<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1994.
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SHOWBOAT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
NEVADA 88-0090766
(STATE OR OTHER JURISDICTION OF (I.R.S.EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
2800 FREMONT STREET
LAS VEGAS, NEVADA 89104
(702) 385-9141
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
<TABLE>
<CAPTION>
OCEAN SHOWBOAT, INC. ATLANTIC CITY SHOWBOAT, INC. SHOWBOAT OPERATING COMPANY
(EXACT NAME OF REGISTRANT (EXACT NAME OF REGISTRANT (EXACT NAME OF REGISTRANT
AS SPECIFIED IN ITS CHARTER) AS SPECIFIED IN ITS CHARTER) AS SPECIFIED IN ITS CHARTER)
--------------------------- ---------------------------- ----------------------------
<S> <C> <C>
NEW JERSEY 22-2500790 NEW JERSEY 22-2500794 NEVADA 88-022752
(STATE OR OTHER (I.R.S. EMPLOYER (STATE OR OTHER (I.R.S. EMPLOYER (STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.) JURISDICTION OF IDENTIFICATION NO.) JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION INCORPORATION INCORPORATION
OR ORGANIZATION) OR ORGANIZATION) OR ORGANIZATION)
801 BOARDWALK 801 BOARDWALK 2800 FREMONT STREET
ATLANTIC CITY, NEW JERSEY 08401 ATLANTIC CITY, NEW JERSEY 08401 LAS VEGAS, NEVADA 89104
(609) 343-4000 (609) 343-4000 (702) 385-9141
(ADDRESS, INCLUDING ZIP (ADDRESS, INCLUDING ZIP (ADDRESS, INCLUDING ZIP
CODE, AND TELEPHONE CODE, AND TELEPHONE CODE, AND TELEPHONE
NUMBER, INCLUDING AREA NUMBER, INCLUDING AREA NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S CODE, OF REGISTRANT'S CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE PRINCIPAL EXECUTIVE PRINCIPAL EXECUTIVE
OFFICES) OFFICES) OFFICES)
JOHN N. BREWER, ESQ. COPY TO:
KUMMER KAEMPFER BONNER & RENSHAW RAYMOND Y. LIN, ESQ.
3800 HOWARD HUGHES PARKWAY LATHAM & WATKINS
SEVENTH FLOOR 885 THIRD AVENUE
LAS VEGAS, NEVADA 89109 NEW YORK, NEW YORK 10022-4802
(702) 792-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
% Senior Subordinated
Notes due 2009......... $150,000,000 100% $150,000,000 $51,725
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Guarantees of Ocean
Showboat, Inc., Atlantic
City Showboat, Inc. and
Showboat Operating
Company................ $150,000,000 -- -- (2)
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) No registration fee is required.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 28, 1994
PROSPECTUS
, 1994
$150,000,000
SHOWBOAT, INC.
% SENIOR SUBORDINATED NOTES DUE 2009
The % Senior Subordinated Notes due 2009 (the "Notes") are being offered
(the "Note Offering") by Showboat, Inc., a Nevada corporation (the "Company").
The Notes will bear interest from the date of issuance at the rate of % per
annum, payable semi-annually in arrears on and of each year,
commencing , 1995. The Company will not be required to make any mandatory
redemption or sinking fund payments with respect to the Notes prior to
maturity. The Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after , 2001 (except as may otherwise be required
by a Gaming Authority (as defined herein)) at the redemption prices set forth
herein, plus accrued and unpaid interest thereon to the date of redemption. In
the event of a Change of Control (as defined herein), each holder of Notes will
have the right to require the Company to repurchase all or any part of such
holder's Notes at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest to the date of purchase.
The Notes will be unsecured general obligations of the Company, subordinated
in right of payment to all Senior Debt (as defined herein) of the Company. The
Notes will be jointly and severally guaranteed on an unsecured, senior
subordinated basis by certain of the Company's subsidiaries. At March 31, 1994,
on a pro forma basis after giving effect to the Note Offering and the
application of the proceeds therefrom, the Company and its subsidiaries would
have had outstanding approximately $429.6 million in aggregate principal amount
of indebtedness on a consolidated basis (excluding trade payables and other
accrued liabilities), of which approximately $279.6 million would have been
Senior Debt.
Concurrently with the Note Offering, the Company is offering 3,000,000 shares
(and a selling shareholder is offering 100,000 shares) of the Company's common
stock (the "Common Stock Offering"). Consummation of the Note Offering is not
contingent upon consummation of the Common Stock Offering, and there can be no
assurance that the Common Stock Offering will be consummated.
SEE "CERTAIN CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED HEREBY.
NEITHER THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD,
THE NEW JERSEY CASINO CONTROL COMMISSION NOR THE LOUISIANA RIVERBOAT GAMING
COMMISSION, NOR ANY OTHER GAMING REGULATORY AGENCY WITH WHICH THE COMPANY IS
LICENSED OR HAS APPLIED FOR A LICENSE, HAS PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS OR THE INVESTMENT MERIT OF THE SECURITIES
OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
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<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
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<S> <C> <C> <C>
Per Note.................................... % % %
Total....................................... $ $ $
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</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) See "Underwriting" for indemnification arrangements with the Underwriter.
(3) Before deducting expenses of the Note Offering payable by the Company,
estimated at $ .
The Notes are being offered by the Underwriter, subject to prior sale, when,
as and if delivered to and accepted by the Underwriter and subject to certain
prior conditions, including the right of the Underwriter to reject any orders
in whole or in part. It is expected that delivery of the Notes will be made in
New York, New York on or about , 1994.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
[RESERVED FOR PHOTOS]
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; at the New York Regional
Office of the Commission, 7 World Trade Center, 13th Floor, New York, New York
10048; and at the Chicago Regional Office of the Commission, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company's Common
Stock is listed on the New York Stock Exchange (the "NYSE"). Reports, proxy
statements, and other information concerning the Company may be inspected at
the offices of the NYSE at 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form S-
3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the registration of the Notes. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain portions which have
been omitted as permitted by the regulations of the Commission. Statements
contained in this Prospectus or in any document incorporated by reference as to
the contents of any contract or other documents referred to herein or therein
are not necessarily complete and, in each instance, reference is made to the
copy of such documents filed as an exhibit to the Registration Statement or
such other documents, which may be obtained from the Commission at its
principal office in Washington, D.C., upon payment of the fees prescribed by
the Commission. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are hereby incorporated herein by reference:
(i) The Company's Annual Report on Form 10-K for the Year Ended December
31, 1993;
(ii) The Company's Quarterly Report on Form 10-Q for the Quarter Ended
March 31, 1994; and
(iii) The Company's Current Report on Form 8-K dated May 19, 1994.
In addition, each document filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(b) of the Exchange Act subsequent to the date of this
Prospectus and prior to termination of the Note Offering shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date such document is filed.
Any statement contained herein, or any document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of the Registration Statement and
this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute part of the Registration Statement or this
Prospectus. All information appearing in this Prospectus is qualified in its
entirety by the information and financial statements (including notes thereto)
appearing in the documents incorporated herein by reference. This Prospectus
incorporates documents by reference which are not presented herein or delivered
herewith. These documents (other than exhibits thereto) are available without
charge, upon written or oral request by any person to whom this Prospectus has
been delivered, from H. Gregory Nasky, Secretary, Showboat, Inc., 2800 Fremont
Street, Las Vegas, Nevada 89104 (telephone (702) 385-9141).
IN CONNECTION WITH THE NOTE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Prospectus. As used in this Prospectus, unless the context
otherwise requires, the "Company" refers to Showboat, Inc. and its
subsidiaries. As used in this Prospectus, amounts in Australian dollars ("A$")
have been converted to United States dollars ("$") using an exchange rate of
$0.730 for each A$1.00 (the exchange rate as of June 14, 1994). See "Certain
Considerations" for factors a prospective investor should consider in
evaluating the Company before purchasing the Notes.
THE COMPANY
Showboat, Inc., through its wholly owned subsidiaries, owns and operates the
Showboat Casino Hotel in Atlantic City, New Jersey (the "Atlantic City
Showboat") and the Showboat Hotel, Casino and Bowling Center in Las Vegas,
Nevada (the "Las Vegas Showboat"). The Company also owns a 50% partnership
interest in, and has a contract to manage, the Star Casino, a riverboat casino
in New Orleans, Louisiana (the "Showboat Star Casino"). In addition to its
existing facilities, the Company maintains an active development program to
identify and develop gaming opportunities in existing and emerging gaming
venues. The Company has announced expansion opportunities in Sydney, Australia,
East Chicago, Indiana and Hogansburg, New York. The Company had EBITDA/1/ of
$69.6 million, $68.5 million and $61.2 million during the years ended December
31, 1993, 1992 and 1991, respectively, and $15.1 million and $12.8 million for
the three months ended March 31, 1994 and 1993, respectively.
The Atlantic City Showboat, which commenced operations in March 1987, is a
516-room, 24-story casino hotel featuring a 95,000 square foot casino
containing approximately 3,000 slot machines and 116 table games. The Company
is currently in the final phase of a three-phase approximately $93 million
expansion project at the Atlantic City Showboat. The first phase of the
expansion was completed in June 1993 and added a 15,000 square foot horse race
simulcasting facility and 5,000 square feet of casino space, resulting in the
addition of approximately 340 slot machines and 28 table games. The second
phase of the expansion was completed in May 1994 and added 15,000 square feet
of casino space, resulting in the addition of approximately 560 slot machines
and 18 table games. The casino expansion permitted the Company to add a total
of approximately 900 slot machines and 46 table games. The final phase of the
expansion will add a new 284-room hotel tower which is currently under
construction and is scheduled to open in early 1995.
The Las Vegas Showboat, which commenced operations in September 1954, is a
482-room, 18-story casino hotel featuring a 78,000 square foot casino
containing approximately 1,900 slot machines, 33 table games and an
approximately 1,300-seat bingo parlor. In October 1990, the Las Vegas Showboat
completed an approximately $25 million expansion and upgrade of its casino,
restaurants and bingo parlor and constructed a 620-space parking garage. The
Company is beginning a $15 million renovation at the Las Vegas Showboat which
will upgrade the facility to current building codes, replace the existing power
plant facility and add 900 additional parking spaces to the existing parking
garage. In addition, the Company is planning a $55 million expansion project
which would add a 500-room hotel tower and an approximately 78,000 square foot
entertainment complex (the "Showboat Entertainment Center"). The Showboat
Entertainment Center is expected to include seven restaurants, a midway arcade,
two movie theatres, a food court, retail shops and a dance hall, all
surrounding a four-story atrium designed to replicate a New Orleans square
featuring a center-court "dancing" water fountain, a laser light show and a
simulated fireworks display. The expansion will add 20,000 square feet of
casino space, which will permit the Company to add up to 1,100 slot machines
and up to 15 table games. Construction on the renovation and expansion projects
is expected to begin before the end of 1994 and is anticipated to take
approximately 18 months to complete.
- --------------------
/1/EBITDA is defined as income from operations of consolidated subsidiaries
before depreciation and amortization plus cash distributions from all
unconsolidated subsidiaries. EBITDA should not be construed as an alternative
to net income and is presented solely as supplemental disclosure because the
Company believes that it is a widely used measure of operating performance in
the gaming industry.
4
<PAGE>
The Showboat Star Casino, which commenced operations in November 1993, is a
riverboat located on the south shore of Lake Pontchartrain in New Orleans,
Louisiana, and features a 21,900 square foot casino which contains
approximately 780 slot machines and 42 table games. In addition to its 50%
equity interest, the Company manages the riverboat for a management fee of 5%
of net gaming revenues. During the first five months of 1994, the Company
earned management fees of $1.6 million and the Showboat Star Casino had net
earnings of $13.9 million. The current policy of Showboat Star Partnership is
to distribute at least 70% of net earnings to its partners on a monthly basis.
The Company is actively pursuing expansion opportunities in emerging gaming
markets throughout the United States and internationally, including land-based
casinos, riverboats and Indian gaming. Announced projects which the Company is
currently pursuing include the following:
Sydney, New South Wales, Australia. On May 6, 1994, the New South Wales
Casino Control Authority (the "NSWCCA") selected an affiliate of the Company as
the preferred applicant to build, manage and operate the sole full-service
casino in New South Wales, Australia (the "Sydney Harbour Casino"). The terms
of the proposed transaction provide for a 99-year site lease and casino
license, which will be the exclusive full-service casino license in the state
of New South Wales for a 12-year period, commencing with the opening of a
proposed temporary casino. Gaming operations are currently anticipated to begin
in mid- to late-1995 in the temporary casino, which is expected to contain
approximately 500 slot machines, 150 table games and, subject to certain
approvals, keno. The permanent Sydney Harbour Casino, expected to open in late
1997, will contain approximately 1,500 slot machines, 200 table games, 352
hotel rooms, 139 luxury condominium units in an adjacent tower, 14 themed
restaurants, 12 cocktail lounges, a 2,000-seat lyric theatre and a 700-seat
cabaret style theatre. The cost of the Sydney Harbour Casino, including
licensing fees, is anticipated to be approximately A$1.2 billion ($866.5
million). Firm commitments for the project have been received for all
anticipated external financing requirements. The Company has agreed to invest
A$135.0 million ($98.5 million) in Sydney Harbour Casino Holdings Limited
("SHCL"), the holding company for the Sydney Harbour Casino, for an
approximately 27% ownership interest in SHCL. In addition, an 85% owned
subsidiary of the Company has a 99-year management agreement to manage and
operate the Sydney Harbour Casino. The management fee will be based on both
revenues and earnings of the casino and the non-casino areas of the
entertainment complex. See "The Company--Expansion Opportunities--Sydney, New
South Wales, Australia."
East Chicago, Indiana. The Company owns a 55% interest in the Showboat Marina
Partnership (the "Indiana Partnership") which is the only applicant for the
sole riverboat gaming license allocated by statute to East Chicago, Indiana.
The riverboat will be located approximately 20 minutes from downtown Chicago,
Illinois and approximately three miles from the Chicago city limits. The
Company plans to invest approximately $30 million in the Indiana Partnership
and assist the Indiana Partnership in obtaining financing (currently estimated
to be $90 million) for the construction of the riverboat casino and related
dock-side facilities (collectively, the "East Chicago Riverboat"). Under the
current partnership agreement, the Company will receive a 12% preferred return
on its investment. The Indiana Partnership's application to the Indiana Gaming
Commission for the license to operate the East Chicago Riverboat proposes a
riverboat with up to 60,000 square feet of casino space containing
approximately 2,300 slot machines and 80 table games and substantial dock-side
amenities. Issuance of the gaming license is subject to the resolution of
certain legal challenges to the Indiana gaming statute. See "Certain
Considerations--New Gaming Jurisdictions and Expansion Opportunities."
St. Regis Mohawk Tribal Reservation, Hogansburg, New York. The Company has
entered into a management agreement and related agreements to manage a casino
(the "St. Regis Casino") on the St. Regis Mohawk Tribal Reservation in
Hogansburg, New York, located approximately 75 miles south of Montreal, Canada.
The agreements, which are subject to the approval of the National Indian Gaming
Commission (the
5
<PAGE>
"NIGC"), contemplate that a wholly owned subsidiary of the Company will lend
approximately $30 million for a term of five years, at a rate of 15% per annum,
to purchase and renovate an existing building which will house an approximately
30,000 square foot casino with approximately 130 table games, including
blackjack, craps, roulette, best hand poker, big six and keno. The proposed
management agreement provides for a fee of 20% of earnings before interest,
taxes and depreciation (subject to a maximum of 30% of earnings before taxes)
and has a term of five years. See "The Company--Expansion Opportunities--St.
Regis Mohawk Tribal Reservation, Hogansburg, New York."
The Company's marketing and operating strategy is to develop a high volume of
traffic through its casinos. The Atlantic City Showboat targets the drive-in
customer by providing competitive games and excellent service in an attractive
and convenient facility. Customers are attracted to the Las Vegas Showboat by
competitive slot machines, bingo, moderately priced food and accommodations, a
friendly "locals" atmosphere and a 106-lane bowling center. The Showboat Star
Casino, like the Las Vegas Showboat, targets "locals" with its excellent
service, attractive and convenient facility and accessible location. At future
venues, the Company will modify its marketing strategies to maximize casino
revenues by focusing on a specific venue's unique location and demographics.
The Company's development strategy is to identify new and existing gaming
opportunities with strong demographics, in attractive and accessible locations,
and which the Company believes will exceed the Company's return on investment
objectives. In 1993, the Company created a Development and Management Services
Division to investigate and secure new properties in the United States and
around the world. The Company's Development and Management Services Division
also provides management services to support new facilities upon opening,
including human resources, marketing, design and construction, management
information systems, regulatory compliance and operating and financial
services. As of May 31, 1994, the Development and Management Services Division
employed approximately 40 full-time employees and, since its inception, has
actively pursued new projects in 16 states and four foreign countries. No
assurance can be given that any of the announced projects, or any project under
development, will be completed, licensed or result in any significant
contribution to the Company's cash flow or earnings. Casino gaming operations
are highly regulated and new casino development is subject to a number of
risks. See "Certain Considerations--New Gaming Jurisdictions and Expansion
Opportunities," "--Regulatory Matters" and "--Development of New Facilities."
6
<PAGE>
THE OFFERING
Securities Offered.......... $150 million aggregate principal amount of % Se-
nior Subordinated Notes due 2009.
Maturity Date............... , 2009.
Interest Payment Dates...... and of each year, commencing on ,
1995.
Guarantees.................. The payment of principal of and interest on the
Notes when due will be guaranteed on an unsecured
senior subordinated basis (the "Subsidiary Guar-
antees") by certain of the Company's subsidiaries
(the "Guarantors").
Optional Redemption......... The Notes will be redeemable, in whole or in
part, at the option of the Company at any time on
or after , 2001 at the redemption prices set
forth herein plus accrued and unpaid interest
thereon to the redemption date.
Mandatory Redemption........ The Company is not required to make mandatory re-
demption or sinking fund payments with respect to
the Notes.
Ranking..................... The Notes will be unsecured general obligations
of the Company, subordinated in right of payment
to all existing and future Senior Debt of the
Company. The Subsidiary Guarantees will be gen-
eral unsecured obligations of the Guarantors,
subordinated in right of payment to all Senior
Debt of the Guarantors. At March 31, 1994, on a
pro forma basis after giving effect to the Note
Offering, the Company and its subsidiaries would
have had outstanding approximately $429.6 million
in aggregate principal amount of indebtedness on
a consolidated basis (excluding trade payables
and other accrued liabilities), of which approxi-
mately $279.6 million would have been Senior
Debt.
Change of Control........... In the event of a Change of Control, each holder
of Notes will have the right to require the Com-
pany to repurchase all or any part of such hold-
er's Notes at a purchase price equal to 101% of
the principal amount thereof plus accrued and un-
paid interest to the date of purchase.
Certain Covenants........... The Indenture relating to the Notes (the "Inden-
ture") will contain covenants restricting or lim-
iting the ability of the Company and its Re-
stricted Subsidiaries (as defined herein) to,
among other things, (i) pay dividends or make
other restricted payments, (ii) incur additional
indebtedness and issue preferred stock, (iii)
create liens, (iv) create dividend and other pay-
ment restrictions affecting Restricted Subsidiar-
ies, (v) enter into mergers, consolidations or
make sales of all or substantially all assets,
(vi) enter into transactions with affiliates and
(vii) engage in other lines of business.
7
<PAGE>
Escrow Agreement............ The Company is required to place $100.0 million
of the net proceeds of the Note Offering into an
escrow account, which may only be used to fund
the Company's investment in SHCL. In the event
that Australian Gaming Approval or Management
Contract Approval (as defined in the Indenture)
has not occurred on or prior to December 31,
1995, the Company will be obligated to make an
offer to repurchase an amount of Notes and cer-
tain other indebtedness of the Company equal to
the amount in the escrow account.
Concurrent Offering......... Concurrently with the Note Offering, the Company
is offering 3,000,000 shares (and a selling
shareholder is offering 100,000 shares) of the
Company's common stock. Consummation of the Note
Offering is not contingent upon consummation of
the Common Stock Offering, and there can be no
assurance that the Common Stock Offering will be
consummated.
Use of Proceeds............. The net proceeds from the Note Offering are ex-
pected to be approximately $144.9 million. The
Company currently intends to apply such net pro-
ceeds, together with the net proceeds to the Com-
pany from the Common Stock Offering and available
cash, to (i) invest A$135.0 million ($98.5 mil-
lion) for an approximately 27% equity interest in
SHCL, (ii) renovate the Las Vegas Showboat in or-
der to upgrade the facility to current building
codes, replace the existing power plant facility
and add 900 parking spaces to the existing park-
ing garage at a cost of approximately $15 mil-
lion, (iii) expand the Las Vegas Showboat to add
a 500-room hotel tower and the Showboat Enter-
tainment Center at a cost of approximately $55
million, (iv) invest approximately $30 million in
the Indiana Partnership and (v) provide a loan of
approximately $30 million to the St. Regis Mohawk
Tribe for the purchase and renovation of a build-
ing in which to operate the St. Regis Casino. See
"Use of Proceeds."
8
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
SUMMARY OF CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- ----------------
1989 1990 1991 1992 1993 1993 1994
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $342,354 $334,247 $331,560 $355,236 $375,727 $85,496 $88,779
Income from operations
of consolidated
subsidiaries.......... 31,107 27,765 35,501 46,508 46,269 7,685 7,848
Equity in income (loss)
from operations of
unconsolidated
affiliate............. -- -- -- -- (850) -- 3,240
Income from operations. 31,107 27,765 35,501 46,508 45,419 7,685 11,088
Interest expense,
net(1)................ 24,870 25,236 25,399 23,894 21,481 4,499 5,399
Income before
extraordinary items
and cumulative effect
adjustment............ 7,066(2) 1,081 6,014 15,857 13,464 1,921 3,440
Net income............. 7,066(2) 5,051 6,194 12,449 7,341 2,477 3,440
Ratio of earnings to
fixed charges(3)...... 1.32(2) 1.06x 1.29x 1.68x 1.67x 1.42x 1.60x
OTHER DATA:
EBITDA(4).............. $50,696 $50,138 $61,193 $68,520 $69,572 $12,825 $15,109
Depreciation and
amortization.......... 19,589 22,373 25,692 22,012 23,303 5,140 6,361
Capital expenditures... 20,497 44,020 13,203 23,092 63,600 17,769 20,488
EBITDA/Interest
expense, net.......... 2.04x 1.99x 2.41x 2.87x 3.24x 2.85x 2.80x
Net debt(5)/EBITDA..... 3.54x 3.87x 2.85x 1.60x 2.27x -- 2.40x
PRO FORMA DATA(6):
Interest expense, net.. $ 32,907 $ 8,011 $ 7,932
EBITDA/Interest
expense, net.......... 2.11x 1.60x 1.90x
Net debt/EBITDA........ 1.60x -- 1.75x
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------------------------
AS AS FURTHER
ACTUAL ADJUSTED(7) ADJUSTED(8)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $107,458 $252,333 $303,996
Total assets................................. 482,475 632,475 684,138
Long-term debt (including current
maturities)................................. 279,570 429,570 429,570
Shareholders' equity......................... 138,561 138,561 190,224
</TABLE>
- ------------------
(1) Interest expense, net of capitalized interest and interest income.
(2) Includes a pre-tax gain of $4.9 million on a sale of a country club by the
Company.
(3) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (income before income taxes,
extraordinary items and cumulative effect adjustment plus fixed charges
less capitalized interest) by fixed charges (interest expense plus
capitalized interest plus that portion of rental expense deemed to
represent interest).
(4) EBITDA is defined as income from operations of consolidated subsidiaries
before depreciation and amortization, plus cash distributions from
unconsolidated subsidiaries. Cash distributions from unconsolidated
subsidiaries were $0 from 1989 through 1993 and were $0.9 million in the
quarter ended March 31, 1994.
(5) Net debt is defined as long-term debt, inclusive of current maturities,
less cash, at the end of the period.
(6) The pro forma data give effect to (i) the Note Offering at an assumed
interest rate of 11%, (ii) the Common Stock Offering at an assumed offering
price of $18.25 per share, the last reported sale price of the Common Stock
on the NYSE on June 23, 1994, and (iii) the sale by the Company on May 18,
1993 of $275 million aggregate principal amount of 9 1/4% First Mortgage
Bonds due 2008 and the application of the net proceeds therefrom to repay
certain indebtedness, in each case as if such transaction had occurred as
of the first day of the period presented. The pro forma data assume that
interest income is earned on cash balances at a rate of 3.0% in 1993 and
3.5% in 1994. If the Common Stock Offering is not consummated, the pro
forma data would be as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------ ----------------
1993 1993 1994
(IN THOUSANDS, EXCEPT RATIO
DATA)
PRO FORMA DATA:
<S> <C> <C> <C>
Interest expense, net...................... $34,457 $ 8,399 $ 8,384
EBITDA/Interest expense, net............... 2.02x 1.53x 1.80x
Net debt/EBITDA............................ 2.34x -- 2.47x
</TABLE>
If the interest rate on the Notes is increased or decreased by 1/4%,
interest expense, net will increase or decrease, respectively, by $375,000.
(7) Adjusted to give effect to the Note Offering.
(8) Adjusted to give effect to the Note Offering and the Common Stock Offering
at an assumed offering price of $18.25 per share.
9
<PAGE>
THE COMPANY
Showboat, Inc., through its wholly owned subsidiaries, owns and operates the
Atlantic City Showboat and the Las Vegas Showboat. The Company also owns a 50%
partnership interest in, and has a contract to manage, the Showboat Star
Casino. In addition to its existing facilities, the Company maintains an
active development program to identify and develop gaming opportunities in
existing and emerging gaming venues. The Company has announced expansion
opportunities in Sydney, Australia, East Chicago, Indiana and Hogansburg, New
York. The Company had EBITDA/1/ of $69.6 million, $68.5 million and $61.2
million during the years ended December 31, 1993, 1992 and 1991, respectively,
and $15.1 million and $12.8 million for the three months ended March 31, 1994
and 1993, respectively.
The Company's marketing and operating strategy is to develop a high volume
of traffic through its casinos. The Atlantic City Showboat targets the drive-
in customer by providing competitive games and excellent service in an
attractive and convenient facility. Customers are attracted to the Las Vegas
Showboat by competitive slot machines, bingo, moderately priced food and
accommodations, a friendly "locals" atmosphere and a 106-lane bowling center.
The Showboat Star Casino, like the Las Vegas Showboat, targets "locals" with
its excellent service, attractive and convenient facility and accessible
location. At future venues, the Company will modify its marketing strategies
to maximize casino revenues by focusing on a specific venue's unique location
and demographics.
The Company's development strategy is to identify new and existing gaming
opportunities with strong demographics, in attractive and accessible
locations, and which the Company believes will exceed the Company's return on
investment objectives. In 1993, the Company created a Development and
Management Services Division to investigate and secure new properties in the
United States and around the world. The Company's Development and Management
Services Division also provides management services to support new facilities
upon opening, including human resources, marketing, design and construction,
management information systems, regulatory compliance and operating and
financial services. As of May 31, 1994, the Development and Management
Services Division employed approximately 40 full-time employees and, since its
inception, has actively pursued projects in 16 states and four foreign
countries. The Development and Management Services Division is currently
working on a number of projects in addition to the announced projects. No
assurance can be given that any of the announced projects, or any project
under development, will be completed, licensed or result in any significant
contribution to the Company's cash flow or earnings. Casino gaming operations
are highly regulated and new casino development is subject to a number of
risks. See "Certain Considerations--New Gaming Jurisdictions and Expansion
Opportunities," "--Regulatory Matters" and "--Development of New Facilities."
The Company is actively pursuing expansion opportunities in emerging gaming
markets in the United States and internationally. The Company has announced
expansion opportunities which include (i) an approximately 27% interest in
SHCL, which was selected as the preferred applicant for the only full-service
casino license in New South Wales, Australia, (ii) a 55% interest in the
Indiana Partnership, which is the only applicant for the sole gaming license
to operate a riverboat casino in East Chicago, Indiana, located approximately
20 minutes from downtown Chicago, Illinois and three miles from the Chicago
city limits, and (iii) a management agreement with the St. Regis Mohawk Tribe
to construct and operate the St. Regis Casino on the St. Regis Mohawk Tribal
Reservation in Hogansburg, New York, located approximately 75 miles south of
Montreal, Canada.
The Company's principal executive offices are located at 2800 Fremont
Street, Las Vegas, Nevada 89104. The telephone number is (702) 385-9141.
- ---------------------
/1/EBITDA is defined as income from operations of consolidated subsidiaries
before depreciation and amortization plus cash distributions from all
unconsolidated subsidiaries. EBITDA should not be construed as an alternative
to net income and is presented solely as supplemental disclosure because the
Company believes that it is a widely used measure of operating performance in
the gaming industry.
10
<PAGE>
THE ATLANTIC CITY SHOWBOAT
The Atlantic City Showboat, a 516-room, 24-story hotel casino which commenced
operations in March 1987, is located at the eastern end of the "Boardwalk." The
casino features approximately 3,000 slot machines and 116 table games,
including 62 "21" tables, 18 poker tables, 14 craps tables, 11 roulette tables,
two baccarat tables, two mini-baccarat tables, two pai-gow poker tables, two
big six wheels, one red dog table, one sic bo table, one double down stud poker
table, keno and a simulcast horse racing facility. The Atlantic City Showboat
contains two public levels. On the ground level the public areas include the
casino, a show lounge, two cocktail lounges, six restaurants, an ice cream
parlor and three shops. On the second level the public areas include a 573-seat
buffet-style restaurant, a 383-seat coffee shop, a player's club lounge, a
beauty salon, a health spa, a video game arcade, 27,000 square feet of meeting
rooms, convention and exhibition space, and a 60-lane bowling center with a
snack bar and cocktail lounge. The themed interior of the facility replicates
the spirit and elegance of turn-of-the-century New Orleans.
The Atlantic City Showboat's attached nine-story parking garage facility,
with a New Orleans themed exterior, provides self-parking for approximately
2,000 cars and a 14-bus depot integrated with the casino. This design permits
Atlantic City Showboat's customers to enter the casino hotel protected from the
weather. In addition, on-site underground parking accommodates valet parking
for approximately 500 cars. The Company recently secured land for 500
additional parking spaces located approximately two blocks from the Atlantic
City Showboat to supplement customer parking during peak periods. Access to the
Atlantic City Showboat has improved with the completion of the expansion of
Delaware Avenue to four traffic lanes in May 1994. Delaware Avenue leads
directly to the Atlantic City Showboat from the White Horse Pike (U.S. Route
30), one of three major highways to Atlantic City.
The Company is in the final phase of a three-phase approximately $93 million
expansion project which commenced in 1993 at the Atlantic City Showboat. As a
result of the expansion, the Company will receive $7.6 million in credits from
the Casino Reinvestment Development Authority, which will be applied to future
required funding obligations. The first phase of the expansion was completed in
June 1993 and added a 15,000 square foot horse race simulcasting facility and
5,000 square feet of casino space, resulting in the addition of approximately
340 slot machines and 28 table games. The second phase of the expansion was
completed in May 1994 and added 15,000 square feet of casino space, resulting
in the addition of approximately 560 slot machines and 18 table games. The
casino expansion permitted the Company to add a total of approximately 900 slot
machines and 46 table games. The final phase of the Atlantic City expansion
will add a new 284-room hotel tower which is currently under construction and
is scheduled to open in early 1995.
The Atlantic City Showboat is connected to the Taj Mahal Casino Hotel, the
largest casino in Atlantic City, and Merv Griffin's Resorts International
Casino Hotel by pedestrian walkways. These three properties form an "uptown
casino complex" in which patrons can pass from property to property, either on
the ocean-front Boardwalk or through the pedestrian walkways.
THE LAS VEGAS SHOWBOAT
The Las Vegas Showboat, a 482-room, 18-story hotel casino which commenced
operations in September 1954, is located on 26 acres approximately 2 1/2 miles
from both the "Strip" and downtown Las Vegas. The Las Vegas Showboat casino
features approximately 1,900 slot machines and 33 table games, including 20
"21" tables, six poker tables, two craps tables, two roulette tables, two
Caribbean stud poker tables, one pai-gow poker table, a race and sports book,
an approximately 1,300-seat bingo parlor and a keno area. The hotel casino
complex also includes a 106-lane bowling center, a 408-seat buffet-style
restaurant, a 194-seat coffee shop, two specialty restaurants and 8,300 square
feet of meeting room space. The facility includes surface parking for 1,200
cars in addition to a 620-car six level parking garage. The Company also owns
and operates a 33-room motel directly across from the Las Vegas Showboat.
11
<PAGE>
The Company is beginning a $15 million renovation at the Las Vegas Showboat
which will upgrade the roof of the oldest portion of the Las Vegas Showboat in
order to comply with current building codes and replace the existing power
plant facility. The renovation also will add 900 parking spaces to the existing
parking garage which, following the renovation, will permit direct access to
the casino through pedestrian walkways.
In addition, the Company is planning a $55 million expansion project which
would add a 500-room tower and the approximately 78,000 square foot Showboat
Entertainment Center featuring seven restaurants (the three existing
restaurants and buffet will be relocated to the Showboat Entertainment Center
providing the Las Vegas Showboat with additional casino and meeting room
space), a midway arcade, two movie theatres, a food court, retail shops and a
dance hall, all surrounding a four-story atrium which will recreate the festive
atmosphere of a New Orleans square during Mardi Gras. The ceiling of the atrium
will be designed to simulate the sky as a day progresses from dawn to dusk. The
highlight of the atrium will be a center-court "dancing" water fountain, a
laser light show and a simulated fireworks display. The primary entrance to the
Showboat Entertainment Center will be through the casino. The Company believes
the expansion project will strengthen the Company's market niche with local Las
Vegas residents and registered hotel guests as well as attract casual tourists,
a market segment which is not currently emphasized by the Las Vegas Showboat.
Following the renovation and expansion, the hotel will contain 833 rooms and
have added casino capacity of 20,000 square feet, which will permit the Company
to add up to 1,100 slot machines and up to 15 table games. Construction on the
renovation and expansion is anticipated to commence before the end of 1994 and
is expected to take approximately 18 months to complete.
THE SHOWBOAT STAR CASINO
The Company owns a 50% equity interest in Showboat Star Partnership, the
owner of the Showboat Star Casino. The Showboat Star Casino riverboat, which
commenced gaming operations in November 1993, is located on the south shore of
Lake Pontchartrain in New Orleans, Louisiana, approximately seven miles from
New Orleans' "French Quarter." The riverboat, which measures 265 feet long and
78 feet wide, was built to resemble a traditional paddle-wheel riverboat. The
riverboat contains 21,900 square feet of casino space on three levels, with
approximately 780 slot machines and 42 table games, including 32 "21" tables,
six craps tables and four roulette tables. A cocktail lounge is located on each
of the three public levels of the riverboat.
Dock-side facilities include a 34,000 square foot terminal building, which
contains a restaurant, a cocktail lounge and administrative offices, and
provides parking for 1,150 cars. Passengers pass through the terminal area in
order to board the riverboat and embark on one of six daily three-hour
excursion cruises on Lake Pontchartrain. During inclement weather conditions,
the riverboat operates mock cruises while docked at the terminal facility. The
Showboat Star Casino currently operates between the hours of 10:00 a.m. and
4:00 a.m. every day of the week. For the five months ended May 31, 1994, the
total number of passengers was 803,431 with an average win per passenger of
$54.60. Since commencement of operations, the Showboat Star Casino has been
principally restricted to mock cruises due to either inclement weather or
underwater obstructions. The Company believes that operating mock cruises has
had a positive effect in attracting customers.
The Company, through its subsidiary, Lake Pontchartrain Showboat, Inc.
("LPSI"), manages and operates the gaming areas of the Showboat Star Casino for
a management fee of 5% of gaming revenues, net of gaming taxes of 18.5% of
gaming revenue and boarding fees of $5.00 per passenger. During the first five
months of 1994, the Company earned a management fee of $1.6 million and the
Showboat Star Casino had net earnings of $13.9 million. The current policy of
Showboat Star Partnership is to distribute at least 70% of net earnings to its
partners monthly.
12
<PAGE>
EXPANSION OPPORTUNITIES
The Company is actively pursuing expansion opportunities in emerging gaming
markets throughout the United States and internationally, including land-based
casinos, riverboats and Indian gaming. Announced expansion opportunities
include:
SYDNEY, NEW SOUTH WALES, AUSTRALIA
The Company and Leighton Properties Pty Limited, a subsidiary of Australia's
largest publicly traded construction firm ("Leighton Properties"), are the
founding stockholders of SHCL, which has been selected as the preferred
applicant by the NSWCCA to develop, construct and operate the sole full-service
casino with slot machines and table games in New South Wales, Australia. The
terms of the proposed transaction provide for a 99-year site lease and casino
license, which will be the exclusive full-service casino license in the state
of New South Wales for a 12-year period, commencing with the opening of a
temporary casino. As the preferred applicant, SHCL is required to obtain
various development approvals for the construction of the Sydney Harbour Casino
(the "Development Period"). The Development Period is anticipated to be
completed by November 1994. Following, and subject to, satisfactory completion
of the Development Period, the NSWCCA is expected to issue the casino license
to SHCL.
The Sydney Harbour Casino will begin operations in a temporary casino, which
will be located at Pyrmont Bay on Wharves 12 and 13 in an existing building
which will be renovated to permit the operation of a casino. The temporary
casino is anticipated to open in August 1995 and is expected to contain
approximately 500 slot machines, 150 table games (30 table games of which are
expected to be located in a private gaming room) and, subject to certain
approvals, keno. Additional amenities are expected to include cocktail lounges,
specialty restaurants, retail shops and on-site parking for 428 cars.
The permanent Sydney Harbour Casino is expected to be open in late 1997.
Based on the maximum allowable number of table games, the permanent Sydney
Harbour Casino will rank as one of the largest casinos in the world. The Sydney
Harbour Casino will be located less than one mile from the Sydney central
business district on an eight-acre waterfront site on Pyrmont Bay next to
Darling Harbour. The Sydney Harbour Casino will feature approximately 136,000
square feet of casino space, including an approximately 20,000 square foot
private gaming area to be located on a separate level which will target a
premium clientele. The Sydney Harbour Casino will have approximately 1,500 slot
machines and 200 table games, including 20 slot machines and 30 table games in
the private gaming area. The Sydney Harbour Casino will be decorated to capture
Australia's natural beauty and diverse geography and will contain cascading
water fountains. Passage through the casino will allow patrons to experience
Australia's indigenous landscape from wall surfaces of brilliant oranges and
reds representing the cliffs and ranges of Australia's central desert, to an
Australian rain forest under a glass canopy and a Great Barrier Reef room with
a large aquarium of tropical fish. The Sydney Harbour Casino will also contain
14 themed restaurants, 12 cocktail lounges, a deluxe 2,000-seat lyric theatre,
a 700-seat cabaret style theatre, extensive public space and a five-acre roof
garden. The Sydney Harbour Casino complex will include a 352-room hotel tower
and an adjacent condominium tower containing 139 privately owned luxury units
with full hotel services. The complex will also include extensive retail
facilities, a station for Sydney's proposed light rail system, a bus terminal,
docking facilities for commuter ferries and parking for approximately 2,500
cars.
Approximately 5.5 million people live within a 120-mile radius of Sydney.
Additionally, 1.7 million international tourists and 4.4 million Australian
tourists visited Sydney in 1992. Slot machines are currently permitted in
approximately 1,500 non-profit private clubs in New South Wales, most of which
contain less than 25 slot machines. According to the Tasmanian Gaming
Commission, in 1992-1993 gambling expenditures per adult citizen in New South
Wales were approximately A$595 ($434), the largest gambling expenditures per
adult citizen in all of the Australian states. The following chart compares
gambling expenditures per adult citizen of the various Australian states in
1992-1993.
13
<PAGE>
AUSTRALIA GAMBLING EXPENDITURES 1992-1993
<TABLE>
<CAPTION>
PERCENTAGE PERCENT OF
OF TOTAL ADULT TOTAL EXPENDITURES
EXPENDITURES EXPENDITURES POPULATION POPULATION PER CAPITA
------------ ------------ ----------- ---------- ------------
(MILLIONS) (THOUSANDS)
<S> <C> <C> <C> <C> <C>
New South Wales......... A$2,667.3 44.9 4,484 34.2 A$594.9
Victoria................ 1,112.7 18.7 3,345 25.5 332.7
Queensland.............. 984.4 16.6 2,270 17.3 433.7
South Australia......... 345.3 5.8 1,107 8.5 311.9
Western Australia....... 513.7 8.7 1,221 9.3 420.7
Tasmania................ 119.1 2.0 345 2.6 345.3
ACT..................... 139.5 2.3 218 1.7 542.1
Northern Territory...... 58.4 1.0 114 0.9 511.9
--------- ----- ------ -----
Total................. A$5,940.4 100.0 13,104 100.0
========= ===== ====== =====
</TABLE>
Source: Australian Gambling Statistics 1973 to 1993, The Tasmanian Gaming
Commission.
Leighton Properties has agreed to construct the Sydney Harbour Casino
(including the temporary casino) for A$691.0 million ($504.4 million). Under
the terms of the construction contract, the temporary casino must be completed
nine months, and the permanent casino must be completed 38 months, after the
issuance of the casino license. In the event that the permanent Sydney Harbour
Casino is not completed within such time period, the construction contract
provides for liquidated damages of A$150,000 ($109,500) per day. Additionally,
SHCL is indemnified against any loss arising from the contractor's failure to
perform its obligations under the construction contract.
The cost of the Sydney Harbour Casino, including licensing fees, is
anticipated to be approximately A$1.2 billion ($866.5 million). The Company and
Leighton Properties have agreed to invest A$135.0 million ($98.5 million) and
A$25.0 million ($18.3 million), respectively, in SHCL for equity stakes of
approximately 27% and 5%, respectively. In addition, each of the Company and
Leighton Properties has options to purchase an additional 7% of the fully
diluted equity of SHCL. The options may be exercised no earlier than July 1,
1998 and expire June 30, 2000 and have an exercise price of A$1.15 per share.
Upon the issuance of the casino license, SHCL will have 505,000,000 shares
outstanding, consisting of 160,000,000 ordinary shares owned by Showboat
Australia Pty Limited ("Showboat Australia"), an indirect wholly owned
subsidiary of the Company, and Leighton Properties, and 345,000,000 preferred
ordinary shares owned by certain institutional investors. SHCL is expected to
become a publicly listed company on the Australian Stock Exchange within six
months of receiving the casino license.
Additional funds for the construction of the Sydney Harbour Casino will be
obtained through bank financing of A$500.0 million ($365.0 million), a working
capital facility of A$50.0 million ($36.5 million), an offering of securities
to institutional investors of A$345.0 million ($251.9 million) for an
approximately 68% ownership in SHCL, and cash flow from the operation of the
temporary casino of approximately A$132.0 million ($96.4 million). SHCL has
received firm commitments for all of its anticipated external financing
requirements, which total approximately A$895.0 million ($653.4 million). In
addition, SHCL has granted options to certain parties that were involved in the
preliminary bidding for the New South Wales casino license to purchase
approximately 4% of the equity of SHCL, 3% of which is exercisable at any time
prior to the issuance of the casino license at an exercise price of A$1.00 per
share and 1% of which is exercisable between June 1, 1998 and June 30, 2000 at
an exercise price of A$1.15 per share.
SHCL has entered into an agreement (the "Facility Agreement") with the
Commonwealth Bank of Australia ("CBA") to obtain a loan in the amount of
A$500.0 million ($365.0 million) to finance a portion of the development and
construction of the Sydney Harbour Casino. SHCL will also obtain from CBA a
working capital facility in the amount of A$50.0 million ($36.5 million) for
working capital purposes. The
14
<PAGE>
A$500.0 million construction facility will convert to a seven-year term loan
upon completion of the Sydney Harbour Casino. The term loan will be amortized
by mandatory repayments specified in the Facility Agreement. The Facility
Agreement also requires that the Company remain the beneficial owner of not
less than 10% of the issued ordinary shares of SHCL for a period of not less
than five years after completion of the permanent Sydney Harbour Casino and
remain the beneficial owner of not less than 5% of the issued ordinary shares
of SHCL for an additional two years thereafter. The Facility Agreement further
restricts SHCL's ability to declare or pay any dividend (other than a permitted
preferred ordinary dividend) or make distributions to stockholders, except
under certain conditions as specified in the Facility Agreement. The Facility
Agreement contains additional customary financial covenants. In connection with
the Facility Agreement, CBA will receive options to acquire 5% of the number of
preferred ordinary shares issued to institutional investors at an exercise
price of A$1.10 per share. The options may be exercised no earlier than July 1,
1998 and expire five years from the date of the agreement granting such
options.
Institutional investors have committed to purchase approximately 68%, or
345,000,000 preferred ordinary shares, of SHCL for A$345.0 million ($251.9
million). The preferred ordinary shares are entitled to a cumulative dividend
of A$.05 per share per annum for the three fiscal years ended June 30, 1997,
1998 and 1999. Prior to the issuance of the casino license, the underwriter for
the institutional investor offering of the preferred ordinary shares is
required to fund the underwritten amount to SHCL in immediately available
funds. The institutional investor offering has been fully committed by 24
institutional investors.
Sydney Harbour Casino Management Pty Limited (the "Manager"), a company which
is 85% owned by Showboat Australia and 15% owned by Leighton Properties, will
manage the temporary casino and the permanent Sydney Harbour Casino pursuant to
a 99-year management agreement (the "Management Agreement"). The terms of the
Management Agreement require the Manager to advise Sydney Harbour Casino Pty
Limited or Sydney Harbour Casino Properties Pty Limited, wholly owned
subsidiaries of SHCL, as to the casino design and configuration and the
placement of all gaming equipment. The Manager also has agreed to train all
employees of the Sydney Harbour Casino and to manage a high quality
international class casino in accordance with the operating standards required
by the NSWCCA. The NSWCCA requires a service audit to be conducted yearly by a
third party so that areas of non-compliance can be identified and remedied by
the Manager. In addition, gaming revenue will be taxed at a rate of (i) 22.5%
of slot machine revenue and (ii) 20% of the first $200 million of table game
revenue, increasing 1% for each additional $5 million of table game revenue, up
to a maximum rate of 45%, and will also be subject to a community benefit levy
of 2% of gross gaming revenue. The Manager will be paid a management fee equal
to the sum of (i) 1 1/2% of casino revenue, (ii) 6% of casino gross operating
profit, (iii) 3 1/2% of total non-casino revenue, and (iv) 10% of total gross
non-casino operating profit, for each fiscal year for services rendered by the
Manager pursuant to the Management Agreement. In connection with the final bid
for the Sydney Harbour Casino license, the Company has also agreed to forego
management fees in an amount with a present value of A$19.0 million ($13.9
million).
In addition, each of the Company and Leighton Holdings Limited, the parent of
Leighton Properties, has agreed to guarantee the obligations of Showboat
Australia and Leighton Properties pursuant to their agreements with the NSWCCA,
including the Company's obligation to invest an aggregate of A$135.0 million
($98.5 million) in SHCL, and to indemnify the NSWCCA for any loss as a result
of the failure by either of Showboat Australia or Leighton Properties to
perform their obligations under such agreements. The Company and Leighton
Holdings Limited will be released from their guarantees and indemnities upon
satisfaction of their obligations to invest in SHCL. The Company has secured
its guarantee and indemnity with an A$8.4 million ($6.1 million) line of
credit.
EAST CHICAGO, INDIANA
On April 12, 1994, the Indiana Partnership, owned 55% by Showboat Indiana
Investment Limited Partnership, a wholly owned limited partnership ("SII"), and
45% by Waterfront Entertainment and Development, Inc., an unrelated Indiana
corporation, filed its gaming application with the Indiana Riverboat Gaming
Commission to operate the East Chicago Riverboat on Lake Michigan in East
Chicago, Indiana. The East Chicago Riverboat is located approximately 20
minutes from downtown Chicago and approximately
15
<PAGE>
three miles from the Chicago city limits. Approximately 9.2 million adults
reside within 120 miles of East Chicago, Indiana. The Indiana Partnership is
the sole applicant for the only riverboat gaming license allocated by statute
to East Chicago. The Company expects to invest approximately $30 million in the
Indiana Partnership and will help the partnership obtain in excess of $75
million (currently estimated to be $90 million) in debt financing. Under the
current partnership agreement, the Company will receive a 12% preferred return
on its investment prior to additional partnership distributions.
The Indiana Partnership is considering constructing a new vessel or
renovating an existing vessel for its proposed gaming operations. The Indiana
Partnership's application to the Indiana Riverboat Gaming Commission for the
license to operate the East Chicago Riverboat proposes a riverboat with up to
60,000 square feet of casino space containing approximately 2,300 slot machines
and 80 table games. The East Chicago Riverboat dock-side facility is also
expected to include up to three restaurants, a 5,000 square foot sports lounge
and a parking garage for 2,000 cars. The Company is continuing to evaluate the
East Chicago market and construction costs for the project and may modify the
riverboat configuration in the future.
The Indiana Riverboat Gambling Act permits the operation of up to 11
riverboats, of which five riverboats, including the Indiana Partnership's
vessel, will operate on Lake Michigan. The Company anticipates that, subject to
the successful resolution of the lawsuit challenging the constitutionality of
Indiana's Riverboat Gaming Act, the first licensed riverboat on Lake Michigan
will be located in Gary, Indiana, and that the East Chicago Riverboat will open
in 1996. See "Certain Considerations--New Gaming Jurisdictions and Expansion
Opportunities." No gaming facility is in operation in Indiana at this time.
Illinois has authorized four gaming licenses, each limited to 1,200 gaming
positions, to operate riverboat casinos in the Chicago metropolitan area.
Riverboat operators holding three of such licenses currently operate six
riverboats and an operator holding the fourth license is expected to commence
gaming operations in late 1994. Additionally, the Illinois legislature is
considering expanding gaming in the Chicago metropolitan area with the proposed
operation of five riverboats in downtown Chicago.
ST. REGIS MOHAWK TRIBAL RESERVATION, HOGANSBURG, NEW YORK
The Company, through Showboat Mohawk Investment Limited Partnership, a wholly
owned limited partnership ("SMI"), and the St. Regis Mohawk Tribe have entered
into agreements to develop, construct, manage and operate a Class III gaming
establishment on the St. Regis Mohawk Tribal Reservation in Hogansburg, New
York. On October 15, 1993, the Governor of the State of New York signed a
compact (the "New York Compact") with the St. Regis Mohawk Tribe, permitting
Class III gaming on the St. Regis Mohawk Tribe's reservation. Class III games
under the New York Compact include blackjack, craps, roulette, best hand poker,
big six, keno, and other authorized games but does not include slot machines.
The agreements were submitted to NIGC and must be approved prior to being
effective. The agreements contemplate that SMI will initially operate Class III
games in an approximately 30,000 square foot casino containing approximately
130 table games. The Company expects to lend approximately $30 million for a
term of five years, at a rate of 15% per annum, to the St. Regis Mohawk Tribe
for the purchase of an existing building which will be expanded to house the
casino, for certain improvements to the building and for working capital
purposes. SMI will receive a management fee of 20% of earnings before interest,
taxes and depreciation throughout the management term of five years, subject to
a maximum of 30% of earnings before taxes.
The St. Regis Mohawk Tribe is governed by a body of three chiefs, with one
chief elected annually for a three-year term. In an election in June 1994,
members of the St. Regis Mohawk Tribe elected a chief who has indicated an
intent to re-examine the New York Compact and the agreements pending before the
NIGC between the St. Regis Mohawk Tribe and prospective gaming operators,
including the Company. No assurance can be given that the St. Regis Mohawk
Tribe will not seek to modify the New York Compact or its agreements with the
Company, which may adversely affect the proposal for the St. Regis Casino.
The St. Regis Mohawk reservation is located on the New York State/Canadian
border approximately 75 miles south of Montreal. Approximately 4.6 million
adults live within 120 miles of Hogansburg, New York. For a five-year period,
the tribal management agreement restricts gaming on the reservation to one
16
<PAGE>
other casino containing in excess of 5,000 square feet, three casinos
containing no more than 5,000 square feet of gaming space and the Mohawk Bingo
Palace, which is limited to Class II games, such as bingo, pull-tabs, tip jars,
lotto and certain non-banking card games. The St. Regis Mohawk Tribe has
entered into a management/construction agreement with a second operator to
construct a casino that is expected to be approximately 40,000 square feet. Any
additional casinos must be located east of the St. Regis Casino making the St.
Regis Casino the first Class III casino visitors will encounter upon entering
the St. Regis Mohawk Reservation from the International Bridge to Canada and
other major highways leading to the reservation. The casino will also compete
with a 35,000 square foot casino in Montreal containing 1,250 slot machines and
65 table games and a casino operated on the Oneida reservation in Verona, New
York, approximately 130 miles south of Hogansburg, New York, containing 136
table games. The Montreal casino has announced plans to expand its casino to
50,000 square feet containing 1,700 slot machines and 100 table games and
Ottawa, Canada has announced its intention to open a casino containing 35,000
square feet of gaming space in 1996-1997.
17
<PAGE>
CERTAIN CONSIDERATIONS
Each prospective investor should carefully consider the following factors,
among others, in evaluating the Company before purchasing the Notes offered
hereby.
Leverage and Debt Service. As of March 31, 1994, the Company had long-term
obligations of approximately $279.6 million, inclusive of current maturities,
and total stockholders' equity of approximately $138.6 million. After giving
effect to the Note Offering and the Common Stock Offering, the Company will
have long-term obligations of approximately $429.6 million, inclusive of
current maturities, and total shareholders' equity of approximately $190.2
million.
