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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from _________ to _________.
Commission file number: 1-12168
BOYD GAMING CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 88-0242733
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2950 SOUTH INDUSTRIAL ROAD, LAS VEGAS NV 89109
(Address of principal executive offices)(Zip Code)
(702) 792-7200
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
9.25% SENIOR NOTES NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period than the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of August 29, 1997, the aggregate market value of the voting
stock held by non-affiliates of the Registrant, based on the closing price on
the New York Stock Exchange for such date, was approximately $206,372,000.
Shares of Common Stock held by officers, directors and holders of more than 5%
of the outstanding Common Stock have been excluded from this calculation because
such persons may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.
As of August 29, 1997, the Registrant had outstanding 61,523,988
shares of Common Stock.
Documents Incorporated by Reference into Parts I-III: Portions of the
definitive Proxy Statement for the Registrant's 1997 Annual Meeting of
Stockholders are incorporated by reference into Part III hereof.
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BOYD GAMING CORPORATION
1997 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PART I
Page No.
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Item 1. Business............................................................... 1
Item 2. Properties ............................................................ 34
Item 3. Legal Proceedings ..................................................... 34
Item 4. Submission of Matters to a Vote of Security-Holders ................... 34
Item 4A. Executive Officers of the Registrant .................................. 34
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.. 36
Item 6. Selected Consolidated Financial Data .................................. 36
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................. 38
Item 7A. Quantitative and Qualitative Disclosure about Market Risk ............. 48
Item 8. Financial Statements and Supplementary Data ........................... 48
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure .................................................. 48
PART III
Item 10. Directors and Executive Officers of the Registrant .................... 48
Item 11. Executive Compensation ................................................ 48
Item 12. Security Ownership of Certain Beneficial Owners and Management ........ 48
Item 13. Certain Relationships and Related Transactions ........................ 48
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K ..... 48
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PART I
ITEM 1. BUSINESS
GENERAL
Boyd Gaming Corporation is a multi-jurisdictional gaming company which
currently owns or operates twelve casino entertainment facilities. The Company
has operated successfully for more than two decades in the highly competitive
Las Vegas market and has entered five new gaming jurisdictions in the past three
years. The Company owns and operates seven facilities in three distinct markets
in Las Vegas, Nevada: the Stardust Resort and Casino (the "Stardust") on the Las
Vegas Strip; Sam's Town Hotel and Gambling Hall ("Sam's Town Las Vegas"), the
Eldorado Casino (the "Eldorado") and the Jokers Wild Casino ("Jokers Wild") on
the Boulder Strip; and the California Hotel and Casino (the "California"), the
Fremont Hotel and Casino (the "Fremont") and Main Street Station Hotel, Casino
and Brewery ("Main Street Station") in downtown Las Vegas. The Company also owns
or manages five facilities in new gaming jurisdictions, all opened during the
last three years. The Company owns and operates Sam's Town Hotel and Gambling
Hall, a dockside gaming and entertainment complex in Tunica County, Mississippi
("Sam's Town Tunica") and Sam's Town Kansas City, a riverboat gaming and
entertainment complex in Kansas City, Missouri. In December 1996, the Company
completed the acquisition of the Par-A-Dice riverboat casino and hotel in East
Peoria, Illinois ("Par-A-Dice"). The Company manages and owns a minority
interest in the Treasure Chest Casino (the "Treasure Chest"), a riverboat casino
in Kenner, Louisiana, and manages for the Mississippi Band of Choctaw Indians
the Silver Star Resort and Casino (the "Silver Star"), a land-based gaming and
entertainment complex located near Philadelphia, Mississippi. In addition, the
Company has agreed to purchase the remaining 85% interest in Treasure Chest that
it does not now own (the "Remaining Treasure Chest Interests") and the Company
and Mirage Resorts, Inc. ("Mirage") have announced the signing of a joint
venture agreement (the "Mirage Joint Venture") to jointly develop and own a
casino hotel entertainment facility in Atlantic City, New Jersey (the "Atlantic
City Project"). See "-- Investment Considerations -- Expansion". The Company
currently owns or operates an aggregate of 590,000 square feet of casino space,
containing 16,779 slot machines and 565 table games. As such, the Company
derives the majority of its gross revenues from its casino operations, which
produced approximately 64% of gross revenues during the last three fiscal years.
Food and beverage revenue, which produced approximately 17% of gross revenues
during the last three fiscal years, represents the only other revenue source
which produced more than 10% of gross revenues during this time frame. See
"Properties" and "Business -- Properties."
The Company currently conducts substantially all of its business through
seven wholly-owned subsidiaries: California Hotel and Casino ("CH&C"); Boyd
Tunica, Inc. ("Boyd Tunica"); Boyd Kenner, Inc. ("Boyd Kenner"); Boyd
Mississippi, Inc. ("Boyd Mississippi"); Boyd Kansas City, Inc. ("Boyd Kansas
City"), Par-A-Dice Gaming Corporation ("Par-A-Dice Gaming") and East Peoria
Hotel, Inc. ("EPH"). CH&C directly owns and operates Sam's Town Las Vegas and
the California and owns and operates the Stardust, the Fremont, the Eldorado,
Jokers Wild and Main Street Station through wholly-owned subsidiaries. Boyd
Tunica owns and operates Sam's Town Tunica; Boyd Kenner operates the Treasure
Chest and owns a 15% equity interest in Treasure Chest, L.L.C., the owner of the
Treasure Chest; Boyd Mississippi operates Silver Star; and Boyd Kansas City owns
and operates Sam's Town Kansas City. Par-A-Dice Gaming owns and operates the
Par-A-Dice and EPH is the general partner of a limited partnership that owns the
Par-A-Dice Hotel.
OPERATING STRATEGY
The Company believes that the following key elements have contributed to
the success of the Company in the past and are central to its future success.
Value-Oriented Casino Entertainment Experience
The Company is committed to providing a high-quality casino entertainment
experience to its primarily middle-income customers at an affordable price in
order to develop customer loyalty. The Company delivers value to its customers
through providing service in an inviting and entertaining environment. The
Company delivers additional value to its customers through moderately-priced
casino entertainment, hotel, restaurant and live entertainment offerings and
regularly reinvests in its existing facilities in an effort to maintain the
quality and competitiveness of its properties.
Lively, Friendly Atmosphere
Each of the Company's facilities is clean and modern and offers friendly
service in an informal and lively atmosphere. The Company's employee training
programs are designed to motivate employees to provide the type of friendly and
attentive service which the Company seeks to provide at its facilities. The
Company has an extensive customer feedback system, ranging from guest comment
cards in its restaurants and hotel rooms, to other consumer surveys and
research. In addition to providing a measure of customer service, comment cards
and consumer research allow the Company to obtain valuable customer feedback and
marketing information for its database.
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Emphasis on Slot Play
The Company emphasizes slot machine wagering, the most consistently
profitable segment of the casino entertainment business. Technological advances
in slot products have resulted in sophisticated interactive games, which offer
customers greater variety, more generous payoffs and increased periods of play
for their casino entertainment dollar. The Company continually invests in
upgrading its machines to reflect advances in technology and the development of
proprietary slot games and related equipment at all of its facilities in order
to further enhance the slot customer's experience.
Comprehensive Marketing and Promotion
The Company actively promotes its casino entertainment offerings, its
hotels, destination restaurants and live entertainment using a variety of
promotional advertising media including outdoor advertising and print and
broadcast media. The Company develops and maintains an extensive customer
database. The database is expanded daily, adding new casino customers by
obtaining their mailing addresses and other marketing information. To encourage
repeat visitation, the Company employs a direct mail program targeting its
database customers with a variety of product offerings, including incentives to
visit the Company's facilities frequently. During fiscal 1997, the Company
distributed approximately 14 million pieces of mail to its database customers.
The Company also provides complimentary rooms, food and other services to valued
customers, but maintains limits on such items consistent with its focus on
middle-income patrons.
PROPERTIES
The Company currently owns and operates seven properties in Las Vegas: the
Stardust; Sam's Town Las Vegas; the Eldorado; Jokers Wild; the California; the
Fremont; and Main Street Station. The Company also owns and/or operates five
properties outside the State of Nevada: Sam's Town Tunica, in Tunica County,
Mississippi; Sam's Town Kansas City, in Kansas City, Missouri; Treasure Chest,
in the western suburbs of New Orleans; Silver Star, in central Mississippi; and
Par-A-Dice in East Peoria, Illinois.
The Stardust
The Stardust, situated on 52 acres of land owned and nine acres of land
leased by the Company on the Las Vegas Strip, is a casino hotel complex with
approximately 87,000 square feet of casino space, a conference center containing
approximately 35,000 square feet of meeting space and a 900-seat showroom. The
casino offers nearly 2,000 slot machines and 79 table games, including tables
featuring "21," craps, roulette, baccarat, mini-baccarat, pai gow, Caribbean
stud and poker, as well as keno. The Stardust features "Enter the Night," a
production show that includes computerized lighting, lasers and digital surround
sound. The Stardust also has one of the largest and best known race and sports
books in the United States and is the home of the Stardust line, a racing and
sports line service that is quoted throughout the United States and abroad. The
Stardust features more than 2,300 guest rooms, 1,500 in its 32-story hotel
tower. The Stardust complex, which is distinguished by dramatic building
lighting, has seven restaurants, a shopping arcade, two swimming pools and
parking spaces for approximately 2,900 cars.
The Stardust caters primarily to adult Las Vegas visitors seeking the
classic Las Vegas gaming experience. Using its extensive database, the property
promotes customer loyalty and generates repeat customer business by
communicating with its customers regarding special events, new product offerings
and special incentive promotions at the property. The Company uses a network of
tour operators and wholesalers to reach customers who prefer packaged trips and
print and broadcast media to attract the independent traveler. The Company
attracts proven slot and table game players through direct mail promotions for
tournaments, events and a variety of special offers. With its conference center,
the Stardust also attracts meeting and banquet business. In addition, the
Stardust draws a significant number of walk-in customers. Patrons of the
Stardust come primarily from the western United States, including Southern
California and Arizona, and the Midwest.
The Company is analyzing various alternatives to utilize the 61-acre
Stardust site, including additional hotel rooms and other amenities to more
effectively compete with the new generation of Las Vegas properties.
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Boulder Strip Properties
Sam's Town Las Vegas is situated on 56 acres of land owned and 7 acres of
land leased by the Company on the Boulder Strip, approximately six miles east of
the Las Vegas Strip. Sam's Town features an approximately 118,000-square foot
casino, a 56-lane bowling center and the 25,000-square foot Western Emporium
retail store. The gaming facilities now include 2,840 gaming machines and 54
table games, including tables featuring blackjack, craps, roulette, pai gow,
poker and Caribbean stud, as well as keno, a race and sports book, and bingo.
The property has 650 guest rooms, 16 restaurants, 500 spaces for recreational
vehicles and approximately 3,200 parking spaces, including two parking garages
which together can accommodate up to 2,000 cars. The resort features a
25,000-square foot atrium which contains extensive foliage and trees, streams,
bridges, and a large waterfall with a laser light show. Adjacent to the atrium
there are several restaurants and a large sports bar. Other features of the
property include an outdoor recreation area, as well as banquet and meeting
facilities.
Sam's Town Las Vegas has a western theme and features an informal, friendly
atmosphere that appeals to both local residents and visitors. Gaming and bowling
tournaments, paycheck sweepstakes, costume contests and holiday parties create a
social center that attracts many Las Vegas residents. The property is a major
sponsor of the Ladies Professional Bowling Tour and hosts many bowling events
which are televised throughout the United States and attract participants from
around the world. Additionally, the Company attracts local market patrons, many
of whom are repeat customers, by offering excellent price/value relationships in
its food and beverage operations, and by slot marketing programs that include
generous slot payouts. The popularity of Sam's Town Las Vegas among local
residents allows it to benefit from the rapid development of the Las Vegas
metropolitan area, which has been one of the fastest growing communities in the
United States over the last decade. However, competition from the recently
opened Sunset Station property may have a negative impact on the future
performance of Sam's Town Las Vegas. In that regard, the Company has developed a
master plan for Sam's Town Las Vegas calling for, among other things, a second
hotel tower. Although the Company has not yet made any decision regarding a
future Sam's Town Las Vegas expansion, it is currently exploring the feasibility
of such a project.
The Eldorado is situated on four acres of land owned by the Company in
downtown Henderson, Nevada, which is southeast of Las Vegas. The casino has over
16,000 square feet of gaming space featuring approximately 600 slot machines and
11 table games, including tables featuring "21," craps, roulette and pai gow, as
well as keno, bingo and a sports book. The facility also offers three
restaurants and a parking garage for up to 500 cars. The principal customers at
the Eldorado are Henderson residents.
Jokers Wild is situated on 13 acres of land owned by the Company on the
Boulder Strip. The property offers over 22,500 square feet of casino space with
over 640 slot machines and 11 table games, including tables featuring "21,"
craps, roulette, pai gow, Caribbean stud and poker, as well as keno and a sports
book. The facility also offers a buffet restaurant, a coffee shop, an
entertainment lounge, a video arcade and approximately 800 parking spaces.
Jokers Wild serves both local residents and visitors to the Las Vegas area
traveling on the Boulder Highway.
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Downtown Properties
The California is situated on 13.9 acres of land owned and 1.6 acres of
land leased by the Company in downtown Las Vegas. The California was the
Company's first property and has over 36,000 square feet of gaming space, 781
guest rooms, five restaurants, approximately 5,000 square feet of meeting space,
more than 800 parking spaces, including a parking garage for up to 425 cars, and
an approximately 95-space recreational vehicle park, the only such facility in
the downtown area. The casino offers approximately 1,150 slot machines and 36
table games, including tables featuring "21," craps, roulette, pai gow and
Caribbean stud, as well as keno and a sports book.
The Fremont is situated on 1.4 acres of land owned and 0.9 acres of land
leased by the Company on the principal thoroughfare in downtown Las Vegas. The
property offers 32,000 square feet of casino space including approximately 1,100
slot machines, and 27 table games, including tables featuring "21," craps,
roulette, pai gow, poker and Caribbean stud, as well as keno and a race and
sports book. The hotel has 452 guest rooms and five restaurants including the
Second Street Grill, an upscale contemporary restaurant, and the Paradise
Buffet, which features tropical-themed surroundings. The property also has
approximately 8,200 square feet of meeting space and a parking garage for up to
350 cars.
Main Street Station was acquired by the Company in December 1993 and was
used to augment the rooms base for the California and Fremont prior to its
opening as a full service hotel casino in November 1996. Main Street Station is
situated on 15 acres of land owned by the Company in downtown Las Vegas and was
renovated and expanded prior to its November 1996 opening. The property includes
a 28,500-square foot, newly-equipped casino with 22 table games and
approximately 865 slot machines. The property also includes 406 renovated hotel
rooms and expanded and renovated food facilities, including a 500-seat buffet, a
130-seat specialty restaurant, a 100-seat cafe, a 200-seat brew pub and oyster
bar and expanded parking to include 2,000 spaces.
The Company coordinates marketing efforts, support functions and has
standardized operating procedures and systems among its three Downtown
Properties with the goal of enhancing revenues and reducing expenses. This
effort will include a consolidated database and marketing program for all
Downtown Properties. The Company believes these efforts will significantly
reduce costs and provide it with a competitive advantage.
While many casinos in downtown Las Vegas compete with other downtown
properties and properties on the Las Vegas Strip for the same customers, the
Company has developed a distinctive niche for its Downtown Properties by
focusing primarily on customers from Hawaii. The Company's marketing strategy
for the Downtown Properties focuses on gaming enthusiasts from Hawaii and tour
and travel agents from Hawaii with whom the Company has cultivated relationships
since it opened the California in 1975. Through the Company's Hawaiian travel
agency, Vacations Hawaii, the Company currently operates six DC-10 charter
flights from Honolulu to Las Vegas each week, helping to ensure stable,
reasonably priced air seats. This, as well as the Company's strong, informal
relationships with other Hawaiian travel agencies, its affordably priced,
all-inclusive packages and its Hawaiian promotions have allowed the California
and the Fremont to capture a significant share of the Hawaiian tourist trade in
Las Vegas. For more than a decade the Downtown Properties have been the leading
Las Vegas destination for visitors from Hawaii. The Company attributes this
success to the amenities and atmosphere at the Downtown Properties, which are
designed to appeal specifically to visitors from Hawaii, and to its marketing
strategy featuring significant promotions in Hawaii and a bi-monthly newsletter
circulated to over 84,000 households, primarily in Hawaii. For the year ended
June 30, 1997, patrons from Hawaii comprised approximately 70% of the room
nights at the California, 56% of the room nights at the Fremont and 79% of the
room nights at Main Street Station.
The Company, together with other downtown casino operators and the City of
Las Vegas, developed the downtown attraction known as the Fremont Street
Experience. The attraction features a semi-circular space frame nine stories
above the street, stretching along four city blocks against which a sound and
light spectacle is displayed. As part of the project, vehicular traffic on
portions of Fremont Street has been eliminated, asphalt replaced by a patterned
streetscape and special events brought to the downtown area to entertain
visitors.
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The Company believes that, since its opening in December 1995, the Fremont
Street Experience has significantly enhanced the experience of visiting downtown
Las Vegas and has attracted additional customers to the downtown area. While the
downtown area has experienced increased traffic flow as a result of the Fremont
Street Experience, the increased traffic flow has not translated into increased
gaming revenue for the Company's Downtown Properties. In addition, the entity
which operates the Fremont Street Experience (Fremont Street Experience, Limited
Liability Company or "FSE") has experienced significant levels of operating
loss and cash deficiency during its first full year of operation. Management
expects this trend to continue and, therefore, does not expect to recover its
investment in this entity. For these reasons, the Company recorded a $5.3
million impairment loss in fiscal 1997 to write-off its entire investment in
FSE. See Note 3 of Notes to Consolidated Financial Statements.
Central Region Properties
The Company has exported its popular Sam's Town western theme and
atmosphere to the Mississippi dockside gaming market by developing Sam's
Town Tunica, which opened on May 25, 1994. Sam's Town Tunica is located in
Tunica County near State Highway 61 approximately 25 miles south of Memphis,
Tennessee. The adult population within a 200-mile radius is over 3 million and
includes the cities of Nashville, Tennessee; Jackson, Mississippi; and Little
Rock, Arkansas. The Company has distinguished itself from other operators in the
area by developing a major casino entertainment complex with extensive amenities
including a 857-room hotel, an entertainment lounge featuring country-western
music, six destination restaurants including Corky's B-B-Q, featuring the food
of that popular Memphis eatery, bars, specialty shops and the River Palace
Arena, a 1,650-seat entertainment facility featuring country-western
entertainers. In December 1994, an $18 million expansion was completed which
included the addition of 308 guest rooms surrounding a swimming pool and
recreational area. The Company, seeking to further its position in both the
overnight and drive-in markets in Tunica, recently expanded Sam's Town Tunica.
The $40 million expansion project included a 350-room hotel tower and a
1,000-car parking garage. The new hotel tower brings the total room count to
857, and the garage is the first enclosed parking structure at a Tunica County
casino. The complex offers a two-story casino of approximately 75,000 square
feet featuring approximately 1,860 slot machines and 77 table games, including
tables featuring "21," craps, roulette, poker, Caribbean stud and pai gow, as
well as keno. The design of the facility integrates the water-based and
land-based components of the facility.
The Company has extended its popular Sam's Town theme to the Kansas City,
Missouri market with the opening of Sam's Town Kansas City on September 13,
1995. Sam's Town Kansas City was completed at a cost of approximately $145
million, including land, capitalized interest and preopening costs. The
facility, which is situated on 34 acres located on the Missouri River and
Interstate 435, features a continuously docked riverboat housing a 28,000-square
foot casino on three decks with approximately 1,060 slot machines and 54 table
games. The 80,000-square foot land-based facility contains five food facilities,
including a 7,000-square foot sports bar, and ticketing services, all
surrounding a turn-of-the-century Kansas City streetscape. The facility also
features a 1,350-space garage, connected to the main facilities by an enclosed
moving walkway. Including surface parking, the property offers a total of 2,000
parking spaces. The Kansas City metropolitan area has an adult population of
over one million. The Company's facility is located near the Interstate 435
entertainment corridor in Kansas City which provides access to the Worlds of Fun
and Oceans of Fun theme parks, the Kansas City Zoo, and the Kansas City Chiefs'
and Kansas City Royals' Stadiums. In connection with the operation of Sam's Town
Kansas City, the Company will pay the City of Kansas City approximately $250,000
per year for a period of ten years ending in September 2004. The Company intends
to offer 10% of the capital stock of Boyd Kansas City, the entity that owns and
operates Sam's Town Kansas City, to certain persons or entities located in the
Kansas City area. The price to be paid by such persons or entities will be based
on the total cost of the project. During fiscal 1997, the Company recorded a
$126 million impairment loss in accordance with SFAS No. 121 to write down the
carrying value of the Company's Missouri fixed and intangible assets, including
Sam's Town Kansas City, to fair value. See Note 3 of Notes to Consolidated
Financial Statements.
The Company manages and partly owns the Treasure Chest, a riverboat casino
operation located on Lake Pontchartrain in Kenner, Louisiana, which opened in
September 1994. Located near the New Orleans International Airport, the Treasure
Chest primarily serves patrons from Jefferson Parish, including suburbs on the
west side of New Orleans. The gaming operation features a classic paddle-wheel
riverboat with a total capacity of 2,000 persons, approximately 24,000 square
feet of casino space, over 900 slot machines and
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56 table games, including tables for "21," craps, roulette and poker. Each of
the riverboat's three decks has a different theme, with one featuring
contemporary Las Vegas-style decor, one offering a nautical environment and one
providing a festive Mardi Gras setting.
The management agreement between the Company and Treasure Chest L.L.C.,
owner of the Treasure Chest, provides for an initial five-year term expiring
June 1999, extendible at the Company's option for three additional five-year
periods if certain operating results are achieved. The agreement also provides
for a management fee of 10% of the enterprise's net operating profit before
interest, depreciation, income taxes, amortization, extraordinary items and the
management fee. The Company owns a 15% equity interest in Treasure Chest L.L.C.
The Company has agreed to purchase the remaining 85% of Treasure Chest
L.L.C. that is not now owned by the Company for approximately $115 million,
including the assumption of debt. The transaction is subject to obtaining
applicable governmental and regulatory approval. There can be no assurance as to
when, or if, such transaction will be consummated. The Company expects to fund
the acquisition and the repayment of Treasure Chest's debt with borrowings under
its revolving bank credit facility (the "Bank Credit Facility"). If the
acquisition is not consummated, the Company has determined that for a number of
reasons, including to strategically focus the management and financial resources
of the Company, the Company will pursue a sale of its 15% ownership interest in
Treasure Chest L.L.C. Whether or not the Company disposes of its 15% ownership
interest in Treasure Chest L.L.C. or acquires the Remaining Treasure Chest
Interests, the management agreement between the Company and Treasure Chest
L.L.C. will terminate no later than October 31, 1997. See "Investment
Considerations -- Expansion."
Pursuant to an agreement with the Mississippi Band of Choctaw Indians, the
Company operates the Silver Star, the only land-based casino in the State of
Mississippi. The facility, which opened in July 1994, is located on tribal lands
in central Mississippi. The principal markets served by the facility are central
Mississippi and Alabama, with the Birmingham, Montgomery and Tuscaloosa
metropolitan areas located within approximately 200 miles of the site. The
property, which recently completed a major expansion project, includes a
500-room hotel and a casino with approximately 90,000 square feet of gaming
space with over 2,790 slot machines and 96 table games, including tables for
"21," craps, roulette, mini-baccarat and Caribbean stud, as well as a lounge
suitable for entertainment and dancing, a swimming pool, four restaurants, a
55,000-square foot conference center and more than 1,300 parking spaces. The
recently completed expansion project included 400 additional rooms and suites, a
casino expansion and a new restaurant. In addition, an 18-hole golf course and a
full-service spa were recently completed in July 1997.
The management agreement for Silver Star provides for a seven-year term
expiring in July 2001 and a management fee of 30% of the enterprise's operating
income before debt service for the first five years and 40% of its operating
income before debt service for the final two years. Under the agreement, the
Company provided $30.5 million in debt financing for the construction and
start-up of the facility, which amount was repaid during fiscal 1995 from the
enterprise's cash flow. The Company loaned the tribe an additional $10 million
for a casino expansion project which was completed in December 1994. This loan
is scheduled to be repaid over five years.
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On December 5, 1996, the Company completed the acquisition of Par-A-Dice.
Par-A-Dice is a riverboat casino operation located along the Illinois River in
East Peoria, Illinois, approximately 170 miles from Chicago. The Par-A-Dice
Riverboat Casino initially commenced operations in November 1991, operating from
a temporary facility in downtown Peoria. In May 1993, the facility was relocated
across the Illinois River to a newly constructed land-based pavilion, containing
two restaurants, a bar, gift shop, ticketing area and surface parking for 750
cars, located on 19 acres in East Peoria. In May 1994, the original Par-A-Dice
Riverboat Casino replica paddle-wheel riverboat was replaced with a new,
state-of-the-art, twin hull cruise ship. The new boat measures 238 feet long and
66 feet wide and since the recent completion of an expansion in March 1996,
features 33,000 square feet of gaming space on four levels with approximately
1,000 slot machines and 42 table games, as well as limited food and beverage
services. Located adjacent to Par-A-Dice is the Par-A-Dice Hotel, a 208-room
full-service hotel with food and beverage and banquet and meeting facilities.
The Company believes the newly-constructed hotel will enable the Par-A-Dice to
develop an overnight customer base for the facility and provides much needed
banquet and meeting capabilities. The Par-A-Dice is the primary casino
entertainment facility serving central Illinois, and is strategically located
within 1/8 of a mile from an exit off of Interstate 74, a major regional
east-west interstate highway. The Par-A-Dice is the only casino entertainment
facility within approximately 100 miles of Peoria. There are more than 350,000
people living within the Peoria metropolitan area and over 1.7 million people
over the age of 21 living within 100 miles of Peoria.
MIRAGE JOINT VENTURE
On May 29, 1996, the Company, through a wholly-owned subsidiary, entered
into a joint venture agreement with a subsidiary of Mirage to jointly develop
and own a casino hotel entertainment facility in Atlantic City, New Jersey. The
Atlantic City Project is planned to be one component of a multi-facility casino
entertainment development, master-planned by Mirage for the Marina District of
Atlantic City. The Atlantic City Project is expected to cost approximately $500
million. The agreement contemplates that the joint venture would fund $300
million of the project cost with non-recourse third-party financing. The
remaining $200 million is expected to be funded equally by capital contributions
from the partners, including, in the case of Mirage, contribution of the land.
Pursuant to the joint venture agreement, the Company will control the
development and operation of the Atlantic City Project. The Atlantic City
Project is expected to include a hotel of at least 1,000 rooms and is expected
to be adjacent and connected to Mirage's planned wholly-owned resort. The
Company believes that certain highway improvements to permit greater access to
the Marina District of Atlantic City will be necessary to support the
multi-facility casino entertainment development master-planned by Mirage. The
State of New Jersey Department of Transportation and Mirage have developed a
mutually satisfactory plan for those improvements. Environmental remediation and
construction of the Atlantic City Project are not expected to begin until after
the necessary highway improvements are assured. Once such improvements are
assured and other requisite approvals are received, the Company estimates that
environmental remediation will take at least six months and construction of the
Atlantic City Project will thereafter take at least two years. Accordingly, the
Company is unable to estimate, when, if at all, the Atlantic City Project will
be completed. The Company has submitted its petition for a statement of
compliance to the New Jersey Casino Control Commission ("NJCCC"). This petition
has been forwarded to the New Jersey Division of Gaming Enforcement ("NJDGE")
for investigation. Recently, such investigations have taken six to nine months
to be completed, but may take significantly longer. Once construction has
commenced, the Company, through a wholly-owned subsidiary, can submit its
application for casino licensure to the NJCCC. With a statement of compliance
for the Company in place, the investigation by the NJCCC and NJDGE in connection
with the casino license application will focus on issues concerning operations,
the facility and equal employment and business opportunity. See "Investment
Considerations -- Expansion." The Atlantic City Project will give the Company a
presence in Atlantic City, the primary casino gaming market serving the eastern
United States.
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INVESTMENT CONSIDERATIONS
This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended.
Discussions containing such forward-looking statements may be found in the
material set forth under "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" as well as within the Annual
Report generally. Also, documents subsequently filed by the Company with the
Securities and Exchange Commission may contain forward-looking statements.
Actual results could differ materially from those projected in the
forward-looking statements as a result of the investment conditions set forth
below and the matters set forth in the Annual Report generally. The Company
cautions the reader, however, that this list of factors may not be exhaustive,
particularly with respect to future filings. Before making a decision to invest
in the Company's Common Stock and/or Public Debt, prospective investors should
carefully consider the following factors.
COMPETITION
The gaming industry is highly competitive. Gaming activities include:
traditional land-based casinos; riverboat and dockside gaming; casino gaming on
Indian land; state-sponsored lotteries; video poker in restaurants, bars and
hotels; pari-mutuel betting on horse racing, dog racing and jai-alai; sports
bookmaking; and card rooms. The casinos owned, managed and being developed by
the Company compete and will in the future compete with all these forms of
gaming and with any new forms of gaming that may be legalized in existing and
additional jurisdictions, as well as with other types of entertainment. The
Company also competes with other gaming companies for opportunities to acquire
legal gaming sites in emerging and established gaming jurisdictions and for the
opportunity to manage casinos on Indian land. Such competition in the gaming
industry could adversely affect the Company's ability to compete for new gaming
opportunities as well as its existing operations. In addition, further expansion
of gaming into other jurisdictions could also adversely affect the Company's
business by diverting its customers to competitors in such jurisdictions. In
particular, the expansion of casino gaming in or near any geographic area from
which the Company attracts or expects to attract a significant number of its
customers could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company believes that
successful gaming facilities compete based on the following factors: location;
attractions; quality of gaming facilities, gaming experience and entertainment;
quality of food, beverage and atmosphere; and price. Although the Company
believes it competes favorably with respect to these factors in most of its
markets, some of its competitors have significantly greater financial and other
resources than the Company.
The Company's Las Vegas properties compete primarily with other casino
hotels on the Las Vegas Strip, on the Boulder Strip and in downtown Las Vegas.
Currently, there are approximately 25 major gaming properties located on or near
the Las Vegas Strip, 13 located in the downtown area and several located in
other areas of Las Vegas. Las Vegas gaming square footage and room capacity are
continuing to increase. A number of marquee properties have opened in the last
several years, and several others are currently under construction or planned
for the Las Vegas Strip, including the 3,000-room Paris Casino-Resort and the
3,000-room Bellagio. Additionally, several properties have recently announced or
begun significant expansion and renovation projects, including MGM Grand
Hotel/Casino, Harrah's - Las Vegas and the Sahara Hotel and Casino. Each of the
foregoing facilities has or may have a theme and attractions which have drawn or
may draw significant numbers of visitors. Moreover, most of these facilities
attract or may attract primarily middle-income patrons, who are the focus of the
Company's marketing strategy. Also, competition from the recently opened Sunset
Station property may have a negative impact on the future performance of Sam's
Town Las Vegas. Although the Company believes that these additional facilities
will draw more visitors to Las Vegas, these properties also may divert potential
gaming activity from the Company. Future additions, expansions and enhancements
to existing properties and construction of new properties by the Company's
competitors could divert additional gaming activity from the Company's
facilities. There can be no assurance that the Company will compete successfully
in the Las Vegas market in the future.
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Sam's Town Tunica competes primarily with other dockside gaming operations
in Tunica County and, to a lesser extent, with dockside casinos in Vicksburg,
Greenville, Natchez and Coahoma County, Mississippi, with dockside casinos on
the Mississippi Gulf Coast and with gaming operations in Louisiana. Gaming has
grown rapidly in Tunica County with nine dockside casinos now in operation. In
addition, several Tunica-area casinos are in the process of adding hotel rooms,
1,200 rooms at Circus Circus-Tunica, 300 rooms at Horseshoe Gaming, and 170
rooms at the Sheraton. Some of these facilities are operated by certain of the
Company's principal Nevada competitors and may be operated or financed by
companies with significantly greater financial resources than the Company.
Sam's Town Kansas City competes primarily with four other riverboat gaming
operations in the Kansas City area. Some of these gaming facilities are operated
by companies that have significantly greater financial resources than the
Company, some have been operating for a longer time than the Company's facility
and some may possess more locations. Sam's Town Kansas City reported an
operating loss of $5 million (before the write off of preopening expenses) in
fiscal 1996 and a $11 million operating loss (before impairment loss) in fiscal
1997 as a result of high fixed costs and substantial advertising and
promotional expenses incurred in response to the highly competitive operating
environment. During fiscal 1997, the Company recorded an impairment loss of
approximately $126 million related to the Company's Missouri gaming assets,
including Sam's Town Kansas City. See Note 3 of Notes to the Consolidated
Financial Statements. No assurance can be given that the Company will compete
successfully in the future.
The Treasure Chest competes primarily with other riverboat gaming
operations in the New Orleans metropolitan area. A large land-based casino is
planned for downtown New Orleans but the project is presently in bankruptcy
reorganization. If the land-based project opens, it will compete directly with
the Treasure Chest. There are presently 15 licensed riverboats, 14 of which are
in operation, in the State of Louisiana with four of these projects (including
the Treasure Chest) operating in the New Orleans metropolitan area. Some of
these riverboats are operated by companies with significantly greater financial
resources and some may possess more desirable locations. No assurance can be
given that the Treasure Chest will compete successfully in the future.
Par-A-Dice competes primarily with other gaming operations in Illinois and,
to a lesser extent, with riverboats and dockside gaming facilities in
Indiana, Iowa and Missouri. The Illinois Riverboat Gambling Act authorizes ten
owner's licenses for riverboat gaming operations. All ten licenses have been
granted and nine riverboat gaming facilities are currently in operation in
Illinois. Some of these riverboats are being operated by companies with greater
experience in the Illinois market and significantly greater financial resources
than the Company. There can be no assurance that Par-A-Dice will compete
successfully in the future.
EXPANSION
On May 29, 1996, the Company entered into a joint venture agreement with
Mirage to jointly develop and own a casino hotel entertainment facility in the
Marina District of Atlantic City, New Jersey. The casino hotel project
contemplated by the Mirage Joint Venture is subject to a number of
contingencies, including, but not limited to, approval and funding of highway
improvements necessary to accommodate the additional traffic that is expected to
be generated to and from the Marina District, approval and licensing by the New
Jersey gaming authorities, environmental remediation, the receipt of state and
local land-use permits, building and zoning permits and liquor licenses. Once
the necessary highway improvements are assured and other requisite approvals are
received, the Company estimates that environmental remediation will take at
least six months and construction of the Atlantic City Project will thereafter
take at least two years. Accordingly, there can be no assurance that the
Atlantic City Project will be completed according to the terms currently
contemplated, if at all. In addition, the Company has no prior experience in New
Jersey, and no assurance can be given that, if the project is completed, the
Company will be able to successfully compete in this market. See "Business
- -- Mirage Joint Venture."
On July 11, 1997, the Company entered into a definitive agreement to
acquire the remaining 85% of Treasure Chest L.L.C. that is not now owned by the
Company for approximately $115 million, including the assumption of debt.
Closing of the transaction is conditioned upon, among other things, approval by
the Louisiana Gaming Control Board. There can be no assurance as to when, or if,
the acquisition will be consummated. The Company expects to fund the acquisition
and the repayment of Treasure Chest's debt with borrowings under the Bank Credit
Facility. If the acquisition is not consummated, the Company has determined that
for a number of reasons, including to strategically focus the management and
financial resources of the Company, the Company will pursue a sale of its 15%
ownership interest in Treasure Chest L.L.C. Whether or not the Company disposes
of its 15% ownership interest in Treasure Chest L.L.C. or acquires the Remaining
Treasure Chest Interests, the management agreement between the Company and
Treasure Chest L.L.C. will terminate no later than October 31, 1997.
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ADDITIONAL FINANCING REQUIREMENTS
The Company intends to finance its current and future expansion projects
primarily with cash flow from operations and borrowings under its Bank Credit
Facility. If the Company is unable to finance such projects through cash flow
from operations and borrowings under its Bank Credit Facility, it will have to
adopt one or more alternatives, such as reducing or delaying planned expansion
and capital expenditures, selling assets, restructuring debt or obtaining
additional equity or debt financing. No assurance can be given that the
aforementioned sources of funds will be sufficient to finance the Company's
expansion, or that other financing will be available on acceptable terms, in a
timely manner or at all. In addition, each of the Company's significant
long-term debt agreements contain certain restrictions on the ability of the
Company to incur additional indebtedness. Following the Company's July 1997
offering (the "Offering") of $250 million principal amount of 9.50% Senior
Subordinated Notes due 2007 (the "9.50% Notes"), availability under the Bank
Credit Facility was reduced by approximately $193 million and will be
subsequently increased if and to the extent the Company or any subsidiary
purchases or redeems its $185 million principal amount of 11% Senior
Subordinated Notes (the "11% Notes"). If the Company is unable to secure
additional financing, it could be forced to limit or suspend expansion,
development and acquisition projects, which may adversely affect the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
LEVERAGE AND DEBT SERVICE
At June 30, 1997, after giving effect to the Offering of 9.50% Notes and
the application of proceeds therefrom, the Company had total consolidated
long-term debt of approximately $747 million, which represents approximately 80%
of the total capitalization of the Company as of such date (or approximately
$862 million, or 82% of total capitalization, after giving effect to the
anticipated borrowings under the Company's Bank Credit Facility to fund the
purchase by the Company of the Remaining Treasure Chest Interests). The Bank
Credit Facility is a five-year, $500 million reducing revolving credit facility.
Debt service requirements on the Bank Credit Facility consist of interest
expense on outstanding Indebtedness. Beginning in December 1998, the total
principal amount available under the Bank Credit Facility will be reduced by $25
million and reduced by an additional $50 million at the end of each six-month
period thereafter until maturity in June 2001. Following the Offering,
availability under the Bank Credit Facility was reduced by approximately $193
million and will be subsequently increased if and to the extent the Company or
any subsidiary purchases or redeems the 11% Notes. No assurance can be given
that any such purchase or redemption will be consummated. Debt service
requirements on the 11% Notes issued by a financing subsidiary of CH&C consist
of semi-annual interest payments and repayment of the $185 million principal
amount on December 1, 2002. Debt service requirements under the Company's 9.25%
Notes consist of semi-annual interest payments and repayment of the $200 million
principal amount on October 1, 2003. The Company expects to fund the acquisition
of the Remaining Treasure Chest Interests, currently expected to be $115
million, and its subsidiary's required capital contributions to the Mirage Joint
Venture, currently expected to be $100 million, with borrowings under the Bank
Credit Facility to the extent not funded from cash flow from operations. The
Company's ability to service its debt will be dependent on its future
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond the Company's
control. Accordingly, no assurance can be given that the Company will maintain a
level of operating cash flow that will permit it to service its obligations. If
the Company is unable to generate sufficient cash flow or is unable to refinance
or extend outstanding borrowings, it will have to adopt one or more
alternatives, such as reducing or delaying planned expansion and capital
expenditures, selling assets, restructuring debt or obtaining additional equity
or debt financing. There can be no assurance that any of these financing
strategies could be effected on satisfactory terms, if at all. In addition,
certain states' laws contain restrictions on the ability of companies engaged in
the gaming business to undertake certain financing transactions. Such
restrictions may prevent the Company from obtaining necessary capital. See "--
Additional Financing Requirements," "-- Governmental Gaming Regulation," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
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GOVERNMENTAL GAMING REGULATION
The Company is subject to a variety of regulations in the jurisdictions in
which it operates. If additional gaming regulations are adopted in a
jurisdiction in which the Company operates, such regulations could
impose restrictions or costs that could have a material adverse effect on the
Company. From time to time, various proposals have been introduced in the
legislatures of some of the jurisdictions in which the Company has existing or
planned operations that, if enacted, could adversely affect the tax, regulatory,
operational or other aspects of the gaming industry and the Company. No
assurance can be given that such legislation will not be enacted. The federal
government has also previously considered a federal tax on casino revenues and
may consider such a tax in the future. In addition, gaming companies are
currently subject to significant state and local taxes and fees in addition to
normal federal and state corporate income taxes, and such taxes and fees are
subject to increase at any time. Any material increase in these taxes or fees
could adversely affect the Company.
Nevada
The ownership and operation of casino gaming facilities in Nevada are
subject to: (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, the "Nevada Act"); and (ii) various local regulations.
The Company's gaming operations are subject to the licensing and regulatory
control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada
State Gaming Control Board (the "Nevada Board"), and the Clark County Liquor and
Gaming Licensing Board (the "Clark County Board"). The Nevada Commission, the
Nevada Board, and the Clark County Board are collectively referred to herein as
the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including establishing minimum procedures for
internal fiscal affairs and the safeguarding of assets and revenues, providing
reliable record keeping and requiring the filing of periodic reports with the
Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent
practices; and (v) the provision of a source of state and local revenues through
taxation and licensing fees. Changes in such laws, regulations and procedures
could have an adverse effect on the Company's gaming operations.
Corporations that operate casinos in Nevada are required to be licensed by
the Nevada Gaming Authorities. A gaming license requires the periodic payment of
fees and taxes and is not transferable. The Company is registered by the Nevada
Commission as a publicly traded corporation (a "Registered Corporation") and as
such, it is required periodically to submit detailed financial and operating
reports to the Nevada Commission and furnish any other information which the
Nevada Commission may require. The Company has been found suitable by the Nevada
Commission to own the stock of CH&C. CH&C is licensed by the Nevada Commission
to operate non-restricted gaming activities at the California and Sam's Town Las
Vegas and is additionally registered as a holding corporation and approved by
the Nevada Gaming Authorities to own the stock of Mare Bear, Inc. ("Mare Bear"),
the operator of the Stardust; Sam Will, Inc. ("Sam Will"), the operator of the
Fremont; and Eldorado, Inc., the operator of the Eldorado and Jokers Wild. No
person may become a stockholder of, or receive any percentage of profits from,
CH&C or its subsidiaries without first obtaining licenses and approvals from the
Nevada Gaming Authorities. The Company, CH&C, Mare Bear, Sam Will and Eldorado,
Inc. have obtained from the Nevada Gaming Authorities the various registrations,
approvals, permits and licenses required in order to engage in gaming activities
in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company, CH&C or any
of its licensed subsidiaries in order to determine whether such individual is
suitable or should be licensed as a business associate of a gaming licensee.
Officers, directors and certain key employees of CH&C and its licensed
subsidiaries must file applications with the Nevada Gaming Authorities and may
be required to be licensed or found suitable by the Nevada Gaming Authorities.
Officers, directors and key employees of the Company who are actively and
directly involved in gaming activities of CH&C or its licensed subsidiaries may
be required to be licensed or found suitable by the Nevada Gaming Authorities.
The Nevada Gaming Authorities may deny an application for licensing for any
cause which they deem reasonable. A finding of suitability is comparable to
licensing, and both require
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submission of detailed personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of suitability must pay
all the costs of the investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities and, in addition to their authority to
deny an application for a finding of suitability or licensure, the Nevada Gaming
Authorities have jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, CH&C or any of its licensed subsidiaries, the
companies involved would have to sever all relationships with such person. In
addition, the Nevada Commission may require the Company, CH&C or any of its
licensed subsidiaries to terminate the employment of any person who refuses to
file appropriate applications. Determinations of suitability or of questions
pertaining to licensing are not subject to judicial review in Nevada.
The Company, CH&C and its licensed subsidiaries are required to submit
detailed financial and operating reports to the Nevada Commission. Substantially
all material loans, leases, sales of securities and similar financing
transactions by CH&C and its subsidiaries must be reported to, or approved by,
the Nevada Commission.
If it were determined that the Nevada Act was violated by CH&C or any of
its licensed subsidiaries, the gaming licenses they hold could be limited,
conditioned, suspended or revoked, subject to compliance with certain statutory
and regulatory procedures. In addition, CH&C, the subsidiary involved, the
Company, and the persons involved could be subject to substantial fines for each
separate violation of the Nevada Act at the discretion of the Nevada Commission.
Further, a supervisor could be appointed by the Nevada Commission to operate the
Company's gaming properties and, under certain circumstances, earnings generated
during the supervisor's appointment (except for reasonable rental value of the
Company's gaming properties) could be forfeited to the State of Nevada.
Limitation, conditioning or suspension of any gaming license or the appointment
of a supervisor could (and revocation of any gaming license would) materially
adversely affect the Company's gaming operations.
Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have his suitability as a beneficial holder of the Company's voting
securities determined if the Nevada Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
state of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of the
Company's voting securities to report the acquisition to the Nevada Commission.
The Nevada Act requires that beneficial owners of more than 10% of the Company's
voting securities apply to the Nevada Commission for a finding of suitability
within thirty days after the Chairman of the Nevada Board mails the written
notice requiring such filing. Under certain circumstances, an "institutional
investor," as defined in the Nevada Act, which acquires more than 10%, but not
more than 15%, of the Company's voting securities may apply to the Nevada
Commission for a waiver of such finding of suitability if such institutional
investor holds the voting securities for investment purposes only. An
institutional investor shall not be deemed to hold voting securities for
investment purposes unless the voting securities were acquired and are held in
the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Company, any change in the Company's
corporate charter, bylaws, management, policies or operations of the Company, or
any of its gaming affiliates, or any other action which the Nevada Commission
finds to be inconsistent with holding the Company's voting securities for
investment purposes only. Activities which are not deemed to be inconsistent
with holding voting securities for investment purposes include only: (i) voting
on all matters voted on by stockholders; (ii) making financial and other
inquiries of management of the type normally made by securities analysts for
informational purposes and not to cause a change in its management, policies or
operations; and (iii) such other activities as the Nevada Commission may
determine to be consistent with such investment intent. If the beneficial holder
of voting securities who must be found suitable is a corporation, partnership or
trust, it must submit detailed business and financial information including a
list of beneficial owners. The applicant is required to pay all costs of
investigation.
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Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock of a
Registered Corporation beyond such period of time as may be prescribed by the
Nevada Commission may be guilty of a criminal offense. The Company is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder or to have any other relationship with the Company, CH&C or any
of its licensed subsidiaries, the Company (i) pays that person any dividend or
interest upon voting securities of the Company, (ii) allows that person to
exercise, directly or indirectly, any voting right conferred through securities
held by the person, (iii) pays remuneration in any form to that person for
services rendered or otherwise, or (iv) fails to pursue all lawful efforts to
require such unsuitable person to relinquish his voting securities for cash at
fair market value. Additionally, the Clark County Board has taken the position
that it has the authority to approve all persons owning or controlling the stock
of any corporation controlling a gaming license.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation. If
the Nevada Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require the Company's securities to bear a legend
indicating that the securities are subject to the Nevada Act. However, to date,
the Nevada Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding, recommendation
or approval by the Nevada Gaming Authorities as to the accuracy or adequacy of
the prospectus or the investment merits of the securities. Any representation to
the contrary is unlawful. The Nevada Commission granted the Company prior
approval to make public offerings through September 21, 1997, subject to certain
conditions ("Shelf Approval"). However, the Shelf Approval may be rescinded for
good cause without prior notice upon the issuance of an interlocutory stop order
by the Chairman of the Nevada Board. The Registered Exchange Offer or the
offering under the Shelf Registration Statement will be made pursuant to the
Shelf Approval. The Shelf Approval does not constitute a finding, recommendation
or approval by the Nevada Commission or the Nevada Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities offered.
Any representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby he obtains control, may not occur without the prior approval
of the Nevada Commission. Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada Gaming Authorities in a variety of stringent
standards prior to assuming control of such Registered Corporation. The Nevada
Commission may also require controlling stockholders, officers, directors and
other persons having a material relationship or involvement with the entity
proposing to acquire control, to be investigated and licensed as part of the
approval process relating to the transaction.
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The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchase of voting securities and corporate defense
tactics affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those licensees, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to the Registered
Corporation's stockholders for the purposes of acquiring control of the
Registered Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada, Clark County
and the City of Las Vegas. Depending upon the particular fee or tax involved,
these fees and taxes are payable either monthly, quarterly or annually and are
based upon any of: (i) a percentage of the gross revenues received; (ii) the
number of gaming devices operated; or (iii) the number of table games operated.
A casino entertainment tax is also paid by casino operations where entertainment
is furnished in connection with the selling of food or refreshments.
Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation of
the Nevada Board of their participation in such foreign gaming. The revolving
fund is subject to increase or decrease in the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engage in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
The sale of food or alcoholic beverages at the Company's Nevada casinos is
subject to licensing, control and regulation by the applicable local
authorities. All licenses are revocable and are not transferable. The agencies
involved have full power to limit, condition, suspend or revoke any such
license, and any such disciplinary action could (and revocation would) have a
material adverse effect upon the operations of the affected casino or casinos.
Indian Lands
Gaming on Indian lands is extensively regulated under federal law,
tribal-state compacts and tribal law. The terms and conditions of management
agreements and the operation of gaming facilities on Indian lands are governed
by the Indian Gaming Regulatory Act of 1988 ("IGRA"), which is administered by
the National Indian Gaming Commission ("NIGC"), and are also subject to the
provisions of statutes relating to contracts with Indian tribes, which are
administered by the Secretary of the Interior (the "Secretary") and the Bureau
of Indian Affairs ("BIA").
The NIGC oversees Class II Indian gaming (essentially bingo and bingo-like
games) and, to a lesser degree, Class III gaming (e.g., slots, casino games and
banking card games). The actual regulation of Class III gaming is determined
pursuant to the terms of tribal-state compacts, which regulate agreements
between individual tribes and states that govern gaming on tribal lands.
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Under IGRA, the NIGC must approve all management agreements between Indian
tribes and managers of tribal gaming facilities. IGRA is subject to
interpretation by the Secretary and the NIGC and may be subject to judicial and
legislative clarification or amendments.
The Company's management contract with the Mississippi Bank of Choctaw
Indians (the "Choctaws") for the Silver Star was approved by the NIGC in
December 1993. The management agreement provides for a seven-year term expiring
in July 2001 and a management fee of 30% of the enterprise's operating income
before debt service for the first five years and 40% of its operating income
before debt service for the final two years. Under the agreement, the Company
provided $30.5 million in debt financing for the construction and start-up of
the facility, which was repaid during fiscal 1995 from the enterprise's cash
flow. Pursuant to NIGC approval dated November 23, 1994, the Company has loaned
to the Choctaws an additional $10 million to expand the property.
The NIGC regulations provide detailed requirements as to certain provisions
which must be included in management agreements, including (i) adequate
accounting procedures and verifiable financial reports, which must be furnished
to the tribe; (ii) tribal access to the daily operations of the gaming
enterprise, including the right to verify daily gross revenues and income; (iii)
minimum guaranteed payments to the tribe, which must have priority over the
retirement of development and construction costs; (iv) a ceiling on the
repayment of such development and construction costs and (v) a term not to
exceed five years except that, upon request of a tribe, a term of seven years
may be allowed by the NIGC Chairman if the Chairman is satisfied that the
capital investment and income projections for the gaming facility require the
additional time. Further, the fee received by the manager of a gaming facility
may not exceed 30% of net revenues except that a fee of 40% of net revenues may
be approved if the NIGC Chairman is satisfied that the capital investment and
income projections for the gaming facility require the additional fee.
Under IGRA, a management company, its directors, persons with management
responsibilities and certain of the company's owners must provide background
information, be investigated by the NIGC and be found suitable to be affiliated
with a gaming operation prior to the NIGC's approval of the management
agreement. The NIGC regulations provide that each of the ten persons who have
the greatest direct or indirect financial interest in a management agreement
must be found suitable in order for the management agreement to be approved by
the NIGC. The NIGC regulations provide that any entity with a financial interest
in a management agreement must be found suitable, as must the directors and ten
largest shareholders of such entities in the case of a corporate entity, or the
ten largest holders of interest in the case of a trust or partnership. The
Chairman of the NIGC may reduce the scope of information to be provided by
institutional investors. At any time, the NIGC has power to investigate and
require the finding of suitability of any person with a direct or indirect
interest in the management agreement, as determined by the NIGC. The management
company must pay all fees associated with background investigations by the NIGC.
The NIGC regulations require that background information as described above
must be submitted for approval within ten days of any proposed change in
financial interest in a management agreement. The NIGC regulations do not
address any specialized procedures for investigations and suitability findings
in the context of publicly held corporations. If, subsequent to the approval of
a management agreement, the NIGC determines that any of its requirements
pertaining to the management agreement have been violated, it may require the
management agreement to be modified or voided, subject to rights of appeal. In
addition, any amendments to the management agreement must be approved by the
NIGC.
In addition to IGRA, tribal-owned gaming facilities on Indian land are
subject to a number of other federal statutes.
Title 25, Section 81 of the United States Code states that "no agreement
shall be made by any person with any tribe of Indians, or individual Indians not
citizens of the United States, for the payment or delivery of any money or other
thing of value . . . in consideration of services for said Indians relative to
their lands . . . unless such contract or agreement be executed and approved" by
the Secretary or his or her designee. An agreement or contract for services
relative to Indian lands which fails to conform with the requirements of Section
81 will be void and unenforceable. All money or other things of value paid to
any person by any Indian or tribe for or on his or their behalf, on account of
such services, in excess of any amount approved by the
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Secretary or his or her authorized representative will be subject to forfeiture.
The Company believes that it has complied with the requirements of Section 81
with respect to its management contract for Silver Star.
The Indian Trader Licensing Act, Title 25, Section 2610-64 of the United
States Code ("ITLA") states that "any person other than an Indian of the full
blood who shall attempt to reside in the Indian country, or on any Indian
reservation, as a trader, or to introduce goods, or to trade therein, without
such license, shall forfeit all merchandise offered for sale to the Indians or
found in his possession, and shall moreover be liable to a penalty of $500. . ."
No such licenses have been issued to the Company to date. The applicability of
ITLA to management contracts is unclear. The Company believes that ITLA is not
applicable to its management contracts under which the Company provides services
rather than goods to Indian tribes. The Company further believes that ITLA has
been superseded by IGRA.
On December 4, 1992, the Choctaws and the State of Mississippi entered into
a tribal-state compact regarding the regulation of gaming on Choctaw lands in
Mississippi. The tribal-state compact has been approved by the BIA. The
tribal-state compact as well as tribal regulations provide for the creation of
the Choctaw Gaming Commission which has regulatory jurisdiction over gaming on
Choctaw lands.
The Choctaw Gaming Commission must perform background checks and
suitability findings on "parties in interest" to a management contract, which
includes the same persons as required by the NIGC regulations discussed above
but also specifically includes direct lenders and persons who hold at least ten
percent of the stock of any corporation which is a party to the management
contract. All investigatory fees of the Choctaw Gaming Commission are to be paid
by the Company. The directors and officers of the Company who are required to
submit background information for Choctaw Gaming Commission investigatory
purposes have done so and the Choctaw Gaming Commission issued the Company a
license in December 1993 (subject to renewal on a yearly basis).
