations under said Lease after reasonable prior notice to
Grantor. Upon receipt by Beneficiary from the Lessor of any written notice of
default by the lessee thereunder, Beneficiary may rely thereon and take any
action as aforesaid after reasonable prior notice to Grantor to cure such
default even though the existence of such default or the nature thereof be
questioned or denied by Grantor or by any party on behalf of Grantor. Grantor
hereby expressly grants to Beneficiary, and agrees that Beneficiary shall have,
the absolute and immediate right to enter in and upon the real property
described herein or any part thereof to such extent and as often as Beneficiary
in its sole discretion deems reasonably necessary or desirable in order to
prevent or to cure any such default by Grantor. Beneficiary may pay and expend
such sums of money as Beneficiary in its sole discretion deems reasonably
necessary for any such purpose, and Grantor hereby agrees to pay to Beneficiary,
immediately and without demand, all such sums so paid and expended by
Beneficiary, together with interest thereon from the date of each such payment
at the Post-Default Rate. All sums so paid and expended by Beneficiary and the
interest thereon shall be added to and be secured by the Lien of this Deed of
Trust.
(b) Except as permitted by the Indenture, Grantor will not surrender the
leasehold estate and interest hereinabove described or terminate or cancel the
Lease. If the Lease is for any reason terminated prior to the natural expiration
of its term, and if, pursuant to any provision of the Lease or otherwise,
Beneficiary or its designee shall acquire from the Lessor a new lease of all of
any portion of the Land, Grantor shall have no right, title or interest in or to
such new lease or the leasehold estate created thereof.
(c) Beneficiary, by accepting this Deed of Trust, consents to the terms
and provisions of the Lease, and the rights, titles and interests created in
favor of the lessor thereunder shall not constitute a default under any
provisions of this Deed of Trust.
26
<PAGE>
(d) Except as specifically provided in the Indenture, and as would not be
adverse in any material respect to Beneficiary or the holders of the Notes,
Grantor also covenants that it will not waive, modify or in any way alter the
material terms of the Lease or cancel or surrender the Lease, or waive, excuse,
condone or in any way release or discharge Lessor of or from the material
obligations, covenants, conditions and agreements to be done and performed by
Lessor under the terms of the Lease; and Grantor does by these presents
expressly release, relinquish and surrender unto Beneficiary all its right,
power and authority to cancel, surrender, amend, modify, waive or alter in any
material way the terms and provisions of the Lease and any attempt on the part
of Grantor to exercise any such right without the written authority and consent
of Beneficiary thereto being first had and obtained (which consent shall not
unreasonably be withheld, conditioned or delayed) shall constitute an Event of
Default hereunder.
(e) Grantor hereby covenants (i) to give Beneficiary prompt notice in
writing of any receipt by it of any notice of default from Lessor; (ii) to
furnish to Beneficiary any and all information which it may reasonably request
concerning the performance by Grantor of the material covenants imposed on
Grantor under the Lease promptly after such request; and (iii) to permit
forthwith Beneficiary or its representative at all reasonable times on
reasonable notice and so long as the same shall not unreasonably interfere with
the use or business at the Mortgaged Property by Grantor, to make investigation
or examination concerning such performance.
(f) The following shall apply to any proceeding (a "Bankruptcy") under
----------
the Federal Bankruptcy Code or comparable law ("Bankruptcy Law") in which Lessor
--------------
is the debtor:
(i) Grantor shall notify Beneficiary promptly after learning of the
commencement or threat of commencement of any Bankruptcy affecting
Lessor. Grantor promptly shall deliver to Beneficiary copies of any
and all material notices, summonses, pleadings, applications, and
other documents that Grantor receives in connection with any such
Bankruptcy and any related proceedings.
(ii) If Lessor rejects or disaffirms, or seeks or purports
to reject or disaffirm, the Lease pursuant to any Bankruptcy Law, then
Grantor shall not exercise its right to treat the Lease as terminated
under (S) 365(h) of the Federal Bankruptcy Code or any similar
Bankruptcy Law, or any comparable right provided under any other
Bankruptcy Law without Beneficiary's prior written consent, such
consent not to be unreasonably withheld. Grantor's right under such
circumstances to elect either to treat the Lease as terminated or to
retain its rights under the Lease pursuant to Section 365(h) of the
Federal Bankruptcy Code or any similar Bankruptcy Law, or any
comparable right provided under any other Bankruptcy Law, shall be
hereinafter referred to as the "365(h) Election".
(iii) Unless Beneficiary directs otherwise in writing, Grantor shall
exercise the 365(h) Election in favor of Grantor's remaining in
possession under the Lease at least five (5) Business Days prior to
the last day on which the 365(h) Election may be exercised. Grantor
hereby constitutes and appoints Beneficiary the true and lawful
attorney-in-fact, coupled with an interest, of Grantor, empowered and
authorized in the name, place and stead of Grantor to exercise the
365(h) Election in favor of Grantor's remaining in possession under
the Lease in the event Grantor fails to do so within the time period
set forth above. The foregoing appointment is
27
<PAGE>
irrevocable and continuing and such rights, powers and privileges
shall be exclusive in Beneficiary, its successors and permitted
assigns, so long as any part of the Obligations secured hereby remain
unpaid or undischarged. Grantor acknowledges that Grantor's resulting
occupancy and other rights, as adjusted by the effect of Federal
Bankruptcy Code Section 365, are part of the Mortgaged Property and
subject to the Lien of this Deed of Trust. Grantor further
acknowledges that exercise of the 365(h) Election in favor of
terminating the Lease would constitute waste prohibited by this Deed
of Trust unless Beneficiary shall have consented to such termination,
such consent not to be unreasonably withheld. Grantor acknowledges and
agrees that the 365(h) Election is in the nature of a remedy available
to Grantor under the Lease and is not a property interest that Grantor
can separate from the Lease as to which it arises. Therefore, Grantor
agrees and acknowledges that exercise of the 365(h) Election in favor
of preserving the right to possession under the Lease shall not be
deemed to constitute Beneficiary's taking or sale of the Mortgaged
Property (or any element thereof) and shall not entitle Grantor to any
credit against the Obligations secured hereby or otherwise impair
Beneficiary's remedies hereunder or under the Indenture.
(iv) If Lessor rejects or disaffirms the Lease or purports or seeks
to disaffirm the Lease pursuant to any Bankruptcy Law, then: (1)
Grantor shall remain in possession of the premises demised under the
Lease and shall perform all acts necessary for Grantor to remain in
such possession for the unexpired term of the Lease (including all
renewals available at the sole option of Grantor); and (2) all terms
and provisions of this Deed of Trust and the Lien created hereby shall
remain in full force and effect and shall extend automatically to all
of Grantor's rights and remedies arising at any time under, or
pursuant to, Federal Bankruptcy Code (S) 365(h), including all of
Grantor's rights to remain in possession of the premises demised under
the Lease.
(v) Following the occurrence and during the continuance of an Event
of Default, if pursuant to Federal Bankruptcy Code (S) 365(h), or any
other similar Bankruptcy Law, Grantor seeks to offset against rent
owing under the Lease ("Ground Rent") the amount of any claim for the
-----------
payment of damages from Lessor's failure to perform under the Lease,
or rejection of the Lease under any Bankruptcy Law (a "Lease Damage
------------
Claim"), then Grantor shall notify Beneficiary of its intent to do so
-----
at least twenty (20) days before effecting such offset. Such notice
shall set forth the amounts proposed to be so offset and the basis for
such offset. If Beneficiary reasonably believes that such offset is
likely to materially adversely affect the security interest of
Beneficiary in the Lease or otherwise materially adversely affect the
Mortgaged Property, Beneficiary may object to all or any part of such
offset, in which event Grantor shall not effect any offset of the
amounts to which Beneficiary objects. If Beneficiary fails to object
within such twenty (20) day period to such offset, then Grantor may
effect such offset as set forth in Grantor's notice. Grantor shall
indemnify Beneficiary against any loss or damage suffered by
Beneficiary with respect to any offset by Grantor against Ground Rent,
except to the extent of any loss or damage resulting from
Beneficiary's gross negligence or willful misconduct.
(g) Grantor hereby irrevocably appoints Beneficiary, during the
existence of an Event of Default, as its true and lawful attorney-in-fact, to
do, in its name or otherwise, any and all acts and to execute any and all
documents which are necessary to preserve any rights of Beneficiary
28
<PAGE>
under or with respect to the Lease, including, without limitation, the right to
effect any extension or renewal of the Lease, or to preserve any rights of
Beneficiary whatsoever in respect of any part of the Lease (and the above powers
granted to Beneficiary are coupled with an interest and shall be irrevocable.)
The generality of the provisions of this Section 9.16 relating to the Lease
------------
shall not be limited by other provisions of this Deed of Trust and the Indenture
setting forth particular obligations of Grantor which are also required of
Grantor with respect to the Lease, the Improvements, or the Land.
Section 9.17. Gaming Authorities.
------------------
Each of the provisions of this Deed of Trust is subject to, and shall be
enforced in compliance with, the requirements of the Gaming Authorities.
Section 9.18. Indenture.
---------
This Deed of Trust is subject to the terms, conditions and provisions of
the Indenture. To the extent a term or provision of this Deed of Trust conflicts
with the Indenture, the Indenture shall control with respect to the subject
matter of such term or provision.
Section 9.19. Rights of Holders.
-----------------
No Holder shall have any independent rights hereunder other than those
rights granted to individual Holders pursuant to Section 6.07 of the Indenture;
provided that nothing in this Section 9.19 shall limit any rights granted to the
- -------- ----
Indenture Trustee under the Notes, the Indenture or the Collateral Documents.
Section 9.20. No Personal Liability of Directors, Officers, Employees and
-----------------------------------------------------------
Stockholders.
- ------------
No past, present or future director, officer, employee, incorporator or
stockholder of the Grantor as such or any successor Person, as such, shall have
any liability for any obligations of the Grantor under this Deed of Trust or for
any claim based on, in respect of, or by reason of, such obligations or their
creation.
Section 9.21. Exculpation Provisions.
----------------------
EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ
THIS DEED OF TRUST, AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF
THE TERMS OF THIS DEED OF TRUST; THAT IT HAS IN FACT READ THIS DEED OF TRUST AND
IS FULLY INFORMED AND HAS FULL
29
<PAGE>
NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS DEED OF TRUST;
THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE
THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS DEED OF TRUST, AND
HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS DEED OF TRUST; AND
THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS DEED OF TRUST RESULT IN ONE
PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND
RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY
HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR
ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS DEED OF TRUST ON THE BASIS
THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE
PROVISION IS NOT "CONSPICUOUS."
Section 9.22. Fraudulent Conveyance Savings Clause.
------------------------------------
Notwithstanding any provision of this Deed of Trust to the contrary, it is
intended that neither this Deed of Trust nor any Lien granted by Grantor to
secure the Obligations shall constitute a "Fraudulent Conveyance" (as defined
below). Consequently, Grantor agrees that if the Deed of Trust, or any Liens
securing this Deed of Trust, would, but for the application of this sentence,
constitute a Fraudulent Conveyance, this Deed of Trust and each such Lien shall
be valid and enforceable only to the maximum extent that would not cause this
Deed of Trust or such Lien to constitute a Fraudulent Conveyance, and this Deed
of Trust shall automatically be deemed to have been amended accordingly at all
relevant times. For purposes hereof, a "Fraudulent Conveyance" means a
fraudulent conveyance under Section 548 of the Bankruptcy Code (or any successor
section) or a fraudulent conveyance or fraudulent transfer under the provisions
of any applicable fraudulent conveyance or fraudulent transfer law or similar
law of any state, nation or other governmental unit, as in effect from time to
time.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
WITNESS THE EXECUTION HEREOF as of the date first above written.
GRANTOR:
HWCC-TUNICA, INC.
Address of Grantor/Debtor is: By: /s/ William D. Pratt
Two Galleria Tower, Suite 2200 ----------------------
13455 Noel Road, LB48 Executive Vice President
Dallas, Texas 75240 General Counsel and
Telephone: (972) 716-3809 Secretary
Address of Beneficiary is:
Two International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Administration
Telephone: (617) 664-5219
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF LAKE )
Personally appeared before me, the undersigned authority in and for said
County and State on this _______ day of May, 1999, within my jurisdiction, the
within named Paul C. Yates, who acknowledged that he is Executive Vice President
and Chief Financial Officer of Hollywood Casino Corporation, a Delaware
corporation, and that for and on behalf of said corporation and as its act and
deed, he executed the above and foregoing instrument, after first having been
duly authorized by said corporation to do so.
(Seal) /s/ Joyce A. Kiel
--------------------
Notary Public in and for
The State of Illinois
County of Lake
My Commission Expires: 3/12/2002
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
TRACT A.
Being a part of the R.M. Leatherman and Hugh M. Magevney, III property, located
in the Northeast Quarter (NE 1/4) and the North Half of the Southeast Quarter
(N 1/2 SE 1/4) of Section Twenty-Four (24), Township Three (3) South, Range
Twelve (12) West, Tunica County, Mississippi and being more particularly
described as follows:
Commencing at a point on the North line of said Section Twenty-Four (24), said
point being North 89 degrees 44 minutes 19 seconds East of distance of 5,258.24
feet from a found concrete monument at the Northwest corner of said Section
Twenty-Four (24); thence South 01 degree 16 minutes 10 seconds West a distance
of 48.02 feet to a point, said point being 48.00 feet South of and parallel to
the North line of said Section Twenty-Four (24), said point being the Point of
Beginning of the tract herein described;
Thence continuing South 01 degree 16 minutes 10 seconds West a distance of
2,990.50 feet to a found iron pin; thence North 85 degrees 51 minutes 27 seconds
West a distance of 1,408.66 feet to a found iron pin; thence North 00 degrees 00
minutes 54 seconds West a distance of 1,184.64 feet to a found iron pin at the
Southeast corner of a parcel of land leased to Biloxi Casino Belle Incorporated
as recorded in Book Z-4, page 001 at the Tunica County Chancery Court Clerk's
Office; thence North 39 degrees 11 minutes 16 seconds East along the East line
of the Biloxi Casino Belle Incorporated lease parcel a distance of 2,197.18 feet
to a point, said point being 48.00 feet South of and parallel to the North line
of said Section Twenty-Four (24); thence North 89 degrees 44 minutes 19 seconds
East a distance of 83.21 feet to the Point of Beginning, and containing 69.929
acres, more or less.
TRACT B
Being a part of the R.M. Leatherman and Hugh M. Mageveny, III property located
in the North Half (N1/2) of Section Twenty-four (24) and in the Northeast
Quarter (NE1/4) of the Northeast Quarter (NE1/4) of Section (23) and in
fractional Section Fourteen (14), all in Township Three (3) South, Range Twelve
(12) West, Tunica County, Mississippi, and being more particularly described as
follows:
Beginning at a point on the North line of said Section Twenty-Four (24), said
point being North 89 degrees 44 minutes 19 seconds East a distance of 5,218.24
feet from a found concrete monument at the Northwest corner of Section
Twenty-Four (24); thence North 89 degrees 41 minutes 49 seconds East and
continuing along the North line of said Section Twenty-Four (24) for 45.00 feet
to a point; thence South 00 degrees 00 minutes 00 seconds East for 1,120.12 feet
to the Point of Beginning of the tract herein described.
Thence South 00 degrees 00 minutes 00 seconds East for 190.75 feet to a point;
Thence North 88 degrees 48 minutes 03 seconds West for 193.62 feet to a point;
Thence North 68 degrees 40 minutes 34 seconds West for 606.87 feet to a point;
Thence North 65 degrees 38 minutes 09 seconds West for 613.65 feet to a point;
Thence North 65 degrees 19 minutes 08 seconds West for 1,083.49 feet to a point;
Thence North 69 degrees 18 minutes 21 seconds West for 539.83 feet to a point;
Thence North 63 degrees 20 minutes 00 seconds West for 634.33 feet to a point;
Thence North 65 degrees 24 minutes 26 seconds West for 641.41 feet to a point on
the Eastern top bank revetment of the Mississippi River, as it exists today;
Thence North 58 degrees 52 minutes 07 seconds East along the said Eastern top
bank revetment of the Mississippi River for 108.91 feet to a point;
Thence North 44 degrees 58 minutes 31 seconds East and continuing along the said
Eastern top bank revetment of the Mississippi River for 95.28 feet to a point;
Thence South 65 degrees 16 minutes 09 seconds East for 546.04 feet to a point;
Thence South 63 degrees 19 minutes 02 seconds East for 612.80 feet to a point
(said pint being South 45 degrees 00 minutes 00 seconds West from the concrete
monument representing the Northwest corner of Section Twenty-Four (24), Township
Three (3) South, Range Twelve (12) West, Tunica County, Mississippi.)
Thence South 72 degrees 33 minutes 04 seconds East for 291.23 feet to a point:
Thence South 65 degrees 21 minutes 03 seconds East for 1,352.15 feet to a point:
Thence South 67 degrees 26 minutes 32 seconds East for 1,162.40 feet to a point;
Thence South 88 degrees 23 minutes 22 seconds East for 173.28 feet to the said
Point of Beginning, containing 17.75 acres, more or less.
Bearings in the above description have an origin of True North based on
computation from celestial observations.
<PAGE>
Exhibit B
Permitted Encumbrances
----------------------
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09
of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
<PAGE>
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of business and consistent with industry practices and Liens on deposits
made to obtain the release of such Liens if:
(a) the underlying Obligations are not overdue for a period of more than
60 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings by the Company and adequate reserves with respect thereto
are maintained on the books of the Company in accordance with GAAP,
and
(c) the Company is in compliance with the terms of the security documents
applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
or other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that do not
exceed Five Million Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and Social
Security benefits.
<PAGE>
EXHIBIT 4.9
FIRST PREFERRED SHIP MORTGAGE
Made by
HWCC-TUNICA, INC.
In Favor of
STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE
ON
THE HOLLYWOOD-TUNICA
Dated as of May 19, 1999
<PAGE>
HWCC-Tunica, Inc.
First Preferred Ship Mortgage
- -----------------------------
Mortgagor: HWCC-Tunica, Inc.
Two Galleria Tower, Suite 2200 13455
Noel Road, LB48
Dallas, Texas 75201
Mortgagor's Interest in the Vessel: 100%
Mortgagee: State Street Bank and Trust Company, as Trustee
Corporate Trust Administration
Two International Place, 4th Floor
Boston, Massachusetts 02110
Mortgagee's Interest in the Vessel: 100%
Amount of Mortgage: $360,000,000.00
Maturity Date: May 1, 2007
THIS FIRST PREFERRED SHIP MORTGAGE, dated as of the 19th day of May, 1999,
(as amended, supplemented or otherwise modified from time to time, the
"Mortgage") is made and given by HWCC-TUNICA, INC., a Texas corporation, (the
--------
"Mortgagor"), whose address is set forth above, to STATE STREET BANK AND TRUST
- ----------
COMPANY, as Trustee for any and all future holders of the Notes (as such term is
hereinafter defined), whose address is set forth above (hereinafter referred to,
together with its successors and assigns, as the "Mortgagee" or the "Trustee").
--------- -------
1
<PAGE>
RECITALS
--------
A. Hollywood Casino Corporation (the "Borrower"), the Mortgagor, HWCC-
--------
Shreveport, Inc. and the Mortgagee have entered into an Indenture dated as of
May 19, 1999 (as the same may be amended, supplemented, restated or otherwise
modified from time to time, the "Indenture") pursuant to which the Borrower will
---------
issue up to (i) $310,000,000 of its 11 1/4% Series A and Series B Senior Secured
Notes due 2007 and (ii) $50,000,000 of its Floating Rate Series A and Series B
Senior Secured Notes due 2006 (as the same may be amended, supplemented,
restated, exchanged, replaced or otherwise modified from time to time, the
"Notes"). Mortgagor acknowledges that the Mortgagor will derive substantial
-----
benefits from the transactions contemplated herein and in the Indenture.
B. The Trustee has requested pursuant to the terms of the Indenture that
Mortgagor execute and deliver this Mortgage, and Mortgagor has agreed to enter
into this Mortgage on the Hollywood-Tunica (Official Number 534006) (the
"Vessel").
------
C. Now, therefore, to induce the Trustee to execute the Indenture, in
consideration of the premises and of other valuable consideration, receipt of
which is hereby acknowledged, Mortgagor hereby agrees as follows:
ARTICLE I.
---------
GRANTING CLAUSE AND DEFINITIONS
-------------------------------
Section 1.1. Granting Clause.
---------------
To secure the full and timely payment of and the full and timely
performance and discharge of the Obligations (as hereinafter defined), the
Mortgagor has granted, conveyed, mortgaged, pledged, assigned, transferred, set
over and confirmed and by these presents does grant, convey, mortgage, pledge,
assign, transfer, set over and confirm unto the Mortgagee, its successors and
assigns, the following:
The whole of the Vessel, duly documented in the name of the Mortgagor
under the laws of the United States, together with all equipment, parts and
accessories integral to the operation of the Vessel as a vessel, including, but
not limited to, all of its boilers, engines, generators, air compressors,
machinery, masts, spars, sails, riggings, boats, anchors, cables, chains,
tackle, tools, pumps and pumping equipment, motors, apparel, furniture, computer
equipment, electronic equipment used in connection with the operation of the
Vessel and belonging to the Vessel, all machinery, equipment, engines,
appliances and fixtures for generating or distributing air, water, heat,
electricity, light, fuel or refrigeration, or for ventilating or sanitary
purposes, fittings and equipment, supplies, spare parts, fuel, and all other
appurtenances thereunto appertaining or belonging, whether now owned or
hereafter acquired, whether or not on board said Vessel, and all extensions,
additions, accessions, improvements, renewals, substitutions, and replacements
hereafter made in or to said Vessel or any part thereof, or in or to any said
appurtenances (the term "Vessel" as used herein being inclusive of all of the
foregoing; provided that the foregoing shall not include any property which is
--------
not a "vessel" within the meaning of 46 U.S.C.(S) 31322(a); and provided
--------
further, that if any determination is made at any time that for any reason this
Mortgage does include any property which is not a "vessel" within the meaning of
46 U.S.C.
2
<PAGE>
(S) 31322(c)(i), then such property may be separately discharged from the Lien
of this Mortgage (but not the Lien of any other security instruments) by the
payment by the Mortgagor to the Trustee (for application to the Notes of .01% of
the total amount set forth in Section 6.1 to be applied in the manner set forth
in the Indenture);
TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee, its successors and assigns, forever upon the terms
herein set forth;
PROVIDED, HOWEVER, and these presents are on the condition that if the
Obligations are paid and performed in accordance with the terms thereof and this
Mortgage, then these presents and the estates and rights hereunder shall cease,
terminate and be void, otherwise to be and remain in full force and effect.
Section 1.2. Definitions.
-----------
As used in this Mortgage, the terms "Mortgage", "Mortgagor", "Mortgagee",
-------- --------- ---------
"Borrower", "Trustee", "Indenture", "Notes", and "Vessel" shall have the
-------- ------- --------- ----- ------
meanings assigned to them in the recitals hereto. Any capitalized term used in
this Mortgage and not defined herein shall have the meaning assigned to such
term in the Indenture. As used herein, the following terms shall have the
following meanings:
"Event of Loss" shall have the meaning set forth in Section 2.4 hereof.
-------------
"Event of Default" shall have the meaning set forth in Section 3.1 hereof.
----------------
"Obligations" shall mean (i) the payment when due of indebtedness
-----------
evidenced by the Notes in the principal sum not to exceed at any time
outstanding of $360,000,000, interest (including post-petition interest) as set
forth in the Indenture and the Notes, and premiums, penalties, and late charges
thereon; (ii) all other indebtedness and other sums (including, without
limitation, all expenses, attorneys' fees, other fees, indemnifications,
reimbursements, damages, other monetary liabilities, and other charges) and
obligations that may or shall become due hereunder or under the Notes, the
Guarantees, the Indenture or the other Collateral Documents; and (iii) any and
all renewals, modifications, amendments, extensions for any period, supplements
and restatements of any of the foregoing.
"Permitted Encumbrances" shall mean the items on Exhibit A hereto.
----------------------
ARTICLE II.
----------
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
In order to induce the Mortgagee to accept this Mortgage as collateral
security for the Obligations, the Mortgagor represents and warrants to the
Mortgagee and covenants and agrees with the Mortgagee that:
Section 2.1. Legal Existence; Citizenship Authorization.
------------------------------------------
3
<PAGE>
The Mortgagor is a corporation duly organized and validly existing under
the laws of the State of Texas; and except as permitted by the Indenture, shall
maintain its corporate existence during the term of this Mortgage; and the
Mortgagor is and will continue to be a citizen of the United States within the
meaning of Section 2 of the Shipping Act of 1916, as amended, and is duly
qualified to engage in the trade in which the Vessel operates. The Mortgagor is
duly authorized to mortgage the Vessel, and all corporate action necessary and
required by law for the execution and delivery of this Mortgage has been duly
and effectively taken by it, and this Mortgage is the valid and enforceable
obligation of the Mortgagor, except that (a) the enforceability of any rights to
indemnity and contribution hereunder may be limited by federal or state
securities laws or principles of public policy, (b) enforceability hereof may be
subject to applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and (c) the enforceability hereof may be subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). All necessary consents and approvals of any
Governmental Authority or any other entity to the entering into and performance
of this Mortgage have been duly obtained or given and the entering into and
performance of this Mortgage does not and will not contravene the terms of or
constitute a default under (with or without giving of notice or lapse of time or
both) any material agreement, instrument or document to which the Mortgagor is a
party or by which it or its properties are bound or affected after giving effect
to the use of the proceeds of the Notes.
Section 2.2. Ownership of Vessel; Warranty and Defense of Title.
--------------------------------------------------
Except as set forth on Schedule 2.2 hereto, the Mortgagor is the sole
owner of the whole of the Vessel and is lawfully possessed of the whole of the
Vessel, free from any Lien whatsoever other than the Lien of this Mortgage and
the Liens permitted by Section 2.6 hereof, and the Mortgagor will warrant and
defend the title to and possession of the Vessel and every part thereof for the
benefit of the Mortgagee against the claims and demands of all other persons
whomsoever, subject to the Liens and other matters not prohibited by the
Indenture or this Mortgage.
Section 2.3. Compliance with Laws.
--------------------
(a) Documentation. The Vessel is, and during the term of this
-------------
Mortgage shall continue to be, duly and lawfully registered under the laws and
flag of the United States, and the Mortgagor will comply with and satisfy all of
the provisions of the laws of the United States in order that the Vessel shall
continue to be documented pursuant to the laws of the United States as a vessel
of the United States under the United States flag with such endorsements as
shall qualify the Vessel for participation in the trades and services to which
it may be dedicated from time to time.
(b) Title 46. The Mortgagor will, at its expense and at no cost
--------
to the Mortgagee, comply with and satisfy all the provisions of Chapters 301 and
313 of Title 46 of the United States Code, as amended, in order to establish,
record and maintain this Mortgage as a first preferred ship mortgage thereunder
upon the Vessel. This Mortgage is in substantial compliance with the conditions
and requirements contained in Section 31321 of Title 46 of the United States
Code.
4
<PAGE>
(c) Laws, Treaties and Conventions. The Vessel shall, and the
------------------------------
Mortgagor covenants that it will in the operation of the Vessel, at all times
comply in all material respects with all applicable laws, treaties and
conventions and rules and regulations issued thereunder, and shall have on board
as and when required thereby valid certificates showing compliance therewith,
except when (i) the use or title of the Vessel has been taken, requisitioned or
chartered by any Governmental Authority, (ii) there has been actual or
constructive total loss or an agreed or compromised total loss of the Vessel, or
damage to the Vessel to the extent, determined in the good faith opinion of the
Mortgagor, as would make repair thereof uneconomical, or (iii) the Vessel has
been laid up and removed from service and the Mortgagor has taken adequate
precautions for the preservation and maintenance of the Vessel.
Section 2.4. Operation of Vessel.
-------------------
The Mortgagor will not (except during any period when the use or title to
the Vessel has been taken, requisitioned or chartered by any Governmental
Authority) cause or permit the Vessel to be operated in any manner contrary to
applicable law or regulation, will not abandon the Vessel in any foreign port
(unless an Event of Loss (as hereinafter defined) has occurred as to the Vessel
or the safety or welfare of the Mortgagor's employees on the Vessel is
endangered), will not engage in any unlawful trade, violate any law or carry any
cargo that will expose the Vessel to penalty, forfeiture or capture and will not
do, or suffer or permit to be done, anything which can or may injuriously affect
the documentation of the Vessel under the existing laws and regulations of the
United States of America. Mortgagor shall keep the operation of the Vessel
within the permitted navigational limits set forth in the trading warranties of
the policies of insurance covering the Vessel and in any case will not operate
the Vessel, or permit the Vessel to be operated, in any area where such
insurance would not be fully applicable and enforceable with respect to the
Vessel and its operation.
"Event of Loss" shall mean any one of the following events: (i) actual
-------------
total loss or destruction of the Vessel or any accident, occurrence or event
resulting in a constructive total loss or an agreed or compromised total loss of
the Vessel; or (ii) substantial damage to the Vessel, the repair of which is
uneconomical, including, but not limited to, any event pursuant to which
insurance proceeds are available which are not applied to repair the Vessel or
any other event resulting for any reason whatsoever in the Vessel being
permanently rendered unfit for normal use; or (iii) the condemnation,
confiscation, acquisition, seizure, detention, forfeiture, purchase or other
taking of title to or use of the Vessel (unless in the case of a requisition,
seizure, detention, or forfeiture, such action is revoked within ninety (90)
days) except the requisition of the use of the Vessel by any United States'
Governmental Authority on a basis not involving requisition of title to or
seizure or forfeiture of the Vessel.
Section 2.5. Claims, Taxes, Fees, etc. The Mortgagor will pay and
------------------------
discharge or cause to be paid and discharged prior to delinquency, all claims
against, and fees, taxes, assessments, governmental charges, fines and penalties
imposed on, the Vessel, its cargoes or any income therefrom; provided, that
--------
nothing in this Section 2.5 shall require the Mortgagor to pay any such claim,
fee, tax, assessment, governmental charge, fine or penalty so long as the
validity thereof shall be contested by it in good faith and by appropriate
proceedings, and, provided, further, that such contest shall not subject the
-------- -------
Vessel, or any part thereof, to forfeiture or loss.
5
<PAGE>
Section 2.6. Liens. Neither the Mortgagor, any charterer, the master of
-----
the Vessel nor any other person has or shall have any right, power or authority
to create, incur or permit to be placed or imposed or continued upon the Vessel,
any Lien whatsoever other than the Lien of this Mortgage, Permitted Encumbrances
and the following:
(i) Liens for wages of the crew (including wages of a
master to the extent provided by 46 U.S.C. App. (S)(S) 10301-10321, inclusive
("Master's Wages")), general average and salvage (including contract salvage)
which shall not have been due and payable for forty-five (45) days after
termination of a voyage or which shall then be contested by the Mortgagor in
good faith;
(ii) Liens for wages of the crew (including Master's
Wages) and salvage (including contract salvage) which are either unclaimed or
covered by insurance;
(iii) Liens incident to current operations (except for
wages of the crew including Master's Wages and salvage) or liens covered by
insurance and any deductible applicable thereto;
(iv) Liens for repairs; and
(v) Liens disclosed on Schedule 2.2 hereto;
provided that the Liens stated to be permitted by the foregoing subparagraphs
(i) through (iv) shall, unless they constitute a Lien for damage arising out of
tort, for wages of a stevedore when employed directly by the Mortgagor, master,
ship's husband, or agent, for wages of the crew (including Master's Wages) for
general average, or for salvage (including contract salvage), be permitted only
to the extent such Liens are either accrued (but not yet due) or are subordinate
to the Lien of this Mortgage. Nothing contained in this Section 2.6 constitutes
a waiver by the Mortgagee of the Mortgagee's preferred status pursuant to the
provisions of Chapters 301 and 313 of Title 46 of the United States Code. If
any such Lien is placed on the Vessel which is not subordinate to the Lien of
this Mortgage, Mortgagor will promptly after becoming aware of such Lien notify
the Mortgagee.
Section 2.7. Notice of Mortgage.
------------------
The Mortgagor will at all times carry on board the Vessel (with the ship's
papers) a certified copy of this Mortgage and any amendments and supplements
hereto and any assignments hereof, and will exhibit or cause to be exhibited the
same to any person having business with the Vessel which might give rise to a
Lien upon the Vessel or to the sale, conveyance, mortgage or lease thereof and,
on demand, to any representative of the Mortgagee. The Mortgagor will also
place and keep prominently displayed on the Vessel a framed printed notice in
plain type of such size that the paragraph of reading matter shall cover a space
of not less than six inches wide by nine inches high (or such other dimensions
as may be required by law) reading as follows:
"NOTICE OF MORTGAGE
This Vessel is owned by HWCC-Tunica, Inc. and is subject to
a First Preferred Ship Mortgage in favor of State Street
Bank and Trust Company, as Trustee, as Mortgagee, and a
Second Preferred
6
<PAGE>
Ship Mortgage in favor of Hollywood Casino Corporation, as
Mortgagee, which Second Preferred Ship Mortgage has been
assigned by Hollywood Casino Corporation to State Street
Bank and Trust Company, as Trustee, under the authority of
Chapter 301 and Chapter 313 of Title 46 of the United States
Code, as amended, a certified copy of which Mortgages are
kept with this Vessel's papers. Under the terms of said
Mortgages neither the owner, any charterer, the master of
this Vessel nor any other person has any right, power or
authority to create, incur or permit to be placed or imposed
upon this Vessel any lien whatsoever other than the lien of
said Mortgages, liens for wages, general average or salvage,
and certain other liens permitted by the provisions of said
Mortgages."
Section 2.8. Libel or Attachment.
-------------------
If a libel is filed against the Vessel or if the Vessel shall be attached,
levied upon or taken into custody by virtue of any proceeding in any court or
tribunal, the Mortgagor will promptly notify the Mortgagee thereof by telegram,
cable or facsimile, confirmed by letter addressed to the Mortgagee, and within
fifteen (15) days after any such libel, levy, attachment or taking into custody,
Mortgagor will use its best efforts to cause the Vessel to be released and will
promptly notify the Mortgagee of such release in the manner aforesaid. In the
event that the Vessel shall not be released within such fifteen (15) day period,
the Mortgagor does hereby authorize and empower the Mortgagee, in the name of
the Mortgagor, or its successor or assigns, to apply for and receive possession
of and to take possession of the Vessel with all the rights and powers that the
Mortgagor, or its successors or assigns, might have, possess or exercise in any
such event; and this power of attorney shall be irrevocable and may be exercised
not only by the Mortgagee hereinabove named but also by any one such appointee
or the appointees of the Mortgagee, with full power of substitution, to the same
extent as if the said appointee or appointees had been named as one of the
attorneys above named by express designation.
Section 2.9. Maintenance of Vessel; Change of Flag or Hailing Port.
-----------------------------------------------------
(a) Except as to such period as (i) the use or title of the
Vessel has been taken, requisitioned or chartered by a Governmental Authority,
(ii) there has been actual or constructive total loss or an agreed or
compromised total loss of the Vessel, or damage to the Vessel to the extent;
determined in the good faith opinion of the Mortgagor, as would make repair
thereof uneconomic, or (iii) the Vessel has been laid up and removed from
service and the Mortgagor has taken adequate precautions for the preservation
and maintenance of the Vessel, the Mortgagor will, at all times and without cost
or expense to the Mortgagee, maintain and preserve, or cause to be maintained
and preserved, the Vessel in good running order and repair, so that the Vessel
shall be tight, staunch, strong and well and sufficiently tackled, appareled,
furnished, equipped and in every respect seaworthy, in compliance with all
applicable United States Coast Guard Regulations, and in as good order and
operating condition for Mortgagor's gaming operations as when made subject to
the Lien of this Mortgage, ordinary wear and tear excepted; provided, however,
-------- -------
that nothing in this Section shall prevent Mortgagor from discontinuing any
operation or maintenance of any portion of the Vessel, or disposing thereof, if
7
<PAGE>
such discontinuance or disposal is (A) in the judgment of the Board of Directors
of the Mortgagor, desirable in the conduct of the business of the Mortgagor, and
(B) not disadvantageous in any material respect to the Holders, subject in both
instances to the terms of the Indenture.
(b) Except as to the Vessel during a period set out in clauses
(i) or (ii) of Subsection 2.9(a) above, the Mortgagor will (i) keep the Vessel
in such condition and will comply with all Marine Insurance Underwriters
requirements for vessels of its type and size, and (ii) will cause the Vessel to
be overhauled when necessary, and as often as required by the Marine Insurance
Underwriters.
(c) Except as to the Vessel during a period set out in clause
(i) or (ii) of Subsection 2.9(a) above, during each calendar year (or part
thereof) in which this Mortgage is in effect, the Mortgagor shall promptly
furnish to the Mortgagee copies of all Certified Marine Survey Reports in
connection with annual, and other periodic and damage surveys with respect to
damage greater than $250,000 with respect to the Vessel.
(d) The Mortgagor will not make, or permit to be made, any
material change in the structure or type of the Vessel or in its rig if such
change is disadvantageous in any material respect to the Holders, subject to the
terms of the Indenture. The Mortgagor will not change the location where the
Vessel is moored or the flag or hailing port of the Vessel, if such change is
disadvantegeous in any material respect to the Holders, subject to the terms of
the Indenture; Mortgagor shall pay for all expenses of registration or re-
registration of this Mortgage incurred in connection with any such change of
location.
Section 2.10. Inspection.
----------
Weather permitting, the Mortgagor will at all reasonable times, upon
reasonable notice and at no cost or risk to the Mortgagor, afford the Mortgagee
or its authorized representatives full and complete access to the Vessel for the
purpose of inspecting or surveying the same and its papers.
Section 2.11. Sale or Other Disposition of Vessel.
-----------------------------------
Except as allowed in the Indenture, the Mortgagor will not sell, mortgage,
bareboat charter, transfer or in any other way dispose of all or any part of the
Vessel without the prior written consent of the Mortgagee.
Section 2.12. Notice of Loss, Requisition or Damage.
-------------------------------------
In the event of actual loss of the Vessel or any casualty, accident or
damage to the Vessel involving or estimated in good faith to involve an amount
in excess of $250,000, the Mortgagor will forthwith give written notice thereof
(containing full particulars) to the Mortgagee.
Section 2.13. Insurance.
---------
8
<PAGE>
(a) All Risk. The Mortgagor shall, at its own expense, keep the
--------
Vessel insured against all such risks that are insured against by prudent owners
of vessels and equipment similar to the Vessel.
(b) Liability; Workers' Compensation. The Mortgagor shall maintain at
--------------------------------
all times, to the extent required by applicable law, such worker's compensation,
employer's liability, and longshoreman and harbor worker's insurance including a
Maritime Coverage Endorsement and pollution insurance. The Mortgagor shall
also, at its own expense, maintain public liability insurance, together with
umbrella liability coverage as insured against by prudent owners of vessels and
equipment similar to the Vessel. Such policies shall provide that any loss under
such insurance may be paid directly to the entity to whom any liability covered
by such policies has been incurred.
(c) Payment Provisions. All payments made under policies of insurance
------------------
maintained under this Section shall be applied as set forth in Section 4.11 of
the Indenture.
(d) Constructive Total Loss. In the case of an Event of Loss which is
-----------------------
a constructive total loss of the Vessel, the Mortgagee shall have the right (but
only with prior written consent of the Mortgagor unless an Event of Default has
occurred and is continuing) to claim for a constructive total loss of the
Vessel, and if both (i) such claim is accepted by all underwriters under all
policies then in force as to the Vessel and (ii) payment in full is made in cash
under such policies, then the Mortgagee shall have the right to abandon the
Vessel to the underwriters under such policies, free from the Lien of this
Mortgage.
(e) Agreed Total Loss. The Mortgagee shall not have the right to
-----------------
enter into an agreement or compromise providing for an agreed or compromised
total loss of the Vessel without the prior consent of the Mortgagor unless an
Event of Default has occurred and is continuing. If the Mortgagor shall have
given its prior consent thereto, or an Event of Default has occurred and is
continuing, the Mortgagee shall have the right in its discretion to enter into
an agreement or compromise providing for an agreed or compromised total loss of
the Vessel, provided the same is agreed to by underwriters under all applicable
policies.
(f) Insurers. All insurance required under this Section 2.13 shall be
--------
placed and kept with the United States Government, or such insurance companies,
underwriters' associations, clubs or underwriting funds as are reputable and
generally recognized within the industry.
(g) Taking by United States. During the continuance of a taking,
-----------------------
requisition or charter of the use of the Vessel by any governmental body of the
United States of America (including, without limitation, the state of
Mississippi), the provisions of this Section 2.13 shall be deemed to have been
complied with in all respects as to the Vessel if the United States Government
or any governmental body (including, without limitation, the state of
Mississippi) shall have agreed (i) to reimburse the Mortgagee and the Mortgagor
for loss or damage resulting from the risks indicated in paragraphs (a) and (b)
of this Section 2.13, or (ii) that the Mortgagee and the Mortgagor shall be
entitled to just compensation therefor. In addition, the provisions of this
Section 2.13 shall be deemed to have been complied with in all respects during
any period after title to the Vessel shall have been taken or requisitioned by
the United States Government
9
<PAGE>
or governmental body (including, without limitation, the state of Mississippi)
or there shall have been an actual or constructive total loss or an agreed or
compromised total loss of the Vessel. In the event of any taking, requisition,
charter or loss of the Vessel contemplated by this paragraph (g), the Mortgagor
shall promptly furnish to the Mortgagee a sworn certificate of an officer of the
Mortgagor stating that such taking, requisition, charter or loss has occurred
and, if there shall have been a taking, requisition or charter of the use of the
Vessel, that the United States Government or governmental body (including,
without limitation, the state of Mississippi) has agreed (i) to reimburse the
Mortgagor for loss or damage resulting from the risks indicated in the above-
mentioned paragraphs (a) and (b) or (ii) that the Mortgagor or the Mortgagee, as
the case may be, is entitled to just compensation therefor.
(h) Mortgage Provisions. All insurance required under this Section
-------------------
2.13 shall be taken out in the name of the Mortgagor. The Mortgagee shall be
named as an additional insured under all liability policies (other than workers'
compensation and similar insurance) and the Mortgagor and the Mortgagee (or its
assignee) shall be named as the sole loss payees under all physical damage
policies in accordance with paragraph (c) of this Section 2.13. All policies
for such insurance shall also provide that (i) there shall be no recourse
against the Mortgagee (or its assignee) for the payment of premiums or
commissions, (ii) if such policies provide for the payment of club calls,
assessments or advances, there shall be no recourse against the Mortgagee (or
its assignee) for the payment thereof, and (iii) at least ten (10) days' or such
greater period as may be provided in any such policy prior written notice of any
cancellation, reduction in amount or material change in coverage of such
insurance shall be given to the Mortgagee (or its assignee) by the insurance
underwriters. All policies for physical damage shall also contain a breach of
warranty clause in favor of the Mortgagee, to the extent applicable.
(i) Compliance. The Mortgagor shall not do any act, nor voluntarily
----------
suffer nor permit any act to be done, whereby any insurance required by this
Section 2.13 shall or may be suspended, impaired or defeated, or suffer or
permit the Vessel to engage in any voyage, to engage in any activity or to carry
any cargo not permitted under the policies of insurance then in effect without
first procuring reasonably comparable insurance for such voyage, activity or the
carriage of such cargo.
(j) Assignment of Insurance to Surety. In the event that any claim or
---------------------------------
Lien is asserted against the Vessel for loss, damage or expense which is covered
by insurance hereunder and it is necessary for the Mortgagor to obtain a bond or
supply other security to prevent arrest of the Vessel or to obtain the release
of the Vessel from arrest on account of said claim or Lien, so long as no Event
of Default has occurred and is continuing, the Mortgagee, upon the written
request of the Mortgagor, shall assign all or any part of its right, title and
interest in and to said insurance covering such loss, damage or expense, to any
entity executing a surety or guaranty bond or other agreement to save or release
the Vessel from such arrest as collateral security to indemnify against
liability under said bond or other agreement.
(k) Policies. The Mortgagor, upon execution of this Mortgage, shall
--------
deliver to the Mortgagee true copies of the original policies, certified to the
satisfaction of the Mortgagee, evidencing the insurance maintained under this
Section 2.13. If the Mortgagor executes any new or renewal policies of insurance
under this Section 2.13, the Mortgagor, upon the request of Mortgagee, will
promptly deliver to the Mortgagee true copies of such policies.
10
<PAGE>
(l) Opinion and Certificates. At such times as the Mortgagee
------------------------
may reasonably request, the Mortgagor shall furnish or cause to be furnished to
the Mortgagee a detailed certificate or opinion (signed by a reputable insurance
broker) as to the insurance maintained by the Mortgagor pursuant to this Section
2.13, specifying the respective policies of insurance covering the same and
attaching certificates of confirmation evidencing the same and stating with
regard to the insurance maintained by the Mortgagor pursuant to this Section
2.13 the amounts, deductibles, and the risks against which such insurance is
issued.
(m) Oil Pollution. The Mortgagor shall on behalf and for the
-------------
benefit of itself and the Mortgagee (i) when required by law, maintain a
Certificate of Financial Responsibility (Oil Pollution) issued by the United
States Coast Guard pursuant to the Oil Pollution Act of 1990, as amended, and
(ii) maintain such additional coverage for the Vessel in respect of oil
pollution liability as may be customary among prudent owners of similar vessels
from time to time.
(n) Obligation to Collect. Mortgagor shall, at no cost or
---------------------
expense to the Mortgagee, have the duty and responsibility to make all proofs of
loss and take any and all other steps necessary to effect collections from
underwriters for any loss under any insurance on or in respect of the Vessel or
the operation thereof; provided, that Mortgagor shall have such duty only to the
--------
extent that such conduct would be taken by a prudent owner.
ARTICLE III.
-----------
REMEDIES; APPLICATION OF PROCEEDS
---------------------------------
Section 3.1. Sale, Etc.
---------
If an Event of Default shall have occurred and be continuing which has
resulted in the Mortgagee accelerating the maturity of the Obligations, the
Mortgagee may, to the fullest extent permitted by and in accordance with
applicable law:
(a) exercise all the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of the Chapter 313 of Title 46
of the United States Code, as amended, or by the applicable laws of any other
applicable jurisdiction;
(b) bring suit at law, in equity or in admiralty or initiate and
prosecute such other judicial, extrajudicial, or administrative proceedings as
it may consider appropriate to recover any and all sums due, or declared due, in
respect of the Obligations, with the right to enforce payment of said sums
against any assets of the Mortgagor, whether they are covered by this Mortgage
or otherwise;
(c) take possession of the Vessel, with or without legal
proceedings, at any place where it may be found, and the Mortgagor or any person
in possession of the Vessel, forthwith upon request by the Mortgagee, as
mortgage creditor, shall deliver possession to the Mortgagee on demand of the
Mortgagee, and the Mortgagee shall have the right, subject to applicable law,
without being responsible for loss or damage to lay up, hold, charter, lease,
operate or otherwise use the Vessel for such period and under such conditions as
it may deem most expedient for its interest, accounting only for net profits, if
any, arising from such use and charging against all receipts from such use or
from the sale of the Vessel by court proceedings or
11
<PAGE>
pursuant to subsection (d) below, all costs, expenses, charges, damages or
losses by reason of such use; and if at any time the Mortgagee shall avail
itself of the right herein given to it to take the Vessel and shall take it, the
Mortgagee shall have the right to dock the Vessel at any dock, pier or other
premises owned or leased by the Mortgagor without charge, or at any other place
at the cost and expense of the Mortgagor;
(d) sell the Vessel at public or private sale, by sealed bids or
otherwise, on such terms and conditions as the Mortgagee deems best, free of any
claim, commitment or encumbrance, regardless of the nature thereof, in favor of
the Mortgagor and, except as provided by law, any other person, upon advance
notice of ten (10) consecutive days published in any newspaper authorized to
publish legal notices of that kind in the port of registry and the place of sale
of the Vessel and by sending notice of such sale at least fourteen (14) days
prior to the date fixed for such sale, by telegraph, cable or telex, confirmed
by mail, to the Mortgagor. In the event that the Vessel shall be offered for
sale by private sale, no newspaper publication of notice shall be required, nor
notice of adjournment of sale. Sale may be held at such place and at such time
as the Mortgagee by notice may have specified, or may be adjourned by the
Mortgagee from time to time by announcement at the time and place appointed for
such sale or for such adjourned sale, and without further notice or publication
the Mortgagee may make any such sale at the time and place to which the same
shall be so adjourned; and any sale may be conducted without bringing the Vessel
to the place designated for such sale and in such manner as the Mortgagee may
deem to be for its best advantage, and the Mortgagee may become the purchaser at
any public sale, and shall have the right to credit on the purchase price any
and all sums of money due hereunder.
As used in this Mortgage, "Event of Default" shall mean the occurrence of
----------------
any Event of Default under the Indenture.
Section 3.2. Finality of Sale. A sale of the Vessel made in pursuance of
----------------
this Mortgage, whether under the power of sale hereby granted or any judicial
proceedings, shall operate to divest all right, title and interest of any nature
whatsoever of the Mortgagor therein and thereto, and shall bar the Mortgagor,
its successors and assigns, and all persons claiming by, through or under them.
No purchaser shall be bound to inquire whether notice has been given or whether
any default has occurred, or as to the propriety of the sale, or as to
application of the proceeds thereof.
Section 3.3. Powers and Rights of Mortgagee Upon Notice of Default.
-----------------------------------------------------
During the occurrence and continuance of an Event of Default and after the
acceleration of the Notes, Mortgagee shall have the following powers and rights:
(a) Sale. The Mortgagor does hereby irrevocably appoint the
----
Mortgagee and its successors and assigns the true and lawful attorney of the
Mortgagor, in its name and stead, for the purpose of Sections 3.1 and 3.2, to
make all necessary transfers of the Vessel, and for that purpose the Mortgagee
shall execute all necessary instruments of assignment and transfer (including
bills of sale), the Mortgagor hereby ratifying and confirming all that its said
attorney shall lawfully do by virtue hereof. Nevertheless, the Mortgagor shall,
if so requested by the Mortgagee, ratify and confirm any sale of the Vessel by
executing and delivering to the
12
<PAGE>
purchaser thereof such proper bills of sale, conveyances, instruments of
transfer and releases as may be designated in such request.
(b) Revenues and Proceeds of Vessel: Prior Liens.
--------------------------------------------
(i) The Mortgagee is hereby irrevocably appointed
attorney-in-fact of the Mortgagor, with the power, among other things in the
name of the Mortgagor to demand, collect, receive, compromise and sue for, so
far as may be permitted by law, all freights, hire, earnings, issues, revenues,
income and profits of the Vessel, and all amounts due from underwriters under
any insurance thereon as payment of losses or as return premiums or otherwise,
salvage awards and recoveries, recoveries in general average or otherwise, and
all other sums due or to become due in respect of the Vessel or in respect of
any insurance thereon from any person whomsoever, and to make, give and execute
in the name of the Mortgagor acquittances, receipts, releases or other
discharges for the same, whether under seal or otherwise, and to endorse and
accept in the name of the Mortgagor all checks, notes, drafts, warrants,
agreements and all other instruments in writing with respect to the foregoing,
the Mortgagor hereby confirming and ratifying the same.
(ii) The Mortgagee is hereby irrevocably authorized to pay
or furnish indemnity in the proper amounts against any Liens which have or may
(in the opinion of the Mortgagee) have priority over the Lien of this Mortgage
and which are not permitted under this Mortgage.
(c) Additional Rights. The Mortgagor covenants and agrees that
-----------------
in addition to any and all other rights, powers and remedies elsewhere in this
Mortgage granted to and conferred upon the Mortgagee, the Mortgagee in any suit
to enforce any of its rights, powers or remedies shall be entitled as a matter
of right and not as a matter of discretion (i) to seek the appointment of a
receiver or receivers of the Vessel and any receiver or receivers so appointed
shall have full right and power to use and operate the Vessel as shall be
ordered by the federal court, and (ii) to a decree ordering and directing the
sale and disposal of the Vessel, and the Mortgagee may become the purchaser at
such sale and shall have the right to credit against the purchase price any and
all sums of money due hereunder.
Section 3.4. Restoration of Position. In case the Mortgagee shall have
-----------------------
proceeded to enforce any right, power or remedy under this Mortgage by
foreclosure, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Mortgagee, then and in every such case the Mortgagor and the Mortgagee
shall, subject to any determination in such proceeding, be restored to their
former positions and rights hereunder with respect to the property subject or
intended to be subject to this Mortgage, and all rights, remedies and powers of
the Mortgagee shall, subject to any determination in such proceeding, continue
as if no such proceedings had been taken.
Section 3.5. Application of Proceeds.
-----------------------
The proceeds of any sale and net earnings derived from the operation, use,
charter, or any other employment of the Vessel by the Mortgagee, as mortgage
creditor, and within any of the powers and authority above given, as well as the
proceeds of any judgment which the
13
<PAGE>
Mortgagee may obtain by reason of the breach of failure to perform any of the
terms of this Mortgage, as well as the proceeds of any claim for damage received
by the Mortgagee while exercising the powers and the authorities above given
shall be applied as follows:
(i) to the payment of all charges and expenses, including
the costs of any public or private sale or sales, the cost of replevying or
taking possession of the Vessel which may be incurred or paid out by the
Mortgagee, as mortgage creditor, and the expenses and reasonable administrator
and attorneys' fees incurred on foreclosure or in the protection of the rights
and interests of the Mortgagee founded upon this Mortgage;
(ii) to pay or to furnish indemnity in the proper amounts
against any Liens which have or may (in the opinion of the Mortgagee) have
priority over the Lien of this Mortgage and which are not Liens permitted under
this Mortgage;
(iii) to reduce or pay in full the Obligations; and
(iv) to the payment of any surplus thereafter remaining to
the Mortgagor or to whomsoever shall be entitled thereto.
Section 3.6. No Transfer in Violation of Shipping Act.
----------------------------------------
Notwithstanding any other provision herein to the contrary, no sale,
charter, transfer or other disposition of the Vessel or any interest therein may
be made to any entity not a citizen of the United States within the meaning of
Section 2 of the Shipping Act of 1916, as amended, without the approval of the
Secretary of Transportation of the United States. Furthermore, the Vessel shall
not be operated by the Trustee without the approval of the Secretary of
Transportation.
Section 3.7. Gaming Authority.
----------------
Each of the provisions of this Mortgage is subject to, and shall be
enforced in compliance with, the requirements of any applicable Gaming
Authority.
ARTICLE IV.
----------
GENERAL POWERS OF MORTGAGEE
---------------------------
Section 4.1. General Powers of Mortgagee.
---------------------------
(a) Arrest or Detention of Vessel. In the event that the Vessel
-----------------------------
shall be arrested or detained by a marshal or other officer of any court of law,
equity or admiralty jurisdiction in any country or nation of the world or by any
government or other entity and shall not be released from arrest or detention
within thirty (30) days from the date of arrest or detention, the Mortgagor does
hereby authorize and empower the Mortgagee, in the name of the Mortgagor, or its
successors or assigns, to apply for and receive possession of and to take
possession of the Vessel with all the rights and powers that the Mortgagor, or
its successors or assigns, might have, possess or exercise in any such event;
and this power of attorney shall be irrevocable and may be exercised not only by
the Mortgagee but also by its appointee or
14
<PAGE>
appointees, with full power of substitution, to the same extent as if the said
appointee or appointees had been named as the attorney above named by express
designation.
(b) Suits. The Mortgagor also authorizes and empowers the
-----
Mortgagee or its appointees or any of them to appear in the name of the
Mortgagor, its successors or assigns, in any court of any country or nation of
the world where a suit is pending against the Vessel because of or on account of
any alleged Lien against the Vessel from which the Vessel has not been released
in accordance with the terms of this Mortgage and to take such proceedings as to
it may seem proper towards the defense of such suit and the discharge of such
Lien.
(c) Reimbursement of Expenses. If Mortgagor fails to perform any
-------------------------
obligation or covenant under this Mortgage, Mortgagee shall have the right, but
not the obligation, to perform or take such actions to comply with the terms of
this Mortgage, and all amounts reasonably expended in connection with such
conduct shall be a demand obligation of Mortgagor owing to Mortgagee at the
post-default rate of interest specified in the Notes and shall be secured by the
Lien of this Mortgage and the other Collateral Documents.
ARTICLE V.
---------
SUNDRY PROVISIONS
-----------------
Section 5.1. Defeasance.
----------
If the Obligations shall have been satisfied and discharged then this
Mortgage and the estate and rights hereunder shall cease, determine, and become
null and void; and the Mortgagee, on the request of the Mortgagor and at the
Mortgagor's cost and expense, shall forthwith cause satisfaction and discharge
of this Mortgage to be entered upon its and other appropriate records and shall
execute and deliver to the Mortgagor such instruments as may be necessary in the
Mortgagor's reasonable opinion to duly acknowledge the satisfaction and
discharge of this Mortgage.
Section 5.2. Right of Peaceful Enjoyment.
---------------------------
During the term of this Mortgage and so long as no Event of Default shall
have occurred and be continuing, the Mortgagor shall have full and peaceful
enjoyment, use, right to possession and control of the Vessel.
Section 5.3. Cumulative Remedies: No Waiver.
------------------------------
Each and every power and remedy herein given to the Mortgagee shall be
cumulative and shall be in addition to every other power and remedy herein or
now or hereafter existing at law, in equity, in admiralty, or by statute, and
each and every power and remedy whether herein given or otherwise existing may
be exercised from time to time and as often and in such order as may be deemed
expedient by the Mortgagee, and the exercise or the beginning of the exercise of
any power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other power or remedy. No course of
dealing on the part of the Mortgagee, its officers, employees, consultants or
agents, nor any delay or omission by the
15
<PAGE>
Mortgagee in the exercise of any right or power or in the pursuance of any
remedy shall operate as a waiver of any such right, power or remedy.
Section 5.4. Further Assurances.
------------------
In the event that this Mortgage, or any provisions hereof, shall be deemed
invalid in whole or in part by reason of any present or future law or any
decision of any court having jurisdiction, or if the documents at any time held
by the Mortgagee shall be deemed by the Mortgagee for any reason insufficient to
carry out the rights and powers granted to the Mortgagee herein, then, from time
to time, the Mortgagor will do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered such other and further assurances and
documents as in the opinion of the Mortgagee may reasonably be required in order
to more effectively subject the Vessel to the lien of this Mortgage or more
effectively subject the Vessel to the performance of the terms and provisions of
this Mortgage, or to enable this Mortgage to continuously enjoy the status of a
first preferred ship mortgage.
Section 5.5. Survival of Agreements.
----------------------
All representations, warranties, covenants and agreements herein contained
or made in writing in connection with this Mortgage shall survive the execution
of this Mortgage and shall continue in full force and effect until all sums
secured hereby shall have been paid in full, and the same shall bind and inure
to the benefit of the respective successors and assigns of the Mortgagor and the
Mortgagee.
Section 5.6. Notices.
-------
All notices, requests and demands to or upon the respective parties hereto
to be effective shall be in writing (including by telex or facsimile
transmission), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when actually delivered or, in the case of telex
notice, when sent, answerback received, or in the case of facsimile
transmission, when received and telephonically confirmed, addressed as follows
or to such other address as may be hereafter notified by the respective parties
hereto or any assignee thereof or successor thereto:
Mortgagor: HWCC-Tunica, Inc.
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75201
Telecopier No. (214) 386-7411
Mortgagee: State Street Bank and Trust Company
Corporate Trust Administration
Two International Place, 4th Floor
Boston, Massachusetts 02110
Telecopier No. (617) 664-5151
Section 5.7. Counterparts.
------------
This instrument may be executed in any number of counterparts, and each of
such counterparts shall for all purposes be deemed to be an original.
16
<PAGE>
Section 5.8. Section Headings.
----------------
The section headings used in this Mortgage are for convenience of
reference only and are not to affect the construction of or be taken into
consideration in interpreting this Mortgage.
Section 5.9. GOVERNING LAW.
-------------
THIS MORTGAGE, AND ALL OF THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, SHALL BE GOVERNED BY
TITLE 46, UNITED STATES CODE, CHAPTERS 301 AND 313 AND THE FEDERAL MARITIME LAWS
OF THE UNITED STATES OF AMERICA AND, ONLY TO THE EXTENT NOT ADDRESSED THEREBY,
BY THE LAWS OF THE STATE OF NEW YORK.
Section 5.10. Amendments and Waivers.
----------------------
None of the terms or provisions of this Mortgage may be waived, amended,
supplemented or otherwise modified except if made or given in compliance with
the terms and provisions of the Indenture.
Section 5.11. Termination.
-----------
The grant of the Liens hereunder and all of Mortgagee's rights, powers and
remedies in connection therewith, shall unless otherwise provided in the
Indenture or this Mortgage, remain in full force and effect until payment in
full of (A) the Notes under the terms of the Indenture and (B) all Obligations
then due and owing under the Indenture, the Notes and the Collateral Documents;
provided, however, that after receipt from the Mortgagor by the Trustee of a
- -------- -------
request for a release of the Vessel permitted under the Indenture upon the sale,
transfer, assignment, exchange or other disposition of the Vessel not prohibited
by the Indenture or otherwise (and upon receipt by the Trustee of all proceeds
of such sale, transfer, assignment, exchange or other disposition to the extent
required to be remitted to the Trustee under the Indenture), the Vessel shall be
released from the Lien and security interest created hereunder in accordance
with the provisions of the Indenture and no longer be subject to the Liens
granted herein. Upon the payment in full of (A) the Notes under the terms of the
Indenture and (B) all Obligations then due and owing under the Indenture and the
Collateral Documents, the Mortgagor shall be entitled to the return, upon its
request and at its expense, of the Vessel.
Upon any termination of this Mortgage or release of the Vessel as
permitted by the Indenture, the Mortgagee will, at the expense of the Mortgagor,
execute and deliver to the Mortgagor such documents and take such other actions
as the Mortgagor shall reasonably request to evidence the termination of this
Mortgage or the release of the Vessel, as the case may be. Any such action taken
by the Mortgagee shall be without warranty by or recourse to the Trustee, except
as to the absence of any prior assignments by the Mortgagee of its interests in
the Vessel, and shall be at the expense of the Mortgagor. The Mortgagee may
conclusively rely on any certificate delivered to it by the Mortgagor stating
that the execution of such documents and release of the Vessel is in accordance
with and permitted by the terms of the Indenture and this Mortgage.
17
<PAGE>
Section 5.12. Indenture.
---------
This Mortgage is issued pursuant to the terms, conditions and provisions
of the Indenture.
Section 5.13. Rights of Holders.
-----------------
No Holder shall have any independent rights hereunder other than those
rights granted to individual Holders pursuant to Section 6.07 of the Indenture;
provided that nothing in this Section 5.13 shall limit any rights granted to the
Trustee under the Notes, the Indenture or the Collateral Documents.
Section 5.14. No Personal Liability of Directors, Officers, Employees and
-----------------------------------------------------------
Stockholders. No past, present or future director, officer, employee,
- ------------
incorporator or stockholder of the Mortgagor as such, or the Holder of any of
the Notes, or any successor Person, as such, shall have any liability for any
obligations of the Mortgagor under this Mortgage or for any claim based on, in
respect of, or by reason of, such obligations or their creation.
Section 5.15. Fraudulent Conveyance Savings Clause. Notwithstanding any
------------------------------------
provision of this Mortgage to the contrary, it is intended that neither this
Mortgage nor any Lien granted by Mortgagor to secure the Obligations shall
constitute a "Fraudulent Conveyance" (as defined below). Consequently,
Mortgagor agrees that if the Mortgage, or any Liens securing this Mortgage,
would, but for the application of this sentence, constitute a Fraudulent
Conveyance, this Mortgage and each such Lien shall be valid and enforceable only
to the maximum extent that would not cause this Mortgage or such Lien to
constitute a Fraudulent Conveyance, and this Mortgage shall automatically be
deemed to have been amended accordingly at all relevant times. For purposes
hereof, a "Fraudulent Conveyance" means a fraudulent conveyance under Section
548 of Title 11, United States Code, as amended from time to time (or any
successor section) or a fraudulent conveyance or fraudulent transfer under the
provisions of any applicable fraudulent conveyance or fraudulent transfer law or
similar law of any state, nation or other governmental unit, as in effect from
time to time.
ARTICLE VI.
----------
AMOUNT OF MORTGAGE: RECORDATION
-------------------------------
Section 6.1. Recordation. For the purpose of this Mortgage and the
-----------
recordation of this Mortgage on the documents of the Vessel as required by
Chapter 313 of Title 46 of the United States Code, as amended, the total amount
of this Mortgage is $360,000,000.00 plus interest and performance of mortgage
covenants. The Vessel subject to this Mortgage is identified on Schedule 6.1
hereto. The Mortgagor holds an interest of 100% in the Vessel and 100% of such
interest is subject to this Mortgage. The addresses of the parties are:
Mortgagor: HWCC-Tunica, Inc.
Two Galleria Tower, Suite 2200
13455 Noel Road, LB48
Dallas, Texas 75201
Mortgagee: State Street Bank and Trust Company
18
<PAGE>
Corporate Trust Administration
Two International Place, 4th Floor
Boston, Massachusetts 02110
Telecopier No. (617) 664-5151
Although it is not intended that this Mortgage include any property other than
the whole of the Vessel named on Schedule 6.1 hereto, including earned freights,
if any determination is made at any time that for any reason this Mortgage does
include any property other than a "vessel" within the meaning of 46 U.S.C. (S)
31322(c)(i), then such property may be separately discharged from the lien of
this Mortgage (but not the lien of any other security instruments) by the
payment of .01% of the said total amount.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly
executed as of the day and year first above written.
HWCC-TUNICA, INC. By: /s/ William D. Pratt
---------------------
William D. Pratt
Executive Vice President
<PAGE>
THE STATE OF ILLINOIS )
)
COUNTY OF KANE )
THIS INSTRUMENT was acknowledged before me on May 19th, 1999, by
William D. Pratt, Executive Vice President of HWCC-TUNICA, a Texas corporation,
on behalf of such corporation, and after having first been duly authorized by
said corporation to do so.
/s/ Zaida Chapa
Notary Public in and for ----------------
the State of Illinois
Printed Name of Notary: Zaida Chapa
My Commission Expires: May 15, 2002
<PAGE>
SCHEDULE 2.2
------------
Other Liens
-----------
Lien evidenced by the Second Preferred Ship Mortgage dated May 19, 1999, by
Mortgagor in favor of Hollywood Casino Corporation, assigned to Trustee.
<PAGE>
SCHEDULE 6.1
------------
Description of Vessel
---------------------
Vessel Name Official Number
----------------------------------------
Hollywood - Tunica 534006
<PAGE>
EXHIBIT A
---------
"Permitted Encumbrances"
----------------------
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09
of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of
<PAGE>
business and consistent with industry practices and Liens on deposits made to
obtain the release of such Liens if:
(a) the underlying Obligations are not overdue for a period of more than
60 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings by the Company or applicable Restricted Subsidiaries and adequate
reserves with respect thereto are maintained on the books of the Company in
accordance with GAAP, and
(c) the Company or applicable Restricted Subsidiaries is/are in compliance
with the terms of the security documents applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
or other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that do not
exceed Five Million Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and Social
Security benefits.
<PAGE>
EXHIBIT 4.10
SUBJECT TO THE PLEDGE TO THE TRUSTEE
PURSUANT TO THE INDENTURE
DATED AS OF MAY 19, 1999
AMONG HOLLYWOOD CASINO CORPORATION,
HWCC-TUNICA, INC., HWCC-SHREVEPORT, INC. AND
STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE
AMENDED AND RESTATED PROMISSORY NOTE
------------------------------------
$87,045,000 Dated: May 19, 1999
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned, HWCC-TUNICA, INC., a Texas
corporation (the "Maker"), hereby promises to pay as hereinafter set forth to
-----
the order of HOLLYWOOD CASINO CORPORATION, a Delaware corporation (together with
its successors and assigns, the "Holder"), at its offices at Two Galleria Tower,
------
Suite 2200, 13455 Noel Road LB48, Dallas, Texas 75240, the principal sum of
EIGHTY-SEVEN MILLION FORTY-FIVE THOUSAND DOLLARS ($87,045,000), or so much as
may have been advanced by Holder to Maker pursuant to the provisions hereof
(individually an "Advance" and collectively "Advances"), together with interest
------- --------
(computed on the basis of a year of 360 days comprised of twelve thirty-day
months (including the first day but excluding the last day) occurring in the
period for which such interest is payable) on the principal amount hereof from
time to time outstanding from the date hereof until such principal amount is
paid in full, at an interest rate per annum equal at all times to the lesser of
the maximum lawful rate or eleven and one quarter percent (11 1/4%). Principal
on this Note is due and payable in a single installment of principal due on May
1, 2007. Accrued interest shall be due and payable on the 15th day of each
April and October until payment in full and at maturity. Any overdue amount of
principal, interest or other amounts payable hereunder shall bear interest,
payable on demand, at the same rate of interest, to the extent lawful. Maker
may prepay the principal amount of this Note at any time in whole or from time
to time in part without premium or penalty. Amounts borrowed hereunder and
repaid may not be reborrowed.
Each Advance made by Holder to Maker shall be recorded by Holder and,
prior to any transfer thereof, endorsed on the grid attached hereto, which is
part of this Note; provided, however, that any failure to make such endorsement
-------- -------
on such grid shall not limit or otherwise affect the obligations of Maker
hereunder.
Both principal and interest hereunder are payable prior to 3:00 p.m.
(Dallas, Texas time) on the day for payment thereof in lawful money of the
United States of America. Whenever any payment hereunder shall be stated to be
due on a day other than a day of the year on which banks are not required or
authorized to close in Dallas, Texas (any such other day being a "Business
--------
Day"), such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest.
Maker waives presentment, demand and presentation for payment, notice
of nonpayment and dishonor, protest and notice of protest.
<PAGE>
All notices and other communications hereunder shall be in writing and
will be deemed to have been duly given when received or (if later) three (3)
days after being mailed registered mail, postage prepaid, return receipt
requested, if to Holder, to the address of Holder set forth above, and if to
Maker, to the address of Maker provided below (or to such other address as
Holder or Maker, as applicable, shall provide to the other by notice in
accordance with the foregoing).
This Note shall be governed by and construed in accordance with the
laws of the State of Mississippi.
This Note is executed to amend and restate that certain (i) Promissory
Note executed by Maker to Holder dated as of October 17, 1995 in the original
principal amount of $54,045,000, and (ii) Promissory Note executed by Maker to
Holder dated as of October 17, 1995 in the original principal amount of
$30,000,000 (collectively, the "Original Notes"). This Note evidences the right
--------------
to receive accrued and unpaid interest on the Original Notes up to but not
including the date hereof, and such interest on the Original Notes up to but not
including the date hereof shall be due and payable hereunder on May 19, 1999.
At the option of the Holder hereof, this Note shall become immediately
due and payable, without notice or demand, upon the occurrence at any time of
one or more of the following events of default:
(a) Failure in the due, prompt and complete observance or performance
of any condition, covenant or obligation of Maker set forth herein to make any
payment of principal, interest or any other sums due hereunder.
(b) An Event of Default under the Indenture (as defined therein).
This Note shall become immediately due and payable, without notice or
demand and without the need for any action or election by the Holder hereof or
any other party, upon the occurrence at any time of any of the following:
(a) The making of an assignment for the benefit of creditors by Maker;
the voluntary appointment (at the request of any such party or with the consent
of any such party) of a receiver, custodian, liquidator or trustee in bankruptcy
of the property of Maker; the filing by Maker of a petition in bankruptcy or
adjudication of Maker as a bankrupt or insolvent, or the filing by Maker of any
petition or answer seeking or acquiescing in any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future federal, state or other law or regulation relating to
bankruptcy, insolvency or other relief for debtors;
(b) The filing against Maker of a petition seeking any
reorganization, arrangement, composition , readjustment, liquidation,
dissolution or similar relief under any present or future federal, state or
other law or regulation relating to bankruptcy, insolvency or other similar
relief for debtors, or the involuntary appointment of a receiver, custodian,
liquidator
2
<PAGE>
or trustee in bankruptcy of the property of Buyer and such petition
or appointment is not vacated or discharged within sixty (60) days after the
filing or making thereof; or
(c) Maker becomes insolvent or unable to pay its debts generally as
the mature.
Anything in this Note notwithstanding, if at any time the rate of
interest on this Note, together with all fees and charges, if any (collectively,
the "Charges"), contracted for, charged, received, taken or reserved by Holder
hereof which may be treated as interest under applicable law, computed over the
full term of this Note, exceeds the maximum legal limit (if any such limit is
applicable) under United States federal law or state law (to the extent not
preempted by federal law, if any), now or hereafter governing the interest
payable on this Note (the "Maximum Rate"), then the rate of interest on this
Note, together with all Charges, shall be limited to the Maximum Rate. If from
any circumstances, Holder shall ever receive as interest an amount which would
exceed the Maximum Rate, such amount which would be excessive interest shall be
applied to the reduction of the unpaid principal balance hereunder (whether or
not due and payable) and not to the payment of interest.
No single or partial exercise of any power hereunder shall preclude
other or further exercise thereof or the exercise of any other power. No delay
or omission on the part of holder in exercising any right hereunder shall
operate as a waiver of such right or of any other right under this Note. No
waiver of any breach of any of the covenants or conditions of this Note shall be
construed to be a waiver of or acquiescence in or a consent to any previous or
subsequent breach of the same or any other condition or covenant.
Contemporaneously with the making of this Note, this Note is being
assigned to the Trustee (as defined in the Indenture) pursuant to the Indenture
and certain other documents to secure obligations as set forth in the Indenture
and such other documents. Maker and Holder agree that this Note shall not be
modified in any respect, and Holder shall take no action to accelerate or
enforce this Note, except as consistent with the Indenture and the Collateral
Documents (as defined in the Indenture).
[SIGNATURE PAGE FOLLOWS]
3
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note as of the date first
set forth above.
HWCC-TUNICA, INC.
By: /s/ WILLIAM D. PRATT
---------------------
Name: William D. Pratt
-------------------
Title: Executive Vice President,
--------------------------
General Counsel and Secretary
------------------------------
Maker's Address:
Two Galleria Tower, Suite 2200
13455 Noel Road LB48
Dallas, Texas 75240
S-1
<PAGE>
ADVANCES OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Advance Unpaid Principal Notation Made By
Date Balance
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
S-1
<PAGE>
EXHIBIT 4.11
INTERCOMPANY SECURITY AGREEMENT
-------------------------------
(Accounts, Inventory, Equipment, Chattel Paper, Documents,
Instruments, General Intangibles and Other Property)
Made by
HWCC-TUNICA, INC.,
as Debtor
to
HOLLYWOOD CASINO CORPORATION,
as Secured Party
and Collaterally Assigned by
Hollywood Casino Corporation
to
STATE STREET BANK AND TRUST COMPANY,
as Trustee
Acting on behalf of the Holders of the Senior Secured Notes
May 19, 1999
<PAGE>
INTERCOMPANY SECURITY AGREEMENT
-------------------------------
Accounts, Inventory, Equipment, Chattel Paper, Documents,
Instruments, General Intangibles and Other Property
---------------------------------------------------
THIS INTERCOMPANY SECURITY AGREEMENT (this "Agreement") is made as of May
---------
19, 1999, by HWCC-Tunica, Inc., a Texas corporation with its chief executive
office at Two Galleria Tower, Suite 2200, 13455 Noel Road, LB 48, Dallas, Texas
75240 ("Debtor"); in favor of Hollywood Casino Corporation (the "Secured
------ -------
Party"). The Secured Party has collaterally assigned its interest hereunder to
State Street Bank and Trust Company, as Trustee (the "Trustee"), to secure,
-------
among other things, the Senior Secured Notes (as such term is hereinafter
defined) pursuant to a Security Agreement of even date herewith between the
Secured Party and the Trustee (the "HWCC Security Agreement").
