<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1996
REGISTRATION NO. 333-3576
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HARVEYS CASINO RESORTS
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEVADA 7993 88-0066882
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
HIGHWAY 50 & STATELINE AVENUE, P.O. BOX 128, LAKE TAHOE, NEVADA 89449
(702) 588-2411
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
HARVEYS C.C. MANAGEMENT COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEVADA 7993 88-0307948
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
HIGHWAY 50 & STATELINE AVENUE, P.O. BOX 128, LAKE TAHOE, NEVADA 89449
(702) 588-2411
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
HARVEYS WAGON WHEEL CASINO LIMITED LIABILITY COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
COLORADO 7993 88-0308321
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
HIGHWAY 50 & STATELINE AVENUE, P.O. BOX 128, LAKE TAHOE, NEVADA 89449
(702) 588-2411
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
HARVEYS IOWA MANAGEMENT COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEVADA 7993 88-0321071
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
HIGHWAY 50 & STATELINE AVENUE, P.O. BOX 128, LAKE TAHOE, NEVADA 89449
(702) 588-2411
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
HARVEYS L.V. MANAGEMENT COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEVADA 7993 88-0308319
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
HIGHWAY 50 & STATELINE AVENUE, P.O. BOX 128, LAKE TAHOE, NEVADA 89449
(702) 588-2411
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
JOHN J. MCLAUGHLIN
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
HIGHWAY 50 & STATELINE AVENUE
P.O. BOX 128
LAKE TAHOE, NEVADA 89449
(702) 588-2411
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
IT IS REQUESTED THAT COPIES OF COMMUNICATIONS BE SENT TO:
Peter P. Wallace, Esq. James D. Phyfe, Esq.
Milbank, Tweed, Hadley & McCloy Davis Polk & Wardwell
601 South Figueroa Street, 30th Floor 450 Lexington Avenue
Los Angeles, California 90017 New York, New York 10017
(213) 892-4000 (212) 450-4000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this registration statement.
--------------------------
If any of the Securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration Statement number of the earlier
effective registration statement for the same offering. / / ________________.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________________.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
HARVEYS CASINO RESORTS
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND ITEM
501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NO. AND CAPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Facing Page of Registration Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page of Prospectus; Underwriting
6. Dilution............................................. Not Applicable
7. Selling Security Holders............................. Not Applicable
8. Plan of Distribution................................. Outside Front Cover Page of Prospectus; Underwriting
9. Description of Securities to be Registered........... Description of the Notes
10. Interests of Named Experts and Counsel............... Experts; Legal Matters
11. Information with Respect to the Registrant........... Prospectus Summary; Business; Selected Financial
Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Management; Principal Stockholders; Certain
Transactions
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 13, 1996
PROSPECTUS
, 1996
[LOGO]
$150,000,000
HARVEYS CASINO RESORTS
% SENIOR SUBORDINATED NOTES DUE 2006
The % Senior Subordinated Notes Due 2006 (the "Notes") are being issued by
Harveys Casino Resorts, a Nevada corporation (the "Company"), and are fully and
unconditionally guaranteed (the "Guarantees") jointly and severally by the
Company's Restricted Subsidiaries (as defined herein). Interest on the Notes is
payable semiannually on each and , commencing
, 1996. The Notes will mature on , 2006. The Notes are
redeemable at the option of the Company, in whole or in part, on or after
, 2001, at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption. Upon a Change of Control (as
defined herein), each holder of the Notes will have the right to require the
Company to repurchase such holder's Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of redemption.
See "Risk Factors" and "Description of the Notes".
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Debt (as defined herein) of
the Company. Each Guarantee will be a general unsecured obligation of the
guaranteeing Restricted Subsidiary (each a "Guarantor" and collectively the
"Guarantors"), subordinated in right of payment to all existing and future
Senior Debt of such Guarantor. As of February 29, 1996, on a PRO FORMA basis
after giving effect to the Exchange Offer (as defined herein) and the offering
of the Notes made hereby and application of the net proceeds therefrom, the
Company and its subsidiaries would have had approximately $14.0 million of
indebtedness that would have constituted Senior Debt and approximately $28.8
million of trade payables and other accrued liabilities. The indenture pursuant
to which the Notes will be issued will permit the Company and its subsidiaries
to incur additional indebtedness, including Senior Debt, subject to certain
limitations. See "Description of the Notes -- Certain Covenants".
There has been no public market for the Notes and there can be no assurance
that an active market for the Notes will develop.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD,
THE IOWA RACING AND GAMING COMMISSION OR THE COLORADO GAMING
COMMISSION HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES
OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
<S> <C> <C> <C>
Per Note...................................... % % %
Total......................................... $ $ $
</TABLE>
(1) PLUS ACCRUED INTEREST, IF ANY, FROM , 1996 TO THE DATE OF
DELIVERY.
(2) THE COMPANY AND ITS SUBSIDIARIES HAVE AGREED TO INDEMNIFY THE UNDERWRITERS
AGAINST CERTAIN LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
SEE "UNDERWRITING".
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED TO BE
$600,000.00.
The Notes are offered by the Underwriters, subject to prior sale, when as
and if delivered to and accepted by the Underwriters and subject to various
other conditions, including their right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. It is expected that delivery of the
Notes will be made in New York, New York, through the facilities of The
Depository Trust Company, on or about , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC BEAR, STEARNS & CO. INC.
<PAGE>
[Logo] Harveys Casino Resorts
Photograph
of Tahoe Harveys
Facility Resort Hotel/Casino - Lake Tahoe
Photograph of Harveys Wagon Wheel Hotel Casino
Central City Central City, CO
Facility
Photograph of Harveys Casino - Hotel
Council Bluffs Council Bluffs, Iowa
Facility
Photographs of Save the Planet
Hard Rock Hotel Hard Rock Hotel
Las Vegas
Affiliated property
in which Harveys
holds a 40 percent
equity interest, and
Peter Morton, majority
shareholder, holds a
60 percent equity interest
[Logo] Las Vegas, Nevada
Photograph of Save the Planet
Hard Rock Hotel Hard Rock Hotel
Las Vegas
Map of Las Vegas In March 1995, Harveys Casino
area Resorts joined Peter Morton, founder
and chairman of Hard Rock America,
in officially opening the world's first
Hard Rock/Casino. Located on
approximately 16 acres and only 5
minutes from the Las Vegas
International Airport, the 330-room
hotel houses a 28,000-square-foot
casino, featuring more than 800 slot
machines, 30 table games and a sports
and race book.
Overall awareness of the property has
grown steadily since opening in
March 1995 and is gaming significant
momentum.
[Logo] Counsel Bluffs, Iowa
Harveys Casino - Hotel
Council Bluffs, Iowa
Photographs of Harveys Casino Resorts ushered in
Council Bluffs 1996 with the much awarded grand
Facility and opening of the riverboat casino at
Riverboat Casino Harveys Casino/Hotel-the
company's newest business
Map of enterprise. Located directly across
Omaha/Council Bluffs the Missouri River from Omaha.
area Nebraska and the 650,000 residents
of the greater Omaha Metropolitan
area. Harveys Casino/Hotel is
poised to become one of the
Midwest's premier gaming
resorts. The opening of the Hotel-
with 231 rooms including 11
suites - and the 21,000 square foot
convention center area is expected
to take place in mid-1996.
[Logo] Lake Tahoe, Nevada
Harveys Resort Hotel/Casino
Lake Tahoe
Harveys Resort Hotel/Casino, located
200 miles northeast of San Francisco
Photographs of and 100 miles east of Sacramento on
Lake Tahoe Facility U.S. Highway 50, is Lake Tahoe's
largest and most modern casino resort.
Map of The resort features 740 rooms-36 of
Lake Tahoe area which are luxury suites-eight great
restaurants, and a spacious casino
with more than 2,100 slot machines,
105 table games, the area's largest
poker room, a race and sports book,
and a keno lounge.
Central City, Colorado
Harveys Wagon Wheel Hotel Casino
Central City
Harveys Wagon Wheel Hotel/Casino
in Central City, Colorado-35 miles
west of Denver off U.S. Interstate 70
Photographs of -takes the atmosphere of an old
Central City Facility western mining town and brings it
into the present. Situated on an
Map of approximately one-acre site.
Denver area Harveys Wagon Wheel offers the
largest casino in the Colorado
market (40,000 square feet).
Lodging accommodations consist
of 118 rooms, making the Wagon
Wheel Central City's only
"stay and play" destination.
More than 50 years of growth and success
Photographs of Harveys properties
Harveys Casino Resorts is in the business of owning, operating and developing
high quality hotel/casino facilities in markets where it can attain a
prominent or niche position. Founded in 1944, Harveys Casino Resorts operates
Harveys Resort Hotel/Casino, a Mobil Four Star and AAA Four Diamond
full-service resort at Lake Tahoe; Harveys Wagon Wheel Hotel/Casino in
Central City, Colorado; Harveys Casino/Hotel in Council Bluffs, Iowa; and in
partnership with Peter Morton, founder and chairman of Hard Rock America, the
Hard Rock Hotel and Casino in Las Vegas, in which Morton is the majority
shareholder.
[Logo]
2
<PAGE>
SUMMARY OF PROSPECTUS
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS. THIS SUMMARY IS INTENDED ONLY TO HIGHLIGHT CERTAIN INFORMATION
CONTAINED IN THIS PROSPECTUS. IT IS NOT INTENDED TO BE COMPLETE IN ITSELF, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS. PROSPECTIVE PURCHASERS OF THE NOTES ARE URGED TO
READ THIS PROSPECTUS IN ITS ENTIRETY. FOR A DISCUSSION OF CERTAIN RISK FACTORS
IN CONNECTION WITH THE OFFERING, SEE "RISK FACTORS".
THE COMPANY
Harveys Casino Resorts ("Harveys" or the "Company") is an established owner,
operator and developer of high-quality hotel/casinos in the state of Nevada and
new gaming jurisdictions. The Company owns and operates Harveys Resort
Hotel/Casino ("Harveys Resort"), the Lake Tahoe area's largest hotel/casino.
Harveys Resort, in operation since 1944, is situated on the south shore of
scenic Lake Tahoe on the Nevada/ California state line. The Company owns and
operates Harveys Wagon Wheel Hotel/Casino in Central City, Colorado ("Harveys
Wagon Wheel"), which opened in December 1994 as the first major hotel/casino
serving the greater Denver area. Harveys owns and operates a riverboat casino
and is in the process of constructing a hotel/convention center, scheduled to
open in mid-1996, in Council Bluffs, Iowa ("Harveys Casino/Hotel") across the
Missouri River from Omaha, Nebraska. The Harveys Casino/Hotel riverboat casino
opened on January 1, 1996 and is one of only three operators in the
Omaha/Council Bluffs gaming market, which also includes one other riverboat
casino and a slot machine operator at the local dogtrack. In addition, through a
joint venture between Harveys and the Hard Rock Cafe co-founder Peter A. Morton,
Harveys owns 40% of and manages the Hard Rock Hotel and Casino in Las Vegas,
Nevada (the "Hard Rock Hotel"), which opened in March 1995. For the twelve
months ended February 29, 1996, Harveys generated net revenues and earnings
before interest, taxes, depreciation and amortization ("EBITDA") of $184.3
million and $38.5 million, respectively. See note 3 of "Summary Financial Data".
BUSINESS STRATEGY
The Company's business strategy is to develop premium hotel/casino
facilities in markets in which the Company believes it can establish and
maintain a prominent or niche position. Each of Harveys' properties offers
casino gaming and a full array of amenities in a friendly atmosphere that caters
to middle- and upper-middle income customers. The Company's strategy focuses on
five key components: high-quality facilities and superior customer service,
strategic locations, a targeted customer base, effective marketing and an
emphasis on slot play.
Harveys' properties are strategically located on highly visible sites or
near regional population centers. The Company seeks to attract customers with
higher disposable incomes by offering well-appointed rooms, quality food and
beverages, and an array of gaming and non-gaming amenities. The Company also has
established extensive customer databases and uses sophisticated player-tracking
systems to develop and monitor playing habits of its customers. In response to
customer preferences at certain of the Company's properties, the Company has
changed its mix of games at such properties to increase the number of slot
machines. Compared to table games, slot machines are less labor-intensive,
require less square footage and generate higher profit margins. The Company
monitors payment percentages closely and ensures that its slot machine payouts
are competitive. Each of Harveys' properties is aggressively promoted through
advertising campaigns tailored to its targeted customer base in each market. The
Company promotes each property through various combinations of newspaper and
broadcast advertisements, billboards, regular promotions and sweepstakes, as
well as point-of-sale material in nearby hotels, restaurants and visitor
attractions. As part of its commitment to ensuring a high level of customer
satisfaction, Harveys is dedicated to ensuring customer loyalty by providing
attentive customer service in a friendly environment.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE>
HARVEYS RESORT
Harveys Resort, the largest hotel/casino in the Lake Tahoe area, is located
on approximately 19.8 acres on U.S. Highway 50, the main route through South
Lake Tahoe. The hotel/casino, situated on the south shore of Lake Tahoe with a
panoramic view of the lake and surrounding mountains, is among Lake Tahoe's most
modern facilities. The main structure is an all-glass 17-story tower which was
completed in 1991, connected to a 12-story tower which was completely re-built
in 1982. Harveys Resort features 740 rooms, 36 of which are luxury suites, and
an 88,000 square foot casino containing approximately 2,100 slot machines, 105
table games, a 15-table poker area, a race and sports book and a keno lounge.
Other amenities include 23,000 square feet of convention space, 2,967 parking
spaces, the 280-seat Emerald Theater and Cabaret, a wedding chapel, restaurants,
retail shops, a pool, a health club and a video arcade. Harveys Resort's eight
restaurants offer a wide variety of high quality food and consist of a coffee
shop, a Mexican restaurant, a seafood and pasta restaurant, a pizzeria, a
premier steakhouse, a buffet, a burger emporium and Llewellyn's, Harveys
Resort's award-winning restaurant that features top quality food and a
spectacular view of Lake Tahoe. In recognition of the outstanding quality of the
facility and its excellent service, Harveys Resort has received both the Mobil
Four Star and AAA Four Diamond Awards every year for the last 15 years.
Management has allocated a total of $20.0 million for capital improvements to be
made to Harveys Resort through 1997 to increase the Company's market share and
to position the Company to benefit from the ongoing South Lake Tahoe
Redevelopment Project.
The South Lake Tahoe gaming market generated approximately $320 million in
gaming revenues in each of the last three years. The Lake Tahoe area is a unique
gaming location because of its natural surroundings and variety of year-round
outdoor recreational activities, including skiing, boating, fishing and golfing.
The South Lake Tahoe area draws tourists primarily from nearby Reno and Northern
California. There are four major casinos in this market to serve the
approximately 2 million annual visitors. Existing environmental regulations
prevent the addition of new gaming facilities or the expansion of existing
hotel/ casinos.
Management seeks to attract middle- to upper-middle income customers to
Harveys Resort by offering well-appointed rooms and a "party" atmosphere for
those seeking nightlife and entertainment. The Company has increased its share
of gaming revenues in South Lake Tahoe to approximately 27% in 1995 from
approximately 24% in 1989 due largely to its effective marketing campaigns.
Management believes that by continuing to focus its efforts on the maintenance
of customer relationships and the Harveys image, it will increase its share of
higher-income customers in the South Lake Tahoe market. In response to the
increased popularity of slot machines over the past several years, Harveys
Resort has shifted its gaming mix toward slot machines. Harveys Resort now
includes a greater percentage of $1 and higher denominated machines to appeal to
the higher-income gaming clientele of Harveys Resort, including $5, $25 and $100
slot machines offered within a premium player section. This increase in higher
denominated machines increased win per unit at Harveys Resort by approximately
19% between 1988 and 1994.
HARVEYS WAGON WHEEL
Through Harveys Wagon Wheel, which opened in December 1994, the Company
established the first major hotel/casino serving the greater Denver area.
Harveys Wagon Wheel is located on a highly visible site in Central City,
Colorado, a picturesque mountain town approximately 35 miles west of Denver.
Unlike most existing gaming facilities in the Central City area, which offer no
overnight accommodations, scarce on-site parking and few non-gaming amenities,
Harveys Wagon Wheel includes approximately 40,000 square feet of casino space,
850 slot machines (approximately 250 more than are currently offered by any
other gaming facility in the area), 18 table games, a nine-table poker area, a
118-room hotel and 195 on-site parking spaces. Other amenities include a
220-seat coffee shop/buffet, a snack bar, an entertainment lounge and a
children's arcade. No other casino in Central City/Black Hawk currently offers
all of these amenities. In 1995, the Central City/Black Hawk market hosted
approximately 3 million visitors and generated gaming revenues of more than
$290.7 million, an increase of 18.7% over gaming revenues of $244.9 million in
1994.
Harveys Wagon Wheel targets middle- to upper-income customers from the
greater Denver area who seek a quality gaming experience, convenient parking and
overnight accommodations. By offering a facility with overnight accommodations
and more amenities than are offered by other casinos in the Central City/ Black
Hawk market, Harveys Wagon Wheel has been successfully building a loyal customer
base. The
4
<PAGE>
Company attracts customers to Harveys Wagon Wheel by aggressively promoting the
facility's hotel rooms, on-site parking, quality dining facilities and varied
entertainment activities in a market in which such amenities are a distinct
competitive advantage.
On April 30, 1996, the Company exchanged 382,500 shares of the Company's
common stock, par value $.01 per share ("Common Stock"), for (i) 30% of the
equity interests of Harveys Wagon Wheel Casino Limited Liability Company
("HWW"), an entity in which the Company held a 70% equity interest prior to the
consummation of the acquisition and which owns Harveys Wagon Wheel, (ii) the
rights to an approximately $3.0 million priority return from HWW and (iii) an
option to acquire an additional 5% of the equity interests of HWW (the "Minority
Interest"). Upon consummation of the acquisition, HWW and Harveys Wagon Wheel
became wholly-owned by the Company. In addition, on such date the Company
exchanged $8.0 million in principal amount of the Company's Subordinated Notes
due December 31, 2000 (the "Subordinated Notes") and $6.0 million cash for $11.9
million in aggregate principal amount of HWW 12% Senior Notes due 1997 (the "HWW
Notes"), constituting all of the outstanding HWW Notes, and $1.9 million of
unpaid interest accrued thereon. A portion of the proceeds of the Offering will
be used to redeem the Subordinated Notes.
HARVEYS CASINO/HOTEL
On January 1, 1996, the Company opened, as the first phase of Harveys
Casino/Hotel, a 1,700-passenger riverboat casino berthed on the Missouri River
directly across from Omaha, Nebraska in Council Bluffs, Iowa. The riverboat
casino has more than 23,500 square feet of casino space on two decks and
contains 883 slot machines and 51 table games. Land-based amenities at Harveys
Casino/Hotel include surface parking for approximately 1,100 cars, and will
include a 14-story, 251-room hotel with a 21,000 square foot convention center
by mid-1996 and additional surface parking for approximately 500 cars. Harveys
Casino/Hotel is within a ten-minute drive from the Omaha/Council Bluffs regional
airport and is located directly off of Interstate 29, Interstate 80 and
Interstate 480.
Harveys Casino/Hotel is located on a 60-acre parcel of land which the
Company acquired from the City of Council Bluffs. Approximately 20 acres of the
site are occupied by a municipal nine-hole golf course, which is leased to the
City of Council Bluffs for a nominal fee. This arrangement allows Harveys the
option of using this land for future expansion needs. In addition, the Company
has acquired an adjacent 44-acre site to accommodate future expansion or support
facilities.
Harveys Casino/Hotel's target market is the approximately 650,000 residents
in the greater Omaha metropolitan area and the nearly 3 million adults within a
three-hour drive of the facility. In addition, the casino, hotel and convention
facilities will be marketed to the estimated 2.5 million visitors and tourists
who visit the Omaha metropolitan area annually. Harveys Casino/Hotel markets
itself as "The Preferred Place to Play" in the Omaha/Council Bluffs market
through the extensive use of television and newspaper advertisement, billboards,
regular promotions and sweepstakes as well as point-of-sale materials located in
local hotels, restaurants and other visitor attractions. Harveys Casino/Hotel
targets frequent, mid-level players from Omaha, Council Bluffs and the
surrounding areas. The Company anticipates that the hotel and convention
facilities that are currently under construction and are scheduled to open in
mid-1996 will attract new players by capturing overnight guests and meeting and
small convention business. In addition, by positioning the property as the
"Preferred Place to Play", management believes that Harveys Casino/Hotel will
attract a large percentage of the gaming revenues generated by the Omaha/Council
Bluffs regional population and visitors to the Omaha/Council Bluffs area.
HARD ROCK HOTEL AND CASINO
The Company, through a joint venture with Peter A. Morton, co-founder of the
Hard Rock Cafes, developed the Hard Rock Hotel, which opened in March 1995 in
Las Vegas, Nevada. The Company owns a 40% equity interest in and manages this
unique first-class facility which is modeled after the highly successful Hard
Rock Cafe concept and targets younger and higher-income gaming patrons. Under
the terms of a management agreement relating to the Hard Rock Hotel, the Company
receives a management fee equal to 4% of the adjusted gross revenues derived
from the Hard Rock Hotel plus additional incentive compensation of up to 2% of
adjusted gross revenues if certain performance targets are achieved by the Hard
Rock
5
<PAGE>
Hotel. Located three blocks from the Las Vegas Strip and five minutes from
McCarran International Airport, the 339-room hotel and casino houses 28,000
square feet of casino space containing 802 slot machines, 39 table games and a
sports and race book.
The Hard Rock Hotel features the Hard Rock Beach Club offering lush
landscaping, whirlpools, luxury cabanas and a sandy beach, and "The Joint", a
live music venue with a 1,400-person capacity. Additional amenities include a
health club, retail store, and two restaurants, a 24-hour casual dining coffee
shop and Mortoni's, an Italian fine dining room, with a view of the Hard Rock
Beach Club, offering indoor and garden patio dining. The hotel/casino also
provides parking spaces for approximately 1,285 cars.
The Hard Rock Hotel is located adjacent to the Hard Rock Cafe on
approximately 16 acres of land with 1,200 feet of frontage near the intersection
of Paradise Road and Harmon Avenue. The site is conveniently located at one of
the busiest intersections in Las Vegas and is a short distance from the Las
Vegas Convention Center, three non-gaming full service hotels with a combined
total of approximately 850 rooms and the New Four Corners, which includes major
casinos such as the MGM Grand Casino Hotel and Theme Park. The Hard Rock Hotel
hosts special events such as award presentations to rock stars and other
celebrities, film premiere parties and fundraising and other charitable
activities, as well as frequently-scheduled live entertainment, in order to
attract its target customers, who tend to be younger and have higher disposable
incomes than the average Las Vegas visitor. The Company believes that the Hard
Rock Hotel appeals to higher income patrons because of the Hard Rock theme,
upscale hotel facilities and the wide variety of special events designed to
maintain the image of the facility in the mind of the Hard Rock Hotel customer
base.
THE OFFERING
<TABLE>
<S> <C>
Notes............................. $150,000,000 principal amount of % Senior
Subordinated Notes Due 2006 (the "Notes").
Maturity Date..................... , 2006.
Interest Payment Dates............ and , commencing , 1996.
Guarantees........................ The Notes will be fully and unconditionally guaranteed
(the "Guarantees") jointly and severally by the
Company's Restricted Subsidiaries (as defined herein).
Optional Redemption............... The Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after ,
2001 at the redemption prices set forth herein, plus
accrued interest to the date of redemption. See
"Description of the Notes -- Optional Redemption".
Special Redemption................ The Notes are subject to redemption requirements imposed
by gaming laws and regulations of the state of Nevada.
See "Description of the Notes -- Optional Redemption".
Subordination..................... The Notes are general unsecured obligations of the
Company, subordinated in right of payment to all
existing and future Senior Debt (as defined herein) of
the Company. Each Guarantee will be a general unsecured
obligation of the guaranteeing Restricted Subsidiary
(each a "Guarantor" and collectively the "Guarantors"),
subordinated in right of payment to all existing and
future Senior Debt of such Guarantor. As of February
29, 1996, on a PRO FORMA basis after giving effect to
the Exchange Offer and the offering of the Notes made
hereby (the "Offering") and application of the net
proceeds therefrom, the Company and its subsidiaries
would have had approximately
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
$14 million of indebtedness outstanding that would have
constituted Senior Debt and approximately $28.8 million
of trade payables and accrued liabilities.
Change of Control................. Upon a Change of Control (as defined herein), each
holder of the Notes will have the right to require the
Company to repurchase such holder's Notes at 101% of
the principal amount thereof, plus accrued interest to
the repurchase date. The Company's ability to make such
a repurchase may be limited by its financial condition
at the time, covenants in Senior Debt documents or its
inability to finance such a repurchase. Such a
repurchase may cause cross defaults under existing or
future indebtedness and would make a takeover of the
Company more expensive to a potential acquirer and
accordingly may make such a takeover less likely. In
any event, the Company must comply with all applicable
laws, including Section 14(e) of the Securities
Exchange Act of 1934, as amended, and the rules
thereunder, in the event that it is required to offer
to repurchase any Notes upon a Change of Control. See
"Risk Factors" and "Description of the Notes --
Repurchase at the Option of Holders".
Certain Covenants................. The indenture governing the Notes (the "Indenture")
contains certain covenants that impose limitations on,
among other things, (i) the incurrence of additional
indebtedness by the Company or any Restricted
Subsidiary (as defined herein), (ii) the payment of
dividends, (iii) the repurchase of capital stock and
the making of certain other Restricted Payments and
Restricted Investments (each as defined herein) by the
Company or any Restricted Subsidiary, (iv) mergers,
consolidations and sales of assets by the Company or
any Restricted Subsidiary, (v) the creation or
incurrence of liens on the assets of the Company or any
Restricted Subsidiary and (vi) transactions by the
Company or any of its subsidiaries with Affiliates (as
defined herein). These limitations are subject to a
number of important qualifications and exceptions. See
"Description of the Notes".
Use of Proceeds................... The net proceeds of the Offering, estimated to be
approximately $144.5 million, will be used by the
Company to repay (i) approximately $107.1 million of
indebtedness incurred under the Company's reducing
revolving credit facility (the "Credit Facility"); (ii)
$7.8 million to redeem the entire $8.0 million
principal amount outstanding of the Subordinated Notes;
(iii) a $10.0 million promissory note evidencing
indebtedness incurred by the Company to fund
construction of a parking garage adjacent to Harveys
Wagon Wheel (the "Promissory Note"); and (iv)
approximately $19.6 million of indebtedness incurred to
finance the purchase of the riverboat casino at Harveys
Casino/ Hotel (the "Iowa Loan"). See "Use of Proceeds".
</TABLE>
7
<PAGE>
SUMMARY FINANCIAL DATA
The following table sets forth selected summary financial data of the
Company for the years ended November 30, 1991 through November 30, 1995 and the
three months ended February 28, 1995 and February 29, 1996. The income statement
and balance sheet data for the years ended November 30, 1991 through November
30, 1995 are derived from the Company's audited consolidated financial
statements for such periods which, except for 1991 and 1992, are included
elsewhere in this Prospectus. The Summary Financial Data are not necessarily
indicative of the Company's future results of operations or financial condition,
and should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements of the Company, including the notes thereto, and the other financial
and statistical information appearing elsewhere in this Prospectus. The Summary
Financial Data presented below as of and for the three months ended February 28,
1995 and February 29, 1996 are derived from unaudited consolidated financial
statements of the Company; however, in the opinion of the Company, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the Company's financial position and result of operations for
such periods have been included. Operating results for the three months ended
February 28, 1995 and February 29, 1996 are not necessarily indicative of the
results that may be expected for future periods, including the entire year
ending November 30, 1996. The Summary Financial Data include operating results
for Harveys Wagon Wheel from its opening on December 2, 1994, for the Hard Rock
Hotel from its opening on March 9, 1995 and for Harveys Casino/Hotel from the
opening of the riverboat casino on January 1, 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEARS ENDED NOVEMBER 30, -------------------------------
------------------------------------------------ FEBRUARY 28, FEBRUARY 29,
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Net revenues............................ $127,517 $132,482 $132,259 $128,286 $173,200 $ 38,337 $ 49,474
Depreciation and amortization........... 11,027 10,786 10,300 9,704 12,333 3,015 3,561
Pre-opening expense..................... -- -- -- -- 2,147 2,147 3,590
Operating income (loss)................. 11,247 14,754 12,193 10,382 18,354 (528) 895
Interest expense, net (1)............... (6,091) (5,084) (4,256) (2,886) (7,960) (1,725) (1,954)
Net income (loss) (2)................... $ 3,197 $ 7,612 $ 4,809 $ 5,138 $ 9,345 $ (1,117) $ (576)
-------- -------- -------- -------- -------- -------------- --------------
-------- -------- -------- -------- -------- -------------- --------------
OTHER OPERATING DATA:
EBITDA (3).............................. $ 22,274 $ 25,540 $ 24,327 $ 20,458 $ 35,080 $ 4,634 $ 8,046
Net cash provided by (used in):
Operating activities.................. 18,878 25,656 15,563 14,106 14,270 6,225 10,917
Investing activities (4).............. (8,518) (15,585) (25,592) (33,505) (74,244) (13,532) (29,488)
Financing activities.................. (5,618) (3,938) (730) 15,506 63,021 14,393 23,156
Capital expenditures (5)................ 8,690 10,034 10,648 35,593 70,709 9,549 29,655
PRO FORMA DATA (6):
Interest expense, net (1)....................................................... $ 12,460 N/A $ 2,720
EBITDA/Interest expense, net (1)................................................ 2.8x N/A 3.0x
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
AT FEBRUARY 29, 1996
-------------------------
ACTUAL AS ADJUSTED (7)
-------- ---------------
(UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............... $ 15,078 $ 15,078
Total assets............................ 346,855 352,164
Long-term debt.......................... 147,362 161,461
Stockholders' equity.................... 131,780 138,680
</TABLE>
- ------------------------------
(1) Net of amounts capitalized and interest income.
(2) For fiscal 1992, net income includes approximately $1.6 million of
nonrecurring income items (approximately $1.1 million net of tax).
(3) EBITDA (operating income (loss) plus depreciation and amortization) should
not be construed as an indicator of the Company's operating performance, or
as an alternative to cash flows from operating activities as a measure of
liquidity. The Company has presented EBITDA solely as supplemental
disclosure because the Company believes that it enhances the understanding
of the financial performance of companies with substantial depreciation and
amortization. For fiscal 1993, EBITDA excludes approximately $1.8 million of
nonrecurring compensation charges, for fiscal 1995, EBITDA excludes
approximately $2.1 million of pre-opening expenses, and for fiscal 1994 and
1995, EBITDA includes approximately $371,000 and $2.2 million, respectively,
of life insurance benefits.