After giving effect to the Note Offering, the Company will have significant
interest expense. The Company's ratio of earnings to fixed charges was 1.67 to
1 and 1.60 to 1 for the year ended December 31, 1993 and the three months ended
March 31, 1994, respectively. On a pro forma basis after giving effect to the
Note Offering, the Company's ratio of earnings to fixed charges would have been
1.13 to 1 and 1.09 to 1 for the year ended December 31, 1993 and the three
months ended March 31, 1994, respectively. The Company's ability to satisfy its
obligations is dependent upon its future performance, which will be subject to
prevailing economic conditions and to financial, business and other factors,
including factors beyond the control of the Company, affecting the business
operations of the Company. If the Company is unable to generate sufficient cash
flow from operations in the future, it may be required to refinance all or a
portion of its existing debt or to obtain additional financing. There can be no
assurance that any such refinancing would be possible or that any additional
financing could be obtained on terms that are favorable or acceptable to the
Company.
Subordination. The Notes will be subordinated in right of payment to all
Senior Debt of the Company. In addition, the Subsidiary Guarantees will be
subordinated to all Senior Debt of the Guarantors. In the event of the
bankruptcy, liquidation or reorganization of the Company or any of the
Guarantors, the assets of the Company or such Guarantor will be available to
pay obligations on the Notes only after all Senior Debt of the Company or such
Guarantor has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the Notes then outstanding. In
addition, the Notes are structurally subordinated to indebtedness of the
Company's subsidiaries that are not Guarantors. Additional indebtedness,
including Senior Debt, may be incurred by the Company and its subsidiaries from
time to time, subject to the terms of the Indenture and the Company's then
outstanding indebtedness.
Sydney Harbour Casino--Need to Obtain Permits and Financing; Risk of
Construction Delays. The Company has not yet received (i) a casino license to
operate the Sydney Harbour Casino or (ii) the approval and permits necessary
for the development and construction of temporary and permanent sites for the
Sydney Harbour Casino ("Development Approval"). The Company is currently in the
process of satisfying certain pre-conditions for the issuance of the casino
license from the NSWCCA and Development Approval from the Minister for Planning
and Housing. While the Company anticipates that it will secure the casino
license and Development Approval, there is no assurance that it will be able to
obtain such casino license, Development Approval, or other licenses, permits
and authorizations. Subsequent to receiving all requisite licenses, permits and
authorizations for the Sydney Harbour Casino, the project will be subject to
the risks of delay and higher expenses to which construction projects of this
type are exposed due to factors such as shortages of materials or skilled
labor, unforeseen engineering, environmental and/or geological problems, work
stoppages and weather interference. Accordingly, there can be no assurance that
the Sydney Harbour Casino will be completed or completed in a timely manner and
within budget.
The total cost for the Sydney Harbour Casino, including licensing fees, is
anticipated to be approximately A$1.2 billion ($866.5 million). The Company has
agreed to invest A$135.0 million ($98.5 million) for the development and
construction of the Sydney Harbour Casino. Additional funds for the
construction of the Sydney Harbour Casino will be obtained in project financing
of A$500.0 million ($365.0 million), a working capital facility of A$50.0
million ($36.5 million), a A$25.0 million ($18.3 million) equity investment by
Leighton Properties, an offering of securities to institutional investors in
Australia of A$345.0 million ($251.9
18
<PAGE>
million) for an approximately 68% ownership in SHCL, and cash flow from the
operation of the temporary casino of approximately A$132.0 million ($96.4
million). While SHCL has received firm commitments on its anticipated external
financing requirements, in the event that additional funds should become
necessary to complete the Sydney Harbour Casino, there can be no assurance that
additional funds will be available on acceptable terms, if at all, or that such
funds will be sufficient to fund the construction. Any such failure to secure
additional financing sufficient to fund the development and construction of the
Sydney Harbour Casino, if necessary, would have a material adverse impact upon
the Company's expansion plans and on the financial condition of the Company.
The NSWCCA retains the right to determine that SHCL is no longer capable of
fulfilling the terms of its agreement with the NSWCCA, primarily because of an
inability to obtain Development Approval. In such circumstances, a non-
preferred applicant would be given the opportunity to obtain development
approval for its project. If successful in such an endeavor, such non-preferred
applicant could be granted the casino license.
Competition. The Atlantic City Showboat competes with 11 other casino hotels
in Atlantic City containing, in the aggregate, approximately 788,000 square
feet of casino space and 8,420 rooms. In addition, the Atlantic City Showboat
competes with Foxwood's High Stakes Bingo and Casino on the Mashantucket Pequot
Indian Reservation in Ledyard, Connecticut. Competition among casino hotels in
Atlantic City is intense. Casino hotels in Atlantic City generally compete on
the basis of promotional allowances, entertainment, advertising, service
provided to patrons, caliber of personnel, attractiveness of the hotel and
casino areas and related amenities.
The Las Vegas Showboat competes generally with approximately 119 casinos in
Clark County, Nevada, which includes the cities of Las Vegas, Henderson,
Laughlin and Mesquite. Competition among casinos in Clark County is intense.
The Company has experienced increased competition from new and existing Las
Vegas hotel casinos which have also sought to attract slot machine players and
Las Vegas-area residents, including construction of a new hotel casino and
renovation of another hotel casino which are located on Boulder Highway near
the Las Vegas Showboat. The Company anticipates continuing increased
competition for these customers.
The Showboat Star Casino currently experiences direct competition in its
primary market area. As of March 31, 1994, the state of Louisiana had
authorized the licensing of 15 riverboat casinos, six of which will operate in
the New Orleans area. The Showboat Star Casino and one other riverboat located
on Lake Charles in southwestern Louisiana were the only riverboat casinos
operating in Louisiana as of December 31, 1993. A third riverboat opened in New
Orleans on February 10, 1994. Additionally, a license has been awarded to
operate a single land-based casino in New Orleans, which is expected to be one
of the larger land-based casinos in the United States. The land-based casino is
anticipated to commence operations in a temporary facility in late 1994. The
Showboat Star Casino also competes with eight casinos approximately 50 miles
away to the east on the Mississippi Gulf Coast. Mississippi permits dock-side
gaming and casinos in Mississippi, unlike the Showboat Star Casino, do not have
a state-imposed admissions tax. To compete with the Mississippi casinos, the
Showboat Star Casino pays the admissions tax as a complimentary item to its
patrons. The Company expects that greater competition will occur as the
emerging casino industry matures in Louisiana and elsewhere in the Southern
United States.
The Company believes that the growing legalization of casino gaming in states
other than New Jersey and Nevada, including Colorado, Connecticut, Illinois,
Iowa, Indiana, Louisiana, Mississippi, Missouri, and South Dakota, and on
various Indian reservations has not to date had a material adverse impact on
its operations. The legalization of casino and other gaming venues in states
close to Nevada, particularly California, or in or near New Jersey,
particularly Delaware, Maryland, New York or Pennsylvania, may have a material
adverse effect on the Company's business. Gaming legislation has been
introduced, but not passed, in Pennsylvania.
19
<PAGE>
The Company expects that many riverboat casinos, land-based casinos, and
Indian gaming will be licensed eventually throughout the United States.
Moreover, each announced opportunity will compete with other nearby gaming
operations. See "The Company--Expansion Opportunities." Some of these gaming
operations may be owned by companies that are larger and have significantly
greater financial and other resources than the Company. Given these factors, it
is possible that substantial competition will arise which could adversely
affect the Company's existing and proposed operations. The Company's ability to
maintain its competitive position may require the expenditure of significant
funds on an ongoing basis at all of its casino properties.
New Gaming Jurisdictions and Expansion Opportunities. The Company is actively
pursuing potential gaming opportunities in certain jurisdictions where gaming
has recently been legalized, as well as jurisdictions where gaming is not yet,
but is expected soon to be legalized. There can be no assurance that
legislation to legalize gaming will be enacted in any additional jurisdictions,
that any properties in which the Company may have invested will be compatible
with any gaming legislation so enacted, that legalized gaming will continue to
be authorized in any jurisdiction or that the Company will be able to obtain
the required licenses in any jurisdiction. In addition, the constitutionality
of Indiana's Riverboat Gambling Act is currently being challenged by a lawsuit
seeking to declare the portion of the Riverboat Gambling Act that treated the
manner in which gaming was approved in Lake County, Indiana (the county in
which East Chicago is located) differently than certain other Indiana counties
unconstitutional. On May 19, 1994, the Porter County Superior Court issued a
ruling that such provisions of the Riverboat Gambling Act are unconstitutional
and ordered the Indiana Gaming Commission to cease all activity, except
background investigations, in the process of licensing riverboats until such
time as the legislature cures the constitutional defects in the legislation or
until further order of the Porter County Superior Court or the Indiana Supreme
Court. No assurance can be given that the order of the Porter County Superior
Court will be vacated by such court, overturned by the Indiana Supreme Court,
or cured by the Indiana legislature.
Furthermore, competition for the development of new gaming opportunities has
intensified as established and newly organized gaming companies compete for a
limited number of sites and licenses. There can be no assurance that attractive
opportunities to develop new gaming operations will be available to the
Company.
The Company may invest in real property related to potential gaming
opportunities. Such investments are subject to the risks generally incident to
the ownership of real property, including changes in economic conditions,
environmental risks, governmental regulations and other circumstances over
which the Company may have little or no control. There can be no assurance that
the Company will be able to recover its investment in any such property.
Risks of Potential Disruptions from Construction. Construction on the
proposed $15 million renovation and $55 million expansion of the Las Vegas
Showboat is expected to begin by the end of 1994 and will take approximately 18
months to complete. The construction of the renovation and expansion project
may disrupt casino operations and will require, from time to time, that
portions of the casino area be temporarily closed. In addition, construction of
the proposed expansion will require the closing of 150 existing hotel rooms in
the rear of the facility. Although, the Company does not believe the resulting
decrease in hotel revenues will be significant, the resulting loss of casino
revenues from its hotel market segment could be significant. Any significant
disruption in casino operations, coupled with the expected decrease in hotel
and casino revenues, could have a material adverse effect on the Company's
business and results of operations.
Relationship With Tribes and Effect of Indian Sovereignty. Good relations
with the St. Regis Mohawk Tribe are critical to the success of the St. Regis
Casino. The Company believes that its ability to enter into agreements with the
St. Regis Mohawk Tribe has been attributable, in large part, to the reputation
it has achieved with tribe officials. Indian tribes are sovereign nations with
their own governmental systems. Tribal officials are subject to replacement by
appointment or election. The Company's relationship with the St. Regis Mohawk
Tribe may improve or deteriorate under new administrations. A deterioration of
the Company's reputation and relationships with officials of the St. Regis
Mohawk Tribe could have a material adverse effect upon the development and
operation of the St. Regis Casino.
20
<PAGE>
The St. Regis Mohawk Tribe is governed by a body of three chiefs, with one
chief elected annually for a three-year term. In an election in June 1994,
members of the St. Regis Mohawk Tribe elected a chief who has indicated an
intent to re-examine the New York Compact and the agreements pending before the
NIGC between the St. Regis Mohawk Tribe and prospective gaming operators,
including the Company. No assurance can be given that the St. Regis Mohawk
Tribe will not seek to modify the New York Compact or its agreements with the
Company, which may adversely affect the proposal for the St. Regis Casino.
In addition to all the usual risks associated with the development of the St.
Regis Casino, the Company faces certain risks peculiar to dealing with Indian
tribes, including the uncertain applicability of federal and state laws as they
relate to Indian tribes and the sovereignty of Indian tribes. With respect to
the anticipated loan of up to $30 million by SMI to the St. Regis Mohawk Tribe,
SMI must look exclusively to the future cash flow from casino operations as a
source of repayment, rather than the general credit of the St. Regis Mohawk
Tribe.
Taxation. The Company believes that the prospect of significant additional
revenue is one of the primary reasons that jurisdictions have legalized gaming.
As a result, gaming companies are typically subject to significant taxes and
fees in addition to normal federal and state income taxes, and such taxes and
fees are subject to increase at any time. The Company pays substantial taxes
and fees with respect to its operations and will likely incur similar burdens
in any other jurisdiction in which it may conduct gaming operations in the
future. In addition, there have been suggestions from time to time to tax all
gaming establishments at the Federal level. Any increase in the Company's tax
rates would adversely affect the Company. See "Regulation."
Loss of a Riverboat From Service. A riverboat, such as the Showboat Star
Casino and the proposed East Chicago Riverboat, could be lost from service for
a variety of reasons, including casualty, mechanical failure or extended or
extraordinary maintenance or inspection. U.S. Coast Guard regulations require a
hull inspection for all riverboats at five-year intervals. The Showboat Star
Casino will be due for this inspection in late 1999. To comply with this
inspection requirement, which could take a substantial amount of time, the
Showboat Star Casino and any other riverboat that the Company operates in the
future must be taken to a U.S. Coast Guard approved dry docking facility.
Hotel/Gaming Business. The Company is subject to the risks inherent in the
hotel and gaming operations business. Gaming activity can vary significantly as
a result of a number of factors, including the competitive environment, hotel
occupancy rate, and general economic conditions, and is subject to substantial
governmental regulation. See "Regulation." Additionally, hotel and gaming
operations are subject to the imposition of special taxes or assessments by
regulatory bodies. Any new tax or assessment may have an adverse impact on the
Company's operations.
Regulatory Matters. The ownership and operation of the Las Vegas Showboat,
the Atlantic City Showboat and the Showboat Star Casino are subject to
extensive regulation by state and local gaming authorities in Nevada, New
Jersey, Louisiana and in other states and foreign countries the Company may
conduct business in the future (collectively, the "Gaming Authorities"). The
Company may be required to disclose to the Gaming Authorities, upon request,
the identities of the holders of the Notes. The Gaming Authorities may, in
their discretion, (i) require holders of debt securities of the Company to file
applications in states in which the Company does business; (ii) investigate
such holders; and (iii) require such holders to be found suitable or qualified
to own such securities. Pursuant to the regulations of the Gaming Authorities,
such gaming corporations may be sanctioned, including the loss of its
approvals, if, without prior approval of the Gaming Authorities, it (i) pays to
the unsuitable or unqualified person any dividend, interest or other
distribution; (ii) recognizes any voting right by such unsuitable or
unqualified person in connection with the securities; (iii) pays the unsuitable
or unqualified person remuneration in any form; or (iv) makes any payments to
the unsuitable or unqualified person by way of principal, redemption,
conversion, exchange, liquidation, or similar transaction. See "Regulation."
21
<PAGE>
Market for the Notes. The Notes will constitute a new issue of securities
with no established trading market and the Company does not intend to list the
Notes on any national securities exchange. The Underwriter has advised the
Company that it currently intends to make a market in the Notes, but they are
not obligated to do so and may discontinue such market-making activity at any
time. No assurance can be given that an active public or other market will
develop for the Notes or as the liquidity of the trading market for the Notes.
Development of New Facilities. The development of any significant new venture
which requires the Company to make a substantial capital investment may require
additional debt or equity financing. There can be no assurance that the cash
flow generated by the operations of the Company or any other new venture will
be sufficient to service any additional debt which may be incurred in
connection therewith. In addition there can be no assurance that additional
financing can be obtained which is acceptable to the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
The opening of any new facility or expansion of an existing facility will be
contingent upon the completion of construction, hiring and training of
experienced management and sufficient personnel and receipt of all regulatory
licenses, permits, allocations and authorizations. The scope of the approvals
required to construct and open a new facility or expand an existing facility
may be extensive, and the failure to obtain such approvals could prevent or
delay the completion of construction or opening of all or part of such
facilities or otherwise affect the design and features of the project. Major
construction projects, such as a new casino development, entail significant
risks, including management's ability to control and manage such projects
effectively, shortages of materials or skilled labor, engineering,
environmental or regulatory problems, work stoppages, weather interference and
unanticipated cost increases. Accordingly, there can be no assurance that any
project will be completed on time or within budget or that unanticipated delays
or cost increases will not have a material adverse effect on any project.
The Company is pursuing a number of gaming opportunities. In many cases, the
Company is competing against other gaming companies, some of which may have
greater financial resources. There can be no assurance that these opportunities
will be realized by the Company. The Company reserves the right to cease
pursuing any of the gaming opportunities at any time.
22
<PAGE>
USE OF PROCEEDS
The net proceeds from the Note Offering, after deducting underwriting
discounts and commissions and estimated offering expenses, are expected to be
approximately $144.9 million. The Company currently intends to apply such net
proceeds, together with the net proceeds to the Company from the Common Stock
Offering, estimated to be approximately $51.7 million, and approximately $32.0
million of available cash, to (i) invest A$135 million ($98.5 million) for an
approximately 27% equity interest in SHCL, which has been selected as the
preferred applicant to build, manage and operate the sole full-service casino
in Sydney, Australia, (ii) renovate the Las Vegas Showboat in order to upgrade
the facility to current building codes, replace the existing power plant
facility and add 900 parking spaces to the existing parking garage at a cost of
approximately $15 million, (iii) expand the Las Vegas Showboat to add a 500-
room hotel tower and the Showboat Entertainment Center and hotel tower at a
cost of approximately $55 million, (iv) invest approximately $30 million in the
Indiana Partnership, the sole applicant to obtain the only riverboat gaming
license in East Chicago, Indiana, and (v) provide a loan of approximately $30
million to the St. Regis Mohawk Tribe for the purchase and renovation of a
building in which to operate the St. Regis Casino.
The Company is required to place $100.0 million of the net proceeds of the
Note Offering into an escrow account, which may only be used to fund the
Company's investment in SHCL. In the event that Australian Gaming Approval or
Management Contract Approval (as defined in the Indenture) has not occurred on
or prior to December 31, 1995, the Company will be obligated to make an offer
to repurchase an amount of Notes and certain other indebtedness of the Company
equal to the amount in the escrow account. See "Description of Notes--
Repurchase at the Option of Holders--Escrow Account."
In the event that the Common Stock Offering is not consummated, the Company
will use the net proceeds of the Note Offering and available cash to invest in
SHCL and to renovate and expand the Las Vegas Showboat. The Company will pursue
other means to finance the other projects or will delay their development in
the event the Common Stock Offering is not consummated. In addition, in the
event that the Company determines not to pursue any of the expansion
opportunities listed above, the Company will apply any remaining net proceeds
to invest in other expansion opportunities or for other general corporate
purposes.
23
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of March 31, 1994, and as adjusted as of such date to give effect to the
Note Offering and as further adjusted as of such date to give effect to both
the Note Offering and the Common Stock Offering. This table should be read in
conjunction with the attached consolidated financial statements and the related
notes thereto included elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
MARCH 31, 1994
---------------------------------
AS AS FURTHER
ACTUAL ADJUSTED(1) ADJUSTED(2)
(IN THOUSANDS)
<S> <C> <C> <C>
Cash......................................... $107,458 $252,333 $303,996
======== ======== ========
Current maturities of long-term debt......... 2,549 2,549 2,549
======== ======== ========
Long-term debt (excluding current maturities)
9 1/4% First Mortgage Bonds due 2008....... $275,000 $275,000 $275,000
Capitalized lease obligations.............. 2,021 2,021 2,021
% Senior Subordinated Notes.............. -- 150,000 150,000
-------- -------- --------
Total long-term debt..................... 277,021 427,021 427,021
Shareholders' equity(3)
Common Stock, par value $1.00; 50,000,000
shares authorized; 15,794,578 shares
issued as adjusted; 18,794,578 shares
issued as further adjusted................ 15,795 15,795 18,795
Additional paid-in capital................. 71,437 71,437 120,100
Retained earnings.......................... 57,693 57,693 57,693
Cost of Common Stock in treasury; 809,383
shares.................................... (6,328) (6,328) (6,328)
Unearned compensation for restricted stock. (36) (36) (36)
-------- -------- --------
Total shareholders' equity............... 138,561 138,561 190,224
-------- -------- --------
Total capitalization................... $415,582 $565,582 $617,245
======== ======== ========
</TABLE>
- ---------------------
(1) Adjusted to give effect to the Note Offering.
(2) Adjusted to give effect to the Note Offering and the Common Stock Offering
at an assumed offering price of $18.25 per share, the last reported sale
price of the Common Stock on the NYSE on June 23, 1994. The Company has
also granted to the underwriters of the Common Stock Offering a 30-day
option to purchase up to an additional 450,000 shares of Common Stock to
cover over-allotments, if any, in connection with the Common Stock
Offering. In the event that such option is exercised in full, cash, total
shareholders' equity and total capitalization would each increase by $7.8
million, and Common Stock and additional paid-in capital would increase by
$450,000 and $7.4 million, respectively.
(3) Excludes (a) 671,120 shares of Common Stock issuable upon exercise of
vested options which have not yet been exercised and (b) 150,000 shares of
Common Stock issuable upon exercise of outstanding warrants.
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below under the captions
"Statement of Operations Data" and "Balance Sheet Data" for, and as of the end
of, each of the years in the five-year period ended December 31, 1993 are
derived from the consolidated financial statements of Showboat, Inc. and
subsidiaries, which consolidated financial statements have been audited by
KPMG Peat Marwick, independent certified public accountants. The selected data
presented for the three months ended March 31, 1993 and 1994 are derived from
unaudited financial statements of the Company which, in the opinion of
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the information set forth therein.
The consolidated financial statements referred to above are included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ -----------------
1989 1990 1991 1992 1993 1993 1994
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DA-
TA:
Net revenues........... $342,354 $334,247 $331,560 $355,236 $375,727 $85,496 $ 88,779
Total expenses......... 311,247 306,482 296,059 308,728 329,458 77,811 80,931
-------- -------- -------- -------- -------- ------- --------
Income from operations
of consolidated
subsidiaries.......... 31,107 27,765 35,501 46,508 46,269 7,685 7,848
Equity in income (loss)
from unconsolidated
affiliate............. -- -- -- -- (850) -- 3,240
-------- -------- -------- -------- -------- ------- --------
Income from operations. 31,107 27,765 35,501 46,508 45,419 7,685 11,088
Interest expense,
net(1)................ 24,870 25,236 25,399 23,894 21,481 4,499 5,399
Gain on sale of
property.............. (4,897) -- -- -- -- -- --
Income tax expense..... 4,068 1,448 4,088 6,757 10,474 1,265 2,249
-------- -------- -------- -------- -------- ------- --------
Income before
extraordinary items
and cumulative effect
adjustment............ 7,066 1,081 6,014 15,857 13,464 1,921 3,440
Extraordinary items and
cumulative effect
adjustment............ -- 3,970 180 (3,408) 6,123 556 --
-------- -------- -------- -------- -------- ------- --------
Net income............. 7,066 5,051 6,194 12,449 7,341 2,477 3,440
Net income per share... 0.62 0.45 0.55 1.08 0.49 0.16 0.23
Cash dividends declared
per share............. 0.235 0.10 0.10 0.10 0.10 0.025 0.025
Ratio of earnings to
fixed charges(2)...... 1.32x 1.06x 1.29x 1.68x 1.67x 1.42x 1.60x
OTHER DATA:
EBITDA(3).............. $ 50,696 $ 50,138 $ 61,193 $ 68,520 $ 69,572 $12,825 $ 15,109
Depreciation and
amortization.......... 19,589 22,373 25,692 22,012 23,303 5,140 6,361
Capital expenditures... 20,497 44,020 13,203 23,092 63,600 17,769 20,488
EBITDA/Interest
expense, net.......... 2.04x 1.99x 2.41x 2.87x 3.24x 2.85x 2.80x
Net debt(4)/EBITDA..... 3.54x 3.87x 2.85x 1.60x 2.27x -- 2.40x
PRO FORMA DATA(5):
Interest expense, net.. $ 32,907 $ 8,011 $ 7,932
EBITDA/Interest
expense, net.......... 2.11x 1.60x 1.90x
Net debt/EBITDA........ 1.60x -- 1.75x
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------------ -----------------
1989 1990 1991 1992 1993 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 46,277 $ 37,550 $ 38,690 $ 99,601 $122,787 $34,767 $107,458
Total assets........... 322,808 331,950 320,032 384,900 470,700 333,576 482,475
Long-term debt
(including current
maturities)........... 225,812 231,591 213,004 209,116 280,617 158,036 279,570
Shareholders' equity... 55,663 58,848 64,133 126,018 135,158 128,375 138,561
</TABLE>
- -------------------
(1) Interest expense, net of capitalized interest and interest income.
(2) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (income before income taxes,
extraordinary items and cumulative effect adjustment plus fixed charges
less capitalized interest) by fixed charges (interest expense plus
capitalized interest plus the portion of rental expenses deemed to
represent interest).
(3) EBITDA is defined as income from operations of consolidated subsidiaries
before depreciation and amortization plus cash distributions from
unconsolidated subsidiaries. Cash distributions from unconsolidated
subsidiaries were $0 from 1989 through 1993 and were $0.9 million in the
quarter ended March 31, 1994.
(4) Net debt is defined as long-term debt, inclusive of current maturities,
less cash, at the end of the period.
(5) The pro forma data give effect to (i) the Note Offering at an assumed
interest rate of 11%, (ii) the Common Stock Offering at an assumed
offering price of $18.25 per share, the last reported sale price of the
Common Stock on the NYSE on June 23, 1994, and (iii) the sale by the
Company on May 18, 1993 of $275 million aggregate principal amount of 9
1/4% First Mortgage Bonds due 2008 and the application of the net proceeds
therefrom to repay certain indebtedness, in each case as if such
transaction had occurred as of the first day of the period presented. The
pro forma data assume that interest income is earned on cash balances at a
rate of 3.0% in 1993 and 3.5% in 1994. If the Common Stock Offering is not
consummated, the pro forma data would be as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------ ----------------
1993 1993 1994
(IN THOUSANDS, EXCEPT RATIO
PRO FORMA DATA: DATA)
<S> <C> <C> <C>
Interest expense, net....................... $34,457 $ 8,399 $ 8,384
EBITDA/Interest expense, net................ 2.02x 1.53x 1.80x
Net Debt/EBITDA............................. 2.34x -- 2.47x
</TABLE>
If the interest rate on the Notes is increased or decreased by 1/4%,
interest expense, net will increase or decrease, respectively, by $375,000.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The consolidated financial statements of the Company include the accounts of
the Company and its wholly owned subsidiaries, Showboat Development Company
("SDC"), Showboat Operating Company ("SBOC") and Ocean Showboat, Inc. ("OSI").
They also include SDC's wholly owned subsidiaries LPSI, Showboat Mohawk, Inc.
("SBM"), Showboat Indiana, Inc. ("SBI") and Showboat Louisiana, Inc. ("SBL")
and OSI's wholly owned subsidiaries, Atlantic City Showboat, Inc. ("ACSI") and
Ocean Showboat Finance Corporation ("OSFC"). The Company and its subsidiaries
operate the Atlantic City Showboat, the Las Vegas Showboat and the Showboat
Star Casino.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1994 Compared to Three Months Ended March 31,
1993
REVENUES
Net revenues for the Company increased to $88.8 million in the quarter ended
March 31, 1994 compared to $85.5 million in the same period in 1993, an
increase of $3.3 million or 3.8%. Casino revenues increased $1.6 million or
2.2% to $76.9 million in the quarter ended March 31, 1994 from $75.3 million in
1993. Nongaming revenues, which consist principally of food, beverage, room and
bowling revenues and management fees, were $18.9 million in the first quarter
of 1994, compared to $17.3 million in 1993, an increase of 9.1%.
The Atlantic City Showboat generated $66.3 million of net revenues in the
quarter ended March 31, 1994 compared to $64.8 million in the same period in
the prior year, an increase of $1.5 million or 2.3%. Casino revenues were $60.5
million in the three months ended March 31, 1994 compared to $59.7 million for
the same period in the prior year, an increase of $.8 million or 1.4%. The
increase in casino revenues was due primarily to poker revenue of $.7 million
and simulcasting revenue of $.5 million recognized for the three months ended
March 31, 1994. The poker and simulcasting facilities were not open in the same
period in the prior year. This increase was offset by a $.6 million or 1.3%
decrease in slot revenues to $44.1 million for the three months ended March 31,
1994 compared to $44.7 million for the same period in the prior year. During
the first quarter of 1993, slot revenues included the effect of a $.8 million
reversal for a progressive slot accrual. The decrease in slot revenue was also
affected by the harsh winter weather experienced during the first quarter of
1994. The inclement weather was a factor in the results for the total Atlantic
City market as gross slot revenues declined 3.7% in that market.
At the Las Vegas Showboat, net revenues increased to $21.6 million in the
quarter ended March 31, 1994 from $20.7 million in the same period in 1993, an
increase of $.9 million or 4.2%. The greatest improvement in revenues was
realized in the casino where revenues increased to $16.4 million in the first
quarter of 1994 from $15.6 million in the first quarter of 1993, an increase of
$.8 million or 5.1%. This is consistent with the increased customer volume as a
result of certain marketing activities. Slot revenues accounted for 81.7% of
casino revenues in the first three months of 1994 and 83.3% for the same period
in 1993. Improvements in nongaming revenues were due to increased hotel
occupancy resulting from increased effectiveness of certain marketing
activities.
LPSI generated $.9 million in management fee revenues in the first quarter of
1994. LPSI receives management fees of 5.0% of Showboat Star Casino's net
gaming revenues after gaming taxes of 18.5% and boarding fees totalling $5.00
per passenger boarding the vessel. The Showboat Star Casino, which began
operations in November 1993, generated net revenues of $27.5 million in the
first quarter of 1994 consisting primarily of casino revenues of $27.1 million.
During the first quarter of 1994 the total number of passengers boarding the
vessel was 485,726 with an average gaming win per passenger of $56.00.
26
<PAGE>
INCOME FROM OPERATIONS
The Company's income from operations increased to $11.1 million in the
quarter ended March 31, 1994 from $7.7 million in the same period in 1993, an
increase of $3.4 million or 44.3% primarily as a result of improved operating
results at the Atlantic City Showboat and the opening of the Showboat Star
Casino in November 1993.
The Company incurred approximately $2.3 million in expenses relating to the
pursuit of expansion opportunities in jurisdictions outside of Nevada and New
Jersey in the first three months of 1994 compared to $.5 million in the first
quarter of 1993.
Atlantic City Showboat's income from operations, before management fees,
increased to $7.0 million in the first quarter of 1994 compared to $5.6 million
for the same period in 1993, an increase of $1.4 million or 25.3%, primarily as
a result of the increase in net revenues. Total operating expenses at the
Atlantic City Showboat remained unchanged from the prior year at $59.2 million.
Increased depreciation expense resulting from recent facility expansion was
offset by a $1.1 million or a 15.2% decrease in promotional coin incentives
offered in conjunction with slot marketing programs and by a $1.2 million or
10.5% decrease in general and administrative costs.
Income from operations at the Las Vegas Showboat, which includes parent
company expenses, declined to $2.4 million in the first quarter of 1994 from
$2.6 million in the quarter ended March 31, 1993, a decrease of $.2 million or
9.5%. This decrease is primarily due to increased parent company expenses,
increased food costs and increases in payroll and benefits due to the increased
customer volume.
Until March 1, 1994 SBL owned 30% of Showboat Star Partnership. On March 1,
1994 SBL acquired an additional 20% equity interest in Showboat Star
Partnership giving SBL a total equity interest of 50%. SBL's equity in the
earnings of Showboat Star Partnership for the quarter ending March 31, 1994 was
$3.2 million. Showboat Star Partnership had net income of $9.1 million on net
revenues of $27.5 million. Showboat Star Partnership paid a management fee of
$.9 million to LPSI and distributed $.9 million to SBL as partner distributions
during the first quarter of 1994.
LPSI, which manages Showboat Star Partnership, had income from operations for
the quarter ended March 31, 1994 of $.8 million. Operating expenses for LPSI
for the first quarter of 1994 were $.1 million.
OTHER (INCOME) EXPENSE
Net interest expense increased to $5.4 million in the first quarter of 1994
up from $4.5 million in the same period in 1993, an increase of $.9 million or
20.0%. This increase is primarily the result of an increase in interest expense
of $1.5 million as a result of an increase in long-term debt. The increase in
interest expense was offset by a $.4 million increase in interest income as a
result of increased invested cash and a $.3 million increase in capitalized
interest costs associated with the Company's Atlantic City Showboat expansion.
INCOME TAXES
During the first quarter of 1994, the Company incurred income tax expense of
$2.2 million, or an effective tax rate of approximately 40%, compared to $1.3
million, or an effective tax rate of approximately 40% in the same period in
1993. Differences between the Company's effective tax rate and statutory
federal tax rates are due to permanent differences between financial and tax
reporting which consisted principally of the estimated tax reporting impact of
the financial reporting provision for loss on Casino Reinvestment Development
Authority obligations and disallowance of certain employee needs.
NET INCOME
The Company recognized net income of $3.4 million for the quarter ended March
31, 1994 or $.23 per share, compared to a net income before the cumulative
effect of the change in method of accounting for
27
<PAGE>
income taxes of $1.9 million or $.13 per share in the quarter ended March 31,
1993. Net income for the quarter ended March 31, 1993 was $2.5 million or $.16
per share.
Year Ended December 31, 1993 (1993) Compared to Year Ended December 31, 1992
(1992)
REVENUES
Net revenues for the Company increased to $375.7 million in 1993 from $355.2
million in 1992, an increase of $20.5 million or 5.8%. Casino revenues
increased $16.3 million or 5.2% to $329.5 million in 1993 from $313.2 million
in 1992. Nongaming revenues, which consist principally of food, beverage, room
and bowling revenues and management fees, were $78.3 million in 1993 compared
to $71.2 million in 1992, an increase of $7.1 million or 10.0%.
The Atlantic City Showboat generated $294.2 million of net revenues in 1993
compared to $277.3 million in 1992, an increase of $16.9 million or 6.1%.
Casino revenues were $268.8 million in 1993 compared to $254.7 million in 1992,
an increase of $14.1 million or 5.5%. The increase in casino revenues was due
to an increase in slot machine revenues of $14.7 million or 8.0% to $196.8
million in 1993 from $182.1 million in 1992. This compares to 4.8% growth in
slot machine revenues in the Atlantic City market in 1993 compared to 1992. The
improved slot revenue growth experienced by the Atlantic City Showboat is
attributed to an increase in slot units throughout the year to approximately
2,410 slot units at the end of 1993, up from approximately 2,070 slot units at
the end of 1992, an increase of 340 slot units or a weighted average rate of
9.9%. The increase in slot machine revenues was partially offset by the $4.0
million or 5.5% decrease in table games revenues which resulted primarily from
the 3.2% decline in table games revenues in the Atlantic City market during
1993 compared to 1992. Casino revenues were positively impacted by the addition
of simulcasting and poker as part of the opening of Jake's Betting Parlor in
the second quarter of 1993. These games contributed $2.2 million and $1.1
million, respectively, during the year ended December 31, 1993. Nongaming
revenues increased $5.6 million or 12.0% in 1993 to $52.7 million from $47.1
million in 1992. This increase was attributed to promotional programs offering
casino customers rooms, food and beverage at a reduced price as well as
increases in complimentary services.
At the Las Vegas Showboat, net revenues increased to $81.1 million in 1993
from $77.9 million in 1992, an increase of $3.2 million or 4.1%. Casino
revenues increased $2.2 million or 3.8% in 1993 to $60.7 million from $58.5
million in 1992. Slot machine revenues showed the greatest improvement in
casino revenues with an increase of $1.6 million or 3.4%. Slot machine revenues
accounted for 84.2% of casino revenues in 1993 and 84.5% of casino revenues in
1992. Increases in gaming revenues were primarily the result of higher patron
volume due to promotions and increased advertising. Nongaming revenues
increased $1.0 million or 4.3% in 1993 to $25.1 million from $24.1 million in
1992. These increases were principally in rooms and food and beverage resulting
from targeted marketing programs for rooms and promotional programs offering
food at a reduced price.
LPSI generated $.4 million in management fee revenues in 1993. LPSI receives
management fees of 5.0% of the Showboat Star Casino's net gaming revenues after
gaming taxes of 18.5% and boarding fees totalling $5.00 per passenger boarding
the vessel. The Showboat Star Casino opened November 8, 1993 and generated net
revenues of $12.0 million in 1993 consisting primarily of casino revenues of
$10.9 million.
INCOME FROM OPERATIONS
The Company's income from operations decreased to $45.4 million in 1993 from
$46.5 million in 1992, a decrease of $1.1 million or 2.3%.
The Company incurred approximately $3.8 million in expenses relating to the
pursuit of expansion opportunities in jurisdictions outside of Nevada and New
Jersey in 1993 compared to $.9 million in 1992.
Income from operations at the Atlantic City Showboat, before management fees,
was $44.0 million in 1993 compared to $39.6 million in 1992, an increase of
$4.4 million or 11.1%. The increase in income from
28
<PAGE>
operations was primarily due to increased revenues which were offset by a $12.5
million or 5.3% increase in operating expenses, before management fees, to
$250.3 million in 1993 compared to $237.7 million in 1992. The increase in
operating expenses was primarily due to the increased capacity and volume of
business. General and administrative expenses increased due to increases in
utilities and maintenance costs resulting from the expanded facility. General
and administrative expenses were also impacted by an $.8 million or 13.2%
increase in real estate taxes and an $.8 million parking assessment absorbed by
Atlantic City Showboat. In addition, depreciation expense increased $1.3
million or 7.4% in 1993 as a result of the expansion at the Atlantic City
Showboat.
Income from operations at the Las Vegas Showboat declined $1.3 million or
16.6% in 1993 to $6.5 million from $7.8 million in 1992. The decrease was
primarily due to a $4.5 million or 6.4% increase in operating expenses to $74.6
million in 1993 from $70.1 million in 1992. Increased operating expenses
resulted primarily from increases in payroll and payroll related expenses,
increased advertising and repairs and maintenance expenses.
LPSI incurred a loss from operations of $.4 million which was primarily the
result of administrative expenses incurred before the November 8, 1993 opening
of the Showboat Star Casino.
The loss from operations of SBL of $.9 million represents SBL's 30% share of
the net loss of SBL's unconsolidated affiliate, Showboat Star Partnership.
Showboat Star Partnership had a net loss of $2.8 million resulting primarily
from preopening costs of Showboat Star Casino of $4.2 million in 1993, of which
SBL's share was $1.3 million. Before the write-off of preopening costs,
Showboat Star Partnership's income was $1.4 million of which SBL's share was
$.4 million.
OTHER (INCOME) EXPENSE
Other (income) expense consisted of $24.7 million interest expense, net of
$1.1 million of capitalized interest, and $3.2 million of interest income in
1993 compared to interest expense of $25.3 million and interest income of $1.4
million in 1992. Two offsetting factors impacted 1993 interest expense. In
January 1993, the Company repurchased all of its 13% Debentures and prepaid its
construction and term loan that had an outstanding balance of $17.2 million. In
June 1993, the Company repurchased all of its 11 3/8% Mortgage-Backed Bonds Due
2002 (the "11 3/8% Bonds"). This resulted in a $14.4 million decrease in
interest expense. This decrease was offset by the issuance in May 1993 of
$275.0 million of 9 1/4% First Mortgage Bonds due 2008 (the "First Mortgage
Bonds") resulting in a $15.8 million increase in interest expense. In
connection with its expansion project at the Atlantic City Showboat, the
Company capitalized $1.1 million of interest costs.
INCOME TAXES
In 1993, the Company incurred, before the income tax benefit on an
extraordinary loss, income taxes of $10.5 million, or an effective rate of
43.8%, compared to $6.8 million, or an effective rate of 29.9% in 1992.
Differences between the Company's effective tax rate and statutory federal tax
rates are due to permanent differences between financial and tax reporting. In
1993, these differences consisted principally of $.9 million in state income
taxes resulting from the utilization, for financial reporting purposes, of New
Jersey net operating loss carryforwards, a $.6 million restricted interest
assessment, net of tax, resulting from an Internal Revenue Service audit of
prior years and $.4 million resulting from the increase in federal tax rates.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes." The Company adopted the provisions of FAS 109 effective January 1, 1993
without restating prior years' financial statements. The adoption of FAS 109
resulted in a reduction of net deferred tax liability of $.6 million and this
amount was reported separately as a cumulative effect of the change in the
method of accounting for income taxes in the 1993 Consolidated Statement of
Income.
29
<PAGE>
NET INCOME
In 1993, the Company realized income before an extraordinary loss on the
extinguishment of debt and the cumulative effect of the change in the method of
accounting for income taxes of $23.9 million or $.89 per share. On June 18,
1993, the Company redeemed all of the outstanding 11 3/8% Bonds at 105.7% of
the principal amount plus accrued and unpaid interest up to and including the
redemption date. The Company recognized an extraordinary loss, before an income
tax benefit, of $11.2 million as a result of the write-off of unamortized debt
issue costs of $2.7 million and payment of a 5.7% redemption premium of $8.5
million. The after tax loss was $6.7 million or $.44 per share. The Company
also recognized a cumulative effect adjustment for the change in the method of
accounting for income taxes of $.6 million or $.04 per share. Net income for
1993 was $7.3 million or $.49 per share.
In 1992, the Company realized income before an extraordinary loss on the
extinguishment of debt of $15.9 million or $1.37 per share. As a result of the
repurchase of the Company's outstanding 13% Debentures, the Company recognized
an extraordinary loss, net of tax, of $3.4 million or $.29 per share. This loss
resulted from the write-off of original issue discount and issuance costs
associated with the 13% Debentures. Net income for 1992 was $12.4 million or
$1.08 per share.
Year Ended December 31, 1992 (1992) Compared to Year Ended December 31, 1991
(1991)
REVENUES
Net revenues for the Company increased to $355.2 million in 1992 from $331.6
million in 1991, an increase of $23.6 million or 7.1%. Casino revenues
increased $24.8 million or 8.6% to $313.2 million in 1992 from $288.4 million
in 1991. Nongaming revenues were $71.2 million in 1992 compared to $71.7
million in 1991, a decrease of $.5 million or .7%.
The Atlantic City Showboat generated $277.3 million of net revenues in 1992
compared to $260.8 million in 1991, an increase of $16.5 million or 6.3%.
Casino revenues were $254.7 million in 1992 compared to $237.2 million in 1991,
an increase of $17.5 million or 7.4%. The increase in casino revenues was due
primarily to an increase in slot machine revenues of $20.4 million or 12.6% to
$182.1 million in 1992 from $161.7 million in 1991. This compares to a 14.2%
growth in slot machine revenues in the Atlantic City market in 1992 compared to
1991. Slot machine revenues were also favorably impacted by a one-time reversal
of a $1.2 million slot progressive jackpot accrual. Slot machine revenues at
the Atlantic City Showboat accounted for 71.5% of casino revenues in 1992 and
68.2% of casino revenues in 1991. The increase in slot machine revenues was
partially offset by the $2.9 million or 3.8% decrease in table games revenues
to $72.6 million in 1992 from $75.5 million in 1991. The decrease in table
games revenues resulted primarily from the Company decreasing the number of
table games units by 24 tables in the third quarter of 1991 and by the 3.4%
decline in table games revenues in the Atlantic City market during 1992
compared to 1991. Nongaming revenues declined $1.0 million or 2.2% in 1992 to
$47.1 million from $48.1 million in 1991. This decrease was primarily
attributed to a $3.1 million or 9.4% decline in food and beverage revenues
associated with a reduction in promotional offers. The reduction in food and
beverage revenues were partially offset by a $1.3 million or 12.8% increase in
room revenues due to more effective room utilization and a $.9 million or 77.2%
increase in entertainment revenues.
At the Las Vegas Showboat, net revenues increased to $77.9 million in 1992
from $70.8 million in 1991, an increase of $7.1 million or 10.1%. Casino
revenues increased $7.3 million or 14.3% in 1992 to $58.5 million from $51.2
million in 1991. The most significant improvement in casino revenues occurred
in slot machine revenues which increased $5.7 million or 13.1% in 1992. Casino
revenues were also favorably impacted by a $1.1 million or 49.9% reduction in
bingo losses in 1992. Slot machine revenues continued to dominate casino
revenues at 84.5% of casino revenues in 1992 and 85.3% of casino revenues in
1991. Increases in casino revenues were due to an overall increase in the
volume of business, principally as a result of the continuation of certain
targeted marketing activities. Nongaming revenues increased $.5 million or 2.0%
in 1992 to $24.1 million from $23.6 million in 1991. Increases in food and
beverage revenues of $.9
30
<PAGE>
million or 6.5% and hotel revenues of $.3 million or 6.3% were offset by a
reduction of $.7 million in other revenues as a result of the recognition in
1991 of a one-time benefit of $.8 million from the reversal of an accrual.
INCOME FROM OPERATIONS
The Company's income from operations increased to $46.5 million in 1992 from
$35.5 million in 1991, an increase of $11.0 million or 31.0%.
Income from operations at the Atlantic City Showboat was $39.6 million in
1992 compared to $31.2 million in 1991, an increase of $8.4 million or 26.9%.
This increase was primarily due to improved casino revenues caused by the 14.2%
slot machine revenue growth experienced in the Atlantic City market in 1992.
Operating expenses increased $8.1 million or 3.5% to $237.7 million in 1992
compared to $229.6 million in 1991. The increase in operating expenses was
comprised of a $5.6 million or 28.9% increase in promotional coin incentives
offered in conjunction with slot marketing programs and a 6.8% increase in
general and administrative costs consisting primarily of a $3.0 million
increase in payroll and benefits. Increases in operating expenses were offset
by a $3.3 million or 16.0% decrease in depreciation and amortization expense to
$17.5 million in 1992 from $20.8 million in 1991. Improvements in income from
operations, excluding that realized from the reduction in depreciation and
amortization expense, occurred principally in the quarter ended March 31, 1992.
At the Las Vegas Showboat, income from operations, increased to $7.8 million
in 1992 from $4.3 million in 1991, an increase of $3.5 million or 81.4%. The
improvement in operating results reflected the continued implementation of cost
effective marketing programs which resulted in increased revenues of $7.2
million offset by a $3.7 million or 5.6% increase in operating expenses in 1992
to $70.1 million from $66.4 million in 1991. In general, increases in operating
expenses were consistent with increases in business volume.
Income from operations in 1992 was adversely impacted by $.9 million of
expenses incurred by the Company in conjunction with the investigation of new
gaming opportunities outside of Nevada and New Jersey.
OTHER (INCOME) EXPENSE
In 1992, other (income) expense consisted of $25.3 million of interest
expense and $1.4 million of interest income compared to $27.5 million and $2.1
million, respectively, in 1991. Reductions in interest expense of $1.4 million
were realized as a result of the fourth quarter 1991 repurchase of $12.1
million of the 11 3/8% Bonds. Other reductions in interest expense were
primarily a result of reduced principal balances due to scheduled principal
amortization.
INCOME TAXES
In 1992, the Company incurred income tax expense, before income tax benefit
on an extraordinary loss, of $6.8 million, or an effective tax rate of 29.9%,
compared to $4.1 million, or an effective tax rate of 40.5%, in 1991.
Differences between the Company's effective tax rate and statutory federal tax
rates are due to permanent differences between financial and tax reporting
which consisted principally of the estimated tax reporting impact of the
financial reporting provision for loss on Casino Reinvestment Development
Authority obligations and disallowance of certain employee meals.
NET INCOME
In 1992, the Company realized income before an extraordinary loss on the
extinguishment of debt of $15.9 million or $1.37 per share. The Company
recognized an extraordinary loss, net of tax, of $3.4 million or $.29 per share
as a result of the write-off of original issue discount and issuance costs
associated with the redemption of the Debentures. Net income for 1992 was $12.4
million or $1.08 per share.
31
<PAGE>
In 1991, the Company realized income before an extraordinary gain on the
extinguishment of debt of $6.0 million or $.53 per share. In 1991, the Company
purchased $12.1 million face value of the 11 3/8% Bonds and realized an
extraordinary gain, net of tax, of $.2 million or $.02 per share. Net income
for 1991 was $6.2 million or $.55 per share.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1994, the Company held cash and cash equivalents of $107.5
million compared to $122.8 million at December 31, 1993. On March 1, 1994 the
Company purchased from a partner an additional 20% equity interest in Showboat
Star Partnership for $9.0 million. The Company has expended approximately $2.3
million in the quarter ended March 31, 1994 in its investigation of expansion
opportunities in new jurisdictions.
During the quarter ended March 31, 1994 and the year ended December 31, 1993,
the Company expended approximately $19.7 million and $59.7 million,
respectively, on capital improvements at its Las Vegas and Atlantic City
facilities which were funded from operations. Costs associated with the
expansion project in Atlantic City were $15.2 million during the quarter ended
March 31, 1994. Capital expenditures relating to the expansion project in
Atlantic City are expected to be $36.2 million for the remainder of 1994 and
$2.3 million in 1995.
The Company has announced expansion opportunities, including foreign gaming
opportunities and renovation and expansion of the Las Vegas Showboat, which
will require additional expenditures of approximately $230 million. See
"Company--Expansion Opportunities." Concurrent with the Note Offering, the
Company is offering 3,000,000 shares of its Common Stock in the Common Stock
Offering. The Company believes that the proceeds from the Note Offering, the
Common Stock Offering and working capital from operations will be sufficient to
fund currently announced expansion opportunities, subject to additional funding
being provided from other entities for the development of the Sydney Harbour
Casino. The closing of the Note Offering is not contingent on the closing of
the Common Stock Offering. There can be no assurance that funds will be
available on acceptable terms to the Company to finance the development of all
announced or other gaming opportunities if the Common Stock Offering is not
consummated.
The Company believes that is has sufficient capital resources to cover the
cash requirements of its existing operations. The ability of the Company to
satisfy its cash requirements, however, will be dependent upon the future
performance of its casino hotels which will continue to be influenced by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond the control of the Company.
CERTAIN INDEBTEDNESS
Lines of Credit
At March 31, 1994, ACSI had available an unsecured line of credit for general
working capital purposes totaling $15.0 million. Interest is payable monthly at
the bank's prime rate plus .5%. The bank's prime rate at March 31, 1994 was
6.75%. The line of credit is guaranteed by OSI and expires in August 1994.
Borrowings on this line of credit may not be used for the payment of management
fees or to fund ventures in other jurisdictions. At March 31, 1994, ACSI had
all the funds under this line of credit available for use.
On March 24, 1994, the Company secured a line of credit for A$8.4 million
($6.1 million) in compliance with NSWCCA's licensing requirements. This line of
credit is secured by a $6.3 million certificate of deposit. Interest on this
line of credit is payable at the bank's prime rate plus 2.0%. This line of
credit expires in December 1994. At March 31, 1994, all funds were available
under this line of credit.
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<PAGE>
First Mortgage Bonds
On May 18, 1993, the Company issued $275 million aggregate principal amount
of 9 1/4% First Mortgage Bonds. The proceeds from the sale of the First
Mortgage Bonds were $268,468,750, net of underwriting discounts and
commissions. Proceeds from the sale of the First Mortgage Bonds were used to
redeem all of the outstanding 11 3/8% Bonds at 105.7% of the principal amount
plus accrued interest.
The First Mortgage Bonds are unconditionally guarantied by OSI, ACSI and
SBOC. Interest on the First Mortgage Bonds is payable semi-annually on May 1
and November 1 of each year commencing November 1, 1993. The First Mortgage
Bonds are not redeemable prior to May 1, 2000. Thereafter, the First Mortgage
Bonds will be redeemable, in whole or in part, at redemption prices specified
in the Indenture for the First Mortgage Bonds (the "Bond Indenture"). The First
Mortgage Bonds are senior secured obligations of the Company and rank senior in
right of payment to all existing and future subordinated indebtedness of the
Company, including the Notes, and pari passu with the Company's senior
indebtedness. The First Mortgage Bonds are secured by a deed of trust
representing a first lien on the Las Vegas Showboat (other than certain
assets), by a pledge of all outstanding shares of capital stock of OSI, an
intercompany note by ACSI in favor of the Company and a pledge of certain
intellectual property rights of the Company. OSI's obligation under its
guaranty is secured by a pledge of all outstanding shares of capital stock of
ACSI. ACSI's obligation under its guaranty is secured by a leasehold mortgage
representing a first lien on the Atlantic City Showboat (other than certain
assets). SBOC's guaranty is secured by a pledge of certain assets related to
the Las Vegas hotel casino.
The Bond Indenture places significant restrictions on the Company and its
subsidiaries, including restrictions on making loans and advances by the
Company to subsidiaries in which the Company owns less than 50% of the equity.
33
<PAGE>
MANAGEMENT
The following table sets forth information concerning the Company's executive
officers, directors and other key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
J.K. Houssels......................... 71 Chairman of the Board
J. Kell Houssels, III................. 44 Director, President and Chief
Executive Officer
William C. Richardson(2).............. 67 Director
John D. Gaughan(1).................... 73 Director
Jeanne S. Stewart..................... 71 Director
Frank A. Modica....................... 66 Director and Executive Vice President
and Chief Operating Officer
H. Gregory Nasky...................... 52 Director and Secretary
George A. Zettler(1)(2)............... 67 Director
Carolyn M. Sparks(1).................. 52 Director
G. Clifford Taylor, Jr................ 49 Treasurer
R. Craig Bird......................... Vice President--Financial
47 Administration
Leann K. Schneider.................... 40 Vice President--Finance and Chief
Financial Officer
Mark J. Miller........................ 37 Executive Vice President and Chief
Operating Officer of ACSI
</TABLE>
- ---------------------
(1) Member of Audit Committee of the Board of Directors.
(2) Member of Compensation Committee of the Board of Directors.
J.K. Houssels is the Chairman of the Board of the Company, SBOC, SDC, OSI,
OSFC, SBL, LPSI, SBI, SBM and Showboat Australia. Mr. Houssels was the
President and Chief Executive Officer of the Company until May 25, 1994. Mr.
Houssels is Vice-Chairman of the Board of Directors of Union Plaza Hotel and
Casino, Inc., Las Vegas, Nevada. Until July 25, 1991, he was Director of First
Western Financial Corporation (savings and loan association), Las Vegas,
Nevada.