-----------------------
1
<PAGE>
RECITALS
--------
A. Of even date herewith, Debtor has executed a certain amended and
restated promissory note payable to the order of Hollywood Casino Corporation, a
Delaware corporation (the "Borrower"), in the original principal amount of
--------
$87,045,000 (as the same may be amended, supplemented, restated or otherwise
modified from time to time, being hereinafter referred to as the "Note").
----
B. The Borrower, Debtor, HWCC-Shreveport, Inc. and State Street Bank and
Trust Company, as Trustee, have entered into an Indenture dated as of May 19,
1999 (as the same may be amended, supplemented, restated or otherwise modified
from time to time, the "Indenture"), pursuant to which the Borrower will issue
---------
up to (i) $310,000,000 of its 11 1/4% Series A and Series B Senior Secured Notes
due 2007 and (ii) $50,000,000 of its Floating Rate Series A and Series B Senior
Secured Notes due 2006 (as the same may be amended, supplemented, restated,
exchanged, replaced or otherwise modified from time to time, collectively, the
"Senior Secured Notes"). Debtor is an affiliate of Borrower and as such will
- ---------------------
derive direct and indirect benefits from the issuance of the Senior Secured
Notes pursuant to the Indenture.
C. It is a condition precedent to the purchase of the Senior Secured
Notes under the Indenture that Debtor shall have executed and delivered this
Agreement.
D. Therefore, in order to comply with the terms and conditions of the
Indenture and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor hereby agrees with Secured
Party as follows:
ARTICLE 1.
----------
SECURITY INTEREST
-----------------
Section 1.01. Grant of Security Interest.
---------------------------
Debtor hereby assigns, endorses, delivers, pledges and grants to Secured
Party a continuing security interest in, Lien upon, and right of set-off against
the assets referred to in Section 1.02 hereof (the "Collateral") to secure the
prompt and complete payment and performance of the Obligations (as defined in
Section 2.02 hereof) and the performance by Debtor of this Agreement.
Section 1.02. Collateral
----------
. The Collateral consists of the following types or items of property
(including property hereafter acquired by Debtor as well as property which
Debtor now owns or in which Debtor has rights), but subject to the exceptions
and provisos as set forth herein:
(a) All of Debtor's accounts, equipment, chattel paper, documents,
instruments, general intangibles and personal property, including, without
limitation, any of the foregoing which may be more specifically indicated
in the remainder of this Section 1.02 and including all of the Debtor's
vessel The Hollywood-Tunica, Official No. 534006 (the "Vessel"), duly
documented in the name of the Debtor under the laws of the United States,
whether or not such Vessel is a vessel within the meaning of 46 U.S.C. (S)
31322(a), and all rights of Debtor therein, including all equipment, parts
and accessories, including, but not limited to, all of its boilers,
engines, generators, air compressors,
2
<PAGE>
machinery, masts, spars, sails, riggings, boats, anchors, cables, chains,
tackle, tools, pumps and pumping equipment, motors, apparel, furniture,
computer equipment, electronic equipment used in connection with the
operation of the Vessel and belonging to the Vessel, all machinery,
equipment, engines, appliances and fixtures for generating or distributing
air, water, heat, electricity, light, fuel or refrigeration, or for
ventilating or sanitary purposes, fittings and equipment, supplies, spare
parts, fuel, and all other appurtenances thereunto appertaining or
belonging, whether now owned or hereafter acquired, whether or not on board
said Vessel, and all extensions, additions, accessions, improvements,
renewals, substitutions, and replacements hereafter made in or to said
Vessel or any part thereof, or in or to any said appurtenances;
(b) All of Debtor's inventory in all of its forms, wherever located,
now or hereafter existing (including, but not limited to, (i) all food
services products including beef, chicken, veal, pork, fish, eggs, dairy
products, salads, soups, herbs, condiments, canned foods, dried foods,
coffee, tea, jams, flour, sugar, canned and bottled sodas, confectioneries
and liquor inventory and raw materials and work in process therefor,
finished goods thereof and materials used or consumed in the manufacture or
production thereof, (ii) goods in which Debtor has an interest in mass or
in joint or other interest or right of any kind (including without
limitation, goods in which Debtor has an interest or right as consignee),
and all accessions thereto and products thereof and documents therefor, and
(iii) all motion picture memorabilia);
(c) All contracts of Debtor, including, without limitation, the
contracts described or referred to in Exhibit A attached hereto and made a
---------
part hereto and each contract in which Debtor may hereafter become a party,
in each case as such agreements may be amended or otherwise modified from
time to time, including, without limitation, (i) all rights of Debtor to
receive moneys due and to become due under or pursuant to the contracts,
(ii) all rights of Debtor to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the contracts, (iii) claims of Debtor
for damages arising out of or for breach of or default under the contracts,
(iv) the right of Debtor to terminate the contracts, to perform thereunder
and to compel performance and to otherwise exercise all remedies thereunder
and (v) all proceeds of the foregoing Collateral;
(d) All of Debtor's general intangibles of any kind whether now
existing or hereafter arising; all chattel papers, documents and
instruments relating to such general intangibles; and all rights now or
hereafter existing in and to all security agreements, leases (excluding
real property leases), and other contracts securing or otherwise relating
to any such general intangibles or any such chattel papers, documents and
instruments. The Debtor's general intangibles that are the subject of this
Agreement and are included as part of the Collateral covered by this
Agreement include, without limitation, the following intangible personal
property in which the Debtor presently or in the future will own any right,
title or interest (to the extent that the granting of this security
interest does not violate a valid and enforceable restriction on such grant
created in the agreement by which the Debtor acquired its right, title or
interest from the prior owner or from the lessor or licensor thereof): (i)
any and all trade secrets, ideas, information, procedures, processes,
systems, methods of operation, concepts, principles or discoveries, whether
or not patentable, and all of the intellectual property rights therein
provided by State or federal laws of the United States, such as the right
of first publication and, if applicable,
3
<PAGE>
the right to file applications for United States patent protection on the
preferred embodiments thereof; (ii) any and all applications for United
States patents and issued United States patents; (iii) any and all names,
tradenames, trademarks or service marks and the goodwill of the Debtor's
business, goods or services represented by such names and marks, and all
applications to register such names or marks on State registrars or with
the United States Patent and Trademark Office and all issued State or
United States registrations thereon, including, without limitation, those
listed on Exhibit B attached hereto and made a part hereof; (iv) all
---------
expressions embodied in a tangible medium that are the subject matter of
copyright and the intangible rights of copyright therein, including,
without limitation, both nonregistered copyrighted works and registered
copyrighted works; (v) all rights arising out of licenses (in cases where
Debtor is the licensee) to use patents, trademarks, copyrights, trade
secrets and other intellectual property rights; (vi) all rights and
proceeds arising out of licenses (in cases where Debtor is the licensor) to
use Debtor's United States patents, trademarks, copyrights, trade secrets
and other intellectual property; and (vii) in all cases, the rights to
prosecute such intellectual property rights referred to in this subsection
1.02(d), and to recover the proceeds of past, present and future
infringement of such rights by third parties; provided, however, that the
Debtor shall at all times have the right in the conduct of its business to
make and carry out decisions that affect such intangible personal property
and the intellectual property rights therein, such as, the Debtor shall
have the right to exercise the right of first publication with respect to
its ideas, information, procedures, processes, systems, methods of
operation, concepts, principles or discoveries; to determine whether
applications for patent protection will be filed or abandoned on the
preferred embodiments thereof; to determine which terms shall be used as
names and marks for its business, goods or services, when the use of such
terms will be discontinued, and the efforts, if any, that will be made to
register such terms and to maintain or, in its discretion, to abandon such
registrations or applications therefor; to determine if and when
copyrighted works will be registered; to determine whether aspects of such
intellectual property will be sold, assigned, or licensed to others in
connection with operation of the Debtor's business; and to determine the
actions that will be taken to maintain and prosecute the Debtor's
intellectual property rights in such intangible personal property;
(e) (i) Any related or additional property from time to time delivered
to or deposited with Secured Party by or for the account of Debtor; (ii)
all certificates of title or other documents evidencing ownership or
possession of or otherwise relating to any property referred to in this
Section 1.02; (iii) all property used or usable in connection with any
property referred to in this Section 1.02; (iv) all goods which were at any
time included in the Collateral and which are returned to or for the
account of Debtor following their sale, lease or other disposition; (v) all
proceeds, products, replacements, additions to, substitutions for,
accessions to, and property necessary for the operation of any of the
property referred to in this Section 1.02, including, without limitation,
insurance payable as a result of loss or damage to any of the property
referred to in this Section 1.02, refunds of unearned premiums of any such
insurance policy and claims against third parties; and (vi) all books and
records related to any of the property referred to in this Section 1.02,
including, without limitation, any and all books of account, customer lists
and other records relating in any way to the accounts, chattel paper,
instruments or inventory referred to in this Section 1.02;
4
<PAGE>
(f) All general intangibles related to any property referred to in
this Section 1.02, including, without limitation, all (i) letters of
credit, bonds, guaranties, purchase or sales agreements and other
contractual rights, rights to performance, and claims for damages, refunds
(including tax refunds, but only to the extent such refunds are assignable
under 31 U.S.C. (S) 3727) or other monies due or to become due; (ii)
orders, franchises, permits, certificates, licenses, consents, exemptions,
variances, authorizations or other approvals by any governmental agency or
court, to the extent but only to the extent permitted by applicable law to
be pledged and assigned and to the extent but only to the extent that the
perfection of the security interests therein may be obtained by the filing
of a financing statement pursuant to the applicable provisions of the Code;
(iii) books, business records, data bases, computer tapes and computer
software; (iv) goodwill; and (v) other intangible personal property,
whether similar or dissimilar to the property referred to in this Section
1.02;
provided that, the Collateral described in this Section 1.02 shall not
include (i) tort claims, (ii) rights represented by judgments, and (iii) any of
the foregoing property that is, pursuant to restrictions enforceable under
applicable law, prohibited from being pledged as security; provided that, with
respect to this clause (iii), upon the termination of such prohibitions for any
reason whatsoever or in the event such prohibitions are or become unenforceable
under applicable law, such foregoing property shall automatically be Collateral
hereunder. Notwithstanding the foregoing, so long as no Event of Default shall
have occurred and be continuing, all dividends, distributions, interest and
principal payments, cash, instruments, and other property and proceeds made upon
or with respect to or of the Collateral shall not constitute Collateral and may
be used by the Debtor subject to the terms and conditions of the Indenture. Upon
the occurrence and during the continuance of an Event of Default, all rights of
the Debtor to receive all such dividends, distributions, interest and principal
payments, cash, instruments and other property and proceeds shall cease, and
such dividends, distributions, interest and principal payments, cash,
instruments and other property and proceeds shall constitute Collateral, and
shall be paid or otherwise delivered to the Secured Party or the Trustee. It is
expressly contemplated that additional property may from time to time be
pledged, assigned or granted to Secured Party as additional security for the
Obligations, and the term "Collateral" as used herein shall be deemed for all
purposes hereof to include all such additional property, together with all other
property of the types described above related thereto.
Section 1.03. Second Priority Security Interest
---------------------------------
. Of even date herewith, the Debtor is executing a certain Security
Agreement (the "First Priority Security Agreement") in favor of State Street
Bank and Trust Company, as Trustee and Secured Party, to secure, among other
things, the indebtedness outstanding under the Indenture and the Senior Secured
Notes. The liens evidenced by this Agreement shall be inferior and subordinate
to the liens and security interests granted by Debtor pursuant to the provisions
of the First Priority Security Agreement, which liens and security interests
shall be first priority (subject to Permitted Encumbrances).
ARTICLE 2.
----------
DEFINITIONS
-----------
Section 2.01. Terms Defined Above or in the Indenture
---------------------------------------
5
<PAGE>
. As used in this Agreement, the terms defined above shall have the
meanings respectively assigned to them. Other capitalized terms which are
defined in the Indenture but which are not defined herein shall have the same
meanings as defined in the Indenture.
Section 2.02. Certain Definitions
-------------------
. As used in this Agreement, the following terms shall have the following
meanings, unless the context otherwise requires:
"Accounts" means all accounts, chattel paper and instruments (as such terms
--------
are defined in the Code) at any time included in the Collateral.
"Account Debtor" means any Person liable (whether directly or indirectly
--------------
primarily or secondarily) for the payment or performance of any obligations
included in the Collateral, whether as an account debtor (as defined in the
Code), obligor on an instrument, issuer of documents or securities, guarantor or
otherwise.
"Agreement" means this Security Agreement, as the same may from time to
---------
time be amended or supplemented.
"Code" means the Uniform Commercial Code as presently in effect in the
----
State of New York; provided that, if by reason of mandatory provisions of law,
the perfection or the effect of perfection or non-perfection of the security
interests in any Collateral is governed by the Uniform Commercial Code as in
effect in any jurisdiction other than the State of New York, "Code" means the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such perfection or the effect of perfection or
non-perfection. Unless otherwise indicated by the context herein, all
uncapitalized terms which are defined in the Code shall have their respective
meanings as used in Article 9 of the Code.
"Event of Default" means any event specified in Section 6.01.
----------------
"Inventory" means all inventory (as defined in the Code) at any time
---------
included in the Collateral, including, without limitation, motion picture
memorabilia.
"Obligations" means (i) the payment when due of indebtedness evidenced by
-----------
the Note, which is in the principal sum not to exceed at any time outstanding of
$87,045,000 interest (including post-petition interest) as set forth in the
Note, and premiums, penalties, and late charges thereon; (ii) all other
indebtedness and other sums (including, without limitation, all expenses,
attorneys' fees, other fees, indemnifications, reimbursements, damages, other
monetary liabilities, and other charges) that may or shall become due hereunder
or under the Note or the other documents executed as security for or in
connection with the Note; and (iii) any and all renewals, modifications,
amendments, extensions for any period, supplements or restatements of any of the
foregoing.
"Obligor" means any Person, other than Debtor, liable (whether directly or
-------
indirectly, primarily or secondarily) for the payment or performance of any of
the Obligations whether as maker, co-maker, endorser, guarantor, accommodation
party, general partner or otherwise.
"Permitted Encumbrances" means the items set forth on Exhibit D hereto.
---------------------- ---------
6
<PAGE>
ARTICLE 3.
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Secured Party to accept this Agreement, Debtor
represents and warrants to Secured Party (which representations and warranties
will survive the creation and payment of the Obligations) that:
Section 3.01. Ownership of Collateral; Absence of Encumbrances and
----------------------------------------------------
Restrictions
- ------------
. After giving effect to the use of the proceeds of the Senior Secured
Notes, Debtor is, and in the case of property acquired after the date hereof,
will be, the sole legal and beneficial owner of the Collateral holding good and
indefeasible title to the same, free and clear of all Liens except for the
Permitted Encumbrances and Debtor has full right, power and authority to assign
and grant a security interest in the Collateral to Secured Party.
Section 3.02. No Required Consent
-------------------
. Except for such authorizations, consents or approvals previously
obtained and in effect, no authorization, consent, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
(other than the filing of financing statements and the other documents required
to perfect or maintain the perfection of the Liens granted hereby) is required
for (i) the due execution, delivery and performance by Debtor of this Agreement,
(ii) the grant by Debtor of the security interest granted by this Agreement,
(iii) the perfection of such security interest or (iv) the exercise by Secured
Party of its rights and remedies under this Agreement, except as may be required
by applicable gaming laws or in connection with the disposition of Collateral or
by federal or state securities laws or antitrust laws.
Section 3.03. Security Interest
-----------------
. After giving effect to the use of proceeds of the Senior Secured Notes,
the grant of the security interest in and Lien on the Collateral pursuant to
this Agreement creates a valid and continuing security interest in and Lien on
the Collateral, enforceable against Debtor, and, upon the filing of financing
statements in the appropriate office for the locations of the Collateral listed
on Exhibit C hereof, the security interests granted hereby will be perfected,
---------
prior to all other Liens except Permitted Encumbrances, enforceable against
third parties and securing payment of the Obligations.
Section 3.04. No Filings By Third Parties
---------------------------
. After giving effect to the use of proceeds of the Senior Secured Notes,
and other than any financing statement or other public notice or recording
naming Secured Party as the secured party therein or financing statements with
respect to Liens permitted hereunder, no financing statement or other public
notice or recording covering the Collateral is on file in any public office and
Debtor has not signed any document or agreement authorizing the filing of any
such financing statement or other public notice or recording so long as any of
the Obligations are outstanding.
Section 3.05. No Name Changes
---------------
7
<PAGE>
. The name of the Debtor set forth on Exhibit C hereto is the true and
---------
correct legal name of the Debtor, and, except as described on Exhibit C hereto,
---------
Debtor has not, during the preceding five (5) years, entered into any contract,
agreement, security instrument or other document using a name other than, or
been known by or otherwise used any name other than, the name used by Debtor
herein.
Section 3.06. Location of Debtor and Collateral
---------------------------------
. Debtor's chief executive office, principal place of business and the
locations of Debtor's records concerning the Collateral are set forth on Exhibit
-------
C hereto. Any Collateral not at such location(s) nevertheless remains subject
- -
to Secured Party's security interest. Except as disclosed on Exhibit C hereto,
---------
all tangible Collateral of Debtor are located at the locations set forth on
Exhibit C hereto.
- ---------
Section 3.07. Collateral
----------
. All statements or other information provided by Debtor to Secured Party
describing or with respect to the Collateral is (or, in the case of subsequently
furnished information, will be when provided) correct and complete in all
material respects. The delivery at any time by Debtor to Secured Party of
additional descriptions of Collateral shall constitute a representation and
warranty by Debtor to Secured Party hereunder that the representations and
warranties of this Article 3 are correct insofar as they would pertain to such
Collateral or the descriptions thereof, except as indicated therein.
Section 3.08. Delivery of Documents
---------------------
. With respect to any Collateral covered by one or more certificates of
title or other documents of title evidencing ownership or possession thereof,
each of such certificates or documents of title shall, after the occurrence and
during the continuance of an Event of Default and upon the request of the
Secured Party or the Trustee, be delivered to Secured Party or the Trustee
(provided that all certificates of title and documents of title referred to in
Section 1.02 shall be subject to the security interest created by this Agreement
irrespective of whether or not such delivery shall have been made).
ARTICLE 4.
----------
COVENANTS AND AGREEMENTS
------------------------
Debtor will at all times comply with the covenants and agreements contained
in this Article 4, from the date hereof and for so long as any part of the
Obligations are outstanding.
Section 4.01. Change in Location of Collateral or Debtor
------------------------------------------
. Except with respect to Collateral under repair or temporarily in transit
between locations (and in any such case, for a period not to exceed four (4)
months), Debtor will not change the location of the Collateral (except for (a)
Collateral held by the Secured Party or the Trustee, (b) motor vehicles and
rolling stock, and (c) Collateral temporarily in transit between locations) to
any state, county or other jurisdiction in which Secured Party has not already
filed a financing statement or taken other necessary steps to perfect or
maintain its security interests in the Collateral without Secured Party's prior
written consent and the delivery of such new financing statements or other
documentation as may be reasonably necessary or required by
8
<PAGE>
Secured Party to ensure the continued perfection and priority of its security
interest in the Collateral. Debtor will not change the location of Debtor's
chief executive office, principal place of business or the locations of Debtor's
records concerning the Collateral unless Debtor shall have given Secured Party
at least thirty (30) days prior written notice thereof and shall have delivered
to Secured Party such new financing statements or other documentation as may be
reasonably necessary or required by Secured Party to ensure the continued
perfection and priority of its security interest in the Collateral.
Section 4.02. Change in Debtor's Name or Corporate Structure
----------------------------------------------
. Debtor will not change its name, identity or corporate structure
(including, without limitation, any merger, consolidation or sale of
substantially all of its assets) unless Debtor shall have given Secured Party at
least thirty (30) days prior written notice thereof and shall have delivered to
Secured Party such new financing statements or other documentation as may be
reasonably necessary or required by Secured Party to ensure the continued
perfection and priority of its security interest on the Collateral.
Section 4.03. Documents; Collateral in Possession of Third Parties
----------------------------------------------------
. If certificates of title or other documents evidencing ownership or
possession of the Collateral are issued or outstanding, Debtor will, after the
occurrence and during the continuance of an Event of Default and upon the
request of the Secured Party, cause the interest of Secured Party to be properly
noted thereon and will, forthwith upon receipt, deliver same to Secured Party.
If any material portion of the Collateral is at any time in the possession or
control of any warehouseman, bailee, agent or independent contractor, Debtor
shall notify such Person of Secured Party's security interest in such
Collateral. Upon Secured Party's request, Debtor shall instruct any such Person
to hold all such Collateral for Secured Party's account subject to Debtor's
instructions, or, if an Event of Default shall have occurred, subject to Secured
Party's instructions.
Section 4.04. Delivery of Letters of Credit and Instruments
---------------------------------------------
. After the occurrence and during the continuance of an Event of Default
and upon the request of the Secured Party, Debtor will deliver each letter of
credit, if any, included in the Collateral to Secured Party, in each case
forthwith upon receipt by or for the account of Debtor. After the occurrence and
during the continuance of an Event of Default and upon the request of the
Secured Party, if any Account becomes evidenced by a promissory note, trade
acceptance or any other instrument for the payment of money (other than checks
or drafts in payment of Accounts collected by Debtor in the ordinary course of
business prior to notification by Secured Party under Section 6.02(h)), Debtor
will immediately deliver such instrument to Secured Party appropriately endorsed
and, regardless of the form of presentment, demand, notice of dishonor, protest
and notice of protest with respect thereto, Debtor will remain liable thereon
until such instrument is paid in full.
Section 4.05. Sale, Disposition or Encumbrance of Collateral
----------------------------------------------
. Except as permitted pursuant to the provisions of the Indenture and by
Section 4.09 of this Agreement or with Secured Party's prior written consent,
Debtor will not in any way encumber any of the Collateral (or permit or suffer
any of the Collateral to be encumbered) or
9
<PAGE>
sell, assign, lend, rent, lease or otherwise dispose of or transfer any of the
Collateral to or in favor of any Person other than Secured Party.
Section 4.06. Records and Information
-----------------------
. Debtor shall keep accurate and complete records of the Collateral
(including proceeds). Secured Party may at any time upon reasonable prior notice
have access during normal business hours to examine, audit, make extracts from
and inspect without hindrance or delay Debtor's records, files and the
Collateral. Debtor will promptly provide written notice to Secured Party of all
information which in any way relates to or affects the filing of any financing
statement or other public notices or recordings, or the delivery and possession
of items of Collateral, for the purpose of perfecting a security interest in the
Collateral. Debtor will also promptly furnish such information as Secured Party
may from time to time reasonably request regarding the Collateral or Secured
Party's rights or remedies with respect thereto.
Section 4.07. Reimbursement of Expenses
-------------------------
. Debtor hereby assumes all liability for the Collateral, the security
interests created hereunder and any use, possession, maintenance, management,
enforcement or collection of any or all of the Collateral. Debtor agrees to
indemnify and hold Secured Party harmless from and against and covenants to
defend Secured Party against any and all losses, damages, claims, costs,
penalties, liabilities and expenses, including, without limitation, court costs
and reasonable attorneys' fees, incurred because of, incident to, or with
respect to the Collateral (including, without limitation, any use, possession,
maintenance or management thereof, or any injuries to or deaths of persons or
damage to property, except to the extent caused by the gross negligence or
willful misconduct of the Secured Party). All amounts for which Debtor is liable
pursuant to this Section 4.07 shall be due and payable by Debtor to Secured
Party upon demand. If Debtor fails to make such payment upon demand (or if
demand is not made due to an injunction or stay arising from bankruptcy or other
proceedings) and Secured Party pays such amount, the same shall be due and
payable by Debtor to Secured Party, plus interest thereon from the date of
Secured Party's demand (or from the date of Secured Party's payment if demand is
not made due to such proceedings) at the interest rate applicable to overdue
principal as provided in the Note.
Section 4.08. Further Assurances
------------------
. Upon the request of Secured Party, Debtor shall (at Debtor's expense)
execute and deliver all such assignments, certificates, financing statements or
other documents and give further assurances and do all other acts and things as
Secured Party may reasonably request to perfect Secured Party's interest in the
Collateral or to protect, enforce or otherwise effect Secured Party's rights and
remedies hereunder.
Section 4.09. Inventory
---------
. Debtor may use the Inventory in any lawful manner not inconsistent with
this Agreement and the Indenture and with the terms of insurance thereon.
Section 4.10. Use of Collateral
-----------------
. Debtor will not use any Collateral in violation in any material respect
of any law, statute, ordinance, regulation or administrative order, or suffer it
to be so used.
10
<PAGE>
Section 4.11. Collateral Attached to Other Property
-------------------------------------
. In the event that the Collateral is to be attached or affixed to any
real property, Debtor hereby agrees that this Agreement may be filed for record
in any appropriate real estate records as a financing statement which is a
fixture filing. In connection therewith, Debtor will take whatever action is
required by Section 4.08. If Debtor is not the record owner of such real
property, Debtor will provide Secured Party with any additional security
agreements or financing statements necessary for the perfection of Secured
Party's security interest in the Collateral. If the Collateral is wholly or
partly affixed to real estate or installed in or affixed to other goods, Debtor
will, on demand of Secured Party, use its commercially reasonable efforts to
furnish Secured Party with landlord's waivers, signed by all Persons or entities
having an interest in the real estate or other goods to which the Collateral may
have become affixed, permitting the Secured Party or the Trustee to have access
to the Collateral at all reasonable times and granting the Secured Party or the
Trustee a reasonable period of time in which to remove the Collateral after an
Event of Default.
ARTICLE 5.
----------
RIGHTS, DUTIES AND POWERS OF SECURED PARTY
------------------------------------------
Secured Party shall have the following rights, duties and powers:
Section 5.01. Discharge Encumbrances
----------------------
. After the occurrence and during the continuance of an Event of Default,
Secured Party may, at its option, discharge any taxes, Liens, security interests
or other encumbrances at any time levied or placed on the Collateral, and may
pay for insurance on the Collateral to the extent required by this Agreement or
the Indenture and not obtained by Debtor. Debtor agrees to reimburse Secured
Party upon demand for any payment so made, plus interest thereon from the date
of Secured Party's demand at the interest rate applicable to overdue principal
as provided in the Note.
Section 5.02. Licenses and Rights to Use Collateral
-------------------------------------
. After the occurrence and during the continuance of an Event of Default,
in connection with any transfer or sale (to Secured Party or any other Person)
of the Collateral, Secured Party is hereby granted a transferable license or
other right to use, without any charge, any of Debtor's labels, patents,
copyrights, tradenames, trade secrets, trademarks or other similar property in
completing production, advertising or selling such Collateral except any of the
foregoing property which is expressly prohibited by its terms from being
assigned or licensed. After the occurrence and during the continuance of an
Event of Default, Debtor's rights under all licenses and franchise agreements
shall inure to the benefit of Secured Party and any transferee of all or any
part of the Collateral.
Section 5.03. Cumulative and Other Rights
---------------------------
. The rights, powers and remedies of Secured Party hereunder are in
addition to all rights, powers and remedies given by law or in equity. The
exercise by Secured Party of any one or more of the rights, powers and remedies
herein shall not be construed as a waiver of any other rights, powers and
remedies, including, without limitation, any other rights of set-off (which
11
<PAGE>
set-off rights may be exercised only after the occurrence and during the
continuance of an Event of Default). If any of the Obligations are given in
renewal, extension for any period or rearrangement, or applied toward the
payment of debt secured by any Lien, Secured Party shall be, and is hereby,
subrogated to all the rights, titles, interests and liens securing the debt so
renewed, extended, rearranged or paid.
Section 5.04. Disclaimer of Certain Duties.
----------------------------
(a) The powers conferred upon Secured Party by this Agreement
are to protect its interest in the Collateral and shall not impose any duty
upon Secured Party to exercise any such powers. Debtor hereby agrees that
Secured Party shall not be liable for, nor shall the indebtedness evidenced
by the Obligations be diminished by, Secured Party's delay or failure to
collect upon, foreclose, sell, take possession of or otherwise obtain value
for the Collateral. Nothing herein shall affect any obligation of Secured
Party to the Holders under the Indenture or under applicable law.
(b) Except as may be required by the Indenture, and to the
fullest extent permitted by applicable law, Secured Party shall be under no
duty whatsoever to make or give any presentment, notice of dishonor,
protest, demand for performance, notice of non-performance, notice of
intent to accelerate, notice of acceleration, or other notice or demand in
connection with any Collateral or the Obligations, or to take any steps
reasonably necessary to preserve any rights against any Obligor, Account
Debtor or other Person. Debtor waives any right of marshaling in respect of
any and all Collateral, and waives any right to require Secured Party to
proceed against any Obligor, Account Debtor or other Person, exhaust any
Collateral or enforce any other remedy which Secured Party now has or may
hereafter have against any Obligor or other Person.
Section 5.05. Modification of Obligations: Other Security
--------------------------------------------
. Except as specifically provided for in the Indenture, Debtor waives (i)
any and all notice of acceptance, creation, modification, rearrangement, renewal
or extension for any period of any instrument executed by any Obligor in
connection with the Obligations and (ii) any defense of any Obligor by reason of
disability, lack of authorization, cessation of the liability of any Obligor or
for any other reason. Debtor authorizes Secured Party, without notice or demand
and without any reservation of rights against Debtor and without affecting
Debtor's liability hereunder or on the Obligations, from time to time to (x)
after the occurrence and during the continuance of an Event of Default and after
the acceleration of the Senior Secured Notes, apply the Collateral in the manner
permitted by this Agreement or the Indenture and (y) after the occurrence and
during the continuance of an Event of Default and after the acceleration of the
Senior Secured Notes, renew, extend for any period, accelerate, amend or modify,
supplement, enforce, compromise, settle, waive or release the obligations of any
Obligor or any instrument or agreement of such other Person with respect to any
or all of the Obligations or Collateral.
ARTICLE 6.
----------
EVENTS OF DEFAULT
-----------------
Section 6.01. Events
------
12
<PAGE>
. It shall constitute an Event of Default under this Agreement if an Event
of Default occurs and is continuing under the Indenture.
Section 6.02. Remedies
--------
. Upon the occurrence and during the continuance of any Event of Default,
Secured Party may take any or all of the following actions without notice
(except where expressly required below or in the Indenture) or demand to Debtor:
(a) Declare all or part of the indebtedness pursuant to the
Obligations immediately due and payable and enforce payment of the same by
Debtor or any Obligor.
(b) Take possession of the Collateral, or at Secured Party's request
Debtor shall, at Debtor's cost, assemble the Collateral and make it
available at a location to be specified by Secured Party which is
reasonably convenient to Debtor and Secured Party. In any event, Debtor
shall bear the risk of accidental loss or damage to or diminution in value
of the Collateral, and Secured Party shall have no liability whatsoever for
failure to obtain or maintain insurance, nor to determine whether any
insurance ever in force is adequate as to amount or as to risk insured.
(c) Sell, in one or more sales and in one or more parcels, or
otherwise dispose of any or all of the Collateral in its then condition or
in any other commercially reasonable manner as Secured Party may elect, in
a public or private transaction, at any location as deemed reasonable by
Secured Party (including, without limitation, Debtor's premises), for cash
at such price as Secured Party may deem fair, and (unless prohibited by the
Code, as adopted in any applicable jurisdiction) Secured Party may be the
purchaser of any or all Collateral so sold and may apply upon the purchase
price therefor any Obligations secured hereby. Any such sale or transfer by
Secured Party either to itself or to any other Person shall be absolutely
free from any claim of right by Debtor, including any equity or right of
redemption, stay or appraisal which Debtor has or may have under any rule
of law, regulation or statute now existing or hereafter adopted. Upon any
such sale or transfer, Secured Party shall have the right to deliver,
assign and transfer to the purchaser or transferee thereof the Collateral
so sold or transferred. It shall not be necessary that the Collateral or
any part thereof be present at the location of any such sale or transfer.
Secured Party may, at its discretion, provide for a public sale, and any
such public sale shall be held at such time or times within ordinary
business hours and at such place or places as Secured Party may fix in the
notice of such sale. Secured Party shall not be obligated to make any sale
pursuant to any such notice. Secured Party may, without notice or
publication, adjourn any public or private sale by announcement at any time
and place fixed for such sale, and such sale may be made at any time or
place to which the same may be so adjourned. In the event any sale or
transfer hereunder is not completed or is defective in the opinion of
Secured Party, such sale or transfer shall not exhaust the rights of
Secured Party hereunder, and Secured Party shall have the right to cause
one or more subsequent sales or transfers to be made hereunder. If only
part of the Collateral is sold or transferred such that the Obligations
remain outstanding (in whole or in part), Secured Party's rights and
remedies hereunder shall not be exhausted, waived or modified, and Secured
Party is specifically empowered to make one or more successive sales or
transfers until all the Collateral shall be sold or transferred and all the
Obligations are paid. In the event that Secured Party elects not to sell
the Collateral, Secured Party retains its rights to lease or otherwise
dispose of or utilize the Collateral or any part or
13
<PAGE>
parts thereof in any manner authorized or permitted by law or in equity,
and to apply the proceeds of the same towards payment of the Obligations.
Each and every method of disposition of the Collateral described in this
subsection or in subsection (f) shall constitute disposition in a
commercially reasonable manner.
(d) Take possession of all books and records of Debtor pertaining to
the Collateral. Secured Party shall have the authority to enter upon any
real property or improvements thereon in order to obtain any such books or
records, or any Collateral located thereon, and remove the same therefrom
without liability.
(e) Apply proceeds of the disposition of the Collateral to the
Obligations in any manner elected by Secured Party and permitted by the
Code or otherwise permitted by law or in equity and in accordance with the
provisions of the Indenture. Such application may include, without
limitation, the reasonable expenses of retaking, holding, preparing for
sale or other disposition, and the reasonable attorneys' fees and legal
expenses incurred by Secured Party.
(f) Appoint any Person as agent to perform any act or acts necessary
or incident to any sale or transfer by Secured Party of the Collateral.
Additionally, any sale or transfer hereunder may be conducted by an
auctioneer or any officer or agent of Secured Party.
(g) Execute, assign and endorse negotiable and other instruments for
the payment of money, documents of title or other evidences of payment,
shipment or storage for any form of Collateral on behalf of and in the name
of Debtor.
(h) Notify or require Debtor to notify Account Debtors that the
Accounts have been assigned to Secured Party and direct such Account
Debtors to make payments on the Accounts directly to Secured Party. To the
extent Secured Party does not so elect, Debtor shall continue to collect
the Accounts. Secured Party or its designee shall also have the right, in
its own name or in the name of Debtor, to do any of the following: (i) to
demand, collect, receipt for, settle, compromise any amounts due, give
acquittances for, prosecute or defend any action which may be in relation
to any monies due, or to become due by virtue of, the Accounts; (ii) to
sell, transfer or assign or otherwise deal in the Accounts or the proceeds
thereof or the related goods, as fully and effectively as if Secured Party
were the absolute owner thereof; (iii) to extend the time of payment of any
of the Accounts, to grant waivers and make any allowance or other
adjustment with reference thereto; (iv) to take control of cash and other
proceeds of any Collateral; (v) to send a request for verification of
Accounts to any Account Debtor; and (vi) to do all other acts and things
necessary to carry out the intent of this Agreement.
(i) Exercise all other rights and remedies permitted by law or in
equity.
Section 6.03. Attorney-in-Fact
----------------
. Debtor hereby irrevocably appoints Secured Party as Debtor's attorney-
in-fact, with full authority in the place and stead of Debtor and in the name of
Debtor or otherwise, from time to time in Secured Party's discretion upon the
occurrence and during the continuance of an Event of Default, but at Debtor's
cost and expense and without notice to Debtor:
14
<PAGE>
(a) To obtain, adjust, sell and cancel any insurance with respect to
the Collateral, and endorse any draft drawn by insurers of the Collateral.
Secured Party may apply any proceeds or unearned premiums of such insurance
to the Obligations (whether or not due).
(b) To take any action and to execute any assignment, certificate,
financing statement, notification, document or instrument which Secured
Party may reasonably deem necessary or advisable to accomplish the purposes
of this Agreement, including, without limitation, to receive, endorse and
collect all instruments made payable to Debtor representing any payment or
other distribution in respect of the Collateral or any part thereof and to
give full discharge for the same.
Section 6.04. Account Debtors
---------------
. Any payment or settlement of an Account made by an Account Debtor will
be, to the extent of such payment or to the extent provided under such
settlement, a release, discharge and acquittance of the Account Debtor with
respect to such Account, and Debtor shall take any action as may reasonably be
required by Secured Party in connection therewith. No Account Debtor on any
Account will ever be bound to make inquiry as to the termination of this
Agreement or the rights of Secured Party to act hereunder, but shall be fully
protected by Debtor in making payment directly to Secured Party.
Section 6.05. Liability for Deficiency
------------------------
. If any sale or other disposition of Collateral by Secured Party or any
other action of Secured Party hereunder results in reduction of the Obligations,
such action will not release Debtor from its liability to Secured Party for any
unpaid Obligations, including costs, charges and expenses incurred in the
liquidation of Collateral, together with interest thereon at the rate then
applicable under the Indenture, and the same shall be immediately due and
payable to Secured Party at Secured Party's address set forth in the Indenture.
Section 6.06. Reasonable Notice
-----------------
. If any applicable provision of any law requires Secured Party to give
reasonable notice of any sale or disposition or other action, Debtor hereby
agrees that ten days' prior written notice shall constitute reasonable notice
thereof. Such notice, in the case of public sale, shall state the time and
place fixed for such sale and, in the case of private sale, the time after which
such sale is to be made.
Section 6.07. Non-judicial Enforcement
------------------------
. Secured Party may enforce its rights hereunder without prior judicial
process or judicial hearing, and to the extent permitted by law Debtor expressly
waives any and all legal rights which might otherwise require Secured Party to
enforce its rights by judicial process.
ARTICLE 7.
----------
MISCELLANEOUS PROVISIONS
------------------------
Section 7.01. Notices
-------
15
<PAGE>
. Any notice required or permitted to be given under or in connection with
this Agreement shall be given in accordance with the notice provisions of the
Indenture.
Section 7.02. Amendments and Waivers
----------------------
. Secured Party's acceptance of partial or delinquent payments or any
forbearance, failure or delay by Secured Party in exercising any right, power or
remedy hereunder shall not be deemed a waiver of any obligation of Debtor or any
Obligor, or of any right, power or remedy of Secured Party; and no partial
exercise of any right, power or remedy shall preclude any other or further
exercise thereof. Secured Party may remedy any Event of Default hereunder or in
connection with the Obligations without waiving the Event of Default so
remedied. Debtor hereby agrees that if Secured Party agrees to a waiver of any
provision hereunder, or an exchange of or release of the Collateral, or the
addition or release of any Obligor or other Person, any such action shall not
constitute a waiver of any of Secured Party's other rights or of Debtor's
obligations hereunder. This Agreement may be amended only by an instrument in
writing executed jointly by Debtor and Secured Party and may be supplemented
only by documents delivered or to be delivered in accordance with the express
terms hereof.
Section 7.03. Copy as Financing Statement
---------------------------
. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral is sufficient as a financing statement, and
the same may be filed with any appropriate filing authority for the purpose of
perfecting Secured Party's security interest in the Collateral.
Section 7.04. Possession of Collateral
------------------------
. Secured Party shall be deemed to have possession of any Collateral in
transit to it or set apart for it (or, in either case, any of its agents,
affiliates or correspondents).
Section 7.05. Redelivery of Collateral
------------------------
. If any sale or transfer of Collateral by Secured Party results in full
satisfaction of the Obligations, and after such sale or transfer and discharge
there remains a surplus of proceeds, Secured Party will deliver to Debtor such
excess proceeds in a commercially reasonable time; provided, however, that
Secured Party shall not be liable for any interest, cost or expense in
connection with any reasonable delay in delivering such proceeds to Debtor.
Section 7.06. Governing Law; Jurisdiction
---------------------------
. This Agreement and the security interest granted hereby shall be
construed in accordance with and governed by the laws of the State of New York
(except to the extent that the laws of any other jurisdiction govern the
perfection and priority of the security interests granted hereby).
Section 7.07. Gaming Authority
----------------
. Each of the provisions of this Agreement is subject to, and shall be
enforced in compliance with, any requirements imposed by any applicable Gaming
Authority.
Section 7.08. Continuing Security Agreement.
-----------------------------
16
<PAGE>
(a) Except as may be expressly applicable pursuant to Section 9-505 of
the Code, no action taken or omission to act by Secured Party hereunder,
including, without limitation, any action taken or inaction pursuant to
Section 6.02 hereof, shall be deemed to constitute a retention of the
Collateral in satisfaction of the Obligations or otherwise to be in full
satisfaction of the Obligations, and the Obligations shall remain in full
force and effect, until Secured Party shall have applied payments
(including, without limitation, collections from Collateral) towards the
Obligations in the full amount then outstanding or until such subsequent
time as is hereinafter provided in subsection (b) below.
(b) To the extent that any payments on the Obligations or proceeds of
the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law
or equitable cause, then to such extent the Obligations so satisfied shall
be revived and continue as if such payment or proceeds had not been
received by Secured Party, and Secured Party's security interests, rights,
powers and remedies hereunder shall continue in full force and effect. In
such event, this Agreement shall be automatically reinstated if it shall
theretofore have been terminated pursuant to Section 7.09.
Section 7.09. Termination
-----------
. The grant of a security interest hereunder and all of Secured Party's
rights, powers and remedies in connection therewith shall unless otherwise
provided in the Indenture, the HWCC Security Agreement, or this Agreement,
remain in full force and effect until payment in full of (A) the Note, (B) all
obligations then due and owing under the Indenture, the Senior Secured Notes and
the Collateral Documents and (C) all other Obligations; provided, however, that
after receipt from the Debtor by the Trustee of a request for a release of any
Collateral permitted under the Indenture upon the sale, transfer, assignment,
exchange or other disposition of such Collateral not prohibited by the Indenture
(and upon receipt by the Trustee of all proceeds of such sale, transfer,
assignment, exchange or other disposition to the extent required to be remitted
to the Trustee under the Indenture or otherwise), such Collateral shall be
released from the lien and security interest created hereunder in accordance
with the provisions of the Indenture and shall no longer constitute Collateral.
Upon the payment in full of (A) the Note, (B) all obligations then due and owing
under the Indenture, the Senior Secured Notes and the Collateral Documents, and
(C) all other Obligations, the Debtor shall be entitled to the return, upon its
request and at its expense, of such of the Collateral pledged by it as shall not
have been sold or otherwise applied pursuant to the terms hereof.
Notwithstanding the foregoing, the reimbursement and indemnification provisions
of Section 4.07 and the provisions of subsection 7.08(b) shall survive the
termination of this Agreement.
Upon any termination of this Agreement or release of any Collateral as
permitted by the Indenture and the HWCC Security Agreement, the Trustee will, at
the expense of the Debtor, execute and deliver to the Debtor such documents and
take such other actions as the Debtor shall reasonably request to evidence the
termination of this Agreement or the release of such Collateral, as the case may
be. Any such action taken by the Trustee shall be without warranty by or
recourse to the Trustee, except as to the absence of any prior assignments by
the Trustee of its interests in the Collateral, and shall be at the expense of
the Debtor. The Trustee may conclusively rely on any certificate delivered to it
by the Debtor stating that the execution of such documents and release of the
Collateral is in accordance with and permitted by the terms of the Indenture and
this Agreement.
17
<PAGE>
Section 7.10. Counterparts; Effectiveness
---------------------------
. This Agreement may be executed in two or more counterparts. Each
counterpart is deemed an original, but all such counterparts taken together
constitute one and the same instrument. This Agreement becomes effective upon
the execution hereof by Debtor and delivery of the same to Secured Party, and it
is not necessary for Secured Party to execute any acceptance hereof or otherwise
signify or express its acceptance hereof.
Section 7.11. Indenture
---------
. This Agreement is subject to the terms, conditions and provisions of the
Indenture. To the extent a term or provision of this Agreement conflicts with
the Indenture, the Indenture shall control with respect to the subject matter of
such term or provision.
Section 7.12. Rights of Holders
-----------------
. No Holder of a Senior Secured Note shall have any independent rights
hereunder other than those rights granted to individual Holders of Senior
Secured Notes pursuant to Section 6.07 of the Indenture; provided that nothing
--------
in this Section 7.12 shall limit any rights granted to the Trustee under the
Senior Secured Notes, the Indenture or the Collateral Documents.
Section 7.13. No Personal Liability of Directors, Officers, Employees and
-----------------------------------------------------------
Stockholders
- ------------
. No past, present or future director, officer, employee, incorporator or
stockholder of the Debtor as such or any successor Person, as such, shall have
any liability for any obligations of the Debtor under the Notes, the Collateral
Documents, this Agreement or for any claim based on, in respect of, or by reason
of, such obligations or their creation.
Section 7.14. Collateral Assignment
---------------------
. Of even date herewith, Secured Party has executed the HWCC Security
Agreement in favor of the Trustee pursuant to which the Secured Party grants to
the Trustee a security interest in certain collateral therein described,
including but not limited to the Note and the liens and security interests
securing same. Debtor hereby consents to and acknowledges the existence of the
Trustee's security interest in the Note and the liens and security interests
securing same, including, but not limited to, the liens and security interests
granted by this Agreement.
18
<PAGE>
IN WITNESS WHEREOF, Debtor has caused this Intercompany Security Agreement
to be executed and delivered as of the date first set forth above.
DEBTOR: HWCC-TUNICA, INC.
- ------
By: /s/ William D. Pratt
---------------------
William D. Pratt
Executive Vice
President, General
Counsel and
Secretary
<PAGE>
EXHIBIT A
---------
CONTRACTS
---------
1. Computer Services Agreement dated as of January 1, 1994, by and between
HWCC-Tunica, Inc., as assignee of the Summit Tunica Partnership, a Mississippi
limited partnership, and Advanced Casino Systems Corporation.
2. Consulting Agreement dated as of January 1, 1994, by and between HWCC-
Tunica, Inc. and Pratt Casino Corporation.
<PAGE>
EXHIBIT B
---------
TRADEMARKS
----------
None
----
<PAGE>
EXHIBIT C
---------
PERFECTION
----------
(a) Legal Name of Debtor:
--------------------
HWCC-Tunica, Inc., a Texas corporation
(b) Other Names:
-----------
Summit Tunica Partnership, A Mississippi Limited Partnership
Summit Riverboat Casinos-Tunica, Inc., a Mississippi corporation
Hollywood Casino Tunica
(c) (i) Chief Executive Office and Principal Place of Business of Debtor:
----------------------------------------------------------------
Chief Executive Office--Dallas County, Texas
Principal Place of Business--Tunica County, Mississippi
(ii) Other Premises at which Collateral is Stored or Located:
-------------------------------------------------------
None
(iii) Locations of Records Concerning Collateral:
------------------------------------------
Tunica County, Mississippi; Dallas County, Texas
<PAGE>
EXHIBIT D
---------
PERMITTED ENCUMBRANCES
----------------------
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09 of
the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of
<PAGE>
business and consistent with industry practices and Liens on deposits made to
obtain the release of such Liens if:
(a) the underlying Obligations are not overdue for a period of more than 60
days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings by the Company and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP, and
(c) the Company is in compliance with the terms of the security
documents applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
or other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to Obligations that do not
exceed Five Million Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and Social
Security benefits.
<PAGE>
EXHIBIT 4.12
To the Chancery Clerk of the N/A Judicial District of Tunica County,
Mississippi, the real property described herein is situated in the NE 1/4 and N
1/2 of the SE 1/4 of Section 24, Township 3 South, Range 12 West of Tunica
County, Mississippi.
PREPARED BY AND WHEN [State of Mississippi]
RECORDING RETURN TO:
Sarah M. Ekdahl
LATHAM & WATKINS
Sears Tower, Suite 5800
233 South Wacker Drive
Chicago, IL 60606
Telephone: (312) 876-7700
SECOND LEASEHOLD DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS,
FIXTURE FILING, AND FINANCING STATEMENT
FROM
HWCC-TUNICA, INC.
IN FAVOR OF
PHILLIP A. POITEVIN, TRUSTEE
FOR THE BENEFIT OF
HOLLYWOOD CASINO CORPORATION
ATTENTION: FILING OFFICER--INSTRUMENT COVERS GOODS THAT ARE OR ARE TO BECOME
FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR RECORD IN
THE RECORDS WHERE DEEDS OF TRUST ON REAL ESTATE ARE RECORDED. ADDITIONALLY,
THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT ONLY AS A DEED OF TRUST,
BUT ALSO AS A FIXTURE FILING AND FINANCING STATEMENT COVERING GOODS THAT ARE OR
ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE MAILING
ADDRESSES OF THE GRANTOR (DEBTOR) AND BENEFICIARY (SECURED PARTY) ARE SET FORTH
IN THIS INSTRUMENT
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1..............................................................................................................2
- ---------
DEFINITIONS............................................................................................................2
- -----------
Section 1.01. Terms Defined Above.................................................................................2
-------------------
Section 1.02. Definitions.........................................................................................2
-----------
Section 1.03. Articles and Sections...............................................................................6
---------------------
Section 1.04. Singular and Plural.................................................................................6
-------------------
Section 1.05. References..........................................................................................6
----------
Section 1.06. Other Defined Terms.................................................................................6
-------------------
ARTICLE 2..............................................................................................................6
- ---------
GRANT..................................................................................................................6
- -----
Section 2.01. Grant...............................................................................................6
-----
Section 2.02. Security Interest...................................................................................7
-----------------
Section 2.03. Grantor's License to Collect Rents, Until Default...................................................7
-------------------------------------------------
Section 2.04. No Obligation of Beneficiary........................................................................8
----------------------------
Section 2.05. Fixture Filing......................................................................................8
--------------
ARTICLE 3..............................................................................................................8
- ---------
WARRANTIES AND REPRESENTATIONS.........................................................................................8
- ------------------------------
Section 3.01. Title to Mortgaged Property and Lien of this Instrument.............................................8
-------------------------------------------------------
ARTICLE 4..............................................................................................................8
- ---------
AFFIRMATIVE COVENANTS..................................................................................................8
- ---------------------
Section 4.01. Lien Status.........................................................................................8
-----------
Section 4.02. Payment of Impositions..............................................................................9
----------------------
Section 4.03. Repair..............................................................................................9
------
Section 4.04. Insurance...........................................................................................9
---------
Section 4.05. Application of Insurance Proceeds..................................................................10
---------------------------------
Section 4.06. Performance of Leases..............................................................................10
---------------------
Section 4.07. Inspection.........................................................................................10
----------
Section 4.08. Books and Records..................................................................................10
-----------------
Section 4.09. Maintenance of Rights of Way, Easements, and Licenses..............................................10
-----------------------------------------------------
Section 4.10. Environmental Indemnification and Hold Harmless....................................................11
-----------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 5.............................................................................................................12
- ---------
NEGATIVE COVENANTS....................................................................................................12
- ------------------
Section 5.01. Use Violations.....................................................................................12
--------------
Section 5.02. Alterations........................................................................................12
-----------
Section 5.03. Replacement of Fixtures and Personalty.............................................................12
--------------------------------------
Section 5.04. No Further Encumbrances............................................................................12
-----------------------
ARTICLE 6.............................................................................................................12
- ---------
EVENTS OF DEFAULT AND REMEDIES........................................................................................12
- ------------------------------
Section 6.01. Event of Default...................................................................................12
----------------
Section 6.02. Remedies...........................................................................................13
--------
Section 6.03. Separate Sales.....................................................................................15
--------------
Section 6.04. Remedies Cumulative, Concurrent and Nonexclusive...................................................15
------------------------------------------------
Section 6.05. No Conditions Precedent to Exercise of Remedies....................................................15
-----------------------------------------------
Section 6.06. Release of and Resort to Collateral................................................................16
-----------------------------------
Section 6.07. Waiver of Redemption, Notice and Marshalling of Assets.............................................16
------------------------------------------------------
Section 6.08. Discontinuance of Proceedings......................................................................16
-----------------------------
Section 6.09. Application of Proceeds............................................................................16
-----------------------
Section 6.10. Acceleration Following Certain Events..............................................................17
-------------------------------------
Section 6.11. Indemnity..........................................................................................17
---------
Section 6.12. Environmental Matters..............................................................................18
---------------------
ARTICLE 7.............................................................................................................19
- ---------
CONDEMNATION..........................................................................................................19
- ------------
Section 7.01. General............................................................................................19
-------
ARTICLE 8.............................................................................................................19
- ---------
CONCERNING THE DEED TRUSTEE...........................................................................................19
- ---------------------------
Section 8.01. No Required Action.................................................................................19
------------------
Section 8.02. Certain Rights.....................................................................................19
--------------
Section 8.03. Retention of Moneys................................................................................20
-------------------
Section 8.04. Successor Deed Trustees............................................................................20
-----------------------
Section 8.05. Perfection of Appointment..........................................................................20
-------------------------
Section 8.06. Succession Instruments.............................................................................20
----------------------
Section 8.07. No Representation by Deed Trustee..................................................................21
---------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 9.............................................................................................................21
- ---------
MISCELLANEOUS.........................................................................................................21
- -------------
Section 9.01. Performance at Grantor's Expense...................................................................21
--------------------------------
Section 9.02. Survival of Obligations............................................................................21
-----------------------
Section 9.03. Further Assurances.................................................................................21
------------------
Section 9.04. Notices............................................................................................21
-------
Section 9.05. No Waiver..........................................................................................22
---------
Section 9.06. Beneficiary's Right to Perform the Obligations.....................................................22
----------------------------------------------
Section 9.07. Covenants Running with the Land....................................................................22
-------------------------------
Section 9.08. Successors and Assigns.............................................................................22
----------------------
Section 9.09. Severability.......................................................................................22
------------
Section 9.10. Modification.......................................................................................23
------------
Section 9.11. Counterparts.......................................................................................23
------------
Section 9.12. Applicable Law.....................................................................................23
--------------
Section 9.13. Subrogation........................................................................................23
-----------
Section 9.14. No Partnership.....................................................................................23
--------------
Section 9.15. Headings...........................................................................................23
--------
Section 9.16. Leasehold Provisions...............................................................................24
--------------------
Section 9.17. Gaming Authorities.................................................................................27
------------------
Section 9.18. Indenture..........................................................................................27
---------
Section 9.19. Rights of Holders..................................................................................27
-----------------
Section 9.20. No Personal Liability of Directors, Officers, Employees and Stockholders...........................27
------------------------------------------------------------------------
Section 9.21. Exculpation Provisions.............................................................................27
----------------------
Section 9.22. Fraudulent Conveyance Savings Clause...............................................................28
------------------------------------
</TABLE>
iii
<PAGE>
SECOND LEASEHOLD DEED OF TRUST,
SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS
FIXTURE FILING AND FINANCING STATEMENT
--------------------------------------
THIS SECOND LEASEHOLD DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS, FIXTURE FILING AND FINANCING STATEMENT (hereinafter together
with any and all amendments, supplements, restatements or modifications of any
kind referred to as the "Deed of Trust"), entered into as of May 19,1999, by
-------------
HWCC-TUNICA, INC., a Texas corporation (hereinafter whether one or more, and any
and all subsequent owners of the Mortgaged Property or any part thereof referred
to as "Grantor"), whose address for notice hereunder is Two Galleria Tower,
-------
Suite 2200, 13455 Noel Road, LB48, Dallas, Texas 75240, to Phillip A. Poitevin,
Trustee (hereinafter together with any successor or substitute referred to in
such capacity as "Deed Trustee"), whose address is 1675 Lakeland Drive,
------------
Riverhill Tower, Jackson, Mississippi 39216 for the benefit of HOLLYWOOD CASINO
CORPORATION, a Delaware corporation, whose address for notice is Two Galleria
Tower, Suite 2200, 13455 Noel Road, LB48, Dallas, Texas 75240 (the "Grantee" or
-------
the "Beneficiary"). Pursuant to a certain Collateral Assignment of Second
-----------
Leasehold Deed of Trust, Security Agreement, Assignment of Leases and Rents,
Fixture Filing and Financing Statement of even date herewith (the "Collateral
----------
Assignment"), Grantee has, in turn, collaterally assigned its interest hereunder
- ----------
to State Street Bank and Trust Company, a Massachusetts chartered trust company,
as Trustee for the holders of the Senior Secured Notes hereinafter referred to.
STATE STREET BANK AND TRUST COMPANY, as Trustee, whose address for notice
hereunder is Two International Place, 4th Floor, Boston, Massachusetts 02110,
Attention: Corporate Trust Administration, is hereinafter referred to as the
"Indenture Trustee".
- ------------------
RECITALS
--------
A. Of even date herewith, Grantor has executed an amended and restated
promissory note (as the same may be amended, supplemented, restated or otherwise
modified from time to time, being herein referred to as the "Intercompany Note")
-----------------
payable to the order of the Grantee, in the original principal amount of
$87,045,000.
B. Grantor is entering into this Deed of Trust to secure, among other
things, its obligations under the Note payable to the order of the Grantee.
C. Grantee, the Grantor, HWCC-Shreveport, Inc. and the Trustee have
entered into an Indenture dated as of May 19, 1999 (as the same may from time to
time be amended, supplemented, restated or otherwise modified, the "Indenture"),
---------
pursuant to which the Grantee will issue up to (i) $310,000,000 of its 11 1/4%
Series A and Series B Senior Secured Notes due 2007, and (ii) $50,000,000 of its
Floating Rate Series A and Series B Senior Secured Notes due 2006 (as the same
may be amended, supplemented, restated, exchanged, replaced or otherwise
modified from time to time, collectively, the "Senior Secured Notes"). Pursuant
--------------------
to the Collateral Assignment, Grantee has agreed to collaterally assign all of
its right, title and interest in and to the Intercompany Note and the liens and
security interests securing same (including the liens and
<PAGE>
security interests granted under this Deed of Trust) to the Indenture Trustee as
security for, among other things, the Grantee's obligations under the Indenture
and the Senior Secured Notes.
A. It is a condition precedent to the purchase of the Senior Secured Notes
under the Indenture that the Grantor shall have executed and delivered this Deed
of Trust.
B. Therefore, to induce the Indenture Trustee to execute the Indenture, in
order to comply with the terms and conditions of the Indenture and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor hereby agrees with Grantee as follows:
ARTICLE 1
---------
DEFINITIONS
-----------
Section 1.01. Terms Defined Above. As used in this deed of Trust, the
-------------------
terms "Collateral Assignment", "Deed of Trust", "Grantor", "Deed Trustee",
--------------------- ------------- ------- ------------
"Beneficiary", "Indenture Trustee", "Senior Secured Notes" and "Intercompany
----------- ----------------- -------------------- ------------
Note" shall have the meanings assigned to them above.
- ----
Section 1.02. Definitions. As used herein, the following terms shall
-----------
have the following meanings:
"Buildings": Any and all buildings, covered garages, utility sheds,
---------
workrooms, air conditioning towers, open parking areas and other
improvements, and any and all additions, alterations, betterments or
appurtenances thereto, now or at any time hereafter situated, placed or
constructed upon the Land or any part thereof.
"Environmental Law": Any federal, state or local statute, law, rule,
-----------------
regulation, ordinance, code, policy or rule of common law now or hereafter
in effect and in each case as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to the environment, health, safety or
Hazardous Materials including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C.
(S)(S)9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
(S)(S)6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.
(S)(S) 1801 et seq.; the Clean Water Act, 33 U.S.C. (S)(S)1251 et seq.; the
Toxic Substance Control Act, 15 U.S.C. (S)(S)2601 et seq.; the Clean Air
Act, 42 U.S.C. (S)(S)7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
(S)(S)300f et seq.; the Atomic Energy Act, 42 U.S.C. (S)(S)2011 et seq.;
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S)(S)136
et seq.; and the Occupational and Safety and Health Act, 29 U.S.C.
(S)(S)651 et. seq.
"Event of Default": As defined in Section 6.01 hereof.
---------------- ------------
"First Lien Deed of Trust": As defined in Section 2.06.
------------------------
2
<PAGE>
"Fixtures": All materials, supplies, equipment, apparatus, fixtures and
--------
other items now or hereafter acquired by Grantor and now or hereafter
attached to, installed in or used or procured for use in connection with
(temporarily or permanently) any of the Buildings or the Land, insofar as
the same are, or can by agreement of the parties be made, a part of the
real estate, including but not limited to any and all partitions, dynamos,
window screens and shades, drapes, rugs and other floor coverings, awnings,
motors, engines, boilers, furnaces, pipes, plumbing, cleaning, call and
sprinkler systems, fire extinguishing apparatus and equipment, water tanks,
swimming pools, heating, ventilating, plumbing, laundry, incinerating, air
conditioning and air cooling equipment and systems, gas and electric
machinery, appurtenances and equipment, disposals, dishwashers,
refrigerators and ranges, recreational equipment and facilities of all
kinds, and water, gas, electrical, storm and sanitary sewer facilities and
all other utilities whether or not situated in easements, together with all
accessions, replacements, betterments and substitutions for any of the
foregoing and the proceeds thereof.
"Hazardous Materials": Any (i) petroleum products, natural or synthetic
-------------------
gas, asbestos in any form that is or could be friable, urea formaldehyde
foam insulation and radon gas; (ii) substances defined as or included in
the definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous waste," "restrictive hazardous waste,"
"toxic substances," "toxic pollutants," "contaminants," or "pollutants," or
words of similar import, under any applicable Environmental Law; and (iii)
any other substance exposure to which is regulated by any governmental
authority.
"Impositions": All real estate and personal property taxes; water, gas,
-----------
sewer, electricity and other utility rates and charges; charges for any
easement, license or agreement maintained for the benefit of the Mortgaged
Property; and all other taxes, charges and assessments and any interest,
costs or penalties with respect thereto, general and special, ordinary and
extraordinary, foreseen and unforeseen, of any kind and nature whatsoever
which at any time prior to or after the execution hereof may be assessed,
levied or imposed upon the Mortgaged Property or the Rents or the
ownership, use, occupancy or enjoyment thereof.
"Indemnified Parties": Deed Trustee, Indenture Trustee, Beneficiary and
-------------------
the holders of the Senior Secured Notes and their respective officers,
directors, employees, agents, and attorneys.
"Land": The real estate or interest therein described in Exhibit A
---- ---------
attached hereto, and all rights, titles and interests appurtenant thereto.
"Leases": Any and all leases, subleases, licenses, concessions or other
------
agreements (written or oral, now or hereafter in effect, and whether one or
more) which grant a possessory interest in and to, or the right to use, the
Mortgaged Property, and all other agreements, including without limitation,
utility contracts, maintenance agreements and service contracts, which in
any way relate to the use, occupancy, operation, maintenance, enjoyment or
ownership of the Mortgaged Property, including, but not limited to, the
Lease referred to in Section 9.16 hereof.
------------
3
<PAGE>
"Legal Requirements": (i) any and all present and future judicial
------------------
decisions, statutes, rulings, rules, regulations, permits, certificates or
ordinances of any governmental authority in any way applicable to Grantor
or the Mortgaged Property, including the ownership, use, occupancy,
possession, operation, maintenance, alteration, repair or reconstruction
thereof; (ii) Grantor's presently or subsequently effective bylaws and
articles of incorporation or partnership, limited partnership, joint
venture, trust or other form of business association agreement; (iii) any
and all Leases; and (iv) any and all leases and other contracts (written or
oral) of any nature to which Grantor may be bound, including without
limitation, any lease or other contract pursuant to which Grantor is
granted a possessory interest in the Land.
"Mortgaged Property": The Land, Buildings, Fixtures, Permits (to the
------------------
extent assignable) Personalty, Leases and, subject to the rights of Grantor
under Section 2.03 hereof, Rents, together with:
------------
(i) all rights, privileges, tenements, hereditaments, rights-of-way,
easements, appendages and appurtenances in anywise appertaining
thereto, and all right, title and interest of Grantor in and to any
streets, ways, alleys, strips or gores of land adjoining the Land or
any part thereof, together with all of Grantor's vessel, The Hollywood
Tunica, Official No. 534006 (the "Vessel"), whether or not such Vessel
------
is a vessel within the meaning of 46 U.S.C. (S) 31322(a), and all
rights of Grantor therein; and
(ii) all betterments, additions, alterations, appurtenances,
substitutions, replacements and revisions thereof and thereto and all
reversions and remainders therein; and
(iii) all of Grantor's right, title and interest in and to any
awards, remuneration, settlements or compensation heretofore made or
hereafter to be made by any Governmental Authority pertaining to the
Land, Buildings, Fixtures or Personalty, including those for any
vacation of, or change of grade in, any streets affecting the Land or
the Buildings.
provided, however, that so long as no Event of Default shall occur and
-------- -------
be continuing, all dividends, distributions, interests and principal
payments, cash, instruments, and other property and proceeds made upon
or with respect to or of the Mortgaged Property (including Rents) may
be used by the Grantor subject to the terms and conditions of
Indenture. Upon the occurrence and during the continuance of an Event
of Default, all rights of the Grantor to receive all dividends,
distributions, interest or principal payments, cash, instruments and
other property and proceeds (including Rents) shall cease and such
dividends, distributions, interest and principal payments, cash,
instruments and other property and proceeds (including Rents) shall be
paid or otherwise delivered the Beneficiary or the Indenture Trustee.
As used in this Deed of Trust, the term "Mortgaged Property" shall be
------------------
expressly defined as meaning all or, where the
4
<PAGE>
context permits or requires, any portion of the above, and all or,
where the context permits or requires, any interest therein.
"Obligations": (i) the payment when due of indebtedness evidenced by the
-----------
Intercompany Note in the principal sum not to exceed at any time
outstanding of $87,045,000, interest (including post-petition interest) as
set forth therein, and premiums, penalties, and late charges thereon; (ii)
all other indebtedness and other sums (including, without limitation, all
expenses, attorneys' fees, other fees, indemnifications, reimbursements,
damages, other monetary liabilities, and other charges) and obligations
that may or shall become due hereunder or under the Intercompany Note, this
Deed of Trust, and the other documents executed as security for or in
connection with the Intercompany Note, and (iii) any and all renewals,
modifications, amendments, extensions for any period, supplements or
restatements of any of the foregoing.
"Permits": All applicable authorizations, consents, licenses, approvals,
-------
indemnification numbers and permits required under Legal Requirements
(including, without limitation, Environmental Laws) required for
construction, operation and occupancy of the Mortgaged Property.
"Permitted Encumbrances": The items set forth on Exhibit B hereto.
---------------------- ---------
"Personalty": All of the right title and interest of Grantor in and to all
----------
furniture, furnishings (other than Fixtures), insurance proceeds relating
to the Mortgaged Property and deposits or other funds or evidences of
credit or indebtedness deposited by or on behalf of Grantor with any
governmental agencies, boards, corporations and other providers of utility
services, public or private, including specifically but without limitation,
all refundable, returnable or reimbursable tap fees, utility deposits,
commitment fees and development costs, and all other personal property on
which a security interest may be granted under the UCC, together with
accessories and replacements thereto or therefor and the proceeds thereof.
"Post-Default Rate": The interest rate applicable to overdue principal
-----------------
pursuant to the provisions of the Indenture.
"Prior Liens": As defined in Section 9.13 hereof.
----------- ------------
"Rents": All of the rents, revenues, income, proceeds, profits, security
-----
and other types of deposits, and other benefits paid or payable by parties
to the Leases other than Grantor for using, leasing, licensing, possessing,
operating from, residing in, selling or otherwise enjoying the Mortgaged
Property, including all rents, revenues, bonus money, royalties, rights and
benefits accruing to Grantor under all present and future oil, gas and
mineral leases on any part of the Land.
"UCC": The Uniform Commercial Code as presently in effect in the state of
---
New York (except to the extent that the laws of any other jurisdiction
govern the perfection and priority of the security interests granted
hereby).
5
<PAGE>
Section 1.03. Articles and Sections. References to Articles and Sections
---------------------
shall mean the corresponding Article or Section of this Deed of Trust unless
the context requires otherwise.
Section 1.04. Singular and Plural. Words used herein in the singular,
-------------------
where the context so permits, shall be deemed to include the plural and vice
versa. The definitions of words in the singular herein shall apply to such words
when used in the plural where the context so permits and vice versa.
Section 1.05. References. The words "herein," "hereof," "hereunder," and
----------
other words of similar import when used in this Deed of Trust refer to this Deed
of Trust as a whole, and not to any particular Article or Section.
Section 1.06. Other Defined Terms. Any capitalized term used in this Deed
-------------------
of Trust and not defined herein shall have the meaning assigned to such term in
the Indenture.
ARTICLE 2
---------
GRANT
-----
Section 2.01. Grant. To secure the full and timely payment of and the full
-----
and timely performance and discharge of the Obligations, Grantor has GRANTED,
BARGAINED, SOLD and CONVEYED, and by these presents does GRANT, BARGAIN, SELL
and CONVEY, unto Deed Trustee the Mortgaged Property, subject, however, to the
Permitted Encumbrances, for the benefit of the Beneficiary, TO HAVE AND TO HOLD
the Mortgaged Property unto Deed Trustee, forever, and Grantor does hereby bind
itself, its successors and assigns to WARRANT AND FOREVER DEFEND the title to
the Mortgaged Property unto Deed Trustee against every person whomsoever
lawfully claiming or to claim the same or any part thereof; provided that, the
------- ----
Liens, security interests, estates and rights granted hereunder and all of
Grantor's rights, powers, and remedies in connection therewith shall, unless
otherwise provided in the Indenture or this Deed of Trust, remain in full force
and effect until payment in full, or provision for payment in full, of (A) the
Intercompany Note and (B) all Obligations then due and owing under the
Indenture, the Senior Secured Notes and the Collateral Documents; provided,
--------
however, that after receipt from the Grantor by the Indenture Trustee of a
- -------
request for a release of any Mortgaged Property permitted under the Indenture
upon the sale, transfer, assignment, exchange or other disposition of such
Mortgaged Property not prohibited by the Indenture (and upon receipt of the
Beneficiary of all proceeds of such sale, transfer, assignment, exchange or
other disposition to the extent required to be remitted to the Beneficiary under
the Indenture or otherwise), such Mortgaged Property shall be released from the
Liens, security interests, estates and rights granted by this Deed of Trust and
no longer constitute Mortgaged Property. Upon the payment in full, or provision
for payment in full, of (A) the Intercompany Note and (B) all Obligations then
due and owing under the Indenture, the Senior Secured Notes and the Collateral
Documents, the Grantor shall be entitled to the return, upon its request and at
its expense, of such of the Mortgaged Property as shall not have been sold or
otherwise applied pursuant to the terms hereof, and the Liens, security
interests, estates and rights granted by this Deed of Trust shall terminate,
otherwise same shall remain in full force and effect. Upon any termination of
this Deed of Trust or release of any Mortgaged Property as permitted by the
Indenture, the Indenture Trustee will, at the expense of the Grantor, execute
and
6
<PAGE>
deliver to the Grantor such documents and take such other actions as the
Grantor shall reasonably request to evidence the termination of this Deed of
Trust or the release of such Mortgaged Property, as the case may be. Any such
action taken by the Indenture Trustee shall be without warranty by or recourse
to the Indenture Trustee, except as to the absence of any prior assignments by
the Indenture Trustee of its interests in the Mortgaged Property, and shall be
at the expense of the Grantor. The Indenture Trustee may conclusively rely on
any certificate delivered to it by the Grantor stating that the execution of
such documents and release of the Mortgaged Property is in accordance with and
permitted by the terms of the Indenture and this Deed of Trust.
Section 2.02. Security Interest. This Deed of Trust shall be construed
-----------------
as a deed of trust on real property and it shall also constitute and serve (a)
as a "Security Agreement" on personal property within the meaning of, and shall
constitute a second security interest under, the UCC with respect to the
Personalty, Fixtures, Leases and Rents (subject to Permitted Encumbrances), and
(b) as an "Assignment of Leases and Rents" of the Leases and Rents (subject to
Permitted Encumbrances). To this end, Grantor has GRANTED, BARGAINED, CONVEYED,
ASSIGNED, TRANSFERRED, AND SET OVER, and by these presents does GRANT, BARGAIN,
CONVEY, ASSIGN, TRANSFER AND SET OVER, unto Deed Trustee and unto Beneficiary, a
second security interest and all of Grantor's right, title and interest in, to
and under the Personalty, Fixtures, Leases and Rents to secure the full and
timely payment of and the full and timely performance and discharge of the
Obligations, subject to Permitted Encumbrances.
Section 2.03. Grantor's License to Collect Rents Until Default.
------------------------------------------------
Grantor and Beneficiary agree that this Deed of Trust is an absolute and
present assignment of Leases and Rents. Provided there exists no Event of
Default, Grantor shall have the right under a license granted hereby and
Beneficiary hereby grants to Grantor a license (but limited by the remedies of
Beneficiary set forth herein and in the Indenture) to collect, but not more than
one (1) month in advance, all of the Rents due or to become due under the
Leases, and, subject to the restrictions set forth in the Indenture, if any, to
exercise the rights of landlord under the Leases. The license granted hereby
may be revoked at Beneficiary's option upon written notice from Beneficiary to
Grantor after the occurrence and during the continuance of an Event of Default.
Grantor hereby agrees with Beneficiary that the other parties under the Leases
may, upon notice from Indenture Trustee or Beneficiary of the occurrence of an
Event of Default that is then continuing, thereafter pay direct to Beneficiary
the Rents due and to become due under the Leases and attorn all other
obligations thereunder directly to Beneficiary without any obligation on their
part to determine whether an Event of Default does in fact exist. Additionally,
upon the occurrence and during the continuance of an Event of Default, Grantor
hereby constitutes and appoints Beneficiary its true and lawful attorney-in-fact
with full power of substitution to collect Rents and other sums due and to
become due under the Leases and to endorse, either in the name of Grantor or in
the name of Beneficiary, any check made payable to Grantor or any assumed
business name of Grantor representing Rents and other sums due and to become due
under the Leases. Following the occurrence and during the continuance of an
Event of Default and the acceleration of the Intercompany Note, any such Rent
and other sums shall be applied in accordance with the provisions of the
Indenture. It is understood and agreed that this power is coupled with an
interest which cannot be revoked.
7
<PAGE>
Section 2.04. No Obligation of Beneficiary. The assignment and security
----------------------------
interest herein granted shall not be deemed or construed to constitute
Beneficiary as a mortgagee in possession of the Mortgaged Property, to obligate
Beneficiary to lease the Mortgaged Property or attempt to do same, or to take
any action, incur any expense or perform or discharge any obligation, duty or
liability whatsoever.
Section 2.05. Fixture Filing. This Deed of Trust shall constitute a
--------------
"fixture filing" for all purposes of the UCC. All or part of the Mortgaged
Property are or are to become fixtures on the Land; information concerning the
security interest herein granted may be obtained at the addresses set forth on
the signature page hereof. The addresses of the Secured Party (Beneficiary) and
of the Debtor (Grantor) are set forth on the signature page hereof.