(4) Net cash used in investing activities includes amounts expended by the
Company for capital expenditures.
(5) Of amounts shown, approximately $3.6 million in fiscal 1991, $2.8 million in
fiscal 1992, $6.5 million in fiscal 1993, $4.4 million in fiscal 1994, $4.6
million in fiscal 1995, $1.3 million for the three months ended February 28,
1995 and $0.9 million for the three months ended February 29, 1996 related
to recurring capital expenditures for maintenance of the current facilities.
(6) The PRO FORMA data gives effect to (i) the Exchange Offer, (ii) the
incurrence of indebtedness under the Iowa Loan, (iii) the incurrence of
indebtedness under the Promissory Note and (iv) the Offering and the
application of the proceeds therefrom to repay certain indebtedness, in each
case as if such transaction had occurred or such indebtedness had been
incurred on the first day of the period presented.
(7) Adjusted to give effect to the Exchange Offer and the Offering and the
application of the proceeds therefrom to repay certain indebtedness, in each
case as if such transaction had occurred as of February 29, 1996.
9
<PAGE>
RISK FACTORS
THIS PROSPECTUS 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
"PROSPECTUS SUMMARY", "USE OF PROCEEDS", "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- LIQUIDITY AND CAPITAL
RESOURCES", "BUSINESS", AND "DESCRIPTION OF NOTES", AS WELL AS WITHIN THE
PROSPECTUS GENERALLY. ALSO, DOCUMENTS SUBSEQUENTLY FILED BY THE COMPANY WITH THE
SECURITIES AND EXCHANGE COMMISSION WILL CONTAIN FORWARD-LOOKING STATEMENTS.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH BELOW AND
THE MATTERS SET FORTH OR INCORPORATED IN THE PROSPECTUS GENERALLY. THE COMPANY
CAUTIONS THE READER, HOWEVER, THAT THIS LIST OF FACTORS MAY NOT BE EXHAUSTIVE,
PARTICULARLY WITH RESPECT TO FUTURE FILINGS. THE FOLLOWING RISK FACTORS SHOULD
BE CAREFULLY CONSIDERED IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS BEFORE PURCHASING THE NOTES OFFERED HEREBY.
LEVERAGE AND DEBT SERVICE
Upon the closing of the Offering, the Company will have significant interest
expense and principal repayment obligations under the Notes and the Company's
other indebtedness. Under the terms of the Notes, the Company may continue to
incur additional indebtedness. The amount of indebtedness which may be incurred
is limited by certain covenants in the Indenture. See "Description of Notes --
Certain Covenants -- Incurrence of Indebtedness". At February 29, 1996, after
giving effect to the Offering and the application of the net proceeds therefrom,
the Company's PRO FORMA total consolidated long-term debt (excluding current
portion) would have been approximately $164.0 million consisting of $13.6
million outstanding under the Company's $150.0 million reducing revolving credit
facility, $150.0 million outstanding under the Notes and approximately $0.4
million of other long-term debt. The Credit Facility specifies annual maximum
year end principal balances and requires the Company to make periodic principal
payments in an amount sufficient to reduce the outstanding principal balance to
predetermined maximum principal balances. See "Selected Financial Data --
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources". The entire advanced principal
balance under the Credit Facility is due and payable on August 16, 2000. See
"Selected Financial Data -- Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and Note
11 to the Company's financial statements contained elsewhere in this Prospectus.
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 and
to satisfy the financial covenants in its credit agreements. If the Company is
unable to generate sufficient cash flow or is unable to refinance or extend its
outstanding indebtedness, it will have to adopt one or more alternatives, such
as reducing or delaying future expansion and capital expenditures, selling
assets, restructuring debt or obtaining additional equity capital. There is no
assurance that any of these strategies could be effected on satisfactory terms.
The terms and financial covenants contained in certain of the Company's debt
instruments restrict the ability of the Company to incur additional indebtedness
and may have the effect of limiting the Company's ability to compete effectively
in the gaming market by effectively preventing expansion of the Company's
facilities or other competitively advantageous capital expenditures. See
"Selected Financial Data -- Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources".
SUBSIDIARY OPERATIONS; SUBORDINATION
The Notes will be general unsecured obligations of the Company, subordinated
in right of payment to all existing and future Senior Debt. The Notes will be
fully and unconditionally guaranteed jointly and severally by the Guarantors.
Each Guarantee will be a general unsecured obligation of the applicable
Guarantor, subordinated in right of payment to all Senior Debt of such
Guarantor. Upon payment or distribution of assets of the Company or a Guarantor
upon a total or partial liquidation, dissolution, reorganization or similar
proceeding, the holders of Senior Debt will be entitled to receive payment in
full
10
<PAGE>
before the holders of the Notes and the Guarantees are entitled to receive
payment thereon. In addition, if any non-payment default occurs that would
permit acceleration of any Guarantor Senior Debt, the holders of such Senior
Debt may prohibit the Company or the Guarantors from making any such payment in
respect of the Notes or the Guarantees, respectively, for a period of up to 179
days. The Indenture provides that the Company and the Guarantors shall not incur
any additional Indebtedness that is both subordinate in right of payment to any
Senior Debt and senior in right of payment to the Notes or the Guarantees.
Additional Senior Debt may be incurred by the Company from time to time subject
to certain restrictions. See "Description of the Notes -- Subordination".
Further, the subordination provisions of the Indenture will provide that the
Company may not pay any principal of, premium for, if any, or interest on, the
Notes, or defease, repurchase, redeem or otherwise acquire or retire Notes
during the continuance of a payment default with respect to certain Senior Debt
(which will include all borrowings under the Credit Facility and, after the
repayment of the Credit Facility, any other Senior Debt permitted under the
Indenture), other than certain payments in the form of subordinated securities
or from a defeasance trust. Upon any liquidation or dissolution of the Company
or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company, holders of Senior Debt will be entitled to
receive payment in full prior to any payment to the holders of the Notes (other
than certain payments in the form of subordinated securities or from a
defeasance trust). See "Description of the Notes -- Subordination".
ENFORCEABILITY OF THE GUARANTEES; FRAUDULENT CONVEYANCE CONSIDERATIONS
The Guarantors will guarantee the Company's obligations under the Notes.
Initially, the Guarantors will consist of certain subsidiaries of the Company.
See "Description of the Notes -- Subsidiary Guarantees". Under applicable
provisions of the federal bankruptcy law or comparable provisions of state law,
if any Guarantor is insolvent at the time it incurs its Guarantee, such
Guarantee could be voided, or claims in respect of such Guarantee could be
subordinated to all other debts of such Guarantor. The measures of insolvency
will vary depending upon the law applied in any such proceeding. Generally,
however, the Guarantors may be considered insolvent if the sum of their debts,
including contingent liabilities, is greater than the fair market value of all
of their assets at a fair valuation or if the present fair market value of their
assets is less than the amount that would be required to pay their probable
liability on their existing debts, including contingent liabilities, as they
become absolute and mature. See "Description of the Notes -- Subordination".
The incurrence by the Company or the Guarantors of indebtedness such as the
Notes may be subject to review under relevant U.S. federal and state fraudulent
conveyance laws if a bankruptcy case or a lawsuit (including in circumstances
where bankruptcy is not involved) is commenced by or on behalf of unpaid
creditors of the Company or the Guarantors. Under these laws, if a court were to
find that, at the time the Notes were issued, either (a) any of the Company or
the Guarantors incurred debt represented by the Notes with the intent of
hindering, delaying or defrauding creditors or (b) any of the Company or the
Guarantors received less than reasonably equivalent value or consideration for
incurring the indebtedness represented by the Notes and (i) was insolvent or was
rendered insolvent by reason of such transaction, (ii) was engaged in a business
or transaction for which the assets remaining with such entity constituted
unreasonably small capital or (iii) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured, such court
may subordinate the Notes to presently existing and future indebtedness of such
entity, void the issuance of the Notes or any Guarantee or direct the repayment
of any amounts paid thereunder to such entity, void the issuance of the Notes or
any Guarantee or direct the repayment of any amounts paid thereunder to such
entity or to a fund for the benefit of such entity's creditors or take other
action detrimental to the holders of the Notes.
The Company believes that it will receive equivalent value at the time the
indebtedness represented by the Notes is incurred. In addition, the Company does
not believe that it, as a result of the issuance of the Notes, (i) will be
insolvent or rendered insolvent under the foregoing standards, (ii) will be
engaged in a business or transaction for which its remaining assets constitute
unreasonably small capital or (iii) intends to incur, or believes that it will
incur, debts beyond its ability to pay such debts as they mature. These beliefs
are
11
<PAGE>
based on the Company's and the Guarantors' operating history and net worth and
management's analysis of internal cash flow projections and estimated values of
assets and liabilities of each such entity at the time of the Offering. There
can be no assurance, however, that a court passing on these issues would make
the same determination.
RISKS RELATING TO A CHANGE OF CONTROL
In the event of a Change of Control, each holder of the Notes will have the
right, at the holder's option, to require the Company to purchase all or a
portion of the holder's Notes in accordance with the terms of the Indenture. The
Company's ability to pay cash to the holders of the Notes upon any such event,
and the ability of the Guarantors to pay pursuant to the terms of the Guarantees
upon the failure of the Company to purchase the Notes upon any such event, may
be limited by the Company's and Guarantors' respective financial condition at
the time of such event or by financial covenants that may be contained in the
Senior Debt. The right to require the Company to purchase the Notes or the
Guarantors to pay pursuant to the Guarantees upon such failure of the Company to
purchase the Notes could create an event of default under the Senior Debt as a
result of which any required purchase or payment pursuant to the Notes or the
Guarantees, respectively, could, absent a waiver, be blocked by the
subordination provision of the Notes and the Guarantees, respectively. See
"Description of the Notes -- Repurchase at the Option of Holders".
COMPETITION
The Company competes for customers primarily on the basis of location, range
and pricing of amenities and overall atmosphere. The Company's hotel/casinos
compete with numerous gaming operations in their respective markets, many of
which have substantially greater name recognition and financial and marketing
resources.
Harveys Resort's principal competitors in South Lake Tahoe are Harrah's Lake
Tahoe, Caesars Tahoe and the Horizon Casino Resort. These four major
hotel/casinos compete intensely. To a lesser extent, Harveys Resort also
competes with hotel/casino operations located in Reno, Las Vegas and Laughlin,
Nevada. A substantial number of customers travel to both Reno and Lake Tahoe
during their visits; consequently, the Company believes that the success of
Harveys Resort is influenced to some degree by the success of the Reno market.
While the Company does not believe that there will be a decline in the
popularity of either Lake Tahoe or Reno as tourist destination areas or in the
success of Lake Tahoe's or Reno's other casinos in the foreseeable future, any
such decline could adversely affect the Company's operations.
Harveys Wagon Wheel competes primarily with the five casinos with the
largest number of gaming devices in Central City and Black Hawk, which, together
with Harveys Wagon Wheel, currently control more than 43% of all gaming devices
in the Central City/Black Hawk area. The Company is currently aware of planned
expansion of parking facilities by certain of its competitors in Central City
and Black Hawk and planned construction by a competitor of a Black Hawk site
that may include casino and hotel facilities. The completion of any such
facilities could improve the relative market position of the Company's
competitors. The Company is not aware of any pending legislation, regulation or
referendums that would legalize gaming closer to Denver, the major population
center of Colorado. Any such legislation, regulation or referendum would likely
have a material adverse effect on the Company's operation in Central City.
The Hard Rock Hotel competes with other high-quality Las Vegas resorts and
other Las Vegas hotel/ casinos, including those located on the Las Vegas Strip,
along the Boulder Highway and in downtown Las Vegas. Currently, there are
approximately 22 major gaming properties located on or near the Las Vegas Strip,
20 licensed locations in the downtown area and several located in other areas of
Las Vegas. In 1996, it is anticipated that three major new properties will open
on or near the Las Vegas Strip and other existing Las Vegas properties will
expand. These new or expanded properties will increase the number of hotel and
motel rooms in the Las Vegas area by approximately 10,800 rooms, or 12%, to a
total of approximately 100,500 rooms. Each of these facilities has a theme and
attractions which, together with recently completed improvements to the downtown
area, such as the Fremont Street Experience, are expected to draw a significant
number of visitors. While the Las Vegas gaming market has historically absorbed
the addition of new and expanded gaming properties and these new facilities
could have a positive effect on the Hard Rock
12
<PAGE>
Hotel if more visitors are drawn to Las Vegas generally, competition from the
casino and hotel facilities, as well as competition from any other major
additions, expansions or enhancements of existing properties, could have a
material adverse effect on the business of the Hard Rock Hotel.
Harveys Casino/Hotel competes with one other riverboat casino which opened
in Council Bluffs on January 19, 1996, slot machines installed at the dogtrack
in the Council Bluffs area and other amusement attractions. As Harveys
Casino/Hotel represents the first experience of casino gaming in the Council
Bluffs area, there can be no assurance that the casino can be operated
profitably. While the Company is not aware of any pending legislation that would
legalize gaming in Nebraska, should casino-style gaming be legalized in
Nebraska, and should gaming facilities be opened in Omaha, Nebraska, the
Company's Iowa property could be materially, adversely impacted.
Since the 1980's, legalized gaming opportunities have proliferated
throughout the United States. Riverboat, dockside or land-based gaming is
currently legal in nine states, full-scale gaming on Indian-owned land is legal
in at least 23 states and at least 40 states, including California (from which
Harveys Resort draws approximately 75% of its customers) now sponsor lotteries.
In addition, California allows other non-casino style gaming, including
pari-mutuel wagering, card parlors, bingo and off-track betting. Several
California-based Indian tribes have established limited casino gaming on
Indian-owned land throughout the state as a result of recent judicial decisions
and federal legislation which require all states, including California, to
negotiate with Indian tribes regarding certain casino gaming privileges. While
the Company believes that the continued spread of legalized gaming may in the
future present the Company with additional opportunities for expansion,
increased legalized gaming in other states, particularly in areas close to
Nevada, such as California, could adversely affect the Company's operations. See
"Business -- Competition".
DEPENDENCE ON KEY MARKET
The Lake Tahoe and Las Vegas gaming markets rely primarily on visitors from
California. The Lake Tahoe market also relies on visitors from Oregon and
Washington. A loss of gaming customers travelling to Lake Tahoe or Las Vegas for
any reason, including increased competition from other gaming markets, could
have a material adverse effect on the Company's results of operations. See
"Business -- Competition".
SEASONALITY
The Company's operations in Lake Tahoe, Nevada are highly seasonal. In
fiscal 1994 and 1995, 97.6% and 80.5%, respectively, of the Company's operating
income was generated in the third and fourth quarters, with the summer months
being the strongest period. The winter months, which primarily cover the
Company's first quarter, are the slowest period for Harveys Resort. While the
Company's EBITDA of approximately $4.6 million and approximately $8.0 million
during the first three months of fiscal 1995 and 1996, respectively, was
positive, the Company has historically experienced net losses in the first
quarter of its fiscal year and may in the future experience net losses for such
periods. The Company experienced a net loss of $576,000 in the first quarter of
1996 due primarily to the expenses associated with pre-opening costs relating to
the opening of Harveys Casino/Hotel. Severe winter storms, such as those which
occurred during the first quarter of fiscal 1993, may result in a significant
loss of revenues and EBITDA during the quarters in which they occur. The Company
expects that its recently-opened operations in Las Vegas and Council Bluffs may
mitigate the effects of seasonal operations of the Company's Lake Tahoe
facilities. There has not, however, been sufficient operating history of the
Company's facilities in Las Vegas and Council Bluffs to determine whether the
Company's operations in such areas will have a mitigating effect. See "Selected
Financial Data -- Management's Discussion and Analysis of Financial Condition
and Results of Operations".
ENVIRONMENTAL RISKS
Harveys Wagon Wheel is close to the Central City/Clear Creek Superfund Site
(the "Superfund Site") as designated by the Environmental Protection Agency
("EPA") pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA"). The Superfund Site includes
numerous specifically identified areas of mine tailings and other waste piles
from former gold mine operations that are the subject of ongoing investigation
and cleanup by the EPA and the State of Colorado. CERCLA requires cleanup of
sites from which there has been a release or threatened release of hazardous
substances and authorizes the EPA to take any necessary response actions at
Superfund sites, including
13
<PAGE>
ordering potentially responsible parties ("PRPs") to clean up or contribute to
the cleanup of a Superfund site. PRPs are broadly defined under CERCLA, and
include past and present owners and operators of a site. Courts have interpreted
CERCLA to impose strict, joint and several liability upon all persons liable for
response costs.
In the course of beginning to develop Harveys Wagon Wheel, investigations at
the site were conducted in accordance with requirements of the governmental
authorities as a prerequisite to obtaining certain necessary development
permits. The investigations have been completed and the requisite permits
issued. Nonetheless, there is the potential that the EPA or other governmental
authorities could broaden their investigations and identify additional areas in
close proximity to the Superfund Site, including the Harveys Wagon Wheel site,
for cleanup. If the Harveys Wagon Wheel site were included in the EPA's
investigation and designated as an additional area within the Superfund Site,
the Company may be identified as a PRP and any liability related thereto could
have a material adverse effect on the Company.
GAMING REGULATION
The ownership and operation of casino gaming facilities are subject to
extensive state and local regulation. The states of Nevada, Iowa and Colorado
and the applicable local authorities require various licenses, findings of
suitability, registrations, permits and approvals to be held by the Company and
its subsidiaries. The Nevada Gaming Authorities, the Colorado Commission and the
Iowa Commission (as such terms are hereinafter defined) may, among other things,
limit, condition, suspend or revoke a license to operate in such jurisdictions
for any cause deemed reasonable by such licensing authority. Substantial fines
or forfeiture of assets for violations of gaming laws or regulations may be
levied against the Company, the Company's subsidiaries and the persons involved.
The suspension or revocation of any of the Company's licenses or the levy on the
Company of substantial fines or forfeiture of assets would have a material
adverse effect on the business of the Company.
To date, the Company has obtained all governmental licenses, findings of
suitability, registrations, permits and approvals necessary for the operation of
its currently operating gaming activities. However, gaming licenses and related
approvals are deemed to be privileges under Nevada, Iowa and Colorado law, and
no assurances can be given that any new licenses, permits and approvals that may
be required in the future will be given or that existing ones will not be
revoked. In particular, any expansion of the Company's gaming operations into
new jurisdictions will require various licenses, findings of suitability,
registrations, permits and approvals of the gaming authorities, which approval
process can be time consuming and costly and has no assurance of success.
Certain of the Company's operations are subject to taxes imposed upon gaming
operators by state gaming authorities and municipalities. Taxes currently levied
on the Company's operations include taxes on gross gaming proceeds in Colorado
and Iowa, admission fees for Harveys Casino/Hotel and annual gaming device fees
in Colorado. Such taxes and fees are subject to revision from time to time and
may cause the Company's operations in such jurisdictions to be unprofitable or
may otherwise have a material adverse effect on the Company.
If a record or beneficial owner of a Note is required by any Gaming
Authority (as defined in the Indenture) to be found suitable, such owner will be
required to apply for a finding of suitability within 30 days after request of
such Gaming Authority. The applicant for a finding of suitability must pay all
costs of the investigation for such finding of suitability. If a record or
beneficial owner is required to be found suitable and is not found suitable by
such Gaming Authority, such owner may be required pursuant to the terms of the
Notes or law to dispose of the Notes. See "Business -- Regulatory Matters".
NO MARKET FOR NOTES
There currently is no public market for the Notes, and there can be no
assurance that an active trading market for the Notes will develop or, if such
market develops, as to the liquidity or sustainability of such market.
Accordingly, there can be no assurance that a holder of the Notes will be able
to sell such securities in the future or as to the price at which any sale may
occur. It is not anticipated that the Notes will be listed on any securities
exchange or quotation system.
14
<PAGE>
NO SINKING FUND
There will be no sinking fund for the retirement of the Notes. Therefore,
the Company will be required to repay the entire principal amount of the Notes
when they mature on , 2006, unless the Notes are previously redeemed.
There can be no assurances that the Company will have available funds or will be
able to raise funds for the repayment of the Notes at maturity.
MANAGEMENT OF GROWTH
Since December 1994, the Company has opened expansion projects in Las Vegas,
Nevada, Central City, Colorado and Council Bluffs, Iowa. The Company's recent
entry into such new markets will require it to develop new marketing strategies,
add and train personnel, continuously evaluate its management structure, expand
its management information systems and control its operating expenses. If these
actions do not successfully address the Company's increased management needs or
the Company otherwise is unable to manage growth effectively, including the
Company's ongoing construction and capital improvements programs, the Company's
operating results could be materially adversely affected. Moreover, the success
of the Company is dependent upon the services of its senior officers, the loss
of whose services could have a material adverse effect on the Company and its
business.
USE OF PROCEEDS
The net proceeds of the Offering, estimated to be approximately $144.5
million, will be used by the Company to repay (i) approximately $107.1 million
of indebtedness incurred under the Credit Facility, which indebtedness bears
interest at a floating rate based, at the option of the Company, upon the London
Inter-Bank Offering Rate or the prime rate of the lender under the Credit
Facility, plus an applicable margin, and matures on August 16, 2000; (ii) $7.8
million to redeem the entire outstanding $8.0 million principal amount of the
Subordinated Notes which currently bear interest at a rate of 12% per annum and
mature on December 31, 2000; (iii) the $10.0 million obligation evidenced by the
Promissory Note, which bears interest at a rate of 12% per annum and matures on
February 9, 2000; and (iv) approximately $19.6 million outstanding under the
Iowa Loan, which bears interest at a rate of 8.42% per annum and matures on
December 31, 2000. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" for
further discussion of the terms of certain of the indebtedness to be repaid with
the net proceeds of the Offering. Pending use of net proceeds as set forth
above, the Company intends to invest such proceeds in short-term,
investment-grade, interest-bearing securities.
15
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at February 29, 1996, PRO FORMA data and as adjusted to reflect the
issuance and sale of the Notes by the Company. See "Use of Proceeds".
<TABLE>
<CAPTION>
AT FEBRUARY 29, 1996
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA (1) AS ADJUSTED (2)
-------- ------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CURRENT PORTION OF LONG-TERM DEBT........................... $ 9,277 $ 5,309 $ 2,576
-------- ------------- ---------------
-------- ------------- ---------------
LONG-TERM DEBT, LESS CURRENT PORTION:
Credit Facility (3)....................................... $109,500 $115,500 $ 8,382
% Senior Subordinated Notes, due 2006................. -- -- 150,000
Other long-term debt...................................... 37,862 37,728 3,079
-------- ------------- ---------------
Total................................................... $147,362 $153,228 $161,461
TOTAL STOCKHOLDERS' EQUITY.................................. $131,780 $138,680 $138,680
-------- ------------- ---------------
TOTAL CAPITALIZATION........................................ $279,142 $291,908 $300,141
-------- ------------- ---------------
-------- ------------- ---------------
</TABLE>
- ------------------------
(1) Pro forma data gives effect to the Exchange Offer as if such transaction had
occurred on February 29, 1996.
(2) Pro forma as adjusted data gives effect to the Exchange Offer and the
Offering and the application of the proceeds therefrom to repay certain
indebtedness, in each case as if such transaction had occurred on February
29, 1996. See "Use of Proceeds".
(3) For discussion of the Company's $150.0 million Credit Facility see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data of the Company for
the years ended November 30, 1991 through November 30, 1995 and for the three
months ended February 28, 1995 and February 29, 1996. The income statement and
balance sheet data for the years ended November 30, 1991 through November 30,
1995 are derived from the Company's audited consolidated financial statements
for such periods, which, except for 1991 and 1992, are included elsewhere in
this Prospectus. The Selected Consolidated Financial Data are not necessarily
indicative of the Company's future results of operations or financial condition,
and should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's consolidated
financial statements, including the notes thereto, and the other financial and
statistical information appearing elsewhere in this Prospectus. The Selected
Consolidated Financial Data presented below as of and for the three months ended
February 28, 1995 and February 29, 1996 are derived from unaudited consolidated
financial statements of the Company; however, in the opinion of the Company, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the Company's financial position and results of operations for
such periods have been included. Operating results for the three months ended
February 28, 1995 and February 29, 1996 are not necessarily indicative of the
results that may be expected for future periods, including the entire year
ending November 30, 1996. The Selected Consolidated Financial Data include
operating results for Harveys Wagon Wheel from its opening on December 2, 1994,
for the Hard Rock Hotel from its opening on March 9, 1995 and for Harveys
Casino/Hotel from the opening of the riverboat casino on January 1, 1996.
Certain of the figures contained in the table below do not total due to rounding
of numbers comprising such figures.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEARS ENDED NOVEMBER 30, ---------------------------
---------------------------------------------------------- FEBRUARY 28, FEBRUARY 29,
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues:
Casino................................ $ 85,510 $ 89,036 $ 87,523 $ 83,991 $ 121,369 $ 26,827 $ 36,935
Lodging............................... 21,621 21,957 22,292 21,870 25,499 5,726 6,065
Food and beverage..................... 31,358 31,358 31,011 29,768 33,970 7,865 8,428
Management fees and joint venture..... -- -- -- -- 1,669 -- 1,060
Other................................. 3,514 4,591 5,866 5,599 6,287 1,533 1,541
Less casino promotional allowances.... (14,486) (14,460) (14,433) (12,943) (15,594) (3,615) (4,556)
---------- ---------- ---------- ---------- ---------- ------------ ------------
Net revenues...................... 127,517 132,482 132,259 128,286 173,200 38,337 49,474
Costs and expenses:
Casino................................ 45,075 44,648 43,235 40,991 57,380 13,469 19,763
Lodging............................... 6,333 6,404 6,534 6,737 9,073 2,077 2,289
Food and beverage..................... 17,202 16,799 17,271 17,408 20,256 4,985 4,346
Other................................. 1,538 2,290 2,733 2,557 2,844 674 645
Selling, general and administrative... 35,095 36,801 38,159 40,506 50,814 12,497 14,385
Depreciation and amortization......... 11,027 10,786 10,300 9,704 12,333 3,015 3,561
Nonrecurring compensation charges..... -- -- 1,834 -- -- -- --
Pre-opening expenses.................. -- -- -- -- 2,147 2,147 3,590
---------- ---------- ---------- ---------- ---------- ------------ ------------
Total costs and expenses.......... 116,270 117,728 120,066 117,903 154,846 38,865 48,579
---------- ---------- ---------- ---------- ---------- ------------ ------------
Operating income (loss)................. 11,247 14,754 12,193 10,382 18,354 (528) 895
Interest expense, net (1)............... (6,091) (5,084) (4,256) (2,886) (7,960) (1,725) (1,954)
Life insurance benefits................. -- -- -- 371 2,246 -- --
Other income (expense), net............. (106) 1,442 (134) (230) 606 506 163
---------- ---------- ---------- ---------- ---------- ------------ ------------
Income (loss) before income taxes....... 5,050 11,112 7,803 7,638 13,245 (1,747) (896)
Income tax provision.................... (1,853) (3,500) (2,994) (2,500) (3,900) 630 320
---------- ---------- ---------- ---------- ---------- ------------ ------------
Net income (loss) (2)................... $ 3,197 $ 7,612 $ 4,809 $ 5,138 $ 9,345 $ (1,117) $ (576)
---------- ---------- ---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ---------- ---------- ------------ ------------
Net income (loss) per share (3)......... $ 0.42 $ 1.04 $ 0.67 $ 0.58 $ 0.99 $ (0.12) $ (0.06)
---------- ---------- ---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ---------- ---------- ------------ ------------
Dividends per share (3)................. $ -- $ 0.05 $ 0.11 $ 0.13 $ 0.16 $ 0.04 $ 0.04
---------- ---------- ---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ---------- ---------- ------------ ------------
Weighted average common shares
outstanding (3)........................ 7,612,977 7,340,985 7,181,730 8,885,525 9,456,051 9,360,095 9,483,449
Other Data:
EBITDA (4).............................. $ 22,274 $ 25,540 $ 24,327 $ 20,458 $ 35,080 $ 4,634 $ 8,046
Net cash provided by (used in):
Operating activities.................. 18,878 25,656 15,563 14,106 14,270 6,225 10,917
Investing activities (5).............. (8,518) (15,585) (25,592) (33,505) (74,244) (13,532) (29,488)
Financing activities.................. (5,618) (3,938) (730) 15,506 63,021 14,393 23,156
Capital expenditures (6)................ 8,690 10,034 10,648 35,593 70,709 9,549 29,655
Ratio of earnings to fixed charges (7).. 1.6x 2.7x 2.3x 1.9x 2.0x N/A 0.4x
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED ------------------------------------
NOVEMBER 30, 1995 FEBRUARY 28, 1995 FEBRUARY 29, 1996
----------------- ----------------- -----------------
(UNAUDITED)
<S> <C> <C> <C>
PRO FORMA DATA (8):
Interest expense, net (1)................................. $ 12,460 N/A $2,720
EBITDA/Interest expense, net (1).......................... 2.8x N/A 3.0x
Ratio of earnings to fixed charges (7).................... 1.3x N/A 0.3x
</TABLE>
<TABLE>
<CAPTION>
AT FEBRUARY 29, 1996
AT NOVEMBER 30, --------------------------
------------------------------------------------ AS
1991 1992 1993 1994 1995 ACTUAL ADJUSTED (9)
-------- -------- -------- -------- -------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............. $ 15,964 $ 22,098 $ 11,338 $ 7,446 $ 10,493 $ 15,078 $ 15,078
Total assets.......................... 182,818 190,785 213,463 238,544 313,244 346,855 352,164
Long-term debt........................ 66,956 66,139 80,203 64,896 126,676 147,362 161,461
Stockholders' equity.................. 81,302 87,270 90,008 123,611 132,301 131,780 138,680
</TABLE>
- ------------------------------
(1) Net of amounts capitalized and interest income.
(2) For fiscal 1992, net income includes approximately $1.6 million of
nonrecurring income items (approximately $1.1 million net of tax).
(3) Figures give effect to the 2,385-for-one split of the Common Stock that
occurred in connection with the initial public offering in February 1994 and
the grant of 196,633 shares under certain of the Company's benefit plans.
(4) EBITDA (operating income (loss) plus depreciation and amortization) should
not be construed as an indicator of the Company's operating performance, or
as an alternative to cash flows from operating activities as a measure of
liquidity. The Company has presented EBITDA solely as supplemental
disclosure because the Company believes that it enhances the understanding
of the financial performance of companies with substantial depreciation and
amortization. For fiscal 1993, EBITDA excludes approximately $1.8 million of
nonrecurring compensation charges, for fiscal 1995, EBITDA excludes
approximately $2.1 million of pre-opening expenses, and for fiscal 1994 and
1995, EBITDA includes approximately $371,000 and $2.2 million, respectively,
of life insurance benefits.