Management officials and key employees of the Company affiliated with
Silver Star, as well as distributors and manufacturers of gaming devices whose
products are used on the reservation, must be licensed by the Choctaw Gaming
Commission. In addition, all employees associated with casino gaming must obtain
work permits issued by the Choctaw Gaming Commission. All holders of casino
gaming licenses and work permits (including the Company's license) are subject
to immediate revocation of such licenses and work permits under certain
circumstances, including (i) the conviction of a felony or any crime of moral
turpitude; (ii) unsuitability to be associated with casino gaming; (iii) the
violation or conspiracy to violate IGRA, the tribal-state compact, or other
tribal or federal laws applicable to casino gaming; or (iv) the violation of
certain tribal conflict of interest laws.
The management agreement provides that, should a person or entity which is
required to undergo a finding of suitability fail to be found suitable in a
final, nonappealable order of the NIGC or the Choctaw Gaming Commission, then
such person or entity must divest its interest in the management agreement
within 72 hours or receipt of such notice.
Illinois
In February 1990, the State of Illinois legalized riverboat gaming. The
Illinois Riverboat Gambling Act (the "Illinois Act") authorizes the issuance by
the five-member Illinois Gaming Board of up to ten riverboat gaming owner's
licenses for navigable streams within or forming a boundary of the State of
Illinois, except for Lake Michigan and any waterway in Cook County, which
includes Chicago. The Illinois Act regulates strictly the facilities, persons,
associations and practices related to riverboat gaming operations. The Illinois
Act grants the Illinois Gaming Board specific powers and duties, and all other
powers necessary and proper, to fully and effectively execute the Illinois Act
for the purpose of administering, regulating and enforcing the system of
riverboat gaming. The Illinois Gaming Board's jurisdiction extends to every
person, association, corporation, partnership and trust involved in riverboat
gaming operations in the State of Illinois. The ownership and operation of a
riverboat gaming operation is subject to extensive regulation. Applicants must
submit comprehensive application and personal disclosure forms and undergo an
exhaustive background investigation prior to the issuance of a license.
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The Illinois Act requires the owner of a riverboat gaming operation to hold
an owner's license issued by the Illinois Gaming Board. The Illinois Act
restricts the granting of certain of the ten owner's licenses by location. Four
are for operators docking at sites on the Mississippi River, one is for an
operator docking at a site on the Illinois River south of Marshall County and
one is for an operator docking at a site on the Des Plaines River in Will
County. The remaining four owner's licenses are not restricted as to location.
Riverboats operating on the Des Plaines River must have a minimum capacity of at
least 400 persons. All riverboats must be accessible to disabled persons, must
be either a replica of a 19th-century Illinois riverboat or be of a casino
cruise ship design and must comply with applicable federal and state laws,
including, but not limited to, U.S. Coast Guard regulations. The Illinois Gaming
Board has currently granted ten licenses, one license to riverboat operations in
each of Alton, East Peoria, Rock Island, East Dubuque, Metropolis, East St.
Louis, Aurora, and Elgin, and two licenses to riverboat operators in Joliet. In
addition to the ten owner's licenses which are authorized under the Illinois
Act, the Illinois Gaming Board may issue special event licenses allowing persons
who are not otherwise licensed to conduct riverboat gaming on a specified date
or series of dates.
Each owner's license initially runs for a period of three years.
Thereafter, the license is subject to renewal on an annual basis upon a
determination by the Illinois Gaming Board that the licensee continues to be
eligible for an owner's license pursuant to the Illinois Act and the Illinois
Gaming Board's rules. The owner's license for Par-A-Dice initially expired in
February 1995. Its license was renewed in February 1996 and in February 1997,
and Par-A-Dice will be required to renew its license each year thereafter. A
licensed owner is authorized to apply to the Illinois Gaming Board for and, if
approved, will receive all licenses necessary for the operation of a riverboat.
These licenses include a liquor license, a license to prepare and serve food and
all other necessary licenses.
Each license granted entitles a licensee to own and operate up to two
riverboats (with a combined maximum of 1,200 gaming participants) as part of the
riverboat gaming operation. No person or entity may be licensed as the owner of
more than one riverboat gaming operation in Illinois, although a licensed owner
of greater than 10% may hold up to a 10% ownership interest in a second
riverboat gaming operation in Illinois.
The Illinois Act does not limit the maximum bet or per patron loss. Minimum
and maximum wagers on games are set by the licensee and wagering may not be
conducted with money or other negotiable currency. No person under the age of 21
is permitted to wager and wagers may only be received from a person present on
the riverboat. With respect to electronic gaming devices, the payout percentage
may not be less than 80% nor more than 100%. The Illinois Act imposes a 20%
wagering tax on adjusted gross receipts (which is gross gaming revenues minus
winnings paid to patrons). The tax imposed is to be paid by the licensed owner
to the Illinois Gaming Board on the day after the day when the liability was
established. The Illinois Act also requires that licensees pay a $2.00 admission
tax for each person admitted to a gaming cruise. All state use, occupation and
excise taxes which apply to the sale of food and beverages and taxes imposed on
the sale or use of tangible property apply to such sales aboard riverboats.
From time to time, various proposals have been introduced in the Illinois
legislature regarding riverboat gaming. Such proposals include, among other
things, taxes, licensing and conduct of gaming. The Company cannot offer any
opinion of the outcome or effect of any pending or proposed legislation.
Under the Illinois Act, there is a four-hour maximum period during which
gaming may be conducted during a gaming excursion. Gaming is deemed to commence
when the first passenger boards a riverboat for an excursion and may continue
while other passengers are boarding for a period not to exceed 30 minutes. A
gaming excursion is deemed to have started upon the commencement of gaming.
Gaming may continue for a period not to exceed 30 minutes after the gangplank or
its equivalent is lowered. During this 30 minute period of egress, new
passengers may not board a riverboat.
If a riverboat captain reasonably determines that either it is unsafe to
transport passengers on the waterway due to inclement weather or the riverboat
has been rendered temporarily inoperable by river icing or unforeseeable
mechanical or structural difficulties, the riverboat shall either not leave the
dock or immediately return to it. In the case of unforeseeable mechanical or
structural difficulties, the owner licensee shall make all reasonable effort to
promptly remedy the problem. If a riverboat captain reasonably determines for
reasons of
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safety that although seaworthy, the riverboat should not leave the dock or
should return immediately thereto, due to the above conditions, a gaming
excursion may commence or continue while the gangplank or its equivalent is
raised and remains raised, in which event the riverboat is not considered
docked. If, due to the above conditions, a gaming excursion must commence or
continue with the gangplank or its equivalent raised and the riverboat does not
leave the dock, ingress is prohibited until the completion of the excursion.
The Illinois Gaming Board is authorized to conduct investigations into the
conduct of gaming as it may deem necessary and proper and into alleged
violations of the Illinois Act and Illinois Gaming Board Rules. Employees and
agents of the Illinois Gaming Board have access to and may inspect any
facilities relating to the riverboat gaming operations at all times.
A holder of a riverboat gaming license will be subject to the imposition of
fines and suspension or revocation of its license for any act by such holder,
its agents or employees that is injurious to the public health, safety, morals,
good order and general welfare of the people of the State of Illinois, or that
would discredit or tend to discredit the Illinois gaming industry or the State
of Illinois. The following may be grounds for such discipline: (i) failing to
comply with or make provision for compliance with the Illinois Act, the rules
promulgated thereunder, any federal, state or local law or regulation, or the
license holder's internal procedures and administration and accounting controls;
(ii) failing to comply with any rule, order or filing of the Illinois Gaming
Board or its agents pertaining to gaming; (iii) receiving goods or services from
a person or business entity who does not hold a supplier's license but who is
required to hold such license by the rules; (iv) being suspended or ruled
ineligible or having a license revoked or suspended in any other state or gaming
jurisdiction; (v) associating with, either socially or in business affairs, or
employing persons of notorious or unsavory reputation or who have extensive
police records, or who have failed to cooperate with any officially constituted
investigatory or administrative body and would adversely affect public
confidence and trust in gaming; (vi) failing to establish and maintain standards
and procedures designed to prevent ineligible or unsuitable persons from
becoming employed by a licensee, including any person known to have been found
guilty of cheating or using any improper device in connection with any game;
(vii) failing to promulgate an approved Internal Control System and (viii)
aiding and abetting a violation by a Gaming Board member or employee, or other
government official, of ethical requirements established by statute, resolution,
ordinance, personal code or code of conduct.
Licensees are required to obtain formal approval from the Illinois Gaming
Board whenever a change is proposed in the following areas: (i) "Key Persons"
(as defined below); (ii) type of entity; (iii) the equity and debt
capitalization of the entity; (iv) investors and/or debt holders; (v) sources of
funds; (vi) the applicant's economic development plan; (vii) riverboat capacity
or significant design change; (viii) the number of gaming positions; (ix)
anticipated economic impact; or (x) agreements, oral or written, relating to the
acquisition or disposition of property (real or personal) of a value greater
than $1 million. In addition, distributions to shareholders, partners and others
are limited to those which cannot impair the financial viability of the gaming
operation.
The Illinois Gaming Board requires that a Key Person of an owner licensee
must submit a Personal Disclosure Form and be investigated and approved by the
Illinois Gaming Board. For a publicly held Business Entity, a Key Person is any
person directly or indirectly holding a legal or beneficial interest of 5% or
more of an applicant or owner licensee and officers, directors, trustees,
partners, and managing agents of a gaming enterprise, and any person identified
by the Board as a person able to control or exercise significant influence over
the management or operating policies of licensee. Furthermore, each applicant or
owner licensee must disclose the identity of every person, association, trust or
corporation having a greater than 1% direct or indirect pecuniary interest in an
owner licensee or in the riverboat gaming operation with respect to which the
license is sought. The Illinois Gaming Board may also require an applicant or
owner licensee to disclose any other principal or investor and require the
investigation and approval of such individuals.
The Illinois Gaming Board (unless the investor qualifies as an
Institutional Investor) requires a Personal Disclosure Form from any person or
entity who or which, individually or in association with others, acquires
directly or indirectly, beneficial ownership of more than 5% of any class of
voting securities or non-voting securities convertible into voting securities of
a publicly-traded corporation which holds an ownership interest
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in the holder of an owner's license. If the Illinois Gaming Board denies an
application for such a transfer and if no hearing is requested, the applicant
for the transfer of ownership interest must promptly divest those shares in the
publicly-traded parent corporation. The holder of an owner's license would not
be able to distribute profits to a publicly-traded parent corporation until such
shares have been divested. If a hearing is requested, the shares need not be
divested and profits may be distributed to a publicly-held parent corporation
pending the issuance of a final order from the Illinois Gaming Board.
An Institutional Investor that individually or jointly with others,
cumulatively acquires, directly or indirectly, 5% or more of any class of voting
securities of a publicly-traded licensee or a licensee's publicly-traded parent
corporation shall, within no less than ten days after acquiring such securities,
notify the Administrator of the Board of such ownership and shall provide any
additional information as may be required. If an Institutional Investor (as
specified above) acquires 10% or more of any class of voting securities of a
publicly-traded licensee or a licensee's publicly-traded parent corporation, it
shall file an Institutional Investor Disclosure Form within 45 days after
acquiring such level of ownership interest.
A person employed at a riverboat gaming operation must hold an occupational
license from the Illinois Gaming Board. The occupational license permits the
holder to perform only activities included within such holder's level of
occupational license or any lower level of occupational license. A holder of a
riverboat gaming license is required to investigate the background and
qualifications of all persons who apply for employment at its gaming operation.
Suppliers of gaming equipment and supplies and certain other vendors must obtain
a supplier's license from the Illinois Gaming Board prior to selling or leasing
any equipment and supplies as defined in Illinois Gaming Board Rules.
The Illinois Gaming Board may waive any licensing requirement or procedure
provided by rule if it determines that such waiver is in the best interest of
the public and the gaming industry.
New Jersey
The ownership and operation of casino gaming facilities in New Jersey are
subject to the New Jersey Casino Control Act (the "Casino Control Act"). In
general, the Casino Control Act and the regulations promulgated thereunder
contain detailed provisions concerning, among other things: the granting of
casino licenses; the suitability of the approved hotel facility and the amount
of authorized casino space and gaming units permitted therein; the qualification
of natural persons and entities related to the casino licensee; the licensing
and registration of employees and vendors of casino licensees; rules of the
games; the selling and redeeming of gaming chips; the granting and duration of
credit and the enforceability of gaming debts; management control procedures,
accountability, and cash control methods and reports to gaming agencies;
security standards; the manufacture and distribution of gaming equipment; equal
opportunity for employees and casino operators, contractors of casino
facilities, and others; and advertising, entertainment, and alcoholic beverages.
The New Jersey Casino Control Commission (the "NJCCC") is empowered under the
Casino Control Act to regulate a wide spectrum of gaming and nongaming related
activities and to approve the form of ownership and financial structure of not
only a casino licensee, but also its entity qualifiers and intermediary and
holding companies.
No casino hotel facility may operate unless the appropriate license and
approvals are obtained from the NJCCC, which has broad discretion with regard to
the issuance, renewal, revocation, and suspension of such licenses and
approvals, which are nontransferable. The qualification criteria with respect to
the holder of a casino license include its financial stability, integrity and
responsibility; the integrity and adequacy of its financial resources which bear
any relation to the casino project; its good character, honesty, and integrity;
and the sufficiency of its business ability and casino experience to establish
the likelihood of creation and maintenance of a successful, efficient casino
operation. The NJCCC may reopen licensing hearings at any time and must reopen a
licensing hearing at the request of the New Jersey Division of Gaming
Enforcement (the "NJDGE").
To be considered financially stable, a licensee must demonstrate the
following ability: to pay winning wagers when due; to achieve a gross operating
profit; to pay all local, state, and federal taxes when due; to make necessary
capital and maintenance expenditures to insure that it has a superior
first-class facility; and to
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pay, exchange, refinance or extend debts which will mature and become due and
payable during the license term.
In the event a licensee fails to demonstrate financial stability, the NJCCC
may take such action as it deems necessary to fulfill the purposes of the Casino
Control Act and protect the public interest, including: issuing conditional
licenses approvals or determinations; establishing an appropriate cure period;
imposing reporting requirements; placing restrictions on the transfer of cash or
the assumption of liability; requiring reasonable reserves or trust accounts;
denying licensure; or appointing a conservator.
Pursuant to the Casino Control Act, NJCCC regulations and precedent, no
entity may hold a casino license unless each officer, director, principal
employee, person who directly or indirectly holds any beneficial interest or
ownership in the licensee, each person who in the opinion of the NJCCC has the
ability to control or elect a majority of the board of directors of the licensee
(other than a banking or other licensed lending institution which makes a loan
or holds a mortgage or other loan acquired in the ordinary course of business),
and any lender, whom the NJCCC may consider appropriate, obtains and maintains
qualification approval from the NJCCC. Qualification approval means
qualification requirements as a casino key employee, as described below.
An entity qualifier or intermediary or holding company is required to
register with the NJCCC and meet the same basic standards for approval as a
casino licensee; provided, however, that the NJCCC, with the concurrence of the
Director of the NJDGE, may waive compliance by a publicly-traded corporate
holding company as to any officer, director, lender, underwriter, agent or
employee thereof, or person directly or indirectly holding a beneficial interest
or ownership of the securities of such company, where the NJCCC and the Director
of the NJDGE are satisfied that such persons are not significantly involved in
the activities of the corporate licensee, and in the case of security holders,
do not have the ability to control the publicly-traded corporation or elect one
or more of its directors.
The NJCCC may require all financial backers, investors, mortgagees, bond
holders and holders of notes or other evidence of indebtedness, either in effect
or proposed, which bears any relation to the casino project, publicly-traded
securities of an entity which holds a casino license or is an entity qualifier,
subsidiary, or holding company of a casino licensee (a "Regulated Company"), to
qualify as financial sources.
An institutional investor ("Institutional Investors") is defined by the
Casino Control Act as any retirement fund administered by a public agency for
the exclusive benefit of federal, state, or local public employees; investment
company registered under the Investment Company Act of 1940; collective
investment trust organized by banks under Part Nine of the Rules of the
Comptroller of the Currency; closed end investment trust; chartered or licensed
life insurance company or property and casualty insurance company; banking and
other chartered or licensed lending institution; investment advisor registered
under the Investment Advisers Act of 1940; and such other persons as the NJCCC
may determine for reasons consistent with the policies of the Casino Control
Act.
An Institutional Investor shall be granted a waiver by the NJCCC from
financial source or other qualification requirements applicable to a holder of
publicly-traded securities, in the absence of a prima facie showing by the NJDGE
that there is any cause to believe that the Institutional Investor may be found
unqualified, on the basis of NJCCC findings that: (a) its holdings were
purchased for investment purposes only and, upon request by the NJCCC, it files
a certified statement to the effect that is has no intention of influencing or
affecting the affairs of the issuer, the casino licensee or its holding or
intermediary companies; provided, however, that the Institutional Investor will
be permitted to vote on matters put to the vote of the outstanding security
holders; and (b) if (i) the securities are debt securities of a casino
licensee's holding or intermediary companies or another subsidiary company of
the casino licensee's holding or intermediary companies which is related in any
way to the financing of the casino licensee and represent either (x) 20% or less
of the total outstanding debt of the company, or (y) 50% or less of any issue of
outstanding debt of the company, (ii) the securities are under 10% of the equity
securities of a casino licensee's holding or intermediary companies, or (iii) if
the securities so held exceed such percentages, upon a showing of good cause.
The NJCCC may grant a waiver of qualification to an Institutional Investor
holding a higher percentage of such securities upon a showing of good cause and
if the conditions specified above are met.
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Generally, the NJCCC requires each institutional holder seeking waiver of
qualification to execute a certification to the effect that (i) the holder has
reviewed the definition of Institutional Investor under the Casino Control Act
and believes that it meets the definition of Institutional Investor; (ii) the
securities are those of a publicly-traded corporation; (iii) the holder
purchased the securities for investment purposes only and holds them in the
ordinary course of business; (iv) the holder has no involvement in the business
activities of, and no intention of influencing or affecting the affairs of the
issuer, the casino licensee, or any affiliate; and (v) if the holder
subsequently determines to influence or affect the affairs of the issuer, the
casino licensee or any affiliate, it shall provide not less than 30 days' prior
notice of such intent and shall file with the NJCCC an application for
qualification before taking any such action. If an Institutional Investor
changes its investment intent, or if the NJCCC finds reasonable cause to believe
that it may be found unqualified, the Institutional Investor may take no action
with respect to the security holdings, other than to divest itself of such
holdings, until it has applied for interim casino authorization and has executed
a trust agreement pursuant to such an application.
The Casino Control Act imposes certain restrictions upon the issuance,
ownership, and transfer of securities of a Regulated Company, and defines the
term "security" to include instruments which evidence a direct or indirect
beneficial ownership or creditor interest in a Regulated Company including, but
not limited to, mortgages, debentures, security agreements, notes, and warrants.
If the NJCCC finds that a holder of such securities is not qualified under
the Casino Control Act, it has the right to take any remedial action it may deem
appropriate, including the right to force divestiture by such disqualified
holder of such securities. In the event that certain disqualified holders fail
to divest themselves of such securities, the NJCCC has the power to revoke or
suspend the casino license affiliated with the Regulated Company which issued
the securities. If a holder is found unqualified, it is unlawful for the holder
(i) to exercise, directly or through any trustee or nominee, any right conferred
by such securities, or (ii) to receive any dividends or interest upon any such
securities or any remuneration, in any form, from its affiliated casino licensee
for services rendered or otherwise.
With respect to non-publicly-traded securities, the Casino Control Act and
NJCCC regulations require that the corporate charter or partnership agreement of
a Regulated Company establish a right in the NJCCC of prior approval with regard
to transfers of securities, shares and other interests and an absolute right in
the Regulated Company to repurchase at the market price or the purchase price,
whichever is the lesser, any such security, share, or other interest in the
event that the NJCCC disapproves a transfer. With respect to publicly-traded
securities, such corporate charter or partnership agreement is required to
establish that any such securities of the entity are held subject to the
conditions that, if a holder thereof is found to be disqualified by the NJCCC,
such holder shall dispose of such securities.
Whenever any person enters into a contract to transfer any property which
relates to an ongoing casino operation, including a security of the casino
licensee or a holding or intermediary company or entity qualifier, under
circumstances which would require that the transferee obtain licensure or be
qualified under the Casino Control Act, and that person is not already licensed
or qualified, the transferee is required to apply for interim authorization.
Furthermore, the closing or settlement date in the contract may not be earlier
than the 121st day after the submission of a complete application for licensure
or qualification together with a fully executed trust agreement in a form
approved by the NJCCC. If, after the report of the NJDGE and a hearing by the
NJCCC, the NJCCC grants interim authorization, the property will be subject to a
trust. If the NJCCC denies interim authorization, the contract may not close or
settle until the NJCCC makes a determination on the qualifications of the
applicant. If the NJCCC denies qualification, the contract will be terminated
for all purposes, and there will be no liability on the part of the transferor.
If, as the result of a transfer of publicly-traded securities of a
Regulated Company or a financing entity of a Regulated Company, any person is
required to qualify under the Casino Control Act, that person is required to
file an application for licensure or qualification within 30 days after the
NJCCC determines that qualification is required or declines to waive
qualification.
The application must include a fully executed trust agreement in a form
approved by the NJCCC, or in the alternative, within 120 days after the NJCCC
determines that qualification is required, the person whose
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qualification is required must divest such securities as the NJCCC may require
in order to remove the need to qualify.
The NJCCC may grant interim casino authorization where it finds by clear
and convincing evidence that: (i) statements of compliance have been issued
pursuant to the Casino Control Act; (ii) the casino hotel is an approved hotel
in accordance with the Casino Control Act; (iii) the trustee satisfies
qualification criteria applicable to casino key employees, except for residency;
and (iv) interim operation will best serve the interests of the public.
When the NJCCC finds the applicant qualified, the trust will terminate. If
the NJCCC denies qualification to a person who has received interim casino
authorization, the trustee is required to endeavor, and is authorized, to sell,
assign, convey, or otherwise dispose of the property subject to the trust to
such persons who are licensed or qualified or shall themselves obtain interim
casino authorization.
Where a holder of publicly-traded securities is required, in applying for
qualification as a financial source or qualifier, to transfer such securities to
a trust in application for interim casino authorization and the NJCCC thereafter
orders that the trust become operative: (i) during the time the trust is
operative, the holder may not participate in the earnings of the casino hotel or
receive any return on its investment or debt security holdings; and (ii) after
disposition, if any, of the securities by the trustee, proceeds distributed to
the unqualified holder may not exceed the lower of their actual cost to the
unqualified holder or their value calculated as if the investment had been made
on the date the trust became operative.
The NJCCC may permit a licensee to increase its casino space if the
licensee agrees to add a prescribed number of qualifying sleeping units within
two years after the commencement of gaming operations in the additional casino
space. However, if the casino licensee does not fulfill such agreement due to
conditions within its control, the licensee will be required to close the
additional casino space, or any portion of thereof that the NJCCC determines
should be closed.
The NJCCC is authorized to establish annual fees for the renewal of casino
licenses. The renewal fee is based upon the cost of maintaining control and
regulatory activities prescribed by the Casino Control Act, and may not be less
than $100,000 for a one-year casino license nor less than $200,000 for a
four-year casino license. Additionally, casino licenses are subject to potential
assessments to fund any annual operating deficits incurred by the NJCCC or the
NJDGE. There is also an annual license fee of $500 for each slot machine
maintained for use or in use in any casino. Additionally, each casino licensee
is also required to pay an annual tax of 8% on its gross casino revenues.
Each party to an agreement for the management of a casino is required to
hold a casino license, and the party who is to manage the casino must own at
least 10% of all the outstanding equity securities of the casino licensee. Such
an agreement shall provide for: (i) the complete management of the casino; (ii)
the sole and unrestricted power to direct the casino operations; and (iii) a
term long enough to ensure the reasonable continuity, stability and independence
and management of the casino.
An investment alternative tax imposed on the gross casino revenues of each
licensee in the amount of 2.5% is due and payable on the last day of April next
following the end of the calendar year. A licensee is obligated to pay the
investment alternative tax for a period of 30 years. Estimated payments of the
investment alternative tax obligation must be made quarterly in an amount equal
to 1.25% of estimated gross revenues for the preceding three-month period.
Investment tax credits may be obtained by the Casino Reinvestment Development
Authority ("CRDA"). CRDA bonds have terms as long as 50 years and bear interest
at below market rates, resulting in a value lower than the face value of such
CRDA bonds.
For the first 10 years of its obligation, the licensee is entitled to an
investment tax credit against the investment alternative tax in an amount equal
to twice the purchase price of the bonds issued to the licensee by the CRDA.
Thereafter, the licensee is (i) entitled to an investment tax credit in an
amount equal to twice the purchase price of such bonds or twice the amount of
its investments authorized in lieu of such bond investments made in projects
designated as eligible by the CRDA, and (ii) has the option of entering into a
contract with the CRDA to have its tax credit comprised of direct investments in
approved eligible projects which may not comprise more than 50% of its eligible
tax credit in any one year.
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<PAGE> 25
From the monies made available to the CRDA, the CRDA is required to set
aside $100 million for investment in hotel development projects in Atlantic City
undertaken by a licensee which result in the construction or rehabilitation of
at least 200 hotel rooms by December 31, 1996. These monies will be held to fund
up to 35% of the cost to casino licensees of expanding their hotel facilities to
provide additional hotel rooms, a portion of which will be required to be
available upon the opening of the new Atlantic City convention center and
dedicated to convention events. The CRDA has determined at this time that
eligible casino licensees will receive up to 27% of the cost of additional hotel
rooms out of these monies set aside and may, in the future, increase the
percentage to no greater than 35%.
On each October 31 during the years 1996 through 2003, each casino licensee
must pay into an account established in the CRDA and known as the Atlantic City
Fund, its proportional share of an amount related to the amount by which annual
operating expenses of the NJCCC and the NJDGE are less than a certain fixed sum.
Additionally, a portion of the investment alternative tax obligation of each
casino licensee for the years 1994 through 1998 allocated for projects in
northern New Jersey is required to be paid into and credited to the Atlantic
City Fund. Amounts in the Atlantic City Fund will be expended by the CRDA for
economic development projects of a revenue producing nature that foster the
redevelopment of Atlantic City, other than the construction and renovation of
casino hotels.
As of July 1, 1993, there was established a standard minimum parking charge
of at least $2.00 per day for the use of a parking space for the purpose of
parking, garaging or storing motor vehicles in a parking facility owned or
leased by a casino licensee or by any person on behalf of a casino licensee. Of
the amount collected by the casino licensee, $1.50 is required to be paid to the
New Jersey State Treasurer and paid by the New Jersey State Treasurer into a
special fund established and held by the New Jersey State Treasurer for the
exclusive use of the CRDA.
Amounts in the special fund will be expended by the CRDA for (i) eligible
projects in the corridor region of Atlantic City, which projects are related to
the improvement of roads, infrastructure, traffic regulation, and public safety,
and (ii) funding up to 35% of the cost to casino licensees of expanding their
hotel facilities to provide additional hotel rooms, which hotel rooms are
required to be available upon the opening of the Atlantic City Convention Center
and dedicated to convention events.
If, at any time, it is determined that a Regulated Company has violated the
Casino Control Act, or that any such entity cannot meet the qualification
requirements of the Casino Control Act, such entity could be subject to fines or
the suspension or revocation of its license or qualification. If a Regulated
Company's license is suspended for a period in excess of 120 days or revoked, or
upon the failure or refusal to renew a casino license, the NJCCC could appoint a
conservator to operate or dispose of such entity's casino hotel facilities. The
conservator would be required to act under the direct supervision of the NJCCC
and would be charged with the duty of conserving, preserving, and if permitted,
continuing the operation of such casino hotel. During the period of true
conservatorship, a former or suspended casino licensee is entitled to a fair
rate of return out of net earnings, if any, on the property retained by the
conservator. The NJCCC may also discontinue any conservatorship action and
direct the conservator to take such steps as are necessary to effect an orderly
transfer of the property of a former or suspended casino licensee.
Casino employees are subject to more stringent requirements than non-casino
employees and must meet applicable standards pertaining to financial stability,
integrity and responsibility, good character, honesty and integrity, and New
Jersey residency. These requirements have resulted in significant competition
among Atlantic City casino operators for the services of qualified employees.
Casinos must follow certain procedures which are outlined in the Casino
Control Act when granting gaming credit and recording counter checks which have
been exchanged, redeemed or consolidated. Gaming debts arising in Atlantic City
in accordance with applicable regulations are enforceable in the courts of the
State of New Jersey.
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<PAGE> 26
Louisiana
The operation and management of riverboat casino facilities in Louisiana
are subject to extensive state regulation. The Louisiana Riverboat Economic
Development and Gaming Control Act (the "Riverboat Act") became effective on
July 19, 1991 and authorized the formation of the Louisiana Riverboat Gaming
Commission (the "Commission") and the Riverboat Gaming Enforcement Division of
the Louisiana State Police (the "Division"). Both the Commission and the
Division, which have since been dissolved, promulgated extensive regulations
which controlled riverboat gaming in Louisiana. The Riverboat Act states, among
other things, that certain of the policies of the State of Louisiana are to
develop a historic riverboat industry that will assist in the growth of the
tourism market, to license and supervise the riverboat industry from the period
of construction through the actual operation, to regulate the operators,
manufacturers, suppliers and distributors of gaming devices and to license all
entities involved in the riverboat gaming industry. The Riverboat Act makes it
clear, however, that no holder of a license or permit possesses any vested
interest in such license or permit and that the license or permit may be revoked
at any time. In a special session held in April 1996, the Louisiana legislature
passed the Louisiana Gaming Control Act (the "Gaming Control Act") which
dissolved both the Commission and the Division and replaced them with the
Louisiana Gaming Control Board. Pursuant to the Gaming Control Act, all of the
regulatory authority, control and jurisdiction of licensing has now been
transferred to the Gaming Control Board. The Gaming Control Board came into
existence on May 1, 1996 and is made up of nine members and two ex-officio
members (including the superintendent of Louisiana State Police). It is
domiciled in Baton Rouge and regulates riverboat gaming, the land-based casino
in New Orleans and video poker. The Attorney General acts as legal counsel to
the Gaming Control Board as he did for the Commission. Any material alteration
in the method whereby riverboat gaming is regulated in the State of Louisiana
could have an adverse effect on the operations of the Treasure Chest.
The Louisiana legislature also passed legislation requiring each parish
(county) where riverboat gaming is currently authorized to hold an election in
order for the voters to decide whether riverboat gaming will remain legal in
that parish. The Treasure Chest is located in Jefferson Parish, Louisiana.
Jefferson Parish approved riverboat gaming at the special election held on
November 6, 1996.
The Riverboat Act approved the conducting of gaming activities on a
riverboat, in accordance with the Riverboat Act, on twelve separate waterways in
Louisiana. The Riverboat Act allows the Division to issue up to 15 licenses to
operate riverboat gaming projects within the state, with no more than six in any
one parish. There are presently 15 licenses issued and 14 riverboats operating.
No gaming is allowed while a riverboat is docked unless the vessel is docked for
less than 45 minutes between excursions. All cruises are required to be at least
three hours in duration. Pursuant to the Riverboat Act and the regulations
promulgated thereunder, each applicant which desired to operate a riverboat
casino in Louisiana was required to file a number of separate applications for a
Certificate of Preliminary Approval, all necessary gaming licenses and a
Certificate of Final Approval. No final Certificate was issued without all
necessary and proper certificates from all regulatory agencies including the
U.S. Coast Guard, the U.S. Army Corps of Engineers, local port authorities and
local levee authorities.
The Treasure Chest project application for a Certificate of Preliminary
Approval was filed by Treasure Chest Casino, L.L.C., the owner of the Treasure
Chest. The Treasure Chest received its Preliminary Certificate in August 1993
and received its license on May 18, 1994. The license is subject to certain
general operational conditions and is subject to revocation pursuant to
applicable laws and regulations.
The Company and certain of its directors and officers and certain key
personnel were found suitable by the Division. New directors, officers and
certain key employees associated with gaming must also be found suitable by the
Gaming Control Board prior to working in gaming-related areas. These approvals
may be immediately revoked for a number of causes as determined by the Gaming
Control Board. The Gaming Control Board may deny any application for a
certificate, permit or license for any cause found to be reasonable by the
Gaming Control Board. The Gaming Control Board has the authority to require the
Company to sever its relationships with any persons for any cause deemed
reasonable by the Division or for the failure of that person to file necessary
applications with the Gaming Control Board.
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<PAGE> 27
At any time, the Gaming Control Board may investigate and require the
finding of suitability of any beneficial shareholder of the Company. The Gaming
Control Board requires all holders of more than 5% of the license holder to
submit to suitability requirements. Additionally, if a shareholder who must be
found suitable is a corporate or partnership entity, then the shareholders of
partners of the entity must also submit to investigation. The sale or transfer
of more than a 5% interest in any riverboat project is subject to Gaming Control
Board approval.
Annual fees are currently charged to each riverboat project as follows: (i)
$50,000 per year for the first year and $100,000 for each year thereafter; and
(ii) 18.5% of the net gaming proceeds. Additionally, each riverboat must pay to
the local government a boarding fee of $2.50 per passenger boarding the vessel.
These fees could be increased by the Gaming Control Board.
Pursuant to the regulations promulgated by the Division and the Commission
(prior to the formation of the Gaming Control Board), all licensees are required
to inform the Commission and the Division of all debt, credit, financing and
loan transactions including the identity of debt holders. This practice will be
followed with the Gaming Control Board pending the issuance of conflicting
regulations. Although the Company is not presently a license holder, its
subsidiary, Boyd Kenner is a licensee and is subject to these regulations. In
addition, the Gaming Control Board, in its sole discretion, may require the
holders of such debt securities to file applications and obtain suitability
certificates from the Gaming Control Board. Although the Riverboat Act does not
specifically require debt holders to be licensed or to be found suitable, the
Gaming Control Board will retain the discretion to investigate and require that
any holders of debt securities be found suitable under the Riverboat Act.
Additionally, if the Gaming Control Board finds that any holder exercises a
material influence over the gaming operations, a suitability certificate will be
required. If the Gaming Control Board determines that a person is unsuitable to
own such a security or to hold such an indebtedness, the Gaming Control Board
may propose any such action which it determines proper and necessary to protect
the public interest, including the suspension or revocation of the license. The
Gaming Control Board may also, under the penalty of revocation of license, issue
a condition of disqualification naming the person(s) and declaring that such
person(s) may not: (i) receive dividends or interest in debt or securities; (ii)
exercise directly or through a nominee a right conferred by the securities or
indebtedness; (iii) receive any remuneration from the licensee; (iv) receive any
economic benefit from the licensee; or (v) continue in an ownership or economic
interest in a licensee or remains as a manager, director or partner of a
licensee.
Any violation of the Riverboat Act or the rules promulgated by the
Commission, the Division or the Gaming Control Board could result in substantial
fines, penalties (including a revocation of the license) and criminal actions.
Additionally, all licenses and permits issued by the Commission or the Division
are revocable privileges and may be revoked at any time by the Gaming Control
Board.
Mississippi
The ownership and operation of casino facilities in Mississippi are subject
to extensive state and local regulation, but primarily the licensing and
regulatory control of the Mississippi Gaming Commission and the regulatory
control of the Mississippi State Tax Commission (the "Mississippi Gaming
Authorities").
The Mississippi Gaming Control Act (the "Mississippi Act"), which legalized
dockside casino gaming in Mississippi, was enacted on June 29, 1990. Although
not identical, the Mississippi Act is similar to the Nevada Gaming Control Act.
The Mississippi Gaming Commission has adopted regulations which are also similar
in many respects to the Nevada gaming regulations.
The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Gaming Commission seek to: (i) prevent unsavory or unsuitable
persons from having any direct or indirect involvement with gaming at any time
or in any capacity; (ii) establish and maintain responsible accounting practices
and procedures; (iii) maintain effective control over the financial practices of
licensees, including establishing minimum procedures for internal fiscal affairs
and safeguarding of assets and revenues, providing reliable record keeping and
making periodic reports to the Mississippi Gaming Commission; (iv) prevent
cheating and fraudulent practices; (v) provide a source of state and local
revenues through taxation and licensing fees; and (vi) ensure that gaming
licensees, to the extent practicable, employ Mississippi residents. The
regulations are subject to
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<PAGE> 28
amendment and interpretation by the Mississippi Gaming Commission. Changes in
Mississippi law or regulations or their interpretation may limit or otherwise
materially affect the types of gaming that may be conducted and could have an
adverse effect on the Company and the Company's Mississippi gaming operations.
The Mississippi Act provides for legalized dockside gaming at the
discretion of the 14 counties that either border the Mississippi Gulf Coast or
the Mississippi River provided that voters in such counties have not voted to
prohibit gaming in that county. As of June 1, 1997, dockside gaming was
permissible in 9 of the 14 eligible counties in the State and gaming operations
had commenced in Adams, Coshoma, Hancock, Harrison, Tunica, Warren and
Washington counties. The law permits unlimited stakes gaming on permanently
moored vessels on a 24-hour basis and does not restrict the percentage of space
which may be utilized for gaming. There are no limitations on the number of
gaming licenses which may be issued in Mississippi.
Under Mississippi law, gaming vessels must be located on the Mississippi
River or on navigable waters in eligible counties along the Mississippi River,
or in the waters of the State of Mississippi lying south of the State in
eligible counties along the Mississippi Gulf Coast. The Sam's Town Tunica casino
is located on barges situated in a specially constructed basin several hundred
feet inland from the Mississippi River. In the recent past, whether basins such
as the one in which the Company's barges are located constituted "navigable
waters" suitable for gaming under Mississippi law was a controversial issue. The
Mississippi Attorney General issued an opinion in July 1993 addressing legal
locations for gaming vessels under the Mississippi Gaming Control Act, and the
Mississippi Gaming Commission later approved the location of the barges on the
Sam's Town Tunica site as legal under the opinion of the Mississippi Attorney
General. A competitor subsequently filed a letter with the Mississippi Gaming
Commission requesting a reconsideration with respect to the Mississippi Gaming
Commission's approval of the placement of the barges on the Sam's Town Tunica
site and other prospective gaming operators' sites adjacent thereto. No official
action was ever taken regarding this request. In December 1993, the Mississippi
Gaming Commission voted to issue a license to Boyd Tunica, the entity through
which the Company operates Sam's Town Tunica. The license requires demonstration
of compliance with the Mississippi Attorney General's "navigable waters"
opinion, a requirement which has been imposed on many licenses for Tunica County
gaming projects. The Company believes that the barges at the Sam's Town Tunica
site, as well as similarly situated barges belonging to operators whose
facilities have opened and other prospective gaming operators, are located on
navigable waters within the meaning of Mississippi law. However, no assurance
can be given that a court would ultimately conclude that such sites constitute
navigable waters within the meaning of Mississippi law. If the basin in which
the Company's barges are presently located were not deemed navigable waters
within the meaning of Mississippi law, there would be a material adverse effect
on Sam's Town Tunica.
The Company has been registered with the Mississippi Gaming Commission as a
publicly traded holding company for Boyd Tunica. The Company is required
periodically to submit detailed financial and operating reports to the
Mississippi Gaming Commission and furnish any other information which the Gaming
Commission may require. The Company, Boyd Tunica and any other subsidiary of the
Company that operates a casino (other than Silver Star) in Mississippi (such a
subsidiary, including Boyd Tunica, a "Mississippi Gaming Subsidiary"), are
subject to the licensing and regulatory control of the Mississippi Gaming
Authorities. If the Company is unable to continue to satisfy the registration
requirements of the Mississippi Act, the Company and its Mississippi Gaming
Subsidiaries cannot own or operate gaming facilities in Mississippi. Each
Mississippi Gaming Subsidiary must obtain gaming licenses from the Mississippi
Gaming Commission to operate casinos in Mississippi. A gaming license is issued
by the Mississippi Gaming Commission subject to certain conditions, including
continued compliance with all applicable state laws and regulations and physical
inspection of the casinos prior to opening. The Mississippi Gaming Commission
granted a gaming license to Boyd Tunica in December 1993 which was renewed in
November of 1995.
Gaming licenses are non-transferable, are initially issued for a two-year
period and must be renewed periodically thereafter. Boyd Tunica was granted a
renewal of its gaming license by the Mississippi Gaming Commission on November
30, 1995. The gaming license for Boyd Tunica must be renewed in November of
1997. No person may become a stockholder of or receive any percentage of profits
from a gaming licensee
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<PAGE> 29
subsidiary of a holding company without first obtaining approvals from the
Mississippi Gaming Commission. The Company obtained such approvals in connection
with the licensing of Boyd Tunica.
Certain officers and employees of the Company and the officers, directors
and certain key employees of the Company's Gaming Subsidiaries must be found
suitable by the Mississippi Gaming Commission. The Company believes it has
obtained or applied for all necessary findings of suitability with respect to
such persons associated with the Company or Boyd Tunica, although the
Mississippi Gaming Commission, in its discretion, may require additional persons
to file applications for findings of suitability. Employees associated with
gaming must also obtain work permits that are subject to immediate suspension
under certain circumstances. In addition, any person having a material
relationship or involvement with the Company may be required to be found
suitable or licensed, in which case those persons must pay the costs and fees
associated with such investigation. The Mississippi Gaming Commission may deny
an application for a license or finding of suitability for any cause that it
deems reasonable. Changes in licensed positions must be reported to the
Mississippi Gaming Commission. Besides its authority to deny an application for
a license or finding of suitability, the Mississippi Gaming Commission has
jurisdiction to disapprove a change in corporate position. The Mississippi
Gaming Commission has the power to require any Mississippi Gaming Subsidiary and
the Company to suspend or dismiss officers, directors and other key employees or
sever relationships with other persons who refuse to file appropriate
applications or whom the authorities find unsuitable to act in such capacities.
Substantially all loans, leases, sales of securities and similar financing
transactions by a Mississippi Gaming Subsidiary must be reported to or approved
by the Mississippi Gaming Commission. A Mississippi Gaming Subsidiary may not
make an issuance or a public offering of its securities, but may pledge or
mortgage casino facilities, if it obtains the prior approval of the Mississippi
Gaming Commission. The Company may not make an issuance or a public offering of
its securities without the prior approval of the Mississippi Gaming Commission
if any part of the proceeds of the offering is to be used to finance the
construction, acquisition or operation of gaming facilities in Mississippi or to
retire or extend obligations incurred for one or more such purposes. Such
approval, if given, does not constitute a recommendation or approval of the
investment merits of the securities subject to the offering. Any representation
to the contrary is unlawful.
If the Mississippi Gaming Commission decides that a Mississippi Gaming
Subsidiary violated a gaming law or regulation, the Mississippi Gaming
Commission could limit, condition, suspend or revoke the license of the
Mississippi Gaming Subsidiary. In addition, a Mississippi Gaming Subsidiary, the
Company and the persons involved could be subject to substantial fines for each
separate violation. Because of such a violation, the Mississippi Gaming
Commission could seek to appoint a supervisor to operate the casino facilities.
Limitation, conditioning or suspension of any gaming license or the appointment
of a supervisor could (and revocation of any gaming license would) materially
adversely affect the Company's and the Gaming Subsidiary's gaming operations.
At any time, the Mississippi Gaming Commission has the power to investigate
and require the finding of suitability of any record or beneficial owner of the
Company's shares. Mississippi law requires any person who acquires more than 5%
of the Company's common stock to report the acquisition to the Mississippi
Gaming Commission, and such person may be required to be found suitable. Also,
any person who becomes a beneficial owner of more than 10% of the Company's
common stock, as reported to the Securities and Exchange Commission, must apply
for a finding of suitability by the Mississippi Gaming Commission and must pay
the costs and fees that the Mississippi Gaming Commission incurs in conducting
the investigation. The Mississippi Gaming Commission has generally exercised its
discretion to require a finding of suitability of any beneficial owner of more
than 5% of a public company's common stock. If a stockholder who must be found
suitable is a corporation, partnership or trust, it must submit detailed
business and financial information including a list of beneficial owners. The
Mississippi Gaming Commission has adopted a policy with respect to certain
institutional investors which may permit such investors to purchase and hold up
to 10% of a public company's common stock without a suitability finding. Such
institutional investors may be required to file certain information with the
Mississippi Gaming Commission under the policy and the Mississippi Gaming
Commission retains discretion to require a finding of suitability at any time.
To date, all stockholders of the Company required to be found suitable by the
Mississippi Gaming Commission have been found suitable.
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Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi Gaming
Commission may be found unsuitable. Management believes that compliance by the
Company with the licensing procedures and regulatory requirements of the
Mississippi Gaming Commission will not affect the marketability of its
securities. Any person found unsuitable and who holds, directly or indirectly,
any beneficial ownership of the securities of the Company beyond such time as
the Mississippi Gaming Commission prescribes, may be guilty of a misdemeanor.
The Company is subject to disciplinary action if, after receiving notice that a
person is unsuitable to be a stockholder or to have any other relationship with
the Company or its Mississippi Gaming Subsidiaries, the Company: (i) pays the
unsuitable person any dividend or other distribution upon the voting securities
of the Company; (ii) recognizes the exercise, directly or indirectly, of any
voting rights conferred by securities held by the unsuitable person; (iii) pays
the unsuitable person any remuneration in any form for services rendered or
otherwise, except in certain limited and specific circumstances; or (iv) fails
to pursue all lawful efforts to require the unsuitable person to divest himself
of the securities, including, if necessary, the immediate purchase of the
securities for cash at a fair market value.
The Company may be required to disclose to the Mississippi Gaming
Commission, upon request, the identities of the security holders including
holders of debt securities of the Company. In addition, the Mississippi Gaming
Commission under the Mississippi Act may, in its discretion, require holders of
debt securities of registered corporations to file applications, investigate
such holders, and require such holders to be found suitable to own such debt
securities. Although the Mississippi Gaming Commission generally does not
require the individual holders of obligations such as notes to be investigated
and found suitable, the Mississippi Gaming Commission retains the discretion to
do so for any reason, including but not limited to a default or where the holder
of the debt instrument exercises a material influence over the gaming operations
of the entity in question. Any holder of debt securities required to apply for a
finding of suitability must pay all investigative fees and costs of the
Mississippi Gaming Commission in connection with such an investigation. If the
Mississippi Gaming Commission determines that a person is unsuitable to own such
security, then it is unlawful for the unsuitable person; (i) to receive any
dividend or interest whatsoever from the Company; (ii) to exercise any voting
right conferred by such securities or interest; or (iii) to receive any
remuneration in any form from the Company.
Boyd Tunica must maintain a current stock ledger in its principal office in
Mississippi and the Company must maintain a current list of stockholders in the
principal offices of the Gaming Subsidiary which must reflect the record
ownership of each outstanding share of any class of equity security issued by
the Company. The stockholder list may thereafter be maintained by adding reports
regarding the ownership of such securities that it receives from the Company's
transfer agent. The ledger and stockholder lists must be available for
inspection by the Mississippi Gaming Commission at any time. If any securities
of the Company are held in trust by an agent or by a nominee, the record holder
may be required to disclose the identity of the beneficial owner to the
Mississippi Gaming Authorities. A failure to make such disclosure may be grounds
for finding the record holder unsuitable. The Company must also render maximum
assistance in determining the identity of the beneficial owner.
The Mississippi Gaming Commission has the power to require that the
Company's securities bear a legend to the general effect that such securities
are subject to the Mississippi Act and the regulations of the Mississippi Gaming
Commission. The Mississippi Gaming Commission has the power, through the power
to regulate licensees, to impose additional restrictions on the holders of the
Company's securities at any time. The Company received a waiver from the legend
requirement in connection with the licensing of Boyd Tunica.
The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Mississippi and
corporations whose stock is publicly traded that are affiliated with those
licensees, may be injurious to stable and productive corporate gaming. The
Mississippi Gaming Commission has established a regulatory scheme to ameliorate
the potentially adverse effects of these business practices upon Mississippi's
gaming industry and to further Mississippi's policy to: (i) assure the financial
stability of corporate gaming operators and their affiliates; (ii) preserve the
beneficial aspects of conducting business in the corporate form; and (iii)
promote a neutral environment for the orderly governance of corporate affairs.
Approvals are, in
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<PAGE> 31
certain circumstances, required from the Mississippi Gaming Commission before
the Company may make exceptional repurchases of voting securities above the
current market price of its common stock or before a corporate acquisition
opposed by management may be consummated. Mississippi's gaming regulations will
also require prior approval by the Mississippi Gaming Commission if the Company
adopts a plan of recapitalization proposed by its Board of Directors opposing a
tender offer made directly to the shareholders for the purpose of acquiring
control of the Company.
Neither the Company nor any subsidiary may engage in gaming activities in
Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Gaming Commission or a waiver of such
approval. The Mississippi Gaming Authorities may require determinations that,
among other things, there are means for the Mississippi Gaming Authorities to
have access to information concerning the out-of-state gaming operations of the
Company and its affiliates. The Company and its affiliates obtained the approval
of the Mississippi Gaming Commission to engage in gaming operations in Nevada,
Louisiana, Illinois and Missouri.
License fees and taxes, computed in various ways depending on the type of
gaming involved, are payable to the State of Mississippi and to the counties and
cities in which a Mississippi Gaming Subsidiary's respective operations will be
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon (i) a
percentage of the gross gaming revenues received by the casino operation, (ii)
the number of slot machines operated by the casino, (iii) the number of table
games operated by the casino or (iv) the number of patrons entering the casino.
The license fees payable to the State of Mississippi are based upon "gaming
receipts" (generally defined as gross receipts less payouts to customers as
winnings) and are equal to 4% of gaming receipts of $50,000 or less per month,
6% of gaming receipts over $50,000 and less than $134,000 per month, and 8% of
gaming receipts over $134,000 per month. The foregoing license fees are allowed
as a credit against the Company's Mississippi income tax liability for the year
paid.
In October 1994, the Mississippi Gaming Commission adopted a regulation
which requires as a condition of licensure or license renewal that a gaming
establishment's plan include a 500-car parking facility in close proximity to
the casino complex and infrastructure facilities which will amount to at least
25% of the casino cost. Such facilities may include any of the following: a
250-room hotel of at least a two star rating as defined by the current edition
of the Mobil Travel Guide, a theme park, golf courses, marinas, tennis complex,
entertainment facilities, or any other such facility as approved by the
Mississippi Gaming Commission as infrastructure. Parking facilities, roads,
sewage and water systems, or facilities normally provided by cities and/or
counties are excluded. The Commission may in its discretion reduce the number of
rooms required, where it is shown to the Commission's satisfaction that
sufficient rooms are available to accommodate the anticipated visitor load. The
Company believes that Boyd Tunica, with an 850-room hotel and other amenities,
currently satisfies these requirements.
Missouri
Gaming was originally authorized in the State of Missouri in November 1992.
On April 29, 1993, new legislation (the "Missouri Act") was enacted which
replaced the 1992 legislation. Subsequent to adoption, the Missouri Act has been
amended from time to time. There can be no assurances that the Missouri Act will
not be further amended and interpreted in a manner that would limit or otherwise
adversely affect the Company and its Missouri gaming operations. The Missouri
Act provides for the licensing and regulation of riverboat and dockside gaming
operations on the Mississippi and Missouri Rivers in the State of Missouri and
the licensing and regulation of persons who distribute gaming equipment and
supplies to gaming licensees. The Missouri Act limits the loss per individual on
each excursion to $500, but does not otherwise limit the amount which may be
wagered on any bet or the amount of space in the vessel which may be utilized
for gaming. In November 1994, a constitutional amendment was passed which
permits certain games of chance such as traditional slot machines on riverboats
and floating gaming facilities.
The Missouri Act is implemented and enforced by the five-member Missouri
Gaming Commission (the "Missouri Commission"). This Commission is empowered to
issue such number of riverboat gaming licenses
29
<PAGE> 32
as it determines to be appropriate. A gaming license cannot be granted to any
gaming operator unless the voters in such operator's "home dock" city or county
have authorized gaming activities on gaming riverboats. On February 2, 1993,
voters in Kansas City, Missouri approved a riverboat gaming ballot measure. On
September 13, 1995, Boyd Kansas City was issued a Missouri gaming license for
its Sam's Town Kansas City facility. Boyd Kansas City's home dock city is Kansas
City, Missouri.
Gaming boats in Missouri must generally resemble boats from Missouri's
riverboat history and must contain nongaming areas, food service and a
Missouri-themed gift shop. The boats must cruise unless the Missouri Commission
approves a petition for continuous docking. On April 25, 1995, the Missouri
Commission approved Boyd Kansas City's petition for continuous docking for its
riverboat at Sam's Town Kansas City. The Missouri Act also imposes a tax of 20%
of adjusted gross receipts from gaming activities and a $2.00 per person per
excursion fee. Annual license fees are set by the Missouri Commission but may
not be less than $25,000. Each licensee also must post a bond or other form of
surety (in an amount determined by the Missouri Commission) to secure
performance of its obligations under the Missouri Act and the regulations of the
Missouri Commission.
On September 1, 1993, the Missouri Commission adopted rules and regulations
(the "Missouri Regulations") governing the licensing, operation and
administration of riverboat gaming in the state of Missouri and the form of
application for such licensure. Subsequent to adoption, the Missouri Regulations
have been amended from time to time. There can be no assurance that the Missouri
Regulations will not be further amended and interpreted in a manner that would
limit or otherwise adversely affect the Company and its Missouri gaming
operations.
Directors and certain officers and key persons of the Company and Boyd
Kansas City must file personal disclosure forms with the gaming license
application and must be found suitable by the Missouri Commission. Owners of 5%
or more of the Company or Boyd Kansas City are considered key persons for
purposes of the gaming application disclosure and finding of suitability.
The Company, Boyd Kansas City and the Port Authority of Kansas City,
Missouri are parties to a development agreement dated April 25, 1995. In the
development agreement, Boyd Kansas City and the Company agreed that, within 6
months after the opening of Sam's Town Kansas City, Boyd Kansas City and the
Company would seek to identify qualified minority and women investors acceptable
to them and to offer such investors an opportunity to purchase up to 10% of the
stock of Boyd Kansas City; 7% of said stock is to be offered to minority
investors and 3% is to be offered to women investors which Boyd Kansas City and
the Company find to be qualified and acceptable. Boyd Kansas City subsequently
requested, and the Port Authority approved, a 6 month extension to complete such
offering. At its regular meeting on August 5, 1996, the Port Authority granted
Boyd Kansas City another extension of time, through September 13, 1997, to
complete such offering. Such offering has not been completed at this time. The
Missouri Commission's staff advised the Company that it will consider all
minority or women investors who are offered the right to purchase the stock of
Boyd Kansas City to be key persons, even if such investor's ownership is less
than 5% of the common stock of Boyd Kansas City.
Further, the Missouri Regulations require that all employees of Boyd Kansas
City who are involved in gaming operations must file applications for and
receive Missouri gaming occupational licenses. Presently, the Missouri
Commission staff has required all employees at Sam's Town Kansas City to obtain
occupational licenses, even if those employees are not involved in gaming
operations.