J. Kell Houssels, III is a Director and the President and Chief Executive
Officer of the Company, a Director of OSI, OSFC, SBOC, SDC, SBL, LPSI and
Showboat Australia, Executive Vice President of OSI, and the President and
Chief Executive Officer of ACSI and SDC. From January 1, 1990 until May 25,
1994, Mr. Houssels was the Vice President of the Company. From June 1989 until
January 1, 1990, Mr. Houssels was the Senior Vice President and Chief Operating
Officer of ACSI. From January 1989 until June 1989 he was the Senior Vice
President and General Manager of ACSI.
William C. Richardson is a Director of the Company and OSI. Mr. Richardson is
an independent financial consultant, Los Angeles, California. Since April 1,
1991, he has been an arbitrator and mediator for the American Arbitration
Association. Until March 30, 1991, Mr. Richardson was President, Chief
Executive Officer and the Vice Chairman of Western Capital Financial Group, Los
Angeles, California.
John D. Gaughan is a Director of the Company, ACSI, SBOC, SDC, OSI, OSFC,
SBL, LPSI, SBI, SBM and Showboat Australia. Mr. Gaughan is Chairman of the
Board and President of Exber, Inc., doing business as the El Cortez Hotel and
the Western Hotel and Casino, Las Vegas, Nevada. Mr. Gaughan is also the
Chairman of the Board of Union Plaza Hotel and Casino, Inc., Las Vegas, Nevada.
Jeanne S. Stewart is a Director of the Company and OSI. Mrs. Stewart is a
retired attorney, Las Vegas, Nevada.
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<PAGE>
Frank A. Modica is the Chief Operating Officer, Executive Vice President and
Director of the Company. He is also a Director, President and Chief Executive
Officer of SBOC and OSI. He also serves as a Director and the President of
OSFC, a Director and Vice Chairman of SBI and SBM, a Director of SDC and
Showboat Australia, and the Chairman of the Board of ACSI. Until December 31,
1989, Mr. Modica was the President and Chief Executive Officer of ACSI. Mr.
Modica is a Director of First Security Bank (formerly Continental National
Bank), Las Vegas, Nevada.
H. Gregory Nasky is the Secretary and a Director of the Company and all
subsidiaries. He also serves as Chief Executive officer and Managing Director
of Showboat Australia and SHCL. Since March 1, 1994, Mr. Nasky has been of
counsel to the law firm of Kummer Kaempfer Bonner & Renshaw, Las Vegas, Nevada,
general counsel to the Company. Until February 28, 1994, Mr. Nasky was a member
of the law firm of Vargas & Bartlett, Las Vegas and Reno, Nevada, former
general counsel to the Company.
George A. Zettler is a Director of the Company and OSI. Since February 1,
1994, Mr. Zettler has been the President of Zimex, Redondo Beach, California.
Until February 1, 1994, he was the President of World Trade Services Group,
Long Beach, California. Prior to January 1, 1991, he was the President of
United Export Trading Company, Los Angeles, California.
Carolyn M. Sparks is a Director of the Company and OSI. Mrs. Sparks is a co-
owner of International Insurance Services, Las Vegas, Nevada. Until January
1991, Mrs. Sparks was the Vice-President, Secretary and Treasurer of
International Insurance Services, Ltd. Until December 31, 1990, she was a
claims administrator for International Insurance Services, Ltd. She is also a
Director of Southwest Gas Corporation, a Director of PriMerit Bank--Federal
Savings Bank and a Regent of the University and Community College System of
Nevada.
G. Clifford Taylor, Jr. has been the Executive Vice President and Chief
Operating Officer of SBOC since December 1, 1988. He has served as the
Assistant Secretary of the Company since May 1990. He has also served as the
Treasurer of the Company and SBOC since February 1981. He served as the
Treasurer of SDC from June 1983 to May 1993. He has been the Treasurer of OSI
since December 1983, ACSI since June 1984 and OSFC since December 1986. He
serves at the pleasure of the respective board of directors.
R. Craig Bird has been the Vice President--Financial Administration of the
Company since February 1988 and Executive Vice President and Chief Operating
Officer of SDC since October 1993. Mr. Bird was the Vice President--Financial
Administration of ACSI from March 1990 to October 1993. He serves at the
pleasure of the respective boards of directors.
Leann K. Schneider has been the Vice President--Finance and Chief Financial
Officer of the Company and the Vice President--Finance and Chief Financial
Officer of SBOC since May 1990. Ms. Schneider has also served as the Chief
Financial Officer and Treasurer of SDC since May 1993, the Treasurer of SBL and
SBM since July 1993 and the Treasurer of SBI since September 1993. From
December 1989 until May 1990, she served as the Vice President--Financial
Relations and Chief Financial Officer of the Company. From December 1988 until
December 1989, she served as the Vice President--Financial Relations and Acting
Chief Financial Officer of the Company. She serves at the pleasure of the
respective boards of directors.
Mark J. Miller has served as the Executive Vice President and Chief Operating
Officer of ACSI since October 1993, the Vice President--Finance of OSI since
April 1988 and the Vice President--Finance and Chief Financial Officer of OSFC
since April 1991. Mr. Miller served as the Vice President--Finance and Chief
Financial Officer of ACSI from December 1988 to October 1993. He serves at the
pleasure of the respective boards of directors.
35
<PAGE>
REGULATION
The operations of the Company are subject to extensive regulation by the
States of Nevada, New Jersey, Louisiana and local governmental authorities in
Nevada, New Jersey and Louisiana. Such regulations impose restrictions on the
Company's operations in such states, including, among other things,
restrictions on the manner of operation of the casinos, licensing of officers,
directors and certain key employees, and the submission of extensive financial
and operating reports. Although the Company believes that it is in substantial
compliance in all material respects with applicable local, state and federal
laws, rules and regulations, there can be no assurance that more restrictive
laws, rules and regulations will not be adopted in the future which could make
compliance much more difficult or expensive, restrict the Company's ability to
attract investors or lenders, or otherwise adversely affect the business or
prospects of the Company.
The Company may be required to disclose to the Gaming Authorities, upon
request, the identities of the holders of the Notes. The Gaming Authorities
may, in their discretion, (i) require holders of the Company's securities to
file applications in states in which the Company does business; (ii)
investigate such holders; and (iii) require such holders to be found suitable
or qualified to own such securities. Pursuant to the regulations of the Gaming
Authorities, such gaming corporations may be sanctioned, including the loss of
its approvals, if, without prior approval of the Gaming Authorities, it (i)
pays to the unsuitable or unqualified person any dividend, interest or other
distribution; (ii) recognizes any voting right by such unsuitable or
unqualified person in connection with the securities; (iii) pays the unsuitable
or unqualified person remuneration in any form; or (iv) makes any payments to
the unsuitable or unqualified person by way of principal, redemption,
conversion, exchange, liquidation, or similar transaction. The Indenture
requires that if any Gaming Authority requires that a holder or beneficial
owner of Notes must be licensed, qualified or found suitable under any
applicable gaming law and the holder or beneficial owner fails to apply for a
license, qualification or a finding of suitability within 30 days after being
requested to do so by the Gaming Authority, or if such holder or such
beneficial owner is not so licensed, qualified or found suitable, the Company
shall have the right, at its option, (i) to require such holder or beneficial
owner to dispose of such holder's or beneficial owner's Notes within 30 days of
receipt of such notice of such finding by the applicable Gaming Authority or
such earlier date as may be ordered by such Gaming Authority or (ii) to call
for the redemption of the Notes of such holder or beneficial owner at the
lesser of the principal amount thereof or the price at which such holder or
beneficial owner acquired the Notes, together with, in either case, accrued
interest to the earlier of the date of the finding of unsuitability by such
Gaming Authority, which may be less than 30 days following the notice of
redemption, if so ordered by such Gaming Authority. See "Description of Notes--
Optional Redemption."
Pursuant to the regulations of the Nevada Gaming Commission (the "Nevada
Commission") and the Nevada State Gaming Control Board ( the "Nevada Board"),
the Company may not make a public offering of its securities, such as the
Notes, without the prior approval of the Nevada Commission if the securities or
proceeds therefrom are intended to be used to construct, acquire or finance
gaming facilities in Nevada, or to retire or extend obligations incurred for
such purposes. On November 18, 1993, the Nevada Commission granted the Company
prior approval to make public offerings for a period of one year, subject to
certain conditions (the "Shelf Approval"). The Shelf Approval is for a period
of one year and expires on the date of the November 1994 Nevada Commission
meeting. The Shelf Approval may be rescinded without prior notice upon the
issuance of an interlocutory stop order by the Chairman of the Nevada Board.
This Offering is made pursuant to the Shelf Approval.
If the Company becomes involved in gaming operations in any other
jurisdictions, such gaming operations will subject the Company and certain of
its officers, directors, key employees, stockholders and other affiliates
("Regulated Persons") to strict legal and regulatory requirements, including
mandatory licensing and approval requirements, suitability requirements, and
ongoing regulatory oversight with respect to such gaming operations. Such legal
and regulatory requirements and oversight will be administered and exercised by
the relevant regulatory agency or agencies in each jurisdiction. The Company
and the Regulated Persons will need to satisfy the licensing, approval and
suitability requirements of each jurisdiction in which the Company seeks to
become involved in gaming operations. To date, other than Nevada, New Jersey
and
36
<PAGE>
Louisiana, no such gaming licenses, approvals or fundings of suitability have
been obtained or, other than in Sydney, Australia, Indiana or the St. Regis
Mohawk Reservation, applied for by the Company.
A more extensive discussion of the Nevada, New Jersey and Louisiana gaming
statutes and regulations, and other statutes and regulations in jurisdictions
to which the Company and its subsidiaries are subject, or may become subject,
is contained in the Company's Annual Report on Form 10-K for the Year Ended
December 31, 1993 under the respective headings "Item 1. Business--Regulation
and Licensing."
DESCRIPTION OF NOTES
GENERAL
The Notes will be issued pursuant to the Indenture among the Company, the
Guarantors and , as trustee (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 (the "Trust Indenture Act"). The
Notes are subject to all such terms, and holders of the Notes are referred to
the Indenture and the Trust Indenture Act for a statement thereof. The
following summary of certain provisions of the Indenture does not purport to be
complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. A copy of the
proposed form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The definitions of certain terms
used in the following summary are set forth below under "Certain Definitions."
The Notes will be unsecured general obligations of the Company and will be
subordinated in right of payment to all Senior Debt of the Company. See "--
Subordination." At March 31, 1994, the Company and its Restricted Subsidiaries
had an aggregate of $279.6 million in principal amount of Senior Debt
outstanding, including $275 million in principal amount of the First Mortgage
Bonds. In addition, substantially all of the Company's and the Guarantors'
assets have been pledged to secure the First Mortgage Bonds. The Company's
obligations under the Notes and the Indenture will be unconditionally
guaranteed on a senior subordinated basis by each of ACSI, OSI and SBOC.
The Company is a holding company that operates its casino hotels and related
facilities through its subsidiaries. Repayment of intercompany notes and
payment of management fees, rent and dividends from its subsidiaries are the
Company's principal sources of cash to pay operating expenses and principal of
and interest on debt. The ability of the Company's New Jersey subsidiaries to
make payments on intercompany notes and to pay management fees and dividends to
the Company may, under certain circumstances, be subject to regulatory approval
by the New Jersey Commission in the event that such payment would affect the
"financial stability" of such subsidiary. Under New Jersey gaming law, a
company's "financial stability" is evaluated pursuant to certain financial
standards, including (i) cash availability to pay gaming wagers and gaming and
nongaming expenditures, (ii) ability to make capital and maintenance
expenditures in a timely manner and (iii) ability to provide for the servicing
of debt.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $150 million and will
mature on , 2009. Interest on the Notes will accrue at the rate of % per
annum and will be payable semi-annually on and , commencing on ,
1995, to holders of record on the immediately preceding and . Interest
on 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 original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. The Notes will be payable both as to principal and interest at
the office or agency of the Company maintained for such purpose within the City
and State of New York or, at the option of the Company, payment of interest may
be made by check mailed to the holders of the Notes at their respective
addresses set forth in the register of holders of Notes. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose. The Notes will be issued
in registered form, without coupons, and in denominations of $1,000 and
integral multiples thereof.
37
<PAGE>
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to , 2001,
except as may be required by a Gaming Authority as provided below. Thereafter,
the Notes will be subject to redemption at the option of the Company, in whole
or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001......................................................... %
2002......................................................... %
2003......................................................... %
2004 and thereafter.......................................... 100.000%
</TABLE>
Notwithstanding any other provision hereof, if any Gaming Authority requires
that a holder or beneficial owner of Notes must be licensed, qualified or found
suitable under any applicable gaming law in order to maintain any gaming
license or franchise of the Company or any Restricted Subsidiary and such
holder or beneficial owner fails to apply for a license, qualification or a
finding of suitability within 30 days after being requested to do so by the
Gaming Authority (or such lesser period that may be required by such Gaming
Authority), or if such holder or such beneficial owner is not so licensed,
qualified or found suitable, the Company shall have the right, at its option,
(i) to require such holder or beneficial owner to dispose of such holder's or
beneficial owner's Notes within 30 days of receipt of such notice of such
finding by the applicable Gaming Authority or such earlier date as may be
ordered by such Gaming Authority or (ii) to call for the redemption of the
Notes of such holder or beneficial owner at the lesser of the principal amount
thereof or the price at which such holder or beneficial owner acquired the
Notes, together with, in either case, accrued interest to the earlier of the
date of redemption or such earlier date as may be required by such Gaming
Authority or the date of the finding of unsuitability by such Gaming Authority,
which may be less than 30 days following the notice of redemption, if so
ordered by such Gaming Authority. The Company shall notify the Trustee in
writing of any such redemption as soon as practicable. The holder of Notes or
beneficial owner applying for a license, qualification or a finding of
suitability must pay all costs of the licensure or investigation for such
qualification or finding of suitability. 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. See "Certain Considerations--
Regulatory Matters" and "Regulation."
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, 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 such holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at a purchase price equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (the "Change of Control Payment").
Within 30 days following any Change of Control, the Company shall mail a notice
to each holder stating: (1) that the Change of Control Offer is being made
pursuant to the covenant entitled "Change of Control" and that all Notes
tendered will be accepted for payment; (2) the purchase price and the purchase
date (the "Change of Control Payment Date"), which shall be no earlier than 30
days nor later than 40 days from the date such notice is mailed (unless a
longer period is required by law); (3) that any Note not tendered will continue
to accrue interest; (4) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date; (5) that holders electing to have any
38
<PAGE>
Notes purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the third
business day preceding the Change of Control Payment Date; (6) that holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the second business day preceding the
Change of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the holder, the principal amount of Notes
delivered for purchase, and a statement that such holder is withdrawing his
election to have such Notes purchased; and (7) that holders whose Notes are
being purchased only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered, which unpurchased portion
must be equal to $1,000 in principal amount or an integral multiple thereof.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment Notes or portions thereof 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 Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Company. The Paying Agent shall promptly mail to each
holder of Notes so accepted payment in an amount equal to the purchase price
for such Notes, and the Trustee shall promptly authenticate and mail to each
holder a new Note equal in principal amount to any unpurchased portion of the
Notes surrendered, if any; provided, that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. Prior to complying
with the provisions of this covenant, but in any event within 90 days following
a Change of Control, the Company shall either repay all outstanding Senior Debt
or obtain the requisite consents, if any, under all agreements governing
outstanding Senior Debt to permit the repurchase of Notes required by this
covenant. 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.
Except as described above with respect to a Change of Control, the Indenture
does not contain any other provisions that permit the holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar restructuring.
The Working Capital Credit Agreement and the First Mortgage Bond Indenture
currently restrict the Company's ability to purchase any Notes upon a Change of
Control. In the event a Change of Control occurs at a time when the Company is
prohibited from purchasing Notes, the Company could seek the consent of its
lenders to the purchase of Notes or could attempt to refinance the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited from purchasing
Notes. In such case, the Company's failure to purchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the Working Capital Credit Agreement and the First
Mortgage Bond Indenture. In such circumstances, the subordination provisions in
the Indenture would restrict payments to the holders of Notes.
The Change of Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. The Change of Control purchase
feature, however, is not the result of management's knowledge of any specific
effort to accumulate the Company's stock or to obtain control of the Company by
means of a merger, tender offer, solicitation or otherwise, or part of a plan
by management to adopt a series of anti-takeover provisions. Instead, the
Change of Control purchase feature is a result of negotiations between the
Company and the Underwriter. Management has no present intention to engage in a
transaction involving a Change of Control, although it is possible that the
Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. The Company will
comply with all applicable laws, including without limitation Section 14(e) of
the Exchange Act and the rules thereunder, in the event that it is required to
offer to repurchase any Notes upon a Change of Control.
39
<PAGE>
The Company and the Trustee may not waive or modify any rights of the holders
of the Notes upon a Change of Control without the consent of the holders of 66
2/3% of the principal amount of the then outstanding Notes.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing 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 to another person may be
uncertain.
Asset Sales
The Indenture will provide that the Company will not, and will not permit any
of its Restricted Subsidiaries to, cause, make or suffer to exist any Asset
Sale unless (i) no Default exists or is continuing immediately prior to and
after giving effect to such Asset Sale, (ii) the Company (or such Restricted
Subsidiary, as the case may be) receives consideration at the time of each such
Asset Sale at least equal to the fair market value (evidenced by a resolution
of the Board of Directors set forth in an Officers' Certificate delivered to
the Trustee) of the assets or equity securities sold or otherwise disposed of
and (iii) at least 90% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash; provided, however, that the
amount of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto) of the Company
or any Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes or any Guarantee thereof) that are assumed by the
transferee of any such assets and (y) any notes or other obligations received
by the Company or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash,
shall be deemed to be cash (to the extent of the cash received) for purposes of
this provision.
Within 360 days after any Asset Sale, the Company (or the Subsidiary, as the
case may be) may apply the Net Proceeds from such Asset Sale, at its option,
either (a) to permanently reduce Senior Debt of the Company or (b) to reinvest
or cause to be reinvested the Net Proceeds from such Asset Sale in another
asset or business in a Gaming Related Business. Pending the final application
of any such Net Proceeds, the Company may temporarily reduce Senior Debt of the
Company, including under the Working Capital Credit Agreement, or otherwise
invest such Net Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from any Asset Sale that are not applied as provided in the
first sentence of this paragraph constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10 million, the Company will make
an offer (an "Asset Sale Offer") to (i) all holders of Notes to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds or (ii) at the Company's option, make an Asset Sale Offer to redeem
outstanding Notes and Pari Passu Indebtedness, on a pro rata basis in relation
to the outstanding aggregate principal amount of such Indebtedness and the
aggregate principal amount of the Notes then outstanding, in each case at an
offer price in cash in an amount equal to 100% of the outstanding principal
amount thereof plus accrued and unpaid interest, if any, to the date fixed for
the closing of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant
to an Asset Sale Offer to purchase is less than the Excess Proceeds, the
Company may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by holders thereof exceeds the
amount of Excess Proceeds, the Trustee will select the Notes to be purchased on
a pro rata basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds will be reset at zero.
Escrow Account
The Indenture will provide that the Company must place $100 million of net
proceeds from the Note Offering into an escrow account. The escrow agent for
the escrow account will be permitted to apply the
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amount in the escrow account only to fund the Company's investment in SHCL. In
the event that Australian Gaming Approval or Management Contract Approval (as
defined in the Indenture) has not occurred on or prior to December 31, 1995,
the Company will be obligated to apply the amount in the escrow account to an
offer to all holders of Notes to purchase the maximum principal amount of Notes
that may be purchased with such amount a purchase price equal to 100% of the
principal amount thereof plus accrued and unpaid interest to the date of
purchase in accordance with the procedures set forth in the Indenture. If the
aggregate principal amount of Notes surrendered by holders thereof exceeds the
amount in the escrow account, the Trustee will select the Notes to be purchased
on a pro rata basis. If the amount in the escrow account exceeds the amount
necessary to purchase all Notes surrendered in such offer, the Company will be
obligated to apply such excess amount to an offer to purchase First Mortgage
Bonds. Any funds remaining in the escrow account after the Company has fully
funded its investment in SHCL or after the required offers to purchase shall be
released to the Company and may be used for general corporate purposes.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate,
provided that no Notes of $1,000 or less shall be redeemed in part. Notice 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. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest ceases to accrue on Notes or portions of them called for redemption.
SUBORDINATION
The payment of principal of and interest on the Notes will be subordinated in
right of payment, as set forth in the Indenture, to the prior payment in full
of all Obligations with respect to Senior Debt of the Company, including
without limitation, the First Mortgage Bonds, whether outstanding on the date
of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt of the Company will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Debt) before the holders of
Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Debt of the Company are paid in
full, any distribution to which the holders of Notes would be entitled shall be
made to the holders of Senior Debt (except that holders of Notes may receive
securities that are subordinated at least to the same extent as the Notes to
Senior Debt and any securities issued in exchange for Senior Debt).
The Company also may not make any payment upon or in respect of the Notes
(except in such subordinated securities) if (a) a default in the payment of the
principal of or interest on Designated Senior Debt of the Company occurs and is
continuing beyond any applicable grace period or (b) any other default occurs
and is continuing with respect to Designated Senior Debt of the Company that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Company or the holders of any Designated
Senior Debt. Payments on the Notes may and shall be resumed (i) in the case of
a payment default, upon the date on which such default is cured or waived and
(ii) in case of a nonpayment default, the earlier of the date on which
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment
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Blockage Notice is received, unless the maturity of any Designated Senior Debt
has been accelerated. No new period of payment blockage may be commenced within
360 days after the receipt by the Trustee of any prior Payment Blockage Notice.
No nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice.
The Indenture will further require that the Company promptly notify holders
of Designated Senior Debt if payment of the Notes is accelerated because of an
Event of Default.
As a result of the subordination provision described above, in the event of a
liquidation or insolvency, holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. At March 31, 1994, the
principal amount of Senior Debt of the Company outstanding was approximately
$279.6 million. The Indenture will limit, subject to certain financial tests,
the amount of additional Indebtedness, including Senior Debt, that the Company
and its Subsidiaries can incur. See "--Certain Covenants."
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture will provide that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or such Restricted Subsidiary or dividends or distributions by a
Restricted Subsidiary of the Company provided, that to the extent that a
portion of such dividend or distribution is paid to a holder other than the
Company or a Restricted Subsidiary, such portion of such dividend or
distribution is not greater than such holder's pro rata aggregate common equity
interest in such Restricted Subsidiary; (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company or any
Subsidiary or other Affiliate of the Company (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary of the Company);
(iii) voluntarily purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is pari passu with or subordinated to the Notes; or
(iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) With respect to a Restricted Payment other than a Regular Quarterly
Dividend or a Restricted Investment in a Subsidiary engaged in a Gaming
Related Business, 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 covenant entitled
"Incurrence of Indebtedness"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (including Restricted Payments permitted by
clauses (i) and (ii) of the next succeeding paragraph but excluding any
Restricted Payments permitted by clauses (iii)-(ix) of the next succeeding
paragraph), is less than the sum of (x) 50% of the Consolidated Net Income
of the Company for the period (taken as one accounting period) from April
1, 1993 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, 100% of such deficit), plus (y) 100% of the aggregate net cash
proceeds received by the Company from the issuance or sale of Equity
Interests of the Company (other than Equity Interests sold to a Restricted
Subsidiary of the Company and other than Disqualified Stock) from and
including the date of the First Mortgage Bond Indenture (including any such
Equity Interests issued concurrently with the issuance of the Notes), plus
(z) Excess Non-Recourse Subsidiary Cash Proceeds received after the date of
the First Mortgage Bond Indenture.
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The foregoing provisions will not prohibit (i) 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; (ii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of other Equity Interests of the Company (other than any Disqualified
Stock); (iii) Investments by the Company or any Restricted Subsidiary in an
amount not to exceed $75 million in the aggregate (measured as of the date such
Investments were made) in any Non-Recourse Subsidiaries engaged in a Gaming
Related Business; provided that any loan to, or Investment Guarantee in favor
of, a Non-Recourse Subsidiary that is not a Subsidiary shall mature prior to
the earlier of (x) the termination of the management contract pursuant to which
the Company or any of its Restricted Subsidiaries manages such Non-Recourse
Subsidiary and (y) the Company or any of its Restricted Subsidiaries otherwise
ceasing to have control over the direction of the day-to-day operations of such
Non-Recourse Subsidiary; (iv) Investments by the Company or any Restricted
Subsidiary in any Non-Recourse Subsidiary engaged in a Gaming Related Business
in an amount (measured as of the date such Investments were made) not to exceed
in the aggregate 100% of all cash received by the Company or any Restricted
Subsidiary from any Non-Recourse Subsidiary (other than cash which is or may be
required to be repaid or returned to such Non-Recourse Subsidiary) up to $75.0
million in the aggregate and thereafter 50% of all cash received by the Company
or any Restricted Subsidiary from any Non-Recourse Subsidiary (other than cash
which is or may be required to be repaid or returned to such Non-Recourse
Subsidiary); provided that the aggregate amount of Investments pursuant to this
clause (iv) does not exceed $125.0 million in the aggregate; (v) the purchase,
redemption, defeasance, or other acquisition or retirement for value of any
Pari Passu Indebtedness with the substantially concurrent purchase, redemption,
defeasance, or other acquisition or retirement for value of the Notes (on a pro
rata basis in relation to the outstanding aggregate principal amount of such
Indebtedness and the aggregate principal amount of the outstanding Notes or
which was on a basis offered pro rata to the holders of the Notes); (vi) any
voluntary purchase, redemption, defeasance or other acquisition or retirement
for value of any Pari Passu Indebtedness with the proceeds of the substantially
concurrent issuance of Refinancing Indebtedness relating to such Pari Passu
Indebtedness in accordance with the "Incurrence of Indebtedness" covenant;
(vii) dividends or distributions from a Non-Recourse Subsidiary or dividends or
distributions from a Controlled Entity; (viii) any purchase, redemption,
defeasance or other acquisition or retirement for value of any Pari Passu
Indebtedness (other than pursuant to clause (v) or (vi) above) up to $30.0
million in aggregate principal amount; and (ix) Investments by the Company or
any Guarantor in Controlled Entities, so long as such Persons remain Controlled
Entities, provided that (A) any Investment in SHCL exceeding $110.0 million
shall be a Restricted Payment pursuant to the preceding paragraph, (B) neither
the Company nor any Guarantor shall invest any portion of the Las Vegas
Showboat or the Atlantic City Showboat in, or contribute any such assets to, a
Controlled Entity and (C) the Issuer would have at the time of such Investment
and after giving effect thereto as if such Investment had been made at the
beginning of the applicable four-quarter period, a Fixed Charge Coverage Ratio
of at least 1.5 to 1 if such Investment is made prior to December 31, 1996 and
at least 1.75 to 1 if such Investment is made thereafter; provided that, with
respect to clauses (iii)-(ix) above, immediately after giving effect to the
transaction contemplated therein, no Default or Event of Default would occur as
a consequence thereof.
Any Investment in a Restricted Subsidiary that becomes a Non-Recourse
Subsidiary or any Investment in a wholly owned Subsidiary that becomes a non-
wholly owned Restricted Subsidiary that is not a Guarantor shall become a
Restricted Payment made on such date in the amount of the greater of (x) the
book value of the Investment in such Subsidiary on such date and (y) the fair
market value of the Investment in such Subsidiary on such date as determined
(A) in good faith by the Board of Directors of the Company if such fair market
value is determined to be less than $10.0 million and (B) by an investment
banking firm of national standing with high yield underwriting expertise if
such fair market value is determined to be in excess of $10.0 million.
Any Guarantee that is an Investment in a Non-Recourse Subsidiary shall cease
to be deemed an Investment (and shall be deemed to have not been made) to the
extent that the Guarantee is released without payment on the obligations
guaranteed by the Company or any Restricted Subsidiary.
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If any Controlled Entity ceases to be a Controlled Entity, then all
Investments owned by the Company or any Restricted Subsidiary in such
Controlled Entity shall be deemed to be a Restricted Investment made on such
date, unless such former Controlled Entity purchases or redeems all such
Investments for a price at least equal to the greater of the book value of such
Investments on the date such entity ceases to be a Controlled Entity or the
original amount of such Investments.
INCURRENCE OF INDEBTEDNESS
The Indenture will provide that 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 with
respect to or become responsible for (collectively, "incur") any Indebtedness
and the Company will not issue any Disqualified Stock and will not permit any
of its Subsidiaries to issue any shares of preferred stock; provided, however,
that the Company or any Restricted Subsidiary may incur Indebtedness if (i) 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 is greater than 2.0 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 at the beginning of such four-quarter period,
and (ii) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof.
The foregoing limitations will not apply to (a) the incurrence by the Company
or any Restricted Subsidiary of up to $25.0 million in aggregate principal
amount of Indebtedness outstanding at any one time, the proceeds of which are
used to acquire or lease tangible assets, (b) the incurrence by the Company or
any Restricted Subsidiary of Indebtedness pursuant to the Working Capital
Credit Agreement for working capital purposes in an aggregate principal amount
not to exceed $25.0 million outstanding at any one time; provided that there
shall be no such Indebtedness outstanding for a period of 14 consecutive days
in each calendar year (other than in respect of standby letters of credit), (c)
the incurrence by the Company and its Restricted Subsidiaries of the Existing
Indebtedness, (d) the incurrence by the Company of Indebtedness represented by
the Notes and the incurrence by the Guarantors of the Subsidiary Guarantees,
(e) Indebtedness incurred in connection with Hedging Obligations with respect
to Indebtedness otherwise permitted under this paragraph, (f) the incurrence by
the Company of Indebtedness issued in exchange for, or the proceeds of which
are used to extend, refinance, renew, replace, or refund Indebtedness referred
to in the first paragraph of this covenant or clauses (a) through (e) above and
(h) below (the "Refinancing Indebtedness"); provided, however, that (1) the
principal amount of such Refinancing Indebtedness shall not exceed the
principal amount of Indebtedness so extended, refinanced, renewed, replaced,
substituted or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (2) the Refinancing Indebtedness shall have 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 or
refunded; (3) the Refinancing Indebtedness shall be 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 or refunded; and (4) no Default or Event of
Default shall have occurred and be continuing or would occur as a consequence
thereof, (g) Indebtedness between the Company and any Restricted Subsidiary;
and (h) the incurrence by the Company or any Restricted Subsidiary of
Indebtedness that is not otherwise permitted under this covenant not to exceed
an aggregate principal amount of $10.0 million outstanding at any one time
under this clause (h).
The Indenture will provide that the Company will not permit any of its Non-
Recourse Subsidiaries to incur any Indebtedness or issue any shares of
Disqualified Stock, other than Non-Recourse Indebtedness; provided, however,
that if any such Non-Recourse Subsidiary ceases to remain a Non-Recourse
Subsidiary, such event shall be deemed to constitute the incurrence of the
Indebtedness in such Subsidiary by a Restricted Subsidiary.
LIENS
The Indenture will provide that neither the Company nor any of its Restricted
Subsidiaries may directly or indirectly create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired,
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or any income or profits therefrom or assign or convey any right to receive
income therefrom, except: (i) Liens securing Obligations under Senior Debt
permitted to be incurred under the Indenture or (ii) Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture will provide that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary, other than a Guarantor, to (a) pay
dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries (i) on its Capital Stock or (ii) with respect to any
other interest or participation in, or measured by, its profits, or (b) pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries; (c)
make loans or advances to the Company or any of its Restricted Subsidiaries; or
(d) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reasons of (i) Existing Indebtedness as in effect on the Issue
Date, (ii) the Working Capital Credit Agreement as in effect as of the Issue
Date, (iii) the Indenture and the Notes, (iv) applicable law, (v) any
instrument governing Indebtedness or Capital Stock of a person acquired by the
Company or any of its Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with 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 that the Consolidated
Cash Flow of such person is not taken into account in determining whether such
acquisition was permitted by the terms of the Indenture, (vi) by reason of
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (vii) with respect to
clause (c) above, purchase money obligations for property acquired in the
ordinary course of business, or (viii) permitted Refinancing Indebtedness,
provided that the restrictions contained in the agreements governing such
Refinancing Indebtedness are substantially not more restrictive taken as a
whole than those contained in the agreements governing the Indebtedness being
refinanced.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture will provide that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions to, another
corporation, person or entity unless (i) the Company is the surviving
corporation or the entity or the person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, 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; (ii) the entity or
person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or person to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made assumes all the
obligations of the Company pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee, under the Notes and the Indenture;
(iii) immediately after such transaction no Default or Event of Default exists;
(iv) the Company or any entity or person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made (A) will have Consolidated
Net Worth (immediately after the transaction but prior to any purchase
accounting adjustments resulting from the transaction) equal to or greater than
the Consolidated Net Worth of the Company immediately preceding the transaction
and (B) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction 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
covenant entitled "Incurrence of Indebtedness"; (v) such transactions would not
require any holder of Notes to obtain a gaming license or be qualified under
the laws of any applicable gaming jurisdiction, provided that such holder would
not have been required to obtain a gaming license or be qualified under the
laws of any applicable gaming jurisdiction in the absence of such transactions;
and (vi) such transactions would not result in the loss of any qualification or
any material license of the Company or its Subsidiaries necessary for any
Gaming Related Business then operated by the Company or its Subsidiary.
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ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture will provide that if the Company or any of its Restricted
Subsidiaries shall transfer or cause to be transferred, in one or a series of
related transactions, any assets, businesses, divisions, real property or
equipment having a book value in excess of $5.0 million to any Restricted
Subsidiary that is not a Guarantor (other than any such transfer that is a
Restricted Payment permitted by the Indenture), then such transferee or
acquired Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion
of counsel, in accordance with the terms of the Indenture. The Subsidiary
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 a Non-Recourse Subsidiary in accordance with the terms of
the Indenture.
NO SENIOR SUBORDINATED DEBT
The Indenture will provide that (i) the Company will not incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness that
is subordinate or junior in right of payment to any Senior Debt of the Company
and senior in any respect in right of payment to the Notes and (ii) no
Guarantor will incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment
to Senior Debt of such Guarantor and senior in any respect in right of payment
to such Guarantor's Subsidiary Guarantee.
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit any
of its Restricted Subsidiaries to, 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 maintain any contract, agreement, understanding, loan, advance
or guarantee with, or for the benefit of, any Affiliate (each of the foregoing,
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, (b) with
respect to any Affiliate Transaction with a Non-Recourse Subsidiary, which,
either individually or when combined with all other Affiliate Transactions with
Non-Recourse Subsidiaries during the past year, involves aggregate payments in
excess of $1.0 million, a majority of the Board of Directors approves each such
transaction, (c) with respect to any Affiliate Transaction (other than with any
Non-Recourse Subsidiary) involving aggregate payments in excess of $1.0
million, or with respect to any Affiliate Transaction with all Non-Recourse
Subsidiaries, which, either individually or when combined with all other
Affiliate Transactions with Non-Recourse Subsidiaries during the past year,
involves aggregate payments in excess of $3.0 million, the Company delivers to
the Trustee a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that any such Affiliate Transaction complies with clause
(a) above and such Affiliate Transaction is approved by a majority of the Board
of Directors, and (d) with respect to any Affiliate Transaction involving
aggregate payments in excess of $10.0 million, the Company delivers to the
Trustee an opinion as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view issued by an investment banking firm
of national standing with expertise in high yield debt offerings or in the case
of a transaction involving the sale or transfer of assets subject to valuation,
such as real estate, an appraisal by a nationally recognized appraisal firm;
provided, however, that the following shall not be deemed Affiliate
Transactions: (i) any employment agreement 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,
(ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payments made pursuant to the Tax Sharing Agreement, (iv)
Restricted Payments, dividends, distributions or Investments permitted by the
provisions of the Indenture described above under the covenant "Restricted
Payments," (v) payments to an Affiliate of ACSI in respect of the leasing of
the Land from such Affiliate; provided that the terms of clause (a) above are
complied with; (vi) payments by the Company pursuant to the indemnification
agreement with its directors and officers in such director's or officer's
capacity as a director or officer of the Company or a Restricted Subsidiary;
(vii) the engagement of Kummer Kaempfer Bonner & Renshaw (or any successor
firm) for legal services in connection with the business of the Company or its
Subsidiaries; provided that the payment for such services
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does not exceed $1.0 million in any fiscal year; (viii) loans to employees of
the Company or any Restricted Subsidiary, other than relocation loans, in an
amount not to exceed $500,000 in aggregate principal amount outstanding at any
one time; (ix) loans to employees of the Company or any Restricted Subsidiary
in connection with the relocation of such employee in an amount not to exceed
$2.0 million in aggregate principal amount outstanding at any one time; (x)
transactions pursuant to any management agreement or trademark license
agreement between the Company and any of its Restricted Subsidiaries; (xi) the
engagement of International Insurance Services, Ltd. for insurance adjustment
services in the ordinary course of business of the Company or its Subsidiaries,
provided that the payments for such services do not exceed $1.0 million in any
fiscal year; and (xii) the lease of a gift shop in the Atlantic City Showboat
to Ocean 11, a sole proprietorship, provided that the payments for such lease
do not exceed $1.0 million in any fiscal year.
BUSINESS ACTIVITIES
The Indenture will provide that the Company will not, and will not permit any
Subsidiary to, engage in any business other than (i) those necessary for,
incident to, connected with or arising out of the gaming business (including
developing and operating hotel casinos, sports or entertainment facilities,
transportation services or other related activities or enterprises and any
additions or improvements thereto) and (ii) such other businesses as the
Company or its Restricted Subsidiaries are engaged in on the Issue Date. The
Company or its Subsidiaries may not enter into any gaming jurisdictions in
which the Company or its Subsidiary is not presently licensed if all of the
holders of Notes will be required to be licensed, provided that this sentence
shall not prohibit the Company or its Subsidiary from entering any jurisdiction
that does not require the licensing or qualification of all of the holders of
the Notes, but reserves the discretionary right to license or qualify any
holder of Notes.
REDESIGNATION OF NON-RECOURSE SUBSIDIARY
Any Non-Recourse Subsidiary may be redesignated by the Company as a
Restricted Subsidiary, provided that at the time of such designation after
giving pro forma effect to such designation as if it occurred at the beginning
of the applicable four-quarter period, the Company could incur $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the "Incurrence of Indebtedness" covenant and
no Default or Event of Default then exists and is continuing.
REPORTS
Whether or not required by the rules and regulations of the Securities and
Exchange Commission (the "Commission"), so long as any Notes are outstanding,
the Company will furnish to the holders of Notes all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants.
PAYMENTS FOR CONSENT
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or
agreed to be 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.
SUBSIDIARY GUARANTEES
The Company's obligations under the Notes will be jointly and severally
guaranteed (the "Subsidiary Guarantees"), on a senior subordinated basis, by
the Guarantors. The Subsidiary Guarantee of each Guarantor will be subordinated
to the prior payment in full of all Senior Debt of such Guarantor, which
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in the aggregate for all Guarantors would be approximately $279.6 million of
Senior Debt outstanding as of March 31, 1994, and the amounts for which the
Guarantors will be liable under the guarantees issued from time to time with
respect to Senior Debt. The obligations of each Guarantor under its Subsidiary
Guarantee will be limited to a maximum amount which will result in the
obligations of such Guarantor in respect of such amount to not be deemed to
constitute a fraudulent conveyance.
Each of the Guarantors may consolidate with, merge with or into, or transfer
all or substantially all of its assets to any other person to the same extent
that the Company may consolidate with, merge with or into, or transfer all or
substantially all of its assets to any other person; provided, however, that if
such other person is not the Company or another Guarantor, such Guarantor's
obligations under its Subsidiary Guarantee must be expressly assumed by such
other person.
In addition, if any Guarantor is or becomes insolvent, the Subsidiary
Guarantees could be challenged, including, but not limited to, under applicable
provisions of federal bankruptcy law or comparable provisions of state
fraudulent conveyance law, and the payment of amounts by Guarantors pursuant to
the Subsidiary Guarantees could be voided and be required to be returned to
such Guarantors, or to a fund for the benefit of the creditors of such
Guarantor or to certain judgment creditor thereof.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event of
Default: (i) default in payment when due at maturity of principal on the Notes
by the Company or any Guarantor (whether or not prohibited by the subordination
provisions of the Indenture); (ii) default for 30 days in the payment when due
of interest on the Notes by the Company or any Guarantor (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
the Company or any Guarantor for 30 days after notice to comply with the
provisions described under the covenants "Change of Control," "Asset Sale,"
"Restricted Payments," "Liens," "Transactions with Affiliates," or "Incurrence
of Indebtedness"; (iv) failure by the Company or any Guarantor for 60 days
after notice to comply with certain other agreements in the Indenture or the
Notes; (v) 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 Guarantor or any of their
respective Restricted Subsidiaries, or the payment of which is guaranteed by
the Company or any Guarantor or any of their respective Restricted
Subsidiaries, whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (a) is caused by a failure to
pay when due principal or interest on such Indebtedness within the grace period
provided in such Indebtedness (which failure continues beyond any applicable
grace period) (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 $10.0 million or more;
(vi) failure by the Company or any Guarantor or any of their respective
Restricted Subsidiaries to pay any final judgments aggregating in excess of
$5.0 million which judgments are not stayed within 60 days after their entry;
(vii) except as permitted by the Indenture, any Subsidiary Guarantee is held in
any judicial proceeding to be unenforceable or invalid or ceases for any reason
to be in full force and effect or any Guarantor, or any person acting on behalf
of any Guarantor, denies or disaffirms its obligations under its Subsidiary
Guarantee; and (viii) certain events of bankruptcy or insolvency with respect
to the Company or any of its Restricted Subsidiaries that individually or as a
group constitute a Significant Subsidiary.
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 immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company or any Subsidiary, all outstanding
Notes will become due and payable without further action or notice. Holders of
the Notes may not enforce the Indenture or the Notes
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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
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, 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.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or the Related Documents 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 Commission that such a waiver is
against public policy.
DEFEASANCE AND DISCHARGE OF THE INDENTURE AND THE NOTES
The Indenture will provide that the Company at any time may terminate all of
its obligations under the Notes and the Indenture ("legal defeasance"), except
for certain obligations, including those with respect to the defeasance trust
and obligations to register the transfer or exchange of the Notes, to replace
mutilated, destroyed, lost or stolen Notes and to maintain a registrar and
paying agent in respect of the Notes. If the Company exercises its legal
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default with respect thereto. Subject to the conditions described
below, the Company at any time may terminate its obligations under the
covenants described under "Certain Covenants," "Change of Control," and "Asset
Sale," and the operation of the provisions described in clauses (v) and (vi)
under "Event of Default" ("covenant defeasance"). The Company may exercise its
legal defeasance option notwithstanding its prior exercise of its covenant
defeasance option.
In order to exercise either defeasance option, (i) the Company must
irrevocably deposit in trust (the "defeasance trust") with the Trustee, money,
U.S. Governmental Obligations, or a combination thereof sufficient to pay the
principal of, premium, if any, and interest on the Notes to redemption or
maturity, as the case may be, (ii) the Company delivers to the Trustee a
certificate from a nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and interest when due
and without reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in such
amounts as will be sufficient to pay principal and interest when due on all the
Notes to maturity or redemption, as the case may be; (iii) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that all
preference periods applicable to the defeasance trust have expired under any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (iv) such legal defeasance or covenant defeasance
shall not result in a breach or violation of or constitute a default under the
Indenture, or any other material agreement or instrument to which the Company
is a party or by which the Company is bound; (v) the Company delivers
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to the Trustee an opinion of counsel to the effect that the trust resulting
from the deposit does not constitute, or is qualified as, a regulated
investment company under the Investment Company Act of 1940, as amended; (vi)
the Company shall have delivered an opinion of counsel to the effect that the
holders of Notes shall have a perfected security interest under applicable law
in the U.S. Government Obligations so deposited; (vii) in the case of legal
defeasance, 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 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 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;
(viii) in the case of covenant defeasance, 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 Notes will not recognize income,
gain or losses 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
tenant defeasance had not occurred; and (ix) the Company shall have delivered
to the Trustee an officers' certificate and an opinion of counsel, each stating
that all conditions precedent provided for relating to either the legal
defeasance or the covenant defeasance, as the case may be, have been complied
with.
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 Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraphs, the Indenture or the
Notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for 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 of Notes) (i) reduce
the principal amount of Notes whose holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the
Notes, (iii) reduce the rate of or change the time for payment of interest on
any Note, (iv) waive a Default or Event of Default in the payment of principal
of or premium, 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 Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) 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 on the Notes or make any change in
the foregoing amendment and waiver provisions or (vii) waive a redemption
payment with respect to any Note.
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Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
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 any Guarantor's obligations to holders of the
Notes in the case of a merger or consolidation, 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, or to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received 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 Commission 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 (which shall not be cured), 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.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Showboat, Inc., 2800 Fremont Street, Las Vegas,
Nevada 89104, Attention: H. Gregory Nasky, Secretary.
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.
"Affiliate" of any specified person means any other individual, corporation,
partnership, trust, incorporated or unincorporated associated, joint venture,
joint stock company, government or other entity of any kind directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), 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 securities of a person
shall be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance, transfer or other
disposition (whether in a single transaction or a series of related
transactions) of property or assets (including by way of a sale and leaseback)
of the Company or any Restricted Subsidiary (each referred to in this
definition as a "disposition") or (ii) the issuance or sale of Equity Interests
of any Restricted Subsidiary (whether in a single transaction or a series of
related transactions) in each case, other than (a) a disposition of inventory
in the ordinary course of business, (b) the disposition of all or substantially
all of the assets of the Company in a manner permitted pursuant to
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the provisions described above under "Merger, Consolidation or Sale of Assets"
and "Change of Control," (c) any disposition that is a Restricted Payment or
that is a dividend or distribution permitted under the covenant described above
under "Restricted Payments" or any Investment that is not prohibited thereunder
or any disposition of cash or Cash Equivalents, and (d) any single disposition,
or related series of dispositions, of assets with an aggregate fair market
value of less than $3.0 million.
"Atlantic City Showboat" means (i) all of ACSI's interest in its hotel casino
and related properties located at 801 Boardwalk, Atlantic City, New Jersey and
any Project Expansion relating thereto and (ii) any contiguous property
acquired by the Company or any of its Subsidiaries and any Project Expansion
relating thereto.
"Australian Gaming Approval" means the official selection of SHCL (or a
subsidiary of SHCL) as the sole licensee or operator of a casino gaming
operation in Sydney, Australia.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including,
without limitation, partnership interests.
"Change of Control" means the occurrence of any of the following events: (i)
the sale, lease, transfer, conveyance or other disposition, 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; (ii) the liquidation or
dissolution of the Company; (iii) the Company becomes 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 Company's Existing Management, 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; or
(iv) 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 shareholders 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) cease for any reason to constitute a
majority of the Company's Board of Directors then in office.
"Consolidated Cash Flow" means, with respect to any person for any period,
the Consolidated Net Income of such person and its Restricted Subsidiaries for
such period plus (a) an amount equal to any extraordinary loss plus any net
loss realized in connection with an Asset Sale (to the extent such losses were
deducted in computing Consolidated Net Income), plus (b) provision for taxes
based on income or profits to the extent such provision for taxes was included
in computing Consolidated Net Income, plus (c) consolidated interest expense of
such person for such period, whether paid or accrued (including amortization of
original issue discount, non-cash interest payments, amortization of deferred
financing charges and the interest component of capital lease obligations), to
the extent such expense was deducted in computing Consolidated Net Income, plus
(d) depreciation, amortization (including amortization of goodwill and other
intangibles) and other non-cash charges (excluding any such non-cash charge
that requires an accrual of or reserve for cash charges for any future period
and excluding any such non-cash charge that is included in consolidated
interest expense or consolidated tax expense) of such person for such period to
the extent such depreciation, amortization and other non-cash charges were
deducted in computing Consolidated Net Income, in each case, on a consolidated
basis for such person and its Restricted Subsidiaries and determined in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any 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 (i) the Net Income 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
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dividends or distributions paid to the referent person or a wholly owned
Subsidiary, (ii) the Net Income of any person that is a Subsidiary (other than
a Subsidiary of which at least 80% of the Capital Stock having ordinary voting
power for the election of directors or other governing body of such Subsidiary
is owned by the referent person directly or indirectly through one or more
Subsidiaries) shall be included only to the extent of the amount of dividends
or distributions paid to the referent person, (iii) 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, and (iv) the cumulative effect
of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any person, the sum of (i)
the consolidated equity of the common stockholders of such person and its
consolidated Subsidiaries plus (ii) the respective amounts reported on such
person's most recent balance sheet with respect to any series of preferred
stock (other than Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid only out of
net earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such person upon issuance of such
preferred stock, less (x) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset owned by
such person or a consolidated Subsidiary of such person, (y) all investments in
unconsolidated Subsidiaries and in persons that are not Subsidiaries (except,
in each case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges, all of the foregoing determined in
accordance with GAAP.
"Controlled Entity" means: any of (a) SHCL, (b) any Non-Recourse Subsidiary
of the Issuer, including Showboat Star Partnership and Showboat Marina
Partnership, provided that the Issuer or a Subsidiary of the Issuer owns at
least 50% of the outstanding Capital Stock of such Non-Recourse Subsidiary, and
which is designated by the Issuer as a Controlled Entity or (c) any Qualified
Native American Gaming Project, including the Qualified Native American Gaming
Project to be managed by Showboat Mohawk Investment Limited Partnership,
provided that in each case: (i) each Subsidiary of the Issuer that owns,
directly or indirectly (through one or more Subsidiaries), any Capital Stock of
such Controlled Entity shall become a Guarantor of the Notes by executing a
Subsidiary Guarantee; and (ii) such Controlled Entity is a Managed Entity or a
Subsidiary of such Controlled Entity which is engaged in gaming activities is a
Managed Entity.
"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.
"Designated Senior Debt" means, with respect to any person, (i) the First
Mortgage Bonds and (ii) any other Senior Debt of such person permitted under
the Indenture the principal amount of which is $50 million or more.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), 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 ,
2005.
"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).
"Excess Non-Recourse Subsidiary Cash Proceeds" means 50% of all cash received
by the Company or any Restricted Subsidiary from any Non-Recourse Subsidiary
(other than cash that is or may be required to be returned or repaid to such
Non-Recourse Subsidiary) in excess of $125 million in the aggregate.
"Existing Hotel Casinos" means the Las Vegas Showboat and the Atlantic City
Showboat.
"Existing Indebtedness" means Indebtedness of the Company or its Restricted
Subsidiaries (other than under the Working Capital Credit Agreement) in
existence on the date of the Indenture, until such amounts are repaid,
including without limitation, the First Mortgage Bonds.
"Existing Management" means J. K. Houssels, members of his family and his
estate.
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"First Mortgage Bond Indenture" means the Indenture, dated as of May 18,
1993, among the Company, the Guarantors and IBJ Schroeder Bank & Trust Company,
as amended, pursuant to which the First Mortgage Bonds were issued.
"Fixed Charges" means, with respect to any person for any period, the sum of
(a) consolidated interest expense of such person and its Restricted
Subsidiaries for such period, whether paid or accrued, to the extent such
expense was deducted in computing Consolidated Net Income (including
amortization of original issue discount, non-cash interest payments and the
interest component of capital leases but excluding amortization of deferred
financing fees and excluding capitalized interest) and (b) the product of (i)
all cash dividend payments (and non-cash dividend payments in the case of a
person that is a Subsidiary) on any series of preferred stock of such person,
times (ii) 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, expressed as a decimal, in each case, on a
consolidated basis for such person and its Restricted Subsidiaries and in
accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any person for any
period, the ratio of the Consolidated Cash Flow of such person for such period
to the Fixed Charges of such person for such period; provided that (a) in the
event that the Company or any of its Restricted Subsidiaries incurs, assumes,
guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues preferred stock subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated but prior to the
event for which the calculation of the Fixed Charge Coverage Ratio is made,
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma
effect to such incurrence, assumption, guarantee or redemption of Indebtedness,
or such issuance or redemption of preferred stock, as if the same had occurred
at the beginning of the applicable period, (b) in making such computation, the
Fixed Charges of such person attributable to interest on any Indebtedness
bearing a floating interest rate shall be computed on a pro forma basis as if
the rate in effect on the date of computation had been the applicable rate for
the entire period, (c) in making such computation, the Fixed Charges of such
person attributable to interest on any Indebtedness under a revolving credit
facility shall be computed on a pro forma basis based upon the average daily
balance of such Indebtedness outstanding during the applicable period, (d) in
the event that the Company or any of its Restricted Subsidiaries consummates a
Material Acquisition or an Asset Sale subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated, then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such
material acquisition or Asset Sale (including the incurrence of any
Indebtedness in connection therewith), as if the same had occurred at the
beginning of the applicable period and in the event that the Company or any of
its Restricted Subsidiaries purchases any assets or property (including the
real property on which the Atlantic City Showboat is situated) which was
previously leased by the Company or any of its Restricted Subsidiaries
subsequent to the commencement of the period for which the calculation of the
Fixed Charge Coverage Ratio is being calculated but prior to the event for
which the calculation of the Fixed Charge Coverage Ratio is made, then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such
purchase as if the same had occurred at the beginning of the applicable period.
"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 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 federal or 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 Nevada
Commission, the Nevada State Gaming Control Board, the City Council of the City
of Las Vegas, and the New Jersey Commission with
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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 or arising out of the gaming
business (including developing and operating lodging facilities, sports or
entertainment facilities, transportation services or other related activities
or enterprises and any additions or improvements thereto).
"Guarantors" means each of (i) SBOC, OSI and ACSI and (ii) any other
Subsidiary that executes a Subsidiary Guarantee in accordance with the
provisions of the Indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any person, the obligations of
such person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such person against fluctuations in interest
rates.