(5) Net cash used in investing activities includes amounts expended by the
Company for capital expenditures.
(6) Of amounts shown, approximately $3.6 million in fiscal 1991, $2.8 million in
fiscal 1992, $6.5 million in fiscal 1993, $4.4 million in fiscal 1994, $4.6
million for fiscal 1995, $1.3 million for the three months ended February
28, 1995 and $0.9 million for the three months ended February 29, 1996
related to recurring capital expenditures for maintenance of the current
facilities.
(7) The ratio of earnings to fixed charges has been computed by dividing
earnings before income taxes and minority interest plus fixed charges
(excluding capitalized interest) by fixed charges. Fixed charges consist of
interest and other finance expenses, the estimated interest component of
rentals and capitalized interest. For the quarter ended February 29, 1996,
earnings were inadequate to cover fixed charges by a coverage deficiency of
approximately $2.1 million, which earnings reflect $3.6 million in
pre-opening expenses incurred in the first quarter of 1996.
(8) The PRO FORMA data gives effect to (i) the Exchange Offer, (ii) the
incurrence of indebtedness under the Iowa Loan, (iii) the incurrence of
indebtedness under the Promissory Note and (iv) the Offering and the
application of the net proceeds therefrom to repay certain indebtedness, in
each case as if such transaction had occurred or such indebtedness had been
incurred on the first day of the period presented.
(9) Adjusted to give effect to the Exchange Offer and the Offering and the
application of the net proceeds therefrom to repay certain indebtedness, in
each case as if such transaction has occurred as of February 29, 1996.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Prior to fiscal 1995 the Company's operations were substantially limited to
those of Harveys Resort on the south shore of Lake Tahoe, Nevada. During fiscal
1993, the Company began investing in expansion projects designed to expand the
Company's operations into new and diverse markets. On December 2, 1994, the
first of the expansion projects, Harveys Wagon Wheel opened in Central City,
Colorado. On March 9, 1995, the Hard Rock Hotel opened in Las Vegas, Nevada and
on January 1, 1996 the riverboat casino portion of Harveys Casino Hotel in
Council Bluffs, Iowa opened for business.
On April 30, 1996, the Company acquired the Minority Interests and Harveys
Wagon Wheel and HWW became wholly-owned by the Company. The operations of
Harveys Wagon Wheel are managed by Harveys C.C. Management Company, Inc.
("HCCMC"), a wholly-owned subsidiary of the Company, and HCCMC receives a fee
for management services provided by HCCMC. The accounts of HWW are consolidated
with those of the Company. All significant intercompany transactions and
accounts are eliminated in consolidation, including the elimination of the
management fee.
The Hard Rock Hotel is owned by Hard Rock Hotel, Inc., a Nevada Corporation
("HRHC"), of which the Company, through its wholly owned subsidiary, Harveys
L.V. Management Company, Inc., a Nevada corporation ("HLVMC"), owns 40% of the
equity interest. HLVMC manages the operations of the Hard Rock Hotel pursuant to
a management agreement between the Company and HRHC (the "HRHC Management
Agreement") and receives management fees that are included in the Company's
consolidated revenues. The investment in HRHC is accounted for on the equity
method.
Harveys Casino/Hotel project is wholly-owned and, since its opening in 1996,
operated by the Company's wholly-owned subsidiary, Harveys Iowa Management
Company, Inc., a Nevada corporation ("HIMC"). The accounts of HIMC are
consolidated with those of the Company. All significant intercompany
transactions and accounts are eliminated in consolidation.
The changes in the operating results for the first quarter of fiscal 1996 as
compared to the first quarter of fiscal 1995 and for fiscal 1995 as compared to
fiscal 1994 were primarily the result of the opening of the Company's expansion
projects in fiscal 1996 and fiscal 1995. The changes in the Company's financial
condition, liquidity, and capital resources, as discussed below, were primarily
attributable to the Company's expansion efforts.
19
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED NOVEMBER 30, ---------------------------
---------------------------- FEBRUARY 28, FEBRUARY 29,
1993 1994 1995 1995 1996
-------- -------- -------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET REVENUES:
Harveys Resort............................................ $132,259 $128,286 $130,616 $28,117 $27,858
Harveys Wagon Wheel....................................... -- -- 40,911 10,220 9,684
Harveys Casino/Hotel(1)................................... -- -- -- -- 10,872
Harveys Las Vegas Management Company(2)................... -- -- 1,669 -- 1,060
Corporate and Development(3).............................. -- -- 5 -- --
-------- -------- -------- ------------ ------------
Total Net Revenues.................................... $132,259 $128,286 $173,200 $38,337 $49,474
OPERATING INCOME (LOSS):
Harveys Resort(3)......................................... $ 16,320 $ 18,570 $ 21,575 $ 1,902 $ 2,386
Harveys Wagon Wheel(4).................................... (12) (156) 5,031 (51) 1,303
Harveys Casino/Hotel(1)................................... -- -- -- -- (1,232)
Harveys Las Vegas Management Company(2)................... -- -- 1,469 -- 1,003
Corporate and Development(3)(5)........................... (4,115) (8,032) (9,721) (2,379) (2,565)
-------- -------- -------- ------------ ------------
Total Operating Income $ 12,193 $ 10,382 $ 18,354 $ (528) $ 895
EBITDA (6):
Harveys Resort............................................ $ 26,615 $ 28,616 $ 30,886 $ 4,137 $ 4,605
Harveys Wagon Wheel....................................... (5) (126) 10,305 2,877 2,074
Harveys Casino/Hotel(1)................................... -- -- -- -- 2,874
Harveys Las Vegas Management Company...................... -- -- 1,635 -- 1,058
Corporate and Development(3).............................. (2,283) (8,032) (7,746) (2,379) (2,565)
-------- -------- -------- ------------ ------------
Total EBITDA.......................................... $ 24,327 $ 20,458 $ 35,080 $ 4,634 $ 8,046
</TABLE>
- ------------------------
(1) The riverboat casino portion of Harveys Casino/Hotel commenced casino
operations on January 1, 1996, one month into the first quarter of 1996. The
operating loss for the three months ended February 29, 1996 includes
approximately $3.6 million of pre-opening expenses.
(2) Net revenues and operating income for HLVMC, the wholly-owned subsidiary of
the Company that provides management services to the Hard Rock Hotel,
consist of fees earned by such entity pursuant to the terms of the HRHC
Management Agreement and the 40% equity interest in the income or loss of
the Hard Rock Hotel.
(3) Harveys Resort is a revenue-generating asset owned by the Company. The
operating results relative to corporate and development expenses have been
excluded from those of Harveys Resort and presented under "Corporate and
Development" in the table above. The Company believes the above presentation
may be useful to potential investors in evaluating the financial performance
of Harveys Resort.
(4) For fiscal 1995 and for the three months ended February 28, 1995, includes
approximately $2.1 million of pre-opening expenses.
(5) For fiscal 1993, includes approximately $1.8 million of nonrecurring
compensation charges.
(6) EBITDA (operating income plus depreciation and amortization) should not be
construed as an indicator of the Company's operating performance, or as an
alternative to cash flows from operating activities as a measure of
liquidity. The Company has presented EBITDA solely as supplemental
disclosure because the Company believes that it enhances the understanding
of the financial performance of companies with substantial depreciation and
amortization. For fiscal 1993, EBITDA for Corporate and
20
<PAGE>
Development excludes approximately $1.8 million of nonrecurring compensation
charges. For fiscal 1994 and 1995, Harveys Resort's EBITDA includes
approximately $371,000 and $271,000, respectively, of life insurance
benefits. For fiscal 1995 and for the three months ended February 28, 1995,
Harveys Wagon Wheel's EBITDA excludes approximately $2.1 million of
pre-opening expenses. For fiscal 1995, EBITDA for Corporate and Development
includes approximately $2.0 million of life insurance benefits. For the
three months ended February 29, 1996, Harveys Casino/Hotel's EBITDA excludes
approximately $3.6 million of pre-opening expenses.
Certain of the figures contained in the table above do not total due to
rounding of numbers comprising such figures.
THREE MONTHS ENDED FEBRUARY 29, 1996 COMPARED TO THREE MONTHS ENDED FEBRUARY 28,
1995
The Company's consolidated net revenues for the first quarter of fiscal 1996
amounted to approximately $49.5 million, a record for the Company's first
quarter and an increase of $11.1 million or 29.1% over net revenues recorded in
the first quarter of fiscal 1995. The increase was attributable to the $10.9
million of net revenues produced in the first two months of operations of the
riverboat casino portion of Harveys Casino/Hotel. Net revenues generated during
the current year's first quarter at Harveys Resort remained constant with net
revenues from that property for the prior year's first quarter. Harveys Wagon
Wheel experienced a 5.2% decline in net revenues during the first quarter of
1996 as compared to net revenues generated at the Central City, Colorado
property's inaugural first quarter of operations in fiscal 1995. The Hard Rock
Hotel, which had not opened as of the end of the first quarter in fiscal 1995,
contributed nearly $1.1 million to the Company's net revenues in the first
quarter of fiscal 1996 by way of management fees and the Company's equity in the
income of the joint venture.
Fiscal 1996 first quarter casino revenues, enhanced by the operations of the
riverboat casino portion of Harveys Casino/Hotel, amounted to approximately
$36.9 million, an increase of $10.1 million over the prior year's comparable
quarter. The initial two months of gaming activity at Harveys Casino/Hotel
produced approximately $10.5 million of casino revenue, accounting for all of
the quarter-over-quarter increase. Casino costs and expenses also increased for
the comparable quarterly periods, up $6.3 million to $19.8 million for the
current year's period. Harveys Casino/Hotel accounted for $4.7 million of the
increase while Harveys Resort and Harveys Wagon Wheel accounted for
approximately $716,000 and $818,000 of the increase, respectively, due to
increases in casino complimentaries and promotions at both properties.
Lodging revenues for the fiscal 1996 first quarter increased by
approximately $339,000 over the prior year's first quarter to $6.1 million due
primarily to increases in the occupancy rate at both Harveys Resort and Harveys
Wagon Wheel. The hotel portion of Harveys Casino/Hotel was under construction at
quarter-end and, consequently, provided none of the lodging revenues. However,
included in lodging costs and expenses for the current year quarter were certain
hotel department expenses associated with the land-based facilities at Harveys
Casino/Hotel. Excluding those costs and expenses, lodging profit margins also
improved for the quarter-to-quarter comparison with improvements recognized at
both Harveys Resort and Harveys Wagon Wheel.
Food and beverage revenues for the fiscal 1996 first quarter increased
$563,000 over the prior fiscal year's first quarter to $8.4 million. The
beverage and limited food service aboard the Harveys Casino/Hotel riverboat
casino provided $536,000 of the increase. Expanded food and beverage offerings
will be available at the Council Bluffs land-based facilities when completed in
mid-1996. Food and beverage costs declined by $639,000, or 12.8%, in the
quarter-to-quarter comparison, due to improvements in cost-of-sales and labor
costs at both Harveys Resort and Harveys Wagon Wheel.
Other revenues for the fiscal 1996 first quarter remained flat compared to
those from the prior fiscal year's first quarter. The contribution from the
Company's management fees and 40% equity interest in the Hard Rock Hotel
amounted to approximately $1.1 million. The Hard Rock Hotel was not open during
the first quarter of fiscal 1995.
Selling, general and administrative expenses increased by approximately $1.9
million, or 15.1%, to $14.4 million for the current fiscal year first quarter.
The first two months of operations of the riverboat portion of
21
<PAGE>
Harveys Casino/Hotel resulted in approximately $2.9 million of such expenses,
excluding the recognition of pre-opening expenses. Harveys Resort recognized a
decrease in overall selling, general and administrative expenses of
approximately $1.0 million in the first quarter of fiscal 1996 compared to the
prior year's first quarter, while these expenses remained constant at Harveys
Wagon Wheel. Depreciation and amortization expenses increased by $546,000.
Nearly all of the increase in depreciation and amortization was associated with
the opening and operation of the riverboat portion of Harveys Casino/Hotel
beginning in January 1996. Net interest expense increased by $229,000, or 13.3%,
to approximately $2.0 million for the first quarter of fiscal 1996. The increase
in interest expense was recognized as a result of the financing of Harveys
Casino/ Hotel.
With the opening of the riverboat casino facilities of Harveys Casino/Hotel
in the first quarter of fiscal 1996, the Company recognized approximately $3.6
million of pre-opening expenses. In the first quarter of the prior fiscal year
the Company opened Harveys Wagon Wheel and recognized approximately $2.1 million
of pre-opening expenses. Such expenses had previously been incurred in
connection with the development of Harveys Wagon Wheel and Harveys Casino/Hotel
and deferred until such properties commenced operations.
The net loss for the fiscal 1996 first quarter amounted to $576,000 compared
to a loss of $1.1 million for the prior year's first quarter. Excluding
pre-opening expenses (net of taxes) from both periods, the Company would have
generated net income of $1.7 million for the current fiscal year's first quarter
(a record first quarter for the Company) and a net loss of $156,000 for the
prior fiscal year's first quarter.
FISCAL YEAR ENDED NOVEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED NOVEMBER 30,
1994
The Company's net revenues for fiscal 1995 were $173.2 million, an increase
of $44.9 million or 35.0% from the $128.3 million recorded in fiscal 1994. Of
the increase, $40.9 million, or 91.1% of the total increase, was attributable to
the first year of operations of Harveys Wagon Wheel, which opened in Central
City, Colorado on December 2, 1994. Approximately $1.7 million of the revenue
increase was attributable to management fees earned for the management of the
Hard Rock Hotel, net of the Company's $0.7 million share of the loss incurred by
the Hard Rock Hotel in fiscal 1995. The Hard Rock Hotel opened in Las Vegas on
March 9, 1995. The balance of the increase in revenues was provided by Harveys
Resort.
CASINO. Fiscal 1995 casino revenues increased $37.4 million, up 44.5% from
fiscal 1994 casino revenues of $84.0 million, to $121.4 million. The first year
operations of Harveys Wagon Wheel provided $35.6 million of the increase.
Harveys Resort accounted for $85.8 million, or 70.7% of consolidated casino
revenues. The contribution from the Company's casino operations in this mature
Nevada market improved by $1.8 million, or 2.1%, over the prior year. Casino
costs and expenses increased with the opening of Harveys Wagon Wheel. While
Harveys Wagon Wheel accounted for 95.3% of the casino revenue growth, it also
accounted for 94.6% of the growth in casino costs and expenses, up from $41.0
million in fiscal 1994 to $57.4 million in fiscal 1995.
LODGING. Lodging revenues of $25.5 million for fiscal 1995 were up $3.6
million, 16.6%, from fiscal 1994. Revenues from the 118-room Harveys Wagon Wheel
hotel operation provided nearly $2.5 million of the increase with an occupancy
rate of 82.0%. The 740-room hotel at the Lake Tahoe facility provided the
balance of the lodging revenue increase due to an increase in occupancy from
71.8% in fiscal 1994 to 76.9% in fiscal 1995. Total lodging costs and expenses
increased at a higher rate than lodging revenue growth. Harveys Resort operates
at a greater economy of scale than the 118-room Harveys Wagon Wheel and commands
a higher average daily rate while spreading necessary costs over a more
extensive room base. In addition, the unique parking situation at Harveys Wagon
Wheel (100% on-site valet parking) requires a proportionately larger hotel valet
parking staff. All of these factors contributed to a decline in lodging profits
as a percentage of lodging revenues, from 69.2% in fiscal 1994 to 64.4% in
fiscal 1995.
FOOD AND BEVERAGE. Food and beverage revenues improved by 14.1%, up $4.2
million to $34.0 million. Just over $3.9 million of the increase was provided by
Harveys Wagon Wheel. Harveys Resort was basically
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flat in the number of meals served but did recognize a slight increase in the
average guest check to account for the balance of the revenue increase. Food and
beverage profit margins declined slightly due to lower pricing and attendant
higher cost of goods sold percentage experienced at Harveys Wagon Wheel.
OTHER REVENUES. Other revenues amounted to $6.3 million in fiscal 1995.
Other revenues in fiscal 1994, solely attributable to Harveys Resort, amounted
to $5.6 million. Other expenses remained relatively flat in absolute dollars, up
just $287,000.
SG&A, DEPRECIATION AND AMORTIZATION, NET INTEREST EXPENSE. Consolidated
selling, general and administrative expenses increased 25.4%, up $10.3 million
to $50.8 million for fiscal 1995. Approximately $9.6 million of the increase was
attributable to Harveys Wagon Wheel. The remaining increase of $728,000
represented a 1.8% increase over comparable expenses in fiscal 1994.
Depreciation and amortization increased $2.6 million from fiscal 1994 to fiscal
1995. The 1995 changes associated with Harveys Wagon Wheel amounted to $3.1
million. All other operations recorded a decrease of nearly $498,000 as a result
of the value of fully depreciated and retired assets in fiscal 1995 exceeding
the value of depreciable assets acquired. Interest expense, net of interest
capitalized, increased $5.3 million, or 150% from fiscal 1994 to fiscal 1995.
This increase was attributable to Harveys Wagon Wheel financing, including
equipment financing, higher consolidated debt levels and higher interest rates.
In fiscal 1994, $1.9 million of interest was capitalized, primarily in
conjunction with the construction of Harveys Wagon Wheel. In fiscal 1995, $1.1
million was capitalized in conjunction with the construction of Harveys
Casino/Hotel.
PRE-OPENING EXPENSES. As a result of the opening of Harveys Wagon Wheel in
fiscal 1995, the Company recognized $2.1 million of pre-opening expenses. These
charges had previously been incurred in connection with the development of that
property and deferred until the facility opened. Additionally, included in
management fees and joint venture revenue is the Company's equity interest in
the net results of the Hard Rock Hotel's partial year of operations including
the Company's net share of approximately $4.5 million in pre-opening expenses.
In fiscal 1996, the Company will recognize pre-opening expenses in connection
with the opening of Harveys Casino/Hotel. Approximately $2.1 million of such
costs have been deferred through fiscal 1995 year end.
LIFE INSURANCE BENEFITS. The Company maintains life insurance policies on
key employees and had owned a life insurance policy on the life of Beverlee A.
Ledbetter, who, until her death in September of 1995, was the holder of the
largest block of the Company's common stock. In fiscal 1994, the Company
recognized approximately $371,000 in proceeds from one of the key employee
policies and, in fiscal 1995, recognized an additional $271,000 from another
such policy. Upon Beverlee A. Ledbetter's death in fiscal 1995, the Company
recognized approximately $2.0 million in life insurance benefits.
INCOME TAX PROVISION. The income tax provision for fiscal 1995 was
favorably affected by the non-taxable life insurance benefits.
As a result of the above, net income for fiscal 1995 improved to $9.3
million from $5.1 million in fiscal 1994.
FISCAL YEAR ENDED NOVEMBER 30, 1994 COMPARED TO FISCAL YEAR ENDED NOVEMBER 30,
1993
The Company's net revenues for fiscal 1994 were $128.3 million, down $4.0
million or 3.0% from fiscal 1993. A substantial portion of the revenue decline,
$3.0 million, or 74.9% of the total, was experienced in the fourth quarter.
Through the first three quarters of fiscal 1994, net revenues trailed those of
fiscal 1993 by $1.0 million, or 1%, primarily due to adverse weather experienced
in the second quarter of fiscal 1994 and the impact of new or expanded
competition from the Las Vegas market. The decrease in net revenues was
predominantly attributable to a decline in casino revenue.
CASINO. Casino revenues of $84.0 million decreased $3.5 million, or 4.0%,
from casino revenues in fiscal 1993. The shortfall represented 88.9% of the
Company's net revenue decline. During the first nine months of fiscal 1994,
casino revenues varied unfavorably from the prior year period by $0.8 million.
This small decline was attributable to management's decision to reduce its
emphasis on the higher wagering, but more expensive, represented players, and
the effects of an aggressive Las Vegas marketing campaign in the
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Company's major feeder markets promoting the new megaresorts in Las Vegas. A
significant decline in casino volume for the fourth quarter, coupled with a
lower hold percentage, was responsible for $2.7 million of the decrease in
casino revenues. The fourth quarter decline in casino revenues was due to the
continuation of the shift away from represented players and the result of early
and severe winter weather in the month of November. The inclement weather
resulted in 11 days of road controls or closures restricting access to the Lake
Tahoe market compared to three days of road controls in November 1993. The
weather had a particularly negative effect on the Thanksgiving week business.
Casino costs and expenses of $41.0 million for fiscal 1994 were 5.2% lower than
the previous year. Lower casino expenses were a direct result of management's
cost containment measures in reaction to lower casino volume and revenue, and
management's decision to concentrate on a quality, mid-level player. Costs
associated with providing promotional complimentaries are absorbed by the
casino. By way of the Company's 10.3% year-to-year decrease in promotional
allowances, cost of such complimentaries had a smaller impact on casino expenses
than the previous year.
LODGING. Lodging revenues of $21.9 million decreased 1.9% in fiscal 1994
from fiscal 1993, partially due to a 6.9% decrease in complimentary lodging
revenue. The remaining shortfall was a result of a 6.0% decrease in occupied
room nights, somewhat offset by a 4.1% increase in average room rate. Lodging
expenses of $6.7 million increased 3.1% over the prior year. As a result of
efforts to better control complimentaries, a decreased amount of hotel operating
expenses were absorbed by the casino.
FOOD AND BEVERAGE. Food and beverage revenues of $29.8 million for fiscal
1994 declined 4.0% in comparison to fiscal 1993. Meals served decreased in the
year-to-year comparison by 12.4%, but the revenue impact was lessened by a 7.5%
increase in the average check amount. A primary factor in the revenue reduction
was management's decision to discontinue the free buffet breakfast program for
each hotel guest. Food and beverage expenses remained relatively flat compared
to fiscal 1993, despite the decline in transferred complimentary costs normally
absorbed by the casino.
OTHER. Other revenues amounted to $5.6 million in fiscal 1994, a 4.6%
decrease from fiscal 1993. The decline was due, in part, to lower gift shop
revenues. Other expenses were 6.4% lower in the year-to-year comparison.
SG&A, DEPRECIATION AND AMORTIZATION, NET INTEREST EXPENSE. The Company's
selling, general and administrative expenses increased $2.3 million, or 6.2% in
fiscal 1994 compared to fiscal 1993. The increase was attributable to additional
costs and expenses associated with changes in the vesting and benefits of
supplemental executive retirement plans, which will have a continuing effect,
and the increase in the cost of directors and officers liability insurance as a
result of the Company becoming publicly traded. Depreciation and amortization
decreased 5.8% in fiscal 1994, and was a result of the value of assets reaching
full depreciation and retirement exceeding the value of depreciable assets
acquired. Additional construction in progress, associated with Harveys Wagon
Wheel, became depreciable upon that property's opening, in December 1994. Net
interest expense decreased 21.8% in fiscal 1994 from fiscal 1993, despite
increased interest rates in 1994. The reduction was attributable to a temporary
pay down of the Company's revolving term loan with initial public offering
proceeds, and the capitalization of interest associated with the construction of
Harveys Wagon Wheel.
NONRECURRING COMPENSATION CHARGES. In fiscal 1993, the Company recognized
nonrecurring charges to operating income related to one-time payments of
$650,000 each to the Company's Chairman of the Board and Vice Chairman of the
Board in connection with renegotiation of their employment contracts. In
addition, in connection with the resignation of a former officer and director
and termination of her employment contract, the Company paid her $218,500. In
1993, the Company also recognized approximately $315,000 of compensation expense
in connection with a one-time grant of Common Stock to employees who have been
employed by the Company for at least one year. These one-time compensation
charges had the effect of reducing operating income for fiscal 1993 by $1.8
million.
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SUBSIDIARIES AND AFFILIATES. The Company recognized a $207,000 loss in
connection with joint ventures. The loss is primarily attributable to the
Company's investment in the Hard Rock Hotel. The loss was due to abandonment of
design fees in connection with the design, development and construction of the
Hard Rock Hotel.
INCOME TAX PROVISION. The income tax provision for fiscal 1994 was
favorably affected by nontaxable proceeds from life insurance and the
utilization of tax credits.
As a result of the above, net income of $5.1 million in fiscal 1994 improved
6.8% compared to fiscal 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources to date
have been cash flow from operations, borrowings under the various credit
arrangements, and, in fiscal 1994, the net proceeds of approximately $27.8
million from the Company's initial public offering.
At February 29, 1996, the Company had $15.1 million of cash and cash
equivalents and $38.3 million available under the Credit Facility. Cash flow
from operations for the first quarter of fiscal 1996 was $10.9 million, compared
to $6.2 for the first quarter of fiscal 1995, and for fiscal 1995 was $14.3
million.
During the first quarter of fiscal 1996, the Company continued to fund the
development and construction of the Council Bluffs project with cash
expenditures of $28.2 million. Additionally, the Company made cash payments for
dividends of approximately $376,000 during the quarter and incurred additional
cash expenditures of approximately $1.3 million in connection with capital
improvements at Harveys Resort.
During fiscal 1995, the Company's principal uses of funds were (i) advances
and investments of approximately $49.6 million to fund the development and
construction of Harveys Casino/Hotel, (ii) investing an additional $4.0 million
in the Hard Rock Hotel, (iii) advances of an additional $7.3 million to complete
the funding for the construction of Harveys Wagon Wheel, (iv) dividend payments
of $1.5 million and (v) pursuing additional expansion opportunities.
During fiscal 1994, the Company's principal uses of funds were (i) advancing
$23.5 million to fund the development and construction of Harveys Wagon Wheel,
(ii) net pay down on long term debt of $11.3 million, (iii) dividend payments of
$1.4 million, (iv) investing an additional $806,000 in the Hard Rock Hotel, (v)
expanding and renovating the Lake Tahoe facility and (vi) pursuing additional
expansion opportunities.
During fiscal 1993, the Company's principal uses of funds were (i) investing
$10.0 million in cash as equity in the Hard Rock Hotel, (ii) purchasing for $5.4
million a mortgage note with a face value of $5.8 million in connection with
Harveys Wagon Wheel, (iii) contributing $4.0 million in cash as equity in
Harveys Wagon Wheel, (iv) expanding and renovating Harveys Resort and (v)
pursuing additional expansion opportunities through the purchase of certain
parcels of land.
The Company expects that its primary capital needs for the remainder of
fiscal 1996 and the first quarter of fiscal 1997 will include (i) approximately
$20.0 million for the completion of construction and opening of the hotel and
convention center portion of Harveys Casino/Hotel, (ii) approximately $7.4
million for capital improvements and replacements at Harveys Resort to increase
market share and to position the Company to benefit from ongoing regional
redevelopment activity in the South Lake Tahoe market, (iii) construction of a
parking garage adjacent to Harveys Wagon Wheel and (iv) recurring capital
expenditures for maintenance of the Company's current facilities.
The maximum available principal balance under the Credit Facility is reduced
by outstanding borrowings and letter of credit exposure. At February 29, 1996,
the outstanding borrowings under the Credit Facility amounted to $109.5 million
and letters of credit exposure amounted to approximately $2.2 million, leaving
$38.3 million available.
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The Company is using the available proceeds from the Credit Facility to fund
completion of Harveys Casino/Hotel. The cost of the project is estimated to be
approximately $104 million (excluding pre-opening expenses). As of February 29,
1996, the amount expended or incurred was $84.4 million (excluding pre-opening
expenses).
As an additional source of financing for the construction of Harveys
Casino/Hotel, HIMC entered into the $20.0 million Iowa Loan on December 26,
1995. As security for the obligation under the Iowa Loan, HIMC granted the
lender a first preferred ship mortgage on the riverboat casino vessel known as
the Harveys Kanesville Queen, and a first priority security interest in all
personalty, earnings and insurance from the riverboat only, excluding
personalty, earnings and insurance derived from casino gaming operations. The
obligation under the Iowa Loan is guaranteed by the Company. Monthly installment
payments under the Iowa Loan commenced in January 1996 and the entire unpaid
principal balance is due and payable on December 31, 2000. The initial
installment payment was $348,667 and the final payment, due in December 2000,
will be $412,013.
Harveys Wagon Wheel opened on December 2, 1994. Those sources of capital for
the project included the equity investments of the Company and the former 30%
owner, $11.9 million of HWW Notes and a $28.0 million loan from the Company. An
additional advance from the Company of $2.8 million and $2.9 million from
operating cash flow of Harveys Wagon Wheel were used to pay design, development
and construction costs of the project. Additionally, HWW entered into an
equipment financing agreement.
The equipment financing agreement entered into by HWW allowed for the
financing of up to $7.5 million of gaming and associated equipment. Under the
terms of the agreement, repayments of principal and interest are due in 36
monthly installments. The equipment financing agreement is secured by all of the
gaming and associated equipment financed under the agreement. The obligation
under the financing agreement is guaranteed by the Company. HWW is current in
its payments under the terms of the financing agreement.
On April 30, 1996, the Company paid the holders of the HWW Notes an
aggregate of $6.0 million in cash and an aggregate of $8.0 million of the
Subordinated Notes in exchange for all of the outstanding HWW Notes and unpaid
interest accrued thereon. On such date, the Company also exchanged 382,500
shares of the Company's Common Stock for (i) 30% of the equity interests of HWW,
(ii) the rights to an approximately $3.0 million priority return from HWW and
(iii) an option to acquire an additional 5% of the equity interests in HWW. The
Subordinated Notes bear interest at 12% per annum from the date of issuance
until December 31, 1996. On January 1, 1997 and each January 1 thereafter until
the Subordinated Notes mature, the interest rate applicable to the Subordinated
Notes will increase 1% per annum. The Subordinated Notes will mature December
31, 2000, but may be redeemed at the Company's option at 97.5% or 99.0% of face
value if redeemed before December 31, 1996 or December 31, 1997, respectively,
or at par thereafter.
The Company has also entered into the $10.0 million Promissory Note to
finance the construction of a parking garage on land owned by the Company
adjacent to Harveys Wagon Wheel. The Promissory Note is secured by a deed of
trust on the real property upon which the garage will be constructed. The loan
bears interest at 12% per annum, payable monthly, and requires equal principal
payments of $2.5 million on May 1, August 1 and November 1, 2000 and February 1,
2001.
Equity contributions by HRHC's joint venture shareholders, including the
Company's $4.0 million equity investment made during fiscal 1995, HRHC's $66.0
million of debt financing and $7.0 million from the operating cash flow of the
Hard Rock Hotel were sufficient to fund all of that project's costs. The Company
believes that operating cash flow from the Hard Rock Hotel will be adequate to
service its debt and satisfy working capital needs on an ongoing basis.