Section 2.06. Second Lien. Of even date herewith, Grantor is executing a
-----------
certain First Leasehold Deed of Trust, Security Agreement, Assignment of Leases
and Rents, Fixture Filing and Financing Statement in favor of State Street Bank
and Trust Company, as Trustee (the "First Lien Deed of Trust"). The liens and
------------------------
security interests granted in this Deed of Trust shall be inferior and
subordinate to the liens and security interests granted in the First Lien Deed
of Trust, which shall be first priority.
ARTICLE 3
---------
WARRANTIES AND REPRESENTATIONS
------------------------------
Grantor hereby unconditionally warrants and represents to Beneficiary as
follows:
Section 3.01. Title to Mortgaged Property and Lien of this Instrument.
-------------------------------------------------------
Grantor has good and indefeasible title to the Land (in fee simple, if the Lien
created hereunder be on the fee, or a first and prior leasehold estate, if it
be created on the leasehold estate) and Buildings, and good and indefeasible
title to the Fixtures and Personalty, free and clear in each case of any liens,
charges, encumbrances, security interests and adverse claims whatsoever except
the Permitted Encumbrances. This Deed of Trust constitutes a valid and
subsisting second Lien deed of trust on the Land, the Buildings and the Fixtures
and a valid, subsisting second security interest in and to, and a valid second
(subject to Permitted Encumbrances) assignment of, the Personalty and Leases and
Rents (subject to the rights of Grantor under Section 2.03 hereof), all in
------------
accordance with the terms hereof.
ARTICLE 4
---------
AFFIRMATIVE COVENANTS
---------------------
Grantor hereby unconditionally covenants and agrees with Beneficiary as
follows:
Section 4.01. Lien Status. Grantor will protect the second Lien and
-----------
security interest status (subject to Permitted Encumbrances) of this Deed of
Trust and, except to the extent permitted by the provisions of the Indenture or
hereunder, will not place, or permit to be placed, or otherwise mortgage,
hypothecate or encumber the Mortgaged Property with, any other Lien or security
interest of any nature whatsoever (statutory, constitutional or contractual)
regardless of
8
<PAGE>
whether same is allegedly or expressly inferior to the Lien and security
interest created by this Deed of Trust, and, if any such Lien or security
interest is asserted against the Mortgaged Property (unless such Lien or
encumbrance constitutes a Permitted Encumbrance), Grantor will promptly, at its
own cost and expense, (a) pay the underlying claim in full or take such other
action so as to cause same to be released or bonded around and (b) within five
(5) days from the date such Lien or security interest is so asserted, give
Beneficiary notice of such Lien or security interest. Such notice shall specify
who is asserting such Lien or security interest and shall detail the origin and
nature of the underlying claim giving rise to such asserted Lien or security
interest.
Section 4.02. Payment of Impositions. Grantor will duly pay and discharge,
----------------------
or cause to be paid and discharged, all material Impositions not later than the
day any fine or penalty may be added thereto or imposed, except such as are
contested in good faith and by appropriate proceedings or where the failure to
effect such payment is not adverse in any material respect to the Holders;
provided, however, that Grantor may, if permitted by law and if such installment
- -------- -------
payment would not create or permit the filing of a Lien against the Mortgaged
Property, pay such Impositions in installments whether or not interest shall
accrue on the unpaid balance of such Impositions.
Section 4.03. Repair. Grantor will keep the Morgaged Property in good
------
condition, ordinary wear and tear excepted, and will make all necessary repairs,
replacements, renewals, betterments and improvements and alterations thereof and
thereto, interior and exterior, structural and non-structural, ordinary and
extraordinary, foreseen and unforeseen all as in the judgment of the Grantor may
be reasonably necessary for the proper conduct of the business carried in
connection therewith, provided that nothing in this Section 4.03 shall prevent
------------
the Grantor from discontinuing the maintenance of any of such properties if such
discontinuance is, in the judgment of the Grantor, desirable in the conduct of
the business of the Grantor and its Subsidiaries taken as a whole.
Notwithstanding the foregoing, nothing contained in this Section 4.03 shall
------------
limit the right of the Grantor to dispose of properties in any manner otherwise
permitted by the Indenture.
Section 4.04. Insurance. Grantor will obtain and maintain insurance upon
---------
and relating to the Mortgaged Property insuring against personal injury and
death, loss by fire and such other hazards, casualties and contingencies
(including business interruptions insurance and builder's all risk coverage) as
are normally and usually covered by extended coverage policies in effect where
the Land is located and with such insurers typical and prudent for properties
similar to the Mortgaged Property. Each insurance policy issued in connection
therewith shall provide by way of endorsements, riders or otherwise that (a)
proceeds will be payable to Beneficiary as its interest may appear, it being
agreed by Grantor that such payments shall be applied in accordance with the
provisions of the Indenture; (b) the coverage of Beneficiary shall not be
terminated, reduced or affected in any manner regardless of any breach or
violation by Grantor of any warranties, declarations or conditions in such
policy; (c) no such insurance policy shall be cancelled unless such insurer
shall have first given Beneficiary thirty (30) days prior written notice
thereof; and (d) Beneficiary may, but shall not be obliged to, make premium
payments to prevent any cancellation, endorsement, alteration or reissuance and
such payments shall be accepted-by the insurer to prevent same. Beneficiary
shall be furnished with photocopies of each renewal policy evidencing the
appropriate coverages as required not later than fifteen (15) days
9
<PAGE>
after the renewals have been completed, together with receipts or other evidence
that the premiums thereon have been paid.
Section 4.05. Application of Insurance Proceeds. The proceeds of the
---------------------------------
insurance of Grantor shall be applied in accordance with the provisions of the
Indenture.
Section 4.06. Performance of Leases. Grantor covenants (a) not to assign
---------------------
or grant a security interest in and to any of the Leases to any party other than
Beneficiary or pursuant to the First Lien Deed of Trust without the prior
written consent of Beneficiary, (b) at the request of Beneficiary, to execute
and deliver all such further assurances and assignments in and to the Mortgaged
Property as Beneficiary shall from time to time reasonably require, and (c) to
deliver to Beneficiary copies of all Leases, regardless of whether such Leases
were or are executed before or after the date hereof.
Section 4.07. Inspection. Grantor, at all reasonable times and upon
----------
reasonable prior notice, will permit the Indenture Trustee and Beneficiary and
their agents, representatives and employees to inspect the Mortgaged Property.
Section 4.08. Books and Records. Grantor will maintain full and accurate
-----------------
books of account and other records reflecting in all material respects the
results of its operations of the Mortgaged Property. At any time and from time
to time Grantor shall deliver to Beneficiary such other financial data as
Beneficiary shall reasonably request with respect to the ownership, maintenance,
use and operation of the Mortgaged Property, and Beneficiary shall have the
right, at reasonable times and upon reasonable notice, to audit, examine and
make copies or extracts of Grantor's books of account and records relating to
the Mortgaged Property.
Section 4.09. Maintenance of Rights of Way, Easements, and Licenses.
-----------------------------------------------------
Grantor will maintain, preserve and renew all rights of way, easements, grants,
privileges, licenses and franchises reasonably necessary for the use of the
Mortgaged Property from time to time. Grantor shall comply in all material
respects with all restrictive covenants which may at any time affect the
Mortgaged Property, zoning ordinances and other public or private restrictions
as to the use of the Mortgaged Property.
(a) Grantor shall (i) comply in all material respects with all applicable
Environmental Laws and obtain, keep and comply with Permits applicable
to the operations of Grantor and the ownership, lease, or use of any
Mortgaged Property; (ii) use commercially reasonable efforts to cause
all Persons occupying any Mortgaged Property to comply with all such
Environmental Laws and Permits; (iii) keep or cause to be kept all
such Mortgaged Property free and clear of any Liens imposed pursuant
to such Environmental Laws; and (iv) obtain and renew all material
Permits required for ownership or use of any Mortgaged Property.
(b) Grantor shall conduct any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other action necessary
to remove and cleanup all Hazardous Materials from any Mortgaged
Property in accordance in all material respects with the requirements
of all applicable Environmental Laws
10
<PAGE>
and any Legal Requirements.
Section 4.10. Environmental Indemnification and Hold Harmless.
-----------------------------------------------
(a) Grantor agrees to defend, indemnify and hold harmless the
Indemnified Parties from and against any and all claims, demands,
judgments, settlements, damages, actions, causes of action, injuries,
administrative orders, consent agreements and orders, liabilities,
penalties, costs, including but not limited to any cleanup costs,
mediation costs, response costs, and all expenses of any kind
whatsoever, including claims arising out of loss of life, injury to
persons, property, or business or damage to natural resources in
connection with the activities of Grantor, its predecessors in
interest, third parties who have trespassed on the Mortgaged Property,
or parties in a contractual relationship with Grantor, or any of them,
whether or not occasioned wholly or in part by any condition, accident
or event caused by any act or omission of Indemnified Parties, which:
(i) Arises out of the actual, alleged or threatened migration,
spill, leach, pour, empty, inject, discharge, dispersal,
release, storage, treatment, generation, disposal or escape of
pollutants or other toxic or hazardous substances, including any
solid, liquid, gaseous or thermal irritant or contaminant,
including smoke, vapor, soot, fumes, acids, alkalis, chemicals,
and waste (including materials to be recycled, reconditioned or
reclaimed); or
(ii) Actually or allegedly arises out of the use, specification, or
inclusion of any product, material or process containing
chemicals, the failure to detect the existence or proportion of
chemicals in the soil, air, surface water or ground water, or
the performance or failure to perform the abatement of any
pollution source or the replacement or removal of any soil,
water, surface water, or ground water containing chemicals.
(iii) Arises out of the breach of any covenant, warranty, or
representation of Grantor as it relates to the provisions of
this Section 4.10.
------------
(iv) Arises out of a judicial or administrative action brought
pursuant to any Environmental Law that relates to the Mortgaged
Property.
(b) Grantor, its successors and assigns, shall bear, pay and discharge
when and as the same become due and payable, any and all such
judgments or claims for damages, penalties or otherwise against
Indemnified Parties, shall hold Indemnified Parties harmless for those
judgments or claims, and shall assume the burden and expense of
defending all suits, administrative proceedings, and negotiations of
any description with any and all persons, political subdivisions or
Governmental Authorities arising out of indemnified matters as set
forth in Section 4.10(a) above.
(c) Grantor's indemnifications and representations made herein shall survive
any termination or expiration of the documents relating to the Intercompany
Note and/or the repayment of the Obligations,
11
<PAGE>
including, but not limited to, any foreclosure under this Deed of Trust or deed-
in-lieu of foreclosure, it being understood and agreed that the indemnity given
herein is independent of the Obligations and the Intercompany Note and the
documents securing the Intercompany Note.
ARTICLE 5
---------
NEGATIVE COVENANTS
------------------
Grantor hereby covenants and agrees with Beneficiary that, until the entire
Obligations shall have been paid in full and shall have been fully performed and
discharged:
Section 5.01. Use Violations. Grantor will not use, maintain, operate or
--------------
occupy, or allow the use, maintenance, operation or occupancy of, the Mortgaged
Property in any manner which violates in any material respect any Governmental
Requirement.
Section 5.02. Alterations. Grantor will not commit or permit any waste of
-----------
the Mortgaged Property that materially impairs Beneficiary's security hereunder.
Section 5.03. Replacement of Fixtures and Personalty. Except as permitted
--------------------------------------
by this Deed of Trust and the Indenture and except in the ordinary course of its
business, Grantor will not, without the prior written consent of Beneficiary,
permit any of the Fixtures or Personalty to be removed at any time from the Land
or Buildings unless the removed item is removed temporarily for maintenance and
repair or, if removed permanently, such removal and disposition does not affect
materially and adversely the value of Grantor's casino and the Mortgaged
Property taken as a whole or the removed item is replaced by an article of
substantially equal utility and value, owned by Grantor and subject to the Liens
created hereby, and free and clear of any other Lien or security interest except
Permitted Encumbrances or such as may be first approved in writing by
Beneficiary.
Section 5.04. No Further Encumbrances. Except to the extent permitted by
-----------------------
the provisions of the Indenture, Grantor will not, without the prior written
consent of Beneficiary, create, place or permit to be created or placed, or
through any act or failure to act, acquiesce in the placing of, or allow to
remain, any mortgage, pledge, Lien (statutory, constitutional or contractual),
security interest, encumbrance or charge on, or conditional sale or other title
retention agreement (regardless of whether same are expressly subordinate to the
Liens of this Deed of Trust) with respect to the Mortgaged Property, other than
the Permitted Encumbrances and the First Lien Deed of Trust.
ARTICLE 6
---------
EVENTS OF DEFAULT AND REMEDIES
------------------------------
Section 6.01. Event of Default. The term "Event of Default", as used in
---------------- ----------------
this Deed of Trust, shall mean the occurrence or happening, at any time and from
time to time, of an Event of Default (as such term is defined thereunder) under
the Indenture.
12
<PAGE>
Section 6.02. Remedies. If an Event of Default shall occur and be
--------
continuing, Beneficiary may, at Beneficiary's election and by or through Deed
Trustee or otherwise, exercise any or all of the following rights, remedies and
recourses:
(a) Entry Upon Mortgaged Property. Enter upon the Mortgaged Property and
-----------------------------
take exclusive possession thereof and of all books, records and
accounts relating thereto. If Grantor remains in possession of all or
any part of the Mortgaged Property during the continuance of an Event
of Default and without Beneficiary's prior written consent thereto,
Beneficiary may invoke any and all legal remedies to dispossess
Grantor, including specifically one or more actions for forcible entry
and detainer, trespass to try title and writ of restitution. Nothing
contained in the foregoing sentence shall, however, be construed to
impose any greater obligation or any prerequisites to acquiring
possession of the Mortgaged Property during the continuance of an
Event of Default than would have existed in the absence of such
sentence.
(b) Operation of Mortgaged Property. Hold, lease, manage, operate or
-------------------------------
otherwise use or permit the use of the Mortgaged Property, either
itself or by other persons, firms or entities, in such manner, for
such time and upon such other terms as Beneficiary may deem to be
prudent and reasonable under the circumstances (making such repairs,
alterations, additions and improvements thereto and taking any and all
other action with reference thereto, from time to time, as Beneficiary
shall deem reasonably necessary or desirable), and after the
occurrence and continuance of an Event of Default, apply all Rents and
other amounts collected by Deed Trustee or Indenture Trustee or
Beneficiary in connection therewith in accordance with the provisions
of the Indenture.
(c) Foreclosure and Sale. Beneficiary shall have the right and option to
--------------------
proceed with foreclosure by directing the Deed Trustee, or his
successors or substitutes in trust, to proceed with foreclosure and to
sell, to the extent permitted by law, all or any portion of the
Mortgaged Property at one or more sales, as an entirety or in parcels,
at such place or places in otherwise such manner and upon such notice
as may be required by law, or, in the absence of any such requirement,
as the Beneficiary may deem appropriate, and to make conveyance to the
purchaser or purchasers. Where the Mortgaged Property is situated in
more than one county, notice as above provided shall be posted and
filed in all such counties (if such notices are required by law), and
all such Mortgaged Property may be sold in any such county and any
such notice shall designate the county where such Mortgaged Property
is to be sold. Nothing contained in this Section 6.02(c) shall be
---------------
construed so as to limit in any way the Deed Trustee's rights to sell
the Mortgaged Property, or any portion thereof, by private sale if,
and to the extent that, such private sale is permitted under the laws
of the applicable jurisdiction or by public or private sale after
entry of a judgment by any court of competent jurisdiction so
ordering. Grantor hereby irrevocably appoints the Deed Trustee to be
the attorney of Grantor and in the name and on behalf of Grantor to
execute and deliver any deeds, transfers, conveyances, assignments,
assurances and notices which Grantor
13
<PAGE>
ought to execute and deliver and do and perform any and all such acts
and things which Grantor ought to do and perform under the covenants
herein contained and generally, to use the name of Grantor in the
exercise of all or any of the powers hereby conferred on the Deed
Trustee. At any such sale: (i) whether made under the power herein
contained or any other legal enactment, or by virtue of any judicial
proceedings or any other legal right, remedy or recourse, it shall not
be necessary for Deed Trustee to have physically present or to have
constructive possession of, the Mortgaged Property (Grantor hereby
covenanting and agreeing to deliver to Deed Trustee any portion of the
Mortgaged Property not actually or constructively possessed by Deed
Trustee immediately upon demand by Deed Trustee) and the title to and
right of possession of any such property shall pass to the purchaser
thereof as completely as if the same had been actually present and
delivered to purchaser at such sale, (ii) each instrument of
conveyance executed by Deed Trustee shall contain a general warranty
of title, binding upon Grantor and its successors and assigns, (iii)
each and every recital contained in any instrument of conveyance made
by Deed Trustee shall conclusively establish the truth and accuracy of
the matters recited therein, including, without limitation, nonpayment
of the Obligations, advertisement and conduct of such sale in the
manner provided herein and otherwise by law and appointment of any
successor Deed Trustee hereunder, (iv) any and all prerequisites to
the validity thereof shall be conclusively presumed to have been
performed, (v) the receipt of Deed Trustee or of such other party or
officer making the sale shall be a sufficient discharge to the
purchaser or purchasers for its purchase money and no such purchaser
or purchasers, or its assigns or personal representatives, shall
thereafter be obligated to see to the application of such purchase
money, or be in any way answerable for any loss, misapplication or
nonapplication thereof, (vi) to the fullest extent permitted by law,
Grantor shall be completely and irrevocably divested of all of its
right, title, interest, claim and demand whatsoever, either at law or
in equity, in and to the property sold and such sale shall be a
perpetual bar both at law and in equity against Grantor, and against
any and all other persons claiming or to claim the property sold or
any part thereof, by, through or under Grantor, and (vii) to the
extent and under such circumstances as are permitted by law,
Beneficiary may be a purchaser at any such sale, and shall have the
right, after paying or accounting for all costs of said sale or sales,
to credit the amount of the bid upon the amount of the Obligations (in
the order of priority set forth in Section 6.09 hereof) in lieu
------------
of cash payment.
(d) Judicial Foreclosure: Receivership. Proceed by a suit or suits in
-----------------------------------
equity or at law, whether for the specific performance of any covenant
or agreement herein contained or in aid of the execution of any power
herein granted, or for any foreclosure hereunder or for the sale of
the Mortgaged Property under the judgment or decree of any court or
courts of competent jurisdiction, or for the appointment of a receiver
pending any foreclosure hereunder or the sale of the Mortgaged
Property under the order of a court or courts of competent
jurisdiction or under executory or other legal process, or for the
enforcement of any other
14
<PAGE>
appropriate legal or equitable remedy. Any money advanced by the Deed
Trustee and/or the Indenture Trustee and/or Beneficiary in connection
with any such receivership shall be a demand obligation (which
obligation Grantor hereby expressly promises to pay) owing by Grantor
to the Deed Trustee and/or Indenture Trustee and/or Beneficiary and
shall bear interest from the date of making such advance by the Deed
Trustee and/or Indenture Trustee and/or Beneficiary until paid at the
Post-Default Rate.
(e) Trustee or Receiver. Prior to, upon or at any time after,
-------------------
commencement of foreclosure of the Lien and security interest provided
for herein or any legal proceedings hereunder, make application to a
court of competent jurisdiction as a matter of strict right and
without notice to Grantor or regard to the adequacy of the Mortgaged
Property for the repayment of the Obligations for appointment of a
receiver of the Mortgaged Property, and Grantor does hereby
irrevocably consent to such appointment Any such receiver shall have
all the usual powers and duties of receivers in similar cases,
including the full power to rent, maintain and otherwise operate the
Mortgaged Property upon such terms as may be approved by the court,
and shall apply the Rents in accordance with the provisions of Section
-------
6.09 hereof.
----
(f) Other. Exercise any and all other rights, remedies and recourses
-----
granted hereunder, or now or hereafter existing in equity or at law,
by virtue of statute or otherwise.
Section 6.03. Separate Sales. The Mortgaged Property may be sold in one
--------------
or more parcels and in such manner and order as Deed Trustee, in his sole
discretion, may elect, it being expressly understood and agreed that the right
of sale arising out of any Event of Default shall not be exhausted by any one or
more sales.
Section 6.04. Remedies Cumulative, Concurrent and Nonexclusive.
------------------------------------------------
Beneficiary shall have all rights, remedies and recourses granted in the
Intercompany Note and the other documents securing the Intercompany Note and
available at law or equity, including specifically those granted by the UCC, and
same (a) shall be cumulative and concurrent; (b) may be pursued separately,
successively or concurrently against Grantor or others obligated under the
Intercompany Note, or against the Mortgaged Property, or against any one or more
of them, at the sole discretion of Beneficiary; (c) may be exercised as often as
occasion therefor shall arise, it being agreed by Grantor that the exercise or
failure to exercise any of same shall in no event be construed as a waiver or
release thereof or of any other right, remedy or recourse; and (d) are intended
to be, and shall be, nonexclusive.
Section 6.05. No Conditions Precedent to Exercise of Remedies. Neither
-----------------------------------------------
Grantor nor any other person hereafter obligated for payment of all or any part
of the Indebtedness or fulfillment of all or any of the Obligations shall be
relieved of such obligation by reason of (a) the failure of Deed Trustee to
comply with any request of Grantor or any other person so obligated to foreclose
the Lien of this Deed of Trust or to enforce any provisions of the other
documents securing the Intercompany Note; (b) the release, regardless of
consideration, of the Mortgaged Property or the addition of any other property
to the Mortgaged Property; (c) any agreement or stipulation
15
<PAGE>
between any subsequent owner of the Mortgaged Property and Beneficiary
extending, renewing, rearranging or in any other way modifying the terms of this
Deed of Trust without first having obtained the consent of, given notice to or
paid any consideration to Grantor, or such other person, and in such event
Grantor and all such other persons shall continue to be liable to make payment
according to the terms of any such extension or modification agreement unless
expressly released and discharged in writing by Beneficiary; or (d) by any other
act or occurrence save and except the complete payment of and the complete
fulfillment of all of the Obligations.
Section 6.06. Release of and Resort to Collateral. Beneficiary may
-----------------------------------
release, regardless of consideration, any part of the Mortgaged Property
without, as to the remainder, in any way impairing, affecting, subordinating or
releasing the Lien or security interest created in or evidenced by this Deed of
Trust or their stature as a second Lien and security interest (subject to
Permitted Encumbrances) in and to the Mortgaged Property. For payment of the
Obligations, Beneficiary may resort to any other security therefor held by Deed
Trustee in such order and manner as Beneficiary may elect.
Section 6.07. Waiver of Redemption, Notice and Marshalling of Assets.
------------------------------------------------------
To the fullest extent permitted by law, Grantor hereby irrevocably and
unconditionally waives and releases (a) all benefits that might accrue to
Grantor by virtue of any present or future law exempting the Mortgaged Property
from attachment, levy or sale on execution or providing for any appraisement,
valuation, stay of execution, exemption from civil process, redemption or
extension of time for payment; (b) except as herein expressly provided and in
the Intercompany Note and the other documents securing the Intercompany Note,
all notices of (i) any Event of Default, (ii) intent to accelerate the
Obligations, (iii) acceleration of the Obligations, or (iv) Deed Trustee's
election to exercise or his actual exercise of any right, remedy or recourse
provided for under this Deed of Trust; and (c) any right to a marshalling of
assets or a sale in inverse order of alienation. Grantor agrees, to the full
extent that it may lawfully do so, that it will not at any time insist upon or
plead or in any way take advantage of any appraisement, valuation, stay,
marshalling of assets, extension, redemption or moratorium law now or hereafter
in force and effect so as to prevent or hinder the enforcement of the provisions
of this Deed of Trust or the indebtedness secured hereby, or any agreement
between Grantor and Beneficiary or any rights or remedies Beneficiary may have
thereunder, hereunder or by law.
Section 6.08. Discontinuance of Proceedings. In case Beneficiary shall
-----------------------------
have proceeded to invoke any right, remedy or recourse permitted hereunder or
under the other documents securing the Intercompany Note and shall thereafter
elect to discontinue or abandon same for any reason, Beneficiary shall have the
unqualified right so to do and, in such an event, Grantor and Beneficiary shall
be restored to their former positions with respect to the Obligations, the other
documents securing the Intercompany Note, the Mortgaged Property and otherwise,
and the rights, remedies, recourses and powers of Beneficiary shall continue as
if same had never been invoked.
Section 6.09. Application of Proceeds. The proceeds of any sale of, and
-----------------------
the Rents and other amounts generated by the holding, leasing, operating or
other use of, the Mortgaged Property or the Leases shall be applied upon the
occurrence and during the continuance of an
16
<PAGE>
Event of Default by Deed Trustee or Beneficiary (or the receiver, if one is
appointed) to the extent that funds are so available therefrom in the following
orders of priority:
(a) first, to the payment of the reasonable costs and expenses of taking
-----
possession of the Mortgaged Property and of holding, using, leasing,
repairing, improving and selling the same, including without limitation (i)
reasonable trustees' and receivers' fees, (ii) court costs, (iii)
reasonable attorneys' and accountants' fees, (iv) costs of advertisement
and (v) the payment of any and all Impositions, Liens, security interests
or other rights, titles or interests equal or superior to the Lien and
security interest of this Deed of Trust (except those to which the
Mortgaged Property has been sold subject and without in anyway implying
Beneficiary's prior consent to the creation thereof and except for the
First Lien Deed of Trust);
(b) second to payment of the Obligations in such order and manner as
------
Beneficiary may elect; and
(c) third, to Grantor; or as otherwise required by any Governmental
-----
Requirement.
Section 6.10. Acceleration Following Certain Events. Notwithstanding
-------------------------------------
anything to the contrary contained in or inferable from any provision hereof,
upon the occurrence of an Event of Default as defined in Section 6.01(i) or
Section 6.01(j) of the Indenture, any accrued but unpaid portion of the
Obligations shall be automatically and immediately due and payable in full
without the necessity of any notice or any other action on the part of Deed
Trustee or Beneficiary or any other party.
Section 6.11. Indemnity. IN CONNECTION WITH ANY ACTION TAKEN BY THE DEED
---------
TRUSTEE AND/OR INDENTURE TRUSTEE AND/OR BENEFICIARY PURSUANT TO THIS DEED OF
TRUST, THE INDEMNIFIED PARTIES SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY
GRANTOR RESULTING FROM ANY ACT OR OMISSION OF ANY INDEMNIFIED PARTY IN
ADMINISTERING, MANAGING, OPERATING OR CONTROLLING THE MORTGAGED PROPERTY UNLESS
SUCH LOSS IS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AN
INDEMNIFIED PARTY, NOR SHALL THE DEED TRUSTEE AND/OR INDENTURE TRUSTEE AND/OR
BENEFICIARY BE OBLIGATED TO PERFORM OR DISCHARGE ANY OBLIGATION, DUTY OR
LIABILITY OF GRANTOR. GRANTOR SHALL AND DOES HEREBY AGREE TO INDEMNIFY EACH
INDEMNIFIED PARTY FOR, AND TO HOLD EACH INDEMNIFIED PARTY HARMLESS FROM, ANY AND
ALL LIABILITY, LOSS OR DAMAGE WHICH MAY OR MIGHT BE INCURRED BY ANY INDEMNIFIED
PARTY BY REASON OF THIS DEED OF TRUST OR THE EXERCISE OF RIGHTS OR REMEDIES
HEREUNDER UNLESS SUCH LIABILITY, LOSS OR DAMAGE IS CAUSED BY THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF AN INDEMNIFIED PARTY; SHOULD THE DEED
TRUSTEE AND/OR THE INDENTURE TRUSTEE AND/OR BENEFICIARY MAKE ANY EXPENDITURE ON
ACCOUNT OF ANY SUCH LIABILITY, LOSS OR DAMAGE, THE AMOUNT THEREOF, INCLUDING
COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, SHALL BE A DEMAND OBLIGATION
(WHICH OBLIGATION GRANTOR HEREBY EXPRESSLY PROMISES TO PAY) OWING BY
17
<PAGE>
GRANTOR TO THE DEED TRUSTEE AND/OR THE INDENTURE TRUSTEE AND/OR BENEFICIARY AND
SHALL BEAR INTEREST FROM THE DATE EXPENDED UNTIL PAID AT THE POST-DEFAULT RATE,
SHALL BE A PART OF THE OBLIGATIONS AND SHALL BE SECURED BY THIS DEED OF TRUST
AND ANY OTHER SECURITY INSTRUMENT. THE LIABILITIES OF THE GRANTOR AS SET FORTH
IN THIS SECTION 6.11 SHALL SURVIVE THE TERMINATION OF THIS DEED OF TRUST.
If any claim for indemnification by any of the Indemnified Parties arises
out of a claim by a person other than the Indemnified Parties, Grantor shall
conduct any proceedings or negotiations in connection therewith which are
necessary to defend such Indemnified Party and shall take all such steps and
proceedings as Grantor in good faith deems necessary to settle or defeat any
such claims, and Grantor shall employ counsel to contest any such claims;
provided, however, that Grantor shall reasonably consider the advice of the
Indemnified Party as to the defense of such claims, and the Indemnified Party
shall have the right to participate, including the right to retain its own
counsel at its expense, in such defense (unless the Indemnified Party reasonably
determines that a conflict exists between the interests of the Grantor and the
interests of the Indemnified Party, in which case such independent counsel
selected by the Indemnified Party shall be paid for by the Grantor). Reasonable
counsel and auditor fees, filing fees and court fees of all proceedings,
contests or lawsuits with respect to any such claims or asserted liability shall
be borne by the Grantor and shall be part of the Obligations, except in the case
where the Indemnified Party hires independent counsel without a reasonable
determination that a conflict exists between the interests of the Grantor and
the interests of the Indemnified Party and unless such claims or liability is
caused by the negligence or willful misconduct of the Indemnified Party. If any
such claim is made hereunder and the Grantor does not undertake the defense
thereof, the Indemnified Party shall be entitled to undertake such litigation
and settlement and shall be entitled to indemnity with respect thereto as
provided herein.
Section 6.12. Environmental Matters. Beneficiary or Indenture Trustee, in
---------------------
its sole discretion, may require, as a prerequisite to the commencement of any
proceeding or the exercise of any remedy with respect to the Mortgaged Property,
that it be provided evidence reasonably satisfactory to Beneficiary or Indenture
Trustee that the Mortgaged Property is not contaminated by Hazardous Materials
and that Beneficiary or Indenture Trustee shall not be subject to any material
liability for any contamination if it undertakes such proceeding or remedy.
Beneficiary or Indenture Trustee shall have the authority (but shall not be
required) to (i) conduct environmental assessments, audits and site monitoring
to determine compliance with Environmental Laws; (ii) take all appropriate
remedial action to contain, clean up and remove any Hazardous Materials either
on its own or in response to an actual violation of any environmental laws or
proceeding with respect thereto; (iii) institute legal proceedings concerning
environmental damage or contest and settle proceedings brought by any local,
state or federal agency litigant; (iv) comply with any local, state or federal
agency or court order directing an assessment, abatement or cleanup of Hazardous
Materials; and (v) employ agents, consultants and legal counsel to assist or
perform the above undertakings or actions. Grantor shall indemnify Beneficiary
and Indenture Trustee for all reasonable costs, expenses and liabilities
reasonably incurred by Beneficiary and Indenture Trustee in connection with any
such undertaking or action unless such costs, expenses and liabilities are
caused by the gross negligence or willful misconduct of the Beneficiary or the
Indenture Trustee.
18
<PAGE>
ARTICLE 7
---------
CONDEMNATION
------------
Section 7.01. General. Promptly upon its obtaining knowledge of the
-------
institution or the threatened institution of any proceeding for the condemnation
of the Mortgaged Property, Grantor shall notify Indenture Trustee and
Beneficiary of such fact. Grantor shall then, if requested by Beneficiary, file
or defend its claim thereunder and prosecute same with due diligence to its
final disposition and shall cause any awards or settlements to be paid over to
Beneficiary for disposition pursuant to the terms of this Deed of Trust and the
Indenture. Grantor may be the nominal party in such proceeding but Beneficiary
shall be entitled to participate in and to control same and to be represented
therein by counsel of its own choice, and Grantor will deliver or cause to be
delivered to Beneficiary such instruments as may be requested by it from time to
time to permit such participation. If the Mortgaged Property is taken or
diminished in value, or if a consent settlement is entered, by or under threat
of such proceeding, the award or settlement payable to Grantor by virtue of its
interest in the Mortgaged Property shall be paid to Beneficiary to be held by
it, subject to the Lien and security interest of this Deed of Trust, and
disbursed pursuant to the terms of the Indenture.
ARTICLE 8
---------
CONCERNING THE DEED TRUSTEE
---------------------------
Section 8.01. No Required Action. Deed Trustee shall not be required to
------------------
take any action toward the execution and enforcement of the trust hereby created
or to institute, appear in or defend any action, suit or other proceeding in
connection therewith where in his opinion such action will be likely to involve
him in expense or liability, unless requested so to do by a written instrument
signed by Beneficiary and, if Deed Trustee so requests, unless Deed Trustee is
tendered security and indemnity satisfactory to him against any and all costs,
expense and liabilities arising therefrom. Deed Trustee shall not be responsible
for the execution, acknowledgment or validity of this Deed of Trust, or for the
proper authorization thereof, or for the sufficiency of the Lien and security
interest purported to be created hereby, and makes no representation in respect
thereof or in respect of the rights, remedies and recourses of Beneficiary.
Section 8.02. Certain Rights. With the approval of Beneficiary, Deed
--------------
Trustee shall have the right to take any and all of the following actions: (a)
to select, employ and advise with counsel (who may be, but need not be, counsel
for Beneficiary) upon any matters arising hereunder, including the preparation,
execution and interpretation of this Deed of Trust, and shall be fully protected
in relying as to legal matters on the advice of counsel; (b) to execute any of
the trusts and powers hereof and to perform any duty hereunder either directly
or through his agents or attorneys; (c) to select and employ, in and about the
execution of his duties hereunder, suitable accountants, engineers and other
experts, agents and attorneys-in-fact, either corporate or individual, not
regularly in the employ of Deed Trustee, and Deed Trustee shall not be
answerable for any act, default or misconduct of any such accountant, engineer
or other expert, agent or attorney-in-fact, if selected with reasonable care, or
for any error of judgment or act
19
<PAGE>
done by Deed Trustee in good faith, or be otherwise responsible or accountable
under any circumstances whatsoever, except for Deed Trustee's negligence or bad
faith; and (d) to take any and all other lawful action as Beneficiary may
instruct Deed Trustee to take to protect or enforce Beneficiary's rights
hereunder. Deed Trustee shall not be personally liable in case of entry by him,
or anyone entering by virtue of the powers herein granted him, upon the
Mortgaged Property for debts contracted or liability or damages incurred in the
management or operation of the Mortgaged Property. Deed Trustee shall have the
right to rely on any instrument, document or signature authorizing or supporting
any action taken or proposed to be taken by him hereunder, believed by him in
good faith to be genuine. Deed Trustee shall be entitled to reimbursement for
expenses incurred by him in the performance of his duties hereunder and to
reasonable compensation for such of his services hereunder as shall be rendered.
Grantor will, from time to time, pay the compensation due to Deed Trustee
hereunder and reimburse Deed Trustee for, and save him harmless against, any and
all liability and expenses which may be incurred by him in the performance of
his duties other than as a result of Deed Trustee's negligence or willful
misconduct.
Section 8.03. Retention of Moneys. All moneys received by Deed Trustee
-------------------
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated in any manner
from any other moneys (except to the extent required by law) and Deed Trustee
shall be under no liability for interest on any moneys received by him
hereunder.
Section 8.04. Successor Deed Trustees. Deed Trustee may resign by the
-----------------------
giving of notice of such resignation in writing to Beneficiary. If Deed Trustee
shall die, resign or become disqualified from acting in the execution of this
trust, or shall fail or refuse to execute the same when requested by Beneficiary
so to do, or if, for any reason, Beneficiary shall prefer to appoint a
substitute trustee to act instead of the aforenamed Deed Trustee, Beneficiary
shall have full power to appoint a substitute trustee and, if preferred, several
substitute trustees in succession who shall succeed to all the estates,
properties, rights, powers and duties of the aforenamed Deed Trustee. Such
appointment may be executed by any authorized agent of Beneficiary, and if such
Beneficiary be a corporation and such appointment be executed in its behalf by
any officer of such corporation, such appointment shall be conclusively presumed
to be executed with authority and shall be valid and sufficient without proof of
any action by the Board of Directors or any superior officer of the corporation.
Grantor hereby ratifies and confirms any and all acts which the aforenamed Deed
Trustee, or his successor or successors in this trust, shall do lawfully by
virtue hereof.
Section 8.05. Perfection of Appointment. Should any deed, conveyance or
-------------------------
instrument of any nature be required from Grantor by any successor Deed Trustee
to more fully and certainly vest in and confirm to such new Deed Trustee such
estates, rights, powers and duties, then, upon request by such Deed Trustee, any
and all such deeds, conveyances and instruments shall be made, executed,
acknowledged and delivered and shall be caused to be recorded and/or filed by
Grantor.
Section 8.06. Succession Instruments. Any new Deed Trustee appointed
----------------------
pursuant to any of the provisions hereof shall, without any further act, deed or
conveyance, become vested with
20
<PAGE>
all the estates, properties, rights, powers and trusts of its or his predecessor
in the rights hereunder with like effect as if originally named as Deed Trustee
herein; but nevertheless, upon the written request of Beneficiary or of the
successor Deed Trustee, the Deed Trustee ceasing to act shall execute and
deliver an instrument transferring to such successor Deed Trustee, upon the
trusts herein expressed, all the estates, properties, rights, powers and trusts
of the Deed Trustee so ceasing to act, and shall duly assign, transfer and
deliver any of the property and moneys held by such Deed Trustee to the
successor Deed Trustee so appointed in its or his place.
Section 8.07. No Representation by Deed Trustee. By accepting or approving
---------------------------------
anything required to be observed, performed or fulfilled or to be given to Deed
Trustee or Beneficiary pursuant to this Deed of Trust, including but not limited
to, any officer's certificate, balance sheet, statement of profit and loss or
other financial statement, survey, appraisal or insurance policy, neither Deed
Trustee nor Beneficiary shall be deemed to have warranted, consented to, or
affirmed 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 be or constitute any warranty, consent or affirmation with
respect thereto by Deed Trustee or Beneficiary.
ARTICLE 9
---------
MISCELLANEOUS
-------------
Section 9.01. Performance at Grantor's Expense. The cost and expense of
--------------------------------
performing or complying with any and all of the Obligations shall be borne
solely by Grantor, and no portion of such cost and expense shall be, in any way
or to any extent, credited against any installment on or portion of the
Obligations.
Section 9.02. Survival of Obligations. Each and all of the Obligations
-----------------------
shall survive the execution and delivery of this Deed of Trust and the
consummation of the loan called for therein and shall continue in full force and
effect until the Obligations shall have been paid in full.
Section 9.03. Further Assurances. Grantor, upon the request of Deed
------------------
Trustee or Indenture Trustee or Beneficiary, will execute, acknowledge, deliver
and record and/or file such further instruments and do such further acts as may
be reasonably necessary, desirable or proper to carry out more effectively the
purpose of this Deed of Trust and to subject to the Liens and security interests
thereof any property intended by the terms thereof to be covered thereby,
including specifically but without limitation, any renewals, additions,
substitutions, replacements, betterments or appurtenances to the then Mortgaged
Property.
Section 9.04. Notices. All notices or other communications required or
-------
permitted to be given pursuant to this Deed of Trust shall be in writing and
shall be considered as properly given if mailed by first-class United States
mail, postage prepaid, registered or certified with return receipt requested, or
by delivering same in person to the intended addressee or by prepaid telegram.
Notice so mailed shall be effective upon its deposit. Notice given in any other
manner shall be effective only if and when received by the addressee. For
purposes of notice, the addresses of Beneficiary and Grantor shall be as set
forth for each party on the signature page hereof; provided, however, that
-------- -------
either party shall have the right to change its address for notice
21
<PAGE>
hereunder to any other location within the continental United States by the
giving of thirty (30) days' notice to the other party in the manner set forth
above.
Section 9.05. No Waiver. Any failure by Deed Trustee or Indenture
---------
Trustee or Beneficiary to insist, or any election by Deed Trustee or Indenture
Trustee or Beneficiary not to insist, upon strict performance by Grantor of any
of the terms, provisions or conditions of this Deed of Trust shall not be deemed
to be a waiver of same or of any other terms, provision or condition thereof and
Deed Trustee or Indenture Trustee or Beneficiary shall have the right at any
time or times thereafter to insist upon strict performance by Grantor of any and
all of such terms, provisions and conditions.
Section 9.06. Beneficiary's Right to Perform the Obligations. If Grantor
----------------------------------------------
shall fail, refuse or neglect to make any payment or perform any act required by
this Deed of Trust, then at any time thereafter, and without notice to or demand
upon Grantor and without waiving or releasing any other right, remedy or
recourse Beneficiary may have because of same, Beneficiary may (but shall not be
obligated to) make such payment or perform such act for the account of and at
the expense of Grantor, and shall have the right to enter upon or in the Land
and Buildings for such purpose and to take all such action thereon and with
respect to the Mortgaged Property as it may deem reasonably necessary or
appropriate. If Beneficiary shall elect to pay any Imposition or other sums due
with reference to the Mortgaged Property, Beneficiary may do so in reliance on
any bill, statement or assessment procured from the appropriate Governmental
Authority or other issuer thereof without inquiring into the accuracy or
validity thereof. Similarly, in making any payments to protect the security
intended to be created by this Deed of Trust, Beneficiary shall not be bound to
inquire into the validity of any apparent or threatened adverse title, Lien,
encumbrance, claim or charge before making an advance for the purpose of
preventing or removing the same. Grantor shall indemnify Beneficiary for all
losses, expenses, damage, claims and causes of action, including reasonable
attorneys' fees, incurred or accruing by reason of any acts performed by
Beneficiary pursuant to the provisions of this Section 9.06 or by reason of any
------------
other provision in this Deed of Trust unless such losses, expenses, damage,
claims or causes of action are caused by Beneficiary's negligence or willful
misconduct. All sums paid by Beneficiary pursuant to this Section 9.06 and all
------------
other sums expended by Beneficiary to which it shall be entitled to be
indemnified, together with interest thereon Post-Default Rate from the date of
such payment or expenditure, shall constitute additions to the Obligations,
shall be secured by this Deed of Trust and shall be paid by Grantor to
Beneficiary upon demand.
Section 9.07. Covenants Running with the Land. All Obligations contained
-------------------------------
contained in the Intercompany Note and the documents securing the Intercompany
Note are intended by the parties to be, and shall be construed as, covenants
running with the Mortgaged Property.
Section 9.08. Successors and Assigns. All of the terms hereof shall apply
----------------------
to, be binding upon and inure to the benefit of the parties hereto, their
successors, assigns, heirs and legal representatives, and all other persons
claiming by, through or under them.
Section 9.09. Severability. This Deed of Trust is intended to be performed
------------
in accordance with, and only to the extent permitted by, all applicable laws and
regulations of applicable Governmental Authorities. If any provision of any of
this Deed of Trust or the
22
<PAGE>
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable neither the remainder of the instrument
in which such provision is contained nor the application of such provision to
other persons or circumstances nor the other instruments referred to shall be
affected thereby, but rather shall be enforced to the greatest extent permitted
by law.
Section 9.10. Modification. This Deed of Trust may not be amended,
------------
revised, waived, discharged, released or terminated orally, but only by a
written instrument or instruments executed by the party against which
enforcement of the amendment, revision, waiver, discharge, release or
termination is asserted. Any alleged amendment, revision, waiver, discharge,
release or termination which is not so documented shall not be effective as to
any party.
Section 9.11. Counterparts. This Deed of Trust may be executed in any
------------
number of counterparts, each of which shall be an original but all of which
together shall constitute but one instrument.
Section 9.12. Applicable Law. THIS DEED OF TRUST SHALL BE GOVERNED BY AND
--------------
CONSTRUED ACCORDING TO THE LAWS OF THE JURISDICTION WHERE THE MORTGAGED PROPERTY
IS LOCATED.
Section 9.13. Subrogation. If any or all of the proceeds of the
-----------
Intercompany Note have been used to extinguish, extend or renew any indebtedness
heretofore existing against the Mortgaged Property, then, to the extent of such
funds so used, the Obligations and this Deed of Trust shall be subrogated to all
of the rights, claims, Liens, titles and interests (herein collectively referred
to as the "Prior Liens") heretofore existing against the Mortgaged Property to
-----------
secure the indebtedness so extinguished, extended or renewed and the Prior
Liens, if any, are not waived but rather are continued in full force and effect
in favor of Beneficiary and are merged with the Lien and security interest
created herein as cumulative security for the repayment of the Obligations and
the satisfaction of the Obligations. Foreclosure of the Liens created by this
Deed of Trust shall also constitute foreclosure of the Prior Liens; provided,
--------
however, if, as a matter of law, foreclosure under this Deed of Trust may not
- -------
also constitute the foreclosure of the Prior Liens, then notwithstanding a
foreclosure under this Deed of Trust, Beneficiary, Deed Trustee, and Indenture
Trustee shall have, and they hereby reserve, all rights with respect to and the
Prior Liens, including without limitation, the right after foreclosure under
this Deed of Trust to seek a judicial foreclosure of any of the Prior Liens.
Section 9.14. No Partnership. Nothing contained in this Deed of Trust is
--------------
intended to, or shall be construed as, creating to any extent and in any manner
whatsoever, any partnership, joint venture, or association between Grantor, Deed
Trustee, Indenture Trustee, Beneficiary and any holder of the Intercompany Note,
or in any way make Beneficiary or Deed Trustee, Indenture Trustee or any holder
of the Intercompany Note, co-principals with Grantor with reference to the
Mortgaged Property, and any inferences to the contrary are hereby expressly
negated.
Section 9.15. Headings. The Article, Section and Subsection entitlements
--------
hereof are inserted for convenience of reference only and shall in no way alter,
modify or define, or be used in construing, the text of such Articles, Sections
or Subsections.
23
<PAGE>
Section 9.16. Leasehold Provisions. (a) Grantor has entered into that
--------------------
certain Ground Lease dated as of October 11, 1993, executed by R.M. Leatherman
and Hugh M. Magevney, III (collectively, together with any successor, "Lessor")
------
and Grantor, as Lessee, covering the premises (the "Lease", which term shall
-----
include any and all amendments and renewals of said lease). Grantor will at all
times fully perform and comply in all material respects with all agreements,
covenants, terms and conditions imposed upon or assumed by it as lessee under
the Lease and Grantor further covenants that it will not do or permit anything
to be done, the doing of which, or refrain from doing anything, the omission of
which, will impair or would reasonably be expected to impair the security of
this Deed of Trust. If Grantor shall fail so to do Beneficiary may (but shall
not be obligated to) take any action Beneficiary deems reasonably necessary or
desirable to prevent or to cure any default by Grantor in the performance of or
compliance with any of Grantor's covenants or obligations under said Lease after
reasonable prior notice to Grantor. Upon receipt by Beneficiary from the Lessor
of any written notice of default by the lessee thereunder, Beneficiary may rely
thereon and take any action as aforesaid after reasonable prior notice to
Grantor to cure such default even though the existence of such default or the
nature thereof be questioned or denied by Grantor or by any party on behalf of
Grantor. Grantor hereby expressly grants to Beneficiary, and agrees that
Beneficiary shall have, the absolute and immediate right to enter in and upon
the real property described herein or any part thereof to such extent and as
often as Beneficiary in its sole discretion deems reasonably necessary or
desirable in order to prevent or to cure any such default by Grantor.
Beneficiary may pay and expend such sums of money as Beneficiary in its sole
discretion deems reasonably necessary for any such purpose, and Grantor hereby
agrees to pay to Beneficiary, immediately and without demand, all such sums so
paid and expended by Beneficiary, together with interest thereon from the date
of each such payment at the Post-Default Rate. All sums so paid and expended by
Beneficiary and the interest thereon shall be added to and be secured by the
Lien of this Deed of Trust.
(b) Except as permitted by the Indenture, Grantor will not surrender the
leasehold estate and interest hereinabove described or terminate or cancel the
Lease. If the Lease is for any reason terminated prior to the natural
expiration of its term, and if, pursuant to any provision of the Lease or
otherwise, Beneficiary or its designee shall acquire from the Lessor a new lease
of all of any portion of the Land, Grantor shall have no right, title or
interest in or to such new lease or the leasehold estate created thereof.
(c) Beneficiary, by accepting this Deed of Trust, consents to the terms and
provisions of the Lease, and the rights, titles and interests created in favor
of the lessor thereunder shall not constitute a default under any provisions of
this Deed of Trust.
(d) Except as specifically provided in the Indenture, and as would not be
adverse in any material respect to Beneficiary or the holders of the Notes,
Grantor also covenants that it will not waive, modify or in any way alter the
material terms of the Lease or cancel or surrender the Lease, or waive, excuse,
condone or in any way release or discharge Lessor of or from the material
obligations, covenants, conditions and agreements to be done and performed by
Lessor under the terms of the Lease; and Grantor does by these presents
expressly release, relinquish and surrender unto Beneficiary all its right,
power and authority to cancel, surrender, amend, modify, waive or alter in any
material way the terms and provisions of the Lease and any attempt on the part
of Grantor to exercise any such right without the written authority and consent
of
24
<PAGE>
Beneficiary thereto being first had and obtained (which consent shall not
unreasonably be withheld, conditioned or delayed) shall constitute an Event of
Default hereunder.
(e) Grantor hereby covenants (i) to give Beneficiary prompt notice in
writing of any receipt by it of any notice of default from Lessor; (ii) to
furnish to Beneficiary any and all information which it may reasonably request
concerning the performance by Grantor of the material covenants imposed on
Grantor under the Lease promptly after such request; and (iii) to permit
forthwith Beneficiary or its representative at all reasonable times on
reasonable notice and so long as the same shall not unreasonably interfere with
the use or business at the Mortgaged Property by Grantor, to make investigation
or examination concerning such performance.
(f) The following shall apply to any proceeding (a "Bankruptcy") under
----------
the Federal Bankruptcy Code or comparable law ("Bankruptcy Law") in which Lessor
--------------
is the debtor:
(i) Grantor shall notify Beneficiary promptly after learning
of the commencement or threat of commencement of any Bankruptcy
affecting Lessor. Grantor promptly shall deliver to Beneficiary
copies of any and all material notices, summonses, pleadings,
applications, and other documents that Grantor receives in connection
with any such Bankruptcy and any related proceedings.
(ii) If Lessor rejects or disaffirms, or seeks or purports
to reject or disaffirm, the Lease pursuant to any Bankruptcy Law, then
Grantor shall not exercise its right to treat the Lease as terminated
under (S) 365(h) of the Federal Bankruptcy Code or any similar
Bankruptcy Law, or any comparable right provided under any other
Bankruptcy Law without Beneficiary's prior written consent, such
consent not to be unreasonably withheld. Grantor's right under such
circumstances to elect either to treat the Lease as terminated or to
retain its rights under the Lease pursuant to Section 365(h) of the
Federal Bankruptcy Code or any similar Bankruptcy Law, or any
comparable right provided under any other Bankruptcy Law, shall be
hereinafter referred to as the "365(h) Election".
(iii) Unless Beneficiary directs otherwise in writing,
Grantor shall exercise the 365(h) Election in favor of Grantor's
remaining in possession under the Lease at least five (5) Business
Days prior to the last day on which the 365(h) Election may be
exercised. Grantor hereby constitutes and appoints Beneficiary the
true and lawful attorney-in-fact, coupled with an interest, of
Grantor, empowered and authorized in the name, place and stead of
Grantor to exercise the 365(h) Election in favor of Grantor's
remaining in possession under the Lease in the event Grantor fails to
do so within the time period set forth above. The foregoing
appointment is irrevocable and continuing and such rights, powers and
privileges shall be exclusive in Beneficiary, its successors and
permitted assigns, so long as any part of the Obligations secured
hereby remain unpaid or undischarged. Grantor acknowledges that
Grantor's resulting occupancy and other rights, as adjusted by the
effect of Federal Bankruptcy Code Section 365, are part of the
Mortgaged Property and subject to the Lien of this Deed of Trust.
25
<PAGE>
Grantor further acknowledges that exercise of the 365(h) Election in
favor of terminating the Lease would constitute waste prohibited by
this Deed of Trust unless Beneficiary shall have consented to such
termination, such consent not to be unreasonably withheld. Grantor
acknowledges and agrees that the 365(h) Election is in the nature of a
remedy available to Grantor under the Lease and is not a property
interest that Grantor can separate from the Lease as to which it
arises. Therefore, Grantor agrees and acknowledges that exercise of
the 365(h) Election in favor of preserving the right to possession
under the Lease shall not be deemed to constitute Beneficiary's taking
or sale of the Mortgaged Property (or any element thereof) and shall
not entitle Grantor to any credit against the Obligations secured
hereby or otherwise impair Beneficiary's remedies hereunder or under
the Indenture.
(iv) If Lessor rejects or disaffirms the Lease or purports
or seeks to disaffirm the Lease pursuant to any Bankruptcy Law, then:
(1) Grantor shall remain in possession of the premises demised under
the Lease and shall perform all acts necessary for Grantor to remain
in such possession for the unexpired term of the Lease (including all
renewals available at the sole option of Grantor); and (2) all terms
and provisions of this Deed of Trust and the Lien created hereby shall
remain in full force and effect and shall extend automatically to all
of Grantor's rights and remedies arising at any time under, or
pursuant to, Federal Bankruptcy Code (S) 365(h), including all of
Grantor's rights to remain in possession of the premises demised under
the Lease.
(v) Following the occurrence and during the continuance of
an Event of Default, if pursuant to Federal Bankruptcy Code (S)
365(h), or any other similar Bankruptcy Law, Grantor seeks to offset
against rent owing under the Lease ("Ground Rent") the amount of any
-----------
claim for the payment of damages from Lessor's failure to perform
under the Lease, or rejection of the Lease under any Bankruptcy Law (a
"Lease Damage Claim"), then Grantor shall notify Beneficiary of its
------------------
intent to do so at least twenty (20) days before effecting such
offset. Such notice shall set forth the amounts proposed to be so
offset and the basis for such offset. If Beneficiary reasonably
believes that such offset is likely to materially adversely affect the
security interest of Beneficiary in the Lease or otherwise materially
adversely affect the Mortgaged Property, Beneficiary may object to all
or any part of such offset, in which event Grantor shall not effect
any offset of the amounts to which Beneficiary objects. If
Beneficiary fails to object within such twenty (20) day period to such
offset, then Grantor may effect such offset as set forth in Grantor's
notice. Grantor shall indemnify Beneficiary against any loss or
damage suffered by Beneficiary with respect to any offset by Grantor
against Ground Rent, except to the extent of any loss or damage
resulting from Beneficiary's gross negligence or willful misconduct.
(g) Grantor hereby irrevocably appoints Beneficiary, during the
existence of an Event of Default, as its true and lawful attorney-in-fact, to
do, in its name or otherwise, any and all acts
26
<PAGE>
and to execute any and all documents which are necessary to preserve any rights
of Beneficiary under or with respect to the Lease, including, without
limitation, the right to effect any extension or renewal of the Lease, or to
preserve any rights of Beneficiary whatsoever in respect of any part of the
Lease (and the above powers granted to Beneficiary are coupled with an interest
and shall be irrevocable.)
The generality of the provisions of this Section 9.16 relating to the Lease
------------
shall not be limited by other provisions of this Deed of Trust and the Indenture
setting forth particular obligations of Grantor which are also required of
Grantor with respect to the Lease, the Improvements, or the Land.
Section 9.17. Gaming Authorities. Each of the provisions of this Deed of
------------------
Trust is subject to, and shall be enforced in compliance with, the requirements
of the Gaming Authorities.
Section 9.18. Indenture. This Deed of Trust is subject to the terms,
---------
conditions and provisions of the Indenture. To the extent a term or provision of
this Deed of Trust conflicts with the Indenture, the Indenture shall control
with respect to the subject matter of such term or provision.
Section 9.19. Rights of Holders. No Holder shall have any independent
-----------------
rights hereunder other than those rights granted to individual Holders pursuant
to Section 6.07 of the Indenture; provided that nothing in this Section 9.19
f -------- ----
shall limit any rights granted to the Indenture Trustee under the Senior Secured
Notes, the Indenture or the Collateral Documents.
Section 9.20. No Personal Liability of Directors, Officers, Employees and
-----------------------------------------------------------
Stockholders. No past, present or future director, officer, employee,
- ------------
incorporator or stockholder of the Grantor as such or any successor Person, as
such, shall have any liability for any obligations of the Grantor under this
Deed of Trust or for any claim based on, in respect of, or by reason of, such
obligations or their creation.
Section 9.21. Exculpation Provisions. EACH OF THE PARTIES HERETO
----------------------
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS DEED OF TRUST, AND AGREES
THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS DEED OF TRUST;
THAT IT HAS IN FACT READ THIS DEED OF TRUST AND IS FULLY INFORMED AND HAS FULL
NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS DEED OF TRUST;
THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE
THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS DEED OF TRUST, AND
HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS DEED OF TRUST; AND
THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS DEED OF TRUST RESULT IN ONE
PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND
RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY
HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR
ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS DEED OF TRUST ON THE BASIS
THAT
27
<PAGE>
THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS
NOT "CONSPICUOUS."
Section 9.22. Fraudulent Conveyance Savings Clause. Notwithstanding any
------------------------------------
provision of this Deed of Trust to the contrary, it is intended that neither
this Deed of Trust nor any Lien granted by Grantor to secure the Obligations
shall constitute a "Fraudulent Conveyance" (as defined below). Consequently,
Grantor agrees that if the Deed of Trust, or any Liens securing this Deed of
Trust, would, but for the application of this sentence, constitute a Fraudulent
Conveyance, this Deed of Trust and each such Lien shall be valid and enforceable
only to the maximum extent that would not cause this Deed of Trust or such Lien
to constitute a Fraudulent Conveyance, and this Deed of Trust shall
automatically be deemed to have been amended accordingly at all relevant times.
For purposes hereof, a "Fraudulent Conveyance" means a fraudulent conveyance
under Section 548 of the Bankruptcy Code (or any successor section) or a
fraudulent conveyance or fraudulent transfer under the provisions of any
applicable fraudulent conveyance or fraudulent transfer law or similar law of
any state, nation or other governmental unit, as in effect from time to time.
[SIGNATURE PAGE FOLLOWS]
28
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Second Leasehold Deed of Trust,
Security Agreement, Assignment of Leases and Rents, Fixture Filing, and
Financing Statement to be executed and delivered as of the date first set forth
above.
GRANTOR: HWCC-TUNICA, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Address of Grantor/Debtor is:
Two Galleria Tower, Suite 2200
13455 Noel Road, LB48
Dallas, Texas 75240
Telephone: (972) 716-3809
Address of Grantee/Beneficiary is:
Two Galleria Tower, Suite 2200
13455 Noel Road, LB48, Dallas, Texas 75240
Telephone: (972) 716-3809
Address of Indenture Trustee is:
Two International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Administration
Telephone: (617) 664-5219
S-1
<PAGE>
STATE OF _______ )
)
COUNTY OF _______ )
Personally appeared before me, the undersigned authority in and for said
County and State on this ________ day of May, 1999, within my jurisdiction, the
within named ____________, who acknowledged that s/he is the of HWCC-
TUNICA, INC., a Texas corporation, and that for and on behalf of said
corporation and as its act and deed, s/he executed the above and foregoing
instrument, after first having been duly authorized by said corporation to do
so.
(Seal) ---------------------------------------
Notary Public in and for
The State of
---------------------------
County of
------------------------------
My Commission Expires:
---------------------------------------
S-2
<PAGE>
EXHIBIT A
---------
Legal Description
<PAGE>
EXHIBIT B
---------
Permitted Encumbrances
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09
of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of business and consistent with industry practices and Liens on deposits
made to obtain the release of such Liens if:
(a) the underlying Obligations are not overdue for a period of
more than 60 days, or
<PAGE>
(b) such Liens are being contested in good faith and by
appropriate proceedings by the Company and adequate reserves with
respect thereto are maintained on the books of the Company in
accordance with GAAP, and
(c) the Company is in compliance with the terms of the security
documents applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
or other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that do not
exceed Five Million Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and Social
Security benefits.
<PAGE>
EXHIBIT 4.13
To the Chancery Clerk of the ___ Judicial District of Tunica County,
Mississippi, the real property described herein is situated in the NE 1/4 and N
1/2 of the SE 1/4 of Section 24, Township 3 South, Range 12 West of Tunica
County, Mississippi.
PREPARED BY AND WHEN [State of Mississippi]
RECORDING RETURN TO:
Sarah M. Ekdahl
LATHAM & WATKINS
Sears Tower, Suite 5800
233 South Wacker Drive
Chicago, IL 60606
Telephone: (312) 876-7700
COLLATERAL ASSIGNMENT OF SECOND LEASEHOLD DEED OF TRUST,
SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS,
FIXTURE FILING AND FINANCING STATEMENT
HOLLYWOOD CASINO CORPORATION,
Mortgagee and Assignor
In Favor of
STATE STREET BANK AND TRUST COMPANY,
in its capacity as Trustee,
Assignee
Dated as of May 19, 1999
<PAGE>
COLLATERAL ASSIGNMENT OF SECOND LEASEHOLD DEED OF TRUST,
--------------------------------------------------------
SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS,
---------------------------------------------------
FIXTURE FILING AND FINANCING STATEMENT
--------------------------------------
FOR VALUE RECEIVED, the undersigned, HOLLYWOOD CASINO CORPORATION, a
Delaware corporation (the "Assignor"), whose address for notice hereunder is Two
--------
Galleria Tower, Suite 2200,13455 Noel Road, LB, 48, Dallas, Texas 75201, does
hereby SELL, ASSIGN, TRANSFER AND SET OVER unto STATE STREET BANK AND TRUST
1
<PAGE>
COMPANY, a Massachusetts chartered trust company, as Trustee (the "Assignee"),
--------
under that certain Indenture (as the same may be amended, supplemented, restated
or otherwise modified from time to time, the "Indenture") dated as of the date
---------
hereof by and among Assignor, Assignee, HWCC-Tunica, Inc., a Texas corporation
("Tunica"), and HWCC-Shreveport, Inc., a Louisiana corporation, which Assignee's
------
address for notice hereunder is Two International Place, 4th Floor, Boston,
Massachusetts 02110, Attention: Corporate Trust Administration:
(i) all of Assignor's right, title and interest in, to and under that
certain Second Leasehold Deed of Trust, Security Agreement, Assignment of Leases
and Rents, Fixture Filing, and Financing Statement (the "Deed of Trust") dated
-------------
as of the date hereof executed by Tunica, whose address is Two Galleria Tower,
Suite 2200, 13455 Noel Road, LB48, Dallas, Texas 75201 (the "Grantor"), in favor
-------
of Assignor, as beneficiary, covering certain property therein described, which
Deed of Trust was recorded as shown on Exhibit A hereto (which Deed of Trust is
---------
incorporated by reference herein), and which Deed of Trust secures the due and
punctual payment of that certain Amended and Restated Promissory Note in the
original principal amount of $87,045,000, made and subscribed by Grantor, dated
as of the date hereof, and being payable to the order of the Assignor, and other
obligations described therein (as the same may be amended, supplemented,
restated or otherwise modified from time to time, the "Note," which Note has
----
been assigned to Assignee), the interest thereon and performance of the Deed of
Trust covenants and obligations, and (ii) all of Assignor's right, title and
interest in and to the property described in the Deed of Trust, and in and to
all amounts which may now be or may hereafter become due and payable by Grantor
under the Deed of Trust, on account of its indebtedness and obligations under
and in respect of the aforesaid Notes and the Obligations (as defined in the
Deed of Trust), and the interest thereon, together with all of the rights,
powers, privileges and remedies of Assignor thereunder, including, but without
limitation thereto, all of the Assignor's rights to receive and collect all
other amounts which may now be or may hereafter become due and payable by the
Grantor under the Deed of Trust, reference to the Deed of Trust being hereby
made for all such purposes.
This Collateral Assignment is made as security for (i) the payment
when due of indebtedness evidenced by those certain 11 1/4% Series A and Series
B Senior Secured Notes due 2007 and those certain Floating Rate Series A and
Series B Senior Secured Notes due 2006 (as the same may be amended,
supplemented, restated, exchanged, replaced or otherwise modified from time to
time, collectively, the "Senior Secured Notes") issued by the Assignor pursuant
--------------------
to the provisions of the Indenture, in the aggregate principal sum not to exceed
in any one time outstanding of $360,000,000, interest (including post-petition
interest and interest at the Post-Default Rate (as defined in the Deed of
Trust)) as set forth in the Indenture and the Senior Secured Notes, and
premiums, penalties, and late charges thereon; (ii) all other indebtedness and
other sums (including, without limitation, all expenses, attorneys' fees, other
fees, indemnifications, reimbursements, damages, other monetary liabilities, and
other charges) and obligations that may or shall become due under the Senior
Secured Notes, the Guarantees (as such term is defined in the Indenture), the
Indenture or the Collateral Documents (as such term is defined in the
Indenture); and (iii) any and all renewals, modifications, amendments,
extensions for any period, supplements, or restatements of any of the foregoing.
In furtherance of the foregoing Collateral Assignment, after the
occurrence and during the continuance of an Event of Default under the
Indenture, Assignor hereby authorizes
2
<PAGE>
and empowers Assignee, in Assignee's own name or in the name of Assignee's
nominee, or in the name of and as attorney for Assignor, to ask, demand, sue
for, collect, receive and enforce all sums to which Assignee is or may be
entitled under this Collateral Assignment and compliance by Grantor with the
terms and agreements on its part to be performed under the Deed of Trust.
Assignee shall have the rights, powers and remedies provided by applicable law
and this Collateral Assignment.
Assignor warrants that it is the legal owner of said Deed of Trust and
has the lawful right to assign, transfer and set over said Deed of Trust unto
the Assignee free and clear of any lien, claim or interest of any party
whatsoever.
The foregoing warranties and the other provisions of this Collateral
Assignment shall inure to the benefit of the Assignee and its successors,
transferees and assigns under the Indenture.
The Deed of Trust encumbers the property legally described on
Exhibit B hereto.
- ---------
THIS COLLATERAL ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE JURISDICTION WHERE THE MORTGAGED PROPERTY IS
LOCATED.
[SIGNATURE PAGE FOLLOWS]
3
<PAGE>
IN WITNESS WHEREOF, the Assignor has executed this Collateral
Assignment of Second Leasehold Deed of Trust, Security Agreement, Assignment of
Leases and Rents, Fixture Filing and Financing Statement on this 19th day of
May, 1999.
ASSIGNOR: HOLLYWOOD CASINO CORPORATION,
a Delaware corporation
By: /s/ PAUL C. YATES
------------------------------------
Paul C. Yates
Executive Vice President and
Chief Financial Officer
Address of Assignor is:
Two Galleria Tower, Suite 2200
13455 Noel Road, LB48
Dallas, Texas 75240
Telephone: (972) 716-3809
Address of Assignee is:
Two International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Administration
Telephone: (617) 664-5219
4
<PAGE>
STATE OF )
)
COUNTY OF )
Personally appeared before me, the undersigned authority in and for
said County and State on this 19th day of May, 1999, within my jurisdiction, the
within named Paul C. Yates, who acknowledged that s/he is the Executive Vice
President and Chief Financial Officer of HOLLYWOOD CASINO CORPORATION, a
Delaware corporation, and as her/his act and deed s/he executed the above and
foregoing instrument, after first having been duly authorized by said
corporation to do so.
(Seal)
Notary Public in and for
The State of Illinois
County of Lake /s/ JOYCE A. KIEL
--------------------------------
My Commission Expires: 3/12/2000
5
<PAGE>
EXHIBIT A
---------
Recording Information
---------------------
<PAGE>
EXHIBIT B
Legal Description
TRACT A.
Being a part of the R.M. Leatherman and Hugh M. Magevney, III property, located
in the Northeast Quarter (NE 1/4) and the North Half of the Southeast Quarter (N
1/2 SE 1/4) of Section Twenty-Four (24), Township Three (3) South, Range Twelve
(12) West, Tunica County, Mississippi and being more particularly described as
follows:
Commencing at a point on the North line of said Section Twenty-Four (24), said
point being North 89 degrees 44 minutes 19 seconds East of distance of 5,258.24
feet from a found concrete monument at the Northwest corner of said Section
Twenty-Four (24); thence South 01 degree 16 minutes 10 seconds West a distance
of 48.02 feet to a point, said point being 48.00 feet South of and parallel to
the North line of said Section Twenty-Four (24), said point being the Point of
Beginning of the tract herein described;
Thence continuing South 01 degree 16 minutes 10 seconds West a distance of
2,990.50 feet to a found iron pin; thence North 85 degrees 51 minutes 27 seconds
West a distance of 1,408.66 feet to a found iron pin; thence North 00 degrees 00
minutes 54 seconds West a distance of 1,184.64 feet to a found iron pin at the
Southeast corner of a parcel of land leased to Biloxi Casino Belle Incorporated
as recorded in Book Z-4, page 001 at the Tunica County Chancery Court Clerk's
Office; thence North 39 degrees 11 minutes 16 seconds East along the East line
of the Biloxi Casino Belle Incorporated lease parcel a distance of 2,197.18 feet
to a point, said point being 48.00 feet South of and parallel to the North line
of said Section Twenty-Four (24); thence North 89 degrees 44 minutes 19 seconds
East a distance of 83.21 feet to the Point of Beginning, and containing 69.929
acres, more or less.
TRACT B
Being a part of the R. M. Leatherman and Hugh M. Mageveny, III property located
in the North Half (N1/2) of Section Twenty-four (24) and in the Northeast
Quarter (NE1/4) of the Northeast Quarter (NE1/4) of Section (23) and in
fractional Section Fourteen (14), all in Township Three (3) South, Range Twelve
(12) West, Tunica County, Mississippi, and being more particularly described as
follows:
Beginning at a point on the North line of said Section Twenty-Four (24), said
point being North 89 degrees 44 minutes 19 seconds East a distance of
5,218.24 feet from a found concrete monument at the Northwest corner of
Section Twenty-Four (24); thence North 89 degrees 41 minutes 49 seconds
East and continuing along the North line of said Section Twenty-Four (24) for
45.00 feet to a point; thence South 00 degrees 00 minutes 00 seconds East for
1,120.12 feet to the Point of Beginning of the tract herein described.
Thence South 00 degrees 00 minutes 00 seconds East for 190.75 feet to a point;
Thence North 88 degrees 48 minutes 03 seconds West for 193.62 feet to a point;
Thence North 68 degrees 40 minutes 34 seconds West for 606.87 feet to a point;
Thence North 65 degrees 38 minutes 09 seconds West for 613.65 feet to a point;
Thence North 65 degrees 19 minutes 08 seconds West for 1,083.49 feet to a point;
Thence North 69 degrees 18 minutes 21 seconds West for 539.83 feet to a point;
Thence North 63 degrees 20 minutes 00 seconds West for 634.33 feet to a point;
Thence North 65 degrees 24 minutes 26 seconds West for 641.41 feet to a point on
the Eastern top bank revetment of the Mississippi River, as it exists today;
Thence North 58 degrees 52 minutes 07 seconds East along the said Eastern
top bank revetement of the Mississippi River for 108.91 feet to a point;
Thence North 44 degrees 58 minutes 31 seconds East and continuing along the said
Eastern top bank revetment of the Mississippi River for 95.28 feet to a point;
Thence South 65 degrees 16 minutes 09 seconds East for 546.04 feet to a point;
Thence South 63 degrees 19 minutes 02 seconds East for 612.80 feet to a point
(said point being South 45 degrees 00 minutes 00 seconds West from the concrete
monument representing the Northwest corner of Section Twenty-Four (24), Township
Three (3) South, Range Twelve (12) West, Tunica County, Mississippi.)
Thence South 72 degrees 33 minutes 04 seconds East for 291.23 feet to a point;
Thence South 65 degrees 21 minutes 03 seconds East for 1,352.15 feet to a
point;
Thence South 67 degrees 26 minutes 32 seconds East for 1,162.40 feet to a point;
Thence South 88 degrees 23 minutes 22 seconds East for 173.28 feet to the said
Point of Beginning, containing 17.75 acres, more or less.
Bearings in the above description have an origin of True North based on
computation from celestial observations.
<PAGE>
EXHIBIT 4.14
SECOND PREFERRED SHIP MORTGAGE
Made by
HWCC-TUNICA, INC.
In Favor of
HOLLYWOOD CASINO CORPORATION
ON
THE HOLLYWOOD-TUNICA
Dated as of May 19, 1999
<PAGE>
HWCC-Tunica, Inc.
Second Preferred Ship Mortgage
- ------------------------------
Mortgagor: HWCC-Tunica, Inc.
Two Galleria Tower, Suite 2200
13455 Noel Road, LB48
Dallas, Texas 75201
Mortgagor's Interest in the Vessel: 100%
Mortgagee: Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB48
Dallas, Texas 75201
Mortgagee's Interest in the Vessel: 100%
Amount of Mortgage: $87,045,000.00
Maturity Date: May 1, 2007
THIS SECOND PREFERRED SHIP MORTGAGE, dated as of the 19th day of May, 1999,
(as amended, supplemented or otherwise modified from time to time, the
"Mortgage") is made and given by HWCC-TUNICA, INC., a Texas corporation, (the
--------
"Mortgagor"), whose address is set forth above, to HOLLYWOOD CASINO CORPORATION,
---------
a Delaware corporation, whose address is set forth above (the "Mortgagee").
---------
Hollywood Casino Corporation will assign all of its interests in this Mortgage
to State Street Bank and Trust Company, as Trustee, as security for, among other
things, the Indenture and the Senior Secured Notes referred
1
<PAGE>
to below. STATE STREET BANK AND TRUST COMPANY, as Trustee is hereinafter
referred to as the "Trustee", and its address is set forth in Section 5.6 below.
-------
RECITALS
--------
A. Of even date herewith, Mortgagor has executed an amended and restated
promissory note (as the same may be amended, supplemented, restated or otherwise
modified from time to time, being herein referred to as the "Note") payable to
----
the order of Mortgagee, in the original principal amount of $87,045,000.
Mortgagor is entering into this Mortgage to secure, among other things, its
obligations under the Note payable to the order of the Mortgagee. The
Mortgagee, the Mortgagor, HWCC-Shreveport, Inc. and the Trustee have entered
into an Indenture dated as of May 19, 1999 (as the same may from time to time be
amended, supplemented, restated or otherwise modified, the "Indenture"),
---------
pursuant to which the Mortgagee will issue up to (i) $310,000,000 of its 11 1/4%
Series A and Series B Senior Secured Notes due 2007, and (ii) $50,000,000 of its
Floating Rate Series A and Series B Senior Secured Notes due 2006 (as the same
may be amended, supplemented, restated, exchanged, replaced or otherwise
modified from time to time, the "Senior Secured Notes"). The Mortgagee will
--------------------
collaterally assign all of its right, title and interest in and to the Note and
the liens and security interests securing same (including the liens and security
interests granted under this Mortgage) to the Trustee as security for, among
other things the Mortgagee's obligations under the Indenture and the Senior
Secured Notes.
B. The Trustee has requested pursuant to the terms of the Indenture that
Mortgagor execute and deliver this Mortgage, and Mortgagor has agreed to enter
into this Mortgage on the Hollywood-Tunica (Official Number 534006) (the
"Vessel").
------
C. Now, therefore, to induce the Trustee to execute the Indenture, in
consideration of the premises and of other valuable consideration, receipt of
which is hereby acknowledged, Mortgagor hereby agrees as follows:
ARTICLE I.