The Missouri Regulations require disclosure by the Company and Boyd Kansas
City of any person or entity holding any direct or indirect ownership interest
in the Company or Boyd Kansas City. The Company is also required to disclose the
names of the holders of all of the Company's debt, including a description of
the nature and terms of such debt. The Missouri Commission may, in its sole
discretion, request additional information with respect to such holders. The
Company and Boyd Kansas City are required to update the Missouri gaming license
application any time there is a material change in the information submitted on
such license application within seven business days after the date of any such
change. Missouri gaming licenses must be renewed annually during the first two
years of an entity's licensure and every two years thereafter.
30
<PAGE> 33
Under Missouri law, gaming licenses are not transferable. The Missouri
Regulations require that the Missouri Commission be notified at least 60 days
prior to the transfer or issuance of any ownership interest in a gaming licensee
which is not a publicly-held entity, such as Boyd Kansas City. Upon receipt of
such 60-day notice, the Missouri Commission may disapprove the transaction or
require the transaction to be delayed pending further investigation. The pledge
or hypothecation of any ownership interest in a gaming licensee which is not a
publicly-held entity is prohibited.
The Missouri Regulations permit a gaming licensee to consummate issuance of
ownership interests in publicly-held gaming licensees or publicly-held holding
companies, such as the Company, and permit a gaming licensee or holding company
to incur debt or publicly issue debt, at any time after 15 days following notice
to the Missouri Commission by the gaming licensee of its intent to consummate
such a transaction. The Missouri Regulations authorize the Missouri Commission
to reopen a license hearing at any time to consider the effect of the
transaction in question on the gaming licensee's suitability.
The Missouri Regulations require that the Missouri Commission be notified
not later than seven days after the consummation of any pledge or hypothecation
of an ownership interest equaling 5% or more of the ownership of a publicly-held
gaming licensee or publicly-held holding company or any transfer or issuance of
ownership interest in a publicly-held gaming licensee or publicly-held holding
company if such transfer or issuance resulted in an entity or group of entities
acting in concert owning, directly or indirectly, a total amount of ownership
interest equaling 5% or more of the ownership of such gaming licensee or holding
company. If any part of such ownership interest is transferred voluntarily or
involuntarily pursuant to such a pledge or hypothecation, separate notice to the
Missouri Commission is required not later than seven days after the consummation
of such transfer. The Missouri Regulations also require that the Missouri
Commission be notified not later than seven days after the consummation of any
transaction that involves or relates to a gaming licensee and has a dollar value
equal to or greater than one million dollars. Further, without the prior
approval of the Missouri Gaming Commission, the Missouri Regulations prohibit
withdrawals of capital, loans, advances or distribution of any assets in excess
of 5% of accumulated earnings by a gaming licensee to anyone with an ownership
interest in the gaming licensee.
The Missouri Regulations specifically provide that any action of the
Missouri Commission shall not indicate or suggest that the Missouri Commission
has considered or passed in any way on the marketability of the applicant or
licensee's securities or on any other matter other than the applicant or
licensee's suitability for licensure under Missouri law. A Missouri gaming
license holder can be disciplined in Missouri for gaming-related acts occurring
in another jurisdiction which results in disciplinary action in such other
jurisdiction.
The Missouri Commission has broad powers to require additional disclosure
by an applicant during the processing of a gaming application, to deny gaming
licensure and to administratively fine or suspend or revoke a gaming license for
failure to comply with or for violation of the Missouri Act or Missouri
Regulations. Under the Missouri Regulations, a licensee is required to provide
all requested information immediately upon request by the Missouri Commission,
and to advise the Missouri Commission of any material changes in the information
submitted by a licensee on its license application within seven business days
after the occurrence of such change. Further, in certain situations, the
Missouri Commission can appoint a supervisor to continue the operations of a
license holder after lapse, suspension or revocation of a gaming license. The
supervisor may operate or sell the facility with earnings or proceeds being paid
to the former owners only after deduction of the costs and expenses of the
supervisorship and establishment of reserves.
31
<PAGE> 34
ENVIRONMENTAL RISKS
The Company is subject to certain federal, state and local environmental,
safety and health laws, regulations and ordinances that apply to non-gaming
businesses generally, such as the Clean Air Act, Clean Water Act, Occupational
Safety and Health Act, Resource Conservation and Recovery Act and the
Comprehensive Environmental Response, Compensation, and Liability Act. The
Company has not made, and does not anticipate making, material expenditures with
respect to such environmental, safety and health laws, regulations and
ordinances. However, the coverage and attendant compliance costs associated with
such laws, regulations and ordinances may result in future additional costs to
the Company's operations. For example, in 1990 the U.S. Congress enacted the Oil
Pollution Act to establish a comprehensive federal oil spill response and
liability framework. Pursuant to the Oil Pollution Act, the Department of
Transportation implemented regulations requiring owners and operators of certain
vessels, including the Company, to establish and maintain through the U.S. Coast
Guard evidence of financial responsibility sufficient to meet their potential
liability under both the Oil Pollution Act and the Comprehensive Environmental
Response, Compensation, and Liability Act for discharges or threatened
discharges of oil or hazardous substances. This requirement may be satisfied by
either proof of adequate insurance (including self-insurance) or the posting of
a surety bond or guaranty. Any significant environmental liability or compliance
costs could have a material adverse effect on the Company's business, financial
condition and results of operations.
REGULATION OF RIVERBOATS
The riverboats operated by the Company must comply with U.S. Coast Guard
requirements as to boat design, on-board facilities, equipment, personnel and
safety. Each of them must hold a Certificate of Seaworthiness or must be
approved by the American Bureau of Shipping ("ABS") for stabilization and
flotation, and may also be subject to local zoning and building codes. The U.S.
Coast Guard requirements establish design standards, set limits on the operation
of the vessels and require individual licensing of all personnel involved with
the operation of the vessels. Loss of a vessel's Certificate of Seaworthiness or
ABS approval would preclude its use as a floating casino. In addition, U.S.
Coast Guard regulations require a hull inspection at a U.S. Coast Guard-approved
dry docking facility for all cruising riverboats at five-year intervals.
Currently, the closest such facility to Sam's Town Kansas City is located in St.
Louis, Missouri. The travel to and from such docking facility, as well as the
time required for inspections of the Sam's Town Kansas City, Treasure Chest and
Par-A-Dice riverboats, could be significant. The loss of a dockside casino or
riverboat casino from service for any period of time could adversely affect the
Company's business, financial condition and results of operations.
CONTROL BY BOYD FAMILY
William S. Boyd, Chairman and Chief Executive Officer of the Company,
together with his immediate family, beneficially own approximately 51% of the
outstanding shares of Common Stock of the Company as of June 30, 1997. As a
result, the Boyd family has the ability to significantly influence the affairs
of the Company, including the election of all of the directors of the Company
and, except as otherwise provided by law, approving or disapproving other
matters submitted to a vote of the Company's stockholders, including a
merger, consolidation or sale of assets.
32
<PAGE> 35
MANAGEMENT AGREEMENTS OF LIMITED DURATION
The management agreement for the Silver Star, which is owned by the
Mississippi Band of Choctaw Indians, expires in July 2001. The Company must
submit any renewal of the management agreement to the NIGC, which has the right
to review management agreements. There can be no assurance that the current
management agreement will be renewed upon expiration or approved by the NIGC
upon any such review. The failure to renew the Company's management agreement
would result in the loss of revenues to the Company derived from the Silver Star
management agreement, which could have a material adverse effect on the Company.
The NIGC also has the authority to reduce the term of a management agreement or
the management fee or otherwise require modification of the agreement, which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company manages the Treasure Chest pursuant to a management agreement
with Treasure Chest L.L.C., owner of the Treasure Chest. On July 11, 1997, the
Company entered into a definitive agreement to acquire the Remaining Treasure
Chest Interests for approximately $115 million, including the assumption of
debt. Closing of the transaction is conditioned upon, among other things,
approval by the Louisiana Gaming Control Board. There can be no assurance as to
when, or if, the acquisition will be consummated. The Company expects to fund
the acquisition and the repayment of Treasure Chest's debt with borrowings under
the Bank Credit Facility. If the acquisition is not consummated, the Company has
determined that for a number of reasons, including to strategically focus the
management and financial resources of the Company, the Company will pursue a
sale of its 15% ownership interest in Treasure Chest L.L.C. Whether or not the
Company disposes of its 15% ownership interest in Treasure Chest L.L.C. or
acquires the Remaining Treasure Chest Interests, the management agreement
between the Company and Treasure Chest L.L.C. will terminate no later than
October 31, 1997. See "-- Expansion" and "Business -- Properties -- Central
Region Properties."
RELIANCE ON CERTAIN MARKETS
The California, Fremont and Main Street Station derive a substantial
portion of their customers from the Hawaiian market. For the year ended June 30,
1997, patrons from Hawaii comprised approximately 70% of the room nights at the
California, over 56% at the Fremont and over 79% at Main Street Station. An
increase in fuel costs or transportation prices, a decrease in airplane seat
availability or a deterioration of relations with tour and travel agents, as
they affect travel between the Hawaiian market and the Company's facilities,
could adversely affect the Company's business, financial condition and results
of operations. The Company's Las Vegas properties also draw a substantial number
of customers from certain other specific geographic areas, including Southern
California, Arizona, Las Vegas and the Midwest. Sam's Town Tunica draws patrons
from northern Mississippi, western Tennessee (principally Memphis) and Arkansas.
The Treasure Chest appeals primarily to local market patrons and attracts
patrons from the western suburbs of New Orleans. The Silver Star draws customers
from central Mississippi, including the greater Jackson area, and central
Alabama, including Birmingham, Montgomery and Tuscaloosa. Sam's Town Kansas City
draws customers from the greater Kansas City metropolitan area, as well as from
other parts of Missouri and Kansas. The Par-A-Dice draws customers not only from
the greater Peoria area but also from Chicago, Indiana, Iowa and Missouri.
Adverse economic conditions in any of these markets, or the failure of the
Company's facilities to continue to attract customers from these geographic
markets as a result of increased competition in those markets, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
33
<PAGE> 36
EMPLOYEES
At June 30, 1997, the Company employed approximately 14,500 persons:
approximately 2,600 at the Stardust; 2,400 at Sam's Town Las Vegas; 300 at the
Eldorado; 340 at Joker's Wild; 1,000 at the California; 975 at the Fremont; 775
at Main Street Station; 1,700 at Sam's Town Tunica; 750 at Sam's Town Kansas
City; 1,050 at Par-A-Dice; and 2,200 at Silver Star. Treasure Chest personnel
are employed by Treasure Chest L.L.C. On such date, the Company had collective
bargaining relationships with eleven unions covering approximately 2,600
employees, substantially all of whom are employed at the Stardust and the
Fremont. Several collective bargaining agreements are currently in effect; other
agreements have expired and are in various stages of negotiation. Employees
covered by expired agreements have continued to work during the negotiations, in
some cases under the terms of the expired agreements and in others under
modifications thereof.
ITEM 2. PROPERTIES
The following table sets forth certain information regarding the properties
owned or operated by the Company as of June 30, 1997.
<TABLE>
<CAPTION>
YEAR BUILT CASINO SPACE SLOT TABLE HOTEL LAND
OR ACQUIRED (SQ. FT.) MACHINES GAMES ROOMS RESTAURANTS (ACRES)
----------- ------------ -------- ----- ----- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
LAS VEGAS STRIP
Stardust Resort and Casino................ 1985 87,000 1,961 79 2,320 7 61
DOWNTOWN LAS VEGAS
California Hotel and Casino............... 1975 36,000 1,151 36 781 5 16
Fremont Hotel and Casino.................. 1985 32,000 1,088 27 452 5 2
Main Street Station Hotel, Casino and
Brewery................................. 1993 28,500 865 22 406 4 15
BOULDER STRIP
Sam's Town Las Vegas...................... 1979 118,000 2,841 54 650 16 63
Eldorado Casino........................... 1993 16,000 600 11 -- 3 4
Jokers Wild Casino........................ 1993 22,500 641 11 -- 2 13
CENTRAL REGION
Sam's Town Tunica......................... 1994 75,000 1,859 77 857 6 150
Sam's Town Kansas City.................... 1995 28,000 1,060 54 -- 5 34
Par-A-Dice Hotel and Casino............... 1996 33,000 1,009 42 208 3 19
Silver Star Resort and Casino............. 1994 90,000 2,799 96 503 6 20
Treasure Chest Casino..................... 1994 24,000 905 56 -- 4 --
------- ------ --- ----- -- ---
Total............................. 590,000 16,779 565 6,177 66 397
======= ====== === ===== == ===
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are also parties to various other
legal proceedings arising in the ordinary course of business. In the opinion of
management, all pending claims in such matters, if adversely decided, would not
have a material adverse effect on the Company's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the non-director and executive
officers of Boyd Gaming Corporation as of August 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Ellis Landau 53 Executive Vice President, Chief Financial Officer and Treasurer
</TABLE>
34
<PAGE> 37
<TABLE>
<S> <C> <C>
James Hippler 50 Senior Vice President-Administration
Keith E. Smith 37 Senior Vice President and Controller
Charles E. Huff 52 Vice President, Secretary and General Counsel
</TABLE>
Ellis Landau has been Executive Vice President since January 1997
and Senior Vice President, Chief Financial Officer and Treasurer of the Company
since August 1990. From April 1990 through July 1990, he served as a consultant
to the Company. Prior to joining the Company, Mr. Landau held various management
positions with Ramada, Inc., a gaming and hospitality company whose gaming
operations were transferred to Aztar Corporation, including Vice President and
Treasurer of that company from 1978 to February 1990.
James W. Hippler has been Senior Vice President-Administration of
the Company since April 1990. From 1980 to 1990, Mr. Hippler held various
positions with CH&C, including Director of Risk Management, Director of Internal
Audit and Director of Human Resources.
Keith E. Smith became Senior Vice President in January 1997. Mr.
Smith served as Vice President and Controller from June 1993 to January 1997
and, from September 1990 to June 1993, he served as Corporate Controller of the
Company. From May 1989 to September 1990, Mr. Smith was Vice President-Finance
of the Dunes Hotel, Casino and Country Club in Las Vegas. From 1982 to May 1989,
he was employed by Ramada, Inc. in a variety of positions, including Controller
of the Tropicana Resort and Casino in Las Vegas.
Charles E. Huff has been Vice President, Secretary and General
Counsel of the Company since its inception. He has served as Vice President and
General Counsel of CH&C since July 1986 and Secretary since January 1988. Prior
to joining CH&C, Mr. Huff practiced law in Las Vegas for 13 years.
35
<PAGE> 38
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed on the New York Stock Exchange
under the symbol "BYD." Information with respect to sales prices and record
holders of the Company's Common Stock is set forth below:
PRICE RANGE OF COMMON STOCK
The following table sets forth, for the calendar quarters
indicated, the high and low sales prices of the Common Stock as reported on the
NYSE Composite Tape.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1995
First Quarter ............................... 14 1/4 10 1/2
Second Quarter .............................. 18 5/8 13 1/8
Third Quarter ............................... 16 3/4 13 1/2
Fourth Quarter .............................. 15 1/8 10
1996
First Quarter ............................... 12 7/8 10 3/4
Second Quarter .............................. 17 3/8 11 1/8
Third Quarter ............................... 15 1/2 9 3/8
Fourth Quarter .............................. 9 1/4 7 1/8
1997
First Quarter ............................... 8 5/8 5 3/8
Second Quarter .............................. 6 1/8 5 3/8
Third Quarter (through August 29) ........... 9 1/8 5
</TABLE>
On August 29, 1997, the closing sales price of the Common Stock
on the NYSE was $8.125 per share. On that date, the Company had approximately
2,496 holders of record of its Common Stock.
The Company has not paid any cash dividends on its Common Stock to
date. The Company currently anticipates that it will retain future earnings to
fund the development and growth of its business and does not anticipate paying
any cash dividends in the foreseeable future. Restrictions imposed by commercial
lenders and note holders may also limit the ability of the Company to pay cash
dividends.
The Company issued $250 million principal amount of 9.50% Senior
Subordinated Notes due 2007 pursuant to a debenture dated July 22, 1997 between
the Company and State Street Bank and Trust Company. The 9.50% Notes were sold
to Salomon Brothers Inc, UBS Securities and CIBC Wood Gundy Securities Corp.
(the "Initial Purchasers") at 97.810% of their principal amount, resulting in
$244.5 million aggregate proceeds to the Company, before deducting expenses. The
Securities were sold pursuant to an exemption under Rule 144A promulgated under
the Securities Act of 1933, as amended (the "Act") in reliance on the fact that
each of the Initial Purchasers is a "Qualified Institutional Buyer", as defined
in such Act.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below as of
June 30, 1997 and 1996 and for the fiscal years ended June 30, 1997, 1996 and
1995, have been derived from the audited consolidated financial statements
contained elsewhere in this Form 10-K. The selected consolidated financial
data presented below as of June 30, 1995 and as of and for the fiscal years
ended June 30, 1994 and 1993 have been derived from audited consolidated
financial statements of the Company not contained herein. Operating results
for the fiscal years shown below are not necessarily indicative of the results
that may be expected for future fiscal years.
36
<PAGE> 39
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net revenues $ 819,259 $ 775,857 $ 660,340 $ 468,219 $ 431,174
Operating expense(b) 863,685 675,071 549,770 413,971 368,255
--------- --------- --------- --------- ---------
Operating income (loss) (44,426) 100,786 110,570 54,248 62,919
Interest expense, net(a) 61,022 51,186 46,371 36,093 32,378
Gain on investment -- -- -- -- (1,062)
--------- --------- --------- --------- ---------
Income (loss) before provision
(benefit) for income taxes,
cumulative effect of a change
in accounting principle
and extraordinary items (105,448) 49,600 64,199 18,155 31,603
Provision (benefit) for income taxes (34,025) 20,021 27,950 7,505 11,469
--------- --------- --------- --------- ---------
Income (loss) before cumulative effect
of a change in accounting principle
and extraordinary items (71,423) 29,579 36,249 10,650 20,134
Cumulative effect of a change in
accounting for income taxes -- -- -- 2,035 --
--------- --------- --------- --------- ---------
Income (loss) before extraordinary items (71,423) 29,579 36,249 12,685 20,134
Extraordinary items, net of tax (6,069) (1,435) -- -- (7,397)
--------- --------- --------- --------- ---------
Net income (loss) (77,492) 28,144 36,249 12,685 12,737
Dividends on preferred stock -- -- -- 467 1,881
--------- --------- --------- --------- ---------
Net income (loss) applicable to
common stock $ (77,492) $ 28,144 $ 36,249 $ 12,218 $ 10,856
========= ========= ========= ========= =========
PER SHARE DATA
Net income (loss) per common share
Income (loss) before cumulative
effect of a change in accounting
principle and extraordinary items $ (1.19) $ 0.52 $ 0.64 $ 0.19 $ 0.37
Cumulative effect of a change
in accounting for income taxes -- -- -- 0.04 --
Extraordinary items (0.10) (0.03) -- -- (0.15)
--------- --------- --------- --------- ---------
Net income (loss) $ (1.29) $ 0.49 $ 0.64 $ 0.23 $ 0.22
========= ========= ========= ========= =========
Dividends on common stock -- -- -- -- --
Weighted average common shares
outstanding 60,248 57,058 56,870 54,297 48,582
OTHER OPERATING DATA
Depreciation and amortization $ 67,242 $ 60,626 $ 54,518 $ 42,136 $ 39,450
Preopening expense 3,481 10,004 -- 4,605 --
Capital expenditures 99,207 90,977 183,299 326,829 24,485
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
------------------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- -------- -------- --------
(IN THOUSANDS)
BALANCE SHEET DATA
<S> <C> <C> <C> <C> <C>
Total assets $1,030,185 $953,425 $949,513 $836,297 $500,123
Long-term debt (excluding current
portion) 739,792 590,808 587,957 525,637 364,927
Stockholders' equity 191,316 233,257 202,613 164,405 72,686
</TABLE>
- --------------
(a) Net of interest income and amounts capitalized.
(b) Includes $131,339 of impairment loss recorded during the year ended June
30, 1997. See Note 3 to Notes to Consolidated Financial Statements.
37
<PAGE> 40
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
operating data for the Company's properties. As used herein, "Boulder Strip
Properties" consist of Sam's Town Las Vegas, the Eldorado and the Jokers Wild;
"Downtown Properties" consists of the California, the Fremont, and Main Street
Station (opened November 1996) and Vacations Hawaii (acquired October 1995), the
Company's wholly-owned travel agency which operates for the benefit of the
Downtown casino properties; and "Central Region Properties" consists of Sam's
Town Tunica, Sam's Town Kansas City (opened September 1995), Par-A-Dice
(acquired December 1996), management fee income from the Silver Star, and
management fee and joint venture income from the Treasure Chest. Net revenues
displayed in this table and discussed in this section are net of promotional
allowances; as such, references to rooms revenue and food and beverage revenue
do not agree to the amounts on the Consolidated Statements of Operations.
Operating income from properties for the purpose of this table exclude corporate
expense, including related depreciation and amortization, preopening expense and
impairment loss.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
------------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues
Stardust $180,387 $194,513 $193,563
Boulder Strip Properties 193,004 189,315 168,036
Downtown Properties 167,330 146,825 135,232
Central Region Properties 278,538 245,204 163,509
-------- -------- --------
Total properties $819,259 $775,857 $660,340
======== ======== ========
Operating income
Stardust $ 19,086 $ 30,748 $ 30,688
Boulder Strip Properties 26,766 23,904 15,551
Downtown Properties 8,763(a) 17,431 22,561
Central Region Properties 62,935(b) 66,683(a) 68,486
-------- -------- --------
Total properties $117,550 $138,766 $137,286
======== ======== ========
</TABLE>
- -------------
(a) Before preopening expense.
(b) Before impairment loss.
38
<PAGE> 41
FISCAL 1997 COMPARED TO FISCAL 1996
Revenues
- --------
Consolidated net revenues increased 5.6% during fiscal 1997
compared to fiscal 1996. Company-wide casino revenue increased 4.7%, food and
beverage revenue increased 6.2% and rooms revenue increased 5.8%. Net revenues
in the Nevada Region increased 1.9% in fiscal 1997 compared to fiscal 1996
primarily as a result of the opening of Main Street Station in November 1996, as
well as a full year of operations and enhanced utilization of the Company's
wholly-owned travel agency, Vacations Hawaii. These increases were partially
offset by declines in net revenues experienced principally at the Stardust
(7.3%) and the California (13.1%). Net revenues in the Central Region increased
13.6% in fiscal 1997 compared to fiscal 1996 primarily as a result of the
acquisition of Par-A-Dice in December 1996, partially offset by declines in net
revenues experienced at Sam's Town Tunica (13.8%) and Sam's Town Kansas City
(12.9%).
The decline in net revenues at those properties which were in
operation for the full 12 months of fiscal 1997 and 1996 (excludes Par-A-Dice,
Main Street Station, Vacations Hawaii and Sam's Town Kansas City) is
attributable, in each case, to increased competition. In addition, Sam's Town
Tunica and the California were each adversely impacted by construction
disruption during the first part of fiscal 1997.
Operating Income (Loss)
- -----------------------
Consolidated operating loss was $44.4 million during fiscal 1997
compared to consolidated operating income of $100.8 million in fiscal 1996. The
majority of the decline in consolidated operating income was the result of $131
million in impairment losses recorded during fiscal 1997, primarily related to
the write-down of certain fixed and intangible assets in the Missouri gaming
market to fair value. See further discussion under "Impairment Losses".
Consolidated operating income before impairment loss and preopening
expense declined by 18.4% from $110.8 million in fiscal 1996 to $90.4 million in
fiscal 1997, while consolidated operating margins declined from 14.3% to 11.0%,
respectively. Operating income in the Nevada Region declined 24.2% due to
declines experienced at the Stardust and Downtown Properties, partially offset
by an increase in operating income at the Boulder Strip Properties. In the
Central Region, operating income declined by 19.6% as a result of declines
experienced at Sam's Town Tunica and Sam's Town Kansas City, offset by
operating income from Par-A-Dice (acquired December 1996). Management fee and
joint venture income from Silver Star and Treasure Chest operating income
increased 2.8% in fiscal 1997 versus fiscal 1996.
Stardust
- --------
Net revenues at the Stardust declined by 7.3% during fiscal 1997
compared to fiscal 1996. The majority of the decline is attributable to a 8.5%
reduction in casino revenues, as a result of a decline in slot wagering and a
lower win percentage in the sports book partially offset by increased wagering.
Revenues from rooms, food and beverage also declined by approximately 6.2%
during the fiscal year due to a decline in the number of occupied rooms and food
covers. Operating income declined by 37.9% to $19.1 million in fiscal 1997
compared to fiscal 1996, and operating income margin declined from 15.8% in
fiscal 1996 to 10.6% in fiscal 1997. These declines in operating income and
operating income margin are primarily the result of the decline in revenues.
Boulder Strip Properties
- ------------------------
Net revenues at the Boulder Strip Properties increased 1.9% during
fiscal 1997 compared to fiscal 1996. The increase is primarily attributable to a
2.2% increase in casino revenue as a result of increased wagering volume in
table games and slots at Sam's Town Las Vegas. Rooms revenues and food and
beverage revenue increased 11.0% and 2.2%, respectively, over the prior fiscal
year's levels. The increase in rooms revenue is primarily attributable to a
24.3% increase in average daily room rates at Sam's Town Las Vegas. Operating
income margin at the Boulder Strip Properties increased from 12.6% in fiscal
1996 to 13.9% in fiscal 1997, due to the increase in net revenues as well as
improved operating margins in the rooms and food and beverage departments at
Sam's Town Las Vegas.
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<PAGE> 42
DOWNTOWN PROPERTIES
- -------------------
Net revenues at the Downtown Properties increased 14.0% during
fiscal 1997 compared to fiscal 1996. The increase is attributable to the
November 1996 opening of Main Street Station as well as increased revenues from
Vacations Hawaii. Hawaiian customers comprise a majority of the available room
nights at the three downtown casino properties. See "Business -- Properties".
These increases in net revenues were partially offset by declines in net
revenues at the California and Fremont of 13.1% and 5.7%, respectively. These
two properties have been affected by the opening of Main Street Station, which
initially attracted patrons from their customer bases. In addition, each
component of the California's net revenues were adversely impacted by a rooms
remodel project which reduced its room availability by approximately 15% during
the first fiscal quarter of 1997. Aggregate operating income for the Downtown
Properties declined by 50% during fiscal 1997 to $8.8 million, and aggregate
operating income margin for the Downtown Properties decreased from 11.9% in
fiscal 1996 to 5.2% in fiscal 1997. These declines are a result of the
reduction in net revenues at the California and Fremont, as well as the $1.6
million operating loss from Vacations Hawaii. In addition, Main Street Station
posted a $1.9 million operating loss before preopening expense since its
opening in November 1996.
CENTRAL REGION
- --------------
Net revenues from the Central Region increased 13.6% during fiscal
1997 compared to fiscal 1996. The majority of the increase is attributable to
Par-A-Dice, which was acquired on December 5, 1996. Par-A-Dice generated net
revenues of $59.6 million since its acquisition. This increase was partially
offset by declines of 13.8% and 12.9%, respectively, in net revenues at Sam's
Town Tunica and Sam's Town Kansas City. Operating income before preopening
expense and impairment loss declined by 5.6% in fiscal 1997, and operating
income margin declined from 27.2% in fiscal 1996 to 22.6% in fiscal 1997. The
decrease in operating income is due to the decline in net revenues at Sam's Town
Tunica and the increased operating losses at Sam's Town Kansas City, offset by
the operating income from Par-A-Dice. Sam's Town Tunica's operating margin
declined from 21.8% in fiscal 1996 to 14.9% during fiscal 1997 as a result of
increased competition in that market as well as the construction disruption from
the 350-room hotel tower and the additional 1,000 space parking garage which
were completed in December 1996. Sam's Town Kansas City posted a $10.9 million
operating loss (before impairment loss) during fiscal 1997 compared to a $5.0
million operating loss in the prior fiscal year. The increase in operating loss
is attributable to increased market competition. Due to the significant change
in the competitive environment, the Company recorded an impairment loss of
approximately $126 million related to its investment in the Missouri gaming
market. See further discussion below regarding this write-down under Impairment
Loss.
OTHER EXPENSES
- --------------
Depreciation and amortization expense increased by $6.6 million
during fiscal 1997. The increase is primarily attributable to an increase in
fixed and intangible assets related to the opening of Main Street Station in
November 1996, the acquisition of Par-A-Dice in December 1996, and the
completion of the new hotel tower and parking garage at Sam's Town Tunica in
December 1996. As discussed below under Impairment Losses, the write-down of the
fixed and intangible assets related to Sam's Town Kansas City is expected to
reduce future depreciation and amortization expense by approximately $7 million
on an annual basis.
Corporate expenses were $24.3 million for both fiscal 1997 and
fiscal 1996.
During fiscal 1997 and 1996, the Company recorded a preopening
charge of $3.5 million and $10.0 million, respectively, upon the opening of Main
Street Station in November 1996 and Sam's Town Kansas City in September 1995.
IMPAIRMENT LOSSES
- -----------------
During fiscal 1997, the Company, in accordance with SFAS No. 121,
recorded an impairment loss of $126 million to adjust the carrying value of its
fixed and intangible assets in the Missouri gaming market to fair value. The
impairment loss was recorded due to a significant change in the competitive
environment with the January 1997 addition of a significantly larger facility in
the Kansas City gaming market and a history of operating losses at the Company's
Sam's Town Kansas City gaming establishment. In addition, the restrictive nature
of the Missouri gaming regulations with respect to wagering limits and simulated
cruise requirements has not been conducive to profitable operations, and based
upon currently available information, management does not believe that any
significant regulatory relief is forthcoming. The Company continues to operate
Sam's Town Kansas City while focusing on cost control measures and the pursuit
of future legislative and regulatory relief.
In addition, the Company recorded a $5.3 million impairment loss
related to its 17.4% ownership interest in FSE during fiscal 1997. This
impairment loss is principally due to the significant levels of operating loss
and operating cash deficiency reported in May 1997 by FSE relating to its first
full year of operation. Management expects this trend to continue and,
therefore, does not expect to recover its investment in this entity.
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<PAGE> 43
OTHER INCOME (EXPENSE)
Other income and expense is primarily comprised of interest
expense, net of amounts capitalized. Interest expense increased by $9.3 million
during fiscal 1997 to $61.7 million and is primarily attributable to higher
levels of average debt outstanding due to, among other things, the December
1996 acquisition of Par-A-Dice for approximately $172 million and the major
renovation and expansion projects related to Main Street Station and Sam's Town
Tunica.
PROVISION (BENEFIT) FOR INCOME TAXES
The Company's effective tax rate was (32.3%) and 40.4%,
respectively, for fiscal years ended June 30, 1997 and 1996. The fluctuation in
the rates is primarily attributable to the impairment loss recorded during
fiscal 1997.
EXTRAORDINARY ITEMS
In connection with the redemption of the Company's $150 million,
10.75% Notes in October 1996, the Company recognized an extraordinary loss of
$6.1 million, net of tax, during fiscal 1997. In addition, the Company recorded
an extraordinary loss of $1.4 million, net of tax, during fiscal 1996 related to
the write-off of unamortized bank loan fees in connection with the completion of
the Company's current Bank Credit Facility in June 1996.
NET INCOME (LOSS)
As a result of these factors, the Company reported a net loss of
$77.5 million for fiscal 1997 compared to net income of $28.1 million in fiscal
1996.
FISCAL 1996 COMPARED TO FISCAL 1995
Consolidated net revenues increased 17.5% for fiscal 1996 compared
to fiscal 1995. The increase in net revenues for fiscal 1996 resulted primarily
from the opening of Sam's Town Kansas City in September 1995, increased revenues
at Sam's Town Las Vegas of 14.9% and increased revenues at Sam's Town Tunica of
8.2%. In the Company's Central Region, revenue increased 50% for fiscal 1996
compared to fiscal 1995 while in the Company's Nevada Region, revenue increased
5.4% for fiscal 1996 compared to fiscal 1995. Revenue growth on a consolidated
basis in fiscal 1996 was achieved in all major revenue categories, with casino
revenue increasing 18.3%, room revenue increasing 5.7%, food and beverage
revenue increasing 12.7% and management fee and joint venture income increasing
16.3% compared to fiscal 1995. Slot revenue, which continued to account for more
than 70% of casino revenue, increased 22% in fiscal 1996 compared to fiscal
1995. The increase in slot revenue was primarily attributable to the opening of
Sam's Town Kansas City in September 1995 and to a 24% increase in slot revenue
at Sam's Town Las Vegas. Table games revenue, the only other significant
component of casino revenue, increased 10.6% in fiscal 1996 compared to fiscal
1995 primarily as a result of the opening of Sam's Town Kansas City.
Company-wide room revenue increased 5.7% in fiscal 1996 compared to fiscal 1995
as a result of a 5.9% increase in occupied rooms and a 6.3% increase in the
average daily room rate. The increase in occupied rooms was attributable to the
openings of the Sam's Town Tunica rooms expansion (300 rooms opened in December
1994) and the California rooms expansion (146 rooms opened in December 1994).
Both of these rooms expansion projects were open for the entire fiscal
41
<PAGE> 44
1996 but were only open for the last six months of fiscal 1995. Occupancy
statistics do not include rooms at Main Street Station which the Company used
until the November 1996 opening of Main Street Station to augment the rooms
base at the California and the Fremont. The Main Street Station property was
purchased in December 1993 as a closed casino hotel facility. In November 1996,
the Company completed a major renovation of the facility and opened Main
Street Station for business.
Consolidated operating income declined 8.8% for fiscal 1996 as
compared to fiscal 1995 while consolidated operating income margins declined to
13.0% from 16.7%. This decline in consolidated operating income and consolidated
operating income margins was primarily attributable to the write-off of
preopening expenses related to the opening of Sam's Town Kansas City on
September 13, 1995. This preopening charge, which amounted to $10 million, was
taken in the first quarter of fiscal 1996. Consolidated operating income for
fiscal 1996 before the write-off of preopening expenses increased slightly
compared to fiscal 1995 while consolidated operating income margins was 14.3% in
fiscal 1996 compared to 16.7% in fiscal 1995. In the Company's Nevada Region,
operating income increased 6.2% for fiscal 1996 compared to fiscal 1995 while
consolidated operating income margins increased to 14.0% for fiscal 1996 from
13.8% in fiscal 1995. This increase in operating income and operating income
margins was primarily attributable to increases at Sam's Town Las Vegas of 83%
and 4.3 percentage points, respectively, offset by declines at the Downtown
Properties of 18.2% and 3.5 percentage points, respectively. In the Company's
Central Region, operating income before the write-off of preopening expenses
related to Sam's Town Kansas City decreased 2.6% in fiscal 1996 compared to
fiscal 1995 while operating income margins declined to 27% primarily as a result
of an operating loss at Sam's Town Kansas City and a decline in operating income
margin at Sam's Town Tunica to 21.8% in fiscal 1996.
Net revenues at the Stardust increased 0.5% for fiscal 1996 as
compared to the prior fiscal year. Casino and food and beverage revenues
declined 0.5% and 1.6%, respectively, while rooms revenue increased 3.4% and
showroom revenue increased 9.3% for fiscal 1996 as compared to fiscal 1995. Slot
revenue declined 1.3% in fiscal 1996 with a 2.3% increase in wagering offset by
lower net winnings. Table games revenue declined 4.1% for fiscal 1996 as
compared to fiscal 1995 as a result of an increase of 4.3% in wagering offset by
lower net winnings. Other casino revenues increased 11.9% for fiscal 1996
primarily as a result of a 28% increase in revenue in the sports book. Rooms
revenue at the Stardust increased 3.4% for fiscal 1996 compared to fiscal 1995
with a 1.3% decline in occupied rooms offset by a 7.9% increase in average daily
room rate. Operating income increased slightly in fiscal 1996 compared to fiscal
1995 and operating income margin was 15.8% compared to 15.9%, respectively for
fiscal 1996 versus fiscal 1995. The slight decline in operating income margin
was primarily the result of higher advertising and promotional expenses not
fully offset by increased operating income and operating income margin in the
rooms department.
Net revenues for the Boulder Strip Properties increased 12.7% for
fiscal 1996 versus fiscal 1995 primarily as a result of increased revenues at
Sam's Town Las Vegas. Sam's Town Las Vegas revenue increased 14.9% for fiscal
1996 while revenues increased 6.8% at Jokers Wild and declined slightly at the
Eldorado. Casino revenues at the Boulder Strip Properties increased 16.7% for
fiscal 1996 versus fiscal 1995, while rooms revenue increased 4.7% and food and
beverage revenue increased 4.8%. Operating income at the Boulder Strip
Properties increased 54% for fiscal 1996 compared to fiscal 1995 while operating
income margin increased 3.3 percentage points to 12.6% for fiscal 1996. Sam's
Town Las Vegas posted increases in operating income and operating income margin
of 83% and 4.3 percentage points, respectively for the 1996 fiscal year.
42
<PAGE> 45
Operating income margins increased 2.5 percentage points at the Eldorado and
declined 2.3 percentage points at Jokers Wild for fiscal 1996 versus fiscal
1995. The increase in operating income margin at the Eldorado was a result of
increased casino revenue while the decline in operating income margin at Jokers
Wild was primarily a result of increased expenses in the food and beverage
department for fiscal 1996 versus fiscal 1995. Management believes that the
significant increases in revenues, operating income and operating income margin
at Sam's Town Las Vegas for fiscal 1996 versus fiscal 1995 were primarily
attributable to the implementation of successful marketing programs creating
increased customer awareness and visitation.
Net revenues at the Downtown Properties increased 3.2% for fiscal
1996 compared to fiscal 1995. Net revenues at the California increased 1.4%
while net revenues at the Fremont increased 5.2%. Casino revenues at the
Downtown Properties were up slightly while food and beverage revenue increased
20% and rooms revenue declined slightly. Operating income and operating income
margins at the Downtown Properties declined 18.2% and 3.5 percentage points,
respectively in fiscal 1996 as compared to fiscal 1995. Operating income at the
California declined 20% while operating income margin at the California declined
3.7 percentage points for fiscal 1996. The decline in operating income and
operating income margin at the California was primarily the result of increased
operating costs in the rooms and food and beverage departments and increased
advertising and promotional costs. Operating income and operating income margin
at the Fremont declined 15.6% and 3.1 percentage points, respectively for fiscal
1996 compared to fiscal 1995 primarily as a result of increased advertising and
promotional costs. Construction of the Fremont Street Experience project, which
was completed and opened to the public in December 1995, negatively impacted the
Downtown Properties for the majority of the first and second fiscal quarter.
Net revenues at the Central Region Properties increased 50% for
fiscal 1996 versus 1995. The opening of Sam's Town Kansas City on September 13,
1995 accounted for the majority of the increase in fiscal 1996. Sam's Town
Tunica revenues increased 8.2% for the 1996 fiscal year versus fiscal 1995 while
management fees and joint venture income related to the Silver Star and the
Treasure Chest operations increased 16.3%. Operating income in the Central
Region (before the write-off of preopening expenses related to Sam's Town Kansas
City) declined 2.6% to $66.7 million for fiscal 1996. The decline in operating
income was primarily a result of a $5 million operating loss at Sam's Town
Kansas City and an 8.0% decline in operating income at Sam's Town Tunica,
partially offset by a 16.3% increase in operating income from management fees
and joint venture income. The operating loss at Sam's Town Kansas City was
primarily attributable to revenues not sufficient to cover the high level of
fixed costs associated with the operation of the facility and higher levels of
advertising and promotional expenses aimed at increasing customer awareness and
revenues. Results from Sam's Town Tunica were weakened due to severe weather
during the third quarter of fiscal 1996, the effects of a new competitor opening
at the beginning of the fourth fiscal quarter and the impact of construction
disruption related to the 350-room hotel expansion project and construction of a
1,000-car parking garage which commenced in the second half of fiscal 1996.
Interest expense, net of amounts capitalized, increased $3.9
million or 8.1% for fiscal 1996 compared to fiscal 1995 primarily as a result of
less capitalized interest related to projects under development. Depreciation
and amortization expense for fiscal 1996 increased $6.1 million or 11.2%
compared to fiscal 1995 primarily as a result of the opening of Sam's Town
Kansas City in September 1995 and a full year of depreciation of the Sam's Town
Las Vegas expansion and the California rooms expansion projects which opened in
December 1994.
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<PAGE> 46
The Company's tax rate for fiscal 1996 was 40% compared to 44% in
fiscal 1995. The Company's 1995 tax rate was affected by the increase in certain
non-deductible expenses related to the Company's development efforts during that
year.
The Company recorded an extraordinary loss, net of tax, of $1.4
million in fiscal 1996. This extraordinary loss resulted from the write-off of
unamortized bank loan fees in connection with its recent bank refinancing which
was completed on June 19, 1996.
As a result of these factors, the Company reported net income of
$28.1 million for fiscal 1996 compared to net income of $36.2 million in fiscal
1995.
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<PAGE> 47
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow and Working Capital
The Company's policy is to use operating cash flow in combination
with debt and equity financing to fund renovations of its properties and
expansion of its business. During fiscal 1997, the Company completed an
expansion and renovation of Main Street Station, the acquisition of Par-A-Dice
and the addition of a 350-room hotel tower and 1,000 space parking garage at
Sam's Town Tunica. The aggregate cost of these expenditures was approximately
$255 million over the course of fiscal 1997 and 1996. In addition, the Company's
current expansion plans include, among other things, the proposed acquisition of
the remaining 85% of Treasure Chest L.L.C., the owner of the Treasure Chest
riverboat casino in Kenner, Louisiana, for $115 million, including the
assumption of debt, as well as the anticipated $100 million investment in the
Mirage Joint Venture in Atlantic City, New Jersey.
During fiscal 1997, the Company's generated operating cash flows of
$82.0 million compared to $103.9 million in fiscal 1996 and $83.1 million in
fiscal 1995. Operating cash flows in fiscal 1997 were impacted by increased
levels of competition as well as construction disruption at Sam's Town Tunica
and the California. As of June 30, 1997 and 1996, the Company had balances of
cash and cash equivalents of approximately $55 million and $49 million,
respectively, and working capital deficits of $3.5 million and $9.0 million,
respectively. The Company has historically operated with negative working
capital in order to minimize borrowings (and related interest costs) under its
Bank Credit Facility. The working capital deficits are funded through cash
generated from operations as well as borrowings under the Bank Credit Facility.
Capital Expenditures
The Company is committed to continually maintaining and enhancing
its existing facilities, most notably by upgrading and remodeling its casinos,
hotel rooms, restaurants and public space and by providing the latest slot
machines for its customers. The Company's capital expenditures for these
purposes were approximately $38.2 million, $30.1 million and $23.5 million
during the years ended June 30, 1997, 1996 and 1995. In addition, the Fremont is
currently undergoing a rooms remodel project which is expected to cost
approximately $5 million and be completed by the end of calendar 1997.
During fiscal 1997, net cash used in investing activities was
$250.3 million versus $105.7 million in fiscal 1996 and $145.5 million in fiscal
1995. Fiscal 1997 investing activities consisted primarily of the $171 million
acquisition of Par-A-Dice, the expansion and renovation of Main Street Station,
the new 350-room hotel tower and parking garage facility at Sam's Town Tunica,
as well as maintenance capital expenditures at the Company's other properties.
45
<PAGE> 48
Debt Facilities and Equity Financing
Much of the funding for the Company's renovation and expansion projects
comes from debt and equity financings, as well as cash flows from existing
operations. During fiscal 1997, cash flows from financing activities totalled
$174.5 million, primarily as a result of net borrowings under the Company's Bank
Credit Facility, which originated in June 1996 and matures in June 2001. At June
30, 1997, outstanding borrowings and unused availability under the Bank Credit
Facility were $351 million and $149 million, respectively. However, the unused
availability was subsequently reduced in July 1997 in connection with the
issuance of $250 million principal amount of 9.50% Senior Subordinated Notes
described below. Interest on the Bank Credit Facility is based upon the agent
bank's quoted reference rate or London Interbank Offered Rate, at the discretion
of the Company. The rate under the Bank Credit Facility at June 30, 1997 was
8.1%.
In October 1996, the Company issued $200 million principal amount of
9.25% Senior Notes due October 1, 2003. The net proceeds from this offering were
used to reduce outstanding indebtedness under the Company's Bank Credit
Facility. Subsequently in November 1996, the Company used amounts available
under its Bank Credit Facility to redeem its $150 million principal amount of
10.75% Senior Subordinated Notes prior to their scheduled maturity. Also in
October 1996, the Company completed an offering of 4,000,000 shares of common
stock at $9.00 per share generating net proceeds of approximately $34 million.
The net proceeds from this offering were used to reduce outstanding indebtedness
under the Company's Bank Credit Facility.
In July 1997, Company issued, through a private placement, $250 million
principal amount of 9.50% Senior Subordinated Notes due July 2007. The net
proceeds from this offering were used to reduce outstanding indebtedness under
the Company's Bank Credit Facility. Management expects to eventually use its
availability under the Bank Credit Facility to redeem the Company's $185 million
principal amount of 11% Senior Subordinated Notes (the "11% Notes") prior to
their scheduled maturity. In connection with the issuance of the 9.50% Notes,
availability under the Bank Credit Facility was reduced by approximately $193
million and will subsequently be increased if and to the extent the Company
purchases or redeems the 11% Notes. There can be no assurance that the 11% Notes
will be redeemed and the availability under the Bank Credit Facility restored to
its prior capacity. The Company is obligated to register and have declared
effective the 9.50% Notes or exchange them for identical notes that have been
registered with the Securities and Exchange Commission within certain predefined
time parameters. If the Company does not accomplish such registration within the
required time frame, certain additional interest will accrue at rates ranging
from 0.50% to 1.50% per annum. There can be no assurance that the 9.50% Notes
will be registered and the registration declared effective within the required
time frame.
The Company, through its wholly-owned subsidiary, California Hotel
Finance Company, has $185 million principal amount of 11% Senior Subordinated
Notes due December 2002. The 11% Notes contain certain covenants, including but
not limited to limitations on restricted payments (as defined in the indenture
related to the 11% Notes). As a result of these restrictions, at June 30, 1997
California Hotel and Casino (a wholly-owned subsidiary of the Company) had a
portion of its retained earnings and net assets, in the amounts of $31.9
million and $87.1 million, respectively, that were not available for
distribution as dividends to the Company.
Certain indebtedness of the Company contains restrictive covenants
which, among other things, impose significant restrictions on the Company's
operations and its ability to seek alternative financing means.
The Company's ability to service its debt will be dependent on its
future performance, which will be affected by, among other things, prevailing
economic conditions and financial, business and other factors, certain of which
are beyond the Company's control.
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<PAGE> 49
New Expansion Projects
The Company, as part of its ongoing strategic planning process, has
recently completed a review of its current growth opportunities. Based on this
review, the Company expects to be focusing its growth efforts in two areas. In
Nevada, the Company has decided to focus its growth efforts on the Stardust.
The Company is analyzing various alternatives to utilize the 61-acre Stardust
site, including additional hotel rooms and other amenities to more effectively
compete with the new generation of Las Vegas properties.
Outside Nevada, the Company is focusing its efforts on its joint
venture with Mirage Resorts, Inc. On May 29, 1996, the Company, through a
wholly-owned subsidiary, executed a joint venture agreement with Mirage for the
Atlantic City Project. The Mirage Joint Venture Agreement provides for $100
million in capital contributions by the Company during the course of the
construction of the Atlantic City Project. The Company plans to fund its Mirage
Joint Venture capital contributions primarily from cash flow from operations
and availability under the Company's Bank Credit Facility.
Also outside Nevada, the Company entered into a definitive agreement on
July 11, 1997 to purchase the remaining 85% interest in Treasure Chest L.L.C.,
the owner of the Treasure Chest riverboat casino in Kenner, Louisiana. The
purchase price is $115 million, including the assumption of debt. The Company
expects to fund the acquisition with borrowings under the Bank Credit Facility.
The transaction is subject to certain regulatory approvals. There can be no
assurance as to when, or if, the acquisition will be consummated.
During the first quarter of fiscal 1997, the Company purchased a casino
hotel site in Reno, Nevada with plans to develop Sam's Town Reno on the site.
The Company has determined that further development of the Stardust site and the
Mirage Joint Venture and the Treasure Chest acquisition should take priority
over the Sam's Town Reno project at this time.
Substantial funds would be required for any of the expansion projects
discussed above. There can be no assurance that any of the above mentioned
projects will go forward or ultimately become operational. The source of funds
required to meet the Company's working capital needs (including maintenance
capital expenditures) and those required to complete the above-mentioned
projects is expected to be cash flow from operations and availability under the
Company's Bank Credit Facility. Based on current plans, the Company does not
anticipate issuing additional equity or obtaining new borrowings in excess of
amounts available under the Bank Credit Facility in the next 12 months.
Thereafter, the Company may require additional funds to support its working
capital requirements or for other purposes and may seek to raise such additional
funds through public or private equity and/or debt financings or from other
sources. No assurance can be given that additional financing will be available
or that, if available, such financing will be obtainable on terms favorable to
the Company or its stockholders. See "Investment Considerations -- Leverage and
Debt Service," "-- Expansion," and "-- Additional Financing Requirements."
The Company continues to pursue and investigate additional expansion
opportunities both in Nevada and in other markets where casino gaming is
currently permitted. Such expansion will be affected and determined by several
key factors, including license selection processes, identification of additional
suitable investment opportunities in current gaming jurisdictions, and
availability of acceptable financing. Additional projects will require the
Company to make substantial investments, which the Company intends to fund
through cash flow from operations and availability under the Bank Credit
Facility. To the extent such sources of funds are not sufficient, the Company
may also seek to raise such additional funds through public or private equity
and/or debt financings or from other sources. No assurance can be given that
additional financing will be available or that, if available, such financing
will be obtainable on terms favorable to the Company and its stockholders.
Recently Issued Accounting Standards
See Note 1 to Notes to Consolidated Financial Statements for a complete
discussion of recently issued accounting standards and their expected impact on
the Company's consolidated financial statements.
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<PAGE> 50
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not required of the Company at this time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of
this Form 10-K. See Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors of the Company is set forth under
the caption "Proposal No. 1 -- Election of Directors" and
"Executive Compensation and Other Information -- Section 16(a)
Beneficial
Ownership Reporting Compliance" in the Company's definitive Proxy Statement to
be filed in connection with its 1997 Annual Meeting of Stockholders and is
incorporated herein by reference. Information regarding non-director executive
officers of the Company is set forth in Item 4A of Part I of this Report on Form
10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth under the caption
"Executive Compensation and Other Information" and "Proposal No. 1 -- Election
of Directors -- Compensation of Directors" in the Company's definitive Proxy
Statement to be filed in connection with its 1997 Annual Meeting of Stockholders
and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth under the caption
"Stock Ownership of Certain Beneficial Owners and Management" in the Company's
definitive Proxy Statement to be filed in connection with its 1997 Annual
Meeting of Stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the captions "Executive
Compensation and Other Information -- Certain Relationships and Related
Transactions and Compensation Committee Interlocks and Insider Participation" in
the Company's definitive Proxy Statement to be filed in connection with its 1997
Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
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Page No.
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<S> <C> <C>
(a) 1. FINANCIAL STATEMENT SCHEDULES. The following financial statement schedules
for the years ended June 30, 1997, 1996 and 1995 filed as part of this report:
Independent Auditors' Report....................................................... F-2
Consolidated Balance Sheets at June 30, 1997 and 1996.............................. F-3
Consolidated Statements of Operations for the Years Ended
June 30, 1997, 1996 and 1995..................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended June 30, 1997, 1996 and 1995......................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1997, 1996 and 1995..................................................... F-6
Notes to Consolidated Financial Statements......................................... F-7
2. FINANCIAL STATEMENT SCHEDULES. The following financial statement schedules
for the years ended June 30, 1997, 1996 and 1995 are filed as part of this report:
Condensed Financial Information of Registrant...................................... S-1
Schedules not listed above have been omitted because they are either inapplicable
or the required information has been given in the financial statements or notes
thereto
3. EXHIBITS. Refer to (c) below.
(b) Reports on Form 8-K.
1. Current Report on Form 8-K, dated April 24, 1997, relating to a change in fiscal
year.
2. Current Report on Form 8-K, dated June 23, 1997, relating to the issuance of
$250 million principal amount of Senior Subordinated Notes due 2007.
3. Current Report on Form 8-K, dated July 11, 1997, relating to the Treasure Chest
acquisition.