"Indebtedness" of any person means, without duplication, (i) the principal of
and premium (if any) in respect of (A) indebtedness of such person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such person is responsible or
liable; (ii) all capitalized lease obligations of such person; (iii) all
obligations of such person issued or assumed as the deferred purchase price of
property, all conditional sale obligations of such person and all obligations
of such person under any title retention agreement (but excluding trade
accounts payable arising in the ordinary course of business); (iv) all
obligations of such person for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (iii) above) entered into in the
ordinary course of business of such person to the extent such letters of credit
are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third business day following receipt by such
person of a demand for reimbursement following payment on the letter of
credit); (v) the amount of all obligations of such person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock (but
excluding any accrued distributions or dividends); (vi) all obligations
existing at the time under Hedging Obligations, foreign currency hedges and
similar agreements; (vii) all obligations of the type referred to in clauses
(i) through (vi) of other persons and all dividends and distributions of other
persons for the payment of which, in either case, such person is responsible or
liable as obligor, guarantor or otherwise; and (viii) all obligations of the
type referred to in clauses (i) through (vi) of other persons secured by any
Lien on any property or asset of such person (whether or not such obligation is
assumed by such person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of the obligation
so secured.
"Investment Grade Securities" means (i) Marketable Securities, (ii) any other
debt securities or debt instruments with a rating of "BBB-" (the lowest
investment grade rating by S&P) or higher by S&P, "Baa-3" (the lowest
investment grade rating by Moody's) or higher by Moody's or the equivalent of
such rating by any other nationally recognized securities rating agency, and
(iii) any fund investing exclusively in investments of the types described in
clauses (i) and (ii) above.
"Investment Guarantee" means, with respect to any person, any direct or
indirect liability, contingent or otherwise, of such person with respect to any
Indebtedness of another person, including, without limitation, any Indebtedness
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business) or discounted or sold with recourse
by such person, or in respect of which such person is otherwise directly or
indirectly liable, or any other obligation under which any contract which, in
economic effect, is substantially equivalent to a guarantee, including, without
limitation, any Indebtedness of a partnership in which such person is a general
partner or of a joint venture in which such person is a joint venturer, and any
Indebtedness in effect guaranteed by such person through any agreement
(contingent or otherwise) to purchase, repurchase or otherwise acquire such
Indebtedness or any security therefor, or to
55
<PAGE>
provide funds for the payment or discharge of such Indebtedness (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain the solvency or any balance sheet or other financial condition
of the obligor of such Indebtedness, or to make payment for any products,
materials or supplies or for any transportation or services regardless of the
non-delivery or nonfurnishing thereof, in any such case if the purpose or
intent of such agreement is to provide assurance that such Indebtedness will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such Indebtedness will be protected against loss
in respect thereof.
"Investments" means, with respect to any person, all investments by such
person in other persons (including Affiliates) in the forms of loans,
Investment Guarantees, 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 and all other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"Issue Date" means , 1994, the date on which the Notes are first
authenticated and issued.
"Las Vegas Showboat" means (i) the Company's hotel casino and related
properties at 2800 Fremont Street, Las Vegas, Nevada and any Project Expansion
relating thereto and (ii) any contiguous property acquired by the Company or
any of its Subsidiaries and any Project Expansion relating thereto.
"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).
"Managed Entity" mean either (i) any Person that is not under Third-Party
Management, so long as such Person is not under Third-Party Management or (ii)
a Person that the Company or any Subsidiary has a contract to manage the day-
to-day gaming operations and affairs, so long as such contract remains in
effect.
"Management Contract Approval" means, with respect to the Sydney Harbour
Casino, a binding agreement with SHCH that provides that the Company or a
Person at least 80% of whose equity interest are owned by the Company or a
wholly-owned Subsidiary (other than a Non-Recourse Subsidiary) will manage the
gaming operations of the Sydney Harbour Casino for a period of not less than 12
years.
"Marketable Securities" means (1) U.S. Government Obligations; (2) any
certificate of deposit, maturing not more than 270 days after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
that has combined capital and surplus of not less than $100,000,000 or its
equivalent in foreign currency, whose debt is rated at the time as of which any
investment is made, of "A" (or higher) according to S&P or Moody's, or if none
of S&P or Moody's shall then exist, the equivalent of such rating by any other
nationally recognized securities rating agency; (3) commercial paper, maturing
not more than 270 days after the date of acquisition, issued by a corporation
(other than an Affiliate or Subsidiary of the Company) with a rating, at the
time as of which any investment therein is made, of "A-1" (indicating that the
degree of timely payment is strong) (or higher) according to S&P or "P-1"
(having a superior capacity for punctual repayment of short-term promissory
obligations) (or higher) according to Moody's, or if neither of S&P and Moody's
shall then exist, the equivalent of such rating by any other nationally
recognized securities ratings agency; (4) any bankers acceptances or any money
market deposit accounts, in each case, issued or offered by any commercial bank
having capital and surplus in excess of $100,000,000 or its equivalent in
foreign currency, whose debt is rated at the time as of which any investment
there is made of "A" (an upper medium grade bond obligation) (or higher)
according to S&P or Moody's, or if none of S&P or Moody's shall then exist, the
equivalent of such rating by any other nationally recognized securities rating
agency and (5) any
56
<PAGE>
fund investing exclusively in investments of the types described in clauses (1)
through (4) above, and if such fund has at least $500,000,000 under management,
including investments in repurchase obligations of the foregoing investments.
"Material Acquisition" means any acquisition of a business, including the
acquisition of operating commercial real estate, that has a fair market value
in excess of $3.0 million and which the Company intends to continue to operate.
"Net Income" means, with respect to any person, the net income (loss) of such
person, determined in accordance with GAAP, excluding, however, (i) any gain
(but not loss), together with any related provision for taxes on such gain (but
not loss), realized in connection with any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) and (ii)
any extraordinary gain (but not loss), together with any related provision for
taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including
insurance proceeds), 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 (after taking into account
any available tax credits or deductions and any tax sharing arrangements),
amounts required to be applied to the repayment of Indebtedness secured by a
Lien on the asset or assets which are the subject of such Asset Sale and any
reserve for adjustment in respect of the sale price of such asset or assets.
"Non-Recourse Debt" means Indebtedness or that portion of Indebtedness (a) as
to which none of the Company, the Guarantors and any of their respective
Restricted Subsidiaries: (i) provides credit support (including any
undertaking, agreement or instrument which would constitute Indebtedness); (ii)
is directly or indirectly liable; and (iii) constitutes the lender; and (b) no
default with respect to which (including any rights which the holders thereof
may have to take enforcement action against a Non-Recourse Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company, the Guarantors or any of their respective
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.
"Non-Recourse Subsidiary" means any Non-Recourse Subsidiary under the First
Mortgage Bonds on the Issue Date and (i) a Subsidiary or (ii) any entity in
which the Company or any of its Subsidiaries has an equity investment and
pursuant to a contract or otherwise has the right to direct the day-to-day
operation of such entity that, in the case of (i) or (ii), (a) at the time of
its designation as a Non-Recourse Subsidiary has not acquired any assets (other
than as specifically permitted by the "Restricted Payments" covenant), at any
previous time, directly or indirectly from the Company, any of the Guarantors,
or any of their respective Subsidiaries, (b) does not own, operate or manage
any portion of any Existing Hotel Casino on the Issue Date, and (c) has no
Indebtedness other than Non-Recourse Debt provided that at the time of such
designation, after giving pro forma effect to such designation as if it
occurred at the beginning of the applicable four-quarter period, the Company's
Fixed Charge Coverage Ratio is not less than 70% of the Company's Fixed Charge
Coverage Ratio immediately prior to such designation.
"Obligations" means any principal, premium, interest (including post-petition
interest), penalties, fees, indemnifications, reimbursements, damages and other
monetary liabilities payable under the documentation governing any
Indebtedness.
"Pari Passu Indebtedness" means senior subordinated Indebtedness of the
Company or its Restricted Subsidiaries permitted by the Covenant entitled
"Incurrence of Indebtedness," other than the Notes which is pari passu in right
of payment with the Notes or the Subsidiary Guarantees.
57
<PAGE>
"Permitted Investments" means (a) any Investments in the Company, in a wholly
owned Restricted Subsidiary of the Company or in a Guarantor; (b) any
Investments in Marketable Securities; and (c) Investments by the Company or any
Subsidiary of the Company in a person, if as a result of such Investment (i)
such person becomes a wholly owned Restricted Subsidiary of the Company or a
Guarantor or (ii) 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 wholly owned Subsidiary of the Company (other
than a Non-Recourse Subsidiary).
"Permitted Liens" means (a) Liens in favor of the Company; (b) Liens on
property of a person existing at the time such person is merged into or
consolidated with the Company or any Subsidiary of the Company; provided, that
such Liens were in existence prior to the contemplation of such merger or
consolidation and less than one year prior to such person becoming merged into
or consolidated with the Company or any of its Subsidiaries; (c) Liens on
property existing at the time of acquisition thereof by the Company or any
Subsidiary of the Company; provided, that such Liens were in existence prior to
the contemplation of such acquisition and less than one year prior to such
acquisition; (d) 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; (e) 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; (f)
ground leases in respect of the real property on which facilities owned or
leased by the Company or any of its Subsidiaries are located; (g) Liens arising
from UCC financing statements regarding property leased by the Company or any
of its Subsidiaries; (h) easements, rights-of-way, navigational servitudes,
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 Subsidiaries; (i) Liens
securing purchase money obligations incurred or assumed in connection with the
purchase of real or personal property to be used in the business of the Company
or any of its Subsidiaries (other than a Non-Restricted Subsidiary) within 180
days of such incurrence or assumption and (j) Liens on the real property
underlying the Atlantic City Showboat securing the Resorts Bonds provided that
the obligations under the Resorts Bonds can be assumed under the "Incurrence of
Indebtedness" covenant at the time the real property is acquired by the Company
or any of its Subsidiaries.
"Project Expansion" means any addition, improvement, extension or capital
repair to the Las Vegas Showboat or the Atlantic City Showboat or any
contiguous or adjacent property, including the purchases of real estate or
improvements thereon; but excluding separable furniture.
"Qualified Native American Gaming Project" means any Gaming Related Business
in the United States owned by a tribe or band of Native Americans in which the
Issuer or a Subsidiary holds a management contract to manage or operate the
day-to-day casino or gaming operations.
"Regular Quarterly Dividend" means the quarterly dividend determined by the
Board of Directors of the Company in its reasonable judgment to be its regular
and normal quarterly dividend and paid by the Company in accordance with the
Company's prior business practices in an amount per share not to exceed $0.10
per fiscal year (or the equivalent thereof after giving effect to any stock
splits, stock dividends or recapitalizations of the Common Stock after June 17,
1994).
"Resorts Bonds" means the First Mortgage Non-Recourse Pass-Through Notes due
June 30, 2000 of Resorts.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company that is not a
Non-Recourse Subsidiary.
"SHCL" means Sydney Harbour Casino Holdings Limited, a New South Wales
corporation.
"Senior Debt" means (a) with respect to the Company, (i) the Obligations of
the Company with respect to the Working Capital Credit Agreement and First
Mortgage Bonds and (ii) any other Indebtedness permitted to be incurred by the
Company under the terms of the Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is pari passu with or
subordinated in right of payment to the Notes, and (b) with respect to any
Guarantor, (i) the Obligations of such Guarantor with
58
<PAGE>
respect to the Working Capital Credit Agreement and First Mortgage Bonds, (ii)
any Guarantee by such Guarantor of any Senior Debt of the Company and (iii) any
other Indebtedness permitted to be incurred by such Guarantor under the terms
of the Indenture, unless the instrument under which such Indebtedness is
incurred expressly provides that it is pari passu with or subordinated in right
of payment to the Subsidiary Guarantee of such Guarantor. Notwithstanding
anything to the contrary in the foregoing, Senior Debt shall not include (v)
any obligation of the Company or any Guarantor to, in respect of or imposed by
any environmental, landfill, waste management or other regulatory or
governmental agency, statute, law or court order, (w) any liability for
federal, state, local or other taxes owed or owing by the Company or any
Guarantor, (x) any Indebtedness of the Company or any Guarantor to any of the
Company's Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of the Indenture on or after the
date of the Indenture.
"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 Act, as such Regulation is in effect on the date hereof.
"Subsidiary" means (i) 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 any person or one or more of the other
Subsidiaries of that person or a combination thereof and (ii) any Non-Recourse
Subsidiary.
"Sydney Harbour Casino" means all of SHCL's interest in its proposed casino
and related properties located in Sydney, Australia.
"Tax Sharing Agreement" means the Tax Sharing Agreement, substantially in the
form attached as an exhibit to the Indenture, as amended, supplemented or
modified from time to time as permitted by the Indenture.
"Third-Party Management" with respect to any Person means that the day-to-day
affairs or business operations of such Person are managed by a third party that
is not the Company or any of its Subsidiaries (other than a Non-Recourse
Subsidiary).
"U.S. Government Obligations" 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
shall also include 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 U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation 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 U.S. Government Obligation or the
specific payment of principal of or interest on the U.S. Government Obligation
evidenced by such depository receipt.
"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 (x) 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 (y) 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.
59
<PAGE>
"Working Capital Credit Agreement" means that certain Credit Agreement, dated
as of September 30, 1992, by and among ACSI and National Westminster Bank,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company, the Guarantors and Donaldson,
Lufkin & Jenrette Securities Corporation (the "Underwriter"), the Company has
agreed to issue and sell to the Underwriter, and the Underwriter has agreed to
purchase from the Company, $150 million aggregate principal amount of the
Notes.
The Underwriting Agreement provides that the obligation of the Underwriter to
purchase the Notes is subject to the approval of certain legal matters by
counsel and to certain other conditions. If any of the Notes are purchased by
the Underwriter pursuant to the Underwriting Agreement, all such Notes must be
so purchased.
The Underwriter has advised the Company that it proposes to offer the Notes
to the public initially at the price to the public set forth on the cover page
of this Prospectus and to certain dealers at such offering price less a
concession not to exceed % of the principal amount of the Notes. The
Underwriter may allow and such dealers may reallow discounts not in excess of
% of such principal amount to certain other dealers. After the initial public
offering, the public offering price and such concessions may be changed.
There is currently no public market for the Notes and the Company does not
intend to list the Notes on any national securities exchange. The Underwriter
has indicated that it intends to make a market in the Notes, subject to
applicable laws and regulations. However, the Underwriter is not obligated to
do so and any such market-making may be discontinued at any time at the
Underwriter's sole discretion. No assurance can be given as to the development
of liquidity of, or any trading market for, the Notes. See "Certain
Considerations--Market for the Notes."
The Company and the Guarantors have agreed to indemnify the Underwriter
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments that the Underwriter may be required to make in
respect thereof.
The Underwriter will also be a managing underwriter in connection with the
Common Stock Offering. In addition, the Underwriter is acting as financial
advisor to the Company in connection with a pending consent solicitation
relating to the First Mortgage Bonds, for which it will receive customary fees.
An affiliate of the Underwriter has provided a standby bridge loan commitment
to the Company relating to the Company's investment in SHCL, for which it
received customary fees.
LEGAL MATTERS
Certain legal matters with regard to the validity of the Notes will be passed
upon for the Company by Kummer Kaempfer Bonner & Renshaw, Las Vegas, Nevada. H.
Gregory Nasky, of counsel to the law firm of Kummer Kaempfer Bonner & Renshaw,
is a Director and the Secretary of the Company. Latham & Watkins, New York, New
York, is acting as counsel for the Underwriter in connection with certain legal
matters relating to the Notes. From time to time Latham & Watkins has
represented certain subsidiaries of the Company on matters not related to the
Note Offering or the Common Stock Offering.
EXPERTS
The consolidated financial statements and schedules of Showboat, Inc. and its
subsidiaries as of December 31, 1993 and 1992, and for each of the years in the
three-year period ended December 31, 1993, included and incorporated by
reference herein and elsewhere in the Registration Statement, have been
included and incorporated by reference herein and elsewhere in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick, independent
certified public accountants, included and incorporated by reference herein and
elsewhere in the Registration Statement, and upon the authority of said firm as
experts in accounting and auditing.
60
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets at December 31, 1993 and 1992 and March 31,
1994 (unaudited)........................................................ F-3
Consolidated Statements of Income for the Years Ended December 31, 1993,
1992 and 1991 and Three Months Ended March 31, 1994 and 1993 (unau-
dited).................................................................. F-4
Consolidated Statements of Stockholders' Equity for the Years Ended De-
cember 31, 1993, 1992 and 1991 and the Three Months Ended March 31, 1994
(unaudited)............................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1992 and 1991 and the Three Months Ended March 31, 1994 (unau-
dited).................................................................. F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors Showboat, Inc.:
We have audited the accompanying consolidated balance sheets of Showboat,
Inc. and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1993. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Showboat,
Inc. and subsidiaries as of December 31, 1993 and 1992, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1993, in conformity with generally accepted
accounting principles.
As discussed in Notes 1 and 8 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
KPMG Peat Marwick
Las Vegas, Nevada February 18, 1994, except for Note 1 paragraph 3 and Note 12
paragraph 2 which are as of March 1, 1994
F-2
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1993 1992 1994
-------- -------- -----------
(UNAUDITED)
(IN THOUSANDS)
ASSETS
------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents..................... $122,787 $ 99,601 $107,458
Receivables, net.............................. 5,913 5,092 6,086
Income taxes receivable....................... -- -- 435
Inventories................................... 2,359 2,411 2,213
Prepaid expenses.............................. 4,044 3,969 4,114
Current deferred income taxes................. 4,865 3,483 5,847
-------- -------- --------
Total current assets........................ 139,968 114,556 126,153
-------- -------- --------
Property and equipment:
Land.......................................... 9,425 3,609 9,425
Land improvements............................. 541 841 541
Buildings..................................... 261,009 246,090 261,398
Furniture and equipment....................... 145,178 122,573 146,079
Construction in progress...................... 27,194 7,253 45,274
-------- -------- --------
443,347 380,366 462,717
Less accumulated depreciation and
amortization................................. 145,527 129,183 150,795
-------- -------- --------
297,820 251,183 311,922
-------- -------- --------
Other assets, at cost:
Deposits and other assets..................... 7,892 16,074 8,167
Investment in unconsolidated affiliate........ 17,750 -- 29,090
Debt issuance costs, net of accumulated
amortization of $323,000 at December 31,
1993, $3,131,000 at December 31, 1992 and
$450,000 at March 31, 1994................... 7,270 3,087 7,143
-------- -------- --------
32,912 19,161 44,400
-------- -------- --------
$470,700 $384,900 $482,475
======== ======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Current maturities of long-term debt.......... $ 3,574 $ 54,055 $ 2,549
Accounts payable.............................. 14,173 10,096 16,497
Income taxes payable.......................... 1,752 1,453 --
Dividends payable............................. 375 284 375
Accrued liabilities........................... 23,664 25,167 30,787
-------- -------- --------
Total current liabilities................... 43,538 91,055 50,208
-------- -------- --------
Long-term debt................................. 277,043 155,061 277,021
-------- -------- --------
Deferred income taxes.......................... 14,961 12,766 16,685
-------- -------- --------
Commitments and contingencies (Note 12)
Shareholders' equity (Note 14):
Common stock, $1 par value; 20,000,000 shares
authorized; issued 15,794,578 shares at
December 31, 1993, 1992 and March 31, 1994... 15,795 15,795 15,795
Additional paid-in capital.................... 71,162 69,374 71,437
Retained earnings............................. 54,628 48,778 57,693
-------- -------- --------
141,585 133,947 144,925
Less: Cost of common stock in treasury, 814,483
shares and 991,043 shares at December 31, 1993
and 1992, respectively; and 809,383 shares at
March 31, 1994................................ (6,370) (7,761) (6,328)
Unearned compensation for restricted stock.. (57) (168) (36)
-------- -------- --------
Total shareholders' equity.................. 135,158 126,018 138,561
-------- -------- --------
$470,700 $384,900 $482,475
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------------- ------------------------------
1993 1992 1991 1994 1993
-------- -------- -------- ------------- -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Casino................. $329,522 $313,247 $288,442 $ 76,897 $ 75,272
Food and beverage...... 48,669 44,511 46,802 11,202 10,972
Rooms.................. 19,355 17,280 15,612 4,225 3,834
Sports and special
events................ 4,251 4,443 4,506 1,106 1,159
Management Fees........ -- -- -- 948 --
Other.................. 5,982 4,932 4,791 1,398 1,345
-------- -------- -------- ------------- -------------
407,779 384,413 360,153 95,776 92,582
Less complimentaries... 32,052 29,177 28,593 6,997 7,086
-------- -------- -------- ------------- -------------
Net revenues........... 375,727 355,236 331,560 88,779 85,496
-------- -------- -------- ------------- -------------
Costs and expenses:
Casino................. 129,898 125,773 115,468 31,005 31,906
Food and beverage...... 55,608 51,173 51,388 13,567 12,689
Rooms.................. 13,083 12,169 11,282 3,253 3,049
Sports and special
events................ 3,198 3,141 3,140 878 869
General and
administrative........ 92,739 84,058 78,022 23,333 21,898
Selling, advertising
and promotion......... 11,629 10,402 11,067 2,534 2,260
Depreciation and
amortization.......... 23,303 22,012 25,692 6,361 5,140
-------- -------- -------- ------------- -------------
329,458 308,728 296,059 80,931 77,811
-------- -------- -------- ------------- -------------
Income from operations
of consolidated
subsidiaries........... 46,269 46,508 35,501 7,848 7,685
Equity in income (loss)
of unconsolidated
affiliate.............. (850) -- -- 3,240 --
-------- -------- -------- ------------- -------------
Income from operations.. 45,419 46,508 35,501 11,088 7,685
-------- -------- -------- ------------- -------------
Other (income) expense:
Interest income........ (3,215) (1,441) (2,098) (803) (401)
Interest expense, net
of amounts
capitalized........... 24,696 25,335 27,497 6,202 4,900
-------- -------- -------- ------------- -------------
21,481 23,894 25,399 5,399 4,499
-------- -------- -------- ------------- -------------
Income before income tax
expense, extraordinary
items and cumulative
effect adjustment...... 23,938 22,614 10,102 5,689 3,186
Income tax expense...... 10,474 6,757 4,088 2,249 1,265
-------- -------- -------- ------------- -------------
Income before
extraordinary items and
cumulative effect
adjustment............. 13,464 15,857 6,014 3,440 1,921
Extraordinary items, net
of income tax.......... (6,679) (3,408) 180 -- --
Cumulative effect of
change in method of
accounting for income
taxes.................. 556 -- -- -- 556
-------- -------- -------- ------------- -------------
Net income.............. $ 7,341 $ 12,449 $ 6,194 $ 3,440 $ 2,477
======== ======== ======== ============= =============
Income per common and
equivalent share:
Income before
extraordinary items
and cumulative effect
adjustment............ $ .89 $ 1.37 $ .53 $ .23 $ .13
Extraordinary items,
net of income tax..... (.44) (.29) .02 -- --
Cumulative effect of
change in method of
accounting for income
taxes................. .04 -- -- -- .03
-------- -------- -------- ------------- -------------
Net income............. $ .49 $ 1.08 $ .55 $ .23 $ .16
======== ======== ======== ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL LESS LESS
COMMON PAID-IN RETAINED TREASURY UNEARNED
STOCK CAPITAL EARNINGS STOCK COMPENSATION TOTAL
------- ---------- -------- -------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1990................... $12,345 $22,416 $32,405 $(7,765) $(553) $ 58,848
Net income.............. -- -- 6,194 -- -- 6,194
Cash dividends ($.10 per
share)................. -- -- (1,135) -- -- (1,135)
Share transactions under
stock plans............ -- 27 -- (19) 15 23
Amortization of unearned
compensation........... -- -- -- -- 203 203
------- ------- ------- ------- ----- --------
Balance, December 31,
1991................... 12,345 22,443 37,464 (7,784) (335) 64,133
Net income.............. -- -- 12,449 -- -- 12,449
Cash dividends ($.10 per
share)................. -- -- (1,135) -- -- (1,135)
Issuance of 3,450,000
shares of common stock. 3,450 46,916 -- -- -- 50,366
Share transactions under
stock plans............ -- 15 -- 23 11 49
Amortization of unearned
compensation........... -- -- -- -- 156 156
------- ------- ------- ------- ----- --------
Balance, December 31,
1992................... 15,795 69,374 48,778 (7,761) (168) 126,018
Net income.............. -- -- 7,341 -- -- 7,341
Cash dividends ($.10 per
share)................. -- -- (1,491) -- -- (1,491)
Share transactions under
stock plans............ -- 1,788 -- 1,391 -- 3,179
Amortization of unearned
compensation........... -- -- -- -- 111 111
------- ------- ------- ------- ----- --------
Balance, December 31,
1993................... $15,795 $71,162 $54,628 $(6,370) $ (57) $135,158
======= ======= ======= ======= ===== ========
(Balances from January
1, 1994 to
March 31, 1994 are
unaudited).............
Net income.............. -- -- 3,440 -- -- 3,440
Cash dividends ($.025
per share)............. -- -- (375) -- -- (375)
Share transactions under
stock plans............ -- 275 -- 42 9 326
Amortization of unearned
compensation........... -- -- -- -- 12 12
------- ------- ------- ------- ----- --------
Balance, March 31, 1994. $15,795 $71,437 $57,693 $(6,328) $ (36) $138,561
======= ======= ======= ======= ===== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------------- -----------------------
1993 1992 1991 1994 1993
-------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income................ $ 7,341 $12,449 $ 6,194 $ 3,440 $ 2,477
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Allowance for doubtful
accounts................. 1,849 1,644 2,924 58 513
Depreciation and
amortization............. 23,303 22,012 25,692 6,361 5,140
Amortization of original
issue discount and debt
issuance costs........... 744 1,011 811 127 134
Provision for deferred
income taxes............. 813 238 1,230 742 141
Amortization of unearned
compensation............. 111 156 203 12 30
Provision for loss on
Casino Reinvestment
Development Authority
obligation............... 1,122 1,068 1,057 255 249
Equity in (income) loss of
unconsolidated affiliate. 850 -- -- (3,240) --
Extraordinary (gain) loss
on extinguishment of
debt..................... 11,166 5,164 (273) -- --
Loss on disposition of
property and equipment... 517 264 350 -- --
(Increase) decrease in
receivables, net......... (2,670) (1,537) (899) (231) 43
(Increase) decrease in
inventories and prepaid
expenses................. (23) (265) 599 76 (339)
(Increase) decrease in
deposits and other
assets................... (554) 284 (448) 235 52
Increase (decrease) in
accounts payable......... 85 395 (826) 1,556 1,236
Increase (decrease) in
income taxes payable..... 968 429 2 (1,996) (1,531)
Increase (decrease) in
accrued liabilities...... (1,503) 400 1,007 7,123 (5,038)
Other..................... (66) 346
-------- ------- ------- -------- -------
Net cash provided by
operating activities.... 44,119 43,712 37,623 14,452 3,453
-------- ------- ------- -------- -------
Cash flows from investing
activities:
Acquisition of property
and equipment............ (59,686) (21,050) (13,381) (19,693) (17,286)
Proceeds from sale of
property and equipment... 78 105 311 47 29
Investment in
unconsolidated affiliate. (18,600) -- -- (9,000) --
(Increase) decrease in
deposits and other
assets................... 4,046 910 (1,097) -- (67)
Deposit for Casino
Reinvestment Development
Authority obligation..... (3,289) (3,161) (2,892) (792) (717)
Distribution of earnings
of unconsolidated
affiliate................ -- -- -- 900 --
-------- ------- ------- -------- -------
Net cash used in
investing activities.... (77,451) (23,196) (17,059) (28,538) (18,041)
-------- ------- ------- -------- -------
Cash flows from financing
activities:
Principal payments of
long-term debt and
capital lease
obligations.............. (3,914) (8,879) (7,635) (1,047) (51,080)
Proceeds from issuance of
long-term debt........... 275,000 -- 1,098 -- --
Proceeds from note
payable.................. -- -- -- -- 1,100
Early extinguishment of
debt..................... (208,085) -- (11,696) -- --
Debt issuance costs....... (7,593) -- (74) -- --
Payment of dividends...... (1,400) (1,141) (1,140) (375) (284)
Issuance of common stock.. 2,510 50,366 -- 179 18
Other..................... -- 49 23 -- --
-------- ------- ------- -------- -------
Net cash provided by
(used in) financing
activities.............. 56,518 40,395 (19,424) (1,243) (50,246)
-------- ------- ------- -------- -------
Net increase (decrease) in
cash and cash equivalents. 23,186 60,911 1,140 (15,329) (64,834)
Cash and cash equivalents
at beginning of period.... 99,601 38,690 37,550 122,787 99,601
-------- ------- ------- -------- -------
Cash and cash equivalents
at end of period.......... $122,787 $99,601 $38,690 $107,458 $34,767
======== ======= ======= ======== =======
Supplemental disclosures of
cash flow information:
Cash paid during the
period for:
Interest, net of amount
capitalized.............. $ 25,741 $24,562 $26,937 $ 164 $10,275
Income taxes.............. 3,650 4,400 2,948 3,503 2,100
Supplemental schedule of
non-cash investing and
financing activities:
Capital lease obligations
incurred in connection
with acquisition of
equipment................ -- 152 131 -- --
Increase (decrease) in
property and equipment
acquisitions included in
construction contracts
and retentions payable
and long-term debt....... 3,914 1,890 (309) 795 483
Share transactions under
long-term incentive plan. -- 27 35 -- --
Transfer deposits for
Casino Reinvestment
Development Authority
obligation to
construction in progress. 6,667 -- -- -- --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION
Showboat, Inc. and subsidiaries, collectively the Company, conduct casino
gaming operations in Las Vegas, Nevada, Atlantic City, New Jersey and New
Orleans, Louisiana. In addition, the Company operates support services
including hotel, restaurant, bar, bowling and convention facilities.
The Consolidated Financial Statements for the three months ended March 31,
1993 and 1994 and related amounts in the Notes to the consolidated financial
statements are unaudited, but in the opinion of management reflect all normal
and recurring adjustments necessary for a fair representation of the results of
those periods.
The consolidated financial statements include the accounts of Showboat, Inc.
(SBO) and its wholly-owned subsidiaries which are Showboat Development Company
(SDC), Showboat Operating Company (SBOC) and Ocean Showboat, Inc. (OSI). They
also include SDC's wholly-owned subsidiaries, Lake Pontchartrain Showboat, Inc.
(LPSI) and Showboat Louisiana, Inc. (SBL), and OSI's wholly-owned subsidiaries
Atlantic City Showboat, Inc. (ACSI) and Ocean Showboat Finance Corporation
(OSFC). Showboat, Inc. and its subsidiaries own and operate hotel casinos in
Las Vegas, Nevada (Las Vegas Showboat) and Atlantic City, New Jersey (Atlantic
City Showboat) and own an equity interest in and manage a riverboat casino on
Lake Pontchartrain in New Orleans, Louisiana (Showboat Star Casino). All
material intercompany balances and transactions have been eliminated in
consolidation.
On March 1, 1994, the Company purchased an additional 20% equity interest
from its partner for $9 million, increasing its interest in Showboat Star
Partnership to 50%. The Company's equity in the income or loss of Showboat Star
Partnership is included in the Consolidated Statements of Income. LPSI receives
a management fee from Showboat Star Partnership of 5.0% of casino revenues net
of gaming taxes of 18.5% and boarding fees of $5.00 per person. Management fees
are included in other revenues in the Consolidated Statements of Income.
CASINO REVENUE AND COMPLIMENTARIES
In accordance with common industry practice, casino revenues are the net of
gaming wins less losses.
Complimentaries primarily consist of rooms, food and beverage furnished
gratuitously to customers. The sales values of such services are included in
the respective revenue classifications and are then deducted as
complimentaries. Complimentary rates are periodically reviewed and adjusted by
management.
CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
FAIR VALUE OF CERTAIN FINANCIAL INSTRUMENTS
The carrying amount of cash equivalents, accounts receivable and all current
liabilities approximates fair value because of the short maturity of these
instruments. See Notes 4 and 11 for additional fair value disclosures.
F-7
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation, including
amortization of capitalized leases, is computed using the straight-line method.
The cost of maintenance and repairs is charged to expense as incurred;
significant renewals and betterments are capitalized.
Estimated useful lives for property and equipment are 5 to 15 years for land
improvements, 10 to 40 years for buildings and 2 to 10 years for furniture and
equipment.
INTEREST COSTS
Interest is capitalized in connection with the construction of major
facilities. The capitalized interest is recorded as part of the asset to which
it relates and is amortized over the asset's estimated useful life. For the
year ended December 31, 1993, $1,085,000 of interest cost was capitalized. No
interest was capitalized in the years ended December 31, 1992 and 1991. For the
three-month periods ended March 31, 1994 and 1993, interest costs of $449,000
and $189,000, respectively, were capitalized (unaudited).
INCOME TAXES
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (FAS 109). Under the asset and liability method of FAS 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under FAS 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the period
that includes the enactment date.
Effective January 1, 1993, the Company adopted FAS 109 and has reported the
cumulative effect of that change in accounting method in the 1993 Consolidated
Statement of Income.
The Company previously used the asset and liability method under Statement of
Financial Accounting Standards No. 96 (FAS 96). Under the asset and liability
method of FAS 96, deferred tax assets and liabilities were recognized for all
the events that had been recognized in the financial statements. Under FAS 96,
the future tax consequences of recovering assets or settling liabilities at
their financial statement carrying amounts were considered in calculating
deferred income taxes. Generally, FAS 96 prohibited consideration of any other
future events in calculating deferred income taxes.
The Company and its subsidiaries file a consolidated federal income tax
return. For tax reporting purposes, the Company has elected to continue its
fiscal year ending June 30.
POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS
The Company does not currently provide any significant postemployment or
postretirement benefits.
AMORTIZATION OF ORIGINAL ISSUE DISCOUNT AND DEBT ISSUANCE COSTS
Original issue discount is amortized over the life of the related
indebtedness using the effective interest method.
Costs associated with the issuance of debt have been deferred and are being
amortized over the life of the related indebtedness using a weighted average
method based on retirement schedules specified in the debt indentures.
F-8
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
INCOME PER COMMON AND EQUIVALENT SHARE
Income per common and equivalent share is based on the weighted average
number of shares outstanding. Such averages were 15,099,147, 11,584,275 and
11,410,208 for the years ended December 31, 1993, 1992 and 1991, respectively
and 15,180,008 and 15,141,493 for the three-months ended March 31, 1994 and
1993, respectively (unaudited). Fully-diluted and primary income per common and
equivalent share are the same.
PREOPENING AND DEVELOPMENT COSTS
The Company is currently investigating expansion opportunities in new gaming
jurisdictions. Costs associated with these investigations are expensed as
incurred until such time as a particular opportunity is determined to be
viable, generally when the Company is selected as the operator of a new gaming
facility or a gaming license has been granted.
Costs incurred during the construction and preopening phase are capitalized.
Types of costs capitalized include professional fees, salaries and wages,
temporary office expenses, marketing expenses and training costs. When the new
operation opens for business, preopening costs will be amortized over a period
not to exceed 12 months using the straight-line method.
Costs associated with the preopening of the Showboat Star Casino on Lake
Pontchartrain in New Orleans, Louisiana were written-off upon commencement of
operations on November 8, 1993 and totaled $4,246,000. The Company's share of
those costs of $1,274,000 are included in equity in loss of unconsolidated
affiliate in the December 31, 1993 Consolidated Statement of Income.
RECLASSIFICATIONS
Certain prior period balances have been reclassified to conform to the
current year's presentation.
2. RECEIVABLES
Receivables consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------- 1994
1993 1992 (UNAUDITED)
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Casino.............................................. $ 6,816 $ 6,964 $6,621
Hotel............................................... 1,020 715 772
Employees........................................... 88 86 80
Other............................................... 935 406 1,248
------- ------- ------
8,859 8,171 8,721
Less allowance for doubtful accounts................ 2,946 3,079 2,635
------- ------- ------
Receivables, net.................................... $ 5,913 $ 5,092 $6,086
======= ======= ======
</TABLE>
F-9
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------- 1994
1993 1992 (UNAUDITED)
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest............................................ $ 4,240 $ 6,029 $10,599
Salaries and wages.................................. 8,289 7,540 7,918
Taxes, other than taxes on income................... 1,988 1,641 3,264
Medical and liability claims........................ 2,983 3,036 3,045
Advertising and promotion........................... 2,397 3,068 2,375
Outstanding chips and tokens........................ 1,204 1,308 1,066
Other............................................... 2,563 2,545 2,520
------- ------- -------
Total accrued liabilities........................... $23,664 $25,167 $30,787
======= ======= =======
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------- 1994
1993 1992 (UNAUDITED)
-------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
9 1/4% First Mortgage Bonds due 2008 (a)......... $275,000 $ -- $275,000
11 3/8% Mortgage-Backed Bonds Due 2002 (b)....... -- 149,444 --
13% Subordinated Sinking Fund Debentures Due Oc-
tober 1, 2004 (c)............................... -- 32,949 --
Construction and term loan, repaid in 1993....... -- 17,192 --
Capitalized lease obligations (Note 5)........... 5,617 9,531 4,570
-------- -------- --------
280,617 209,116 279,570
Less current maturities.......................... 3,574 54,055 2,549
-------- -------- --------
$277,043 $155,061 $277,021
======== ======== ========
</TABLE>
(a) On May 18, 1993, the Company issued $275,000,000 of 9 1/4% First Mortgage
Bonds due 2008 (First Mortgage Bonds). The proceeds from the sale of the First
Mortgage Bonds were $268,469,000, net of underwriting discounts and
commissions. Proceeds from the sale of the First Mortgage Bonds were used to
redeem all of the outstanding 11 3/8% Mortgage-Backed Bonds Due 2002 at 105.7%
of the principal amount plus accrued interest. The remaining proceeds were
reserved by the Company to benefit existing facilities and to expand into new
facilities or gaming jurisdictions.
The First Mortgage Bonds are unconditionally guaranteed by OSI, ACSI and
SBOC. Interest on the First Mortgage Bonds is payable semi-annually on May 1
and November 1 of each year commencing November 1, 1993. The First Mortgage
Bonds are not redeemable prior to May 1, 2000. Thereafter, the First Mortgage
Bonds will be redeemable, in whole or in part, at redemption prices specified
in the Indenture for the First Mortgage Bonds (Indenture). The First Mortgage
Bonds are senior secured obligations of the Company and rank senior in right of
payment to all existing and future subordinated indebtedness of the Company and
pari passu with the Company's senior indebtedness. The First Mortgage Bonds are
secured by a deed of trust representing a first lien on the Las Vegas Showboat
(other than certain assets), by a pledge of all outstanding shares of capital
stock of OSI, an intercompany note by ACSI in favor of SBO and a pledge of
certain intellectual property rights of the Company. OSI's obligation under its
guaranty is secured by a pledge of all outstanding shares of capital stock of
ACSI. ACSI's obligation under its guaranty is secured by
F-10
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
a leasehold mortgage representing a first lien on the Atlantic City Showboat
(other than certain assets). SBOC's guaranty is secured by a pledge of certain
assets related to the Las Vegas Showboat.
The Indenture places significant restrictions on SBO and its subsidiaries,
including restrictions on making loans and advances by SBO to subsidiaries
which are Non-Recourse Subsidiaries or subsidiaries in which SBO owns less than
50% of the equity. All capitalized terms not otherwise defined in this
paragraph have the meanings assigned to the Indenture. The Indenture also
places significant restrictions on the incurrence of additional Indebtedness by
SBO and its subsidiaries, the creation of additional Liens on the Collateral
securing the First Mortgage Bonds, transactions with Affiliates and the
investment of SBO and its subsidiaries in certain Investments. In addition, the
terms of the Indenture prohibit SBO and its subsidiaries from making a
Restricted Payment unless, at the time of such Restricted Payment: (i) no
Default or Event of Default has occurred or would occur as a consequence of
such restricted payment; (ii) SBO, at the time of 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, would have been permitted
to incur at least $1.00 of additional Indebtedness; and (iii) such Restricted
Payment, together with the aggregate of all other Restricted Payments by SBO
and its subsidiaries is less than the sum of (x) 50% of the Consolidated Net
Income of SBO for the period (taken as one accounting period) from April 1,
1993 to the end of SBO's most recently ended fiscal quarter for which internal
financial statements are available, plus (y) 100% of the aggregate net cash
proceeds received by SBO from the issuance or sale of Equity Interests of SBO
since the Issue Date, plus (z) Excess Non-Recourse Subsidiary Cash Proceeds
received after the Issue Date. The Term Restricted Payment does not include,
among other things, the payment of any dividend if, at the time of declaration
of such dividend, the dividend would have complied with the provisions of the
Indenture; the redemption, repurchase, retirement, or other acquisition of any
Equity Interest of SBO out of proceeds of, the substantially concurrent sale of
other Equity Interests of SBO; Investments by SBO in an amount not to exceed
$75,000,000 in the aggregate in any Non-Recourse Subsidiary engaged in a Gaming
Related Business; Investments by SBO in any Non-Recourse Subsidiary engaged in
a Gaming Related Business in an amount not to exceed in the aggregate 100% of
all cash received by SBO from any Non-Recourse Subsidiary up to $75,000,000 in
the aggregate and thereafter, 50% of all cash received by SBO from any Non-
Recourse Subsidiary other than cash required to be repaid or returned to such
Non-Recourse Subsidiary provided that the aggregate amount of Investments
pursuant thereto does not exceed $125,000,000 in the aggregate; and the
purchase, redemption, defeasance of any pari passu Indebtedness with a
substantially concurrent purchase, redemption, defeasance, or retirement of the
First Mortgage Bonds (on a pro rata basis).
(b) In March 1987, the Company issued $180,000,000 of 11 3/8% Mortgage-Backed
Bonds Due 2002 (11 3/8% Bonds). Interest was payable semi-annually on March 15
and September 15 of each year. During the years ended December 31, 1991 and
1990, the Company repurchased $12,096,000 and $18,460,000 face value,
respectively, of the 11 3/8% Bonds (Note 10). In accordance with the provisions
of the Indenture for the First Mortgage Bonds, the 11 3/8% Bonds were redeemed
on June 18, 1993 at 105.7% of par plus accrued interest.
(c) During fiscal year 1985, the Company issued $57,500,000 of 13% (effective
rate of 15.75%) Subordinated Sinking Fund Debentures Due October 1, 2004
(Debentures), with interest payable semi-annually. The Debentures were
redeemable at any time at the option of the Company, in whole or in part, at
par plus accrued interest or the Debentures may have been reacquired through
purchases in the open market. The Debentures had a mandatory sinking fund
requirement beginning October 1, 1991, designed to retire 80% of the issue
prior to maturity. On October 1, 1992 and 1991, the Company applied $2,875,000
of previously repurchased Debentures toward the sinking fund requirement. On
October 29, 1992, the Company made a redemption of $2,875,000 of Debentures. On
January 29, 1993, the Company redeemed in full the Debentures at par plus
accrued interest (Note 10).
F-11
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1993 and March 31, 1994, the Company's Atlantic City
subsidiary, ACSI, had available an unsecured line of credit for general working
capital purposes totaling $15,000,000. Interest is payable monthly at the
bank's prime rate plus .5%. The Bank's prime rate was 6.0% and 6.75% at
December 31, 1993 and March 31, 1994, respectively. The line of credit is
guaranteed by OSI and expires in August 1994. Borrowings on this line of credit
may not be used for the payment of management fees or to fund ventures in other
jurisdictions. At December 31, 1993 and March 31, 1994, ACSI had all the funds
under this line of credit available for use.
Maturities of the Company's long-term debt are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Year Ending
December 31,
1994........................................................... $ 3,574
1995........................................................... 20
1996........................................................... 1,950
1997........................................................... 25
1998........................................................... 29
Thereafter....................................................... 275,019
--------
$280,617
========
</TABLE>
The fair value of the Company's First Mortgage Bonds was $283,250,000 at
December 31, 1993 based on the quoted market price of the First Mortgage Bonds.
The carrying amount of capital leases approximates fair value at December 31,
1993.
5. LEASES
The Company leases certain furniture and equipment and a warehouse under
long-term lease agreements. The leases covering furniture and equipment expire
in 1994 and the warehouse lease expires in 2001. The Company has the option to
purchase the warehouse from January 1, 1996 through March 31, 2001 at an option
price of approximately $1,928,000.
Property leased under capital leases by major classes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
MARCH 31,
1994
1993 1992 (UNAUDITED)
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Building--warehouse................................. $ 2,050 $ 2,050 $ 2,050
Furniture and equipment............................. 22,621 23,417 22,262
------- ------- -------
24,671 25,467 24,312
Less accumulated amortization....................... 19,456 21,308 21,667
------- ------- -------
$ 5,215 $ 4,159 $ 2,645
======= ======= =======
</TABLE>
F-12
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
ACSI is leasing 10 1/2 acres of Boardwalk property in Atlantic City, New
Jersey for a term of 99 years commencing October 1983. Annual rent payments,
which are payable monthly, commenced upon opening of the Atlantic City
Showboat. The rent is adjusted annually based upon increases or decreases in
the Consumer Price Index. In April 1993, the annual rent increased $243,000 to
$8,118,000. ACSI is responsible for taxes, assessments, insurance and
utilities.
The following is a schedule of future minimum lease payments for capital
leases and operating leases (with initial or remaining terms in excess of one
year) as of December 31, 1993:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Year ending December 31,
1994........................................................ $4,014 $ 9,537
1995........................................................ 286 9,773
1996........................................................ 1,961 9,629
1997........................................................ 33 9,783
1998........................................................ 33 9,916
Thereafter.................................................... 20 797,971
------ --------
Total minimum lease payments.................................. 6,347 $846,609
========
Less amount representing interest (10.4% to 12.9%)............ 730
------
Present value of net minimum capital lease payments........... $5,617
======
</TABLE>
Rent expense for all operating leases was $9,287,000, $8,659,000 and
$8,046,000 for the years ended December 31, 1993, 1992 and 1991, respectively
and $2,406,000 and $2,157,000 for the three-months ended March 31, 1994 and
1993.
6. STOCK PLANS
On May 17, 1990, the shareholders of SBO approved a long-term incentive plan
in which officers and key employees of the Company participate. Up to 600,000
shares of SBO common stock may be awarded to plan participants as either
restricted shares or stock options. Restricted shares and options shall vest
over a five-year period. The options are exercisable, subject to vesting, over
ten years at option prices determined by SBO's Compensation Committee provided
that the option price is not less than 100% of the fair market value of the
Company's common stock determined on the date of grant of the options. As of
December 31, 1993, 127,900 restricted shares have been issued from treasury.
On May 17, 1990, the shareholders of SBO approved the Directors' Stock Option
Plan whereby options to purchase up to 120,000 shares of SBO common stock may
be granted at an option price no less than 100% of the fair market value of the
shares on the date of grant. Under the terms of the Directors' Plan, each
option shall be exercisable in full one year after the date of grant. Unless
special circumstances exist, each option shall expire on the tenth anniversary
of the date of grant or two years after the director's retirement.
In April 1992, the Board of Directors of the Company adopted the 1992
Employee Stock Option Plan (Plan) for all full-time and part-time employees.
The Company reserved an aggregate of 1,000,000 shares of SBO common stock for
issuance under the Plan. The exercise price of an option awarded under the Plan
cannot be less than the fair market value of the Company's common stock on the
date of grant. The number of options granted to an employee is based on the
employee's years of service with the Company. Options, all of which expire ten
years from the date of grant, are subject to vesting and continued affiliation
with the Company.
F-13
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A summary of certain stock option information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Options outstanding at
January 1........................................ 901,080 393,570 386,850
Granted........................................... 96,550 521,550 21,000
Exercised......................................... (176,560) (6,840) (2,280)
Forfeited......................................... (8,750) (7,200) (12,000)
-------- -------- --------
Options outstanding at
December 31...................................... 812,320 901,080 393,570
======== ======== ========
Option price range at $6.50 to $6.50 to $6.50 to
December 31...................................... $18.00 $14.50 $8.00
Options exercisable at
December 31...................................... 529,495 120,430 82,245
</TABLE>
Unearned compensation in connection with restricted stock issued for future
services was recorded on the date of grant at the fair market value of SBO's
common stock and is being amortized ratably from the date of grant over the
five-year vesting period as it is earned. Compensation expense of $111,000,
$156,000 and $203,000 was recognized during the years ended December 31, 1993,
1992 and 1991, respectively. Unearned compensation has been shown as a
reduction of shareholders' equity in the accompanying Consolidated Balance
Sheets.
7. SHAREHOLDERS' EQUITY
On December 24, 1992, the Company issued 3,450,000 shares of its $1.00 par
value common stock in a public offering. The price to the public was $15.50 per
share. Net proceeds of the offering, after deducting all associated costs, was
$50,366,000 or $14.60 per newly issued share. Proceeds of the offering were
used in January 1993 to redeem all of SBO's 13% Subordinated Sinking Fund
Debentures Due 2004 and to fully prepay the balance outstanding on the
construction and term loan.
8. INCOME TAXES
As discussed in Note 1, the Company adopted FAS 109 effective January 1,
1993. The cumulative effect of the change in method of accounting for income
taxes of $556,000 is determined as of January 1, 1993 and is reported
separately in the Consolidated Statement of Income for the year ended December
31, 1993. Prior year financial statements have not been restated to apply the
provisions of FAS 109.
Total income tax expense for the year ended December 31, 1993 was allocated
as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Continuing operations...................................... $10,474
Extraordinary item......................................... (4,487)
Shareholders' equity, related to compensation expense de-
ferred and reported as a reduction of shareholders' equity
for financial reporting purposes.......................... (661)
-------
$ 5,326
=======
</TABLE>
F-14
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense (benefit) attributable to income from continuing
operations consists of:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------ 1994
1993 1992 1991 (UNAUDITED)
-------- ------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. federal
Current................................. $ 7,910 $ 6,519 $ 2,858 $1,260
Deferred................................ 965 238 1,230 853
-------- ------- ------- ------
8,875 6,757 4,088 2,113
-------- ------- ------- ------
State and local
Current................................. 1,195 -- -- 248
Deferred................................ 404 -- -- (112)
-------- ------- ------- ------
1,599 -- -- 136
-------- ------- ------- ------
Total
Current................................. 9,105 6,519 2,858 1,508
Deferred................................ 1,369 238 1,230 741
-------- ------- ------- ------
$ 10,474 $ 6,757 $ 4,088 $2,249
======== ======= ======= ======
</TABLE>
In 1992 and 1991, income tax expense of $6,757,000 and $4,088,000,
respectively, represents income tax expense from continuing operations before
extraordinary items. In 1992, as a result of an extraordinary loss of
$5,164,000 (Note 10), the Company recognized an income tax benefit of
$1,756,000 resulting in total income tax expense of $5,001,000. In 1991, as a
result of an extraordinary gain of $273,000 (Note 10), the Company recognized
additional income tax expense of $93,000 resulting in total income tax expense
of $4,181,000.
Income tax expense attributable to income from continuing operations differed
from the amounts computed by applying the U.S. federal income tax rate of 35%
for the year ended December 31, 1993 and 34% for the years ended December 31,
1992 and 1991 to pretax income from continuing operations as a result of the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense..................... $ 8,378 $ 7,689 $ 3,435
Increase (reduction) in income taxes resulting from:
Change in the beginning of the year balance of the
valuation allowance for deferred tax assets allo-
cated to income tax expense...................... 224 -- --
Adjustment to deferred tax assets and liabilities
for enacted changes in tax rates................. 383 -- --
State and local income taxes, net of federal tax
benefit.......................................... 930 -- --
Impact of settlement of Internal Revenue Service
examination...................................... -- (102) --
Restricted interest assessment, net of tax........ 619 -- --
Impact of graduated tax rates..................... (90) -- --
Other, net........................................ 30 (830) 653
-------- ------- -------
Income tax expense................................ $ 10,474 $ 6,757 $ 4,088
======== ======= =======
</TABLE>
F-15
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The significant components of deferred income tax expense attributable to
income from continuing operations for the year ended December 31, 1993 are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Deferred tax expense (exclusive of other components listed
below).................................................... $ 762
Adjustment to deferred tax assets and liabilities for en-
acted changes in tax rates................................ 383
Change in beginning of the year balance of the valuation
allowance for deferred tax assets......................... 224
------
$1,369
======
</TABLE>
For the years ended December 31, 1992 and 1991, deferred income tax expense
of $238,000 and $1,230,000, respectively, results from temporary differences in
the recognition of income and expenses for income tax and financial reporting
purposes. The sources and tax effects of these temporary differences are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1992 1991
------- -------
(IN THOUSANDS)
<S> <C> <C>
Depreciation and amortization................................ $ 1,250 $ 556
Utilization of credit carryforwards, net..................... 1,145 (676)
Provisions for loss on Casino Reinvestment Development Au-
thority obligation.......................................... (1,496) 31
Allowance for doubtful accounts.............................. 309 342
Preopening costs............................................. 369 1,511
Accrued vacations............................................ (359) (149)
Impact of settlement of Internal Revenue Service examination. (625) --
Other, net................................................... (355) (385)
------- -------
$ 238 $ 1,230
======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1993 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Deferred tax assets:
Casino Reinvestment Development Authority obligation........ $(1,566)
Accrued vacations........................................... (1,621)
Allowance for doubtful accounts............................. (1,210)
Alternative minimum tax credit carryforwards................ (2,423)
Other....................................................... (3,606)
-------
Total gross deferred tax assets............................. (10,426)
Less valuation allowance.................................... 601
-------
Net deferred tax assets.................................... (9,825)
-------
Deferred tax liabilities:
Depreciation and amortization.............................. 17,350
Capitalized interest....................................... 2,571
-------
Total gross deferred tax liabilities....................... 19,921
-------
Net deferred tax liability................................... $10,096
=======
</TABLE>
F-16
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to significant portions of
the net deferred tax liability at December 31, 1992 relate to the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Depreciation and amortization.............................. $13,931
Utilization of credit carryforwards........................ (2,032)
Capitalized interest....................................... 2,572
Allowance for doubtful accounts............................ (1,047)
Accrued vacations.......................................... (1,328)
Provisions for loss on Casino Reinvestment Development Au-
thority
obligation................................................ (1,496)
Other...................................................... (1,317)
-------
Net deferred tax liability................................. $ 9,283
=======
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1993 was
$377,000. The net change in the total valuation allowance for the year ended
December 31, 1993 was an increase of $224,000.