---------
GRANTING CLAUSE AND DEFINITIONS
-------------------------------
Section 1.1. Granting Clause
---------------
. To secure the full and timely payment of and the full and timely
performance and discharge of the Obligations (as hereinafter defined), the
Mortgagor has granted, conveyed, mortgaged, pledged, assigned, transferred, set
over and confirmed and by these presents does grant, convey, mortgage, pledge,
assign, transfer, set over and confirm unto the Mortgagee, its successors and
assigns, the following:
The whole of the Vessel, duly documented in the name of the Mortgagor under
the laws of the United States, together with all equipment, parts and
accessories integral to the operation of the Vessel as a vessel, including, but
not limited to, all of its boilers, engines, generators, air compressors,
machinery, masts, spars, sails, riggings, boats, anchors, cables, chains,
tackle, tools, pumps and pumping equipment, motors, apparel, furniture, computer
equipment, electronic equipment used in connection with the operation of the
Vessel and belonging to the Vessel, all machinery, equipment, engines,
appliances and fixtures for generating or distributing air, water, heat,
electricity, light, fuel or refrigeration, or for ventilating or sanitary
purposes, fittings and equipment, supplies, spare parts, fuel and all other
appurtenances thereunto appertaining or
2
<PAGE>
belonging, whether now owned or hereafter acquired, whether or not on board said
Vessel, and all extensions, additions, accessions, improvements, renewals,
substitutions, and replacements hereafter made in or to said Vessel or any part
thereof, or in or to any said appurtenances (the term "Vessel" as used herein
being inclusive of all of the foregoing; provided, that the foregoing shall not
--------
include any property which is not a "vessel" within the meaning of 46 U.S.C. (S)
31322(a); and provided, further, that if any determination is made at any time
--------
that for any reason this Mortgage does include any property which is not a
"vessel" within the meaning of 46 U.S.C. (S) 31322(c)(i), then such property may
be separately discharged from the Lien of this Mortgage (but not the Lien of any
other security instruments) by the payment by the Mortgagor to the Trustee (for
application to the Senior Secured Notes of .01% of the total amount set forth in
Section 6.1 to be applied in the manner set forth in the Indenture);
TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee, its successors and assigns, forever upon the terms
herein set forth;
PROVIDED, HOWEVER, and these presents are on the condition that if the
Obligations are paid and performed in accordance with the terms thereof and this
Mortgage, then these presents and the estates and rights hereunder shall cease,
terminate and be void, otherwise to be and remain in full force and effect.
Section 1.2. Definitions
-----------
. As used in this Mortgage, the terms "Mortgage", "Mortgagor",
-------- ---------
"Mortgagee","Trustee", "Note", "Senior Secured Notes" and "Vessel" shall have
--------- ------- ---- -------------------- ------
the meanings assigned to them in the recitals hereto. Any capitalized term used
in this Mortgage and not defined herein shall have the meaning assigned to such
term in the Indenture. As used herein, the following terms shall have the
following meanings:
"Event of Loss" shall have the meaning set forth in Section 2.4 hereof.
-------------
"Event of Default" shall have the meaning set forth in Section 3.1 hereof.
----------------
"Obligations" shall mean (i) the payment when due of indebtedness evidenced
-----------
by the Note, which is in the principal sum not to exceed at any time outstanding
of $87,045,000.00, interest (including post-petition interest) as set forth
therein, and premiums, penalties, and late charges thereon; (ii) all other
indebtedness and other sums (including, without limitation, all expenses,
attorneys' fees, other fees, indemnifications, reimbursements, damages, other
monetary liabilities, and other charges) and obligations that may or shall
become due under the Note, this Mortgage, and the other documents executed as
security for or in connection with the Note; and (iii) any and all renewals,
modifications, amendments, extensions for any period, supplements and
restatements of any of the foregoing.
"Permitted Encumbrances" shall mean the items on Exhibit A hereto.
----------------------
Section 1.3. Second Lien
-----------
. Of even date herewith, Mortgagor is executing a certain First
Preferred Ship Mortgage (the "First Mortgage") in favor of the Trustee. The
liens and security interests granted in this Mortgage shall be inferior and
subordinate to the liens and security interests granted in the First Mortgage,
which shall be first priority.
3
<PAGE>
ARTICLE II.
----------
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
In order to induce the Mortgagee to accept this Mortgage as collateral
security for the Obligations, the Mortgagor represents and warrants to the
Mortgagee and covenants and agrees with the Mortgagee that:
Section 2.1. Legal Existence; Citizenship Authorization
------------------------------------------
. The Mortgagor is a corporation duly organized and validly existing under
the laws of the State of Texas; and except as permitted by the Indenture, shall
maintain its corporate existence during the term of this Mortgage; and the
Mortgagor is and will continue to be a citizen of the United States within the
meaning of Section 2 of the Shipping Act of 1916, as amended, and is duly
qualified to engage in the trade in which the Vessel operates. The Mortgagor is
duly authorized to mortgage the Vessel, and all corporate action necessary and
required by law for the execution and delivery of this Mortgage has been duly
and effectively taken by it, and this Mortgage is the valid and enforceable
obligation of the Mortgagor, except that (a) the enforceability of any rights to
indemnity and contribution hereunder may be limited by federal or state
securities laws or principles of public policy, (b) enforceability hereof may be
subject to applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and (c) the enforceability hereof may be subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). All necessary consents and approvals of any
Governmental Authority or any other entity to the entering into and performance
of this Mortgage have been duly obtained or given and the entering into and
performance of this Mortgage does not and will not contravene the terms of or
constitute a default under (with or without giving of notice or lapse of time or
both) any material agreement, instrument or document to which the Mortgagor is a
party or by which it or its properties are bound or affected after giving effect
to the use of the proceeds of the Note.
Section 2.2. Ownership of Vessel; Warranty and Defense of Title
--------------------------------------------------
. Except as set forth on Schedule 2.2 hereto, the Mortgagor is the sole
owner of the whole of the Vessel and is lawfully possessed of the whole of the
Vessel, free from any Lien whatsoever other than the Lien of this Mortgage and
the Liens permitted by Section 2.6 hereof, and the Mortgagor will warrant and
defend the title to and possession of the Vessel and every part thereof for the
benefit of the Mortgagee against the claims and demands of all other persons
whomsoever, subject to the Liens and other matters not prohibited by the
Indenture or this Mortgage.
Section 2.3. Compliance with Laws.
--------------------
(a) Documentation. The Vessel is, and during the term of this
-------------
Mortgage shall continue to be, duly and lawfully registered under the laws and
flag of the United States, and the Mortgagor will comply with and satisfy all of
the provisions of the laws of the United States in order that the Vessel shall
continue to be documented pursuant to the laws of the United States as a vessel
of the United States under the United States flag with such endorsements as
shall qualify the Vessel for participation in the trades and services to which
it may be dedicated from time to time.
4
<PAGE>
(b) Title 46. The Mortgagor will, at its expense and at no cost
--------
to the Mortgagee, comply with and satisfy all the provisions of Chapters 301 and
313 of Title 46 of the United States Code, as amended, in order to establish,
record and maintain this Mortgage as a second preferred ship mortgage thereunder
upon the Vessel. This Mortgage is in substantial compliance with the conditions
and requirements contained in Section 31321 of Title 46 of the United States
Code.
(c) Laws, Treaties and Conventions. The Vessel shall, and the
------------------------------
Mortgagor covenants that it will in the operation of the Vessel, at all times
comply in all material respects with all applicable laws, treaties and
conventions and rules and regulations issued thereunder, and shall have on board
as and when required thereby valid certificates showing compliance therewith,
except when (i) the use or title of the Vessel has been taken. requisitioned or
chartered by any Governmental Authority, (ii) there has been actual or
constructive total loss or an agreed or compromised total loss of the Vessel, or
damage to the Vessel to the extent, determined in the good faith opinion of the
Mortgagor, as would make repair thereof uneconomical, or (iii) the Vessel has
been laid up and removed from service and the Mortgagor has taken adequate
precautions for the preservation and maintenance of the Vessel.
Section 2.4. Operation of Vessel
-------------------
. The Mortgagor will not (except during any period when the use or title
to the Vessel has been taken, requisitioned or chartered by any Governmental
Authority) cause or permit the Vessel to be operated in any manner contrary to
applicable law or regulation, will not abandon the Vessel in any foreign port
(unless an Event of Loss (as hereinafter defined) has occurred as to the Vessel
or the safety or welfare of the Mortgagor's employees on the Vessel is
endangered), will not engage in any unlawful trade, violate any law or carry any
cargo that will expose the Vessel to penalty, forfeiture or capture and will not
do, or suffer or permit to be done, anything which can or may injuriously affect
the documentation of the Vessel under the existing laws and regulations of the
United States of America. Mortgagor shall keep the operation of the Vessel
within the permitted navigational limits set forth in the trading warranties of
the policies of insurance covering the Vessel and in any case will not operate
the Vessel, or permit the Vessel to be operated, in any area where such
insurance would not be fully applicable and enforceable with respect to the
Vessel and its operation.
"Event of Loss" shall mean any one of the following events: (i) actual
-------------
total loss or destruction of the Vessel or any accident, occurrence or event
resulting in a constructive total loss or an agreed or compromised total loss of
the Vessel; or (ii) substantial damage to the Vessel, the repair of which is
uneconomical, including, but not limited to, any event pursuant to which
insurance proceeds are available which are not applied to repair the Vessel or
any other event resulting for any reason whatsoever in the Vessel being
permanently rendered unfit for normal use; or (iii) the condemnation,
confiscation, acquisition, seizure, detention, forfeiture, purchase or other
taking of title to or use of the Vessel (unless in the case of a requisition,
seizure, detention, or forfeiture, such action is revoked within ninety (90)
days) except the requisition of the use of the Vessel by any United States'
Governmental Authority on a basis not involving requisition of title to or
seizure or forfeiture of the Vessel.
Section 2.5. Claims, Taxes, Fees, etc.
-------------------------
The Mortgagor will pay and discharge or cause to be paid and discharged
prior to delinquency, all claims against, and fees, taxes, assessments,
governmental charges, fines and
5
<PAGE>
penalties imposed on, the Vessel, its cargoes or any income therefrom; provided
that nothing in this Section 2.5 shall require the Mortgagor to pay any such
claim, fee, tax, assessment, governmental charge, fine or penalty so long as the
validity thereof shall be contested by it in good faith and by appropriate
proceedings, and, provided, further, that such contest shall not subject the
-------- -------
Vessel, or any part thereof, to forfeiture or loss.
Section 2.6. Liens
-----
. Neither the Mortgagor, any charterer, the master of the Vessel nor any
other person has or shall have any right, power or authority to create, incur or
permit to be placed or imposed or continued upon the Vessel, any Lien whatsoever
other than the Lien of this Mortgage, Permitted Encumbrances and the following:
(i) Liens for wages of the crew (including wages of a master to the
extent provided by 46 U.S.C. App. (S)(S) 10301-10321, inclusive ("Master's
Wages")), general average and salvage (including contract salvage) which shall
not have been due and payable for forty-five (45) days after termination of a
voyage or which shall then be contested by the Mortgagor in good faith;
(ii) Liens for wages of the crew (including Master's Wages) and
salvage (including contract salvage) which are either unclaimed or covered by
insurance;
(iii) Liens incident to current operations (except for wages of the
crew including Master's Wages and salvage) or liens covered by insurance and any
deductible applicable thereto;
(iv) Liens for repairs; and
(v) Liens disclosed on Schedule 2.2 hereto;
provided that the Liens stated to be permitted by the foregoing
subparagraphs (i) through (iv) shall, unless they constitute a Lien for damage
arising out of tort, for wages of a stevedore when employed directly by the
Mortgagor, master, ship's husband, or agent, for wages of the crew (including
Master's Wages) for general average, or for salvage (including contract
salvage), be permitted only to the extent such Liens are either accrued (but not
yet due) or are subordinate to the Lien of this Mortgage. Nothing contained in
this Section 2.6 constitutes a waiver by the Mortgagee of the Mortgagee's
preferred status pursuant to the provisions of Chapters 301 and 313 of Title 46
of the United States Code. If any such Lien is placed on the Vessel which is not
subordinate to the Lien of this Mortgage, Mortgagor will promptly after becoming
aware of such Lien notify the Mortgagee.
Section 2.7. Notice of Mortgage
------------------
. The Mortgagor will at all times carry on board the Vessel (with the
ship's papers) a certified copy of this Mortgage and any amendments and
supplements hereto and any assignments hereof, and will exhibit or cause to be
exhibited the same to any person having business with the Vessel which might
give rise to a Lien upon the Vessel or to the sale, conveyance, mortgage or
lease thereof and, on demand, to any representative of the Mortgagee. The
Mortgagor will also place and keep prominently displayed on the Vessel a framed
printed notice in plain type of such size that the paragraph of reading matter
shall cover a space of not
6
<PAGE>
less than six inches wide by nine inches high (or such other dimensions as may
be required by law) reading as follows:
"NOTICE OF MORTGAGE
This Vessel is owned by HWCC-Tunica, Inc. and is subject to
a First Preferred Ship Mortgage in favor of State Street
Bank and Trust Company, as Trustee, as Mortgagee, and a
Second Preferred Ship Mortgage in favor of Hollywood Casino
Corporation, as Mortgagee, which Second Preferred Ship
Mortgage has been assigned by Hollywood Casino Corporation
to State Street Bank and Trust Company, as Trustee, under
the authority of Chapter 301 and Chapter 313 of Title 46 of
the United States Code, as amended, a certified copy of
which Mortgages are kept with this Vessel's papers. Under
the terms of said Mortgages neither the owner, any
charterer, the master of this Vessel nor any other person
has any right, power or authority to create, incur or permit
to be placed or imposed upon this Vessel any lien whatsoever
other than the lien of said Mortgages, liens for wages,
general average or salvage, and certain other liens
permitted by the provisions of said Mortgages."
Section 2.8. Libel or Attachment
-------------------
. If a libel is filed against the Vessel or if the Vessel shall be
attached, levied upon or taken into custody by virtue of any proceeding in any
court or tribunal, the Mortgagor will promptly notify the Mortgagee thereof by
telegram, cable or facsimile, confirmed by letter addressed to the Mortgagee,
and within fifteen (15) days after any such libel, levy, attachment or taking
into custody, Mortgagor will use its best efforts to cause the Vessel to be
released and will promptly notify the Mortgagee of such release in the manner
aforesaid. In the event that the Vessel shall not be released within such
fifteen (15) day period, the Mortgagor does hereby authorize and empower the
Mortgagee, in the name of the Mortgagor, or its successor or assigns, to apply
for and receive possession of and to take possession of the Vessel with all the
rights and powers that the Mortgagor, or its successors or assigns, might have,
possess or exercise in any such event; and this power of attorney shall be
irrevocable and may be exercised not only by the Mortgagee hereinabove named but
also by any one such appointee or the appointees of the Mortgagee, with full
power of substitution, to the same extent as if the said appointee or appointees
had been named as one of the attorneys above named by express designation.
Section 2.9. Maintenance of Vessel
---------------------
. Except as to such period as (i) the use or title of the Vessel has been
taken, requisitioned or chartered by a Governmental Authority, (ii) there has
been actual or constructive total loss or an agreed or compromised total loss of
the Vessel, or damage to the Vessel to the extent, determined in the good faith
opinion of the Mortgagor, as would make repair thereof uneconomic, or (iii) the
Vessel has been laid up and removed from service and the Mortgagor has taken
adequate precautions for the preservation and maintenance of the Vessel, the
Mortgagor will, at all times and without cost or expense to the Mortgagee,
maintain and preserve, or cause to be maintained and preserved, the Vessel in
good running order and repair, so that the Vessel shall be tight, staunch,
strong and well and sufficiently tackled, appareled,
7
<PAGE>
furnished, equipped and in every respect seaworthy, and in compliance with all
applicable United States Coast Guard Regulations, and in as good order and
operating condition for Mortgagor's gaming operations as when made subject to
the Lien of this Mortgage, ordinary wear and tear excepted; provided, however,
that nothing in this Section shall prevent Mortgagor from discontinuing any
operation or maintenance of any portion of the Vessel, or disposing thereof, if
such discontinuance or disposal is (A) in the judgment of the Board of Directors
of the Mortgagor desirable in the conduct of business of the Mortgagor, and (B)
not disadvantageous in any material respect to the Holders, subject in both
instances to the terms of the Indenture.
Section 2.10. Inspection
----------
. Weather permitting, the Mortgagor will at all reasonable times, upon
reasonable notice and at no cost or risk to the Mortgagor, afford the Mortgagee
or its authorized representatives full and complete access to the Vessel for the
purpose of inspecting or surveying the same and its papers.
Section 2.11. Sale or Other Disposition of Vessel
-----------------------------------
. Except as allowed in the Indenture, the Mortgagor will not sell,
mortgage, bareboat charter, transfer or in any other way dispose of all or any
part of the Vessel without the prior written consent of the Mortgagee.
Section 2.12. Notice of Loss, Requisition or Damage
-------------------------------------
. In the event of actual loss of the Vessel or any casualty, accident or
damage to the Vessel involving or estimated in good faith to involve an amount
in excess of $250,000, the Mortgagor will forthwith give written notice thereof
(containing full particulars) to the Mortgagee.
Section 2.13. Insurance.
---------
(a) All Risk. The Mortgagor shall, at its own expense, keep the
--------
Vessel insured against all such risks that are insured against by prudent owners
of vessels and equipment similar to the Vessel.
(b) Liability; Workers' Compensation. The Mortgagor shall
--------------------------------
maintain at all times, to the extent required by applicable law, such worker's
compensation, employer's liability, and longshoreman and harbor worker's
insurance including a Maritime Coverage Endorsement and pollution insurance. The
Mortgagor shall also, at its own expense, maintain public liability insurance,
together with umbrella liability coverage as insured against by prudent owners
of vessels and equipment similar to the Vessel. Such policies shall provide that
any loss under such insurance may be paid directly to the entity to whom any
liability covered by such policies has been incurred.
(c) Payment Provisions. All payments made under policies of
------------------
insurance maintained under this Section shall be applied as set forth in Section
4.11 of the Indenture.
(d) Constructive Total Loss. In the case of an Event of Loss
-----------------------
which is a constructive total loss of the Vessel, the Mortgagee shall have the
right (but only with prior written consent of the Mortgagor unless an Event of
Default has occurred and is continuing) to claim for a constructive total loss
of the Vessel, and if both (i) such claim is accepted by all
8
<PAGE>
underwriters under all policies then in force as to the Vessel and (ii) payment
in full is made in cash under such policies, then the Mortgagee shall have the
right to abandon the Vessel to the underwriters under such policies, free from
the Lien of this Mortgage.
(e) Agreed Total Loss. The Mortgagee shall not have the right to
-----------------
enter into an agreement or compromise providing for an agreed or compromised
total loss of the Vessel without the prior consent of the Mortgagor unless an
Event of Default has occurred and is continuing. If the Mortgagor shall have
given its prior consent thereto, or an Event of Default has occurred and is
continuing, the Mortgagee shall have the right in its discretion to enter into
an agreement or compromise providing for an agreed or compromised total loss of
the Vessel, provided the same is agreed to by underwriters under all applicable
policies.
(f) Insurers. All insurance required under this Section 2.13 shall be
--------
placed and kept with the United States Government, or such insurance companies,
underwriters' associations, clubs or underwriting funds as are reputable and
generally recognized within the industry.
(g) Taking by United States. During the continuance of a taking,
-----------------------
requisition or charter of the use of the Vessel by any governmental body of the
United States of America (including, without limitation, the state of
Mississippi), the provisions of this Section 2.13 shall be deemed to have been
complied with in all respects as to the Vessel if the United States Government
or any governmental body (including, without limitation, the state of
Mississippi) shall have agreed (i) to reimburse the Mortgagee and the Mortgagor
for loss or damage resulting from the risks indicated in paragraphs (a) and (b)
of this Section 2.13, or (ii) that the Mortgagee and the Mortgagor shall be
entitled to just compensation therefor. In addition, the provisions of this
Section 2.13 shall be deemed to have been complied with in all respects during
any period after title to the Vessel shall have been taken or requisitioned by
the United States Government or governmental body (including, without
limitation, the state of Mississippi) or there shall have been an actual or
constructive total loss or an agreed or compromised total loss of the Vessel.
In the event of any taking, requisition, charter or loss of the Vessel
contemplated by this paragraph (g), the Mortgagor shall promptly furnish to the
Mortgagee a sworn certificate of an officer of the Mortgagor stating that such
taking, requisition, charter or loss has occurred and, if there shall have been
a taking, requisition or charter of the use of the Vessel, that the United
States Government or governmental body (including, without limitation, the state
of Mississippi) has agreed (i) to reimburse the Mortgagor for loss or damage
resulting from the risks indicated in the above-mentioned paragraphs (a) and (b)
or (ii) that the Mortgagor or the Mortgagee, as the case may be, is entitled to
just compensation therefor.
(h) Compliance. The Mortgagor shall not do any act, nor voluntarily
----------
suffer nor permit any act to be done, whereby any insurance required by this
Section 2.13 shall or may be suspended, impaired or defeated, or suffer or
permit the Vessel to engage in any voyage, to engage in any activity or to carry
any cargo not permitted under the policies of insurance then in effect without
first procuring reasonably comparable insurance for such voyage, activity or the
carriage of such cargo.
(i) Assignment of Insurance to Surety. In the event that any claim or
---------------------------------
Lien is asserted against the Vessel for loss, damage or expense which is covered
by insurance hereunder and it is necessary for the Mortgagor to obtain a bond or
supply other security to prevent arrest of the Vessel or to obtain the release
of the Vessel from arrest on account of said claim or Lien, so long as no Event
of Default has occurred and is continuing, the Mortgagee, upon the written
9
<PAGE>
request of the Mortgagor, shall assign all or any part of its right, title and
interest in and to said insurance covering such loss, damage or expense. to any
entity executing a surety or guaranty bond or other agreement to save or release
the Vessel from such arrest as collateral security to indemnify against
liability under said bond or other agreement.
(j) Policies. The Mortgagor, upon execution of this Mortgage, shall
--------
deliver to the Mortgagee true copies of the original policies, certified to the
satisfaction of the Mortgagee, evidencing the insurance maintained under this
Section 2.13. If the Mortgagor executes any new or renewal policies of
insurance under this Section 2.13, the Mortgagor, upon the request of Mortgagee,
will promptly deliver to the Mortgagee true copies of such policies.
(k) Oil Pollution. The Mortgagor shall on behalf and for the benefit
-------------
of itself and the Mortgagee (i) when required by law, maintain a Certificate of
Financial Responsibility (Oil Pollution) issued by the United States Coast Guard
pursuant to the Oil Pollution Act of 1990, as amended, and (ii) maintain such
additional coverage for the Vessel in respect of oil pollution liability as may
be customary among prudent owners of similar vessels from time to time.
(l) Obligation to Collect. Mortgagor shall, at no cost or expense to
---------------------
the Mortgagee, have the duty and responsibility to make all proofs of loss and
take any and all other steps necessary to effect collections from underwriters
for any loss under any insurance on or in respect of the Vessel or the operation
thereof; provided that Mortgagor shall have such duty only to the extent that
such conduct would be taken by a prudent owner.
ARTICLE III.
------------
REMEDIES; APPLICATION OF PROCEEDS
---------------------------------
Section 3.1. Sale, Etc.
----------
If an Event of Default shall have occurred and be continuing which has
resulted in the Mortgagee accelerating the maturity of the Obligations, the
Mortgagee may, to the fullest extent permitted by and in accordance with
applicable law:
(a) exercise all the rights and remedies in foreclosure and otherwise
given to mortgagees by the provisions of the Chapter 313 of Title 46 of the
United States Code, as amended, or by the applicable laws of any other
applicable jurisdiction;
(b) bring suit at law, in equity or in admiralty or initiate and
prosecute such other judicial, extrajudicial, or administrative proceedings as
it may consider appropriate to recover any and all sums due, or declared due, in
respect of the Obligations, with the right to enforce payment of said sums
against any assets of the Mortgagor, whether they are covered by this Mortgage
or otherwise;
(c) take possession of the Vessel, with or without legal proceedings,
at any place where it may be found, and the Mortgagor or any person in
possession of the Vessel, forthwith upon request by the Mortgagee, as mortgage
creditor, shall deliver possession to the Mortgagee on demand of the Mortgagee,
and the Mortgagee shall have the right, subject to applicable law, without being
responsible for loss or damage to lay up, hold, charter, lease, operate or
otherwise use the Vessel for such period and under such conditions as it may
deem most expedient for its interest, accounting only for net profits, if any,
arising from such use and
10
<PAGE>
charging against all receipts from such use or from the sale of the Vessel by
court proceedings or pursuant to subsection (d) below, all costs, expenses,
charges, damages or losses by reason of such use; and if at any time the
Mortgagee shall avail itself of the right herein given to it to take the Vessel
and shall take it, the Mortgagee shall have the right to dock the Vessel at any
dock, pier or other premises owned or leased by the Mortgagor without charge, or
at any other place at the cost and expense of the Mortgagor;
(d) sell the Vessel at public or private sale, by sealed bids or
otherwise, on such terms and conditions as the Mortgagee deems best, free of any
claim, commitment or encumbrance, regardless of the nature thereof, in favor of
the Mortgagor and, except as provided by law, any other person, upon advance
notice of ten (10) consecutive days published in any newspaper authorized to
publish legal notices of that kind in the port of registry and the place of sale
of the Vessel and by sending notice of such sale at least fourteen (14) days
prior to the date fixed for such sale, by telegraph, cable or telex, confirmed
by mail, to the Mortgagor. In the event that the Vessel shall be offered for
sale by private sale, no newspaper publication of notice shall be required, nor
notice of adjournment of sale. Sale may be held at such place and at such time
as the Mortgagee by notice may have specified, or may be adjourned by the
Mortgagee from time to time by announcement at the time and place appointed for
such sale or for such adjourned sale, and without further notice or publication
the Mortgagee may make any such sale at the time and place to which the same
shall be so adjourned; and any sale may be conducted without bringing the Vessel
to the place designated for such sale and in such manner as the Mortgagee may
deem to be for its best advantage, and the Mortgagee may become the purchaser at
any public sale, and shall have the right to credit on the purchase price any
and all sums of money due hereunder.
As used in this Mortgage, "Event of Default" shall mean the occurrence of
any Event of Default under the Indenture.
Section 3.2. Finality of Sale
----------------
. A sale of the Vessel made in pursuance of this Mortgage, whether under
the power of sale hereby granted or any judicial proceedings, shall operate to
divest all right, title and interest of any nature whatsoever of the Mortgagor
therein and thereto, and shall bar the Mortgagor, its successors and assigns,
and all persons claiming by, through or under them. No purchaser shall be bound
to inquire whether notice has been given or whether any default has occurred, or
as to the propriety of the sale, or as to application of the proceeds thereof.
Section 3.3. Powers and Rights of Mortgagee Upon Notice of Default
-----------------------------------------------------
. During the occurrence and continuance of an Event of Default and after
the acceleration of the Senior Secured Notes, Mortgagee shall have the following
powers and rights:
(a) Sale. The Mortgagor does hereby irrevocably appoint the
----
Mortgagee and its successors and assigns the true and lawful attorney of the
Mortgagor, in its name and stead, for the purpose of Sections 3.1 and 3.2, to
make all necessary transfers of the Vessel, and for that purpose the Mortgagee
shall execute all necessary instruments of assignment and transfer (including
bills of sale), the Mortgagor hereby ratifying and confirming all that its said
attorney shall lawfully do by virtue hereof. Nevertheless, the Mortgagor shall,
if so requested by the Mortgagee, ratify and confirm any sale of the Vessel by
executing and delivering to the
11
<PAGE>
purchaser thereof such proper bills of sale, conveyances, instruments of
transfer and releases as may be designated in such request.
(b) Revenues and Proceeds of Vessel; Prior Liens.
--------------------------------------------
(i) The Mortgagee is hereby irrevocably appointed attorney-in-
fact of the Mortgagor, with the power, among other things in the name of the
Mortgagor to demand, collect, receive, compromise and sue for, so far as may be
permitted by law, all freights, hire, earnings, issues, revenues, income and
profits of the Vessel, and all amounts due from underwriters under any insurance
thereon as payment of losses or as return premiums or otherwise, salvage awards
and recoveries, recoveries in general average or otherwise, and all other sums
due or to become due in respect of the Vessel or in respect of any insurance
thereon from any person whomsoever, and to make, give and execute in the name of
the Mortgagor acquittances, receipts, releases or other discharges for the same,
whether under seal or otherwise, and to endorse and accept in the name of the
Mortgagor all checks, notes, drafts, warrants, agreements and all other
instruments in writing with respect to the foregoing, the Mortgagor hereby
confirming and ratifying the same.
(ii) The Mortgagee is hereby irrevocably authorized to pay or
furnish indemnity in the proper amounts against any Liens which have or may (in
the opinion of the Mortgagee) have priority over the Lien of this Mortgage and
which are not permitted under this Mortgage.
(c) Additional Rights. The Mortgagor covenants and agrees that in
-----------------
addition to any and all other rights, powers and remedies elsewhere in this
Mortgage granted to and conferred upon the Mortgagee, the Mortgagee in any suit
to enforce any of its rights, powers or remedies shall be entitled as a matter
of right and not as a matter of discretion (i) to seek the appointment of a
receiver or receivers of the Vessel and any receiver or receivers so appointed
shall have full right and power to use and operate the Vessel as shall be
ordered by the federal court, and (ii) to a decree ordering and directing the
sale and disposal of the Vessel, and the Mortgagee may become the purchaser at
such sale and shall have the right to credit against the purchase price any and
all sums of money due hereunder.
Section 3.4. Restoration of Position
-----------------------
. In case the Mortgagee shall have proceeded to enforce any right, power
or remedy under this Mortgage by foreclosure, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Mortgagee, then and in every such case the
Mortgagor and the Mortgagee shall, subject to any determination in such
proceeding, be restored to their former positions and rights hereunder with
respect to the property subject or intended to be subject to this Mortgage, and
all rights, remedies and powers of the Mortgagee shall, subject to any
determination in such proceeding, continue as if no such proceedings had been
taken.
Section 3.5. Application of Proceeds
-----------------------
. The proceeds of any sale and net earnings derived from the operation,
use, charter, or any other employment of the Vessel by the Mortgagee, as
mortgage creditor, and within any of the powers and authority above given, as
well as the proceeds of any judgment which the Mortgagee may obtain by reason of
the breach of failure to perform any of the terms of this
12
<PAGE>
Mortgage, as well as the proceeds of any claim for damage received by the
Mortgagee while exercising the powers and the authorities above given shall be
applied as follows:
(i) to the payment of all charges and expenses, including the
costs of any public or private sale or sales, the cost of replevying or taking
possession of the Vessel which may be incurred or paid out by the Mortgagee, as
mortgage creditor. and the expenses and reasonable administrator and attorneys'
fees incurred on foreclosure or in the protection of the rights and interests of
the Mortgagee founded upon this Mortgage;
(ii) to pay or to furnish indemnity in the proper amounts
against any Liens which have or may (in the opinion of the Mortgagee) have
priority over the Lien of this Mortgage and which are not Liens permitted under
this Mortgage;
(iii) to reduce or pay in full the Obligations; and
(iv) to the payment of any surplus thereafter remaining to the
Mortgagor or to whomsoever shall be entitled thereto.
Section 3.6. No Transfer in Violation of Shipping Act
----------------------------------------
. Notwithstanding any other provision herein to the contrary, no sale,
charter, transfer or other disposition of the Vessel or any interest therein may
be made to any entity not a citizen of the United States within the meaning of
Section 2 of the Shipping Act of 1916, as amended, without the approval of the
Secretary of Transportation of the United States. Furthermore, the Vessel shall
not be operated by the Trustee without the approval of the Secretary of
Transportation.
Section 3.7. Gaming Authority
----------------
. Each of the provisions of this Mortgage is subject to, and shall be
enforced in compliance with, the requirements of any applicable Gaming
Authority.
Section 3.8. Collateral Assignment of Note and Mortgage
------------------------------------------
. The Note and this Mortgage are contemporaneously herewith being
collaterally assigned to State Street Bank and Trust Company, as Trustee
(together with all successors in such capacity, the "Trustee') under the
Indenture. Mortgagor hereby acknowledges and consents to such Collateral
assignment and agrees that, so long as such collateral assignment shall remain
in effect, the Trustee shall be, for all purposes hereunder, the Mortgagee under
this Mortgage.
ARTICLE IV.
-----------
GENERAL POWERS OF MORTGAGEE
---------------------------
Section 4.1. General Powers of Mortgagee.
---------------------------
(a) Arrest or Detention of Vessel. In the event that the Vessel
-----------------------------
shall be arrested or detained by a marshal or other officer of any court of law,
equity or admiralty jurisdiction in any country or nation of the world or by any
government or other entity and shall not be released from arrest or detention
within thirty (30) days from the date of arrest or detention, the Mortgagor does
hereby authorize and empower the Mortgagee, in the name of the Mortgagor, or its
successors or assigns, to apply for and receive possession of and to take
13
<PAGE>
possession of the Vessel with all the rights and powers that the Mortgagor, or
its successors or assigns, might have, possess or exercise in any such event;
and this power of attorney shall be irrevocable and may be exercised not only by
the Mortgagee but also by its appointee or appointees, with full power of
substitution, to the same extent as if the said appointee or appointees had been
named as the attorney above named by express designation.
(b) Suits. The Mortgagor also authorizes and empowers the Mortgagee
-----
or its appointees or any of them to appear in the name of the Mortgagor, its
successors or assigns, in any court of any country or nation of the world where
a suit is pending against the Vessel because of or on account of any alleged
Lien against the Vessel from which the Vessel has not been released in
accordance with the terms of this Mortgage and to take such proceedings as to it
may seem proper towards the defense of such suit and the discharge of such Lien.
(c) Reimbursement of Expenses. If Mortgagor fails to perform any
-------------------------
obligation or covenant under this Mortgage, Mortgagee shall have the right, but
not the obligation, to perform or take such actions to comply with the terms of
this Mortgage, and all amounts reasonably expended in connection with such
conduct shall be a demand obligation of Mortgagor owing to Mortgagee at the
post-default rate of interest specified in the Senior Secured Notes and shall be
secured by the Lien of this Mortgage and the other Collateral Documents.
ARTICLE V.
----------
SUNDRY PROVISIONS
-----------------
Section 5.1. Defeasance
----------
. If the Obligations shall have been satisfied and discharged then this
Mortgage and the estate and rights hereunder shall cease, determine, and become
null and void; and the Mortgagee, on the request of the Mortgagor and at the
Mortgagor's cost and expense, shall forthwith cause satisfaction and discharge
of this Mortgage to be entered upon its and other appropriate records and shall
execute and deliver to the Mortgagor such instruments as may be necessary in the
Mortgagor's reasonable opinion to duly acknowledge the satisfaction and
discharge of this Mortgage.
Section 5.2. Right of Peaceful Enjoyment
---------------------------
. During the term of this Mortgage and so long as no Event of Default
shall have occurred and be continuing, the Mortgagor shall have full and
peaceful enjoyment, use, right to possession and control of the Vessel.
Section 5.3. Cumulative Remedies, No Waiver
------------------------------
. Each and every power and remedy herein given to the Mortgagee shall be
cumulative and shall be in addition to every other power and remedy herein or
now or hereafter existing at law, in equity, in admiralty, or by statute, and
each and every power and remedy whether herein given or otherwise existing may
be exercised from time to time and as often and in such order as may be deemed
expedient by the Mortgagee, and the exercise or the beginning of the exercise of
any power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other power or remedy. No course of
dealing on the part of the Mortgagee, its officers, employees, consultants or
agents, nor any delay or omission by the
14
<PAGE>
Mortgagee in the exercise of any right or power or in the pursuance of any
remedy shall operate as a waiver of any such right, power or remedy.
Section 5.4. Further Assurances
------------------
. In the event that this Mortgage, or any provisions hereof, shall be
deemed invalid in whole or in part by reason of any present or future law or any
decision of any court having jurisdiction, or if the documents at any time held
by the Mortgagee shall be deemed by the Mortgagee for any reason insufficient to
carry out the rights and powers granted to the Mortgagee herein, then, from time
to time, the Mortgagor will do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered such other and further assurances and
documents as in the opinion of the Mortgagee may reasonably be required in order
to more effectively subject the Vessel to the lien of this Mortgage or more
effectively subject the Vessel to the performance of the terms and provisions of
this Mortgage, or to enable this Mortgage to continuously enjoy the status of a
preferred ship mortgage.
Section 5.5. Survival of Agreements
----------------------
. All representations, warranties, covenants and agreements herein
contained or made in writing in connection with this Mortgage shall survive the
execution of this Mortgage and shall continue in full force and effect until all
sums secured hereby shall have been paid in full, and the same shall bind and
inure to the benefit of the respective successors and assigns of the Mortgagor
and the Mortgagee.
Section 5.6. Notices
-------
. All notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telex or facsimile
transmission), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when actually delivered or, in the case of telex
notice, when sent, answerback received, or in the case of facsimile
transmission, when received and telephonically confirmed, addressed as follows
or to such other address as may be hereafter notified by the respective parties
hereto or any assignee thereof or successor thereto:
Mortgagor:
HWCC-Tunica, Inc.
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75201
Telecopier No. (214) 386-7411
Mortgagee:
15
<PAGE>
Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB48
Dallas, Texas 75201
Trustee:
State Street Bank and Trust Company
Corporate Trust Administration
Two International Place, 4th Floor
Boston, Massachusetts 02110
Telecopier No. (617) 664-5151
Section 5.7. Counterparts
------------
. This instrument may be executed in any number of counterparts, and each
of such counterparts shall for all purposes be deemed to be an original.
Section 5.8. Section Headings
----------------
. The section headings used in this Mortgage are for convenience of
reference only and are not to affect the construction of or be taken into
consideration in interpreting this Mortgage.
Section 5.9. GOVERNING LAW
-------------
. THIS MORTGAGE, AND ALL OF THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, SHALL BE GOVERNED BY
TITLE 46, UNITED STATES CODE, CHAPTERS 301 AND 313 AND THE FEDERAL MARITIME LAWS
OF THE UNITED STATES OF AMERICA AND, ONLY TO THE EXTENT NOT ADDRESSED THEREBY,
BY THE LAWS OF THE STATE OF NEW YORK.
Section 5.10. Amendments and Waivers
----------------------
. None of the terms or provisions of this Mortgage may be waived, amended,
supplemented or otherwise modified except if made or given in compliance with
the terms and provisions of the Indenture.
Section 5.11. Termination
-----------
16
<PAGE>
. The grant of the Liens hereunder and all of Mortgagee's rights, powers
and remedies in connection therewith, shall unless otherwise provided in the
Indenture or this Mortgage, remain in full force and effect until payment in
full of (A) the Senior Secured Notes under the terms of the Indenture and (B)
all Obligations then due and owing under the Indenture, the Senior Secured Notes
and the Collateral Documents; provided, however, that after receipt from the
-------- -------
Mortgagor by the Trustee of a request for a release of the Vessel permitted
under the Indenture upon the sale, transfer, assignment, exchange or other
disposition of the Vessel not prohibited by the Indenture or otherwise (and upon
receipt by the Trustee of all proceeds of such sale, transfer, assignment,
exchange or other disposition to the extent required to be remitted to the
Trustee under the Indenture), the Vessel shall be released from the Lien and
security interest created hereunder in accordance with the provisions of the
Indenture and no longer be subject to the Liens granted herein. Upon the payment
in full of (A) the Senior Secured Notes under the terms of the Indenture and (B)
all Obligations then due and owing under the Indenture and the Collateral
Documents, the Mortgagor shall be entitled to the return, upon its request and
at its expense, of the Vessel.
Upon any termination of this Mortgage or release of the Vessel as permitted
by the Indenture, the Mortgagee will, at the expense of the Mortgagor, execute
and deliver to the Mortgagor such documents and take such other actions as the
Mortgagor shall reasonably request to evidence the termination of this Mortgage
or the release of the Vessel, as the case may be. Any such action taken by the
Mortgagee shall be without warranty by or recourse to the Trustee, except as to
the absence of any prior assignments by the Mortgagee of its interests in the
Vessel, and shall be at the expense of the Mortgagor. The Mortgagee may
conclusively rely on any certificate delivered to it by the Mortgagor stating
that the execution of such documents and release of the Vessel is in accordance
with and permitted by the terms of the Indenture and this Mortgage.
Section 5.12. Indenture
---------
. This Mortgage is issued pursuant to the terms, conditions and provisions
of the Indenture.
Section 5.13. Rights of Holders
-----------------
. No Holder shall have any independent rights hereunder other than those
rights granted to individual Holders pursuant to Section 6.07 of the Indenture;
provided that nothing in this Section 5.13 shall limit any rights granted to the
- --------
Trustee under the Senior Secured Notes, the Indenture or the Collateral
Documents.
Section 5.14. No Personal Liability of Directors
----------------------------------
. Officers, Employees and Stockholders. No past, present or future
director, officer, employee, incorporator or stockholder of the Mortgagor as
such, or the holder of any of the Senior Secured Notes, or any successor Person,
as such, shall have any liability for any obligations of the Mortgagor under
this Mortgage or for any claim based on, in respect of, or by reason of, such
obligations or their creation.
ARTICLE VI.
-----------
AMOUNT OF MORTGAGE; RECORDATION
-------------------------------
Section 6.1. Recordation
-----------
17
<PAGE>
. For the purpose of this Mortgage and the recordation of this Mortgage on
the documents of the Vessel as required by Chapter 313 of Title 46 of the United
States Code, as amended, the total amount of this Mortgage is $87,045,000.00
plus interest and performance of mortgage covenants. The Vessel subject to this
Mortgage is identified on Schedule 6.1 hereto. The Mortgagor holds an interest
of 100% in the Vessel and 100% of such interest is subject to this Mortgage. The
addresses of the parties are:
Mortgagor: HWCC-Tunica, Inc.
Two Galleria Tower, Suite 2200
13455 Noel Road, LB48
Dallas, Texas 75201
Mortgagee: Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB48
Dallas, Texas 75201
Trustee: State Street Bank and Trust Company
Corporate Trust Administration
Two International Place, 4th Floor
Boston, Massachusetts 02110
Telecopier No. (617) 664-5151
Although it is not intended that this Mortgage include any property other
than the whole of the Vessel named on Schedule 6.1 hereto, including earned
freights, if any determination is made at any time that for any reason this
Mortgage does include any property other than a "vessel" within the meaning of
46 U.S.C. (S) 31322(c)(i), then such property may be separately discharged from
the lien of this Mortgage (but not the lien of any other security instruments)
by the payment of .01% of the said total amount.
[Signature page follows]
18
<PAGE>
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly
executed as of the day and year first above written.
HWCC-TUNICA, INC.
By: /s/ William D. Pratt
---------------------
William D. Pratt
Executive Vice President
19
<PAGE>
THE STATE OF ILLINOIS)
)
COUNTY OF KANE )
THIS INSTRUMENT was acknowledged before me on May 19th, 1999, by William
D. Pratt, Executive Vice President of HWCC-TUNICA, a Texas corporation, on
behalf of such corporation, and after having first been duly authorized by said
corporation to do so.
/s/ Zaida Chapa
----------------
Notary Public in and for
the State of Illinois
Printed Name of Notary: Zaida Chapa
My Commission Expires: May 15, 2002
20
<PAGE>
SCHEDULE 2.2
------------
Other Liens
-----------
Lien evidenced by the First Preferred Ship Mortgage dated May 19, 1999 by
Mortgagor in favor of the Trustee.
21
<PAGE>
SCHEDULE 6.1
------------
Description of Vessel
---------------------
<TABLE>
<CAPTION>
Name Official Number
---- ---------------
<S> <C>
Hollywood Tunica 534006
</TABLE>
22
<PAGE>
EXHIBIT A
---------
"Permitted Encumbrances"
----------------------
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09
of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
<PAGE>
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of business and consistent with industry practices and Liens on deposits
made to obtain the release of such Liens if:
(a) the underlying Obligations are not overdue for a period of more than
60 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings by the Company or applicable Restricted Subsidiaries and adequate
reserves with respect thereto are maintained on the books of the Company in
accordance with GAAP, and
(c) the Company or applicable Restricted Subsidiaries is/are in compliance
with the terms of the security documents applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
or other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that do not
exceed Five Millions Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and Social
Security benefits.
<PAGE>
EXHIBIT 4.15
ASSIGNMENT OF SECOND PREFERRED SHIP MORTGAGE
ON THE WHOLE OF THE
THE HOLLYWOOD-TUNICA
(Official Number 534006)
$87,045,000.00
HOLLYWOOD CASINO CORPORATION
TWO GALLERIA TOWER, SUITE 2200
13455 NOEL ROAD, LB 48
DALLAS, TEXAS 75201
Mortgagee and Assignor
In Favor of
STATE STREET BANK AND TRUST COMPANY,
in its capacity as Trustee under
that certain Indenture dated as of
May 19, 1999 between State Street Bank and Trust Company,
Hollywood Casino Corporation,
HWCC-Shreveport, Inc. and HWCC-Tunica, Inc.
TWO INTERNATIONAL PLACE, 4TH FLOOR
BOSTON, MASSACHUSETTS 02110
Assignee
Dated May 19, 1999
<PAGE>
ASSIGNMENT OF SECOND PREFERRED SHIP MORTGAGE
--------------------------------------------
FOR VALUE RECEIVED, the undersigned, HOLLYWOOD CASINO CORPORATION, Two
Galleria Tower, Suite 2200, 13455 Noel Road, LB 48, Dallas, Texas 75201, a
Delaware corporation (the "Assignor"), does hereby SELL, ASSIGN, TRANSFER AND
SET OVER unto STATE STREET BANK AND TRUST COMPANY, Two International Place, 4th
Floor, Boston, Massachusetts 02110, a Massachusetts trust company, as Trustee
(the "Assignee") under that certain Indenture (the "Indenture") dated as of May
19, 1999 between Assignor, Assignee, HWCC-Shreveport, Inc., a Louisiana
corporation and HWCC-Tunica, Inc., a Texas corporation with an address at Two
Galleria Tower, Suite 2200, 13455 Noel Road, LB 48, Dallas, Texas 75201, and
Assignee's successors and assigns: (i) all of Assignor's right, title and
interest in, to and under that certain Second Preferred Ship Mortgage (the
"Mortgage"), dated May 19, 1999, executed by HWCC-TUNICA, INC., a Texas
corporation, Two Galleria Tower, Suite 2200, 13455 Noel Road, LB48, Dallas,
Texas 75201 (the "Mortgagor"), in favor of Assignor, as mortgagee, covering the
following vessel:
NAME OFFICIAL NO.
------------------------------------
THE HOLLYWOOD-TUNICA 534006
which Mortgage was recorded by the National Vessel Documentation Center on May
19, 1999 at ___:____ a.m./p.m. in Book No. _____, Page _______, and which
mortgage secures the due and punctual payment of one certain amended and
restated promissory note in the original principal amount of $87,045,000.00,
made and subscribed by Mortgagor, dated May 19, 1999, and being payable to the
order of the Assignor, and other obligations described therein (the "Note"), the
interest thereon and performance of Mortgage covenants, and (ii) all of
Assignor's right, title and interest in and to the property described in the
Mortgage, and in and to all amounts which may now be or may hereafter become due
and payable by Mortgagor under the Mortgage, on account of its indebtedness and
obligations under and in respect of the aforesaid Note and the Obligations (as
defined in the Mortgage), and the interest thereon, together with all of the
rights, powers, privileges and remedies of the Mortgagee thereunder, including,
but without limitation thereto, all of the Mortgagee's rights to receive and
collect all other amounts which may now be or may hereafter become due and
payable by the Mortgagor under the Mortgage, reference to the Mortgage being
hereby made for all such purposes.
This Assignment is made as security for (i) the payment when due of
indebtedness evidenced by (a) those certain 11 1/4% Series A and Series B Senior
Secured Notes due 2007 and (b) those certain Floating Rate Series A and Series B
Senior Secured Notes due 2006 (as the same may be amended, supplemented,
restated, exchanged, replaced or otherwise modified from time to time,
collectively, the "Senior Secured Notes"), issued by the Assignor pursuant to
the provisions of the Indenture, in the aggregate principal sum not to exceed in
any one time outstanding of $360,000,000, interest (including post-petition
interest) as set forth in the Indenture and the Senior Secured Notes, and
premiums, penalties, and late charges thereon; and (ii) all other indebtedness
and other sums (including, without limitation, all expenses, attorneys' fees,
other fees, indemnifications, reimbursements, damages, other monetary
liabilities, and
<PAGE>
other charges) that may or shall become due under the Senior Secured Notes, the
Guarantees (as such term is defined in the Indenture), the Indenture or the
Security Documents (as such term is defined in the Indenture).
In furtherance of the foregoing Assignment, after the occurrence and
during the continuance of an Event of Default under the Indenture, Assignor
hereby authorizes and empowers Assignee, in Assignee's own name or in the name
of Assignee's nominee, or in the name of and as attorney for Assignor, to ask,
demand, sue for, collect, receive and enforce all sums to which Assignee is or
may be entitled under this Assignment and compliance by Mortgagor with the terms
and agreements on its part to be performed under the Mortgage. Assignee shall
have the rights, powers and remedies provided by applicable law and this
Assignment.
Assignor warrants that it is the legal owner of said Mortgage and has
the lawful right to assign, transfer and set over said Mortgage unto the
Assignee free and clear of any claim or interest of any party whatsoever.
Assignor further warrants and covenants that it is and will remain a citizen of
the United States of America within the meaning of Title 46, Section 802 of the
United States Code.
The interest of the Assignor in the Mortgage is 100 percent (100%) and
the interest in the Mortgage granted to the Assignee is 100 percent (100%).
The foregoing warranties and the other provisions of this Assignment
shall inure to the benefit of the Assignee and its successors, transferees and
assigns under the Indenture.
IN WITNESS WHEREOF, the Assignor has executed this Assignment of
Second Preferred Ship Mortgage on this 19th day of May, 1999.
ASSIGNOR
HOLLYWOOD CASINO CORPORATION
a Delaware corporation
By: /s/ William D. Pratt
---------------------
William D. Pratt
Executive Vice President
<PAGE>
ACKNOWLEDGMENT
--------------
STATE OF ILLINOIS
COUNTY OF KANE
On this 19th day of May, 1999, within my jurisdiction before me
personally came and appeared William D. Pratt, known to me, who being by
me duly sworn, did say that he/she resides at Dallas, Texas that he/she is
Executive Vice President of HOLLYWOOD CASINO CORPORATION, the Delaware
corporation described above and Assignor herein, and acknowledged that he/she
executed the foregoing instrument for and on behalf of HOLLYWOOD CASINO
CORPORATION, for the purposes therein contained and in the capacities therein
stated, after first having been duly authorized by said corporation to so do.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in said County and State on the date and year last above written.
/s/ Zaida Chapa
----------------
Notary Public
(Seal)
<PAGE>
EXHIBIT 4.16
SUBJECT TO THE PLEDGE TO THE TRUSTEE
PURSUANT TO THE INDENTURE
DATED AS OF MAY 19, 1999
AMONG HOLLYWOOD CASINO CORPORATION,
HWCC-TUNICA, INC., HWCC-SHREVEPORT, INC. AND STATE STREET BANK AND TRUST
COMPANY, AS TRUSTEE (THE "INDENTURE")
PROMISSORY NOTE
---------------
$108,000,000 Dated: May 19, 1999
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned, HOLLYWOOD CASINO-AURORA, INC., an
Illinois corporation (the "Maker"), hereby promises to pay as hereinafter set
-----
forth to the order of HOLLYWOOD CASINO CORPORATION (together with its successors
and assigns, the "Holder") at its offices at Two Galleria Tower, Suite 2200,
------
13455 Noel Road LB48, Dallas, Texas 75240, the principal sum of ONE HUNDRED
EIGHT MILLION DOLLARS ($108,000,000), or so much as may have been advanced by
Holder to Maker pursuant to the provisions hereof and as may otherwise be
required pursuant to the terms of the Indenture (individually, an "Advance" and
-------
collectively, the "Advances"), together with interest (computed on the basis of
--------
a year of 360 days comprised of twelve thirty-day months (including the first
day but excluding the last day) occurring in the period for which such interest
is payable) on the principal amount hereof from time to time outstanding from
the date hereof until such principal amount is paid in full, at an interest rate
per annum equal at all times to the lesser of the maximum lawful rate or Eleven
and One Quarter percent (11 1/4%). Principal on this Note is due and payable in
a single installment of principal due on May 1, 2007; provided, however, that
-------- -------
upon such time as Maker becomes a Guarantor (as defined in the Indenture) and
the security for this Note has been pledged to secure such guaranty, or as
required by Governmental Authorities, the date upon which this Note becomes due
and payable may be changed as mutually agreed by Maker and Holder. Accrued
interest shall be due and payable on the 15th day of each April and October
until payment in full and at maturity. Any overdue amount of principal,
interest or other amounts payable hereunder shall bear interest, payable on
demand, at the same rate of interest, to the extent lawful. Maker shall have no
right to prepay any unpaid principal amount.
Each Advance made by Holder to Maker shall be recorded by Holder and,
prior to any transfer thereof, endorsed on the grid attached hereto, which is
part of this Note; provided, however, that any failure to make such endorsement
-------- -------
on such grid shall not limit or otherwise affect the obligations of Maker
hereunder.
Both principal and interest hereunder are payable prior to 3:00 p.m.
(Dallas, Texas time) on the day for payment thereof in lawful money of the
United States of America. Whenever any payment hereunder shall be stated to be
due on a day other than a day of the year on which banks are not required or
authorized to close in Dallas, Texas (any such other day being a "Business
--------
Day"), such payment shall be made on the next succeeding Business Day, and such
- ---
extension of time shall in such case be included in the computation of payment
of interest.
Maker waives presentment, demand and presentation for payment, notice
of nonpayment and dishonor, protest and notice of protest.
1
<PAGE>
All notices and other communications hereunder shall be in writing and
will be deemed to have been duly given when received or (if later) three (3)
days after being mailed registered mail, postage prepaid, return receipt
requested, if to Holder, to the address of Holder set forth above, and if to
Maker, to the address of Maker provided below (or to such other address as
Holder or Maker, as applicable, shall provide to the other by notice in
accordance with the foregoing).
This Note shall be governed by and construed in accordance with the
laws of the State of Illinois.
At the option of the Holder hereof, this Note shall become immediately
due and payable, without notice or demand, upon the occurrence at any time of
one or more of the following events of default:
(a) Failure in the due, prompt and complete observance or performance
of any condition, covenant or obligation of Maker set forth herein to make any
payment of principal, interest or any other sums due hereunder.
(b) An Event of Default under the Indenture (as defined therein).
This Note shall become immediately due and payable, without notice or
demand and without the need for any action or election by the Holder hereof or
any other party, upon the occurrence at any time of any of the following:
(a) The making of an assignment for the benefit of creditors by
Maker; the voluntary appointment (at the request of any such party or with the
consent of any such party) of a receiver, custodian, liquidator or trustee in
bankruptcy of the property of Maker; the filing by Maker of a petition in
bankruptcy or adjudication of Maker as a bankrupt or insolvent, or the filing by
Maker of any petition or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future federal, state or other law or regulation
relating to bankruptcy, insolvency or other relief for debtors;
(b) The filing against Maker of a petition seeking any
reorganization, arrangement, composition , readjustment, liquidation,
dissolution or similar relief under any present or future federal, state or
other law or regulation relating to bankruptcy, insolvency or other similar
relief for debtors, or the involuntary appointment of a receiver, custodian,
liquidator or trustee in bankruptcy of the property of Buyer and such petition
or appointment is not vacated or discharged within sixty (60) days after the
filing or making thereof; or
(c) Maker becomes insolvent or unable to pay its debts generally as
the mature.
Anything in this Note notwithstanding, if at any time the rate of
interest on this Note, together with all fees and charges, if any (collectively,
the "Charges"), contracted for, charged, received, taken or reserved by Holder
hereof which may be treated as interest under applicable law, computed over the
full term of this Note, exceeds the maximum legal limit (if any such limit is
applicable) under United States federal law or state law (to the extent not
2
<PAGE>
preempted by federal law, if any), now or hereafter governing the interest
payable on this Note (the "Maximum Rate"), then the rate of interest on this
Note, together with all Charges, shall be limited to the Maximum Rate. If from
any circumstances, Holder shall ever receive as interest an amount which would
exceed the Maximum Rate, such amount which would be excessive interest shall be
applied to the reduction of the unpaid principal balance hereunder (whether or
not due and payable) and not to the payment of interest.
No single or partial exercise of any power hereunder shall preclude
other or further exercise thereof or the exercise of any other power. No delay
or omission on the part of holder in exercising any right hereunder shall
operate as a waiver of such right or of any other right under this Note. No
waiver of any breach of any of the covenants or conditions of this Note shall be
construed to be a waiver of or acquiescence in or a consent to any previous or
subsequent breach of the same or any other condition or covenant.
Contemporaneously with the making of this Note, this Note is being
assigned to the Trustee (as defined in the Indenture) pursuant to the Indenture
and certain other documents to secure obligations as set forth in the Indenture
and such other documents. Maker and Holder agree that this Note shall not be
modified in any respect, and Holder shall take no action to accelerate or
enforce this Note, except as consistent with the Indenture and the Collateral
Documents (as defined in the Indenture).
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, Maker has executed this Note as of the date first
set forth above.
HOLLYWOOD CASINO-AURORA, INC.
By:
Name:
Title:
Maker's Address:
49 West Galena Boulevard
Aurora, Illinois 60506
3
<PAGE>
ADVANCES OF PRINCIPAL
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Amount of Advance Unpaid Principal Notation Made By
Date Balance
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 4.17
INTERCOMPANY SECURITY AGREEMENT
-------------------------------
(Accounts, Inventory, Equipment, Chattel Paper, Documents,
Instruments, General Intangibles and Other Property)
Made by
HOLLYWOOD CASINO-AURORA, INC.,
as Debtor
to
HOLLYWOOD CASINO CORPORATION,
as Secured Party
and Collaterally Assigned by
Hollywood Casino Corporation
to
STATE STREET BANK AND TRUST COMPANY,
as Trustee
Acting on behalf of the Holders of the Senior Secured Notes
May 19, 1999
<PAGE>
INTERCOMPANY SECURITY AGREEMENT
-------------------------------
Accounts, Inventory, Equipment, Chattel Paper, Documents,
Instruments, General Intangibles and Other Property
---------------------------------------------------
THIS INTERCOMPANY SECURITY AGREEMENT (this "Agreement") is made as of May
---------
19, 1999, by Hollywood Casino-Aurora, Inc., an Illinois corporation with its
chief executive office at 49 West Galena Boulevard, Aurora, Illinois 60506
("Debtor"); in favor of Hollywood Casino Corporation (the "Secured Party"). The
- -------- -------------
Secured Party has collaterally assigned its interest hereunder to State Street
Bank and Trust Company, as Trustee (the "Trustee"), to secure, among other
-------
things, the Senior Secured Notes (as such term is hereinafter defined) pursuant
to a Security Agreement of even date herewith between the Secured Party and the
Trustee (the "HWCC Security Agreement").
-----------------------
RECITALS
--------
A. Of even date herewith, Debtor has executed a certain amended and
restated promissory note payable to the order of Hollywood Casino Corporation, a
Delaware corporation (the "Borrower"), in the original principal amount of
--------
$31,500,000, with a maximum principal amount not to exceed $108,000,000 (as the
same may be amended, supplemented, restated or otherwise modified from time to
time, being hereinafter referred to as the "Note").
----
B. The Borrower, HWCC-Tunica, Inc., HWCC-Shreveport, Inc. and State Street
Bank and Trust Company, as Trustee, have entered into an Indenture dated as of
May 19, 1999 (as the same may be amended, supplemented, restated or otherwise
modified from time to time, the "Indenture"), pursuant to which the Borrower
---------
will issue up to (i) $310,000,000 of its 11 1/4% Series A and Series B Senior
Secured Notes due 2007 and (ii) $50,000,000 of its Floating Rate Series A and
Series B Senior Secured Notes due 2006 (as the same may be amended,
supplemented, restated, exchanged, replaced or otherwise modified from time to
time, collectively, the "Senior Secured Notes"). Debtor is an affiliate of
--------------------
Borrower and as such will derive direct and indirect benefits from the issuance
of the Senior Secured Notes pursuant to the Indenture.
C. It is a condition precedent to the purchase of the Senior Secured Notes
under the Indenture that Debtor shall have executed and delivered this
Agreement.
D. Therefore, in order to comply with the terms and conditions of the
Indenture and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor hereby agrees with Secured
Party as follows:
<PAGE>
ARTICLE 1.
----------
SECURITY INTEREST
-----------------
Section 1.01. Grant of Security Interest. Debtor hereby assigns,
--------------------------
endorses, delivers, pledges and grants to Secured Party a continuing security
interest in, Lien upon, and right of set-off against the assets referred to in
Section 1.02 hereof (the "Collateral") to secure the prompt and complete payment
and performance of the Obligations (as defined in Section 2.02 hereof) and the
performance by Debtor of this Agreement.
Section 1.02. Collateral. The Collateral consists of the following types
----------
or items of property (including property hereafter acquired by Debtor as well as
property which Debtor now owns or in which Debtor has rights), but subject to
the exceptions and provisos as set forth herein:
(a) All of Debtor's accounts, equipment, chattel paper, documents,
instruments, general intangibles and personal property, including, without
limitation, any of the foregoing which may be more specifically indicated
in the remainder of this Section 1.02 and including all of the Debtor's
vessels The City of Lights I (Official No. 993836), The City of Lights II
(Official No. 993827), and The Aurora Borealis (Official No. 1029229)
(collectively, the "Vessels"), duly documented in the name of the Debtor
under the laws of the United States, whether or not such Vessels are
vessels within the meaning of 46 U.S.C. (S) 31322(a), and all rights of
Debtor therein, including all equipment, parts and accessories, including,
but not limited to, all of their respective boilers, engines, generators,
air compressors, machinery, masts, spars, sails, riggings, boats, anchors,
cables, chains, tackle, tools, pumps and pumping equipment, motors,
apparel, furniture, computer equipment, electronic equipment used in
connection with the operation of the Vessels and belonging to the Vessels,
all machinery, equipment, engines, appliances and fixtures for generating
or distributing air, water, heat, electricity, light, fuel or
refrigeration, or for ventilating or sanitary purposes, fittings and
equipment, supplies, spare parts, fuel, and all other appurtenances
thereunto appertaining or belonging, whether now owned or hereafter
acquired, whether or not on board said Vessels, and all extensions,
additions, accessions, improvements, renewals, substitutions, and
replacements hereafter made in or to said Vessels or any part thereof, or
in or to any said appurtenances;
(b) All of Debtor's inventory in all of its forms, wherever located,
now or hereafter existing (including, but not limited to, (i) all food
services products including beef, chicken, veal, pork, fish, eggs, dairy
products, salads, soups, herbs, condiments, canned foods, dried foods,
coffee, tea, jams, flour, sugar, canned and bottled sodas, confectioneries
and liquor inventory and raw materials and work in process therefor,
finished goods thereof and materials used or consumed in the manufacture or
production thereof, (ii) goods in which Debtor has an interest in mass or
in joint or other interest or right of any kind (including without
limitation, goods in which Debtor has an interest or right as consignee),
and all accessions thereto and products thereof and documents therefor, and
(iii) all motion picture memorabilia);
2
<PAGE>
(c) All contracts of Debtor, including, without limitation, the
contracts described or referred to in Exhibit A attached hereto and made a
---------
part hereto and each contract in which Debtor may hereafter become a party,
in each case as such agreements may be amended or otherwise modified from
time to time, including, without limitation, (i) all rights of Debtor to
receive moneys due and to become due under or pursuant to the contracts,
(ii) all rights of Debtor to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the contracts, (iii) claims of Debtor
for damages arising out of or for breach of or default under the contracts,
(iv) the right of Debtor to terminate the contracts, to perform thereunder
and to compel performance and to otherwise exercise all remedies thereunder
and (v) all proceeds of the foregoing Collateral;
(d) All of Debtor's general intangibles of any kind whether now
existing or hereafter arising; all chattel papers, documents and
instruments relating to such general intangibles; and all rights now or
hereafter existing in and to all security agreements, leases (excluding
real property leases), and other contracts securing or otherwise relating
to any such general intangibles or any such chattel papers, documents and
instruments. The Debtor's general intangibles that are the subject of this
Agreement and are included as part of the Collateral covered by this
Agreement include, without limitation, the following intangible personal
property in which the Debtor presently or in the future will own any right,
title or interest (to the extent that the granting of this security
interest does not violate a valid and enforceable restriction on such grant
created in the agreement by which the Debtor acquired its right, title or
interest from the prior owner or from the lessor or licensor thereof): (i)
any and all trade secrets, ideas, information, procedures, processes,
systems, methods of operation, concepts, principles or discoveries, whether
or not patentable, and all of the intellectual property rights therein
provided by State or federal laws of the United States, such as the right
of first publication and, if applicable, the right to file applications for
United States patent protection on the preferred embodiments thereof; (ii)
any and all applications for United States patents and issued United States
patents; (iii) any and all names, tradenames, trademarks or service marks
and the goodwill of the Debtor's business, goods or services represented by
such names and marks, and all applications to register such names or marks
on State registrars or with the United States Patent and Trademark Office
and all issued State or United States registrations thereon, including,
without limitation, those listed on Exhibit B attached hereto and made a
---------
part hereof; (iv) all expressions embodied in a tangible medium that are
the subject matter of copyright and the intangible rights of copyright
therein, including, without limitation, both nonregistered copyrighted
works and registered copyrighted works; (v) all rights arising out of
licenses (in cases where Debtor is the licensee) to use patents,
trademarks, copyrights, trade secrets and other intellectual property
rights; (vi) all rights and proceeds arising out of licenses (in cases
where Debtor is the licensor) to use Debtor's United States patents,
trademarks, copyrights, trade secrets and other intellectual property; and
(vii) in all cases, the rights to prosecute such intellectual property
rights referred to in this subsection 1.02(d), and to recover the proceeds
of past, present and future infringement of such rights by third parties;
provided, however, that the Debtor shall at all times have the right in the
conduct of its business to make and carry out decisions that affect such
intangible personal property and the intellectual property rights therein,
such as, the Debtor shall have the right to exercise the right of first
publication with respect to its ideas, information, procedures, processes,
3
<PAGE>
systems, methods of operation, concepts, principles or discoveries; to
determine whether applications for patent protection will be filed or
abandoned on the preferred embodiments thereof; to determine which terms
shall be used as names and marks for its business, goods or services, when
the use of such terms will be discontinued, and the efforts, if any, that
will be made to register such terms and to maintain or, in its discretion,
to abandon such registrations or applications therefor; to determine if and
when copyrighted works will be registered; to determine whether aspects of
such intellectual property will be sold, assigned, or licensed to others in
connection with operation of the Debtor's business; and to determine the
actions that will be taken to maintain and prosecute the Debtor's
intellectual property rights in such intangible personal property;
(e) (i) Any related or additional property from time to time
delivered to or deposited with Secured Party by or for the account of
Debtor; (ii) all certificates of title or other documents evidencing
ownership or possession of or otherwise relating to any property referred
to in this Section 1.02; (iii) all property used or usable in connection
with any property referred to in this Section 1.02; (iv) all goods which
were at any time included in the Collateral and which are returned to or
for the account of Debtor following their sale, lease or other disposition;
(v) all proceeds, products, replacements, additions to, substitutions for,
accessions to, and property necessary for the operation of any of the
property referred to in this Section 1.02, including, without limitation,
insurance payable as a result of loss or damage to any of the property
referred to in this Section 1.02, refunds of unearned premiums of any such
insurance policy and claims against third parties; and (vi) all books and
records related to any of the property referred to in this Section 1.02,
including, without limitation, any and all books of account, customer lists
and other records relating in any way to the accounts, chattel paper,
instruments or inventory referred to in this Section 1.02;
(f) All general intangibles related to any property referred to in
this Section 1.02, including, without limitation, all (i) letters of
credit, bonds, guaranties, purchase or sales agreements and other
contractual rights, rights to performance, and claims for damages, refunds
(including tax refunds, but only to the extent such refunds are assignable
under 31 U.S.C. (S) 3727) or other monies due or to become due; (ii)
orders, franchises, permits, certificates, licenses, consents, exemptions,
variances, authorizations or other approvals by any governmental agency or
court, to the extent but only to the extent permitted by applicable law to
be pledged and assigned and to the extent but only to the extent that the
perfection of the security interests therein may be obtained by the filing
of a financing statement pursuant to the applicable provisions of the Code;
(iii) books, business records, data bases, computer tapes and computer
software; (iv) goodwill; and (v) other intangible personal property,
whether similar or dissimilar to the property referred to in this Section
1.02;
provided that, the Collateral described in this Section 1.02 shall not include
(i) tort claims, (ii) rights represented by judgments, and (iii) any of the
foregoing property that is, pursuant to restrictions enforceable under
applicable law, prohibited from being pledged as security; provided that, with
respect to this clause (iii), upon the termination of such prohibitions for any
reason whatsoever or in the event such prohibitions are or become unenforceable
under applicable law, such foregoing property shall automatically be Collateral
hereunder.
4
<PAGE>
Notwithstanding the foregoing, so long as no Event of Default shall have
occurred and be continuing, all dividends, distributions, interest and principal
payments, cash, instruments, and other property and proceeds made upon or with
respect to or of the Collateral shall not constitute Collateral and may be used
by the Debtor subject to the terms and conditions of the Indenture. Upon the
occurrence and during the continuance of an Event of Default, all rights of the
Debtor to receive all such dividends, distributions, interest and principal
payments, cash, instruments and other property and proceeds shall cease, and
such dividends, distributions, interest and principal payments, cash,
instruments and other property and proceeds shall constitute Collateral, and
shall be paid or otherwise delivered to the Secured Party or the Trustee. It is
expressly contemplated that additional property may from time to time be
pledged, assigned or granted to Secured Party as additional security for the
Obligations, and the term "Collateral" as used herein shall be deemed for all
purposes hereof to include all such additional property, together with all other
property of the types described above related thereto.
ARTICLE 2.
----------
DEFINITIONS
-----------
Section 2.01. Terms Defined Above or in the Indenture. As used in this
---------------------------------------
Agreement, the terms defined above shall have the meanings respectively assigned
to them. Other capitalized terms which are defined in the Indenture but which
are not defined herein shall have the same meanings as defined in the Indenture.
Section 2.02. Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the following meanings, unless the context otherwise
requires:
"Accounts" means all accounts, chattel paper and instruments (as such terms
--------
are defined in the Code) at any time included in the Collateral.
"Account Debtor" means any Person liable (whether directly or indirectly
--------------
primarily or secondarily) for the payment or performance of any obligations
included in the Collateral, whether as an account debtor (as defined in the
Code), obligor on an instrument, issuer of documents or securities, guarantor or
otherwise.
"Agreement" means this Security Agreement, as the same may from time to
---------
time be amended or supplemented.
"Code" means the Uniform Commercial Code as presently in effect in the
----
State of New York; provided that, if by reason of mandatory provisions of law,
the perfection or the effect of perfection or non-perfection of the security
interests in any Collateral is governed by the Uniform Commercial Code as in
effect in any jurisdiction other than the State of New York, "Code" means the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such perfection or the effect of perfection or
non-perfection. Unless otherwise indicated by the context herein, all
uncapitalized terms which are defined in the Code shall have their respective
meanings as used in Article 9 of the Code.
"Event of Default" means any event specified in Section 6.01.
----------------
5
<PAGE>
"Inventory" means all inventory (as defined in the Code) at any time
---------
included in the Collateral, including, without limitation, motion picture
memorabilia.
"Obligations" means (i) the payment when due of indebtedness evidenced by
-----------
the Note, which is in the principal sum not to exceed at any time outstanding of
$108,000,000, interest (including post-petition interest) as set forth in the
Note, and premiums, penalties, and late charges thereon; (ii) all other
indebtedness and other sums (including, without limitation, all expenses,
attorneys' fees, other fees, indemnifications, reimbursements, damages, other
monetary liabilities, and other charges) that may or shall become due hereunder
or under the Note or the other documents executed as security for or in
connection with the Note; and (iii) any and all renewals, modifications,
amendments, extensions for any period, supplements or restatements of any of the
foregoing.
"Obligor" means any Person, other than Debtor, liable (whether directly or
-------
indirectly, primarily or secondarily) for the payment or performance of any of
the Obligations whether as maker, co-maker, endorser, guarantor, accommodation
party, general partner or otherwise.
"Permitted Encumbrances" means the items set forth on Exhibit D hereto.
---------------------- ---------
ARTICLE 3.
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Secured Party to accept this Agreement, Debtor
represents and warrants to Secured Party (which representations and warranties
will survive the creation and payment of the Obligations) that:
Section 3.01. Ownership of Collateral; Absence of Encumbrances and
----------------------------------------------------
Restrictions. After giving effect to the use of the proceeds of the Senior
- ------------
Secured Notes, Debtor is, and in the case of property acquired after the date
hereof, will be, the sole legal and beneficial owner of the Collateral holding
good and indefeasible title to the same, free and clear of all Liens except for
Permitted Encumbrances and Debtor has full right, power and authority to assign
and grant a security interest in the Collateral to Secured Party.
Section 3.02. No Required Consent. Except for such authorizations,
-------------------
consents or approvals previously obtained and in effect, no authorization,
consent, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body (other than the filing of financing
statements and the other documents required to perfect or maintain the
perfection of the Liens granted hereby) is required for (i) the due execution,
delivery and performance by Debtor of this Agreement, (ii) the grant by Debtor
of the security interest granted by this Agreement, (iii) the perfection of such
security interest or (iv) the exercise by Secured Party of its rights and
remedies under this Agreement, except as may be required by applicable gaming
laws or in connection with the disposition of Collateral or by federal or state
securities laws or antitrust laws.
Section 3.03. Security Interest. After giving effect to the use of
-----------------
proceeds of the Senior Secured Notes, the grant of the security interest in and
Lien on the Collateral pursuant to this
6
<PAGE>
Agreement creates a valid and continuing security interest in and Lien on the
Collateral, enforceable against Debtor, and, upon the filing of financing
statements in the appropriate office for the locations of the Collateral listed
on Exhibit C hereof, the security interests granted hereby will be perfected,
---------
prior to all other Liens except Permitted Encumbrances, enforceable against
third parties and securing payment of the Obligations.
Section 3.04. No Filings By Third Parties. After giving effect to the use
---------------------------
of proceeds of the Senior Secured Notes, and other than any financing statement
or other public notice or recording naming Secured Party as the secured party
therein or financing statements with respect to Liens permitted hereunder, no
financing statement or other public notice or recording covering the Collateral
is on file in any public office and Debtor has not signed any document or
agreement authorizing the filing of any such financing statement or other public
notice or recording so long as any of the Obligations are outstanding.
Section 3.05. Name; No Name Changes. The name of the Debtor set forth on
---------------------
Exhibit C hereto is the true and correct legal name of the Debtor, and, except
- ---------
as described on Exhibit C hereto, Debtor has not, during the preceding five (5)
---------
years, entered into any contract, agreement, security instrument or other
document using a name other than, or been known by or otherwise used any name
other than, the name used by Debtor herein.