</TABLE>
48
<PAGE> 51
BOYD GAMING CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report F-2
Consolidated Financial Statements
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE> 52
INDEPENDENT AUDITORS' REPORT
Boyd Gaming Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Boyd
Gaming Corporation and Subsidiaries (the "Company") as of June 30, 1997 and
1996, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended June 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
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, such consolidated financial statements present fairly,
in all material respects, the financial position of Boyd Gaming Corporation and
Subsidiaries at June 30, 1997 and 1996 and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1997
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
August 20, 1997
F-2
<PAGE> 53
CONSOLIDATED BALANCE SHEETS Boyd Gaming Corporation and Subsidiaries
<TABLE>
<CAPTION>
June 30,
------------------------
(In thousands, except share data) 1997 1996
---------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 55,220 $ 48,980
Accounts receivable, net 16,946 16,040
Inventories 8,501 6,531
Prepaid expenses 14,873 15,265
---------- --------
Total current assets 95,540 86,816
Property and equipment, net 744,038 796,093
Other assets and deferred charges 56,944 59,989
Deferred income taxes 8,533 --
Goodwill and other intangible assets, net 125,130 10,527
---------- --------
Total assets $1,030,185 $953,425
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 1,841 $ 4,031
Accounts payable 30,760 31,936
Accrued liabilities
Payroll and related 24,648 22,956
Interest and other 40,725 36,213
Income taxes payable 1,103 678
---------- --------
Total current liabilities 99,077 95,814
Long-term debt, net of current maturities 739,792 590,808
Deferred income taxes -- 33,546
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value,
5,000,000 shares authorized -- --
Common stock, $.01 par value; 200,000,000
shares authorized; 61,523,988 and
57,213,720 shares outstanding 615 572
Additional paid-in capital 138,091 102,583
Retained earnings 52,610 130,102
---------- --------
Total stockholders' equity 191,316 233,257
---------- --------
Total liabilities and stockholders' equity $1,030,185 $953,425
========== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-3
<PAGE> 54
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS Boyd Gaming Corporation and Subsidiaries
(In thousands, except per share data) For the years ended June 30,
- --------------------------------------------------------------------------------------------------
1997 1996 1995
----------------------------------
<S> <C> <C> <C>
Revenues
Casino $573,782 $548,167 $463,179
Food and beverage 151,261 142,420 123,527
Rooms 74,209 69,645 62,300
Other 58,311 49,895 37,563
Management fees and joint venture 42,747 41,576 35,763
----------------------------------
Gross revenues 900,310 851,703 722,332
Less promotional allowances 81,051 75,846 61,992
----------------------------------
Net revenues 819,259 775,857 660,340
----------------------------------
Costs and expenses
Casino 298,081 273,545 221,844
Food and beverage 106,729 99,213 90,670
Rooms 25,210 25,842 24,578
Other 50,695 36,830 25,567
Selling, general and administrative 120,538 114,497 79,785
Maintenance and utilities 36,037 30,171 28,452
Depreciation and amortization 67,242 60,626 54,518
Corporate expense 24,333 24,343 24,356
Preopening expense 3,481 10,004 --
Impairment loss 131,339 -- --
----------------------------------
Total 863,685 675,071 549,770
----------------------------------
Operating income (loss) (44,426) 100,786 110,570
----------------------------------
Other income (expense)
Interest income 650 1,174 2,072
Interest expense, net of amounts capitalized (61,672) (52,360) (48,443)
----------------------------------
Total (61,022) (51,186) (46,371)
----------------------------------
Income (loss) before provision (benefit) for income taxes
and extraordinary item (105,448) 49,600 64,199
Provision (benefit) for income taxes (34,025) 20,021 27,950
----------------------------------
Income (loss) before extraordinary item (71,423) 29,579 36,249
Extraordinary item, net of tax benefit of $3,268 and $889,
respectively 6,069 1,435 --
==================================
Net income (loss) $(77,492) $28,144 $36,249
==================================
Net income (loss) per common share
Income (loss) before extraordinary item $(1.19) $0.52 $0.64
Extraordinary item, net of tax (0.10) (0.03) --
----------------------------------
Net income (loss) $(1.29) $0.49 $0.64
==================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE> 55
<TABLE>
CONSOLIDATED STATEMENTS OF Boyd Gaming Corporation and Subsidiaries
CHANGES IN STOCKHOLDERS' EQUITY
For the years ended June 30, 1997, 1996 and 1995
<CAPTION>
Common Stock Additional Total
-------------------- Paid-In Retained Stockholders'
(In thousands, except share data) Shares Amount Capital Earnings Equity
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, July 1, 1994 56,816,895 $568 $ 98,128 $ 65,709 $164,405
Net income 36,249 36,249
Stock issued in connection with
employee stock purchase plan 182,123 2 1,957 1,959
- -------------------------------------------------------------------------------------------------
Balances, June 30, 1995 56,999,018 570 100,085 101,958 202,613
Net income 28,144 28,144
Stock issued in connection with
employee stock purchase plan 212,368 2 2,466 2,468
Stock options exercised 2,334 -- 32 32
- -------------------------------------------------------------------------------------------------
Balances, June 30, 1996 57,213,720 572 102,583 130,102 233,257
Net loss (77,492) (77,492)
Issuance of stock,
net of expenses 4,000,000 40 33,493 33,533
Stock issued in connection with
employee stock purchase plan 310,268 3 2,015 2,018
- -------------------------------------------------------------------------------------------------
BALANCES, JUNE 30, 1997 61,523,988 $615 $138,091 $ 52,610 $191,316
=================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 56
CONSOLIDATED STATEMENTS OF CASH FLOWS Boyd Gaming Corporation and Subsidiaries
<TABLE>
<CAPTION>
For the years ended June 30,
----------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (77,492) $ 28,144 $ 36,249
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 67,242 60,626 54,518
Loss on early retirement of debt 9,337 3,759 --
Deferred income taxes (42,079) 3,903 14,148
Impairment loss 131,339 -- --
Other -- 185 84
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net (906) 95 (3,089)
(Increase) decrease in inventories (1,970) 117 (180)
(Increase) decrease in prepaid expenses 392 (1,800) 1,940
Increase in other assets (4,853) (6,736) (2,032)
Increase (decrease) in other current liabilities 574 15,504 (19,146)
Increase in income taxes payable 425 82 596
--------- --------- ---------
Net cash provided by operating activities 82,009 103,879 83,088
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash paid for acquisition of Par-A-Dice Hotel and Casino (170,725) -- --
Acquisition of property, equipment and other assets (99,586) (107,734) (181,212)
Proceeds from loans receivable -- 2,000 30,667
Proceeds from sale of riverboat 20,000 -- --
Decrease in short-term investments -- -- 5,000
--------- --------- ---------
Net cash used in investing activities (250,311) (105,734) (145,545)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 200,148 230,934 86,025
Payments on long-term debt (19,354) (265,149) (22,027)
Early retirement of long-term debt (157,500) -- --
Net borrowings (payments) under credit agreements 116,000 (250) 13,000
Proceeds from issuance of common stock 35,248 2,131 1,664
--------- --------- ---------
Net cash provided by (used in) financing activities 174,542 (32,334) 78,662
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 6,240 (34,189) 16,205
Cash and cash equivalents, beginning of year 48,980 83,169 66,964
--------- --------- ---------
Cash and cash equivalents, end of year $ 55,220 $ 48,980 $ 83,169
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net amounts capitalized $ 58,556 $ 54,342 $ 51,405
Cash paid for income taxes 7,981 15,266 12,607
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Property additions acquired on contracts and trade
payables which were accrued, but not yet paid $ 6,973 $ 7,352 $ 24,109
Deferred bond financing costs incurred 4,624 -- --
Acquisition of Par-A-Dice Hotel and Casino
Fair value of assets acquired $ 174,800 $ -- $ --
Cash paid to seller 170,725 -- --
--------- --------- ---------
Liabilities assumed $ 4,075 $ -- $ --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-6
<PAGE> 57
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
NOTE 1. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Boyd
Gaming Corporation and its wholly-owned subsidiaries, collectively referred to
herein as the "Company". The Company owns and operates ten casino entertainment
facilities located in Las Vegas, Nevada, Tunica, Mississippi, Kansas City,
Missouri and East Peoria, Illinois, as well as a travel agency located in
Honolulu, Hawaii. In addition, the Company manages a casino entertainment
facility in Philadelphia, Mississippi for which it has a seven year management
contract that expires in 2001. The Company is also part owner of and manages a
riverboat gaming operation in Kenner, Louisiana which opened September 1994 for
which it has a five year management contract with certain renewal options. The
Company has recently entered into an agreement to purchase the remaining equity
interests in the entity which owns the Kenner gaming operation (see Note 11).
All material intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with an original
maturity of three months or less. These investments are stated at cost which
approximates fair value.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out and retail inventory methods.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
assets. Costs of major improvements are capitalized, while costs of normal
repairs and maintenance are charged to expense as incurred. Gains or losses on
disposal of assets are recognized as incurred.
Capitalized Interest
Interest costs associated with major construction projects are capitalized. When
no debt is incurred specifically for a project, interest is capitalized on
amounts expended on the project using the Company's weighted average cost of
borrowing. Capitalization of interest ceases when the project is substantially
complete. Capitalized interest during the fiscal years ended June 30, 1997, 1996
and 1995 was $3.2 million, $4.6 million and $7.1 million, respectively.
Goodwill and Other Intangible Assets
The excess of total acquisition costs over the fair market value of assets
acquired is amortized using the straight-line method over forty years.
Management periodically assesses the recoverability of
F-7
<PAGE> 58
goodwill and other intangible assets by comparing its carrying value to the
undiscounted cash flows expected to be generated by the acquired operation
during the anticipated period of benefit. As of June 30, 1997 and 1996,
accumulated amortization was $6.1 million and $4.0 million, respectively.
Debt Issuance Costs
Debt issuance costs incurred in connection with the issuance of long-term debt
are capitalized and amortized to interest expense over the terms of the related
debt agreements.
Revenue and Promotional Allowances
Casino revenues represent the net win from gaming activities, which is the
difference between gaming wins and losses. Revenues include the estimated retail
value of rooms, food and beverage, and other goods and services provided to
customers on a complimentary basis. Such amounts are then deducted as
promotional allowances. The estimated cost of providing these promotional
allowances is charged to the casino department in the following amounts:
<TABLE>
<CAPTION>
Year ended June 30,
------------------------------------------
(In thousands) 1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Rooms $11,704 $10,660 $ 8,991
Food and beverage 58,120 59,254 49,674
Other 3,168 3,116 2,422
------- ------- -------
Total $72,992 $73,030 $61,087
======= ======= =======
</TABLE>
Preopening Expenses
Expenses incurred prior to the opening of new facilities are capitalized as
incurred and charged to expense upon commencement of operations. During the
years ended June 30, 1997 and 1996, the Company expensed $3.5 million and $10.0
million, respectively, upon the opening of Main Street Station and Sam's Town
Kansas City. There were no preopening expenses recorded during the year ended
June 30, 1995.
Net Income (Loss) Per Common Share
Net income (loss) per common share is based upon the weighted average number of
shares of common stock and common stock equivalents outstanding during the
period, which were 60,247,508, 57,057,550 and 56,870,104 for the years ended
June 30, 1997, 1996 and 1995, respectively. Common stock equivalents, although
not considered during net loss years, consist of outstanding stock options.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Significant estimates used by the Company include the estimated useful lives
for depreciable and amortizable assets, the estimated allowance for doubtful
accounts receivable, the estimated valuation allowance for deferred tax assets,
and estimated cash flows in assessing the recoverability of long-lived assets.
Actual results could differ from those estimates.
Reclassifications
Certain amounts in the 1996 and 1995 consolidated financial statements have
been reclassified to conform to the 1997 presentation. These reclassifications
had no effect on the Company's net income.
F-8
<PAGE> 59
Change in Fiscal Year
Effective July 1, 1997, the Company changed its fiscal year from a June 30 year
end to a December 31 year end.
Recently Issued Accounting Standards
The Financial Accounting Standards Board ("FASB") has issued Statement on
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which is
effective for fiscal years ending after December 15, 1997. This statement
establishes standards for computing and presenting earnings per share. Earlier
adoption of this statement is not permitted and, upon adoption, requires
restatement as applicable of all prior period earnings per share data
presented. The Company will adopt SFAS No. 128 in the stub period ending
December 31, 1997. Management believes the adoption of SFAS No. 128 will not
have a significant impact on the Company's previously reported earnings per
share.
The FASB issued SFAS No. 129, "Disclosure of Information about Capital
Structure", which is effective for fiscal years ending after December 15, 1997.
This statement establishes standards for disclosing information about an
entity's capital structure. Management intends to comply with the disclosure
requirements of this statement in the stub period ending December 31, 1997.
The FASB issued SFAS No. 130, "Reporting Comprehensive Income," which is
effective for fiscal years beginning after December 15, 1997. This statement
requires businesses to disclose comprehensive income and its components in their
financial statements. Management intends to comply with the disclosure
requirements of this statement in the year ending December 31, 1998.
The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which is effective for fiscal years beginning after
December 15, 1997. This statement redefines how operating segments are
determined and requires qualitative disclosure of certain financial and
descriptive information about a company's operating segments. The Company will
adopt SFAS No. 131 in the year ending December 31, 1998. Management has not yet
completed its analysis of which operating segments it will report on to comply
with SFAS No. 131.
- --------------------------------------------------------------------------------
NOTE 2. - ACQUISITION
On December 5, 1996, the Company completed the acquisition of Par-A-Dice Gaming
Corporation, owner and operator of the Par-A-Dice riverboat casino in East
Peoria, Illinois, and East Peoria Hotel, Inc., the general partner of a
partnership which recently opened a 208-room hotel adjacent to the Par-A-Dice
casino. The purchase price of the acquisition was approximately $173 million.
The purchase price exceeded the fair value of the net assets by approximately
$116 million. The Company's pro-forma consolidated results of operations, as if
the acquisition had occurred on July 1, 1995, are as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Pro forma (in thousands, except share data)
Net revenues ....................................... $861,563 $869,819
Income (loss) before extraordinary item ............ (66,644) 40,828
Net income (loss) .................................. (72,713) 39,393
-------- --------
Net income (loss) per common share
Net income (loss) before extraordinary item ........ $ (1.11) $ 0.72
Net income (loss) .................................. (1.21) 0.69
-------- --------
</TABLE>
F-9
<PAGE> 60
- ---------------------------------------------------------------------------
NOTE 3. - IMPAIRMENT LOSS
During the fiscal year ended June 30, 1997, the Company recorded an impairment
loss of $126 million to adjust the carrying value of its fixed and intangible
assets in the Missouri gaming market to fair value. The impairment loss was
recorded due to a significant change in the competitive environment in the
Kansas City gaming market with the January 1997 addition of a significantly
larger facility and a history of operating losses at the Company's Sam's Town
Kansas City gaming establishment. The fair value of the impaired assets was
primarily determined through a discounted cash flow analysis of the operations
of Sam's Town Kansas City.
The Company also recorded a $5.3 million impairment loss related to its 17.4%
ownership interest in the Fremont Street Experience, Limited Liability Company
("FSE"). This impairment loss is principally due to the significant levels of
operating loss and operating cash deficiency reported in May 1997 by FSE
relating to its first full year of operation. Management expects this trend to
continue and, therefore, does not expect to recover its investment in this
entity.
- --------------------------------------------------------------------------------
NOTE 4. - ACCOUNTS RECEIVABLE
Components of accounts receivable at June 30 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- -------------- ------- -------
<S> <C> <C>
Casino $ 7,428 $ 6,420
Hotel 2,947 3,622
Other 9,875 8,110
------- -------
Total 20,250 18,152
Less allowance for doubtful accounts 3,304 2,112
------- -------
Accounts receivable, net $16,946 $16,040
======= =======
</TABLE>
- ---------------------------------------------------------------------------
NOTE 5. - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at June 30,:
<TABLE>
<CAPTION>
Estimated
Life
(In thousands) (Years) 1997 1996
- -------------- --------- ---------- ----------
<S> <C> <C> <C>
Land -- $ 115,946 $ 119,057
Buildings and leasehold improvements 3-40 632,829 607,874
Furniture and equipment 3-30 327,445 312,937
Riverboats and barges 15-40 39,728 39,728
Construction in progress -- 5,973 50,854
---------- ----------
Total 1,121,921 1,130,450
Less accumulated depreciation and amortization 377,883 334,357
---------- ----------
Property and equipment, net $ 744,038 $ 796,093
========== ==========
</TABLE>
F-10
<PAGE> 61
- --------------------------------------------------------------------------------
NOTE 6. - LONG-TERM DEBT
Long-term debt at June 30 consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- -------------- --------- --------
<S> <C> <C>
Bank Credit Facility $ 351,000 $235,000
9.25% Senior Notes 200,000 --
11% Senior Subordinated Notes 185,000 185,000
10.75% Senior Subordinated Notes -- 150,000
Other 5,633 24,839
--------- --------
Total long-term debt 741,633 594,839
Less current maturities 1,841 4,031
--------- --------
Total $ 739,792 $590,808
========= ========
</TABLE>
The Company has a $500 million five-year reducing, revolving bank credit
facility which matures in June 2001 (the "Bank Credit Facility"). Total
availability under the Bank Credit Facility will be reduced by $25 million at
the end of two and one-half years and reduced by an additional $50 million at
the end of each six-month period thereafter until maturity. As of June 30, 1997,
the Company had unused availability of $149 million under the Bank Credit
Facility. Interest on the Bank Credit Facility is based upon the agent bank's
quoted reference rate or London Interbank Offered Rate, at the discretion of the
Company. The interest rate under the Bank Credit Facility at June 30, 1997 was
8.1%. The Company incurs a commitment fee on the unused portion of the Bank
Credit Facility which ranges from 0.375% to 0.50% per annum, depending upon the
level of a certain predefined ratio. The Bank Credit Facility is collateralized
by the real and personal property comprising eight casino properties owned by
the Company and by related security agreements with assignment of rents. The
Bank Credit Facility contains certain financial covenants, limitations on the
incurrence of debt and limitations on the incurrence of capital expenditure and
investments, all as defined in the Bank Credit Facility. In connection with the
closing of the Bank Credit Facility in June 1996, the Company recorded a $1.4
million extraordinary loss (net of $.9 million in tax benefit) related to the
write-off of unamortized fees. In July 1997, in connection with the issuance of
$250 million principal amount of 9.50% Senior Subordinated Notes, availability
under the Bank Credit Facility was reduced by approximately $193 million.
Availability will subsequently be increased if and to the extent the Company
purchases or redeems the 11% Senior Subordinated Notes (see Note 11).
On October 4, 1996, the Company issued $200 million of 9.25% Senior Notes (the
"9.25% Notes") due October 1, 2003. The 9.25% Notes require semi-annual interest
payments in April and October of each year through October 2003, at which time
the entire principal balance becomes due. The 9.25% Notes contain certain
restrictive covenants regarding, among other things, incurrence of debt, sales
of assets, mergers and consolidations and limitations on restricted payments (as
defined in the indenture relating to the 9.25% Notes). In addition, the 9.25%
Notes are guaranteed by all existing significant subsidiaries of the Company.
The guaranties are full, unconditional, and joint and several. All of the
Company's significant subsidiaries are wholly-owned. Assets, equity, income and
cash flows of all other subsidiaries of the Company that do not guaranty the
9.25% Notes are less than 3% of the respective consolidated amounts and are
inconsequential, individually and in the aggregate, to the Company. The Company
has not included separate financial information of the guarantors since such
information is not material to investors. The net proceeds from this offering
were used to reduce outstanding indebtedness under the Company's Bank Credit
Facility. Subsequently, the Company used amounts available under its Bank Credit
Facility to redeem $150 million principal amount of 10.75% Senior Subordinated
Notes on November 4, 1996. As a result, the Company recognized an extraordinary
loss of $6.1 million, net of $3.3 million in tax benefit, related to the early
extinguishment of debt.
F-11
<PAGE> 62
The Company, through its wholly-owned subsidiary California Hotel Finance
Company, has $185 million principal amount of 11% Senior Subordinated Notes (the
"11% Notes") due December 2002. The net proceeds were used to refinance certain
indebtedness of the Company and provide for working capital needs and expansion
of the Company's operations. The 11% Notes require semi-annual interest payments
on June 1 and December 1 of each year until December 1, 2002, at which time the
principal balance is due and payable. The 11% Notes may be redeemed at the
Company's option anytime after December 1, 1997 at redemption prices ranging
from 104.125% in 1997 to 100% in 1999 and thereafter. The 11% Notes contain
certain covenants regarding incurrence of debt, sales and disposition of
assets, mergers or consolidations and limitations on restricted payments (as
defined in the indenture relating to the 11% Notes). As a result of these
restrictions, at June 30, 1997, California Hotel and Casino (a wholly-owned
subsidiary of the Company) had a portion of its retained earnings and its net
assets in the amounts of $31.9 million and $87.1 million, respectively, that
were not available for distribution as dividends to the Company.
The estimated fair value of the Company's long-term debt at June 30, 1997 was
approximately $750 million, versus its book value of $742 million. At June 30,
1996, the estimated fair value of the Company's long-term debt was approximately
$608 million, versus its book value of $595 million. The estimated fair value
amounts were based on quoted market prices on or about June 30, 1997 and 1996
for the Company's debt securities that are traded. For the debt securities that
are not traded, fair value was based on estimated discounted cash flows using
current rates offered to the Company for debt securities having the same
remaining maturities.
Interest rates on the Company's other long-term debt range from 5.0% to 16.8%.
Management believes the Company and its subsidiaries are in compliance with all
covenants contained in its long-term debt agreements at June 30, 1997.
The scheduled maturities of long-term debt for the years ending June 30 are as
follows:
<TABLE>
<CAPTION>
(In thousands)
--------------
<S> <C>
1998 $ 1,841
1999 1,790
2000 1,340
2001 351,412
2002 250
Thereafter 385,000
---------
Total $ 741,633
=========
</TABLE>
F-12
<PAGE> 63
- ---------------------------------------------------------------------------
NOTE 7. - COMMITMENTS AND CONTINGENCIES
Future minimum lease payments required under noncancelable operating leases
(principally for land) as of June 30, 1997 are as follows:
<TABLE>
<CAPTION>
(In thousands)
--------------
<S> <C>
1998 $ 2,884
1999 2,054
2000 2,040
2001 2,037
2002 2,060
Thereafter 85,518
-------
Total $96,593
=======
</TABLE>
Rent expense for the years ended June 30, 1997, 1996 and 1995 was $3.2
million, $2.9 million and $2.8 million, respectively, and is included in
selling, general and administrative expenses on the consolidated statements of
operations.
On May 29, 1996, the Company, through a wholly-owned subsidiary, executed a
joint venture agreement with Mirage Resorts, Inc., to develop and own a casino
hotel entertainment facility in the Marina district of Atlantic City, New Jersey
(The "Atlantic City Project"). The Mirage Joint Venture Agreement provides for
$100 million in capital contributions by the Company during the course of the
construction of the Atlantic City Project. The Company plans to fund its Mirage
Joint Venture capital contributions primarily from cash flow from operations and
availability under the Bank Credit Facility.
The Company is subject to various claims and litigation in the normal course of
business. In the opinion of management, all pending legal matters are either
adequately covered by insurance or, if not insured, will not have a material
adverse impact on the Company's consolidated financial statements.
- ---------------------------------------------------------------------------
NOTE 8. - EMPLOYEE BENEFIT PLANS
The Company contributes to multi-employer pension plans under various union
agreements. Contributions, based on wages paid to covered employees, totaled
approximately $2.2 million, $2.2 million and $2.0 million in 1997, 1996 and
1995, respectively. The Company's share of the unfunded liability related to
multi-employer plans, if any, is not determinable.
The Company has a retirement savings plan under Section 401(k) of the Internal
Revenue Code covering its non-union employees. The plan allows employees to
defer up to the lesser of the Internal Revenue Code prescribed maximum amount or
15% of their income on a pre-tax basis through contributions to the plan. On
January 1, 1996 the Company combined its profit sharing plan into the 401(k)
plan. The Company expensed voluntary contributions of $2.6 million, $1.4
million and $1.8 million in 1997, 1996 and 1995 respectively, to the Company's
401(k) profit-sharing plan and trust.
F-13
<PAGE> 64
- --------------------------------------------------------------------------
NOTE 9. - INCOME TAXES
A summary of the provision (benefit) for income taxes for the years ended
June 30 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- ------------- -------- ------- -------
<S> <C> <C> <C>
Current
Federal $ 7,009 $15,301 $14,165
State 1,045 817 494
-------- ------- -------
8,054 16,118 14,659
-------- ------- -------
Deferred
Federal (43,899) 4,119 12,786
State 1,820 (216) 505
-------- ------- -------
(42,079) 3,903 13,291
-------- ------- -------
Total $(34,025) $20,021 $27,950
======== ======= =======
</TABLE>
The following table provides a reconciliation between the federal statutory rate
and the effective income tax rate from continuing operations at June 30 where
both are expressed as a percentage of income.
<TABLE>
<CAPTION>
1997 1996 1995
------ ---- ----
<S> <C> <C> <C>
Tax provision at statutory rate (35.0)% 35.0% 35.0%
Increase/(decrease) resulting from:
State income tax, net of federal benefit 1.7 0.8 1.0
Company provided benefits 0.9 2.5 2.7
Licensing expenditures for new jurisdictions 0.3 0.5 3.1
Tax preferred investments -- -- (0.1)
Other, net (0.2) 1.6 1.8
----- ---- ----
Total (32.3)% 40.4% 43.5%
===== ==== ====
</TABLE>
The tax items comprising the Company's net deferred tax liability (asset) as of
June 30 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
------------ ------- ------- -------
<S> <C> <C> <C>
Deferred tax assets:
Alternative minimum tax credit carryforward $ 7,677 $ 5,146 $ 3,944
Preopening expense amortized for tax purposes 3,119 3,498 1,126
Difference between book and tax basis of property 1,991 -- --
Provision for doubtful accounts 1,314 952 832
Separate state loss attributes 5,425 -- --
Other 2,808 2,777 1,107
------- ------- -------
Subtotal 22,334 12,373 7,009
Valuation allowance (5,425) -- --
------- ------- -------
Gross deferred tax asset 16,909 12,373 7,009
------- ------- -------
Deferred tax liabilities:
Difference between book and tax basis of property -- 38,187 33,053
Difference between book and tax basis of
amortizable assets 3,821 2,185 1,513
Reserve differential for gaming activities 1,010 2,027 894
Other 3,545 3,520 1,192
------- ------- -------
Gross deferred liability 8,376 45,919 36,652
------- ------- -------
Net deferred tax liability (asset) $(8,533) $33,546 $29,643
======= ======= =======
</TABLE>
At June 30, 1997 the Company has approximately $34 million of state tax net
operating loss carryforwards which begin to expire in the year 2011.
F-14
<PAGE> 65
- ---------------------------------------------------------------------------
NOTE 10. - STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS
Equity Offering
In October 1996, the Company completed a public offering of 4,000,000 shares of
common stock at $9.00 per share. Net proceeds for this offering, after deducting
costs paid by the Company, were $33.5 million. The net proceeds from the
offering were used to reduce outstanding indebtedness under the Company's Bank
Credit Facility.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan (the "Plan") which allows
employees to purchase the Company's common stock, through payroll deductions, at
a price that shall not be less than 85% of fair market value on the first or
last date of the purchase period. The Plan provides for a maximum of 1,500,000
shares to be issued. During 1997, a total of 310,268 shares were issued at
prices of $7.01 and $4.89. During 1996, 212,368 shares were issued at a price of
$9.88. In 1995, 182,123 shares were issued to employees at a price of $9.14. At
June 30, 1997, there were 758,297 shares available for issuance under the Plan.
Stock Options
As of June 30, 1997, the Company had in effect various stock option plans.
Stock options awarded under these plans are granted primarily to employees and
directors of the Company. The maximum number of shares of common stock
available for issuance under these plans are 7,050,000 shares.
Options granted under the plans generally become exercisable ratably over a
three or four year period from the date of grant. Options granted under the
plans have an exercise price equal to the market price of the Company's common
stock on the date of grant and expire no later than ten years after the date of
grant. In May 1997, the Board of Directors of the Company authorized the
repricing of certain options. The effect of the repricing resulted in the
cancellation of 2,274,033 options and the reissuance of 1,277,971 options with a
price equal to the market value of the common stock at the date of repricing.
All repriced options will fully vest and become exercisable on December 31,
1998.
Summarized information for the stock options plans is as follows:
<TABLE>
<CAPTION>
Option
Options Prices
---------- -------------
<S> <C> <C>
Options outstanding at July 1, 1994 2,669,700 $17.00-$18.50
Options granted 1,285,600 13.63- 14.00
Options canceled (38,682) 13.63- 17.00
---------- -------------
Options outstanding at June 30, 1995 3,916,618 13.63-$18.50
Options granted 63,000 13.25- 14.38
Options canceled (72,697) 13.63- 17.00
Options exercised (2,334) 13.63
---------- -------------
Options outstanding at June 30, 1996 3,904,587 $13.63-$18.50
Options granted 2,841,671 5.50- 11.50
Options canceled (2,677,087) 13.25- 17.00
---------- ------------
Options outstanding at June 30, 1997 4,069,171 $ 5.50-$18.50
========== =============
Exercisable options at June 30, 1997 1,198,162
==========
Options available for grant at June 30, 1997 2,978,495
==========
</TABLE>
F-15
<PAGE> 66
The following table summarizes the information about stock options outstanding
at June 30, 1997;
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------- --------------------------
Weighted Average Weighted
Remaining Weighted Average
Range of Number Contractual Average Number Exercise
Exercise Prices Outstanding Life (Years) Exercise Price Exercisable Price
---------------- ------------ ---------------- -------------- ------------- --------
<S> <C> <C> <C> <C> <C>
$5.50-$8.50 1,319,804 7.05 $ 5.75 -- $ --
8.38 1,366,100 9.47 8.38 -- --
8.63-18.50 1,383,267 6.68 15.81 1,198,162 16.31
--------- ---- ------ --------- ------
4,069,171 7.74 $10.05 1,198,162 $16.31
========= ==== ====== ========= ======
</TABLE>
For the fiscal year ended June 30, 1997, the Company adopted the disclosure
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation." SFAS No. 123 provides, among other things, that
companies may elect to account for employee stock options using a fair
value-based method or continue to apply the intrinsic value-based method
prescribed by Accounting Principal Board Opinion No. 25 ("APB No. 25"). The
Company has elected to continue to account for employee stock options in
accordance with APB No. 25.
The following table discloses the Company's pro forma net income (loss) and net
income (loss) per share assuming compensation cost for employee stock options
had been recognized under SFAS No. 123. In addition, the table includes the
excess of the compensation cost under SFAS No. 123 over the cost recognized
related to the Employee Stock Purchase Plan. The table also discloses the
weighted-average assumptions used in estimating the fair value of each option
grant on the date of grant using the Black-Scholes option pricing model, and the
estimated weighted-average fair value of the options granted. The model assumes
no expected future dividend payments on the Company's common stock for the
options granted in both fiscal 1997 and 1996.
<TABLE>
<CAPTION>
Years ended June 30,
---------------------
(dollars in thousands, except per share data) 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Income (loss) before extraordinary item
As reported $(71,423) $29,579
Pro forma (72,555) 29,561
Net income (loss)
As reported $(77,492) $28,144
Pro forma (78,624) 28,126
Income (loss) per share before extraordinary item
As reported $ (1.19) $ 0.52
Pro forma (1.20) 0.52
Net income (loss) per share
As reported $ (1.29) $ 0.49
Pro forma (1.31) 0.49
Weighted-average assumptions
Expected stock price volatility 38.48% 38.48%
Risk-free interest rate 6.05% 6.20%
Expected option lives (years) 2.54 2.72
Estimated fair value of options granted $ 2.13 $ 4.15
</TABLE>
Because the accounting method prescribed by SFAS No. 123 is not applicable to
options granted prior to July 1, 1995, the compensation cost reflected in the
pro forma amounts shown above may not be representative of that to be expected
in future years.
F-16
<PAGE> 67
- --------------------------------------------------------------------------------
NOTE 11. - SUBSEQUENT EVENTS
On July 11, 1997, the Company entered into a definitive agreement to acquire the
remaining 85% of Treasure Chest L.L.C. that is not now owned by the Company (the
"Remaining Treasure Chest Interest") for approximately $115 million, including
the assumption of debt. Treasure Chest L.L.C. owns the Treasure Chest Casino, a
riverboat casino operation on Lake Pontchartrain in Kenner, Louisiana. The
Company has been managing the Treasure Chest since its opening in September
1994. Closing of the transaction is conditioned upon, among other things,
approval by the Louisiana Gaming Control Board. The Company expects to fund the
acquisition and the repayment of Treasure Chest's debt with borrowings under the
Bank Credit Facility.
On July 22, 1997, the Company issued, through a private placement, $250 million
principal amount of 9.50% Senior Subordinated Notes (the "9.50% Notes") due July
2007. The 9.50% Notes require semi-annual interest payments in January and July
of each year through July 2007, at which time the entire principal balance
becomes due and payable. The 9.50% Notes contain certain restrictive covenants
regarding, among other things, incurrence of debt, sales of assets, mergers and
consolidations and limitations on restricted payments (as defined in the
indenture relating to the 9.50% Notes). The 9.50% Notes may be redeemed at the
Company's option anytime after July 15, 2002 at redemption prices ranging from
104.75% in 2002 to 100% in 2005 and thereafter. The net proceeds from this
offering were used to reduce outstanding indebtedness under the Company's Bank
Credit Facility. Upon consummation of this offering, availability under the Bank
Credit Facility was reduced by approximately $193 million and will subsequently
be increased if and to the extent the Company purchases or redeems the 11% Notes
(see Note 6). The Company is obligated to register and have declared effective
the 9.50% Notes, or exchange them for identical notes that have been registered,
with the Securities and Exchange Commission within certain predefined time
parameters. If the Company does not consummate an effective registration of the
9.50% Notes within the required time frame, certain additional interest will
accrue at rates ranging from 0.50% to 1.50% per annum.
F-17
<PAGE> 68
SELECTED QUARTERLY FINANCIAL INFORMATION
(Unaudited)
Boyd Gaming Corporation and Subsidiaries
<TABLE>
<CAPTION>
Fiscal Year ended June 30, 1997
------------------------------------------------------------------------
(In thousands, except per share data) First Second Third Fourth Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues $185,891 $198,267 $219,154 $215,947 $819,259
Operating income (loss) 11,121 20,360 (98,740) 22,833 (44,426)
Income (loss) before income tax
and extraordinary item (1,960) 6,714 (115,941) 5,739 (105,448)
Extraordinary item, net of tax -- 6,069 -- -- 6,069
Net income (loss) (1,215) (2,002) (77,712) 3,437 (77,492)
======== ======== ======== ======== ========
Net income (loss) per common share:
Income (loss) before extraordinary item (0.02) $ 0.07 $ (1.27) $ 0.06 $ (1.19)
Extraordinary item, net of tax -- $ (0.10) -- (0.10)
-------- -------- -------- -------- --------
Net income (loss) $ (0.02) $ (0.03) $ (1.27) $ 0.06 $ (1.29)
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year ended June 30, 1996
------------------------------------------------------------------------
(In thousands, except per share data) First Second Third Fourth Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues $179,060 $200,289 $202,160 $194,348 $775,857
Operating income 18,729 31,280 31,743 19,034 100,786
Income before income tax
and extraordinary item 6,859 17,322 19,236 6,183 49,600
Extraordinary item, net of tax -- -- -- 1,435 1,435
Net income 4,184 10,567 11,351 2,042 28,144
======== ======== ======== ======== ========
Net income per common share:
Income before extraordinary item $ 0.07 $ 0.19 $ 0.20 $ 0.06 $ 0.52
Extraordinary item, net of tax -- -- -- (0.02) (0.03)
-------- -------- -------- -------- --------
Net income $ 0.07 $ 0.19 $ 0.20 $ 0.04 $ 0.49
======== ======== ======== ======== ========
</TABLE>
F-18
<PAGE> 69
(c) Exhibits.
EXHIBIT
NUMBER DOCUMENT
2.1(5) Stock Purchase Agreement, dated as of April 26, 1996, by and
among Registrant, Par-A-Dice Gaming Corporation, East Peoria
Hotel, Inc., and the Owners of all the Capital Stock of
Par-A-Dice Gaming Corporation and East Peoria Hotel.
2.2(2) Agreement and Plan of Reorganization dated as of June 25, 1993,
by and among Eldorado, Inc., the Registrant, CH&C and certain
stockholders and noteholders of Eldorado, Inc.
2.3(2) Subscription Agreement dated as of August 30, 1993, by and among
Boyd Kenner, Inc., the Registrant and Treasure Chest Casino,
L.L.C.
2.4(12) Purchase Agreement, dated as of July 11, 1997, by and among the
Registrant, Boyd Kenner, Inc., Boyd Louisiana, L.L.C., Treasure
Chest casino, L.L.C., and certain members of Treasure Chest
Casino, L.L.C.
3.1(9) Restated Articles of Incorporation.
3.2(9) Restated Bylaws
4.1 Registration Agreement, dated July 17, 1997, among the
Registrant, Salomon Brothers Inc., UBS Securities LLC and CIBC
Wood Gundy Securities Corp.
4.2(1) Form of Indenture relating to $150,000,000 aggregate principal
amount 11% Senior Subordinated Notes due 2002 of California Hotel
Finance Corporation, including the Form of Note.
4.4 Form of Indenture relating to 9.50% Senior Subordinated Notes
due 2007, dated as of July 22, 1997, between Registrant and State
Street Bank and Trust Company, including the Form of Note.
4.5 First Supplemental Indenture, among Registrant, as Issuer,
certain subsidiaries of Registrant, as Guarantors, and the Bank
of New York, as Trustee, dated as of December 31, 1996.
10.1(2) First Amended and Restated Credit Agreement dated as of September
2, 1993, by and among CH&C, Certain Commercial Lending
Institutions, CIBC Inc., First Interstate Bank of Nevada and
related Exhibits.
10.2(2) Loan Agreement dated March 2, 1989, by and between First
Interstate Bank of Nevada and Eldorado, Inc., including related
Promissory Note, and related Revision Agreement dated October 31,
1989, by and between First Interstate Bank of Nevada, N.A. and
Eldorado, Inc.
10.3(4) Loan Agreement dated August 17, 1994 by and among Boyd Tunica,
Inc., the Registrant, First Interstate Bank of Nevada, Bankers
Trust Company and Bank of America Nevada.
10.4(1) Ninety-Nine Year Lease dated June 30, 1954, by and among Fremont
Hotel, Inc., and Charles L. Ronnow and J.L. Ronnow, and Alice
Elizabeth Ronnow.
10.5(1) Lease Agreement dated October 31, 1963, by and between Fremont
Hotel, Inc. and Cora Edit Garehime.
10.6(1) Lease Agreement dated December 31, 1963, by and among Fremont
Hotel, Inc., Bank of Nevada and Leon H. Rockwell, Jr.
49
<PAGE> 70
10.7(1) Lease Agreement dated June 7, 1971, by and among Anthony
Antonacci, Margaret Fay Simon and Bank of Nevada, as Co-Trustees
under Peter Albert Simon's Last Will and Testament, and related
Assignment of Lease dated February 25, 1985 to Sam-Will, Inc. and
Fremont Hotel, Inc.
10.8(4) Lease Agreement dated July 25, 1973, by and between CH&C and
William Peccole, as Trustee of the Peter Peccole 1970 Trust.
10.9(1) Lease Agreement dated July 1, 1974, by and among Fremont Hotel,
Inc. and Bank of Nevada, Leon H. Rockwell, Jr. and Margorie
Rockwell Riley.
10.10(1) Ground Lease Agreement dated July 5, 1978, by and between CH&C,
and Irene Elizabeth Carey, as Trustee of the Carey Survivor's
Trust U/A October 18, 1972 and Irene Elizabeth Carey, as Trustee
of the Carey Family Trust U/A October 18, 1972.
10.11(1) Ninety-Nine Year Lease dated December 1, 1978 by and between
Matthew Paratore, and George W. Morgan and LaRue Morgan, and
related Lease Assignment dated November 10, 1987 to Sam-Will,
Inc., d/b/a/ Fremont Hotel and Casino.
10.12(4) Collective Bargaining Agreement effective as of January 17, 1994,
by and between Sam-Will, Inc. d/b/a/ Fremont Hotel and Casino and
the International Union of Operating Engineers, Local No. 501,
AFL-CIO (slot technician unit).
10.13(2) Labor Agreement dated as of January 13, 1993, by and between
Mare-Bear, Inc. d/b/a/ Stardust Hotel & Casino, and the
International Union of Operating Engineers, Local No. 501,
AFL-CIO.
10.14(2) Labor Agreement dated as of January 13, 1993, by and between
Sam-Will, Inc., d/b/a/ Fremont Hotel and Casino, and the
International Union of Operating Engineers, Local No. 501,
AFL-CIO.
10.15(2) Labor Agreement dated January 13, 1993, by and between CH&C and
the International Union of Operating Engineers, Local No. 501,
AFL-CIO.
10.16(2) Agreement dated as of May 1, 1991, by and between Mare-Bear,
Inc., d/b/a/ Stardust Hotel & Casino, and the Local Joint
Executive Board of Las Vegas for and on behalf of the Culinary
Workers' Union, Local No. 226 and Bartenders Union, Local No.
165.
10.17(1) Agreement dated as of May 1, 1991, by and between Sam-Will, Inc.,
d/b/a/ Fremont Hotel and Casino, and the Local Joint Executive
Board of Las Vegas for and on behalf of the Culinary Workers'
Union, Local No. 226 and Bartenders Union, Local No. 165.
10.18(2) Collective Bargaining Agreement dated September 12, 1991, by and
between Eldorado Casino and the Local Joint Executive Board of
Las Vegas for and on behalf of the Culinary Workers Union, Local
No. 226 and Bartenders Union, Local No. 165.
50
<PAGE> 71
10.19(1) Collective Bargaining Agreement dated March 14, 1991, by and
between Mare-Bear, Inc., d/b/a/ Stardust Hotel & Casino, and the
Musicians Union of Las Vegas, Local No. 369, American Federation
of Musicians, AFL-CIO.
10.20(1) Labor Agreement dated May 1, 1991, by and between Mare-Bear,
Inc., d/b/a/ Stardust Hotel & Casino, and the International
Alliance of Theatrical Stage Employees and Moving Picture Machine
Operators of the United States and Canada, Local 720, Las Vegas,
Nevada.
10.21(1) Labor Agreement dated May 1, 1991, by and between Mare-Bear,
Inc., d/b/a/ Stardust Hotel & Casino, and the International
Alliance of Theatrical Stage Employees and Moving Picture Machine
Operators of the United States and Canada, Local 720, Las Vegas,
Nevada (Theatrical Wardrobe Employees).
10.22(1) Labor Agreement dated June 14, 1983, by and between Stardust
Hotel & Casino and the International Brotherhood of Painters and
Allied Trades, Local Union No. 159, AFL-CIO.
10.23(1) Labor Agreement dated June 1, 1983, by and between Stardust Hotel
and Casino and the United Brotherhood of Carpenters and Joiners
of America, Local Union No. 1780, Las Vegas, Nevada.
10.24(1) Labor Agreement dated August 1, 1983, by and between Stardust
Hotel and the International Brotherhood of Electrical Workers,
Local Union No. 357, AFL-CIO.
10.25(1) Implemented Proposal dated June 15, 1992, by and between Stardust
Hotel and Casino and the Back-End Teamsters Local Union No. 995.
10.26(1) Implemented Proposal dated June 15, 1992, by and between Fremont
Hotel and Casino and the Back-End Teamsters Local Union No. 995.
10.27(2) Management Agreement dated March 11, 1993, by and between
Mississippi Band of Choctaw Indians and Boyd Mississippi, Inc.
10.28(4) Addendum to Management Agreement dated November 24, 1993, by and
between Mississippi Band of Choctaw Indians and Boyd Mississippi,
Inc.
10.29(2) Casino Management Agreement dated August 30, 1993, by and between
Treasure Chest Casino, L.L.C. and Boyd Kenner, Inc.
51
<PAGE> 72
10.30(4) Amended and Restated Operating Agreement dated August 5, 1994, by
and between Treasure Chest Casino, L.L.C. and Boyd Kenner, Inc.
10.31(2) Real Estate Contract of Sale dated April 29, 1993, by and among
Boyd Tunica, Inc. and Shea Leatherman, Irwin L. Zanone and
William A. Leatherman, Jr.
10.32(2) Real Estate Contract of Sale dated April 29, 1993, by and between
Eugene H. Beck, Jr. and the Boyd Group.
10.33(2) Real Estate Contract of Sale dated April 30, 1993, by and between
Mid-West Terminal Warehouse Company and the Boyd Group.
10.34(2) Real Estate Contract of Sale dated April 30, 1993, by and between
Hunt Midwest Real Estate Development, Inc. and the Boyd Group.
10.35(2) Amendment to Real Estate Contracts of Sale dated May 26, 1993, by
and among The Boyd Group, Hunt Midwest Real Estate Development,
Inc., Mid-West Terminal Warehouse Company and Eugene H. Beck, Jr.
10.36(2) Real Estate Contract of Sale dated as of April 30, 1993, by and
between Vergie G. Bevan, individually and as trustee of the
Vergie G. Bevan Revocable Trust and the Boyd Group.
10.37(4) Development Agreement dated June 6, 1994, by and among the
Registrant, Boyd Kansas City, Inc. and Port Authority of Kansas
City, Missouri.
10.38(4) Agreement dated January 10, 1994 by and between Boyd Tunica, Inc.
and W.G. Yates & Sons Construction Company.
10.39(4) Building Contract dated July 15, 1993, by and between Marnell
Corrao Associates, Inc. and Sam's Town Hotel and Gambling Hall
for Sam's Town Addition Phase V.
10.40(2) Form of Indemnification Agreement.
10.41(2)* 1993 Flexible Stock Incentive Plan and related agreements.
10.42(2)* 1993 Directors Non-Qualified Stock Option Plan and related
agreements.
10.43(2)* 1993 Employee Stock Purchase Plan and related agreement.
10.44(1) 401(k) Profit Sharing Plan and Trust.
10.45(1) Note dated July 1, 1992, from Samuel A. Boyd Family Trust to the
Boyd Group in the principal sum of $3,000,000.
10.46(3) Promissory Note dated December 30, 1991, from Eldorado, Inc. to
Samuel A. Boyd in the principal sum of $600,000.
52
<PAGE> 73
10.47(6) Joint Venture Agreement of Stardust A.C., dated as of May 29,
1996, by and between MAC, Corp., a New Jersey Corporation, which
is a wholly-owned subsidiary of Mirage Resorts Incorporated, a
Nevada Corporation, and Grand K, Inc., a Nevada Corporation,
which is a wholly-owned subsidiary of Registrant. (Certain
portions of this exhibit have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request
for confidential treatment for this Agreement.)
10.48(7) Credit Agreement dated as of June 19, 1996, by and among the
Registrant and California Hotel and Casino as the Borrowers,
certain commercial lending institutions as the Lenders, Canadian
Imperial Bank of Commerce as the Agent, Bank of America National
Trust Savings Association and Wells Fargo Bank N.A. as
Co-Managing Agents and Bankers Trust Company, Credit Lyonnais and
Societe Generale as Co-Agents.
10.49(8) Property Purchase Agreement dated as of August 9, 1996, by and
between Steamboat Station Company, a Nevada general partnership,
and Boyd Reno, Inc., a Nevada corporation and wholly-owned
subsidiary of the Company.
10.50(8) Buy-Sell Agreement dated as of August 2, 1996, by and between the
Registrant and Casino Magic of Louisiana, Corp., a Louisiana
corporation.
10.51(10)* Boyd Gaming Corporation 1996 Stock Incentive Plan.
10.52(11) First Amendment to Credit Agreement, dated as of March 28, 1997,
among Boyd Gaming Corporation and California Hotel and Casino,
and Wells Fargo Bank, N.A., as Swingline Lender, Canadian
Imperial Bank of Commerce, ("CIBC") as letter of credit issuer,
Bank of America National Trust and Savings Association and Wells
Fargo Bank, N.A., as co-managing agents, Bankers Trust Company,
Credit Lyonnais, Los Angeles Branch and Societe Generale as
co-agents, and CIBC as administrative agent and collateral agent.
10.53 Second Amendment to Credit Agreement, dated as of June 11, 1997,
among the Registrant and California Hotel and Casino, and Wells
Fargo Bank, N.A., as Swingline Lender, Canadian Imperial Bank of
Commerce, ("CIBC") as letter of credit issuer, Bank of America
National Trust and Saving Association and Wells Fargo Bank,
N.A., as co-managing agents, Bankers Trust Company, Credit
Lyonnais Los Angeles Branch and Societe Generale as co-agents,
and CIBC as administrative agent and collateral agent.
10.54 Third Amendment to Credit Agreement, dated as of June 24, 1997,
among the Registrant and California Hotel and Casino, and Wells
Fargo Bank, N.A., as Swingline Lender, Canadian Imperial Bank of
Commerce, ("CIBC") as letter of credit issuer, Bank of America
National Trust and Saving Association and Wells Fargo Bank,
N.A., as co-managing agents, Bankers Trust Company, Credit
Lyonnais Los Angeles Branch and Societe Generale as co-agents,
and CIBC as administrative agent and collateral agent.
10.55 First Amendment to Purchase Agreement, dated as of September 9,
1997 among the Registrant, Boyd Kenner, Inc., Boyd Louisiana,
L.L.C., Treasure Chest Casino, L.L.C. and the Selling Members.
21.1 Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
24 Powers of Attorney (reference is made to page II-2).
27 Financial Data Schedule.
53
<PAGE> 74
- --------------------------------------------------------------------------------
* Management contracts or compensatory plans or arrangements.
(1) Incorporated by reference to the Registration Statement on Form
S-1, File No. 33-51672, of California Hotel and Casino and
California Hotel Finance Corporation, which became effective on
November 18, 1992.
(2) Incorporated by reference to the Registrant's Registration
Statement on Form S-1, File No. 33-64006, which became effective
on October 15, 1993.
(3) Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended June 30, 1994.
(4) Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended June 30, 1995.
(5) Incorporated by reference to Registrant's Current Report on Form
8-K dated April 26, 1996.
(6) Incorporated by reference to Registrant's Current Report on Form
8-K dated June 7, 1996.
(7) Incorporated by reference to Exhibit 10.1 of Registrant's
Current Report on Form 8-K dated June 19, 1996.
(8) Incorporated by reference to Registrant's Exhibit 2.1 of Current
Report on Form 8-K dated August 16, 1996.
(9) Incorporated by reference to Exhibit 3.1 of Registrant's
Quarterly Report on Form 10-Q for the quarter ended December 31,
1996.
(10) Incorporated by reference to Appendix A of Registrant's October
22, 1996 Proxy Statement for the 1996 Annual Meeting of
Stockholders.
(11) Incorporated by reference to Exhibit 10.59 of Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
(12) Incorporated by reference to Exhibit 2.1 of Registrant's Current
Report on Form 8-K dated July 11, 1997.
54
<PAGE> 75
BOYD GAMING CORPORATION AND SUBSIDIARIES
INDEX TO REGISTRANT CONDENSED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report S-2
Financial Statements
Condensed Balance Sheets S-3
Condensed Statements of Operations S-4
Condensed Statements of Cash Flows S-5
Notes to Condensed Financial Statements S-6
</TABLE>
S-1
<PAGE> 76
INDEPENDENT AUDITORS' REPORT
Boyd Gaming Corporation and Subsidiaries:
We have audited the consolidated financial statements of Boyd Gaming Corporation
and subsidiaries (the "Company") as of June 30, 1997 and 1996, and for each of
the three years in the period ended June 30, 1997, and have issued our report
thereon dated August 20, 1997; such consolidated financial statements and report
are included in your 1997 Annual Report to Stockholders and are incorporated
herein by reference. Our audits also included the condensed financial
statement schedule of Boyd Gaming Corporation, listed in Item 14(a). The
condensed financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such condensed financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material aspects the information set forth therein.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
August 20, 1997
S-2
<PAGE> 77
SCHEDULE I
BOYD GAMING CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
June 30,
--------------------------
1997 1996
--------- ---------
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $ 697 $ 3,192
Accounts receivable, net 8,195 7,624
Prepaid expenses 1,333 685
Deferred income taxes -- 1,892
-------- --------
Total current assets 10,225 13,393
Property and equipment, net 18,250 22,824
Other assets and deferred charges 17,181 2,118
Investments in and advances to
subsidiaries (eliminated in consolidation) 484,305 457,696
-------- --------
Total assets $529,961 $496,031
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long term-debt $ 133 $ 2,437
Accounts payable 4,644 4,964
Accrued liabilities
Payroll and related 2,089 1,081
Interest and other 7,482 6,787
Income taxes payable 2,535 --
-------- --------
Total current liabilities 16,883 15,269
Long-term debt, net of current maturities 300,270 226,800
Deferred income taxes 21,492 20,705
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000 shares authorized
Common stock, $.01 par value; 200,000,000 shares authorized:
61,523,988 and 57,213,720 shares outstanding 615 572
Additional paid-in capital 138,091 102,583
Retained earnings 52,610 130,102
-------- --------
Total stockholders' equity 191,316 233,257
-------- --------
Total liabilities and stockholders' equity $529,961 $496,031
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-3
<PAGE> 78
SCHEDULE 1
BOYD GAMING CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the year ended June 30,
--------------------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Revenues $ 60,680 $ 51,091 $34,457
--------------------------------------
Costs and expenses
Depreciation and amortization 1,513 1,831 550
Corporate expense 12,767 20,024 19,929
Impairment loss 5,032 -- --
--------------------------------------
Total 19,312 21,855 20,479
--------------------------------------
Operating income 41,368 29,236 13,978
--------------------------------------
Other income (expense)
Interest income 638 2,812 2,033
Interest expense, net of amounts capitalized (28,150) (16,404) (9,951)
--------------------------------------
Total (27,512) (13,592) (7,918)
--------------------------------------
Income before equity in subsidiaries' income
(loss) and provision for income taxes 13,856 15,644 6,060
Equity in subsidiaries' income (loss) (80,065) 19,414 32,825
--------------------------------------
Income (loss) before provision for income taxes (66,209) 35,058 38,885
Provision for income taxes 5,214 6,320 2,636
--------------------------------------
Income (loss) before extraordinary item (71,423) 28,738 36,249
Extraordinary item, net of tax benefit
of $3,268 6,069 594 --
--------------------------------------
Net income (loss) $(77,492) $ 28,144 $36,249
======================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-4
<PAGE> 79
SCHEDULE I
BOYD GAMING CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the year ended June 30,
-------------------------------------------
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (77,492) $ 28,144 $ 36,249
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,513 1,831 550
Deferred income taxes 2,679 19,605 (792)
Extraordinary loss on early retirement of debt 9,337 -- --
Impairment loss 5,032 -- --
Changes in assets and liabilities:
Increase in accounts receivable, net (571) (1,454) (1,030)
(Increase) decrease in prepaid expenses (648) (410) 197
(Increase) decrease in other assets (20,045) 11,707 (467)
Increase in other current liabilities 1,382 3,630 2,582
Increase in taxes payable 2,535 -- --
Increase in investments in and advances to subsidiaries (26,609) (165,299) (42,213)
-------------------------------------------
Net cash used in operating activities (102,887) (102,246) (4,924)
-------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (18,522) (10,764) (5,477)
Proceeds from sale of riverboat 20,000 -- --
Decrease in short-term investments -- -- 5,000
-------------------------------------------
Net cash provided by (used in) financing activities 1,478 (10,764) (477)
-------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings of long-term debt 63,666 60,737 18,500
Proceeds from issuance of common stock 35,248 2,131 1,664
-------------------------------------------
Net cash provided by financing activities 98,914 62,868 20,164
-------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,495) (50,142) 14,763
Cash and cash equivalents, beginning of year 3,192 53,334 38,571
-------------------------------------------
Cash and cash equivalents, end of year $ 697 $ 3,192 $ 53,334
===========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-5
<PAGE> 80
SCHEDULE I
BOYD GAMING CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Organization
Boyd Gaming Corporation (the "Company"), through its wholly-owned subsidiaries,
owns, operates and/or manages twelve casino entertainment facilities located in
Las Vegas, Nevada, Tunica, Mississippi, Kansas City, Missouri, Philadelphia,
Mississippi, Kenner, Louisiana and East Peoria, Illinois, as well as a travel
agency located in Honolulu, Hawaii. These condensed financial statements should
be read in conjunction with the consolidated financial statements of Boyd Gaming
Corporation and Subsidiaries.
Advances to Subsidiaries
Advances to subsidiaries primarily represents cash advances made to various
subsidiaries of the Company and to a lesser extent the value of goods and
services provided by the Company to its subsidiaries.
Income Taxes
The Company and its subsidiaries file a consolidated federal tax return. Taxes
are allocated to individual subsidiaries and to the Company based upon their
operating results.
Management Fee
The Company charges its wholly-owned subsidiaries a management fee for services
provided.
Change in Fiscal Year
Effective July 1, 1997, the Company changed its fiscal year from a June 30 year
end to a December 31 year end.
NOTE 2. LEGAL PROCEEDINGS
The Company is subject to various claims and litigation in the normal
course of business. In the opinion of management, all pending legal matters are
either adequately covered by insurance or, if not insured, will not have a
material adverse impact on the Company's consolidated financial statements.
S-6
<PAGE> 81
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on September
12, 1997.