The Company and HRHC entered into a $66.0 million reducing revolving credit
facility (the "Hard Rock Bank Facility") with First Interstate Bank of Nevada,
N.A. ("FIBN") to finance the development of the Hard Rock Hotel. The Hard Rock
Bank Facility was initially guaranteed by the Company. The Company's guarantee
was terminated in May 1996.
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In March 1995, the Company sold its interest in the HWW $28.0 million note
to FIBN for $27.7 million, net of a transaction fee. The purpose of the
refinancing was to provide an immediate source of funds to partially finance the
construction and development costs of Harveys Casino/Hotel, until an additional
financing source could be identified.
Until August 16, 1995, the Company's primary source of debt financing was
its Loan Agreement with a consortium of banks. On that date the outstanding
balance on the Loan Agreement was $59.0 million out of a maximum available of
$68.2 million. On August 14, 1995, the Company entered into its $150.0 million
Credit Facility and on August 16, 1995 drew $89.0 million against that facility
to repay the outstanding balance of the Loan Agreement, repurchase the $28.0
million loan to HWW and pay fees related to the Credit Facility.
The maximum available principal balance under the Credit Facility of $150.0
million is reduced by outstanding borrowings and letter of credit exposure. At
November 30, 1995, the outstanding borrowings under the Credit Facility amounted
to $115.0 million and letters of credit exposure amounted to approximately $1.7
million leaving $33.3 million available. At February 29, 1996, the outstanding
borrowings under the Credit Facility amounted to $109.5 million, the letters of
credit exposure had increased to $2.2 million and the amount available was
approximately $38.3 million.
The Credit Facility matures on August 16, 2000. There are no required
repayments of principal under the Credit Facility in 1996. In 1997, required
repayments of principal, assuming maximum principal amounts are outstanding,
total approximately $15.0 million. The year-end maximum principal balance
outstanding under the Credit Facility reduces to $135.0 million in 1997, $120.0
million in 1998 and $97.5 million in 1999. The Company is required to make
payments reducing the principal balance outstanding under the Credit Facility to
the applicable maximum permitted principal balance on February 1 of each of
1997, 1998, 1999 and 2000. The Credit Facility is secured by all of the real and
personal property of Harveys Resort, including a pledge of the stock of all its
subsidiaries, as well as all of the contracts the Company has entered into in
connection with its ownership and operation of Harveys Resort. Interest on
borrowings outstanding under the Credit Facility is payable, at the Company's
option, at either the London Inter-Bank Offering Rate ("LIBOR") or the prime
rate of FIBN, in each case plus an applicable margin. The applicable margin is
determined with reference to the Company's funded debt to EBITDA ratio. The
applicable margins as of May 1, 1996 are 2.0%, with respect to the LIBOR based
interest rate, and 0.5%, with respect to the FIBN prime rate based interest
rate.
The Credit Facility contains certain financial and other covenants. The
financial covenants prevent the Company from making any investments in or
advances to affiliates without the prior written consent of the lenders under
the Credit Facility. The covenants allow the declaration and payment of
dividends without the prior written consent of the lenders if certain fixed
charge coverage ratios are maintained. The covenants require the Company to
maintain certain set standards with respect to (i) minimum tangible net worth,
(ii) fixed charge coverage ratios and (iii) minimum annual capital expenditures.
The financial covenants also limit the Company's ability to incur additional
indebtedness.
The Company pays FIBN an annual agency fee of $100,000 for its services as
agent of the lenders under the Credit Facility and an annual "non-usage fee" of
3/8 or 1/2 of 1% of the average daily amount of the unused portions of funds
committed under the Credit Facility, depending upon the applicable interest rate
margin.
As a result of the foregoing debt transactions, and the $11.9 million of HWW
Notes that were outstanding on February 29, 1996 and acquired by the Company on
April 30, 1996, the Company's long-term debt at February 29, 1996 amounted to
$156.6 million (including the current portion of $9.3 million) compared to
$133.1 million at November 30, 1995 (including the current portion of $6.5
million), an increase of $23.5 million or 17.7%.
It is the Company's intention to use proceeds from the Offering, expected to
be approximately $144.5 million, to repay (i) approximately $107.1 million
outstanding under the Credit Facility;
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(ii) $7.8 million to redeem $8.0 million in principal amount of Subordinated
Notes; (iii) the $10.0 million obligation under the Promissory Note; and (iv)
approximately $19.6 million outstanding under the Iowa Loan.
IMPACT OF INFLATION
Absent changes in competitive and economic conditions or in specific prices
affecting the industry, management does not expect that inflation will have a
significant impact on the Company's operations. Changes in specific prices (such
as fuel and transportation prices) relative to the general rate of inflation may
have a material effect on the hotel-casino industry.
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BUSINESS
The Company is an established owner, operator and developer of high-quality
hotel/casinos in Nevada and new gaming jurisdictions. The Company owns and
operates Harveys Resort, the Lake Tahoe area's largest hotel/casino. Harveys
Resort, in operation since 1944, is situated on the south shore of scenic Lake
Tahoe on the Nevada/California state line. The Company owns and operates Harveys
Wagon Wheel in Central City, Colorado, which opened in December 1994 as the
first major hotel/casino serving the greater Denver area. Harveys owns and
operates a riverboat casino and is in the process of constructing a hotel/
convention center, scheduled to open in mid-1996, in Council Bluffs, Iowa across
the Missouri River from Omaha, Nebraska. The Harveys Casino/Hotel riverboat
casino opened on January 1, 1996 and is one of only three operators in the
Omaha/Council Bluffs gaming market, which also includes one other riverboat
casino and a slot machine operator at the local dogtrack. In addition, through a
joint venture between Harveys and the Hard Rock Cafe co-founder Peter A. Morton,
Harveys owns 40% of and manages the Hard Rock Hotel in Las Vegas, Nevada, which
opened in March 1995. See "-- Harveys Wagon Wheel", "-- Hard Rock Hotel" and "--
Harveys Casino/Hotel" below. For the twelve months ended February 29, 1996,
Harveys generated net revenues and EBITDA of $184.3 million and $38.5 million,
respectively.
Harveys Resort was originally founded on the south shore of Lake Tahoe by
Harvey and Llewellyn Gross in 1944 as a one room saloon, cafe and casino. Major
additions to the property were made in 1955 and 1963, and since 1979 the Company
has pursued a master plan through which it has developed the property into a
major hotel/casino consisting of 740 hotel rooms, an 88,000-square foot casino,
23,000 square feet of convention space, 2,967 parking spaces, the 280-seat
Emerald Theater and Cabaret, a wedding chapel, restaurants and retail shops, a
pool, a health club and a video arcade. Mr. Gross ran Harveys Resort until the
early 1980's at which time he transferred responsibilities to an experienced
casino management team. Today, Harveys Resort offers its customers high quality
hotel rooms, excellent dining facilities, an exciting location, entertaining
events and a lively gaming atmosphere.
Through Harveys Wagon Wheel, which opened in December 1994, the Company
established the first major hotel/casino serving the greater Denver area,
Colorado's major population center of more than 2 million people. Unlike
existing gaming facilities in the Central City area, which offer no overnight
accommodations, scarce on-site parking and few non-gaming amenities, Harveys
Wagon Wheel includes 850 slot machines, 18 table games and a nine-table poker
area, a 118-room hotel and 195 on-site parking spaces. Other amenities include a
220-seat coffee shop/buffet, a snack bar, an entertainment lounge and a
children's arcade.
The Hard Rock Hotel is located three blocks east of the Las Vegas Strip at
the intersection of Paradise Road and Harmon Avenue on approximately 16 acres
and consists of an 11-story, 339-room hotel that houses a 28,000-square foot
casino containing 802 slot machines, 39 table games and a sports and race book.
The interior and exterior decor of the facility resembles that of Hard Rock
Cafes and incorporates authentic rock'n'roll and entertainment collectibles such
as electric guitars and gold records. Mr. Morton is Chairman of the Hard Rock
Hotel and receives a supervisory fee for supervising certain aspects of its
development and operations.
The Harveys Casino/Hotel riverboat casino accommodates 1,700 passengers and
is berthed on the Missouri River directly across from Omaha, Nebraska in Council
Bluffs, Iowa. The riverboat casino has more than 23,500 square feet of casino
space on two decks and contains 883 slot machines and 51 table games. Harveys
Casino/Hotel's land-based amenities include surface parking for approximately
1,100 cars, and will include a 14-story, 251-room hotel with a 21,000 square
foot convention center, scheduled to open in mid-1996, and additional surface
parking for approximately 500 cars.
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BUSINESS STRATEGY
The Company's business strategy is to develop premium hotel/casino
facilities in markets in which the Company believes it can establish and
maintain a prominent or niche position. Each of the Company's properties offers
casino gaming and a full range of amenities in a friendly atmosphere that caters
to middle-and upper-middle income customers. This strategy emphasizes the
following elements:
HIGH-QUALITY FACILITIES AND SUPERIOR CUSTOMER SERVICE
As part of its commitment to providing a quality entertainment experience
for its patrons, the Company is dedicated to ensuring a high level of customer
satisfaction and loyalty by providing distinctive and modern accommodations and
attentive customer service in a friendly atmosphere. Management recognizes that
consistent quality and a comfortable atmosphere can differentiate its facilities
from the competition in all of its markets. The Company strives to meet customer
demand by furnishing each of its properties with a variety of restaurants and
non-gaming amenities. To foster a high level of customer satisfaction through
attentive customer service, management plays an active role in the training of
all of its employees at all levels. In particular, management conducts annual
training sessions with all employees at which it stresses the importance of
customer contact and encourages employees to look at, smile at, talk to and
thank each customer with whom they interact. The Company has implemented
attractive employee benefit programs at all of its facilities to recruit and
retain friendly, professional employees.
STRATEGIC LOCATIONS
Management believes that location is the key to attracting customers. South
Lake Tahoe, which draws approximately 2 million visitors per year, is a unique
gaming location because of its natural surroundings and variety of outdoor
attractions and activities. Harveys Resort is strategically placed on a site
adjacent to the California border in close proximity to more than 6,500 hotel
and motel rooms in non-gaming facilities. Harveys Wagon Wheel is located in a
highly visible site in Central City, Colorado, a picturesque mountain town,
approximately 35 miles west of Denver, serving the greater Denver area with its
population of over 2 million people. The Hard Rock Hotel is conveniently located
at one of the busiest intersections in Las Vegas and is a short distance from
the Las Vegas Convention Center, three non-gaming full service hotels with
approximately 850 rooms and the New Four Corners, which includes major casinos
such as the MGM Grand Casino Hotel and Theme Park. Harveys Casino/Hotel is
within a ten-minute drive of the Omaha/ Council Bluffs metropolitan regional
airport and is located directly off of Interstate 29, Interstate 80 and
Interstate 480.
TARGETED CUSTOMER BASE
The Company targets middle- to upper-middle income customers who tend to
have more disposable income for gaming and entertainment. Harveys Resort seeks
to attract these customers by offering well-appointed rooms and a "party"
atmosphere for those seeking nightlife and entertainment. The Company also has
established extensive customer databases and uses sophisticated player tracking
systems to award promotional allowances, such as complimentary rooms, food,
beverage and entertainment, when gaming play warrants. Management believes that
by continuing to focus its efforts on the maintenance of customer relationships
and the Harveys image, it will increase its share of higher-income customers in
the South Lake Tahoe market. Harveys Wagon Wheel targets middle- to upper-middle
income customers from the greater Denver area who seek a quality gaming
experience, convenient parking and overnight accommodations. By offering a
facility with overnight accommodations and more amenities than are offered by
other casinos in the Central City/Black Hawk market, Harveys Wagon Wheel has
been successfully building a loyal customer base. Harveys Casino/Hotel targets
frequent, mid-level players from Omaha, Council Bluffs and the surrounding
areas. The Company anticipates that the Harveys Casino/Hotel hotel and
convention facilities, currently under construction and scheduled to open in
mid-1996, will attract new players by capturing overnight guests and meeting and
small convention business. In addition, by positioning itself as the "Preferred
Place to Play", management believes that Harveys Casino/Hotel will attract a
large percentage of the gaming revenues generated by the Omaha/Council Bluffs
regional population and visitors to the Omaha/ Council Bluffs area. The Hard
Rock Hotel appeals to younger and higher-income gaming patrons because of the
Hard Rock theme, upscale hotel facilities and the wide variety of special events
designed to maintain the image of the facility in the mind of the Hard Rock
Hotel customer base.
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EFFECTIVE MARKETING
Since 1989, the Company has aggressively promoted Harveys Resort and a
lively image through television, radio, billboard and print advertising. The
slogan of Harveys Resort, "The Party's at Harveys," has become a well-known
advertising trailer in Lake Tahoe's key Northern California feeder markets.
Since 1989, the Company has increased its share of gaming revenues in South Lake
Tahoe from approximately 24% to approximately 27% in 1995, due largely to its
targeted marketing strategy. The Company attracts customers to Harveys Wagon
Wheel by aggressively promoting the facility's hotel rooms, on-site parking,
quality dining facilities and varied entertainment activities in a market in
which such amenities are a distinct competitive advantage. The Hard Rock Hotel
maintains and capitalizes on its well-known and popular "Hard Rock" name
recognition by hosting special events such as award presentations to rock music
stars, film premiere parties, fundraising and other charitable activities, as
well as frequently-scheduled live entertainment. Harveys Casino/Hotel is
marketed as "The Preferred Place to Play" in the Omaha/Council Bluffs market
through the extensive use of television and newspaper advertisement, billboards,
regular promotions and sweepstakes as well as point-of-sale materials located in
local hotels, restaurants and other visitor attractions.
EMPHASIS ON SLOT PLAY
Responding to the increased popularity of slot machines over the past
several years, Harveys Resort has shifted its gaming mix toward slot machines.
The mix of slot machines is closely matched to the demand of the customer base
at each property. Harveys Resort, for instance, now includes a greater
percentage of $1 and higher denominated machines to appeal to the higher-income
gaming clientele of Harveys Resort, including $5, $25 and $100 slot machines
offered within a premium player section. This increase in higher denominated
machines increased win per unit at Harveys Resort by approximately 19% between
1988 and 1994. Harveys Wagon Wheel offers 850 slot machines, approximately 250
more machines than are currently offered by any other gaming facility in the
area. Similarly, the Hard Rock Hotel offers 802 slot machines and Harveys
Casino/Hotel offers 883 slot machines. Slot machines, which are less labor
intensive and require less square footage than table games, also generate higher
profit margins compared to table games. The Company monitors payout percentages
closely and ensures that its slot machine payouts are competitive.
THE PROPERTIES
HARVEYS RESORT
Harveys Resort, the largest hotel/casino in the Lake Tahoe area, is located
on approximately 19.8 acres on U.S. Highway 50, the main route through South
Lake Tahoe. The hotel/casino, situated on the south shore of Lake Tahoe with a
panoramic view of the lake and surrounding mountains, is among Lake Tahoe's most
modern facilities. The main structure is an all-glass 17-story tower which was
completed in 1991, connected to a 12-story tower which was completely re-built
in 1982. Harveys Resort features 740 rooms, 36 of which are luxury suites, and
an 88,000 square foot casino containing approximately 2,100 slot machines, 105
table games, a 15-table poker area, a race and sports book and a keno lounge.
Other amenities include 23,000 square feet of convention space, 2,967 parking
spaces, the 280-seat Emerald Theater and Cabaret, a wedding chapel, restaurants,
retail shops, a pool, a health club and a video arcade. Harveys Resort's eight
restaurants offer a wide variety of high quality food and consist of a coffee
shop, a Mexican restaurant, a seafood and pasta restaurant, a pizzeria, a
premier steakhouse, a buffet, a burger emporium and Llewellyn's, Harveys
Resort's award-winning restaurant that features top quality food and a
spectacular view of Lake Tahoe. In recognition of the outstanding quality of the
facility and its excellent service, Harveys Resort has received both the Mobil
Four Star and AAA Four Diamond Awards every year for the last 15 years.
Management has allocated a total of $20.0 million for capital improvements to be
made to Harveys Resort through 1997 to increase the Company's market share and
to position the Company to benefit from the ongoing South Lake Tahoe
Redevelopment Project. In 1984, the City of South Lake Tahoe, California,
adopted a redevelopment plan and created the South Tahoe Redevelopment Agency.
The redevelopment plan has resulted in the removal of numerous older motel and
retail properties along Highway 50 through the City of South Lake Tahoe. The
properties were demolished, creating a scenic open space corridor containing
public facilities including drainage ponds and wetlands. The redevelopment plan
resulted in a 400-room Embassy Suites hotel on the California-Nevada state line,
completed in 1991. It is anticipated that
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the next phase of redevelopment, set to commence in the fall of 1996, will
involve the condemnation of certain older motels and retail establishments
located within one mile of Harveys Resort and the replacement thereof with a
regional transit center including an aerial tram to the Heavenly Valley ski
area, parking facilities, a theater complex, retail space, hotels and vacation
interval units. It is anticipated that the third phase, also to be located
immediately adjacent to the California-Nevada state line, will result in a
regional convention facility, hotel, retail space, regional parking facilities
and various public amenities.
The South Lake Tahoe gaming market generated approximately $320.0 million in
gaming revenues in each of the last three years. The Lake Tahoe area is a unique
gaming location because of its natural surroundings and variety of year-round
outdoor recreational activities, including skiing, boating, fishing and golfing.
The South Lake Tahoe area draws tourists primarily from nearby Reno and Northern
California. There are four major casinos in this market to serve the
approximately 2 million annual visitors. Existing environmental regulations
prevent the addition of new gaming facilities or the expansion of existing
hotel/ casinos.
HARVEYS WAGON WHEEL
Through Harveys Wagon Wheel, which opened in December 1994, the Company
established the first major hotel/casino serving the greater Denver area.
Harveys Wagon Wheel is located on a highly visible site in Central City,
Colorado, a picturesque mountain town approximately 35 miles west of Denver.
Unlike most existing gaming facilities in the Central City area, which offer no
overnight accommodations, scarce on-site parking and few non-gaming amenities,
Harveys Wagon Wheel includes approximately 40,000 square feet of casino space,
850 slot machines, 18 table games, a nine-table poker area, a 118-room hotel and
195 on-site parking spaces. Other amenities include a 220-seat coffee
shop/buffet, a snack bar, an entertainment lounge and a children's arcade. No
other casino in Central City/Black Hawk currently offers all of these amenities.
In 1995, the Central City/Black Hawk market hosted approximately 3 million
visitors and generated gaming revenues of more than $290.7 million, an increase
of 18.7% over gaming revenues of $244.9 million in 1994.
On April 30, 1996, the Company exchanged 382,500 shares of Common Stock for
the Minority Interests. Upon consummation of such acquisition, HWW and Harveys
Wagon Wheel became wholly-owned by the Company. In addition, on such date the
Company exchanged $8.0 million in principal amount of the Subordinated Notes and
$6.0 million cash for all of the outstanding HWW Notes and $1.9 million of
unpaid interest accrued thereon. A portion of the proceeds of the Offering will
be used to redeem the Subordinated Notes.
HCCMC, a wholly-owned subsidiary of the Company, owns approximately 48 acres
of undeveloped land adjacent to the Harveys Wagon Wheel facility. HCCMC has
entered into an Agreement of Purchase and Sale, subject to several conditions,
to sell 40 of such acres to a group seeking to develop a non-gaming hotel and
other facilities. The Company intends to use the remaining eight acres to
construct a parking garage for the Harveys Wagon Wheel facility. Numerous
permits and approvals which have not been obtained are necessary for both
transactions. No assurances can be given, however, that either transaction will
be consummated or consummated on the terms described above.
HARD ROCK HOTEL
The Company, through a joint venture with Peter A. Morton, co-founder of the
Hard Rock Cafes, developed the Hard Rock Hotel, which opened in March 1995 in
Las Vegas, Nevada. The Company owns a 40% equity interest in and manages this
unique first-class facility which is modeled after the highly successful Hard
Rock Cafe concept and targets younger and higher-income gaming patrons. Located
three blocks from the Las Vegas Strip and five minutes from McCarran
International Airport, the 339-room hotel and casino houses 28,000 square feet
of casino space containing 802 slot machines, 39 table games and a sports and
race book.
The Hard Rock Hotel features the Hard Rock Beach Club offering lush
landscaping, whirlpool, luxury cabanas and a sandy beach, and "The Joint", a
live music venue with a 1,400-person capacity. Additional
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amenities include a health club, retail store, and two restaurants, a 24-hour
casual dining coffee shop and Mortoni's, an Italian fine dining room, with a
view of the Hard Rock Beach Club, offering indoor and garden patio dining. The
hotel/casino also provides parking spaces for approximately 1,285 cars.
The Hard Rock Hotel is located adjacent to the Hard Rock Cafe on
approximately 16 acres of land with 1,200 feet of frontage near the intersection
of Paradise Road and Harmon Avenue. The site is conveniently located at one of
the busiest intersections in Las Vegas and is a short distance from the Las
Vegas Convention Center, three non-gaming full service hotels with a combined
total of approximately 850 rooms and the New Four Corners, which includes major
casinos such as the MGM Grand Casino Hotel and Theme Park. The Hard Rock Hotel
hosts special events such as award presentations to rock stars and other
celebrities, film premiere parties and fundraising and other charitable
activities, as well as frequently-scheduled live entertainment, in order to
attract its target customers, who tend to be younger and have higher disposable
incomes than the average Las Vegas visitor.
OWNERSHIP OF THE HARD ROCK HOTEL. The Company owns 40% of the Hard Rock
Hotel. Peter A. Morton, the co-founder of Hard Rock Cafes and Chairman of Hard
Rock America, through Lily Pond Investments, Inc. ("Lily Pond"), owns
substantially all of the remaining interests in the Hard Rock Hotel. The
ownership and control of the Hard Rock Hotel is governed by, among other things,
the Stockholders Agreement. Substantially all of the equity interests of Lily
Pond are owned by Peter A. Morton who owns the exclusive rights to use the name,
mark and logo "Hard Rock Hotel" in the western half of the United States. Mr.
Morton and Lily Pond have entered into a sublicense agreement (the "Sublicense
Agreement") which gives Lily Pond the right to use the "Hard Rock Hotel" mark.
Pursuant to the Stockholders Agreement, the Company initially made a capital
contribution of $10 million in cash for a 40% equity interest in HRHC. Lily Pond
transferred to HRHC a portion of the property on which the Hard Rock Hotel was
developed and assigned the Sublicense Agreement in return for a 60% equity
interest in HRHC. The Company and Lily Pond have made additional capital
contributions, on a pro rata basis, of approximately $12.0 million in return for
additional common stock.
The Stockholders Agreement also sets forth the Company's and Lily Pond's
rights with respect to, among other things, designation of HRHC's board of
directors, preemptive rights and participation in future projects. The
Stockholders Agreement places certain restrictions on the transfer of HRHC stock
and also grants Lily Pond the right to decide whether HRHC may engage in a
public offering of its stock.
Pursuant to the Stockholders Agreement, the Company entered into a
management agreement (the "HRHC Management Agreement") with HRHC under which the
Company was designated manager (the "Manager") of the Hard Rock Hotel and HRHC
and Mr. Morton entered into a supervisory agreement (the "Supervisory
Agreement") regarding certain supervisory and oversight rights and duties with
respect thereto.
Under the HRHC Management Agreement, the Company has certain
responsibilities with respect to, among other things, the design, development
and operation of the Hard Rock Hotel, marketing and sales strategies, employee
matters, maintenance, capital expenditure plans and accounting matters. In
addition, the Company was required to obtain all liquor and gaming licenses and
permits for the Hard Rock Hotel. As compensation for its services as Manager,
the Company receives a base fee equal to 4% of adjusted gross revenues derived
from the Hard Rock Hotel. In addition, the Company will be entitled to an
incentive fee of up to 2% of adjusted gross revenues if the Hard Rock Hotel
achieves certain performance targets.
Either party has the right to terminate the HRHC Management Agreement if
certain performance levels are not achieved at specified times. In addition,
HRHC may also terminate the HRHC Management Agreement if (i) the Company reduces
its equity interest in HRHC to below 20%, (ii) certain stockholders of the
Company cease to own at least 40% of the voting power of the Company or (iii)
the Company ceases to own or maintain gaming operations elsewhere. The term of
the HRHC Management Agreement commenced on the date of its execution and will
continue until the year 2018. The Company has the option to renew the HRHC
Management Agreement for two consecutive 15-year terms.
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The Supervisory Agreement delineates Mr. Morton's right to supervise the
Hard Rock Hotel with respect to development, improvement, operation and
maintenance. Mr. Morton is responsible for ensuring that the Hard Rock Hotel's
concept, design, image, operational standards, service levels, theme, music and
entertainment are similar to those of existing Hard Rock Cafes. Mr. Morton's fee
under the Supervisory Agreement will be equal to 2% of adjusted gross revenues
of the Hard Rock Hotel. The term of the Supervisory Agreement is the same as
that of the HRHC Management Agreement.
HARVEYS CASINO/HOTEL
On January 1, 1996, the Company opened, as the first phase of Harveys
Casino/Hotel, a 1,700-passenger riverboat casino berthed on the Missouri River
directly across from Omaha, Nebraska in Council Bluffs, Iowa. The riverboat
casino has more than 23,500 square feet of casino space on two decks and
contains 883 slot machines and 51 table games. Land-based amenities at Harveys
Casino/Hotel include surface parking for approximately 1,100 cars, and will
include a 14-story, 251-room hotel with a 21,000 square foot convention center
by mid-1996 and additional surface parking for approximately 500 cars. Harveys
Casino/Hotel is within a ten-minute drive of the Omaha/Council Bluffs regional
airport and is located directly off of Interstate 29, Interstate 80 and
Interstate 480.
Harveys Casino/Hotel is located on a 60-acre parcel of land which the
Company acquired from the City of Council Bluffs. Approximately 20 acres of the
site are occupied by a municipal nine-hole golf course, which is leased to the
City of Council Bluffs for a nominal fee. This arrangement allows Harveys the
option of using this land for future expansion needs. In addition, the Company
has acquired an adjacent 44-acre site to accommodate future expansion or support
facilities.
Harveys Casino/Hotel's target market is the approximately 650,000 residents
in the greater Omaha metropolitan area and the nearly 3 million adults within a
three-hour drive of the facility. In addition, the casino, hotel and convention
facilities will be marketed to the estimated 2.5 million visitors and tourists
who visit the Omaha metropolitan area annually. Harveys Casino/Hotel markets
itself as "The Preferred Place to Play" in the Omaha/Council Bluffs market
through the extensive use of television and newspaper advertisement, billboards,
regular promotions and sweepstakes as well as point-of-sale materials located in
local hotels, restaurants and other visitor attractions. Harveys Casino/Hotel
targets frequent, mid-level players from Omaha, Council Bluffs and the
surrounding areas. The Company anticipates that the hotel and convention
facilities that are currently under construction and scheduled to open in
mid-1996 will attract new players by capturing overnight guests and meeting and
small convention business. In addition, by positioning the property as the
"Preferred Place to Play", management believes that Harveys Casino/Hotel will
attract a large percentage of the gaming revenues generated by the Omaha/Council
Bluffs regional population and visitors to the Omaha/Council Bluffs area.
COMPETITION
LAKE TAHOE
The Company competes for customers primarily on the basis of location, range
and pricing of amenities and overall atmosphere. Several of the competitors of
Harveys Resort have substantially greater name recognition and financial and
marketing resources. Harveys Resort competes with a number of other hotel/
casinos in Lake Tahoe and, to a lesser extent, with hotel/casino operations
located in Reno, Las Vegas and Laughlin, Nevada. In South Lake Tahoe, Harveys
Resort competes primarily with three other major casino operations: Harrah's
Lake Tahoe, Caesars Tahoe and the Horizon Casino Resort.
In 1987, the Tahoe Regional Planning Agency, an entity established under a
bi-state compact reached between the states of California and Nevada, placed
restrictions on additional commercial, residential and tourist accommodation
construction in Lake Tahoe in an effort to curb development and to preserve the
local environment. Under the bi-state compact and community plan constraints,
future tourist accommodation units added to the market will be required to
mitigate environmental impacts from expansion. Such measures may include
replacing an imposed multiple of older tourist accommodation units. The limited
number of rooms available in Lake Tahoe, however, allows Lake Tahoe hotel/casino
operators there to achieve much higher nightly room rates than those in most of
the gaming industry. The occupancy rate for
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the 2,250 upscale rooms in the four major south Lake Tahoe casinos has
historically been between 80% and 85%, while the occupancy rate in the motels is
typically between 40% and 50%. It is estimated that the average day room rate
for the Lake Tahoe hotel/casinos is approximately $100, compared to average
estimated rates of $28-$62 for Las Vegas, Reno and Laughlin. The Tahoe Regional
Planning Agency has imposed significant restrictions on construction as well as
on expansion of gaming facilities. These restrictions prohibit existing casinos
from expanding cubic volume of structures housing gaming and limit expansion of
the gaming areas within such structures. The Company believes that because of
such restrictions, it is unlikely that any new hotel/casinos will commence
operations in Lake Tahoe or that any of the smaller existing casinos will expand
to a size that could make them competitive with the four major casinos; however,
the Company expects that the four major hotel/casinos will continue to compete
intensely.
CENTRAL CITY/BLACK HAWK
Harveys Wagon Wheel competes primarily with the five casinos with the
largest numbers of gaming devices in Central City and Black Hawk as well as the
26 other smaller gaming establishments in operation in Central City and Black
Hawk as of December 31, 1995. The top five casinos, together with Harveys Wagon
Wheel, currently control more than 43% of all gaming devices in the Central
City/Black Hawk area. See "-- Harveys Wagon Wheel" above. In addition, as of
December 1995, there were approximately 24 other gaming establishments operating
within Cripple Creek, the third city in the state of Colorado where gaming is
legal, and two establishments located on two Native American reservations in
southwest Colorado. The contiguous cities of Central City and Black Hawk form
Colorado's primary gaming market and in Colorado the majority of the gaming
establishments lack on-site parking, over-night accommodations and non-gaming
amenities. Currently, limited stakes gaming in Colorado is legal in Central
City, Black Hawk, Cripple Creek and two Native American reservations in
southwest Colorado. However, there can be no assurances that gaming will not be
approved in other Colorado communities in the future. The legalization of gaming
closer to Denver, the major population center of Colorado, would likely have a
material adverse effect on the Company's operation in Central City.