At December 31, 1993, the Company had available $2,423,000 of alternative
minimum tax credit carryforwards which are available to reduce future federal
regular income taxes, if any, over an indefinite period.
For State of New Jersey income tax purposes, the Company has available
$1,144,000 of net operating loss carryforwards which expire through 1997.
9. EMPLOYEE BENEFIT PLANS
The Company maintains a profit sharing and retirement plan for eligible
employees who are not covered by a collective bargaining agreement or by
another retirement plan to which the Company is required to contribute.
Contributions to the plan are made at the discretion of the Board of Directors
of SBO. The benefits are limited to the allocated interest in the fund assets
and each participant's account vests over a seven-year period. Contributions
accrued by the Company were $195,000, $175,000 and $150,000 for the years ended
December 31, 1993, 1992 and 1991, respectively.
The Company maintains a retirement and savings plan for eligible employees of
ACSI and OSI. Under the terms of the plan, eligible employees may defer up to
3% of their compensation, as defined, of which 100% of the deferral is matched
by ACSI. Eligible employees may contribute an additional 12% of their
compensation which will not be matched by the Company. Contributions by the
Company vest over a five-year period. The Company contributed $1,330,000,
$1,110,000 and $776,000 to this plan for the years ended December 31, 1993,
1992 and 1991, respectively.
Effective January 1, 1994, SBOC and LPSI adopted the provisions of the
retirement and savings plan previously available to the eligible employees of
ACSI and OSI. The Company has requested a determination letter from the
Internal Revenue Service to allow the Company to merge the present profit
sharing plan and the retirement and savings plan.
The Company's union employees are covered by union-sponsored, collectively-
bargained, multi-employer pension plans. The Company contributed and charged to
expense $1,197,000, $1,182,000 and $1,184,000 during the years ended December
31, 1993, 1992 and 1991, respectively. These contributions are
F-17
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
determined in accordance with the provisions of negotiated labor contracts and
generally are based on the number of hours worked.
10. EXTRAORDINARY ITEMS
On June 18, 1993, the Company redeemed all of its remaining 11 3/8% Bonds at
105.7% plus accrued and unpaid interest up to and including the redemption
date. The Company recognized an extraordinary loss before any income tax
benefit of $11,166,000 as a result of the write-off of the unamortized debt
issuance costs of $2,666,000 and the payment of a 5.7% redemption premium of
$8,500,000. The after tax loss was $6,679,000 or $.44 per share.
On December 30, 1992, the Company notified debentureholders of its intent to
redeem all of the outstanding Debentures at par plus accrued interest on
January 29, 1993. Accordingly, at December 31, 1992, the Company reclassified
the outstanding principal balance of $32,949,000 to current maturities of long-
term debt and recognized an extraordinary loss of $5,164,000 before an income
tax benefit of $1,756,000 as a result of the write-off of the unamortized
discount and debt issuance costs. The after tax loss was $3,408,000 or $.29 per
share.
In 1991, OSI purchased $12,096,000 face value of the Company's 11 3/8% Bonds
for $11,696,000. Accordingly, after a charge of $127,000 for unamortized bond
issuance costs, the Company realized an extraordinary gain of $273,000 before
income taxes of $93,000 resulting in an after tax gain of $180,000 or $.02 per
share.
11. NEW JERSEY INVESTMENT OBLIGATION
The New Jersey Casino Control Act (Act) provides, among other things, for an
assessment on a gaming licensee based upon its gross casino revenues after
completion of its first full year of operation. This assessment may be
satisfied by investing in qualified direct investments, purchasing bonds issued
by the Casino Reinvestment Development Authority (CRDA), or paying an
"alternative tax." In order for direct investments to be eligible, they must be
approved by the CRDA.
Deposits with the CRDA bear interest at two-thirds of market rates resulting
in a current value lower than cost. At December 31, 1993 and 1992, deposits and
other assets include $5,010,000 and $9,431,000, respectively, representing the
Company's deposit with the CRDA of $7,488,000 as of December 31, 1993 and
$14,121,000 as of December 31, 1992, net of a valuation allowance of $2,478,000
and $4,690,000, respectively. The carrying value of these deposits, net of the
valuation allowance, approximates fair value.
The CRDA, as an agency of the City of Atlantic City, is responsible for the
redevelopment of the area surrounding the Boardwalk. The Company has requested
and the CRDA has approved that $8,000,000 of the Company's deposits with the
CRDA will be used in connection with the expansion of a City street leading to
the Atlantic City Showboat. In connection with its approval, the CRDA required
the Company to donate $2,000,000 of its deposits with the CRDA to certain
public programs. Construction of the City street commenced in the fourth
quarter of 1993 and is expected to be completed in 1994. The Company has
reclassified these CRDA deposits, net of the valuation allowance, totaling
$6,667,000 to construction in progress. When construction is complete, these
costs will be amortized over seven years. The CRDA has set aside these deposits
in a restricted account and the Company no longer receives the benefit of
investment income on these funds.
The Company has applied for and received approval for approximately
$8,800,000 in funding credits from the CRDA in connection with the construction
of Atlantic City Showboat's additional hotel rooms.
F-18
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Pending the execution of a Credit Agreement with the CRDA, which states the
terms and conditions by which the Company may receive funding credit, the
Company may begin applying for and receiving funds from the CRDA as
expenditures are made for the construction of the hotel rooms to the extent
ACSI has available funds on deposit with the CRDA. The Company has
approximately $2,500,000 in available deposits with the CRDA which they may
apply for upon execution of the Credit Agreement, with the balance being
applied to portions of future CRDA deposits.
12. COMMITMENTS AND CONTINGENCIES
During 1993, the Company entered into construction contracts which commit the
Company to approximately $39,000,000 in expenditures in 1994 and approximately
$7,000,000 in 1995.
In December 1993, the Company agreed to purchase an additional 20% equity
interest in Showboat Star Partnership from a partner for $9,000,000, increasing
the Company's interest in the partnership to 50% subject to the approval of the
Louisiana Riverboat Gaming Commission. The Louisiana Riverboat Gaming
Commission approved the transaction in February 1994 and effective March 1,
1994, the Company acquired the additional 20% equity interest in Showboat Star
Partnership.
In February 1994, Showboat and Waterfront Entertainment and Development, Inc.
formed the Showboat Marina Partnership (Indiana Partnership). The Indiana
Partnership has filed a gaming application with the Indiana Gaming Commission
to operate a riverboat on Lake Michigan in East Chicago, Indiana. Under the
terms of the partnership agreement, Showboat will own 55% of the Indiana
Partnership and is required to make an initial capital contribution of
$1,000,000 and an additional contribution of $16,500,000 at such later dates as
specified in an initial development budget.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. Additionally, the Company is presently undergoing
an audit by the Internal Revenue Service for the tax years ending June 30, 1989
and 1990. The State of New Jersey is currently auditing the Company's state
income tax returns for the tax years ended June 30, 1986 through 1992. In the
opinion of management, the ultimate disposition of these matters will not have
a material adverse effect on the Company's financial position or results of
operations.
F-19
<PAGE>
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
13. SELECTED QUARTERLY DATA (UNAUDITED)
Summarized unaudited financial data for interim periods for the years ended
December 31, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED (A) YEAR
-------------------------------------- ENDED
3/31/93 6/30/93 9/30/93 12/31/93 12/31/93
-------- -------- --------- --------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues.................. $ 85,496 $ 92,706 $ 108,005 $ 89,520 $375,727
Income from operations (b).... 7,685 11,983 18,250 7,501 45,419
Income before extraordinary
loss and cumulative effect
adjustment (c)(d)............ 1,921 3,751 7,356 436 13,464
Net income (loss)............. 2,477 (2,928) 7,356 436 7,341
Income before extraordinary
loss and cumulative effect
adjustment per share (c)(d).. .13 .24 .48 .03 .89
Net income (loss) per share... .16 (.20) .48 .03 .49
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED (A) YEAR
--------------------------------------- ENDED
3/31/92 6/30/92 9/30/92 12/31/92 12/31/92
--------- --------- --------- --------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues................. $ 85,523 $ 89,250 $ 99,105 $ 81,358 $355,236
Income from operations....... 10,074 12,224 18,981 5,229 46,508
Income before extraordinary
loss (e).................... 2,628 3,973 8,426 830 15,857
Net income (loss)............ 2,628 3,973 8,426 (2,578) 12,449
Income before extraordinary
loss per share(e)........... .23 .34 .73 .07 1.37
Net income (loss) per share.. .23 .34 .73 (.22) 1.08
</TABLE>
- ---------------------
(a) Quarterly results may not be comparable due to the seasonal nature of the
Atlantic City operation.
(b) In 1993, the Company acquired a 30% equity interest in Showboat Star
Partnership which was engaged in the development of a riverboat casino on
Lake Pontchartrain in New Orleans, Louisiana. Operation of the riverboat
casino commenced on November 8, 1993. The Company's share of the
partnership's loss from the commencement of operations through December 31,
1993, including the write-off of preopening costs of $1,274,000, is
included in income from operations for the quarter ended December 31, 1993.
(c) The Company adopted FAS 109 in 1993 and reported the cumulative effect of
the change in method of accounting for income taxes as of January 1, 1993
in the 1993 Consolidated Statement of Income.
(d) In the quarter ended June 30, 1993, the Company recognized an extraordinary
loss of $6,679,000, net of tax, as a result of the redemption of all of its
outstanding 11 3/8% Bonds (Note 10).
(e) In the quarter ended December 31, 1992, the Company recognized an
extraordinary loss of $3,408,000, net of tax, as a result of the planned
redemption of all of its outstanding Debentures (Note 10).
14. SUBSEQUENT EVENTS (UNAUDITED)
On May 6, 1994, the New South Wales Casino Control Authority announced that
Sydney Harbour Casino Pty Limited, a wholly owned subsidiary of a company in
which Showboat, Inc. is a principal founding shareholder, was the preferred
applicant to develop a casino in Sydney, Australia. The preferred applicant
will work during the next six months to obtain all the necessary regulatory
approvals. Subsequently, the Authority will enter into a 99-year lease for the
site of the casino in New South Wales and issue an exclusive casino license for
12 years to cover the State of New South Wales. The Company will have an
approximate 27% equity interest in the casino at a cost of approximately $98.5
million. The Company anticipates making its investment in November 1994.
F-20
<PAGE>
On March 24, 1994, SBO secured a line of credit for A$8.4 million (U.S.
dollar equivalent approximately $6.1 million) in compliance with the New South
Wales Casino Control Authority's licensing requirements. This line of credit is
secured by a $6.3 million certificate of deposit. Interest on this line of
credit is payable at the bank's prime rate plus 2.0%. This line of credit
expires in December 1994. At March 31, 1994, ACSI had all the funds under this
line of credit available for use.
On May 25, 1994, the Shareholders approved an increase in the number of
Shares of Common Stock authorized from 20,000,000 to 50,000,000 Shares.
On May 25, 1994, the Shareholders approved a long-term incentive plan in
which officers and most management level employees of the Company participate.
Up to 2,000,000 Shares of SBO Common Stock may be awarded to plan participants
as either restricted shares or stock options. Restricted shares and options
generally vest over a five-year period. The options are exercisable, subject to
vesting, over ten years at option prices determined by SBO's Compensation
Committee provided that the option price is not less than 100% of the fair
market value of the Company's Common Stock determined on the date of grant of
the options.
F-21
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED
HEREBY IN ANY JURISDICTION IN WHICH OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 4
The Company............................................................... 10
Certain Considerations.................................................... 18
Use of Proceeds........................................................... 23
Capitalization............................................................ 24
Selected Consolidated Financial Data...................................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 26
Management................................................................ 34
Regulation................................................................ 36
Description of Notes...................................................... 37
Underwriting.............................................................. 60
Legal Matters............................................................. 60
Experts................................................................... 60
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$150,000,000
LOGO
SHOWBOAT, INC.
% SENIOR SUBORDINATED NOTES DUE 2009
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1994
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of the issuance and distribution of the Notes, as set
forth below, will be borne entirely by the Company:
<TABLE>
<CAPTION>
ITEM AMOUNT
---- -------
<S> <C>
Securities and Exchange Commission Registration Fee................. $51,725
Blue Sky Fees*......................................................
NASD Fees........................................................... 15,500
Rating Agency Fees*.................................................
Transfer Agents' Fees*..............................................
Printing and Engraving Fees and Expenses*...........................
Legal Fees and Expenses*............................................
Accounting Fees and Expenses*.......................................
Trustee's Fees*.....................................................
Miscellaneous Expenses*.............................................
-------
Total*.......................................................... $
=======
</TABLE>
- ---------------------
* Amount to be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Articles of Incorporation. Section 78.037 of the Nevada Revised Statutes and
Article XI of the Company's Articles of Incorporation contain provisions that
eliminate or limit, in certain situations, the personal liability of a director
or officer of the Company. The Articles of Incorporation provide that a
director or officer of the Company will not be personally liable to the Company
or its shareholders for breach of his fiduciary duty as a director or officer,
but Article XI does not eliminate or limit the director's or officer's
liability for: (i) acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law; or (ii) the unlawful payment of
distributions.
Bylaws. Section 78.751 of the Nevada Revised Statutes and Article VIII of the
Company's Bylaws contain provisions for the indemnification of directors,
officers, employees or agents of the Company. The Company's Bylaws provide that
the Company 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, by reason
of the fact that such person is or was a director, officer, employee or agent
of the Company or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. Such indemnification may be against
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 if such person acted in good faith and in a
manner which the individual reasonably believed to be in or not opposed to, the
best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. Where the action or suit for which indemnification is sought is one
brought by or in the name of the Company to procure a judgment in the Company's
favor, no indemnification shall be made in respect to any claim, issue, for
matter as to which such person has been adjudged to be liable or negligence or
misconduct in the performance of such person's duty to the Company unless and
only to the extent that the court in which such action or suit was brought
shall determine upon application that, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnification, despite
the adjudication of liability.
II-1
<PAGE>
The indemnification discussed above shall only be made where a determination
is made that such indemnification is proper in the circumstances because such
person has met the applicable standard of conduct discussed above. Such
determination is to be made: (i) by the shareholders; (ii) by a majority vote
of the Board of Directors consisting of a quorum of disinterested directors;
(iii) if such a quorum of disinterested directors so orders; or (iv) if such a
quorum of disinterested directors cannot be obtained, by independent legal
counsel in a written opinion.
To the extent that a director, officer, employee or agent of the Company has
been successful on the merits or otherwise in defense of any action, suit or
proceeding of the type discussed above, the Bylaws state that such person shall
be indemnified against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with such defense.
Expenses incurred in defending a civil or criminal action, suit or proceeding
may be paid by the Company in advance of the final disposition of such action,
suit or proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount unless it shall be ultimately determined that he is entitled
to indemnification by the Company as authorized by the Bylaws.
The indemnification described above does not exclude any other rights to
which a person seeking indemnification may be entitled under any agreement,
vote of shareholders or disinterested directors under the Articles of
Incorporation or Bylaws, if amended to so provide in the future or otherwise,
and the above right 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 person.
The Company's Bylaws also indemnify the spouses of the Company's directors
and officers for such director's or officer's acts if such spouses were or are
a party or threatened to be made a party to any threatened, pending or
completed action, suit or proceeding due to the fact that they are married to a
director or officer of the Company. Each spouse's indemnification rights are
governed by Article VIII of the Bylaws.
Indemnification Agreements. The Company has entered into indemnification
agreements with each member of the Board of Directors and certain officers of
the Company (individually, an "Indemnified Person"). The agreement provides
that the Company will hold harmless and indemnify such Indemnified Person in
certain specified instances and, in any event, to the fullest extent authorized
or permitted by law. However, no such specified indemnity shall be paid by the
Company if payment is actually made to such Indemnified Person under an
insurance policy (except in the event that an award is in excess of the insured
amount, in which case the payment may be made for such excess); aggregate
losses do not exceed $1,000; the Indemnified Person is indemnified by the
Company otherwise than pursuant to the indemnity agreement; a judgment is
rendered against such Indemnified Person for the payment of dividends or other
distributions in violation of Section 78.300 the Nevada Revised Statutes, as
amended; a judgment is rendered against such Indemnified Person for "short
swing" profits pursuant to Section 16(b) of the Securities Exchange Act of
1934, as amended, or similar state and local laws; such Indemnified Person's
conduct is finally adjudged by a court of competent jurisdiction to have
involved intentional misconduct, fraud or a knowing violation of the law and
such conduct was material to the cause of action; a judgment is rendered
against such person by a court of competent jurisdiction, after exhaustion of
all appeals therefrom, and the court determines that such Indemnified Person is
not entitled to indemnity; or, except as otherwise provided in such agreement,
the Indemnified Person initiates or maintains an action against the Company or
the Company's directors, officers, employees or other agents.
All agreements and obligations of the Company contained in the indemnity
agreement shall continue during the period the person is serving in such
position and shall continue so long as such person shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding.
II-2
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION/1/
------- --------------
<C> <S>
1.01 Form of Underwriting Agreement.
4.01 Specimen Common Stock Certificate for the Common Stock of the
Company./2/
4.02 Restated Articles of Incorporation of the Company dated June ,
1994./2/
4.03 Restated Bylaws of the Company dated February 25, 1993 are
incorporated herein by reference from the Company's Form 10-K for the
Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 3.02.
4.04 Indenture relating to the 9 1/4% First Mortgage Bonds due 2008 is
incorporated by reference from the Company's Form 8-K dated May 18,
1993, Item 5, Exhibit 28.01.
4.05 Bond Certificate relating to the 9 1/4% First Mortgage Bonds due 2008
is incorporated herein by reference from the Company's Form 8-K dated
May 18, 1993, Item 5, Exhibit 28.01.
4.06 Form of Indenture relating to the % Senior Subordinated Notes due
2009, including form of Note.
5.01 Opinion and consent of Kummer Kaempfer Bonner & Renshaw as to the
legality of securities being registered./2/
12.01 Statement re: Computation of Ratios of Earnings to Fixed Charges.
23.01 Consent of Kummer Kaempfer Bonner & Renshaw, contained in Exhibit
5.01./2/
23.02 Consent of KPMG Peat Marwick.
24.01 Powers of Attorney (see pp. II-5, II-7, II-8 and II-9).
25.01 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of ./2/
</TABLE>
- ---------------------
/1/All exhibits which are incorporated by reference are incorporated from
the Company's respective periodic reports, Securities and Exchange Commission
File No. 1-7123.
/2/To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 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 the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
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-3
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANTS
CERTIFY THAT THEY HAVE REASONABLE GROUNDS TO BELIEVE THAT THEY MEET ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAVE DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON THEIR BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED IN THE CITY OF LAS VEGAS, STATE OF NEVADA ON JUNE 28, 1994.
Showboat, Inc. Atlantic City Showboat, Inc.
/s/ J. Kell Houssels, III /s/ J. Kell Houssels, III
By: _________________________________ By: _________________________________
J. KELL HOUSSELS, III PRESIDENT J. KELL HOUSSELS, III PRESIDENT
AND CHIEF EXECUTIVE OFFICER AND CHIEF EXECUTIVE OFFICER
Ocean Showboat, Inc. Showboat Operating Company
/s/ Frank A. Modica /s/ Frank A. Modica
By: _________________________________ By: _________________________________
FRANK A. MODICA PRESIDENT AND FRANK A. MODICA PRESIDENT AND
CHIEF EXECUTIVE OFFICER CHIEF EXECUTIVE OFFICER
The undersigned Directors and Officers of Showboat, Inc. hereby appoint Leann
K. Schneider, R. Craig Bird or John N. Brewer as attorney-in-fact for the
undersigned, with full power of substitution, for and in the name, place and
stead of the undersigned, to sign and file with the Securities and Exchange
Commission under the Securities Act of 1933 any and all amendments (including
post-effective amendments) and exhibits to this Registration Statement and any
and all applications and other documents to be filed with the Securities and
Exchange Commission pertaining to the registration of the securities covered
hereby, with full power and authority to do and perform any and all acts and
things whatsoever requisite and necessary or desirable, hereby ratifying and
confirming all that said attorney-in-fact, or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
SIGNATURES TITLE DATE
/s/ J.K. Houssels Chairman of the June 28, 1994
- ------------------------------------- Board
J.K. HOUSSELS
/s/ J. Kell Houssels, III Director, President June 28, 1994
- ------------------------------------- and Chief Executive
J. KELL HOUSSELS, III Officer (Principal
Executive Officer)
/s/ Leann K. Schneider Vice President-- June 28, 1994
- ------------------------------------- Finance and Chief
LEANN K. SCHNEIDER Financial Officer
(Principal
Financial Officer
and Principal
Accounting Officer)
II-5
<PAGE>
SIGNATURES TITLE DATE
/s/ William C. Richardson Director June 28, 1994
- -------------------------------------
WILLIAM C. RICHARDSON
/s/ John D. Gaughan Director June 28, 1994
- -------------------------------------
JOHN D. GAUGHAN
/s/ Jeanne S. Stewart Director June 28, 1994
- -------------------------------------
JEANNE S. STEWART
/s/ Frank A. Modica Director, Executive June 28, 1994
- ------------------------------------- Vice President and
FRANK A. MODICA Chief Operating
Officer
/s/ H. Gregory Nasky Director and June 28, 1994
- ------------------------------------- Secretary
H. GREGORY NASKY
/s/ George A. Zettler Director June 28, 1994
- -------------------------------------
GEORGE A. ZETTLER
/s/ Carolyn M. Sparks Director June 28, 1994
- -------------------------------------
CAROLYN M. SPARKS
II-6
<PAGE>
THE UNDERSIGNED DIRECTORS AND OFFICERS OF ATLANTIC CITY SHOWBOAT, INC. HEREBY
APPOINT LEANN K. SCHNEIDER, R. CRAIG BIRD OR JOHN N. BREWER AS ATTORNEY-IN-FACT
FOR THE UNDERSIGNED, WITH FULL POWER OF SUBSTITUTION, FOR AND IN THE NAME,
PLACE AND STEAD OF THE UNDERSIGNED, TO SIGN AND FILE WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 ANY AND ALL AMENDMENTS
(INCLUDING POST-EFFECTIVE AMENDMENTS) AND EXHIBITS TO THIS REGISTRATION
STATEMENT AND ANY AND ALL APPLICATIONS AND OTHER DOCUMENTS TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PERTAINING TO THE REGISTRATION OF THE
SECURITIES COVERED HEREBY, WITH FULL POWER AND AUTHORITY TO DO AND PERFORM ANY
AND ALL ACTS AND THINGS WHATSOEVER REQUISITE AND NECESSARY OR DESIRABLE, HEREBY
RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT, OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Frank A. Modica Chairman of the Board June 28, 1994
- ------------------------------------
Frank A. Modica
/s/ J. Kell Houssels, III Director, President and June 28, 1994
- ------------------------------------ Chief Executive Officer
J. Kell Houssels, III (Principal Executive
Officer)
/s/ Kathy Caracciolo Vice President--Finance June 28, 1994
- ------------------------------------ (Principal Financial
Kathy Caracciolo Officer and Principal
Accounting Officer)
/s/ John D. Gaughan Director June 28, 1994
- ------------------------------------
John D. Gaughan
/s/ J.K. Houssels Director June 28, 1994
- ------------------------------------
J.K. Houssels
/s/ H. Gregory Nasky Director and Secretary June 28, 1994
- ------------------------------------
H. Gregory Nasky
</TABLE>
II-7
<PAGE>
THE UNDERSIGNED DIRECTORS AND OFFICERS OF OCEAN SHOWBOAT, INC. HEREBY APPOINT
LEANN K. SCHNEIDER, R. CRAIG BIRD OR JOHN N. BREWER AS ATTORNEY-IN-FACT FOR THE
UNDERSIGNED, WITH FULL POWER OF SUBSTITUTION, FOR AND IN THE NAME, PLACE AND
STEAD OF THE UNDERSIGNED, TO SIGN AND FILE WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933 ANY AND ALL AMENDMENTS (INCLUDING
POST-EFFECTIVE AMENDMENTS) AND EXHIBITS TO THIS REGISTRATION STATEMENT AND ANY
AND ALL APPLICATIONS AND OTHER DOCUMENTS TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PERTAINING TO THE REGISTRATION OF THE SECURITIES COVERED
HEREBY, WITH FULL POWER AND AUTHORITY TO DO AND PERFORM ANY AND ALL ACTS AND
THINGS WHATSOEVER REQUISITE AND NECESSARY OR DESIRABLE, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT, OR HIS OR HER SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J.K. Houssels Chairman of the Board June 28, 1994
- ------------------------------------
J.K. Houssels
/s/ Frank A. Modica Director, President and June 28, 1994
- ------------------------------------ Chief Executive Officer
Frank A. Modica (Principal Executive
Officer)
/s/ Mark J. Miller Executive Vice President-- June 28, 1994
- ------------------------------------ Finance and Chief Operating
Mark J. Miller Officer (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ William C. Richardson Director June 28, 1994
- ------------------------------------
William C. Richardson
/s/ John D. Gaughan Director June 28, 1994
- ------------------------------------
John D. Gaughan
/s/ Jeanne S. Stewart Director June 28, 1994
- ------------------------------------
Jeanne S. Stewart
/s/ H. Gregory Nasky Director and Secretary June 28, 1994
- ------------------------------------
H. Gregory Nasky
/s/ J. Kell Houssels, III Director and Executive Vice June 28, 1994
- ------------------------------------ President
J. Kell Houssels, III
/s/ George A. Zettler Director June 28, 1994
- ------------------------------------
George A. Zettler
/s/ Carolyn M. Sparks Director June 28, 1994
- ------------------------------------
Carolyn M. Sparks
</TABLE>
II-8
<PAGE>
THE UNDERSIGNED DIRECTORS AND OFFICERS OF SHOWBOAT OPERATING COMPANY HEREBY
APPOINT LEANN K. SCHNEIDER, R. CRAIG BIRD OR JOHN N. BREWER AS ATTORNEY-IN-FACT
FOR THE UNDERSIGNED, WITH FULL POWER OF SUBSTITUTION, FOR AND IN THE NAME,
PLACE AND STEAD OF THE UNDERSIGNED, TO SIGN AND FILE WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 ANY AND ALL AMENDMENTS
(INCLUDING POST-EFFECTIVE AMENDMENTS) AND EXHIBITS TO THIS REGISTRATION
STATEMENT AND ANY AND ALL APPLICATIONS AND OTHER DOCUMENTS TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PERTAINING TO THE REGISTRATION OF THE
SECURITIES COVERED HEREBY, WITH FULL POWER AND AUTHORITY TO DO AND PERFORM ANY
AND ALL ACTS AND THINGS WHATSOEVER REQUISITE AND NECESSARY OR DESIRABLE, HEREBY
RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT, OR HIS OR HER
SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J.K. Houssels Chairman of the Board June 28, 1994
- ------------------------------------
J.K. Houssels
/S/ Frank A. Modica Director, President and June 28, 1994
- ------------------------------------ Chief Executive Officer
Frank A. Modica (Principal Executive
Officer)
/s/ Leann K. Schneider Vice President--Finance and June 28, 1994
- ------------------------------------ Chief Financial Officer
Leann K. Schneider (Principal Financial
Officer and Principal
Accounting Officer)
/S/ John D. Gaughan Director June 28, 1994
- ------------------------------------
John D. Gaughan
/S/ H. Gregory Nasky Directory and Secretary June 28, 1994
- ------------------------------------
H. Gregory Nasky
/S/ J. Kell Houssels, III Director June 28, 1994
- ------------------------------------
J. Kell Houssels, III
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION/1/ NUMBER
------- -------------- ------
<C> <S> <C>
1.01 Form of Underwriting Agreement.
4.01 Specimen Common Stock Certificate for the Common Stock of the
Company./2/
4.02 Restated Articles of Incorporation of the Company dated June
, 1994./2/
4.03 Restated Bylaws of the Company dated February 25, 1993 are
incorporated herein by reference from the Company's Form 10-K
for the Year Ended December 31, 1992, Part IV, Item 14(a)(3),
Exhibit 3.02.
4.04 Indenture relating to the 9 1/4% First Mortgage Bonds due
2008 is incorporated by reference from the Company's Form 8-K
dated May 18, 1993, Item 5, Exhibit 28.01.
4.05 Bond Certificate relating to the 9 1/4% First Mortgage Bonds
due 2008 is incorporated herein by reference from the
Company's Form 8-K dated May 18, 1993, Item 5, Exhibit 28.01.
4.06 Form of Indenture relating to the % Senior Subordinated
Notes due 2009, including form of Note.
5.01 Opinion and consent of Kummer Kaempfer Bonner & Renshaw as to
the legality of securities being registered./2/
12.01 Statement re: Computation of Ratios of Earnings to Fixed
Charges.
23.01 Consent of Kummer Kaempfer Bonner & Renshaw, contained in
Exhibit 5.01./2/
23.02 Consent of KPMG Peat Marwick.
24.01 Powers of Attorney (see p. II-5, II-7, II-8 and II-9).
25.01 Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of ./2/
</TABLE>
- ---------------------
/1/All exhibits which are incorporated by reference are incorporated from
the Company's respective periodic reports, Securities and Exchange Commission
File No. 1-7123.
/2/To be filed by amendment.
<PAGE>
EXHIBIT 1.01
================================================================================
SHOWBOAT, INC.
$150,000,000
__% Senior Subordinated Notes Due 2009
Underwriting Agreement
July __, 1994
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
================================================================================
<PAGE>
SHOWBOAT, INC.
$150,000,000
% Senior Subordinated Notes due 2009
Payment of Principal and
Interest Unconditionally Guaranteed
By
Ocean Showboat, Inc.
Atlantic City Showboat, Inc.
and
Showboat Operating Company
UNDERWRITING AGREEMENT
----------------------
July __, 1994
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
140 Broadway
New York, New York 10005
Dear Sirs:
Showboat, Inc., a Nevada corporation (the "COMPANY"), proposes to issue
and sell to you (the "UNDERWRITER") $150,000,000 in aggregate principal amount
of its % Senior Subordinated Notes due 2009 (the "NOTES"). The Notes will be
issued pursuant to an indenture (the "INDENTURE") among the Company, Ocean
Showboat, Inc., a New Jersey corporation ("OSI"), Atlantic City Showboat, Inc.,
a New Jersey corporation ("ACSI"), and Showboat Operating Company, a Nevada
corporation ("SBOC"), as guarantors (collectively, the "GUARANTORS") and
as Trustee (the "TRUSTEE"). The Notes will be unsecured general obligations of
the Company, subordinated in right of payment to all existing and future Senior
Debt (as that term is defined in the Indenture) of the Company. The Company's
obligations under the Notes will be unconditionally guaranteed on a senior
subordinated basis by OSI, ACSI and SBOC (the "OSI GUARANTY," the "ACSI
GUARANTY," and the "SBOC GUARANTY," respectively, and collectively, the
"SUBSIDIARY GUARANTEES").
The Company, OSI, ACSI and SBOC are hereinafter referred to collectively
as the "REGISTRANTS." The Notes and the Subsidiary Guarantees are more fully
described in the Registration Statement referred to below and in the Indenture,
the form of which has been filed as an exhibit to such Registration Statement.
Terms not otherwise defined herein have the same meanings as set forth in the
Indenture.
1. REGISTRATION STATEMENT AND PROSPECTUS. Each of the Registrants has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively the "ACT"), a registration statement (including a prospectus) on
Form S-3 (No. 33- ) relating to the Notes and the Subsidiary Guarantees,
which may be amended. The registration
<PAGE>
statement as amended at the time when it becomes effective or, if a post-
effective amendment is filed with respect thereto, as amended by such post-
effective amendment at the time of its effectiveness, including in each case
financial statements and exhibits filed as a part thereof or incorporated by
reference therein and the information (if any) contained in a prospectus
subsequently filed with the Commission pursuant to Rule 424(b) under the Act and
deemed to be part of the registration statement at the time of effectiveness
pursuant to Rule 430A under the Act, is hereinafter referred to as the
REGISTRATION STATEMENT, and the prospectus in the form first used to confirm
sales of the Notes, whether or not filed with the Commission pursuant to Rule
424(b) under the Act, is hereinafter referred to as the PROSPECTUS. Any
reference herein to the Registration Statement, Prospectus and any amendment or
supplement thereto shall be deemed to refer to and include the documents
incorporated by reference therein, and any reference herein to the terms
"amend," "amendment" or supplement" with respect to the Registration Statement
or the Prospectus shall be deemed to refer to and include the filing after the
execution hereof of any document with the Commission deemed to be incorporated
by reference therein.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the representations
and warranties contained in this Agreement, and subject to the terms and
conditions contained herein, (i) the Company agrees to issue and sell to the
Underwriter, and (ii) the Underwriter agrees to purchase from the Company, the
principal amount of Notes set forth opposite the name of the Underwriter in
Schedule I hereto. The purchase price for the Notes shall be % of the
principal amount thereof (the "PURCHASE PRICE").
3. TERMS OF PUBLIC OFFERING. The Underwriter has advised the Company that
the Underwriter proposes (i) to make a public offering of the Notes as soon
after the effective date of the Registration Statement as in its judgment is
advisable and (ii) initially to offer the Notes upon the terms set forth in the
Prospectus.
4. DELIVERY AND PAYMENT. Delivery to the Underwriter of and payment for
the Notes shall be made at such place or places in New York, New York as
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") shall designate, at
10:00 A.M., New York City time, on the fifth business day following the date of
the Agreement (the "CLOSING DATE"). The Closing Date and the location of
delivery of and the form of payment for the Notes may be varied by mutual
agreement between the Underwriter and the Company.
The certificates in definitive form evidencing the Notes shall be
registered in such names and issued in such denominations as the Underwriter
shall request in writing not later than two full business days prior to the
Closing Date, and such certificates shall be made available to the Underwriter
for inspection at the offices of DLJ in New York, New York not later than 9:30
A.M., New York City time, on the business day immediately preceding the Closing
Date. Certificates in definitive form evidencing the Notes shall be delivered
to the Underwriter on the Closing Date, with any transfer taxes thereon duly
paid by the Company, for the account of the Underwriter, against payment of the
Purchase Price therefor by certified or official bank checks payable in New York
Clearing House funds (next day) to the order of the Company.
5. AGREEMENTS OF REGISTRANTS. The Registrants jointly and severally
hereby agree with the Underwriter:
(a) To file, if necessary, (i) an amendment to the Registration
Statement or (ii) a post-effective amendment to the Registration Statement
pursuant to Rule 430A under the Act, as
2
<PAGE>
soon as practicable after the execution and delivery of this Agreement and to
use their best efforts to cause the Registration Statement or such post-
effective amendment to become effective at the earliest possible time.
(b) To advise the Underwriter promptly and, if requested by the
Underwriter, to confirm such advice in writing, (i) when the Registration
Statement has become effective and when any post-effective amendment thereto
becomes effective, (ii) of any request by the Commission for amendments to
the Registration Statement or amendments or supplements to the Prospectus or
for additional information, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
the suspension by any state securities commission of the qualification of the
Notes for offering or sale in any jurisdiction, or the initiation of any
proceeding for such purposes, and (iv) of the happening of any event during
the period referred to in paragraph (e) below that makes any statement of a
material fact made in the Registration Statement or the Prospectus untrue or
that requires the making of any additions to or changes in the Registration
Statement or the Prospectus in order to make the statements therein 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 Notes
under state securities or Blue Sky laws, the Registrants will make every
reasonable effort to obtain the prompt withdrawal or lifting of such order.
(c) To furnish to the Underwriter and its counsel, without charge,
three signed copies of the Registration Statement (including documents
incorporated by reference) as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to the Underwriter as
many conformed copies of the Registration Statement (including documents
incorporated by reference) as so filed and of each amendment to it, without
exhibits, and each preliminary prospectus as the Underwriter may reasonably
request.
(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or to
make any amendment or supplement to the Prospectus of which the Underwriter
shall not previously have been advised or to which the Underwriter shall
reasonably object in writing within three business days after being furnished
a copy thereof, and to prepare and file with the Commission, promptly upon
the Underwriter's reasonable request, any amendment to the Registration
Statement or supplement to the Prospectus which may be necessary or advisable
in connection with the distribution of the Notes by the Underwriter, and to
use their best efforts to cause the same to become effective promptly.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of counsel to
the Underwriter a prospectus is required by law to be delivered in connection
with sales of the Notes by the Underwriter or dealers, to furnish to the
Underwriter and dealers, without charge, as many copies of the Prospectus
(and of any amendment or supplement to the Prospectus) as the Underwriter or
dealers may reasonably request. The Registrants consent to the use of the
Prospectus and any amendment or supplement thereto by the Underwriter and by
all dealers to whom the Notes may be sold, both in connection with the
offering or sale of the Notes and for such period of time thereafter as the
Prospectus is required by law to be delivered in connection therewith.
(f) If during the period specified in paragraph (e) above any event
shall occur as a result of which, in the opinion of counsel to the
Underwriter it becomes necessary or advisable
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to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances then existing, not misleading, or
if it is necessary to amend or supplement the Prospectus to comply with any
law, forthwith to promptly prepare and file with the Commission an
appropriate amendment or supplement to the Prospectus so that the statements
in the Prospectus, as so amended or supplemented will not, in the light of
the circumstances then existing, be misleading, or so that the Prospectus
will comply with law, and to furnish to the Underwriter and to such dealers
as the Underwriter shall specify, such number of copies thereof as the
Underwriter or such dealers may reasonably request.
(g) Prior to any public offering of the Notes, to cooperate with the
Underwriter and counsel to the Underwriter in connection with obtaining the
registration or qualification of the Notes for offer and sale by the
Underwriter and by dealers under the state securities or Blue Sky laws of
such jurisdictions as the Underwriter may reasonably request, to continue
such qualification in effect so long as reasonably required for distribution
of the Notes and to file such consents to service of process or other
documents as may be necessary in order to effect such registration or
qualification, provided, however, that in no event shall the Registrants be
obligated to qualify to do business or to take any action that would subject
any of them to service of process in suits, other than as to matters and
transactions relating to the offer and sale of the Notes or to subject
themselves to taxation in respect of doing business in any jurisdiction in
which they are not so subject.
(h) To make generally available to the holders of the Notes as soon
as reasonably practicable an earnings statement (which need not be audited)
covering a period of at least twelve months beginning on the first day of the
first fiscal quarter of the Company after the effective date of the
Registration Statement which shall satisfy the provisions of Section 11(a) of
the Act and Rule 158 promulgated thereunder, and to advise the Underwriter in
writing when such statement has been so made available.
(i) As long as the Notes remain outstanding, to furnish to the
Underwriter as soon as available a copy of each report, document or other
publicly available information of the Registrants mailed to the holders of
the Notes pursuant to the terms of the Indenture or to the holders of the
Company's common stock.
(j) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to pay
all costs, expenses, fees and taxes incident to, and in connection with:
(i) the preparation, printing, filing and distribution under the
Act of the Registration Statement (including, without limitation,
financial statements and exhibits contained therein), each preliminary
prospectus relating to the Notes and all amendments and supplements to any
of them prior to or during the period specified in paragraph (e) above
(excluding legal fees and expenses of counsel to the Underwriter incurred
in connection therewith),
(ii) the preparation, printing and delivery of the Prospectus and
all amendments or supplements thereto during the period specified in
paragraph (e) above,
(iii) the preparation, printing, execution and delivery of this
Agreement, the Indenture, the Notes, the preliminary and supplemental Blue
Sky memoranda and all other
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agreements, memoranda, correspondence and other documents printed and
delivered in con-nection with the offering of the Notes,
(iv) the registration with the Commission, and the issuance and
delivery by the Company of, the Notes,
(v) the registration or qualification of the Notes for offer and
sale under the securities or Blue Sky laws or regulations of the several
states (including, without limitation, the fees and disbursements of
counsel to the Underwriter relating to such registration or qualification
and memoranda relating thereto),
(vi) filings and clearance with the National Association of
Securities Dealers, Inc. ("NASD") in connection with the offering
(including, without limitation, the fees and expenses, including
reasonable legal fees and expenses, of the "qualified independent
underwriter" required by Schedule E to the By-Laws of the NASD),
(vii) furnishing such copies of the Registration Statement, the
Prospectus and all amendments and supplements thereto as may be requested
for use in connection with the offering or sale of the Notes by the
Underwriter or by dealers to whom the Notes may be sold,
(viii) the performance by the Trustee of its obligations under the
Indenture,
(ix) the rating of the Notes by rating agencies, if any, and
(x) the performance by the Registrants of their other obligations
under this Agreement.
(k) To use the proceeds from the sale of the Notes in the manner
specified in the Registration Statement under the caption "Use of Proceeds."
(l) Not to claim voluntarily, and to resist actively any attempts to
claim, the benefit of any usury laws against the holders of the Notes.
(m) From and after the date the Registration Statement becomes
effective, for such period as in the opinion of counsel to the Underwriter a
prospectus is required by law to be delivered in connection with market-
making activities, to prepare, file and maintain an effective Registration
Statement to permit the Underwriter (or any affiliates of the Underwriter) to
make a market in the Notes.
(n) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than a default by the Underwriter) or if for any
reason the Company shall be unable or unwilling to perform its obligations
hereunder, to reimburse the Underwriter for the fees and expenses to be paid
or reimbursed pursuant to 5(j) above, and to reimburse the Underwriter for
all out-of-pocket expenses (including the reasonable fees and expenses of
counsel to the Underwriter) reasonably incurred by the Underwriter in
connection herewith. If the transactions contemplated hereby are
consummated, each of the parties shall pay its own expenses, including the
costs and expenses of its counsel, except as otherwise provided in 5(j)
above.
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<PAGE>
(o) Not to distribute prior to the Closing Date any offering material
in connection with the offering and sale of the Notes other than the
Registration Statement, the preliminary prospectus, the Prospectus or other
materials, if any, permitted by the Act.
(p) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Registrants
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Notes.
(q) To comply to the best of its ability in a timely manner with the
Act (including, without limitation, the applicable provisions of Rules 424
and 430A under the Act), the Securities Exchange Act of 1934, as amended, and
rules and regulations of the Commission thereunder (the "EXCHANGE ACT") and
the Trust Indenture Act of 1939, as amended (the "TRUST INDENTURE ACT") so as
to permit the completion of the distribution of the Notes as contemplated in
this Agreement and in the Prospectus.
(r) Prior to the Closing Date, to furnish to the Underwriter, as
soon as they have been prepared by the Company, a copy of any consolidated
financial statements of the Company for any period subsequent to the period
covered by the financial statements appearing in the Registration Statement
and the Prospectus.
(s) Not to register, offer, sell, contract to sell or grant any
option to purchase or otherwise dispose of any Notes or any other debt
securities (other than any private loan, credit or financing agreement with a
bank or similar financial institution) for a period of 90 days after the
commencement of the public offering of the Notes by the Underwriter, without
its prior written consent.
6. REPRESENTATIONS AND WARRANTIES OF THE REGISTRANTS. The Registrants
jointly and severally represent and warrant to the Underwriter that:
(a) (i) The Registration Statement, as originally filed, and each
preliminary prospectus filed as part of the Registration Statement as
originally filed or as part of any amendment thereto, or filed pursuant to
Rule 424 under the Act, complied when so filed in all material respects with
the Act and (ii) when the Registration Statement becomes effective and on the
Closing Date (A) the Registration Statement and any amendments thereto will
comply in all material respects with the provisions of the Act and will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and (B) the Prospectus and any supplements thereto
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that
the representations and warranties contained in this paragraph (a) shall not
apply to statements or omissions in the Registration Statement or the
Prospectus (or any supplement or amendment to them) based upon information
relating to the Underwriter furnished to the Company in writing by the
Underwriter or counsel to the Underwriter expressly for use therein.
(b) The documents incorporated by reference in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
preliminary prospectus, when they became or become effective under the Act or
were or are filed with the Commission under the Exchange Act, as the case may
be, conformed or will conform in all material respects with the
6
<PAGE>
requirements of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder.
(c) The Indenture has been qualified under the Trust Indenture Act.
(d) The Company has been duly organized, is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to carry on
its business as it is currently being conducted and to own, lease and operate
its respective properties as described in the Registration Statement, and is
duly qualified and in good standing as a foreign corporation registered to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where
the failure to be so qualified would not have a material adverse effect on
the business, condition (financial or other), results of operations,
properties or prospects of the Company.
(e) The entities listed in Exhibit A hereto are all of the
Subsidiaries of the Company (the "SUBSIDIARIES"). Each Subsidiary is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation with corporate power and
authority under such laws to own, lease and operate its properties and
conduct its business, and each Subsidiary is duly qualified to transact
business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or transacts
business of a type, that would make such qualification necessary, except to
the extent that the failure to so qualify or be in good standing would not
have a material adverse effect on the business, condition (financial or
other), results of operations, properties or prospects of the Company and the
Subsidiaries, taken as a whole. All of the outstanding capital stock or
other securities evidencing equity ownership of each Subsidiary of the
Company has been duly authorized and validly issued, is fully paid and
nonassessable, is not subject to preemptive or similar rights and is owned by
the Company, free and clear of any security interest, claim, lien or
encumbrance except for the pledge pursuant to the Working Capital Credit
Agreement and the Senior Debt of the Company, including the 9 1/4% First
Mortgage Bonds due 2008. There are no outstanding rights, warrants or
options to acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other equity interest in any such Subsidiary.
(f) Each of the Registrants has all necessary corporate power and
authority to enter into and perform its obligations under this Agreement and
the Indenture.
(g) The Company has all necessary corporate power and authority to
issue, sell and deliver the Notes to the Underwriter, to be sold by the
Underwriter pursuant hereto.
(h) This Agreement has been duly authorized, validly executed and
delivered by each of the Registrants and (assuming the due execution and
delivery thereof by the Underwriter) is the legally valid and binding
obligation of each of the Registrants, enforceable against each of the
Registrants in accordance with its terms, except as the enforceability
thereof may be limited by (i) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors generally, (ii)
the effect of general principles of equity, whether enforcement is considered
in a proceeding in equity or at law, and the discretion of the court before
which any proceeding therefor may be brought and (iii) state or federal laws
or policies relating to the non-enforceability of the indemnification or
contribution provisions contained in this Agreement.
7
<PAGE>
(i) The Indenture has been duly authorized by the Registrants and, when
duly executed and delivered by each of the Registrants (assuming the due
authorization, execution and delivery thereof by the Trustee thereunder),
will be the legally valid and binding obligation of each of the Registrants,
enforceable against each of the Registrants in accordance with its terms,
except as the enforceability thereof may be limited by (i) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting the rights and remedies of
creditors and (ii) the effect of general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefor may be brought.
The Indenture, when executed and delivered, will conform in all material
respects to the description thereof in the Prospectus.
(j) The Notes have been duly authorized for issuance and sale by the
Company to the Underwriter pursuant to this Agreement and, when issued and
authenticated by the Trustee in accordance with the terms of the Indenture
and delivered to and paid for by the Underwriter in accordance with the terms
hereof, the Notes will conform in all material respects to the description
thereof in the Registration Statement and the Prospectus, will be the legally
valid and binding obligation of the Company, enforceable against the Company
in accordance with their terms, and will be entitled to the benefits of the
Indenture except as the enforceability thereof may be limited by (i) the
effect of bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting the rights and
remedies of creditors and (ii) the effect of general principles of equity,
whether enforcement is considered in a proceeding in equity or at law, and
the discretion of the court before which any proceeding therefor may be
brought.
(k) The authorized, issued and outstanding capital stock of the
Company as of March 31, 1994 is as set forth in the Registration Statement
under the caption "Capitalization," and all of the outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid, non-assessable and not subject to any preemptive or similar
rights. There are no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, any shares of capital stock
or other equity interest in the Company other than pursuant to the 1989
Executive Officer Plan, the 1989 Director Stock Option Plan, the Showboat,
Inc. Employee Stock Option Plan and outstanding warrants to purchase 150,000
shares of common stock of the Company.
(l) Neither the Company nor any of its Subsidiaries is in violation
of its respective charter or by-laws, as the case may be, or in default in
the performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any other
agreement, indenture or instrument material to the conduct of the busi-ness
of the Company and its Subsidiaries, taken as a whole, to which the Company
or any of its Subsidiaries is a party or by which it or any of the
Subsidiaries or their respective property is bound.
(m) The issuance and sale of the Notes by the Company, the
execution, delivery and performance of this Agreement and the Indenture by
each of the Registrants and compliance by each of the Registrants with the
provisions hereof, of the Indenture and the Notes will not conflict with or
constitute a breach of any of the terms or provisions of, or cause a default
under, or result in the imposition of a lien or encumbrance on any properties
of any of the Registrants or their Subsidiaries or an acceleration of
indebtedness pursuant to, (i) the charter or by-laws of any of the
Registrants or their Subsidiaries, (ii) any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which any of the
Registrants or their Subsidiaries is a party
8
<PAGE>
or by which any of them or their property is bound, or (iii) any law or
administrative regulation applicable to any of the Registrants, any of their
Subsidiaries or any of their assets or properties, or any judgment, order or
decree of any court or governmental agency or authority (including, without
limitation, the Nevada Gaming Commission, the Nevada State Gaming Control
Board, the New Jersey Casino Control Commission or any other gaming authority
in any State of the United States or foreign country (collectively, the
"GAMING AUTHORITIES")) entered in any proceeding to which any of the
Registrants or any of their Subsidiaries was or is now a party or to which
any of them or their respective properties may be subject. Except as
disclosed in the Registration Statement, no authorization, approval, consent
or license of any government, governmental agency (including, without
limitation, any Gaming Authorities) or court, domestic or foreign (other than
under the Act, the Trust Indenture Act and the securities or Blue Sky laws or
regulations of the various states) is required for the valid authorization,
issuance, sale and delivery of the Notes by the Company or for the execution,
delivery or performance of this Agreement and the Indenture by the
Registrants. No consents or waivers from any person are required to
consummate the transactions contemplated by this Agreement and the Indenture
other than such consents and waivers as have been or will be obtained, except
for such consents and waivers which, if not obtained, would not, either
individually or in the aggregate, have a material adverse effect on the
business, condition (financial or other), results of operations, properties
or prospects of the Company and the Subsidiaries, taken as a whole.
(n) Except as disclosed in the Registration Statement, to the best
knowledge of the Company, there is (i) no action, suit or proceeding before
or by any court, arbitrator or governmental agency (including, without
limitation, any Gaming Authorities), body or official, domestic or foreign,
now pending, or threatened or contemplated to which the Company or any of the
Subsidiaries is or may be a party or to which the business or property of the
Company or any of the Subsidiaries is or may be subject, (ii) no statute,
rule, regulation or order that has been enacted, adopted or issued by any
governmental agency or that has been proposed by any governmental body, or
(iii) no injunction, restraining order or order of any nature by a federal or
state court of competent jurisdiction to which the Company or any of the
Subsidiaries is or may be subject has been issued that, in the case of
clauses (i), (ii) and (iii) above, (w) is required to be disclosed in the
Registration Statement or the Prospectus and that is not so disclosed, (x)
might have a material adverse effect on the business, condition (financial or
other), results of operations, properties or prospects of the Company and the
Subsidiaries, taken as a whole, (y) would interfere with or adversely affect
the issuance of the Notes in any material respect or (z) in any manner seeks
to challenge the validity of this Agreement, the Indenture or the Notes.
There is no contract or document concerning the Company or any of the
Subsidiaries of a character required to be described in the Registration
Statement or in the Prospectus or to be filed as an exhibit to the
Registration Statement or incorporated by reference therein that is not so
described, or filed or incorporated as required.
(o) There are no holders of securities of the Company who, by reason
of the filing of the Registration Statement under the Act or the execution by
the Company of this Agreement, have the right to request or demand that the
Company include any such securities in the registration or offering
contemplated hereby.
(p) Neither the Company nor any of its Subsidiaries is involved in
any material labor dispute nor, to the knowledge of the Company or any of its
Subsidiaries, is any material dispute threatened which, if such dispute were
to occur, would have a material adverse effect on
9
<PAGE>
the business, condition (financial or other), results of operations,
properties or prospects of the Company and its Subsidiaries, taken as a
whole.
(q) Neither the Company nor any of its Subsidiaries has violated any
safety or similar law applicable to its business, nor any federal or state
law relating to discrimination in the hiring, promotion or pay of employees
nor any applicable federal or state wages and hours laws, nor any provisions
of the Employee Retirement Income Security Act, as amended, or the rules and
regulations promulgated thereunder, which in each case might result in any
material adverse effect on the business, condition (financial or other),
results of operations, properties or prospects of the Company and its
Subsidiaries, taken as a whole.
(r) Except as set forth in the Registration Statement, the Company
and its Subsidiaries are in material compliance with all applicable existing
federal, state, local and foreign laws and regulations relating to protection
of human health or the environment or imposing liability or standards of
conduct concerning any Hazardous Material ("ENVIRONMENTAL LAWS"), except for
those liabilities reserved for on the Company's financial statements
contained in the Registration Statement and for such instances of
noncompliance which, either singly or in the aggregate, would not have a
material adverse effect on the business, condition (financial or other),
results of operations, properties or prospects of the Company and its
Subsidiaries, taken as a whole. The term "Hazardous Material" means (i) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) any "hazardous
waste" as defined by the Resource Conservation and Recovery Act, as amended,
(iii) any petroleum or petroleum product, (iv) any polychlorinated biphenyl,
and (v) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material, waste or substance regulated under or within the meaning
of any other Environmental Law.
(s) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its Subsidiaries, in the course
of which it identifies and evaluates associated costs and liabilities.