BOYD GAMING CORPORATION
By: /s/ KEITH E. SMITH
-------------------
Keith E. Smith
Senior Vice President,
Controller
II-1
<PAGE> 82
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William S. Boyd, Ellis Landau and Keith
Smith, and each of them, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report on Form 10-K and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------ ------------------------------------------ ------------------
<S> <C> <C>
/s/ William S. Boyd Chairman of the Board of Directors, Chief September 12, 1997
- ------------------------------------ Executive Officer and Director (Principal
William S. Boyd Executive Officer)
/s/ Ellis Landau Executive Vice President, Chief Financial September 12, 1997
- ------------------------------------ Officer and Treasurer (Principal Financial
Ellis Landau Officer)
/s/ Keith E. Smith Senior Vice President and Controller September 12, 1997
- ------------------------------------ (Principal Accounting Officer)
Keith E. Smith
/s/ Don Snyder President and Director September 12, 1997
- ------------------------------------
Don Snyder
/s/ Robert L. Boughner Executive Vice President & September 12, 1997
- ------------------------------------ Chief Operating Officer and Director
Robert L. Boughner
/s/ William R. Boyd Director September 12, 1997
- ------------------------------------
William R. Boyd
/s/ Marianne Boyd Johnson Director September 12, 1997
- ------------------------------------
Marianne Boyd Johnson
/s/ Perry B. Whitt Director September 12, 1997
- ------------------------------------
Perry B. Whitt
</TABLE>
II-2
<PAGE> 83
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------ ------------------------------------------ ------------------
<S> <C> <C>
Director
- ------------------------------------
Warren L. Nelson
Director
- ------------------------------------
Philip Dion
/s/ Michael O. Maffe Director September 12, 1997
- ------------------------------------
Michael O. Maffe
/s/ Billy G. McCoy Director September 12, 1997
- ------------------------------------
Billy G. McCoy
</TABLE>
II-3
<PAGE> 84
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
2.1(5) Stock Purchase Agreement, dated as of April 26, 1996, by and
among Registrant, Par-A-Dice Gaming Corporation, East Peoria
Hotel, Inc., and the Owners of all the Capital Stock of
Par-A-Dice Gaming Corporation and East Peoria Hotel.
2.2(2) Agreement and Plan of Reorganization dated as of June 25, 1993,
by and among Eldorado, Inc., the Registrant, CH&C and certain
stockholders and noteholders of Eldorado, Inc.
2.3(2) Subscription Agreement dated as of August 30, 1993, by and among
Boyd Kenner, Inc., the Registrant and Treasure Chest Casino,
L.L.C.
2.4(12) Purchase Agreement, dated as of July 11, 1997, by and among the
Registrant, Boyd Kenner, Inc., Boyd Louisiana, L.L.C., Treasure
Chest casino, L.L.C., and certain members of Treasure Chest
Casino, L.L.C.
3.1(9) Restated Articles of Incorporation.
3.2(9) Restated Bylaws
4.1 Registration Agreement, dated July 17, 1997, among the
Registrant, Salomon Brothers Inc., UBS Securities LLC and CIBC
Wood Gundy Securities Corp.
4.2(1) Form of Indenture relating to $150,000,000 aggregate principal
amount 11% Senior Subordinated Notes due 2002 of California Hotel
Finance Corporation, including the Form of Note.
4.4 Form of Indenture relating to 9.50% Senior Subordinated Notes
due 2007, dated as of July 22, 1997, between Registrant and State
Street Bank and Trust Company, including the Form of Note.
4.5 First Supplemental Indenture, among Registrant, as Issuer,
certain subsidiaries of Registrant, as Guarantors, and the Bank
of New York, as Trustee, dated as of December 31, 1996.
10.1(2) First Amended and Restated Credit Agreement dated as of September
2, 1993, by and among CH&C, Certain Commercial Lending
Institutions, CIBC Inc., First Interstate Bank of Nevada and
related Exhibits.
10.2(2) Loan Agreement dated March 2, 1989, by and between First
Interstate Bank of Nevada and Eldorado, Inc., including related
Promissory Note, and related Revision Agreement dated October 31,
1989, by and between First Interstate Bank of Nevada, N.A. and
Eldorado, Inc.
10.3(4) Loan Agreement dated August 17, 1994 by and among Boyd Tunica,
Inc., the Registrant, First Interstate Bank of Nevada, Bankers
Trust Company and Bank of America Nevada.
10.4(1) Ninety-Nine Year Lease dated June 30, 1954, by and among Fremont
Hotel, Inc., and Charles L. Ronnow and J.L. Ronnow, and Alice
Elizabeth Ronnow.
10.5(1) Lease Agreement dated October 31, 1963, by and between Fremont
Hotel, Inc. and Cora Edit Garehime.
10.6(1) Lease Agreement dated December 31, 1963, by and among Fremont
Hotel, Inc., Bank of Nevada and Leon H. Rockwell, Jr.
II-4
<PAGE> 85
10.7(1) Lease Agreement dated June 7, 1971, by and among Anthony
Antonacci, Margaret Fay Simon and Bank of Nevada, as Co-Trustees
under Peter Albert Simon's Last Will and Testament, and related
Assignment of Lease dated February 25, 1985 to Sam-Will, Inc. and
Fremont Hotel, Inc.
10.8(4) Lease Agreement dated July 25, 1973, by and between CH&C and
William Peccole, as Trustee of the Peter Peccole 1970 Trust.
10.9(1) Lease Agreement dated July 1, 1974, by and among Fremont Hotel,
Inc. and Bank of Nevada, Leon H. Rockwell, Jr. and Margorie
Rockwell Riley.
10.10(1) Ground Lease Agreement dated July 5, 1978, by and between CH&C,
and Irene Elizabeth Carey, as Trustee of the Carey Survivor's
Trust U/A October 18, 1972 and Irene Elizabeth Carey, as Trustee
of the Carey Family Trust U/A October 18, 1972.
10.11(1) Ninety-Nine Year Lease dated December 1, 1978 by and between
Matthew Paratore, and George W. Morgan and LaRue Morgan, and
related Lease Assignment dated November 10, 1987 to Sam-Will,
Inc., d/b/a/ Fremont Hotel and Casino.
10.12(4) Collective Bargaining Agreement effective as of January 17, 1994,
by and between Sam-Will, Inc. d/b/a/ Fremont Hotel and Casino and
the International Union of Operating Engineers, Local No. 501,
AFL-CIO (slot technician unit).
10.13(2) Labor Agreement dated as of January 13, 1993, by and between
Mare-Bear, Inc. d/b/a/ Stardust Hotel & Casino, and the
International Union of Operating Engineers, Local No. 501,
AFL-CIO.
10.14(2) Labor Agreement dated as of January 13, 1993, by and between
Sam-Will, Inc., d/b/a/ Fremont Hotel and Casino, and the
International Union of Operating Engineers, Local No. 501,
AFL-CIO.
10.15(2) Labor Agreement dated January 13, 1993, by and between CH&C and
the International Union of Operating Engineers, Local No. 501,
AFL-CIO.
10.16(2) Agreement dated as of May 1, 1991, by and between Mare-Bear,
Inc., d/b/a/ Stardust Hotel & Casino, and the Local Joint
Executive Board of Las Vegas for and on behalf of the Culinary
Workers' Union, Local No. 226 and Bartenders Union, Local No.
165.
10.17(1) Agreement dated as of May 1, 1991, by and between Sam-Will, Inc.,
d/b/a/ Fremont Hotel and Casino, and the Local Joint Executive
Board of Las Vegas for and on behalf of the Culinary Workers'
Union, Local No. 226 and Bartenders Union, Local No. 165.
10.18(2) Collective Bargaining Agreement dated September 12, 1991, by and
between Eldorado Casino and the Local Joint Executive Board of
Las Vegas for and on behalf of the Culinary Workers Union, Local
No. 226 and Bartenders Union, Local No. 165.
II-5
<PAGE> 86
10.19(1) Collective Bargaining Agreement dated March 14, 1991, by and
between Mare-Bear, Inc., d/b/a/ Stardust Hotel & Casino, and the
Musicians Union of Las Vegas, Local No. 369, American Federation
of Musicians, AFL-CIO.
10.20(1) Labor Agreement dated May 1, 1991, by and between Mare-Bear,
Inc., d/b/a/ Stardust Hotel & Casino, and the International
Alliance of Theatrical Stage Employees and Moving Picture Machine
Operators of the United States and Canada, Local 720, Las Vegas,
Nevada.
10.21(1) Labor Agreement dated May 1, 1991, by and between Mare-Bear,
Inc., d/b/a/ Stardust Hotel & Casino, and the International
Alliance of Theatrical Stage Employees and Moving Picture Machine
Operators of the United States and Canada, Local 720, Las Vegas,
Nevada (Theatrical Wardrobe Employees).
10.22(1) Labor Agreement dated June 14, 1983, by and between Stardust
Hotel & Casino and the International Brotherhood of Painters and
Allied Trades, Local Union No. 159, AFL-CIO.
10.23(1) Labor Agreement dated June 1, 1983, by and between Stardust Hotel
and Casino and the United Brotherhood of Carpenters and Joiners
of America, Local Union No. 1780, Las Vegas, Nevada.
10.24(1) Labor Agreement dated August 1, 1983, by and between Stardust
Hotel and the International Brotherhood of Electrical Workers,
Local Union No. 357, AFL-CIO.
10.25(1) Implemented Proposal dated June 15, 1992, by and between Stardust
Hotel and Casino and the Back-End Teamsters Local Union No. 995.
10.26(1) Implemented Proposal dated June 15, 1992, by and between Fremont
Hotel and Casino and the Back-End Teamsters Local Union No. 995.
10.27(2) Management Agreement dated March 11, 1993, by and between
Mississippi Band of Choctaw Indians and Boyd Mississippi, Inc.
10.28(4) Addendum to Management Agreement dated November 24, 1993, by and
between Mississippi Band of Choctaw Indians and Boyd Mississippi,
Inc.
10.29(2) Casino Management Agreement dated August 30, 1993, by and between
Treasure Chest Casino, L.L.C. and Boyd Kenner, Inc.
II-6
<PAGE> 87
10.30(4) Amended and Restated Operating Agreement dated August 5, 1994, by
and between Treasure Chest Casino, L.L.C. and Boyd Kenner, Inc.
10.31(2) Real Estate Contract of Sale dated April 29, 1993, by and among
Boyd Tunica, Inc. and Shea Leatherman, Irwin L. Zanone and
William A. Leatherman, Jr.
10.32(2) Real Estate Contract of Sale dated April 29, 1993, by and between
Eugene H. Beck, Jr. and the Boyd Group.
10.33(2) Real Estate Contract of Sale dated April 30, 1993, by and between
Mid-West Terminal Warehouse Company and the Boyd Group.
10.34(2) Real Estate Contract of Sale dated April 30, 1993, by and between
Hunt Midwest Real Estate Development, Inc. and the Boyd Group.
10.35(2) Amendment to Real Estate Contracts of Sale dated May 26, 1993, by
and among The Boyd Group, Hunt Midwest Real Estate Development,
Inc., Mid-West Terminal Warehouse Company and Eugene H. Beck, Jr.
10.36(2) Real Estate Contract of Sale dated as of April 30, 1993, by and
between Vergie G. Bevan, individually and as trustee of the
Vergie G. Bevan Revocable Trust and the Boyd Group.
10.37(4) Development Agreement dated June 6, 1994, by and among the
Registrant, Boyd Kansas City, Inc. and Port Authority of Kansas
City, Missouri.
10.38(4) Agreement dated January 10, 1994 by and between Boyd Tunica, Inc.
and W.G. Yates & Sons Construction Company.
10.39(4) Building Contract dated July 15, 1993, by and between Marnell
Corrao Associates, Inc. and Sam's Town Hotel and Gambling Hall
for Sam's Town Addition Phase V.
10.40(2) Form of Indemnification Agreement.
10.41(2)* 1993 Flexible Stock Incentive Plan and related agreements.
10.42(2)* 1993 Directors Non-Qualified Stock Option Plan and related
agreements.
10.43(2)* 1993 Employee Stock Purchase Plan and related agreement.
10.44(1) 401(k) Profit Sharing Plan and Trust.
10.45(1) Note dated July 1, 1992, from Samuel A. Boyd Family Trust to the
Boyd Group in the principal sum of $3,000,000.
10.46(3) Promissory Note dated December 30, 1991, from Eldorado, Inc. to
Samuel A. Boyd in the principal sum of $600,000.
II-7
<PAGE> 88
10.47(6) Joint Venture Agreement of Stardust A.C., dated as of May 29,
1996, by and between MAC, Corp., a New Jersey Corporation, which
is a wholly-owned subsidiary of Mirage Resorts Incorporated, a
Nevada Corporation, and Grand K, Inc., a Nevada Corporation,
which is a wholly-owned subsidiary of Registrant. (Certain
portions of this exhibit have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request
for confidential treatment for this Agreement.)
10.48(7) Credit Agreement dated as of June 19, 1996, by and among the
Registrant and California Hotel and Casino as the Borrowers,
certain commercial lending institutions as the Lenders, Canadian
Imperial Bank of Commerce as the Agent, Bank of America National
Trust Savings Association and Wells Fargo Bank N.A. as
Co-Managing Agents and Bankers Trust Company, Credit Lyonnais and
Societe Generale as Co-Agents.
10.49(8) Property Purchase Agreement dated as of August 9, 1996, by and
between Steamboat Station Company, a Nevada general partnership,
and Boyd Reno, Inc., a Nevada corporation and wholly-owned
subsidiary of the Company.
10.50(8) Buy-Sell Agreement dated as of August 2, 1996, by and between the
Registrant and Casino Magic of Louisiana, Corp., a Louisiana
corporation.
10.51(10)* Boyd Gaming Corporation 1996 Stock Incentive Plan.
10.52(11) First Amendment to Credit Agreement, dated as of March 28, 1997,
among Boyd Gaming Corporation and California Hotel and Casino,
and Wells Fargo Bank, N.A., as Swingline Lender, Canadian
Imperial Bank of Commerce, ("CIBC") as letter of credit issuer,
Bank of America National Trust and Savings Association and Wells
Fargo Bank, N.A., as co-managing agents, Bankers Trust Company,
Credit Lyonnais, Los Angeles Branch and Societe Generale as
co-agents, and CIBC as administrative agent and collateral agent.
10.53 Second Amendment to Credit Agreement, dated as of June 11, 1997,
among the Registrant and California Hotel and Casino, and Wells
Fargo Bank, N.A., as Swingline Lender, Canadian Imperial Bank of
Commerce, ("CIBC") as letter of credit issuer, Bank of America
National Trust and Saving Association and Wells Fargo Bank,
N.A., as co-managing agents, Bankers Trust Company, Credit
Lyonnais Los Angeles Branch and Societe Generale as co-agents,
and CIBC as administrative agent and collateral agent.
10.54 Third Amendment to Credit Agreement, dated as of June 24, 1997,
among the Registrant and California Hotel and Casino, and Wells
Fargo Bank, N.A., as Swingline Lender, Canadian Imperial Bank of
Commerce, ("CIBC") as letter of credit issuer, Bank of America
National Trust and Saving Association and Wells Fargo Bank,
N.A., as co-managing agents, Bankers Trust Company, Credit
Lyonnais Los Angeles Branch and Societe Generale as co-agents,
and CIBC as administrative agent and collateral agent.
10.55 First Amendment to Purchase Agreement, dated as of September 9,
1997 among the Registrant, Boyd Kenner, Inc., Boyd Louisiana,
L.L.C., Treasure Chest Casino, L.L.C. and the Selling Members.
21.1 Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
24 Powers of Attorney (reference is made to page II-2).
27 Financial Data Schedule.
II-8
<PAGE> 89
- --------------------------------------------------------------------------------
* Management contracts or compensatory plans or arrangements.
(1) Incorporated by reference to the Registration Statement on Form
S-1, File No. 33-51672, of California Hotel and Casino and
California Hotel Finance Corporation, which became effective on
November 18, 1992.
(2) Incorporated by reference to the Registrant's Registration
Statement on Form S-1, File No. 33-64006, which became effective
on October 15, 1993.
(3) Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended June 30, 1994.
(4) Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended June 30, 1995.
(5) Incorporated by reference to Registrant's Current Report on Form
8-K dated April 26, 1996.
(6) Incorporated by reference to Registrant's Current Report on Form
8-K dated June 7, 1996.
(7) Incorporated by reference to Exhibit 10.1 of Registrant's
Current Report on Form 8-K dated June 19, 1996.
(8) Incorporated by reference to Registrant's Exhibit 2.1 of Current
Report on Form 8-K dated August 16, 1996.
(9) Incorporated by reference to Exhibit 3.1 of Registrant's
Quarterly Report on Form 10-Q for the quarter ended December 31,
1996.
(10) Incorporated by reference to Appendix A of Registrant's October
22, 1996 Proxy Statement for the 1996 Annual Meeting of
Stockholders.
(11) Incorporated by reference to Exhibit 10.59 of Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
(12) Incorporated by reference to Exhibit 2.1 of Registrant's Current
Report on Form 8-K dated July 11, 1997.
II-9
<PAGE> 1
EXHIBIT 4.1
BOYD GAMING CORPORATION
$250,000,000
9.50% Senior Subordinated Notes Due 2007
REGISTRATION AGREEMENT
New York, New York
July 17, 1997
To: SALOMON BROTHERS INC
UBS SECURITIES LLC
CIBC WOOD GUNDY SECURITIES CORP.
In care of:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Boyd Gaming Corporation, a Nevada corporation (the "Company"),
proposes to issue and sell to certain purchasers (the "Purchasers"), upon the
terms set forth in a purchase agreement dated the date hereof (the "Purchase
Agreement"), $250,000,000 aggregate principal amount of its 9.50% Senior
Subordinated Notes due 2007 (the "Notes") (the "Initial Placement"). As an
inducement to the Purchasers to enter into the Purchase Agreement and in
satisfaction of a condition to your obligations thereunder, the Company agrees
with you, (i) for your benefit and the benefit of the other Purchasers and (ii)
for the benefit of the holders from time to time of the Securities (including
you and the other Purchasers) (each of the foregoing a "Holder" and together the
"Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control
<PAGE> 2
2
of, is controlled by, or is under common control with, such specified person.
For purposes of this definition, control of a person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Closing Date" has the meaning set forth in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Registration Period" means the 180-day period
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" means a registration
statement of the Company on an appropriate form under the Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the
Purchasers) which is a broker-dealer, electing to exchange Securities acquired
for its own account as a result of market-making activities or other trading
activities, for New Securities.
"Final Memorandum" has the meaning set forth in
the Purchase Agreement.
"Holder" has the meaning set forth in the preamble
hereto.
"Holders' Counsel" has the meaning set forth in
Section 5.
"Indenture" means the Indenture relating to the Securities and the
New Securities dated as of July 22, 1997, between the Company and State Street
Bank and Trust Company, as trustee, as the same may be amended from time to time
in accordance with the terms thereof.
<PAGE> 3
3
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of securities registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.
"New Securities" means debt securities of the Company identical in
all material respects to the Securities (except that the cash interest and
interest rate step-up provisions and the transfer restrictions will be modified
or eliminated, as appropriate), to be issued under the Indenture.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the New Securities, covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Registered Exchange Offer" means the proposed offer to the Holders
to issue and deliver to such Holders, in exchange for the Securities, a like
principal amount of the New Securities.
"Registrable Securities" has the meaning set forth
in Section 3(a).
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the New Securities pursuant to the provisions of this Agreement, amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"Securities" has the meaning set forth in the preamble hereto.
"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
<PAGE> 4
4
"Shelf Registration Period" has the meaning set forth in Section
3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof which
covers some or all of the Securities or New Securities, as applicable, on an
appropriate form under Rule 415 under the Act, or any similar rule that may be
adopted by the Commission, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Trustee" means the trustee with respect to the Securities and the
New Securities under the Indenture.
"Underwriter" means any underwriter of Securities in connection with
an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of New Securities by
Exchanging Dealers; Private Exchange. (a) The Company shall prepare and, not
later than 60 days after the date of the original issuance of the Notes, shall
file with the Commission the Exchange Offer Registration Statement with respect
to the Registered Exchange Offer. The Company shall use its best efforts to
cause the Exchange Offer Registration Statement to become effective under the
Act within 150 days after the date of the original issuance of the Notes.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for New Securities (assuming that such Holder is
not an affiliate of the Company within the meaning of the Act, acquires the New
Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the New
Securities) to trade such New Securities from and after their receipt without
any limitations or restrictions under the Act and without material restrictions
under the securities laws of a substantial proportion of the several states of
the United States.
<PAGE> 5
5
(c) In connection with the Registered Exchange Offer, the Company
shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for not less than 30
days and not more than 45 days after the date notice thereof is mailed to
the Holders (or longer if required by applicable law);
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York; and
(iv) comply in all respects with all applicable laws.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(i) accept for exchange all Securities validly tendered and not
validly withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to each
Holder of Securities New Securities equal in principal amount to the
Securities of such Holder so accepted for exchange.
(e) The Purchasers and the Company acknowledge that, pursuant to
current interpretations by the Commission's staff of Section 5 of the Act, and
in the absence of an applicable exemption therefrom, each Exchanging Dealer is
required to deliver a Prospectus in connection with a sale of any New Securities
received by such Exchanging Dealer pursuant to the Registered Exchange Offer in
exchange for Securities acquired for its own account as a result of
market-making activities or other trading activities. Accordingly, the Company
shall:
(i) include the information set forth in Annex A hereto on the cover
of the Exchange Offer Registration Statement, in Annex B hereto in the
forepart of the Exchange Offer Registration Statement in a section setting
forth details of the Exchange Offer, in Annex C hereto in the underwriting
or plan of distribution
<PAGE> 6
6
section of the Prospectus forming a part of the Exchange Offer
Registration Statement, and in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Act during the Exchange Offer
Registration Period for delivery by Exchanging Dealers in connection with
sales of New Securities received pursuant to the Registered Exchange
Offer, as contemplated by Section 4(h) below.
(f) In the event that any Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Securities constituting any portion of an unsold allotment, at the
request of such Purchaser, the Company shall issue and deliver to such Purchaser
or the party purchasing New Securities registered under a Shelf Registration
Statement as contemplated by Section 3 hereof from such Purchaser, in exchange
for such Securities, a like principal amount of New Securities. The Company
shall seek to cause the CUSIP service bureau to issue the same CUSIP number for
such New Securities as for New Securities issued pursuant to the Registered
Exchange Offer.
3. Shelf Registration. If, (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determine upon advice of its outside counsel that they are not permitted to
effect the Registered Exchange Offer as contemplated by Section 2 hereof, or
(ii) if for any other reason the Exchange Offer Registration Statement is not
declared effective within 150 days after the Closing Date or the Registered
Exchange Offer is not consummated within 180 days after the Closing Date, or
(iii) if any Purchaser so requests with respect to Securities held by it
following consummation of the Registered Exchange Offer, (iv) any Holder (other
than a Purchaser) is not eligible to participate in the Registered Exchange
Offer or (v) in the case of any Purchaser that participates in the Registered
Exchange Offer or acquires New Securities pursuant to Section 2(f) hereof, such
Purchaser does not receive freely tradeable New Securities in exchange for
Securities constituting any portion of an unsold allotment (it being understood
that, for purposes of this Section 3, (x) the requirement that a Purchaser
deliver a Prospectus containing the information required by Items 507 and/or 508
of Regulation S-K under the Act in connection with sales of New Securities
acquired in exchange for such Securities shall result in such New Securities
being not "freely tradeable" but (y) the requirement that an
<PAGE> 7
7
Exchanging Dealer deliver a Prospectus in connection with sales of New
Securities acquired in the Registered Exchange Offer in exchange for Securities
acquired as a result of market-making activities or other trading activities
shall not result in such New Securities being not "freely tradeable"), the
following provisions shall apply:
(a) The Company shall as promptly as practicable (but in no event
not more than 30 days after so required or requested pursuant to this Section 3)
file with the Commission and thereafter shall use its best efforts to cause to
be declared effective under the Act a Shelf Registration Statement relating to
the offer and sale of the Securities or the New Securities, as applicable, by
the Holders from time to time in accordance with the methods of distribution
elected by such Holders and set forth in such Shelf Registration Statement (such
Securities or New Securities, as applicable, to be sold by Holders under such
Shelf Registration Statement being referred to herein as "Registrable
Securities"); provided, that with respect to New Securities received by a
Purchaser in exchange for Securities constituting any portion of an unsold
allotment, the Company may, if permitted by current interpretations by the
Commission's staff, file a post-effective amendment to the Exchange Offer
Registration Statement containing the information required by Regulation S-K
Items 507 and/or 508, as applicable, in satisfaction of its obligations under
this paragraph (a) with respect thereto, and any such Exchange Offer
Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration Statement.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the Prospectus
forming part thereof to be usable by Holders for a period of two years from the
date the Shelf Registration Statement is declared effective by the Commission
(or until one year after such effective date if such Shelf Registration
Statement is filed at the request of a Purchaser) or such shorter period that
will terminate when all the Securities or New Securities, as applicable, covered
by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement (in any such case, such period being called the "Shelf
Registration Period"). The Company shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective during the requisite
period if any of them voluntarily takes any action that would result in Holders
of securities covered thereby not being able to offer and sell such securities
during that period, unless (i) such action is required by applicable law or (ii)
such action is taken by the Company in good faith and for valid business reasons
<PAGE> 8
8
(not including avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of Section 4(k) hereof, if applicable.
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to you, prior to the filing thereof
with the Commission, a copy of any Shelf Registration Statement and any
Exchange Offer Registration Statement, and each amendment thereof and each
amendment or supplement, if any, to the Prospectus included therein and
shall use its best efforts to reflect in each such document, when so filed
with the Commission, such comments as you may reasonably and timely
propose.
(b) The Company shall ensure that (i) any Registration Statement and
any amendment thereto and any Prospectus forming part thereof and any
amendment or supplement thereto complies in all material respects with the
Act and the rules and regulations thereunder, (ii) any Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any Prospectus forming part of any
Registration Statement, and any amendment or supplement to such
Prospectus, does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements,
in the light of the circumstances under which they were made, not
misleading.
(c) (1) The Company shall advise you and, in the case of a Shelf
Registration Statement, the Holders of securities covered thereby, and, if
requested by you or any such Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment
thereto has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration
<PAGE> 9
9
Statement or the Prospectus included therein or for additional
information.
(2) The Company shall advise you and, in the case of a Shelf
Registration Statement, the Holders of securities covered thereby, and, in
the case of an Exchange Offer Registration Statement, any Exchanging
Dealer which has provided in writing to the Company a telephone or
facsimile number and address for notices, and, if requested by you or any
such Holder or Exchanging Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(ii) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the
securities included therein for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(iii) of the happening of any event that requires the
making of any changes in the Registration Statement or the
Prospectus so that, as of such date, the statements therein are not
misleading and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the
case of the Prospectus, in the light of the circumstances under
which they were made) not misleading (which advice shall be
accompanied by an instruction to suspend the use of the Prospectus
until the requisite changes have been made).
(d) The Company shall use its best efforts to obtain the withdrawal
of any order suspending the effectiveness of any Registration Statement at
the earliest possible time.
(e) The Company shall furnish to each Holder of securities included
within the coverage of any Shelf Registration Statement, without charge,
at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, any documents
incorporated by reference therein and all exhibits (including those
incorporated by reference therein).
<PAGE> 10
10
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of securities included within the coverage of any Shelf
Registration Statement, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request; and the Company consent to the use of the
Prospectus or any amendment or supplement thereto by each of the selling
Holders of securities in connection with the offering and sale of the
securities covered by the Prospectus or any amendment or supplement
thereto.
(g) The Company shall furnish to each Exchanging Dealer which so
requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by
reference therein, and, if the Exchanging Dealer so requests in writing,
any documents incorporated by reference therein and all exhibits
(including those incorporated by reference therein).
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as
many copies of the Prospectus included in such Exchange Offer Registration
Statement and any amendment or supplement thereto as such Exchanging
Dealer may reasonably request for delivery by such Exchanging Dealer in
connection with a sale of New Securities received by it pursuant to the
Registered Exchange Offer; and the Company consent to the use of the
Prospectus or any amendment or supplement thereto by any such Exchanging
Dealer, as aforesaid.
(i) Prior to the Registered Exchange Offer or any other offering of
securities pursuant to any Registration Statement, the Company shall
register or qualify or cooperate with the Holders of securities included
therein and Holders' Counsel in connection with the registration or
qualification of such securities for offer and sale under the securities
or blue sky laws of such jurisdictions as any such Holder reasonably
requests in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the
securities covered by such Registration Statement; provided, however, that
the Company will not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action
<PAGE> 11
11
which would subject it to general service of process or to taxation in any
such jurisdiction where it is not then so subject.
(j) The Company shall cooperate with the Holders of Securities to
facilitate the timely preparation and delivery of certificates
representing Securities to be sold pursuant to any Registration Statement
free of any restrictive legends and in such denominations and registered
in such names as Holders may request prior to sales of Securities pursuant
to such Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) above, the Company shall promptly prepare a post-effective
amendment to any Registration Statement or an amendment or supplement to
the related Prospectus or file any other required document so that, as
thereafter delivered to purchasers of the securities included therein, the
Prospectus will not include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the
Securities or New Securities, as the case may be, registered under such
Registration Statement, and provide the applicable trustee with printed
certificates for such Securities or New Securities, in a form, if
requested by the applicable Holder or Holder's counsel, eligible for
deposit with The Depository Trust Company.
(m) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission to the extent and so
long as they are applicable to the Registered Exchange Offer or the Shelf
Registration and will make generally available to its security holders a
consolidated earnings statement (which need not be audited) covering a
twelve-month period commencing after the effective date of the
Registration Statement and ending not later than 15 months thereafter, as
soon as practicable after the end of such period, which consolidated
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
(n) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner.
<PAGE> 12
12
(o) The Company may require each Holder of Registrable Securities to
be sold pursuant to any Shelf Registration Statement to furnish to the
Company such information regarding such Holder and the distribution of
such securities as the Company may from time to time reasonably require
for inclusion in such Registration Statement.
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information as the Managing Underwriters and Majority
Holders reasonably agree should be included therein and shall make all
required filings of such Prospectus supplement or post-effective amendment
as soon as notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Company
shall enter into such agreements (including underwriting agreements) and
take all other appropriate actions in order to expedite or facilitate the
registration or the disposition of the Securities, and in connection
therewith, if an underwriting agreement is entered into, cause the same to
contain indemnification provisions and procedures no less favorable than
those set forth in Section 6 hereof (or such other provisions and
procedures acceptable to the Majority Holders and the Managing
Underwriters, if any), with respect to all parties to be indemnified
pursuant to Section 6 hereof from Holders of Securities to the Company.
(r) In the case of any Shelf Registration Statement, the Company
shall (i) make reasonably available for inspection by the Holders of
securities to be registered thereunder, any underwriter participating in
any disposition pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by the Holders or any such underwriter
all relevant financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries; (ii) cause the
Company's officers, directors and employees to supply all relevant
information reasonably requested by the Holders or any such underwriter,
attorney, accountant or other agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information that is designated
in writing by the Company, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by the Holders
<PAGE> 13
13
or any such underwriter, attorney, accountant or other agent, unless such
disclosure is made in connection with a court proceeding or required by
law, or such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to the
Holders of securities registered thereunder and the underwriters, if any,
in form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings; (iv) obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Managing Underwriters,
if any) addressed to each selling Holder and the underwriters, if any,
covering such matters as are customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters; (v) obtain "cold comfort"
letters (or, in the case of any person that does not satisfy the
conditions for receipt of a "cold comfort" letter specified in Statement
on Auditing Standards No. 72, an "agreed-upon procedures letter") and
updates thereof from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or
are required to be, included in the Registration Statement), addressed to
each selling Holder of securities registered thereunder and the
underwriters, if any, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with primary
underwritten offerings; and (vi) deliver such documents and certificates
as may be reasonably requested by the Majority Holders and the Managing
Underwriters, if any, including those to evidence compliance with Section
4(k) and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company. The foregoing
actions set forth in clauses (iii), (iv), (v) and (vi) of this Section
4(r) shall be performed at (A) the effective date of such Registration
Statement and each post-effective amendment thereto and (B) each closing
under any underwriting or similar agreement as and to the extent required
thereunder.
(s) In the case of any Exchange Offer Registration Statement, the
Company shall (i) make reasonably available for inspection by each
Purchaser, and any attorney, accountant or other agent retained by
<PAGE> 14
14
such Purchaser, all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries;
(ii) cause the Company's officers, directors and employees to supply all
relevant information reasonably requested by such Purchaser or any such
attorney, accountant or other agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information that is designated
in writing by the Company, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by such Purchaser
or any such attorney, accountant or other agent, unless such disclosure is
made in connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a third
party without an accompanying obligation of confidentiality; (iii) make
such representations and warranties to such Purchaser, in form, substance
and scope as are customarily made by issuers to underwriters in primary
underwritten offerings; (iv) obtain opinions of counsel to the Company,
which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to such Purchaser and its counsel, addressed to
such Purchaser, covering such matters as are customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by such Purchaser or its counsel; (v) obtain "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to such Purchaser, in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with primary underwritten offerings, or if requested by such
Purchaser or its counsel in lieu of a "cold comfort" letter, an
agreed-upon procedures letter under Statement on Auditing Standards No.
35, covering matters requested by such Purchaser or its counsel; and (vi)
deliver such documents and certificates as may be reasonably requested by
such Purchaser or its counsel, including those to evidence compliance with
Section 4(k) and with conditions customarily contained in underwriting
agreements. The foregoing actions set forth in clauses (iii), (iv), (v),
and (vi) of this Section 4(s) shall be performed at the close of the
Registered Exchange Offer and the effective date of any
<PAGE> 15
15
post-effective amendment to the Exchange Offer Registration Statement.
5. Registration Expenses. The Company shall bear all expenses
incurred in connection with the performance of its obligations under Sections 2,
3 and 4 hereof and, in the event of any Shelf Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm or
counsel (in addition to one local counsel in each relevant jurisdiction)
designated by the Majority Holders to act as counsel for the Holders in
connection therewith ("Holders' Counsel"), and, in the case of any Exchange
Offer Registration Statement, will reimburse the Purchasers for the reasonable
fees and disbursements of counsel acting in connection therewith.
6. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Company agrees to indemnify and hold harmless each
Holder of securities covered thereby (including each Purchaser and, with respect
to any Prospectus delivery as contemplated in Section 4(h) hereof, each
Exchanging Dealer), the directors, officers, employees and agents of each such
Holder and each other person, if any, who controls any such Holder within the
meaning of Section 15 the Act or Section 20 of the Exchange Act against any and
all losses, claims, damages or liabilities, joint or several, to which they or
any of them may become subject under the Act, the Exchange Act or other Federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement as originally filed
or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or
in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and agrees to reimburse each such indemnified party, as incurred, for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that (i) the Company will not be liable in any case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any such Holder
specifically for inclusion therein and (ii) the Company shall not be liable to
any indemnified party under this indemnity agreement with respect to the
<PAGE> 16
16
Registration Statement or Prospectus to the extent that any such loss, claim,
damage or liability of such indemnified party results solely from an untrue
statement of a material fact contained in, or the omission of a material fact
from, the Registration Statement or Prospectus which untrue statement or
omission was corrected in an amended or supplemented Registration Statement or
Prospectus, if the person alleging such loss, claim, damage or liability was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the amended or supplemented Registration Statement or Prospectus if the Company
had previously furnished copies thereof to such indemnified party and if
delivery of a prospectus is required by the Act and was not so made. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
The Company also agrees to indemnify or contribute to Losses of, as
provided in Section 6(d), any underwriters of Securities registered under a
Shelf Registration Statement, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Purchasers and the selling Holders provided in this
Section 6(a) and shall, if requested by any Holder, enter into an underwriting
agreement reflecting such agreement, as provided in Section 4(q) hereof.
(b) Each Holder of securities covered by a Registration Statement
(including each Purchaser and, with respect to any Prospectus delivery as
contemplated in Section 4(h) hereof, each Exchanging Dealer) severally agrees to
indemnify and hold harmless (i) the Company, (ii) each of its respective
directors, (iii) each of its officers who signs such Registration Statement and
(iv) each other person, if any, who controls the Company 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 Company to each such Holder, but only with
reference to written information relating to such Holder furnished to the
Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to
<PAGE> 17
17
notify the indemnifying party (i) will not relieve it from liability under
paragraph (a) or (b) above unless and to the extent it did not otherwise learn
of such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint as counsel one firm
of attorneys of the indemnifying party's choice at the indemnifying party's
expense, which counsel, together with one local counsel in each jurisdiction,
shall act on behalf of all the indemnified parties in any action for which
indemnification is sought (in which case the indemni fying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indem nified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action or
(iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. No indemnifying party
shall be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. An indemnifying party will not, without
the prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be
<PAGE> 18
18
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Registration Statement which resulted in such Losses; provided, however, that in
no case shall any Purchaser or any subsequent Holder of any Security or New
Security be responsible, in the aggregate, for any amount in excess of the
purchase discount or commission applicable to such Security, or in the case of a
New Security, applicable to the Security which was exchangeable into such New
Security, as set forth on the cover page of the Final Memorandum, nor shall any
underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the securities purchased by such underwriter under
the Registration Statement which resulted in such Losses. If the allocation
provided by the immediately preceding sentence is unavailable for any reason,
the indemnifying party and the indemnified party shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the sum of (x) the total net proceeds from the Initial Placement (before
deducting expenses) as set forth on the cover page of the Final Memorandum and
(y) the total amount of additional interest which the Company was not required
to pay as a result of registering the securities covered by the Registration
Statement which resulted in such Losses. Benefits received by the Purchasers
shall be deemed to be equal to the total purchase discounts and commissions as
set forth on the cover page of the Final Memorandum, and benefits received by
any other
<PAGE> 19
19
Holders shall be deemed to be equal to the value of receiving Securities or New
Securities, as applicable, registered under the Act. Benefits received by any
underwriter shall be deemed to be equal to the total underwriting discounts and
commissions, as set forth on the cover page of the Prospectus forming a part of
the Registration Statement which resulted in such Losses. Relative fault shall
be determined by reference to whether any alleged untrue statement or omission
relates to information provided by the indemnifying party, on the one hand, or
by the indemnified party, on the other hand. The parties agree that it would not
be just and equitable if contribution were determined by pro rata allocation or
any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 6, each person who controls a Holder within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder, the
Company or any of the officers, directors or controlling persons referred to in
Section 6 hereof, and will survive the sale by a Holder of securities covered by
a Registration Statement.
7. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders herein or otherwise conflicts with
the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the
<PAGE> 20
20
Company has obtained the written consent of the Holders of at least a
majority of the then outstanding aggregate principal amount of Securities
(or, after the consummation of any Exchange Offer in accordance with
Section 2 hereof, of New Securities); provided that, with respect to any
matter that directly or indirectly affects the rights of any Purchaser
hereunder, the Company shall obtain the written consent of each such
Purchaser against which such amendment, qualification, supplement, waiver
or consent is to be effective. Notwithstanding the foregoing (except the
foregoing proviso), a waiver or consent to departure from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of
other Holders may be given by the Majority Holders, determined on the
basis of securities being sold rather than registered under such
Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, fax or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by
such holder to the Company in accordance with the provisions of this
Section 7(c), which address initially is, with respect to each
Holder, the address of such Holder maintained by the registrar under
the Indenture, with a copy in like manner to Salomon Brothers Inc;
(2) if to you, initially at the address set forth in the
Purchase Agreement; and
(3) if to the Company, initially at its address set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given when received.
The Purchasers or the Company by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any
consent by the Company thereto, subsequent
<PAGE> 21
21
Holders of Securities and/or New Securities. The Company each hereby
agrees to extend the benefits of this Agreement to any Holder of
Securities and/or New Securities and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF).
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions hereof
shall not be in any way impaired or affected thereby, it being intended
that all of the rights and privileges of the parties shall be enforceable
to the fullest extent permitted by law.
(i) Securities Held by the Company, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of
Securities or New Securities is required hereunder, Securities or New
Securities, as applicable, held by the Company or its Affiliates (other
than subsequent Holders of Securities or New Securities if such subsequent
Holders are deemed to be Affiliates solely by reason of their holdings of
such Securities or New Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
<PAGE> 22
22
Please confirm that the foregoing correctly sets forth the agreement
among the Company and you.
Very truly yours,
BOYD GAMING CORPORATION,
by
-----------------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
SALOMON BROTHERS INC
UBS SECURITIES LLC
CIBC WOOD GUNDY SECURITIES CORP.
by SALOMON BROTHERS INC,
by
-------------------------------
Name:
Title:
<PAGE> 23
23
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
SALOMON BROTHERS INC
UBS SECURITIES LLC
CIBC WOOD GUNDY SECURITIES CORP.
by SALOMON BROTHERS INC,
by /s/DAVID M.
-------------------------------
Name: David M.
Title: Vice President
<PAGE> 24
ANNEX A
Each broker-dealer that receives New Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Securities received in exchange for Securities where such
New Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, starting on
the Expiration Date (as defined herein) and ending on the close of business on
the 180th day following the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
<PAGE> 25
ANNEX B
Each broker-dealer that receives New Securities for its own account
in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Securities. See "Plan of Distribution."
<PAGE> 26
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. The Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Securities received in exchange
for Securities where such Securities were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, starting on
the Expiration Date and ending on the close of business on the 180th day
following the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until _____________, 199 , all dealers effecting
transactions in the Exchange Securities may be required to deliver a prospectus.
*/
The Company will not receive any proceeds from any sale of New
Securities by broker-dealers. New Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Securities. Any broker-dealer that resells New Securities that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such New Securities may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit of any
such resale of New Securities and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
- ----------------
*/ In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE> 27
2
it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
[If applicable, add information required by Regulation S-K Items 507 and/or
508.]
<PAGE> 28
ANNEX D
Rider A
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH
TO RECEIVE 10 ADDITIONAL COPIES OF THE
PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
-----------------------------------------------------
Address:
--------------------------------------------------
--------------------------------------------------
Rider B
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New
Securities. If the undersigned is a broker-dealer that will receive New
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 29
<PAGE> 1
EXHIBIT 4.4
================================================================================
BOYD GAMING CORPORATION
9.50% Senior Subordinated Notes Due 2007
INDENTURE
Dated as of July 22, 1997
STATE STREET BANK AND TRUST COMPANY,
Trustee
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C> <C>
310 (a)(1) ...........................................................7.10
(a)(2) ...........................................................7.10
(a)(3) ...........................................................N.A.
(a)(4) ...........................................................N.A.
(a)(5) ...........................................................7.10
(b) .....................................................7.08; 7.10
(c) ...........................................................N.A.
311 (a) ...........................................................7.11
(b) ...........................................................7.11
(c) ...........................................................N.A.
312 (a) ...........................................................2.05
(b) ..........................................................11.03
(c) ..........................................................11.03
313 (a) ...........................................................7.06
(b)(1) ...........................................................N.A.
(b)(2) ...........................................................7.06
(c) ..........................................................11.02
(d) ...........................................................7.06
314 (a) ..............................................4.03; 4.08; 11.02
(b) ...........................................................N.A.
(c)(1) ..........................................................11.04
(c)(2) ..........................................................11.04
(c)(3) ...........................................................N.A.
(d) ...........................................................N.A.
(e) ..........................................................11.05
(f) ...........................................................N.A.
315 (a) ...........................................................7.01
(b) ....................................................7.05; 11.02
(c) ...........................................................7.01
(d) ...........................................................7.01
(e) ...........................................................6.11
316 (a)(last sentence)....................................................2.07
(a)(1)(A).............................................................6.05
(a)(1)(B).............................................................6.04
(a)(2) ...........................................................N.A.
(b) ...........................................................6.07
(c) ...........................................................6.07
317 (a)(1) ...........................................................6.08
(a)(2) ...........................................................6.09
(b) ...........................................................2.04
318 (a) ..........................................................11.01
</TABLE>
N.A. means Not Applicable.
- ----------------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to
be part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I Page
----
<S> <C> <C>
Definitions and Incorporation by Reference
SECTION 1.01. Definitions ................................................. 1
SECTION 1.02. Other Definitions ........................................... 23
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act ............................................ 24
SECTION 1.04. Rules of Construction........................................ 24
ARTICLE II
The Securities
SECTION 2.01. Form and Dating ............................................. 25
SECTION 2.02. Execution and Authentication................................. 25
SECTION 2.03. Registrar and Paying Agent................................... 26
SECTION 2.04. Paying Agent To Hold Money in
Trust.................................................... 27
SECTION 2.05. Securityholder Lists......................................... 27
SECTION 2.06. Replacement Securities....................................... 27
SECTION 2.07. Outstanding Securities....................................... 28
SECTION 2.08. Temporary Securities......................................... 28
SECTION 2.09. Cancelation.................................................. 29
SECTION 2.10. Defaulted Interest........................................... 29
SECTION 2.11. Record Date.................................................. 30
SECTION 2.12. Computation of Interest...................................... 30
SECTION 2.13. CUSIP Numbers................................................ 30
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee .......................................... 31
SECTION 3.02. Selection of Securities to Be
Redeemed ................................................ 31
SECTION 3.03. Notice of Redemption ........................................ 31
SECTION 3.04. Effect of Notice of Redemption............................... 32
SECTION 3.05. Deposit of Redemption Price.................................. 33
SECTION 3.06. Securities Redeemed in Part ................................. 33
SECTION 3.07. Redemption Pursuant to Gaming
Laws...................................................... 33
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IV
Covenants
SECTION 4.01. Certain Suspended Covenants............................... 34
SECTION 4.02. Payment of Securities..................................... 34
SECTION 4.03. SEC Reports............................................... 35
SECTION 4.04. Limitation on Indebtedness................................ 35
SECTION 4.05. Limitation on Restricted
Payments.............................................. 37
SECTION 4.06. Limitation on Transactions with
Affiliates............................................ 39
SECTION 4.07. Change of Control......................................... 40
SECTION 4.08. Compliance Certificate.................................... 42
SECTION 4.09. Further Instruments and Acts.............................. 42
SECTION 4.10. Limitation on Liens....................................... 42
SECTION 4.11. Limitation on Dividend and Other
Payment Restrictions Affecting
Restricted Subsidiaries............................... 43
SECTION 4.12. Limitation on Asset Sales; Event of
Loss.................................................. 43
SECTION 4.13. Limitation on Layered Indebtedness ....................... 47
SECTION 4.14. Maintenance of Properties and Other
Matters............................................... 47
SECTION 4.15. Limitation on Activities of the
Company............................................... 48
SECTION 4.16. Agreement to Redeem the CHFC Notes ....................... 48
ARTICLE V
Successor Company
SECTION 5.01. When Company May Merge or Transfer
Assets................................................ 49
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default......................................... 50
SECTION 6.02. Acceleration.............................................. 52
SECTION 6.03. Other Remedies............................................ 53
SECTION 6.04. Waiver of Past Defaults................................... 53
SECTION 6.05. Control by Majority....................................... 53
SECTION 6.06. Limitation on Suits....................................... 54
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.07. Rights of Holders To Receive
Payment............................................... 54
SECTION 6.08. Collection Suit by Trustee................................ 54
SECTION 6.09. Trustee May File Proofs of
Claim................................................. 54
SECTION 6.10. Priorities................................................ 55
SECTION 6.11. Undertaking for Costs..................................... 55
SECTION 6.12. Waiver of Stay or Extension
Laws.................................................. 56
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee......................................... 56
SECTION 7.02. Rights of Trustee......................................... 57
SECTION 7.03. Individual Rights of Trustee.............................. 58
SECTION 7.04. Trustee's Disclaimer...................................... 58
SECTION 7.05. Notice of Defaults........................................ 58
SECTION 7.06. Reports by Trustee to Holders............................. 58
SECTION 7.07. Compensation and Indemnity................................ 59
SECTION 7.08. Replacement of Trustee.................................... 60
SECTION 7.09. Successor Trustee by Merger............................... 61
SECTION 7.10. Eligibility; Disqualification............................. 61
SECTION 7.11. Preferential Collection of Claims
Against Company....................................... 61
SECTION 7.12. Trustee's Application for
Instructions from the Company......................... 62
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance............................................ 62
SECTION 8.02. Conditions to Defeasance.................................. 63
SECTION 8.03. Application of Trust Money................................ 65
SECTION 8.04. Repayment to Company...................................... 65
SECTION 8.05. Indemnity for Government Obligations...................... 65
SECTION 8.06. Reinstatement............................................. 65
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders................................ 66
SECTION 9.02. With Consent of Holders................................... 66
SECTION 9.03. Compliance with Trust Indenture
Act................................................... 67
SECTION 9.04. Revocation and Effect of Consents and
Waivers............................................... 67
SECTION 9.05. Notation on or Exchange of
Securities............................................ 68
SECTION 9.06. Trustee To Sign Amendments................................ 68
SECTION 9.07. Payment for Consent....................................... 69
ARTICLE X
Subordination
SECTION 10.01. Agreement To Subordinate ................................. 69
SECTION 10.02. Liquidation, Dissolution, Bankruptcy ..................... 70
SECTION 10.03. Default on Senior Indebtedness ........................... 70
SECTION 10.04. Acceleration of Payment of
Securities............................................ 71
SECTION 10.05. When Distribution Must Be Paid Over....................... 71
SECTION 10.06. Subrogation............................................... 71
SECTION 10.07. Relative Rights........................................... 72
SECTION 10.08. Subordination May Not Be Impaired by
Company............................................... 72
SECTION 10.09. Rights of Trustee and Paying Agent ....................... 72
SECTION 10.10. Distribution or Notice to
Representative........................................ 73
SECTION 10.11. Article X Not To Prevent Events of
Default or Limit Right To
Accelerate ........................................... 73
SECTION 10.12. Trust Moneys Not Subordinated ............................ 73
SECTION 10.13. Trustee Entitled To Rely ................................. 73
SECTION 10.14. Trustee To Effectuate
Subordination ........................................ 74
SECTION 10.15. Trustee Not Fiduciary for Holders of
Senior Indebtedness .................................. 74
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions ........................................... 74
SECTION 10.17 Certain Payments.......................................... 75
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE XI
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls.............................. 75
SECTION 11.02. Notices................................................... 75
SECTION 11.03. Communication by Holders with Other
Holders.............................................. 76
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent................................. 76
SECTION 11.05. Statements Required in Certificate or
Opinion.............................................. 76
SECTION 11.06. Rules by Trustee, Paying Agent and
Registrar............................................ 77
SECTION 11.07. Legal Holidays............................................ 77
SECTION 11.08. GOVERNING LAW............................................. 77
SECTION 11.09. No Recourse Against Others................................ 77
SECTION 11.10. Successors................................................ 77
SECTION 11.11. Multiple Originals........................................ 78
SECTION 11.12. Table of Contents; Headings............................... 78
SECTION 11.13. Severability.............................................. 78
Appendix A - Provisions Relating to Initial Securities and
Exchange Securities
Exhibit 1 to
Appendix A - Form of Initial Security
Exhibit A - Form of Exchange Security
</TABLE>
<PAGE> 8
INDENTURE dated as of July 22, 1997, among BOYD GAMING
CORPORATION, a Nevada corporation (the "Company"), and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts banking
corporation (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 9.50% Senior
Subordinated Notes Due July 15, 2007 (the "Initial Securities") and, if and when
issued pursuant to a registered exchange for the Initial Securities, the
Company's 9.50% Senior Subordinated Notes Due July 15, 2007 (the "Exchange
Securities" and together with the Initial Securities, the "Securities"):
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Additional Assets" means (i) any Property (other than cash, cash
equivalents or securities) to be owned by the Company or a Restricted Subsidiary
and used in a Related Business, (ii) the costs of improving, restoring,
replacing or developing any Property owned by the Company or a Restricted
Subsidiary which is used in a Related Business or (iii) Investments in any other
Person engaged primarily in a Related Business (including the acquisition from
third parties of Capital Stock of such Person) as a result of which such other
Person becomes a Restricted Subsidiary in compliance with the procedure for
designation of Restricted Subsidiaries set forth below in the definition of
"Restricted Subsidiary".
"Affiliate" means, with respect to any Person, a Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person, (ii) which directly
or indirectly through one or more intermediaries beneficially owns or holds 10%
or more of any class of the Voting Stock of such Person (or a 10% or greater
equity interest in a Person which is not a corporation) or (iii) of which 10% or
more of any class of the Voting Stock (or, in the case of a Person which is not
a corporation, 10% or more of the equity interest) is beneficially owned or held
directly or indirectly through one or more intermediaries by such
<PAGE> 9
2
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Asset Sale" means the sale, conveyance, transfer, lease or other
disposition, whether in a single transaction or a series of related transactions
(including, without limitation, dispositions pursuant to Sale/Leaseback
Transactions or pursuant to the merger of the Company or any of its Restricted
Subsidiaries with or into any Person other than the Company or one of its
Restricted Subsidiaries, but not including any dispositions to the Company or
any of its Restricted Subsidiaries), by the Company or one of its Restricted
Subsidiaries to any Person other than the Company or one of its Restricted
Subsidiaries of (i) any of the Capital Stock or other ownership interests of any
Subsidiary of the Company or (ii) any other Property of the Company or any
Property of its Restricted Subsidiaries, in each case not in the ordinary course
of business of the Company or such Restricted Subsidiary.
"Attributable Indebtedness" means Indebtedness deemed to be Incurred
in respect of a Sale/Leaseback Transaction and shall be, at the date of
determination, the present value (discounted at the actual rate of interest
implicit in such transaction, compounded annually), of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to such Preferred Stock multi
plied by the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors,
<PAGE> 10
3
to be in full force and effect on the date of such certification and delivered
to the Trustee.
"Boyd Family" means William S. Boyd, any direct descendant or spouse
of such person, or any direct descendant of such spouse, and any trust or other
estate in which each person who has a beneficial interest, directly or
indirectly through one or more intermediaries, in Capital Stock of the Company
is one of the foregoing persons.
"Boyd Notes" means the Company's 9.25% Senior Notes Due 2003 issued
pursuant to the Indenture dated as of October 4, 1996, between the Company and
The Bank of New York, a New York banking corporation.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP. For purposes of Section 4.10, Capital Lease Obligations shall be
deemed secured by a Lien on the Property being leased.
"Capital Stock" means, with respect to any Person, any and all
shares or other equivalents (however designated) of corporate stock, partnership
interests or any other participation, right, warrants, options or other interest
in the nature of an equity interest in such Person, but excluding any debt
security convertible or exchangeable into such equity interest.
"Change of Control" means the occurrence of any of the following
events: (i) any "person" or "group" (within the meaning of Sections 13(d)(3) and
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 Permitted Holders and other than a Restricted
Subsidiary, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time) of 50%
or more of the total voting power of all classes of the Voting Stock of the
Company and/or warrants
<PAGE> 11
4
or options to acquire such Voting Stock, calculated on a fully diluted basis;
provided that for purposes of this clause (i), the members of the Boyd Family
shall be deemed to beneficially own any Voting Stock of a corporation held by
any other corporation (the "parent corporation") so long as the members of the
Boyd Family beneficially own (as so defined), directly or indirectly through one
or more intermediaries, in the aggregate 50% or more of the total voting power
of the Voting Stock of the parent corporation; (ii) the sale, lease, conveyance
or other transfer of all or substantially all of the Property of the Company
(other than to any Restricted Subsidiary); (iii) the stockholders of the Company
shall have approved any plan of liquidation or dissolution of the Company; (iv)
the Company consolidates with or merges into another Person or any Person
consolidates with or merges into the Company in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is reclassified
into or exchanged for cash, securities or other property, other than any such
transaction where (a) the outstanding Voting Stock of the Company is
reclassified into or exchanged for Voting Stock of the surviving corporation
that is Capital Stock and (b) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving corporation immediately after
such transaction in substantially the same proportion as before the transaction;
or (v) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with any
new directors whose election or appointment by such board or whose nomination
for election by the stockholders of the Company was approved by a vote of either
(A) 66 2/3% 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 or (B) members of the Boyd Family who beneficially own
(as defined for purposes of clause (i) above), directly or indirectly through
one or more intermediaries, in the aggregate 50% or more of the total voting
power of the Voting Stock of the Company) cease for any reason to constitute a
majority of the Board of Directors then in office.