LAS VEGAS
The Hard Rock Hotel provides a "themed" product and targets a "niche" market
consisting of individuals who are younger and have a higher income than the
average Las Vegas visitor. The Hard Rock Hotel competes with other highly-themed
Las Vegas resorts, such as The Mirage, Excalibur, Luxor and Treasure Island and
MGM Grand Casino Hotel and Theme Park. The Company believes that the Hard Rock
Hotel also competes with other Las Vegas hotel/casinos, including those located
on the Las Vegas Strip, and, to a lesser extent those along the Boulder Highway
and in downtown Las Vegas. Currently, there are approximately 22 major gaming
properties located on or near the Las Vegas Strip, 20 licensed locations in the
downtown area and several located in other areas of Las Vegas. Several
highly-themed new facilities on the Las Vegas Strip are expected to draw
significant numbers of visitors when they open. Although these new facilities
could have a positive effect on the Hard Rock Hotel if more visitors are drawn
to Las Vegas generally, these facilities as well as any other major additions,
expansions or enhancements of existing properties by competitors, could have a
material adverse effect on the business of the Hard Rock Hotel. In addition, the
Company believes that the Hard Rock Hotel will benefit from the recent and
anticipated future growth of Las Vegas and the overall popularity of gaming in
Las Vegas. A decline or leveling off of growth or popularity of gaming in Las
Vegas could adversely affect the Company's operations in Las Vegas.
OMAHA/COUNCIL BLUFFS
Harveys Casino/Hotel, with its riverboat casino that opened on January 1,
1996 and the adjacent 251-room hotel and 21,000 square foot convention center
that are currently under construction and are expected to open in mid-1996, will
provide that city's first major hotel product. The Company's target markets are
the residential population base (approximately 650,000) of the greater Omaha,
Nebraska metropolitan area, and the nearly 3 million adults within a three-hour
drive of the facility. Additionally, the Company's hotel and convention
facilities will be marketed to an estimated 2.5 million visitors and tourists
who visit to the Omaha metropolitan area annually, which now offers
approximately 7,000 hotel and motel units and is home to major tourist
attractions such as zoos, museums, pari-mutuel tracks, and historic monuments.
The Company's casino competes with Ameristar Casino Inc.'s riverboat casino in
Council
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Bluffs, which opened on January 19, 1996, as well as with the slot machines
installed at a dogtrack in the Council Bluffs area and other amusement
attractions. As the Company's casino represents the first experience of casino
gaming in the Omaha/Council Bluffs area, there can be no assurance that the
operation can be operated profitably. Should casino-style gaming be legalized in
Nebraska, and should gaming facilities be opened in Omaha, Nebraska, Harveys
Casino/Hotel could be materially, adversely affected.
GENERAL
Since the 1980s, legalized gaming opportunities have proliferated throughout
the United States. Casinos, including riverboat, dockside, land-based or Class
II Indian gaming facilities are currently legal in 23 states and approximately
40 states, including California, now sponsor lotteries. In addition, California
allows other non-casino style gaming, including pari-mutuel wagering, card
parlors, bingo and off-track betting. Several California-based Indian tribes
have established limited casino gaming on Indian-owned land throughout the state
as a result of recent judicial decisions and federal legislation which require
all states, including California to negotiate with Indian tribes regarding
certain casino gaming privileges. While the Company believes that the continued
spread of legalized gaming may in the future allow the Company additional
opportunities for expansion, increased legalized gaming in other states,
particularly in areas close to Nevada, such as California, could adversely
affect the Company's operations.
EMPLOYEES
As of May 10, 1996, the Company had approximately 4,960 employees.
Management believes that employee relations are good. The Company has entered
into a collective bargaining agreement that covers approximately ten employees.
This agreement relates to stage-hand employees who provide support to
entertainment facilities at Harveys Resort. None of the Company's other
employees are represented by labor unions.
REGULATORY MATTERS
NEVADA GAMING LAWS AND REGULATIONS
The ownership and operation of casino gaming facilities in Nevada are
subject to (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, "Nevada Act"); and (ii) various local regulations. The
Company's gaming operations are subject to the licensing and regulatory control
of the Nevada State Gaming Control Board (the "Nevada Board"), the Nevada Gaming
Commission (the "Nevada Commission"), the Douglas County Liquor Board and the
Clark County Liquor and Gaming Licensing Board ("CCLGLB", and together with the
Nevada Board and the Nevada Commission, the "Nevada Gaming Authorities").
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) to provide a source of state and local revenues
through taxation and licensing fees. Change in such laws, regulations and
procedures could have an adverse effect on the Company's gaming operations.
Any company that operates a Nevada gaming casino is required to be licensed
by the Nevada Gaming Authorities. The 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 ("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 obtained
from the Nevada Gaming Authorities the various registrations, approvals, permits
and licenses required in order to engage in gaming activities in Nevada.
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The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company 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 the Company must file applications with the Nevada Gaming
Authorities and may be required to be licensed or found suitable by the Nevada
Gaming Authorities. The Nevada Gaming Authorities may deny an application for
licensing for any cause which they deem reasonable. A finding of suitability is
comparable to licensing, and both require submission of detailed personal and
financial information followed by a thorough investigation. The applicant for
licensing or a finding of suitability must pay all the costs of the
investigation. Changes in licensed positions must be reported to the Nevada
Gaming Authorities and in addition to their authority to deny an application for
a finding of suitability or licensure, the Nevada Gaming Authorities have
jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, the companies involved would have to sever all
relationships with such person. In addition, the Nevada Commission may require
the Company 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 is 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 the Company must be reported
to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by the Company, the
gaming licenses it holds could be limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory procedures. In
addition, the Company, and the persons involved, could be subject to substantial
fines of up to $250,000 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 the 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
and may be required to be found suitable. 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 only include: (i) voting on all
matters voted on by
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stockholders; (ii) making financial and other inquiries of management of the
type normally made by securities analysts for informational purposes and not to
cause a change in its management, policies or operations; and (iii) such other
activities as the Nevada Commission may determine to be consistent with such
investment intent. If the beneficial holder of voting securities who must be
found suitable is a corporation, partnership or trust, it must submit detailed
business and financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock of a
Registered Corporation beyond such period of time as may be prescribed by the
Nevada Commission may be guilty of a criminal offense. The Company is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder or to have any other relationship with the Company, the Company
(i) pays that person any dividend or interest upon voting securities of the
Company, (ii) allows that person to exercise, directly or indirectly, any voting
right conferred through securities held by that person, (iii) pays remuneration
in any form to that person for services rendered or otherwise, or (iv) fails to
pursue all lawful efforts to require such unsuitable person to relinquish his
voting securities for cash at fair market value. Additionally, the CCLGLB 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 stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Nevada Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, 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. Any
representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby he obtains control, may not occur without the prior approval
of the Nevada Commission. Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada Board and Nevada Commission in a variety of
stringent standards prior to assuming control of such Registered Corporation.
The Nevada Commission may also require controlling
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stockholders, officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire control to be
investigated and licensed as part of the approval process relating to the
transaction.
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral 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 and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments. Nevada
licensees that hold a license as an operator of a slot route, or a
manufacturer's or distributor's license, also pay certain fees and taxes to the
State of Nevada.
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 it knowingly violates any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fails to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engages in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employs a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
COLORADO GAMING LAWS AND REGULATIONS
The State of Colorado created the Division of Gaming (the "Division") within
the Department of Revenue to license, implement, regulate and supervise the
conduct of limited gaming under the Colorado Limited Gaming Act. The Director of
the Division, under the supervision of a five-member Colorado Limited Gaming
Control Commission (the "Colorado Commission"), has been granted broad power to
ensure compliance with the Colorado gaming regulations (the "Colorado
Regulations"). The Director may inspect, without notice, impound or remove any
gaming device. He may examine and copy any licensee's records, may investigate
the background and conduct of licensees and their employees, and may bring
disciplinary actions against licensees and their employees. He also may conduct
detailed background investigations of persons who loan money to the Company.
The Colorado Commission is empowered to issue five types of gaming and
gaming-related-licenses. The licenses are revocable and non-transferrable. The
failure or inability of the Company, HCCMC, Harveys Wagon Wheel or others
associated with Harveys Wagon Wheel to maintain necessary gaming licenses will
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<PAGE>
have a material adverse effect on the operations of the Company. All persons
employed by the Company, HCCMC or Harveys Wagon Wheel and involved, directly or
indirectly, in gaming operations in Colorado also are required to obtain a
Colorado gaming license. All licenses must be renewed annually.
As a general rule, under the Colorado Regulations, it is a criminal
violation for any person to have a legal, beneficial, voting or equitable
interest, or right to receive profits, in more than three retail gaming licenses
in Colorado. The Commission has ruled that a person does not have an interest in
a licensee for purposes of the multiple-license prohibition if: (i) such person
has less than a five percent (5%) interest in an institutional investor which
has an interest in a publicly traded licensee or publicly traded company
affiliated with a licensee (such as the Company); (ii) a person has a five
percent (5%) or more financial interest in an institutional investor, but the
institutional investor has less than a five percent (5%) interest in a publicly
traded licensee or publicly traded company affiliated with a licensee; (iii) an
institutional investor has less than a five percent (5%) financial interest in a
publicly traded licensee or publicly traded company affiliated with a licensee;
(iv) an institutional investor possesses securities in a fiduciary capacity for
another person, and does not exercise voting control over five percent (5%) or
more of the outstanding voting securities of a publicly traded licensee or of a
publicly traded company affiliated with a licensee; (v) a registered broker or
dealer retains possession of securities of a publicly traded licensee or of a
publicly traded company affiliated with a licensee for its customers in street
name or otherwise, and exercises voting rights for less than five percent (5%)
of the publicly traded licensee's voting securities or of a publicly traded
company affiliated with a licensee; (vi) a registered broker or dealer acts as a
market maker for the stock of a publicly traded licensee or of a publicly traded
company affiliated with a licensee and possesses a voting interest in less than
five percent (5%) of the stock of the publicly traded licensee or of a publicly
traded company affiliated with a licensee; (vii) an underwriter is holding
securities of a publicly traded licensee or of a publicly traded company
affiliated with a licensee as part of an underwriting for no more than 90 days
if it exercises voting rights of less than five percent (5%) of the outstanding
securities of a publicly traded licensee or of a publicly traded company
affiliated with a licensee; (viii) a stock clearinghouse holds voting securities
for third parties, if it exercises voting rights with respect to less than five
percent (5%) of the outstanding securities of a publicly traded licensee or of a
publicly traded company affiliated with a licensee; or (ix) a person owns less
than five percent (5%) of the voting securities of the publicly traded licensee
or publicly traded company affiliated with a licensee. Hence, the Company's and
its stockholders' business opportunities in Colorado are limited to such
interests that comply with the statute and Commission's rule.
Although attorneys for the Colorado legislature initially expressed concern
that the promulgation of the above-described regulation was beyond the Colorado
Commission's statutory delegated authority, they appear to have retreated from
this position. Therefore, unless the Colorado legislature repeals the
regulation, it is likely that it will continue in effect.
In addition, pursuant to the Colorado Regulations, no manufacturer or
distributor of slot machines may have an interest in any casino operator, allow
any of its officers to have such an interest, employ any person if such person
is employed by a casino operator, or allow any casino operator or person with a
substantial interest therein to have an interest in a manufacturer's or
distributor's business. The Commission has ruled that a person does not have a
"substantial interest" if it directly or indirectly has less than five percent
(5%) of such voting securities of a licensee.
Under the Colorado Regulations, any person or entity having any direct or
indirect interest in a gaming licensee or an applicant for a gaming license,
including, but not limited to, the Company and stockholders of the Company, may
be required to supply the Colorado Commission with substantial information,
including, but not limited to, background information, source of funding
information, a sworn statement that such person or entity is not holding his
interest for any other party, and fingerprints. Such information, investigation
and licensing as an "associated person" automatically will be required of all
persons (other than certain institutional investors discussed below) which
directly or indirectly own ten percent (10%) or more of a direct or indirect
legal, beneficial or voting interest in Harveys Wagon Wheel, through their
ownership in the Company. Such persons must report their interest and file
appropriate applications within 45 days after acquiring such interest. Persons
directly or indirectly having a five percent (5%) or more interest (but less
than 10%) in Harveys Wagon Wheel, through their ownership in the Company, must
report their interest to
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<PAGE>
the Colorado Commission within ten (10) days after acquiring such interest and
may be required to provide additional information and to be found suitable. If
certain institutional investors provide certain information to the Colorado
Commission, such investors, at the Colorado Commission's discretion, may be
permitted to own up to 14.99% of Harveys Wagon Wheel, through their ownership in
the Company, before being required to be found suitable. All licensing and
investigation fees will have to be paid for by the person in question. The
associated person investigation fee currently is $48 per hour.
The Colorado Commission also has the right to request information from any
person directly or indirectly interested in, or employed by, a licensee, and to
investigate the moral character, honesty, integrity, prior activities, criminal
record, reputation, habits and associations of (i) all persons licensed pursuant
to the Colorado Limited Gaming Act, (ii) all officers, directors and
stockholders of a licensed privately held corporation, (iii) all officers,
directors and stockholders holding either a five percent (5%) or greater
interest or a controlling interest in a licensed publicly traded corporation,
(iv) all general partners and all limited partners of a licensed partnership,
(v) all persons which have a relationship similar to that of an officer,
director or stockholder of a corporation (such as members and managers of a
limited liability company), (vi) all persons supplying financing or loaning
money to any licensee (such as the holders of the Notes) connected with the
establishment or operation of limited gaming, and (vii) all persons having a
contract, lease or ongoing financial or business arrangement with any licensee,
where such contract, lease or arrangement relates to limited gaming operations,
equipment, devices or premises.
In addition, under the Colorado Regulations, every person who is a party to
a "gaming contract" with an applicant for a license, or with a licensee, upon
the request of the Colorado Commission or the Director, promptly must provide to
the Colorado Commission or Director all information which may be requested
concerning financial history, financial holdings, real and personal property
ownership, interests in other companies, criminal history, personal history and
associations, character, reputation in the community, and all other information
which might be relevant to a determination whether a person would be suitable to
be licensed by the Colorado Commission. Failure to provide all information
requested constitutes sufficient grounds for the Director or the Colorado
Commission to require a licensee or applicant to terminate its "gaming contract"
(as defined below) with any person who failed to provide the information
requested. In addition, the Director or the Colorado Commission may require
changes in "gaming contracts" before an application is approved or participation
in the contract is allowed. A "gaming contract" is defined as an agreement in
which a person does business with or on the premises of a licensed entity.
Holders of the Notes will be considered parties to a gaming contract and will be
subject to potential review by the Colorado Commission or the Director.
An application for licensure or suitability may be denied for any cause
deemed reasonable by the Colorado Commission or the Director, as appropriate.
Specifically, the Colorado Commission and the Director must deny a license to
any applicant who (i) fails to prove by clear and convincing evidence that the
applicant is qualified; (ii) fails to provide information and documentation
requested; (iii) fails to reveal any fact material to qualification, or supplies
information which is untrue or misleading as to a material fact pertaining to
qualification; (iv) has been, or has any director, officer, general partner,
stockholder, limited partner or other person who has a financial or equity
interest in the applicant who has been, convicted of certain crimes, including
the service of a sentence upon conviction of a felony in a correctional
facility, city or county jail, or community correctional facility or under the
state board of parole or any probation department within ten years prior to the
date of the application, gambling-related offenses, theft by deception or crimes
involving fraud or misrepresentation, is under current prosecution for such
crimes (during the pendency of which license determination may be deferred), is
a career offender or a member or associate of a career offender cartel, or is a
professional gambler; or (v) has refused to cooperate with any state or federal
body investigating organized crime, official corruption or gaming offenses.
If the Colorado Commission determines that a person or entity is unsuitable
to own interests in the Company, then the Company, HCCMC or Harveys Wagon Wheel
may be sanctioned, which may include the loss by the Company, HCCMC or Harveys
Wagon Wheel of their respective approvals and licenses.
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The Colorado Commission does not need to approve in advance a public
offering of securities, but rather requires a filing of notice and additional
documents with regard to such public offering prior to such public offering.
Under the regulations, the Colorado Commission may, in its discretion, require
additional information and prior approval of such public offering.
In addition, the Colorado Regulations prohibit a licensee or affiliated
company thereof, such as the Company, from paying dividends, interest or other
remuneration to any unsuitable person, or recognizing the exercise of any voting
rights by any unsuitable person. Further, the Company may repurchase the shares
of anyone found unsuitable at the lesser of the cash equivalent to the original
investment in the Company or the current market price. Further, the regulations
require anyone with a material involvement with a licensee, including a director
or officer of a holding company, such as the Company, to file for a finding of
suitability if required by the Colorado Commission.
In addition to its authority to deny an application for a license or
suitability, the Colorado Commission has jurisdiction to disapprove a change in
corporate position of a licensee and may have such authority with respect to any
entity which is required to be found suitable by the Colorado Commission. The
Colorado Commission has the power to require the Company, HCCMC and Harveys
Wagon Wheel to suspend or dismiss managers, 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, and may have such power with respect to any entity which is required
to be found suitable.
A person or entity may not sell, lease, purchase, convey or acquire a
controlling interest in the Company without the prior approval of the Colorado
Commission. The Company may not sell any interest in HCCMC or Harveys Wagon
Wheel without the prior approval of the Colorado Commission.
Harveys Wagon Wheel must meet certain architectural requirements, fire
safety standards and standards for access for disabled persons. Harveys Wagon
Wheel also must not exceed certain gaming square footage limits as a total of
each floor and the full building. The casino at Harveys Wagon Wheel may operate
only between 8:00 am. to 2:00 am., and may permit only individuals 21 years or
older to gamble in the casino. It may permit slot machines, blackjack and poker,
with a maximum single bet of $5.00. Harveys Wagon Wheel may not provide credit
to its gaming patrons.
The Colorado Regulations permit gaming only in a limited number of cities
and certain commercial districts.
The Colorado Constitution permits a gaming tax of up to 40% on adjusted
gross gaming proceeds. The Colorado Commission has set a gaming tax rate of 2%
on adjusted gross gaming proceeds of up to and including $2 million, 8% over $2
million up to and including $4 million, 15% over $4 million up to and including
$5 million and 18% on adjusted gross gaming proceeds in excess of $5 million.
The Colorado Commission also has imposed an annual device fee of $75 per gaming
device. The Colorado Commission may revise the gaming tax rate and device fee
from time to time. Central City has imposed an annual device fee of $1,165 per
gaming device and may revise the same from time to time.
The sale of alcoholic beverages is subject to licensing, control and
regulation by the Colorado Liquor Agencies. All persons who directly or
indirectly own 10% or more of Harveys Wagon Wheel, through their ownership of
the Company, must file applications and possibly be investigated by the Colorado
Liquor Agencies. The Colorado Liquor Agencies also may investigate those persons
who, directly or indirectly, loan money to or have any financial interest in
liquor licensees. All licenses are revocable and not transferable. The Colorado
Liquor Agencies have the full power to limit, condition, suspend or revoke any
such license and any such disciplinary action could (and revocation would) have
a material adverse effect upon the operations of the Company. Harveys Wagon
Wheel holds a hotel and restaurant liquor license for its casino, hotel and
restaurant operations, rather than a gaming tavern license. Accordingly, no
person with an interest in the Company can have an interest in a liquor licensee
which holds anything other than a hotel and restaurant liquor license, and
specifically cannot have an interest in an entity which holds a gaming tavern
license.
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IOWA GAMING LAWS AND REGULATIONS
The State of Iowa first authorized excursion gambling boat activities in
1989. The Iowa Racing and Gaming Commission (the "Iowa Commission") has the
authority to grant and review licenses to owners and operators of excursion
gambling boats and has the further authority to adopt and enforce rules
governing a broad range of subjects dealing with excursion gambling boat
facilities and operations. The Iowa Commission consists of five members who are
appointed by the governor and confirmed by the state senate. Members serve a
term not to exceed three years at the pleasure of the governor.
Under Iowa law, only non-profit organizations may receive a license to own
gambling game operations; for-profit organizations may receive a license for
their management and operation. The Company, through its wholly-owned
subsidiary, HIMC, together with Iowa West, a qualified non-profit organization,
have been granted the necessary licenses to own and operate the current gambling
facilities and activities on the riverboat casino at Harveys Casino/Hotel. The
present licenses have a term expiring March 31, 1997. The licenses are granted
upon the condition that the license holders accept, observe and enforce all
applicable laws, regulations, ordinances, rules and orders. Any violation by a
license holder, including violations by its officers, employees or agents, may
result in disciplinary action, including the suspension or revocation of the
license.
HIMC and Iowa West have entered into an excursion sponsorship and operating
agreement dated August 22, 1994 (the "Operating Agreement") pursuant to which
Iowa West authorizes HIMC to operate the excursion gambling boat activities on
the riverboat casino under Iowa West's gaming license. The Operating Agreement's
initial term continues through December 31, 2002 and during such term HIMC has
agreed to pay Iowa West a fee equal to $1.50 for each adult passenger embarking
upon the excursion gambling boat. HIMC further agrees to pay, and hold Iowa West
harmless from, the admission fees payable to the Iowa Commission and the local
municipality and the wagering tax imposed by Iowa law. Following the expiration
of the initial term of the Operating Agreement, HIMC may extend its provisions
for five successive three-year periods, except that the admission fees payable
by HIMC to Iowa West for each such period shall be adjusted to reflect increases
in the consumer price index.
Excursion boat gambling licenses may be granted by the Iowa Commission only
in those counties that have approved the conduct of gambling games in a
county-wide referendum. Gambling has been approved by the county electorate in
Pottawattamie County, Iowa, the location of Harveys Casino/Hotel, but another
referendum requested by petition can be held and there can be no assurance that
gambling would again be approved. If licenses to conduct gambling games and to
operate an excursion gambling boat are in effect at the time gambling is
disapproved by a referendum of the county electorate, the licenses remain valid
and may, at the discretion of the Iowa Commission, be renewed for a total of
nine years from the date of the original issue.
Following the issuance of a gaming license, the Iowa Commission monitors and
supervises the activities of the excursion gambling boat and its licenses.
Material contracts to be entered into by the licensee, changes in ownership of
the licensee and acquisitions of interests in other gambling activities by the
licensee or its owners must be all reported to, and approved by, the Iowa
Commission. Further, the Iowa Commission has the authority to determine the
payouts from the gambling games, to set the payout rate for all slot machines,
to establish minimum charges for admission to excursion gambling boats and
regulate the number of free admissions and to define the excursion season and
the duration of an excursion.
Iowa law authorizes the imposition of an admission fee, set by and payable
to the Iowa Commission, on each person embarking on an excursion gambling boat.
An additional admission fee may be imposed by the municipality in which the
gambling operation is located. In practice, the Iowa Commission has not imposed
a per-person admission fee, but rather imposed a fee on each excursion gambling
boat based upon the estimated costs of supervision and enforcement to be
incurred by the Iowa Commission for the ensuing fiscal year. For the fiscal year
beginning July 1, 1995, the fee is $246,064, payable in $4,732 weekly
installments. A $0.50 per person admission fee is also payable to the City of
Council Bluffs, Iowa. Further, Iowa law imposes an annual wagering tax ranging
from five percent on the first $1 million of adjusted gross receipts from
gambling games to 20 percent on adjusted gross receipts in excess of $3 million.
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The Company's excursion gambling boat activities are also subject to safety
and inspection requirements of the State of Iowa and the U.S. Coast Guard. These
requirements set limits on the operation of the vessel; mandate that it must be
operated by a minimum complement of licensed personnel; establish periodic
inspections, including the physical inspection of the outside hull requiring the
vessel to be drydocked every five years; and establish other mechanical and
operational rules.
PROPERTIES OF THE COMPANY
Harveys Resort comprises approximately 1,020,000 square feet on
approximately 19.8 acres, of which the Company owns approximately 5.4 acres and
leases approximately 14.4 acres pursuant to several ground leases that expire in
2015. A 973,000-square foot parking garage and certain other amenities are
located on the leased property.
The Harveys Wagon Wheel facility comprises approximately 200,000 square feet
on approximately 1.1 acres. Additionally, HCCMC, a wholly-owned subsidiary of
the Company, owns approximately 48 acres of undeveloped land adjacent to the
Harveys Wagon Wheel facility. HCCMC has entered into an Agreement of Purchase
and Sale, subject to several conditions, to sell 40 of such acres to a group
seeking to develop a non-gaming hotel and other facilities. The Company intends
to use the remaining eight acres to construct a parking garage for the Harveys
Wagon Wheel facility. Numerous permits and approvals which have not been
obtained are necessary for both transactions. No assurances can be given,
however, that either transaction will be consummated or consummated on the terms
described above.
The Hard Rock Hotel facility is located on approximately 16 acres owned by
HRHC. The hotel/casino comprises approximately 358,000 square feet.
Harveys Casino/Hotel will be located on approximately 36 acres of land owned
by the Company. The land- based amenities, including a covered "skywalk" to the
riverboat casino, will be comprised of a hotel, convention center, and passenger
staging area, totalling nearly 300,000 square feet. Contiguous thereto is a
24-acre leasehold parcel which will contain the boat docking facility and
additional parking. This parcel is subject to a long-term lease with the City of
Council Bluffs for a nominal annual sum. Additionally, the Company owns an
adjacent 44-acre parcel suitable for expansion or support facilities.
LEGAL PROCEEDINGS OF THE COMPANY
The Company is a defendant in various lawsuits relating to routine matters
incidental to its business. Management does not believe that the outcome of any
such litigation, in the aggregate, will have a material adverse effect on the
Company.
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MANAGEMENT
The following table sets forth the directors and executive officers of the
Company as of May 10, 1996. All directors hold their positions until their terms
expire or until their respective successors are elected and qualified. Executive
officers are elected by and serve at the discretion of the Board of Directors
until their successors are duly chosen and qualified. On April 25, 1995, Donald
D. Snyder resigned from the Board of Directors to pursue other business
opportunities and the vacancy created thereby has not yet been filled.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ----------------------- --- ------------------------------------------------------------
<S> <C> <C>
Thomas M. Yturbide 60 Chairman of the Board of Directors
William B. Ledbetter 65 Vice Chairman of the Board of Directors and Secretary
Charles W. Scharer 41 President, Chief Executive Officer and Director
Richard F. Kudrna, Sr. 62 Chairman Emeritus and Director
Jessica L. Ledbetter 40 Director
Kirk B. Ledbetter 37 Director
Luther Mack, Jr. 57 Director
Franklin K. Rahbeck 74 Director
John J. McLaughlin 41 Senior Vice President, Chief Financial Officer and Treasurer
Stephen L. Cavallaro 38 Chief Operating Officer of Subsidiary Operations
Kevin O. Servatius 43 Senior Vice President and General Manager -- Lake Tahoe
Verne H. Welch, Jr. 58 Senior Vice President and General Manager -- Harveys Iowa
Management Company
Edward B. Barraco 51 Senior Vice President and General Manager -- Harveys Wagon
Wheel
Gary D. Armentrout 48 Senior Vice President of Business Development and Government
Relations
Gary R. Selesner 42 Senior Vice President and General Manager -- Hard Rock
Hotel/Casino
James J. Rafferty 40 Corporate Vice President of Marketing
</TABLE>
THOMAS M. YTURBIDE. Mr. Yturbide served as President and Chief Executive
Officer from October 1993 until December 1, 1995 when he became Chairman of the
Board. From 1987 to October 1993, he served as Executive Vice President and
Chief Operating Officer. He has been a Director since 1987. Mr. Yturbide's
current term as a member of the Board of Directors will expire at the 1997
Annual Meeting of Stockholders.
WILLIAM B. LEDBETTER. Mr. Ledbetter has served as Vice Chairman of the
Board of Directors and Secretary since October 1993. Mr. Ledbetter's current
term as a member of the Board of Directors will expire at the 1999 Annual
Meeting of Stockholders. From 1983 until October 1993, Mr. Ledbetter served as
President, Chief Executive Officer and a Director. Since joining the Company in
1954, he has been involved in virtually every aspect of the Company's
operations. Mr. Ledbetter was instrumental in developing the Company's present
management team. From 1984 to 1991, he was intimately involved in overseeing the
completion of the Company's master plan. Mr. Ledbetter is the father of Jessica
L. and Kirk B. Ledbetter.
CHARLES W. SCHARER. Mr. Scharer was elected President and Chief Executive
Officer effective December 1, 1995. He has served as a Director since April
1995. His current term as a Director will expire at the 1997 Annual Meeting of
Stockholders. Prior to becoming President and Chief Executive Officer, Mr.
Scharer served as Executive Vice President from August 1995. Mr. Scharer was
elected Chief Financial Officer in July 1993 and Treasurer in September 1993,
having served as the Company's senior financial officer since 1988 when he
became Vice President -- Finance & Administration.
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RICHARD F. KUDRNA, SR. Mr. Kudrna served as Chairman of the Board of
Directors from 1983 until December 1, 1995, when he became Chairman Emeritus of
the Board of Directors. Mr. Kudrna's current term as a member of the Board of
Directors will expire at the 1998 Annual Meeting of Stockholders. Prior to
joining the Company in 1968, he had been employed by Harrah's Lake Tahoe for
4 1/2 years. Mr. Kudrna served as Sr. Vice President of Administration, then as
Sr. Vice President and General Manager before assuming the position as Chairman
of the Board. Mr. Kudrna is a past board member of the Lake Tahoe Gaming
Alliance, past director of the Lake Tahoe Visitors' Authority and charter member
and past president of the Douglas County Education Foundation. Mr. Kudrna has
also served as past president of the Tahoe Douglas Rotary Club, past president
of the Tahoe Douglas Chamber of Commerce and a member of the Douglas County
Planning Committee. He currently sits on the Advisory Board for the University
of Nevada -- Reno Business College.
JESSICA L. LEDBETTER. Ms. Ledbetter has served as a Director since 1987 and
as Executive Assistant from 1986 to 1993. Ms. Ledbetter's current term as a
member of the Board of Directors will expire at the 1998 Annual Meeting of
Stockholders. Ms. Ledbetter has been employed by the Company in a variety of
capacities, including internal audit, accounting and cashier functions, Director
of Planning, games and slot operations and food and beverage service. She
currently serves as a member of the Board of Directors of Barton Memorial
Hospital, Lake Tahoe Community Trust and the Lake Tahoe Education Foundation.
Ms. Ledbetter presently owns and operates the Thunderbird Ranch in northern
Nevada. Ms. Ledbetter is the daughter of William B. Ledbetter and the sister of
Kirk B. Ledbetter.