Except as set forth in the Registration Statement, there is no alleged
liability, or to the best knowledge and information of the Company and its
Subsidiaries, potential liability (including, without limitation, alleged or
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal
injuries, or penalties) of the Company or any of its Subsidiaries arising out
of, based on or resulting from (i) the presence or release into the
environment of any Hazardous Material at any location at which the Company or
any Subsidiary is currently conducting any business whether or not owned by
the Company or any of its Subsidiaries, or which the Company or any
Subsidiary owns or (ii) any violation or alleged violation of any
Environmental Law, which alleged or potential liability, singly or in the
aggregate, would have a material adverse effect on the business, condition
(financial or other), results of operations, properties or prospects of the
Company and its Subsidiaries, taken as a whole.
(t) Except as disclosed in the Registration Statement, no Gaming
Authority has issued any order or decree or is otherwise impairing,
restricting or prohibiting (i) a payment of dividends by any Subsidiary to
its parent or the Company, or (ii) the continuation of the business of any
Subsidiary as presently conducted.
(u) Except as disclosed in the Registration Statement, each of the
Company and its Subsidiaries has such material permits, licenses, franchises
and authorizations of governmental or regulatory authorities (including,
without limitation, licenses, certificates, permits and other required
10
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authorizations from the Gaming Authorities and other governmental
authorities) ("PERMITS") as are necessary to own, lease and operate its
respective properties and to conduct its business in the manner described in
the Prospectus. All such Permits are in full force and effect, and each of
the Company and its Subsidiaries has fulfilled and performed all of its
material obligations with respect to such Permits. No event has occurred
which allows, or after notice or lapse of time would allow, revocation or
termination by the issuer thereof or which results in any other material
impairment of the rights of the holder of any such Permits. Such Permits
contain no restrictions that are materially burdensome to the Company or any
of its Subsidiaries in light of their respective business, and the Company
and its Subsidiaries have no reason to believe that any governmental body or
agency is considering limiting, suspending or revoking any such Permit.
(v) Except as otherwise set forth in the Prospectus or such as are
not material to the business, condition (financial or other), results of
operations, properties or prospects of the Company and its Subsidiaries,
taken as a whole, the Company and its Subsidiaries have good and marketable
title, free and clear of all liens, claims, encumbrances and restrictions
(except liens for taxes not yet due and payable and immaterial liens and
liens disclosed in the Registration Statement) to all property and assets
described in the Registration Statement as being owned by it. All leases to
which the Company or any of its Subsidiaries is a party are valid and binding
obligations of the Company or its Subsidiaries, and no default has occurred
or is continuing there-under which might result in any material adverse
effect on the business, condition (financial or other), results of
operations, properties or prospects of the Company and its Subsidiaries,
taken as a whole. The Company and its Subsidiaries enjoy peaceful and
undisturbed possession under all such leases to which any of them is a party
as lessee with such exceptions as do not materially interfere with the use
made by the Company or such Subsidiary.
(w) The Company and each of its Subsidiaries maintain reasonably
adequate insurance on their assets.
(x) The financial statements, together with related schedules and
notes forming part of the Registration Statement and the Prospectus (and any
amendment or supplement thereto), comply in all material respects with the
requirements of the Act and present fairly the consolidated financial
position, results of operations and cash flows of the Company and its
Subsidiaries on the basis stated in the Registration Statement at the
respective dates or for the respective periods to which they apply; except as
disclosed therein, such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved; the pro forma financial
statements and the related notes thereto included in the Registration
Statement and Prospectus have been prepared in accordance with the applicable
requirements of the Act, have been compiled on the pro forma basis described
therein, and in the opinion of the Company, all assumptions used in the
preparation thereof were reasonable at the time made and all adjustments used
therein are based upon good faith estimates and assumptions believed by the
Company to be reasonable at the time made.
(y) Each of the Company and its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's
general or specific authorizations, and
11
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(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles.
(z) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as set forth
in the Prospectus, and up to the Closing Date, unless the Company has
notified the Underwriter as provided in Section 5(b)(iv) above: (i) neither
the Company nor any of its Subsidiaries has incurred any liabilities or
obligations, direct or contingent, that are material, individually or in the
aggregate, to the Company and its Subsidiaries, taken as a whole, nor entered
into any material transactions not in the ordinary course of business, (ii)
there has not been any decrease in the Company's or any of its Subsidiaries'
capital stock or any increase in long-term indebtedness to meet working
capital requirements or any material increase in short-term indebtedness of
the Company or its Subsidiaries or any payment of or declaration to pay any
dividends or any other distribution with respect to the Company's or any of
its Subsidiaries' capital stock, as the case may be, (iii) there has not been
any material adverse effect on the business, condition (financial or other),
results of operations, properties or prospects of the Company and its
Subsidiaries, taken as a whole and (iv) to the best knowledge of the Company
and its Subsidiaries, there has been no change in the gaming laws,
regulations or administrative practices of the Gaming Authorities of the
State of Nevada, the State of New Jersey, the State of Louisiana, the State
of New York, the State of Indiana or any other State in the United States or
foreign country, including the State of New South Wales, Australia, which
would have a material adverse effect on the business, condition (financial or
other), results of operations, properties or prospects of the Company and its
Subsidiaries, taken as a whole.
(aa) The present fair salable value of the assets of the Company and
its Subsidiaries, taken as a whole, exceeds the amount that will be required
to be paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of the Company and its Subsidiaries as
they become absolute and matured. The assets of the Company and its
Subsidiaries, taken as a whole, do not constitute unreasonably small capital
to carry out their business as conducted or as proposed to be conducted. The
Company does not intend to, and does not believe that it will, incur debts
beyond its ability to pay such debts as they mature. The Company does not
intend to permit any of its Subsidiaries to incur debts beyond their
respective ability to pay such debts as they mature. Upon the issuance of
the Notes and the Subsidiary Guarantees, (i) the present fair salable value
of the assets of the Company and its Subsidiaries, taken as a whole, will
exceed the amount that will be required to be paid on or in respect of their
existing debts and other liabilities (including contingent liabilities) as
they become absolute and matured, and (ii) the assets of the Company and its
Subsidiaries, taken as a whole, will not constitute unreasonably small
capital to carry out their business as now conducted or as proposed to be
conducted, including the capital needs of the Company and each of its
Subsidiaries, taking into account the projected capital requirements and
capital availability of the Company and each of its Subsidiaries.
(ab) The Company and any agent thereof acting on its behalf, has not
taken and will not take any action that might cause this Agreement or the
issuance or sale of the Notes to violate Regulation G (12 C.F.R. Part 207),
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System, in each case as in effect now or as the same may hereafter be
in effect on the Closing Date.
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<PAGE>
(ac) Neither the Company nor any of its Subsidiaries is an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations and interpretations promulgated thereunder.
(ad) KPMG Peat Marwick is an independent public accountant with
respect to the Company, as required by the Act.
(ae) The Registrants have complied with all provisions of Florida
H.B. 1771, codified as Section 517.075 of the Florida statutes, and all
regulations promulgated thereunder relating to issuers doing business with
the Government of Cuba or with any person or any affiliate located in Cuba.
(af) Exhibit B attached hereto contains a complete and accurate list
of all material agreements between the Company or any of its Subsidiaries, on
the one hand, and any of their affiliates, on the other hand, (i) that are in
effect as of the date of this Agreement, copies of which have been provided
previously to the Underwriter and (ii) that will be in effect as of the
Closing Date, copies of which will be provided to the Underwriter on or prior
to the Closing Date.
(ag) Except as disclosed in the Registration Statement, no change in
any gaming laws, regulations or administrative practices, or recommendations
or guidelines of the Gaming Authorities of the State of Nevada, the State of
New Jersey, the State of Louisiana, the State of New York, the State of
Indiana or any other State or foreign country, including the State of New
South Wales, Australia, is pending which could reasonably be expected to be
adopted and if adopted, could reasonably be expected to have, individually or
in the aggregate with all such changes, a material adverse effect upon the
business, condition (financial or other), results of operations, properties
or prospects of the Company and its Subsidiaries, taken as a whole.
7. INDEMNIFICATION.
(a) Each of the Registrants jointly and severally agrees (i) to
indemnify and hold harmless the Underwriter, each person, if any, who
controls the Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of the Underwriter, from and
against any and all losses, claims, damages, liabilities and judgments
arising out of or relating to any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
Prospectus (as amended or supplemented if the Registrants shall have
furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the case of the Prospectus, in light of the
circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by any such
untrue statement or omission or alleged untrue statement or omission based
upon information relating to the Underwriter furnished in writing to the
Registrants by such Underwriter or counsel to the Underwriter expressly for
use therein and (ii) to reimburse the Underwriter, each person, if any, who
controls the Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of the Underwriter, for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending against such losses, claims, damages, liabilities
and judgments as such expenses are incurred.
13
<PAGE>
(b) In case any action (including any governmental action or proceeding by
the Gaming Authorities) shall be brought against the Underwriter or any
person controlling such Underwriter, based upon any preliminary prospectus,
the Registration Statement or the Prospectus or any amendment or supplement
thereto and with respect to which indemnity may be sought against the
Registrants, such Underwriter shall promptly notify the Company in writing
and the Registrants shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Underwriter or such controlling person unless
(i) the employment of such counsel has been specifically authorized in
writing by the Registrants, (ii) the Registrants have failed to assume the
defense with counsel reasonably satisfactory to such Underwriter or (iii) the
named parties to any such action (including any impleaded parties) include
both such Underwriter or such controlling person and the Registrants, and
such Underwriter or such controlling person shall have been advised by
counsel that there may be one or more legal defenses available to it that are
different from or additional to those available to the Registrants (in which
case the Registrants shall not have the right to assume the defense of such
action on behalf of such Underwriter or such controlling person, it being
understood, however, that the Registrants shall not, in connection with any
one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for such Underwriter and
the controlling persons, which firm shall be designated in writing by such
Underwriter, and that all such fees and expenses shall be reimbursed as they
are incurred). The Registrants shall not be liable for any settlement of any
such action effected without the written consent of the Company but if
settled with the Company's written consent, the Registrants agree to
indemnify and hold harmless such Underwriter and any such controlling person
from and against any loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second sentence of
this paragraph, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 10 business days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(c) The Underwriter agrees to indemnify and hold harmless the
Registrants and the Subsidiaries and their respective directors, the officers
who sign the Registration Statement, and any person controlling the
Registrants within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, to the same extent as the foregoing indemnity from the
Registrants to such Underwriter but only with reference to information
relating to such Underwriter furnished in writing by or on behalf of such
Underwriter or counsel to such Underwriter expressly for use in the
Registration Statement, the Prospectus or any preliminary prospectus. In
case any action shall be brought against the Registrants in respect of which
indemnity may be sought against the Underwriter, such Underwriter shall have
the rights and duties given to the Registrants (except that if the
Registrants shall have assumed the defense thereof, such Underwriter shall
not be required
14
<PAGE>
to do so, but may employ separate counsel therein and participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of such Underwriter), and the Registrants shall have the rights and
duties given to such Underwriter, by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities and judgments (i) in such proportion as
is appropriate to reflect the relative benefits received by the Registrants,
on the one hand, and the Underwriter, on the other hand, from the offering of
the Notes or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Registrants and the Underwriter in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Registrants and the
Underwriter shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
Registrants, and the total underwriting discounts and commissions received by
the Underwriter, bear to the total price to the public of the Notes, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault of the Registrants and the Underwriter 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 Registrants or the
Underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Registrants and the Underwriter agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were determined
by pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The losses, claims, damages, liabilities or judgments
of an indemnified party referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating, preparing to defend or defending any such
action or claim. Notwithstanding the provisions of this Section 7(d), the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the underwriting discounts and commissions received by it
exceeds the amount of any damages that the Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The statements with respect to the offering of the Notes set
forth on the cover page of the Prospectus (to the extent such statements
relate to the Underwriter) and the first and third paragraph, as well as the
statement in the third sentence of the fourth paragraph that following
completion of the initial offering of the Notes, the Underwriter intends to
make a market in the Notes but the Underwriter is not obligated to do so and
may discontinue any market making at any time without notice, under the
caption "Underwriting" in the Prospectus constitute the only information
heretofore furnished to the Registrants in writing by or on behalf of or by
the Underwriter expressly for use in the Registration Statement, the
Prospectus or any amendment or supplement thereto or any preliminary
prospectus.
15
<PAGE>
(f) The indemnity and contribution agreements contained in this Section 7
are in addition to any liability that the indemnifying persons may otherwise
have to the indemnified persons referred to above.
8. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligation of the
Underwriter to purchase the Notes under this Agreement is subject to the
satisfaction or waiver of each of the following conditions:
(a) All the representations and warranties of the Registrants and
its Subsidiaries contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the
Closing Date. The Registrants shall have performed or complied with all of
the agreements and satisfied all conditions on its part to be performed,
complied with or satisfied at or prior to the Closing Date.
(b) (i) the Registration Statement shall have become effective (or
if a post-effective amendment is required to be filed pursuant to Rule 430A
under the Act, such post-effective amendment shall have become effective) not
later than 1:00 p.m., New York City time, on the date of this Agreement or at
such later date and time as the Underwriter may approve in writing,
(ii) no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction shall have been issued as
of the Closing Date that would prevent or interfere with the issuance of
the Notes, and
(iii) at the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission and no stop order suspending the
sale of the Notes in any jurisdiction designated by the Underwriter
pursuant to Section 5(g) hereof shall have been issued and no proceeding
for that purpose shall have been commenced or be pending or, to the
knowledge of the Registrants, be contemplated.
(c) No action shall have been taken and no statute, rule or
regulation or order shall have been enacted, adopted or issued by any
governmental agency that would as of the Closing Date prevent the issuance of
the Notes; and on the Closing Date, no action, suit or proceeding shall be
pending against or affecting or, to the knowledge of the Registrants or any
Subsidiary, threatened against, the Registrants or any of its Subsidiaries
before any court or arbitrator or any governmental body, agency or official,
except for such actions, suits or proceedings that if adversely determined
would not, either individually or in the aggregate, have a material adverse
effect on the issuance or marketability of the Notes, or would, except as
disclosed in the Registration Statement and Prospectus, individually or in
the aggregate have a material adverse effect on the business, condition
(financial or other), results of operations, properties or prospects of the
Company and its Subsidiaries, taken as a whole.
(d) (i) Except as disclosed in the Registration Statement and the
Prospectus, since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse effect or any development involving a prospective material
adverse effect on the equity ownership of the Registrants and its
Subsidiaries or in the business, condition (financial or other), results of
operation, properties or prospects, whether or not arising in the ordinary
course of business, of the Company and its Subsidiaries, taken as a whole,
16
<PAGE>
(ii) the Registrants and its Subsidiaries shall have no liability or
obligation, direct or contingent, that is material to the Registrants and
its Subsidiaries, other than those reflected in the Registration Statement
and the Prospectus, and
(iii) at the Closing Date the Underwriter shall have received a
certificate dated the Closing Date, signed by the President and Secretary
of the Registrants and each Subsidiary (who may, as to proceedings
contemplated, rely upon his information and belief), confirming the
matters set forth in paragraphs (a), (b), (c) and (d) of this Section 8.
(e) The Underwriter shall have received on the Closing Date an
opinion (reasonably satisfactory to the Underwriter and counsel to the
Underwriter) dated the Closing Date, of Kummer Kaempfer Bonner & Renshaw,
counsel to the Company, in the form of Exhibit C attached hereto.
(f) The Underwriter shall have received on the Closing Date an
opinion (reasonably satisfactory to the Underwriter and counsel to the
Underwriter) dated the Closing Date, of Thomas Bonner, General Counsel of
ACSI, in the form of Exhibit D attached hereto.
(g) The Underwriter shall have received on the Closing Date an
opinion, dated the Closing Date, of Latham & Watkins, in form and substance
satisfactory to the Underwriter, and Latham & Watkins shall have received
such papers and information as it requests to enable it to pass upon the
matters contained in such opinion.
(h) Prior to the Closing Date, the Registrants shall have received
the requisite approval or approvals of the transactions contemplated by this
Agreement and described in the Registration Statement from the Gaming
Authorities of the State of Nevada and the State of New Jersey and no such
approval or approvals shall impose on the Registrants or any Subsidiary
thereof any conditions which adversely effect the ability of the Registrants
and the Subsidiaries to conduct their business as is presently being
conducted.
(i) At the time this Agreement is executed by the Registrants, the
Underwriter shall have received from KPMG Peat Marwick a letter, dated such
date, in form and substance satisfactory to the Underwriter and counsel to
the Underwriter, confirming that they are independent public accountants with
respect to the financial statements and certain financial information of the
Registrants contained in the Registration Statement and the Prospectus within
the meaning of the Act and applicable published regulations of the Act, and
otherwise in the form previously agreed.
(j) At the Closing Date, the Underwriter shall have received from
KPMG Peat Marwick a letter, in form and substance satisfactory to the
Underwriter and counsel to the Underwriter and dated as of the Closing Date,
to the effect that they reaffirm the statements made in the letter furnished
pursuant to Section 8(k), except that the specified date referred to shall be
a date not more than five days prior to the Closing Date.
(k) At the Closing Date, the Underwriter shall have received a
certificate of solvency, dated the Closing Date, signed by the Chairman and
Chief Executive Officer and Principal Accounting officer of the Company,
substantially in the form previously approved by the Underwriter.
17
<PAGE>
(l) Counsel to the Underwriter shall have been furnished with such
documents as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in this Section 8 and in order to
evidence the accuracy, completeness or satisfaction in all material respects
of any of the representations, warranties or conditions herein contained.
All opinions, certificates, letters and other documents required by this
Section 8 to be delivered by the Company and its Subsidiaries will be in
compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Underwriter. The Company and its
Subsidiaries will furnish the Underwriter with such conformed copies of such
opinions, certificates, letters and other documents as the Underwriter shall
reasonably request.
9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the later of (i) execution of this Agreement and (ii) the
effectiveness of the Registration Statement.
The Underwriter may terminate this Agreement at any time prior to the
Closing Date by written notice to the Company if any of the following has
occurred:
(a) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse effect
or development involving a prospective material adverse effect on the
business, condition (financial or other), results of operations,
properties or prospects of the Company and its Subsidiaries, taken as a
whole, whether or not arising in the ordinary course of business, that
would, in the Underwriter's judgment, make it impracticable or inadvisable
to proceed with the offering or delivery of the Notes on the terms and in
the manner contemplated in the Prospectus,
(b) any outbreak or escalation of hostilities or other national or
international calamity or crisis or material change in economic
conditions, if the effect of such outbreak, escalation, calamity, crisis
or change on the financial markets of the United States or elsewhere
would, in the Underwriter's judgment, make it impracticable to market the
Notes on the terms and in the manner contemplated in the Prospectus,
(c) the suspension or material limitation of trading generally in
securities on the New York Stock Exchange, the American Stock Exchange or
the NASDAQ National Market System or limitation on prices for securities
on any such exchange or National Market System,
(d) the enactment, publication, decree or other promulgation after
the date hereof of any federal or state statute, regulation, rule or order
of any court or other governmental authority that in the Underwriter's
opinion materially and adversely affects, or will materially and adversely
affect, the business, condition (financial or other), results of
operations, properties or prospects of the Company and its Subsidiaries,
taken as a whole,
(e) any securities of the Company or any of its Subsidiaries shall
have been downgraded or placed on any "watch list" for possible
downgrading by any nationally recognized statistical rating organization,
provided, that in the case of such "watch list" placement, termination
--------
shall be permitted only if such placement would, in the judgment of any
underwriter, make it impracticable or inadvisable to market the Notes or
to enforce contracts for the sale of the Notes or materially impair the
investment quality of the Notes,
18
<PAGE>
(f) the declaration of a banking moratorium by either federal or New
York State authorities, or
(g) the taking of any action by any federal, state or local
government or agency after the date hereof in respect of its monetary or
fiscal affairs that in the Underwriter's opinion has a material adverse
effect on the financial markets in the United States.
In any such case which does not result in termination of this Agreement, you
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.
10. MISCELLANEOUS.
(a) Notices given pursuant to any provision of this Agreement shall
be addressed as follows: (i) if to the Registrants, c/o Showboat, Inc., 2800
Fremont Street, Las Vegas, Nevada 89104, Attention: J. K. Houssels, with a
copy to Kummer Kaempfer Bonner & Renshaw, 3800 Howard Hughes Parkway, Seventh
Floor, Las Vegas, Nevada 89109, Attention: John N. Brewer, Esq. and (ii) if
to the Underwriter, c/o Donaldson, Lufkin & Jenrette Securities Corporation,
140 Broadway, New York, New York 10005, Attention: Steve Puccinelli, with a
copy to Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New York
10022, Attention: Raymond Y. Lin, Esq. (provided that any notice to the
Underwriter pursuant to section 7 hereof will be mailed, delivered,
telegraphed or telecopied and confirmed to the Underwriter and its counsel),
or in any case to such other address as the person to be notified may have
requested in writing.
(b) The respective indemnities, contribution agreements,
representations, warranties and other statements set forth in or made
pursuant to this Agreement shall remain operative and in full force and
effect, and will survive delivery of and payment for the Notes, regardless of
(i) any investigation or statement as to the results thereof, made by or on
behalf of any such person, (ii) acceptance of the Notes and payment for them
hereunder and (iii) termination of this Agreement.
(c) Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Registrants, the
Underwriter, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of
this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Notes from the Underwriter merely because of such
purchase.
(d) This Agreement shall be construed, interpreted and the rights of
the parties determined in accordance with the laws of the State of New York
without reference to its choice of law provisions.
(e) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
19
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Underwriter.
Very truly yours,
SHOWBOAT, INC.
By: _____________________________________
Name:
Title:
Subsidiary Guarantors:
OCEAN SHOWBOAT, INC.
By: _____________________________________
Name:
Title:
ATLANTIC CITY SHOWBOAT, INC.
By: _____________________________________
Name:
Title:
SHOWBOAT OPERATING COMPANY
By: _____________________________________
Name:
Title:
20
<PAGE>
Accepted and Agreed to:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: _____________________________________
Name:
Title:
21
<PAGE>
SCHEDULE I
----------
Aggregate Principal
Amount of Senior
Subordinated Notes
Underwriter to be Purchased
- ----------- --------------------
Donaldson, Lufkin & Jenrette $150,000,000
Securities Corporation ____________
Total $150,000,000
============
22
<PAGE>
EXHIBIT A
---------
[LIST OF SUBSIDIARIES]
23
<PAGE>
EXHIBIT B
---------
[LIST OF AGREEMENTS BETWEEN THE COMPANY AND ITS SUBSIDIARIES]
24
<PAGE>
EXHIBIT C
---------
Form of Opinion of Kummer Kaempfer Bonner & Renshaw.
The Underwriter shall have received on the Closing Date an opinion
(satisfactory to the Underwriter and counsel to the Underwriter) dated the
Closing Date, of Kummer Kaempfer Bonner & Renshaw, counsel to the Company, to
the effect that:
(i) Each of the Registrants and the Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation, has full corporate power and authority
to carry on its business as it is described in the Prospectus and as it is
currently being conducted and to own, lease and operate its properties,
and is duly qualified and is in good standing as a foreign corporation
registered to do business in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have
a material adverse effect on the Registrants and the Subsidiaries, taken
as a whole.
(ii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Registration Statement under the caption
"Capitalization" and all of the shares of issued and outstanding capital
stock of the Company have been duly authorized and validly issued and are
fully paid and non-assessable and, to the knowledge of such counsel, are
not subject to preemptive or similar rights.
(iii) The authorized capital stock of SBOC consists of
[2,500,000] shares of common stock, [$1.00] par value, of which
[1,000,000] shares are issued and outstanding. The authorized capital
stock of OSI consists of [10,000,000] shares of common stock, [$1.00] par
value, of which [10,000,000] shares are issued and outstanding. The
authorized capital stock of ACSI consists of [2,500] shares of common
stock, no par value, of which [1,500] are issued and outstanding. All
shares of such outstanding capital stock of such Subsidiaries of the
Company have been duly authorized and validly issued and are fully paid
and nonassessable, are not subject to preemptive or similar rights and are
currently owned by the Company, free and clear of any security interest,
claim, lien or encumbrance, except for the pledge pursuant to the Working
Capital Credit Agreement.
(iv) There are no outstanding rights, warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares
of capital stock or other equity interest in the Company (other than
pursuant to the 1989 Executive Officer Plan, the 1989 Director Stock
Option Plan, the Showboat, Inc. Employee Stock Option Plan and outstanding
warrants to purchase 150,000 shares of common stock of the Company), or
any Subsidiary.
(v) There are no holders of securities of the Company who, by
reason of the filing of the Registration Statement under the Act or the
execution by the Company of this Agreement, have the right to request or
demand that the Company include any such securities in the registration or
offering contemplated hereby.
(vi) Each of the Registrants has all necessary corporate power
and authority to enter into and perform its obligations under this
Agreement and the Indenture. The Company
25
<PAGE>
has all necessary corporate power and authority to issue, sell and deliver
the Notes to the Underwriter to be sold by the Underwriter pursuant
hereto.
(vii) This Agreement has been duly authorized and validly
executed by each of the Registrants.
(viii) The Indenture has been duly authorized by each of the
Registrants, and when duly executed and delivered by such Registrant
(assuming due authorization, execution and delivery thereof by the Trustee
thereunder), will be a legally valid and binding obligation of such
Registrant, enforceable against such Registrant in accordance with its
terms, except as the enforceability thereof may be limited by (1) the
effect of bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting the
rights and remedies of creditors, and (2) the effect of general principles
of equity, whether enforcement is considered in a proceeding in equity or
at law, and the discretion of the court before which any proceeding
therefor may be brought.
(ix) The Notes have been duly authorized for issuance and sale by
the Company to the Underwriter pursuant to this Agreement and, when issued
and authenticated in accordance with the terms of the Indenture and
delivered to and paid for by the Underwriter in accordance with the terms
hereof, the Notes will be the legally valid and binding obligation of the
Company, enforceable against the Company in accordance with their terms
and will be entitled to the benefits of the Indenture, except as the
enforceability thereof may be limited by (1) the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors, and (2) the effect of general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefor may be
brought.
(x) The issuance and sale of the Notes by the Company, the
execution, delivery and performance of this Agreement and the Indenture by
each of the Registrants and compliance by each of the Registrants with the
provisions hereof and of the Indenture and the Notes will not conflict
with or constitute a breach of any of the terms or provisions of, or a
default under, or result in the imposition of a lien or encumbrance on any
properties of such Registrant or any of its Subsidiaries, or an
acceleration of indebtedness pursuant to (1) the charter or by-laws of
such Registrant or any of its Subsidiaries, (2) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to
which such Registrant or any of its Subsidiaries is a party or by which
any of them or their property is bound, or (3) any law or administrative
regulation applicable to such Registrant, any of its Subsidiaries or any
of their assets or properties, or any judgment, order or decree of any
court or governmental agency or authority (including, without limitation,
any Gaming Authorities) entered in any proceeding to which such Registrant
or any of its Subsidiaries was or is now a party or to which any of them
or their respective properties may be subject.
(xi) None of the Company, SBOC and their Subsidiaries is, or will
be upon the execution and delivery of the Indenture, the issuance and sale
of the Notes and the fulfillment of the terms of this Agreement, subject
to regulation under any Nevada statute or regulation limiting their
respective ability to incur indebtedness for borrowed money, except
statutes or regulations applicable generally to business corporations
incorporated or doing business in
26
<PAGE>
Nevada, and except the Nevada Gaming Control Act, the regulations
thereunder and any rules, ordinances or regulations of local regulatory
authorities.
(xii) The guarantees by OSI, ACSI and SBOC (the "Subsidiary
Guarantees") have been duly authorized, executed and delivered by OSI,
ACSI and SBOC. The SBOC Guaranty is a valid and binding obligation of
SBOC, enforceable against SBOC in accordance with its terms, in each case
except as such enforceability may be limited by (i) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the rights and
remedies of creditors and (ii) the effect of general principles of equity,
whether enforcement is considered in a proceeding in equity or at law, and
the discretion of the court before which any proceeding therefor may be
brought.
(xiii) The execution, delivery and performance of the SBOC
Guaranty by SBOC and compliance by such parties with all applicable
provisions thereof and the consummation of the transactions contemplated
thereby, will not conflict with or constitute a breach of any of the terms
or provisions of, or a default under, or result in the imposition of a
lien or encumbrance on any properties of the Company, SBOC or any of their
Subsidiaries, or an acceleration of indebtedness pursuant to (1) the
charter or by-laws of the Company, SBOC or any of their Subsidiaries, (2)
any bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument to which the Company, SBOC or any of their
Subsidiaries is a party or by which any of them or their property is
bound, or (3) any law or administrative regulation applicable to the
Company, SBOC any of their Subsidiaries or any of their assets or
properties, or any judgment, order or decree of any court or governmental
agency or authority (including, without limitation, any Gaming
Authorities) entered in any proceeding to which the Company, SBOC or any
of their Subsidiaries was or is now a party or to which any of them or
their respective properties may be subject.
(xiv) No consent, approval, authorization or order of, or filing
or registration with, any regulatory body, administrative agency, or other
governmental agency (including, without limitation, any Gaming
Authorities), except as securities or Blue Sky laws of the various states
may require, which has not been made or obtained, is required for the
execution, delivery and performance of this Agreement, the Indenture and
for the valid issuance and sale of Notes to the Underwriter as
contemplated by this Agreement or the offering of Notes contemplated by
the Prospectus; and no consent, approval, authorization or order of, or
filing or registration with, any regulatory body, administrative agency,
or other governmental agency (including, without limitation, any Gaming
Authorities), except as the securities or Blue Sky laws of the various
states may require, which was not made or obtained, was required for the
consummation of the transactions (other than future transactions to
benefit the Company's existing facilities or to expand into new facilities
or gaming jurisdictions for which the net proceeds from the sale of Notes
pursuant to this agreement have been reserved) described in the
Registration Statement under the caption "Use of Proceeds."
(xv) The Indenture has been duly qualified under the Trust
Indenture Act.
(xvi) The Registration Statement has become effective under the
Act.
(xvii) Any required filing of the Prospectus, or any supplement
thereto, pursuant to Rule 424(b) under the Act has been made in the manner
and within the time period required thereunder and, to the best knowledge
of such counsel, no stop order suspending the
27
<PAGE>
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose are pending before or contemplated by the
Commission.
(xviii) The Registration Statement, as of its effective date, and
the Prospectus, as of its date, complied as to form in all material
respects with the requirements of the Act, except that in each case such
counsel expresses no opinion with respect to the financial statements or
other financial data contained in the Registration Statement or the
Prospectus or with respect to the Statement of Eligibility of
Qualification on Form T-1 of the Trustee under the Indenture. The
documents incorporated by reference in the Registration Statement or
Prospectus or any amendment or supplement thereto, when they became
effective under the Act or were filed with the Commission under the
Exchange Act, as the case may be, complied as to form in all materials
respects with the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder.
There has been no document required to be filed under the Exchange Act and
the rules and regulations of the Commission thereunder that upon such
filing would be deemed to be incorporated by reference in the Prospectus
that has not been so filed.
(xix) The Notes and the Indenture conform in all material
respects to the descriptions thereof in the Registration Statement.
(xx) The statements in the Registration Statement under the
caption "Certain Considerations-Regulatory Matters," in Item 15 of the
Registration Statement under the caption "Indemnification of Officers and
Directors" and in the Annual Report on Form 10-K of the Company for the
year ended December 31, 1993 (the "10-K"), and incorporated by reference
in the Registration Statement under the caption "Regulation," to the
extent they constitute matters of Nevada law, summaries of Nevada legal
matters, documents or proceedings, or legal conclusions with respect to
Nevada law, have been reviewed by us and are correct summaries in all
respects.
(xxi) There is no contract or document concerning any of the
Registrants or any of the Subsidiaries of a character required to be
described in the Registration Statement or in the Prospectus or to be
filed as an exhibit to the Registration Statement that is not so described
or filed or incorporated by reference therein.
(xxii) Neither the Company nor any of its Subsidiaries is in
violation of its charter or by-laws, as the case may be, and, to the best
knowledge of such counsel after due inquiry, neither the Company nor any
of its Subsidiaries is in default in the performance of any obliga-tion,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any other agreement, indenture or
instrument material to the conduct of the business of the Company and its
Subsidiaries, taken as a whole, to which the Company or any of its
Subsidiaries is a party or by which it or any of its Subsidiaries or their
respective property is bound.
(xxiii) To the best of such counsel's knowledge, there is (1) no
action, suit or proceeding before or by any court, arbitrator or
governmental agency (including, without limitation, any Gaming Authority),
body or official, domestic or foreign, now pending, threatened or
contemplated to which the Company or any of its Subsidiaries is or may be
a party or to which the business or property of the Company or any of its
Subsidiaries is or may be subject, (2) no statute, rule, regulation
(including any gaming statutes and regulations) or
28
<PAGE>
order that has been enacted, adopted or issued by any governmental agency
or that has been proposed by any governmental body or (3) no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction to which the Company or any of its Subsidiaries is
or may be subject issued that, in the case of clauses (1), (2) and (3)
above, (x) is required to be disclosed in the Registration Statement or
the Prospectus and that is not so disclosed, (y) would adversely affect
the Company, any of its Subsidiaries, or the property of the Company or
any of its Subsidiaries in any material respect or (z) would interfere
with or adversely affect the issuance of the Notes.
(xxiv) Except as otherwise set forth in the Prospectus, or such as
would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, each of the Company and its Subsidiaries
has good and marketable title, free and clear of all liens, claims,
encumbrances and restrictions (except liens for taxes not yet due and
payable and immaterial liens and liens disclosed in the Registration
Statement) to all property and assets described in the 10-K and
incorporated by reference in the Registration Statement as being owned by
it.
(xxv) All leases to which each of the Company or any of its
Subsidiaries is a party are valid and binding and no default has occurred
or is continuing thereunder which might result in any material adverse
effect on the Company and its Subsidiaries, taken as a whole, and the
Company and the Subsidiaries enjoy peaceful and undisturbed possession
under all such leases to which any of them is a party lessee with such
exceptions as do not materially interfere with the use made by the Company
or such Subsidiary.
(xxvi) Except as otherwise set forth in the Registration
Statement, each of the Company and its Subsidiaries has such Permits as
are necessary to own, lease and operate its respective properties and to
conduct its business in the manner described in the Registration
Statement. Each of the Company and its Subsidiaries has fulfilled and
performed all of its material obligations with respect to such Permits and
no event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or which results in any other
material impairment of the rights of the holder of any such Permit and
such Permits contain no restrictions that are materially burdensome to the
Company or any of its Subsidiaries.
(xxvii) The indebtedness represented by the Notes is not usurious
under any applicable Nevada law.
(xxviii) Neither the Company nor any of its Subsidiaries is an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(xxix) Neither the issuance, sale or delivery of the Notes nor
the application of the proceeds thereof by the Company in accordance with
this Agreement will violate Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
In addition, such counsel shall state that it has participated in
conferences with representatives of the Company, representatives of the
Company's accountants, the Underwriter's representatives and counsel to the
Underwriter, at which conferences the contents of the Registration Statement and
the Prospectus and related matters were discussed and although such counsel has
not independently verified
29
<PAGE>
and is not passing upon and assumes no responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus (other than those that such counsel must opine on
pursuant to Section 8(e) of this Agreement), no facts have come to such
counsel's attention which led it to believe that the Registration Statement, on
the effective date thereof, 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 contained therein, in the light of the circumstances under
which they were made, not misleading or that the Prospectus, on the date thereof
or on the date of such opinion, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary to make the
statements contained therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such counsel need express no
view with respect to the financial statements and related notes, the financial
statement schedules and other financial, statistical and accounting data
included in the Registration Statement or Prospectus or incorporated by
reference therein or with respect to the Statements of Eligibility of
Qualification on Form T-1 of the Trustee under the Indenture).
30
<PAGE>
EXHIBIT D
---------
Form of Opinion of Thomas Bonner
The Underwriter shall have received on the Closing Date and opinion
(reasonably satisfactory to the Underwriter and counsel to the Underwriter),
dated the Closing Date, of Thomas Bonner, General Counsel of ACSI, to the effect
that:
(i) Each of OSI, ACSI and their Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation, has full corporate power and authority
to carry on its business as it is described in the Prospectus and as it is
currently being conducted and to own, lease and operate its properties,
and is duly qualified and is in good standing as a foreign corporation
registered to do business in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have
a material adverse effect on OSI, ACSI and their Subsidiaries, taken as a
whole.
(ii) The authorized, issued and outstanding capital stock of OSI
and its Subsidiaries is as set forth in the Form 10-K for OSI for the year
ended December 31, 1993, under the caption "OSI, Inc. and Subsidiaries
Consolidated Balance Sheets" and all of the shares of issued and
outstanding capital stock of OSI and its Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable and,
to the knowledge of such counsel, are not subject to preemptive or similar
rights.
(iii) The authorized capital stock of ACSI consists of [2,500]
shares of common stock, no par value, of which [1,500] shares are issued
and outstanding. All of such shares have been duly authorized and validly
issued and are fully paid and nonassessable, are not subject to preemptive
or similar rights and are currently owned by OSI, free and clear of any
security interest, claim, lien or encumbrance.
(iv) There are no outstanding rights, warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares
of capital stock or other equity interest in each of OSI, ACSI or their
Subsidiaries.
(v) Each of OSI and ACSI has all necessary corporate power and
authority to enter into and perform its obligations under this Agreement
and the Indenture.
(vi) This Agreement has been duly authorized and validly executed
by each of OSI and ACSI.
(vii) The Indenture has been duly authorized by each of OSI and
ACSI, and when duly executed and delivered by OSI and ACSI (assuming due
authorization, execution and delivery thereof by the Trustee thereunder),
will be a legally valid and binding obligation of each of OSI and ACSI,
enforceable against OSI and ACSI in accordance with its terms, except as
the enforceability thereof may be limited by (1) the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors, and (2) the effect of general principles of equity,
31
<PAGE>
whether enforcement is considered in a proceeding in equity or at law, and
the discretion of the court which any proceeding therefor may be brought.
(viii) None of OSI, ACSI and their Subsidiaries is, or will be upon
the execution and delivery of Indenture, the issuance and sale of the
Notes and the fulfillment of the terms of this Agreement, subject to
regulation under any New Jersey statute or regulation limiting their
respective ability to incur indebtedness for borrowed money, except
statutes or regulations applicable generally to business corporations
incorporated or doing business in New Jersey, and except the New Jersey
Casino Control Act, the regulations thereunder and any rules, ordinances
or regulations of local regulatory authorities.
(ix) The Subsidiary Guarantees are valid and binding obligations
of OSI and ACSI enforceable against OSI and ACSI in accordance with their
terms, except as such enforceability may be limited by (1) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the rights and
remedies of creditors and (2) the effect of general principles of equity
whether enforcement is considered in a proceeding in equity or at law, and
the discretion of the court before which any proceeding therefor may be
brought.
(x) The execution, delivery and performance of this Agreement,
the Indenture and the Subsidiary Guarantees by ACSI and compliance by such
parties with all applicable provisions thereof and the consummation of the
transactions contemplated thereby will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under, or result
in the imposition of a lien or encumbrance on any properties of each of
OSI, ACSI or any of their Subsidiaries, or an acceleration of indebtedness
pursuant to (1) the charter or by-laws of OSI, ACSI or any of their
Subsidiaries, (2) any bond, debenture, note, indenture, mortgage, deed of
trust or other agreement or instrument to which OSI, ACSI or any of their
Subsidiaries is a party or by which any of them or their property is bound
or (3) any law or administrative regulation applicable to OSI, ACSI, any
of their Subsidiaries or any of their assets or properties, or any
judgment, order or decree of any court or governmental agency or authority
(including, without limitation, any Gaming Authorities) entered in any
proceeding to which OSI, ACSI or any of their Subsidiaries was or is now a
party or to which any of them or their respective properties may be
subject.
(xi) No consent, approval, authorization or order of, or filing
or registration with, any regulatory body, administrative agency, or other
governmental agency (including, without limitation, any Gaming
Authorities), except as securities or Blue Sky laws or the gaming
securities laws or regulations of the various states may require, which
has not been made or obtained, is required for the execution, delivery and
performance of this Agreement and the Indenture; and no consent, approval,
authorization or order of, or filing or registration with, any regulatory
body, administrative agency, or other governmental agency (including,
without limitation, any Gaming Authorities), except as the securities or
Blue Sky laws of the various states may require, which was not made or
obtained, was required for the consummation of the transactions (other
than future transactions to benefit the Company's existing facilities or
to expand into new facilities or gaming jurisdictions for which the net
proceeds from the sale of the Notes pursuant to this Agreement have been
reserved) described in the Registration Statement under the caption "Use
of Proceeds."
32
<PAGE>
(xii) The statements in the Registration Statement under the
caption "Certain Considerations-Regulatory Matters" and in the Annual
Report on Form 10-K of the Company for the year ended December 31, 1993
(the "10-K") and incorporated by reference into the Registration
Statement, under the caption "Regulation" to the extent they constitute
matters of New Jersey law, summaries of New Jersey legal matters,
documents or proceedings, or legal conclusions with respect to New Jersey
law, have been reviewed by us and are correct summaries in all respects.
(xiii) None of OSI, ACSI and any of their Subsidiaries is in
violation of its charter or by-laws, as the case may be, and, to the best
knowledge of such counsel after due inquiry, none of OSI, ACSI and any of
their Subsidiaries is in default in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any other agreement, indenture or
instrument material to the conduct of the business of OSI, ACSI and their
Subsidiaries, taken as a whole, to which OSI, ACSI or any of their
Subsidiaries is a party or by which it or any of the Subsidiaries or their
respective property is bound.
(xiv) To the best of such counsel's knowledge, there is (1) no
action, suit or proceeding before or by any court, arbitrator or
governmental agency (including, without limitation, any Gaming Authority),
body or official, domestic or foreign, now pending, threatened or
contemplated to which OSI, ACSI or any of their Subsidiaries is or may be
a party or to which the business or property of OSI, ACSI or any of their
Subsidiaries is or may be subject, (2) no statute, rule, regulation
(including gaming statutes and regulations) or order that has been
enacted, adopted or issued by any governmental agency or that has been
proposed by any governmental body or (3) no injunction, restraining order
or order of any nature by a federal or state court of competent
jurisdiction to which OSI, ACSI or any of their Subsidiaries is or may be
subject issued that, in the case of clauses (1), (2) and (3) above (x) is
required to be disclosed in the Registration Statement or the Prospectus
and that is not so disclosed, (y) might adversely affect OSI, ACSI or any
of their Subsidiaries, or the property of OSI, ACSI or any of their
Subsidiaries in any material respect or (z) would interfere with or
adversely affect the issuance of the Notes.
(xv) Except as otherwise set forth in the Prospectus, or such as
would not have a material adverse effect on OSI, ACSI and their
Subsidiaries, taken as a whole, each of OSI, ACSI and their Subsidiaries
has good and marketable title, free and clear of all liens, claims,
encumbrances and restrictions (except liens for taxes not yet due and
payable and immaterial liens and liens disclosed in the Registration
Statement) to all property and assets described in the 10-K and
incorporated by reference in the Registration Statement as being owned by
them.
(xvi) All leases to which each of OSI, ACSI or any of their
Subsidiaries is a party are valid and binding and no default has occurred
or is continuing thereunder which might result in any material adverse
effect on OSI, ACSI and their Subsidiaries, taken as a whole, and OSI,
ACSI and their Subsidiaries enjoy peaceful and undisturbed possession
under all such leases to which any of them is a party lessee with such
exceptions as do not materially interfere with the use made by each of
OSI, ACSI or their Subsidiaries.
(xvii) Each of OSI, ACSI and their Subsidiaries has such Permits
as are necessary to own, lease and operate its respective properties and
to conduct its business in the manner
33
<PAGE>
described in the Registration Statement. Each of OSI, ACSI and their
Subsidiaries has fulfilled and performed all of its material obligations
with respect to such Permits and no event has occurred which allows, or
after notice or lapse of time would allow, revocation or termination
thereof or which results in any other material impairment of the rights of
the holder of any such Permit and such Permits contain no restrictions
that are materially burdensome to OSI, ACSI or any of their Subsidiaries.
(xviii) The indebtedness represented by the promissory note
issued by ACSI in favor of the Company is not usurious under any
applicable New Jersey law.
(xix) Neither OSI, ACSI nor any of their Subsidiaries is an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
34
<PAGE>
Exhibit 4.06
DRAFT 6/28/94
================================================================================
SHOWBOAT, INC.
__% SENIOR SUBORDINATED NOTES DUE 2009
INDENTURE
Dated as of ________ __, 1994
[___________________]
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).............................................................................. 12.03
(c) ............................................................................. 12.03
313 (a) ............................................................................. 7.06
(b)(1) .......................................................................... 7.06
(b)(2) .......................................................................... 7.06;7.07
(c) ............................................................................. 7.06;12.02
(d).............................................................................. 7.06
314 (a) ............................................................................. 4.03;12.02
(b) ............................................................................. N.A.
(c)(1) .......................................................................... 12.04
(c)(2) .......................................................................... 12.04
(c)(3) .......................................................................... N.A.
(d).............................................................................. N.A.
(e) ............................................................................ 12.05
(f).............................................................................. N.A.
315 (a).............................................................................. 7.01
(b).............................................................................. 7.05,12.02
(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) ............................................................................. 2.13
317 (a)(1) .......................................................................... 6.08
(a)(2)........................................................................... 6.09
(b) ............................................................................. 2.04
318 (a).............................................................................. 12.01
(b).............................................................................. N.A.
(c).............................................................................. 12.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
<C> <S> <C>
Section 1.01. Definitions............................................................. 1
Section 1.02. Other Definitions....................................................... 13
Section 1.03. Incorporation by Reference of Trust Indenture Act....................... 13
Section 1.04. Rules of Construction................................................... 14
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating......................................................... 14
Section 2.02. Execution and Authentication............................................ 15
Section 2.03. Registrar and Paying Agent.............................................. 15
Section 2.04. Paying Agent to Hold Money in Trust..................................... 15
Section 2.05. Lists of Holders........................................................ 16
Section 2.06. Transfer and Exchange................................................... 16
Section 2.07. Replacement Notes....................................................... 17
Section 2.08. Outstanding Notes....................................................... 17
Section 2.09. Treasury Notes.......................................................... 17
Section 2.10. Temporary Notes......................................................... 18
Section 2.11. Cancellation............................................................ 18
Section 2.12. Defaulted Interest...................................................... 18
Section 2.13. Record Date............................................................. 18
Section 2.14. CUSIP Number............................................................ 18
ARTICLE 3
REDEMPTION AND OFFERS TO PURCHASE
Section 3.01. Notices to Trustee...................................................... 19
Section 3.02. Selection of Notes to Be Purchased or Redeemed.......................... 19
Section 3.03. Notice of Redemption.................................................... 20
Section 3.04. Effect of Notice of Redemption.......................................... 20
Section 3.05. Deposit of Redemption or Purchase Price................................. 20
Section 3.06. Notes Redeemed or Purchased in Part..................................... 21
Section 3.07. Optional Redemption..................................................... 21
Section 3.08. Mandatory Redemption.................................................... 22
Section 3.09. Offers to Purchase...................................................... 22
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes........................................................ 24
Section 4.02. Maintenance of Office or Agency......................................... 24
Section 4.03. Reports................................................................. 25
Section 4.04. Compliance Certificate.................................................. 25
Section 4.05. Taxes................................................................... 25
Section 4.06. Stay, Extension and Usury Laws.......................................... 26
Section 4.07. Restricted Payments..................................................... 26
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries............................................................ 28
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
Section 4.09. Incurrence of Indebtedness and Issuance of
Disqualified Stock...................................................... 28
Section 4.10. Asset Sales............................................................. 29
Section 4.11. Transactions with Affiliates............................................ 30
Section 4.12. Liens................................................................... 31
Section 4.13. Additional Subsidiary Guarantees........................................ 31
Section 4.14. Redesignation of Non-Recourse Subsidiary................................ 31
Section 4.15. Offer to Purchase Upon Change of Control................................ 32
Section 4.16. Corporate Existence..................................................... 32
Section 4.17. Line of Business........................................................ 32
Section 4.18. No Senior Subordinated Indebtedness..................................... 33
Section 4.19. Escrow Agent............................................................ 33
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets................................ 33
Section 5.02. Successor Corporation Substituted....................................... 34
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default....................................................... 34
Section 6.02. Acceleration............................................................ 36
Section 6.03. Other Remedies.......................................................... 37
Section 6.04. Waiver of Past Defaults................................................. 37
Section 6.05. Control by Majority..................................................... 37
Section 6.06. Limitation on Suits..................................................... 37
Section 6.07. Rights of Holders of Notes to Receive Payment........................... 38
Section 6.08. Collection Suit by Trustee.............................................. 38
Section 6.09. Trustee May File Proofs of Claim........................................ 38
Section 6.10. Priorities.............................................................. 39
Section 6.11. Undertaking for Costs................................................... 39
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee....................................................... 40
Section 7.02. Rights of Trustee....................................................... 41
Section 7.03. Individual Rights of Trustee............................................ 41
Section 7.04. Trustee's Disclaimer.................................................... 41
Section 7.05. Notice of Defaults...................................................... 41
Section 7.06. Reports by Trustee to Holders........................................... 42
Section 7.07. Compensation and Indemnity.............................................. 42
Section 7.08. Replacement of Trustee.................................................. 43
Section 7.09. Successor Trustee by Merger, etc........................................ 44
Section 7.10. Eligibility; Disqualification........................................... 44
Section 7.11. Preferential Collection of Claims Against Company....................... 44
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance.............................................................. 44
Section 8.02. Legal Defeasance and Discharge.......................................... 44
</TABLE>
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<TABLE>
<C> <S> <C>
Section 8.03. Covenant Defeasance..................................................... 45
Section 8.04. Conditions to Legal or Covenant Defeasance.............................. 45
Section 8.05. Deposited Money and U.S. Government Obligations
to be Held in Trust; Other Miscellaneous Provisions..................... 47
Section 8.06. Repayment to Company.................................................... 47
Section 8.07. Reinstatement........................................................... 47
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes..................................... 48
Section 9.02. With Consent of Holders of Notes........................................ 48
Section 9.03. Compliance with Trust Indenture Act..................................... 50
Section 9.04. Revocation and Effect of Consents....................................... 50
Section 9.05. Notation on or Exchange of Notes........................................ 50
Section 9.06. Trustee to Sign Amendments, etc......................................... 50
ARTICLE 10
SUBSIDIARY GUARANTEES
Section 10.01. Subsidiary Guarantee.................................................... 51
Section 10.02. Subordination........................................................... 52
Section 10.03. Liquidation; Dissolution; Bankruptcy.................................... 52
Section 10.04. Default on Senior Debt of the Guarantor................................. 53
Section 10.05. Acceleration of Notes................................................... 53
Section 10.06. When Distribution Must Be Paid Over..................................... 53
Section 10.07. Notice by a Guarantor................................................... 54
Section 10.08. Subrogation............................................................. 54
Section 10.09. Relative Rights......................................................... 54
Section 10.10. Subordination May Not Be Impaired By Any
Guarantor............................................................... 55
Section 10.11. Distribution or Notice to Representative................................ 55
Section 10.12. Rights of Trustee and Paying Agent...................................... 55
Section 10.13. Authorization to Effect Subordination................................... 56
Section 10.14. Limitation of Guarantor's Liability..................................... 56
Section 10.15. Releases Following Sale of Assets....................................... 56
ARTICLE 11
SUBORDINATION
Section 11.01. Subordination........................................................... 56
Section 11.02. Liquidation; Dissolution; Bankruptcy.................................... 57
Section 11.03. Default on Senior Debt.................................................. 57
Section 11.04. Acceleration of Notes................................................... 58
Section 11.05. When Distribution Must Be Paid Over..................................... 58
Section 11.06. Notice by Company....................................................... 58
Section 11.07. Subrogation............................................................. 59
Section 11.08. Relative Rights......................................................... 59
Section 11.09. Subordination May Not Be Impaired By Company............................ 59
Section 11.10. Distribution or Notice to Representative................................ 59
Section 11.11. Rights of Trustee and Paying Agent...................................... 60
Section 11.12. Authorization to Effect Subordination................................... 60
ARTICLE 12
MISCELLANEOUS
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<TABLE>
<C> <S> <C>
Section 12.01. Trust Indenture Act Controls............................................ 60
Section 12.02. Notices................................................................. 60
Section 12.03. Communication by Holders of Notes with Other
Holders of Notes........................................................ 61
Section 12.04. Certificate and Opinion as to Conditions Precedent...................... 61
Section 12.05. Statements Required in Certificate or Opinion........................... 62
Section 12.06. Rules by Trustee and Agents............................................. 62
Section 12.07. No Personal Liability of Directors, Officers,
Employees and Stockholders.............................................. 62
Section 12.08. Governing Law........................................................... 62
Section 12.09. No Adverse Interpretation of Other Agreements........................... 63
Section 12.10. Successors.............................................................. 63
Section 12.11. Severability............................................................ 63
Section 12.12. Counterpart Originals................................................... 63
Section 12.13. Table of Contents, Headings, etc........................................ 63
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF SUPPLEMENTAL INDENTURE
Exhibit C FORM OF NOTATION ON SENIOR SUBORDINATED
NOTE RELATING TO NOTE GUARANTEE
Exhibit D FORM OF ESCROW AGREEMENT
</TABLE>
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INDENTURE dated as of __________, 1994 between Showboat, Inc. a Nevada
corporation (the "Company"), Atlantic City Showboat, Inc., a New Jersey
corporation ("ACSI"), Ocean Showboat, Inc., a New Jersey corporation ("OSI") and
Showboat Operating Company, a Nevada corporation ("SBOC", and together with ACSI
and OSI, the "Guarantors") and ____________________, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the __% Senior
Subordinated Notes due 2009:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Affiliate" of any specified Person means any other individual,
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government or other entity of any kind
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), 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
securities of a Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance, transfer or other
disposition (whether in a single transaction or a series of related
transactions) of property or assets (including by way of a sale and leaseback)
of the Company or any Restricted Subsidiary (each referred to in this definition
as a "disposition") or (ii) the issuance or sale of Equity Interests of any
Restricted Subsidiary (whether in a single transaction or a series of related
transactions) in each case, other than (a) a disposition of inventory in the
ordinary course of business, (b) the disposition of all or substantially all of
the assets of the Company in a manner permitted pursuant to the provisions
described above under "Merger, Consolidation or Sale of Assets" and "Offer to
Purchase Upon Change of Control," (c) any disposition that is a Restricted
Payment or that is a dividend or distribution permitted under the covenant
described above under "Restricted Payments" or any Investment that is not
prohibited thereunder or any disposition of cash or Cash Equivalents, and (d)
any single disposition, or related series of dispositions, of assets with an
aggregate fair market value of less than $3.0 million.