"Change of Control Time" means the earlier of the public
announcement of (x) a Change of Control or (y) (if applicable) the intention of
the Company to effect a Change of Control.
"Change of Control Triggering Event" means both a Change of Control
and a Rating Decline with respect to the
<PAGE> 12
5
Securities; provided, however, that a Change of Control Triggering Event shall
not be deemed to have occurred if (i) at the Change of Control Time the
Securities have Investment Grade Status and (ii) the Company effects defeasance
of the Securities pursuant to the provisions of Article VIII prior to a Rating
Decline.
"CH&C" means California Hotel and Casino, a Nevada corporation.
"CHFC Indenture" means the Indenture dated October 15, 1992, among
CHFC, CH&C and State Street Bank and Trust Company, a Massachusetts banking
corporation.
"CHFC Notes" means the 11% Senior Subordinated Notes Due 2002 issued
pursuant to the CHFC Indenture.
"CHFC" means California Hotel Finance Corporation, a Nevada
corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Consolidated EBITDA" means, for any period, without duplication,
Consolidated Net Income, plus (i) Consolidated Fixed Charges, (ii) provisions
for taxes based on income to the extent such taxes were deducted in determining
Consolidated Net Income, (iii) consolidated depreciation expense, (iv)
consolidated amortization expense, and (v) other noncash items reducing
Consolidated Net Income, minus (vi) other noncash items increasing Consolidated
Net Income, all as determined on a consolidated basis for the Company and its
Restricted Subsidiaries in conformity with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of (i)
Consolidated EBITDA during the Reference Period to (ii) the aggregate amount of
Consolidated Fixed Charges during the Reference Period.
"Consolidated Fixed Charges" means, for any period, the total
interest expense of the Company and its consolidated Subsidiaries (other than
Unrestricted Subsidiaries), including (i) the interest component of Capital
Lease Obligations, (ii) one-third of the rental expense attributable to
operating leases, (iii) amortization of Indebtedness discount and commissions,
discounts and
<PAGE> 13
6
other similar fees and charges owed with respect to Indebtedness, (iv) noncash
interest payments, (v) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, (vi) net
costs pursuant to Interest Rate Agreements, (vii) dividends on all Preferred
Stock of Restricted Subsidiaries held by Persons other than the Company or a
Restricted Subsidiary, (viii) interest attributable to the Indebtedness of any
other Person for which the Company or any Restricted Subsidiary is responsible
or liable as obligor, guarantor or otherwise (including Indebtedness Guaranteed
pursuant to Investment Guarantees) and (viii) any dividend or distribution,
whether in cash, property or securities, on Disqualified Stock of the Company.
"Consolidated Net Income" means for any period, the net income
(loss) of the Company and its Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income (i) any net income (loss) of any
Person if such Person is not a Restricted Subsidiary, except that subject to the
limitations contained in (iv) below, (a) the Company's equity in the net income
of any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other distribution to
a Restricted Subsidiary, to the limitations contained in clause (iii) below) and
(b) the Company's equity in a net loss of any such Person (other than an
Unrestricted Subsidiary) for such period shall be included in determining such
Consolidated Net Income, (ii) any net income (loss) of any Person acquired by
the Company or a Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition, (iii) any net income (loss) of any
Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions, directly
or indirectly, to the Company, except that (a) subject to the limitations
contained in (iv) below, the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash that could have been distributed by
such Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend (subject, in the case of a dividend to
another Restricted Subsidiary, to the limitation contained in this clause) and
(b) the Company's equity in a net loss of any such Restricted
<PAGE> 14
7
Subsidiary for such period shall be included in determining such Consolidated
Net Income, (iv) any gain or loss realized upon the sale or other disposition of
any Property of the Company or its consolidated Subsidiaries (including pursuant
to any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in
the ordinary course of business and any gain or loss realized upon the sale or
other disposition of any Capital Stock of any Person, (v) any extraordinary gain
or loss and (vi) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Credit Facility" means the revolving credit facility, as amended
from time to time, among the Company, certain Subsidiaries and a syndicate of
banks, and any extensions, revisions, refinancings or replacements thereof by an
institutional lender or syndicate of institutional lenders.
"Currency Exchange Protection Agreement" means, in respect of a
Person, any foreign exchange contract, currency swap agreement, currency option
or other similar agreement or arrangement designed to protect such Person
against fluctuations in currency exchange rates.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default; provided, however, that a Default
with respect to any event referred to in clause (iv) of the definition of "Event
of Default" shall not be deemed to occur until the Company has received written
notice of such event from the Trustee or Holders of not less than 25% in
aggregate principal amount of the Securities then outstanding.
"Designated Senior Indebtedness" means any Senior Indebtedness of
the Company which, at the date of determination, has an aggregate principal
amount outstanding of, or under which at the date of determination the holders
<PAGE> 15
8
thereof are committed to lend up to, at least $25 million and is specifically
designated by the Company in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes hereof.
"Disqualified Stock" of a Person means any Capital Stock of such
Person: (i) that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or otherwise (a) matures or is
mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b)
is or may become redeemable or repurchaseable at the option of the holder
thereof, in whole or in part, or (c) is convertible or exchangeable or
exercisable for Indebtedness; and (ii) as to which the maturity, mandatory
redemption, conversion or exchange or redemption at the option of the holder
thereof occurs, or may occur, in the case of each of clauses (i) or (ii) on or
prior to the first anniversary of the Stated Maturity of the Securities;
provided, however, that such Capital Stock of the Company or any of its
Subsidiaries shall not constitute Disqualified Stock if it is redeemable prior
to the first anniversary of the Stated Maturity of the Securities only if: (A)
the holder or a beneficial owner of such Capital Stock is required to qualify
under the Gaming Laws and does not so qualify, or (B) the Board of Directors
determines in its reasonable, good faith judgment, as evidenced by a Board
Resolution, that as a result of a holder or beneficial owner owning such Capital
Stock, the Company or any of its Subsidiaries has lost or may lose any Gaming
License, which if lost or not reinstated, as the case may be, would have a
material adverse effect on the business of the Company and its Subsidiaries,
taken as a whole, or would restrict the ability of the Company or any of its
Subsidiaries to conduct business in any gaming jurisdiction.
"Event of Loss" means, with respect to any Property, any (i) loss,
destruction or damage of such Property; or (ii) any condemnation, seizure or
taking, by exercise of the power of eminent domain or otherwise, of such
Property, or confiscation or requisition of the use of such Property.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means with respect to any Property, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair
<PAGE> 16
9
Market Value will be determined, except as otherwise provided, (i) if such
Property has a Fair Market Value of less than $5 million, by any Officer or (ii)
if such Property has a Fair Market Value in excess of $5 million, by a majority
of the Board of Directors and evidenced by a Board Resolution, dated within 30
days of the relevant transaction, delivered to the Trustee.
"GAAP" means generally accepted accounting principles in effect on
the date of this Indenture, including those 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. All ratios and
computations based on GAAP contained in this Indenture shall be computed in
conformity with GAAP consistently applied.
"Gaming Authority" means any of the Nevada Gaming Commission, the
Nevada Gaming Control Board, the Mississippi Gaming Commission, the Mississippi
State Tax Commission, the Missouri Gaming Commission, the National Indian Gaming
Commission, the Bureau of Indian Affairs, the Illinois Gaming Board and any
other agency (including, without limitation, any agency established by a
federally-recognized Indian tribe to regulate gaming on such tribe's
reservation) which has, or may at any time after the date of this Indenture
have, jurisdiction over the gaming activities of the Company or any of its
Subsidiaries or any successor to such authority.
"Gaming Facility" means any gaming establishment and other property
or assets directly ancillary thereto or used in connection therewith, including
any building, restaurant, hotel, theater, parking facilities, retail shops,
land, golf courses and other recreation and entertainment facilities, vessel,
barge, ship and equipment or 100% of the equity interest of a Person the primary
business of which is ownership and operation of any of the foregoing.
"Gaming Laws" means the gaming laws of a jurisdiction or
jurisdictions to which the Company or any of its Subsidiaries is, or may at any
time after the date of this Indenture be, subject.
"Gaming License" means any license, permit, franchise or other
authorization from any Governmental
<PAGE> 17
10
Authority required on the date of this Indenture or at any time thereafter to
own, lease, operate or otherwise conduct the gaming business of the Company and
its Subsidiaries, including all licenses granted under Gaming Laws and other
Legal Requirements.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit, whether Federal, state, county,
district, city or other political subdivision, foreign or otherwise and whether
now or hereafter in existence, or any officer or official of any thereof,
including any Gaming Authority.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such first
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or otherwise),
extend, assume, Guarantee or become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or obligation on the consolidated balance sheet of such
Person including by merger or operation of law (and "Incurrence", "Incurred",
"Incurrable" and "Incurring" shall have meanings correlative to the foregoing).
The accretion of principal of a noninterest bearing or other discount security
shall be deemed the Incurrence of Indebtedness.
<PAGE> 18
11
"Indebtedness" means (without duplication), with respect to any
Person, any indebtedness, secured or unsecured, contingent or otherwise, which
is for borrowed money (whether or not the recourse of the lender is to the whole
of the assets of such Person or only to a portion thereof), or the principal
amount of such indebtedness evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding any balances that constitute customer advance
payments and deposits, accounts payable or trade payables, and other accrued
liabilities arising in the ordinary course of business) if and to the extent any
of the foregoing indebtedness would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, and shall also include, to the
extent not otherwise included (i) any Capital Lease Obligations, (ii)
Indebtedness of other Persons secured by a Lien to which the Property or assets
owned or held by such Person is subject, whether or not the obligation or
obligations secured thereby shall have been assumed (the amount of such
Indebtedness being deemed to be the lesser of the value of such Property or
assets or the amount of the Indebtedness so secured), (iii) Guarantees of
Indebtedness of other Persons, (iv) any Disqualified Stock, (v) any Attributable
Indebtedness, (vi) all obligations of such Person in respect of letters of
credit, bankers' acceptances or other similar instruments or credit transactions
issued for the account of such Person (including reimbursement obligations with
respect thereto), other than obligations with respect to letters of credit
securing obligations (other than obligations described in this definition)
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, (vii) in the case of the Company, Preferred Stock of its
Restricted Subsidiaries and (viii) obligations pursuant to any Interest Rate
Agreement or Currency Rate Protection Agreement. Notwithstanding the foregoing,
Indebtedness shall not include any interest or accrued interest until due and
payable. For purposes of this definition, the maximum fixed repurchase price of
any Disqualified Stock or Preferred Stock that does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Disqualified
Stock or Preferred Stock as if such Disqualified Stock or Preferred Stock were
repurchased on any date on which Indebtedness shall be required to be determined
pursuant to this Indenture; provided, however, that if such Disqualified Stock
or Preferred Stock is not
<PAGE> 19
12
then permitted to be repurchased, the repurchase price shall be the book value
of such Disqualified Stock or Preferred Stock. The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
other obligations described in clauses (i) through (viii) above in respect
thereof at such date.
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the TIA that are deemed to be a part of and govern
this instrument, and any such supplemental indenture, respectively.
"Independent Advisor" means an investment banking firm of national
standing with noninvestment-grade debt underwriting experience or any third
party appraiser of national standing; provided, however, that such firm or
appraiser is not an Affiliate of the Company.
"Interest Rate Agreement" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement.
"Investment" by any Person means any direct or indirect loan,
advance or other extension of credit or capital contribution (by means of
transfers of cash or other Property to others or payments for Property or
services for the account or use of others, or otherwise) to, or Incurrence of an
Investment Guarantee or a Guarantee of any obligation of, or purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities or
evidence of Indebtedness issued by, any other Person, including the
redesignation by the Board of Directors of a Person to be an Unrestricted
Subsidiary. In determining the amount of any Investment in respect of any
Property other than cash, such Property shall be valued at its Fair Market Value
at the time of such Investment.
"Investment Grade Rating" means a rating equal to or higher than
Baa3 (or the equivalent) by Moody's (or any successor to the rating agency
business thereof), BBB- (or the equivalent) by S&P (or any successor to the
rating agency business thereof) and BBB- (or the equivalent) by Duff & Phelps
Credit Rating Co. (or any successor to the rating agency business thereof).
<PAGE> 20
13
"Investment Grade Status" means any time at which the ratings of the
Securities by two of the three Rating Agencies are Investment Grade Ratings;
provided, however, that one of such two must be Moody's or S&P.
"Investment Guarantee" means any Guarantee by the Company or a
Restricted Subsidiary of Indebtedness of a Permitted Joint Venture; provided
such Guarantee complies with the requirements of clause (vii) of Section
4.05(b); provided further that only such Indebtedness of such Permitted Joint
Venture Guaranteed by the Company or a Restricted Subsidiary that matures by its
terms prior to the time (if any) that the ability of the Company or a Restricted
Subsidiary to control the day-to-day operations of such Permitted Joint Venture
(pursuant to a management contract or otherwise) is scheduled to expire may
constitute Indebtedness subject to an Investment Guarantee.
"Issue Date" means the date on which the Securities are initially
issued.
"Legal Requirements" means all laws, statutes and ordinances and all
rules, orders, rulings, regulations, directives, decrees, injunctions and
requirements of all Governmental Authorities, that are now or may hereafter be
in existence, and that may be applicable to the Company or any Subsidiary or
Affiliate thereof or the Trustee (including building codes, zoning and
environmental laws, regulations and ordinances and Gaming Laws), as modified by
any variances, special use permits, waivers, exceptions or other exemptions
which may form time to time be applicable.
"Lien" means with respect to any Property of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property (including any Capital
Lease Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing). Any
Sale/Leaseback Transaction shall be deemed to constitute a Lien on the Property
which is the subject of such Sale/Leaseback Transaction securing the
Attributable Indebtedness represented thereby.
"Material Gaming Facility" means any Gaming Facility owned, leased
or operated by the Company or any
<PAGE> 21
14
Subsidiary or Permitted Joint Venture which generated more than 10% of
Consolidated EBITDA during the Reference Period or represented more than 10% of
the book value of the Company's consolidated assets as of the date of the most
recent balance sheet prepared by the Company.
"Mirage Joint Venture" means the joint venture pursuant to that
certain Joint Venture Agreement dated as of May 29, 1996, by and between MAC,
CORP., a New Jersey corporation which is a wholly-owned subsidiary of Mirage
Resorts, Incorporated, a Nevada corporation, and Grand K, Inc., a Nevada
corporation which is a wholly-owned subsidiary of the Company.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale, net of attorney's fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually Incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Net Proceeds" from any Asset Sale or Event of Loss by any Person or
its Restricted Subsidiaries means cash and cash equivalents received in respect
of the Property sold or with respect to which an Event of Loss occurred net of
(i) all reasonable out-of-pocket expenses of such Person or such Restricted
Subsidiary Incurred in connection with an Asset Sale of such type, including,
without limitation, all legal, title and recording tax expenses, commissions and
fee and expenses incurred (but excluding any finder's fee or broker's fee
payable to any Affiliate of such Person) and all Federal, state, provincial,
foreign and local taxes arising in connection with such Asset Sale or Event of
Loss that are paid or required to be accrued as a liability under GAAP by such
Person or its Restricted Subsidiaries, (ii) all payments made by such Person or
its Restricted Subsidiaries on any Indebtedness which is secured by such
Property in accordance with the terms of any Lien upon or with respect to such
Property or which must, by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Sale or by applicable law, be repaid out of the
proceeds from such Asset Sale or Event of Loss and (iii) all contractually
required distributions and other payments made to minority interest holders (but
excluding distributions and payments to Affiliates of such Person) in Restricted
Subsidiaries of such Person as a result of such Asset Sale or Event of Loss;
provided, however, that, in the event that any consideration
<PAGE> 22
15
for an Asset Sale (which would otherwise constitute Net Proceeds) is required to
be held in escrow pending determination of whether a purchase price adjustment
will be made, such consideration (or any portion thereof) shall become Net
Proceeds only at such time as it is released to such Person or its Restricted
Subsidiaries from escrow; and provided further, however, that any noncash
consideration received in connection with an Asset Sale or Event of Loss which
is subsequently converted to cash shall be deemed to be Net Proceeds at and from
the time of such conversion.
"Non-Recourse Indebtedness" means Indebtedness of a Person to the
extent that under the terms thereof or pursuant to applicable law (i) no
personal recourse shall be had against such Person for the payment of the
principal of or interest or premium, if any, on such Indebtedness, and (ii)
enforcement of obligations on such Indebtedness is limited only to recourse
against interests in Property purchased with the proceeds of the Incurrence of
such Indebtedness and as to which neither the Company nor any of its Restricted
Subsidiaries provides any credit support or is liable.
"Officer" means the Chief Executive Officer, President, the
Treasurer, or any Executive Vice President or Vice President of the Company.
"Officers' Certificate" means a certificate signed by two Officers
at least one of whom shall be the principal executive officer, principal
accounting officer or principal financial officer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
"Permitted FF&E Financing" means Indebtedness of the Company or any
of its Restricted Subsidiaries that is Incurred to finance the acquisition or
lease after the date of this Indenture of newly acquired or leased furniture,
fixtures or equipment ("FF&E") used directly in the operation of a Gaming
Facility owned or leased by the Company or its Restricted Subsidiaries and
secured by a Lien on such FF&E in an amount not to exceed 100% of the cost of
the FF&E so purchased or leased.
"Permitted Holders" means the Boyd Family and any group (as such
term is used in Sections 13(d) and 14(d) of
<PAGE> 23
16
the Exchange Act) comprised solely of members of the Boyd Family.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) a Restricted Subsidiary or a Person which will,
upon the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary, as
the case may be; (vii) stock, obligations or securities received in settlement
of debts created in the ordinary course of business and owing to the Company or
any Restricted Subsidiary or in satisfaction of judgments; and (viii) securities
received pursuant to clause (ii) of Section 4.12(a).
"Permitted Joint Venture" means a Person in which a Permitted Joint
Venture Investment has been made by the Company or any Restricted Subsidiary.
"Permitted Joint Venture Investment" means any Investment in a
Person primarily engaged or preparing to engage in a Related Business if,
immediately after giving effect to such Investment, the Company or a Restricted
Subsidiary will own at least 50.0% of the shares of Capital Stock (including at
least 50.0% of the total voting power thereof) of such Person, and will control
the day-to-day operations of such Person pursuant to a management contract or
otherwise.
"Permitted Liens" means (i) Liens for taxes, assessments or
governmental charges or levies on the
<PAGE> 24
17
Property of the Company if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good faith and
by appropriate proceedings; (ii) Liens imposed by law, such as carriers',
warehousemen's and mechanics' Liens and other similar Liens on the Property of
the Company which secure payment of obligations arising in the ordinary course
of business; (iii) Liens on the Property of the Company in favor of issuers of
performance bonds and surety bonds obtained in the ordinary course of business;
(iv) other Liens on the Property of the Company incidental to the conduct of its
business or the ownership of its Properties which were not created in connection
with the Incurrence of Indebtedness or the obtaining of advances or credit and
which do not in the aggregate materially detract from the value of its
Properties or materially impair the use thereof in the operation of its
business; (v) pledges or deposits by the Company under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good faith deposits
in connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which the Company or any Restricted Subsidiary is a
party, or deposits to secure public or statutory obligations of the Company or
any Restricted Subsidiary, or deposits for the payment of rent, in each case
Incurred in the ordinary course of business; (vi) utility easements, building
restrictions and such other encumbrances or charges against real property as are
of a nature generally existing with respect to properties of a similar character
and do not materially detract from the value of such Property; and (vii) Liens
securing obligations to the Trustee pursuant to the compensation and indemnity
provisions of this Indenture.
"Permitted Refinancing Indebtedness" means any renewals, extensions,
substitutions, refinancings or replacements of any Indebtedness, including any
successive extensions, renewals, substitutions, refinancings or replacements
(and including refinancings by the Company of Indebtedness of a Restricted
Subsidiary) so long as (i) the aggregate amount of Indebtedness represented
thereby is not increased by such renewal, extension, substitution, refinancing
or replacement, (ii) the Average Life and Stated Maturity is not shortened and
(iii) the new Indebtedness shall not be senior in right of payment to the
Indebtedness that is being extended, renewed, substituted, refinanced or
replaced; provided, however, that Permitted Refinancing Indebtedness shall not
include (a) Indebtedness of a Subsidiary that refinances Indebtedness of the
Company or another Subsidiary or (b) Indebtedness of the Company that refinances
the Indebtedness of an Unrestricted Subsidiary.
<PAGE> 25
18
"Person" means any individual, corporation, company (including
limited liability company), partnership, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"principal" of a Security means the principal of the Security plus
the premium, if any, payable on the Secu rity which is due or overdue or is to
become due at the relevant time.
"pro forma" means, with respect to any calculation made or required
to be made pursuant to the terms hereof, a calculation in accordance with
Article XI of Regulation S-X promulgated under the Securities Act (to the extent
applicable), as interpreted in good faith by the Board of Directors after
consultation with the independent certified public accountants of the Company,
or otherwise a calculation made in good faith by the Board of Directors after
consultation with the independent certified public accountants of the Company,
as the case may be.
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock in any
other Person (but excluding Capital Stock or other securities issued by such
first Person).
"Rating Agencies" means S&P, Duff & Phelps Credit
Rating Co. and Moody's or any successor to the respective
rating agency businesses thereof.
"Rating Decline" shall have occurred if at any date within 90
calendar days after the date of public disclosure of the occurrence of a Change
of Control (which period will be extended for so long as the Company's debt
ratings are under publicly announced review for possible downgrading (or without
an indication of the direction of a possible ratings change) by either Moody's
or S&P or their respective successors) the Securities no longer have Investment
Grade Status.
"Reference Period" means the period of four consecutive fiscal
quarters ending with the last full fiscal
<PAGE> 26
19
quarter immediately preceding the date of a proposed Incurrence, Restricted
Payment or other transaction.
"Related Business" means the business conducted (or proposed to be
conducted) by the Company and its Subsidiaries in connection with any Gaming
Facility and any and all reasonably related businesses necessary for, in
support, furtherance or anticipation of and/or ancillary to or in preparation
for, such business including, without limitation, the development, expansion or
operation of any Gaming Facility (including any land-based, dockside, riverboat
or other type of casino) owned, or to be owned, leased or managed by the Company
or one of its Subsidiaries.
"Related Person" means any legal or beneficial owner of 5% or more
of any class of Capital Stock of the Company or any of its Subsidiaries.
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company.
"Restricted Payment" means (i) any dividend or distribution (whether
made in cash, property or securities) declared or paid on or with respect to any
shares of Capital Stock of the Company or to the Company's stockholders except
for such dividends or distributions payable solely in Capital Stock of the
Company (other than Disqualified Stock of the Company); (ii) a payment made by
the Company or any Restricted Subsidiary (other than to the Company or a
Restricted Subsidiary) to purchase, redeem, acquire or retire any Capital Stock
of the Company or Capital Stock of any Affiliate of the Company or any warrants,
rights or options, to directly or indirectly purchase or acquire any such
Capital Stock or any securities exchangeable for or convertible into any such
Capital Stock; (iii) a payment made by the Company or any Restricted Subsidiary
to redeem, repurchase, defease or otherwise acquire or retire for value, prior
to any scheduled maturity, scheduled sinking fund or mandatory redemption
payment (other than the purchase, repurchase, or other acquisition of any
Indebtedness subordinate in right of payment to the Securities purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition),
Indebtedness of the Company which is subordinate (whether pursuant to its terms
or by operation of law) in right of payment to the Securities; or (iv) any
Investment (other than a Permitted Investment) in any Person.
<PAGE> 27
20
"Restricted Subsidiary" means any Subsidiary of the Company that (A)
has not been designated by the Board of Directors as an Unrestricted Subsidiary
or (B) was an Unrestricted Subsidiary but has been redesignated by the Board of
Directors as a Restricted Subsidiary, in each case as provided under the
definition of Unrestricted Subsidiary; provided, however, that no Subsidiary
shall become a Restricted Subsidiary unless, immediately after giving pro forma
effect to such designation, the Company would be able to incur at least $1.00 of
additional Indebtedness pursuant to Section 4.04(a).
"Sale/Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which Property is sold or transferred
by such Person or a Restricted Subsidiary of such Person and is thereafter
leased back from the purchaser or transferee thereof by such Person or one of
its Restricted Subsidiaries.
"Securities Act" means the Securities Act of 1933, as amended.
"S&P" shall mean Standard & Poor's Ratings Group, a division of the
McGraw-Hill Companies, Inc.
"Senior Indebtedness" means (a) all obligations consisting of the
principal, premium, if any, and accrued and unpaid interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company to the extent post- filing interest is
allowed in such proceeding) in respect of (i) Indebtedness of the Company for
borrowed money and (ii) Indebtedness of the Company evidenced by notes,
debentures, bonds or other similar instruments permitted under this Indenture
for the payment of which the Company is responsible or liable; (b) all Capital
Lease Obligations of the Company; (c) all obligations of the Company (i) for the
reimbursement of any obligor on any letter of credit, bankers' acceptance or
similar credit transaction, (ii) under any Interest Rate Agreement or Currency
Exchange Protection Agreement or (iii) issued or assumed as the deferred
purchase price of Property and all conditional sale obligations of the Company
and all obligations under any title retention agreement permitted under this
Indenture; and (d) all obligations of other Persons of the type referred to in
clauses (a) and (b) for the payment of which the Company is responsible or
liable as guarantor; provided, however, that Senior Indebtedness does not
include (A) Indebtedness of the Company that is by its terms subordinate or pari
passu in right of payment to the
<PAGE> 28
21
Securities, including any Senior Subordinated Indebtedness or any Subordinated
Obligations; (B) any Indebtedness Incurred in violation of the provisions of
this Indenture; (C) accounts payable or any other obligations of the Company to
trade creditors created or assumed by the Company in the ordinary course of
business in connection with the obtaining of materials or services (including
Guarantees thereof or instruments evidencing such liabilities); (D) any
liability for Federal, state, local or other taxes owed or owing by the Company;
(E) any obligation of the Company to any Subsidiary; or (F) any obligations with
respect to any Capital Stock.
"Senior Subordinated Indebtedness" means the Securities and any
other subordinated indebtedness of the Company that specifically provides that
such Indebtedness is to rank pari passu with the Securities and is not
subordinated by its terms to any other subordinated Indebtedness or other
obligation of the Company which is not Senior Indebtedness.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which a payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness (whether
outstanding on the Issue Date or thereafter incurred) which is subordinated or
junior in right of payment to the Securities pursuant to a written agreement to
that effect.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) 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 (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i)
Investments in U.S. Government Obligations maturing within 90 days of the date
of acquisition thereof,
<PAGE> 29
22
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 90 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America or any state thereof having capital, surplus and
undivided profits aggregating in excess of $500,000,000 and whose long-term debt
is rated "A-3" or higher, "A- or higher or "A-" or higher according to Moody's,
S&P or Duff & Phelps Credit Rating Co. (or such similar equivalent rating by at
least one "nationally recognized statistical rating organization" (as defined in
Rule 436 under the Securities Act)), respectively, (iii) repurchase obligations
with a term of not more than 7 days for underlying securities of the types
described in clause (i) entered into with a bank meeting the qualifications
described in clause (ii) above, and (iv) Investments in commercial paper,
maturing not more than 90 days after the date of acquisition, issued by a
corporation (other than the Company or an Affiliate of the Company) organized
and in existence under the laws of the United States of America with a rating at
the time as of which any Investment therein is made of "P-1" (or higher)
according to Moody's, "A-1" (or higher) according to S&P or "A-1" (or higher)
according to Duff & Phelps Credit Rating Co. (or such similar equivalent rating
by at least one "nationally recognized statistical rating organization" (as
defined in Rule 436 under the Securities Act)).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of this Indenture; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "TIA" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939, as so amended.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
which at the time of determination shall be an Unrestricted Subsidiary (as
designated by the Board of Directors) and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary (unless such Subsidiary owns any Capital Stock of or owns or holds
any Lien on any Property of the Company or any other Subsidiary of the Company
which is not a Subsidiary of the Subsidiary to be so designated); provided that
either (A) the Subsidiary to be so designated has total assets of $1,000 or less
or (B) such designation is effective immediately upon such entity becoming a
Subsidiary of the Company. Subject to clause (ii) above, the Board of
<PAGE> 30
23
Directors may redesignate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that immediately after giving pro forma effect to such
redesignation, the Company would be able to incur at least $1.00 of additional
Indebtedness pursuant to Section 4.04(a).
Any such designation by the Board of Directors will be evidenced to
the Trustee by filing with the Trustee a copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying (i) that such
designation complies with the foregoing provisions and (ii) giving the effective
date of such designation, such filing with the Trustee to occur within 75 days
after the end of the fiscal quarter of the Company in which such designation is
made (or, in the case of a designation made during the last fiscal quarter of
the Company's fiscal year, within 120 days after the end of such fiscal year).
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" means securities of any class or classes of a Person,
the holders of which are ordinarily, in the absence of contingencies, entitled
to vote for corporate directors (or Persons performing equivalent functions).
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the
Company all the Capital Stock of which (other than directors' qualifying shares)
is owned by the Company or another Wholly Owned Subsidiary.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Affiliate Transaction"......................................... 4.06(a)
"Bankruptcy Law"................................................ 6.01
"Change of Control Offer"....................................... 4.07(a)
"Change of Control Payment"..................................... 4.07(a)
"Change of Control Payment Date"................................ 4.07(b)
"covenant defeasance option"................................... 8.01(b)
"Custodian"..................................................... 6.01
"Defaulted Interest"........................................... 2.11
"Depositary"................................................... 2.02
</TABLE>
<PAGE> 31
24
<TABLE>
<S> <C>
"Events of Default"............................................. 6.01
"Excess Proceeds".............................................. 4.12
"Global Security".............................................. 2.02
"incorporated provision........................................ 11.01
"legal defeasance option"...................................... 8.01(b)
"Legal Holiday"................................................ 11.07
"pay the Securities"........................................... 10.03
"Paying Agent"................................................. 2.03
"Payment Blockage Notice".......................................10.03
"Payment Blockage Period".......................................10.03
"Prepayment Offer".............................................. 4.12(d)
"Prepayment Offer Notice"....................................... 4.12(e)
"Purchase Date"................................................. 4.12(e)
"Registrar"..................................................... 2.03
"Successor"..................................................... 5.01
"Suspended Covenants"........................................... 4.01
"Trust Officer"................................................ 7.01(c)
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the Commission.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meanings assigned to them by such definitions.
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;
<PAGE> 32
25
(3) "or" is not exclusive;
(4) "including" means including without limita tion;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP; and
(8) the principal amount of any Preferred Stock shall be the greater
of (i) the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with respect to
such Preferred Stock.
ARTICLE II
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the Initial
Securities and the Exchange Securities are set forth in Appendix A, which is
hereby incorporated in and expressly made part of this Indenture. The Initial
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to Appendix A which is hereby
incorporated in and made a part of this Indenture. The Exchange Securities and
the Trustee's certificate of authentication shall be substantially in the form
of Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture. The Securities may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). Each Security shall be dated the date of its
authentication. The terms of the Securities set forth in Exhibit 1 to Appendix A
and Exhibit A are part of the terms of this Indenture.
<PAGE> 33
26
SECTION 2.02. Execution and Authentication. Two Officers of the
Company shall sign the Securities by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the Secu
rities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenti cates the Security, the Security shall
be valid neverthe less.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be con clusive evidence that the Security has been authenticated
under this Indenture.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appoint ment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authen tication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent (as
defined in Section 2.03) or agent for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Secur ities and of their transfer and exchange. The
Company may have one or more coregistrars and one or more additional paying
agents. The term "Paying Agent" includes any addi tional paying agent.
The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms 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 Regis trar or Paying Agent, the Trustee shall act as such and shall
be entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
<PAGE> 34
27
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securi ties.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due. 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 Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the Company
or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as
Paying Agent and hold it as a separate trust fund. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and to account
for any funds disbursed by the Paying Agent. Upon complying with this Section,
the Paying Agent shall have no further liability for the money delivered to the
Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably prac ticable the most recent list available to
it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
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 Securityholders.
SECTION 2.06. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security provides evidence
reasonably satisfactory to the Company and the Trustee that the Security has
been lost, destroyed or wrongfully taken, then, in absence of notice to the
Company or the Trustee that the Security has been acquired by a bona fide
purchaser, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Holder satisfies the reasonable requirements of the
Trustee or the Company. If required by the Trustee or the Company, such Holder
shall furnish an indemnity bond sufficient in the judgment of the Company and
the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar
and any co-registrar from any loss which any of them may suffer if a Security is
replaced. The
<PAGE> 35
28
Company and the Trustee may charge the Holder for their expenses in replacing a
Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.07. Outstanding Securities. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
as not outstanding. A Security does not cease to be outstand ing because the
Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Sec tion 2.06, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
then on and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction or consent or any amendment,
modification or other change to this Indenture, Securities owned by the Company
or by an Affiliate of the Company shall be disregarded and treated as if they
were not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent
or any amendment, modification or other change to this Indenture, only
Securities which the Trustee knows are so owned shall be so disregarded.
Securities so owned which have been pledged in good faith shall not be
disregarded if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to the Securities and that the pledgee is
not the Company or an Affiliate of the Company.
SECTION 2.08. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations
<PAGE> 36
29
that the Company considers appropriate for temporary Secur ities. Without
unreasonable delay, the Company shall prepare and the Trustee shall authenticate
definitive Securities and deliver them in exchange for temporary Securities.
SECTION 2.09. Cancelation. The Company at any time may deliver
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel
(subject to the record retention require ments of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver the canceled Securities to the Company. The Company may
not issue new Securities to replace Securities it has redeemed, paid or
delivered to the Trustee for cancelation.
SECTION 2.10. Defaulted Interest. Any interest on any Security which
is payable, but is not punctually paid or duly provided for, on the dates and in
the manner provided in the Securities and this Indenture (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant record date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in clause (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities are registered at the close
of business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
notify the Trustee in writing of the amount of Defaulted Interest proposed
to be paid on each Security and the date of the proposed payment, and at
the same time the Company shall irrevocably deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date for the payment of
such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than
10 days after the receipt by
<PAGE> 37
30
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such special record date and, in the name
and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the special record date therefor to
be given to each Holder, not less than 10 days prior to such special
record date. Notice of the proposed payment of such Defaulted Interest and
the special record date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Securities are
registered at the close of business on such special record date.
(ii) The Company may make payment of any Defaulted Interest on the
Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.10, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 2.11. Record Date. The Company may set a record date for
purposes of determining the identity of Securityholders entitled to vote or to
consent to any action solicited by the Company by vote of consent authorized or
permitted by Sections 6.04 and 6.05. Unless this Indenture provides otherwise,
such record date shall be the later of 30 days prior to the first solicitation
of such consent or the date of the most recent list of Holders furnished to the
Trustee pursuant to Section 2.05 prior to such solicitation.
SECTION 2.12. Computation of Interest. Interest on the Securities
shall be computed on the basis of a 360- day year of twelve 30-day months. For
disclosure purposes under the Interest Act (Canada), whenever in this Indenture
or the Securities interest at a specified rate is to be calculated on the basis
of a period less than a calendar year, the yearly rate of interest to which such
rate is equivalent is such rate multiplied by the actual number of
<PAGE> 38
31
days in the relevant calendar year and divided by the number
of days in such period.
SECTION 2.13. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers and, if it does so, the Trustee shall use the CUSIP
numbers in notices of redemption or exchange as a convenience to Holders;
provided that any such notice may state that no representa tion is made as to
the correctness or accuracy of the CUSIP numbers printed in the notice or on the
Securities and that reliance may be placed only on the other identification
numbers printed on the Securities. The Company will promptly notify the Trustee
of any change in the CUSIP numbers.
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for in
this Section at least 45 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the condi tions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee
considers fair and appropriate and in accordance with methods generally used at
the time of selection by fiduciaries in similar circumstances. The Trustee shall
make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Secur ities that have denominations larger than $1,000. Secur ities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
<PAGE> 39
32
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemp tion of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemp
tion price;
(5) if fewer than all the outstanding Securities
are to be redeemed, the identification and principal
amounts of the particular Securities to be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is pro hibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date; and
(7) 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
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section at least 45 days before the redemption date.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surren der to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued
<PAGE> 40
33
interest to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the related interest payment
date). Failure to give notice or any defect in the notice to any Holder shall
not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to the redemption
date, the Company shall deposit with the Paying Agent (or, if the Company or a
Subsidiary is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of and accrued inter est (subject to the
right of Holders of record on the relevant record date to receive interest due
on the related interest payment date) on all Securities to be redeemed on that
date other than Securities or portions of Securities called for redemption which
have been delivered by the Company to the Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Secur ity
surrendered.
SECTION 3.07. Redemption Pursuant to Gaming Laws. (a) If any Gaming
Authority requires that a Holder or beneficial owner of Securities must be
licensed or found qualified or suitable to hold or own the Securities, but that
Person is not licensed or found qualified or suitable within any time specified
by such Gaming Authority, or such Gaming Authority denies a license to or finds
unqualified or unsuitable such Person, the Company will have the right at its
option to require such Person to dispose of such Person's Securities within the
time period prescribed by the Company (or such other time period as may be
prescribed by any Gaming Authority, which time period shall be specified in a
written notice from the Company). If such Holder or beneficial owner, having
been given the opportunity by the Company to dispose of such Securities, fails
to dispose of such Securities within the prescribed time period, the Company
shall have the right to call for redemption such Securities by notice of
redemption to such Person given in accordance with Section 3.07(c) with the
effect set forth in Section 3.04. A copy of such notice of any such required
disposition or call for redemption shall be given to the Trustee.
<PAGE> 41
34
(b) On any redemption of Securities pursuant to this Section 3.07,
the redemption price (the "Redemption Price") shall be the lesser of (i) the
lowest closing sale price of the Securities on any trading day during the 120-
day period ending on the date upon which the Company shall have received notice
from a Gaming Authority of such Holder's disqualification or (ii) the price at
which such Holder or beneficial owner acquired the Securities, unless a
different redemption price is required by such Gaming Authority, in which event
such required price shall be the Redemption Price. Each Holder and beneficial
owner, by accepting a Security, agrees to the provisions of this Section 3.07
and any related paragraphs of the Securities and agrees to inform the Company
upon request of the price at which such Holder or beneficial owner acquired such
Holder's or beneficial owner's Securities.
(c) Any redemption notice given by the Company under this Section
3.07 shall state (i) that the Securities are being called for redemption as a
result of the Holder's or beneficial owner's status under the relevant Gaming
Laws, (ii) the Redemption Date, (iii) the Redemption Price and (iv) the place or
places where such Securities are to be surrendered for payment of the Redemption
Price.
ARTICLE IV
Covenants
SECTION 4.01. Certain Suspended Covenants. During any period of time
that (i) the Securities have Investment Grade Status and (ii) no Default or
Event of Default has occurred and is continuing under this Indenture with
respect to the Securities, the Company and its Restricted Subsidiaries will not
be subject to the provisions of Sections 4.04, 4.05 and 4.12 (collectively, the
"Suspended Covenants"). In the event that the Company and its Restricted
Subsidiaries are not subject to the Suspended Covenants with respect to the
Securities for any period of time as a result of the preceding sentence and,
subsequently, at least two of the three Rating Agencies withdraw their ratings
or assign the Securities a rating below the required Investment Grade Ratings,
then the Company and its Restricted Subsidiaries will thereafter again be
subject to the Suspended Covenants for the benefit of the Securities and
compliance with the Suspended Covenants with respect to Restricted Payments made
after the time of such withdrawal or assignment will be calculated in accordance
with Section 4.05 as if such Section had been in
<PAGE> 42
35
effect during the entire period of time from the Issue Date with respect to the
Securities.
SECTION 4.02. Payment of Securities. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due.
The Company shall pay interest on overdue princi pal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.03. SEC Reports. The Company shall file with the Trustee
and provide Securityholders, within 15 days after it files them with the
Commission, copies of its annual report and the information, documents and other
reports which the Company is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. Notwithstanding that the Company may
not be required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall continue to file with the
Commission and provide the Trustee and Securityholders with the annual reports
and the information, documents and other reports which are specified in Sections
13 and 15(d) of the Exchange Act. The Company also shall comply with the other
provisions of TIA Section 314(a).
SECTION 4.04. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, Incur any Indebtedness unless
no Event of Default has occurred and is continuing and unless (after giving
effect to (i) the Incurrence of such Indebtedness as if such Indebtedness was
Incurred at the beginning of the Reference Period and (if applicable) the
application of the net proceeds thereof to repay other Indebtedness as if the
application of such proceeds occurred at the beginning of the Reference Period,
(ii) the Incurrence and retirement of any other Indebtedness since the first day
of the Reference Period as if such Indebtedness was Incurred or retired at the
beginning of the Reference Period and (iii) the acquisition or disposition of
any company or business by the Company or any Restricted Subsidiary since the
first day of the Reference Period including any acquisition or disposition which
will be consummated contemporaneously with the Incurrence of such
<PAGE> 43
36
Indebtedness, as if such acquisition or disposition occurred at the beginning of
the Reference Period), the Company's Consolidated Fixed Charge Coverage Ratio
would exceed 2.0 to
1.0.
(b) Notwithstanding the foregoing limitation, the Company or any
Restricted Subsidiary may Incur the following Indebtedness: (i) Indebtedness
evidenced by the Securities; (ii) Indebtedness outstanding on the Issue Date;
(iii) Indebtedness under the Credit Facility in an aggregate amount outstanding
at any time not to exceed $500 million (less (A) the aggregate principal amount
of CHFC Notes then outstanding and (B) Indebtedness Incurred pursuant to clause
(x) below to refinance Indebtedness previously Incurred pursuant to this clause
(iii) and any Permitted Refinancing Indebtedness in respect thereof), as such
amount may be reduced as a result of repayments pursuant to Section 4.12 hereof
of Indebtedness outstanding under the Credit Facility; (iv) Indebtedness of the
Company or a Restricted Subsidiary owing to and held by a Restricted Subsidiary
or the Company; provided, however, that any subsequent issuance or transfer of
any Capital Stock or other event that results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any subsequent transfer of any such
Indebtedness except to the Company or a Restricted Subsidiary shall be deemed in
each case to constitute the Incurrence of such Indebtedness by the issuer
thereof; (v) Indebtedness under Interest Rate Agreements entered into for the
purpose of limiting interest rate risks, provided that the obligations under
such agreements are related to payment obligations on Indebtedness otherwise
permitted by the terms of this covenant; (vi) Indebtedness under Currency
Exchange Protection Agreements, provided that such Currency Exchange Protection
Agreements were entered into for the purpose of limiting exchange rate risks in
connection with transactions entered into in the ordinary course of business;
(vii) Indebtedness in connection with one or more standby letters of credit,
performance bonds or completion guarantees issued in the ordinary course of
business or pursuant to self-insurance obligations and not in connection with
the borrowing of money or the obtaining of advances or credit; (viii)
Indebtedness outstanding under Permitted FF&E Financings which are either (x)
Non-Recourse Indebtedness of the Company and its Restricted Subsidiaries or (y)
limited in amount for each Gaming Facility owned or leased by the Company or any
of its Restricted Subsidiaries to the lesser of (1) the amount of FF&E used in
such Gaming Facility and financed by such Permitted FF&E Financing or (2) $10
million; (ix) so long as no Event of Default has occurred and is continuing,
Indebtedness of the Company not
<PAGE> 44
37
otherwise permitted to be Incurred pursuant to the provisions of the immediately
preceding paragraph or this paragraph in an aggregate amount not to exceed $25
million outstanding at any time; or (x) Permitted Refinancing Indebtedness
Incurred in respect of Indebtedness outstanding pursuant to the provisions of
Section 4.04(a) or clauses (i), (ii) (other than the CHFC Notes), (iii), (viii)
and this clause (x) of this Section 4.04(b).
SECTION 4.05. Limitation on Restricted Payments. (a) The Company
shall not make, and shall not permit any Restricted Subsidiary to make, any
Restricted Payment if at the time of, and after giving effect to, such proposed
Restricted Payment, (i) a Default or an Event of Default shall have occurred and
be continuing, (ii) the Company could not Incur at least $1.00 of additional
Indebtedness pursuant to Section 4.04(a) or (iii) the aggregate amount of such
Restricted Payment and all other Restricted Payments made from and after the
date of this Indenture (the amount of any Restricted Payment, if made other than
in cash, to be based upon Fair Market Value) would exceed an amount equal to the
sum of (A) 50% of the Consolidated Net Income accrued during the period (treated
as one accounting period) from April 1, 1997 to the end of the most recent
fiscal quarter ended immediately prior to the date of such Restricted Payment
(or, in the case such Consolidated Net Income shall be a deficit, minus 100% of
such deficit); (B) the aggregate Net Cash Proceeds received by the Company from
the issue or sale of its Capital Stock (other than Disqualified Stock)
subsequent to March 31, 1997 (other than an issuance or sale to a Subsidiary of
the Company or an employee stock ownership plan or other trust established by
the Company or any of its Subsidiaries or pursuant to clauses (iii) or (iv) of
the following paragraph); (C) the amount by which Indebtedness of the Company or
any Restricted Subsidiary is reduced on the Company's balance sheet upon the
conversion or exchange (other than an issuance or sale to a Subsidiary of the
Company or an employee stock ownership plan or other trust established by the
Company or any of its Subsidiaries) subsequent to March 31, 1997 of any
Indebtedness of the Company or any Restricted Subsidiary convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash or other property distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange); (D) the amount equal to
the net reduction in Investments resulting from (1) payments of dividends,
repayments of loans or advances or other transfers of assets to the Company or
any Restricted Subsidiary or the satisfaction or reduction (other than by means
of payments by the Company or any
<PAGE> 45
38
Restricted Subsidiary) of obligations of other Persons which have been
Guaranteed by the Company or any Restricted Subsidiary or (2) the redesignation
of Unrestricted Subsidiaries as Restricted Subsidiaries, in each case such net
reduction in Investments being (x) valued as provided in the definition of
"Investment", (y) in an amount not to exceed the aggregate amount of Investments
previously made by the Company or any Restricted Subsidiary which were treated
as a Restricted Payment, and (z) included in this clause (D) only to the extent
not included in Consolidated Net Income; (E) payments of dividends, repayments
of loans or advances or other transfers of assets to the Company or any
Restricted Subsidiary from the Mirage Joint Venture to the extent such
dividends, repayments, advances or other transfers exceed $100 million; and (F)
$75 million; provided, however, that in the event that the sum of the amounts
referred to in clauses (A) through (E) above is a negative number, such sum
shall be deemed to be zero.
(b) The provisions of the preceding paragraph shall not prohibit:
(i) the payment of any dividend within 60 days after the date of its declaration
if such dividend could have been paid on the date of its declaration in
compliance with such provisions; provided that at the time of payment of such
dividend no Default under any provision of this Indenture other than this
Section 4.05 shall have occurred and be continuing (or would result therefrom);
(ii) the redemption or repurchase of any Capital Stock or Indebtedness of the
Company (other than any Capital Stock or Indebtedness which is held or
beneficially owned by, or issued by, any member of the Boyd Family, the Company
or any Affiliate of the Company), (A) if the holder or beneficial owner of such
Capital Stock or Indebtedness is required to qualify under the Gaming Laws and
does not so qualify or (B) if necessary in the reasonable, good faith judgment
of the Board of Directors, as evidenced by a Board Resolution, to prevent the
loss or secure the reinstatement of any Gaming License which if lost or not
reinstated, as the case may be, would have a material adverse effect on the
business of the Company and its Subsidiaries, taken as a whole, or would
restrict the ability of the Company or any of its Subsidiaries to conduct
business in any gaming jurisdiction; (iii) any purchase, redemption or other
acquisition or retirement of Capital Stock of the Company made by exchange for,
or out of the proceeds of the substantially concurrent sale of, Capital Stock
(other than Disqualified Stock) of the Company; (iv) any purchase, redemption or
other acquisition or retirement of the Indebtedness of any Person made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock (other than
<PAGE> 46
39
Disqualified Stock) of the Company; (v) any purchase, redemption, defeasance or
other acquisition or retirement for value of Indebtedness from the proceeds of
Permitted Refinancing Indebtedness; (vi) Investments not to exceed $100 million
in the Mirage Joint Venture; (vii) Investment Guarantees to the extent permitted
by Section 4.04 that constitute Permitted Joint Venture Investments and
Guarantee (with full rights of subrogation) Indebtedness Incurred by a Permitted
Joint Venture to acquire or construct Gaming Facilities provided that such
Indebtedness (A) is not expressly subordinated in right of payment or otherwise
to any other Indebtedness of such Permitted Joint Venture and (B) is secured by
first priority security interests in such Gaming Facilities; and (viii) payments
pursuant to Investment Guarantees which were entered into in compliance with
clause (vii) of this Section 4.05(b).
(c) The full amount of any Restricted Payments pursuant to clauses
(i) and (ii) of Section 4.05(b) (but not pursuant to clauses (iii), (iv), (v)
and (vi) of Section 4.05(b)) shall be included in the calculation of the
aggregate amount of the Restricted Payments referred to in Section 4.05(a). With
respect to any Investment Guarantee, (x) if at any time the Company or any
Restricted Subsidiary ceases to control the day-to-day operations of the
Permitted Joint Venture the Indebtedness of which is Guaranteed by the
Investment Guarantee, the full amount of such Investment Guarantee shall
thereafter be included in the calculation of the aggregate amount of Restricted
Payments referred to in Section 4.05(a) and (y) if the Company or a Restricted
Subsidiary retains such control, any amount actually paid pursuant to such
Investment Guarantee shall be included in the calculation of the aggregate
amount of Restricted Payments referred to in Section 4.05(a).
SECTION 4.06. Limitation on Transactions with Affiliates. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, conduct any business or enter into or suffer to exist any
transaction or series of transactions (including the purchase, sale, transfer,
lease or exchange of any Property, the making of any Investment, the giving of
any Guarantee or the rendering or receiving of any service) with, from or for
the benefit of, (1) any Affiliate, (2) any Related Person or (3) any officer or
director of any Affiliate or a Related Person (an "Affiliate Transaction")
unless (i) the terms of such Affiliate Transaction are (a) in writing, if such
Affiliate Transaction involves aggregate payments to either party in excess of
$250,000, (b) in the best interest of the Company or such Restricted Subsidiary,
as the case may be,
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40
and (c) at least as favorable to the Company or such Restricted Subsidiary, as
the case may be, as those that could be obtained at the time of such Affiliate
Transaction in a similar transaction in arm's-length dealings with a Person who
is not such an Affiliate, Related Person or officer or director of an Affiliated
or Related Person, (ii) with respect to each Affiliate Transaction involving
aggregate payments to either party in excess of $5 million, the Company delivers
to the Trustee an Officers' Certificate certifying that such Affiliate
Transaction was approved by a majority of the disinterested members of the Board
of Directors and that such Affiliate Transaction complies with clause (i), and
(iii) with respect to each Affiliate Transaction involving aggregate payments in
excess of $20 million, the Company delivers to the Trustee an opinion letter
from an Independent Advisor to the effect that such Affiliate Transaction is
fair, from a financial point of view.
(b) Notwithstanding the limitation of Section 4.06(a), the Company
may enter into or suffer to exist the following: (i) any transaction pursuant to
any contract in existence on the Issue Date; (ii) any Restricted Payment
permitted to be made pursuant to Section 4.05; (iii) any transaction or series
of transactions between the Company and one or more of its Restricted
Subsidiaries or Permitted Joint Ventures or between two or more of its
Restricted Subsidiaries or Permitted Joint Ventures; and (iv) the payment of
compensation (including amounts paid pursuant to employee benefit plans) for the
personal services of officers, directors and employees of the Company or any of
its Restricted Subsidiaries, so long as the Board of Directors in good faith
shall have approved the terms thereof and deemed the services theretofore or
thereafter to be performed for such compensation to be fair consideration
therefor.
SECTION 4.07. Change of Control. (a) Upon the occurrence of (i) in
the event at the Change of Control Time the Securities do not have Investment
Grade Status, a Change of Control or, (ii) in the event at the Change of Control
Time the Securities have Investment Grade Status, a Change of Control Triggering
Event, each Holder 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
Securities pursuant to the offer described below (the "Change of Control Offer")
at a purchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, thereon to the purchase date (the "Change of
Control Payment").
<PAGE> 48
41
(b) Within 30 days following (i) any Change of Control or, (ii) in
the event the Securities at the earlier of the public announcement of (x) a
Change of Control or (y) (if applicable) the intention of the Company to effect
a Change of Control have Investment Grade Status, a Change of Control Triggering
Event, the Company shall mail a notice to the Trustee and each Holder stating,
among other things: (1) that a Change of Control or Change of Control Triggering
Event, as the case may be, has occurred and a Change of Control Offer is being
made pursuant to this Section 4.07 and that all Securities (or portions thereof)
timely tendered will be accepted for payment; (2) the purchase price and the
purchase date, which shall be, subject to any contrary requirements of
applicable law, no earlier than 30 days nor later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"); (3) that any
Securities (or portion thereof) accepted for payment (and for which payment has
been duly provided on the Change of Control Payment Date) pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of Control
Payment Date; (4) that any Securities (or portions thereof) not tendered will
continue to accrue interest; (5) a description of the transaction or
transactions constituting the Change of Control or Change of Control Triggering
Event, as the case may be; and (6) the procedures that Holders must follow in
order to tender their Securities (or portions thereof) for payment and the
procedures that Holders must follow in order to withdraw an election to tender
Securities (or portions thereof) for payment.
(c) Not later than the Business Day prior to the Change of Control
Payment Date, the Company shall irrevocably deposit with the Trustee or with a
paying agent (or, if the Company is acting as its own paying agent, segregate
and hold in trust) in Temporary Cash Investments an amount equal to the Change
of Control Payment, if any, to be made to the Holders entitled thereto, to be
held for payment in accordance with the provisions of this Section 4.07. Holders
electing to have a Security purchased will be required to surrender the
Security, with an appro priate form duly completed, to the Company at the
address specified in the notice at least five Business Days prior to the Change
of Control Payment Date. Holders will be entitled to withdraw their election if
the Trustee or the Company receives not later than three Business Days prior to
the purchase date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the princi pal amount of the Security which was
delivered for purchase by the Holder, the certificate number of such Security
and a
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statement that such Holder is withdrawing his election to have such Security
purchased.