KIRK B. LEDBETTER. Mr. Ledbetter has served as a Director since 1987. His
current term as a member of the Board of Directors will expire at the 1999
Annual Meeting of Stockholders. Since 1986, he has served as an Executive
Assistant/Management Trainee in which capacity he has completed assignments in
numerous departments within the Company. He has been with the Company for a
total of seventeen years and has had a wide range of experience in various
functional systems and customer service. In November 1993, Mr. Ledbetter was
named Customer Services Systems Manager, with responsibility for the customer
database, direct mail marketing, analysis of customer ratings and various
marketing functions. Mr. Ledbetter holds B.S. and MBA degrees from the
University of Nevada -- Reno. Mr. Ledbetter is the son of William B. Ledbetter
and the brother of Jessica L. Ledbetter.
LUTHER MACK, JR. Mr. Mack joined the Company's Board of Directors in August
1994. His current term as a Director will expire at the 1997 Annual Meeting of
Stockholders. Mr. Mack has been an owner-operator of several McDonald franchises
for over 20 years. He is also the President and Chief Executive Officer of the
Nevada Television Corporation. Mr. Mack is a member of the board of the Nevada
State Athletic Commission and the Reno-Tahoe International Airport, as well as
director and member of the audit committee for Pioneer Citizens Bank of Nevada.
FRANKLIN K. RAHBECK. Mr. Rahbeck has served as a Director since 1987. Mr.
Rahbeck's current term as a Director will expire at the 1998 Annual Meeting of
Stockholders. He also serves on the Board of Directors of FIBN and Barton
Memorial Hospital Foundation and is a director for the Washoe Tribe's Economic
Development Corporation. In 1947, Mr. Rahbeck founded the Nevada Lumber Company,
which he operated until its sale to Diamond International in 1959. He is the
co-founder of the Outdoorsman retail store in South Lake Tahoe which he managed
for a period of 23 years until 1983. Mr. Rahbeck currently resides in Carson
Valley where he engages in cattle ranching.
JOHN J. MCLAUGHLIN. Mr. McLaughlin was appointed Chief Financial Officer in
September 1995 and in January 1996 was appointed Senior Vice President, Chief
Financial Officer and Treasurer. Mr. McLaughlin is a Certified Public Accountant
with over 15 years experience in the gaming industry and served most recently as
Chief Financial Officer of President Riverboat Casinos, Inc. from January 1993
until September 1995. From 1980 until 1993, Mr. McLaughlin was employed by
TropWorld Casino and Entertainment Resort in Atlantic City, where he served as
Director of Financial Reporting from 1984 to 1986 and then as Executive Director
of Finance until 1993.
STEPHEN L. CAVALLARO. Mr. Cavallaro joined the Company in February 1994 to
oversee the management of the Hard Rock Hotel as Senior Vice President and
General Manager -- Hard Rock Hotel. In
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<PAGE>
February 1996, he was promoted to Chief Operating Officer of Subsidiary
Operations, in which position he has overall operating responsibility for the
Company's operations in Central City, Las Vegas and Council Bluffs. From 1992 to
1994, Mr. Cavallaro served as Vice President and General Manager of the Palace
Station Hotel/Casino. Mr. Cavallaro also served as Executive Vice President and
General Manager of Maloof Companies from 1990 to 1992.
KEVIN O. SERVATIUS. Mr. Servatius was appointed Senior Vice President and
General Manager -- Lake Tahoe in August 1995. Mr. Servatius has over 15 years of
experience in the gaming and hospitality industry. He started his career with
Harrah's Lake Tahoe where he progressed through the ranks of both the Harrah's
and Embassy Suites organizations, becoming, in March 1993, Senior Vice President
and General Manager of Harrah's -- Lake Tahoe. He is a member of the Lake Tahoe
Visitor's Authority and a board member of the Lake Tahoe Gaming Alliance.
VERNE H. WELCH, JR. Mr. Welch has served as Senior Vice President and
General Manager -- Harveys Iowa Management Company since September 1995. He is
responsible for the overall direction of the Council Bluffs facilities and
directs all of its operating departments. Prior to moving to the Council Bluffs
property, Mr. Welch served as Senior Vice President and General Manager -- Lake
Tahoe from December 1993. From 1988 to December 1993, he served as Vice
President Casino Operations.
EDWARD B. BARRACO. Mr. Barraco has served as Senior Vice President and
General Manager -- Central City, Harveys Wagon Wheel since July 1995. From 1985
to 1995, Mr. Barraco served as Assistant General Manager -- Lake Tahoe, where he
was responsible for the overseeing of all aspects of the operation on an
assigned shift.
GARY R. SELESNER. In March 1996, Mr. Selesner was appointed Senior Vice
President and General Manager -- Hard Rock Hotel/Casino. From August 1995 to
March 1996, Mr. Selesner served as Senior Vice President and General Manager --
Maryland and was involved in the Company's development activities. Prior to
joining the Company, Mr. Selesner was Vice President -- Sales and Marketing of
President Riverboat Casinos, Inc. from 1992 to August 1995. From July 1986 to
March 1991, Mr. Selesner was employed by the Trump Plaza Hotel and Casino in
Atlantic City, New Jersey where he served as Vice President of Marketing until
November 1988 and Executive Vice President until May 1990 when he became
President and Chief Operating Officer.
GARY D. ARMENTROUT. Mr. Armentrout has served as Senior Vice President of
Business Development and Government Relations since May 1995. In this position
he is responsible for identifying and pursuing the development of new projects.
Prior to joining the Company, Mr. Armentrout was with President Riverboat
Casinos, Inc. where he served as Vice President -- Gaming from May 1990 until
June 1994 when he became Vice President -- Gaming Development, a position he
held until May 1995. From 1984 until 1990, Mr. Armentrout was Vice President and
Assistant General Manager for Harrah's Las Vegas.
JAMES J. RAFFERTY. Mr. Rafferty was appointed Corporate Vice President of
Marketing in December 1995. Mr. Rafferty served as Vice President -- Marketing
- -- Lake Tahoe from 1992 to 1995. From 1988 through 1992, he served as Director
of Employee Development.
COMMITTEES OF THE BOARD OF DIRECTORS OF THE COMPANY
The Board of Directors has established an Audit Committee and a Compensation
Committee. The functions of the Audit Committee are to recommend annually to the
Board of Directors the appointment of the independent public accountants of the
Company, discuss and review the scope and the fees of the prospective annual
audit and review the results thereof with the independent public accountants,
review and approve non-audit services of the independent public accountants,
review compliance with existing major accounting and financial policies of the
Company, review the adequacy of the financial organization of the Company and
review management's procedures and policies relative to the adequacy of the
Company's internal accounting controls. The current members of the Audit
Committee are Luther Mack, Jr. (chairman) and Franklin K. Rahbeck. Donald D.
Snyder served as a member of the Audit Committee prior to his resignation from
the Board of Directors on April 25, 1996 to pursue other business opportunities.
During fiscal year 1995, the Audit Committee met on five occasions.
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<PAGE>
The functions of the Compensation Committee are to review annual salaries
and bonuses for all executive officers, review and approve the annual salary and
bonus for the President and Chief Executive Officer and review, approve and
recommend to the Board of Directors the terms and conditions of all employee
benefit plans or changes thereto. The current members of the Compensation
Committee are Richard F. Kudrna (chairman), Jessica L. Ledbetter, Luther Mack,
Jr. and Franklin K. Rahbeck. Donald D. Snyder served as the chairman of the
Compensation Committee prior to his resignation from the Board of Directors on
April 25, 1996 to pursue other business opportunities. During fiscal year 1995,
the Compensation Committee met on six occasions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following individuals served on the Compensation Committee during fiscal
year 1995: Donald D. Snyder (chairman), Jessica L. Ledbetter, Luther Mack, Jr.,
Robert L. Weise and Franklin K. Rahbeck. Thomas M. Yturbide and Richard F.
Kudrna, Sr. participated as non-voting members. During fiscal year 1995, Richard
F. Kudrna, Sr. served as the Company's Chairman of the Board and Thomas M.
Yturbide served as President and Chief Executive Officer of the Company.
Franklin K. Rahbeck, a Director of the Company, is also a director of FIBN.
The Company and FIBN are parties to a loan agreement. HRHC (in which the Company
holds a 40% equity interest) and FIBN are also parties to a loan agreement which
is guaranteed by the Company.
FIBN, Jessica L. Ledbetter, Kirk B. Ledbetter and Franklin K. Rahbeck are
the co-trustees of the William B. Ledbetter and Beverlee A. Ledbetter
Irrevocable Trust (the "Ledbetter Trust"). The Ledbetter Trust owns survivorship
life insurance policies on the lives of William B. Ledbetter and Beverlee A.
Ledbetter, deceased. Prior to fiscal 1995, the Company paid premiums on such
life insurance policies. The Company has no further obligation to pay such
premiums. The Ledbetter Trust has issued two notes payable to the Company for
the amounts of the premiums previously paid by the Company. The notes are in the
principal amounts of $1,376,995 and $455,275 and bear interest at the rate of
5.84% and 6.30%, respectively. Interest on the notes is payable on December 31
of each year and the entire unpaid principal amount becomes due on the earlier
of November 15, 2001 or the death of William B. Ledbetter.
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
DIRECTOR COMPENSATION. In fiscal 1995, non-employee directors received an
annual retainer of $24,000 and an additional $800 for each board meeting
attended. During such period, non-employee committee members generally received
$800 for each committee meeting attended, non-employee members of the Audit
Committee received $900 for each meeting attended and the non-employee chairs of
each of the Audit Committee and the Compensation Committee received $1,100 and
$1,000, respectively, for each meeting attended. Effective December 1, 1995, the
annual retainer for non-employee directors was increased to $30,000 and the fees
for board and committee meeting attendance were increased to $1,000 per meeting.
Effective as of such date, the amount that non-employee chairs of each of the
Audit and Compensation Committee are compensated for meeting attendance was
increased to $1,200 per meeting. Non-employee directors are reimbursed for
expenses incurred in connection with attending meetings of the Board of
Directors and Committees thereof. Non-employee directors are eligible to
participate in the Non-Employee Directors Stock Option Program. See "-- 1993
Non-Employee Directors Stock Option Program".
The Company has established an Outside Directors' Retirement Plan pursuant
to which each outside director and any employee-director not covered under the
Company's Supplemental Executive Retirement Plan ("SERP") or Senior Supplemental
Executive Retirement Plan, who has served five or more years or his/her
beneficiaries, as applicable, shall be entitled to receive $25,000 per year for
up to ten years upon such director's retirement, death or disability. The plan
also provides for continuing medical insurance coverage under the Company's
executive health plan for a period of up to 10 years.
Directors who are also employees are eligible to participate in the
Incentive Plan. See "-- Omnibus Incentive Plans".
EXECUTIVE OFFICER COMPENSATION. The following table presents certain
information concerning compensation paid or accrued by the Company for services
rendered during the last three completed fiscal years for
48
<PAGE>
the Chief Executive Officer and the four most highly compensated executive
officers, other than the Chief Executive Officer, of the Company whose total
annual salary and bonus in 1995 exceeded $100,000 (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
AWARDS
ANNUAL COMPENSATION --------------------- PAYOUTS
--------------------------- RESTRICTED ----------- ALL OTHER
FISCAL STOCK AWARD LTIP COMPENSATION
NAME AND PRINCIPAL POSITION (1) YEAR SALARY BONUS (2) OPTIONS PAYOUTS (3) (4)(5)(6)(7)
- --------------------------------------------- ------ -------- -------- ----------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas M. Yturbide 1995 $400,000 $148,000(8) $ -- -- $ -- $ 34,074
Chairman of the Board of 1994 350,000 241,300(8) 770,000 110,000 361,206 22,801
Directors 1993 277,676 156,036 62,334
--- --- ---
Charles W. Scharer (9) 1995 240,507 125,000 -- -- -- 1,819
President, Chief Executive 1994 184,712 60,000 252,000 32,000 134,364 664
Officer and Director 1993 154,191 49,341 -- -- -- 98
William B. Ledbetter 1995 239,274 -- -- -- -- 11,787
Vice Chairman of the 1994 239,274 -- -- -- -- 11,588
Board and Secretary 1993 238,986 -- -- -- -- 816,711
Stephen L. Cavallaro 1995 242,135 124,020 -- -- -- 1,777
Chief Operating Officer of 1994 173,077 45,000 210,000 30,000 -- 393
Subsidiary Operations 1993 -- -- -- -- -- --
Verne H. Welch, Jr. (10) 1995 161,381 12,000 -- -- -- 7,463
Sr. Vice President 1994 148,884 20,000 210,000 30,000 109,473 4,074
and General 1993 121,013 26,841 -- -- -- 2,396
Manager-Harveys Iowa
Management Company
</TABLE>
- ------------------------
(1) The position listed for each officer is the position currently held by such
officer. As of November 30, 1995, Mr. Yturbide was the President and Chief
Executive Officer of the Company and a director, Mr. Scharer was the
Executive Vice President and Treasurer of the Company and a director and Mr.
Cavallaro was the Senior Vice President and General Manager of Hard Rock
Hotel.
(2) Represents the market value ($14) as of February 14, 1994 (the effective
date of the Company's initial public offering) of restricted stock awarded
the Named Executive Officers pursuant to the 1993 Omnibus Incentive Plan.
See "-- Employee Benefit Plans -- 1993 Omnibus Incentive Plan". The number
of shares awarded and the value as of November 30, 1995 are as follows: Mr.
Yturbide, 55,000 shares ($825,000); Mr. Scharer, 18,000 shares ($270,000);
Mr. Welch, 15,000 shares ($225,000); and Mr. Cavallaro, 15,000 shares
($225,000). The shares vested, immediately as to 25% of the award on
February 14, 1994, 25% on November 12, 1994, 25% on November 12, 1995, the
second anniversary of the date of grant, and the remaining 25% will vest on
the next anniversary of the grant date, November 12, 1996. The Named
Executive Officers receive dividends on all of their shares.
(3) In 1990, the Company adopted a long-term incentive plan for key employees.
Payment of incentives under the plan was contingent upon the Company
attaining certain financial objectives over consecutive and concurrent
three-year periods. In 1993, the Company terminated the plan and in 1994
paid all participants, including the Named Executive Officers, all
incentives earned. In 1994, the Company adopted a new long-term incentive
plan for six key employees. See "-- Long-Term Incentive Plans -- Awards in
Last Fiscal Year" below.
(4) Includes in the case of Mr. Ledbetter a one-time guaranteed payment of
$650,000, in connection with his employment contract.
49
<PAGE>
(5) All Other Compensation includes $46,600 and $52,000, paid to Mr. Yturbide
and Mr. Ledbetter, respectively, for services on the Board of Directors,
including attendance at Board of Director meetings and board committee
meetings. Prior to August 1993, Directors received an annual retainer of
$24,000 and an additional $800 for each board meeting attended. Committee
members generally received $800 for each committee meeting attended prior to
August 1993. Members of the Audit and Finance Committee received $900 for
each meeting attended prior to August 1993 and the chairs of each of the
Audit and Finance Committee and the Compensation Committee received $1,100
and $1,000, respectively, for each meeting attended prior to August 1993. In
August 1993, the Board of Directors' policy was changed so that employee
directors no longer receive fees for attending board or committee meetings.
(6) Includes for fiscal 1993, $13,544, $98, $2,146 and $2,396 of above market
interest earned by Mr. Yturbide, Mr. Scharer, Mr. Ledbetter and Mr. Welch,
respectively, on deferred compensation. Includes for fiscal 1994, $20,611,
$664, $2,848, $393 and $4,074 of above market interest earned by Mr.
Yturbide, Mr. Scharer, Mr. Ledbetter, Mr. Cavallaro and Mr. Welch,
respectively, on deferred compensation. Includes for fiscal 1995 $31,884,
$1,819, $3,047, $1,777 and $7,463 of above-market interest earned by Mr.
Yturbide, Mr. Scharer, Mr. Ledbetter, Mr. Cavallaro and Mr. Welch,
respectively, on deferred compensation. Includes for each year $2,190 and
$8,740 of term life insurance premium payments by the Company for policies
insuring the lives of Mr. Yturbide and Mr. Ledbetter, respectively.
(7) Includes for fiscal 1993, in respect to Mr. Ledbetter, $103,825 related to
split-dollar insurance agreements, pursuant to which the Company had agreed
to pay the insurance premiums on three survivorship policies insuring the
lives of William B. and Beverlee A. Ledbetter. For a description of such
split-dollar insurance agreements, which have been terminated, see "--
Certain Transactions".
(8) Includes a $100,000 signing bonus paid by the Company in connection with Mr.
Yturbide's employment contract.
(9) As of August 21, 1995, Mr. Scharer became the Company's Executive Vice
President, and Treasurer.
(10) As of September 4, 1995, Mr. Welch became Sr. Vice President and General
Manager for Harveys Iowa Management Company.
50
<PAGE>
LONG-TERM INCENTIVE PLAN
In fiscal year 1994, the Company adopted a Long-Term Incentive Plan. The
table below sets forth awards made to Named Executive Officers in the last
fiscal year under the Company's Long-Term Incentive Plan.
LONG-TERM INCENTIVE PLANS AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
SHARES OTHER PERIOD UNTIL NON STOCK PRICE-BASED PLANS
UNITS OR MATURATION OR -------------------------------------
NAME OTHER RIGHTS PAYOUT THRESHOLD TARGET MAXIMUM
- ---------------------------------------------------------- ------------ ------------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Thomas M. Yturbide -- Three years ending $ 30,000 $ 60,000 $90,000
November 30, 1996
Three years ending 30,000 60,000 90,000
November 30, 1997
Charles W. Scharer -- Three years ending 12,025 24,051 36,076
November 30, 1996
Three years ending 12,025 24,051 36,076
November 30, 1997
Stephen L. Cavallaro -- Three years ending 11,873 23,746 35,619
November 30, 1996
Three years ending 11,873 23,746 35,619
November 30, 1997
Verne H. Welch, Jr. -- Three years ending 8,219 16,438 24,657
November 30, 1996
Three years ending 8,219 16,438 24,657
November 30, 1997
</TABLE>
Mr. Ledbetter does not participate in the Company's Long-Term Incentive
Plan. Benefits received by participants under this plan are based on the
Company's achieving specified levels of cash flow and return on equity over
three-year periods. The target amount of the incentive is earned if the average
of the percentage of achievement of the two goals equals 100%. The threshold
amount is earned if the average of the percentage of achievement of the two
goals equals 80% and the maximum amount is earned if the average of the
percentage of achievement of the two goals equals 120%.
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<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The tables below set forth total benefits payable to executive employees,
including Named Executive Officers, who participate in the Company's SERP.
Amounts shown represent the aggregate amounts to which such employees are
entitled under the SERP.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE
(SEVEN YEAR VESTING)
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS AT AGE 65
FOR REPRESENTATIVE YEARS OF SERVICE ($)
AVERAGE BASE COMPENSATION ------------------------------------------
FOR FINAL FIVE YEARS ($) 3 4 5 6 7
- ------------------------------------------------------------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
125,000................................................... 12,500 25,000 37,500 50,000 62,500
150,000................................................... 15,000 30,000 45,000 60,000 75,000
175,000................................................... 17,500 35,000 52,500 70,000 87,500
200,000................................................... 20,000 40,000 60,000 80,000 100,000
225,000................................................... 22,500 45,000 67,500 90,000 112,500
250,000................................................... 25,000 50,000 75,000 100,000 125,000
300,000................................................... 30,000 60,000 90,000 120,000 150,000
400,000................................................... 40,000 80,000 120,000 160,000 200,000
450,000................................................... 45,000 90,000 135,000 180,000 225,000
500,000................................................... 50,000 100,000 150,000 200,000 250,000
</TABLE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE
(20 YEAR VESTING)
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS AT AGE 65
FOR REPRESENTATIVE YEARS OF
SERVICE ($)
AVERAGE BASE COMPENSATION ------------------------------------
FOR FINAL FIVE YEARS ($) 5 10 15 20
- ------------------------------------------------------------ ------ ------- ------- -------
<S> <C> <C> <C> <C>
125,000................................................... 15,625 31,250 46,875 62,500
150,000................................................... 18,750 37,500 56,250 75,000
175,000................................................... 21,875 43,750 65,625 87,500
200,000................................................... 25,000 50,000 75,000 100,000
225,000................................................... 28,125 56,250 84,375 112,500
250,000................................................... 31,250 62,500 93,750 125,000
300,000................................................... 37,500 75,000 112,500 150,000
400,000................................................... 50,000 100,000 150,000 200,000
450,000................................................... 56,250 112,500 168,750 225,000
500,000................................................... 62,500 125,000 187,500 250,000
</TABLE>
Participation in the plan requires a recommendation by the President of the
Company and officer or other key employee status. The seven year vesting SERP
presently covers approximately 19 current or former executive employees. The 20
year vesting SERP, for those who began participation after October 1, 1994,
covers approximately four executive employees. SERP benefits are based on a
percentage of average base compensation earned during the participant's last
five years of service. Base compensation is the participant's annual salary (but
not bonuses or incentive compensation), which is the same as compensation
depicted as salary in the Summary Compensation Table. Benefits are generally
computed as a straight-life annuity, and are not subject to any deduction for
social security benefits. Participants are entitled to receive SERP benefits
upon attaining age 65 (age 63 for Mr. Yturbide) and having become vested in the
SERP. Participants in the seven year vesting SERP become 20% vested after having
accumulated at least three years of service with the Company and vesting
continues in 20% increments each year thereafter, with 100% vesting occurring
upon completion of seven years of service. Participants in the 20 year vesting
SERP become 25% vested after having accumulated at least five years of service
with the Company and vesting continues in 5% increments each year thereafter,
with 100% vesting occurring upon completion of 20 years of service. Amounts
shown for seven years or 20 years of service in the respective tables above
represent the
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<PAGE>
maximum annual payments a participant may receive under the SERP. Benefits under
the SERP are payable for a period of 15 years. In the event that an individual
or entity that did not own shares of Common Stock prior to February 14, 1994
(the date of the initial public offering), or is not a family member of an
individual who did, acquires more than 25% of the total shares of Common Stock,
participants will become immediately entitled to benefits under the SERP.
Messrs. Yturbide, Scharer and Welch are 100% vested under the seven year
vesting plan. Mr. Cavallaro has two years of credited service under the seven
year vesting plan.
HONORARY DIRECTORS PROGRAM
The Company's Honorary Director Program is a special program designed to
compensate Vera Gross for her years of service to the Company. Vera Gross served
as Executive Assistant and Director of the Company. She contributed over 25
years of service to the Company. Under the Honorary Director Program, for the
duration of her life, Mrs. Gross received annual payments of $50,000 and
benefits under the Company's Group Health Plan.
ALTERNATIVE DEFINED BENEFIT PLANS
Certain executives are entitled to participate in a Senior Supplemental
Executive Retirement Plan ("SSERP") that provides for benefits based on a
percentage of the salary that was being paid as of January 1, 1991 and computed
as a straight-life annuity. Benefits under the SSERP are payable one month after
retirement until the recipient reaches age 80. Messrs. Kudrna and William
Ledbetter are fully vested in the SSERP, and will be entitled to annual benefits
of $200,000, each commencing one month after retirement.
EMPLOYMENT AGREEMENTS
Thomas M. Yturbide serves as Chairman of the Board under an employment
contract with the Company. The term of agreement began as of December 1, 1995
and ends on May 31, 1998. His annual salary under this agreement is $400,000.
The agreement also provides Mr. Yturbide options to purchase up to 100,000
shares of the Company's Common Stock at $18 5/8 per share. The options granted
to Mr. Yturbide vest in three equal installments on April 1, 1996, 1997 and
1998. The contract is terminable at any time (upon ninety days' notice) by Mr.
Yturbide or the Company. If the agreement is terminated by the Company for
reason other than cause, Mr. Yturbide is entitled to receive the full value of
his salary and other benefits for the remainder of the term of the agreement.
Prior to December 1, 1995, Mr. Yturbide served as President and Chief Executive
Officer under an employment contract with the Company. His annual salary was
$400,000. He also received signing bonuses of $100,000 on December 6, 1993,
$100,000 on December 1, 1994 and $100,000 on December 1, 1995. In addition, the
agreement provided that Mr. Yturbide received restricted stock and stock options
pursuant to the 1993 Omnibus Incentive Plan. See "-- 1993 Omnibus Incentive
Plan".
Charles W. Scharer serves as President and Chief Executive Officer under an
employment contract with the Company. The term of the contract began on December
1, 1995 and ends on November 30, 2000. The agreement provides that Mr. Scharer's
salary during the term of the agreement will be $350,000 per year. The agreement
also provides Mr. Scharer options to purchase up to 100,000 shares of the
Company's Common Stock at $18 5/8 per share. Twenty percent of the options
granted to Mr. Scharer vested immediately on December 1, 1995 and the remaining
options vest in four equal installments on December 1, 1996, 1997, 1998 and
1999. The contract is terminable at any time (upon ninety days' notice) by Mr.
Scharer or the Company. If the agreement is terminated by the Company for reason
other than cause, Mr. Scharer is entitled to receive the full value of his
salary and other benefits for the remainder of the agreement. Prior to December
1, 1995, Mr. Scharer served as Chief Financial Officer under an employment
contract with the Company. His annual salary was $200,000. The agreement also
provided that Mr. Scharer received restricted stock and stock options pursuant
to the 1993 Omnibus Incentive Plan. See "-- 1993 Omnibus Incentive Plan".
William B. Ledbetter serves as Vice Chairman of the Board of Directors and
Secretary under an employment agreement with the Company. His annual salary is
$239,274. He also received on November 29, 1993 (i) a one-time guaranteed
payment of $650,000 and (ii) option to purchase 15,000 shares of Common
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<PAGE>
Stock at $14.00 (the initial public offering price per share of Common Stock),
which options are immediately exercisable and remain exercisable for a period of
10 years. Mr. Ledbetter's employment contract is for a term of five years,
terminating on October 31, 1998, and is terminable after two years at any time
by Mr. Ledbetter or at any time by the Company for cause or if Mr. Ledbetter
ceases to be reasonably available to the Company for a period of six months.
Stephen L. Cavallaro serves as Chief Operating Officer of Subsidiary
Operations under an employment contract with the Company effective as of
February 1, 1996. The term of the contract runs for three years, terminating on
January 31, 1999. Mr. Cavallaro's annual salary established by the contract is
$280,000. The contract also provides for the award of options to purchase 10,000
shares of the Company's Common Stock. The contract is terminable at any time
(upon ninety days' notice) by Mr. Cavallaro or the Company. If the contract is
terminated by the Company for reasons other than cause, Mr. Cavallaro is
entitled to receive the full value of his salary and other benefits for the
remainder of the contract term. Prior to February 1, 1996, Mr. Cavallaro served
as Senior Vice President and General Manager - Hard Rock Hotel under an
employment contract with the Company. His annual salary under the contract was
$245,000. The agreement also provides that Mr. Cavallaro receive restricted
stock and stock options pursuant to the 1993 Omnibus Incentive Plan. See "--
Employee Benefit Plans -- 1993 Omnibus Incentive Plan".
EMPLOYEE BENEFIT PLANS
OMNIBUS INCENTIVE PLANS
In November 1993, the Company adopted the 1993 Omnibus Incentive Plan (the
"1993 Incentive Plan") and in March 1996, the stockholders of the Company
approved the 1996 Omnibus Incentive Plan (the "1996 Incentive Plan" and together
with the 1993 Incentive Plan, the "Incentive Plans"). The Incentive Plans were
adopted to further and promote the interests of the Company, its subsidiaries
and its stockholders by enabling the Company to attract, retain and motivate key
employees or prospective employees, and to align the interests of such
individuals and the stockholders of the Company. The Incentive Plans are
administered by the Compensation Committee, which is authorized to construe and
interpret the Incentive Plans and to promulgate, amend and rescind rules and
regulations relating to the implemen-tation, administration and maintenance of
the Incentive Plans, including selecting the participants in each of the
Incentive Plans, making awards of stock options, stock appreciation rights,
restricted stock grants and/or performance units (each an "Award", and
collectively "Awards") in such amounts and form as the Compensation Committee
determines and imposing any restrictions, terms and conditions upon such Awards
as the Compensation Committee deems appropriate.
The maximum number of shares of Common Stock authorized for issuance under
the 1993 Incentive Plan, other than shares of Common Stock issued pursuant to
Awards and subsequently reacquired by the Company, is 915,219. The maximum
number of shares of Common Stock authorized for issuance under the 1996
Incentive Plan, other than shares of Common Stock issued pursuant to Awards and
subsequently reacquired, is 500,000. No Awards may be granted or shares of
Common Stock issued under the Incentive Plans after 10 years; provided that
shares of Common Stock may be issued thereafter pursuant to Awards granted prior
to such date. Awards granted prior to such date may be amended after such date,
so long as there is no increase in the number of shares of Common Stock subject
to or comprising that Award.
Any Award that constitutes a derivative security (as defined in Rule
16a-1(c) under the Exchange Act) and is granted to or held by a person subject
to Section 16 of the Exchange Act shall be subject to the restrictions on
exercisability and on transfer set forth in or pursuant to Rule 16b-3 of the
Exchange Act. The Incentive Plans are intended to satisfy the requirements of
Rule 16b-3 under Section 16 of the Exchange Act in the case of recipients
subject to such Section 16.
54
<PAGE>
In the event of a stock split, the declaration of a stock dividend, the
exchange or conversion of securities of the class subject to an Award into cash,
property or different kinds of securities pursuant to a merger, reorganization
or otherwise, or the sale of substantially all of the assets of the Company or
if an extraordinary dividend is declared, adjustments will be made in (i) the
number and type of share or other securities or cash or other property that may
be acquired pursuant to each Award, (ii) the maximum number and type of shares
or other securities that may be issued pursuant to other Awards thereafter
granted under the Incentive Plans and (iii) any other terms as are necessarily
affected by such event.
On November 12, 1993, the Company granted an aggregate of 176,500 shares of
restricted stock and 348,000 stock options to certain key management of the
Company pursuant to the 1993 Incentive Plan. Of the shares of restricted stock,
approximately 25% became unrestricted and vested immediately upon the effective
date of the Company's initial public offering and the remaining shares will
become unrestricted and vest over a period of approximately three years. The
stock options granted become exercisable in three installments, 33 1/3% on each
of the first three anniversaries of grant, and expire ten years from the date of
grant. The initial grantees included Mr. Yturbide (55,000 shares of restricted
stock and 110,000 stock options), Mr. Scharer (18,000 shares of restricted stock
and 32,000 stock options), Mr. Welch (15,000 shares of restricted stock and
30,000 stock options) and Mr. Cavallaro (15,000 shares of restricted stock and
30,000 stock options).
1993 NON-EMPLOYEE DIRECTORS STOCK OPTION PROGRAM
The purpose of the Company's 1993 Non-Employee Directors Stock Option
Program (the "Program") is to promote the interests of the Company and its
stockholders by strengthening the Company's ability to attract and retain the
services of experienced and knowledgeable non-employee directors and by
encouraging such directors to acquire an increased proprietary interest in the
Company.