"Atlantic City Showboat" means (i) all of ACSI's interest in its hotel
casino and related properties located at 801 Boardwalk, Atlantic City, New
Jersey and any Project Expansion relating thereto and (ii) any contiguous
property acquired by the Company or any of its Subsidiaries and any Project
Expansion relating thereto.
"Australian Gaming Approval" means the official selection of SHCL (or a
Subsidiary of SHCL) as the sole licensee or operator of a casino gaming
operation in Sydney, Australia.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
<PAGE>
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, partnership interests.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months from
the date of acquisition and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of $500 million,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above and (v) commercial paper having a rating of P-2 or the
equivalent thereof by Moody's Investors Service, Inc. or A-2 or the equivalent
thereof by Standard & Poor's Corporation and in each case maturing within six
months after the date of acquisition.
"Change of Control" means the occurrence of any of the following events:
(i) the sale, lease, transfer, conveyance or other disposition, 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; (ii) the liquidation or
dissolution of the Company; (iii) the Company becomes 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 Company's Existing Management, 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; or (iv) 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 shareholders 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) cease for any reason to constitute a majority of the Company's Board
of Directors then in office.
"Company" means the party named as such in the recitals to this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person and its Restricted Subsidiaries for
such period plus (a) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing Consolidated Net Income), plus (b) provision for taxes
based on income or profits to the extent such provision for taxes was included
in computing Consolidated Net Income, plus (c) consolidated interest expense of
such Person for such period, whether paid or accrued
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(including amortization of original issue discount, non-cash interest payments,
amortization of deferred financing charges and the interest component of capital
lease obligations), to the extent such expense was deducted in computing
Consolidated Net Income, plus (d) depreciation, amortization (including
amortization of goodwill and other intangibles) and other non-cash charges
(excluding any such non-cash charge that requires an accrual of or reserve for
cash charges for any future period and excluding any such non-cash charge that
is included in consolidated interest expense or consolidated tax expense) of
such Person for such period to the extent such depreciation, amortization and
other non-cash charges were deducted in computing Consolidated Net Income, in
each case, on a consolidated basis for such Person and its Restricted
Subsidiaries and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any 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 (i) the Net Income 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 to
the referent Person or a Wholly Owned Subsidiary, (ii) the Net Income of any
Person that is a Subsidiary (other than a Subsidiary of which at least 80% of
the Capital Stock having ordinary voting power for the election of directors or
other governing body of such Subsidiary is owned by the referent Person directly
or indirectly through one or more Subsidiaries) shall be included only to the
extent of the amount of dividends or distributions paid to the referent Person,
(iii) 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, and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person, the sum of (i)
the consolidated equity of the common stockholders of such Person and its
consolidated Subsidiaries plus (ii) the respective amounts reported on such
Person's most recent balance sheet with respect to any series of preferred stock
(other than Disqualified Stock) that by its terms is not entitled to the payment
of dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by such Person upon issuance of such preferred
stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset owned by
such Person or a consolidated Subsidiary of such Person, (y) all investments in
unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in
each case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges, all of the foregoing determined in
accordance with GAAP.
"Controlled Entity" means any of (a) SHCL, (b) any Non-Recourse Subsidiary
of the Company, including Showboat Star Partnership and Showboat Marina
Partnership, provided that the Company or a Subsidiary of the Company owns at
least 50% of the outstanding Capital Stock of such Non-Recourse Subsidiary, and
which is designated by the Company as a Controlled Entity or (c) any Qualified
Native American Gaming Project, including the Qualified Native American Project
to be managed by Showboat Mohawk Investment Limited Partnership, provided that
in each case: (i) each Subsidiary of the Company that owns, directly or
indirectly (through one or more Subsidiaries), any Capital Stock of such
Controlled Entity shall become a Guarantor of the Notes by executing a
Subsidiary Guarantee; and (ii) such Controlled Entity is a Managed Entity or a
Subsidiary of such Controlled Entity which is engaged in gaming activities is a
Managed Entity.
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"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"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.
"Designated Senior Debt" means, with respect to any Person, (i) the First
Mortgage Bonds and (ii) any other Senior Debt of such Person permitted under the
Indenture the principal amount of which is $50.0 million or more or which is
pari passu in right of payment to the First Mortgage Bonds and is secured by
substantially the same collateral.
"Disqualified Stock" means any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), 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
, 2009.
"Distribution" means, for purposes of Articles 10 and 11, a distribution
consisting of cash, securities or other property, by set-off or otherwise.
"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 the Escrow Agreement between the Company and
______________, as escrow agent, substantially in the form of Exhibit D hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excess Non-Recourse Subsidiary Cash Proceeds" means 50% of all cash
received by the Company or any Restricted Subsidiary from any Non-Recourse
Subsidiary (other than cash that is or may be required to be returned or repaid
to such Non-Recourse Subsidiary) in excess of $125 million in the aggregate.
"Existing Hotel Casinos" means the Las Vegas Showboat and the Atlantic
City Showboat.
"Existing Indebtedness" means Indebtedness of the Company or its
Restricted Subsidiaries (other than under the Working Capital Credit Agreement)
in existence on the date of the Indenture, until such amounts are repaid,
including without limitation, the First Mortgage Bonds.
"Existing Management" means J. K. Houssels, members of his family and his
estate.
"First Mortgage Bond Indenture" means the Indenture, dated as of May 18,
1993, among the Company, the Guarantors and IBJ Schroeder Bank & Trust Company,
as amended, pursuant to which the First Mortgage Bonds were issued.
4
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"Fixed Charges" means, with respect to any Person for any period, the sum
of (a) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, to the extent such
expense was deducted in computing Consolidated Net Income (including
amortization of original issue discount, non-cash interest payments and the
interest component of capital leases but excluding amortization of deferred
financing fees and excluding capitalized interest) and (b) the product of (i)
all cash dividend payments (and non-cash dividend payments in the case of a
Person that is a Subsidiary) on any series of preferred stock of such Person,
times (ii) 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, expressed as a decimal, in each case, on a consolidated
basis for such Person and its Restricted Subsidiaries and in accordance with
GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period; provided that (a) in the
event that the Company or any of its Restricted Subsidiaries incurs, assumes,
guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the event for
which the calculation of the Fixed Charge Coverage Ratio is made, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable period, (b) in making such computation, the Fixed
Charges of such Person attributable to interest on any Indebtedness bearing a
floating interest rate shall be computed on a pro forma basis as if the rate in
effect on the date of computation had been the applicable rate for the entire
period, (c) in making such computation, the Fixed Charges of such Person
attributable to interest on any Indebtedness under a revolving credit facility
shall be computed on a pro forma basis based upon the average daily balance of
such Indebtedness outstanding during the applicable period, (d) in the event
that the Company or any of its Restricted Subsidiaries consummates a Material
Acquisition or an Asset Sale subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated, then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such material
acquisition or Asset Sale (including the incurrence of any Indebtedness in
connection therewith), as if the same had occurred at the beginning of the
applicable period and in the event that the Company or any of its Restricted
Subsidiaries purchases any assets or property (including the real property on
which the Atlantic City Showboat is situated) which was previously leased by the
Company or any of its Restricted Subsidiaries subsequent to the commencement of
the period for which the calculation of the Fixed Charge Coverage Ratio is being
calculated but prior to the event for which the calculation of the Fixed Charge
Coverage Ratio is made, then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such purchase as if the same had occurred at the
beginning of the applicable period.
"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 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 federal or 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 Nevada
Gaming Commission, the Nevada State Gaming Control Board, the City Council of
the City of Las Vegas, and
5
<PAGE>
the New Jersey Casino Control 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 or arising out of the gaming business
(including developing and operating lodging facilities, sports or entertainment
facilities, transportation services or other related activities or enterprises
and any additions or improvements thereto).
"Guarantors" means each of (i) SBOC, OSI and ACSI and (ii) any other
Subsidiary that executes a Subsidiary Guarantee in accordance with the
provisions of the Indenture, and their respective successors and assigns until
any of them shall be released from their obligations as a Guarantor pursuant to
the terms of this Indenture.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) 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.
"Indebtedness" of any Person means, without duplication, (i) the principal
of and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all capitalized lease obligations of such Person; (iii) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations of such Person and all obligations of
such Person under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than obligations
described in clauses (i), (ii) and (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third business day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock (but excluding any accrued
distributions or dividends); (vi) all obligations existing at the time under
Hedging Obligations, foreign currency hedges and similar agreements; (vii) all
obligations of the type referred to in clauses (i) through (vi) of other Persons
and all dividends and distributions of other Persons for the payment of which,
in either case, such Person is responsible or liable as obligor, guarantor or
otherwise; and (viii) all obligations of the type referred to in clauses (i)
through (vi) of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Investment Grade Securities" means (i) Marketable Securities, (ii) any
other debt securities or debt instruments with a rating of "BBB-" (the lowest
investment grade rating by S&P) or higher by S&P, "Baa-3" (the lowest investment
grade rating by Moody's) or higher by Moody's or the equivalent of such rating
by any other nationally recognized securities rating agency, and (iii) any fund
investing exclusively in investments of the types described in clauses (i) and
(ii) above.
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"Investment Guarantee" means, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
Indebtedness of another Person, including, without limitation, any Indebtedness
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business) or discounted or sold with recourse
by such Person, or in respect of which such Person is otherwise directly or
indirectly liable, or any other obligation under which any contract which, in
economic effect, is substantially equivalent to a guarantee, including, without
limitation, any Indebtedness of a partnership in which such Person is a general
partner or of a joint venture in which such Person is a joint venturer, and any
Indebtedness in effect guaranteed by such Person through any agreement
(contingent or otherwise) to purchase, repurchase or otherwise acquire such
Indebtedness or any security therefor, or to provide funds for the payment or
discharge of such Indebtedness (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
Indebtedness, or to make payment for any products, materials or supplies or for
any transportation or services regardless of the non-delivery or nonfurnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such Indebtedness will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
Indebtedness will be protected against loss in respect thereof.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans, Investment
Guarantees, 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 and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Issue Date" means , 1994, the date on which the Notes are first
authenticated and issued.
"Las Vegas Showboat" means (i) the Company's hotel casino and related
properties at 2800 Fremont Street, Las Vegas, Nevada and any Project Expansion
relating thereto and (ii) any contiguous property acquired by the Company or any
of its Subsidiaries and any Project Expansion relating thereto.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York 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
for the intervening 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).
"Managed Entity" mean either (i) any Person that is not under Third-Party
Management, so long as such Person is not under Third-Party Management or (ii) a
Person that the Company or any Subsidiary has a contract to manage the day-to-
day gaming operations and affairs, so long as such contract remains in effect.
7
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"Management Contract Approval" means, with respect to the Sydney Harbour
Casino, a binding agreement with SHCL that provides that the Company or a Person
at least 80% of whose equity interests are owned by the Company or a wholly-
owned Subsidiary (other than a Non-Recourse Subsidiary) will manage the gaming
operations of the Sydney Harbour Casino for a period of not less than 12 years.
"Marketable Securities" means (1) U.S. Government Obligations; (2) any
certificate of deposit, maturing not more than 270 days after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
that has combined capital and surplus of not less than $100,000,000 or its
equivalent in foreign currency, whose debt is rated at the time as of which any
investment is made, of "A" (or higher) according to S&P or Moody's, or if none
of S&P or Moody's shall then exist, the equivalent of such rating by any other
nationally recognized securities rating agency; (3) commercial paper, maturing
not more than 270 days after the date of acquisition, issued by a corporation
(other than an Affiliate or Subsidiary of the Company) with a rating, at the
time as of which any investment therein is made, of "A-1" (indicating that the
degree of timely payment is strong) (or higher) according to S&P or "P-1"
(having a superior capacity for punctual repayment of short-term promissory
obligations) (or higher) according to Moody's, or if neither of S&P and Moody's
shall then exist, the equivalent of such rating by any other nationally
recognized securities ratings agency; (4) any bankers acceptances or any money
market deposit accounts, in each case, issued or offered by any commercial bank
having capital and surplus in excess of $100,000,000 or its equivalent in
foreign currency, whose debt is rated at the time as of which any investment
there is made of "A" (an upper medium grade bond obligation) (or higher)
according to S&P or Moody's, or if none of S&P or Moody's shall then exist, the
equivalent of such rating by any other nationally recognized securities rating
agency and (5) any fund investing exclusively in investments of the types
described in clauses (1) through (4) above, and if such fund has at least
$500,000,000 under management, including investments in repurchase obligations
of the foregoing investments.
"Material Acquisition" means any acquisition of a business, including the
acquisition of operating commercial real estate, that has a fair market value in
excess of $3.0 million and which the Company intends to continue to operate.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) and (ii)
any extraordinary gain (but not loss), together with any related provision for
taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including
insurance proceeds), 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 (after taking into account any
available tax credits or deductions and any tax sharing arrangements), amounts
required to be applied to the repayment of Indebtedness secured by a Lien on the
asset or assets which are the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets.
"Non-Recourse Debt" means Indebtedness or that portion of Indebtedness (a)
as to which none of the Company, the Guarantors and any of their respective
Restricted Subsidiaries: (i) provides credit support (including any
undertaking, agreement or instrument which would constitute Indebtedness); (ii)
is directly or indirectly liable; and (iii) constitutes the lender; and (b) no
default with respect to which
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(including any rights which the holders thereof may have to take enforcement
action against a Non-Recourse Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company, the
Guarantors or any of their respective 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.
"Non-Recourse Subsidiary" means any Non-Recourse Subsidiary under the
First Mortgage Bonds on the Issue Date and (i) a Subsidiary or (ii) any entity
in which the Company or any of its Subsidiaries has an equity investment and
pursuant to a contract or otherwise has the right to direct the day-to-day
operation of such entity that, in the case of (i) or (ii), (a) at the time of
its designation as a Non-Recourse Subsidiary has not acquired any assets (other
than as specifically permitted by the "Restricted Payments" covenant), at any
previous time, directly or indirectly from the Company, any of the Guarantors,
or any of their respective Subsidiaries, (b) does not own, operate or manage any
portion or any Existing Hotel Casino on the Issue Date, and (c) has no
Indebtedness other than Non-Recourse Indebtedness, provided that at the time of
such designation, after giving pro forma effect to such designation as if it
occurred at the beginning of the applicable four-quarter period, the Company's
Fixed Charge Coverage Ratio is not less than 70% of the Company's Fixed Charge
Coverage Ratio immediately prior to such designation.
"Notes" means the ___% Senior Subordinated Notes due 2009, as amended or
supplemented from time to time pursuant to the terms of this Indenture, that are
issued under this Indenture.
"Obligations" means any principal, premium, interest (including post-
petition interest), penalties, fees, indemnifications, reimbursements, damages
and other monetary liabilities payable under the documentation governing any
Indebtedness.
"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 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Pari Passu Indebtedness" means senior subordinated Indebtedness of the
Company or its Restricted Subsidiaries permitted by the covenant entitled
"Incurrence of Indebtedness and Issuance of Disqualified Stock," other than the
Notes which is pari passu in right of payment with the Notes or the Subsidiary
Guarantees.
"Permitted Investments" means (a) any Investments in the Company, in a
Wholly Owned Restricted Subsidiary of the Company or in a Guarantor; (b) any
Investments in Marketable Securities; and (c) Investments by the Company or any
Subsidiary of the Company in any Person, if as a result of such Investment (i)
such Person becomes a Wholly Owned Restricted Subsidiary of the Company or a
Guarantor or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or
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conveys substantially all of its assets to, or is liquidated into, the Company
or a Wholly Owned Subsidiary of the Company or a Guarantor.
"Permitted Liens" means (a) Liens in favor of the Company; (b) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company; provided, that
such Liens were in existence prior to the contemplation of such merger or
consolidation and less than one year prior to such Person becoming merged into
or consolidated with the Company or any of its Subsidiaries; (c) Liens on
property existing at the time of acquisition thereof by the Company or any
Subsidiary of the Company; provided, that such Liens were in existence prior to
the contemplation of such acquisition and less than one year prior to such
acquisition; (d) 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; (e) 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; (f)
ground leases in respect of the real property on which facilities owned or
leased by the Company or any of its Subsidiaries are located; (g) Liens arising
from UCC financing statements regarding property leased by the Company or any of
its Subsidiaries; (h) easements, rights-of-way, navigational servitudes,
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 Subsidiaries; and (i) Liens securing
purchase money obligations incurred or assumed in connection with the purchase
of real or Personal property to be used in the business of the Company or any of
its Restricted Subsidiaries within 180 days of such incurrence or assumption and
(j) Liens on the real property underlying the Atlantic City Showboat securing
the Resorts Bonds provided that the obligations under the Resorts Bonds can be
assumed under the "Incurrence of Indebtedness and Issuance of Disqualified
Stock" covenant at the time that real property is acquired by the Company or any
of its Subsidiaries.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Project Expansion" means any addition, improvement, extension or capital
repair to the Las Vegas Showboat or the Atlantic City Showboat or any contiguous
or adjacent property, including the purchases of real estate or improvements
thereon; but excluding separable furniture.
"Qualified Native American Gaming Project" means any Gaming Related
Business in the United States owned by a tribe or band of Native Americans in
which the Company or a Subsidiary holds a management contract to manage or
operate the day-to-day casino or gaming operations.
"Refinancing Disqualified Stock" means Disqualified Stock issued in
exchange for, or the proceeds of which are used, to extend, refinance, renew,
replace, defease or refund Disqualified Stock permitted to be issued pursuant to
the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof or
Disqualified Stock referred to in clause (c) of the second paragraph of Section
4.09 hereof.
"Refinancing Indebtedness" means Indebtedness issued in exchange for, or
the proceeds of which are used to extend, refinance, renew, replace, defease or
refund Indebtedness permitted to be incurred pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof or
Indebtedness referred to in clause (vi) of the second paragraph of Section 4.09
hereof.
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"Regular Quarterly Dividend" means the quarterly dividend determined by
the Board of Directors of the Company in its reasonable judgment to be its
regular and normal quarterly dividend and paid by the Company in accordance with
the Company's prior business practices in an amount per share not to exceed
$0.10 per fiscal year (or the equivalent thereof after giving effect to any
stock splits, stock dividends or recapitalizations of the Common Stock after
June 17, 1994).
"Representative" means, for purposes of Articles 10 and 11, the indenture
trustee or other trustee, agent or representative for any Senior Indebtedness
or, with respect to any Guarantor, for any Senior Indebtedness of such
Guarantor.
"Resorts Bonds" means, the First Mortgage Non-Recourse Pass-Through Notes
due June 30, 2000 of Resorts.
"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 Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company that is not a
Non-Recourse Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"SHCL" means Sydney Harbour Casino Holdings Limited, a New South Wales
corporation.
"Senior Debt" means (a) with respect to the Company, (i) the Obligations
of the Company with respect to the Working Capital Credit Agreement and First
Mortgage Bonds and (ii) any other Indebtedness permitted to be incurred by the
Company under the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is pari passu with or
subordinated in right of payment to the Notes, and (b) with respect to any
Guarantor, (i) the Obligations of such Guarantor with respect to the Working
Capital Credit Agreement and First Mortgage Bonds, (ii) any Guarantee by such
Guarantor of any Senior Debt of the Company and (iii) any other Indebtedness
permitted to be incurred by such Guarantor under the terms of the Indenture,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is pari passu with or subordinated in right of payment to the
Subsidiary Guarantee of such Guarantor. Notwithstanding anything to the
contrary in the foregoing, Senior Debt shall not include (v) any obligation of
the Company or any Guarantor to, in respect of or imposed by any environmental,
landfill, waste management or other regulatory or governmental agency, statute,
law or court order, (w) any liability for federal, state, local or other taxes
owed or owing by the Company or any Guarantor, (x) any Indebtedness of the
Company or any Guarantor to any of the Company's Subsidiaries or other
Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in
violation of the Indenture on or after the date of the Indenture.
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"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 Act, as such Regulation is in effect on the date hereof.
"Subsidiary" means, with respect to any Person, (i) 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 (ii) any Non-Recourse Subsidiary.
"Subsidiary Guarantee" means each guarantee of the Notes by a Guarantor
pursuant to Article 10 hereof.
"Sydney Harbour Casino" means all of SHCL's interest in its proposed
casino and related properties located in Sydney, Australia.
"Tax Sharing Agreement" means the Tax Sharing Agreement, substantially in
the form attached as an exhibit to the Indenture, as amended, supplemented or
modified from time to time as permitted by the Indenture.
"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.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Third-Party Management" with respect to any Person means that the day-to-
day affairs or business operations of such Person are managed by a third party
that is not the Company or any of its Subsidiaries.
"U.S. Government Obligations" 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
shall also include 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 U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation 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 U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
"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 (x) 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 (y) 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
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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.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
"Working Capital Credit Agreement" means that certain Credit Agreement,
dated as of September 30, 1992, by and among ACSI and National Westminster Bank,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction".............. 4.11
"Benefitted Party"................... 10.01
"Commencement Date".................. 3.09
"Covenant Defeasance"................ 8.03
"Custodian".......................... 4.13
"Event of Default"................... 6.01
"Excess Proceeds".................... 4.10
"Guarantor".......................... 10.01
"Guarantor Payment Blockage Notice".. 10.04
"incur".............................. 4.09
"Legal Defeasance"................... 8.02
"Offer Amount"....................... 3.09
"Offer Period"....................... 3.09
"Paying Agent"....................... 2.03
"Payment Blockage Notice"............ 11.01
"Payment Default".................... 6.01
"Purchase Date"...................... 3.09
"Purchase Offer"..................... 3.09
"Registrar".......................... 2.03
"Restricted Payments"................ 4.07
</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, other than those
provisions of the TIA that may be excluded herein, which provision shall be
excluded to the extent specifically excluded in this Indenture.
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The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and the Subsidiary Guarantees, if
any;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, the Guarantors, if any, and any
successor obligor upon the Notes or any Subsidiary Guarantee, as the case may
be.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule or regulation
promulgated by the SEC under the TIA have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) 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.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. The notation on each Note
relating to any Subsidiary Guarantee shall be substantially in the form set
forth on Exhibit C, which is part of this Indenture. The Notes may have
notations, legends or endorsements approved as to form by the Company and
required by law, stock exchange rule, agreements to which the Company or any
Guarantor is subject, or usage. Each Note shall be dated the date of its
authentication. The Notes shall be issuable only in denominations of $1,000 and
integral multiples thereof.
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Section 2.02. Execution and Authentication.
Two Officers of the Company 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. An Officer of the Guarantor, if any, shall sign any
Subsidiary Guarantee for such Guarantor by manual or facsimile signature.
If an Officer of the Company or any Guarantor whose signature is on a Note
or a Subsidiary Guarantee, as the case may be, no longer holds that office at
the time the Note is authenticated, the Note or the Subsidiary Guarantee, as the
case may be, shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature of the Trustee shall be conclusive evidence that the
Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company, authenticate Notes for original issue up to an
aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time shall not exceed the amount
set forth herein except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or any Guarantor or an Affiliate of the Company
or any Guarantor.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange (including any co-
registrar, the "Registrar") and (ii) 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 "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent, Registrar or co-registrar without prior notice to any Holder of a Note.
The Company shall notify the Trustee and the Trustee shall notify the Holders of
the name and address of any Agent not a party to this Indenture. The Company or
any Guarantor may act as Paying Agent, Registrar or co-registrar. The Company
shall enter into an appropriate agency agreement with any Agent not a party to
this Indenture, which shall be subject to any obligations imposed by the
provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such, and shall be entitled to appropriate compensation and
indemnity in accordance with Section 7.07 hereof.
The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
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The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, and interest on the Notes, and shall notify the
Trustee of any Default by the Company or any Guarantor 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 Guarantor,
if any) shall have no further liability for the money delivered to the Trustee.
If the Company or any Guarantor 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 proceeding relating
to the Company or any Guarantor, the Trustee shall serve as Paying Agent for the
Notes and the Company shall forward to the Trustee all money for the benefit of
the Holders.
Section 2.05. Lists of Holders.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not
the Registrar, the Company and/or any Guarantor 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
Holders, including the aggregate principal amount of the Notes held by each
thereof, and the Company and each Guarantor, if any, shall otherwise comply with
TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
When Notes are presented to the Registrar with a request to register the
transfer or to exchange them for an equal principal amount of Notes of other
denominations, the Registrar shall register the trans-fer or make the exchange
if its requirements for such transactions are met; provided, however, that any
Note presented or surrendered for registration of transfer or exchange shall be
duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by the Holder thereof or by his
attorney duly authorized in writing. To permit registrations of transfer and
exchanges, the Company shall issue and the Trustee shall authenticate Notes at
the Registrar's request, subject to such rules as the Trustee may reasonably
require.
Neither the Company nor the Registrar shall be required to (i) issue,
register the transfer of or exchange Notes during a period beginning at the
opening of business on a Business Day 15 days before the day of any selection of
Notes for redemption or purchase under Sections 3.02 or 3.09 hereof or (ii)
register the transfer of or exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part.
No service charge shall be made to any Holder of a Note for any
registration of transfer or exchange (except as otherwise expressly permitted
herein), 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 such transfer tax or similar governmental charge payable upon
exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof, which shall be paid by
the Company).
Prior to due presentment to the Trustee for registration of the transfer
of any Note, the Trustee, any Agent, the Company and any Guarantor 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,
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<PAGE>
premium, if any, and interest on such Note and for all other purposes
whatsoever, whether or not such Note is overdue, and none of the Trustee, any
Agent, the Company or any Guarantor shall be affected by notice to the contrary.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate a
replacement Note (accompanied by a notation of the Subsidiary Guarantee duly
endorsed by the Guarantors, if applicable) if the Trustee's requirements for
replacements of Notes are met. If required by the Trustee, the Company or the
Guarantors, if any, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee, the Company and the Guarantors, if
any, to protect the Company, the Guarantors, if any, the Trustee, any Agent or
any authenticating agent from any loss which any of them may suffer if a Note is
replaced. Each of the Company, the Guarantors, if any, and the Trustee may
charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and the
Guarantors, if any, and shall be entitled to all of the benefits of this
Indenture equally and ratably 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 cancelled by it, those delivered to it for cancellation
and those described in this Section 2.08 as not outstanding.
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.
Subject to Section 2.09 hereof, a Note does not cease to be outstanding
because the Company, a Subsidiary of the Company or an Affiliate of the Company
holds the Note.
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, any Guarantor, any of their respective Subsidiaries or any Affiliate of
the Company or any Guarantor shall be considered as though not outstanding,
except that for purposes of determining whether the Trustee shall be protected
in relying on any such direction, waiver or consent, only Notes which a
Responsible Officer knows to be so owned shall be so considered.
Notwithstanding the foregoing, Notes that are to be acquired by the Company, any
Guarantor, any Subsidiary of the Company or any Affiliate of the Company
pursuant to an exchange offer, tender offer or other agreement shall not be
deemed to be owned by the Company, such Guarantor, such Subsidiary of the
Company or such Affiliate of the Company until legal title to such Notes passes
to the Company, such Guarantor, such Subsidiary of the Company or such Affiliate
of the Company as the case may be.
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Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes (accompanied by a notation of the
Subsidiary Guarantee duly endorsed by the Guarantors, if applicable). Temporary
Notes shall be substantially in the form of definitive Notes but may have
variations that the Company and the Trustee consider appropriate for temporary
Notes. Without unreasonable delay, the Company shall prepare and the Trustee,
upon receipt of the written order of the Company signed by two Officers of the
Company, shall authenticate definitive Notes (accompanied by a notation of the
Subsidiary Guarantee duly endorsed by the Guarantors, if applicable) in exchange
for temporary Notes. Until such exchange, temporary Notes shall be entitled to
the same rights, benefits and privileges as definitive Notes.
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 shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall destroy cancelled Notes
(subject to the record retention requirement of the Exchange Act), unless the
Company directs cancelled Notes to be returned to it. The Company may not issue
new Notes to replace Notes that it has redeemed or paid or that have been
delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
the Company, unless by a written order, signed by two Officers of the Company,
the Company shall direct that cancelled Notes be returned to it.
Section 2.12. Defaulted Interest.
If the Company or any Guarantor defaults in a payment of interest on the
Notes, the Company or such Guarantor (to the extent of their obligations under
the Subsidiary Guarantees) 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, which date shall be
at the earliest practicable date but in all events at least five Business Days
prior to the payment date, in each case at the rate provided in the Notes and in
Section 4.01 hereof. The Company shall fix or cause to be fixed each such
special record date and payment date, and shall, promptly thereafter, notify the
Trustee of any such date. At least 15 days before the special record date, the
Company (or the Trustee, in the name of and at the expense of the Company) shall
mail to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
Section 2.13. Record Date.
The record date for purposes of determining the identity of Holders
entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA (S)
316(c).
Section 2.14. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number and, if it does
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes and that reliance may be placed only on
the other
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identification numbers printed on the Notes. The Company will promptly notify
the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION AND OFFERS TO PURCHASE
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 but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the section of this Indenture pursuant to which
the redemption shall occur, (ii) the redemption date, (iii) the principal amount
of Notes to be redeemed and (iv) the redemption price.
If the Company is required to make an offer to purchase Notes pursuant to
the provisions of Sections 4.10, 4.15 or 4.19 it shall furnish to the Trustee,
at least 30 days before the scheduled purchase date, an Officers' Certificate
setting forth (i) the Section of this Indenture pursuant to which the offer to
purchase shall occur, (ii) the offer's terms, (iii) the purchase price, (iv) the
principal amount of the Notes that may be purchased, and (v) further setting
forth a statement to the effect that (a) the Company or one of its Subsidiaries
has made an Asset Sale and there are Excess Proceeds aggregating more than $10.0
million and the amount of such Excess Proceeds, (b) a Change of Control has
occurred or (c) that Australian Gaming Approval and Management Contract Approval
had not been obtained by December 31, 1995, as applicable.
Section 3.02. Selection of Notes to Be Purchased or Redeemed.
If less than all of the Notes are to be purchased in an Asset Sale Offer
or redeemed at any time, the Trustee shall select the Notes to be purchased or
redeemed among the applicable Holders in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not so listed, on a pro rata basis, or in accordance with
any other method the Trustee considers fair and appropriate. In the event of
partial redemption in the manner provided above, the particular Notes to be
redeemed shall be selected, unless otherwise provided herein, not less than 30
nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption. In the event that less
than all of the Notes properly tendered in an Asset Sale Offer are to be
purchased, the particular Notes to be purchased shall be selected promptly upon
the expiration of such Asset Sale Offer.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
purchase or redemption, the principal amount thereof to be purchased or
redeemed. 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
purchased or redeemed, the entire outstanding amount of Notes held by such
Holder, even if not a multiple of $1,000, shall be purchased or redeemed.
Except as provided in the preceding sentence, provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for
redemption.
In the event the Company is required to make an Asset Sale Offer pursuant
to Sections 3.09 and 4.10 hereof and the amount of Excess Proceeds to be applied
to such purchase would result in the purchase of a principal amount of Notes
which is not evenly divisible by $1,000, the Trustee shall
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promptly refund to the Company the portion of such Excess Proceeds that is not
necessary to purchase the immediately lesser principal amount of Notes that is
so divisible.
Section 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a purchase or 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.
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; and
(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.
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 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.
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. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption or Purchase Price.
On or prior to any redemption date or purchase date with respect to an
offer to purchase the Notes required hereunder, the Company shall deposit with
the Trustee or with the Paying Agent money
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sufficient to pay the redemption or purchase price of and accrued interest on
all Notes to be redeemed or purchased 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 or purchase price of, and accrued interest on, all Notes to be
redeemed or purchased.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption or purchase date, interest shall cease to accrue on the
Notes or the portions of Notes called for redemption, whether or not such Notes
are presented for payment or on the Notes or the portions of Notes tendered on
any offer to purchase. If a Note is redeemed or purchased on or after an
interest record date but on or prior to the related interest payment date, then
any accrued and unpaid interest shall be paid to the Person in whose name such
Note was registered at the close of business on such record date. If a
redemption or purchase date is a Legal Holiday, payment shall be made on the
next succeeding Business Day and no interest shall accrue for the period from
such redemption date to such succeeding Business Day. If any Note called for
redemption or tendered for purchase shall not be so paid upon surrender for
redemption or such tender 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 or Purchased in Part.
Upon surrender of a Note that is redeemed or purchased 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
(accompanied by a notation of the Subsidiary Guarantee duly endorsed by the
Guarantors, if applicable) equal in principal amount to the unredeemed or
unpurchased portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to ________ __, 2001. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon, if any, to the applicable redemption date, if redeemed during
the twelve-month period beginning on _______ of the years indicated below:
YEAR PERCENTAGE
---- ----------
2001..................... _______%
2002..................... _______%
2003..................... _______%
2004 and thereafter...... 100.000%
(b) Notwithstanding any other provision hereof, if any Gaming Authority
requires that a Holder or beneficial owner of Notes must be licensed, qualified
or found suitable under any applicable gaming law in order to maintain any
gaming license or franchise of the Company or any Restricted Subsidiary and such
Holder or beneficial owner fails to apply for a license, qualification or a
finding of suitability within 30 days after being requested to do so by the
Gaming Authority (or such lesser period that may
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be required by such Gaming Authority), or if such Holder or such beneficial
owner is not so licensed, qualified or found suitable, the Company shall have
the right, at its option (i) to require such Holder or beneficial owner to
dispose of such Holder's or beneficial owner's Notes within 30 days of receipt
of such notice of such finding by the applicable Gaming Authority or such
earlier date as may be ordered by such Gaming Authority or (ii) to call for the
redemption of the Notes of such Holder or beneficial owner at the lesser of the
principal amount thereof or the price at which such Holder or beneficial owner
acquired the Notes, together with, in either case, accrued interest to the
earlier of the date of redemption or such earlier date as may be required by
such Gaming Authority or the date of the finding of unsuitability by such Gaming
Authority, which may be less than 30 days following the notice of redemption, if
so ordered by such Gaming Authority. The Company shall notify the Trustee in
writing of any such redemption as soon as practicable. The Holder of Notes or
beneficial owner applying for a license, qualification or a finding of
suitability shall pay all costs of the licensure or investigation for such
qualification or finding of suitability. The Company shall not be 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 shall be the obligation of such Holder or beneficial owner.
(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.
The Company shall not be required to make mandatory redemption or sinking
fund payments with respect to the Notes prior to the maturity of the Notes
(whether at final maturity or upon acceleration thereof).
Section 3.09. Offers to Purchase.
(a) In the event that, pursuant to Sections 4.10, 4.15 or 4.19 hereof,
the Company shall be required to commence an offer to all Holders to purchase
some or all of the Notes (each, a "Purchase Offer"), it shall follow the
procedures specified in this Section 3.09.
(b) The Purchase Offer shall commence on the date (the "Commencement
Date") specified in Section 4.10 or Section 4.15 hereof, as the case may be,
remain open for a period specified by the Company, which shall be in accordance
with Section 4.10 or Section 4.15 hereof, as the case may be, 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 the principal amount of Notes
required to be purchased pursuant to Section 4.10 or 4.15 hereof (the "Offer
Amount") or, if less than the Offer Amount has been tendered, all Notes tendered
in response to such Purchase 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, 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 Purchase Offer.
Upon the commencement of a Purchase Offer, the Company shall send, by
first class mail, a notice to each of the Holders, with a copy to the Trustee.
The notice shall contain all instructions and
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materials necessary to enable such Holders to tender Notes pursuant to such
Purchase Offer. The Purchase Offer shall be made to all Holders. The notice,
which shall govern the terms of the Purchase Offer, shall state:
(i) that the Purchase Offer is being made pursuant to Sections 4.10,
4.15 or 4.19 hereof, as the case may be, the Offer Period, and the expiration
date of the Offer Period;
(ii) the Offer Amount, the purchase price and the Purchase Date;
(iii) that any Note not tendered and accepted for payment shall
continue to accrue interest;
(iv) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Purchase Offer shall cease to
accrue interest after the Purchase Date;
(v) that Holders electing to have a Note purchased pursuant to any
Purchase 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, to the Company, a depositary, if appointed by the Company, or a
Paying Agent at the address specified in the notice prior to the close of the
Offer Period;
(vi) 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 close 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;
(vii) 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 (accompanied by a
notation of the Subsidiary Guarantee duly endorsed by the Guarantors, if
applicable) equal in principal amount to the unpurchased portion of the Notes
surrendered; and
(viii) (x) if such Purchase Offer was pursuant to Section 4.15, the
circumstances and material facts regarding such Change of Control, including
but not limited to, information with respect to pro forma and historical
financial information after giving effect to such Change of Control, and
information regarding the Person or Persons acquiring control, (y) if such
Purchase Offer was pursuant to Section 4.10, the circumstances and material
facts regarding the Asset Sale or Asset Sales giving rise to such Purchase
Offer, including but not limited to, information with respect to pro forma
and historical financial information if material operations of the Company or
any Restricted Subsidiary were divested in such Asset Sale or Asset Sales and
(z) if such Purchase Offer was pursuant to the terms of Section 4.19, the
circumstances and material facts regarding the failure to obtain Australian
Gaming Approval or Management Contract Approval and the then current plans,
if any, of SHCL with respect to the Sydney Harbour Casino.
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 Purchase 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
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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 (accompanied by a notation of the Subsidiary Guarantee
duly endorsed by the Guarantors, if applicable) 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 such Purchase Offer
on the Purchase Date.
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 to the extent applicable.
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. Other than pursuant to Section 3.05, 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 Guarantor, holds as of Noon New York City 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. Such Paying Agent shall return to the Company no later than
two days following the date of payment, any money (including accrued interest)
that exceeds such amount of principal, premium, if any, and interest paid on the
Notes.
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 or the Guarantors 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.
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.
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Section 4.03. Reports.
Whether or not required by the rules and regulations of the SEC, so long
as any Notes are outstanding, the Company shall (i) furnish to the Trustee and
to all Holders 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 certified
independent accountants and (ii) file a copy of all such information with the
SEC for public availability (unless the SEC will not accept such a filing) and
file such information with the Trustee and make such information available to
investors and securities analysts who request it in writing. The Company shall
at all times comply with TIA (S) 314(a).
Section 4.04. Compliance Certificate.
(a) The Company 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 and each obligor on the Notes and this Indenture
has kept, observed, performed and fulfilled its obligations under this Indenture
(including with respect to any Restricted Payments made during such year, the
basis upon which the calculations required by Section 4.07 were computed, which
calculations may be based on the Company's latest available financial
statements), and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company and each such
obligor, has kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of this Indenture (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 or such Guarantor, as the case may be, 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 or any obligor, as the case may be, is taking or proposes to take with
respect thereto.
(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 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
the provisions contained in Sections 4.01, 4.05, 4.07, 4.09, 4.10, 4.17, 4.18 or
5.01 hereof or (to the extent such provisions relate to accounting matters), 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, within five Business Days 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.
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The Company shall pay, and shall cause each of its Restricted 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.
Section 4.06. Stay, Extension and Usury Laws.
Each of the Company and 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 each of the
Company and 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.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or such
Restricted Subsidiary or dividends or distributions by a Restricted Subsidiary
of the Company provided, that to the extent that a portion of such dividend or
distribution is paid to a Holder other than the Company or a Restricted
Subsidiary, such portion of such dividend or distribution is not greater than
such Holder's pro rata aggregate common equity interest in such Restricted
Subsidiary; (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Subsidiary or other Affiliate of the
Company (other than any such Equity Interests owned by the Company or any
Restricted Subsidiary of the Company); (iii) voluntarily purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is pari
passu with or subordinated to the Notes; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
such Restricted Payment: (1) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof; (2) with respect to a
Restricted Payment other than a Regular Quarterly Dividend or a Restricted
Investment in a Subsidiary engaged in a Gaming Related Business, 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 covenant entitled "Incurrence of Indebtedness and Issuance of
Disqualified Stock"; and (3) such Restricted Payment, together with the
aggregate of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of this Indenture (including Restricted
Payments permitted by clauses (i) and (ii) of the next succeeding paragraph but
excluding any Restricted Payments permitted by clauses (iii)-(ix) of the next
succeeding paragraph), is less than the sum of (x) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period) from April
1, 1993 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, 100%
of such deficit), plus (y) 100% of the aggregate net cash proceeds received by
the Company from the issuance or sale of Equity Interests of the Company (other
than Equity Interests sold to a Restricted Subsidiary of the Company and other
than Disqualified Stock) from and including the date of the First Mortgage Bond
Indenture (including any such
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Equity Interests issued concurrently with the issuance of the Notes), plus (z)
Excess Non-Recourse Subsidiary Cash Proceeds received after the date of the
First Mortgage Bond Indenture.
(b) The foregoing provisions of this Section 4.07 shall not prohibit: (i)
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; (ii) the redemption, repurchase, retirement or
other acquisition of any Equity Interests of the Company in exchange for, or out
of the proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of other Equity Interests of the Company
(other than any Disqualified Stock); (iii) Investments by the Company or any
Restricted Subsidiary in an amount not to exceed $75 million in the aggregate
(measured as of the date such Investments were made) in any Non-Recourse
Subsidiaries engaged in a Gaming Related Business; provided that any loan to, or
Investment Guarantee in favor of, a Non-Recourse Subsidiary that is not a
Restricted Subsidiary shall mature prior to the earlier of (x) the termination
of the management contract pursuant to which the Company or any of its
Restricted Subsidiaries manages such Non-Recourse Subsidiary and (y) the Company
or any of its Restricted Subsidiaries otherwise ceasing to have control over the
direction of the day-to-day operations of such Non-Recourse Subsidiary; (iv)
Investments by the Company or any Restricted Subsidiary in any Non-Recourse
Subsidiary engaged in a Gaming Related Business in an amount (measured as of the
date such Investments were made) not to exceed in the aggregate 100% of all cash
received by the Company or any Restricted Subsidiary from any Non-Recourse
Subsidiary (other than cash which is or may be required to be repaid or returned
to such Non-Recourse Subsidiary) up to $75.0 million in the aggregate and
thereafter 50% of all cash received by the Company or any Restricted Subsidiary
from any Non-Recourse Subsidiary (other than cash which is or may be required to
be repaid or returned to such Non-Recourse Subsidiary); provided that the
aggregate amount of Investments pursuant to this clause does not exceed $125.0
million in the aggregate; (v) the purchase, redemption, defeasance, or other
acquisition or retirement for value of any Pari Passu Indebtedness with the
substantially concurrent purchase, redemption, defeasance, or other acquisition
or retirement for value of the Notes (on a pro rata basis in relation to the
outstanding aggregate principal amount of such Indebtedness and the aggregate
principal amount of the outstanding Notes or which was on a basis offered pro
rata to the Holders of the Notes); (vi) any voluntary purchase, redemption,
defeasance or other acquisition or retirement for value of any Pari Passu
Indebtedness with the proceeds of the substantially concurrent issuance of
Refinancing Indebtedness relating to such Pari Passu Indebtedness in accordance
with Section 4.09 hereof; (vii) dividends or distributions from a Non-Recourse
Subsidiary or dividends or distributions from a Controlled Entity; (viii) any
purchase, redemption, defeasance or other acquisition or retirement for value of
any Pari Passu Indebtedness (other than pursuant to clause (v) or (vi) above) up
to $30.0 million in aggregate principal amount; and (ix) Investments by the
Company or any Guarantor in Controlled Entities, so long as such Persons remain
Controlled Entities, provided that (A) any Investment in SHCL exceeding $110.0
million shall be a Restricted Payment pursuant to the proceeding paragraph, (B)
neither the Company nor any Guarantor shall invest any portion of the Las Vegas
Showboat or the Atlantic City Showboat in, or contribute any such assets to, a
Controlled Entity and (C) the Company would have at the time of such Investment
and after giving effect thereto as if such Investment had been made at the
beginning of the applicable four-quarter period, a Fixed Charge Coverage Ratio
of at least 1.5 to 1 if such Investment is made prior to December 31, 1996 and
at least 1.75 to 1 if such Investment is made thereafter; provided that, with
respect to clauses (iii)-(ix) above, immediately after giving effect to the
transaction contemplated therein, no Default or Event of Default would occur as
a consequence thereof.
(c) Any Investment in a Restricted Subsidiary that becomes a Non-Recourse
Subsidiary or any Investment in a Wholly Owned Subsidiary that becomes a Non-
Wholly Owned Restricted Subsidiary that is not a Guarantor shall become a
Restricted Payment made on such date in the amount of the greater of
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(x) the book value of the Investment in such Subsidiary on such date and (y) the
fair market value of the Investment in such Subsidiary on such date as
determined (A) in good faith by the Board of Directors of the Company if such
fair market value is determined to be less than $10.0 million and (B) by an
investment banking firm of national standing with high yield underwriting
expertise if such fair market value is determined to be in excess of $10.0
million.
(d) Any Guarantee that is an Investment in a Non-Recourse Subsidiary shall
cease to be deemed an Investment (and shall be deemed to have not been made) to
the extent that the Guarantee is released without payment on the obligations
guaranteed by the Company or any Restricted Subsidiary.
(e) If any Controlled Entity ceases to be a Controlled Entity, then all
Investments owned by the Company or any Restricted Subsidiary in such Controlled
Entity shall be deemed to be a Restricted Investment made on such date, unless
such former Controlled Entity purchases or redeems all such Investments for a
price at least equal to the greater of the book value of such Investments on the
date such entity ceases to be a Controlled Entity or the original amount of such
Investments.
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 otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary, other than a Guarantor, to: (i) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (x) on
its Capital Stock or (y) with respect to any other interest or participation in,
or measured by, its profits; (ii) pay any Indebtedness owed to the Company or
any of its Restricted Subsidiaries; (iii) make loans or advances to the Company
or any of its Restricted Subsidiaries; or (iv) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reasons of (1) Existing
Indebtedness as in effect on the Issue Date, (2) the Working Capital Credit
Agreement as in effect as of the Issue Date, (3) this Indenture and the Notes,
(4) applicable law, (5) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with 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 that the Consolidated Cash Flow of such Person is not taken into
account in determining whether such acquisition was permitted by the terms of
this Indenture, (6) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (7) with respect to clause (iii) above, purchase money obligations
for property acquired in the ordinary course of business, or (8) permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Refinancing Indebtedness are substantially not more
restrictive taken as a whole than those contained in the agreements governing
the Indebtedness being refinanced.
Section 4.09. Incurrence of Indebtedness and Issuance of Disqualified Stock.
(a) 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 with respect to or become
responsible for (collectively, "incur"), any Indebtedness and the Company shall
not issue any Disqualified Stock and shall not permit any of its Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company or any
Restricted Subsidiary may incur Indebtedness if (i) the Fixed Charge Coverage
Ratio for the Company's most recently ended four full fiscal quarters for
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which internal financial statements are available immediately preceding the date
on which such additional Indebtedness is incurred is greater than 2.0 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 at the
beginning of such four-quarter period and (ii) no Default or Event of Default
shall have occurred and be continuing or would occur as a consequence thereof.
(b) The foregoing limitations in this Section 4.09 shall not apply to: (i)
the incurrence by the Company or any Restricted Subsidiary of up to $25.0
million in aggregate principal amount of Indebtedness outstanding at any one
time, the proceeds of which are used to acquire or lease tangible assets; (ii)
the incurrence by the Company or any Restricted Subsidiary of Indebtedness
pursuant to the Working Capital Credit Agreement for working capital purposes in
an aggregate principal amount not to exceed $25.0 million outstanding at any one
time; provided that there shall be no such Indebtedness outstanding for a period
of 14 consecutive days in each calendar year (other than in respect of standby
letters of credit); (iii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness; (iv) the incurrence by the Company of
Indebtedness represented by the Notes and the incurrence by the Guarantors of
the Subsidiary Guarantees; (v) Indebtedness incurred in connection with Hedging
Obligations with respect to Indebtedness otherwise permitted under this
paragraph; (vi) the incurrence by the Company of Indebtedness issued in exchange
for, or the proceeds of which are used to extend, refinance, renew, replace or
refund Indebtedness referred to in the first paragraph of this covenant or in
clauses (i) through (v) above and clause (viii) below (the "Refinancing
Indebtedness"); provided, however, that (1) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount of Indebtedness
so extended, refinanced, renewed, replaced, substituted or refunded (plus the
amount of reasonable expenses incurred in connection therewith), (2) the
Refinancing Indebtedness shall have 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 or refunded, (3) the Refinancing
Indebtedness shall be 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 or refunded and (4) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof; (vii) Indebtedness
between the Company and any Restricted Subsidiary; and (viii) the incurrence by
the Company or any Restricted Subsidiary of Indebtedness that is not otherwise
permitted under this covenant not to exceed an aggregate principal amount of
$10.0 million outstanding at any one time under this clause (viii).
(c) The Company shall not permit any of its Non-Recourse Subsidiaries to
incur any Indebtedness or issue any shares of Disqualified Stock, other than
Non-Recourse Indebtedness; provided, however, that if any such Non-Recourse
Subsidiary ceases to remain a Non-Recourse Subsidiary, such event shall be
deemed to constitute the incurrence of the Indebtedness in such Subsidiary by a
Restricted Subsidiary.
Section 4.10. Asset Sales.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, cause, make or suffer to exist any Asset Sale unless (i) no
Default exists or is continuing immediately prior to and after giving effect to
such Asset Sale; (ii) the Company (or such Restricted Subsidiary, as the case
may be) receives consideration at the time of each such Asset Sale at least
equal to the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee) of the
assets or equity securities sold or otherwise disposed of; and (iii) at least
90% of the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash; provided, however, that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of the Company or any Restricted
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Subsidiary (other than liabilities that are by their terms subordinated to the
Notes or any Guarantee thereof) that are assumed by the transferee of any such
assets and (y) any notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are immediately converted
by the Company or such Restricted Subsidiary into cash, shall be deemed to be
cash (to the extent of the cash received) for purposes of this provision.
(b) Within 360 days after any Asset Sale, the Company (or the Subsidiary, as
the case may be) may apply the Net Proceeds from such Asset Sale, at its option,
either: (i) to permanently reduce Senior Debt of the Company or (ii) to
reinvest or cause to be reinvested the Net Proceeds from such Asset Sale in
another asset or business in a Gaming Related Business. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce Senior
Debt of the Company, including under the Working Capital Credit Agreement, or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from any Asset Sale that are not applied as
provided in clauses (i) and (ii) of this paragraph constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company
shall make an offer (an "Asset Sale Offer") to (a) all Holders of Notes to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds or (b) at the Company's option, make an Asset Sale Offer to
redeem outstanding Notes and Pari Passu Indebtedness, on a pro rata basis in
relation to the outstanding aggregate principal amount of such Indebtedness and
the aggregate principal amount of the Notes then outstanding, in each case at an
offer price in cash in an amount equal to 100% of the outstanding principal
amount thereof plus accrued and unpaid interest, if any, to the date fixed for
the closing of such offer, in accordance with the procedures set forth in this
Indenture. To the extent that the aggregate amount of Notes tendered pursuant
to an Asset Sale Offer to purchase is less than the Excess Proceeds, the Company
may use such deficiency for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee will select the Notes to be purchased on a pro rata
basis. Upon completion of such offer to purchase, the amount of Excess Proceeds
will be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, 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 maintain any contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) 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, (ii) with respect to any
Affiliate Transaction with a Non-Recourse Subsidiary, which, either individually
or when combined with all other Affiliate Transactions with Non-Recourse
Subsidiaries during the past year, involves aggregate payments in excess of $1.0
million, a majority of the Board of Directors approves each such transaction,
(iii) with respect to any Affiliate Transaction (other than with any Non-
Recourse Subsidiary) involving aggregate payments in excess of $1.0 million, or
with respect to any Affiliate Transaction with all Non-Recourse Subsidiaries,
which, either individually or when combined with all other Affiliate
Transactions with Non-Recourse Subsidiaries during the past year, involves
aggregate payments in excess of $3.0 million, the Company delivers to the
Trustee a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that any such Affiliate Transaction complies with clause
(i) above and such Affiliate Transaction is approved by a majority of the Board
of Directors, and (iv) with respect to any Affiliate Transaction involving
aggregate payments in excess of $10.0 million, the Company delivers to the
Trustee an opinion as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view issued by an investment
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banking firm of national standing with expertise in high yield debt offerings or
in the case of a transaction involving the sale or transfer of assets subject to
valuation, such as real estate, an appraisal by a nationally recognized
appraisal firm; provided, however, that the following shall not be deemed
Affiliate Transactions: (1) any employment agreement 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) payments made pursuant to the Tax Sharing Agreement; (4)
Restricted Payments, dividends, distributions or Investments permitted by the
provisions of Section 4.7 hereof; (5) payments to an Affiliate of ACSI in
respect of the leasing of land from such Affiliate; provided that the terms of
clause (i) above are complied with; (6) payments by the Company pursuant to the
indemnification agreement with its directors and officers in such director's or
officer's capacity as a director or officer of the Company or a Restricted
Subsidiary; (7) the engagement of Kummer Kaempfer Bonner & Renshaw (or any
successor firm) for legal services in connection with the business of the
Company or its Subsidiaries; provided that the payment for such services does
not exceed $1.0 million in any fiscal year; (8) loans to employees of the
Company or any Restricted Subsidiary, other than relocation loans, in an amount
not to exceed $500,000 in aggregate principal amount outstanding at any one
time; (9) loans to employees of the Company or any Restricted Subsidiary in
connection with the relocation of such employee in an amount not to exceed $2.0
million in aggregate principal amount outstanding at any one time; (10)
transactions pursuant to any management agreement or trademark license agreement
between the Company and any of its Restricted Subsidiaries; (11) the engagement
of International Insurance Services, Ltd. for insurance adjustment services in
the ordinary course of business of the Company or its Restricted Subsidiaries,
provided that the payments for such services do not exceed $1.0 million in any
fiscal year; and (12) the lease of a gift shop in the Atlantic City Showboat to
Ocean 11, a sole proprietorship, provided that the payments for such lease do
not exceed $1.0 million in any fiscal year.