(d) On the Business Day prior to the Change of Control Payment Date,
the Company shall deliver to the Trustee the Securities or portions thereof
which have been properly tendered to and are to be accepted by the Company. The
Trustee shall, on the Change of Control Payment Date, mail or deliver payment of
the purchase price to each tendering Holder. In the event that the aggregate
purchase price of the Securities delivered by the Company to the Trustee is less
than the amount deposited with the Trustee, the Trustee shall deliver the excess
to the Company immediately after the end of the payment date.
(e) The Company will comply, to the extent applicable, 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 the purchase of Securities in connection with a
Change of Control or Change of Control Triggering Event, as the case may be. To
the extent that the provisions of any securities laws or regulations conflict
with the provisions relating to the Change of Control Offer, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under Section 4.07 by virtue thereof.
SECTION 4.08. Compliance Certificate. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA Section 314(a)(4).
SECTION 4.09. Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.10. Limitation on Liens. The Company shall not, directly
or indirectly, Incur or suffer to exist, any Lien (other than Permitted Liens)
upon any of its
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43
Property, whether owned at the Issue Date or thereafter acquired, or any
interest therein or any income or profits therefrom, which secures Indebtedness
that ranks pari passu with or is subordinated to the Securities unless (a) if
such Lien secures Indebtedness that ranks pari passu with the Securities, the
Securities are secured on an equal and ratable basis with the obligations so
secured or (b) if such Lien secures Indebtedness that is subordinated to the
Securities, such Lien shall be subordinated to a Lien granted to the holders of
the Securities in the same collateral as that securing such Indebtedness
subordinated to the Securities to the same extent as such subordinated
Indebtedness is subordinated to the Securities.
SECTION 4.11. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. The Company shall not, and shall
not permit any Restricted Subsidiary 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 to (a)(i) pay dividends
or make any other distributions to the Company or any other Restricted
Subsidiary (A) on its Capital Stock or (B) with respect to any other interest or
participation in, or measured by, its profits, or (ii) pay any indebtedness owed
to the Company or any other Restricted Subsidiary or (b) make loans or advances
to the Company or any other Restricted Subsidiary or (c) transfer any of its
Property to the Company or any other Restricted Subsidiary, except for such
encumbrances or restrictions existing under or by reason of (i) agreements in
effect on the Issue Date; (ii) applicable law; (iii) customary nonassignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices; (iv) Permitted Refinancing Indebtedness;
provided, however, that the restrictions contained in the agreements governing
such Permitted Refinancing Indebtedness are no more restrictive than those
contained in the agreements governing the Indebtedness being refinanced; or (v)
agreements in existence with respect to a Restricted Subsidiary at the time it
is so designated; provided, however, that such agreements are not entered into
in anticipation or contemplation of such designation. Nothing contained in this
covenant shall prevent the Company or any Restricted Subsidiary from granting
any Lien permitted by Section 4.10.
SECTION 4.12. Limitation on Asset Sales; Event of Loss. (a) Other
than upon an Event of Loss, the Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale
after
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44
the Issue Date, where the Property subject to such Asset Sale has an aggregate
Fair Market Value equal to or in excess of $20 million, unless: (i) the Company
or such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the Property
subject to such Asset Sale; (ii) at least 75% of such consideration consists of
cash or Temporary Cash Investments; provided, however, that for purposes of this
clause (ii), (x) the assumption of Indebtedness of the Company or a Restricted
Subsidiary which is not subordinated to the Securities shall be deemed to be
Temporary Cash Investments if the Company, such Restricted Subsidiary, and all
other Restricted Subsidiaries of the Company, to the extent any of the foregoing
are liable with respect to such Indebtedness, are expressly released from all
liability for such Indebtedness by the holder thereof in connection with such
Asset Sale, (y) any securities or notes received by the Company or such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash or Temporary Cash Investments within 20
Business Days of such Asset Sale shall be deemed to be Temporary Cash
Investments and (z) the Company and its Restricted Subsidiaries may receive
consideration in the form of securities exceeding 25% of the consideration for
one or more Asset Sales so long as the Company and its Restricted Subsidiaries
do not hold such securities having an aggregate Fair Market Value in excess of
$50 million at any time outstanding; (iii) no Event of Default shall have
occurred and be continuing at the time of, or would occur after giving effect,
on a pro forma basis, to, such Asset Sale; and (iv) the Board of Directors
determines in good faith that such Asset Sale complies with clauses (i) and
(ii).
(b) Upon an Event of Loss incurred by the Company or any of its
Restricted Subsidiaries, the Net Proceeds received from such Event of Loss shall
be applied in the same manner as proceeds from Asset Sales described in Section
4.12(a) and pursuant to the procedures set forth in this Section 4.12.
(c) Within 360 days after the receipt of the Net Proceeds of an
Asset Sale or Event of Loss, some or all of the Net Proceeds from such Asset
Sale or Event of Loss may be applied by the Company or a Restricted Subsidiary
(A) to permanently repay, redeem or repurchase Senior Indebtedness of the
Company or Indebtedness of any Restricted Subsidiary or (B) to reinvest in
Additional Assets (including by means of an Investment in Additional Assets by a
Restricted Subsidiary with Net Proceeds received by the Company or
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another Restricted Subsidiary); provided, however, that if the Company or any
Restricted Subsidiary contractually commits within such 360-day period to apply
such Net Proceeds within 180 days of such contractual commitment in accordance
with the above clauses (A) or (B), and such Net Proceeds are subsequently
applied as contemplated in such contractual commitment, then the requirement for
application of Net Proceeds set forth in this Section 4.12(c) shall be
considered satisfied.
(d) Any Net Proceeds from an Asset Sale or Event of Loss that are
not used in accordance with Section 4.12(c) shall constitute "Excess Proceeds".
When the aggregate amount of Excess Proceeds exceeds $20 million (taking into
account income earned on such Excess Proceeds), the Company shall make an offer
to purchase (the "Prepayment Offer"), on a pro rata basis, from all Holders of
the Securities (together with the holders of all other Senior Subordinated
Indebtedness which have a similar repurchase obligation), an aggregate principal
amount of Securities and such other Senior Subordinated Indebtedness equal to
the Excess Proceeds, at a price in cash at least equal to 100% of the principal
amount thereof, plus accrued and unpaid interest, in accordance with Section
4.12(e), (f), (g) and (h). To the extent that any portion of the Excess Proceeds
remains after compliance with the preceding sentence and provided that all
Holders have been given the opportunity to tender the Securities for repurchase
in accordance with this Indenture, the Company or such Restricted Subsidiary may
use such remaining amount for any purpose permitted by this Indenture and the
amount of Excess Proceeds shall be reset to zero. Pending application of Net
Proceeds pursuant to clause (A) and (B) of Section 4.12(c) above, such Net
Proceeds will be invested in Temporary Cash Investments. Notwithstanding the
foregoing, the Company shall not be required to make a Prepayment Offer if the
purchase of the Securities is prohibited by the terms of the Boyd Notes, but
only to the extent and for so long as such purchase of the Securities is
prohibited.
(e) Within 10 Business Days after the Company is required to make a
Prepayment Offer, the Company shall send a written notice (the "Prepayment Offer
Notice"), by first-class mail, to the Holders (a copy of which is to be sent to
the Trustee), accompanied by such information regarding the Company and its
Subsidiaries as the Company in good faith believes will enable such Holders to
make an informed decision with respect to the Prepayment Offer. The Prepayment
Offer Notice will state, among other things, (i) that the Company is offering to
purchase Securities
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46
pursuant to Section 4.12, (ii) that any Security (or any portion thereof)
accepted for payment (and for which payment has been duly provided on the
Purchase Date) pursuant to the Prepayment Offer shall cease to accrue interest
after the Purchase Date, (iii) the purchase price and purchase date, which shall
be, subject to any contrary requirements of applicable law, no less than 30 days
nor more than 60 days from the date the Prepayment Offer Notice is mailed (the
"Purchase Date"), (iv) the aggregate principal amount of Securities (or portions
thereof) to be purchased and (v) a description of the procedure which Holders
must follow in order to tender their Securities (or portions thereof) and the
procedures that Holders must follow in order to withdraw an election to tender
their Securities (or portions thereof) for payment.
(f) Not later than the Business Day prior to the Purchase Date, the
Company shall irrevocably deposit with the Trustee or with the Paying Agent (or,
if the Company is acting as its own paying agent, segregate and hold in trust)
in Temporary Cash Investments an amount equal to the purchase price plus accrued
and unpaid interest, if any, to the Holders entitled thereto, to be held for
payment in accordance with the provisions of this Section. Holders electing to
have a Security purchased will be required to surrender the Security, with an
appropriate form duly completed, to the Company at the address specified in the
notice at least five Business Days prior to the Purchase Date. Holders will be
entitled to withdraw their election if the Trustee or the Company receives not
later than three Business Days prior to the Purchase Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Security which was delivered for purchase by the Holder,
the certificate number of such Security and a statement that such Holder is
withdrawing his election to have such Security purchased.
(g) On the Business Day prior to the Purchase Date, the Company
shall deliver to the Trustee the Securities or portions thereof which have been
properly tendered to and are to be accepted by the Company. The Trustee (or
Paying Agent) shall, on the Purchase Date, mail or deliver payment of the
purchase price to each tendering Holder. In the event that the aggregate
purchase price of the Securities delivered by the Company to the Trustee is less
than the amount deposited with the Trustee (or Paying Agent), the Trustee (or
Paying Agent) shall deliver the excess to the Company immediately after the end
of the Purchase Date.
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47
(h) The Company will comply, to the extent applicable, 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 the purchase of Securities required by this
Section. To the extent that the provisions of any securities laws or regulations
conflict with the provisions relating to the Prepayment Offer, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations described above by virtue thereof.
SECTION 4.13. Limitation on Layered Indebtedness. The Company shall
not, directly or indirectly, Incur any Indebtedness which is subordinate or
junior in right of payment to any Senior Indebtedness unless such Indebtedness
is Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness. The Company shall not permit any of
its Restricted Subsidiaries to issue any Guarantee with respect to any Senior
Subordinated Indebtedness or Subordinated Obligations of the Company unless such
Restricted Subsidiary has executed and delivered to the Trustee a supplemental
indenture pursuant to which such Restricted Subsidiary will Guarantee payment of
the Securities on terms and conditions (including with respect to any Liens
securing such Guarantees) at least as favorable to the holders of the Securities
as such Guarantee and (a) in the case of Senior Subordinated Indebtedness, such
Guarantee (and related Liens, if any) shall rank pari passu with such Guarantee
of the Securities and (b) in the case of Subordinated Obligations, such
Guarantee (and related Liens, if any) shall be subordinated in right of payment
to such Guarantee of the Securities to at least the same extent as such
Subordinated Obligations are subordinated to the Securities.
SECTION 4.14. Maintenance of Properties and Other Matters. (a) The
Company shall, and shall cause each of its Subsidiaries to, maintain its
Properties in good working order and condition and make all necessary repairs,
renewals and replacements; provided, however, that nothing in this Section 4.14
shall prevent the Company or any of its Subsidiaries from discontinuing the
operation and maintenance of any of its Properties, if such discontinuance is,
in the judgment of the Company, both desirable in the conduct of the business of
the Company and its Subsidiaries, taken as a whole, and not disadvantageous in
any material respect to the Holders.
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(b) The Company shall, and shall cause each of its Subsidiaries to,
insure and keep insured, with financially sound and reputable insurers, so much
of their respective Properties and in such amounts as is usually and customarily
insured by Persons engaged in a similar business with respect to Properties of a
similar character against loss by fire and the extended coverage perils. None of
the Company or any of its Subsidiaries shall maintain a system of self-insurance
in lieu of or in combination with the foregoing insurance with respect to its
Properties; provided that deductibles under the insurance policy or policies of
the Company and its Subsidiaries shall not be considered to be self-insurance as
long as such deductibles accord with financially sound and approved practices of
Persons owning or operating Properties of a similar character and maintaining
similar insurance coverage.
(c) The Company shall, and shall cause each of its Subsidiaries to,
keep proper books and records of accounts in which full and correct entries will
be made of all its business transactions in accordance with GAAP. The Company
shall cause the books and records of accounts of the Company and its
Subsidiaries to be examined, either on a consolidated or on an individual basis,
by one or more firms of independent public accountants not less frequently than
annually. The Company shall, and shall cause each of its Subsidiaries to,
prepare its financial statements in accordance with GAAP.
(d) The Company shall, and shall cause each of its Subsidiaries to,
comply with all Legal Requirements and to obtain any licenses, permits,
franchises or other authorizations, including Gaming Licenses, from Governmental
Authorities necessary to the ownership or operation of its Properties or to the
conduct of its business.
(e) Notwithstanding the provisions of Section 4.14(a), (b), (c) or
(d), failure by the Company or any of its Subsidiaries to comply with such
provisions shall not be deemed to be a breach of such provisions to the extent
that such failure would not have a material adverse effect on the Company and
its Subsidiaries, taken as a whole.
SECTION 4.15. Limitation on Activities of the Company. The Company
shall not, and shall not permit any of its Restricted Subsidiaries to, engage in
(through acquisition or otherwise) any business other than a Related Business.
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SECTION 4.16. Agreement to Redeem the CHFC Notes. The Company shall
cause CHFC to take all action required pursuant to the CHFC Indenture in order
to redeem the CHFC Notes on December 1, 1997, and shall cause CHFC to effect
such redemption on such date; provided, however, that the Company's obligation
under this Section 4.16 shall be suspended if the Board of Directors shall have
determined in good faith that the Company expects to be unable to borrow under
the Credit Facility the amounts required to fund such redemption on the
redemption date, as evidenced by a Board Resolution delivered to the Trustee.
The Company's obligation under this Section 4.16 shall be reinstated upon a
determination by the Board of Directors that the required amounts are expected
to be available under the Credit Facility for a period of at least 45 days, at
which time the Company shall cause CHFC to give the required notice of
redemption and redeem the CHFC Notes as promptly as it is permitted to do so
under the CHFC Indenture. During any period when the Company's obligation under
this covenant is suspended, the Board of Directors shall reconsider the
determination referred to in the first sentence of this Section 4.16 no less
frequently than monthly.
ARTICLE V
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. The Company
shall not merge or consolidate with or into any other entity (other than a
merger or consolidation of a Restricted Subsidiary with or into the Company) or
in one transaction or a series of related transactions sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of its Property
unless: (i) the entity formed by or surviving any such consolidation or merger
(if the Company is not the surviving entity) or the Person to which such sale,
assignment, transfer, lease or conveyance is made (the "Successor") (a) shall be
a corporation organized and existing under the laws of the United States of
America or a State thereof or the District of Columbia and such corporation
expressly assumes, by supplemental indenture satisfactory to the Trustee,
executed and delivered to the Trustee by such corporation, the due and punctual
payment of the principal, premium, if any, and interest on all the Securities,
according to their tenor, and the due and punctual performance and observance of
all the covenants and conditions of this Indenture to be performed by the
Company and (b) the Successor shall have
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50
all Gaming Licenses required to operate all Gaming Facilities to be owned by
such Successor; (ii) in the case of a sale, transfer, assignment, lease,
conveyance or other disposition of all or substantially all of the Company's
Property, such Property shall have been transferred as an entirety or virtually
as an entirety to one Person; (iii) immediately before and after giving effect
to such transaction or series of transactions on a pro forma basis, no Default
or Event of Default shall have occurred and be continuing; (iv) immediately
after giving effect to such transaction or series of transactions on a pro forma
basis (including, without limitation, any Indebtedness Incurred or anticipated
to be Incurred in connection with such transaction or series of transactions),
the Company or the Successor, as the case may be, would be able to Incur at
least $1.00 of additional Indebtedness under Section 4.04(a); and (v)
immediately after giving effect to such transaction or series of transactions on
a pro forma basis including, without limitation, any Indebtedness Incurred or
anticipated to be Incurred in connection with such transaction or series of
transactions), the Company or the Successor shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to the transaction or series of transactions.
The Successor shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Securities.
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default. The following events shall be
"Events of Default":
(i) default with respect to payment of interest on any of the
Securities when it becomes due and payable, and the continuance of such
default for a period of 30 days;
(ii) default with respect to payment of principal or premium, if
any, on any of the Securities when due
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at maturity, upon acceleration, required purchase or
otherwise;
(iii) failure by the Company to observe, perform or comply with
Article V herein;
(iv) failure by the Company to observe, perform or comply with any
of the other covenants and agreements in this Indenture and such failure
to observe, perform or comply continues for a period of 30 days after
receipt by the Company of a written notice from the Trustee or Holders of
not less than 25% of aggregate principal amount of the Securities then
outstanding;
(v) Indebtedness of the Company or any Restricted Subsidiary is not
paid when due within any applicable grace period or is accelerated by the
holders thereof and, in either case, the total amount of such unpaid or
accelerated Indebtedness exceeds $10 million;
(vi) the entry by a court of competent jurisdiction of one or more
judgments or orders against the Company or any Restricted Subsidiary in an
uninsured aggregate amount in excess of $10 million and such judgment or
order is not discharged, waived, stayed or satisfied for a period of 60
consecutive days;
(vii) the Company or any Restricted Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against
it in an involuntary case;
(C) consents to the appointment of a Custo dian of it or
for any substantial part of its property; or
(D) makes a general assignment for the bene fit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
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(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Restricted Subsidiary or for any substantial part of its property;
or
(C) orders the winding up or liquidation of the Company
or any Restricted Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; and
(ix) any revocation, suspension or loss of any Gaming License which
results in the cessation of business for a period of more than 90
consecutive days of the business of any Material Gaming Facility owned,
leased or operated directly or indirectly by the Company or any of its
Subsidiaries or Permitted Joint Ventures (other than any voluntary
relinquishment of a Gaming License if such relinquishment is, in the
reasonable, good faith judgment of the Board of Directors, evidenced by a
Board Resolution, both desirable in the conduct of the business of the
Company and its Subsidiaries and Permitted Joint Ventures, taken as a
whole, and not disadvantageous in any material respect to the Holders).
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (iv), (v), (vi) or (ix) is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the Securities notify the Company of the Default and the Company does not cure
such Default within the time specified after receipt of such
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53
notice. Such notice must specify the Default, demand that it be remedied and
state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default, its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default with respect to
the Securities (other than an Event of Default resulting from Section 6.01(vii)
or (viii)) shall have occurred and be continuing, the Trustee or the registered
holders of not less than 25% in aggregate principal amount of the Securities
then outstanding may accelerate the maturity of all the Securities in which
event the Securities shall become immediately due and payable; provided,
however, that after such acceleration but before a judgment or decree based on
acceleration is obtained by the Trustee, the registered holders of a majority in
aggregate principal amount of the Securities then outstanding, may, under
certain circumstances, rescind and annul such acceleration if all Events of
Default, other than the nonpayment of accelerated principal, have been cured or
waived as provided in this Indenture. In case an Event of Default resulting from
Section 6.01(vii) or (viii) shall occur, the Securities shall be due and payable
immediately without any declaration or other act on the part of the Trustee or
the Holders.
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 of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder 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 acquies cence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
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principal of or interest on a Security or (ii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceed ing for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee, including pursuant to Section 7.01(a), that is not
inconsistent with such direction. Prior to taking any action hereunder, the
Trustee shall be entitled to indemni fication satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
SECTION 6.06. Limitation on Suits. No Holder will have any right to
institute any proceeding with respect to this Indenture or for any remedy
thereunder, unless: (i) such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default; (ii) Holders of at least 25% in
aggregate principal amount of the Securities then outstanding shall have made
written request and offered reasonable indemnity to the Trustee to institute
such proceeding as a trustee; and (iii) the Trustee shall not have received from
the Holders of a majority in aggregate principal amount of the Securities then
outstanding a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, such limitations do not apply
to a suit instituted by a Holder for enforcement of payment of the principal of
and premium, if any, or interest on such Security on or after the respective due
dates expressed in such Security.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding
any other provision of this Inden-
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ture, the right of any Holder to receive payment of princi pal of and interest
on the Securities held by such Holder, on or after the respective due dates
expressed in the Secu rities, 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 in
payment of interest or principal speci fied in Section 6.01(1) or (2) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of principal and
interest remaining unpaid (together with interest on such unpaid interest to the
extent lawful) and the amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may 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 and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disburse ments and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07.
SECTION 6.10. Priorities. If the Trustee col lects any money or
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Sec tion 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Securi ties for
principal and interest, respectively; and
THIRD: to the Company.
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The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Inden ture or in any suit against the Trustee
for any action taken or omitted by it as 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 rea sonable attorneys' fees and expenses, 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 pursuant to Section 6.07 or a suit by
Holders of more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the
extent it may lawfully refrain from doing so) shall not at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and shall not 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 had been enacted.
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default: (1) the
Trustee undertakes to perform such duties
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and only such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and (2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. 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 liabil ity for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that: (1) this paragraph does not limit the effect of paragraph (b) of
this Section; (2) the Trustee shall not be liable for any error of judgment made
in good faith by a duly authorized officer of the Trustee (a "Trust Officer")
unless it is proved that the Trustee was negligent in ascertaining the pertinent
facts; and (3) 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.
(d) 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) 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.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
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SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
document or any other writing 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 Opin ion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through 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 which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it here under
in good faith and in accordance with the advice or opinion of such counsel.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
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 Secur ities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Inden ture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
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SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of May 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA Section
313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the Commission and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to
the Trustee from time to time rea sonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reim burse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify the Trustee (or any predecessor Trustee)
and its agents against, and hold it harmless for, any and all loss, liability or
expense (including attorneys' fees and expenses) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder, except to the extent that such loss, damage, claim,
liability or expense is due to its own negligence or bad faith. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company
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shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee may have separate counsel and the Company shall
pay the fees and expenses of such counsel. The Company need not reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on Securities under Article VIII or otherwise.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(vii) or (viii) with
respect to the Company, the expenses are intended to constitute expenses of
administration under Bankruptcy Law; provided, however, that, if such amounts
are paid as expenses of administration, they shall be paid in accordance with
Section 6.10.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in principal amount
of the Secur ities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders
of a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint 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 Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
25% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appoint ment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust busi ness or assets to, another corporation or banking
associa tion, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
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SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. No obligor upon the Securities or
Person directly controlling, controlled by, or under common control with such
obligor shall serve as Trustee upon the Securities. The Trustee shall comply
with TIA Section 310(b); provided, however, that there shall be excluded from
the operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Company are out standing if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
SECTION 7.12. Trustee's Application for Instructions from the
Company. Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
three Business Days after the date any officer of the Company actually receives
such application, unless any such officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securi ties; Defeasance. (a)
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities
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replaced pursuant to Section 2.06) for cancelation or (ii) all outstanding
Securities have become due and payable, and the Company irrevocably deposits
with the Trustee funds sufficient to pay at maturity or upon redemption all out
standing Securities, including interest thereon (other than Securities replaced
pursuant to Section 2.06), and if in either case the Company pays all other sums
payable here under by the Company, then this Indenture shall, subject to
Sections 8.01(c) and 8.06, cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel and at
the cost and expense of the Company.
(b) Subject to Sections 8.01(c), 8.02 and 8.06, the Company at any
time may terminate (i) all its obliga tions under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.01, 4.03 (to the extent that the failure to comply with such Section 4.03
shall not violate the TIA), 4.04, 4.05, 4.06, 4.07, 4.10, 4.11, 4.12, 4.13,
4.14, 4.15, 4.16 and Article V and the related operation of Section 6.01(iii)
and (iv), and the operation of Sections 6.01(v), (vi), (vii) (with respect to
Restricted Subsidiaries), (viii) (with respect to Restricted Subsidiaries), (ix)
or (x) ("covenant defeasance option"). The Company may exercise its legal
defeasance option not withstanding its prior exercise of its covenant defeasance
option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Section 6.01(iii), (iv),
(v), (vi), (vii) (with respect to Restricted Subsidiaries), (viii) (with respect
to Restricted Subsidiaries) or (ix) (except to the extent covenants or
agreements referenced in such Sections remain applicable).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 7.07, 7.08, 8.04, 8.05 and 8.06
shall survive until the Securities have been paid in full. Thereafter, the
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Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal and interest
on the Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a cer tificate from a
nationally recognized firm of indepen dent accountants expressing their
opinion that the pay ments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obliga tions 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 Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(vii) or (viii) with respect to
the Company occurs which is continuing at the end of the period;
(4) no Default has occurred and is continuing on the date of such
deposit and after giving effect thereto;
(5) the deposit does not constitute a default under any other
agreement binding on the Company ;
(6) the Company delivers 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;
(7) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from the Internal Revenue Service a ruling, or (ii)
since the date of this Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Securityholders
will not recognize income, gain or loss
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for Federal income tax purposes as a result of such 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 defeasance had not
occurred;
(8) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Security holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such cove nant 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; and
(9) the Company delivers to the Trustee an Offi cers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Securities as contemplated by this
Article VIII have been complied with.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obliga tions deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon written request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon request any money held by them
for the payment of principal or interest that remains unclaimed for two years,
and, thereafter, Securityholders entitled to the money must look to the Company
for payment as general creditors.
SECTION 8.05. Indemnity for Government Obliga tions. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
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SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article VII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restrain ing or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII.
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Security holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Sec tion 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add Guarantees by Subsidiaries with respect to the Securities
and to release such Guarantees when required by the terms thereof;
(5) to secure the Securities;
(6) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(7) to comply with any requirements of the Commission in connection
with qualifying this Indenture under the TIA; or
(8) to make any change that does not adversely affect the rights of
any Securityholder.
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After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in principal
amount of the Securities. However, without the consent of each Securityholder
affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security
or change the time at which any Secur ity may be redeemed in accordance
with Article III;
(5) make any Security payable in money other than that stated in the
Security;
(6) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Securities on or after the due dates
therefor or to institute suit for the enforcement of any payment on or
with respect to such Holder's Securities; or
(7) make any change to Article X that would adversely affect the
holders of the Securities, subordinate in right of payment, or otherwise
subordinate, the Securities to any other obligation of the Company.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a
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notice briefly describing such amendment. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subse quent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subse quent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Security holder.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securi ties. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
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SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In sign ing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such (i)
amendment is authorized or permitted by this Indenture and that all conditions
precedent to the execution, delivery and performance of such amendment have been
satisfied; (ii) the Company has all necessary corporate power and authority to
execute and deliver the amendment and that the execution, delivery and
performance of such amendment has been duly authorized by all necessary
corporate action; (iii) the execution, delivery and performance of the amendment
do not conflict with, or result in the breach of or constitute a default under
any of the terms, conditions or provisions of (a) this Indenture, (b) the
Certificate of Incorporation or By-Laws of the Company, (c) any law or
regulation applicable to the Company, (d) any material order, writ, injunction
or decree of any court or governmental instrumentality applicable to the Company
or (e) any material agreement or instrument to which the Company is subject;
(iv) such amendment has been duly and validly executed and delivered by the
Company, and this Indenture together with such amendment constitutes a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles; and (v) this
Indenture together with such amendment complies with the TIA.
SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE X
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Subordination
SECTION 10.01. Agreement To Subordinate. The Company agrees, and
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article X, to the prior payment of all Senior
Indebtedness of the Company and that the subordination is for the benefit of and
enforceable by the holders of such Senior Indebtedness. The Securities shall in
all respects rank pari passu with all other Senior Subordinated Indebtedness of
the Company and only Senior Indebtedness of the Company shall rank senior to the
Securities in accordance with the provisions set forth herein. All provisions of
this Article X shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bank ruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness of the Company shall be entitled
to receive payment in full in cash or cash equivalents of such Senior
Indebtedness before Securityholders shall be entitled to receive any
payment of principal of or interest on the Securities; and
(2) until such Senior Indebtedness is paid in full in cash or cash
equivalents, any distribution to which Securityholders would be entitled
but for this Article X all be made to holders of such Senior Indebtedness
as their interests may appear;
except that Securityholders may receive shares of stock and any debt securities
that are subordinated to Senior Indebtedness, and to any debt securities
received by holders of Senior Indebtedness, of the Company to at least the same
extent as the Securities.
SECTION 10.03. Default on Senior Indebtedness. The Company may not
pay the principal of or interest on the Securities or make any deposit pursuant
to Section 8.01 and may not repurchase, redeem or otherwise retire any
Securities (collectively, "pay the Securities") if (i) any principal, premium or
interest in respect of any Senior Indebtedness is not paid within any applicable
grace period
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(including at maturity) or (ii) any other default on Senior Indebtedness occurs
and the maturity of such Senior Indebtedness is accelerated in accordance with
its terms unless, in either case, (x) the default has been cured or waived and
any such acceleration has been rescinded or (y) such Senior Indebtedness has
been paid in full in cash or cash equivalents; provided, however, that the
Company may pay the Securities without regard to the foregoing if the Company
and the Trustee receive written notice approving such payment from the
Representative of each issue of Designated Senior Indebtedness. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the preceding sentence) with respect to any Designated Senior Indebtedness
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration), the Company may not pay the Securities for a period (a "Payment
Blockage Period") commencing upon the receipt by the Company and the Trustee of
written notice of such default from the Representative of such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period (a
"Payment Blockage Notice") and ending 179 days thereafter (or earlier if such
Payment Blockage Period is terminated (i) by written notice to the Trustee and
the Company from the Representative who gave such Payment Blockage Notice, (ii)
by repayment in full in cash or cash equivalents of such Designated Senior
Indebtedness or (iii) because the default giving rise to such Payment Blockage
Notice is no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence, unless the holders of such Designated Senior
Indebtedness or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness and not rescind such
acceleration, the Company may (unless otherwise prohibited pursuant to the first
sentence of this Section 10.03) resume payments on the Securities after such
Payment Blockage Period. Not more than one Payment Blockage Notice with respect
to all issues of Designated Senior Indebtedness may be given in any consecutive
360-day period, irrespective of the number of defaults with respect to one or
more issues of Designated Senior Indebtedness during such period.
SECTION 10.04. Acceleration of Payment of Securities. If payment of
the Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
(or their Representatives) of the acceleration.
<PAGE> 79
72
SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article X should
not have been made to them, the Securityholders who receive the distribution
shall hold such distribution in trust for holders of Senior Indebtedness of the
Company and pay it over to such holders as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of the
Company is paid in full in cash or cash equivalents and until the Securities are
paid in full, Securityholders shall be subrogated to the rights of holders of
such Senior Indebtedness to receive distributions applicable to such Senior
Indebtedness. A distribution made under this Article X to holders of such Senior
Indebtedness which otherwise would have been made to Securityholders is not, as
between the Company and Securityholders, a payment by the Company on such Senior
Indebtedness.
SECTION 10.07. Relative Rights. This Article X defines the relative
rights of Securityholders and holders of Senior Indebtedness of the Company.
Nothing in this Indenture shall:
(1) impair, as between the Company and Secu rityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default or an Event of Default, subject to the
rights of holders of Senior Indebtedness of the Company to receive distri
butions otherwise payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company. No
right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer receives notice
that payments
<PAGE> 80
73
may not be made under this Article X. The Company, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness may give the notice; provided, however, that, if an issue of Senior
Indebtedness of the Company has a Representative, only the Representative may
give the notice on behalf of the holders of such Senior Indebtedness.
The Trustee in its individual or any other capa city may hold Senior
Indebtedness of the Company with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article X with respect to any Senior Indebtedness of the Company which may
at any time be held by it, to the same extent as any other holder of such Senior
Indebtedness; and nothing in Article VII shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article X shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Repre sentative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article X Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment pursuant to the Securities by
reason of any provision in this Article X shall not be construed as pre venting
the occurrence of a Default. Nothing in this Article 10 shall have any effect on
the right of the Secu rityholders or the Trustee to accelerate the maturity of
the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article VIII by the Trustee
for the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or subject to the
restrictions set forth in this Article X, and none of the Securityholders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness of the Company or any other creditor of the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article X, the
<PAGE> 81
74
Trustee and the Securityholders shall be entitled to rely (i) upon any order or
decree of a court of competent juris diction in which any proceedings of the
nature referred to in Section 10.02 are pending, (ii) upon a certificate of the
liquidating trustee or agent or other Person making such payment or distribution
to the Trustee or to the Security holders or (iii) upon the Representatives for
the holders of Senior Indebtedness of the Company for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of such Senior Indebtedness and other Indebtedness 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
X. In the event that the Trustee determines, in good faith, that evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness of the Company to participate in any payment or distribution
pursuant to this Article X, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article X, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article X.
SECTION 10.14. Trustee To Effectuate Subordina tion. Each
Securityholder by accepting a Security author izes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to acknowledge
or effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Company as provided in this Article X and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness of the
Company shall be entitled by virtue of this Article X or otherwise.
<PAGE> 82
75
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Company, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness and such holder of
such Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
SECTION 10.17. Certain Payments. Nothing in this Article 10 shall
prevent or delay (i) the Company from or in redeeming any Securities pursuant to
paragraph 6 of the Securities or otherwise purchasing any Securities pursuant to
any Legal Requirement relating to the gaming business of the Company and its
Subsidiaries or (ii) the receipt by the Holders of payments of principal of and
interest on the Securities as provided in Section 8.03.
ARTICLE XI
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls. If and to the extent
that any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by, or with another provision (an "incorporated provision")
included in this Indenture by operation of, Sections 310 to 318, inclusive, of
the TIA, such imposed duties or incorporated provision shall control.
SECTION 11.02. Notices. Any notice or communica tion shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Boyd Gaming Corporation
2950 South Industrial Road
Las Vegas, Nevada 89109
Attention of Office of the Secretary
<PAGE> 83
76
if to the Trustee:
State Street Bank and Trust Company
Corporate Trust Department
2 International Place
Boston, MA 02110
Attention: Mr. Arthur MacDonald
The Company or the Trustee by notice to the other may designate
additional or different addresses for subse quent notices or communications.
Any notice or communication mailed to a Security holder shall be
mailed to the Securityholder at the Secu rityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
<PAGE> 84
77
SECTION 11.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 11.07. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in
the State of New York. If a payment date is a Legal Holiday, payment shall be
made on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 11.08. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 11.09. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security,
<PAGE> 85
78
each Securityholder shall waive and release all such lia bility. The waiver and
release shall be part of the consi deration for the issue of the Securities.
SECTION 11.10. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.11. Multiple 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. One signed copy is enough to prove
this Indenture.
SECTION 11.12. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
<PAGE> 86
79
SECTION 11.13. Severability. In case any provision in this Indenture
or in the Securities 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.
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
BOYD GAMING CORPORATION,
by
-------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY,
by
-------------------------------
Name:
Title:
<PAGE> 87
APPENDIX A
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT
TO RULE 144A AND TO CERTAIN PERSONS IN OFFSHORE
TRANSACTIONS IN RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Initial Security bearing
the restricted securities legend set forth in Section 2.3(d) and which is held
by an IAI in accordance with Section 2.1(c).
"Depository" means The Depository Trust Company, its nominees and
their respective successors.
"Exchange Securities" means the 9.50% Senior Subordinated Notes Due
2007 to be issued pursuant to this Indenture in connection with a Registered
Exchange Offer pursuant to the Registration Agreement.
"Initial Purchasers" means Salomon Brothers Inc, UBS Securities LLC
and CIBC Wood Gundy Securities Corp.
"Initial Securities" means the 9.50% Senior Subordinated Notes Due
2007, issued under this Indenture on or about the date hereof.
"Purchase Agreement" means the Purchase Agreement dated July 17,
1997, among the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Registered Exchange Offer" means the offer by the Company, pursuant
to the Registration Agreement, to certain Holders of Initial Securities, to
issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Agreement" means the Registration Agreement dated July
17, 1997, among the Company and the Initial Purchasers.
<PAGE> 88
2
"Securities" means the Initial Securities and the Exchange
Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depository), or any successor person thereto and
shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement
issued by the Company in connection with the offer and sale of Initial
Securities pursuant to the Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities and
Securities that bear or are required to bear the legend set forth in Section
2.3(d) hereto.
1.2 Other Definitions
<TABLE>
<CAPTION>
Defined in
Term Section:
---- ----------
<S> <C>
"Agent Members"................................................... 2.1(b)
"Global Security"................................................. 2.1(a)
"Regulation S".................................................... 2.1(a)
"Rule 144A"....................................................... 2.1(a)
</TABLE>
2. The Securities
2.1 Form and Dating
The Initial Securities are being offered and sold by the Company
pursuant to the Purchase Agreement.
(a) Global Securities. Initial Securities offered and sold to a QIB
in reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance
on Regulation S under the Securities Act ("Regulation S"), in each case as
provided in the Purchase Agreement, shall be issued initially in the form of one
or more permanent global Securities in definitive, fully registered form without
interest coupons with the global securities legend and restricted securities
legend set forth in Exhibit 1 hereto (each, a "Global Security"), which shall be
deposited on behalf of the purchasers of the Initial Securities represented
thereby with the Trustee, as custodian for the Depository (or with such other
custodian as the Depository may direct), and registered in the name of the
Depository or a nominee of the Depository, duly executed by the Company and
authenticated by the Trustee as provided in the Indenture. The aggregate
principal amount of the Global Securities may from time to time be increased or
decresaed by adjustments made on the records of the Trustee and the Depository
or its nominee as hereinafter provided.
<PAGE> 89
3
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b) and pursuant to an order of the Company, authenticate and
deliver initially one or more Global Securities that (a) shall be registered in
the name of the Depository for such Global Security or Global Securities or the
nominee of such Depository and (b) shall be delivered by the Trustee to such
Depository or pursuant to such Depository's instructions or held by the Trustee
as custodian for the Depository.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices of such Depository governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) Definitive Securities. Except as provided in this Section 2.1 or
Sections 2.3 or 2.4, owners of beneficial interests in Global Securities will
not be entitled to receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$250,000,000 and (2) Exchange Securities for issue only in a Registered Exchange
Offer pursuant to the Registration Agreement, for a like principal amount of
Initial Securities, upon a written order of the Company signed by two Officers
or by an Officer and either an Assistant Treasurer or an Assistant Secretary of
the Company. Such order shall specify the amount of the Securities to be
<PAGE> 90
4
authenticated and the date on which the original issue of Securities is to be
authenticated and whether the Securities are to be Initial Securities or
Exchange Securities. The aggregate principal amount of Securities outstanding
at any time may not exceed $250,000,000, except as provided in Section 2.07 of
this Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar
or co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied by
the following additional information and documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse of the Security); or
(B) if such Definitive Securities are being transferred to the
Company, a certification to that effect (in the form set forth on the
reverse of the Security); or
(C) if such Definitive Securities are being transferred pursuant
to an exemption from registration in accordance with Rule 144, (i) a
<PAGE> 91
5
certification to that effect (in the form set forth on the reverse of
the Security) and (ii) if the Company or Registrar so requests, an
opinion of counsel or other evidence reasonably satisfactory to them
as to the compliance with the restrictions set forth in the legend
set forth in Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred (A) to a
QIB in accordance with Rule 144A, or (B) outside the United States in
an offshore transaction within the meaning of Regulation S and in
compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books
and records with respect to such Global Security to reflect an
increase in the aggregate principal amount of the Securities
represented by the Global Security, such instructions to contain
information regarding the Depository account to be credited with such
increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so cancelled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged pursuant to Section 2.4, the Company shall issue and the
Trustee shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
<PAGE> 92
6
(c) Transfer and Exchange of Global Securities. (i) The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depository therefor. A transferor of a beneficial interest in a Global Security
shall deliver a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary to be credited with a beneficial interest in the Global Security and
such account shall be credited in accordance with such instructions with a
beneficial interest in the Global Security and the account of the Person making
the transfer shall be debited by an amount equal to the beneficial interest in
the Global Security being transferred.
(ii) Notwithstanding any other provisions of this Appendix A
(other than the provisions set forth in Section 2.4), a Global
Security may not be transferred as a whole except by the Depository
to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee
of such successor Depository.
(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4
prior to the consummation of a Registered Exchange Offer or the
effectiveness of a Shelf Registration Statement with respect to such
Securities, such Securities may be exchanged only in accordance with
such procedures as are substantially consistent with the provisions
of this Section 2.3 (including the certification requirements set
forth on the reverse of the Initial Securities intended to ensure
that such transfers comply with Rule 144A or Regulation S, as the
case may be) and such other procedures as may from time to time be
adopted by the Company.
(d) Legend
(i) Except as permitted by the following paragraphs (ii), (iii)
and (iv), each Security certificate evidencing the Global Securities
and the Definitive Securities (and all Securities issued in exchange
therefor or in substitution thereof) shall bear a legend in
substantially the following form:
<PAGE> 93
7
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY
MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE
SECOND ANNIVERSARY OF THE ISSUANCE HEREOF OR THE LAST DATE ON WHICH THE
COMPANY OR AN AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE
OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF
SUCH TRANSFER, IN EITHER CASE. OTHER THAN (1) TO THE COMPANY, (2) SO LONG
AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE
BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE
REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE ON THE REVERSE OF THIS
SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS
SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE EXPIRATION OF
THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE
OBTAINED FROM THE COMPANY OR THE TRUSTEE, (4) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE) UNDER THE SECURITIES ACT, OR (5) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND
AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) A NON-U.S.
PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT
SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER)
REGULATION S UNDER THE SECURITIES ACT."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a
<PAGE> 94
8
Definitive Security that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Security; and
(B) in the case of any Transfer Restricted Security that is
represented by a Global Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Security,
in either case, if the Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144 (such certification
to be in the form set forth on the reverse of the Initial Security).
(iii) After a transfer of any Initial Securities during the period
of the effectiveness of a Shelf Registration Statement with respect to
such Initial Securities, all requirements pertaining to legends on such
Initial Security will cease to apply, the requirements requiring any such
Initial Security issued to certain Holders be issued in global form will
cease to apply, and an Initial Security in certificated or global form
without legends will be available to the transferee of the Holder of such
Initial Securities upon exchange of such transferring Holder's
certificated Initial Security. Upon the occurrence of any of the
circumstances described in this paragraph, the Company will deliver an
Officers' Certificate to the Trustee instructing the Trustee to issue
Securities without legends.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which certain Holders of
such Initial Securities are offered Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued in
global form will cease to apply and certificated Initial Securities with
the restricted securities legend set forth in Exhibit 1 hereto will be
available to Holders of such Initial Securities that do not exchange their
Initial Securities, and Exchange Securities in certificated or global form
will be available to Holders that exchange such Initial Securities in such
Registered Exchange Offer. Upon the occurrence of any of the circumstances
described in this paragraph, the Company will deliver an Officers'
Certificate to the Trustee instructing the Trustee to issue Securities
without legends.
<PAGE> 95
9
(e) Cancellation or Adjustment of Global Security. At such time as
all beneficial interests in a Global Security have either been exchanged for
certificated or Definitive Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to the Depository for cancellation or retained
and canceled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Security is exchanged for certificated or
Definitive Securities, repurchased or canceled, the principal amount of
Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
(f) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate certificated Securities,
Definitive Securities and Global Securities at the Registrar's or
co-registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes, assessments or similar governmental charge payable upon
exchange or transfer pursuant to Section 3.08).
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of any Security for a period
beginning 15 days before the mailing of a notice of an offer to repurchase
Securities or 15 days before an interest payment date.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or
any co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for
all other purposes whatsoever, whether or not such Security is overdue,
and none of the Company, the Trustee, the Paying Agent, the Registrar or
any co-registrar shall be affected by notice to the contrary.
<PAGE> 96
10
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in
the Depository or other Person with respect to the accuracy of the records
of the Depository or its nominee or of any participant or member thereof,
with respect to any ownership interest in the Securities or with respect
to the delivery to any participant, member, beneficial owner or other
Person (other than the Depository) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or
made only to the registered Holders (which shall be the Depository or its
nominee in the case of a Global Security). The rights of beneficial owners
in any Global Security shall be exercised only through the Depository
subject to the applicable rules and procedures of the Depository. The
Trustee may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its members, participants and
any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depository participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Certificated Securities
(a) A Global Security deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate
<PAGE> 97
11
principal amount equal to the principal amount of such Global Security, in
exchange for such Global Security, only if such transfer complies with Section
2.3 and (i) the Depository notifies the Company that it is unwilling or unable
to continue as Depository for such Global Security or if at any time such
Depository ceases to be a "clearing agency" registered under the Exchange Act
and a successor depositary is not appointed by the Company within 90 days of
such notice, or (ii) an Event of Default has occurred and is continuing or (iii)
the Company, in its sole discretion, notifies the Trustee in writing that it
elects to cause the issuance of certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section 2.4 shall be surrendered by the
Depository to the Trustee, to be so transferred, in whole or from time to time
in part, without charge, and the Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Security, an equal aggregate
principal amount of certificated Initial Securities of authorized denominations.
Any portion of a Global Security transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such names as the Depository shall
direct. Any certificated Initial Security delivered in exchange for an interest
in the Global Security shall, except as otherwise provided by Section 2.3(d),
bear the restricted securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of either of the events specified
in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to
the Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
<PAGE> 98
EXHIBIT 1
to APPENDIX A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF
THE ISSUANCE HEREOF OR THE LAST DATE ON WHICH THE COMPANY OR AN AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR A PREDECESSOR SECURITY HERETO) OR (Y)
BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE
MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE, OTHER THAN (1) TO
THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER
THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING
EFFECTED BY CERTAIN
<PAGE> 99
2
TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE
EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE
903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE
OBTAINED FROM THE COMPANY OR THE TRUSTEE, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER
THE SECURITIES ACT, OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A
QUALIFIED INSTITU TIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) A NON-U.S.
PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING
THE REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT.
<PAGE> 100
EXHIBIT A
[FORM OF FACE OF SECURITY]
No. $__________
9.50% Senior Subordinated Note Due 2007
CUSIP No. ______
Boyd Gaming Corporation, a Nevada corporation, promises to pay
to , or registered assigns, the principal sum of Dollars on July 15,
2007.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
Additional provisions of this Security are set forth on the other
side of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed.
BOYD GAMING CORPORATION,
by
-------------------------------
Name:
Title:
by
-------------------------------
Name:
Title:
[CORPORATE SEAL]
<PAGE> 101
2
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
Dated:
STATE STREET BANK AND
TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By:
-------------------------
Authorized Signatory
<PAGE> 102
5
4. Indenture
The Company issued the Securities under an Indenture dated as of
July 22, 1997 (the "Indenture"), among the Company and the Trustee. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the TIA for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $250,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). This Security is one of the Initial Securities referred to in
the Indenture. The Securities include the Initial Securities and any Exchange
Securities issued in exchange for the Initial Securities pursuant to the
Indenture. The Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, make certain Investments and other Restricted Payments, pay
dividends and other distributions, incur Indebtedness, enter into consensual
restrictions upon the payment of certain dividends and distributions by such
Restricted Subsidiaries, issue or sell shares of capital stock of such
Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or incur Liens and make Asset Sales. The Indenture also
imposes limitations on the ability of the Company to consolidate or merge with
or into any other Person or permit any other Person to merge with or into the
Company, or sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the Property of the Company.
5. Optional Redemption
Except as set forth in the next two paragraphs, the Securities may
not be redeemed prior to July 15, 2002. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued and unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date that is on or prior to the
<PAGE> 103
6
date of redemption), if redeemed during the 12-month period beginning on or
after July 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ -----
<S> <C>
2002........................................................ 104.750%
2003........................................................ 103.167%
2004 ....................................................... 101.583%
2005 and thereafter......................................... 100.000%
</TABLE>
6. Redemption Pursuant to Gaming Laws; Sinking Fund
Pursuant to the Indenture, the Company will have the right to
require a Holder to dispose of such Holder's Securities if such Holder or the
beneficial owner of such Securities is not licensed or found qualified or
suitable by a Gaming Authority. In the event any such Holder fails to dispose of
Securities within a prescribed time period, the Company shall have the right to
call such Securities for redemption at a Redemption Price equal to the lesser of
(i) the lowest closing sale price of the Securities on any trading day during
the 120-day period ending on the date upon which the Company shall have received
notice from a Gaming Authority of such Holder's disqualification or (ii) the
price at which such Holder or beneficial owner acquired the Securities, unless a
different redemption price is required by such Gaming Authority, in which event
such required price shall be the Redemption Price.
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued interest
on all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.
<PAGE> 104
7
8. Subordination
The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. The Company agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
9. Repurchase of Securities at the Option of Holders upon Change of Control
Upon the occurrence of (i) in the event at the Change of Control
Time the Securities do not have Investment Grade Status, a Change of Control or,
(ii) in the event at the Change of Control Time the Securities have Investment
Grade Status, a Change of Control Triggering Event, each Holder of Securities
shall have the right to require the Company to purchase such Holder's
Securities, in whole, or in part in a principal amount that is an integral
multiple of $1,000, pursuant to a Change of Control Offer, at a purchase price
in cash equal to 101% of the principal amount thereof on any Change of Control
Payment Date plus accrued and unpaid interest, if any, to the Change of Control
Payment Date.
Within 30 calendar days following any Change of Control Triggering
Event, the Company shall send, or cause to be sent, by first-class mail, postage
prepaid, a notice regarding the Change of Control Offer to the Trustee and each
Holder of Securities. The Holder of this Security may elect to have this
Security or a portion hereof in an authorized denomination purchased by
completing the form entitled "Option of Holder to Elect Purchase" appearing
below and tendering this Security pursuant to the Change of Control Offer.
Unless the Company defaults in the payment of the Change of Control Purchase
Price with respect thereto, all Securities or portions thereof accepted for
payment pursuant to the Change of Control Offer will cease to accrue interest
from and after the Change of Control Payment Date.
10. Repurchase of Securities at the Option of Holders upon
Asset Sale or Event of Loss
If at any time the Company or any Restricted Subsidiary engages in
any Asset Sale and/or an Event of Loss, as a result of which the aggregate
amount of Excess Proceeds exceeds $20,000,000, the Company shall, within 10
Business
<PAGE> 105
8
days of the date the amount of Excess Proceeds exceeds $20,000,000, use the
then-existing Excess Proceeds to make an offer to purchase from all Holders, on
a pro rata basis, Securities in an aggregate principal amount equal to the
maximum principal amount that may be purchased out of the then-existing Excess
Proceeds, at a purchase price in cash equal to 100% of the principal amount
thereof on any Purchase Date plus accrued and unpaid interest thereon, if any,
to the Purchase Date. Upon completion of a Prepayment Offer (including payment
for accepted Securities), any surplus Excess Proceeds that were the subject of
such offer shall cease to be Excess Proceeds, and the Company may then use such
amounts for general corporate purposes.
Within 10 Business days of the date the amount of Excess Proceeds
exceeds $20,000,000, the Company shall send, or cause to be sent, by first-class
mail, postage prepaid, a notice regarding the Prepayment Offer to each Holder of
Securities. The Holder of this Security may elect to have this Security or a
portion hereof in an authorized denomination purchased by completing the form
entitled "Option of Holder to Elect Purchase" appearing below and tendering this
Security pursuant to the Prepayment Offer. Unless the Company defaults in the
payment of the purchase price with respect thereto, all Securities or portions
thereof selected for payment pursuant to the Prepayment Offer will cease to
accrue interest from and after the Purchase Date.
11. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture.
12. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
13. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request
<PAGE> 106
9
unless an abandoned property law designates another Person. After any such
payment, Holders entitled to the money must look only to the Company and not to
the Trustee for payment.
14. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
15. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the outstanding Securities and (ii) any past
Default and its consequences may be waived with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Holder of Securities, the Company and the Trustee may amend
the Indenture or the Securities (i) to cure any ambiguity, omission, defect or
inconsistency; (ii) to comply with Article V of the Indenture; (iii) to provide
for uncertificated Securities in addition to or in place of certificated
Securities; (iv) to add Guarantees by Subsidiaries with respect to the
Securities and to release such Guarantees when required by the terms thereof;
(v) to secure the Securities; (vi) to add additional covenants or to surrender
rights and powers conferred on the Company; (vii) to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the TIA; or (viii) to make any change that does not
adversely affect the rights of any Securityholder.
16. Defaults and Remedies
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and
<PAGE> 107
10
payable upon the occurrence of such Events of Default without any further act of
the Trustee or any Holder.
Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power under the Indenture. The Holders of a majority in principal amount of the
outstanding Securities, by written notice to the Company and the Trustee, may
rescind any declaration of acceleration and its consequences if the rescission
would not conflict with any judgment or decree, and if all Events of Default
have been cured or waived except nonpayment of principal and interest that has
become due solely because of the acceleration.
17. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
18. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
19. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
<PAGE> 108
11
20. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
21. Governing Law
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN SAID STATE WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAWS.
The Company will furnish to any Holder of Securities upon written
request and without charge to the Holder a copy of the Indenture which has in it
the text of this Security.
Requests may be made to:
Boyd Gaming Corporation
2950 South Industrial Road
Las Vegas, Neveda
Attention: General Counsel
22. 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 Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
<PAGE> 109
12
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The agent
may substitute another to act for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to an effective registration statement
under the Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act of 1933) that
purchases for its own account or for the
account of a qualified institutional buyer to
whom notice is given that such transfer is
being made in reliance on Rule 144A, in each
case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
<PAGE> 110
14
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE> 111
15
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have
been made:
<TABLE>
<S> <C> <C> <C> <C>
Date of Amount of decrease Amount of increase Principal amount Signature of
Exchange in Principal in Principal of this Global authorized
Amount of this Amount of this Security following signatory of
Global Security Global Security such decrease or Trustee or
increase Securities
Custodian
</TABLE>
<PAGE> 112
16
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED
BY THE COMPANY PURSUANT TO SECTION 4.07 OR 4.12 OF THE INDENTURE,
CHECK THE BOX:
[ ]
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS
SECURITY PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.07 OR
4.12 OF THE INDENTURE, STATE THE AMOUNT:
$
DATE: __________________ YOUR SIGNATURE: __________________
(SIGN EXACTLY AS YOUR NAME APPEARS
ON THE OTHER SIDE OF THE SECURITY)
SIGNATURE GUARANTEE:_______________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT
IN A RECOGNIZED SIGNATURE GUARANTY MEDALLION
PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE
TO THE TRUSTEE
<PAGE> 113
EXHIBIT A
[FORM OF FACE OF SECURITY]
No. $__________
9.50% Senior Subordinated Note Due 2007
CUSIP No. ______
Boyd Gaming Corporation, a Nevada corporation, promises to pay to
________________, or registered assigns, the principal sum of___________ Dollars
on July 15, 2007.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
Additional provisions of this Security are set forth on the other
side of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed.
BOYD GAMING CORPORATION,
by
-------------------------------
Name:
Title:
by
-------------------------------
Name:
Title:
[CORPORATE SEAL]
<PAGE> 114
2
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION Dated:
STATE STREET BANK AND TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
- ----------------------
*/ If the Security is to be issued in global form, add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".
<PAGE> 115
3
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
9.50% Senior Subordinated Note Due 2007
1. Interest
Boyd Gaming Corporation, a Nevada corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above. The Company will pay
interest semiannually on January 15 and July 15 of each year. Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from July 22, 1997. Interest will be computed
on the basis of a 360-day year of twelve 30-day months. The Company shall pay
interest on overdue principal at the rate borne by the Securities plus 1% per
annum, and it shall pay interest on overdue installments of interest at the same
rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the January 1 or July 1 next preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments in
respect of a certificated Security (including principal, premium and interest),
by mailing a check to the registered address of each Holder thereof; provided,
however, that payments on the Securities may also be made, in the case of a
Holder of at least $1,000,000 aggregate principal amount of Securities, by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately
<PAGE> 116
4
preceding the relevant due date for payment (or such other date as the Trustee
may accept in its discretion).