Section 3.06. Location of Debtor and Collateral. Debtor's chief executive
---------------------------------
office, principal place of business and the locations of Debtor's records
concerning the Collateral are set forth on Exhibit C hereto. Any Collateral not
---------
at such location(s) nevertheless remains subject to Secured Party's security
interest. Except as disclosed on Exhibit C hereto, all tangible Collateral of
---------
Debtor are located at the locations set forth on Exhibit C hereto.
---------
Section 3.07. Collateral. All statements or other information provided by
----------
Debtor to Secured Party describing or with respect to the Collateral is (or, in
the case of subsequently furnished information, will be when provided) correct
and complete in all material respects. The delivery at any time by Debtor to
Secured Party of additional descriptions of Collateral shall constitute a
representation and warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Article 3 are correct insofar as they
would pertain to such Collateral or the descriptions thereof, except as
indicated therein.
Section 3.08. Delivery of Documents. With respect to any Collateral
---------------------
covered by one or more certificates of title or other documents of title
evidencing ownership or possession thereof, each of such certificates or
documents of title shall, after the occurrence and during the continuance of an
Event of Default and upon the request of the Secured Party or the Trustee, be
delivered to Secured Party or the Trustee (provided that all certificates of
title and documents of title referred to in Section 1.02 shall be subject to the
security interest created by this Agreement irrespective of whether or not such
delivery shall have been made).
ARTICLE 4.
----------
COVENANTS AND AGREEMENTS
------------------------
Debtor will at all times comply with the covenants and agreements contained
in this Article 4, from the date hereof and for so long as any part of the
Obligations are outstanding.
7
<PAGE>
Section 4.01. Change in Location of Collateral or Debtor. Except with
------------------------------------------
respect to Collateral under repair or temporarily in transit between locations
(and in any such case, for a period not to exceed four (4) months), Debtor will
not change the location of the Collateral (except for (a) Collateral held by the
Secured Party or the Trustee, (b) motor vehicles and rolling stock, and (c)
Collateral temporarily in transit between locations) to any state, county or
other jurisdiction in which Secured Party has not already filed a financing
statement or taken other necessary steps to perfect or maintain its security
interests in the Collateral without Secured Party's prior written consent and
the delivery of such new financing statements or other documentation as may be
reasonably necessary or required by Secured Party to ensure the continued
perfection and priority of its security interest in the Collateral. Debtor will
not change the location of Debtor's chief executive office, principal place of
business or the locations of Debtor's records concerning the Collateral unless
Debtor shall have given Secured Party at least thirty (30) days prior written
notice thereof and shall have delivered to Secured Party such new financing
statements or other documentation as may be reasonably necessary or required by
Secured Party to ensure the continued perfection and priority of its security
interest in the Collateral.
Section 4.02. Change in Debtor's Name or Corporate Structure. Debtor will
----------------------------------------------
not change its name, identity or corporate structure (including, without
limitation, any merger, consolidation or sale of substantially all of its
assets) unless Debtor shall have given Secured Party at least thirty (30) days
prior written notice thereof and shall have delivered to Secured Party such new
financing statements or other documentation as may be reasonably necessary or
required by Secured Party to ensure the continued perfection and priority of its
security interest on the Collateral.
Section 4.03. Documents; Collateral in Possession of Third Parties. If
----------------------------------------------------
certificates of title or other documents evidencing ownership or possession of
the Collateral are issued or outstanding, Debtor will, after the occurrence and
during the continuance of an Event of Default and upon the request of the
Secured Party, cause the interest of Secured Party to be properly noted thereon
and will, forthwith upon receipt, deliver same to Secured Party. If any material
portion of the Collateral is at any time in the possession or control of any
warehouseman, bailee, agent or independent contractor, Debtor shall notify such
Person of Secured Party's security interest in such Collateral. Upon Secured
Party's request, Debtor shall instruct any such Person to hold all such
Collateral for Secured Party's account subject to Debtor's instructions, or, if
an Event of Default shall have occurred, subject to Secured Party's
instructions.
Section 4.04. Delivery of Letters of Credit and Instruments. After the
---------------------------------------------
occurrence and during the continuance of an Event of Default and upon the
request of the Secured Party, Debtor will deliver each letter of credit, if any,
included in the Collateral to Secured Party, in each case forthwith upon receipt
by or for the account of Debtor. After the occurrence and during the continuance
of an Event of Default and upon the request of the Secured Party, if any Account
becomes evidenced by a promissory note, trade acceptance or any other instrument
for the payment of money (other than checks or drafts in payment of Accounts
collected by Debtor in the ordinary course of business prior to notification by
Secured Party under Section 6.02(h)), Debtor will immediately deliver such
instrument to Secured Party appropriately endorsed and, regardless of the form
of presentment, demand, notice of dishonor, protest and notice of protest with
respect thereto, Debtor will remain liable thereon until such instrument is paid
in full.
8
<PAGE>
Section 4.05. Sale, Disposition or Encumbrance of Collateral. Except as
----------------------------------------------
permitted pursuant to the provisions of the Indenture and by Section 4.09 of
this Agreement or with Secured Party's prior written consent, Debtor will not in
any way encumber any of the Collateral (or permit or suffer any of the
Collateral to be encumbered) or sell, assign, lend, rent, lease or otherwise
dispose of or transfer any of the Collateral to or in favor of any Person other
than Secured Party.
Section 4.06. Records and Information. Debtor shall keep accurate and
-----------------------
complete records of the Collateral (including proceeds). Secured Party may at
any time upon reasonable prior notice have access during normal business hours
to examine, audit, make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral. Debtor will promptly provide written
notice to Secured Party of all information which in any way relates to or
affects the filing of any financing statement or other public notices or
recordings, or the delivery and possession of items of Collateral, for the
purpose of perfecting a security interest in the Collateral. Debtor will also
promptly furnish such information as Secured Party may from time to time
reasonably request regarding the Collateral or Secured Party's rights or
remedies with respect thereto.
Section 4.07. Reimbursement of Expenses. Debtor hereby assumes all
-------------------------
liability for the Collateral, the security interests created hereunder and any
use, possession, maintenance, management, enforcement or collection of any or
all of the Collateral. Debtor agrees to indemnify and hold Secured Party
harmless from and against and covenants to defend Secured Party against any and
all losses, damages, claims, costs, penalties, liabilities and expenses,
including, without limitation, court costs and reasonable attorneys' fees,
incurred because of, incident to, or with respect to the Collateral (including,
without limitation, any use, possession, maintenance or management thereof, or
any injuries to or deaths of persons or damage to property, except to the extent
caused by the gross negligence or willful misconduct of the Secured Party). All
amounts for which Debtor is liable pursuant to this Section 4.07 shall be due
and payable by Debtor to Secured Party upon demand. If Debtor fails to make such
payment upon demand (or if demand is not made due to an injunction or stay
arising from bankruptcy or other proceedings) and Secured Party pays such
amount, the same shall be due and payable by Debtor to Secured Party, plus
interest thereon from the date of Secured Party's demand (or from the date of
Secured Party's payment if demand is not made due to such proceedings) at the
interest rate applicable to overdue principal as provided in the Note.
Section 4.08. Further Assurances. Upon the request of Secured Party,
------------------
Debtor shall (at Debtor's expense) execute and deliver all such assignments,
certificates, financing statements or other documents and give further
assurances and do all other acts and things as Secured Party may reasonably
request to perfect Secured Party's interest in the Collateral or to protect,
enforce or otherwise effect Secured Party's rights and remedies hereunder.
Section 4.09. Inventory. Debtor may use the Inventory in any lawful
---------
manner not inconsistent with this Agreement and the Indenture and with the terms
of insurance thereon.
Section 4.10. Use of Collateral. Debtor will not use any Collateral in
-----------------
violation in any material respect of any law, statute, ordinance, regulation or
administrative order, or suffer it to be so used.
9
<PAGE>
Section 4.11. Collateral Attached to Other Property. In the event that
-------------------------------------
the Collateral is to be attached or affixed to any real property, Debtor hereby
agrees that this Agreement may be filed for record in any appropriate real
estate records as a financing statement which is a fixture filing. In connection
therewith, Debtor will take whatever action is required by Section 4.08. If
Debtor is not the record owner of such real property, Debtor will provide
Secured Party with any additional security agreements or financing statements
necessary for the perfection of Secured Party's security interest in the
Collateral. If the Collateral is wholly or partly affixed to real estate or
installed in or affixed to other goods, Debtor will, on demand of Secured Party,
use its commercially reasonable efforts to furnish Secured Party with landlord's
waivers, signed by all Persons or entities having an interest in the real estate
or other goods to which the Collateral may have become affixed, permitting the
Secured Party or the Trustee to have access to the Collateral at all reasonable
times and granting the Secured Party or the Trustee a reasonable period of time
in which to remove the Collateral after an Event of Default.
ARTICLE 5.
----------
RIGHTS, DUTIES AND POWERS OF SECURED PARTY
------------------------------------------
Secured Party shall have the following rights, duties and powers:
Section 5.01. Discharge Encumbrances. After the occurrence and during the
----------------------
continuance of an Event of Default, Secured Party may, at its option, discharge
any taxes, Liens, security interests or other encumbrances at any time levied or
placed on the Collateral, and may pay for insurance on the Collateral to the
extent required by this Agreement or the Indenture and not obtained by Debtor.
Debtor agrees to reimburse Secured Party upon demand for any payment so made,
plus interest thereon from the date of Secured Party's demand at the interest
rate applicable to overdue principal as provided in the Note.
Section 5.02. Licenses and Rights to Use Collateral. After the occurrence
-------------------------------------
and during the continuance of an Event of Default, in connection with any
transfer or sale (to Secured Party or any other Person) of the Collateral,
Secured Party is hereby granted a transferable license or other right to use,
without any charge, any of Debtor's labels, patents, copyrights, tradenames,
trade secrets, trademarks or other similar property in completing production,
advertising or selling such Collateral except any of the foregoing property
which is expressly prohibited by its terms from being assigned or licensed.
After the occurrence and during the continuance of an Event of Default, Debtor's
rights under all licenses and franchise agreements shall inure to the benefit of
Secured Party and any transferee of all or any part of the Collateral.
Section 5.03. Cumulative and Other Rights. The rights, powers and
---------------------------
remedies of Secured Party hereunder are in addition to all rights, powers and
remedies given by law or in equity. The exercise by Secured Party of any one or
more of the rights, powers and remedies herein shall not be construed as a
waiver of any other rights, powers and remedies, including, without limitation,
any other rights of set-off (which set-off rights may be exercised only after
the occurrence and during the continuance of an Event of Default). If any of the
Obligations are given in renewal, extension for any period or rearrangement, or
applied toward the payment of debt secured by any Lien, Secured Party shall be,
and is hereby, subrogated to all the rights, titles, interests and liens
securing the debt so renewed, extended, rearranged or paid.
10
<PAGE>
Section 5.04. Disclaimer of Certain Duties.
----------------------------
(a) The powers conferred upon Secured Party by this Agreement are to
protect its interest in the Collateral and shall not impose any duty upon
Secured Party to exercise any such powers. Debtor hereby agrees that
Secured Party shall not be liable for, nor shall the indebtedness evidenced
by the Obligations be diminished by, Secured Party's delay or failure to
collect upon, foreclose, sell, take possession of or otherwise obtain value
for the Collateral. Nothing herein shall affect any obligation of Secured
Party to the Holders under the Indenture or under applicable law.
(b) Except as may be required by the Indenture, and to the fullest
extent permitted by applicable law, Secured Party shall be under no duty
whatsoever to make or give any presentment, notice of dishonor, protest,
demand for performance, notice of non-performance, notice of intent to
accelerate, notice of acceleration, or other notice or demand in connection
with any Collateral or the Obligations, or to take any steps reasonably
necessary to preserve any rights against any Obligor, Account Debtor or
other Person. Debtor waives any right of marshaling in respect of any and
all Collateral, and waives any right to require Secured Party to proceed
against any Obligor, Account Debtor or other Person, exhaust any Collateral
or enforce any other remedy which Secured Party now has or may hereafter
have against any Obligor or other Person.
Section 5.05. Modification of Obligations: Other Security. Except as
--------------------------------------------
specifically provided for in the Indenture, Debtor waives (i) any and all notice
of acceptance, creation, modification, rearrangement, renewal or extension for
any period of any instrument executed by any Obligor in connection with the
Obligations and (ii) any defense of any Obligor by reason of disability, lack of
authorization, cessation of the liability of any Obligor or for any other
reason. Debtor authorizes Secured Party, without notice or demand and without
any reservation of rights against Debtor and without affecting Debtor's
liability hereunder or on the Obligations, from time to time to (x) after the
occurrence and during the continuance of an Event of Default and after the
acceleration of the Senior Secured Notes, apply the Collateral in the manner
permitted by this Agreement or the Indenture and (y) after the occurrence and
during the continuance of an Event of Default and after the acceleration of the
Senior Secured Notes, renew, extend for any period, accelerate, amend or modify,
supplement, enforce, compromise, settle, waive or release the obligations of any
Obligor or any instrument or agreement of such other Person with respect to any
or all of the Obligations or Collateral.
ARTICLE 6.
----------
EVENTS OF DEFAULT
-----------------
Section 6.01. Events. It shall constitute an Event of Default under this
------
Agreement if an Event of Default occurs and is continuing under the Indenture.
Section 6.02. Remedies. Upon the occurrence and during the continuance of
--------
any Event of Default, Secured Party may take any or all of the following actions
without notice (except where expressly required below or in the Indenture) or
demand to Debtor:
11
<PAGE>
(a) Declare all or part of the indebtedness pursuant to the
Obligations immediately due and payable and enforce payment of the same by
Debtor or any Obligor.
(b) Take possession of the Collateral, or at Secured Party's request
Debtor shall, at Debtor's cost, assemble the Collateral and make it
available at a location to be specified by Secured Party which is
reasonably convenient to Debtor and Secured Party. In any event, Debtor
shall bear the risk of accidental loss or damage to or diminution in value
of the Collateral, and Secured Party shall have no liability whatsoever for
failure to obtain or maintain insurance, nor to determine whether any
insurance ever in force is adequate as to amount or as to risk insured.
(c) Sell, in one or more sales and in one or more parcels, or
otherwise dispose of any or all of the Collateral in its then condition or
in any other commercially reasonable manner as Secured Party may elect, in
a public or private transaction, at any location as deemed reasonable by
Secured Party (including, without limitation, Debtor's premises), for cash
at such price as Secured Party may deem fair, and (unless prohibited by the
Code, as adopted in any applicable jurisdiction) Secured Party may be the
purchaser of any or all Collateral so sold and may apply upon the purchase
price therefor any Obligations secured hereby. Any such sale or transfer
by Secured Party either to itself or to any other Person shall be
absolutely free from any claim of right by Debtor, including any equity or
right of redemption, stay or appraisal which Debtor has or may have under
any rule of law, regulation or statute now existing or hereafter adopted.
Upon any such sale or transfer, Secured Party shall have the right to
deliver, assign and transfer to the purchaser or transferee thereof the
Collateral so sold or transferred. It shall not be necessary that the
Collateral or any part thereof be present at the location of any such sale
or transfer. Secured Party may, at its discretion, provide for a public
sale, and any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as Secured Party may
fix in the notice of such sale. Secured Party shall not be obligated to
make any sale pursuant to any such notice. Secured Party may, without
notice or publication, adjourn any public or private sale by announcement
at any time and place fixed for such sale, and such sale may be made at any
time or place to which the same may be so adjourned. In the event any sale
or transfer hereunder is not completed or is defective in the opinion of
Secured Party, such sale or transfer shall not exhaust the rights of
Secured Party hereunder, and Secured Party shall have the right to cause
one or more subsequent sales or transfers to be made hereunder. If only
part of the Collateral is sold or transferred such that the Obligations
remain outstanding (in whole or in part), Secured Party's rights and
remedies hereunder shall not be exhausted, waived or modified, and Secured
Party is specifically empowered to make one or more successive sales or
transfers until all the Collateral shall be sold or transferred and all the
Obligations are paid. In the event that Secured Party elects not to sell
the Collateral, Secured Party retains its rights to lease or otherwise
dispose of or utilize the Collateral or any part or parts thereof in any
manner authorized or permitted by law or in equity, and to apply the
proceeds of the same towards payment of the Obligations. Each and every
method of disposition of the Collateral described in this subsection or in
subsection (f) shall constitute disposition in a commercially reasonable
manner.
(d) Take possession of all books and records of Debtor pertaining to
the Collateral. Secured Party shall have the authority to enter upon any
real property or
12
<PAGE>
improvements thereon in order to obtain any such books or records, or any
Collateral located thereon, and remove the same therefrom without
liability.
(e) Apply proceeds of the disposition of the Collateral to the
Obligations in any manner elected by Secured Party and permitted by the
Code or otherwise permitted by law or in equity and in accordance with the
provisions of the Indenture. Such application may include, without
limitation, the reasonable expenses of retaking, holding, preparing for
sale or other disposition, and the reasonable attorneys' fees and legal
expenses incurred by Secured Party.
(f) Appoint any Person as agent to perform any act or acts necessary
or incident to any sale or transfer by Secured Party of the Collateral.
Additionally, any sale or transfer hereunder may be conducted by an
auctioneer or any officer or agent of Secured Party.
(g) Execute, assign and endorse negotiable and other instruments for
the payment of money, documents of title or other evidences of payment,
shipment or storage for any form of Collateral on behalf of and in the name
of Debtor.
(h) Notify or require Debtor to notify Account Debtors that the
Accounts have been assigned to Secured Party and direct such Account
Debtors to make payments on the Accounts directly to Secured Party. To the
extent Secured Party does not so elect, Debtor shall continue to collect
the Accounts. Secured Party or its designee shall also have the right, in
its own name or in the name of Debtor, to do any of the following: (i) to
demand, collect, receipt for, settle, compromise any amounts due, give
acquittances for, prosecute or defend any action which may be in relation
to any monies due, or to become due by virtue of, the Accounts; (ii) to
sell, transfer or assign or otherwise deal in the Accounts or the proceeds
thereof or the related goods, as fully and effectively as if Secured Party
were the absolute owner thereof; (iii) to extend the time of payment of any
of the Accounts, to grant waivers and make any allowance or other
adjustment with reference thereto; (iv) to take control of cash and other
proceeds of any Collateral; (v) to send a request for verification of
Accounts to any Account Debtor; and (vi) to do all other acts and things
necessary to carry out the intent of this Agreement.
(i) Exercise all other rights and remedies permitted by law or in
equity.
Section 6.03. Attorney-in-Fact. Debtor hereby irrevocably appoints
----------------
Secured Party as Debtor's attorney-in-fact, with full authority in the place and
stead of Debtor and in the name of Debtor or otherwise, from time to time in
Secured Party's discretion upon the occurrence and during the continuance of an
Event of Default, but at Debtor's cost and expense and without notice to Debtor:
(a) To obtain, adjust, sell and cancel any insurance with respect to
the Collateral, and endorse any draft drawn by insurers of the Collateral.
Secured Party may apply any proceeds or unearned premiums of such insurance
to the Obligations (whether or not due).
(b) To take any action and to execute any assignment, certificate,
financing statement, notification, document or instrument which Secured
Party may reasonably
13
<PAGE>
deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, to receive, endorse and collect all
instruments made payable to Debtor representing any payment or other
distribution in respect of the Collateral or any part thereof and to give
full discharge for the same.
Section 6.04. Account Debtors. Any payment or settlement of an Account
---------------
made by an Account Debtor will be, to the extent of such payment or to the
extent provided under such settlement, a release, discharge and acquittance of
the Account Debtor with respect to such Account, and Debtor shall take any
action as may reasonably be required by Secured Party in connection therewith.
No Account Debtor on any Account will ever be bound to make inquiry as to the
termination of this Agreement or the rights of Secured Party to act hereunder,
but shall be fully protected by Debtor in making payment directly to Secured
Party.
Section 6.05. Liability for Deficiency. If any sale or other disposition
------------------------
of Collateral by Secured Party or any other action of Secured Party hereunder
results in reduction of the Obligations, such action will not release Debtor
from its liability to Secured Party for any unpaid Obligations, including costs,
charges and expenses incurred in the liquidation of Collateral, together with
interest thereon at the rate then applicable under the Indenture, and the same
shall be immediately due and payable to Secured Party at Secured Party's address
set forth in the Indenture.
Section 6.06. Reasonable Notice. If any applicable provision of any law
-----------------
requires Secured Party to give reasonable notice of any sale or disposition or
other action, Debtor hereby agrees that ten days' prior written notice shall
constitute reasonable notice thereof. Such notice, in the case of public sale,
shall state the time and place fixed for such sale and, in the case of private
sale, the time after which such sale is to be made.
Section 6.07. Non-judicial Enforcement. Secured Party may enforce its
------------------------
rights hereunder without prior judicial process or judicial hearing, and to the
extent permitted by law Debtor expressly waives any and all legal rights which
might otherwise require Secured Party to enforce its rights by judicial process.
ARTICLE 7.
----------
MISCELLANEOUS PROVISIONS
------------------------
Section 7.01. Notices. Any notice required or permitted to be given under
-------
or in connection with this Agreement shall be given in accordance with the
notice provisions of the Indenture.
Section 7.02. Amendments and Waivers. Secured Party's acceptance of
----------------------
partial or delinquent payments or any forbearance, failure or delay by Secured
Party in exercising any right, power or remedy hereunder shall not be deemed a
waiver of any obligation of Debtor or any Obligor, or of any right, power or
remedy of Secured Party; and no partial exercise of any right, power or remedy
shall preclude any other or further exercise thereof. Secured Party may remedy
any Event of Default hereunder or in connection with the Obligations without
waiving the Event of Default so remedied. Debtor hereby agrees that if Secured
Party agrees to a waiver of any provision hereunder, or an exchange of or
release of the Collateral, or the addition or release of
14
<PAGE>
any Obligor or other Person, any such action shall not constitute a waiver of
any of Secured Party's other rights or of Debtor's obligations hereunder. This
Agreement may be amended only by an instrument in writing executed jointly by
Debtor and Secured Party and may be supplemented only by documents delivered or
to be delivered in accordance with the express terms hereof.
Section 7.03. Copy as Financing Statement. A photocopy or other
---------------------------
reproduction of this Agreement or any financing statement covering the
Collateral is sufficient as a financing statement, and the same may be filed
with any appropriate filing authority for the purpose of perfecting Secured
Party's security interest in the Collateral.
Section 7.04. Possession of Collateral. Secured Party shall be deemed to
------------------------
have possession of any Collateral in transit to it or set apart for it (or, in
either case, any of its agents, affiliates or correspondents).
Section 7.05. Redelivery of Collateral. If any sale or transfer of
------------------------
Collateral by Secured Party results in full satisfaction of the Obligations, and
after such sale or transfer and discharge there remains a surplus of proceeds,
Secured Party will deliver to Debtor such excess proceeds in a commercially
reasonable time; provided, however, that Secured Party shall not be liable for
any interest, cost or expense in connection with any reasonable delay in
delivering such proceeds to Debtor.
Section 7.06. Governing Law; Jurisdiction. This Agreement and the
---------------------------
security interest granted hereby shall be construed in accordance with and
governed by the laws of the State of New York (except to the extent that the
laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby).
Section 7.07. Gaming Authority. Each of the provisions of this Agreement
----------------
is subject to, and shall be enforced in compliance with, any requirements
imposed by any applicable Gaming Authority.
Section 7.08. Continuing Security Agreement.
-----------------------------
(a) Except as may be expressly applicable pursuant to Section 9-505
of the Code, no action taken or omission to act by Secured Party hereunder,
including, without limitation, any action taken or inaction pursuant to
Section 6.02 hereof, shall be deemed to constitute a retention of the
Collateral in satisfaction of the Obligations or otherwise to be in full
satisfaction of the Obligations, and the Obligations shall remain in full
force and effect, until Secured Party shall have applied payments
(including, without limitation, collections from Collateral) towards the
Obligations in the full amount then outstanding or until such subsequent
time as is hereinafter provided in subsection (b) below.
(b) To the extent that any payments on the Obligations or proceeds of
the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law
or equitable cause, then to such extent the Obligations so satisfied shall
be revived and continue as if such payment or proceeds had not been
received by Secured Party, and Secured Party's security interests, rights,
powers and remedies hereunder shall continue in full force and effect. In
such event, this Agreement
15
<PAGE>
shall be automatically reinstated if it shall theretofore have been
terminated pursuant to Section 7.09.
Section 7.09. Termination. The grant of a security interest hereunder and
-----------
all of Secured Party's rights, powers and remedies in connection therewith shall
unless otherwise provided in the Indenture, the HWCC Security Agreement, or this
Agreement, remain in full force and effect until payment in full of (A) the
Note, (B) all obligations then due and owing under the Indenture, the Senior
Secured Notes and the Collateral Documents and (C) all other Obligations;
provided, however, that after receipt from the Debtor by the Trustee of a
request for a release of any Collateral permitted under the Indenture upon the
sale, transfer, assignment, exchange or other disposition of such Collateral not
prohibited by the Indenture (and upon receipt by the Trustee of all proceeds of
such sale, transfer, assignment, exchange or other disposition to the extent
required to be remitted to the Trustee under the Indenture or otherwise), such
Collateral shall be released from the lien and security interest created
hereunder in accordance with the provisions of the Indenture and shall no longer
constitute Collateral. Upon the payment in full of (A) the Note, (B) all
obligations then due and owing under the Indenture, the Senior Secured Notes and
the Collateral Documents, and (C) all other Obligations, the Debtor shall be
entitled to the return, upon its request and at its expense, of such of the
Collateral pledged by it as shall not have been sold or otherwise applied
pursuant to the terms hereof. Notwithstanding the foregoing, the reimbursement
and indemnification provisions of Section 4.07 and the provisions of subsection
7.08(b) shall survive the termination of this Agreement.
Upon any termination of this Agreement or release of any Collateral as
permitted by the Indenture and the HWCC Security Agreement, the Trustee will, at
the expense of the Debtor, execute and deliver to the Debtor such documents and
take such other actions as the Debtor shall reasonably request to evidence the
termination of this Agreement or the release of such Collateral, as the case may
be. Any such action taken by the Trustee shall be without warranty by or
recourse to the Trustee, except as to the absence of any prior assignments by
the Trustee of its interests in the Collateral, and shall be at the expense of
the Debtor. The Trustee may conclusively rely on any certificate delivered to
it by the Debtor stating that the execution of such documents and release of the
Collateral is in accordance with and permitted by the terms of the Indenture and
this Agreement.
Section 7.10. Counterparts; Effectiveness. This Agreement may be executed
---------------------------
in two or more counterparts. Each counterpart is deemed an original, but all
such counterparts taken together constitute one and the same instrument. This
Agreement becomes effective upon the execution hereof by Debtor and delivery of
the same to Secured Party, and it is not necessary for Secured Party to execute
any acceptance hereof or otherwise signify or express its acceptance hereof.
Section 7.11. Indenture. This Agreement is subject to the terms,
---------
conditions and provisions of the Indenture. To the extent a term or provision of
this Agreement conflicts with the Indenture, the Indenture shall control with
respect to the subject matter of such term or provision.
Section 7.12. Rights of Holders. No Holder of a Senior Secured Note shall
-----------------
have any independent rights hereunder other than those rights granted to
individual Holders of Senior Secured Notes pursuant to Section 6.07 of the
Indenture; provided that nothing in this Section
--------
16
<PAGE>
7.12 shall limit any rights granted to the Trustee under the Senior Secured
Notes, the Indenture or the Collateral Documents.
Section 7.13. No Personal Liability of Directors, Officers, Employees and
-----------------------------------------------------------
Stockholders. No past, present or future director, officer, employee,
- ------------
incorporator or stockholder of the Debtor as such or any successor Person, as
such, shall have any liability for any obligations of the Debtor under the
Notes, the Collateral Documents, this Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation.
Section 7.14. Collateral Assignment. Of even date herewith, Secured Party
---------------------
has executed the HWCC Security Agreement in favor of the Trustee pursuant to
which the Secured Party grants to the Trustee a security interest in certain
collateral therein described, including but not limited to the Note and the
liens and security interests securing same. Debtor hereby consents to and
acknowledges the existence of the Trustee's security interest in the Note and
the liens and security interests securing same, including, but not limited to,
the liens and security interests granted by this Agreement.
17
<PAGE>
IN WITNESS WHEREOF, Debtor has caused this Intercompany Security Agreement
to be executed and delivered as of the date first set forth above.
DEBTOR: HOLLYWOOD CASINO-AURORA, INC.
- ------
By: /s/ M. Shannan Pratt
------------------------------------
Name: M. Shannan Pratt
----------------------------------
Title: Vice President of Operations
---------------------------------
S-1
<PAGE>
EXHIBIT A
---------
CONTRACTS
---------
1. Management Services Agreement, dated as of June 21, 1991, by and
between Aurora Riverboats, Inc. (n/k/a Hollywood Casino-Aurora, Inc.) and Greate
Bay Casino Corporation (as predecessor in interest to Pratt Management, L.P.),
as amended by that First Amendment dated as of May 14, 1992.
S-2
<PAGE>
EXHIBIT B
---------
TRADEMARKS
----------
None
----
S-3
<PAGE>
EXHIBIT C
---------
PERFECTION
----------
(a) Legal Name of Debtor:
--------------------
Hollywood Casino-Aurora, Inc.
(b) Other Names:
-----------
Hollywood Casino Aurora
(c) (i) Chief Executive Office and Principal Place of Business of Debtor:
----------------------------------------------------------------
49 West Galena Boulevard, Aurora, Kane County, Illinois 60506
(ii) Other Premises at which Collateral is Stored or Located:
-------------------------------------------------------
Kane County, Illinois
Dallas County, Texas
(iii) Locations of Records Concerning Collateral:
------------------------------------------
Kane County, Illinois
Dallas County, Texas
<PAGE>
EXHIBIT D
---------
PERMITTED ENCUMBRANCES
----------------------
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09
of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of business and consistent with industry practices and Liens on deposits
made to obtain the release of such Liens if:
(a) the underlying Obligations are not overdue for a period of
more than 60 days, or
<PAGE>
(b) such Liens are being contested in good faith and by
appropriate proceedings by the Company and adequate reserves with
respect thereto are maintained on the books of the Company in
accordance with GAAP, and
(c) the Company is in compliance with the terms of the security
documents applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
or other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that do not
exceed Five Million Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and Social
Security benefits.
<PAGE>
EXHIBIT 4.18
MORTGAGE, LEASEHOLD MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND
RENTS,
FIXTURE FILING, AND FINANCING STATEMENT
FROM
HOLLYWOOD CASINO-AURORA, INC.
FOR THE BENEFIT OF
HOLLYWOOD CASINO CORPORATION
ATTENTION: FILING OFFICER--INSTRUMENT COVERS GOODS THAT ARE OR ARE TO BECOME
FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR RECORD IN
THE RECORDS WHERE MORTGAGES ON REAL ESTATE ARE RECORDED. ADDITIONALLY, THIS
INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT ONLY AS A MORTGAGE, BUT ALSO AS
A FIXTURE FILING AND FINANCING STATEMENT COVERING GOODS THAT ARE OR ARE TO
BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE MAILING ADDRESSES OF
THE MORTGAGOR (DEBTOR) AND MORTGAGEE (SECURED PARTY) ARE SET FORTH IN THIS
INSTRUMENT.
<PAGE>
MORTGAGE, LEASEHOLD MORTGAGE,
SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS, FIXTURE FILING
AND FINANCING STATEMENT
-----------------------
THIS MORTGAGE, LEASEHOLD MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS, FIXTURE FILING AND FINANCING STATEMENT (hereinafter together
with any and all amendments, supplements, restatements or modifications of any
kind referred to as the "Mortgage"), entered into as of May 19, 1999, by
--------
HOLLYWOOD CASINO-AURORA, INC., an Illinois corporation (hereinafter whether one
or more, and any and all subsequent owners of the Mortgaged Property or any part
thereof referred to as "Mortgagor"), whose address for notice hereunder is 49
---------
West Galena Boulevard, Aurora, Illinois 60506, to HOLLYWOOD CASINO CORPORATION,
whose address for notice hereunder is Two Galleria Tower, Suite 2200, 13455 Noel
Road, LB48, Dallas, Texas 75240 (the
<PAGE>
"Mortgagee"). Pursuant to a certain Collateral Assignment of Mortgage, Leasehold
---------
Mortgage, Security Agreement, Fixture Filing and Financing Statement of even
date herewith (the "Collateral Assignment"), Mortgagee will collaterally assign
---------------------
its interests hereunder to STATE STREET BANK AND TRUST COMPANY, a Massachusetts
chartered trust company, as Trustee for the holders of the Senior Secured Notes
hereinafter referred to (the "Trustee.").
--------
RECITALS
A. Mortgagor has executed a certain promissory note (as the same may be
amended, supplemented, restated or otherwise modified from time to time, the
"Intercompany Note") dated of even date herewith in the original principal
-----------------
amount of $108,000,000 payable to the order of Mortgagee.
B. Mortgagor is entering into this Mortgage to secure, among other
things, its obligations under the Intercompany Note payable to the order of the
Mortgagee.
C. Mortgagee, HWCC-Tunica, Inc., HWCC-Shreveport, Inc. and Trustee have
entered into an Indenture dated as of May 19, 1999 (as the same may from time to
time be amended, supplemented, restated or otherwise modified the "Indenture"),
---------
pursuant to which Mortgagee will issue up to (i) $310,000,000 of its 11 1/4%
Series A and Series B Senior Secured Notes due 2007 and (ii) up to $50,000,000
of its Floating Rate Series A and Series B Senior Secured Notes due 2006 (as the
same may be amended, supplemented, restated, exchanged, replaced or otherwise
modified from time to time, the "Senior Secured Notes").
--------------------
D. Pursuant to the Collateral Assignment, Mortgagee has agreed to
collaterally assign all of its right, title and interest in and to the
Intercompany Note and the Liens and security interest securing same (including,
the Liens and security interest granted under this Mortgage) to the Mortgagee as
security for, among other things, the Mortgagee's obligations under the
Indenture and the Senior Secured Notes.
E. It is a condition precedent to the purchase of the Senior Secured
Notes under the Indenture that the Mortgagor shall have executed and delivered
this Mortgage.
F. Therefore, in order to comply with the terms and conditions of the
Indenture and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Mortgagor hereby agrees with
Mortgagee as follows:
ARTICLE 1
---------
DEFINITIONS
-----------
Section 1.01. Terms Defined Above.
As used in this Mortgage, the terms "Collateral Assignment", "Indenture",
--------------------- ----------
"Intercompany Note", "Mortgage" "Mortgagor", "Mortgagee", and "Senior Secured
----------------- -------- --------- --------- --------------
Notes" shall have the meanings assigned to them above.
- -----
2
<PAGE>
Section 1.02. Definitions.
-----------
As used herein, the following terms shall have the following meanings:
"Buildings": Any and all buildings, covered garages, utility sheds, workrooms,
---------
air conditioning towers, open parking areas and other improvements, and any and
all additions, alterations, betterments or appurtenances thereto, now or at any
time hereafter situated, placed or constructed upon the Land or any part
thereof.
"Environmental Law": Any federal, state or local statute, law, rule,
-----------------
regulation, ordinance, code, policy or rule of common law now or hereafter in
effect and in each case as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent,
decree or judgment, relating to the environment, health, safety or Hazardous
Materials including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, 42 U.S.C. (S)(S)9601 et seq.;
the Resource Conservation and Recovery Act, 42 U.S.C. (S)(S)6901 et seq.; the
Hazardous Materials Transportation Act, 49 U.S. (S)(S)1801 et seq.; the Clean
Water Act, 33 U.S.C. (S)(S)1251 et seq.; the Toxic Substance Control Act, 15
U.S.C. (S)(S)2601 et seq.; the Clean Air Act, 42 U.S.C. (S)(S)7401 et seq.; the
Safe Drinking Water Act, 42 U.S.C. (S)(S)300f et seq.; the Atomic Energy Act, 42
U.S.C. (S)(S)2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. (S)(S)136 et seq.; and the Occupational and Safety and Health Act,
29 U.S.C. (S)(S)651 et seq..
"Event of Default": As defined in Section 6.01 hereof.
----------------
"Fixtures": All materials, supplies, equipment, apparatus, fixtures and other
--------
items now or hereafter acquired by Mortgagor and now or hereafter attached to,
installed in or used or procured for use in connection with (temporarily or
permanently) any of the Buildings or the Land, insofar as the same are, or can
by agreement of the parties be made, part of the real estate, including but not
limited to any and all partitions, dynamos, window screens and shades, drapes,
rugs and other floor coverings, awnings, motors, engines, boilers, furnaces,
pipes, plumbing, cleaning, call and sprinkler systems, fire extinguishing
apparatus and equipment, water tanks, swimming pools, heating, ventilating
plumbing, laundry, incinerating, air conditioning and air cooling equipment and
systems, gas and electric machinery, appurtenances and equipment, disposals,
dishwashers, refrigerators and ranges, recreational equipment and facilities of
all kinds, and water, gas, electrical, storm and sanitary sewer facilities and
all other utilities whether or not situated in easements, together with all
accessions, replacements, betterments and substitutions for any of the foregoing
and the proceeds thereof.
"Hazardous Materials": Any (i) petroleum products, natural or synthetic-gas,
-------------------
asbestos in any form that is or could be friable, urea formaldehyde foam
insulation and radon gas; (ii) substances defined as or included in the
definition of "hazardous substances," "hazardous waste," "hazardous materials,"
"extremely hazardous waste," restrictive hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or pollutants." or words of similar import,
under any applicable Environmental Law; and (iii) any other substance exposure
to which is regulated by any governmental authority.
"Impositions": All real estate and personal property taxes; water, gas, sewer,
-----------
electricity and other utility rates and charges; charges for any easement,
license or agreement maintained for the benefit of the Mortgaged Property; and
all other taxes, charges and assessments and any interest, costs or penalties
with respect thereto, general and special, ordinary and extraordinary, foreseen
and unforeseen, of any kind and nature whatsoever which at any time prior to or
after the
3
<PAGE>
execution hereof may be assessed, levied or imposed upon the Mortgaged Property
or the Rents or the ownership, use, occupancy or enjoyment thereof.
"Indemnified Parties": Mortgagee and Trustee and the holders of the Senior
-------------------
Secured Notes and their respective officers, directors, employees, agents and
attorneys.
"Land": The real estate or interest therein described in Exhibit A attached
---- ---------
hereto, and all rights, titles and interests appurtenant thereto.
"Leases": Any and all leases, subleases, licenses, concessions or other
------
agreements (written or oral, now or hereafter in effect) which grant a
possessory interest in and to, or the right to use, the Mortgaged Property, and
all other agreements, including without limitation, utility contracts,
maintenance agreements and service contracts, which in any way relate to the
use, occupancy, operation, maintenance, enjoyment or ownership of the Mortgaged
Property, including, but not limited to, the Leases referred to in Section 8.16
------------
hereof.
"Legal Requirements": (i) any and all present and future judicial decisions,
------------------
statutes, rulings, rules, regulations, permits, certificates or ordinances of
any Governmental Authority in any way applicable to Mortgagor or the Mortgaged
Property, including the ownership, use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction thereof; (ii) Mortgagor's
presently or subsequently effective bylaws and certificates and/or articles of
incorporation or partnership, limited partnership, joint venture, trust or other
form of business association agreement; (iii) any and all Leases; and (iv) any
and all leases and other contracts (written or oral) of any nature to which
Mortgagor may be bound, including without limitation, any lease or other
contract pursuant to which Mortgagor is granted a possessory interest in the
Land.
"Mortgaged Property": The Land, Buildings, Fixtures, Permits (to the extent
------------------
assignable), Personalty, Leases, and, subject to the rights of Mortgagor under
Section 2.03 hereof, Rents, together with:
(i) all rights, privileges, tenements, hereditaments, rights-of-way,
easements, appendages and appurtenances in anywise appertaining thereto, and all
right, title and interest of Mortgagor in and to any streets, ways, alleys,
strips or gores of land adjoining the Land or any part thereof, together with
all of Mortgagor's vessels, the City of Lights I, Official No. 993836, the City
of Lights II, Official No. 993837, and the Aurora Borealis, Official No. 1029229
(collectively, the "Vessels") whether or not such Vessels are vessels within the
-------
meaning of 46 U.S.C. (S)31322(a), and all rights of Mortgagor therein; and
(ii) all betterments, additions, alterations, appurtenances, substitutions,
replacements and revisions thereof and thereto and all reversions and remainders
therein; and
(iii) all of Mortgagor's right, title and interest in and to any awards,
remuneration, settlements or compensation heretofore made or hereafter to be
made by any Governmental Authority pertaining to the Land, Buildings, Fixtures
or Personalty, including those for any vacation of, or change of grade in, any
streets affecting the Land or the Buildings;
provided, however, that so long as no Event of Default shall occur and be
continuing, all dividends, distributions, interest and principal payments, cash,
instruments, and other property and proceeds made upon or with respect to or of
the Mortgaged Property (including Rents) may be used by the Mortgagor subject to
the terms and conditions of the Indenture. Upon the occurrence and during the
continuance of an Event of Default, all rights of the Mortgagor to receive all
dividends, distributions, interest or principal payments, cash, instruments and
other property and proceeds (including Rents) shall cease and such dividends,
distributions, interest and principal payments, cash, instruments, and other
property and proceeds (including Rents) shall be paid or otherwise delivered to
the Mortgagee or the Trustee. As used in this Mortgage,
4
<PAGE>
the term "Mortgaged Property" shall be expressly defined as meaning all or,
------------------
where the context permits or requires, any portion of the above, and all or,
where the context permits or requires, any interest therein.
"Obligations": (i) the payment when due of the indebtedness evidenced by the
-----------
Intercompany Note, in the aggregate principal sum of $108,000,000 interest
(including post-petition interest) as set forth therein, and premiums,
penalties, and late charges thereon; (ii) all other indebtedness and other sums
(including, without limitation, all expenses, attorneys' fees, other fees,
indemnifications, reimbursements, damages, other monetary liabilities, and other
charges) that may or shall become due under the Intercompany Note, this
Mortgage, and the other documents executed as security for or in connection with
the Intercompany Note; and (iii) any and all renewals, modifications,
amendments, extensions for any period, supplements, or restatements of any of
the foregoing.
"Permits": All applicable authorizations, consents, licenses, approvals,
-------
indemnification numbers and permits required under Legal Requirements
(including, without limitation, Environmental Laws) required for construction,
operation and occupancy of the Mortgaged Property.
"Permitted Encumbrances": the items set forth on Exhibit B hereto.
----------------------
"Personalty": All of the right, title and interest of Mortgagor in and to all
----------
furniture, furnishings (other than Fixtures), insurance proceeds relating to the
Mortgaged Property, and deposits or other funds or evidences of credit or
indebtedness deposited by or on behalf of Mortgagor with any governmental
agencies, boards, corporations and other providers of utility services, public
or private, including specifically but without limitation, all refundable,
returnable or reimbursable tap fees, utility deposits, commitment fees and
development costs, and all other personal property on which a security interest
may be granted under the UCC, together with accessories and replacements thereto
or therefor and the proceeds thereof.
"Post-Default Rate": The interest rate applicable to overdue principal pursuant
-----------------
to the provisions of the Indenture.
"Prior Liens": As defined in Section 8.13 hereof.
-----------
"Rents": All of the rents, revenues, income, proceeds, profits, security and
-----
other types of deposits, and other benefits paid or payable by parties to the
Leases other than Mortgagor for using, leasing, licensing, possessing, operating
from, residing in, selling or otherwise enjoying the Mortgaged Property,
including all rents, revenues, bonus money, royalties, rights and benefits
accruing to Mortgagor under all present and future oil, gas and mineral leases
on any part of the Land.
"UCC": The Uniform Commercial Code as presently in effect in the state of
---
New York (except to the extent that the laws of any other jurisdiction govern
the perfection and priority of the security interests granted hereby).
Section 1.03. Articles and Sections.
References to Articles and Sections shall mean the corresponding Article or
Section of this Mortgage unless the context requires otherwise.
Section 1.04. Singular and Plural.
Words used herein in the singular, where the context so permits, shall be
deemed to include the plural and vice versa. The definitions of words in the
singular herein shall apply to such words when used in the plural where the
context so permits and vice versa.
5
<PAGE>
Section 1.05. References.
The words "herein," "hereof," "hereunder," and other words of similar
import when used in this Mortgage refer to this Mortgage as a whole, and not to
any particular Article or Section.
Section 1.06. Other Defined Terms.
Any capitalized term used in this Mortgage and not defined herein shall
have the meaning assigned to such term in the Indenture.
ARTICLE 2
GRANT
Section 2.01. Grant.
To secure the full and timely payment and performance of the Obligations
Mortgagor hereby irrevocably GRANTS, MORTGAGES, and WARRANTS unto Mortgagee,
with power of sale, the real and personal property, rights, titles, interests
and estates constituting the Mortgaged Property, subject, however, to the
Permitted Encumbrances, and Mortgagor does hereby bind itself, its successors
and assigns to WARRANT AND FOREVER DEFEND the title to the Mortgaged Property
unto Mortgagee against every person whomsoever lawfully claiming or to claim the
same or any part thereof; provided that the Liens and security interests,
-------- ----
estates and rights granted hereunder and all of Mortgagee's rights, powers and
remedies in connection therewith shall, unless otherwise provided in the
Indenture or this Mortgage, remain in full force and effect until payment in
full, or provision for payment in full, of (A) the Intercompany Note and (B) all
obligations then due and owing under the Senior Secured Notes, the Indenture and
the Collateral Documents; provided, however, that after receipt from the
-------- -------
Mortgagor by the Mortgagee of a request for a release of any Mortgaged Property
permitted under the Indenture upon the sale, transfer, assignment, exchange or
other disposition of such Mortgaged Property not prohibited by the Indenture
(and upon receipt by the Mortgagee of all proceeds of such sale, transfer,
assignment, exchange or other disposition to the extent required to be remitted
to the Mortgagee under the Indenture or otherwise), such Mortgaged Property
shall be released from the Liens, security interests, estates, and rights
granted by this Mortgage and no longer constitute Mortgaged Property. Upon the
payment in full, or provision for payment in full, of (A) the Intercompany Note
and (B) all obligations then due and owing under the Senior Secured Notes, the
Indenture and the Collateral Documents, the Mortgagor shall be entitled to the
return, upon its request and at its expense, of such of the Mortgaged Property
as shall not have been sold or otherwise applied pursuant to the terms hereof,
and then the Liens, security interests, estates and rights granted by this
Mortgage shall terminate, otherwise same shall remain in full force and effect.
Upon any termination of this Mortgage or release of any Mortgaged Property as
permitted by the Indenture, the Mortgagee will, at the expense of the Mortgagor,
execute and deliver to the Mortgagor such documents and take such other actions
as the Mortgagor shall reasonably request to evidence the termination of this
Mortgage or the release of such Mortgaged
6
<PAGE>
Property, as the case may be. Any such action taken by the Mortgagee shall be
without warranty by or recourse to the Mortgagee, except as to the absence of
any prior assignments by the Mortgagee of its interests in the Mortgaged
Property, and shall be at the expense of the Mortgagor. The Mortgagee may
conclusively rely on any certificate delivered to it by the Mortgagor stating
that the execution of such documents and release of the Mortgaged Property is in
accordance with and permitted by the terms of the Indenture and this Mortgage.
It is expressly understood and agreed that the indebtedness secured hereby
will in no event exceed two hundred percent (200%) of the face amount of the
Intercompany Note, and the Intercompany Note has a maturity date of May 1, 2007.
Section 2.02. Security Interest.
This Mortgage shall be construed as a mortgage on real property and it
shall also constitute and serve (a) as a "Security Agreement" on personal
property within the meaning of, and shall constitute a first and prior security
interest under, the UCC with respect to the Personalty, Fixtures, Leases and
Rents (subject to Permitted Encumbrances), and (b) as an "Assignment of Leases
and Rents" of the Leases and Rents (subject to Permitted Encumbrances). To this
end, Mortgagor has GRANTED, BARGAINED, CONVEYED, ASSIGNED, TRANSFERRED, AND SET
OVER, and by these presents does GRANT, BARGAIN, CONVEY, ASSIGN, TRANSFER AND
SET OVER, unto Mortgagee a first and prior security interest and all of
Mortgagor's right, title and interest in, to and under the Personalty, Fixtures,
Leases and Rents to secure the full and timely payment of and the full and
timely performance and discharge of the Obligations, subject to Permitted
Encumbrances.
Section 2.03. Mortgagor's License to Collect Rents Until Default.
Mortgagor and Mortgagee agree that this Mortgage is an absolute and present
assignment of Leases and Rents. Provided there exists no Event of Default,
Mortgagor shall have the right under a license granted hereby and Mortgagee
hereby grants to Mortgagor a license (but limited by the remedies of Mortgagee
set forth herein and in the Indenture) to collect, but not more than one (1)
month in advance, all of the Rents due or to become due under the Leases, and,
subject to the restrictions set forth in the Indenture, if any, to exercise the
rights of landlord under the Leases. The license granted hereby may be revoked
at Mortgagee's option upon written notice from Mortgagee to Mortgagor after the
occurrence and during the continuance of an Event of Default. Mortgagor hereby
agrees with Mortgagee that the other parties under the Leases may, upon notice
from Mortgagee of the occurrence of an Event of Default that is then continuing,
thereafter pay direct to Mortgagee the Rents due and to become due under the
Leases and attorn all other obligations thereunder directly to Mortgagee without
any obligation on their part to determine whether an Event of Default does in
fact exist. Additionally, upon the occurrence and during the continuation of an
Event of Default, Mortgagor hereby constitutes and appoints Mortgagee its true
and lawful attorney-in-fact with full power of substitution to collect Rents and
other sums due and to become due under the Leases and to endorse, either in the
name of Mortgagor or in the name of Mortgagee, any check payable to Mortgagor or
any assumed business name of Mortgagor representing Rents and other sums due
7
<PAGE>
and to become due under the Leases. Following the occurrence and during the
continuation of an Event of Default and the acceleration of the Intercompany
Note, any such Rent and other sums shall be applied in accordance with the
provisions of the Indenture. It is understood and agreed that this power is
coupled with an interest which cannot be revoked.
Section 2.04. No Obligation of Mortgagee.
The assignment and security interest herein granted shall not be deemed or
construed to constitute Mortgagee as a mortgagee in possession of the Mortgaged
Property, to obligate Mortgagee to lease the Mortgaged Property or attempt to do
same, or to take any action, incur any expense or perform or discharge any
obligation, duty or liability whatsoever.
Section 2.05. Fixture Filing.
This Mortgage shall constitute a "fixture filing" for all purposes of the
UCC. All or part of the Mortgaged Property are or are to become fixtures on the
Land; information concerning the security interest herein granted may be
obtained at the addresses set forth on the signature page hereof. The addresses
of the Secured Party (Mortgagee) and of the Debtor (Mortgagor) are set forth on
the signature page hereof.
ARTICLE 3
WARRANTIES AND REPRESENTATIONS
Mortgagor hereby unconditionally warrants and represents to Mortgagee as
follows:
Section 3.01. Title to Mortgaged Property and Lien of this Instrument.
Mortgagor has good and indefeasible title to the Land (in fee simple, if
the Lien created hereunder be on the fee, or a first and prior leasehold estate,
if it be created on the leasehold estate) and Buildings, and good and
indefeasible title to the Fixtures and Personalty, free and clear in each case
of any Liens, charges, encumbrances, security interests and adverse claims
whatsoever except the Permitted Encumbrances. This Mortgage constitutes a valid
and subsisting first Lien deed of trust on the Land, the Buildings and the
Fixtures and a valid, subsisting first (subject to Permitted Encumbrances)
security interest in and to, and a valid first (subject to Permitted
Encumbrances) assignment of, the Personalty and Leases and Rents (subject to the
rights of Mortgagor under Section 2.03 hereof), all in accordance with the terms
hereof.
ARTICLE 4
AFFIRMATIVE COVENANTS
Mortgagor hereby unconditionally covenants and agrees with Mortgagee as
follows:
8
<PAGE>
Section 4.01. First Lien Status.
Mortgagor will protect the first Lien and security interest status (subject
to Permitted Encumbrances) of this Mortgage and, except to the extent permitted
by the provisions of the Indenture and this Mortgage, will not place, or permit
to be placed, or otherwise mortgage, hypothecate or encumber the Mortgaged
Property with, any other Lien or security interest of any nature whatsoever
(statutory, constitutional or contractual) regardless of whether same is
allegedly or expressly inferior to the Lien and security interest created by
this Mortgage, and, if any such Lien or security interest is asserted against
the Mortgaged Property unless such Lien or security interest constitutes a
Permitted Encumbrance, Mortgagor will promptly, at its own cost and expense, (a)
pay the underlying claim in full or take such other action so as to cause same
to be released or bonded around and (b) within five (5) Business Days from the
date such Lien or security interest is so asserted, give Mortgagee notice of
such Lien or security interest. Such notice shall specify who is asserting such
Lien or security interest and shall detail the origin and nature of the
underlying claim giving rise to such asserted Lien or security interest.
Section 4.02. Payment of Impositions.
Mortgagor will duly pay and discharge, or cause to be paid and discharged,
all material Impositions not later than the day any fine or penalty may be added
thereto or imposed; except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Senior Secured Notes;
provided, however, that Mortgagor may, if permitted by law and if such
installment payment would not create or permit the thing or a Lien against the
Mortgaged Property, pay such Impositions in installments whether or not interest
shall accrue on the unpaid balance of such Impositions.
Section 4.03. Repair.
Mortgagor will keep the Mortgaged Property in good condition, ordinary wear
and tear excepted, and will make all necessary repairs, replacements, renewals,
betterments, and improvements thereof and thereto interior and exterior,
structural and non-structural, ordinary and extraordinary, foreseen and
unforeseen, all as in the judgment of the Mortgagor may be reasonably necessary
for the proper conduct of the business carried on in connection therewith,
provided that nothing in this Section 4.03 shall prevent the Mortgagor from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the judgment of Mortgagor, desirable in the conduct of the business of
Mortgagor and its Subsidiaries taken as a whole. Notwithstanding the foregoing,
nothing contained in this Section 4.03 shall limit the right of the Mortgagor to
dispose of properties of any manner otherwise permitted by the Indenture.
Section 4.04. Insurance.
Mortgagor will obtain and maintain insurance upon and relating to the
Mortgaged Property insuring against personal injury and death, loss by fire and
such other hazards, casualties and contingencies (including business
interruption insurance and builder's all risk
9
<PAGE>
coverage) as are normally and usually covered by extended coverage policies in
effect where the Land is located with such insurers of recognized responsibility
as are typical and prudent for properties similar to the Mortgaged Property.
Each insurance policy issued in connection therewith shall provide by way of
endorsements, riders or otherwise that (a) proceeds will be payable to Mortgagee
as its interest may appear, it being agreed by Mortgagor that such payments
shall be applied in accordance with the provisions of the Indenture; (b) the
coverage of Mortgagee shall not be terminated, reduced or affected in any manner
regardless of any breach or violation by Mortgagor of any warranties,
declarations or conditions in such policy, (c) no such insurance policy shall be
cancelled unless such insurer shall have first given Mortgagee thirty (30) days
prior written notice thereof, and (d) Mortgagee may, but shall not be obliged
to, make premium payments to prevent any cancellation, endorsement, alteration
or reissuance and such payments shall be accepted by the insurer to prevent
same. Mortgagee shall be furnished with photocopies of each renewal policy
evidencing the appropriate coverages as required no later than fifteen (15) days
after renewals have been completed together with receipts or other evidence that
the premiums thereon have been paid.
Section 4.05. Application of Insurance Proceeds.
The proceeds of the insurance of Mortgagor shall be used in accordance with
the provisions of the Indenture.
Section 4.06. Performance of Leases.
Mortgagor covenants (a) not to assign or grant a security interest in and
to any of the Leases to any party other than Mortgagee without the prior written
consent of Mortgagee, (b) at the request of Mortgagee, to execute and deliver
all such further assurances and assignments in and to the Mortgaged Property as
Mortgagee shall from time to time reasonably require, and (c) to deliver to
Mortgagee copies of all Leases, regardless of whether such Leases were or are
executed before or after the date hereof.
Section 4.07. Inspection.
Mortgagor, at all reasonable times and upon reasonable prior notice, will
permit Mortgagee, and its agents, representatives and employees, to inspect the
Mortgaged Property.
Section 4.08. Books and Records.
Mortgagor will maintain full and accurate books of account and other
records reflecting in all material aspects the results of its operations of the
Mortgaged Property. At any time and from time to time Mortgagor shall deliver to
Mortgagee such other financial data as Mortgagee shall reasonably request with
respect to the ownership, maintenance, use and operation of the Mortgaged
Property, and Mortgagee shall have the right, at reasonable times and upon
reasonable notice, to audit, examine and make copies or extracts of Mortgagor's
books of account and records relating to the Mortgaged Property.
10
<PAGE>
Section 4.09. Maintenance of Rights of Way, Easements, and Licenses.
Mortgagor will maintain, preserve and renew all rights of way,
easements, grants, privileges, licenses and franchises reasonably necessary for
the use of the Mortgaged Property from time to time. Mortgagor shall comply in
all material respects with all restrictive covenants which may at any time
affect the Mortgaged Property, zoning ordinances and other public or private
restrictions as to the use of the Mortgaged Property.
(a) Mortgagor shall (i) comply in all material respects with all
applicable Environmental Laws and obtain, keep and comply with Permits
applicable to the operations of Mortgagor and the ownership, lease, or
use of any Mortgaged Property; (ii) use commercially reasonable
efforts to cause all Persons occupying any Mortgaged Property to
comply with all such Environmental Laws and Permits; (iii) keep or
cause to be kept all such Mortgaged Property free and clear of any
Liens imposed pursuant to such Environmental Laws; and (iv) obtain and
renew all material Permits required for ownership or use of any
Mortgaged Property.
(b) Mortgagor shall conduct any investigation, study, sampling and
testing, and undertake any cleanup, removal, remedial or other action
necessary to remove and cleanup all Hazardous Materials from any
Mortgaged Property in accordance in all material respects with the
requirements of all applicable Environmental Laws and any Governmental
Requirements.
Section 4.10. Environmental Indemnification and Hold Harmless.
(a) Mortgagor agrees to defend, indemnify and hold harmless the
Indemnified Parties from and against any and all claims, demands,
judgments, settlements, damages, actions, causes of action, injuries,
administrative orders, consent agreements and orders, liabilities,
penalties, costs, including but not limited to any cleanup costs,
mediation costs, response costs, and all expenses of any kind
whatsoever, including claims arising out of loss of life, injury to
persons, property, or business or damage to natural resources in
connection with the activities of Mortgagor, its predecessors in
interest, third parties who have trespassed on the Mortgaged Property,
or parties in a contractual relationship with Mortgagor, or any of
them, whether or not occasioned wholly or in part by any condition,
accident or event caused by any act or omission of Indemnified
Parties, which:
(i) Arises out of the actual, alleged or threatened
migration, spill, leach, pour, empty, inject, discharge, dispersal, release,
storage, treatment, generation, disposal or escape of pollutants or other toxic
or hazardous substances, including any solid, liquid, gaseous or thermal
irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis,
chemicals, and waste (including materials to be recycled, reconditioned or
reclaimed); or
(ii) Actually or allegedly arises out of the use,
specification, or inclusion of any product, material or process containing
chemicals, the failure to detect the
11
<PAGE>
existence or proportion of chemicals in the soil, air, surface water or ground
water, or the performance or failure to perform the abatement of any pollution
source or the replacement or removal of any soil, water, surface water, or
ground water containing chemicals.
(iii) Arises out of the breach of any covenant, warranty, or
representation of Mortgagor as it relates to the provisions of this Section
4.10.
(iv) Arises out of a judicial or administrative action
brought pursuant to any Environmental Law that relates to the Mortgaged
Property.
(b) Mortgagor, its successors and assigns, shall bear, pay and
discharge when and as the same become due and payable, any and all
such judgments or claims for damages, penalties or otherwise against
Indemnified Parties, shall hold Indemnified Parties harmless for those
judgment or claims, and shall assume the burden and expense of
defending all suits, administrative proceedings, and negotiations of
any description with any and all persons, political subdivisions or
Governmental Authorities arising out of indemnified matters as set
forth in Section 4.10(a) above.
(c) Mortgagor's indemnifications and representations made herein
shall survive any termination or expiration of the documents relating
to the Intercompany Note and/or the repayment of the Obligations,
including, but not limited to, any foreclosure under this Mortgage or
deed-in-lieu of foreclosure, it being understood and agreed that the
indemnity given herein is independent of the Obligations and the
Intercompany Note, and the other documents constituting security for
the Intercompany Note.
ARTICLE 5
NEGATIVE COVENANTS
Mortgagor hereby covenants and agrees with Mortgagee that, until the
entire Obligations shall have been paid in full and shall have been fully
performed and discharged:
Section 5.01. Use Violations.
Mortgagor will not use, maintain, operate or occupy, or allow the use,
maintenance, operation or occupancy of, the Mortgaged Property in any manner
which violates in any material respect any Governmental Requirement
Section 5.02. Alterations.
Mortgagor will not commit or permit any waste of the Mortgaged Property
that materially impairs Mortgagee's security hereunder.
12
<PAGE>
Section 5.03. Replacement of Fixtures and Personalty.
Except as permitted by this Mortgage and the Indenture, and except in the
ordinary course of its business, Mortgagor will not, without the prior written
consent of Mortgagee, permit any of the Fixtures or Personalty to be removed at
any time from the Land or Buildings unless the removed item is removed
temporarily for maintenance and repair or, if removed permanently, such removal
or disposition does not affect materially and adversely the value of the
Mortgagor's casino and the Mortgaged Property taken as a whole or the removed
item is replaced by an article of substantially equal utility and value, owned
by Mortgagor and subject to the Liens created hereby, free and clear of any Lien
or security interest except Permitted Encumbrances or such as may be first
approved in writing by Mortgagee.
Section 5.04. No Further Encumbrances.
Except to the extent permitted by the provisions of the Indenture,
Mortgagor will not, without the prior written consent of Mortgagee, create,
place or permit to be created or placed, or through any act or failure to act,
acquiesce in the placing of, or allow to remain, any mortgage, pledge, Lien
(statutory, constitutional or contractual), security interest, encumbrance or
charge on, or conditional sale or other title retention agreement, regardless of
whether same are expressly subordinate to the Liens of this Mortgage, with
respect to, the Mortgaged Property, other than the Permitted Encumbrances.
ARTICLE 6
EVENTS OF DEFAULT AND REMEDIES
Section 6.01. Event of Default.
The term "Event of Default", as used in this Mortgage, shall mean the
----------------
occurrence or happening, at any time and from time to time, of an Event of
Default (as such term is defined thereunder) under the Indenture.
Section 6.02. Remedies.
If an Event of Default shall occur and be continuing, Mortgagee may, at
Mortgagee's election, exercise any or all of the following rights, remedies and
recourses:
(a) Acceleration. Declare the then unpaid principal balance of the
------------
Intercompany Note, the accrued interest and any other accrued but
unpaid portion of the Obligations to be immediately due and payable,
without further notice, presentment, protest, demand or action of any
nature whatsoever (each of which hereby is expressly waived by
Mortgagor), whereupon the same shall become immediately due and
payable.
13
<PAGE>
(b) Entry Upon Mortgaged Property. Enter upon the Mortgaged Property
-----------------------------
and take exclusive possession thereof and of all books, records and
accounts relating thereto. If Mortgagor remains in possession of all
or any part of the Mortgaged Property during the continuance of an
Event of Default and without Mortgagee's prior written consent
thereto, Mortgagee may invoke any and all legal remedies to dispossess
Mortgagor, including specifically one or more actions for forcible
entry and detainer, trespass to try title and writ of restitution.
Nothing contained in the foregoing sentence shall, however, be
construed to impose any greater obligation or any prerequisites to
acquiring possession of the Mortgaged Property during the continuance
of an Event of Default than would have existed in the absence of such
sentence.
(c) Operation of Mortgaged Property. Hold, lease, manage, operate or
-------------------------------
otherwise use or permit the use of the Mortgaged Property, either
itself or by other persons, firms or entities, in such manner, for
such time and upon such other terms as Mortgagee may deem to be
prudent and reasonable under the circumstances (making such repairs,
alterations, additions and improvements thereto and taking any and all
other action with reference thereto, from time to time, as Mortgagee
shall deem reasonably necessary or desirable), and, after the
occurrence and continuance of an Event of Default, apply all Rents and
other amounts collected by Mortgagee in connection therewith in
accordance with the provisions of the Indenture.
(d) Foreclosure and Sale. Mortgagee shall have the right and option
--------------------
to proceed with foreclosure and to sell, to the extent permitted by
law, all or any portion of the Mortgaged Property at one or more
sales, as an entirety or in parcels, at such place or places in
otherwise such manner and upon such notice as may be required by law,
or, in the absence of any such requirement, as the Mortgagee may deem
appropriate, and to make conveyance to the purchaser or purchasers.
Where the Mortgaged Property is situated in more than one county,
notice as above provided shall be posted and filed in all such
counties (if such notices are required by law), and all such Mortgaged
Property may be sold in any such county and any such notice shall
designate the county where such Mortgaged Property is to be sold.
Nothing contained in this Section 6.02(c) shall be construed so as to
limit in any way the Mortgagee's rights to sell the Mortgaged
Property, or any portion thereof, by private sale if, and to the
extent that, such private sale is permitted under the laws of the
applicable jurisdiction or by public or private sale after entry of a
judgment by any court of competent jurisdiction so ordering. Mortgagor
hereby irrevocably appoints the Mortgagee to be the attorney of
Mortgagor and in the name and on behalf of Mortgagor to execute and
deliver any deeds, transfers, conveyances, assignments, assurances and
notices which Mortgagor ought to execute and deliver and do and
perform any and all such acts and things which Mortgagor ought to do
and perform under the covenants herein contained and generally, to use
the name of Mortgagor in the exercise of all or any of the powers
hereby conferred on the Mortgagee. At any such sale: (i) whether made
under the power herein contained or any other legal enactment, or by
virtue of any judicial proceedings or any other legal right,
14
<PAGE>
remedy or recourse, it shall not be necessary for Mortgagee to have
physically present, or to have constructive possession of, the
Mortgaged Property (Mortgagor hereby covenanting and agreeing to
deliver to Mortgagee any portion of the Mortgaged Property not
actually or constructively possessed by Mortgagee immediately upon
demand by Mortgagee) and the title to and right of possession of any
such property shall pass to the purchaser thereof as completely as if
the same had been actually present and delivered to purchaser at such
sale, (ii) each instrument of conveyance executed by Mortgagee shall
contain a general warranty of title, binding upon Mortgagor and its
successors and assigns, (iii) each and every recital contained in any
instrument of conveyance made by Mortgagee shall conclusively
establish the truth and accuracy of the matters recited therein,
including, without limitation, nonpayment of the Obligations,
advertisement and conduct of such sale in the manner provided herein
and otherwise by law and appointment of any successor Mortgagee
hereunder, (iv) any and all prerequisites to the validity thereof
shall be conclusively presumed to have been performed, (v) the receipt
of Mortgagee or of such other party or officer making the sale shall
be a sufficient discharge to the purchaser or purchasers for its
purchase money and no such purchaser or purchasers, or its assigns or
personal representatives, shall thereafter be obligated to see to the
application of such purchase money, or be in any way answerable for
any loss, misapplication or nonapplication thereof, (vi) to the
fullest extent permitted by law, Mortgagor shall be completely and
irrevocably divested of all of its right, title, interest, claim and
demand whatsoever, either at law or in equity, in and to the property
sold and such sale shall, be a perpetual bar both at law and in equity
against Mortgagor, and against any and all other persons claiming or
to claim the property sold or any part thereof, by, through or under
Mortgagor, and (vii) to the extent and under such circumstances as are
permitted by law, Mortgagee may be a purchaser at any such sale, and
shall have the right, after paying or accounting for all costs of said
sale or sales, to credit the amount of the bid upon the amount of the
Obligations (in the order of priority set forth in Section 6.09
------------
hereof) in lieu of cash payment.
(e) Judicial Foreclosure; Receivership. Proceed by a suit or suits in
----------------------------------
equity or at law, whether for the specific performance of any covenant
or agreement herein contained or in aid of the execution of any power
herein granted, or for any foreclosure hereunder or for the sale of
the Mortgaged Property under the judgment or decree of any court or
courts of competent jurisdiction, or for the appointment of a receiver
pending any foreclosure hereunder or the sale of the Mortgaged
Property under the order of a court or courts of competent
jurisdiction or under executory or other legal process, or for the
enforcement of any other appropriate legal or equitable remedy. Any
money advanced by Mortgagee in connection with any such receivership
shall be a demand obligation (which obligation Mortgagor hereby
expressly promises to pay) owing by Mortgagor to Mortgagee and shall
bear interest from the date of making such advance by Mortgagee until
paid at the Post-Default Rate.
(f) Receiver. Prior to, upon or at any time after, commencement of
--------
foreclosure of the Lien and security interest provided for herein or
any legal
15
<PAGE>
proceedings hereunder, make application to a court of competent
jurisdiction as a matter of strict right and without notice to
Mortgagor or regard to the adequacy of the Mortgaged Property for the
repayment of the Obligations for appointment of a receiver of the
Mortgaged Property, and Mortgagor does hereby irrevocably consent to
such appointment. Any such receiver shall have all the usual powers
and duties of receivers in similar cases, including the full power to
rent, maintain and otherwise operate the Mortgaged Property upon such
terms as may be approved by the court, and shall apply the Rents in
accordance with the provisions of Section 6.09 hereof.
------------
(g) Other. Exercise any and all other rights, remedies and recourses
-----
granted hereunder or now or hereafter existing in equity or at law, by
virtue of statute or otherwise.
Section 6.03. Separate Sales.
The Mortgaged Property may be sold in one or more parcels and in such
manner and order as Mortgagee, in its sole discretion, may elect, it being
expressly understood and agreed that the right of sale arising out of any Event
of Default shall not be exhausted by any one or more sales.
Section 6.04. Remedies Cumulative, Concurrent and Nonexclusive.
Mortgagee shall have all rights, remedies and recourses granted in the
Intercompany Note, this Mortgage, and the other documents securing the
Intercompany Note and available at law or equity (including specifically those
granted by the UCC) and same (a) shall be cumulative and concurrent; (b) may be
pursued separately, successively or concurrently against Mortgagor or others
obligated under the Intercompany Note, or against the Mortgaged Property, or
against any one or more of them, at the sole discretion of Mortgagee; (c) may be
exercised as often as occasion therefor shall arise, it being agreed by
Mortgagor that the exercise or failure to exercise any of same shall in no event
be construed as a waiver or release thereof or of any other right, remedy or
recourse; and (d) are intended to be, and shall be, nonexclusive.
Section 6.05. No Conditions Precedent to Exercise of Remedies.
Neither Mortgagor nor any other person hereafter obligated for payment of
all or any part of or fulfillment of all or any of the Obligations shall be
relieved of such obligation by reason of (a) the failure of Mortgagee to comply
with any request of Mortgagor or any other person so obligated to foreclose the
Lien of this Mortgage or to enforce any provisions of the other documents
securing the Intercompany Note; (b) the release, regardless of consideration, of
the Mortgaged Property or the addition of any other property to the Mortgaged
Property, (c) any agreement or stipulation between any subsequent owner of the
Mortgaged Property and Mortgagee extending, renewing, rearranging or in any
other way modifying the terms of this Mortgage without first having obtained the
consent of, given notice to or paid any consideration to Mortgagor, or such
other person, and in such event Mortgagor and all such other persons shall
16
<PAGE>
continue to be liable to make payment according to the terms of any such
extension or modification agreement unless expressly released and discharged in
writing by Mortgagee; or (d) by any other act or occurrence save and except the
complete payment of and the complete fulfillment of all of the Obligations.
Section 6.06. Release of and Resort to Collateral.
Mortgagee may release, regardless of consideration, any part of the
Mortgaged Property without, as to the remainder, in any way impairing,
affecting, subordinating or releasing the Lien or security interest created in
or evidenced by this Mortgage or its stature as a first and prior Lien and
security interest (subject to Permitted Encumbrances) in and to the Mortgaged
Property. For payment of the Obligations, Mortgagee may resort to any other
security therefor held by Mortgagee in such order and manner as Mortgagee may
elect.
Section 6.07. Waiver of Redemption, Notice and Marshalling of Assets.
To the fullest extent permitted by law, Mortgagor hereby irrevocably and
unconditionally waives and releases (a) all benefits that might accrue to
Mortgagor by virtue of any present or future law exempting the Mortgaged
Property from attachment, levy or sale on execution or providing for any
appraisement, valuation, stay of execution, exemption from civil process,
redemption or extension of time for payment; (b) except as herein or in any
other documents evidencing or securing the Obligations expressly provided, all
notices of (i) any Event of Default (ii) intent to accelerate the Obligations,
(iii) acceleration of the Obligations, or (iv) Mortgagee's election to exercise
or its actual exercise of any right, remedy or recourse provided for under this
Mortgage; and (c) any right to a marshalling of assets or a sale in inverse
order of alienation. Mortgagor agrees, to the full extent that it may lawfully
do so, that it will not at any time insist upon or plead or in any way take
advantage of any appraisement, valuation, stay, marshalling of assets,
extension, redemption or moratorium law now or hereafter in force and effect so
as to prevent or hinder the enforcement of the provisions of this Mortgage or
the indebtedness secured hereby, or any agreement between Mortgagor and
Mortgagee or any rights or remedies Mortgagee may have thereunder, hereunder or
by law.
Section 6.08. Discontinuance of Proceedings.
In case Mortgagee shall have proceeded to invoke any right, remedy or
recourse permitted hereunder or under the Intercompany Note or the other
documents securing the Intercompany Note and shall thereafter elect to
discontinue or abandon same for any reason. Mortgagee shall have the unqualified
right so to do and, in such an event, Mortgagor and Mortgagee shall be restored
to their former positions with respect to the Intercompany Note or the other
documents securing the Intercompany Note, the Obligations, the Mortgaged
Property and otherwise, and the rights, remedies, recourses and powers of
Mortgagee shall continue as if same had never been invoked.
17
<PAGE>
Section 6.09. Application of Proceeds.
The proceeds of any sale of, and the Rents and other amounts generated by
the holding, leasing operating or other use of, the Mortgaged Property or the
Leases shall be applied upon the occurrence and during the continuance of an
Event of Default by Mortgagee (or the receiver, if one is appointed) to the
extent that funds are so available therefrom in the following orders of
priority:
(a) first, to the payment of costs and expenses of taking possession
-----
of the Mortgaged Property and of holding, using, leasing, repairing,
improving and selling the same, including without limitation (i)
reasonable trustees' and receivers' fees, (ii) court costs, (iii)
reasonable attorneys' and accountants' fees, (iv) costs of
advertisement and (v) the payment of any and all Impositions, Liens,
security interests or other rights, titles or interests equal or
superior to the Lien and security interest of this Mortgagee (except
those to which the Mortgaged Property has been sold subject to and
without in any way implying Mortgagee's prior consent to the creation
thereof);
(b) second, to payment of the Obligations in such order and manner as
------
Mortgagee may elect; and
(c) third, to Mortgagor; or as otherwise required by any Governmental
-----
Requirement.
Section 6.10. Acceleration Following Certain Events.