Section 4.12. Liens.
Neither the Company nor any of its Restricted Subsidiaries shall 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: (i) Liens securing
Obligations under Senior Debt permitted to be incurred under this Indenture or
(ii) Permitted Liens.
Section 4.13. Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries shall transfer or
cause to be transferred, in one or a series of related transactions, any assets,
businesses, divisions, real property or equipment having a book value in excess
of $5.0 million to any Restricted Subsidiary that is not a Guarantor (other than
any such transfer that is a Restricted Payment permitted by this Indenture),
then such transferee or acquired Subsidiary shall execute a Subsidiary Guarantee
and deliver an opinion of counsel, in accordance with the terms of this
Indenture. The Subsidiary 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 a Non-Recourse Subsidiary in
accordance with the terms of this Indenture.
Section 4.14. Redesignation of Non-Recourse Subsidiary.
The Board of Directors of the Company may redesignate any Non-Recourse
Subsidiary as a Restricted Subsidiary, provided that at the time of such
designation after giving pro forma effect to such designation as if it occurred
at the beginning of the applicable four-quarter period, the Company could
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incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in Section 4.09 hereof and no Default or Event of Default
then exists and is continuing.
Section 4.15. Offer to Purchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make a
Purchase Offer to each Holder to purchase all or any part of such Holder's Notes
at an offer price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase.
Such Purchase Offer shall be made in accordance with the procedures set forth in
Article 3 hereof. The Company shall commence such Purchase Offer within 30
Business Days following any Change of Control by mailing the notice set forth in
Section 3.09 to the Holders. The Offer Period shall be not less than 30
Business Days nor more than 40 Business Days from the date such notice is
mailed, unless a longer period is required by law. 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 such Purchase Offer.
(b) Prior to making the Change of Control Payment, but in any event
within 90 days following a Change of Control, the Company shall either repay all
outstanding Senior Debt or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the repurchase of Notes
required by this Section 4.15. The Company shall publicly announce the results
of the Change of Control Offer on or as soon as practicable after the payment
date for such Purchase Offer.
Section 4.16. Corporate Existence.
Subject to Article 5 and Article 10 hereof, as the case may be, the
Company and each of the Guarantors shall do or cause to be done all things
necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of their
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company, any such Guarantor or any
such Subsidiary, as the case may be, and (ii) the rights (charter and
statutory), licenses and franchises of the Company, the Guarantors and their
respective Subsidiaries; provided, however, that the Company and the Guarantors
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of their respective
Subsidiaries, if an officer of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company,
the Guarantors and their Subsidiaries, taken as a whole.
Section 4.17. Line of Business.
The Company shall not, and shall not permit any Subsidiary to, engage in
any business other than (i) those necessary for, incident to, connected with or
arising out of the gaming business (including developing and operating hotel
casinos, sports or entertainment facilities, transportation services or other
related activities or enterprises and any additions or improvements thereto) and
(ii) such other businesses as the Company or its Restricted Subsidiaries are
engaged in on the Issue Date. The Company or its Subsidiaries may not enter
into any gaming jurisdictions in which the Company or its Subsidiaries are not
presently licensed if all of the Holders of Notes will be required to be
licensed, provided that this sentence shall not prohibit the Company or any of
its Subsidiaries from entering any jurisdiction that does not require the
licensing or qualification of all of the Holders of the Notes, but reserves the
discretionary right to license or qualify any Holder of Notes.
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Section 4.18. No Senior Subordinated Indebtedness.
Notwithstanding the provisions of Section 4.09 hereof, (i) the Company
shall not incur, create, issue, assume, guarantee or otherwise become liable for
any Indebtedness that is subordinate or junior in right of payment to any Senior
Debt and senior in any respect in right of payment to the Notes and (ii) no
Guarantor shall incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
Senior Debt of such Guarantor and senior in any respect in right of payment to
such Guarantor's Subsidiary Guarantee.
Section 4.19. Escrow Agent
The Company shall place $100 million of net proceeds from the offering of
the Notes into an escrow account pursuant to the terms of the Escrow Agreement.
The escrow agent for such escrow account may apply the amount in the escrow
account only to fund the Company's investment in SHCL as provided for in the
Escrow Agreement. In the event that Australian Gaming Approval or Management
Contract Approval (as defined in the Indenture) has not occurred on or prior to
December 31, 1995, the Company shall apply the amount in the escrow account to
an offer to all Holders of Notes to purchase the maximum principal amount of
Notes that may be purchased with such amount at a purchase price equal to 100%
of the principal amount thereof plus accrued and unpaid interest thereon, if
any, to the date of purchase in accordance with the procedures set forth in
Article 3 hereof. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount in the escrow account, the Trustee will
select the Notes to be purchased on a pro rata basis. If the amount in the
escrow account exceeds the amount necessary to purchase all Notes surrendered in
such offer, the Company will be obligated to apply such excess amount to an
offer to purchase the First Mortgage Bonds. Any funds remaining in the escrow
account after the Company has fully funded its investment in SHCL or after the
required offers to purchase shall be released to the Company and may be used for
general corporate purposes.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
(a) The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving Person), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another Person unless (i) the
Company is the surviving Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, assignment, transfer,
lease, 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; (ii) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the obligations of the Company pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under the Notes and
this Indenture; (iii) immediately after such transaction no Default or Event of
Default exists; (iv) the Company or any Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) shall have Consolidated
Net Worth (immediately after the transaction but prior to any purchase
accounting adjustments resulting from the transaction) equal to or greater than
the Consolidated Net Worth of the Company immediately preceding the transaction
and (B) shall, at the time of such transaction and after
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giving pro forma effect thereto as if such transaction 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; (v) such transactions would not require
any Holder of Notes to obtain a gaming license or be qualified under the laws of
any applicable gaming jurisdiction, provided that such Holder would not have
been required to obtain a gaming license or be qualified under the laws of any
applicable gaming jurisdiction in the absence of such transactions; and (vi)
such transactions would not result in the loss of any qualification or any
material license of the Company or its Subsidiaries necessary for any Gaming
Related Business then operated by the Company or its Subsidiaries.
(b)(i) A Guarantor shall not consolidate with or merge with or into the
Company unless the surviving corporation (if other than the Company) shall
expressly assume by supplemental indenture complying with the requirements of
this Indenture, the due and punctual payment of the principal of, premium, if
any, and interest on all of the Notes, and the due and punctual performance and
observance of all the covenants and conditions of this Indenture to be performed
by the Company and (ii) a Guarantor may consolidate with or merge with or into
any other Guarantor.
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 or the Company and its Subsidiaries on a consolidated basis in
accordance with Section 5.01 hereof, the successor Person 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" or the "Guarantor," as
the case may be, shall refer instead to the successor corporation and not to the
Company or the Guarantor, as the case may be), and may exercise every right and
power of the Company or the Guarantors, as the case may be, under this Indenture
with the same effect as if such successor Person had been named as the Company
or Guarantor, as the case may be, herein; provided, however, that the
predecessor Company and the predecessor Subsidiaries that are Guarantors shall
not be relieved from the obligation to pay the principal of and interest on the
Notes except in the case of a sale of all of the Company's assets that meets the
requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company or the Guarantors default in the payment when due of
interest on the Notes (whether or not prohibited by the subordination
provisions of Article 10 or Article 11 hereof, as the case may be) and
such default continues for a period of 30 days;
(b) the Company or the Guarantors default in the payment when due of
principal of or premium, if any, on the Notes (whether or not prohibited
by the subordination provisions of
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Article 10 or Article 11 hereof, as the case may be) when the same becomes
due and payable at maturity, upon redemption (including in connection with
an offer to purchase) or otherwise;
(c) the Company or the Guarantors fail to comply with any of the
provisions of Sections 4.07, 4.09, 4.10 or 4.14 hereof for 60 days after
notice to the Company by the Trustee or to the Company and the Trustee
from Holders of at least 25% in principal amount of the Notes then
outstanding;
(d) the Company or the Guarantors fail to observe or perform any other
covenant, representation, warranty or other agreement in this Indenture or
the Notes for 60 days after notice to the Company by the Trustee or to the
Company and the Trustee from Holders of at least 25% in principal amount
of the Notes then outstanding;
(e) a default occurs 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 Guarantor or any
of their respective Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any Guarantor or any of their respective
Restricted Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the Issue Date, which default (i) is caused by
a failure to pay when due principal or interest on such Indebtedness
within the grace period provided in such Indebtedness (which failure
continues beyond any applicable grace period) (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 $10.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any Guarantor or any of their respective Restricted Subsidiaries and
such judgments are not paid, discharged or stayed for a period of 60 days,
provided that the aggregate of all such undischarged judgments exceeds
$5.0 million;
(g) except as permitted by this Indenture, any Subsidiary Guarantee
with respect to the Notes 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 Guarantor (or its successors or assigns), or any Person
acting on behalf of such Guarantor (or its successors or assigns), shall
deny or disaffirm its obligations or shall fail to comply with any
obligations under its Subsidiary Guarantee;
(h) the Company, any of its Restricted Subsidiaries or any Guarantor
which individually or as a group constitutes a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(1) commences a voluntary case,
(2) consents to the entry of an order for relief against it in an
involuntary case,
(3) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
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(4) makes a general assignment for the benefit of its creditors, or
(5) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(1) is for relief against the Company, any of its Restricted
Subsidiaries or any Guarantor which individually or as a group
constitutes a Significant Subsidiary in an involuntary case;
(2) appoints a Custodian of the Company, any of its Restricted
Subsidiaries or any Guarantor which individually or as a group
constitutes a Significant Subsidiary or for all or substantially all of
the property of the Company, any of its Restricted Subsidiaries or any
Guarantor which individually or as a group constitutes a Significant
Subsidiary; or
(3) orders the liquidation of the Company, any of its Restricted
Subsidiaries or any Guarantor which individually or as a group
constitutes a Significant Subsidiary ;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section 6.01 hereof with respect to the Company, any of its
Restricted Subsidiaries or any Guarantor which individually or as a group
constitutes 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. Notwithstanding
the foregoing, in case an Event of Default specified in clause (h) or (i) of
Section 6.01 hereof occurs with respect to the Company, any of its Restricted
Subsidiaries or any Guarantor which individually or as a group constitutes a
Significant Subsidiary , all outstanding Notes will become due and payable
without further action or notice. Under certain circumstances, the Holders of a
majority in principal amount of the outstanding Notes may rescind any
acceleration with respect to the Notes and its consequences. Holders may not
enforce this Indenture or the Notes except as provided herein. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders notice of any continuing Default 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.
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 Notes pursuant to Section 3.07 hereof,
then, upon acceleration of the Notes, an equivalent premium 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. If an Event of
Default occurs prior to ________ __, 2001 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 ____________ __,
2001 then, upon acceleration of the Notes, an additional premium shall also
become and be immediately due and payable in an amount, for each of the years
beginning on ______ of the years set forth below, as set forth below
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(expressed as a percentage of the principal amount that would otherwise be due
but for the provisions of this sentence):
YEAR PERCENTAGE
---- ----------
1994..................................... _______%
1995..................................... _______%
1996..................................... _______%
1997..................................... _______%
1998..................................... _______%
1999..................................... _______%
2000..................................... _______%
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, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
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
Notes then outstanding 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, 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. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee 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:
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(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default or the Trustee receives such notice from the
Company;
(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 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 direction
inconsistent with the request; provided, however, that such provision does
not effect the right of a Holder of a Note to sue for enforcement of any
overdue payment thereon.
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.
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, if any, and interest
on the Note, on or after the respective due dates expressed in the Note
(including in connection with a Purchase Offer), 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.
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, 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 allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Notes, including the Guarantors), 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
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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:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof;
Second: to the holders of Senior Debt of the Company or the Guarantors,
as the case may be, to the extent required by Article 10 or Article 11 hereof,
as applicable;
Third: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium, 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, if any, and interest, respectively; and
Fourth: 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 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.
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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 man would
exercise or use under the circumstances in the conduct of his 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 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 (c) 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 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) The Trustee shall not be responsible for having knowledge of any
defaults, except for monetary defaults, unless specifically notified in writing
by the Holders.
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Section 7.02. Rights of Trustee.
(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, the Guarantors, if
any, or any Affiliate of the Company or the Guarantors, if any, 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 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, 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 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.
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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, 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.
Section 7.06. Reports by Trustee to Holders.
Within 60 days after each [DATE] beginning with the [DATE] following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders 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 and filed 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. Compensation and Indemnity.
The Company and the Guarantors, if any, 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 and the
Guarantors, if any, 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.
The Company and the Guarantors, if any, shall indemnify the Trustee and
its directors, officers and employees 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 and the Guarantors, if
any (including this Section 7.07), and defending itself against any claim
(whether asserted by the Company, any Guarantor 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, bad faith or
breach of its duties under this Indenture. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Unless the position of
the Company or the Guarantors is prejudiced by such failure, failure by the
Trustee to so notify the Company shall not relieve the Company and the
Guarantors, of their obligations hereunder. The Company and the Guarantors, if
any, shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel if the Trustee shall have been reasonably
advised by such counsel that there may be one or more legal defenses available
to it that are different from or additional to those available to the Company
and in the reasonable judgment of such counsel it is advisable for the Trustee
to employ separate counsel, and the Company and the Guarantors, if any, shall
pay the reasonable fees and expenses of such counsel. The Company and the
Guarantors, if any, need not pay for any settlement made without their consent,
which consent shall not be unreasonably withheld.
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The obligations of the Company and the Guarantors, if any, under this
Section 7.07 shall survive the satisfaction and discharge of this Indenture.
To secure the Company's and the Guarantors', if any, 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 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(h) or (i) 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 7.08. 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. The Holders of Notes 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 7.10 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, any
Guarantor, or the Holders of Notes 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 of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
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A successor Trustee shall 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 provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's and the Guarantors', if any, obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. 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 such corporation shall be otherwise eligible and qualified under this
Article.
Section 7.10. 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 7.11. 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.
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 Eight.
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, each of the Company and the Guarantors, if any,
shall, subject to the satisfaction of the conditions
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set forth in Section 8.04 hereof, be deemed to have been discharged from its
obligations with respect to all outstanding Notes and Subsidiary Guarantees 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, if any, and interest on such Notes when such payments
are due, (b) the Company's and Guarantors' obligations with respect to such
Notes under Article 2 (except those obligations set forth in Sections 2.08, 2.09
and 2.12 hereof) and Section 4.02 hereof, (c) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and the Company's and the Guarantors'
obligations in connection therewith and (d) this Article Eight. Subject to
compliance with this Article Eight, 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, each of the Company and the Guarantors, if any,
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 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17,
4.18, and 4.19 and Articles 5, 10 and 11 hereof and the operation of the
provisions contained in Subsections (e) and (f) of Article 6 with respect to the
outstanding Notes and Subsidiary Guarantees on and after the date the conditions
set forth below 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, such
Notes and the Subsidiary Guarantees, if any, 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 hereof, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(h)
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:
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(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, U.S.
Governmental Obligations, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants as evidenced by a certificate delivered to
the Trustee, to pay the principal of, premium, 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, of such principal or
installment of principal of, premium, if any, or interest on the
outstanding Notes;
(b) in the case of an election under Section 8.02 hereof, 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 Issue Date, 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
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 or insofar as Sections 6.01(h) or
6.01(i) hereof is concerned, at any time in the period ending on the 91st
day after the date of deposit (or greater period of time in which any such
deposit of trust funds may remain subject to Bankruptcy Law insofar as
those apply to the deposit by the Company) or the Company provides an
Opinion of Counsel to the effect that as of the effective date of such
Opinion of Counsel, the deposited trust funds are not subject to any claim
by any other creditor of the Company under any Bankruptcy Law as a
preferential payment;
(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 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 the Guarantors, if any, or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or the
Guarantors, if any;
(g) 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; and
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(h) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that the Holders of Notes shall have a perfected
security interest under applicable law in the U.S. Government Obligations
so deposited.
Section 8.05. Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable U.S. Government
Obligations (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, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company and the Guarantors, if any, shall pay and indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against the
cash or non-callable U.S. Government Obligations 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 Eight 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 U.S. Government Obligations 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, if any, or
interest, if any, on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest, if any, have 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, as an unsecured general creditor, 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.
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If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable U.S. Government Obligations 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 and the Guarantors', if any,
obligations under this Indenture, the Notes and the Subsidiary Guarantees 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 and the Guarantors, if any,
make any payment of principal of, premium, if any, or interest, if any, on any
Note following the reinstatement of its obligations, the Company and the
Guarantors, if any, 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, if any, and the Trustee may amend or supplement this Indenture or
the Notes 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 or any Guarantor's
obligations to the Holders in the case of a merger or consolidation pursuant
to Article 5 or Article 10 hereof, as the case may be;
(d) to make any change that would provide any additional rights or
benefits to the Holders (including providing for Subsidiary Guarantees
pursuant to Section 4.13 hereof) or that does not adversely affect the legal
rights hereunder of any such Holder; or
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA.
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
9.06 hereof, the Trustee shall join with the Company and the Guarantors, if any,
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, the
Guarantors, if any, and the Trustee may amend or supplement this Indenture or
the Notes with the consent of the Holders of at least
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a majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for the Notes),
and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of
Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for the Notes).
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 9.06 hereof, the Trustee shall
join with the Company and the Guarantors, if any, in the execution of such
amended or supplemental Indenture unless such amended or supplemental Indenture
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 may waive
compliance in a particular instance by the Company or any Guarantor with any
provision of this Indenture, the Note or the Subsidiary Guarantees, if any.
However, without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held at the time of such consent 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 or waive any of the provisions with respect to the redemption of the
Notes;
(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 premium, 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;
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(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 or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note;
(h) make any change to the subordination provisions of Section 10.02 or
Article 11 hereof that adversely affects Holders;
(i) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of this Indenture (and the obligations of the Company
to obtain any such consent otherwise required from such Holder) may be subject
to the requirements that such Holder shall have been the Holder of record of any
Notes with respect to which such consent is required to be sought as of a date
identified by the Trustee in a notice furnished to Holders in accordance with
the terms of this Indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in an 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 authenticate new Notes
(accompanied by a notation of the Subsidiary Guarantee duly endorsed by the
Guarantors) 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 Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Company and the Guarantors, if any, may not sign an amendment or supplemental
Indenture until the Board of Directors of the Company approves it. In executing
any
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amended or supplemental indenture, the Trustee shall be entitled to receive and
(subject to Section 7.01) shall be fully protected in relying upon, 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.
ARTICLE 10
SUBSIDIARY GUARANTEES
Section 10.01. Subsidiary Guarantee.
Each Subsidiary of the Company which in accordance with Section 4.13
hereof is required to guarantee the obligations of the Company under the Notes
(each, a "Guarantor") upon execution of a counterpart of this Indenture, hereby
jointly and severally unconditionally guarantees (each such guarantee being a
"Subsidiary Guarantee") to each Holder of a Note authenticated and delivered by
the Trustee irrespective of the validity or enforceability of this Indenture,
the Notes or the Obligations of the Company under this Indenture or the Notes,
that: (i) the principal of and interest on the Notes will be paid in full when
due, whether at the maturity or interest payment or mandatory redemption date,
by acceleration, call for redemption or otherwise, and interest on the overdue
principal of and interest, if any, is lawful on the Notes and all other
obligations of the Company to the Holders or the Trustee under this Indenture or
the Notes will be promptly paid in full or performed, all in accordance with the
terms of this Indenture and the Notes; and (ii) in case of any extension of time
of payment or renewal of any Notes or any of such other obligations, they will
be paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed for whatever reason, each
Guarantor will be obligated to pay the same whether or not such failure to pay
has become an Event of Default which could cause acceleration pursuant to
Section 6.02 hereof. 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
Subsidiary 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 the Trustee, the Holders or the
Company (each, a "Benefitted Party") to proceed against the Company or any other
Person or to proceed against or exhaust any security held by a Benefitted Party
at any time or to pursue any other remedy in any Benefitted Party's power before
proceeding against such Guarantor; (b) the defense of the statute of limitations
in any action hereunder or in any action for the collection of any Indebtedness
or the performance of any obligation hereby guaranteed; (c) any defense that may
arise by reason of the incapacity, lack of authority, death or disability of any
other Person or the failure of a Benefitted Party to file or enforce a claim
against the estate (in administration, bankruptcy or any other proceeding) of
any other Person; (d) demand, protest and notice of any kind including but not
limited to notice of the existence, creation or incurring of any new or
additional Indebtedness or Obligation or of any action or non-action on the part
of such Guarantor, the Company, any Benefitted Party, any creditor of such
Guarantor, the Company or on the part of any other Person whomsoever in
connection with any Indebtedness or obligations hereby
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guaranteed; (e) any defense based upon an election of remedies by a Benefitted
Party, including but not limited to an election to proceed against such
Guarantor for reimbursement; (f) 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; (g) any
defense arising because of a Benefitted Party's election, in any proceeding
instituted under the Federal Bankruptcy Code, of the application of Section
1111(b)(2) of the Federal Bankruptcy Code; or (h) any defense based on any
borrowing or grant of a security interest under Section 364 of the Federal
Bankruptcy Code. Each Guarantor hereby covenants that its Subsidiary Guarantee
will not be discharged except by complete performance of the obligations
contained in its Subsidiary Guarantee and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to either the Company or any Guarantor, or any Custodian acting in
relation to either the Company or such Guarantor, any amount paid by the Company
or such Guarantor to the Trustee or such Holder, the applicable Subsidiary
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor agrees that it will 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 such Guarantor, on the one
hand, and the Holders and the Trustee, on the other hand, (i) the maturity of
the Obligations guaranteed hereby may be accelerated as provided in Section 6.02
hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration as to the Company
or any other obligor on the Notes of the obligations guaranteed hereby, and (ii)
in the event of any declaration of acceleration of those obligations as provided
in Section 6.02 hereof, those Obligations (whether or not due and payable) will
forthwith become due and payable by such Guarantor for the purpose of this
Subsidiary Guarantee.
Section 10.02. Subordination.
Each Guarantor, the Trustee, and each Holder by accepting a Note agrees,
that the Obligations of such Guarantor hereunder shall be subordinated in right
of payment to the prior irrevocable and indefeasible payment in full of all
Obligations of every type whatsoever, contingent or otherwise due in respect of
all Senior Debt of such Guarantor and of the Company (whether outstanding on the
date hereof or hereafter created, incurred, assumed or guaranteed).
Section 10.03. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of any Guarantor in a liquidation or
dissolution of such Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Guarantor or its property,
in an assignment for the benefit of creditors or any marshaling of such
Guarantor's assets and liabilities:
(1) Holders of Senior Debt of such Guarantor shall be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt of such
Guarantor (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Debt of such Guarantor) before
the Trustee or any Holder shall be entitled to receive any payment from the
Guarantor under or pursuant to this Subsidiary Guarantee with respect to the
Notes; and
(2) until all Obligations with respect to Senior Debt of such Guarantor
(as provided in subsection (1) above) are paid in full, any distribution to
which the Trustee or any Holder would be
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entitled but for this Article shall be made to holders of Senior Debt of such
Guarantor (except that Holders may receive securities that are subordinated
in right and priority of payment to at least the same extent as the
Subsidiary Guarantee to (a) Senior Debt of such Guarantor and (b) any
securities issued in exchange for Senior Debt of such Guarantor).
Section 10.04. Default on Senior Debt of the Guarantor.
No Guarantor shall make any payment or distribution to the Trustee or any
Holder upon or in respect of its Subsidiary Guarantee or the Notes, or any
obligation with respect thereto, and no Guarantor shall acquire or purchase from
the Trustee or any Holder any Notes for cash or property (other than securities
that are subordinated in right and priority of payment to at least the same
extent as its Subsidiary Guarantee to (a) Senior Debt of such Guarantor and (b)
any securities issued in exchange for Senior Debt of such Guarantor) until all
principal and other obligations with respect to the Senior Debt of such
Guarantor have been paid in full if:
(i) a default in the payment when due, whether upon acceleration or
otherwise, of any principal, premium, if any, or interest on Designated
Senior Debt of such Guarantor occurs and is continuing beyond any applicable
grace period; or
(ii) any other default on Designated Senior Debt of such Guarantor occurs
and is continuing and the Trustee receives a notice of the default from such
Guarantor, or the holders of any such Designated Senior Debt of such
Guarantor, stating that such Guarantor or holders are invoking a payment
blockage under this Section 10.04(ii) (a "Guarantor Payment Blockage
Notice"). If the Trustee receives any such notice, a subsequent notice
received within 365 days thereafter shall not be effective for purposes of
this Section.
Each Guarantor may and shall resume payments on and distributions in
respect of its Subsidiary Guarantee and all obligations with respect thereto,
and may acquire obligations for value when:
(1) in the case of a payment default as described in (i) above, upon the
date on which such default is cured or waived, and
(2) in the case of a nonpayment default as described in (ii) above, on the
earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which a Guarantor Payment Blockage Notice is
received unless the maturity of such Designated Senior Debt of such Guarantor
has been accelerated, and this Article otherwise permits the payment at the
time of such payment.
Section 10.05. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of Default,
each Guarantor shall promptly notify the Representative of the holders of Senior
Debt of such Guarantor of the acceleration.
Section 10.06. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives from a Guarantor any
payment of any Obligations with respect to the Notes or any other obligation
guaranteed hereby at a time when the Trustee or such Holder has actual knowledge
that such payment is prohibited by Section 10.03 or Section 10.04 hereof, such
payment shall be held by the Trustee or such Holder, in trust for the benefit
of, and
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shall be paid forthwith over and delivered, upon written request, to, the
holders of Senior Debt of such Guarantor (to the extent necessary to pay in full
all such Senior Debt, whether or not due) as their interests may appear, or
their Representative under the indenture or other agreement (if any) pursuant to
which Senior Debt of such Guarantor may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt of such Guarantor remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Debt of such Guarantor.
If a distribution is made to the Trustee or any Holder that because of
this Article 10 should not have been made to it at a time when the Trustee or
such Holder has actual knowledge that such distribution should not have been
made to it, the Trustee or such Holder who receives the distribution shall hold
it in trust for the benefit of, and, upon written request, pay it over to, the
holders of Senior Debt of such Guarantor as their interests may appear, or their
Representative under the indenture or other agreement (if any) pursuant to which
Senior Debt of such Guarantor may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt of such Guarantor remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Debt of such Guarantor.
With respect to the holders of Senior Debt of any Guarantor, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt of any such Guarantor
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Debt of such
Guarantor, and shall not be liable to any such holders if the Trustee shall pay
over or distribute to or on behalf of Holders or the Company or any other Person
money or assets to which any holders of Senior Debt of such Guarantor shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
Section 10.07. Notice by a Guarantor.
Each Guarantor shall promptly notify the Trustee and the Paying Agent of
any facts known to such Guarantor that would cause a payment of any Obligations
with respect to the Notes or its Subsidiary Guarantee to violate this Article,
but failure to give such notice shall not affect the subordination of its
Subsidiary Guarantee or of the Notes to the Senior Debt of such Guarantor as
provided in this Article.
Section 10.08. Subrogation.
With respect to any Guarantor, after all Senior Debt of such Guarantor is
paid in full (whether or not due) and until the Notes are paid in full, Holders
shall, without duplication, be subrogated to the rights of holders of Senior
Debt of such Guarantor to receive distributions applicable to Senior Debt of
such Guarantor to the extent that distributions otherwise payable to the Holders
have been applied to the payment of Senior Debt of such Guarantor. A
distribution made under this Article to holders of Senior Debt of such Guarantor
that otherwise would have been made to Holders is not, as between such Guarantor
and Holders, a payment by such Guarantor on the Senior Debt of such Guarantor.
Section 10.09. Relative Rights.
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This Article defines the relative rights of Holders and holders of Senior
Debt of such Guarantor. Nothing in this Indenture shall:
(1) impair, as between such Guarantor and the Holders, the obligation of
such Guarantor, which is absolute and unconditional, to pay principal of and
interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of such Guarantor
other than their rights in relation to holders of Senior Debt of such
Guarantor; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of holders
of Senior Debt of such Guarantor set forth herein to receive distributions
and payments otherwise payable to Holders.
Section 10.10. Subordination May Not Be Impaired By Any Guarantor.
With respect to any Guarantor, no right of any holder of Senior Debt of
such Guarantor to enforce the subordination of the Subsidiary Guarantee shall be
impaired by any act or failure to act by such Guarantor or any Holder or by
failure of such Guarantor or any Holder to comply with this Indenture.
Section 10.11. Distribution or Notice to Representative.
With respect to any Guarantor, whenever a distribution is to be made or a
notice given to holders of Senior Debt of such Guarantor, the distribution may
be made and the notice given to their Representative.
Upon any payment or distribution of assets referred to in this Article 10,
the Trustee and the Holders shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction or upon any certificate of such
Representative or of the liquidating trustee or agent or other Person making any
distribution for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Debt of such Guarantor, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 10.
Section 10.12. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Subsidiary Guarantee to violate this Article. Only a
Guarantor, the Company, the holder of any Senior Debt of such Guarantor, or the
Representative of holders of Senior Debt of such Guarantor may give the notice.
Nothing in this Article 10 shall impair the claims of, or payments to, the
Trustee under or pursuant to Section 7.07 hereof.
With respect to any Guarantor, the Trustee in its individual or any other
capacity may hold Senior Debt of such Guarantor with the same rights it would
have if it were not Trustee.
55
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Section 10.13. Authorization to Effect Subordination.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee the Holder's attorney-in-fact for any and
all such purposes. If the Trustee does not file a proper proof of claim or
proof of debt in the form required in any proceeding relative to any Guarantor
referred to in Section 6.09 hereof at least 30 days before the expiration of the
time to file such claim, the holders (or their Representative) of Senior Debt of
each Guarantor are hereby authorized to file an appropriate claim for and on
behalf of the Holders.
Section 10.14. Limitation of Guarantor's Liability.
Each Guarantor and by its acceptance hereof, each beneficiary hereof,
hereby confirm that it is its intention that the Subsidiary Guarantee by such
Guarantor not constitute a fraudulent transfer or conveyance for purposes of the
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
Subsidiary Guarantees. To effectuate the foregoing intention, each such Person
hereby irrevocably agrees that the obligation of such Guarantor under its
Subsidiary Guarantee under this Article 10 shall be limited to the maximum
amount as will, after giving effect to such maximum amount and all other
(contingent or otherwise) 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 10, result
in the obligations of such Guarantor in respect of such maximum amount not
constituting a fraudulent conveyance. Each beneficiary under the Subsidiary
Guarantees, by accepting the benefits hereof, confirms its intention that, in
the event of a bankruptcy, reorganization or other similar proceeding of the
Company or any Guarantor in which concurrent claims are made upon such Guarantor
hereunder, to the extent such claims will not be fully satisfied, each such
claimant with a valid claim against the Company shall be entitled to a ratable
share of all payments by such Guarantor in respect of such concurrent claims.
Section 10.15. Releases Following Sale of Assets.
Upon (i) a sale or other disposition of all or substantially all of the
assets of any Guarantor, by way of merger, consolidation or otherwise, (ii) a
sale or other disposition of all of the capital stock of any Guarantor or (iii)
a Restricted Subsidiary becoming an Unrestricted Subsidiary pursuant to the
provisions of this Indenture, then such Guarantor (in the event of a sale or
other disposition, by way of such a 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) shall be released and relieved of its
obligations under its Subsidiary Guarantee; provided that the Net Proceeds of
such sale or other disposition are applied in accordance with Section 4.10
hereof.
ARTICLE 11
SUBORDINATION
Section 11.01. Subordination.
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The Company agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Notes shall be subordinated in right of payment to
the prior irrevocable and indefeasible payment in full of all Obligations of
every type whatsoever, contingent or otherwise due in respect of Senior Debt of
the Company (whether outstanding on the date hereof or hereafter created,
incurred, assumed or guaranteed).
Section 11.02. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(1) holders of Senior Debt of the Company shall be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt of the
Company (including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt of the Company) before the
Holders shall be entitled to receive any payment with respect to the Notes;
and
(2) until all Obligations with respect to Senior Debt of the Company (as
provided in subsection (1) above) are paid in full, any distribution to which
Holders would be entitled but for this Article shall be made to holders of
Senior Debt of the Company (except that Holders may receive securities that
are subordinated in right and priority of payment to at least the same extent
as the Notes to (a) Senior Debt of the Company and (b) any securities issued
in exchange for any such Senior Debt of the Company).
Section 11.03. Default on Senior Debt.
The Company may not make any payment or distribution to the Trustee or any
Holder upon or in respect of the Notes, or any Obligation with respect thereto,
and may not acquire or purchase from the Trustee or any Holder any Notes for
cash or property (other than securities that are subordinated in right and
priority of payment to at least the same extent as the Notes to (a) Senior Debt
of the Company and (b) any securities issued in exchange for Senior Debt of the
Company) until all principal and other Obligations with respect to the Senior
Debt of the Company have been paid in full if:
(i) a default in the payment when due, whether upon acceleration or
otherwise, of any principal, premium, if any, or interest on Designated
Senior Debt of the Company occurs and is continuing beyond any applicable
grace period; or
(ii) any other default on Designated Senior Debt of the Company occurs and
is continuing and the Trustee receives a notice of the default from the
Company, or the holders of any such Designated Senior Debt of the Company,
stating that it is or such holders are invoking a payment blockage under this
Section 11.03(ii) (a "Payment Blockage Notice"). If the Trustee receives any
such notice, a subsequent notice received within 365 days thereafter shall
not be effective for purposes of this Section.
The Company may and shall resume payments on and distributions in respect
of the Notes, and all Obligations with respect thereto, and may acquire them
when:
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(1) in the case of a payment default as described in (i) above, upon the
date on which such default is cured or waived, and
(2) in the case of a nonpayment default as described in (ii) above, on the
earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any such Designated Senior Debt of the
Company has been accelerated, and this Article otherwise permits the payment
at the time of such payment.
Section 11.04. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of Default, the
Company shall promptly notify the Representative of the holders of Senior Debt
of the Company of the acceleration.
Section 11.05. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when the Trustee or such Holder
has actual knowledge that such payment is prohibited by Section 11.02 or Section
11.03 hereof, such payment shall be held by the Trustee or such Holder, in trust
for the benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Debt of the Company (to the extent necessary
to pay in full all such Senior Debt, whether or not due) as their interests may
appear, or their Representative under the indenture or other agreement (if any)
pursuant to which Senior Debt of the Company may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt of the Company remaining unpaid to the
extent necessary to pay such Obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt of the Company.
If a distribution is made to the Trustee or any Holder that because of
this Article 11 should not have been made to it at a time when the Trustee or
such Holder has actual knowledge that such distribution should not have been
made to it, the Trustee or such Holder who receives the distribution shall hold
it in trust for the benefit of, and, upon written request, pay it over to, the
holders of Senior Debt of the Company as their interests may appear, or their
Representative under the indenture or other agreement (if any) pursuant to which
Senior Debt of the Company may have been issued, as their respective interests
may appear, for application to the payment of all Obligations with respect to
Senior Debt of the Company remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt of the
Company.
With respect to the holders of Senior Debt of the Company, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 11, and no implied covenants or
obligations with respect to the holders of Senior Debt of the Company shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of Senior Debt of the Company, and
shall not be liable to any such holders if the Trustee shall pay over or
distribute to or on behalf of Holders or the Company or any other Person money
or assets to which any holders of Senior Debt of the Company shall be entitled
by virtue of this Article 11, except if such payment is made as a result of the
willful misconduct or gross negligence of the Trustee.
Section 11.06. Notice by Company.
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The Company shall promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of any Obligations with
respect to the Notes to violate this Article, but failure to give such notice
shall not affect the subordination of the Notes to the Senior Debt of the
Company as provided in this Article.
Section 11.07. Subrogation.
After all Senior Debt of the Company is paid in full (whether or not due)
and until the Notes are paid in full, Holders shall, without duplication, be
subrogated to the rights of holders of Senior Debt of the Company to receive
distributions applicable to Senior Debt of the Company to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt of the Company. A distribution made under this Article to
holders of Senior Debt of the Company that otherwise would have been made to
Holders is not, as between the Company and Holders, a payment by the Company on
Senior Debt of the Company.
Section 11.08. Relative Rights.
This Article defines the relative rights of Holders and holders of Senior
Debt of the Company. Nothing in this Indenture shall:
(1) impair, as between the Company and the Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and
interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of the Company
other than their rights in relation to holders of Senior Debt of the Company;
or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of holders
of Senior Debt of the Company set forth herein to receive distributions and
payments otherwise payable to Holders.
If the Company fails because of this Article to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
Section 11.09. Subordination May Not Be Impaired By Company.
No right of any holder of Senior Debt of the Company to enforce the
subordination of the Indebtedness with respect to the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by failure of the
Company or any Holder to comply with this Indenture.
Section 11.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt of the Company, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets referred to in this Article 11,
the Trustee and the Holders shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction or upon any certificate of such
Representative or of the liquidating trustee or agent or other Person making any
distribution for the purpose of ascertaining the Persons entitled to participate
in such
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distribution, the holders of the Senior Debt of the Company, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article 11.
Section 11.11. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 11 or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article. Only the Company, the holder
of any Senior Debt of the Company, or the Representative of holders of Senior
Debt of the Company may give the notice. Nothing in this Article 11 shall
impair the claims of, or payments to, the Trustee under or pursuant to Section
7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
of the Company with the same rights it would have if it were not Trustee.
Section 11.12. Authorization to Effect Subordination.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 11, and appoints the Trustee the Holder's attorney-in-fact for any and
all such purposes. If the Trustee does not file a proper proof of claim or
proof of debt in the form required in any proceeding referred to in Section 6.09
hereof at least 30 days before the expiration of the time to file such claim,
the holders (or their Representative) of Senior Debt of the Company are hereby
authorized to file an appropriate claim for and on behalf of the Holders.
ARTICLE 12
MISCELLANEOUS
Section 12.01. 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 12.02. Notices.
Any notice or communication by the Company, the Guarantors, if any, 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 or any Guarantor:
Showboat, Inc.
2800 Fremont Street
Las Vegas, Nevada 89104
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Telecopier No.: (702) 385-9678
Attention:
With a copy to:
Kummer Kaempfer Bonner & Renshaw
3800 Howard Hughes Pkwy
Las Vegas, Nevada 89109
Telecopier No.: (212) 796-7181
Attention: John N. Brewer
If to the Trustee:
Telecopier No.:
Attention: Corporate Trust Administration
The Company, the Guarantors, if any, 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 regis-tered, 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 Hold-ers.
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 12.03. 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, if any, the Trustee, the Registrar and anyone else shall have the
protection of TIA (S) 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
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Upon any request or application by the Company or the Guarantors, if any,
to the Trustee to take any action under this Indenture, the Company or the
Guarantors, if any, 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 12.05 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 12.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
Section 12.05. 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 an Officers'
Certificate or certificates of Public Officials.
Section 12.06. 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 12.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Guarantor, or any successor Person as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, the Subsidiary Guarantees, this 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 and the Subsidiary Guarantees, if any, waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
Section 12.08. Governing Law.
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THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES, IF ANY.
Section 12.09. 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 12.10. Successors.
All agreements of the Company and the Guarantors, if any, in this
Indenture and the Notes and the Subsidiary Guarantees, as the case may be, shall
bind their respective successors. All agreements of the Trustee in this
Indenture shall bind its successors.
Section 12.11. Severability.
In case any provision in this Indenture, in the Notes or in the Subsidiary
Guarantees, if any, 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 12.12. 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 12.13. 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]
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<PAGE>
SIGNATURES
Dated as of ______, 1994 SHOWBOAT, INC.
By:
------------------------------
Name:
Title:
Attest:
(SEAL)
- ------------------------------
Dated as of ______, 1994
Trustee
By:
------------------------------
Name:
Title:
Attest:
(SEAL)
- ------------------------------
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Exhibit A
(Face of Note)
____% Senior Subordinated Notes due 2009
No. $__________
SHOWBOAT, INC., or any successor thereto,
promises to pay to
or registered assigns,
the principal sum of
Dollars on _________ __, 2009.
Interest Payment Dates: ________ __, and ________ __
Record Dates: ________ __, and ________ __
Dated: _______________ __, 1994
SHOWBOAT, INC.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
This is one of the Notes
referred to in the
within-mentioned Indenture:
as Trustee
By:__________________________________
================================================================================
A-1
<PAGE>
(Back of Security)
__% SENIOR SUBORDINATED NOTE
DUE ________, 2009
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. Interest. Showboat, Inc., a Nevada corporation (or any successor
--------
thereto as provided in the Indenture, the "Company"), promises to pay interest
on the principal amount of this Note at the rate and in the manner specified
below.
The Company shall pay interest on the principal amount of this Note at
the rate per annum of __%. The Company will pay interest semi-annually on
_______ and _______ of each year, or if any such day is not a Business Day (as
defined in the Indenture), on the next succeeding Business Day (each an
"Interest Payment Date").
Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of the
original issuance of the Notes. To the extent lawful, the Company shall pay
interest on overdue principal (including post-petition interest in any
proceeding under any Bankruptcy Law) at the rate of 1% per annum in excess of
the then applicable interest rate on the Notes; it shall pay interest,
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful.
2. Method of Payment. The Company will pay interest on the Notes
-----------------
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date next preceding the Interest Payment
Date, even if such Notes are cancelled after such record date and on or before
such Interest Payment Date. The Holder hereof must surrender this Note to a
Paying Agent to collect principal payments. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. The Company, however, may pay
principal, premium, if any, and interest by check payable in such money. It may
mail an interest check to a Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as
--------------------------
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-registrar without notice to any Holder. The Company or any Guarantor may
act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated
---------
as of _________, 1994 (as it may be amended from time to time, the "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 (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on
the date of the Indenture. The Notes are subject to all such terms, and Holders
are referred to the Indenture and such act for a statement of such terms. The
terms of the Indenture shall govern any inconsistencies between the Indenture
and the Notes. The Notes are unsecured general obligations of the Company
limited to $150,000,000 in aggregate principal amount.
A-2
<PAGE>
5. Optional Redemption. Except as set forth below, the Company shall
-------------------
not have the option to redeem the Notes pursuant to Section 3.07 of the
Indenture prior to ____________, 2001. Thereafter, the Company shall have the
option to redeem the Notes, in whole or in part, at the redemption prices
(expressed as percentages of the principal amount) set forth below, plus accrued
and unpaid interest thereon to the applicable redemption date, if redeemed
during the 12 month period beginning on __________ of the years indicated below:
Year Percentage
---- ----------
2001 %
2002 %
2003 %
2004 and thereafter 100.000%
6. Mandatory Redemption. The Company shall not be required to make
--------------------
mandatory redemption or sinking fund payments with respect to the Notes.
7. Redemption or Repurchase at Option of Holder. Under certain
-------------------------------------------
circumstances, as provided in the Indenture, the Company may be required to make
an offer to purchase all or a portion of the Notes. Holders of Notes that are
subject to an offer to purchase will receive an offer to purchase 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"
appearing below.
8. Notice of Redemption. Notice of redemption shall be mailed at
--------------------
least 30 days but not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at its registered address. Notes 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 of them called for redemption.
9. Subordination. The Notes are subordinated to Senior Debt (as
-------------
defined in the Indenture) (whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed) and all Obligations (as
defined in the Indenture) with respect thereto. To the extent provided in the
Indenture, Senior Debt must be paid before the Notes may be paid. The Company
agrees, and each Holder by accepting a Note agrees, to the subordination and
authorizes the Trustee to give it effect.
10. 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 to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not exchange or register the transfer of any Note or portion of a
Note selected for redemption. Also, it need not exchange or register the
transfer of any Notes for a period of 15 days before a selection of Notes to be
redeemed, during the period between a record date and the corresponding Interest
Payment Date.
11. Persons Deemed Owners. Prior to due presentment to the Trustee
---------------------
for registration of the transfer of this Note, the Trustee, any Agent, the
Company and the Guarantors, if any, may deem and treat the Person in whose name
this Note is registered as its absolute owner for the purpose of receiving
payment of principal of and interest on this Note and for all other purposes
whatsoever, whether or not this Note is overdue, and neither the Trustee, any
Agent, the Company nor any Guarantor shall be affected by notice to the
contrary. The registered holder of a Note shall be treated as its owner for all
purposes.
A-3
<PAGE>
12. Amendments and Waivers. Subject to certain exceptions, the
----------------------
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes) however,
without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held at the time of such consent 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 or waive any of the provisions with respect to the redemption of
the Notes;
(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 premium, 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 or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note;
(h) make any change to the subordination provisions of Section 10.02
or Article 11 of the Indenture that adversely affects Holders;
(i) make any change in Section 6.07 of the Indenture or in the
foregoing amendment and waiver provisions.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of this Indenture (and the obligations of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirements that such Holder shall have been the Holder of
record of any Notes with respect to which such consent is required to be sought
as of a date identified by the Trustee in a notice furnished to Holders in
accordance with the terms of the Indenture. Without the consent of any Holder,
the Indenture or the Notes may be amended to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for assumption of the Company's obligations to
Holders in the case of a merger or consolidation or to make any change that
would provide any additional rights or benefits to the Holders (including
providing for Subsidiary Guarantees pursuant to Section 4.13 hereof) or that
does not adversely affect the rights of any Holder under the Indenture or to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
A-4
<PAGE>
13. Defaults and Remedies. Events of Default include (as more fully
---------------------
described, and subject to, the terms and conditions of the Indenture): default
for 30 days in the payment when due of interest on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); default in payment
when due of principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); failure by the
Company to comply with Sections 4.07, 4.09, 4.10 or 4.14 of the Indenture;
failure by the Company or the Guarantors for 60 days after notice to comply with
any of its other agreements in the Indenture or the Notes; 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 Subsidiaries or Holding (or the payment of which is
guaranteed by the Company or any of its Subsidiaries or Holding) whether such
Indebtedness or Guarantee now exists, or is created after the Issue Date, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness (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 $10.0
million or more; failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; except as permitted by the
Indenture, any Subsidiary Guarantee 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 Guarantor, or any Person acting on behalf of any Guarantor,
shall deny or disaffirm its obligations or shall fail to comply with any
obligations under its Subsidiary Guarantee; and certain events of bankruptcy or
insolvency with respect to the Company, any Guarantor or any of their respective
Subsidiaries. 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 immediately, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company or any of its Subsidiaries, 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 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 Company must furnish an annual
compliance certificate to the Trustee.
14. Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company, any Guarantor or their respective
Affiliates, and may otherwise deal with the Company, any Guarantor or their
respective Affiliates, as if it were not Trustee.
15. No Recourse Against Others. No past, present or future director,
--------------------------
officer, employee, incorporator or stockholder, as such, of the Company, any
Guarantor, as such, shall have any liability for any obligations of the Company
or any Guarantor under the Notes, the Subsidiary Guarantees 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 and the Subsidiary Guarantees, if
any, waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of the Notes.
16. Authentication. This Note shall not be valid until authenticated
--------------
by the manual signature of the Trustee or an authenticating agent.
A-5
<PAGE>
17. 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).
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 has directed the Trustee to 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.
19. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
-------------
GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE SUBSIDIARY
GUARANTEES, IF ANY.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to:
Showboat, Inc.
2800 Fremont Street
Las Vegas, Nevada 89104
Telecopier No.: (702) 385-9678
Attention: Chief Financial Officer
A-6
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
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.
A-7
<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 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
Date:__________________________ Your Signature:______________________
(Sign exactly as your name appears on the Note)
Tax Identification No.:____________________
Signature Guarantee.
A-8
<PAGE>
EXHIBIT B
Form of Supplemental Indenture to Be Delivered by Guarantors
Supplemental Indenture (this "Supplemental Indenture"), dated as of
________________, between __________________ (the "Guarantor"), a subsidiary of
Showboat, Inc. (or its successor), a Nevada corporation (the "Company"), and
_______________, a national banking association, as trustee under the indenture
referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, Showboat, Inc., a Nevada corporation has heretofore executed and
delivered to the Trustee an indenture (the "Indenture"), dated as of _______ __,
1994, providing for the issuance of an aggregate principal amount of
$150,000,000 of ______% Senior Subordinated Notes due 2009 (the "Notes");
WHEREAS, Section 4.13 of the Indenture provides that under certain
circumstances the Company is required to cause the Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the Guarantor
shall unconditionally guarantee all of the Company's obligations under the Notes
pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein;
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
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders 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 Guarantor hereby agrees that its obligations
to the Holder and the Trustee pursuant to this Subsidiary Guarantee shall be as
expressly set forth in Article 10 of the Indenture and in such other provisions
of the Indenture as are applicable to Guarantors, and reference is made to the
Indenture for the precise terms of this Supplemental Indenture. The terms of
Article 10 of the Indenture and such other provisions of the Indenture as are
applicable to Guarantors are incorporated herein by reference.
3. Execution and Delivery of Subsidiary Guarantees.
(a) To evidence its Subsidiary Guarantee set forth in this Supplemental
Indenture, the Guarantor hereby agrees that a notation of such Subsidiary
Guarantee substantially in the form of Exhibit C to the Indenture shall be
endorsed by an Officer of such Guarantor on each Note authenticated and
delivered by the Trustee after the date hereof.
(b) Notwithstanding the foregoing, the Guarantor hereby agrees that its
Subsidiary Guarantee set forth herein shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
B-1
<PAGE>
(c) If an Officer whose signature is on this Supplemental Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
(d) The delivery of any Note by the Trustee, after the authentication
thereof under the Indenture, shall constitute due delivery of the Subsidiary
Guarantee set forth in this Supplemental Indenture on behalf of the
Guarantor.
4. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder of the Guarantor, as such, shall
have any liability for any obligations of the Company or any Guarantor under the
Notes, any Subsidiary 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.
5. New York Law to Govern. The internal law of the State of New York shall
govern and be used to construe this Supplemental Indenture and the Subsidiary
Guarantee.
6. 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.
7. Effect of Headings. The Section headings herein are for convenience only
and shall not affect the construction hereof.
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: ____________ ___, ____ [Guarantor]
By: ___________________________
Name:
Title:
Dated: ____________ ___, ____ _________________________________,
as Trustee
By: ___________________________
Name:
Title:
B-2
<PAGE>
EXHIBIT C
[FORM OF NOTATION ON SENIOR SUBORDINATED NOTE
RELATING TO SUBSIDIARY GUARANTEE]
Each Subsidiary of the Company which in accordance with Section 4.13 of
the Indenture is required to guarantee the obligations of the Company under the
Notes upon execution of a counterpart of this Indenture, has jointly and
severally unconditionally guaranteed (i) the due and punctual payment of the
principal of and interest on the Notes, whether at the maturity or interest
payment or mandatory redemption date, by acceleration, call for redemption or
otherwise, and of interest on the overdue principal of and interest, if any, on
the Notes and all other obligations of the Company to the Holders or the Trustee
under the Indenture or the Notes and (ii) 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 maturity, by acceleration or otherwise.
The obligations of each Guarantor to the Holder and to the Trustee
pursuant to this Subsidiary Guarantee and the Indenture are as expressly set
forth in Article 10 of the Indenture and in such other provisions of the
Indenture as are applicable to Guarantors, and reference is hereby made to such
Indenture for the precise terms of this Subsidiary Guarantee. The terms of
Article 10 of the Indenture and such other provisions of the Indenture as are
applicable to Guarantors are incorporated herein by reference.
This is a continuing guarantee and shall remain in full force and effect
and shall be binding upon each Guarantor and its successors and assigns until
full and final payment of all of the Company's obligations under the Notes and
the Indenture and shall inure to the benefit of the successors and assigns of
the Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. This is a
guarantee of payment and not a guarantee of collection.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
C-1
<PAGE>
EXHIBIT D
[FORM OF ESCROW AGREEMENT]
1
<PAGE>
EXHIBIT 12.01
SHOWBOAT, INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------- ----------------
1989 1990 1991 1992 1993 1993 1994
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income
taxes and extraordinary
items.................. $11,134 $ 2,529 $10,102 $22,614 $23,938 $ 3,186 $ 5,689
------- ------- ------- ------- ------- ------- -------
Add:
Fixed Charges:
Interest--expensed.. 28,038 28,099 27,497 25,335 24,696 4,900 6,202
Interest--capital-
ized............... 248 1,085 189 449
Portion of rents
representative of
the interest
factor............. 6,965 7,471 7,710 8,096 8,467 2,031 2,155
------- ------- ------- ------- ------- ------- -------
Total fixed charges (1). 35,003 35,818 35,207 33,431 34,248 7,120 8,806
------- ------- ------- ------- ------- ------- -------
Less:
Interest--capitalized. 248 1,085 189 449
------- ------- ------- ------- ------- ------- -------
Earnings as adjusted(2). $46,137 $38,099 $45,309 $56,045 $57,101 $10,117 $14,046
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to
fixed charges(2)/(1)... 1.32x 1.06x 1.29x 1.68x 1.67x 1.42x 1.60x
======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
Exhibit 23.02
ACCOUNTANT'S CONSENT
The Board of Directors
Showboat, Inc.
We consent to the use of our reports included and incorporated herein by
reference and to the references to our Firm under the headings "Selected
Consolidated Financial Data" and "Experts" in the prospectus.
KPMG PEAT MARWICK
Las Vegas, Nevada
June 27, 1994