The total number of shares of Common Stock for which options may be granted
under the Program shall not exceed 60,000 shares subject to automatic
adjustments for stock splits and certain other corporate transactions and/or
recapitalizations. An initial grant of options to acquire 4,500 shares has been
awarded to each current non-employee director. Pursuant to the Program, initial
awards of options to acquire 4,500 shares will be granted to any new
non-employee director immediately following the first annual meeting after such
non-employee director is first elected or appointed to the Board of Directors.
Subsequent annual grants of options to acquire 1,500 shares will be made
immediately following each annual meeting to all non-employee directors who had
previously received initial grants.
The Board of Directors may amend the Program, provided that no amendment
which would change the amount, price or timing of the initial and annual grants
may be made more than once every six months, and provided, further, that certain
other material changes may not be made to the Program without stockholder
approval.
Options granted under the Program become exercisable in three installments,
33 1/3% on the date of grant and 33 1/3% on each of the next two anniversaries
of grant. Each Option granted expires ten years from the date of its grant. The
Program continues in effect until it is terminated by action of the Board of
Directors or the stockholders.
If a non-employee director voluntarily terminates his or her board
membership at any time, the Options granted to such director automatically
expire and are forfeited as of the effective date of such service termination.
For purposes of the Program, a "voluntary termination" will occur only if a
non-employee director resigns (other than due to death, disability or retirement
(as defined in the Program)) or refuses to stand for election to the Board of
Directors if nominated (other than due to death, disability or retirement). If
the director's membership on the Board of Directors is terminated for any other
reason, including a failure to be reelected by the stockholders of the Company,
the Options become fully exercisable as of the date of such termination and each
Option shall expire two years after the date of any such termination (but not
beyond the expiration of the stated option term).
55
<PAGE>
1993 EMPLOYEE STOCK GRANT PROGRAM
In November 1993, the Company adopted the 1993 Employee Stock Grant Program
(the "Employee Stock Program") providing for a one-time grant of shares of
Common Stock to persons who had been employed by the Company for at least one
year and were not otherwise stockholders in the Company or eligible to
participate in any of the Company's other benefit plans providing for stock
ownership. Under the Employee Stock Program, each eligible employee on the date
of grant received one share of Common Stock for each full year of past service
to the Company plus five additional shares of Common Stock for every five years
of past service to the Company. The Company granted 20,133 shares of Common
Stock under the Employee Stock Program.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Articles of Incorporation contain, pursuant to Nevada
law, provisions for indemnification of officers and directors of the Company and
in certain cases employees and other persons. In addition, the Company's Bylaws
require the Company to indemnify such persons to the full extent permitted by
Nevada law. Each such person will be indemnified in any proceeding if he or she
acted in good faith and in a manner which he or she reasonably believed to be
in, or not opposed to, the best interests of the Company. Indemnification would
cover expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement. The Company's Bylaws also provide that the Company's Board of
Directors may cause the Company to purchase and maintain insurance on behalf of
any present or past director or officer insuring against any liability asserted
against such person incurred in the capacity of director or officer or arising
out of such status, whether or not the Company would have the power to indemnify
such person. The Company maintains directors' and officers' liability insurance.
The Company has also entered into separate indemnification agreements with
its directors and officers. Each indemnification agreement provides for, among
other things (i) indemnification against any and all expenses, judgments, fines,
penalties and amounts paid in settlement of any claim against an indemnified
party unless it is determined, as provided in the indemnification agreement,
that indemnification is not permitted under law and (ii) prompt advancement of
expenses to any indemnitee in connection with his or her defense against any
claim.
OPTIONS HELD BY NAMED EXECUTIVE OFFICERS
No options were granted by the Company to the Named Executive Officers in
the year ended November 30, 1995. The following table presents certain
information regarding the number of unexercised options and the value of
unexercised in-the-money options for each of the Named Executive Officers at
1995 fiscal year-end.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF IN-THE-MONEY
OPTIONS AT NOVEMBER 30, UNEXERCISED OPTIONS AT
SHARES 1995 NOVEMBER 30, 1995 (1)
ACQUIRED ON VALUE --------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------- ----------- -------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Thomas M. Yturbide........................... -- -- 73,333 36,667 $73,333 $36,667
Charles W. Scharer........................... -- -- 21,333 10,667 21,333 10,667
William B. Ledbetter......................... -- -- 15,000 -- 15,000 --
Stephen L. Cavallaro......................... -- -- 20,000 10,000 20,000 10,000
Verne H. Welch, Jr........................... -- -- 20,000 10,000 20,000 10,000
</TABLE>
- ------------------------
(1) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise price of the options.
56
<PAGE>
CERTAIN TRANSACTIONS
Franklin K. Rahbeck, a Director of the Company, is also a director of FIBN.
The Company and FIBN are parties to a loan agreement. HRHC (in which the Company
holds a 40% equity interest) and FIBN are also parties to a loan agreement which
is guaranteed by the Company.
FIBN, Jessica L. Ledbetter, Kirk B. Ledbetter and Franklin K. Rahbeck are
the co-trustees of the Ledbetter Trust. The Ledbetter Trust owns survivorship
life insurance policies on the lives of William B. Ledbetter and Beverlee A.
Ledbetter, deceased. Prior to fiscal 1995, the Company had paid premiums on such
life insurance policies. The Company has no further obligation to pay such
premiums. The Ledbetter Trust has issued two notes payable to the Company for
the amounts of the premiums previously paid by the Company. The notes are in the
principal amounts of $1,376,995 and $455,275 and bear interest at the rate of
5.84% and 6.30%, respectively. Interest on the notes is payable on December 31
of each year and the entire unpaid principal amount becomes due on the earlier
of November 15, 2001 or the death of William B. Ledbetter.
PRINCIPAL STOCKHOLDERS
Currently, the Company's only outstanding class of voting securities is the
Common Stock. As of May 10, 1996, there were 9,798,532 shares of the Company's
Common Stock outstanding. The following table sets forth certain information
with respect to the beneficial ownership of the Company's Common Stock as of May
10, 1996 of (i) each stockholder who is known by the Company to beneficially own
5% or more of the outstanding shares of Common Stock, (ii) each director and
Named Executive Officer of the Company and (iii) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF
NAME OF BENEFICIAL OWNER (1) SHARES PERCENT (2)
- ------------------------------------------------------------ --------- -----------
<S> <C> <C>
Estate of Beverlee A. Ledbetter, deceased (3)............... 2,924,392 29.8%
Kirk B. Ledbetter (3)(4).................................... 3,561,392 36.4
Jessica L. Ledbetter (3)(5)................................. 3,456,588 35.3
William B. Ledbetter (3)(6)................................. 2,939,442 30.0
First Interstate Bank of Nevada, N.A. (7)................... 764,000 7.8
P.O. Box 30100
Reno, Nevada 89520-0010...................................
Richmont Capital Partners I, L.P. (8)....................... 695,800 7.1
4300 Westgrove
Dallas, Texas 75248
Thomas M. Yturbide (6)(9)................................... 161,666 1.6
Richard F. Kudrna, Sr. (6)(10).............................. 114,950 1.2
Charles W. Scharer (6)(9)................................... 59,333 *
Stephen L. Cavallaro (9).................................... 35,000 *
Verne H. Welch, Jr. (9)..................................... 35,000 *
Franklin E. Rahbeck (5)..................................... 14,000 *
Luther Mack, Jr. (5)........................................ 4,200 *
Executive Officers and Directors as a Group
(16 persons) (3)(4)(5)(6)(9)(10)........................... 4,613,121 45.9
</TABLE>
- ------------------------
* Less than one percent
(1) Unless otherwise indicated, the address of each of the stockholders named in
the above table is: c/o Harveys Casino Resort, P.O. Box 128, U.S. Highway 50
& Stateline Avenue, Lake Tahoe, Nevada 89449.
57
<PAGE>
(2) Unless otherwise indicated in the footnotes to the above table and subject
to the community property laws where applicable, each of the stockholders
named in the above table has sole voting and investment power with respect
to the shares shown as beneficially owned. Percentages of beneficial
ownership total more than one hundred percent because shares of Common Stock
held by the Estate of Beverlee A. Ledbetter, deceased, are reported as
beneficially owned by each of Kirk B. Ledbetter, Jessica L. Ledbetter and
William B. Ledbetter.
(3) Includes the 2,924,392 shares held by the Estate of Beverlee A. Ledbetter,
deceased. Kirk B. Ledbetter, Jessica L. Ledbetter and William B. Ledbetter
have been appointed co-executors of the estate and share the voting power
and investment power of the shares held by the estate, subject to such
rights and restrictions imposed under the terms of the governing estate
instruments and the applicable state law.
(4) Includes 200 shares owned by Kirk Ledbetter's spouse and 100 shares each
controlled by Mr. Ledbetter's spouse as custodian for their son and
daughter. Kirk B. Ledbetter disclaims beneficial ownership of all 400
shares.
(5) Includes, in respect to each of Jessica L. Ledbetter and Franklin K.
Rahbeck, options to purchase 6,000 shares of Common Stock, and in respect to
Luther Mack, Jr., options to purchase 3,500 shares of Common Stock, all
granted under the terms of the Company's 1993 Non-Employee Directors Stock
Option Program, which options are currently exercisable.
(6) Includes the following options to purchase shares of Common Stock granted
under the terms of employment contracts, which options are currently
exercisable or are exercisable within 60 days: William B. Ledbetter, 15,000;
Richard F. Kudrna, Sr., 12,500; Thomas M. Yturbide, 33,333; and Charles W.
Scharer, 20,000.
(7) All shares are held by FIBN, as Trustee of (1) the Ledbetter 1993
Irrevocable Trust (572,400 shares); (2) the Gregory Lou Kudrna Trust (95,800
shares); and (3) the Richard Frank Kudrna, Jr. Trust (95,800 shares). The
beneficial interests in the Ledbetter 1993 Irrevocable Trust are divided
into two equal shares between Jessica L. Ledbetter and Kirk B. Ledbetter.
The shares will be distributed to the beneficiaries on the fourth
anniversary of the death of William B. Ledbetter. Based on a Schedule 13G
filed in February 1996 with the Securities and Exchange Commission, FIBN has
sole voting power for all 764,000 shares.
(8) Based on a Schedule 13D filed in April 1996 with the Securities and Exchange
Commission, such shares are held by a group of affiliated parties that share
the power to vote and dispose of such shares.
(9) Includes those restricted shares of Common Stock awarded under the terms of
the Company's 1993 Omnibus Incentive Plan in the following amounts: Stephen
L. Cavallaro, 15,000; Charles W. Scharer, 18,000; Verne H. Welch, Jr.,
15,000; Thomas M. Yturbide, 55,000; and, to all officers and directors as a
group 163,000. Recipients of such shares have immediate power to vote all
such shares; however, ownership of such shares is subject to restrictions
which lapse as to 25% on the date of grant of such shares and on each of the
following three anniversaries of the grant date. Includes the following
options to purchase shares of Common Stock awarded under the terms of the
Company's 1993 Omnibus Incentive Plan, which options are currently
exercisable; Stephen L. Cavallaro, 20,000; Charles W. Scharer, 21,333; Verne
H. Welch, Jr., 20,000; Thomas M. Yturbide, 73,333; and, to all officers and
directors as a group, 175,000.
(10) Includes 95,400 shares owned by Richard F. Kudrna, Sr.'s spouse. Mr. Kudrna
disclaims beneficial ownership of all 95,400 shares.
58
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Notes will be issued pursuant to the Indenture among the Company, the
Guarantors on the date thereof and IBJ Schroder Bank & Trust Company, as trustee
(the "Trustee"). The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Notes are subject to all such
terms, and holders of the Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below. A copy of the proposed form of Indenture has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The definitions of certain terms used in the following summary are set
forth below under "-- Certain Definitions".
The Notes will be unsecured general obligations of the Company and will be
subordinated in right of payment to all Senior Debt of the Company and the
Guarantors. See "-- Subordination". At February 29, 1996, after giving PRO FORMA
effect to the Exchange Offer and the Offering and the application of the net
proceeds therefrom, the Company and the Guarantors had an aggregate of $14.0
million in principal amount of Senior Debt outstanding and approximately $28.8
million of trade payables and other accrued liabilities. The Company's
obligations under the Notes and Indenture will be fully and unconditionally
guaranteed on a senior subordinated basis by each of the Guarantors jointly and
severally. Four subsidiaries of the Company are not to become guarantors of the
Notes. These subsidiaries (WestAd; Reno Projects, Inc.; Wagon Wheel Stages,
Inc.; and Harveys Maryland Management Company, Inc.) are inconsequential to the
Company because the Company's share of the subsidiaries' assets and its net
investment in the subsidiaries is less than 3% of total consolidated assets and
the Company's share of income before income taxes is less than 3% of
consolidated income before income taxes.
The Company is a management, operating and holding company that operates
Gaming Facilities directly or through its Subsidiaries. Repayment of
intercompany notes and payment of management fees, rent and dividends from its
Subsidiaries are the Company's principal sources of cash to pay operating
expenses and the principal of, premium, if any, and interest on its
Indebtedness. The ability of the Company's Subsidiaries to make payments on
intercompany notes and to pay management fees and dividends to the Company may,
under certain circumstances, be subject to regulatory approval by the applicable
Gaming Authority in the event that such payment would affect the "financial
stability" of such subsidiary. Under Nevada, Iowa and Colorado gaming law, a
company's "financial stability" is evaluated pursuant to certain financial
standards, including (i) cash availability to pay gaming wagers and gaming and
nongaming expenditures, (ii) ability to make capital and maintenance
expenditures in a timely manner and (iii) ability to provide for the servicing
of debt.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $150.0 million. The
Notes will mature on , 2006. Interest on the Notes will accrue at the
rate per annum set forth on the cover page of this Prospectus and will be
payable semi-annually on and , commencing on , 1996,
to holders of record on the immediately preceding and .
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. The Notes will be payable both as to principal and
interest at the office or agency of the Company maintained for such purpose
within the Borough of Manhattan, The City and State of New York or, at the
option of the Company, payment of interest may be made by check mailed to the
holders of the Notes at their respective addresses set forth in the register of
holders of Notes. Until otherwise designated by the Company, the Company's
office or agency in the Borough of Manhattan, The City and State of New York
will be the corporate trust office of the Trustee. The Notes will be issued in
registered form, without coupons, and in denominations of $1,000 and integral
multiples thereof.
59
<PAGE>
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to ,
2001, except as may be required by a Gaming Authority as provided below.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the date fixed for
redemption, if redeemed during the twelve-month period beginning on of
the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ----------------------------------------------------------------------- -----------
<S> <C>
2001................................................................... %
2002................................................................... %
2003................................................................... %
2004 and thereafter.................................................... 100.000%
</TABLE>
Notwithstanding any other provision hereof, if any Gaming Authority requires
that a holder or beneficial owner of Notes must be licensed, qualified or found
suitable under any applicable gaming law and such holder or beneficial owner
fails to apply for a license, qualification or a finding of suitability within
30 days after being requested to do so by the Gaming Authority (or such lesser
period that may be required by such Gaming Authority), or if such holder or such
beneficial owner is not so licensed, qualified or found suitable, the Company
will have the right, at its option, (i) to require such holder or beneficial
owner to dispose of such holder's or beneficial owner's Notes within 30 days of
receipt of such notice of such finding by the applicable Gaming Authority or
such earlier date as may be ordered by such Gaming Authority or (ii) to redeem
the Notes of such holder or beneficial owner at the lesser of the principal
amount thereof or the price at which such holder or beneficial owner acquired
such Notes, together with, in either case, accrued interest to the earlier of
the date of redemption or such earlier date as may be required by such Gaming
Authority or the date of the finding of unsuitability by such Gaming Authority,
which may be less than 30 days following the notice of redemption, if so ordered
by such Gaming Authority. The holder or beneficial owner of Notes applying for a
license, qualification or a finding of suitability must pay all costs of the
licensure or investigation for such qualification or finding of suitability. The
Company is not required to pay or reimburse any holder or beneficial owner of
Notes who is required to apply for such license, qualification or finding of
suitability for the costs of the licensure or investigation for such
qualification or finding of suitability. Such expense will, therefore, be the
obligation of such holder or beneficial owner. See "Risk Factors -- Gaming
Regulation" and "Business -- Regulatory Matters".
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon a Change of Control, each holder of Notes will have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such holder's Notes 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,
to the date of purchase (the "Change of Control Payment"). Within 45 days
following a Change of Control, the Company is required to mail a notice to each
holder stating: (i) that the Change of Control Offer is being made pursuant to
the covenant entitled "Change of Control", the date the offer shall commence,
the length and expiration of the Offer Period, as defined in the Indenture, and
that all Notes tendered will be accepted for payment; (ii) the purchase price
and the purchase date (the "Change of Control Payment Date"), which is required
to be no earlier than 30 days nor later than 60 days from the date such notice
is mailed (unless a longer period is required by law); (iii) that any Note not
tendered will continue to accrue interest; (iv) that, unless the Company
defaults in the payment of the Change of Control Payment, all Notes accepted for
payment pursuant to the Change of Control Offer will cease to accrue interest
after the Change of Control Payment Date; (v) that holders electing to have any
Notes purchased pursuant to a Change of Control Offer will be required to
surrender such Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of such Notes completed, to the Paying Agent specified
in the notice prior to the close of business on the third business day preceding
the Change of Control Payment Date; (vi) that a holder will be entitled to
withdraw its election if a Paying Agent receives,
60
<PAGE>
not later than the close of the Offer Period (as defined in the Indenture), a
telegram, telex, facsimile transmission or letter setting forth the name of such
holder, the principal amount of Notes delivered for purchase, and a statement
that such holder is withdrawing his election to have such Notes purchased; (vii)
that such holder may elect to have its Notes purchased by the Company either in
whole or in part in multiples of $1,000 principal amount, at a purchase price
equal to 101% of the principal amount of the Notes plus accrued and unpaid
interest, if any, to the Change of Control Payment Date and that a holder whose
Notes are being purchased only in part will be issued new Notes in an aggregate
principal amount equal to the unpurchased portion of the Notes surrendered by
such holder, which unpurchased portion amount must be equal to $1,000 or an
integral multiple thereof; (viii) all instructions and materials necessary to
enable each holder to tender Notes pursuant to the Change of Control Offer; and
(ix) information concerning the business of the Company which the Company in
good faith believes will enable such holders to make an informed decision.
On or before the Change of Control Payment Date, the Company will, to the
extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with one or more Paying
Agents an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate stating
that the Notes or portions thereof were tendered to the Company and accepted for
payment in accordance with the terms of the Indenture. The Paying Agent is
required to mail promptly to each holder of Notes so accepted payment in an
amount equal to the purchase price for such Notes, the Company is required to
issue new Notes, and the Trustee, upon written request from the Company is
required to authenticate promptly and mail to each holder a new Note or Notes
equal in principal amount to any unpurchased aggregate principal amount of the
Notes surrendered, if any; PROVIDED, that each such new Note is required to be
in a principal amount of $1,000 or an integral multiple thereof. Prior to
complying with the provisions of this covenant, but in any event within 90 days
following a Change of Control, the Company is required either to repay all
outstanding Senior Debt or to obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the repurchase of Notes
required by this covenant. The Company will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
Except as described above with respect to a Change of Control, the Indenture
does not contain any other provisions that permit holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar restructuring.
The Credit Facility currently restricts the Company's ability to purchase
any Notes upon a Change of Control. In the event a Change of Control occurs at a
time when the Company is prohibited from purchasing Notes, the Company could
seek the consent of its lenders to the purchase of Notes or could attempt to
refinance the obligations that contain such prohibition. If the Company did not
obtain such a consent or repay such obligations, the Company would remain
prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute a Default under the Indenture which
would, in turn, constitute a default under the Credit Facility. In such
circumstances, the subordination provisions of the Notes would restrict payments
to the holders of Notes.
The Change of Control provisions may in certain circumstances make more
difficult or discourage a takeover of the Company and, thus, the removal of
incumbent management. The existence of the Change of Control provisions,
however, do not reflect any knowledge of management of any specific effort to
accumulate the Company's stock or to obtain control of the Company by means of a
merger, tender offer, solicitation or otherwise, and are not part of a plan by
management to adopt a series of anti-takeover provisions. The Change of Control
provisions have resulted from negotiations between the Company and the
Underwriters. Management has no present intention to engage in a transaction
involving a Change of Control, although it is possible that the Company may
decide to do so in the future. Subject to the limitations discussed below, the
Company could, in the future, enter into certain transactions including
acquisitions, refinancings or other recapitalizations, that would not constitute
a Change of Control under the Indenture, but that could increase the amount of
indebtedness outstanding at such time or otherwise affect the
61
<PAGE>
Company's capital structure or credit ratings. The Company will comply with all
applicable laws, including Section 14(e) of the Exchange Act and the rules
thereunder, in the event that it is required to offer to repurchase any Notes
upon a Change of Control.
The Company and the Trustee may not waive or modify any rights of the
holders of the Notes upon a Change of Control without the consent of the holders
of 66 2/3% of the principal amount of the then outstanding Notes.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all", there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Notes to require the Company to repurchase such Notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of the Company and its Subsidiaries to another Person may be uncertain.
ASSET SALES
The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to cause, make or suffer to exist any Asset Sale
unless (i) no Default exists or is continuing immediately prior to and after
giving effect to such Asset Sale, (ii) the Company (or such Restricted
Subsidiary, as the case may be) receives consideration at the time of each such
Asset Sale at least equal to the fair market value (evidenced by a resolution of
the Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests sold or otherwise disposed of and
(iii) at least 85% of the consideration therefor received by the Company or such
Restricted Subsidiary is in the form of cash or one or more Permitted
Investments; PROVIDED, HOWEVER, that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet or in
the notes thereto) of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes or any Subsidiary
Guarantee) that are assumed by the transferee of any such assets or Equity
Interests and (y) any notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are immediately converted
by the Company or such Restricted Subsidiary into cash, will be deemed to be
cash (to the extent of the cash received) for purposes of this provision.
Within 180 days after any Asset Sale, the Company (or the applicable
Restricted Subsidiary, as the case may be) will be required either (i) to apply
the Net Proceeds from such Asset Sale to reduce Senior Debt of the Company
(including, if such Senior Debt is payable under the Credit Facility, the amount
available thereunder) or Senior Debt of a Restricted Subsidiary or (ii) to
commit itself by contract to reinvest or cause to be reinvested the Net Proceeds
from such Asset Sale within 270 days thereof in a Permitted Investment (other
than Marketable Securities); and within 270 days of any Asset Sale, such Net
Proceeds are required to have been so applied pursuant to such contract. Pending
the application of any such Net Proceeds as required by the provisions described
in the immediately preceding sentence, the Company may reduce Senior Debt of the
Company payable under the Credit Facility (but need not reduce the amount
available thereunder) or otherwise invest such Net Proceeds in Marketable
Securities. Any Net Proceeds from an Asset Sale that are not applied as required
by the provisions described in the first sentence of this paragraph will
constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds
exceeds $25.0 million, the Company will be required to make an offer (an "Asset
Sale Offer") to all holders of Notes and of any other Indebtedness of the
Company that is PARI PASSU with the Notes (if required to do so by the terms
thereof) to purchase the maximum principal amount of Notes and other
Indebtedness that may be purchased out of the Excess Proceeds at an offer price
in cash in an amount equal to 100% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date fixed for the closing of such offer, in
accordance with the procedures set forth in the Indenture and the terms of such
Indebtedness. To the extent that the aggregate principal amount of Notes and
such other Indebtedness tendered by the holders thereof for purchase pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company may use the
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes and such other Indebtedness tendered by holders
exceeds the amount of Excess Proceeds, the Trustee (and the Person, if
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any, exercising similar functions for such other Indebtedness) will select the
Notes and other Indebtedness to be purchased on a PRO RATA basis or by such
other method as the Trustee (and such Person) deem fair and appropriate.
Within 30 days of the date that the amount of Excess Proceeds exceeds $25.0
million, the Company is required to mail a notice to each holder which shall
state that an Asset Sale Offer is being made and shall provide information
substantially similar to that which is required to be provided to holders in
connection with a Change of Control Offer; PROVIDED that such notice will state
that if the aggregate principal amount of Notes and Senior Debt surrendered by
holders of Securities and Senior Debt exceeds the available Excess Proceeds,
Notes and Senior Debt shall be selected for purchase in accordance with the
Indenture and the holders whose Notes are purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered. See "-- Change of Control". The Company will follow substantially
the same procedures for purchase of the Notes as those described in the second
paragraph under the caption "-- Change of Control" above.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed, at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed on a PRO RATA basis, by lot
or by such other method as the Trustee deems fair and appropriate; PROVIDED that
no Notes of $1,000 or less will be redeemed in part. Notice of redemption is
required to be mailed by first class mail at least 30 but not more than 60 days
before the redemption date to each holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note is required to state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Notes. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption.
SUBORDINATION
Payment of principal of, premium, if any, and interest on the Notes will be
subordinated as set forth in the Indenture, to the prior payment in full of all
Obligations with respect to Senior Debt of the Company whether outstanding on
the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt of the Company will be
entitled to receive payments in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt) before the holders of Notes
will be entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt of the Company are paid in full, any
distribution to which the holders of Notes would be entitled is required to be
made to the holders of Senior Debt (except that holders of Notes may receive
securities that are subordinated at least to the same extent as the Notes to
Senior Debt and any securities issued in exchange for Senior Debt).
The Company also may not make any payment upon or in respect of the Notes
(except in such subordinated securities) if (i) a default in the payment of the
principal of or interest on Designated Senior Debt of the Company occurs and is
continuing beyond any applicable grace period or (ii) any other default occurs
and is continuing with respect to Designated Senior Debt of the Company that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Company or the holders of any Designated
Senior Debt. Payments on the Notes may and are required to be resumed (A) in the
case of a payment default, upon the date on which such payment default is cured
or waived and (B) in case of a nonpayment default, the earlier of the date on
which nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior
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Debt has been accelerated. No new period of payment blockage may be commenced
within 360 days after the receipt by the Trustee of any prior Payment Blockage
Notice. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee will be, or be made, the
basis for a subsequent Payment Blockage Notice (unless such nonpayment default
shall have been cured or waived for a period of not less than 181 days).
The Indenture will further require that the Company promptly notify holders
of Designated Senior Debt if payment of the Notes is accelerated as a result of
the occurrence of an Event of Default.
The Subsidiary Guarantee of each Guarantor will be subordinated to the
payment in full of all Obligations with respect to Senior Debt of such Guarantor
the applicable Guarantors in the same manner and to the same extent as the Notes
are subordinated to Obligations with respect to Senior Debt of the Company. See
"-- Certain Covenants -- Subsidiary Guarantees".
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency of the Company or a Guarantor, holders of Notes may
recover less ratably than creditors of the Company or such Guarantor who are
holders of Senior Debt. See "-- Subsidiary Guarantees". At February 29, 1996,
the aggregate principal amount of Senior Debt outstanding of the Company and the
Guarantors was approximately $156.6 million. The Indenture will limit, subject
to certain financial tests, the amount of additional Indebtedness, including
Senior Debt, that the Company and the Restricted Subsidiaries can incur. See "--
Certain Covenants -- Incurrence of Indebtedness".
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly: (i) declare or pay any
dividend on, or make any distribution on account of the Company's or any
Restricted Subsidiary's Equity Interests other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company or
such Restricted Subsidiary or dividends or distributions by a Restricted
Subsidiary which, to the extent that a portion of such dividend or distribution
is paid to a holder other than the Company or a Restricted Subsidiary do not
exceed an amount equal to such holder's PRO RATA aggregate common Equity
Interest in such Restricted Subsidiary; (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company or any
Subsidiary of the Company (other than any such Equity Interests owned by the
Company or any Restricted Subsidiary); or (iii) voluntarily purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or any Indebtedness that is PARI PASSU with the Notes
and that has a stated maturity that is later than the stated maturity of the
Notes or a Weighted Average Life to Maturity that is longer than the Weighted
Average Life to Maturity of the Notes at such time, all such payments and other
actions set forth in clauses (i) through (iii) above being collectively referred
to as "Restricted Payments"), unless, at the time of such Restricted Payment:
(A) no Default shall have occurred and be continuing or would occur as a
consequence thereof;
(B) the Company would, after giving PRO FORMA effect to such Restricted
Payment as if such Restricted Payment had been made at the beginning of the
Company's most recently completed four full fiscal quarters for which
internal financial statements are available preceding the date of such
Restricted Payment, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
contained in the provisions described under the caption "-- Incurrence of
Indebtedness" below; and
(C) such Restricted Payment, together with the aggregate of all other
Restricted Payments and all Restricted Investments made by the Company and
its Restricted Subsidiaries after the date of the Indenture, including all
Restricted Payments made in reliance on the provisions described in the next
succeeding paragraph, but excluding all Restricted Investments made in
reliance on the provisions described in the second paragraph under the
caption "-- Restricted Investments" below, is less than the sum of (x) 50%
of Consolidated Net Income for the period (taken as one accounting period)
from March 1, 1996 to the end of the Company's most recently ended fiscal
quarter for which internal
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financial statements are available at the time of such Restricted Payment
(or, if Consolidated Net Income for such period is a deficit, 100% of such
deficit) plus (y) 100% of the aggregate net cash proceeds received by the
Company from the issuance or sale of Equity Interests of the Company (other
than Equity Interests sold to a Restricted Subsidiary and other than
Disqualified Stock).
The provisions described in the foregoing paragraph will not prohibit the
following Restricted Payments made by the Company or any Restricted Subsidiary
after the date of the Indenture: (i) the payment of any Regular Quarterly
Dividend; (ii) the payment of any other dividend within 60 days after the date
of declaration thereof if, at the date of such declaration, such payment would
have been permitted by the provisions described in the immediately preceding
paragraph; or (iii) the redemption, repurchase, retirement or other acquisition
of any Equity Interests of the Company either (A) in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Subsidiary of
the Company) of other Equity Interests of the Company (other than Disqualified
Stock) or (B) to the extent required by a final order of a Gaming Authority.