Notwithstanding anything to the contrary contained in or inferable from
any provision hereof, upon the occurrence of an Event of Default as defined in
Section 6.01(i) or Section 6.01(j) of the Indenture, any accrued but unpaid of
- --------------- ---------------
the Obligations shall be automatically and immediately due and payable in full
without the necessity of notice of any other action on the part of Mortgagee or
any other party.
Section 6.11. Indemnity.
IN CONNECTION WITH ANY ACTION TAKEN BY MORTGAGEE OR TRUSTEE PURSUANT TO
THIS MORTGAGE, THE INDEMNIFIED PARTIES SHALL NOT BE LIABLE FOR ANY LOSS
SUSTAINED BY MORTGAGOR RESULTING FROM ANY ACT OR OMISSION OF ANY INDEMNIFIED
PARTY IN ADMINISTERING, MANAGING, OPERATING OR CONTROLLING THE MORTGAGED
PROPERTY UNLESS SUCH LOSS IS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF AN INDEMNIFIED PARTY, NOR SHALL MORTGAGEE OR TRUSTEE BE OBLIGATED
TO PERFORM OR DISCHARGE ANY OBLIGATION, DUTY OR LIABILITY OF MORTGAGOR.
MORTGAGOR SHALL AND DOES HEREBY AGREE TO INDEMNITY EACH INDEMNIFIED PARTY FOR,
AND TO HOLD EACH INDEMNIFIED PARTY HARMLESS FROM, ANY AND ALL LIABILITY, LOSS OR
DAMAGE WHICH MAY OR MIGHT BE INCURRED BY ANY INDEMNIFIED PARTY BY REASON OF THIS
MORTGAGE OR THE EXERCISE OF RIGHTS OR REMEDIES HEREUNDER UNLESS
18
<PAGE>
SUCH LIABILITY, LOSS OR DAMAGE IS CAUSED BY THE GROSS NEGLIGENCE OF WILLFUL
MISCONDUCT OF AN INDEMNIFIED PARTY; SHOULD MORTGAGEE OR TRUSTEE MAKE ANY
EXPENDITURE ON ACCOUNT OF ANY SUCH LIABILITY, LOSS OR DAMAGE, THE AMOUNT
THEREOF, INCLUDING COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, SHALL BE A
DEMAND OBLIGATION (WHICH OBLIGATION MORTGAGOR HEREBY EXPRESSLY PROMISES TO PAY)
OWING BY MORTGAGOR TO MORTGAGEE OR TRUSTEE AND SHALL BEAR INTEREST FROM THE DATE
EXPENDED UNTIL PAID AT THE POST-DEFAULT RATE, SHALL BE A PART OF THE OBLIGATIONS
AND SHALL BE SECURED BY THIS MORTGAGE AND ANY OTHER SECURITY INSTRUMENT. THE
LIABILITIES OF THE MORTGAGOR AS SET FORTH IN THIS SECTION 6.11 SHALL SURVIVE THE
TERMINATION OF THIS MORTGAGE.
If any claim for indemnification by any of the Indemnified Parties arises
out of a claim by a person other than the Indemnified Parties, Mortgagor shall
conduct any proceedings or negotiations in connection therewith which are
necessary to defend such Indemnified Party and shall take all such steps and
proceedings as Mortgagor in good faith deems necessary to settle or defeat any
such claims, and Mortgagor shall employ counsel to contest any such claims;
provided, however, that Mortgagor shall reasonably consider the advice of the
Indemnified Party as to the defense of such claims, and the Indemnified Party
shall have the right to participate, including the right to retain its own
counsel at its expense, in such defense (unless the Indemnified Party reasonably
determines that a conflict exists between the interests of the Mortgagor and the
interests of the Indemnified Party, in which case such independent counsel
selected by the Indemnified Party shall be paid for by the Mortgagor).
Reasonable counsel and auditor fees, filing fees and court fees of all
proceedings, contests or lawsuits with respect to any such claims or asserted
liability shall be borne by the Mortgagor and shall be part of the Obligations,
except in the case where the Indemnified Party hires independent counsel without
a reasonable determination that a conflict exists between the interests of the
Mortgagor and the interests of the Indemnified Party, unless such loss or
liability is caused by the negligence or willful misconduct of the Indemnified
Party. If any such claim is made hereunder and the Mortgagor does not undertake
the defense thereof, the Indemnified Party shall be entitled to undertake such
litigation and settlement and shall be entitled to indemnity with respect
thereto as provided herein.
Section 6.12. Environmental Matters.
Mortgagee or Trustee, in its sole discretion, may require, as a
prerequisite to the commencement of any proceeding or the exercise of any remedy
with respect to the Mortgaged Property, that it be provided evidence reasonably
satisfactory to Mortgagee or Trustee that the Mortgaged Property is not
contaminated by Hazardous Materials and that Mortgagee or Trustee shall not be
subject to any material liability for any contamination if it undertakes such
proceeding or remedy. Mortgagee or Trustee shall have the authority (but shall
not be required) to (i) conduct environmental assessments, audits and site
monitoring to determine compliance with Environmental Laws; (ii) take all
appropriate remedial action to contain, clean up and remove any Hazardous
Materials either on its own or in response to an actual violation of any
environmental laws or proceeding with respect thereto; (iii) institute legal
proceedings
19
<PAGE>
concerning environmental damage or contest and settle proceedings brought by any
local, state or federal agency litigant: (iv) comply with any local, state or
federal agency or court order directing an assessment, abatement or cleanup of
Hazardous Materials; and (v) employ agents, consultants and legal counsel to
assist or perform the above undertakings or actions. Mortgagor shall indemnify
Mortgagee and Trustee for all reasonable costs, expenses and liabilities
reasonably incurred by Mortgagee and Trustee in connection with any such
undertaking or action unless such costs, expenses and liabilities are caused by
the gross negligence or willful misconduct of the Mortgagee or the Trustee.
ARTICLE 7
---------
CONDEMNATION
Section 7.01. General.
Promptly upon its obtaining knowledge of the institution or the threatened
institution of any proceeding for the condemnation of the Mortgaged Property.
Mortgagor shall notify Mortgagee of such fact. Mortgagor shall then, if
requested by Mortgagee, file or defend its claim thereunder and prosecute same
with due diligence to its final disposition and shall cause any awards or
settlements to be paid over to Mortgagee for disposition pursuant to the terms
of this Mortgage and the Indenture. Mortgagor may be the normal party in such
proceeding but Mortgagee shall be entitled to participate in and to control same
and to be represented therein by counsel of its own choice, and Mortgagor will
deliver or cause to be delivered to Mortgagee such instruments as may be
requested by it from time to time to permit such participation. If the Mortgaged
Property is taken or diminished in value, or if a consent settlement is entered,
by or under threat of such proceeding, the award or settlement payable to
Mortgagor by virtue of its interest in the Mortgaged Property shall be paid to
Mortgagee to be held by it, subject to the Lien and security interest of this
Mortgage, and disbursed pursuant to the terms of the Indenture.
ARTICLE 8
MISCELLANEOUS
-------------
Section 8.01. Performance at Mortgagor's Expense.
The cost and expense of performing or complying with any and all of the
Obligations shall be borne solely by Mortgagor, and no portion of such cost and
expense shall be, in any way or to any extent, credited against any installment
on or portion of the Obligations.
Section 8.02. Survival of Obligations.
Each and all of the Obligations shall survive the execution and delivery
of this Mortgage and the consummation of the loan called for therein and shall
continue in full force and effect until the Obligations shall have been paid in
full.
20
<PAGE>
Section 8.03. Further Assurances.
Mortgagor, upon the request of Mortgagee, will execute, acknowledge,
deliver and record and/or file such further instruments and do such further acts
as may be reasonably necessary, desirable or proper to carry out more
effectively the purpose of this Mortgage and to subject to the Liens and
security interests thereof any property intended by the terms thereof to be
covered thereby, including specifically but without limitation, any renewals,
additions, substitutions, replacements, betterments or appurtenances to the then
Mortgaged Property.
Section 8.04. Notices.
All notices or other communications required or permitted to be given
pursuant to this Mortgage shall be in writing and shall be considered as
properly given if mailed by first-class United States mail, postage prepaid,
registered or certified with return receipt requested, or by delivering same in
person to the intended addressee or by prepaid telegram. Notice so mailed shall
be effective upon its deposit Notice given in any other manner shall be
effective only if and when received by the addressee. For purposes of notice,
the addresses of Mortgagee and Mortgagor shall be as set forth for each party on
the signature page hereof; provided, however, that either party shall have the
right to change its address for notice hereunder to any other location within
the continental United States by the giving of thirty (30) days' notice to the
other party in the manner set forth above.
Section 8.05. No Waiver.
Any failure by Mortgagee to insist, or any election by Mortgagee not to
insist, upon strict performance by Mortgagor of any of the terms, provisions or
conditions of this Mortgage shall not be deemed to be a waiver of same or of any
other terms, provision or condition thereof and Mortgagee shall have the right
at any time or times thereafter to insist upon strict performance by Mortgagor
of any and all of such terms, provisions and conditions.
Section 8.06. Mortgagee's Right to Perform the Obligations.
If Mortgagor shall fail, refuse or neglect to make any payment or perform
any act required by this Mortgage, then at any time thereafter, and without
notice to or demand upon Mortgagor and without waiving or releasing any other
right, remedy or recourse Mortgagee may have because of same, Mortgagee may (but
shall not be obligated to) make such payment or perform such act for the account
of and at the expense of Mortgagor, and shall have the right to enter upon or in
the Land and Buildings for such purpose and to take all such action thereon and
with respect to the Mortgaged Property as it may deem reasonably necessary or
appropriate. If Mortgagee shall elect to pay any Imposition or other sums due
with reference to the Mortgaged Property, Mortgagee may do so in reliance on any
bill, statement or assessment procured from the appropriate Governmental
Authority or other issuer thereof without inquiring into the accuracy or
validity thereof. Similarly, in making any payments to protect the security
intended to be created by this Mortgage, Mortgagee shall not be bound to inquire
into the validity of any apparent or threatened adverse title, Lien,
encumbrance, claim or charge before making an
21
<PAGE>
advance for the purpose of preventing or removing the same. Mortgagor shall
indemnify Mortgagee for all losses, expenses, damage, claims and causes of
action, including reasonable attorneys' fees, incurred or accruing by reason of
any acts performed by Mortgagee pursuant to the provisions of this Section 8.06
or by reason of any other provision in this Mortgage unless such loss, expense,
damages, claims or causes of action are caused by Mortgagee's negligence or
willful misconduct. All sums paid by Mortgagee pursuant to this Section 8.06 and
all other sums expended by Mortgagee to which it shall be entitled to be
indemnified, together with interest thereon at the Post Default Rate from the
date of such payment or expenditure, shall constitute additions to the
Obligations, shall be secured by this Mortgage and shall be paid by Mortgagor to
Mortgagee upon demand.
Section 8.07. Covenants Running with the Land.
All Obligations contained in the Intercompany Note and the documents
securing the Intercompany Note are intended by the parties to be, and shall be
construed as, covenants running with the Mortgaged Property.
Section 8.08. Successors and Assigns.
All of the terms hereof shall apply to, be binding upon and inure to the
benefit of the parties hereto, their successors, assigns, heirs and legal
representatives, and all other persons claiming by, through or under them.
Section 8.09. Severability.
This Mortgage is intended to be performed in accordance with, and only to
the extent permitted by, all applicable laws and regulations of applicable
Governmental Authorities. If any provision of any of this Mortgage or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or neither the remainder of the instrument which such
provision is contained in the application of such provision to other persons or
circumstances nor the other instruments referred to shall be affected thereby,
but rather shall be enforced to the greatest extent permitted by law.
Section 8.10. Modification.
This Mortgage may not be amended, revised, waived, discharged, released or
terminated orally, but only by a written instrument or instruments executed by
the party against which enforcement of the amendment, revisions, waiver,
discharge, release or termination is asserted. Any alleged amendment, revision,
waiver, discharge, release or termination which is not so documented shall not
be effected as to any party.
22
<PAGE>
Section 8.11. Counterparts.
This Mortgage may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute but one
instrument.
Section 8.12. Applicable Law.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF
THE JURISDICTION WHERE THE MORTGAGED PROPERTY IS LOCATED.
Section 8.13. Subrogation.
If any or all of the proceeds of the Intercompany Note have been used to
extinguish, extend or renew any indebtedness heretofore existing against the
Mortgaged Property, then, to the extent of such funds so used, the Obligations
and this Mortgage shall be subrogated to all of the rights, claims, Liens,
titles and interests (herein collectively referred to as the "Prior Liens")
-----------
heretofore existing against the Mortgaged Property to secure the indebtedness so
extinguished, extended or renewed and the Prior Liens, if any, are not waived
but rather are continued in full force and effect in favor of Mortgagee and are
merged with the Lien and security interest created herein as cumulative security
for the repayment of and the satisfaction of the Obligations. Foreclosure of
the Liens created by this Mortgage shall also constitute foreclosure of the
Prior Liens; provided, however, if, as a matter of law, foreclosure under this
Mortgage may not also constitute the foreclosure of the Prior Liens, then
notwithstanding a foreclosure under this Mortgage, Mortgagee shall have, and
they hereby reserve, all rights with respect to and the Prior Liens, including
without limitation, the right after foreclosure under this Mortgage to seek a
judicial foreclosure of any of the Prior Liens.
Section 8.14. No Partnership.
Nothing contained in this Mortgage is intended to, or shall be construed
as, creating to any extent and in any manner whatsoever, any partnership, joint
venture, or association between Mortgagor and Mortgagee, or in any way make
Mortgagee co-principals with Mortgagor with reference to the Mortgaged Property,
and any inferences to the contrary are hereby expressly negated.
Section 8.15. Headings.
The Article, Section and Subsection entitlements hereof are inserted for
convenience of reference only and shall in no way alter, modify or define, or be
used in construing, the text of such Articles, Sections or Subsections.
Section 8.16. Leasehold Provisions.
23
<PAGE>
(a) Mortgagor has entered into those certain lease agreements
described on Exhibit C hereto (collectively, the "Leases"), which term
------
shall include any and all amendments and renewals of said leases).
Mortgagor will at all times fully perform and comply in all material
respects with all agreements, covenants, terms and conditions imposed
upon or assumed by it as lessee under the Leases, and Mortgagor
further covenants that it will not do or permit anything to be done,
the doing of which, or refrain from doing anything, the omission of
which, will impair or would reasonably be expected to impair the
security of this Mortgage, if Mortgagor shall fail so to do Mortgagee
may (but shall not be obligated to) take any action Mortgagee deems
reasonably necessary or desirable to prevent or to cure any default by
Mortgagor in the performance of or compliance with any of Mortgagor's
covenants or, obligations under said Lease after reasonable prior
notice to Mortgagor. Upon receipt by Mortgagee from the lessor under
any of said Leases of any written notice of default by the lessee
thereunder, Mortgagee may rely thereon and take any action as
aforesaid after reasonable prior notice to Mortgagor to cure such
default even though the existence of such default or the nature
thereof be questioned or denied by Mortgagor or by any party on behalf
of Mortgagor. Mortgagor hereby expressly grants to Mortgagee, and
agrees that Mortgagee shall have, the absolute and immediate right to
enter in and upon the real property described herein or any part
thereof to such extent and as often as Mortgagee in its sole
discretion deems reasonably necessary or desirable in order to prevent
or to cure any such default by Mortgagor. Mortgagee may pay and expend
such sums of money as Mortgagee in its sole discretion deems
reasonably necessary for any such purpose, and Mortgagor hereby agrees
to pay to Mortgagee, immediately and without demand, all such sums so
paid and expended by Mortgagee, together with interest thereon from
the date of each such payment at the Post-Default Rate. All sums so
paid and expended by Mortgagee and the interest thereon shall be added
to and be secured by the Lien of this Mortgage.
(b) Except as permitted by the Indenture, Mortgagor will not
surrender the leasehold estate and interest hereinabove described or
terminate or cancel the Leases.
(c) Mortgagee, by accepting this Mortgage, consents to the terms and
provisions of the Leases, and the rights, titles and interests created
in favor of the lessor thereunder shall not constitute a default under
any provisions of this Mortgage.
(d) This Mortgage is executed subject to the terms and provisions of
the Leases and to all Permitted Encumbrances.
Section 8.17. Gaming Authorities.
Each of the provisions of this Mortgage is subject to, and shall be
enforced in compliance with, the requirements of the Gaming Authorities.
24
<PAGE>
Section 8.18. Indenture.
This Mortgage is subject to the terms, conditions and provisions of the
Indenture. To the extent a term or provision of this Mortgage conflicts with the
Indenture, the Indenture shall control with respect to the subject matter of
such term or provision.
Section 8.19. Rights of Holders.
No Holders of Senior Secured Notes shall have any independent rights
hereunder other than those rights granted to individual Holders pursuant to
Section 6.07 of the Indenture; provided that nothing in this Section 8.19 shall
--------
limit any rights granted to the Trustee under the Senior Secured Notes, the
Indenture or the Collateral Documents.
Section 8.20. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Mortgagor as such or any successor Person, as such, shall
have any liability for any obligations of the Mortgagor under this Mortgage or
for any claim based on, in respect to, or by reason of, such obligations of
their creation.
Section 8.21. Exculpation Provisions.
EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ
THIS MORTGAGE; AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE
TERMS OF THIS MORTGAGE; THAT IT HAS IN FACT READ THIS MORTGAGE AND IS FULLY
INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS
OF THIS MORTGAGE; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF
ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS MORTGAGE;
AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS MORTGAGE; AND
THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS MORTGAGE RESULT IN ONE
PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND
RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY
HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR
ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS MORTGAGE ON THE BASIS THAT
THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS
NOT "CONSPICUOUS."
[SIGNATURE PAGE FOLLOWS]
25
<PAGE>
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage, Leasehold Mortgage,
Security Agreement, Assignment of Leases and Rents, Fixture Filing, and
Financing Statement to be executed and delivered as of the date first set forth
above.
MORTGAGOR: HOLLYWOOD CASINO-AURORA, INC.
By: By: /s/ M. Shannan Pratt
------------------------ -------------------------
Name: M. Shannan Pratt
Title: Vice President of Operations
Address of Mortgagor/Debtor is:
49 West Galena Boulevard
Aurora, Illinois 60506
Address of Mortgagee is:
Two Galleria Tower, Suite 2200
13455 Noel Road, LB48
Dallas, Texas 75240
Address of Trustee is:
Two International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Administration
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF LAKE )
I, Joyce A. Kiel, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY, that M. Shannan Pratt of HOLLYWOOD CASINO-
AURORA, INC., an Illinois corporation, personally known to me to be the Vice
President of Operations of said corporation, and personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person and acknowledged tht as such V. P. of Operations,
he or she signed and delivered the said instrument as V. P. of Operations of
said corporation, pursuant to authority, given as his or her free and voluntary
act and deed of said corporation, for the uses and purposes therein set forth.
Given under my hand and notarial seal this 19th day of May, 1999.
/s/ Joyce A. Kiel
-----------------
Notary Public
[SEAL]
My Commission Expires: 3/12/2002
<PAGE>
EXHIBIT A
---------
Legal Description
PARCEL 1
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOT B
IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA, ALL BOUNDED AND DESCRIBED AS
FOLLOWS: COMMENCING AT THE NORTHWESTERLY CORNER OF LOT 12 IN SAID BLOCK 2;
THENCE NORTHEASTERLY 8.0 FEET ON THE NORTHEASTERLY EXTENSION OF THE
NORTHWESTERLY LINE OF SAID LOT 12 HAVING AN ASSUMED BEARING OF NORTH 54 DEGREES
28 MINUTES 44 SECONDS EAST; THENCE NORTH 52 DEGREES 34 MINUTES 26 MINUTES EAST,
A DISTANCE OF 178.6 FEET TO THE SOUTHWESTERLY LINE OF NEW YORK STREET (ALSO
KNOWN AS ILLINOIS ROUTE 66 AND U.S. ROUTE 30); THENCE NORTH 39 DEGREES 36
MINUTES 14 SECONDS WEST ON THE SOUTHWESTERLY LINE OF SAID NEW YORK STREET, A
DISTANCE OF 13.05 FEET; THENCE NORTH 49 DEGREES 58 MINUTES 46 SECONDS EAST, A
DISTANCE OF 66.0 FEET TO THE NORTHEASTERLY LINE OF SAID NEW YORK STREET FOR THE
POINT OF BEGINNING; THENCE CONTINUING NORTH 48 DEGREES 58 MINUTES 46 SECONDS
EAST, A DISTANCE OF 50.75 FEET TO A POINT OF CURVE; THENCE NORTHEASTERLY TO THE
SOUTHWESTERLY, 361.26 FEET ON THE ARC OF A CURVE TANGENT TO THE LAST DESCRIBED
COURSE, BEING CONCAVE TO THE SOUTHWEST, HAVING A RADIUS OF 115.0 FEET WITH A
CHORD DISTANCE OF 230.0 FEET AND A CHORD BEARING OF SOUTH 40 DEGREES 01 MINUTES
14 SECONDS EAST, THENCE SOUTH 49 DEGREES 58 MINUTES 46 SECONDS WEST, TANGENT TO
THE LAST DESCRIBED CURVE A DISTANCE OF 51.34 FEET TO THE NORTHEASTERLY LINE OF
SAID NEW YORK STREET; THENCE NORTH 39 DEGREES 41 MINUTES 03 SECONDS WEST ON THE
NORTHEASTERLY LINE OF SAID NEW YORK STREET, A DISTANCE OF 229.46 FEET TO THE
POINT OF BEGINNING, ALL IN KANE COUNTY, ILLINOIS.
PARCEL 2:
EASEMENTS FOR THE BENEFIT OF PARCEL 1 AS CREATED BY DECLARATION OF PERMANENT
EASEMENTS BY AND BETWEEN AURORA RIVERBOATS, INC., AND THE CITY OF AURORA,
ILLINOIS, DATED NOVEMBER 12, 1991 AND RECORDED NOVEMBER 14, 1991 AS DOCUMENT
NUMBER 91K62160 AS SET FORTH BELOW:
(A) NON-EXCLUSIVE, IRREVOCABLE AND PERPETUAL EASEMENT FOR INGRESS AND EGRESS TO
PROVIDE ACCESS FOR PEDESTRIAN TRAFFIC OVER, UNDER AND UPON THE FOLLOWING
DESCRIBED PROPERTY:
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOTS
"A" AND "B" IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA, ACCORDING TO THE
PLAT THEREOF RECORDED OCTOBER 18, 1913 AS DOCUMENT NO. 134974, ALL BOUNDED AND
DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHWESTERLY CORNER OF LOT TWELVE IN
SAID BLOCK TWO; THENCE SOUTH 35 DEGREES 31 MINUTES 14 SECONDS EAST ON THE
NORTHEASTERLY LINE OF SAID LOT TWELVE AND ITS SOUTHEASTERLY EXTENSION, A
DISTANCE OF 194.16 FEET TO THE POINT OF BEGINNING; THENCE CONTINUING SOUTH 35
DEGREES 31 MINUTES 14 SECONDS EAST ON SAID SOUTHEASTERLY EXTENSTION, A DISTANCE
OF 48.70 FEET TO THE SOUTHEASTERLY LINE OF SAID LOT "B"; THENCE SOUTH 54 DEGREES
28 MINUTES 46 SECONDS WEST ON THE SOUTHEASTERLY LINE OF SAID LOTS "A" AND "B", A
DISTANCE OF 170.07 FEET TO THE NORTHERLY LINE OF GALENA BOULEVARD, (ALSO KNOWN
AS ILLINOIS ROUTE 65 AND U.S. ROUTE 30); THENCE NORTH 35 DEGREES 31 MINUTES 45
SECONDS WEST ON THE NORTHERLY LINE OF SAID GALENA BOULEVARD A DISTANCE OF 44.80
FEET TO THE NORTHWESTERLY LINE OF SAID LOT "A"; THENCE NORTH 54 DEGREES 28
MINUTES 46 SECONDS EAST ON THE NORTHWESTERLY LINE OF SAID LOT "A", A DISTANCE OF
150.0 FEET TO THE SOUTHWESTERLY LINE OF SAID LOT "B"; THENCE NORTH 35 DEGREES 31
MINUTES 14 SECONDS WEST ON THE SOUTHWESTERLY LINE OF SAID LOT "B", A DISTANCE OF
3.81 FEET; THENCE NORTH 54 DEGREES 21 MINUTES 23 SECONDS EAST A DISTANCE OF 20.0
FEET TO THE POINT OF BEGINNING ALL IN KANE COUNTY, ILLINOIS.
(B) EXCLUSIVE, IRREVOCABLE AND PERPETUAL EASEMENT FOR INGRESS AND EGRESS AND FOR
THE CONSTRUCTION, MAINTENANCE AND USE THEREON OF ANY IMPROVEMENTS ANCILLARY TO
THE USE OF PARCEL 1 OVER, UNDER AND UPON THE FOLLOWING DESCRIBED PROPERTY:
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOT
"B" IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA ACCORDING TO THE PLAT
THEREOF RECORDED OCTOBER 18, 1913 AS DOCUMENT NO. 134974. ALL BOUNDED AND
DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHWESTERLY CORNER OF LOT TWELVE, IN
SAID BLOCK TWO; THENCE NORTHEASTERLY 8.0 FEET ON THE NORTHEASTERLY EXTENSION OF
THE NORTHWESTERLY LINE OF SAID LOT TWELVE, HAVING AN ASSUMED BEARING OF NORTH 54
DEGREES 28 MINUTES 44 SECONDS EAST; THENCE NORTH 52 DEGREES 34 MINUTES 26
SECONDS EAST A DISTANCE OF 178.60 FEET TO THE SOUTHERLY LINE OF NEW YORK STREET
BRIDGE (ALSO KNOWN AS ILLINOIS ROUTE 65 AND U.S. ROUTE 30) FOR THE POINT OF
BEGINNING. THENCE NORTH 39 DEGREES 36 MINUTES 14 SECONDS WEST ON THE SOUTHERLY
LINE OF SAID NEW YORK STREET BRIDGE A DISTANCE OF 13.05 FEET; THENCE NORTH 49
DEGREES 58 MINUTES 56 SECONDS EAST A DISTANCE OF 66.60 FEET TO THE NORTHERLY
LINE OF SAID NEW YORK STREET BRIDGE; THENCE SOUTH 39 DEGREES 41 MINUTES
03 SECONDS EAST ON THE NORTHERLY LINE OF SAID NEW YORK STREET BRIDGE A DISTANCE
OF 229.46 FEET; THENCE SOUTH 49 DEGREES 58 MINUTES 46 SECONDS WEST A DISTANCE OF
66.49 FEET TO THE SOUTHERLY LINE OF SAID NEW YORK STREET BRIDGE; THENCE NORTH 39
DEGREES 36 MINUTES 14 SECONDS WEST ON THE SOUTHERLY LINE OF SAID NEW YORK STREET
BRIDGE, A DISTANCE OF 216.55 FEET TO THE POINT OF BEGINNING, ALL IN KANE COUNTY,
ILLINOIS.
(C) NON-EXCLUSIVE, IRREVOCABLE AND PERPETUAL EASEMENT TO PROVIDE ACCESS FOR
PEDESTRIAN TRAFFIC OVER, UNDER AND UPON THE FOLLOWING DESCRIBED PROPERTY:
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOT
"B" IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA ACCORDING TO THE PLAT
THEREOF RECORDED OCTOBER 18, 1913 AS DOCUMENT NO. 134974. ALL BOUNDED AND
DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER OF LOT TWELVE IN SAID
BLOCK TWO; THENCE NORTHEASTERLY 8.0 FEET ON THE NORTHEASTERLY EXTENSION OF THE
NORTHWESTERLY LINE OF SAID LOT TWELVE, HAVING AN ASSUMED BEARING OF NORTH 54
DEGREES 28 MINUTES 44 SECONDS EAST; THENCE NORTH 52 DEGREES 34 MINUTES 26
SECONDS EAST A DISTANCE OF 178.60 FEET TO THE SOUTHERLY LINE OF NEW YORK STREET
BRIDGE (ALSO KNOWN AS ILLINOIS ROUTE 65 AND U.S. ROUTE 30); THENCE SOUTH 39
DEGREES 36 MINUTES 14 SECONDS EAST, ALONG THE SOUTHERLY LINE OF SAID NEW YORK
STREET BRIDGE, A DISTANCE OF 16.05 FEET; THENCE SOUTH 54 DEGREES 20 MINUTES 19
SECONDS WEST A DISTANCE OF 187.67 FEET TO THE NORTHEASTERLY LINE OF SAID LOT
TWELVE; THENCE NORTH 35 DEGREES 31 MINUTES 14 SECONDS WEST ON THE NORTHEASTERLY
LINE OF SAID LOT TWELVE, A DISTANCE OF 10.53 FEET TO THE POINT OF BEGINNING, ALL
IN KANE COUNTY, ILLINOIS.
ALSO
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH, RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOT
"B" IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA, ACCORDING TO THE PLAT
THEREOF RECORDED OCTOBER 18, 1913 AS DOCUMENT NO. 134974, ALL BOUNDED AND
DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHWESTERLY CORNER OF LOT TWELVE IN
SAID BLOCK TWO; THENCE SOUTH 35 DEGREES 31 MINUTES 14 SECONDS EAST ON THE
NORTHEASTERLY LINE OF SAID LOT TWELVE AND ITS SOUTHEASTERLY EXTENSION, A
DISTANCE OF 194.16 FEET TO THE POINT OF BEGINNING; THENCE NORTH 54 DEGREES 21
MINUTES 23 SECONDS EAST A DISTANCE OF 57.49 FEET; THENCE NORTH 35 DEGREES 38
MINUTES 37 SECONDS WEST A DISTANCE OF 8.35 FEET; THENCE NORTH 54 DEGREES 21
MINUTES 23 SECONDS EAST A DISTANCE OF 130.30 FEET; THENCE SOUTH 39 DEGREES 34
MINUTES 23 SECONDS EAST A DISTANCE OF 25.72 FEET; THENCE SOUTH 49 DEGREES 58
MINUTES 46 SECONDS EAST A DISTANCE OF 190.21 FEET TO THE SOUTHEASTERLY EXTENSION
OF THE NORTHEASTERLY LINE OF SAID LOT TWELVE; THENCE NORTH 35 DEGREES 31 MINUTES
14 SECONDS WEST ON THE SOUTHEASTERLY EXTENSION OF THE NORTHEASTERLY LINE OF SAID
LOT TWELVE, A DISTANCE OF 32.21 FEET TO THE POINT OF BEGINNING, ALL IN KANE
COUNTY, ILLINOIS.
ALSO
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH, RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOT
"B" IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA, ACCORDING TO THE PLAT
THEREOF RECORDED OCTOBER 18, 1913 AS DOCUMENT NO. 134974. ALL BOUNDED AND
DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHWESTERLY CORNER OF LOT TWELVE IN
SAID BLOCK TWO; THENCE NORTHEASTERLY 8.0 FEET ON THE NORTHEASTERLY EXTENSION OF
THE NORTHWESTERLY LINE OF SAID LOT TWELVE, HAVING AN ASSUMED BEARING OF NORTH 54
DEGREES 28 MINUTES 44 SECONDS EAST; THENCE NORTH 52 DEGREES 34 MINUTES 26
SECONDS EAST A DISTANCE OF 178.60 FEET TO THE SOUTHERLY LINE OF NEW YORK STREET
BRIDGE, (ALSO KNOWN AS ILLINOIS ROUTE 65 AND U.S. ROUTE 30), FOR THE POINT OF
BEGINNING; THENCE SOUTH 39 DEGREES 36 MINUTES 14 SECONDS EAST ALONG THE
SOUTHERLY LINE OF SAID NEW YORK STREET BRIDGE, A DISTANCE OF 216.55 FEET; THENCE
SOUTH 49 DEGREES 58 MINUTES 46 SECONDS WEST A DISTANCE OF 12.79 FEET; THENCE
NORTH 39 DEGREES 34 MINUTES 23 SECONDS WEST A DISTANCE OF 83.49 FEET; THENCE
NORTH 35 DEGREES 22 MINUTES 07 SECONDS WEST A DISTANCE OF 2.0 FEET; THENCE SOUTH
54 DEGREES 37 MINUTES 53 SECONDS WEST A DISTANCE OF 1.0 FEET; THENCE NORTH 35
DEGREES 22 MINUTES 07 SECONDS WEST A DISTANCE OF 27.51 FEET; THENCE NORTH 31
DEGREES 16 MINUTES 11 SECONDS WEST A DISTANCE OF 42.76 FEET; THENCE SOUTH 54
DEGREES 37 MINUTES 53 SECONDS WEST A DISTANCE OF 1.0 FEET; THENCE NORTH 35
DEGREES 22 MINUTES 07 SECONDS WEST A DISTANCE OF 4.0 FEET; THENCE NORTH 39
DEGREES 43 MINUTES 09 SECONDS WEST A DISTANCE OF 22.48 FEET; THENCE SOUTH 52
DEGREES 34 MINUTES 26 SECONDS WEST A DISTANCE OF 22.48 FEET; THENCE SOUTH 52
DEGREES 34 MINUTES 26 SECONDS WEST A DISTANCE OF 11.66 FEET; THENCE NORTH 39
DEGREES 43 MINUTES 09 SECONDS WEST A DISTANCE OF 35.03 FEET TO THE SOUTHEASTERLY
LINE OF STOLP AVENUE; THENCE NORTH 52 DEGREES 34 MINUTES 26 SECONDS EAST A
DISTANCE OF 17.42 FEET TO THE POINT OF BEGINNING, ALL IN KANE COUNTY, ILLINOIS.
PARCEL 3:
The estate or interest in the land described or referred to in this Commitment
and covered herein is a Leasehold Estate, as leasehold estate is defined in
paragraph 1 (H) of the conditions and stipulations of the ALTA Leasehold Policy,
created by the instrument herein referred to as the Lease, executed by The City
of Aurora and consented to by The Aurora Metropolitan Exposition Auditorium AND
Office Building Authority, as Lessor, and Aurora Riverboats, Inc., as Lessee,
dated June 04, 1991, a memorandum of which was recorded November 14, 1991 as
Document No. 91K62158, demising the land for a term for 30 years with one or
more 5 year extensions not to exceed 99 years as more fully set forth in the
lease, demising the following described land:
THAT PART OF LOT 1 AND LOTS 2,3,4,5 AND 6, IN BLOCK 1 OF WILDER'S AMENDED
ADDITION TO WEST AURORA COMPLETED, PART OF C. HOYT'S SUBDIVISION OF THAT PART OF
BLOCK 1, IN THE ORIGINAL TOWN OF WEST AURORA, LYING EAST OF RIVER STREET AND
NORTH OF MILL STREET, LOTS 1,2,16, AND THE ALLEY ADJACENT THERETO OF HOYT AND
BROTHER CO., SUBIDIVISION, COUNSEL STREET AND VACATED COUNCIL STREET ALL
DESCRIBED AS FOLLOWS:
BEGINNING AT THE MOST WESTERLY CORNER OF LOT 1 IN BLOCK 1 OF SAID WILDER'S
AMENDED ADDITION, BEGIN ON THE SOUTHEASTERLY LINE OF RIVER STREET; THENCE
NORTHEASTERLY ALONG SAID SOUTHEASTERLY LINE 256.0 FEET TO THE NORTHERLY CORNER
OF LOT 2 IN SAID HOYT AND BROTHER CO., SUBDIVISION; THENCE SOUTHEASTERLY ALONG
THE NORTHEASTERLY LINE OF LOT 2 IN SAID HOYT AND BROTHERS CO., SUBDIVISION 80.0
FEET TO THE EASTERLY CORNER THEREOF; THENCE SOUTHEASTERLY ALONG A LINE FORMING
AN ANGLE OF 196 DEGREES 41 MINUTES 26 SECONDS WITH THE LAST DESCRIBED COURSE
(MEASURED COUNTER-CLOCKWISE THEREFROM) 20.88 FEET TO THE MOST NORTHERLY CORNER
OF SAID LOT 16; THENCE SOUTHEASTERLY ALONG THE NORTHEASTERLY LINE OF SAID LOT
16, 125.66 FEET TO THE NORTHWESTERLY CORNER OF A TRACT OF LAND CONVEYED TO THE
FOX VALLEY PARK DISTRICT BY DISTRICT BY DOCUMENT 1672103; THENCE SOUTHWESTERLY
ALONG A NORTHWESTERLY LINE OF SAID TRACT FORMING AN ANGLE OF 80 DEGREES 57
MINUTES 03 SECONDS WITH THE LAST DESCRIBED COURSE (MEASURED COUNTER-CLOCKWISE
THEREFROM) 28.0 FEET TO AN ANGLE IN SAID NORTHWESTERLY LINE; THENCE
SOUTHEASTERLY AT RIGHT ANGLES TO THE LAST DESCRIBED COURSE 24.0 FEET; THENCE
SOUTHWESTERLY AT RIGHT ANGLES TO THE LAST DESCRIBED COURSE 198.94 FEET; THENCE
SOUTHEASTERLY ALONG A LINE FORMING AN ANGLE OF 53 DEGREES 30 MINUTES 42 SECONDS
WITH THE PROLONGATION OF THE LAST DESCRIBED COURSE (MEASURED COUNTER-CLOCKWISE
THEREFORM) 24.54 FEET TO THE NORTHEASTERLY LINE OF GALENA BOULEVARD AS
EASTABLISHED BY COUNTY COURT PROCEEDING KNOWN AS CASE NUMBER 5190; THENCE
NORTHWESTERLY ALONG THE NORTHEASTERLY LINE OF SAID GALENA BOULEVARD 242.42 FEET
TO AN ANGLE IN SAID NORTHEASTERLY LINE; THENCE NORTHWESTERLY ALONG SAID
NORTHEASTERLY LINE 46.09 FEET TO THE POINT OF BEGINNING, IN THE CITY OF AURORA,
KANE COUNTY ILLINOIS.
PARCEL 4:
The estate or interest in the land described or referred to in this Commitment
and covered herein is a Leasehold Estate, as leasehold estate is defined in
paragraph 1 (H) of the conditions and stipulations of the ALTA Leasehold Policy,
created by the instrument herein referred to as the Lease, executed by The City
of Aurora and consented to by The Aurora Metropolitan Exposition Auditorium AND
Office Building Authority, as Lessor, and Hollywood Casino-Aurora Inc., as
Lessee, dated June 12, 1995, a memorandum of which was recorded October 24, 1995
as Document No. 95K63744, which demises the land for a term of 30 years with
four 5 year extensions as more fully set forth in the lease, demising the
following described land:
LOTS 1,2,3,4,5,6,7,8,9,10,11,12, AND PARTS OF LOTS A AND B IN BLOCK 2 OF ISLAND
AVENUE ADDITION TO AURORA, AND THAT PART OF THE SOUTHWEST 1/4 OF SECTION 22,
TOWNSHIP 38 NORTH, RANGE 8 EAST OF THE THIRD PRINCIPAL MERIDIAN DESCRIBED AS
FOLLOWS: BEGINNING AT THE MOST WESTERLY CORNER OF SAID LOT 9 AT THE NORTHEAST
CORNER OF ISLAND AVENUE AND GALENA BOULEVARD (FORMERLY MAIN STREET); THENCE
NORTHEASTERLY ALONG THE NORTHWESTERLY LINES OF SAID LOTS 9,10,11 AND 12 TO THE
MOST NORTHERLY CORNERLY OF SAID LOT 12; THENCE NORTHEASTERLY 8.0 FEET ON A
NORTHEASTERLY EXTENSION OF SAID NORTHWESTERLY LINE OF SAID LOT 12; THENCE
NORTHEASTERLY AT AN ANGLE OF 178 DEGREES 05 MINUTES 40 SECONDS MEASURED
CLOCKWISE FROM THE LAST DESCRIBED COURSE, 178.6 FEET; THENCE NORTHWESTERLY AT AN
ANGLE OF 87 DEGREES 49 MINUTES 20 SECONDS MEASURED CLOCKWISE FROM THE LAST
DESCRIBED COURSE, 13.06 FEET; THENCE NORTHEASTERLY AT AN ANGLE OF 90 DEGREES 25
MINUTES MEASURED COUNTER-CLOCKWISE FROM THE LAST DESCRIBED COURSE 117.35 FEET:
THENCE NORTHEASTERLY, EASTERLY, SOUTHEASTERLY, SOUTHERLY AND SOUTHWESTERLY
361.28 FEET ON THE ARC OF A CURVE TO THE RIGHT TANGENT TO THE LAST DESCRIBED
COURSE HAVING A RADIUS OF 115.0 FEET, THRU A CENTRAL ANGLE OF 180 DEGREES 00
MINUTES; THENCE SOUTHWESTERLY ALONG A LINE TANGENT TO THE LAST DESCRIBED CURVE,
321.6 FEET TO A LINE PARALLEL WITH AND 170.0 FEET NORTHERLY OF, AS MEASURED AT
RIGHT ANGLES THEREFROM THE NORTHEASTERLY LINE OF GALENA BOULEVARD, SUCH PARALLEL
LINE ALSO BEING A SOUTHEASTERLY EXTENSION OF THE NORTHEASTERLY LINE OF SAID LOT
12; THENCE SOUTHEASTERLY ALONG SAID EXTENSIONS OF THE NORTHEASTERLY LINE OF SAID
LOT 12 TO A LINE (HEREAFTER REFERRED TO AS LINE A) DRAWN FROM A POINT ON THE
NORTHEASTERLY LINE OF GALENA BOULEVARD 44.18 FEET SOUTHEASTERLY OF THE SOUTHWEST
CORNER OF SAID LOT A, SAID LINE A MEASURED NORTHEASTERLY AT AN ANGLE OF 88
DEGREES 19 MEASURED CLOCKWISE FROM SAID NORTHERLY LINE OF GALENA BOULEVARD;
THENCE SOUTHWESTERLY ALONG LINE A, 170.07 FEET TO THE NORTHEAST LINE OF GALENA
BOULEVARD; THENCE NORTHWESTERLY ALONG THE NORTHEASTERLY LINE OF GALENA
BOULEVARD, BEING THE SOUTHWESTERLY LINES OF LOTS 1,2,3,4,5,6,7,8, AND 9 AND PART
OF LOT A, 242.8 FEET TO THE POINT OF BEGINNING, (EXCEPT THAT PART DESCRIBED AS
FOLLOWS: THAT PART OF THE SOUTHWEST 1/4 OF SECTION 22, TOWNSHIP 38 NORTH, RANGE
8, EAST OF THE THIRD PRINCIPAL MERIDIAN DESCRIBED AS FOLLOWS: COMMENCING AT THE
NORTHWESTERLY CORNER OF LOT 12 IN SAID BLOCK 2; THENCE NORTHEASTERLY 8.0 FEET ON
THE NORTHEASTERLY EXTENSION OF THE NORTHWESTERLY LINE OF SAID LOT 12 HAVING AN
ASSUMED BEARING OF NORTH 54 DEGREES 28 MINUTES 44 SECONDS EAST, THENCE NORTH 52
DEGREES 34 MINUTES 26 SECONDS EAST, A DISTANCE OF 178.6 FEET TO THE
SOUTHWESTERLY LINE OF NEW YORK STREET (ALSO KNOWN AS ILLINOIS ROUTE 66 AND U.S.
ROUTE 30); THENCE NORTH 39 DEGREES 36 MINUTES 14 SECONDS WEST ON THE
SOUTHWESTERLY LINE OF SAID NEW YORK STREET, A DISTANCE OF 13.05 FEET; THENCE
NORTH 49 DEGREES 58 MINUTES 56 SECONDS EAST, A DISTANCE OF 66.0 FEET TO THE
NORTHEASTERLY LINE OF SAID NEW YORK STREET FOR THE POINT OF BEGINNING; THENCE
CONTINUING NORTH 48 DEGREES 58 MINUTES 46 SECONDS EAST A DISTANCE OF 50.75 FEET
TO A POINT OF CURVE; THENCE NORTHEASTERLY TO THE SOUTHWESTERLY 361.26 FEET ON
THE ARC OF A CURVE TANGENT TO THE LAST DESCRIBED COURSE, BEING CONCAVE TO THE
SOUTHWEST, HAVING A RADIUS OF 115.0 FEET WITH A CHORD DISTANCE OF 230.0 FEET AND
A CHORD BEARING OF SOUTH 40 DEGREES 01 MINUTES 14 SECONDS EAST, THENCE SOUTH 49
DEGREES 58 MINUTES 46 SECONDS WEST, TANGENT TO THE LAST DESCRIBED CURVE A
DISTANCE OF 51.34 FEET TO THE NORTHEASTERLY LINE OF SAID NEW YORK STREET; THENCE
NORTH 39 DEGREES 41 MINUTES 03 SECONDS WEST ON THE NORTHEASTERLY LINE OF SAID
NEW YORK STREET, A DISTANCE OF 229.46 FEET TO THE POINT OF BEGINNING) ALL IN THE
CITY OF AURORA, KANE COUNTY, ILLINOIS.
P.I.N.: 15-22-330-009
15-22-302-019
15-22-330-008
15-22-330-010
15-22-302-021
15-22-302-022
Commonly known as: 49 West Galena Boulevard
Aurora, IL 60506
<PAGE>
EXHIBIT B
---------
Permitted Encumbrances
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09
of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
<PAGE>
9. Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of business and consistent with industry practices and Liens on deposits
made to obtain the release of such Liens if:
(a) the underlying Obligations are not overdue for a period of more than
60 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings by the Company and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP, and
(c) the Company is in compliance with the terms of the security documents
applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
or other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel;
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to Obligations that do not
exceed Five Million Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of business in
connection with worker's compensation, unemployment insurance and Social
Security benefits.
<PAGE>
EXHIBIT C
---------
Leases
1. NIC Redevelopment Lease dated as of June 12, 1995 by and among Aurora
Metropolitan Exposition, Auditorium and Office Building Authority, Hollywood
Casino-Aurora, Inc. and the City of Aurora (a memorandum of which was recorded
October 24, 1995 as Document Number 95K063744 in the official public records of
real property of Kane County, Illinois).
2. Parking Lease Agreement dated as of June 4, 1991 by and between the
City of Aurora and Aurora Riverboats, Inc., predecessor to Hollywood Casino-
Aurora, Inc. (a memorandum of which was recorded November 14, 1991 as Document
Number 91K62158 in the official public records of real property of Kane County,
Illinois).
<PAGE>
EXHIBIT 4.19
COLLATERAL ASSIGNMENT OF MORTGAGE, LEASEHOLD MORTGAGE,
SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS,
FIXTURE FILING AND FINANCING STATEMENT
HOLLYWOOD CASINO CORPORATION,
Mortgagee and Assignor
In Favor of
STATE STREET BANK AND TRUST COMPANY,
in its capacity as Trustee,
Assignee
Dated as of May 19, 1999
<PAGE>
COLLATERAL ASSIGNMENT OF MORTGAGE, LEASEHOLD MORTGAGE,
------------------------------------------------------
SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS,
---------------------------------------------------
FIXTURE FILING AND FINANCING STATEMENT
--------------------------------------
FOR VALUE RECEIVED, the undersigned, HOLLYWOOD CASINO CORPORATION, a
Delaware corporation (the "Assignor"), whose address for notice hereunder is Two
--------
Galleria Tower, Suite 2200,13455 Noel Road, LB, 48, Dallas, Texas 75201, does
hereby SELL, ASSIGN, TRANSFER AND SET OVER unto STATE STREET BANK AND TRUST
COMPANY, a Massachusetts chartered trust company, as Trustee (the "Assignee"),
--------
under that certain Indenture (as the same may be amended, supplemented, restated
or otherwise modified from time to time, the "Indenture") dated as of the date
---------
hereof by and among Assignor,
1
<PAGE>
Assignee, HWCC-Tunica, Inc., a Texas corporation, and HWCC-Shreveport, Inc., a
Louisiana corporation, which Assignee's address for notice hereunder is Two
International Place, 4th Floor, Boston, Massachusetts 02110, Attention:
Corporate Trust Administration:
(i) all of Assignor's right, title and interest in, to and under that
certain Mortgage, Leasehold Mortgage, Security Agreement, Assignment of Leases
and Rents, Fixture Filing, and Financing Statement (the "Mortgage") dated as of
--------
the date hereof executed by HOLLYWOOD CASINO-AURORA, INC., an Illinois
corporation whose address is 49 West Galena Boulevard, Aurora, Illinois 60506
(the "Mortgagor"), in favor of Assignor, as Mortgagee, covering certain property
---------
therein described, which Mortgage was recorded as shown on Exhibit A hereto
---------
(which Mortgage is incorporated by reference herein), and which Mortgage secures
the due and punctual payment of that certain Promissory Note in the original
principal amount of $108,000,000, made and subscribed by Mortgagor, dated as of
the date hereof, and being payable to the order of the Assignor, and other
obligations described therein (as the same may be amended, supplemented,
restated or otherwise modified from time to time, the "Note," which Note has
----
been assigned to Assignee), the interest thereon and performance of the Mortgage
covenants and obligations, and (ii) all of Assignor's right, title and interest
in and to the property described in the Mortgage, and in and to all amounts
which may now be or may hereafter become due and payable by Mortgagor under the
Mortgage, on account of its indebtedness and obligations under and in respect of
the aforesaid Notes and the Obligations (as defined in the Mortgage), and the
interest thereon, together with all of the rights, powers, privileges and
remedies of Assignor thereunder, including, but without limitation thereto, all
of the Assignor's rights to receive and collect all other amounts which may now
be or may hereafter become due and payable by the Mortgagor under the Mortgage,
reference to the Mortgage being hereby made for all such purposes.
This Collateral Assignment is made as security for (i) the payment
when due of indebtedness evidenced by those certain 11 1/4% Series A and Series
B Senior Secured Notes due 2007 and those certain Floating Rate Series A and
Series B Senior Secured Notes due 2006 (as the same may be amended,
supplemented, restated, exchanged, replaced or otherwise modified from time to
time, collectively, the "Senior Secured Notes") issued by the Assignor pursuant
--------------------
to the provisions of the Indenture, in the aggregate principal sum not to exceed
in any one time outstanding of $360,000,000, interest (including post-petition
interest and interest at the Post-Default Rate (as defined in the Mortgage)) as
set forth in the Indenture and the Senior Secured Notes, and premiums,
penalties, and late charges thereon; (ii) all other indebtedness and other sums
(including, without limitation, all expenses, attorneys' fees, other fees,
indemnifications, reimbursements, damages, other monetary liabilities, and other
charges) and obligations that may or shall become due under the Senior Secured
Notes, the Guarantees (as such term is defined in the Indenture), the Indenture
or the Collateral Documents (as such term is defined in the Indenture); and
(iii) any and all renewals, modifications, amendments, extensions for any
period, supplements, or restatements of any of the foregoing.
In furtherance of the foregoing Collateral Assignment, after the
occurrence and during the continuance of an Event of Default under the
Indenture, Assignor hereby authorizes and empowers Assignee, in Assignee's own
name or in the name of Assignee's nominee, or in the name of and as attorney for
Assignor, to ask, demand, sue for, collect, receive and enforce all sums to
which Assignee is or may be entitled under this Collateral Assignment and
compliance
2
<PAGE>
by Mortgagor with the terms and agreements on its part to be
performed under the Mortgage. Assignee shall have the rights, powers and
remedies provided by applicable law and this Collateral Assignment.
Assignor warrants that it is the legal owner of said Mortgage and has
the lawful right to assign, transfer and set over said Mortgage unto the
Assignee free and clear of any lien, claim or interest of any party whatsoever.
The foregoing warranties and the other provisions of this Collateral
Assignment shall inure to the benefit of the Assignee and its successors,
transferees and assigns under the Indenture.
The Mortgage encumbers the property legally described on Exhibit B
---------
hereto.
THIS COLLATERAL ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE JURISDICTION WHERE THE MORTGAGED PROPERTY IS
LOCATED.
[SIGNATURE PAGE FOLLOWS]
3
<PAGE>
IN WITNESS WHEREOF, the Assignor has executed this Collateral
Assignment of Mortage, Leasehold Mortgage, Security Agreement, Assignment of
Leases and Rents, Fixture Filing and Financing Statement on this 19th day of
May, 1999.
ASSIGNOR: HOLLYWOOD CASINO CORPORATION,
a Delaware corporation
By: /s/ Paul C. Yates
-------------------------------
Paul C. Yates
Executive Vice President and
Chief Financial Officer
4
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF LAKE )
Personally appeared before me, the undersigned authority in and for
said County and State on this 19th day of May, 1999, within my jurisdiction, the
within named Paul C. Yates, who acknowledged that s/he is the Executive Vice
President and CFO of HOLLYWOOD CASINO CORPORATION, a Delaware corporation, and
as her/his act and deed s/he executed the above and foregoing instrument, after
first having been duly authorized by said corporation to do so.
(Seal)
/s/ Joyce A. Kiel
Notary Public in and for
The State of Illinois
County of Lake
My Commission Expires: 3/12/2002
<PAGE>
EXHIBIT A
---------
Recording Information
---------------------
<PAGE>
EXHIBIT B
---------
Legal Description
-----------------
PARCEL 1
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOT B
IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA, ALL BOUNDED AND DESCRIBED AS
FOLLOWS: COMMENCING AT THE NORTHWESTERLY CORNER OF LOT 12 IN SAID BLOCK 2;
THENCE NORTHEASTERLY 8.0 FEET ON THE NORTHEASTERLY EXTENSION OF THE
NORTHWESTERLY LINE OF SAID LOT 12 HAVING AN ASSUMED BEARING OF NORTH 54 DEGREES
28 MINUTES 44 SECONDS EAST; THENCE NORTH 52 DEGREES 34 MINUTES 26 MINUTES EAST,
A DISTANCE OF 178.6 FEET TO THE SOUTHWESTERLY LINE OF NEW YORK STREET (ALSO
KNOWN AS ILLINOIS ROUTE 66 AND U.S. ROUTE 30); THENCE NORTH 39 DEGREES 36
MINUTES 14 SECONDS WEST ON THE SOUTHWESTERLY LINE OF SAID NEW YORK
STREET, A DISTANCE OF 13.05 FEET; THENCE NORTH 49 DEGREES 58 MINUTES 46 SECONDS
EAST, A DISTANCE OF 66.0 FEET TO THE NORTHEASTERLY LINE OF SAID NEW YORK STREET
FOR THE POINT OF BEGINNING; THENCE CONTINUING NORTH 48 DEGREES 58 MINUTES 46
SECONDS EAST, A DISTANCE OF 50.75 FEET TO A POINT OF CURVE; THENCE NORTHEASTERLY
TO THE SOUTHWESTERLY, 361.26 FEET ON THE ARC OF A CURVE TANGENT TO THE LAST
DESCRIBED COURSE, BEING CONCAVE TO THE SOUTHWEST, HAVING A RADIUS OF 115.0 FEET
WITH A CHORD DISTANCE OF 230.0 FEET AND A CHORD BEARING OF SOUTH 40 DEGREES 01
MINUTES 14 SECONDS EAST, THENCE SOUTH 49 DEGREES 58 MINUTES 46 SECONDS WEST,
TANGENT TO THE LAST DESCRIBED CURVE A DISTANCE OF 51.34 FEET TO THE
NORTHEASTERLY LINE OF SAID NEW YORK STREET; THENCE NORTH 39 DEGREES 41 MINUTES
03 SECONDS WEST ON THE NORTHEASTERLY LINE OF SAID NEW YORK STREET, A DISTANCE OF
229.46 FEET TO THE POINT OF BEGINNING, ALL IN KANE COUNTY, ILLINOIS.
PARCEL 2:
EASEMENTS FOR THE BENEFIT OF PARCEL 1 AS CREATED BY DECLARATION OF PERMANENT
EASEMENTS BY AND BETWEEN AURORA RIVERBOATS, INC., AND THE CITY OF AURORA,
ILLINOIS, DATED NOVEMBER 12, 1991 AND RECORDED NOVEMBER 14, 1991 AS DOCUMENT
NUMBER 91K62160 AS SET FORTH BELOW:
(A) NON-EXCLUSIVE, IRREVOCABLE AND PERPETUAL EASEMENT FOR INGRESS AND EGRESS TO
PROVIDE ACCESS FOR PEDESTRIAN TRAFFIC OVER, UNDER AND UPON THE FOLLOWING
DESCRIBED PROPERTY:
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOTS
"A" AND "B" IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA, ACCORDING TO THE
PLAT THEREOF RECORDED OCTOBER 18, 1913 AS DOCUMENT NO. 134974, ALL BOUNDED AND
DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHWESTERLY CORNER OF LOT TWELVE IN
SAID BLOCK TWO; THENCE SOUTH 35 DEGREES 31 MINUTES 14 SECONDS EAST ON THE
NORTHEASTERLY LINE OF SAID LOT TWELVE AND ITS SOUTHEASTERLY EXTENSION, A
DISTANCE OF 194.16 FEET TO THE POINT OF BEGINNING; THENCE CONTINUING SOUTH 35
DEGREES 31 MINUTES 14 SECONDS EAST ON SAID SOUTHEASTERLY EXTENSION, A DISTANCE
OF 48.70 FEET TO THE SOUTHEASTERLY LINE OF SAID LOT "B"; THENCE SOUTH 54 DEGREES
28 MINUTES 46 SECONDS WEST ON THE SOUTHEASTERLY LINE OF SAID LOTS "A" AND "B", A
DISTANCE OF 170.07 FEET TO THE NORTHERLY LINE OF GALENA BOULEVARD, (ALSO KNOWN
AS ILLINOIS ROUTE 65 AND U.S. ROUTE 30); THENCE NORTH 35 DEGREES 31 MINUTES 45
SECONDS WEST ON THE NORTHERLY LINE OF SAID GALENA BOULEVARD A DISTANCE OF 44.80
FEET TO THE NORTHWESTERLY LINE OF SAID LOT "A"; THENCE NORTH 54 DEGREES 28
MINUTES 46 SECONDS EAST ON THE NORTHWESTERLY LINE OF SAID LOT "A", A DISTANCE OF
150.0 FEET TO THE SOUTHWESTERLY LINE OF SAID LOT "B"; THENCE NORTH 35 DEGREES 31
MINUTES 14 SECONDS WEST ON THE SOUTHWESTERLY LINE OF SAID LOT "B", A DISTANCE OF
3.81 FEET; THENCE NORTH 54 DEGREES 21 MINUTES 23 SECONDS EAST A DISTANCE OF 20.0
FEET TO THE POINT OF BEGINNING ALLIN KANE COUNTY, ILLINOIS.
(B) EXCLUSIVE, IRREVOCABLE AND PERPETUAL EASEMENT FOR INGRESS AND EGRESS AND FOR
THE CONSTRUCTION, MAINTENANCE AND USE THEREON OF ANY IMPROVEMENTS ANCILLARY TO
THE USE OF PARCEL 1 OVER, UNDER AND UPON THE FOLLOWING DESCRIBED PROPERTY:
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOT
"B" IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA ACCORDING TO THE PLAT
THEREOF RECORDED OCTOBER 18, 1913 AS DOCUMENT NO. 134974. ALL BOUNDED AND
DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHWESTERLY CORNER OF LOT TWELVE, IN
SAID BLOCK TWO; THENCE NORTHEASTERLY 8.0 FEET ON THE NORTHEASTERLY EXTENSION OF
THE NORTHWESTERLY LINE OF SAID LOT TWELVE, HAVING AN ASSUMED BEARING OF NORTH 54
DEGREES 28 MINUTES 44 SECONDS EAST; THENCE NORTH 52 DEGREES 34 MINUTES 26
SECONDS EAST A DISTANCE OF 178.60 FEET TO THE SOUTHERLY LINE OF NEW YORK STREET
BRIDGE (ALSO KNOWN AS ILLINOIS ROUTE 65 AND U.S. ROUTE 30) FOR THE POINT OF
BEGINNING. THENCE NORTH 39 DEGREES 36 MINUTES 14 SECONDS WEST ON THE SOUTHERLY
LINE OF SAID NEW YORK STREET BRIDGE A DISTANCE OF 13.05 FEET; THENCE NORTH 49
DEGREES 58 MINUTES 56 SECONDS EAST A DISTANCE OF 66.60 FEET TO THE NORTHERLY
LINE OF SAID NEW YORK STREET BRIDGE; THENCE SOUTH 39 DEGREES 41 MINUTES 03
SECONDS EAST ON THE NORTHERLY LINE OF SAID NEW YORK STREET BRIDGE A DISTANCE OF
229.46 FEET; THENCE SOUTH 49 DEGREES 58 MINUTES 46 SECONDS WEST A DISTANCE OF
66.49 FEET TO THE SOUTHERLY LINE OF SAID NEW YORK STREET BRIDGE; THENCE NORTH 39
DEGREES 36 MINUTES 14 SECONDS WEST ON THE SOUTHERLY LINE OF SAID NEW YORK STREET
BRIDGE, A DISTANCE OF 216.55 FEET TO THE POINT OF BEGINNING, ALL IN KANE COUNTY,
ILLINOIS.
(C) NON-EXCLUSIVE, IRREVOCABLE AND PERPETUAL EASEMENT TO PROVIDE ACCESS FOR
PEDESTRIAN TRAFFIC OVER, UNDER AND UPON THE FOLLOWING DESCRIBED PROPERTY:
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOT
"B" IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA ACCORDING TO THE PLAT
THEREOF RECORDED OCTOBER 18, 1913 AS DOCUMENT NO. 134974. ALL BOUNDED AND
DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER OF LOT TWELVE IN SAID
BLOCK TWO; THENCE NORTHEASTERLY 8.0 FEET ON THE NORTHEASTERLY EXTENSION OF THE
NORTHWESTERLY LINE OF SAID LOT TWELVE, HAVING AN ASSUMED BEARING OF NORTH 54
DEGREES 28 MINUTES 44 SECONDS EAST; THENCE NORTH 52 DEGREES 34 MINUTES 26
SECONDS EAST A DISTANCE OF 178.60 FEET TO THE SOUTHERLY LINE OF NEW YORK STREET
BRIDGE (ALSO KNOWN AS ILLINOIS ROUTE 65 AND U.S. ROUTE 30); THENCE SOUTH 39
DEGREES 36 MINUTES 14 SECONDS EAST, ALONG THE SOUTHERLY LINE OF SAID NEW YORK
STREET BRIDGE, A DISTANCE OF 16.05 FEET; THENCE SOUTH 54 DEGREES 20 MINUTES 19
SECONDS WEST A DISTANCE OF 187.67 FEET TO THE NORTHEASTERLY LINE OF SAID LOT
TWELVE; THENCE NORTH 35 DEGREES 31 MINUTES 14 SECONDS WEST ON THE NORTHEASTERLY
LINE OF SAID LOT TWELVE, A DISTANCE OF 10.53 FEET TO THE POINT OF BEGINNING, ALL
IN KANE COUNTY, ILLINOIS.
ALSO
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH, RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOT
"B" IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA, ACCORDING TO THE PLAT
THEREOF RECORDED OCTOBER 18, 1913 AS DOCUMENT NO. 134974, ALL BOUNDED AND
DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHWESTERLY CORNER OF LOT TWELVE IN
SAID BLOCK TWO; THENCE SOUTH 35 DEGREES 31 MINUTES 14 SECONDS EAST ON THE
NORTHEASTERLY LINE OF SAID LOT TWELVE AND ITS SOUTHEASTERLY EXTENSION, A
DISTANCE OF 194.16 FEET TO THE POINT OF BEGINNING; THENCE NORTH 54 DEGREES 21
MINUTES 23 SECONDS EAST A DISTANCE OF 57.49 FEET; THENCE NORTH 35 DEGREES 38
MINUTES 37 SECONDS WEST A DISTANCE OF 8.35 FEET; THENCE NORTH 54 DEGREES 21
MINUTES 23 SECONDS EAST A DISTANCE OF 130.30 FEET; THENCE SOUTH 39 DEGREES 34
MINUTES 23 SECONDS EAST A DISTANCE OF 25.72 FEET; THENCE SOUTH 49 DEGREES 58
MINUTES 46 SECONDS EAST A DISTANCE OF 190.21 FEET TO THE SOUTHEASTERLY EXTENSION
OF THE NORTHEASTERLY LINE OF SAID LOT TWELVE; THENCE NORTH 35 DEGREES 31 MINUTES
14 SECONDS WEST ON THE SOUTHEASTERLY EXTENSION OF THE NORTHEASTERLY LINE OF SAID
LOT TWELVE, A DISTANCE OF 32.21 FEET TO THE POINT OF BEGINNING, ALL IN KANE
COUNTY, ILLINOIS.
ALSO
THAT PART OF THE SOUTHWEST QUARTER OF SECTION TWENTY-TWO, TOWNSHIP THIRTY-EIGHT
NORTH, RANGE EIGHT, EAST OF THE THIRD PRINCIPAL MERIDIAN, AND THAT PART OF LOT
"B" IN BLOCK TWO OF ISLAND AVENUE ADDITION TO AURORA, ACCORDING TO THE PLAT
THEREOF RECORDED OCTOBER 18, 1913 AS DOCUMENT NO. 134974. ALL BOUNDED AND
DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHWESTERLY CORNER OF LOT TWELVE IN
SAID BLOCK TWO; THENCE NORTHEASTERLY 8.0 FEET ON THE NORTHEASTERLY EXTENSION OF
THE NORTHWESTERLY LINE OF SAID LOT TWELVE, HAVING AN ASSUMED BEARING OF NORTH 54
DEGREES 28 MINUTES 44 SECONDS EAST; THENCE NORTH 52 DEGREES 34 MINUTES 26
SECONDS EAST A DISTANCE OF 178.60 FEET TO THE SOUTHERLY LINE OF NEW YORK STREET
BRIDGE, (ALSO KNOWN AS ILLINOIS ROUTE 65 AND U.S. ROUTE 30), FOR THE POINT OF
BEGINNING; THENCE SOUTH 39 DEGREES 36 MINUTES 14 SECONDS EAST ALONG THE
SOUTHERLY LINE OF SAID NEW YORK STREET BRIDGE, A DISTANCE OF 216.55 FEET; THENCE
SOUTH 49 DEGREES 58 MINUTES 46 SECONDS WEST A DISTANCE OF 12.79 FEET; THENCE
NORTH 39 DEGREES 34 MINUTES 23 SECONDS WEST A DISTANCE OF 83.49 FEET; THENCE
NORTH 35 DEGREES 22 MINUTES 07 SECONDS WEST A DISTANCE OF 2.0 FEET; THENCE SOUTH
54 DEGREES 37 MINUTES 53 SECONDS WEST A DISTANCE OF 1.0 FEET; THENCE NORTH 35
DEGREES 22 MINUTES 07 SECONDS WEST A DISTANCE OF 27.51 FEET; THENCE NORTH 31
DEGREES 16 MINUTES 11 SECONDS WEST A DISTANCE OF 42.76 FEET; THENCE SOUTH 54
DEGREES 37 MINUTES 53 SECONDS WEST A DISTANCE OF 1.0 FEET; THENCE NORTH 35
DEGREES 22 MINUTES 07 SECONDS WEST A DISTANCE OF 4.0 FEET; THENCE NORTH 39
DEGREES 43 MINUTES 09 SECONDS WEST A DISTANCE OF 22.48 FEET; THENCE SOUTH 52
DEGREES 34 MINUTES 26 SECONDS WEST A DISTANCE OF 11.66 FEET; THENCE NORTH 39
DEGREES 43 MINUTES 09 SECONDS WEST A DISTANCE OF 35.03 FEET TO THE SOUTHEASTERLY
LINE OF STOLP AVENUE; THENCE NORTH 52 DEGREES 34 MINUTES 26 SECONDS EAST A
DISTANCE OF 17.42 FEET TO THE POINT OF BEGINNING, ALL IN KANE COUNTY, ILLINOIS.
PARCEL 3:
The estate or interest in the land described or referred to in this Commitment
and covered herein is a Leasehold Estate, as leasehold estate is defined in
paragraph 1 (H) of the conditions and stipulations of the ALTA Leasehold Policy,
created by the instrument herein referred to as the Lease, executed by The City
of Aurora and consented to by The Aurora Metropolitan Exposition Auditorium AND
Office Building Authority, as Lessor, and Aurora Riverboats, inc., as Lessee,
dated June 04, 1991, a memorandum of which was recorded November 14, 1991 as
Document No. 91K62158, demising the land for a term for 30 years with one or
more 5 year extensions not to exceed 99 years as more fully set forth in the
lease, demising the following described land:
THAT PART OF LOT 1 AND LOTS 2,3,4,5 AND 6, IN BLOCK 1 OF WILDER'S AMENDED
ADDITION TO WEST AURORA COMPLETED, PART OF C. HOYT'S SUBDIVISION OF THAT PART OF
BLOCK 1, IN THE ORIGINAL TOWN OF WEST AURORA, LYING EAST OF RIVER STREET AND
NORTH OF MILL STREET, LOTS 1,2,16, AND THE ALLEY ADJACENT THERETO OF HOYT AND
BROTHER CO., SUBDIVISION, COUNSEL STREET AND VACATED COUNCIL STREET ALL
DESCRIBED AS FOLLOWS:
BEGINNING AT THE MOST WESTERLY CORNER OF LOT 1 IN BLOCK 1 OF SAID WILDER'S
AMENDED ADDITION, BEGIN ON THE SOUTHEASTERLY LINE OF RIVER STREET; THENCE
NORTHEASTERLY ALONG SAID SOUTHEASTERLY LINE 256.0 FEET TO THE NORTHERLY CORNER
OF LOT 2 IN SAID HOYT AND BROTHER CO., SUBDIVISION; THENCE SOUTHEASTERLY ALONG
THE NORTHEASTERLY LINE OF LOT 2 IN SAID HOYT AND BROTHERS CO., SUBDIVISION 80.0
FEET TO THE EASTERLY CORNER THEREOF; THENCE SOUTHEASTERLY ALONG A LINE FORMING
AN ANGLE OF 196 DEGREES 41 MINUTES 26 SECONDS WITH THE LAST DESCRIBED COURSE
(MEASURED COUNTER-CLOCKWISE THEREFROM) 20.88 FEET TO THE MOST NORTHERLY CORNER
OF SAID LOT 16; THENCE SOUTHEASTERLY ALONG THE NORTHEASTERLY LINE OF SAID LOT
16, 125.66 FEET TO THE NORTHWESTERLY CORNER OF A TRACT OF LAND CONVEYED TO THE
FOX VALLEY PARK DISTRICT BY DISTRICT BY DOCUMENT 1672103; THENCE SOUTHWESTERLY
ALONG A NORTHWESTERLY LINE OF SAID TRACT FORMING AN ANGLE OF 80 DEGREES 57
MINUTES 03 SECONDS WITH THE LAST DESCRIBED COURSE (MEASURED COUNTER-CLOCKWISE
THEREFROM) 28.0 FEET TO AN ANGLE IN SAID NORTHWESTERLY LINE; THENCE
SOUTHEASTERLY AT RIGHT ANGLES TO THE LAST DESCRIBED COURSE 24.0 FEET; THENCE
SOUTHWESTERLY AT RIGHT ANGLES TO THE LAST DESCRIBED COURSE 198.94 FEET; THENCE
SOUTHEASTERLY ALONG A LINE FORMING AN ANGLE OF 53 DEGREES 30 MINUTES 42 SECONDS
WITH THE PROLONGATION OF THE LAST DESCRIBED COURSE (MEASURED COUNTER-CLOCKWISE
THEREFROM) 24.54 FEET TO THE NORTHEASTERLY LINE OF GALENA BOULEVARD AS
ESTABLISHED BY COUNTY COURT PROCEEDINGS KNOWN AS CASE NUBMER 5190; THENCE
NORTHWESTERLY ALONG THE NORTHEASTERLY LINE OF SAID GALENA BOULEVARD 242.42 FEET
TO AN ANGLE IN SAID NORTHEASTERLY LINE; THENCE NORTHWESTERLY ALONG SAID
NORTHEASTERLY LINE 46.09 FEET TO THE POINT OF BEGINNING, IN THE CITY OF AURORA,
KANE COUNTY ILLIINOIS.
PARCEL 4:
The estate or interest in the land described or referred to in this Commitment
and covered herein is a Leasehold Estate, as leasehold estate is defined in
paragraph 1 (H) of the conditions and stipulations of the ALTA Leasehold Policy,
created by the instrument herein referred to as the Lease, executed by The City
of Aurora and consented to by The Aurora Metropolitan Exposition Auditiorium AND
Office Building Authority, as Lessor, and Hollywood Casino-Aurora Inc., as
Lessee, dated June 12, 1995, a memorandum of which was recorded October 24, 1995
as Document No. 95K63744, which demises the land for a term for 30 years with
four 5 year extensions as more fully set forth in the lease, demising the
following described land:
LOTS 1,2,3,4,5,6,7,8,9,10,11,12, AND PARTS OF LOTS A AND B IN BLOCK 2 OF ISLAND
AVENUE ADDITION TO AURORA, AND THAT PART OF THE SOUTHWEST 1/4 OF SECTION 22,
TOWNSHIP 38 NORTH, RANGE 8 EAST OF THE THIRD PRINCIPAL MERIDIAN DESCRIBED AS
FOLLOWS: BEGINNING AT THE MOST WESTERLY CORNER OF SAID LOT 9 AT THE NORTHEAST
CORNER OF ISLAND AVENUE AND GALENA BOULEVARD (FORMERLY MAIN STREET); THENCE
NORTHEASTERLY ALONG THE NORTHWESTERLY LINES OF SAID LOTS 9,10,11 AND 12 TO THE
MOST NORTHERLY CORNERLY OF SAID LOT 12; THENCE NORTHEASTERLY 8.0 FEET ON A
NORTHEASTERLY EXTENSION OF SAID NORTHWESTERLY LINE OF SAID LOT 12; THENCE
NORTHEASTERLY AT AN ANGLE OF 178 DEGREES 05 MINUTES 40 SECONDS MEASURED
CLOCKWISE FORM THE LAST DESCRIBED COURSE, 178.6 FEET; THENCE NORTHWESTERLY AT AN
ANGLE OF 87 DEGREES 49 MINUTES 20 SECONDS MEASURED CLOCKWISE FROM THE LAST
DESCRIBED COURSE, 13.06 FEET; THENCE NORTHEASTERLY AT AN ANGLE OF 90 DEGREES 25
MINUTES MEASURED COUNTER-CLOCKWISE FROM THE LAST DESCRIBED COURSE 117.35 FEET:
THENCE NORTHEASTERLY, EASTERLY, SOUTHEASTERLY, SOUTHERLY AND SOUTHWESTERLY
361.28 FEET ON THE ARC OF A CURVE TO THE RIGHT TANGENT TO THE LAST DESCRIBED
COURSE HAVING A RADIUS OF 115.0 FEET, THRU A CENTRAL ANGLE OF 180 DEGREES 00
MINUTES; THENCE SOUTHWESTERLY ALONG A LINE TANGENT TO THE LAST DESCRIBED CURVE,
321.6 FEET TO A LINE PARALLEL WITH AND 170.0 FEET NORTHERLY OF, AS MEASURED AT
RIGHT ANGLES THEREFROM THE NORTHEASTERLY LINE OF GALENA BOULEVARD, SUCH PARALLEL
LINE ALSO BEING A SOUTHEASTERLY EXTENSION OF THE NORTHEASTERLY LINE OF SAID LOT
12; THENCE SOUTHEASTERLY ALONG SAID EXTENSIONS OF THE NORTHEASTERLY LINE OF SAID
LOT 12 TO A LINE (HEREAFTER REFERRED TO AS LINE A) DRAWN FROM A POINT ON THE
NORTHEASTERLY LINE OF GALENA BOULEVARD 44.18 FEET SOUTHEASTERLY OF THE SOUTHWEST
CORNER OF SAID LOT A, SAID LINE A MEASURED NORTHEASTERLY AT AN ANGLE OF 88
DEGREES 19 MEASURED CLOCKWISE FROM SAID NORTHERLY LINE OF GALENA BOULEVARD;
THENCE SOUTHWESTERLY ALONG LINE A, 170.07 FEET TO THE NORTHEAST LINE OF GALENA
BOULEVARD; THENCE NORTHWESTERLY ALONG THE NORTHEASTERLY LINE OF GALENA
BOULEVARD, BEING THE SOUTHWESTERLY LINES OF LOTS 1,2,3,4,5,6,7,8, AND 9 AND PART
OF LOT A, 242.8 FEET TO THE POINT OF BEGINNING, (EXCEPT THAT PART DESCRIBED AS
FOLLOWS: THAT PART OF THE SOUTHWEST 1/4 OF SECTION 22, TOWNSHIP 38 NORTH, RANGE
8, EAST OF THE THIRD PRINCIPAL MERIDIAN DESCRIBED AS FOLLOWS: COMMENCING AT THE
NORTHWESTERLY CORNER OF LOT 12 IN SAID BLOCK 2; THENCE NORTHEASTERLY 8.0 FEET ON
THE NORTHEASTERLY EXTENSION OF THE NORTHWESTERLY LINE OF SAID LOT 12 HAVING AN
ASSUMED BEARING OF NORTH 54 DEGREES 28 MINUTES 44 SECONDS EAST, THENCE NORTH 52
DEGREES 34 MINUTES 26 SECONDS EAST, A DISTANCE OF 178.6 FEET TO THE
SOUTHWESTERLY LINE OF NEW YORK STREET (ALSO KNOWN AS ILLINOIS ROUTE 66 AND U.S.