3. Paying Agent and Registrar
Initially, State Street Bank and Trust Company, a Massachusetts
banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
July 22, 1997 (the "Indenture"), among the Company and the Trustee. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the TIA for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $250,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). This Security is one of the Exchange Securities referred to in
the Indenture. The Securities include the Initial Securities and any Exchange
Securities issued in exchange for the Initial Securities pursuant to the
Indenture. The Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, make certain Investments and other Restricted Payments, pay
dividends and other distributions, incur Indebtedness, enter into consensual
restrictions upon the payment of certain dividends and distributions by such
Restricted Subsidiaries, issue or sell shares of capital stock of such
Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or incur Liens and make Asset Sales. The Indenture also
imposes limitations on the ability of the Company to consolidate or merge with
or into any other Person or permit any other Person to merge with or into the
Company, or sell, convey, assign,
<PAGE> 117
5
transfer, lease or otherwise dispose of all or substantially all of the Property
of the Company.
5. Optional Redemption
Except as set forth in the next two paragraphs, the Securities may
not be redeemed prior to July 15, 2002. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued and unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date that is on or prior to the date of
redemption), if redeemed during the 12-month period beginning on or after July
15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ -----
<S> <C>
2002............................................... 104.750%
2003............................................... 103.167%
2004 .............................................. 101.583%
2005 and thereafter................................ 100.000%
</TABLE>
6. Redemption Pursuant to Gaming Laws; Sinking Fund
Pursuant to the Indenture, the Company will have the right to
require a Holder to dispose of such Holder's Securities if such Holder or the
beneficial owner of such Securities is not licensed or found qualified or
suitable by a Gaming Authority. In the event any such Holder fails to dispose of
Securities within a prescribed time period, the Company shall have the right to
call such Securities for redemption at a Redemption Price equal to the lesser of
(i) the lowest closing sale price of the Securities on any trading day during
the 120-day period ending on the date upon which the Company shall have received
notice from a Gaming Authority of such Holder's disqualification or (ii) the
price at which such Holder or beneficial owner acquired the Securities, unless a
different redemption price is required by such Gaming Authority, in which event
such required price shall be the Redemption Price.
The Securities are not subject to any sinking fund.
<PAGE> 118
6
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued interest
on all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.
8. Subordination
The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. The Company agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
9. Repurchase of Securities at the Option of Holders upon Change of Control
Upon the occurrence of (i) in the event at the Change of Control
Time the Securities do not have Investment Grade Status, a Change of Control or,
(ii) in the event at the Change of Control Time the Securities have Investment
Grade Status, a Change of Control Triggering Event, each Holder of Securities
shall have the right to require the Company to purchase such Holder's
Securities, in whole, or in part in a principal amount that is an integral
multiple of $1,000, pursuant to a Change of Control Offer, at a purchase price
in cash equal to 101% of the principal amount thereof on any Change of Control
Payment Date plus accrued and unpaid interest, if any, to the Change of Control
Payment Date.
Within 30 calendar days following any Change of Control Triggering
Event, the Company shall send, or cause to be sent, by first-class mail, postage
prepaid, a notice regarding the Change of Control Offer to the Trustee and each
Holder of Securities. The Holder of this Security may elect to have this
Security or a portion hereof in an authorized denomination purchased by
completing the form entitled "Option
<PAGE> 119
7
of Holder to Elect Purchase" appearing below and tendering this Security
pursuant to the Change of Control Offer. Unless the Company defaults in the
payment of the Change of Control Purchase Price with respect thereto, all
Securities or portions thereof accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest from and after the Change of Control
Payment Date.
10. Repurchase of Securities at the Option of Holders upon
Asset Sale or Event of Loss
If at any time the Company or any Restricted Subsidiary engages in
any Asset Sale and/or an Event of Loss, as a result of which the aggregate
amount of Excess Proceeds exceeds $20,000,000, the Company shall, within 10
Business days of the date the amount of Excess Proceeds exceeds $20,000,000, use
the then-existing Excess Proceeds to make an offer to purchase from all Holders,
on a pro rata basis, Securities in an aggregate principal amount equal to the
maximum principal amount that may be purchased out of the then-existing Excess
Proceeds, at a purchase price in cash equal to 100% of the principal amount
thereof on any Purchase Date plus accrued and unpaid interest thereon, if any,
to the Purchase Date. Upon completion of a Prepayment Offer (including payment
for accepted Securities), any surplus Excess Proceeds that were the subject of
such offer shall cease to be Excess Proceeds, and the Company may then use such
amounts for general corporate purposes.
Within 10 Business days of the date the amount of Excess Proceeds
exceeds $20,000,000, the Company shall send, or cause to be sent, by first-class
mail, postage prepaid, a notice regarding the Prepayment Offer to each Holder of
Securities. The Holder of this Security may elect to have this Security or a
portion hereof in an authorized denomination purchased by completing the form
entitled "Option of Holder to Elect Purchase" appearing below and tendering this
Security pursuant to the Prepayment Offer. Unless the Company defaults in the
payment of the purchase price with respect thereto, all Securities or portions
thereof selected for payment pursuant to the Prepayment Offer will cease to
accrue interest from and after the Purchase Date.
<PAGE> 120
8
11. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture.
12. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
13. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
14. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
15. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the outstanding Securities and (ii) any past
Default and its consequences may be waived with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Holder of Securities, the Company and the Trustee may amend
the Indenture or the Securities (i) to cure any ambiguity, omission, defect or
inconsistency; (ii) to
<PAGE> 121
9
comply with Article V of the Indenture; (iii) to provide for uncertificated
Securities in addition to or in place of certificated Securities; (iv) to add
Guarantees by Subsidiaries with respect to the Securities and to release such
Guarantees when required by the terms thereof; (v) to secure the Securities;
(vi) to add additional covenants or to surrender rights and powers conferred on
the Company; (vii) to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA; or (viii)
to make any change that does not adversely affect the rights of any
Securityholder.
16. Defaults and Remedies
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.
Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power under the Indenture. The Holders of a majority in principal amount of the
outstanding Securities, by written notice to the Company and the Trustee, may
rescind any declaration of acceleration and its consequences if the rescission
would not conflict with any judgment or decree, and if all Events of Default
have been cured or waived except nonpayment of principal and interest that has
become due solely because of the acceleration.
17. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
<PAGE> 122
10
18. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
19. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
20. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
21. Governing Law
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN SAID STATE WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAWS.
The Company will furnish to any Holder of Securities upon written
request and without charge to the Holder a copy of the Indenture which has in it
the text of this Security.
Requests may be made to:
Boyd Gaming Corporation
2950 South Industrial Road
Las Vegas, Nevada
Attention: General Counsel
<PAGE> 123
11
22. 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 Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
<PAGE> 124
12
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The agent
may substitute another to act for him.
_____________________________________________________________
Date: ________________ Your Signature: _____________________
_____________________________________________________________
Sign exactly as your name appears on the other side of this Security. Signature
must be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.
<PAGE> 125
13
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.07 or 4.12 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.07 or 4.12 of the Indenture, state the amount:
$
Date: __________________ Your Signature: __________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:_______________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the
Trustee.
<PAGE> 1
EXHIBIT 4.5
================================================================================
FIRST SUPPLEMENTAL INDENTURE
Among
BOYD GAMING CORPORATION,
Issuer,
CALIFORNIA HOTEL and CASINO,
BOYD TUNICA, INC.,
BOYD MISSISSIPPI, INC.,
BOYD KANSAS CITY, INC.,
BOYD KENNER, INC.,
MARE-BEAR, INC.,
SAM-WILL, INC.,
ELDORADO, INC.,
M.S.W., INC.,
PAR-A-DICE GAMING CORPORATION and
EAST PEORIA HOTEL, INC.,
the "Guarantors"
and
The Bank of New York,
Trustee
Dated as of December 31, 1996
================================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE (this
"Supplemental Indenture") dated as of December 31,
1996, among BOYD GAMING CORPORATION, a Nevada
corporation (the "Company"), CALIFORNIA HOTEL AND
CASINO, a Nevada corporation, BOYD TUNICA, INC., a
Mississippi corporation, BOYD MISSISSIPPI, INC., a
Nevada corporation, BOYD KANSAS CITY, INC., a
Missouri corporation, BOYD KENNER, INC., a
Louisiana corporation, MARE-BEAR, INC., a Nevada
corporation, SAM-WILL, INC., a Nevada corporation,
ELDORADO, INC., a Nevada corporation, M.S.W., INC.,
a Nevada corporation, PAR-A-DICE GAMING
CORPORATION, an Illinois corporation, and EAST
PEORIA HOTEL, INC., an Illinois corporation
(collectively, the "Guarantors"), and The Bank of
New York, a New York banking corporation (the
"Trustee") to the INDENTURE (the "Basic Indenture")
dated as of October 4, 1996, among the Company,
CALIFORNIA HOTEL AND CASINO, BOYD TUNICA, INC.,
BOYD MISSISSIPPI, INC., BOYD KANSAS CITY, INC.,
BOYD KENNER, INC., MARE-BEAR, INC., SAM-WILL, INC.,
ELDORADO, INC., and M.S.W., INC. (the "Basic
Indenture Guarantors"), and the Trustee.
WHEREAS, Sections 9.01(4) and (9) of the Basic Indenture provide
that without the consent of any Securityholder, the Company, the Basic Indenture
Guarantors and the Trustee may amend the Basic Indenture to add additional
Guarantees with respect to the Securities, including Guaranties, or to make any
change that does not adversely affect the rights of any Securityholder;
WHEREAS, Section 4.13 of the Basic Indenture requires the
Company, among other things, to use all reasonable efforts, and to cause
Par-A-Dice Gaming Corporation ("Par-A-Dice") and East Peoria Hotel, Inc. ("EPH")
to use all reasonable efforts, to obtain all necessary approvals for Par-A-Dice
and EPH to execute this Supplemental Indenture and become Guarantors, and
Par-A-Dice and EPH are hereby agreeing to do and become such;
WHEREAS, the entry into this Supplemental Indenture by the
parties hereto is in all respects authorized by the provisions of the Basic
Indenture; and
WHEREAS, all things necessary to make this Supplemental Indenture
a valid agreement of the Company and the Guarantors in accordance with its terms
have been done.
NOW, THEREFORE, and in consideration of the premises, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Securityholders, as follows:
1
<PAGE> 3
SECTION 1. The Basic Indenture is hereby amended as follows:
Cover Page, fourth paragraph. Delete "and M.S.W., INC." and insert "M.S.W.,
INC., PAR-A-DICE GAMING CORPORATION and EAST PEORIA HOTEL, INC." in its place.
First Page, first paragraph. Delete "and M.S.W., INC., a Nevada corporation" and
insert "M.S.W., INC., a Nevada corporation, PAR-A-DICE GAMING CORPORATION, an
Illinois corporation, and EAST PEORIA HOTEL, INC., an Illinois corporation" in
its place.
SECTION 2. The Basic Indenture, as supplemented and amended by this Supplemental
Indenture, is in all respects ratified and confirmed, and the Basic Indenture
and this Supplemental Indenture shall be read, taken and construed as one and
the same instrument.
SECTION 3. If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Supplemental Indenture
by any of the provisions of the Trust Indenture Act, such required provision
shall control.
SECTION 4. All covenants and agreements in this Supplemental Indenture by the
Company shall bind its successors and assigns, whether so expressed or not.
SECTION 5. In case any provision in this Supplemental Indenture 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 6. Nothing in this Supplemental Indenture, expressed or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Securityholders, any benefit or any legal or equitable right, remedy or
claim under this Supplemental Indenture.
SECTION 7. THIS SUPPLEMENTAL INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 8. All terms used in this Supplemental Indenture not otherwise defined
herein that are defined in the Basic Indenture shall have the meanings set forth
therein.
SECTION 9. This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
SECTION 10. The recitals contained herein shall be taken as statements of the
Company, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of the Basic
Indenture, this Supplemental Indenture or of the Securities and shall not be
accountable for the use or application by the Company of the Securities or the
proceeds thereof.
2
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Supplemental
Indenture to be duly executed as of the date first written above.
BOYD GAMING CORPORATION
By: /s/ Ellis Landau
--------------------------------------------
Name: Ellis Landau
Title: Senior Vice President, Treasurer
and Chief Financial Officer
CALIFORNIA HOTEL AND CASINO
By: /s/ Ellis Landau
--------------------------------------------
Name: Ellis Landau
Title: Senior Vice President, Treasurer
and Chief Financial Officer
Attest:
By: /s/ Charles E. Huff
- -----------------------------------------
Name: Charles E. Huff
Title: Vice President, Secretary
and General Counsel
BOYD TUNICA, INC.
By: /s/ Ellis Landau
--------------------------------------------
Name: Ellis Landau
Title: Senior Vice President, Treasurer
and Chief Financial Officer
BOYD MISSISSIPPI, INC.
By: /s/ Ellis Landau
--------------------------------------------
Name: Ellis Landau
Title: Senior Vice President, Treasurer
and Chief Financial Officer
Attest:
By: /s/ Charles E. Huff
- -----------------------------------------
Name: Charles E. Huff
Title: Vice President, Secretary
and General Counsel
1
<PAGE> 5
BOYD KANSAS CITY, INC.
By: /s/ Ellis Landau
--------------------------------------------
Name: Ellis Landau
Title: Senior Vice President, Treasurer
and Chief Financial Officer
BOYD KENNER, INC.
By: /s/ Ellis Landau
--------------------------------------------
Name: Ellis Landau
Title: Senior Vice President, Treasurer
and Chief Financial Officer
MARE-BEAR, INC.
By: /s/ Ellis Landau
--------------------------------------------
Name: Ellis Landau
Title: Senior Vice President, Treasurer
and Chief Financial Officer
SAM-WILL, INC.
By: /s/ Ellis Landau
--------------------------------------------
Name: Ellis Landau
Title: Senior Vice President, Treasurer
and Chief Financial Officer
ELDORADO, INC.
By: /s/ Ellis Landau
--------------------------------------------
Name: Ellis Landau
Title: Senior Vice President, Treasurer
and Chief Financial Officer
2
<PAGE> 6
M.S.W., INC.
By: /s/ William S. Boyd
--------------------------------------------
Name: William S. Boyd
Title: President and Secretary
Attest:
By: /s/ Stephen S. Thompson
- -----------------------------------------
Name: Stephen S. Thompson
Title: Executive Vice President
and Treasurer
Attest:
By:
-------------------
Name:
Title:
PAR-A-DICE GAMING CORPORATION
By: /s/ Robert L. Boughner
--------------------------------------------
Name: Robert L. Boughner
Title: Vice President and Secretary
EAST PEORIA HOTEL, INC.
By: /s/ Robert L. Boughner
--------------------------------------------
Name: Robert L. Boughner
Title: Vice President and Secretary
THE BANK OF NEW YORK
By: /s/ Vivian Georges
--------------------------------------------
Name: Vivian Georges
Title: Assistant Vice President
3
<PAGE> 1
EXHIBIT 10.53
SECOND AMENDMENT TO
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made and
dated as of the 11th day of June, 1997, by and among BOYD GAMING CORPORATION, a
Nevada corporation ("Boyd Gaming") and CALIFORNIA HOTEL AND CASINO, a Nevada
corporation ("CH&C"; CH&C and Boyd Gaming being referred to collectively as the
"Borrowers" and each individually as a "Borrower"), the commercial lending
institutions listed on the signature pages hereof (collectively, the "Lenders"),
WELLS FARGO BANK, N.A., as Swingline Lender, CANADIAN IMPERIAL BANK OF COMMERCE
("CIBC"), as letter of credit issuer, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION and WELLS FARGO BANK, N.A., as co-managing agents (herein, in such
capacity, the "Co-Managing Agents"), BANKERS TRUST COMPANY, CREDIT LYONNAIS LOS
ANGELES BRANCH and SOCIETE GENERALE, as co-agents (herein, in such capacity, the
"Co-Agents"), and CIBC, as administrative agent and collateral agent for the
Lenders (herein, in such capacity, called the "Agent").
RECITALS
A. The Borrowers and the Lenders entered into that certain $500,000,000
Credit Agreement dated as of June 19, 1996 (as amended by the First Amendment to
Credit Agreement dated as of March 28, 1997, the "Credit Agreement"), pursuant
to which the Lenders agreed to extend credit to the Borrowers on the terms and
subject to the conditions set forth therein.
B. The Borrowers and the Lenders desire to amend certain terms and
conditions of the Credit Agreement pursuant to this Amendment.
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree to amend the Credit Agreement as
follows:
AGREEMENT
1. The Credit Agreement is hereby amended as follows:
(a) Section 1.1 of the Credit Agreement is hereby amended by adding
the following defined terms in their correct alphabetical order:
"Newco" means the wholly-owned Subsidiary of Boyd Gaming that has
acquired the 85% equity interest in Treasure Chest not owned by Boyd
Kenner as of the date of this Agreement.
<PAGE> 2
"Treasure Chest" means Treasure Chest Casino LLC, a Louisiana
limited liability company.
"Treasure Chest Casino" means Treasure Chest casino, which
facility is owned by Treasure Chest and is located in Kenner,
Louisiana.
(b) The definition of the term "Pledgors" in Section 1.1 of the
Credit Agreement is hereby amended by adding Treasure Chest, Newco" following
"Boyd Kansas City".
(c) The definition of the term "Pledged Casinos" in Section 1.1
of the Credit Agreement is hereby amended by adding ", (vii) Treasure Chest
Casino" following "(vi) the Fremont Hotel and Casino" and by relabelling
existing "(vii)" as "(viii)".
(d) Clause (a) of Section 7.2.4 of the Credit Agreement is hereby
amended to read in its entirety as follows:
"(a) Tangible Net Worth to be less than the sum of (i)
$210,000,000, plus (ii) 50% of Boyd Gaming's consolidated net
income (without giving effect to any losses) for each Fiscal
Quarter ending on or after September 30, 1996, plus (iii) an
amount equal to the increase in Boyd Gaming's stockholders equity
following the Effective Date by reason of sales and issuances of
Boyd Gaming's capital stock, minus (iv) the amount of goodwill,
not to exceed $130,000,000, associated with the Proposed
Acquisition, minus (v) the amount of noncash write-downs taken by
Boyd Kansas City in connection with its Venture in Kansas City,
Missouri (net of any associated tax benefits) and minus (vi) the
amount of goodwill, not to exceed $95,000,000, associated with
the acquisition by a wholly-owned Subsidiary of Boyd Gaming of
the 85% equity interest in Treasure Chest not owned by Boyd
Kenner as of the Effective Date;"
(e) Clause (a) of Section 7.2.7 of the Credit Agreement is hereby
amended to read in its entirety as follows:
"(a) Expansion Capital Expenditures (other than those
described in clause (c) below) on a cumulative basis from the
effective date of the Second Amendment dated as of June 11, 1997
to Credit Agreement through the term of this Agreement in an
amount not to exceed $50,000,000 plus the net cash proceeds from
the issuance or sale of capital stock of Boyd Gaming after March
31, 1997;"
(f) Exhibit L of the Credit Agreement is hereby amended to read
in its entirety as set forth in Exhibit B hereto.
-2-
<PAGE> 3
2. Waivers and Covenant Regarding Additional Loan Documents. Upon
satisfaction of the conditions set forth in Section 3 of this Amendment, the
Lenders (i) hereby waive any provisions of the Credit Agreement, including,
without limitation, the provisions of Sections 7.2.5, and 7.2.7 of the Credit
Agreement to the extent that any of such provisions would be violated by the
acquisition by a wholly-owned Subsidiary of Boyd Gaming ("Newco") of the 85%
equity interest in Treasure Chest (the "Treasure Chest Acquisition") not owned
by Boyd Kenner as of the date of this Amendment for total proceeds not exceeding
$120,000,000; provided that the Treasure Chest Acquisition occurs not later than
December 31, 1997.
3. Effective Date. This Amendment shall be effective concurrently with
the closing of the Treasure Chest Acquisition so long as each of the following
shall have been satisfied on or before such date:
(a) This Amendment shall have been executed by the Borrowers and
the Required Lenders;
(b) The Agent shall have received executed acknowledgment and
reaffirmations, substantially in the form set forth in Exhibit A hereto, duly
executed by each of the Guarantors;
(c) The Agent shall have received an undertaking from Boyd Gaming
and Newco to deliver the documentation from Newco required by Section 7.1.11 of
the Credit Agreement within fifteen days following the closing of the Treasure
Chest Acquisition; and
(d) The Agent shall have received an undertaking from Boyd Gaming
and Treasure Chest to deliver the documentation required under Sections 5.1.1,
5.1.3 through 5.1.12, 5.1.14, 5.1.15 and 5.1.17 of the Credit Agreement with
respect to the Treasure Chest Casino within fifteen days following the closing
of the Treasure Chest Acquisition.
4. Representations and Warranties. The Borrowers hereby represent and
warrant to the Agent and the Lenders as follows:
(a) Each Borrower has the power and authority and the legal right
to execute, deliver and perform this Amendment and has taken all necessary
action to authorize the execution, delivery and performance of this Amendment.
This Amendment has been duly executed and delivered by each Borrower. The Credit
Agreement (as amended by this Amendment) and the other Loan Documents constitute
legal, valid, and binding obligations of each Borrower, enforceable against such
Borrower in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws now or hereafter
in effect relating to creditors, rights generally, and general principles of
equity.
-3-
<PAGE> 4
(b) At and as of the date of execution hereof and at and as of
the effective date of this Amendment and after giving effect to this Amendment:
(1) the-representations and warranties of each Borrower contained in the Credit
Agreement are true and correct in all respects, and (2) no Default or Event of
Default has occurred and is continuing under the Credit Agreement.
5. Reaffirmation of Credit Agreement. This Amendment shall be deemed to
be an amendment to the Credit Agreement, and the Credit Agreement, as amended
hereby, is hereby ratified, approved and confirmed in each and every respect.
All references to the Credit-Agreement in any other document, instrument,
agreement or writing shall hereafter be deemed to refer to the Credit Agreement
as amended hereby.
6. Reaffirmation of Loan Documents. The Borrowers hereby further affirm
and agree that (a) the execution and delivery by the Borrowers of and the
performance of their obligations under the Credit Agreement, as amended by this
Amendment, shall not in any way amend, impair, invalidate or otherwise affect
any of the obligations of the Borrowers or the rights of the Agent or the
Lenders under any of the Loan Documents or any other document or, instrument
made or given by the Borrowers in connection therewith, and (b) the term
"Obligations" as used in the Loan Documents includes, without limitation, the
obligations of the Borrowers under the Credit Agreement as amended by this
Amendment.
7. Miscellaneous Provisions.
(a) Survival. The provisions of this Amendment shall survive to the
extent provided in Section 10.5 of the credit Agreement.
(b) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF NEVADA.
(c) Counterparts. This Amendment may be executed in any number of
counterparts, all of which together shall constituted one agreement.
(d) No Other Amendment. Except as expressly amended herein, the
Credit Agreement, the other Loan Documents and all documents, instruments and
agreements relating thereto or executed in connection therewith shall remain in
full force and effect as currently written.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
BOYD GAMING CORPORATION
By: /s/ [SIG]
-----------------------------------------
Title: Executive Vice President
CALIFORNIA HOTEL AND CASINO
By: /s/ [SIG]
-----------------------------------------
Title: Senior Vice President
CIBC INC.
By: /s/
-----------------------------------------
Title: Managing Director
CIBC Wood Gundy Securities Corp.,
AS AGENT
BANK OF AMERICA NT&SA
By: /s/
-----------------------------------------
Title:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/
-----------------------------------------
Title:
BANKERS TRUST COMPANY
By: /s/
-----------------------------------------
Title:
CREDIT LYONNAIS LOS ANGELES BRANCH
By: /s/
-----------------------------------------
Title:
SOCIETE GENERALE
By: /s/
-----------------------------------------
Title:
<PAGE> 6
ABN AMRO BANK N.V.
SAN FRANCISCO INTERNATIONAL BRANCH
By: ABN AMRO North America, Inc.
as agent
By /s/ [SIG]
-----------------------------------------
Title: Bradford H. Leahy
Assistant Vice President
By: /s/ [SIG]
-----------------------------------------
Title: L.T. Osborne
Group Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION, LOS ANGELES AGENCY
By: /s/
-----------------------------------------
Title:
THE SANWA BANK, LIMITED
By:
-----------------------------------------
Title:
COMMERZBANK AG, LOS ANGELES BRANCH
By:
-----------------------------------------
Title:
By:
-----------------------------------------
Title:
FIRST SECURITY BANK, N.A.
By: /s/
-----------------------------------------
Title:
THE SUMITOMO BANK, LIMITED
By:
-----------------------------------------
Title:
By:
-----------------------------------------
Title:
<PAGE> 7
BANKBOSTON, N.A.
By: /s/ [SIG]
-----------------------------------------
Title:
BANK OF HAWAII
By: /s/
-----------------------------------------
Title:
THE BANK OF NEW YORK
By: /s/
-----------------------------------------
Title:
BANQUE NATIONALE DE PARIS
By: /s/
-----------------------------------------
Title:
By: /s/
-----------------------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY
By: /s/
-----------------------------------------
Title:
NBD BANK
By: /s/
-----------------------------------------
Title:
THE NIPPON CREDIT BANK, LTD., LOS
ANGELES AGENCY
By: /s/
-----------------------------------------
Title:
US BANK OF NEVADA
By: /s/
-----------------------------------------
Title:
-7-
<PAGE> 8
WHITNEY NATIONAL BANK
By: /s/
-----------------------------------------
Title: Assistant Vice President
DEPOSIT GUARANTY NATIONAL BANK
By: /s/
-----------------------------------------
Title:
FIRST HAWAIIAN BANK
By: /s/
-----------------------------------------
Title:
GIROCREDIT BANK, AG DER SPARKASSEN,
GRAND CAYMAN ISLANDS BRANCH
By: /s/
-----------------------------------------
Title:
By: /s/
-----------------------------------------
Title:
IMPERIAL BANK
By: /s/
-----------------------------------------
Title:
TRUSTMARK NATIONAL BANK
By: /s/
-----------------------------------------
Title:
-8-
<PAGE> 9
EXHIBIT A to
Second Amendment
to Credit Agreement
June 11, 1997
Mare-Bear, Inc.
Sam-Will, Inc.
Boyd Tunica, Inc.
Boyd Kansas City, Inc.
Eldorado, Inc.
Boyd Mississippi, Inc.
Boyd Kenner, Inc.
MSW, Inc.
East Peoria Hotel, Inc.
Par-A-Dice Gaming Corporation
c/o California Hotel and Casino
2950 South Industrial Road
Las Vegas, Nevada 89109
Attention: Chief Financial officer
Re: Boyd Gaming Corporation and California Hotel and Casino
Gentlemen:
Please refer to (1) the $500,000,000 Credit Agreement, dated as of June
19, 1996 (as amended by the First Amendment to Credit Agreement dated as of
March 28, 1997, the "Credit Agreement"), by and among Boyd Gaming Corporation
and California Hotel and Casino, as the Borrowers, the commercial lending
institutions party thereto (collectively, the "Lenders"), Wells Fargo Bank N.A.,
as Swingline Lender, Canadian Imperial Bank Of Commerce ("CIBC"), as letter of
credit issuer, Bank of America National Trust and Savings Association and Wells
Fargo Bank N.A., as co-managing agents (herein, in such capacity, the
"Co-Managing Agents"), Bankers Trust Company, Credit Lyonnais Los Angeles Branch
and Societe Generale, as co-agents (herein, in such capacity, the "Co-Agents"),
and CIBC, as administrative agent and collateral agent for the Lenders (herein,
in such capacity, called the "Agent")(the Lenders, the Co-Managing Agents, the
Co-Agents and the Agent herein are collectively called the "Beneficiaries") and
(2) the General Continuing Guaranties, dated as of June 19, 1996 of Mare-Bear,
Inc., Sam-Will, Inc., Boyd Tunica, Inc., Boyd Kansas City, Inc., Eldorado, Inc.,
Boyd Mississippi, Inc., Boyd Kenner, Inc. and MSW, Inc. and the General
Continuing Guaranties dated as of December 13, 1996 of
<PAGE> 10
East Peoria Hotel, Inc. and Par-A-Dice Gaming Corporation, executed in favor
of the Beneficiaries (each such Guaranty is herein called a "Guaranty").
Pursuant to an amendment dated of even date herewith, certain terms of the
Credit Agreement were amended. We hereby request that you (i) acknowledge and
reaffirm all of your obligations and undertakings under your Guaranty and (ii)
acknowledge and agree that your Guaranty is and shall remain in full force and
effect in accordance with the terms thereof.
Please indicate your agreement to the foregoing by signing in the space
provided below, and returning the executed copy to the undersigned.
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent
By:
-----------------------------------------
Title: Managing Director
CIBC Wood Gundy Securities
Corp., AS AGENT
Acknowledged and Agreed to
MARE-BEAR, INC.
By:
----------------------------
Its:
-----------------------
SAM-WILL, INC.
By:
----------------------------
Its:
-----------------------
BOYD TUNICA, INC.
By:
----------------------------
Its:
-----------------------
BOYD KANSAS CITY, INC
By:
----------------------------
Its:
-----------------------
ELDORADO, INC.
By:
----------------------------
Its:
-----------------------
-2-
<PAGE> 11
BOYD MISSISSIPPI, INC.
By:
----------------------------
Its:
-----------------------
BOYD KENNER, INC.
By:
----------------------------
Its:
-----------------------
MSW, INC.
By:
----------------------------
Its:
-----------------------
EAST PEORIA HOTEL, INC.
By:
----------------------------
Its:
-----------------------
PAR-A-DICE GAMING CORPORATION
By:
----------------------------
Its:
-----------------------
<PAGE> 12
EXHIBIT B to
Second Amendment
to Credit Agreement
Form of Certificate of the
Borrowers of Compliance with the
Provisions of Section 7.2
Schedule of Compliance with the
Credit Agreement
dated as of June 19, 1996, as amended
as of __________, 19__
The undersigned,__________________________________________ of, Boyd
Gaming Corporation and California Hotel and Casino (the "Borrowers"), pursuant
to Section 7.1.1(c) and (d) of the Credit Agreement, dated as of June 19, 1996,
as amended (the "Credit Agreement"), among the Borrowers, Canadian Imperial Bank
of Commerce, as Agent, and the various financial institutions as are, or may
become, parties thereto, hereby certifies that as of the date hereof (defined
terms in the Credit Agreement being used herein with the same meanings as in the
Credit Agreement), the following computations were true and correct:
I. Calculation of EBITDA for four consecutive Fiscal Quarters ending
on the date set forth above:
<TABLE>
<S> <C> <C>
a. Consolidated earnings of Boyd Gaming $_____________
before: depreciation $______________
amortization $______________
interest expense $______________
pre-opening expenses $______________
extraordinary items $______________
taxes $______________
plus (if applicable without duplication)
b. Earnings of any New Venture which became a
direct or indirect Subsidiary of Boyd Gaming
during such period: $_____________
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C>
before: depreciation $______________
amortization $______________
interest expense $______________
pre-opening expense $______________
extraordinary items $______________
taxes $______________
plus (or minus)
c. any non-cash loss (or gain arising from
change in GAAP $_____________
EBITDA $_____________
II. Additional Indebtedness Test, Section 7.2.2
a. Aggregate notional principal amount of
secured Hedging Obligations under (iii):
[description]
Aggregate notional principal amount of
such secured Hedging Obligations shall
not exceed $300,000,000.
b. Indebtedness outstanding under (v):
(description)
Total Indebtedness described above shall
not exceed $25,000,000.
III. Tangible Net Worth Test, Section 7.2.4(a)
a. Actual Tangible Net Worth
(i) consolidated net worth $_____________
less (ii) intangible assets $_____________
TOTAL $_____________
b. Required Tangible Net Worth
(i) $210,000,000 $210,000,000
pus (ii) 50% of Consolidated net income
(without giving effect to any losses)
for each Fiscal Quarter ending on or
after September 30, 1996 $_____________
plus (iii) Amount of increased equity due
to stock issuances $_____________
minus (iv) Amount of goodwill from
acquisition of Par-A-Dice Gaming
Corporation (not to exceed
$130,000,000) $_____________
</TABLE>
-2-
<PAGE> 14
<TABLE>
<S> <C> <C>
minus (v) Noncash writedowns taken by
Boyd Kansas City in connection
with its Venture in
Kansas City, Missouri $_____________
minus (vi) The amount of goodwill, not
to exceed $95,000,000,
associated with the
acquisition of Treasure Chest $_____________
TOTAL $_____________
c. Actual Tangible Net Worth shown
in (a) above must exceed (b) $_____________
IV. Funded Debt to EBITDA Ratio, Section 7.2.4(b)
a. Funded Debt of Boyd Gaming and its
Subsidiaries
(i) obligations for borrowed money $_____________
plus (ii) letter of credit and bankers
acceptances $_____________
plus (iii) capitalized lease obligations $
plus (iv) deferred purchase price
indebtedness and secured
indebtedness $_____________
plus (v) contingent liabilities $_____________
TOTAL $_____________
b. Twelve month trailing
EBITDA (from Section I above) $_____________
c. Ratio of line (a) to line (b) to
------ ------
d. The ratio on line (c) must not exceed to
------ ------
V. Fixed Charge Coverage Test, Section 7.2.4(c)
a. Twelve-month trailing EBITDA (from Section I above)
plus rental payments ($_____________)
b. Fixed charges
(i) Twelve-month consolidated net
interest expense $_____________
plus (ii) mandatory principal payments.(other
than payment of Indebtedness pursuant
to Section 5.1.16 and mandatory
prepayments of Loans upon Commitment
reductions) $_____________
plus (iii) provision for tax payments $_____________
plus (iv) dividends and distributions $_____________
</TABLE>
-3-
<PAGE> 15
<TABLE>
<S> <C> <C>
plus (v) share redemptions and repurchases $_____________
plus (vi) rental payments $_____________
c. Ratio of line (a) to line (b) to
------ ------
d. The ratio on line (c) at the end of any
Fiscal Quarter must exceed to
------ ------
VI. Expansion Capital Expenditures after the effective date of the Second
Amendment to the Credit Agreement, Section 7.2.7(a)
a. Aggregate Expansion Capital Expenditures
during term of Agreement $_____________
[List Expenditures by Venture]
b. Line (a) must not exceed $50,000,000 plus net
cash proceeds from the issuance or sale of
Boyd Gaming capital stock ($______________) after
March 31, 1997
VII. Maintenance Capital Expenditures, Section 7.2.7(b)
a. Aggregate Maintenance Capital Expenditures
for current Fiscal Year $_____________
b. Line (a) must not exceed $__,000,000.
VIII. New Venture Investments, Section 7.2.5
a. Aggregate New Venture Investments during
term of Agreement $_____________
[List Investments by New Venture]
IX. Pledgor EBITDA (Fiscal Year test)
a. Consolidated earnings of all Pledgors
attributable to the Pledged Casinos $_____________
before: depreciation $__________
amortization $__________
interest expense $__________
pre-opening expenses $__________
extraordinary items $__________
taxes $__________
</TABLE>
-4-
<PAGE> 16
<TABLE>
<S> <C> <C>
plus
b. Consolidated earnings of any Venture that
becomes a Pledged Casino pursuant to
Section 7.1.11 $_____________
before: depreciation $_____________
amortization $_____________
interest expense $_____________
pre-opening expenses $_____________
extraordinary items $_____________
taxes $_____________
plus (or minus)
c. Any non-cash loss (or gain) arising from
a change in GAAP $_____________
Pledgor EBITDA $_____________
</TABLE>
I hereby further certify that no event has occurred or is continuing on the date
hereof which constitutes an Event of Default or a Default.
IN WITNESS WHEREOF, I have hereunto set my hand as of the date first above
written.
BOYD GAMING CORPORATION
By
-----------------------------------
Its:
CALIFORNIA HOTEL AND CASINO
By
-----------------------------------
Its:
-5-
<PAGE> 1
EXHIBIT 10.54
THIRD AMENDMENT TO
CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made and
dated as of the 24th day of June, 1997, by and among BOYD GAMING CORPORATION, a
Nevada corporation ("Boyd Gaming") and CALIFORNIA HOTEL AND CASINO, a Nevada
corporation ("CH&C"; CH&C and Boyd Gaming being referred to collectively as the
"Borrowers" and each individually as a "Borrower"), the commercial lending
institutions listed on the signature pages hereof (collectively, the "Lenders"),
WELLS FARGO BANK, N.A., as Swingline Lender, CANADIAN IMPERIAL BANK OF COMMERCE
("CIBC"), as letter of credit issuer, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION and WELLS FARGO BANK, N.A., as co-managing agents (herein, in such
capacity, the "Co-Managing Agents"), BANKERS TRUST COMPANY, CREDIT LYONNAIS LOS
ANGELES BRANCH and SOCIETE GENERALE, as co-agent (herein, in such capacity, the
"Co-Agents"), and CIBC, as administrative agent and collateral agent for the
Lenders (herein, in such capacity, called the "Agent").
RECITALS
A. The Borrowers and the Lenders entered into that certain $500,000,000
Credit Agreement dated as of June 19, 1996 (as amended by the First Amendment to
Credit Agreement dated as of March 28, 1997 and the Second Amendment to Credit
Agreement dated as of June 11, 1997, the "Credit Agreement"), pursuant to which
the Lenders agreed to extend credit to the Borrowers on the terms and subject to
the conditions set forth therein.
B. The Borrowers and the Lenders desire to amend certain terms and
conditions of the Credit Agreement pursuant to this Amendment.
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree to amend the Credit Agreement as
follows:
AGREEMENT
1. The Credit Agreement is hereby amended as follows:
(a) Section 1.1 of the Credit Agreement is hereby amended by adding
the following defined terms in their correct alphabetical order:
"Permitted Subordinated Debt Issuance means an issuance by Boyd
Gaming of up to $250,000,000 of subordinated unsecured notes, on terms
reasonably acceptable to the Agent and Co-Managing Agents.
<PAGE> 2
"Supplemental Fee is defined in Section 3.3.5.
"Temporary Availability Reduction" is defined in
Section 2.2.2(f).
(b) The definition of the term "Commitment Fee Amount" in Section 1.1 of
the Credit Agreement is hereby amended by adding "or pursuant to Section
2.2.2(f)" immediately prior to the end of the parenthetical clause therein.
(c) The definition of the term "Permitted Note Issuance" in Section 1.1
of the Credit Agreement is hereby amended and restated in its entirety to read
as follows:
"Permitted Note Issuance" means an issuance by Boyd Gaming of
senior or subordinated unsecured notes (other than the Permitted
Subordinated Debt Issuance) on terms reasonably acceptable to the Agent
and the Co-Managing Agents.
(d) The definition of the term "Subordinated Debt" in Section 1.1 of
the Credit Agreement is hereby amended and restated to read in its entirety as
follows:
"Subordinated Debt" means the Boyd Notes, the CH&C Notes, the
Permitted Subordinated Debt Issuance, and all additional unsecured
Indebtedness of the Borrowers for money borrowed which is subordinated,
upon terms satisfactory to the Required Lenders, in right of payment to
the payment in full in cash of all Obligations.
(e) There shall be added to Section 2.2.2 of the Credit Agreement a new
clause (f) reading in its entirety as follows:
(f) To the extent Boyd Gaming completes a Permitted Subordinated
Debt Issuance, the availability under the Revolving Loan Commitment
Amount shall be reduced (the "Temporary Availability Reduction) by the
lesser of (i) the amount of such Permitted Subordinated Debt Issuance
and (ii) $192,631,250 (the estimated cost to redeem all of the CH&C
Notes), and such Temporary Availability Reduction shall remain in effect
until Boyd Gaming or any of its Subsidiaries redeems or repurchases all
or a portion of the CH&C Notes, at which time the availability under the
Revolving Loan Commitment Amount shall increase by an amount equal to
the lesser of (i) the amount of such Permitted Subordinated Debt
Issuance or (ii) 104.125% of the principal amount of each CH&C Note
redeemed or repurchased.
(f) The first parenthetical clause of Section 3.3.1 of the Credit
Agreement is hereby amended by adding "or pursuant to Section 2.2.2(f)"
immediately prior to the end of such parenthetical clause.
-2-
<PAGE> 3
(g) There shall be added to the Credit Agreement a new Section 3.3.5
reading in its entirety as follows:
SECTION 3.3.5. Supplemental Fee. In addition to the Unused Fee, the
Borrowers agree to pay to the Agent for the account of each Lender
during the Temporary Availability Reduction, a supplemental fee (the
"Supplemental Fee") at the rate of 1/4 of 1% per annum, calculated on
the average daily outstanding principal amount of the CH&C Notes. Not
later than 10 days prior to the end of each March, June, September and
December, commencing on the first of such dates following the Permitted
Subordinated Debt Issuance and ending with the quarter in which all CH&C
Notes have been purchased or redeemed, the Borrowers will furnish to the
Agent a certificate setting forth the dates and amount of each purchase
or redemption of CH&C Notes completed since the date of the Permitted
Subordinated Debt Issuance, certified by the chief financial officer of
Boyd Gaming. The Supplemental Fee shall be payable by the Borrowers
quarterly in arrears on the last day of March, June, September and
December in each year (or, if such day is not a Business Day, on the
next succeeding Business Day), commencing with the first such date to
occur after commencement of the Temporary Availability Reduction and on
any expiration or termination of the Revolving Loan Commitment.
(h) The sixth sentence of Section 4.7 of the Credit Agreement is hereby
amended by adding "Supplemental Fees," after "Unused Fees," and before "L/C
Fees".
(i) Clause (ii) of Section 7.2.2 of the Credit Agreement is hereby
amended to read in its entirety as follows;
(ii) the Boyd Notes and CH&C Notes outstanding on the Effective Date,
any notes issued pursuant to a Permitted Note Issuance and any notes issued
pursuant to a Permitted Subordinated Debt Issuance;
(j) Clause (a) of Section 7.2.6 of the Credit Agreement is hereby
amended to read in its entirety as follows:
(a) Neither Boyd Gaming nor any of its Subsidiaries shall
purchase or redeem the Boyd Notes, the CH&C Notes or any other
Subordinated Debt other than (i) the redemption of the Boyd Notes at any
time after a Permitted Note Issuance in an amount not to exceed the
amount of such Permitted Note Issuance and (ii) the redemption or
repurchase of the CH&C Notes at any time after a Permitted Subordinated
Debt Issuance in an amount not to exceed the amount of such Permitted
Subordinated Debt Issuance.
-3-
<PAGE> 4
(k) Clause (c) of Section 8.1.8 of the Credit Agreement is hereby
amended to read in its entirety as follows:
"(c) prior to the redemption or repurchase of all of the CH&C
Notes, a "Change in Control" (as such term is defined in the CH&C
Indenture) in respect of CH&C shall occur or, after a Permitted
Subordinated Debt Issuance, a "Change in Control" (as such term is
defined under the indenture for such Permitted Subordinated Debt
Issuance) shall occur;"
2. Effective Date. This Amendment shall be effective on the date on
which:
(a) This Amendment shall have been executed by the Borrowers and the
Required Lenders; and
(b) The Agent shall have received executed acknowledgment and
reaffirmations, substantially in the form set forth in Exhibit A hereto, duly
executed by each of the Guarantors.
3. Representations and Warranties. The Borrowers hereby represent and
warrant to the Agent and the Lenders as follows:
(a) Each Borrower has the power and authority and the
legal right to execute, deliver and perform this Amendment and has taken all
necessary action to authorize the execution, delivery and performance of this
Amendment. This Amendment has been duly executed and delivered by each Borrower.
The Credit Agreement (as amended by this Amendment) and the other Loan Documents
constitute legal, valid, and binding obligations of each Borrower, enforceable
against such Borrower in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws now or
hereafter in effect relating to creditors, rights generally, and general
principles of equity.
(b) At and as of the date of execution hereof and at and as of the
effective date of this Amendment and after giving effect to this Amendment: (1)
the representations and warranties of each Borrower contained in the Credit
Agreement are true and correct in all respects, and (2) no Default or Event of
Default has occurred and is continuing under the Credit Agreement.
4. Reaffirmation of Credit agreement,. This Amendment shall be deemed to
be an amendment to the Credit Agreement, and the Credit Agreement, as amended
hereby, is hereby ratified, approved and confirmed in each and every respect.
All references to the Credit Agreement in any other document, instrument,
agreement or writing shall hereafter be deemed to refer to the Credit Agreement
as amended hereby.
-4-
<PAGE> 5
5. Reaffirmation of Loan Documents. The Borrowers hereby further
affirm and agree that (a) the execution and delivery by the Borrowers of and the
performance of their obligations under the Credit Agreement, as amended by this
Amendment, shall not in any way amend, impair, invalidate or otherwise affect
any of the obligations of the Borrowers or the rights of the Agent or the
Lenders under any of the Loan Documents or any other document or instrument made
or given by the Borrowers in connection therewith, and (b) the term
"obligations* as used in the Loan Documents includes, without limitation, the
obligations of the Borrowers under the Credit Agreement an amended by this
Amendment.
6. Miscellaneous Provisions.
(a) Survival. The provisions of this Amendment shall survive to the
extent provided in section 10.5 of the Credit Agreement.
(b) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF NEVADA.
(c) Counterparts. This Amendment may be executed in any number of
counterparts, all of which together shall constituted one agreement.
(d) No other Amendment. Except as expressly amended herein, the
Credit Agreement, the other Loan Documents and all documents, instruments and
agreements relating thereto or executed in connection therewith shall remain in
full force and effect as currently written.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
BOYD GAMING CORPORATION
By: /s/ [SIG]
--------------------------------------
Title: Executive Vice President
CALIFORNIA HOTEL AND CASINO
By: /s/ [SIG]
-------------------------------------
Title: Senior Vice President
-5-
<PAGE> 6
CIBC INC.
By: /s/ [SIG]
-----------------------------------------
Title: Managing-Director
CIBC Wood Gundy Securities Corp.,
AS AGENT
BANK OF AMERICA NT&SA
By: /s/
----------------------------------------
Title:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/
----------------------------------------
Title:
BANKERS TRUST COMPANY
By: /s/
----------------------------------------
Title:
CREDIT LYONNAIS LOS ANGELES BRANCH
By: /s/
----------------------------------------
Title:
SOCIETE GENERALE
By: /s/
----------------------------------------
Title:
ABN AMRO BANK N.V.
SAN FRANCISCO INTERNATIONAL BRANCH
By: ABN AMRO North America, Inc.
as agent
By: /s/
----------------------------------------
Title:
By: /s/
----------------------------------------
Title:
-6-
<PAGE> 7
THE MITSUBISHI TRUST AND BANKING
CORPORATION, LOS ANGELES AGENCY
By: /s/ [SIG]
----------------------------------------------
Title: Hiroaki Koseki - Deputy General Manager
THE SANWA BANK, LIMITED
By:
-----------------------------------------------
Title:
COMMERZBANK AG, LOS ANGELES BRANCH
By:
-----------------------------------------------
Title:
By:
-----------------------------------------------
Title:
FIRST SECURITY BANK, N.A.
By: /s/
-----------------------------------------------
Title:
THE SUMITOMO BANK, LIMITED
By: /s/
-----------------------------------------------
Title:
By: /s/
-----------------------------------------------
Title:
BANKBOSTON, N.A.
By:
-----------------------------------------------
Title:
BANK OF HAWAII
By: /s/
-----------------------------------------------
Title:
-7-
<PAGE> 8
THE BANK OF NEW YORK
By: /s/ [SIG]
-----------------------------------------------
Title:
BANQUE NATIONALE DE PARIS
By: /s/
-----------------------------------------------
Title:
By: /s/
-----------------------------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY
By: /s/
-----------------------------------------------
Title:
NBD BANK
By: /s/
-----------------------------------------------
Title:
THE NIPPON CREDIT BANK, LTD., LOS
ANGELES AGENCY
By: /s/
-----------------------------------------------
Title:
US BANK OF NEVADA
By: /s/
-----------------------------------------------
Title:
WHITNEY NATIONAL BANK
By: /s/
-----------------------------------------------
Title:
DEPOSIT GUARANTY NATIONAL BANK
By: /s/
-----------------------------------------------
Title:
-8-
<PAGE> 9
FIRST HAWAIIAN BANK
By: /s/ [SIG]
---------------------------------------------
Title: Vice President
GIROCREDIT BANK# AG DER SPARKASSEN,
GRAND CAYMAN ISLANDS BRANCH
By: /s/
---------------------------------------------
Title:
IMPERIAL BANK
By: /s/
---------------------------------------------
Title:
TRUSTMARK NATIONAL BANK
By: /s/
---------------------------------------------
Title:
-9-
<PAGE> 1
EXHIBIT 10.55
FIRST AMENDMENT TO PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AGREEMENT (the "First Amendment") dated as
of September 9, 1997, is executed by and among Boyd Kenner, Inc., a Louisiana
corporation ("BKI"), Boyd Louisiana, L.L.C., a Nevada limited liability company
("Purchaser"), Boyd Gaming Corporation, a Nevada corporation ("Guarantor"),
Treasure Chest Casino, L.L.C., a Louisiana limited liability company ("Treasure
Chest"), and each of the persons set forth on Exhibit A hereto (such persons
collectively, the "Selling Members," and severally, a "Selling Member").
A. Purchaser, Guarantor, Treasure Chest and Selling Members entered into that
certain Purchase Agreement dated July 11, 1997 (the "Agreement").
B. Unless expressly defined herein, all capitalized terms used herein shall
have the same meaning as set forth in the Agreement.
C. Purchaser, Guarantor, Treasure Chest and Selling Members desire to amend
the Agreement as provided herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby agree as
follows:
1. Section 6.1(b) is hereby deleted and the following is substituted
therefore:
by either BKI or the Members' Representative, by written notice to the
other parties hereto by 5:00 p.m., New Orleans time, on or before
October 3, 1997, if the approval of the Louisiana Gaming Control Board
as required by Section 5.1.2 hereof shall not have been obtained on or
before September 30, 1997, (unless the failure to obtain such approval
shall be due to any breach of this Agreement by the parties seeking to
terminate), unless such date shall be extended by the mutual written
consent of each BKI, Treasure Chest and the Members' Representative.
Notwithstanding anything in this Section 6.1(b) or otherwise in this
Agreement to the contrary, if such approval of the Louisiana Gaming
Control Board is not obtained on or before September 30, 1997, the
parties agree to extend this Agreement and to cooperate in good faith
to extend the termination date of the Management Agreement such that
Louisiana Gaming Control Board approval may be obtained and the
transaction contemplated by this Agreement closed prior to such
termination date; provided further that BKI and Guarantor agree to use
their reasonable best efforts to obtain all necessary regulatory
approvals in connection with such extension of the Management Agreement
termination date.
2. Section 6.1(f) is hereby amended by changing the date September 15,
1997 in the last line thereof to September 30, 1997.
3. This First Amendment may be executed in multiple counterparts, which
together shall constitute one and the same document. Facsimile copies hereof and
facsimile signatures hereon shall have the force and effect of originals.
<PAGE> 2
4. Except as amended hereby, the Agreement shall remain unmodified and in
full force and effect.
The undersigned have executed this First Amendment as of the day and year
first above written.
BOYD KENNER, INC.
By: /s/ WILLIAM S. BOYD
-------------------------------
Name: William S. Boyd
Title: President
BOYD LOUISIANA, L.L.C.
By: /s/ WILLIAM S. BOYD
-------------------------------
Name: William S. Boyd
Title: Manager
BOYD GAMING CORPORATION
By: /s/ WILLIAM S. BOYD
-------------------------------
Name: William S. Boyd
Title: Chairman of the
Board and Chief
Executive Officer
TREASURE CHEST CASINO L.L.C.
By: /s/ ROBERT J. GUIDRY
-------------------------------
Name: Robert J. Guidry
Title: Chief Executive Officer
/s/ ROBERT J. GUIDRY
-------------------------------
Robert J. Guidry
Members' Representative
& Selling Member
<PAGE> 1
EXHIBIT 21.1
Boyd Gaming Corporation
Significant Subsidiaries:
California Hotel and Casino
(State of Incorporation or Organization) Nevada
(IRS Employer Identification Number) 88-012743
Boyd Tunica, Inc.
(State of Incorporation or Organization) Mississippi
(IRS Employer Identification Number) 64-0829658
Boyd Mississippi, Inc.
(State of Incorporation or Organization) Mississippi
(IRS Employer Identification Number) 93-1104426
Boyd Kansas City, Inc.
(State of Incorporation or Organization) Missouri
(IRS Employer Identification Number) 43-1649728
Boyd Kenner, Inc.
(State of Incorporation or Organization) Louisiana
(IRS Employer Identification Number) 88-0319489
Mare-Bear, Inc.
(State of Incorporation or Organization) Nevada
(IRS Employer Identification Number) 88-0203692
Sam-Will, Inc.
(State of Incorporation or Organization) Nevada
(IRS Employer Identification Number) 88-0203673
Eldorado, Inc.
(State of Incorporation or Organization) Nevada
(IRS Employer Identification Number) 88-0093922
MSW, Inc.
(State of Incorporation or Organization) Nevada
(IRS Employer Identification Number) 88-0310765
Par-A-Dice Gaming Corporation
(State of Incorporation or Organization) Illinois
(IRS Employer Identification Number) 37-1268902
East Peoria Hotel, Inc.
(State of Incorporation or Organization) Illinois
(IRS Employer Identification Number) 37-1342276
Boyd Travel, Inc.
(State of Incorporation or Organization) Nevada
(IRS Employer Identification Number) 88-0345135
II-10
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
Boyd Gaming Corporation and Subsidiaries:
We consent to the incorporation by reference in Registration Statement No.
33-17941, No. 33-76484, and No. 33-85022 on Form S-8 of Boyd Gaming Corporation
of our reports dated August 20, 1997, appearing in and incorporated by reference
in this Annual Report on Form 10-K of Boyd Gaming Corporation for the year ended
June 30, 1997.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
September 12, 1997
II-11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 55,220
<SECURITIES> 0
<RECEIVABLES> 20,250
<ALLOWANCES> 3,304
<INVENTORY> 8,501
<CURRENT-ASSETS> 95,540
<PP&E> 1,121,921
<DEPRECIATION> 377,883
<TOTAL-ASSETS> 1,030,185
<CURRENT-LIABILITIES> 99,077
<BONDS> 739,792
0
0
<COMMON> 615
<OTHER-SE> 190,701
<TOTAL-LIABILITY-AND-EQUITY> 1,030,185
<SALES> 0
<TOTAL-REVENUES> 819,259
<CGS> 0
<TOTAL-COSTS> 863,685
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (61,672)
<INCOME-PRETAX> (105,448)
<INCOME-TAX> (34,025)
<INCOME-CONTINUING> (71,423)
<DISCONTINUED> 0
<EXTRAORDINARY> 6,069
<CHANGES> 0
<NET-INCOME> (77,492)
<EPS-PRIMARY> (1.29)
<EPS-DILUTED> (1.29)
</TABLE>