ROUTE 30); THENCE NORTH 39 DEGREES 36 MINUTES 14 SECONDS WEST ON THE
SOUTHWESTERLY LINE OF SAID NEW YORK STREET, A DISTANCE OF 13.05 FEET; THENCE
NORTH 49 DEGREES 58 MINUTES 56 SECONDS EAST, A DISTANCE OF 66.0 FEET TO THE
NORTHEASTERLY LINE OF SAID NEW YORK STREET FOR THE POINT OF BEGINNING; THENCE
CONTINUING NORTH 48 DEGREES 58 MINUTES 46 SECONDS EAST A DISTANCE OF 50.75 FEET
TO A POINT OF CURVE; THENCE NORTHEASTERLY TO THE SOUTHWESTERLY 361.26 FEET ON
THE ARC OF A CURVE TANGENT TO THE LAST DESCRIBED COURSE, BEING CONCAVE TO THE
SOUTHWEST, HAVING A RADIUS OF 115.0 FEET WITH A CHORD DISTANCE OF 230.0 FEET AND
A CHORD BEARING OF SOUTH 40 DEGREES 01 MINUTES 14 SECONDS EAST, THENCE SOUTH 49
DEGREES 58 MINUTES 46 SECONDS WEST, TANGENT TO THE LAST DESCRIBED CURVE A
DISTANCE OF 51.34 FEET TO THE NORTHEASTERLY LINE OF SAID NEW YORK STREET; THENCE
NORTH 39 DEGREES 41 MINUTES 03 SECONDS WEST ON THE NORTHEASTERLY LINE OF SAID
NEW YORK STREET, A DISTANCE OF 229.46 FEET TO THE POINT OF BEGINNING) ALL IN THE
CITY OF AURORA, KANE COUNTY, ILLINOIS.
P.I.N.: 15-22-330-009
15-22-302-019
15-22-330-008
15-22-330-010
15-22-302-021
15-22-302-022
Commonly known as: 49 West Galena Boulevard
Aurora, IL 60506
<PAGE>
Exhibit 4.20
FIRST PREFERRED FLEET MORTGAGE
Made by
HOLLYWOOD CASINO-AURORA INC.
In Favor of
HOLLYWOOD CASINO CORPORATION
ON
THE CITY OF LIGHTS I, THE CITY OF LIGHTS II,
AND THE AURORA BOREALIS
Dated as of May 19, 1999
<PAGE>
<PAGE>
Hollywood Casino-Aurora, Inc.
First Preferred Fleet Mortgage
- ------------------------------
Mortgagor: Hollywood Casino-Aurora, Inc.
49 West Galena Boulevard
Aurora, Illinois 60506
Mortgagor's Interest in each Vessel: 100%
Mortgagee: Hollywood Casino Corporation
Two Galleria, Tower, Suite 2200
13455 Noel Road, LB48
Dallas, Texas 75201
Mortgagee's Interest in each Vessel: 100%
Amount of Mortgage: $108,000,000.00
Maturity Date: May 1, 2007
THIS FIRST PREFERRED FLEET MORTGAGE, dated as of the 19th day of May, 1999,
(as amended, supplemented or otherwise modified from time to time, the
"Mortgage") is made and given by HOLLYWOOD CASINO-AURORA, INC., an Illinois
--------
corporation, (the "Mortgagor"), whose address is set forth above, to HOLLYWOOD
---------
CASINO CORPORATION, a Delaware corporation, whose address is set forth above
(the "Mortgagee"). Mortgagee will assign all of its interests in this Mortgage
---------
to State Street Bank and Trust Company, as Trustee, as security for, among other
things, the Indenture and the Senior Secured Notes referred to below. STATE
STREET BANK AND TRUST COMPANY, as Trustee is hereinafter referred to as the
"Trustee", whose address is set forth in Section 5.6 below.
-------
1
<PAGE>
RECITALS
--------
A. Of even date herewith, Mortgagor has executed a promissory note (with
such note herein referred to as the "Note") payable to the order of Mortgagee in
the original principal amount of $31,500,000.00, with a maximum principal amount
not to exceed at any time outstanding $108,000,000.00. Mortgagor is entering
into this Mortgage to secure, among other things, its obligations under the Note
payable to the order of the Mortgagee. Mortgagee, HWCC-Tunica, Inc., HWCC-
Shreveport, Inc. and the Trustee have entered into an Indenture dated as of May
19, 1999 (as the same may be amended, supplemented, restated or otherwise
modified from time to time, the "Indenture"), pursuant to which the Mortgagee
---------
will issue up to (i) $310,000,000 of its 11 1/4% Series A and Series B Senior
Secured Notes due 2007 and (ii) $50,000,000 of its Floating Rate Series A and
Series B Senior Secured Notes due 2006 (as the same may be amended,
supplemented, restated, exchanged, replaced or otherwise modified from time to
time, the "Senior Secured Notes"). The Mortgagee will collaterally assign all
--------------------
of its right, title and interest in and to the Note and the liens and security
interests securing same (including the liens and security interests granted
under this Mortgage) to the Trustee as security for, among other things the
Mortgagee's obligations under the Indenture and the Senior Secured Notes.
B. The Trustee has requested pursuant to the terms of the Indenture that
Mortgagor execute and deliver this Mortgage, and Mortgagor has agreed to enter
into this Mortgage on the City of Lights I (Official Number 993836), the City of
Lights II (Official Number 993837), and the Aurora Borealis (Official Number
1029229) (collectively, the "Vessels").
-------
C. Now, therefore, to induce the Trustee to execute the Indenture, in
consideration of the premises and of other valuable consideration, receipt of
which is hereby acknowledged, Mortgagor hereby agrees as follows:
ARTICLE I.
----------
GRANTING CLAUSE AND DEFINITIONS
-------------------------------
Section 1.1. Granting Clause.
---------------
To secure the full and timely payment of and the full and timely
performance and discharge of the Obligations (as hereinafter defined), the
Mortgagor has granted, conveyed, mortgaged, pledged, assigned, transferred, set
over and confirmed and by these presents does grant, convey, mortgage, pledge,
assign, transfer, set over and confirm unto the Mortgagee, its successors and
assigns, the following:
The whole of each of the Vessels, duly documented in the name of the
Mortgagor under the laws of the United States, together with all equipment,
parts and accessories integral to the operation of each Vessel as a vessel,
including, but not limited to, all of its respective boilers, engines,
generators, air compressors, machinery, masts, spars, sails, riggings, boats,
anchors, cables, chains, tackle, tools, pumps and pumping equipment, motors,
apparel, furniture, computer equipment, electronic equipment used in connection
with the operation of such Vessel and belonging to such Vessel, all machinery,
equipment, engines, appliances and fixtures for
2
<PAGE>
generating or distributing air, water, heat, electricity, light, fuel or
refrigeration, or for ventilating or sanitary purposes, fittings and equipment,
supplies, spare parts, fuel, and all other appurtenances thereunto appertaining,
or belonging, whether now owned or hereafter acquired, whether or not on board
any said Vessel, and all extensions, additions, accessions, improvements,
renewals, substitutions, and replacements hereafter made in or to any said
Vessel or any part thereof, or in or to any said appurtenances (the term
"Vessel" as used herein being inclusive of all of the foregoing; provided that
the foregoing, shall not include any property which is not a "vessel" within the
meaning of 46 U.S.C. (S) 31322(a); and provided, further, that if any
determination is made at any time that for any reason this Mortgage does include
any property which is not a "vessel" within the meaning of 46 U.S.C. (S)
31322(c)(i), then such property may be separately discharged from the Lien of
this Mortgage (but not the Lien of any other security instruments) by the
payment by the Mortgagor to the Trustee (for application to the Senior Secured
Notes) of .01% of the total amount set forth in Section 6.1 to be applied in the
manner set forth in the Indenture);
TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee, its successors and assigns, forever upon the terms
herein set forth;
PROVIDED, HOWEVER, and these presents are on the condition that if the
Obligations are paid and performed in accordance with the terms thereof and this
Mortgage, then these presents and the estates and rights hereunder shall cease,
terminate and be void, otherwise to be and remain in full force and effect.
Section 1.2. Definitions.
-----------
As used in this Mortgage, the terms "Mortgage", "Mortgagor", "Mortgagee",
-------- --------- ---------
"Indenture", "Note", "Senior Secured Notes", "Trustee", and "Vessels" shall have
--------- ---- -------------------- ------- -------
the meanings assigned to them in the recitals hereto. Any capitalized term used
in this Mortgage and not defined herein shall have the meaning assigned to such
term in the Indenture. As used herein, the following terms shall have the
following meanings:
"Event of Loss" shall have the meaning set forth in Section 2.4 hereof.
-------------
"Event of Default" shall have the meaning set forth in Section 3.1 hereof.
----------------
"Obligations" shall mean (i) the payment when due of indebtedness
-----------
evidenced by the Note is in the principal sum not to exceed at any time
outstanding of $108,000,000.00, interest (including post-petition interest) as
set forth therein, and premiums, penalties, and late charges thereon; (ii) all
other indebtedness and other sums (including, without limitation, all expenses,
attorneys' fees, other fees, indemnifications, reimbursements, damages, other
monetary liabilities, and other charges) and obligations that may or shall
become due under the Note, this Mortgage, and the other documents executed as
security for or in connection with the Note; and (iii) any and all renewals,
modifications, amendments, extensions for any period, supplements and
restatements of any of the foregoing.
"Permitted Encumbrances" shall mean the items on Exhibit A hereto.
----------------------
3
<PAGE>
ARTICLE II.
-----------
REPRESENTATION, WARRANTIES AND COVENANTS
----------------------------------------
In order to induce the Mortgagee to accept this Mortgage as collateral
security for the Obligations, the Mortgagor represents and warrants to the
Mortgagee and covenants and agrees with the Mortgagee that:
Section 2.1. Legal Existence; Citizenship Authorization.
------------------------------------------
The Mortgagor is a corporation duly organized and validly existing under
the laws of the State of Illinois; and except as permitted by the Indenture,
shall maintain its corporate existence during the term of this Mortgage; and the
Mortgagor is and will continue to be a citizen of the United States within the
meaning of Section 2 of the Shipping Act of 1916, as amended, and is duly
qualified to engage in the trades in which each of the Vessels operates. The
Mortgagor is duly authorized to mortgage each of the Vessels, and all corporate
action necessary and required by law for the execution and delivery of this
Mortgage has been duly and effectively taken by it, and this Mortgage is the
valid and enforceable obligation of the Mortgagor, except that (a) the
enforceability of any rights to indemnity and contribution hereunder may be
limited by federal or state securities laws or principles of public policy, (b)
enforceability hereof may be subject to applicable bankruptcy, insolvency,
fraudulent conveyance or transfer, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and (c) the enforceability
hereof may be subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). All necessary
consents and approvals of any Governmental Authority or any other entity to the
entering into and performance of this Mortgage have been duly obtained or given
and, after giving effect to the use of proceeds of the Note and the Senior
Secured Notes, the entering into and performance of this Mortgage does not and
will not contravene the terms of or constitute a default under (with or without
giving of notice or lapse of time or both) any material agreement, instrument or
document to which the Mortgagor is a party or by which it or its properties are
bound or affected.
Section 2.2. Ownership of Vessels; Warranty and Defense of Title.
---------------------------------------------------
Except as set forth on Schedule 2.2 hereto, the Mortgagor is the sole
owner of the whole of each of the Vessels and is lawfully possessed of the whole
of each of the Vessels, free from any Lien whatsoever other than the Lien of
this Mortgage and the Liens permitted by Section 2.6 hereof, and the Mortgagor
will warrant and defend the title to and possession of each of the Vessels and
every part thereof for the benefit of the Mortgagee against the claims and
demands of all other persons whomsoever, subject to the Liens and other matters
not prohibited by the Indenture or this Mortgage.
Section 2.3. Compliance with Laws.
--------------------
(a) Documentation. Each Vessel is, and during the term of this
-------------
Mortgage shall continue to be, duly and lawfully registered under the laws and
flag of the United States,
4
<PAGE>
and the Mortgagor will comply with and satisfy all of the provisions of the laws
of the United States in order that each Vessel shall continue to be documented
pursuant to the laws of the United States as a vessel of the United States under
the United States flag with such endorsements as shall qualify such Vessel for
participation in the trades and services to which it may be dedicated from time
to time.
(b) Title 46. The Mortgagor will, at its expense and at no cost to
--------
the Mortgagee, comply with and satisfy all the provisions of Chapters 301 and
313 of Title 46 of the United States Code, as amended, in order to establish,
record and maintain this Mortgage as a first preferred ship or fleet mortgage
thereunder upon each of the Vessels. This Mortgage is in substantial compliance
with the conditions and requirements contained in Section 31321 of Title 46 of
the United States Code.
(c) Laws, Treaties and Conventions. Each Vessel shall, and the
------------------------------
Mortgagor covenants that it will in the operation of each Vessel, at all times
comply in all material respects with all applicable laws, treaties and
conventions and rules and regulations issued thereunder, and shall have on board
as and when required thereby valid certificates showing compliance therewith,
except, with respect to a Vessel, when (i) the use or title of such Vessel has
been taken, requisitioned or chartered by any Governmental Authority, (ii) there
has been actual or constructive total loss or an agreed or compromised total
loss of such Vessel, or damage to such Vessel to the extent, determined in the
good faith opinion of the Mortgagor, as would make repair thereof uneconomical,
or (iii) such Vessel has been laid up and removed from service and the Mortgagor
has taken adequate precautions for the preservation and maintenance of such
Vessel.
Section 2.4. Operation of Vessels.
--------------------
The Mortgagor will not (except during any period when the use or title to
any Vessel has been taken, requisitioned or chartered by any Governmental
Authority) cause or permit any Vessel to be operated in any manner contrary to
applicable law or regulation, will not abandon any Vessel in any foreign port
(unless an Event of Loss (as hereinafter defined) has occurred as to such Vessel
or the safety or welfare of the Mortgagor's employees on such Vessel is
endangered), will not engage in any unlawful trade, violate any law or carry any
cargo that will expose any Vessel to penalty, forfeiture or capture and will not
do, or suffer or permit to be done, anything which can or may injuriously affect
the documentation of any Vessel under the existing laws and regulations of the
United States of America. Mortgagor shall keep the operation of each Vessel
within the permitted navigational limits set forth in the trading warranties of
the policies of insurance covering such Vessel and in any case will not operate
such Vessel, or permit such Vessel to be operated, in any area where such
insurance would not be fully applicable and enforceable with respect to such
Vessel and its operation.
"Event of Loss" shall mean any one of the following events: (i) actual
-------------
total loss or destruction of a Vessel or any accident, occurrence or event
resulting in a constructive total loss or an agreed or compromised total loss of
such Vessel; or (ii) substantial damage to a Vessel, the repair of which is
uneconomical, including, but not limited to, any event pursuant to which
insurance proceeds are available which are not applied to repair such Vessel or
any other event
5
<PAGE>
resulting for any reason whatsoever in such Vessel being permanently rendered
unfit for normal use; or (iii) the condemnation, confiscation, acquisition,
seizure, detention, forfeiture, purchase or other taking of title to or use of a
Vessel (unless in the case of a requisition, seizure, detention, or forfeiture,
such action is revoked within ninety (90) days) except the requisition of the
use of a Vessel by any United States' Governmental Authority on a basis not
involving, requisition of title to or seizure or forfeiture of such Vessel.
Section 2.5. Claims, Taxes, Fees, etc.
------------------------
The Mortgagor will pay and discharge or cause to be paid and discharged
prior to delinquency, all claims against, and fees, taxes, assessments,
governmental charges, fines and penalties imposed on, the Vessels, their
respective cargoes or any income therefrom; provided, that nothing in this
--------
Section 2.5 shall require the Mortgagor to pay any such claim, fee, tax,
assessment, governmental charge, fine or penalty so long as the validity thereof
shall be contested by it in good faith and by appropriate proceedings, and,
provided, further, that such contest shall not subject any Vessel, or any part
- -------- -------
thereof, to forfeiture or loss.
Section 2.6. Liens.
-----
Neither the Mortgagor, any charterer, the master of any Vessel nor any
other person has or shall have any right, power or authority to create, incur or
permit to be placed or imposed or continued upon any Vessel, any Lien whatsoever
other than the Lien of this Mortgage, Permitted Encumbrances and the following:
(i) Liens for wages of the crew (including wages of a master to the
extent provided by 46 U.S.C. App. (S)(S) 10301-10321, inclusive ("Master's
Wages")) general average and salvage (including contract salvage) which shall
not have been due and payable for forty-five (45) days after termination of a
voyage or which shall then be contested by the Mortgagor in good faith;
(ii) Liens for wages of the crew (including Master's Wages) and
salvage (including contract salvage) which are either unclaimed or covered by
insurance;
(iii) Liens incident to current operations (except for wages of the
crew including Master's Wages and salvage) or liens covered by insurance and any
deductible applicable thereto;
(iv) Liens for repairs; and
(v) Liens disclosed on Schedule 2.2 hereto;
provided that the Liens stated to be permitted by the foregoing subparagraphs
(i) through (iv) shall, unless they constitute a Lien for damage arising out of
tort, for wages of a stevedore when employed directly by the Mortgagor, master,
ship's husband, or agent, for wages of the crew (including Master's Wages) for
general average, or for salvage (including contract salvage), be permitted only
to the extent such Liens are either accrued (but not yet due) or are subordinate
to the Lien of this Mortgage. Nothing contained in this Section 2.6 constitutes
a waiver by the
6
<PAGE>
Mortgagee of the Mortgagee's preferred status pursuant to the provisions of
Chapters 301 and 313 of Title 46 of the United States Code. If any such Lien is
placed on any Vessel which is not subordinate to the Lien of this Mortgage,
Mortgagor will promptly after becoming aware of such Lien notify the Mortgagee.
Section 2.7. Notice of Mortgage.
------------------
The Mortgagor will at all times carry on board each Vessel (with the
ship's papers) a certified copy of this Mortgage and any amendments and
supplements hereto and any assignments hereof, and will exhibit or cause to be
exhibited the same to any person having business with such Vessel which might
give rise to a Lien upon such Vessel or to the sale, conveyance, mortgage or
lease thereof and, on demand, to any representative of the Mortgagee. The
Mortgagor will also place and keep prominently displayed on each Vessel a framed
printed notice in plain type of such size that the paragraph of reading matter
shall cover a space of not less than six inches wide by nine inches high (or
such other dimensions as may be required by law) reading as follows:
"NOTICE OF MORTGAGE
This Vessel is owned by Hollywood Casino-Aurora, Inc. and is
subject to a First Preferred Fleet Mortgage in favor of
Hollywood Casino Corporation, as Mortgagee, which First
Preferred Fleet Mortgage has been assigned by Hollywood
Casino Corporation to State Street Bank and Trust Company,
as Trustee, under the authority of Chapter 301 and Chapter
313 of Title 46 of the United States Code, as amended, a
certified copy of which Mortgage is kept with this Vessel's
papers. Under the terms of said Mortgage neither the owner,
any charterer, the master of this Vessel nor any other
person has any right, power or authority to create, incur or
permit to be placed or imposed upon this Vessel any lien
whatsoever other than the lien of said Mortgage, liens for
wages, general average or salvage, and certain other liens
permitted by the provisions of said Mortgage."
Section 2.8. Libel or Attachment.
-------------------
If a libel is filed against any Vessel or if any Vessel shall be attached,
levied upon or taken into custody by virtue of any proceeding in any court or
tribunal, the Mortgagor will promptly notify the Mortgagee thereof by telegram,
cable or facsimile, confirmed by letter addressed to the Mortgagee, and within
fifteen (15) days after any such libel, levy, attachment or taking into custody,
Mortgagor will use its best efforts to cause such Vessel to be released and will
promptly notify the Mortgagee of such release in the manner aforesaid. In the
event that such Vessel shall not be released within such fifteen (15) day
period, the Mortgagor does hereby authorize and empower the Mortgagee, in the
name of the Mortgagor, or its successor or assigns, to apply for and receive
possession of and to take possession of such Vessel with all the rights and
powers that the Mortgagor, or its successors or assigns, might have, possess or
exercise in any such event; and this power of attorney shall be irrevocable and
may be exercised not only by the Mortgagee hereinabove named but also by any one
such appointee or the appointees of the
7
<PAGE>
Mortgagee, with full power of substitution, to the same extent as if the said
appointee or appointees had been named as one of the attorneys above named by
express designation.
Section 2.9. Maintenance of Vessels; Change of Flag or Hailing Port.
------------------------------------------------------
(a) Except as to any Vessel during such period as (i) the use or title
of such Vessel has been taken, requisitioned or chartered by a Governmental
Authority, (ii) there has been actual or constructive total loss or an agreed or
compromised total loss of such Vessel, or damage to such Vessel to the extent,
determined in the good faith opinion of the Mortgagor, as would make repair
thereof uneconomic, or (iii) such Vessel has been laid up and removed from
service and the Mortgagor has taken adequate precautions for the preservation
and maintenance of such Vessel, the Mortgagor will, at all times and without
cost or expense to the Mortgagee, maintain and preserve, or cause to be
maintained and preserved, each Vessel in good running order and repair, so that
such Vessel shall be tight, staunch, strong and well and sufficiently tackled,
appareled, furnished, equipped and in every respect seaworthy, in compliance
with all applicable United States Coast Guard Regulations, and in as good order
and operating condition for Mortgagor's gaming operations as when made subject
to the Lien of this Mortgage, ordinary wear and tear excepted; provided,
however, that nothing in this Section shall prevent Mortgagor from discontinuing
any operation or maintenance of any portion of a Vessel, or disposing thereof,
if such discontinuance or disposal is (A) in the judgment of the Board of
Directors of the Mortgagor, desirable in the conduct of the business of the
Mortgagor, and (B) not disadvantageous in any material respect to the holders of
the Senior Secured Notes, subject in both instances to the terms of the
Indenture.
(b) Except as to any Vessel during a period set out in clauses (i) or
(ii) of Subsection 2.9(a) above, the Mortgagor will (i) keep such Vessel in such
condition and will comply with all United States Coast Guard and Marine
Insurance Underwriters requirements for vessels of this type and size, and (ii)
will cause such Vessel (except for the Aurora Borealis) to be overhauled when
necessary and to have the bottom inspected, when necessary, and as often as
required by the United States Coast Guard and by the Marine Insurance
Underwriters.
(c) Except as to any Vessel (except for the Aurora Borealis) during a
period set out in clause (i) or (ii) of Subsection 2.9(a) above, during each
calendar year (or part thereof) in which this Mortgage is in effect, the
Mortgagor shall promptly furnish to the Mortgagee copies of all Certified Marine
Survey Reports in connection with annual, and other periodic and damage surveys
with respect to damage greater than $250,000 with respect to such Vessel.
(d) The Mortgagor will not make, or permit to be made, any material
change in the structure or type of any of the Vessels or in their respective
rigs if such change is disadvantageous in any material respect to the Holders of
the Senior Secured Notes, subject to the terms of the Indenture. The Mortgagor
will not change the location where the Vessels are moored or the flag or hailing
port of any of the Vessels, if such change is disadvantageous in any material
respect to the Holders of the Senior Secured Notes, subject to the terms of the
Indenture; Mortgagor shall pay for all expenses of registration or re-
registration of this Mortgage incurred in connection with any such change of
location.
8
<PAGE>
Section 2.10. Inspection.
----------
Weather permitting, the Mortgagor will at all reasonable times, upon
reasonable notice and at no cost or risk to the Mortgagor, afford the Mortgagee
or its authorized representatives full and complete access to each Vessel for
the purpose of inspecting or surveying the same and its papers.
Section 2.11. Sale or Other Disposition of Vessels.
------------------------------------
Except as allowed in the Indenture, the Mortgagor will not sell, mortgage,
bareboat charter, transfer or in any other way dispose of all or any part of any
Vessel without the prior written consent of the Mortgagee.
Section 2.12. Notice of Loss, Requisition or Damage.
-------------------------------------
In the event of actual loss of any Vessel or any casualty, accident or
damage to any Vessel involving or estimated in good faith to involve an amount
in excess of $250,000, the Mortgagor will forthwith give written notice thereof
(containing full particulars) to the Mortgagee.
Section 2.13. Insurance.
---------
(a) All Risk. The Mortgagor shall, at its own expense, keep
--------
such Vessel insured against all such risks that are insured against by prudent
owners of vessels and equipment similar to the Vessels, such insurance to
include, without limitation, insurance against the risks indicated below:
(i) marine (including without limitation, marine and port
risk) hull insurance under the latest (at the time of issue of the policies in
question) forms of American Institute of Marine Underwriters' policies, or under
such other forms of policies as are customary for similar vessels with such a
use, insuring the Vessel against the usual risks covered by such forms; and
(ii) while any Vessel is laid up, at the option of the
Mortgagor and in lieu of the insurance specified by subparagraph (i) above with
respect to such Vessel, port risk insurance under the latest (at the time of
issue of the policies in question) forms of American Institute of Marine
Underwriters' policies, or under such other forms of policies as are customary
for similar vessels with such a use, insuring such Vessel against the usual
risks covered by such forms.
(b) Liability; Workers' Compensation. The Mortgagor shall
--------------------------------
maintain at all times, to the extent required by applicable law, such workers'
compensation or longshoremen's and harbor workers' insurance including a
Maritime Coverage Endorsement and pollution insurance. The Mortgagor shall also,
at its own expense, keep the Vessels insured against such marine protection and
indemnity risks and liabilities (including, without limitation, public
9
<PAGE>
liabilities, marine liabilities and employer's liability) together with umbrella
liability coverage as insured against by prudent owners of vessels and equipment
similar to the Vessels. Such policies shall provide that any loss under such
insurance may be paid directly to the entity to whom any liability covered by
such policies has been incurred.
(c) Payment Provisions. All payments made under policies of insurance
------------------
maintained under this Section shall be applied as set forth in Section 4.11 of
the Indenture.
(d) Constructive Total Loss. In the case of an Event of Loss which is
-----------------------
a constructive total loss of any Vessel, the Mortgagee shall have the right (but
only with prior written consent of the Mortgagor unless an Event of Default has
occurred and is continuing) to claim for a constructive total loss of such
Vessel, and if both (i) such claim is accepted by all underwriters under all
policies then in force as to such Vessel and (ii) payment in full is made in
cash under such policies, then the Mortgagee shall have the right to abandon
such Vessel to the underwriters under such policies, free from the Lien of this
Mortgage.
(e) Agreed Total Loss. The Mortgagee shall not have the right to
-----------------
enter into an agreement or compromise providing for an agreed or compromised
total loss of any Vessel without the prior consent of the Mortgagor unless an
Event of Default has occurred and is continuing. If the Mortgagor shall have
given its prior consent thereto, or an Event of Default has occurred and is
continuing,, the Mortgagee shall have the right in its discretion to enter into
an agreement or compromise providing for an agreed or compromised total loss of
such Vessel, provided the same is agreed to by underwriters under all applicable
policies.
(f) Insurers. All insurance required under this Section 2.13 shall be
--------
placed and kept with the United States Government, or such insurance companies,
underwriters' associations, clubs or underwriting funds as are reputable and
generally recognized within the industry.
(g) Taking by United States. During the continuance of a taking,
-----------------------
requisition or charter of the use of any Vessel by any governmental body of the
United States of America (including, without limitation, the state of Illinois),
the provisions of this Section 2.13 shall be deemed to have been complied with
in all respects as to such Vessel if the United States Government or
governmental body (including, without limitation, the state of Illinois) shall
have agreed (i) to reimburse the Mortgagee and the Mortgagor for loss or damage
resulting from the risks indicated in paragraphs (a) and (b) of this Section
2.13, or (ii) that the Mortgagee and the Mortgagor shall be entitled to just
compensation therefor. In addition, the provisions of this Section 2.13 shall
be deemed to have been complied with in all respects during any period after
title to such Vessel shall have been taken or requisitioned by the United States
Government or governmental body (including, without limitation, the state of
Illinois) or there shall have been an actual or constructive total loss or an
agreed or compromised total loss of such Vessel. In the event of any taking,
requisition, charter or loss of such Vessel contemplated by this paragraph (g),
the Mortgagor shall promptly furnish to the Mortgagee a sworn certificate of an
officer of the Mortgagor stating that such taking, requisition, charter or loss
has occurred and, if there shall have been a taking, requisition or charter of
the use of such Vessel, that the United States Government or governmental body
(including, without limitation, the state of Illinois) has agreed (i) to
reimburse the Mortgagor for loss or damage resulting from the risks indicated in
the
10
<PAGE>
above-mentioned paragraphs (a) and (b) or (ii) that the Mortgagor or the
Mortgagee, as the case may be, is entitled to just compensation therefor.
(h) Mortgage Provisions. All insurance required under this Section
-------------------
2.13 shall be taken out in the name of the Mortgagor. The Mortgagee shall be
named as an additional insured under all liability policies (other than workers'
compensation and similar insurance) and the Mortgagor and the Mortgagee (or its
assignee) shall be named as the sole loss payees under all physical damage
policies in accordance with paragraph (c) of this Section 2.13. All policies
for such insurance shall also provide that (i) there shall be no recourse
against the Mortgagee (or its assignee) for the payment of premiums or
commissions, (ii) if such policies provide for the payment of club calls,
assessments or advances, there shall be no recourse against the Mortgagee (or
its assignee) for the payment thereof, and (iii) at least ten (10) days' or such
greater period as may be provided in any such policy prior written notice of any
cancellation, reduction in amount or material change in coverage of such
insurance shall be given to the Mortgagee (or its assignee) by the insurance
underwriters. All policies for physical damage shall also contain a breach of
warranty clause in favor of the Mortgagee or Mortgagee's interest insurance
shall be carried in lieu thereof.
(i) Compliance. The Mortgagor shall not do any act, nor voluntarily
----------
suffer nor permit any act to be done, whereby any insurance required by this
Section 2.13 shall or may be suspended, impaired or defeated, or suffer or
permit any Vessel to engage in any voyage, to engage in any activity or to carry
any cargo not permitted under the policies of insurance then in effect without
first procuring reasonably comparable insurance for such voyage, activity or the
carriage of such cargo.
(j) Assignment of Insurance to Surety. In the event that any claim or
---------------------------------
Lien is asserted against any Vessel for loss, damage or expense which is covered
by insurance hereunder and it is necessary for the Mortgagor to obtain a bond or
supply other security to prevent arrest of such Vessel or to obtain the release
of such Vessel from arrest on account of said claim or Lien, so long as no Event
of Default has occurred and is continuing, the Mortgagee, upon the written
request of the Mortgagor, shall assign all or any part of its right, title and
interest in and to said insurance covering such loss, damage or expense, to any
entity executing a surety or guaranty bond or other agreement to save or release
such Vessel from such arrest as collateral security to indemnify against
liability under said bond or other agreement
(k) Policies. The Mortgagor, upon execution of this Mortgage, shall
--------
deliver to the Mortgagee true copies of the original policies, certified to the
satisfaction of the Mortgagee, evidencing the insurance maintained under this
Section 2.13. If the Mortgagor executes any new or renewal policies of
insurance under this Section 2.13, the Mortgagor, upon the request of Mortgagee,
will promptly deliver to the Mortgagee true copies of such policies.
(l) Opinion and Certificates. At such times as the Mortgagee may
------------------------
reasonably request, the Mortgagor shall furnish or cause to be furnished to the
Mortgagee a detailed certificate or opinion (signed by a reputable insurance
broker) as to the insurance maintained by the Mortgagor pursuant to this Section
2.13, specifying the respective policies of insurance covering the same and
attaching certificates of confirmation evidencing the same and stating
11
<PAGE>
with regard to the insurance maintained by the Mortgagor pursuant to this
Section 2.13 the amounts, deductibles, and the risks against which such
insurance is issued.
(m) Oil Pollution. The Mortgagor shall on behalf and for the benefit
-------------
of itself and the Mortgagee (i) when required by law, maintain a Certificate of
Financial Responsibility (Oil Pollution) issued by the United States Coast Guard
pursuant to the Oil Pollution Act of 1990, as amended, and (ii) maintain such
additional coverage for the Vessels in respect of oil pollution liability as may
be customary among prudent owners of similar vessels from time to time.
(n) Obligation to Collect. Mortgagor shall, at no cost or expense to
---------------------
the Mortgagee, have the duty and responsibility to make all proofs of loss and
take any and all other steps necessary to effect collections from underwriters
for any loss under any insurance on or in respect of any of the Vessels or the
operation thereof; provided that Mortgagor shall have such duty only to the
extent that such conduct would be taken by a prudent owner.
ARTICLE III.
------------
REMEDIES; APPLICATION OF PROCEEDS
---------------------------------
Section 3.1. Sale, Etc.
---------
If an Event of Default shall have occurred and be continuing which has
resulted in the Mortgagee accelerating the maturity of the Obligations, the
Mortgagee may, to the fullest extent permitted by and in accordance with
applicable law:
(a) exercise all the rights and remedies in foreclosure and otherwise
given to mortgagees by the provisions of the Chapter 313 of Title 46 of the
United States Code, as amended, or by the applicable laws of any other
applicable jurisdiction;
(b) bring suit at law, in equity or in admiralty or initiate and
prosecute such other judicial, extrajudicial, or administrative proceedings as
it may consider appropriate to recover any and all sums due, or declared due, in
respect of the Obligations, with the right to enforce payment of said sums
against any assets of the Mortgagor, whether they are covered by this Mortgage
or otherwise;
(c) take possession of the Vessels, with or without legal proceedings,
at any place where they may be found, and the Mortgagor or any person in
possession of any Vessel, forthwith upon request by the Mortgagee, as mortgage
creditor, shall deliver possession to the Mortgagee on demand of the Mortgagee,
and the Mortgagee shall have the right, subject to applicable law, without being
responsible for loss or damage to lay up, hold, charter, lease, operate or
otherwise use such Vessel for such period and under such conditions as it may
deem most expedient for its interest, accounting only for net profits, if any,
arising from such use and charging against all receipts from such use or from
the sale of such Vessel by court proceedings or pursuant to subsection (d)
below, all costs, expenses, charges, damages or losses by reason of such use;
and if at any time the Mortgagee shall avail itself of the right herein given to
it to take
12
<PAGE>
such Vessel and shall take it, the Mortgagee shall have the right to dock such
Vessel at any dock, pier or other premises owned or leased by the Mortgagor
without charge, or at any other place at the cost and expense of the Mortgagor;
(d) sell any Vessel at public or private sale, by sealed bids or
otherwise, on such terms and conditions as the Mortgagee deems best, free of any
claim, commitment or encumbrance, regardless of the nature thereof, in favor of
the Mortgagor and, except as provided by law, any other person, upon advance
notice of ten (10) consecutive days published in any newspaper authorized to
publish legal notices of that kind in the port of registry and the place of sale
of such Vessel and by sending notice of such sale at least fourteen (14) days
prior to the date fixed for such sale, by telegraph, cable or telex, confirmed
by mail, to the Mortgagor. In the event that any Vessel shall be offered for
sale by private sale, no newspaper publication of notice shall be required, nor
notice of adjournment of sale. Sale may be held at such place and at such time
as the Mortgagee by notice may have specified, or may be adjourned by the
Mortgagee from time to time by announcement at the time and place appointed for
such sale or for such adjourned sale, and without further notice or publication
the Mortgagee may make any such sale at the time and place to which the same
shall be so adjourned; and any sale may be conducted without bringing such
Vessel to the place designated for such sale and in such manner as the Mortgagee
may deem to be for its best advantage, and the Mortgagee may become the
purchaser at any public sale, and shall have the right to credit on the purchase
price any and all sums of money due hereunder.
As used in this Mortgage, "Event of Default" shall mean the occurrence of
any Event of Default under the Indenture.
Section 3.2. Finality of Sale.
----------------
A sale of a Vessel made in pursuance of this Mortgage, whether under the
power of sale hereby granted or any judicial proceedings, shall operate to
divest all right, title and interest of any nature whatsoever of the Mortgagor
therein and thereto, and shall bar the Mortgagor, its successors and assigns,
and all persons claiming by, through or under them. No purchaser shall be bound
to inquire whether notice has been given or whether any default has occurred, or
as to the propriety of the sale, or as to application of the proceeds thereof.
Section 3.3. Powers and Rights of Mortgagee Upon Notice of Default.
-----------------------------------------------------
During the occurrence and continuance of an Event of Default and after the
acceleration of the Senior Secured Notes, Mortgagee shall have the following
powers and rights:
(a) Sale. The Mortgagor does hereby irrevocably appoint the
----
Mortgagee and its successors and assigns the true and lawful attorney of the
Mortgagor, in its name and stead, for the purpose of Sections 3.1 and 3.2, to
make all necessary transfers of any Vessel, and for that purpose the Mortgagee
shall execute all necessary instruments of assignment and transfer (including
bills of sale), the Mortgagor hereby ratifying and confirming all that its said
attorney shall lawfully do by virtue hereof. Nevertheless, the Mortgagor shall,
if so requested by the Mortgagee, ratify and confirm any sale of any Vessel by
executing and delivering to the
13
<PAGE>
purchaser thereof such proper bills of sale, conveyances, instruments of
transfer and releases as may be designated in such request.
(b) Revenues and Proceeds of Vessel: Prior Liens.
--------------------------------------------
(i) The Mortgagee is hereby irrevocably appointed attorney-in-
fact of the Mortgagor, with the power, among other things in the name of the
Mortgagor to demand, collect, receive, compromise and sue for, so far as may be
permitted by law, all freights, hire, earnings, issues, revenues, income and
profits of the Vessels, and all amounts due from underwriters under any
insurance thereon as payment of losses or as return premiums or otherwise,
salvage awards and recoveries, recoveries in general average or otherwise, and
all other sums due or to become due in respect of the Vessels or in respect of
any insurance thereon from any person whomsoever, and to make, give and execute
in the name of the Mortgagor acquittances, receipts, releases or other
discharges for the same, whether under seal or otherwise, and to endorse and
accept in the name of the Mortgagor all checks, notes, drafts, warrants,
agreements and all other instruments in writing with respect to the foregoing,
the Mortgagor hereby confirming and ratifying the same.
(ii) The Mortgagee is hereby irrevocably authorized to pay or
furnish indemnity in the proper amounts against any Liens which have or may (in
the opinion of the Mortgagee) have priority over the Lien of this Mortgage and
which are not permitted under this Mortgage.
(c) Additional Rights. The Mortgagor covenants and agrees that in
-----------------
addition to any and all other rights, powers and remedies elsewhere in this
Mortgage granted to and conferred upon the Mortgagee, the Mortgagee in any suit
to enforce any of its rights, powers or remedies shall be entitled as a matter
of right and not as a matter of discretion (i) to seek the appointment of a
receiver or receivers of any Vessel or the Vessels and any receiver or receivers
so appointed shall have full right and power to use and operate any Vessel or
the Vessels as shall be ordered by the federal court, and (ii) to a decree
ordering and directing the sale and disposal of any Vessel, and the Mortgagee
may become the purchaser at such sale and shall have the right to credit against
the purchase price any and all sums of money due hereunder.
Section 3.4. Restoration of Position.
-----------------------
In case the Mortgagee shall have proceeded to enforce any right, power or
remedy under this Mortgage by foreclosure, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Mortgagee, then and in every such case the
Mortgagor and the Mortgagee shall, subject to any determination in such
proceeding, be restored to their former positions and rights hereunder with
respect to the property subject or intended to be subject to this Mortgage, and
all rights, remedies and powers of the Mortgagee shall, subject to any
determination in such proceeding, continue as if no such proceedings had been
taken.
Section 3.5. Application of Proceeds.
-----------------------
14
<PAGE>
The proceeds of any sale and net earnings derived from the operation, use,
charter, or any other employment of the Vessels by the Mortgagee, as mortgage
creditor, and within any of the powers and authority above given, as well as the
proceeds of any judgment which the Mortgagee may obtain by reason of the breach
of failure to perform any of the terms of this Mortgage, as well as the proceeds
of any claim for damage received by the Mortgagee while exercising the powers
and the authorities above given shall be applied as follows:
(i) to the payment of all charges and expenses, including the
costs of any public or private sale or sales, the cost of replevying or taking
possession of the Vessels which may be incurred or paid out by the Mortgagee, as
mortgage creditor, and the expenses and reasonable administrator and attorneys'
fees incurred on foreclosure or in the protection of the rights and interests of
the Mortgagee founded upon this Mortgage;
(ii) to pay or to furnish indemnity in the proper amounts
against any Liens which have or may (in the opinion of the Mortgagee) have
priority over the Lien of this Mortgage and which are not Liens permitted under
this Mortgage;
(iii) to reduce or pay in full the Obligations; and
(iv) to the payment of any surplus thereafter remaining to the
Mortgagor or to whomsoever shall be entitled thereto.
Section 3.6. No Transfer in Violation of Shipping Act.
----------------------------------------
Notwithstanding any other provision herein to the contrary, no sale,
charter, transfer or other disposition of a Vessel or any interest therein may
be made to any entity not a citizen of the United States within the meaning of
Section 2 of the Shipping Act of 1916, as amended, without the approval of the
Secretary of Transportation of the United States. Furthermore, any Vessel shall
not be operated by the Trustee without the approval of the Secretary of
Transportation.
Section 3.7. Gaming Authority.
----------------
Each of the provisions of this Mortgage is subject to, and shall be
enforced in compliance with, the requirements of any applicable Gaming
Authority.
Section 3.8. Collateral Assignment of Note and Mortgage.
------------------------------------------
The Note and this Mortgage are contemporaneously herewith being
collaterally assigned to the Trustee. Mortgagor hereby acknowledges and
consents to such collateral assignment and agrees that, so long as such
collateral assignment shall remain in effect, the Trustee shall be, for all
purposes hereunder, the Mortgagee under this Mortgage and the other Collateral
Documents.
15
<PAGE>
ARTICLE IV.
-----------
GENERAL POWERS OF MORTGAGEE
---------------------------
Section 4.1. General Powers of Mortgagee.
---------------------------
(a) Arrest or Detention of Vessel. In the event that any Vessel shall
-----------------------------
be arrested or detained by a marshal or other officer of any court of law,
equity or admiralty jurisdiction in any country or nation of the world or by any
government or other entity and shall not be released from arrest or detention
within thirty (30) days from the date of arrest or detention, the Mortgagor does
hereby authorize and empower the Mortgagee, in the name of the Mortgagor, or its
successors or assigns, to apply for and receive possession of and to take
possession of such Vessel with all the rights and powers that the Mortgagor, or
its successors or assigns, might have, possess or exercise in any such event;
and this power of attorney shall be irrevocable and may be exercised not only by
the Mortgagee but also by its appointee or appointees, with full power of
substitution, to the same extent as if the said appointee or appointees had been
named as the attorney above named by express designation.
(b) Suits. The Mortgagor also authorizes and empowers the Mortgagee
-----
or its appointees or any of them to appear in the name of the Mortgagor, its
successors or assigns, in any court of any country or nation of the world where
a suit is pending against any Vessel because of or on account of any alleged
Lien against such Vessel from which the Vessel has not been released in
accordance with the terms of this Mortgage and to take such proceedings as to it
may seem proper towards the defense of such suit and the discharge of such Lien.
(c) Reimbursement of Expenses. If Mortgagor fails to perform any
-------------------------
obligation or covenant under this Mortgage, Mortgagee shall have the right, but
not the obligation, to perform or take such actions to comply with the terms of
this Mortgage, and all amounts reasonably expended in connection with such
conduct shall be a demand obligation of Mortgagor owing to Mortgagee at the
post-default rate of interest specified in the Note and shall be secured by the
Lien of this Mortgage.
ARTICLE V.
----------
SUNDRY PROVISIONS
-----------------
Section 5.1. Defeasance.
----------
If the Obligations shall have been satisfied and discharged then this
Mortgage and the estate and rights hereunder shall cease, determine, and become
null and void; and the Mortgagee, on the request of the Mortgagor and at the
Mortgagor's cost and expense, shall forthwith cause satisfaction and discharge
of this Mortgage to be entered upon its and other appropriate records and shall
execute and deliver to the Mortgagor such instruments as may be necessary in the
Mortgagor's reasonable opinion to duly acknowledge the satisfaction and
discharge of this Mortgage.
16
<PAGE>
Section 5.2. Right of Peaceful Enjoyment.
---------------------------
During the term of this Mortgage and so long as no Event of Default shall
have occurred and be continuing, the Mortgagor shall have full and peaceful
enjoyment, use, right to possession and control of each Vessel.
Section 5.3. Cumulative Remedies: No Waiver.
------------------------------
Each and every power and remedy herein given to the Mortgagee shall be
cumulative and shall be in addition to every other power and remedy herein or
now or hereafter existing at law, in equity, in admiralty, or by statute, and
each and every power and remedy whether herein given or otherwise existing may
be exercised from time to time and as often and in such order as may be deemed
expedient by the Mortgagee, and the exercise or the beginning of the exercise of
any power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other power or remedy. No course of
dealing on the part of the Mortgagee, its officers, employees, consultants or
agents, nor any delay or omission by the Mortgagee in the exercise of any right
or power or in the pursuance of any remedy shall operate as a waiver of any such
right, power or remedy.
Section 5.4. Further Assurances.
------------------
In the event that this Mortgage, or any provisions hereof, shall be deemed
invalid in whole or in part by reason of any present or future law or any
decision of any court having jurisdiction, or if the documents at any time held
by the Mortgagee shall be deemed by the Mortgagee for any reason insufficient to
carry out the rights and powers granted to the Mortgagee herein, then, from time
to time, the Mortgagor will do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered such other and further assurances and
documents as in the opinion of the Mortgagee may reasonably be required in order
to more effectively subject the Vessels to the lien of this Mortgage or more
effectively subject the Vessels to the performance of the terms and provisions
of this Mortgage, or to enable this Mortgage to continuously enjoy the status of
a first preferred ship and fleet mortgage.
Section 5.5. Survival of Agreements.
----------------------
All representations, warranties, covenants and agreements herein contained
or made in writing in connection with this Mortgage shall survive the execution
of this Mortgage and shall continue in full force and effect until all sums
secured hereby shall have been paid in full, and the same shall bind and inure
to the benefit of the respective successors and assigns of the Mortgagor and the
Mortgagee.
Section 5.6. Notices.
-------
All notices, requests and demands to or upon the respective parties hereto
to be effective shall be in writing (including by telex or facsimile
transmission), and, unless otherwise expressly
17
<PAGE>
provided herein, shall be deemed to have been duly given or made when actually
delivered or, in the case of telex notice, when sent, answerback received, or in
the case of facsimile transmission, when received and telephonically confirmed,
addressed as follows or to such other address as may be hereafter notified by
the respective parties hereto or any assignee thereof or successor thereto:
Mortgagor: Hollywood Casino-Aurora, Inc.
49 West Galena Boulevard
Aurora, Illinois 60506
Telecopier No. (708) 801-7250
with copies to:
Two Galleria Tower
Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75201
Telecopier No. (214) 386-7411
Mortgagee: Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75201
Telecopier No. (214) 386-7411
Trustee: State Street Bank and Trust Company,
as Trustee
Corporate Trust Administration
Two International Place, 4th Floor
Boston, Massachusetts 02110
Telecopier No. (617) 664-5151
Section 5.7. Counterparts.
------------
This instrument may be executed in any number of counterparts, and each of
such counterparts shall for all purposes be deemed to be an original.
Section 5.8. Section Headings.
----------------
The section headings used in this Mortgage are for convenience of
reference only and are not to affect the construction of or be taken into
consideration in interpreting this Mortgage.
Section 5.9. GOVERNING LAW.
-------------
THIS MORTGAGE, AND ALL OF THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, SHALL BE GOVERNED BY
TITLE 46, UNITED STATES CODE, CHAPTERS 301 AND 313 AND THE FEDERAL MARITIME LAWS
OF THE UNITED STATES OF AMERICA AND, ONLY TO THE EXTENT NOT ADDRESSED THEREBY,
BY THE LAWS OF THE STATE OF NEW YORK.
18
<PAGE>
Section 5.10. Amendments and Waivers.
----------------------
None of the terms or provisions of this Mortgage may be waived, amended,
supplemented or otherwise modified except if made or given in compliance with
the terms and provisions of the Indenture.
Section 5.11. Termination.
-----------
The grant of the Liens hereunder and all of Mortgagee's rights, powers and
remedies in connection therewith, shall unless otherwise provided in the
Indenture or this Mortgage, remain in full force and effect until payment in
full of (A) the Senior Secured Notes under the terms of the Indenture and (B)
all Obligations then due and owing under the Indenture, the Senior Secured Notes
and the Collateral Documents; provided however that after receipt from the
Mortgagor by the Trustee of a request for a release of any Vessel permitted
under the Indenture upon the sale, transfer, assignment, exchange or other
disposition of such Vessel not prohibited by the Indenture or otherwise (and
upon receipt by the Trustee of all proceeds of such sale, transfer, assignment
exchange or other disposition to the extent required to be remitted to the
Trustee under the Indenture), such Vessel shall be released from the Lien and
security interest created hereunder in accordance with the provisions of the
Indenture and no longer be subject to the Liens granted herein. Upon the
payment in full of (A) the Senior Secured Notes under the terms of the Indenture
and (B) all Obligations then due and owing under the Indenture and the
Collateral Documents, the Mortgagor shall be entitled to the return, upon its
request and at its expense, of such of Vessels pledged by it as shall not have
been sold or otherwise applied pursuant to the terms hereof.
Upon any termination of this Mortgage or release of any Vessel as
permitted by the Indenture the Trustee will, at the expense of the Mortgagor,
execute and deliver to the Mortgagor such documents and take such other actions
as the Mortgagor shall reasonably request to evidence the termination of this
Mortgage or the release of such Vessel, as the case may be. Any such action
taken by the Mortgagee shall be without warranty by or recourse to the
Mortgagee, except as to the absence of any prior assignments by the Mortgagee of
its interests in any Vessel, and shall be at the expense of the Mortgagor. The
Trustee may conclusively rely on any certificate delivered to it by the
Mortgagor stating that the execution of such documents and release of any Vessel
is in accordance with and permitted by the terms of the Indenture and this
Mortgage.
Section 5.12. Indenture.
---------
This Mortgage is issued pursuant to the terms, conditions and provisions
of the Indenture.
Section 5.13. Rights of Senior Secured Noteholders.
------------------------------------
No Senior Secured Noteholder shall have any independent rights hereunder
other than those rights granted to individual Senior Secured Noteholders
pursuant to Section 6.07 of the
19
<PAGE>
Indenture; provided that nothing in this Section 5.13 shall limit any rights
granted to the Trustee under the Senior Secured Notes, the Indenture or the
Collateral Documents.
Section 5.14. No Personal Liability of Directors, Officers, Employees and
-----------------------------------------------------------
Stockholders.
- ------------
No past, present or future director, officer, employee, incorporator or
stockholder of the Mortgagor as such, or the Holder of any of the Senior Secured
Notes, or any successor Person, as such, shall have any liability for any
obligations of the Mortgagor under this Mortgage or for any claim based on, in
respect of, or by reason of, such obligations or their creation.
ARTICLE VI.
-----------
AMOUNT OF MORTGAGE: RECORDATION
-------------------------------
Section 6.1. Recordation.
-----------
For the purpose of this Mortgage and the recordation of this Mortgage on
the documents of each Vessel as required by Chapter 313 of Title 46 of the
United States Code, as amended, the total amount of this Mortgage is One Hundred
Eight Million and No/100 Dollars ($108,000,000.00) plus interest and performance
of mortgage covenants. The Vessels subject to this Mortgage are identified on
Schedule 6.1 hereto. The Mortgagor holds an interest of 100% in each of the
Vessels and 100% of such interest is subject to this Mortgage. The addresses of
the parties are:
Mortgagor: 49 West Galena Boulevard
Aurora, Illinois 60506
with copy to:
Two Galleria Tower
Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75201
Mortgagee: Two Galleria Tower, Suite 2200
13455 Noel Road, LB48
Dallas, Texas 75201
Trustee: State Street Bank and Trust Company,
as Trustee
Corporate Trust Administration
Two International Place, 4th Floor
Boston Massachusetts 02110
Although it is not intended that this Mortgage include any property other than
the whole of the Vessels named on Schedule 6.1 hereto, including earned
freights, if any determination is made at any time that for any reason this
Mortgage does include any property other than "vessel" within the meaning of 46
U.S.C. (S) 31322(c)(i), then such property may be separately discharged from the
lien of this Mortgage (but not the lien of any other security instruments) by
the payment of .01% of the said total amount.
20
<PAGE>
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly
executed as of the day and year first above written.
HOLLYWOOD CASINO-AURORA, INC.
By: /s/William D. Pratt
---------------------
William D. Pratt
Director and
Assistant Secretary
<PAGE>
THE STATE OF Illinois )
)
COUNTY OF Kane )
THIS INSTRUMENT was acknowledged before me on May 19, 1999, by William D.
Pratt, Assistant Secretary of HOLLYWOOD CASINO-AURORA, INC., an Illinois
corporation, on behalf of such corporation, after having first been duly
authorized by said corporation to do so.
/s/ Zaida Chapa
----------------------
Notary Public in and for
the State of Illinois
Printed Name of Notary: Zaida Chapa
My Commission Expires: May 15, 2002
<PAGE>
SCHEDULE 2.2
------------
Other Liens
-----------
NONE
----
<PAGE>
SCHEDULE 6.1
------------
Description of Vessels
----------------------
Vessel Name Official Number
----------- ---------------
City of Lights I 993836
City of Lights II 993837
Aurora Borealis 1029229
<PAGE>
EXHIBIT A
---------
"Permitted Encumbrances"
----------------------
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09
of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
<PAGE>
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of business and consistent with industry practices and Liens on deposits
made to obtain the release of such Liens if:
(a) the underlying Obligations are not overdue for a period of
more than 60 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings by the Company or applicable Restricted Subsidiaries and adequate
reserves with respect thereto are maintained on the books of the Company in
accordance with GAAP, and
(c) the Company or applicable Restricted Subsidiaries is/are in compliance
with the terms of the security documents applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture (a) the creditor
under such FF&E Financing or Capital Lease Obligations agrees to release such
Lien upon satisfaction of the Obligations under such FF&E Financing or Capital
Lease Obligations, (b) the creditor under such FF&E Financing or Capital Lease
Obligations agrees to release such Lien upon payment of the proceeds from the
sale of such vessel attributable to such FF&E Financing or Capital Lease
Obligations, (c) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges that such Lien does not create rights on the hull or
other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing or lease and Lien
documents, (d) such Lien is expressly subject and subordinate to the Liens
granted in favor of the Trustee, (e) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to promptly notify the Trustee of the
occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that do not
exceed Five Million Dollars ($5,000,000) at any one time outstanding.
<PAGE>
14. Liens incurred and pledges made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and Social
Security benefits.
<PAGE>
EXHIBIT 4.21
ASSIGNMENT OF FIRST PREFERRED FLEET MORTGAGE
ON THE WHOLE OF THE
CITY OF LIGHTS I
(Official Number 993836)
CITY OF LIGHTS II
(Official Number 993837)
-and-
AURORA BOREALIS
(Official Number 1029229)
$108,000,000.00
HOLLYWOOD CASINO CORPORATION
TWO GALLERIA TOWER, SUITE 2200
13455 NOEL ROAD, LB 48
DALLAS, TEXAS 75201
Mortgagee and Assignor
In Favor of
STATE STREET BANK AND TRUST COMPANY,
in its capacity as Trustee under
that certain Indenture dated as of
May 19, 1999 between State Street Bank and
Trust Company, Hollywood Casino Corporation,
HWCC-Shreveport, Inc. and HWCC-Tunica, Inc.
TWO INTERNATIONAL PLACE, 4TH FLOOR
BOSTON, MASSACHUSETTS 02110
Assignee
Dated May 19, 1999
<PAGE>
ASSIGNMENT OF FIRST PREFERRED FLEET MORTGAGE
--------------------------------------------
FOR VALUE RECEIVED, the undersigned, HOLLYWOOD CASINO CORPORATION, Two
Galleria Tower, Suite 2200, 13455 Noel Road, LB 48, Dallas, Texas 75201, a
Delaware corporation (the "Assignor"), does hereby SELL, ASSIGN, TRANSFER AND
SET OVER unto STATE STREET BANK AND TRUST COMPANY, Two International Place, 4th
Floor, Boston, Massachusetts 02110, a Massachusetts trust company, as Trustee
(the "Assignee") under that certain Indenture (the "Indenture") dated as of May
19, 1999 between Assignor, Assignee, HWCC-Shreveport, Inc., a Louisiana
corporation and HWCC-Tunica, Inc., a Texas corporation with an address at Two
Galleria Tower, Suite 2200, 13455 Noel Road, LB 48, Dallas, Texas 75201, and
Assignee's successors and assigns: (i) all of Assignor's right, title and
interest in, to and under that certain First Preferred Fleet Mortgage (the
"Mortgage"), dated May 19, 1999, executed by HOLLYWOOD CASINO-AURORA, INC., 49
West Galena Boulevard, Aurora, Illinois 60506, an Illinois corporation (the
"Mortgagor"), in favor of Assignor, as mortgagee, covering the following
vessels:
NAME OFFICIAL NO.
-------------------------------------------
CITY OF LIGHTS I 993836
CITY OF LIGHTS II 993837
AURORA BOREALIS 1029229
which Mortgage was recorded by the National Vessel Documentation Center on May
19, 1999 at 12:35 p.m. in Book No. 99-50, Page 456, and which mortgage
secures the due and punctual payment of one certain promissory note, in the
original principal amount of $31,500,000.00 with a maximum principal amount of
$108,000,000.00, made and subscribed by Mortgagor, dated May 19, 1999, and being
payable to the order of Assignor, and other obligations described therein (the
"Note"), the interest thereon and performance of Mortgage covenants, and (ii)
all of Assignor's right, title and interest in and to the property described in
the Mortgage, and in and to all amounts which may now be or may hereafter become
due and payable by Mortgagor under the Mortgage, on account of its indebtedness
and obligations under and in respect of the aforesaid Note and the Obligations
(as defined in the Mortgage), and the interest thereon, together with all of the
rights, powers, privileges and remedies of the Mortgagee thereunder, including,
but without limitation thereto, all of the Mortgagee's rights to receive and
collect all other amounts which may now be or may hereafter become due and
payable by the Mortgagor under the Mortgage, reference to the Mortgage being
hereby made for all such purposes.
This Assignment is made as security for (i) the payment when due of
indebtedness evidenced by (a) those certain 11 1/4% Series A and Series B Senior
Secured Notes due 2007 and (b) those certain Floating Rate Series A and Series B
Senior Secured Notes due 2006 (as the same may be amended, supplemented,
restated, exchanged, replaced or otherwise modified from time to time,
collectively, the "Senior Secured Notes") issued by the Assignor pursuant to the
provisions of the Indenture, in the aggregate principal sum not to exceed in any
one time outstanding of $360,000,000,
2
<PAGE>
interest (including post-petition interest) as set forth in the Indenture and
the Senior Secured Notes, and premiums, penalties, and late charges thereon; and
(ii) all other indebtedness and other sums
(including, without limitation, all expenses, attorneys' fees, other
fees, indemnifications, reimbursements, damages, other monetary liabilities, and
other charges) that may or shall become due under the Senior Secured Notes, the
Guarantees (as such term is defined in the Indenture), the Indenture or the
Security Documents (as such term is defined in the Indenture).
In furtherance of the foregoing Assignment, after the occurrence and
during the continuance of an Event of Default under the Indenture, Assignor
hereby authorizes and empowers Assignee, in Assignee's own name or in the name
of Assignee's nominee, or in the name of and as attorney for Assignor, to ask,
demand, sue for, collect, receive and enforce all sums to which Assignee is or
may be entitled under this Assignment and compliance by Mortgagor with the terms
and agreements on its part to be performed under the Mortgage. Assignee shall
have the rights, powers and remedies provided by applicable law and this
Assignment
Assignor warrants that it is the legal owner of said Mortgage and has
the lawful right to assign, transfer and set over said Mortgage unto the
Assignee free and clear of any claim or interest of any party whatsoever.
Assignor further warrants and covenants that it is and will remain a citizen of
the United States of America within the meaning of Title 46, Section 802 of the
United States Code.
The interest of the Assignor in the Mortgage is 100 percent (100%) and
the interest in the Mortgage granted to the Assignee is 100 percent (100%).
The foregoing warranties and the other provisions of this Assignment
shall inure to the benefit of the Assignee and its successors, transferees and
assigns under the Indenture.
IN WITNESS WHEREOF, the Assignor has executed this Assignment of First
Preferred Fleet Mortgage on this 19th day of May, 1999.
ASSIGNOR
HOLLYWOOD CASINO CORPORATION
a Delaware Corporation
By: /s/ William D. Pratt
----------------------
Executive Vice President
3
<PAGE>
ACKNOWLEDGMENT
--------------
STATE OF Illinois
COUNTY OF Kane
On this 19th day of May, 1999, within my jurisdiction before me
personally came and appeared William D. Pratt, known to me, who being by
me duly sworn, did say that he/she resides at Dallas, Texas that he/she is
Executive Vice President of HOLLYWOOD CASINO CORPORATION, the Delaware
corporation described above and Assignor herein, and acknowledged that he/she
executed the foregoing instrument for and on behalf of HOLLYWOOD CASINO
CORPORATION, for the purposes therein contained and in the capacities therein
stated, after first having been duly authorized by said corporation to so do.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in said County and State on the date and year last above written.
/s/ Zaida Chapa
---------------
Notary Public
(Seal)
4
<PAGE>
EXHIBIT 4.22
SECURITY AGREEMENT
------------------
Made by
HWCC-SHREVEPORT, INC.,
as Debtor
to
STATE STREET BANK AND TRUST COMPANY,
as Trustee and Secured Party
Acting on behalf of the Holders of the Notes
May 19, 1999
<PAGE>
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (this "Agreement") is made as of May 19, 1999, by
---------
HWCC-SHREVEPORT, INC., a Louisiana corporation with its chief executive office
at Two Galleria Tower, Suite 2200, 13455 Noel Road, LB 48, Dallas, Texas 75240
("Debtor") in favor of STATE STREET BANK AND TRUST COMPANY, a Massachusetts
------
chartered trust company, with offices at Two International Place, 4th Floor,
Boston, Massachusetts 02110, as Trustee acting on behalf of the Holders of the
Notes under (and as defined in) the Indenture described below (the "Secured
-------
Party").
- -----
RECITALS
--------
A. Hollywood Casino Corporation, a Delaware corporation (the "Borrower"),
--------
HWCC-Tunica, Inc., the Debtor, and State Street Bank and Trust Company, as
Trustee, and certain other parties have entered into an Indenture dated as of
May 19, 1999 (as the same may be amended, supplemented, restated or otherwise
modified from time to time, the "Indenture"), pursuant to which the Borrower
---------
will issue up to (i) $310,000,000 of its 11 1/4% Series A and Series B Senior
Secured Notes due 2007 and (ii) $50,000,000 of its Floating Rate Series A and
Series B Senior Secured Notes due 2006 (as the same may be amended,
supplemented, restated, exchanged, replaced or otherwise modified from time to
time, collectively, the "Notes"). Debtor is an affiliate of Borrower and as
-----
such will derive direct and indirect benefits from the issuance of the Notes
pursuant to the Indenture.
B. Debtor manages that certain casino, hotel complex and related
facilities located in Shreveport, Louisiana (the "Shreveport Casino") pursuant
-----------------
to that certain Management Agreement dated as of September 22, 1998 (the
"Management Agreement") by and between Debtor and QNOV, a Louisiana general
- ---------------------
partnership ("QNOV").
----
C. It is a condition precedent to the purchase of the Notes under the
Indenture that Debtor shall have executed and delivered this Agreement.
D. Therefore, in order to comply with the terms and conditions of the
Indenture and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor hereby agrees with Secured
Party as follows:
ARTICLE 1.
Security Interest
-----------------
Section 1.01. Grant of Security Interest. Debtor hereby assigns,
--------------------------
endorses, delivers, pledges and grants to Secured Party a continuing security
interest in, Lien upon, and right of set-off against the assets referred to in
Section 1.02 hereof (the "Collateral") to secure the prompt and complete payment
----------
and performance of the Obligations (as defined in Section 2.02 hereof) and the
performance by Debtor of this Agreement.
Section 1.02. Collateral. The Collateral consists of the following types
----------
or items of property (including property hereafter acquired by Debtor as well as
property which Debtor now
1
<PAGE>
owns or in which Debtor has rights), but subject to the exceptions and provisos
as set forth herein: the Management Agreement and all profits, fees or other
amounts received, or otherwise receivable by the Debtor in respect of services
provided pursuant to the Management Agreement, and, to the extent permitted by
the Management Agreement and applicable law, all rights and interests of the
Debtor in and to the Management Agreement, and all proceeds of the foregoing
Collateral.
Notwithstanding the foregoing, so long as no Event of Default shall have
occurred and be continuing, all dividends, distributions, interest and principal
payments, cash, instruments, and other property and proceeds made upon or with
respect to or of the Collateral shall not constitute Collateral and may be used
by the Debtor subject to the terms and conditions of the Indenture. Upon the
occurrence and during the continuance of an Event of Default, all rights of the
Debtor to receive all such dividends, distributions, interest and principal
payments, cash, instruments and other property and proceeds shall cease, and
such dividends, distributions, interest and principal payments, cash,
instruments and other property and proceeds shall constitute Collateral, and
shall be paid or otherwise delivered to the Secured Party. It is expressly
contemplated that additional property may from time to time be pledged, assigned
or granted to Secured Party as additional security for the Obligations, and the
term "Collateral" as used herein shall be deemed for all purposes hereof to
include all such additional property, together with all other property of the
types described above related thereto.
ARTICLE 2.
DEFINITIONS
-----------
Section 2.01. Terms Defined Above or in the Indenture. As used in this
---------------------------------------
Agreement, the terms defined above shall have the meanings respectively assigned
to them. Other capitalized terms which are defined in the Indenture but which
are not defined herein shall have the same meanings as defined in the Indenture.
Section 2.02. Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the following meanings, unless the context otherwise
requires:
"Agreement" means this Security Agreement, as the same may from time
---------
to time be amended or supplemented.
"Code" means the Uniform Commercial Code as presently in effect in the
----
State of New York; provided that, if by reason of mandatory provisions of
-------- ----
law, the perfection or the effect of perfection or non-perfection of the
security interests in any Collateral is governed by the Uniform Commercial
Code as in effect in any jurisdiction other than the State of New York,
"Code" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or the effect of perfection or non-perfection. Unless otherwise
indicated by the context herein, all uncapitalized terms which are defined
in the Code shall have their respective meanings as used in Article 9 of
the Code.
"Event of Default" means any event specified in Section 6.01.
----------------
2
<PAGE>
"Obligations" means (i) the payment when due of indebtedness evidenced
-----------
by the Notes in the principal sum not to exceed at any time outstanding of
$360,000,000, interest (including post-petition interest) as set forth in
the Indenture and the Notes, and premiums, penalties, and late charges
thereon; (ii) all other indebtedness and other sums (including, without
limitation, all expenses, attorneys' fees, other fees, indemnifications,
reimbursements, damages, other monetary liabilities, and other charges) and
obligations that may or shall become due hereunder or under the Notes, the
Guarantees, the Indenture, or the other Collateral Documents; and (iii) any
and all renewals, modifications, amendments, extensions for any period,
supplements or restatements of any of the foregoing.
"Obligor" means any Person, other than Debtor, liable (whether
-------
directly or indirectly, primarily or secondarily) for the payment or
performance of any of the Obligations whether as maker, co-maker, endorser,
guarantor, accommodation party, general partner or otherwise.
"Permitted Encumbrances" means the items set forth on Exhibit B
---------------------- ---------
hereto.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Secured Party to accept this Agreement, Debtor
represents and warrants to Secured Party (which representations and warranties
will survive the creation and payment of the Obligations) that:
Section 3.01. Ownership of Collateral; Absence of Encumbrances and
----------------------------------------------------
Restrictions. After giving effect to the use of the proceeds of the Notes,
- ------------
Debtor is, and in the case of property acquired after the date hereof, will be,
the sole legal and beneficial owner of the Collateral holding good and
indefeasible title to the same, free and clear of all Liens except for Permitted
Encumbrances and Debtor has full right, power and authority to assign and grant
a security interest in the Collateral to Secured Party.
Section 3.02. No Required Consent. Except for such authorizations,
-------------------
consents or approvals previously obtained and in effect, no authorization,
consent, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body (other than the filing of financing
statements and the other documents required to perfect or maintain the
perfection of the Liens granted hereby), or QNOV, is required for (i) the due
execution, delivery and performance by Debtor of this Agreement, (ii) the grant
by Debtor of the security interest granted by this Agreement and any enforcement
of the security interest created hereby and any assignment of the Collateral by
Secured Party to a third party purchaser thereof following an Event of Default,
(iii) the perfection of such security interest or (iv) the exercise by Secured
Party of its rights and remedies under this Agreement, except as may be required
by applicable gaming laws or in connection with the disposition of Collateral or
by federal or state securities laws or antitrust laws. The Management Agreement
contains no provisions which conflict with this Agreement or prohibit the
granting of a security interest in the Collateral pursuant to the terms hereof
or the exercise of remedies hereunder with respect to such security interest, or
the assignment of the Collateral to a subsequent purchaser.
3
<PAGE>
Section 3.03. Security Interest. After giving effect to the use of
-----------------
proceeds of the Notes, the grant of the security interest in and Lien on the
Collateral pursuant to this Agreement creates a valid and continuing security
interest in and Lien on the Collateral, enforceable against Debtor, and, upon
the filing of financing statements in the appropriate office for the locations
of the Collateral listed on Exhibit A hereof, the security interests granted
---------
hereby will be perfected, prior to all other Liens except Permitted
Encumbrances, enforceable against third parties and securing payment of the
Obligations.
Section 3.04. No Filings By Third Parties. After giving effect to the use
---------------------------
of proceeds of the Notes, and other than any financing statement or other public
notice or recording naming Secured Party as the secured party therein, no
financing statement or other public notice or recording covering the Collateral
is on file in any public office and Debtor has not signed any document or
agreement authorizing the filing of any such financing statement or other public
notice or recording so long as any of the Obligations are outstanding.
Section 3.05. Name; No Name Changes. The name of the Debtor set forth on
---------------------
Exhibit A hereto is the true and correct legal name of the Debtor, and, except
- ---------
as described on Exhibit A hereto, Debtor has not, during the preceding five (5)
---------
years, entered into any contract, agreement, security instrument or other
document using a name other than, or been known by or otherwise used any name
other than, the name used by Debtor herein.
Section 3.06. Location of Debtor and Collateral. Debtor's chief executive
---------------------------------
office, principal place of business and the locations of Debtor's records
concerning the Collateral are set forth on Exhibit A hereto. Any Collateral not
---------
at such location(s) nevertheless remains subject to Secured Party's security
interest.
Section 3.07. Collateral. All statements or other information provided by
----------
Debtor to Secured Party describing or with respect to the Collateral is (or, in
the case of subsequently furnished information, will be when provided) correct
and complete in all material respects. The delivery at any time by Debtor to
Secured Party of additional descriptions of Collateral shall constitute a
representation and warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Article 3 are correct insofar as they
would pertain to such Collateral or the descriptions thereof, except as
indicated therein.
ARTICLE 4.
COVENANTS AND AGREEMENTS
------------------------
Debtor will at all times comply with the covenants and agreements contained
in this Article 4, from the date hereof and for so long as any part of the
Obligations are outstanding.
Section 4.01. Change in Location of Debtor. Debtor will not change the
----------------------------
location of Debtor's chief executive office, principal place of business or the
locations of Debtor's records concerning the Collateral unless Debtor shall have
given Secured Party at least thirty (30) days prior written notice thereof and
shall have delivered to Secured Party such new financing statements or other
documentation as may be reasonably necessary or required by Secured Party to
ensure the continued perfection and priority of its security interest in the
Collateral.
4
<PAGE>
Section 4.02. Change in Debtor's Name or Corporate Structure. Debtor will
----------------------------------------------
not change its name, identity or corporate structure (including, without
limitation, any merger, consolidation or sale of substantially all of its
assets) unless Debtor shall have given Secured Party at least thirty (30) days
prior written notice thereof and shall have delivered to Secured Party such new
financing statements or other documentation as may be reasonably necessary or
required by Secured Party to ensure the continued perfection and priority of its
security interest on the Collateral.
Section 4.03. Sale, Disposition or Encumbrance of Collateral. Except as
----------------------------------------------
permitted pursuant to the provisions of the Indenture or with Secured Party's
prior written consent, Debtor will not in any way encumber any of the Collateral
(or permit or suffer any of the Collateral to be encumbered) or sell, assign or
otherwise dispose of or transfer any of the Collateral to or in favor of any
Person other than Secured Party.
Section 4.04. Records and Information. Debtor shall keep accurate and
-----------------------
complete records of the Collateral (including proceeds). Secured Party may at
any time upon reasonable prior notice have access during normal business hours
to examine, audit, make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral. Debtor will promptly provide
written notice to Secured Party of all information which in any way relates to
or affects the filing of any financing statement or other public notices or
recordings, or the delivery and possession of items of Collateral, for the
purpose of perfecting a security interest in the Collateral. Debtor will also
promptly furnish such information as Secured Party may from time to time
reasonably request regarding the Collateral or Secured Party's rights or
remedies with respect thereto.
Section 4.05. Reimbursement of Expenses. Debtor hereby assumes all
-------------------------
liability for the Collateral, the security interests created hereunder and any
use, possession, maintenance, management, enforcement or collection of any or
all of the Collateral. Debtor agrees to indemnify and hold Secured Party
harmless from and against and covenants to defend Secured Party against any and
all losses, damages, claims, costs, penalties, liabilities and expenses,
including, without limitation, court costs and reasonable attorneys' fees,
incurred because of, incident to, or with respect to the Collateral (including,
without limitation, any use, possession, maintenance or management thereof, or
any injuries to or deaths of persons or damage to property except to the extent
caused by the gross negligence or willful misconduct of Secured Party). All
amounts for which Debtor is liable pursuant to this Section 4.05 shall be due
and payable by Debtor to Secured Party upon demand. If Debtor fails to make
such payment upon demand (or if demand is not made due to an injunction or stay
arising from bankruptcy or other proceedings) and Secured Party pays such
amount, the same shall be due and payable by Debtor to Secured Party, plus
interest thereon from the date of Secured Party's demand (or from the date of
Secured Party's payment if demand is not made due to such proceedings) at the
interest rate applicable to overdue principal as provided in the Notes.
Section 4.06. Further Assurances. Upon the request of Secured Party,
------------------
Debtor shall (at Debtor's expense) execute and deliver all such assignments,
certificates, financing statements or other documents and give further
assurances and do all other acts and things as Secured Party may reasonably
request to perfect Secured Party's interest in the Collateral or to protect,
enforce or otherwise effect Secured Party's rights and remedies hereunder.
5
<PAGE>
Section 4.07. Use of Collateral. Debtor will not use any Collateral in
-----------------
violation of any law, statute, ordinance, regulation or administrative order, or
suffer it to be so used.
Section 4.08. Secured Party Assumption of Management Agreement. Debtor
------------------------------------------------
agrees that at any time following an Event of Default Lender by notice to Debtor
may assume the Debtor's rights and obligations under the Management Agreement on
a going forward basis and Debtor has obtained the consent of QNOV thereto, and
QNOV's agreement to attorn to and perform all of its obligations under and in
accordance with the terms of the Management Agreement for the benefit of Secured
Party or its assignee. A copy of such agreement of QNOV has been delivered to
Trustee.
ARTICLE 5.
RIGHTS, DUTIES AND POWERS OF SECURED PARTY
------------------------------------------
Secured Party shall have the following rights, duties and powers:
Section 5.01. Discharge Encumbrances. After the occurrence and during the
----------------------
continuance of an Event of Default, Secured Party may, at its option, discharge
any taxes, Liens, security interests or other encumbrances at any time levied or
placed on the Collateral, and may pay for insurance on the Collateral to the
extent required by this Agreement or the Indenture and not obtained by Debtor.
Debtor agrees to reimburse Secured Party upon demand for any payment so made,
plus interest thereon from the date of Secured Party's demand at the interest
rate applicable to overdue principal as provided in the Notes.
Section 5.02. Licenses and Rights to Use Collateral. After the occurrence
-------------------------------------
and during the continuance of an Event of Default, in connection with any
transfer or sale (to Secured Party or any other Person) of the Collateral,
Secured Party is hereby granted a transferable license or other right to use,
without any charge, any of Debtor's labels, patents, copyrights, tradenames,
trade secrets, trademarks or other similar property in completing production,
advertising or selling such Collateral except any of the foregoing property
which is expressly prohibited by its terms from being assigned or licensed.
After the occurrence and during the continuance of an Event of Default, Debtor's
rights under all licenses and franchise agreements shall inure to the benefit of
Secured Party and any transferee of all or any part of the Collateral.
Section 5.03. Cumulative and Other Rights. The rights, powers and
---------------------------
remedies of Secured Party hereunder are in addition to all rights, powers and
remedies given by law or in equity. The exercise by Secured Party of any one or
more of the rights, powers and remedies herein shall not be construed as a
waiver of any other rights, powers and remedies, including, without limitation,
any other rights of set-off (which set-off rights may be exercised only after
the occurrence and during the continuance of an Event of Default). If any of
the Obligations are given in renewal, extension for any period or rearrangement,
or applied toward the payment of debt secured by any Lien, Secured Party shall
be, and is hereby, subrogated to all the rights, titles, interests and liens
securing the debt so renewed, extended, rearranged or paid.
Section 5.04. Disclaimer of Certain Duties.
----------------------------
(a) The powers conferred upon Secured Party by this Agreement are to
protect its interest in the Collateral and shall not impose any duty upon
Secured Party to
6
<PAGE>
exercise any such powers. Debtor hereby agrees that Secured Party shall not
be liable for, nor shall the indebtedness evidenced by the Obligations be
diminished by, Secured Party's delay or failure to collect upon, foreclose,
sell, take possession of or otherwise obtain value for the Collateral.
Nothing herein shall affect any obligation of Secured Party to the Holders
under the Indenture or under applicable law.
(b) Except as may be required by the Indenture, and to the fullest
extent permitted by applicable law, Secured Party shall be under no duty
whatsoever to make or give any presentment, notice of dishonor, protest,
demand for performance, notice of non-performance, notice of intent to
accelerate, notice of acceleration, or other notice or demand in connection
with any Collateral or the Obligations, or to take any steps reasonably
necessary to preserve any rights against any Obligor or other Person.
Debtor waives any right of marshaling in respect of any and all Collateral,
and waives any right to require Secured Party to proceed against any
Obligor or other Person, exhaust any Collateral or enforce any other remedy
which Secured Party now has or may hereafter have against any Obligor or
other Person.
Section 5.05. Modification of Obligations; Other Security. Except as
-------------------------------------------
specifically provided for in the Indenture, Debtor waives (i) any and all notice
of acceptance, creation, modification, rearrangement, renewal or extension for
any period of any instrument executed by any Obligor in connection with the
Obligations and (ii) any defense of any Obligor by reason of disability, lack of
authorization, cessation of the liability of any Obligor or for any other
reason. Debtor authorizes Secured Party, without notice or demand and without
any reservation of rights against Debtor and without affecting Debtor's
liability hereunder or on the Obligations, from time to time to (x) after the
occurrence and during the continuance of an Event of Default and after the
acceleration of the Notes, apply the Collateral in the manner permitted by this
Agreement or Indenture and (y) after the occurrence and during the continuance
of an Event of Default and after the acceleration of the Notes, renew, extend
for any period, accelerate, amend or modify, supplement, enforce, compromise,
settle, waive or release the obligations of any Obligor or any instrument or
agreement of such other Person with respect to any or all of the Obligations or
Collateral.
ARTICLE 6.
EVENTS OF DEFAULT
-----------------
Section 6.01. Events. It shall constitute an Event of Default under this
------
Agreement if an Event of Default occurs and is continuing under the Indenture.
Section 6.02. Remedies. Upon the occurrence and during the continuance of
--------
any Event, of Default, Secured Party may take any or all of the following
actions without notice (except where expressly required below or in the
Indenture) or demand to Debtor:
(a) Take possession of the Collateral and sell or otherwise dispose
of any or all of the Collateral in any commercially reasonable manner as
Secured Party may elect, in a public or private transaction, at any
location as deemed reasonable by Secured Party (including, without
limitation, Debtor's premises), for cash at such price as Secured Party may
deem fair, and (unless prohibited by the Code, as adopted in any applicable
7
<PAGE>
jurisdiction) Secured Party may be the purchaser of any or all Collateral
so sold and may apply upon the purchase price therefor any Obligations
secured hereby. Any such sale or transfer by Secured Party either to
itself or to any other Person shall be absolutely free from any claim of
right by Debtor, including any equity or right of redemption, stay or
appraisal which Debtor has or may have under any rule of law, regulation or
statute now existing or hereafter adopted. Upon any such sale or transfer,
Secured Party shall have the right to deliver, assign and transfer to the
purchaser or transferee thereof the Collateral so sold or transferred.
Secured Party may, at its discretion, provide for a public sale, and any
such public sale shall be held at such time or times within ordinary
business hours and at such place or places as Secured Party may fix in the
notice of such sale. Secured Party shall not be obligated to make any sale
pursuant to any such notice. Secured Party may, without notice or
publication, adjourn any public or private sale by announcement at any time
and place fixed for such sale, and such sale may be made at any time or
place to which the same may be so adjourned. In the event any sale or
transfer hereunder is not completed or is defective in the opinion of
Secured Party, such sale or transfer shall not exhaust the rights of
Secured Party hereunder, and Secured Party shall have the right to cause
one or more subsequent sales or transfers to be made hereunder. If only
part of the Collateral is sold or transferred such that the Obligations
remain outstanding (in whole or in part), Secured Party's rights and
remedies hereunder shall not be exhausted, waived or modified, and Secured
Party is specifically empowered to make one or more successive sales or
transfers until all the Collateral shall be sold or transferred and all the
Obligations are paid. In the event that Secured Party elects not to sell
the Collateral, Secured Party retains its rights to dispose of or utilize
the Collateral or any part or parts thereof in any manner authorized or
permitted by law or in equity, and to apply the proceeds of the same
towards payment of the Obligations. Each and every method of disposition
of the Collateral described in this subsection or in subsection (a) shall
constitute disposition in a commercially reasonable manner.
(b) Take possession of all books and records of Debtor pertaining to
the Collateral. Secured Party shall have the authority to enter upon any
real property or improvements thereon in order to obtain any such books or
records, or any Collateral located thereon, and remove the same therefrom
without liability.
(c) Apply proceeds of the disposition of the Collateral to the
Obligations in any manner elected by Secured Party and permitted by the
Code or otherwise permitted by law or in equity and in accordance with the
provisions of the Indenture. Such application may include, without
limitation, the reasonable expenses of preparing for sale or other
disposition, and the reasonable attorneys' fees and legal expenses incurred
by Secured Party.
(d) Appoint any Person as agent to perform any act or acts necessary
or incident to any sale or transfer by Secured Party of the Collateral.
Additionally, any sale or transfer hereunder may be conducted by an
auctioneer or any officer or agent of Secured Party.
8
<PAGE>
(e) Execute, assign and endorse negotiable and other instruments
for the payment of money or other evidences of payment for any form of
Collateral on behalf of and in the name of Debtor.
(f) Require all payments received by Debtor under or in
connection with the Management Agreement or otherwise in respect of the
Collateral to be received in trust for the benefit of Secured Party,
segregated from other funds of Debtor, and require that such funds
forthwith be paid over to Secured Party in the same form as so received
(with any necessary endorsement).
(g) Exercise all other rights and remedies permitted by law or
in equity.
Section 6.03. Attorney- in -Fact. Debtor hereby irrevocably appoints
------------------
Secured Party as Debtor's attorney-in-fact, with full authority in the place and
stead of Debtor and in the name of Debtor or otherwise, from time to time in
Secured Party's discretion upon the occurrence and during the continuance of an
Event of Default, but at Debtor's cost and expense and without notice to Debtor:
(a) To obtain, adjust, sell and cancel any insurance with
respect to the Collateral, and endorse any draft drawn by insurers of the
Collateral. Secured Party may apply any proceeds or unearned premiums of
such insurance to the Obligations (whether or not due).
(b) To take any action and to execute any assignment,
certificate, financing statement, notification, document or instrument
which Secured Party may reasonably deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation,
to receive, endorse and collect all instruments made payable to Debtor
representing any payment or other distribution in respect of the Collateral
or any part thereof and to give full discharge for the same.
Section 6.04. Liability for Deficiency. If any sale or other disposition
------------------------
of Collateral by Secured Party or any other action of Secured Party hereunder
results in reduction of the Obligations, such action will not release Debtor
from its liability to Secured Party for any unpaid Obligations, including costs,
charges and expenses incurred in the liquidation of Collateral, together with
interest thereon, and the same shall be immediately due and payable to Secured
Party at Secured Party's address set forth in the Indenture.
Section 6.05. Reasonable Notice. If any applicable provision of any law
-----------------
requires Secured Party to give reasonable notice of any sale or disposition or
other action, Debtor hereby agrees that ten days' prior written notice shall
constitute reasonable notice thereof. Such notice, in the case of public sale,
shall state the time and place fixed for such sale and in the case of private
sale, the time after which such sale is to be made.
Section 6.06. Non-judicial Enforcement. Secured Party may enforce its
------------------------
rights hereunder without prior judicial process or judicial hearing, and to the
extent permitted by law Debtor expressly waives any and all legal rights which
might otherwise require Secured Party to enforce its rights by judicial process.
9
<PAGE>
ARTICLE 7.
MISCELLANEOUS PROVISIONS
------------------------
Section 7.01. Notices. Any notice required or permitted to be given under
-------
or in connection with this Agreement shall be given in accordance with the
notice provisions of the Indenture.
Section 7.02. Amendments and Waivers. Secured Party's acceptance of
----------------------
partial or delinquent payments or any forbearance, failure or delay by Secured
Party in exercising any right, power or remedy hereunder shall not be deemed a
waiver of any obligation of Debtor or any Obligor, or of any right, power or
remedy of Secured Party, and no partial exercise of any right, power or remedy
shall preclude any other or further exercise thereof Secured Party may remedy
any Event of Default hereunder or in connection with the Obligations without
waiving the Event of Default so remedied. Debtor hereby agrees that if Secured
Party agrees to a waiver of any provision hereunder, or an exchange of or
release of the Collateral or the addition or release of any Obligor or other
Person, any such action shall not constitute a waiver of any of Secured Party's
other rights or of Debtor's obligations hereunder. This Agreement may be
amended only by an instrument in writing executed jointly by Debtor and Secured
Party and may be supplemented only by documents delivered or to be delivered in
accordance with the express terms hereof.
Section 7.03. Copy as Financing Statement. A photocopy or other
---------------------------
reproduction of this Agreement or any financing statement covering the
Collateral is sufficient as a financing statement, and the same may be filed
with any appropriate filing authority for the purpose of perfecting Secured
Party's security interest in the Collateral.
Section 7.04. Possession of Collateral. Secured Party shall be deemed to
------------------------
have possession of any Collateral in transit to it or set apart for it (or, in
either case, any of its agents, affiliates or correspondents).
Section 7.05. Redelivery of Collateral. If any sale or transfer of
------------------------
Collateral by Secured Party results in full satisfaction of the Obligations, and
after such sale or transfer and discharge there remains a surplus of proceeds,
Secured Party will deliver to Debtor such excess proceeds in a commercially
reasonable time; provided, however, that Secured Party shall not be liable for
any interest, cost or expense in connection with any reasonable delay in
delivering such proceeds to Debtor.
Section 7.06. Governing Law; Jurisdiction. This Agreement and the
---------------------------
security interest granted hereby shall be construed in accordance with and
governed by the laws of the State of New York (except to the extent that the
laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby).
Section 7.07. Gaming Authority. Each of the provisions of this Agreement
----------------
is subject to, and shall be enforced in compliance with, any requirements
imposed by any applicable Gaming Authority.
Section 7.08. Continuing Security Agreement
-----------------------------
10
<PAGE>
(a) Except as may be expressly applicable pursuant to Section 9-505
of the Code, no action taken or omission to act by Secured Party hereunder,
including, without limitation, any action taken or inaction pursuant to
Section 6.02 hereof, shall be deemed to constitute a retention of the
Collateral in satisfaction of the Obligations or otherwise to be in full
satisfaction of the Obligations, and the Obligations shall remain in full
force and effect, until Secured Party shall have applied payments
(including, without limitation, collections from Collateral) towards the
Obligations in the full amount then outstanding or until such subsequent
time as is hereinafter provided in subsection (b) below.
(b) To the extent that any payments on the Obligations or proceeds of
the Collateral are subsequently invalidated, declared to be fraudulent or
preferential set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law
or equitable cause, then to such extent the Obligations so satisfied shall
be revived and continue as if such payment or proceeds had not been
received by Secured Party, and Secured Party's security interests, rights,
powers and remedies hereunder shall continue in full force and effect. In
such event, this Agreement shall be automatically reinstated if it shall
theretofore have been terminated pursuant to Section 7.09.
Section 7.09. Termination. The grant of a security interest hereunder and
-----------
all of Secured Party's rights, powers and remedies in connection therewith shall
unless otherwise provided in the Indenture or this Agreement, remain in full
force and effect until payment in full of (A) the Notes under the terms of the
Indenture, (B) all obligations then due and owing under the Indenture, the Notes
and the Collateral Documents and (C) all other Obligations; provided, however,
-------- -------
that after receipt from the Debtor by the Trustee of a request for a release of
any Collateral permitted under the Indenture upon the sale, transfer,
assignment, exchange or other disposition of such Collateral not prohibited by
the Indenture (and upon receipt by the Trustee of all proceeds of such sale,
transfer, assignment, exchange or other disposition to the extent required to be
remitted to the Trustee under the Indenture or otherwise), such Collateral shall
be released from the lien and security interest created hereunder in accordance
with the provisions of the Indenture and shall-no longer constitute Collateral.
Upon the payment in full of (A) the Notes under the terms of the Indenture (B)
all obligations then due and owing under the Indenture and the Collateral
Documents, and (C) all other Obligations, the Debtor shall be entitled to the
return, upon its request and at its expense, of such of the Collateral pledged
by it as shall not have been sold or otherwise applied pursuant to the terms
hereof. Notwithstanding the foregoing, the reimbursement and indemnification
provisions of Section 4.05 and the provisions of subsection 7.08(b) shall
survive the termination of this Agreement.
Upon any termination of this Agreement or release of any Collateral as
permitted by the Indenture the Trustee will, at the expense of the Debtor,
execute and deliver to the Debtor such documents and take such other actions as
the Debtor shall reasonably request to evidence the termination of this
Agreement or the release of such Collateral, as the case may be. Any such
action taken by the Trustee shall be without warranty by or recourse to the
Trustee, except as to the absence of any prior assignments by the Trustee of its
interests in the Collateral, and shall be at the expense of the Debtor. The
Trustee may conclusively rely on any certificate delivered to it by the Debtor
stating that the execution of such documents and release of the Collateral is in
accordance with and permitted by the terms of the Indenture and this Agreement.
11
<PAGE>
Section 7.10. Counterparts; Effectiveness. This Agreement may be executed
---------------------------
in two or more counterparts. Each counterpart is deemed an original, but all
such counterparts taken together constitute one and the same instrument. This
Agreement becomes effective upon the execution hereof by Debtor and delivery of
the same to Secured Party, and it is not necessary for Secured Party to execute
any acceptance hereof or otherwise signify or express its acceptance hereof.
Section 7.11. Indenture. This Agreement is subject to the terms,
---------
conditions and provisions of the Indenture. To the extent a term or provision
of this Agreement conflicts with the Indenture, the Indenture shall control with
respect to the subject matter of such term or provision.
Section 7.12. Rights of Noteholders. No Holder of a Note shall have any
---------------------
independent rights hereunder other than those rights granted to individual
Holders of Notes pursuant to the Indenture; provided that nothing in this
Section 7.12 shall limit any rights granted to the Trustee under the Notes, the
Indenture or the Collateral Documents.
Section 7.13. No Personal Liability of Directors, Officers, Employees and
-----------------------------------------------------------
Stockholders. No past, present or future director, officer, employee,
- ------------
incorporator or stockholder of the Debtor as such or any successor Person, as
such, shall have any liability for any obligations of the Debtor under the
Notes, the Collateral Documents, this Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation.
Section 7.14. Fraudulent Conveyance Savings Clause. Notwithstanding any
------------------------------------
provision of this Agreement to the contrary, it is intended that neither this
Agreement nor any Lien granted by Debtor to secure the Obligations shall
constitute a "Fraudulent Conveyance" (as defined below). Consequently, Debtor
agrees that if the Agreement or any Liens securing this Agreement, would, but
for the application of this sentence, constitute a Fraudulent Conveyance, this
Agreement and each such Lien shall be valid and enforceable only to the maximum
extent that would not cause this Agreement or such Lien to constitute a
Fraudulent Conveyance, and this Agreement shall automatically be deemed to have
been amended accordingly at all relevant times. For purposes hereof, a
"Fraudulent Conveyance" means a fraudulent conveyance under Section 548 of Title
11, United States Code, as amended (or any successor section) or a fraudulent
conveyance or fraudulent transfer under the provisions of any applicable
fraudulent conveyance or fraudulent transfer law or similar law of any state,
nation or other governmental unit, as in effect from time to time.
[SIGNATURE PAGE FOLLOWS]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be executed and delivered as of the date first written above.
DEBTOR: HWCC-SHREVEPORT, INC.
- ------
By: /s/ WILLIAM D. PRATT
------------------------------
Vice President and
Secretary
13
<PAGE>
Name:
Title:
EXHIBIT A
---------
PERFECTION
----------
(a) Legal Name of Debtor: HWCC - Shreveport, Inc.
--------------------
(b) Other Names: None
-----------
(c) (i) Chief Executive Office and Principal Place of Business of Debtor:
----------------------------------------------------------------
Dallas County, Texas
(ii) Other Premises at which Collateral is Stored or Located:
-------------------------------------------------------
Dallas County, Texas
(iii) Locations of Records Concerning Collateral:
------------------------------------------
Caddo Parish, Louisiana
Shreveport Parish, Louisiana
Dallas County, Texas
<PAGE>
EXHIBIT B
---------
PERMITTED ENCUMBRANCES
----------------------
1. Liens on the assets of the Company and any Guarantor created by the
Indenture and the Collateral Documents securing the Notes and the Note
Guarantees;
2. Liens in favor of the Company or the Guarantors;
3. Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
4. Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
5. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
6. Liens to secure Indebtedness permitted by clause (a) of Section 4.09
of the Indenture covering only inventory and accounts receivable;
7. Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (d) of the second paragraph of Section 4.09 of the Indenture
covering only the assets acquired with such Indebtedness;
8. Liens of record on the date of the Indenture;
9. Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provisions as shall be required in conformity with
GAAP shall have been made therefor;
10. Liens arising from UCC financing statements regarding property leased
by the Company or any of its Restricted Subsidiaries;
11. Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law or in the ordinary
course of business and consistent with industry practices and Liens on deposits
made to obtain the release of such Liens if:
(a) the underlying Obligations are not overdue for a period of more than
60 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings by the Company and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP, and
(c) the Company is in compliance with the terms of the security documents
applicable to such Liens;
12. A Lien on a vessel to secure FF&E Financing or Capital Lease
Obligations in accordance with Section 4.09(d) of the Indenture where (a) the
creditor under such FF&E Financing or Capital Lease Obligations agrees to
release such Lien upon satisfaction of the Obligations under such FF&E Financing
or Capital Lease Obligations, (b) the creditor under such FF&E Financing or
Capital Lease Obligations agrees to release such Lien upon payment of the
proceeds from the sale of such vessel attributable to such FF&E Financing or
Capital Lease Obligations, (c) the creditor under such FF&E Financing or Capital
Lease Obligations acknowledges that such Lien does not create rights on the hull
or other equipment constituting such vessel, but shall be limited to the FF&E
specifically identified in such creditor's financing
<PAGE>
or lease and Lien documents, (d) such Lien is expressly subject and subordinate
to the Liens granted in favor of the Trustee, (e) the creditor under such FF&E
Financing or Capital Lease Obligations agrees to promptly notify the Trustee of
the occurrence of any event of default under such creditor's financing or lease
documents, and (f) the creditor under such FF&E Financing or Capital Lease
Obligations acknowledges and agrees that it has no right to possess or use such
vessel or anything on board such vessel, except for its right to come on board
the vessel to inspect the related FF&E and, after the occurrence and continuance
of an event of default under such creditor's financing or lease documents, to
remove or repossess the subject FF&E, provided that such creditor's efforts to
remove or repossess such FF&E shall be commercially reasonable and shall not
damage the vessel, its hull or any other equipment constituting such vessel.
13. Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to Obligations that do not
exceed Five Million Dollars ($5,000,000) at any one time outstanding.
14. Liens incurred and pledges made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and Social
Security benefits.
<PAGE>
Exhibit 4.23
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of May 19, 1999
by and among
Hollywood Casino Corporation,
the Guarantors Named on the Signature Pages Hereto
and
Bear, Stearns & Co. Inc.
Credit Suisse First Boston Corporation
Lehman Brothers Inc.
NationsBanc Montgomery Securities LLC
Prudential Securities Incorporated
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of May 19, 1999, by and among Hollywood Casino Corporation, a Delaware
corporation (the "Company"), HWCC-Tunica, Inc., a Texas corporation ("Tunica"),
------- ------
HWCC-Shreveport, Inc., a Louisiana corporation (together with Tunica, the
"Guarantors"), and Bear, Stearns & Co. Inc., Credit Suisse First Boston
- -----------
Corporation, Lehman Brothers Inc., NationsBanc Montgomery Securities LLC and
Prudential Securities Incorporated (each an "Initial Purchaser" and,
-----------------
collectively, the "Initial Purchasers"), each of whom has agreed to purchase the
------------------
Company's 11 1/4% Series A Senior Secured Notes due 2007 (the "Series A Fixed
--------------
Rate Notes") and the Company's Series A Floating Rate Notes due 2006 (the
- ----------
"Series A Floating Rate Notes" and, together with the Series A Fixed Rate Notes,
- -----------------------------
the "Series A Notes") pursuant to the Purchase Agreement (as defined below).
--------------
This Agreement is made pursuant to the Purchase Agreement, dated May 14,
1999 (the "Purchase Agreement"), by and among the Company, the Guarantors and
------------------
the Initial Purchasers. In order to induce the Initial Purchasers to purchase
the Series A Notes, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers to purchase and pay for
the Series A Notes under the Purchase Agreement. Capitalized terms used herein
and not otherwise defined shall have the meaning assigned to them in the
Indenture, dated as of the date hereof, by and among the Company, the Guarantors
and State Street Bank and Trust Company, as Trustee, relating to the Series A
Notes and the Series B Notes (the "Indenture").
---------
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Affiliate: As defined in Rule 144 of the Act.
---------
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Certificated Securities: Definitive Notes, as defined in the Indenture.
-----------------------
Closing Date: The date hereof.
------------
Commission: The Securities and Exchange Commission.
----------
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
----------
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Series B
Fixed Rate Notes and Series B Floating Rate Notes to be issued in the Exchange
Offer, (b) the maintenance of such Exchange Offer Registration Statement
continuously effective and the keeping of the Exchange Offer open for a period
not less than the period required pursuant to Section 3(b) hereof and (c) the
delivery by the Company to the Registrar under the Indenture of (1) Series B
Fixed Rate Notes in the same
<PAGE>
aggregate principal amount as the aggregate principal amount of Series A Fixed
Rate Notes tendered by Holders thereof pursuant to the Exchange Offer and (2)
Series B Floating Rate Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Floating Rate Notes tendered by Holders
thereof pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
---------------------
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
----------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Offer: The offer by the Company to exchange and issue a principal
--------------
amount of Series B Fixed Rate Notes and Series B Floating Rate Notes,
respectively (which shall be registered pursuant to the Exchange Offer
Registration Statement), equal to the outstanding principal amount of Series A
Fixed Rate Notes and Series A Floating Rate Notes, respectively.
Exchange Offer Registration Statement: The Registration Statement relating
-------------------------------------
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
--------------
to sell the Series A Notes to (i) certain "qualified institutional buyers," as
such term is defined in Rule 144A under the Act and (ii) outside the United
States to non U.S. persons in offshore transactions in reliance on Regulation S
under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
---------------
Holders: As defined in Section 2 hereof.
-------
Indenture: As defined in the preamble hereto.
---------
Notes: Collectively, the Series A Notes and the Series B Notes.
-----
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
Prospectus: The prospectus included in a Registration Statement at the
----------
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all exhibits to and material
incorporated by reference into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
-------------------
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company and the
----------------------
Guarantors relating to (a) an offering of Series B Fixed Rate Notes and Series B
Floating Rate Notes pursuant to an Exchange Offer or (b) the registration for
resale of Transfer Restricted Securities pursuant to the Shelf Registration
Statement, in each case, (i) that is filed pursuant to the
2
<PAGE>
provisions of this Agreement and (ii) including the Prospectus included therein,
all amendments and supplements thereto, including post-effective amendments, and
all exhibits and material incorporated by reference therein.
Rule 144: Rule 144 promulgated under the Act.
--------
Series B Notes: The Series B Fixed Rate Notes and the Series B Floating
--------------
Rate Notes to be issued pursuant to the Indenture (i) in the Exchange Offer or
(ii) as contemplated by Section 4 hereof.
Series B Fixed Rate Notes: The Company's 11 1/4% Series B Senior Secured
-------------------------
Notes due 2007.
Series B Floating Rate Notes: The Company's Series B Floating Rate Senior
----------------------------
Secured Notes due 2006.
Shelf Registration Statement: As defined in Section 4(a) hereof.
----------------------------
Suspension Notice: As defined in Section 6(d) hereof.
-----------------
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
---
in effect on the date of the Indenture.
Transfer Restricted Securities: Each (A) Series A Fixed Rate Note and
------------------------------
Series A Floating Rate Note, until the earliest to occur of (i) the date on
which such Series A Fixed Rate Note or Series A Floating Rate Note,
respectively, is exchanged in the Exchange Offer for a Series B Fixed Rate Note
or Series B Floating Rate Note, respectively, which is entitled to be resold to
the public by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (ii) the date on which such Series A Fixed Rate Note or
Series A Floating Rate Note, respectively, has been disposed of in accordance
with a Shelf Registration Statement (and the purchasers thereof have been issued
Series B Fixed Rate Note or Series B Floating Rate Note, respectively pursuant
to Section 6(b)(ii)), or (iii) the date on which such Series A Fixed Rate Note
or Series A Floating Rate Note, respectively, is distributed to the public
pursuant to Rule 144 under the Act and each (B) Series B Fixed Rate Note or
Series B Floating Rate Note, respectively, held by a Broker Dealer until the
date on which such Series B Fixed Rate Note or Series B Floating Rate Note,
respectively, is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
------
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been
satisfied), the Company and the Guarantors
3
<PAGE>
shall (i) cause the Exchange Offer Registration Statement to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 60 days after the Closing Date (such 60th day being for purposes of this
Section 3(a) the "Filing Deadline"), (ii) use their reasonable best efforts to
---------------
cause such Exchange Offer Registration Statement to become effective at the
earliest possible time, but in no event later than 150 days after the Closing
Date (such 150th day being the "Effectiveness Deadline"), (iii) in connection
----------------------
with the foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Series B Fixed Rate Notes
and Series B Floating Rate Notes to be offered in exchange for the Series A
Fixed Rate Notes or Series A Floating Rate Notes, respectively, that are
Transfer Restricted Securities and (ii) resales of Series B Fixed Rate Notes and
Series B Floating Rate Notes by Broker-Dealers that tendered into the Exchange
Offer Series A Fixed Rate Notes or Series A Floating Rate Notes, respectively,
that any such Broker-Dealer acquired for its own account as a result of market-
making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its Affiliates) as contemplated by
Section 3(c) below.
(b) The Company and the Guarantors shall use their respective reasonable
best efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 business days. The Company and the Guarantors shall
cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Series B Notes shall be included
in the Exchange Offer Registration Statement. The Company and the Guarantors
shall use their respective reasonable best efforts to cause the Exchange Offer
to be Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
business days thereafter (such 30th day being the "Consummation Deadline").
---------------------
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates), may exchange such Transfer
Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement. See the Shearman & Sterling no-action letter (available
July 2, 1993).
4
<PAGE>
Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Company and
Guarantors shall permit the use of the Prospectus contained in the Exchange
Offer Registration Statement by such Broker-Dealer to satisfy such prospectus
delivery requirement. To the extent necessary to ensure that the prospectus
contained in the Exchange Offer Registration Statement is available for sales of
Series B Notes by Broker-Dealers, the Company and the Guarantors agree to use
their respective reasonable best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented, amended and current as required
by and subject to the provisions of Section 6(a) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of one year from the date the Exchange Offer is Consummated or such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold pursuant thereto. The Company and
the Guarantors shall provide sufficient copies of the latest version of such
Prospectus to such Broker-Dealers, promptly upon request, and in no event later
than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
------------------
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 business days following
the date the Exchange Offer is Consummated that (A) such Holder was prohibited
by law or Commission policy from participating in the Exchange Offer or (B) such
Holder may not resell the Series B Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company and the Guarantors shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the
date on which the Company receives the notice specified in clause (a)(ii)
above, (such earlier date for purposes of this Section 4(a), the "Filing
------
Deadline"), a shelf registration statement pursuant to Rule 415 under the
--------
Act (which may be an amendment to the Exchange Offer Registration Statement
(the "Shelf Registration Statement")), relating to all Transfer Restricted
----------------------------
Securities; and
(y) shall use their respective reasonable best efforts to cause such Shelf
Registration Statement to become effective on or prior to the later of (i)
60 days after the Filing Deadline for the Shelf Registration Statement and
(ii) the Effectiveness Deadline under Section 3(a) (such 60th day the
"Effectiveness Deadline").
-----------------------
If, after the Company and the Guarantors have filed an Exchange Offer
Registration Statement that satisfies the requirements of Section 3(a) above,
the Company and the Guarantor are required to file and make effective a Shelf
Registration Statement solely because the Exchange Offer is not permitted under
applicable federal law (i.e., clause (a)(i) above), then the filing of the
5
<PAGE>
Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; provided that, in such event, the Company and
the Guarantors shall remain obligated to meet the Effectiveness Deadline set
forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and
the Guarantors shall use their respective reasonable best efforts to keep any
Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Sections 6(b) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of at least two
years (as extended pursuant to Section 6(c)(i)) following the Closing Date, or
such shorter period as will terminate when all Transfer Restricted Securities
covered by such Shelf Registration Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated on or prior to the Consummation Deadline or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded within 5 business days by a post-
effective amendment to such Registration Statement that cures such failure and
that is itself declared effective within three business days of being filed
(each such event referred to in clauses (i) through (iv), a "Registration
------------
Default"), then the Company and the Guarantors hereby jointly and severally
- -------
agree to pay to each Holder of Transfer Restricted Securities affected thereby
liquidated damages in an amount equal to $.05 per week per $1,000 in principal
amount of Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues for the first 90-day
period immediately following the occurrence of such Registration Default. The
amount of the liquidated damages shall increase by an additional $.05 per week
per $1,000 in principal amount of Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of liquidated damages of $.50 per week per $1,000 in
principal amount of
6
<PAGE>
Transfer Restricted Securities; provided that the Company and the Guarantors
shall in no event be required to pay liquidated damages for more than one
Registration Default at any given time. Notwithstanding anything to the contrary
set forth herein, (1) upon filing of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of (i)
above, (2) upon the effectiveness of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of (ii)
above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above,
or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company and the Guarantors to pay liquidated damages with respect to such
securities shall survive until such time as such obligations shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
-------------------------------------
Offer, the Company and the Guarantors shall (x) comply with all applicable
provisions of Section 6(c) below, (y) use their respective reasonable best
efforts to effect such exchange and to permit the resale of Series B Notes by
Broker-Dealers that tendered in the Exchange Offer Series A Notes that such
Broker-Dealer acquired for its own account as a result of its market-making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates) being sold in accordance
with the intended method or methods of distribution thereof, and (z) comply with
all of the following provisions:
(i) If, following the date hereof there has been announced a change in
Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Guarantors hereby agree to seek
a no-action letter or other favorable decision from the Commission allowing
the Company and the Guarantors to Consummate an Exchange Offer for such
Transfer Restricted Securities. The Company and the Guarantors hereby
agree to pursue the issuance of such a decision to the Commission staff
level. In connection with the foregoing, the Company and the Guarantors
hereby agree to take all such other commercially reasonable actions as may
be requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A) participating
in telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursuing a
resolution (which need not be favorable) by the Commission staff.
7
<PAGE>
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker-Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantors (which may be contained in
the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Company,
(B) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Series B Notes to be issued in the Exchange Offer and
(C) it is acquiring the Series B Notes in its ordinary course of business.
As a condition to its participation in the Exchange Offer each Holder using
the Exchange Offer to participate in a distribution of the Series B Notes
shall acknowledge and agree that, if the resales are of Series B Notes
obtained by such Holder in exchange for Series A Notes acquired directly
from the Company or an Affiliate thereof, it (1) could not, under
Commission policy as in effect on the date of this Agreement, rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling (available July 2, 1993), and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to clause
(i) above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered by
an effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
interpreted in the Commission's letter to Shearman & Sterling (available
July 2, 1993), and, if applicable, any no-action letter obtained pursuant
to clause (i) above, (B) including a representation that neither the
Company nor any Guarantor has entered into any arrangement or understanding
with any Person to distribute the Series B Notes to be received in the
Exchange Offer and that, to the best of the Company's and each Guarantor's
information and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer and (C)
any other undertaking or representation required by the Commission as set
forth in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company and the Guarantors shall:
(i) comply with all the provisions of Section 6(c) below and use their
respective reasonable best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
8
<PAGE>
pursuant thereto the Company and the Guarantors will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof; and
(ii) issue, upon the request of any Holder or purchaser of Series A
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation. The
Company shall register Series B Notes on the Shelf Registration Statement for
this purpose and issue the Series B Notes to the purchaser(s) of securities
subject to the Shelf Registration Statement in the names as such purchaser(s)
shall designate.
(c) General Provisions. In connection with any Registration Statement and
------------------
any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective reasonable best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein
(A) to contain an untrue statement of material fact or omit to state any
material fact necessary to make the statements therein not misleading or
(B) not to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement, the Company and
the Guarantors shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use their respective reasonable best efforts to cause such
amendment to be declared effective as soon as practicable;
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462, as applicable, under the Act in
a timely manner; and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) provide written notice to Holders promptly (A) when the
Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to any applicable Registration Statement or
any post-effective amendment thereto, when the same has become effective,
(B) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the
9
<PAGE>
preceding purposes or (C) of the existence of any fact or the happening of any
event that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of any
additions to or changes in the Registration Statement in order to make the
statements therein not misleading, or that requires the making of any additions
to or changes in the Prospectus in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the effectiveness
of the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company and the Guarantors shall use their
respective reasonable best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(C) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to each Holder who has provided in writing to the Company
a telephone or facsimile number and address for deliveries and notices in
connection with such exchange or sale, if any, before filing with the
Commission, copies of any Registration Statement or any Prospectus included
therein or any amendments or supplements to any such Registration Statement
or Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders in connection with such
sale, if any, for a period of at least five business days, and the Company
will not file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) to which such
Holders shall reasonably object within five business days after the receipt
thereof. An objection by a selling Holder or underwriter, if any, shall be
deemed to be reasonable if it relates to a material misstatement or
omission in such Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed;
(vi) promptly prior to the filing of any document (other than an
exhibit) that is to be incorporated by reference into a Registration
Statement or Prospectus, provide copies of such document to each Holder who
has provided in writing to the Company a telephone or facsimile number and
address for deliveries and notices in connection with such exchange or
sale, if any, make the Company's and the Guarantors' representatives
available for discussion of such document and other customary due diligence
matters, and include such information in such document prior to the filing
thereof as such Holders may reasonably request;
10
<PAGE>
(vii) make available, at reasonable times, for inspection by each
Holder that is an Initial Purchaser or that may reasonably be deemed to be
an underwriter, and any attorney or accountant retained by such Holders,
all financial and other records, pertinent corporate documents of the
Company and the Guarantors and cause the Company's and the Guarantors'
officers, directors and employees to supply all information reasonably
requested by any such Holder, attorney or accountant in connection with
such Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness;
(viii) if requested by any Holders in connection with such exchange
or sale, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Holders may reasonably request to have included
relating to the "Plan of Distribution" of the Transfer Restricted
Securities or the Holder, and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(ix) furnish to each Holder who has provided in writing to the
Company a telephone or facsimile number and address for deliveries and
notices in connection with such exchange or sale without charge, at least
one copy of the Registration Statement, as first filed with the Commission,
and of each amendment thereto, including all exhibits and documents
incorporated by reference therein;
(x) deliver to each Holder who has provided in writing to the
Company a telephone or facsimile number and address for deliveries and
notices without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Guarantors hereby
consent to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each selling Holder in connection with
the offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such reasonable
representations and warranties and take all such other reasonable actions
in connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be reasonably
requested by any Holder in connection with any sale or resale pursuant to
any applicable Registration Statement. In such connection, the Company and
the Guarantors shall:
(A) upon request of any Holder, furnish (or in the case of paragraphs
(2) and (3) below, use their respective reasonable best efforts to cause
to be furnished) to each Holder, upon Consummation of the Exchange Offer
or upon the effectiveness of the Shelf Registration Statement, as the
case may be,
(1) a certificate, dated such date, signed on behalf of the
Company and each Guarantor by (x) the President or any Vice President
and (y) a principal
11
<PAGE>
financial or accounting officer of the Company and each Guarantor,
confirming, as of the date thereof, the matters set forth in Section
8(d) of the Purchase Agreement and such other similar matters as such
Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company and the
Guarantors covering matters similar to those set forth in paragraph
(f) of Section 8 of the Purchase Agreement and such other matter as
such Holder may reasonably request, and in any event including a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of the Company and
the Guarantors, representatives of the independent public accountants
for the Company and the Guarantors and has considered the matters
required to be stated therein and the statements contained therein,
although such counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such counsel
advises that, on the basis of the foregoing, no facts came to such
counsel's attention that caused such counsel to believe that the
applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became effective
and, in the case of the Exchange Offer Registration Statement, as of
the date of Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the opinion
dated the date of Consummation of the Exchange Offer, as of the date
of Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes no responsibility
for, and has not independently verified, the accuracy, completeness or
fairness of the financial statements, notes and schedules and other
financial, statistical or similar data included in any Registration
Statement contemplated by this Agreement or the related Prospectus;
(3) a customary comfort letter, dated the date of Consummation
of the Exchange Offer, or as of the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the Company's
independent accountants, in the customary form and covering matters of
the type customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section 8(f) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance with
the matters covered in
12
<PAGE>
clause (A) above and with any customary conditions contained in the any
agreement entered into by the Company and the Guarantors pursuant to this
clause (xi);
(xii) prior to any public offering of Transfer Restricted Securities
by selling Holders, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all other
acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that neither the
Company nor any Guarantor shall be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as the
selling Holders may request (subject to the provisions of the Indenture) at
least two business days prior to such sale of Transfer Restricted
Securities;
(xiv) use their respective reasonable best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii)
above;
(xv) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with the Depository Trust Company;
(xvi) otherwise use their respective reasonable best efforts to
comply with all applicable rules and regulations of the Commission, and
make generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective date
of the Registration Statement (as such term is defined in paragraph (c) of
Rule 158 under the Act); and
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and
the Holders to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the
13
<PAGE>
terms of the TIA; and execute and use their respective reasonable best
efforts to cause the Trustee to execute, all documents that may be required
to effect such changes and all other forms and documents required to be
filed with the Commission to enable such Indenture to be so qualified in a
timely manner.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(B) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(CC) hereof (in each case, a
"Suspension Notice"), such Holder will forthwith discontinue disposition of
-----------------
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "Recommencement
--------------
Date"). Each Holder receiving a Suspension Notice hereby agrees that it will
- ----
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company all copies, other
than permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of the Suspension Notice. The time period regarding the effectiveness
of such Registration Statement set forth in Section 3 or 4 hereof, as
applicable, shall be extended by a number of days equal to the number of days in
the period from and including the date of delivery of the Suspension Notice to
the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses of their compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Series B Notes to be issued in the Exchange Offer and printing of
Prospectuses, messenger and delivery services and telephone); (iv) all fees and
disbursements of counsel for the Company, the Guarantors and the Holders of
Transfer Restricted Securities, subject to the limitations set forth in Section
7(b) below; (v) all application and filing fees in connection with listing the
Series B Notes on a national securities exchange or automated quotation system
pursuant to the requirements hereof; and (vi) all fees and disbursements of
independent certified public accountants of the Company and the Guarantors
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration
14
<PAGE>
Statement), the Company and the Guarantors will reimburse the Initial Purchasers
and the Holders of Transfer Restricted Securities who are tendering Series A
Notes into in the Exchange Offer and/or selling or reselling Series A Notes or
Series B Notes pursuant to the "Plan of Distribution" contained in the Exchange
Offer Registration Statement or the Shelf Registration Statement, as applicable,
for the reasonable fees and disbursements of not more than one counsel, who
shall be Latham & Watkins, unless another firm shall be chosen by the Holders of
a majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared; provided, however, that
the reimbursement pursuant to this Section 7(b) shall not exceed $10,000.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless (i) each Holder, (ii) each person, if any, who
controls the Holder within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act and (iii) the respective officers, directors, partners,
employees, representatives and agents of the Holder or any controlling person to
the fullest extent lawful, from and against any and all losses, liabilities,
claims, damages and expenses whatsoever (including but not limited to reasonable
attorneys' fees and any and all expenses reasonably incurred in investigating,
preparing or defending against any investigation or litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the preliminary prospectus or Prospectus, or in
any supplement thereto or amendment thereof, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that neither the Company nor any Guarantor will be liable in any such case to
the extent, but only to the extent, that any such loss, liability, claim, damage
or expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with information relating to the Holder furnished to the
Company and the Guarantors in writing by or on behalf of the Holder expressly
for use therein. This indemnity agreement will be in addition to any liability
which the Company and the Guarantors may otherwise have, including under this
Agreement.
(b) Each Holder agrees to indemnify and hold harmless (i) the Company and
the Guarantors, (ii) each person, if any, who controls the Company or any of the
Guarantors within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and (iii) the officers, directors, partners, employees,
representatives and agents of the Company and the Guarantors, against any
losses, liabilities, claims, damages and expenses whatsoever (including but not
limited to reasonable attorneys' fees and any and all expenses reasonably
incurred in investigating, preparing or defending against any investigation or
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a
15
<PAGE>
material fact contained in the preliminary prospectus or the Prospectus, or in
any amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with information relating to the Holder furnished to the Company and
the Guarantors in writing by or on behalf of the Holder expressly for use
therein. In no event shall the Holder, its directors, officers or any Person who
controls such Holder be liable or responsible for any amount in excess of the
amount by which the total amount received by such Holder with respect to its
sale of Transfer Restricted Securities pursuant to a Registration Statement
exceeds (i) the amount paid by such Holder for such Transfer Restricted
Securities and (ii) the amount of any damages that such Holder, its directors,
officers or any Person who controls such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may
otherwise have). In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to the indemnified party to take charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying party or parties shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties), in
any of which events such fees and expenses of counsel shall be borne by the
indemnifying parties; provided, however, that the indemnifying party under
subsection (a) or (b) above shall only be liable for the legal expenses of one
counsel (in addition to any local counsel) for all indemnified parties in each
jurisdiction in which any claim or action arising out of the same general
allegations or circumstances is brought. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its prior written consent,
provided that such consent was not unreasonably withheld. An indemnifying party
will not, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or
16
<PAGE>
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
(d) In order to provide for contribution in circumstances in which the
indemnification provided for above is for any reason other than by its terms
held to be unavailable from an indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, the Company and the Guarantors, on the
one hand, and the Holder, on the other hand, shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by
such indemnification provision (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claims asserted, but after deducting in the
case of losses, liabilities, claims, damages and expenses suffered by the
Company or any Guarantor, any contribution received by the Company and the
Guarantors from persons, other than the Holder, who may also be liable for
contribution, including persons who control the Company or any of the Guarantors
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
and directors of the Company and the Guarantors) to which the Company, the
Guarantors and the Holder may be subject, in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Guarantors, on
the one hand, and the Holder, on the other hand, from their sale of Transfer
Restricted Securities or, if such allocation is not permitted by applicable law
or indemnification is not available as a result of the indemnifying party not
having received notice as provided above, in such proportion as is appropriate
to reflect not only the relative benefits referred to above but also the
relative fault of the Company and the Guarantors, on the one hand, and the
Holder, on the other hand, in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations. The relative fault of the Company
and the Guarantors, on the one hand, and of the Holder, on the other hand, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, any Guarantor or
the Holder and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
the Guarantors and the Holder agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 8(d), no Holder, its directors, its officers or any Person, if
any, who controls such Holder shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of Transfer Restricted Securities pursuant to a
Registration statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities and (ii) the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. For purposes of this Section
8(d), (A) each person, if any, who controls the Holder within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the
respective officers, directors, partners, employees, representatives and agents
of the Holder or any controlling person shall have the same rights to
contribution as the Holder, and (C) each person, if any, who controls the
Company or any Guarantor within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and (D) the respective officers, directors, partners,
employees, representatives and agents of the Company and the Guarantors shall
have the same rights to contribution as the
17
<PAGE>
Company and the Guarantors, subject in each case to clauses (i) and (ii) of this
Section 8(d). Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party or
parties under this Section 8(d), notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 8(d) or otherwise. No
party shall be liable for contribution with respect to any action or claim
settled without its prior written consent, provided that such written consent
was not unreasonably withheld.
SECTION 10. RULE 144A AND RULE 144
The Company and each Guarantor agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company or such Guarantor (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to such Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of
the Exchange Act, to make all filings required thereby in a timely manner in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144.
SECTION 11. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that
--------
any failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantor's obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
--------------------------
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in
18
<PAGE>
the case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
-----------------------
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect the rights of the
Company and the Guarantors or the rights of the Holders hereunder.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address, if any, set forth on the records
of the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company or the Guarantors:
c/o Hollywood Casino Corporation
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
Telecopier No.: (972) 716-3903
Attention: Donald A. Shapiro,
Associate General Counsel
With a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopier No.: (214) 746-7777
Attention: Michael A. Saslaw, Esq.
All such notices and communications shall be deemed to have been duly given
at the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
19
<PAGE>
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; provided, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
HOLLYWOOD CASINO CORPORATION
By: /s/ Paul C. Yates
-----------------------------------------
Paul C. Yates
Executive Vice President and
Chief Financial Officer
HWCC-TUNICA, INC.
By: /s/ William D. Pratt
----------------------------------------
William D. Pratt
Executive Vice President, General Counsel
and Secretary
HWCC-SHREVEPORT, INC.
By: /s/ William D. Pratt
----------------------------------------
William D. Pratt
Vice President and Secretary
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
LEHMAN BROTHERS INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
PRUDENTIAL SECURITIES INCORPORATED
By Bear, Stearns & Co. Inc.
By:_________________________________
Name:
Title:
21
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF HOLLYWOOD CASINO CORPORATION
STATE
NAME ADDRESS ORGANIZED
Hollywood Casino - Aurora, Inc. 49 West Galena Boulevard Illinois
Aurora, Illinois 60506
HWCC-Aurora Management, Inc. 13455 Noel Road Illinois
Suite 2200, LB48
Dallas, TX 75240
HWCC - Tunica, Inc. 13455 Noel Road Texas
Suite 2200, LB48
Dallas, TX 75240
HWCC Development Corporation 13455 Noel Road Texas
Suite 2200, LB48
Dallas, TX 75240
HWCC - Louisiana, Inc. 13455 Noel Road Louisiana
Suite 2200, LB48
Dallas, TX 75240
HWCC - Argentina, Inc. 13455 Noel Road Texas
Suite 2200, LB48
Dallas, TX 75240
Hollywood Management, Inc. 13455 Noel Road Texas
Suite 2200, LB48
Dallas, TX 75240
HWCC - Golf Course Partners, Inc. 13455 Noel Road Delaware
Suite 2200, LB48
Dallas, TX 75240
HWCC - Holdings, Inc. 13455 Noel Road Texas
Suite 2200, LB48
Dallas, TX 75240
HWCC-Shreveport, Inc. 13455 Noel Road Louisiana
Suite 2200, LB48
Dallas, TX 75240
HWCC-Transportation, Inc. 13455 Noel Road Texas
Suite 2200, LB48
Dallas, TX 75240
Hollywood Casino Shreveport 13455 Noel Road Louisiana
Suite 2200, LB48
Dallas, TX 75240
Pratt Management, L.P. 13455 Noel Road Delaware
Suite 2200, LB48
Dallas, TX 75240
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Hollywood Casino
Corporation and Subsidiaries on Form S-4 of our reports on the consolidated
financial statements of Hollywood Casino Corporation and Subsidiaries, and the
financial statements of Hollywood Casino-Aurora, Inc. and HWCC-Tunica, Inc.
and Subsidiary dated February 23, 1999 (which report on Hollywood Casino
Corporation and Subsidiaries expresses an unqualified opinion and contains an
explanatory paragraph regarding the restatement of the Company's 1997 and 1996
financial statements), appearing in the Prospectus, which is part of this
Registration Statement and of our reports dated February 23, 1999 relating to
the financial statement schedules appearing elsewhere in this Registration
Statement.
We also consent to the reference to us under the headings "Summary Financial
and Operating Data" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Dallas, Texas
July 15, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hollywood Casino Corporation:
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
July 15, 1999
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
_________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
Hollywood Casino Corporation
(Exact name of obligor as specified in its charter)
Delaware 75-2352412
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48 Dallas, TX 75240
(Address of principal executive offices) (Zip Code)
11.25% Senior Secured Notes Due 2007
Floating Rate Senior Secured Notes Due 2006
(Title of indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(A) Name and address of each examining or supervisory authority to
which it is subject.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System,
Washington, D.C., Federal Deposit Insurance Corporation,
Washington, D.C.
(B) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
Item 3. Through item 15. Not applicable.
ITEM 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1
to the Statement of Eligibility and Qualification of Trustee (Form T-
1) filed with the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement
of Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as
Exhibit 4 to the Statement of Eligibility and Qualification
of Trustee (Form T-1) filed with the Registration Statement
of Eastern Edison Company (File No. 33-37823) and is
incorporated herein by reference thereto.
1
<PAGE>
5. A copy of each indenture referred to in item 4. if the obligor is
in default.
Not applicable.
6. The consents of United States Institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a part
hereof.
NOTES
In answering any item of this Statement of Eligibility which relates
to matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the May 27, 1999.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Robert J. Dunn
-------------------------------------
NAME: Robert J. Dunn
TITLE: Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by Hollywood
Casino Corporation of its 11.25% Senior Secured Notes Due 2007 And its Floating
Rate Senior Secured Notes Due 2006, we hereby consent that reports of
examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Robert J. Dunn
---------------------------------
NAME: Robert J. Dunn
TITLE: Vice President
DATED: May 26, 1999
3
<PAGE>
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1999,
--------------
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin....................................... 1,249,670
Interest-bearing balances................................................................ 13,236,699
Securities.................................................................................... 10,970,415
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary...................................................... 9,561,556
Loans and lease financing receivables:
Loans and leases, net of unearned income ................................................ 7,053,580
Allowance for loan and lease losses ..................................................... 85,416
Allocated transfer risk reserve ......................................................... 0
Loans and leases, net of unearned income and allowances.................................. 6,968,164
Assets held in trading accounts............................................................... 1,553,354
Premises and fixed assets..................................................................... 536,535
Other real estate owned....................................................................... 0
Investments in unconsolidated subsidiaries.................................................... 606
Customers' liability to this bank on acceptances outstanding.................................. 71,273
Intangible assets............................................................................. 207,323
Other assets.................................................................................. 1,371,043
----------
Total assets.................................................................................. 45,726,638
===========
LIABILITIES
Deposits:
In domestic offices...................................................................... 10,101,297
Noninterest-bearing................................................................. 6,932,549
Interest-bearing.................................................................... 3,168,748
In foreign offices and Edge subsidiary................................................... 18,061,721
Noninterest-bearing................................................................. 54,654
Interest-bearing.................................................................... 18,007,067
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary...................................................... 12,063,069
Demand notes issued to the U.S. Treasury...................................................... 149,322
Trading liabilities.......................................................... 1,140,080
Other borrowed money.......................................................................... 285,027
Subordinated notes and debentures............................................................. 0
Bank's liability on acceptances executed and outstanding...................................... 71,273
Other liabilities............................................................................. 1,079,470
Total liabilities............................................................................. 42,951,259
----------
EQUITY CAPITAL
Perpetual preferred stock and related
surplus....................................................................................... 0
Common stock.................................................................................. 29,931
Surplus....................................................................................... 480,330
Undivided profits and capital reserves/Net unrealized holding gains (losses).................. 2,258,177
Net unrealized holding gains (losses) on available-for-sale securities................... 15,937
Cumulative foreign currency translation adjustments........................................... (8,996)
Total equity capital.......................................................................... 2,775,379
----------
Total liabilities and equity capital.......................................................... 45,726,638
----------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE>
EXHIBIT 99.2
LETTER OF TRANSMITTAL
To Exchange any and all Outstanding
11 1/4% Senior Secured Notes due 2007
for
11 1/4% Senior Secured Notes due 2007
and
Floating Rate Senior Secured Notes due 2006
for
Floating Rate Senior Secured Notes due 2006
of
HOLLYWOOD CASINO CORPORATION
Pursuant to the Exchange Offer and Prospectus dated , 1999
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999 (THE "EXPIRATION DATE"), UNLESS
THE EXCHANGE OFFER IS EXTENDED BY THE COMPANY.
The Exchange Agent for the Exchange Offer is:
State Street Bank and Trust Company
By Mail: Overnight Courier:
State Street Bank and Trust State Street Bank and Trust Company
Company Corporate Trust Department
Corporate Trust Department 2 Avenue de Lafayette
P.O. Box 778 Fifth Floor, Corporate Trust Window
Boston, Massachusetts 02102 Boston, Massachusetts 02111-1724
Attention: Mackenzie Elijah Attention: Mackenzie Elijah
By Hand in New York (as Drop By Hand in Boston:
Agent) State Street Bank and Trust Company
State Street Bank and Trust 2 Avenue de Lafayette
Company Fifth Floor, Corporate Trust Window
61 Broadway Boston, Massachusetts 02111-1724
15th Floor, Corporate Trust
Window
Confirm by telephone:
New York, New York 10006 (617) 662-1525
Facsimile Transmission Number
(for Eligible Institutions Only)
(617) 664-1452
Delivery of this Letter of Transmittal to an address or transmission of
instructions via facsimile other than as set forth above will not constitute a
valid delivery.
The undersigned acknowledges that it has received the Prospectus, dated
, 1999 (the "Prospectus"), of Hollywood Casino Corporation, a Delaware
corporation (the "Company"), and this Letter of Transmittal, which together
constitute the Company's offer (the "Exchange Offer") to exchange an aggregate
principal amount of up to $310 million of its 11 1/4% Senior Secured Notes due
2007 and an aggregate principal amount of up to $50 million of its Floating
Rate Senior Secured Notes due 2006 (collectively, the "Registered Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of its issued and outstanding
11 1/4% Senior Secured Notes due 2007 and Floating Rate Senior Secured Notes
due 2006 (collectively, the "Original Notes").
IF YOU WISH TO EXCHANGE YOUR ORIGINAL NOTES FOR AN EQUAL AGGREGATE PRINCIPAL
AMOUNT OF REGISTERED NOTES PURSUANT TO THE EXCHANGE OFFER, YOU MUST VALIDLY
TENDER, AND NOT WITHDRAW, YOUR ORIGINAL NOTES TO THE EXCHANGE AGENT PRIOR TO
THE EXPIRATION DATE.
SIGNATURES MUST BE PROVIDED.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY BEFORE COMPLETING THIS
LETTER OF TRANSMITTAL.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus.
1
<PAGE>
This Letter of Transmittal is to be completed by holders of Original Notes
either if Original Notes are to be forwarded herewith or if tenders of
Original Notes are to be made by book-entry transfer to an account maintained
by State Street Bank and Trust Company (the "Exchange Agent") at the
Depository Trust Company (the "Book-Entry Transfer Facility" or "DTC")
pursuant to the procedures set forth in the section entitled "Description of
the Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus.
Holders of Original Notes whose certificates (the "Certificates") for such
Original Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or
prior to the Expiration Date or who cannot complete the procedures for book-
entry transfer on a timely basis, must tender their Original Notes according
to the guaranteed delivery procedures set forth in the section entitled
"Description of the Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus.
DESCRIPTION OF ORIGINAL NOTES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and
Address(es)
of
Registered
Owner(s)
as it
appears on
the
Original
Notes Aggregate
(Please Certificate Principal Amount
fill in, if Number(s) of Original Notes
blank) of Original Notes Tendered
- -------------------------------------------------------
--------------
--------------
--------------
--------------
--------------
<S> <C> <C>
Total Principal
Amount
of Notes Tendered
</TABLE>
2
<PAGE>
BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY
[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
Account Number ______________________________________________________________
Transaction Code Number _____________________________________________________
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name of Registered Holder(s) ________________________________________________
Window Ticket Number (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution which Guaranteed Delivery _______________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution _______________________________________________
Account Number ______________________________________________________________
Transaction Code Number _____________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED ORIGINAL
NOTES ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER SET FORTH ABOVE.
[_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE ORIGINAL NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: _________________________________________________________________________
Address: ______________________________________________________________________
3
<PAGE>
Ladies and Gentlemen:
1. The undersigned hereby tenders to Hollywood Casino Corporation, a
Delaware corporation (the "Company"), its 11 1/4% Senior Secured Notes due
2007 or Floating Rate Senior Secured Notes due 2006, in each case, of the
Company (collectively the "Original Notes"), pursuant to the Company's offer
to exchange $1,000 principal amount of its registered 11 1/4% Senior Secured
Notes due 2007 or Floating Rate Senior Secured Notes due 2006 (collectively,
the "Registered Notes"), for each $1,000 principal amount of Original Notes,
upon the terms and subject to the conditions contained in the Prospectus dated
, 1999 (the "Prospectus"), receipt of which is hereby acknowledged, and
in this Letter of Transmittal (which together with the Prospectus constitute
the "Exchange Offer").
2. THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
ORIGINAL NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR
EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE
THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES,
AND THAT THE ORIGINAL NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE
CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY
ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE
NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF
THE ORIGINAL NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS
OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ
AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
3. The undersigned understands that the tender of the Original Notes
pursuant to any one of the procedures set forth in the Prospectus and in the
instructions, attached hereto, will, upon the Company's acceptance for
exchange of such tendered Original Notes, constitute a binding agreement
between the undersigned and the Company as to the terms and conditions set
forth in the Prospectus.
4. Unless the box under the heading "Special Registration Instructions" is
checked, the undersigned hereby represents and warrants that:
(i) the Registered Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the undersigned,
whether or not the undersigned is the holder;
(ii) neither the undersigned nor any such other person is engaging in or
intends to engage in a distribution of such Registered Notes;
(iii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of such Registered Notes; and
(iv) neither the holder nor any such other person is an "affiliate," as
such term is defined under Rule 405 promulgated under the Securities Act of
1933, as amended (the "Securities Act"), of the Company.
5. The undersigned may, if, and only if, unable to make all of the
representations and warranties contained in Item 4 above, elect to have its
Original Notes registered in the shelf registration described in the
Registration Rights Agreement, dated as of May 19, 1999, by and among the
Company, the Guarantors and Initial Purchasers in the form filed as an exhibit
to the Registration Statement (the "Registration Agreement"). All terms used
in this Item 5 with their initial letters capitalized, unless otherwise
defined herein, shall have the meanings given them in the Registration
Agreement. Such election may be made by checking the box under "Special
Registration Instructions" below. By making such election, the undersigned
agrees, as a Holder participating in a Shelf Registration, to indemnify and
hold harmless (i) the Company and the Guarantors, (ii) each person, if any,
who controls the Company or any of the Guarantors within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and (iii) the
officers, directors, partners, employees, representatives and agents of the
Company and the Guarantors, against any losses, liabilities, claims, damages
and expenses whatsoever (including but not limited to reasonable attorneys'
fees and any and all expenses reasonably incurred in
4
<PAGE>
investigating, preparing or defending against any investigation or litigation,
commenced or threatened, or any claim whatsoever and any and all amounts paid
in settlement of any claim or litigation), joint or several, to which they or
any of them may become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the preliminary
prospectus or the Prospectus, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading in each case to the extent, but only to the
extent, that any such loss, liability, claim, damage or expense arises out of
or is based upon any untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with
information relating to the Holder furnished to the Company and the Guarantors
in writing by or on behalf of the Holder expressly for use therein. In no
event shall the Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds
(i) the amount paid by such Holder for such Transfer Restricted Securities and
(ii) the amount of any damages that such Holder, its directors, officers or
any Person who controls such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.
6. If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Registered Notes. If the undersigned is a broker-dealer that will receive
Registered Notes for its own account in exchange for Original Notes that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any
resale of such Registered Notes; however, by so acknowledging and delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. If the undersigned is
a broker-dealer and Original Notes held for its own account were not acquired
as a result of market-making or other trading activities, such Original Notes
cannot be exchanged pursuant to the Exchange Offer.
7. Any obligation of the undersigned hereunder shall be binding upon the
successors, assigns, executors, administrators, trustees in bankruptcy and
legal and personal representatives of the undersigned.
8. Unless otherwise indicated herein under "Special Delivery Instructions,"
the certificates for the Registered Notes will be issued in the name of the
undersigned.
9. Holders of Original Notes whose Original Notes are accepted for exchange
will not receive accrued interest on such Original Notes for any period from
and after the last Interest Payment Date to which interest has been paid or
duly provided for on such Original Notes prior to the original issue date of
the Registered Notes or, if no such interest has been paid or duly provided
for, will not receive any accrued interest on such Original Notes, and the
undersigned waives the right to receive any interest on such Original Notes
accrued from and after such Interest Payment Date or, if no such interest has
been paid or duly provided for, from and after November 1, 1999.
10. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company or the Exchange Agent to be necessary or
desirable to complete the sale, assignment and transfer of the Original Notes
tendered hereby. All authority herein conferred or agreed to be conferred in
this Letter of Transmittal shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, executors, administrators, personal representatives, trustees
in bankruptcy, legal representatives, successors and assigns of the
undersigned. Except as stated in the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
ORIGINAL NOTES AS SET FORTH IN SUCH BOX.
5
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 1)
To be completed ONLY IF the Registered Notes are to be issued or sent to
someone other than the undersigned or to the undersigned at an address
other than that provided above.
Mail [_] Issue [_] (check appropriate boxes) certificates to:
Name: _____________________________________________________________________
(Please Print)
Address: __________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(Including Zip Code)
SPECIAL REGISTRATION INSTRUCTIONS
(See Item 5)
To be completed ONLY IF (i) the undersigned satisfies the conditions set
forth in Item 5 above, (ii) the undersigned elects to register its
Original Notes in the shelf registration described in the Registration
Rights Agreement and (iii) the undersigned agrees to indemnify certain
entities and individuals as set forth in Item 5 above.
[_] By checking this box the undersigned hereby (i) represents that it
is unable to make all of the representations and warranties set forth in
Item 4 above, (ii) elects to have its Original Notes registered pursuant
to the shelf registration described in the Registration Rights Agreement,
and (iii) agrees to indemnify certain entities and individuals identified
in, and to the extent provided in, Item 5 above.
6
<PAGE>
SIGNATURE
To be completed by all exchanging noteholders. Must be signed by
registered holder exactly as name appears on Original Notes. If signature
is by trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 3.
X _________________________________________________________________________
X _________________________________________________________________________
Signature(s) of Registered Holder(s) or Authorized Signature
Dated: ____________________________________________________________________
Name(s):___________________________________________________________________
___________________________________________________________________________
Please Type or Print
Capacity: _________________________________________________________________
Address: __________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
Including Zip Code
Area Code and Telephone No.: ______________________________________________
SIGNATURE GUARANTEE (If Required by Instruction 1 below)
Certain Signatures Must be Guaranteed by an Eligible Institution
___________________________________________________________________________
Name of Eligible Institution Guaranteeing Signatures
___________________________________________________________________________
Address (including zip code) and Telephone Number (including area code) of Firm
___________________________________________________________________________
Authorized Signature
___________________________________________________________________________
Printed Name
___________________________________________________________________________
Title
Dated: ____________________________________________________________________
PLEASE READ THE INSTRUCTIONS ON THE REVERSE SIDE HEREOF, WHICH FORM A PART OF
THIS LETTER OF TRANSMITTAL.
7
<PAGE>
INSTRUCTIONS
1. Guarantee of Signatures. Signatures on this Letter of Transmittal must be
guaranteed by an eligible guarantor institution that is a member or
participant in the Securities Transfer Agents Medallion Program, the Stock
Exchange Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program, or by an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 promulgated under the Exchange Act (an "Eligible
Institution") unless the box entitled "Special Delivery Instructions" has not
been completed or the Original Notes described above are tendered for the
account of an Eligible Institution.
2. Delivery of Letter of Transmittal and Old Notes; Guaranteed Delivery
Procedures. The Original Notes, together with a properly completed and duly
executed Letter of Transmittal (or copy thereof), should be mailed or
delivered to the Exchange Agent at the address set forth above.
Holders who wish to tender their Original Notes and (i) whose Original Notes
are not immediately available or (ii) who cannot deliver their Original Notes,
this Letter of Transmittal and all other required documents to the Exchange
Agent on or prior to the Expiration Date or (iii) who cannot complete the
procedures for delivery by book-entry transfer on a timely basis, may tender
their Original Notes by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth
in the section entitled "Description of the Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus. Pursuant to such procedures: (i) such
tender must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in
the form made available by the Company, must be received by the Exchange Agent
from such Eligible Institution on or prior to the Expiration Date; and (iii) a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required thereby, along with the Certificates
(or a Book-Entry Confirmation (as defined in the Prospectus)) representing all
tendered Original Notes, in proper form for transfer, must be received by the
Exchange Agent within three New York Stock Exchange, Inc. trading days after
the date of execution of such Notice of Guaranteed Delivery, all as provided
in the section entitled "Description of the Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Original Notes
to be properly tendered pursuant to the guaranteed delivery procedure, the
Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the
Expiration Date.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND THE LETTER OF TRANSMITTAL OR
THE NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS TO THE
EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY
BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY
SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO
THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR
ORIGINAL NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR NOMINEES TO
EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
3. Signature on Letter of Transmittal, Bond Powers and Endorsements. If this
Letter of Transmittal is signed by a person other than a registered holder of
any Original Notes, such Original Notes must be endorsed or accompanied by
appropriate bond powers, signed by such registered holder exactly as such
registered holder's name appears on such Original Notes.
8
<PAGE>
If this Letter of Transmittal or any Original Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted with this Letter of Transmittal.
4. Inadequate Space. If the space provided in the box captioned "Description
of Original Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Original Notes and any other required information should
be listed on a separate signed schedule which is attached to this Letter of
Transmittal.
5. Questions, Requests for Assistance and Additional Copies. Questions and
requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
6. Miscellaneous. All questions as to the validity, form, eligibility
(including time of receipt), acceptance, and withdrawal of tendered Original
Notes will be resolved by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any or all Original Notes not properly tendered or any
Original Notes the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects, irregularities, or conditions of tender as to particular
Original Notes. The Company's interpretation of the terms and conditions of
the Exchange Offer, including the instructions in this Letter of Transmittal,
will be final and binding. Unless waived, any defects or irregularities in
connection with tenders of Original Notes must be cured within such time as
the Company shall determine. Neither the Company, the Exchange Agent, nor any
other person shall be under any duty to give notification of defects in such
tenders or shall incur any liability for failure to give such notification.
Tenders of Original Notes will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any Original Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
by the Exchange Agent to the tendering holder thereof as soon as practicable
following the Expiration Date.
9
<PAGE>
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY
To Exchange any and all Outstanding
11 1/4% Senior Secured Notes due 2007
for
11 1/4% Senior Secured Notes due 2007
and
Floating Rate Senior Secured Notes due 2006
for
Floating Rate Senior Secured Notes due 2006
of
HOLLYWOOD CASINO CORPORATION
Pursuant to the Exchange Offer and Prospectus dated , 1999
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the 11 1/4% Senior Secured Notes due 2007 or Floating Rate
Senior Secured Notes due 2006 (collectively, the "Original Notes"), of
Hollywood Casino Corporation, a Delaware corporation (the "Company"), are not
immediately available, (ii) Original Notes, the Letter of Transmittal and all
other required documents cannot be delivered to State Street Bank and Trust
Company (the "Exchange Agent") on or prior to 5:00 P.M., New York City time,
on the Expiration Date (as defined in the Prospectus) or (iii) the procedures
for delivery by book-entry transfer cannot be completed on a timely basis.
This Notice of Guaranteed Delivery may be delivered by hand, overnight courier
or mail, or transmitted by facsimile transmission, to the Exchange Agent. See
the section entitled "Description of the Exchange Offer--Guaranteed Delivery
Procedures" in the prospectus of the Company dated , 1999 (as the same
may be amended or supplemented from time to time, the "Prospectus").
Capitalized terms not defined herein have the meanings assigned to them in the
Prospectus.
The Exchange Agent for the Exchange Offer is:
State Street Bank and Trust Company
By Mail: Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department
P.O. Box 778 2 Avenue de Lafayette
Boston, Massachusetts 02102 Fifth Floor, Corporate Trust Window
Attention: Mackenzie Elijah Boston, Massachusetts 02111-1724
Attention: Mackenzie Elijah
By Hand in New York (as Drop Agent)
State Street Bank and Trust Company By Hand in Boston:
61 Broadway State Street Bank and Trust Company
15th Floor, Corporate Trust Window 2 Avenue de Lafayette
New York, New York 10006 Fifth Floor, Corporate Trust Window
Boston, Massachusetts 02111-1724
Facsimile Transmission Number
(for Eligible Institutions Only) Confirm by telephone:
(617) 664-1452 (617) 662-1525
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of this Notice of Guaranteed Delivery via
facsimile to a number other than as set forth above will not constitute a
valid delivery.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
1
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Hollywood Casino Corporation, a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated , 1999 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the aggregate principal
amount of Original Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus under the caption "Description of the
Exchange Offer--Guaranteed Delivery Procedures."
Name(s) of Registered Holder(s): __________________________________________
Aggregate Principal Amount Amount Tendered: $ _____________________________
Certificate No.(s) (if available): ________________________________________
Total Principal Amount Represented by Original Notes Certificate(s): $ ____
If Original Notes will be tendered by book-entry transfer, provide the
following information:
DTC Account Number: _______________________________________________________
Date: _____________________________________________________________________
--------
* Must be in denominations of $1,000 and any integral multiple thereof.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs personal representatives, successors
and assigns of the undersigned.
2
<PAGE>
PLEASE SIGN HERE
X
------------------------------------- -------------------------------
X
------------------------------------- -------------------------------
Signature(s) of Owner(s) or Authorized
Signatory Date
Area Code and Telephone Number: ___________________________________________
Must be signed by the holder(s) of the Original Notes as their name(s)
appear(s) on certificates for Original Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed
Delivery. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below.
Please print name(s) and address(es)
Name(s):
----------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Capacity:
--------------------------------------------------------------------
Address(es):
-------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of or participant in the Securities Transfer
Agents Medallion Program, the Stock Exchange Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or a firm or other entity
identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, as an "eligible guarantor institution," including (as such terms are
defined therein): (i) a bank; (ii) a broker, dealer, municipal securities
broker, municipal securities dealer, government securities broker, government
securities dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or learning agency; or (v) a savings
association that is a participant in a Securities Transfer Association
recognized program (each of the foregoing being referred to as an "Eligible
Institution"), hereby guarantees to deliver to the Exchange Agent, at one of
its addresses set forth above, either the Original Notes tendered hereby in
proper form for transfer, or confirmation of the book-entry transfer of such
Original Notes to the Exchange Agent's account at The Depositary Trust Company
("DTC"), pursuant to the procedures for book-entry transfer set forth in the
Prospectus, a properly completed and duly executed Letter of Transmittal and
any other documents required by the Letter of Transmittal within three New
York Stock Exchange, Inc. trading days after the date of execution of this
Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Original Notes tendered hereby to the Exchange Agent
within the time period set forth above and that failure to do so could result
in a financial loss to the undersigned.
--------------------------------- ---------------------------------
Name of Firm Authorized Signature
--------------------------------- ---------------------------------
Address Title
--------------------------------- ---------------------------------
Zip Code (Please Type or Print)
Area Code and Telephone No. _____ Dated: __________________________
NOTE: DO NOT SEND CERTIFICATES FOR ORIGINAL NOTES WITH THIS FORM.
4