RESTRICTED INVESTMENTS
The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly make any Restricted
Investment, unless, at the time of such Restricted Investment:
(i) no Default shall have occurred and be continuing or would occur as a
consequence thereof;
(ii) the Company would, after giving PRO FORMA effect to such Restricted
Investment as if such Restricted Investment had been made at the beginning
of the Company's most recently completed four full fiscal quarters for which
internal financial statements are available preceding the date of such
Restricted Investment, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
contained in the provisions described under the caption "-- Incurrence of
Indebtedness" below; and
(iii) such Restricted Investment, together with the aggregate of all
other Restricted Investments and all Restricted Payments (including all
Restricted Payments made in reliance on the provisions described in the
second paragraph under the caption "-- Restricted Payments" above) made by
the Company and its Restricted Subsidiaries after the date of the Indenture,
other than Restricted Investments made in reliance on the provisions
described in the next succeeding paragraph, is less than the sum of (x) 50%
of Consolidated Net Income for the period (taken as one accounting period)
from March 1, 1996 to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time of
such Restricted Investment (or, if Consolidated Net Income for such period
is a deficit, 100% of such deficit) plus (y) 100% of the aggregate net cash
proceeds received by the Company from the Issuance or sale of Equity
Interests of the Company (other than Equity Interests sold to a Subsidiary
and other than Disqualified Stock).
The provisions described in the foregoing paragraph will not prohibit the
following Restricted Investments made by the Company or any Restricted
Subsidiary after the date of the Indenture of the following types and in the
following amounts (measured as of the date such Restricted Investments are
made): (i) Investments not otherwise permitted by the provisions described under
this caption in an amount not to exceed $5.0 million in the aggregate in any one
or more Persons; (ii) Investments not otherwise permitted by the provisions
described under this caption in an amount not to exceed $15.0 million in the
aggregate in one or more Permitted Joint Venture Investments; and (iii)
Investment Guarantees to the extent permitted by the provisions described under
the caption, "-- Incurrence of Indebtedness" below that constitute Permitted
Joint Venture Investments and guarantee (with full rights of subrogation)
Indebtedness incurred to acquire or construct Gaming Facilities (A) which is not
expressly subordinated in right of payment or otherwise to any other
Indebtedness of such Person and (B) which is secured by first priority security
interests in such Gaming Facilities; PROVIDED that any payments required to be
made by the Company or a Restricted Subsidiary pursuant to such Investment
Guarantee will not be treated for the purposes of the Indenture as being
permitted by this clause (iii). The respective amounts of the types of
Restricted Investments permitted to be made by clauses (i) and (ii) above will
be increased by any dividends or other payments or transfers of
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cash, Marketable Securities or tangible assets (at their then fair market value)
to the Company or any Restricted Subsidiary from Persons in which such
Investments were made in amounts not to exceed the respective amounts specified
in such clauses (i) and (ii); and, for the purposes of the provisions described
in this paragraph, if any such Person becomes a Subsidiary of the Company and is
designated as a Restricted Subsidiary in accordance with the provisions
described under the caption "-- Designation of an Unrestricted Subsidiary as a
Restricted Subsidiary", such designation shall be deemed to constitute a
transfer of tangible assets to the Company in an amount equal to the fair market
value of the net tangible assets of such Person on the date of such designation
as determined in good faith by the Board of Directors of the Company.
Any Investment in a Restricted Subsidiary that is designated as an
Unrestricted Subsidiary pursuant to the provisions described under the caption
"-- Designation of a Restricted Subsidiary as an Unrestricted Subsidiary" will
be deemed to be a Restricted Investment made on the date that such Restricted
Subsidiary is designated as an Unrestricted Subsidiary in an amount equal to the
greater of (i) the book value of the Investment in such Subsidiary on such date
and (ii) the fair market value of the Investment in such Subsidiary on such date
as determined (x) in good faith by the Board of Directors of the Company if such
fair market value is determined to be less than or equal to $15.0 million and
(y) by an investment banking firm of national standing with high yield
underwriting expertise if such fair market value is determined to be in excess
of $15.0 million.
Any Investment Guarantee with respect to the Indebtedness of any Person will
cease to be deemed an Investment (and will be deemed not to have been made) to
the extent that such Investment Guarantee is released without payment by the
Company or a Restricted Subsidiary.
INCURRENCE OF INDEBTEDNESS
The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to or become responsible for (collectively, "incur") any Indebtedness, UNLESS,
at the time of the Incurrence of such Indebtedness, (i) no Default shall have
occurred and be continuing or would occur as a consequence thereof and (ii) the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
is greater than 2.00 to 1, determined on a PRO FORMA basis (including a PRO
FORMA application of the net proceeds therefrom) as if the additional
Indebtedness had been incurred at the beginning of such four-quarter period.
The limitations described in the foregoing paragraph will not apply to: (i)
the incurrence by the Company or any Restricted Subsidiary of Non-Recourse Debt
in an FF&E Financing to acquire gaming equipment and secured only by a security
interest in such gaming equipment and the proceeds thereof; (ii) the incurrence
by the Company or any Restricted Subsidiary of recourse Indebtedness in one or
more FF&E Financings for each Gaming Facility not to exceed $7.0 million in
aggregate principal amount outstanding at any one time incurred to finance newly
acquired FF&E to be used in such Gaming Facility; (iii) the incurrence by the
Company or any Restricted Subsidiary of Indebtedness (x) under the Credit
Facility or (y) as a Permitted Joint Venture Investment to the extent that the
aggregate principal amount of Indebtedness outstanding at any one time under the
Credit Facility or constituting Permitted Joint Venture Investments does not
exceed $115 million; (iv) the incurrence by the Company of Indebtedness
represented by the Notes; (v) the incurrence by the Guarantors of Subsidiary
Guarantees; (vi) Indebtedness incurred in connection with Interest Rate
Protection Agreements with respect to Indebtedness otherwise permitted by the
provisions described in this and the immediately preceding paragraphs; (vii) the
incurrence by the Company of Indebtedness issued in exchange for, or the
proceeds of which are used to extend, refinance, renew, replace, or refund any
Existing Indebtedness or any Indebtedness referred to in the provisions
described in clauses (i) through (iii) above and (ix) below ("Refinancing
Indebtedness"); PROVIDED, HOWEVER, that (A) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount of Indebtedness
so extended, refinanced, renewed, replaced, substituted or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (B) such
Refinancing Indebtedness shall have a Weighted Average Life to Maturity equal to
or greater than the remaining Weighted Average Life to
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Maturity of the Indebtedness being extended, refinanced, renewed, replaced or
refunded; (C) if the Indebtedness being extended, refinanced, renewed, replaced
or refunded is subordinated in right of payment to the Notes, such Refinancing
Indebtedness shall be similarly subordinated on terms at least as favorable to
the holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced or refunded; and (D)
no Default shall have occurred and be continuing or would occur as a consequence
thereof; (viii) Indebtedness incurred by the Company or a Restricted Subsidiary
and owing to the Company or Restricted Subsidiary; and (ix) the incurrence by
the Company or any Restricted Subsidiary of Indebtedness that is not otherwise
permitted under the provisions described in this and the immediately preceding
paragraphs not to exceed an aggregate principal amount of $10.0 million
outstanding at any one time.
The Indenture will provide that the Company will not issue any Disqualified
Stock and will not permit a Restricted Subsidiary to issue any shares of
preferred stock.
The Indenture will provide that the Company will not permit an Unrestricted
Subsidiary to incur any Indebtedness or issue any Disqualified Stock, other than
Non-Recourse Debt; PROVIDED, HOWEVER, that if an Unrestricted Subsidiary is
designated as a Restricted Subsidiary pursuant to the provisions described below
under the caption "Designation of an Unrestricted Subsidiary as a Restricted
Subsidiary", such designation will be deemed to constitute at such time the
incurrence by a Restricted Subsidiary of any such previously incurred
Non-Recourse Debt.
LIENS
The Indenture will provide that neither the Company nor any Restricted
Subsidiary may directly or indirectly create, incur, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired, or any income or profits
therefrom or assign or convey any right to receive income therefrom, except: (i)
Liens securing Obligations under Senior Debt or (ii) Permitted Liens.
DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture will provide that the Company will not, and will 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 (i) pay dividends or make any other
distributions to the Company or any Restricted Subsidiary (x) on its Capital
Stock or (y) with respect to any other interest or participation in, or measured
by, its profits; (ii) pay any Indebtedness owed to the Company or any Restricted
Subsidiary; (iii) make loans or advances to the Company or any Restricted
Subsidiary; or (iv) transfer any of its properties or assets to the Company or
any Restricted Subsidiary.
The provisions described in the foregoing paragraph will not prohibit
encumbrances or restrictions existing under (i) documentation concerning
Existing Indebtedness as in effect on the date of the Indenture, (ii) provisions
of the Credit Facility no more restrictive than the provisions contained in the
Credit Facility as in effect on the date of the Indenture, (iii) the Indenture
and the Notes, (iv) applicable law, (v) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any Restricted Subsidiary
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred or such Capital Stock was issued in contemplation of
such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, as long as the Consolidated Cash
Flow of such Person was not taken into account in determining whether such
acquisition was permitted by the terms of the Indenture, (vi) customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (vii) Permitted Liens, (viii)
permitted Refinancing Indebtedness if the restrictions contained in the
agreements governing such Refinancing Indebtedness are not substantially more
restrictive taken as a whole than those contained in the agreements governing
the Indebtedness being refinanced or (ix) Non-Recourse Debt incurred in
accordance with the provisions of the Indenture.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all
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or substantially all of its properties or assets in one or more related
transactions to, another Person unless (i) the Company is the surviving
corporation or the Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (ii) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made assumes all the obligations of the Company under the Notes and the
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default exists; (iv)
the Company or any Person formed by or surviving any such consolidation or
merger, or to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made (A) will have Consolidated Net Worth
(immediately after the transaction but prior to any purchase accounting
adjustments resulting from the transaction) equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, at the time of such transaction and after giving PRO FORMA effect
thereto as if such transaction had occurred at the beginning of the Company's
most recently completed four full fiscal quarters for which internal financial
statements are available preceding the date of such transaction, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth under the provisions described under "--
Incurrence of Indebtedness" above; (v) any such transaction would not require
any holder of Notes to obtain a Gaming License or be qualified under the laws of
any applicable gaming jurisdiction if such holder would not have been required
to obtain a Gaming License or be qualified under the laws of any applicable
gaming jurisdiction in the absence of such transactions; and (vi) any such
transaction would not result in the loss of any qualification or any material
license of the Company or its Subsidiaries necessary for any Gaming Business
then operated by the Company or its Subsidiary.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture will provide that if any Restricted Subsidiary becomes the
owner or lessee of assets, businesses, divisions, real property or equipment
having a book value in excess of $5.0 million, then such Restricted Subsidiary
will execute a Subsidiary Guarantee and will deliver an opinion of counsel, as
required by the Indenture. The Subsidiary Guarantee will be released if the
Company and all other Restricted Subsidiaries cease to own any Equity Interests
in such Restricted Subsidiary or if such Restricted Subsidiary is designated as
an Unrestricted Subsidiary in accordance with the provisions described under the
caption "-- Designation of a Restricted Subsidiary as an Unrestricted
Subsidiary".
ISSUANCE OF OTHER SUBORDINATED INDEBTEDNESS SENIOR TO THE SECURITIES OR THE
SUBSIDIARY GUARANTEES
The Indenture will provide that (i) the Company will not incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt of the Company and
senior in any respect in right of payment to the Notes and (ii) no Guarantor
will incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to Senior Debt of
such Guarantor and senior in any respect in right of payment to such Guarantor's
Subsidiary Guarantee.
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or maintain any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms no
less favorable to the Company or the applicable Restricted Subsidiary, as the
case may be, than those that could have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with an unrelated
Person; (ii) with respect to any Affiliate Transaction with an Unrestricted
Subsidiary which, either individually or when combined with all other Affiliate
Transactions with Unrestricted Subsidiaries during the preceding 365 days,
involves aggregate payments in excess of $1.0 million, a majority of the Board
of Directors approves each such transaction; (iii) with respect to any Affiliate
Transaction (other than with an Unrestricted Subsidiary) involving aggregate
payments in excess of $1.0 million, or with respect to any Affiliate Transaction
with all Unrestricted Subsidiaries, which, either
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individually or when combined with all other Affiliate Transactions with
Unrestricted Subsidiaries during the past year, involves aggregate payments in
excess of $3.0 million, the Company delivers to the Trustee a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that any
such Affiliate Transaction complies with clause (i) above and that such
Affiliate Transaction has been approved by a majority of the Board of Directors
and a unanimous vote of the Independent Directors; and (iv) with respect to any
Affiliate Transaction involving aggregate payments in excess of $15.0 million,
the Company delivers to the Trustee (x) a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and such Affiliate Transaction has been approved
by a majority of the Board of Directors and a unanimous vote of the Independent
Directors and (y) an opinion as to the fairness of such Affiliate Transaction to
the Company or such Restricted Subsidiary from a financial point of view issued
by an investment banking firm of national standing with expertise in high yield
debt offerings and, in the case of a transaction involving the sale or transfer
of assets subject to valuation, such as real estate, an appraisal by a
nationally recognized appraisal firm; PROVIDED, HOWEVER, that the following
shall not be deemed Affiliate Transactions: (A) any employment agreement entered
into by the Company or any Restricted Subsidiary in the ordinary course of
business and consistent with the past practice of the Company or such Restricted
Subsidiary; (B) transactions between or among the Company and Restricted
Subsidiaries; (C) Restricted Payments or Restricted Investments permitted by the
provisions described above under the captions, "-- Restricted Payments" and "--
Restricted Investments"; and (D) payments by the Company pursuant to any
indemnification agreement with its directors and officers with respect to any
action taken or omitted to be taken by such director or officer in such
director's or officer's capacity as a director or officer of the Company or a
Restricted Subsidiary.
BUSINESS ACTIVITIES
The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, engage, directly or indirectly, in any business
other than (i) a Gaming Business and (ii) such other businesses as the Company
or any Restricted Subsidiary is engaged in on the date of the Indenture. Neither
the Company nor any of its Subsidiaries will be permitted by the Indenture to
conduct a Gaming Business in any gaming jurisdiction in which the Company or
such Subsidiary is not licensed on the date of the Indenture if the holders of
the Notes would be required to be licensed as a result thereof; PROVIDED that
the provisions described in this sentence will not prohibit the Company or any
of its Subsidiaries from conducting a Gaming Business in any jurisdiction that
does not require the licensing or qualification of all of the holders of the
Notes, but reserves the discretionary right to require the licensing or
qualification of any holder of Notes.
DESIGNATION OF AN UNRESTRICTED SUBSIDIARY AS A RESTRICTED SUBSIDIARY
Any Unrestricted Subsidiary may be designated by the Board of Directors of
the Company as a Restricted Subsidiary; PROVIDED that (i) at the time of such
designation after giving PRO FORMA effect thereto as if such designation had
occurred, and any Non-Recourse Debt previously incurred by such Unrestricted
Subsidiary had been incurred, at the beginning of the Company's most recently
completed four fiscal quarters for which internal financial statements are
available preceding the date of such designation, the Company would be permitted
to incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test contained in the provisions described in the first paragraph under
the caption "-- Incurrence of Indebtedness"; (ii) if such newly designated
Restricted Subsidiary owns or leases assets, businesses, divisions, real
property or equipment having a book value in excess of $5.0 million, such newly
designated Restricted Subsidiary executes and delivers a Subsidiary Guarantee
and an opinion of counsel as required by the Indenture; and (iii) no Default has
occurred and is continuing immediately preceding such designation and after
giving PRO FORMA effect thereto.
DESIGNATION OF A SUBSIDIARY AS AN UNRESTRICTED SUBSIDIARY
Any Subsidiary of the Company may be designated by the Board of Directors of
the Company as an Unrestricted Subsidiary at the time of its formation, PROVIDED
that such Subsidiary has total assets of $1,000 or less at the time of such
designation. Any Restricted Subsidiary may be designated by the Board of
Directors of the Company as an Unrestricted Subsidiary (at which time such
Restricted Subsidiary's Subsidiary Guarantee will terminate); PROVIDED that (i)
at the time of such designation after giving PRO FORMA
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effect thereto as if such designation had occurred at the beginning of the
Company's most recently completed four fiscal quarters for which internal
financial statements are available preceding the date of such designation, (A)
the Company would be permitted to incur $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test contained in the provisions
described in the first paragraph under the caption "-- Incurrence of
Indebtedness" and (B) the Company's Fixed Charge Coverage Ratio is not less than
80% of the Company's Fixed Charge Coverage Ratio for such period without giving
PRO FORMA effect to such designation; (ii) such Restricted Subsidiary does not
wholly or partially own, operate or manage directly or indirectly, or otherwise
use in its business, any portion or aspect of Harveys Resort Hotel/Casino in
Lake Tahoe, Nevada; and (iii) no Default has occurred and is continuing
immediately preceding such designation and after giving PRO FORMA effect
thereto, including the requirement described in the third paragraph under the
caption "-- Restricted Investments" that any Investment in such Restricted
Subsidiary be deemed to be a Restricted Investment made on the date of such
designation.
REPORTS
Whether or not required by the rules and regulations of the Securities and
Exchange Commission (the "Commission"), so long as any Notes are outstanding,
the Company will furnish to the holders of Notes all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants.
PAYMENTS FOR CONSENT
Neither the Company nor any of its Subsidiaries will be permitted, directly
or indirectly, to pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SUBSIDIARY GUARANTEES
The Company's obligations under the Notes will be jointly and severally
guaranteed (the "Subsidiary Guarantees"), on a senior subordinated basis, by
each Restricted Subsidiary that owns or leases assets, businesses, divisions,
real property or equipment having a book value in excess of $5.0 million. The
Subsidiary Guarantee of each Guarantor will be subordinated to the prior payment
in full of all Senior Debt of such Guarantor in the same manner and to the same
extent as the Notes are subordinated to Obligations with respect to Senior Debt
of the Company. See "-- Subordination". The aggregate principal amount of Senior
Debt outstanding of all Guarantors was approximately $36.7 million as of
February 29, 1996. The Obligations of each Guarantor under its Subsidiary
Guarantee will be limited to the maximum amount which may be paid thereunder
without resulting in any payment thereunder being deemed to constitute a
fraudulent conveyance.
If a Guarantor is or becomes insolvent, its Subsidiary Guarantees could be
challenged, including, but not limited to, under applicable provisions of
federal bankruptcy law or comparable provisions of state fraudulent conveyance
law, and the payment of amounts by such Guarantor pursuant to its Subsidiary
Guarantee could be voided and be required to be returned to such Guarantor, or
to a fund for the benefit of the creditors of such Guarantor or to certain
judgment creditors thereof.
If any Restricted Subsidiary is designated as an Unrestricted Subsidiary
pursuant to the provisions described above under the caption "-- Certain
Covenants -- Designation of a Restricted Subsidiary as an Unrestricted
Subsidiary," the Subsidiary Guarantee of such formerly designated Restricted
Subsidiary will terminate.
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BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes will initially be
issued in the form of one or more Global Notes (the "Global Note"). The Global
Note will be deposited on the date of the closing of the sale of the Notes
offered hereby (the "Closing Date") with, or on behalf of, The Depository Trust
Company (the "Depositary") and registered in the name of the Trustee, as nominee
of the Depositary (such nominee being referred to herein the "Global Note
Holder").
Notes that are issued as described below under "-- Certificated Notes" will
be issued in the form of registered definitive certificates (the "Certificated
Notes"). Such Certificated Notes may, unless the Global Note has previously been
exchanged for Certificated Notes, be exchanged for an interest in the Global
Note representing the principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations and other organizations
(collectively, the "Participants", the "Depositary's Participants" or the
"Depositary's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of the
Depositary only through the Depositary's Participants or the Depositary's
Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary: (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Underwriters with portions of the
principal amount of the Global Note; and (ii) ownership of the Notes evidenced
by the Global Note will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by the Depositary (with respect to
the interests in the Depositary's Participants), the Depositary's Participants
and the Depositary's Indirect Participants. Prospective purchasers are advised
that the laws of some states require that certain Persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer Notes evidenced by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered holder of the Global
Note, the Global Note Holder will be considered for all purposes under the
Indenture as the sole and absolute owner of the Notes evidenced by the Global
Note. Beneficial owners of Notes evidenced by the Global Note will not be
considered the owners or holders thereof under the Indenture for any purpose.
Therefore, neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records of the Depositary or for maintaining,
supervising or reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest on,
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by an office or agency established by the Company
under the Indenture for such purpose (a "Paying Agent") to or at the direction
of the Global Note Holder in its capacity as the holder of the Global Note.
Under the terms of the Indenture, the Company and the Trustee may treat the
Persons in whose names Notes, including the Global Note, are registered as the
owners thereof for the purpose of receiving such payments. Consequently, neither
the Company nor the Trustee has or will have any responsibility or liability for
the payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to credit immediately
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the Notes
as shown on the records of the Depositary. Payments by the Depositary's
Participants and the Depositary's Indirect Participants to the beneficial owners
of Notes will be governed by standing instructions and customary practice and
will be the responsibility of the Depositary's Participants or the Depositary's
Indirect Participants.
CERTIFICATED NOTES
Subject to certain conditions, any Person owning a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Notes. Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of, and
cause the same to be delivered to, such Person or Persons (or the nominee of any
thereof). In addition, if: (i) the
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Company notifies the Trustee in writing that the Depositary is no longer willing
or able to act as a depository and the Company is unable to locate a qualified
successor within 90 days; or (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Notes in the form of
Certificated Notes under the Indenture, then, upon surrender by the Global Note
Holder of its Global Note, Certificated Notes will be issued to each Person that
the Global Note Holder and the Depositary identify as being the beneficial owner
of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of the
Notes, and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal, premium, if any, and interest) be made
in immediately available funds. With respect to Certificated Notes, the Company
will make all payments of principal, premium, if any, and interest in
immediately available funds to the holders thereof, either at the office or
agency of a Paying Agent or by mailing a check to each such holder's registered
address. Secondary trading in long-term notes and debentures of corporate
issuers is generally settled in clearinghouse or next-day funds. In contrast,
the Notes represented by the Global Note are expected to trade in the
Depositary's Same-Day Funds Settlement System, and secondary market trading
activity in such Notes will, therefore, be required by the Depositary to be
settled in immediately available funds.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an "Event
of Default": (i) default in payment when due of principal on the Notes; (ii)
default for 30 days in the payment when due of interest on the Notes; (iii)
failure by the Company to comply with the provisions described under "Merger,
Consolidation or Sale of Assets"; (iv) failure by the Company for 30 days after
notice to comply with any other covenants or agreements in the Indenture or the
Notes; (v) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any Guarantor, or the payment of which is
guaranteed by the Company or any Guarantor, which default (A) is caused by a
failure to pay when due principal or interest on such Indebtedness within the
grace period provided in the documentation relating to such Indebtedness (a
"Payment Default") or (B) results in the acceleration of such Indebtedness prior
to its stated maturity and, in either case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10.0 million or more; (vi) failure by the Company or
any Guarantor or any Restricted Subsidiary to pay any final judgments
aggregating in excess of $5.0 million which judgments are not stayed within 60
days after their entry; (vii) except as permitted by the Indenture, any
Subsidiary Guarantee is held in any judicial proceeding to be unenforceable or
invalid or ceases for any reason to be in full force and effect or any
Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms
its obligations under its Subsidiary Guarantee; (viii) any Gaming License
relating to a Material Gaming Facility is revoked, terminated or suspended or
otherwise ceases to be effective, resulting in the cessation or suspension of
operation for a period of more than 30 days of any material portion or aspect of
the Gaming Business of any Material Gaming Facility; and (ix) certain events of
bankruptcy or insolvency with respect to the Company or any Restricted
Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately; PROVIDED that in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, with
respect to the Company or any Restricted Subsidiary, all outstanding Notes will
become due and payable without any action or notice. Holders of the Notes will
only be permitted to enforce the Indenture or the Notes in accordance with the
provisions of the Indenture. Subject to certain limitations, holders of a
majority in aggregate principal amount of the Notes then outstanding may direct
the Trustee in its exercise of any
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trust or power. The Trustee may withhold from holders of the Notes notice of any
continuing Default (except a Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default and rescind any resulting acceleration and its
consequences under the Indenture other than a continuing Default in the payment
of the principal of, premium, if any, or interest on, the Notes.
The Company is required by the Indenture to deliver to the Trustee annually
a statement regarding compliance with the Indenture, and the Company is required
upon becoming aware of any Default, to deliver to the Trustee a statement
specifying such Default.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such legal defeasance means that the Company will be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes, except for: (i) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust; (ii) the rights, powers, trust,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith; and (iii) the Legal Defeasance provisions of the Indenture
. In addition, the Company may, at its option and at any time, elect to have all
obligations released with respect to certain covenants and agreements in the
Indenture and the Notes that are described above ("Covenant Defeasance") and
thereafter any omission to comply with such obligations will not constitute a
Default under the Indenture. In the event Covenant Defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described above under the caption, "-- Events of Default and
Remedies", will no longer constitute a Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance: (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes, cash in U.S. dollars, non-callable U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants
satisfactory to the Trustee, to pay the principal of, premium, if any, and
interest on, the outstanding Notes at stated maturity or on the applicable
optional redemption date specified by the Company, as the case may be; (ii) in
the case of Legal Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by the Internal Revenue Service, a
ruling or (B) there has been a change in the applicable provisions of the
Internal Revenue Code of 1986, as amended, since the date of the Indenture, in
each case to the effect that the holders of such Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance, and will be subject to federal income tax in the same amount, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel acceptable to
such Trustee confirming that the holders of such Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income 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; (iv) no Default shall have occurred and be
continuing on the date of such deposit and, insofar as Events of Default
relating to bankruptcy or insolvency events are concerned, at any time during
the period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance shall not result in a breach or violation of,
or constitute a default under the Indenture or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any material assets or property of the Company or any of its Subsidiaries
is bound; and (vi) the Company shall have delivered to the Trustee an Officers'
Certificate stating that (A) such deposit was not made by the Company with the
intent of preferring the holders of the Notes over any other creditors of the
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Company or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or others; and (B) all conditions precedent in
the Indenture and the Notes relating to Legal Defeasance or Covenant Defeasance,
as the case may be, have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture.
The registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents, and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption, and the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
Pursuant to the Indenture, the Company and the Trustee may deem and treat
the registered holder of a Note as the sole owner of such Note for all purposes.
As used herein, the term "holder" is deemed to mean a registered holder of a
Note.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as set forth in the provisions described above under the caption
"Repurchase at the Option of Holders -- Change of Control" and in the next two
paragraphs, any provision of the Notes or the Indenture, may be amended or
supplemented with the consent of the holders of at least a majority in principal
amount of the Notes then outstanding (including consents obtained in connection
with a tender offer or exchange offer for Notes). Any Default, and compliance
with any provision of the Indenture or the Notes (other than a continuing
Default in the payment of the principal of, premium, if any, or interest on, the
Notes), may be waived with the consent of the holders of a majority in principal
amount of the then outstanding Notes (including consents obtained in connection
with a tender offer or exchange offer for Notes).
Without the consent of each holder of Notes affected thereby, an amendment
or waiver of any provision of the Notes or the Indenture may not (i) reduce the
principal amount of Notes whose holders must consent to an amendment, supplement
or waiver; (ii) reduce the principal of or change the stated maturity of any
installment of principal of any Note or alter the provisions with respect to the
redemption of Notes as described under the caption "-- Optional Redemption";
(iii) reduce the rate of or change the time for payment of interest on any Note;
(iv) waive a Default in the payment of principal of or premium, if any, or
interest on the Notes; (v) change the currency in which the Notes are payable;
and (vi) make any change in the provisions of the Indenture relating to waivers
of Defaults or the rights of holders of Notes to receive payments of principal
of, premium, if any, or interest on, the Notes or make any change in the
foregoing amendment and waiver provision.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency in the Indenture of the Notes, to
provide for the assumption of the Company's or any Guarantor's obligations to
holders of the Notes in the case of a merger, consolidation or disposition of
assets in accordance with the provisions of the Indenture, to make any change
that would provide additional rights or benefits to the holders of the Notes, or
to comply with requirements of the Commission in order to maintain the
qualification of the Indenture under the Trust Indenture Act, in each case in a
manner which does not materially and adversely affect the rights under the
Indenture or the Notes of any holder.
CONCERNING THE TRUSTEE
The Trustee will be permitted to engage in transactions with the Company;
however, if the Trustee acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue or
resign.
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The Indenture provides that the holders of a majority in principal amount of
the then outstanding Notes will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. The Indenture provides that in case a
Default shall occur (which shall not be cured), the Trustee will be required in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any holder of Notes, unless such holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Harveys Casino Resorts, Highway 50 and Stateline
Avenue, P.O. Box 128, Lake Tahoe, Nevada 89449, Attention: Secretary.
CERTAIN DEFINITIONS
The meanings of certain defined terms used in the Indenture are summarized
below. Reference is made to the Indenture for the full definitions of such
terms, as well as any other capitalized terms used herein for which no
definition is provided.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling, or controlled by, or under direct or indirect common
control with, such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER,
that in all cases beneficial ownership of 10% or more of the voting securities
of a Person is deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance, transfer or other
disposition (whether in a single transaction or a series of related
transactions) of property or other assets (including by way of a sale and
leaseback) of the Company or any Restricted Subsidiary (each referred to in this
definition as a "disposition") or (ii) the issuance or sale of Equity Interests
of any Restricted Subsidiary (whether in a single transaction or a series of
related transactions); PROVIDED that the following dispositions are excluded
from the dispositions referred to in clause (i) above: (A) dispositions of
inventory or gaming equipment in the ordinary course of business or pursuant to
an established program for the maintenance and upgrading of such equipment; (B)
dispositions of all or substantially all of the assets of the Company in a
manner permitted pursuant to the provisions described above under the captions
"Merger, Consolidation or Sale of Assets" and "Change of Control"; (C) any
disposition that is a Restricted Payment or that is a dividend or distribution
permitted by the provisions described above under the caption "-- Certain
Covenants -- Restricted Payments" and any Investment that is not prohibited by
the provisions described above under the caption "-- Certain Covenants --
Restricted Investments"; and (D) any single disposition, or related series of
dispositions of assets with an aggregate fair market value of less than $5.0
million.
"CAPITAL STOCK" of any Person means any and all shares, interests,
participations, rights or other equivalents (however designated) in the
ownership or profits of such Person.
"CHANGE OF CONTROL" means the occurrence of any of the following events: (i)
the sale, lease, transfer, conveyance or other disposition, in one or a series
of related transactions, of all or substantially all of the assets of the
Company and its Subsidiaries, taken as a whole; (ii) the liquidation or
dissolution of the Company; (iii) the Company becomes aware of (by way of a
report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy
vote, written notice or otherwise) the acquisition by any "Person" or related
group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act, or any successor provision to either of the foregoing, including
any "group" acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than a group consisting of the Company's Existing Management and any Person or
heirs of any Person that owned more than 1.3% of the Company's Common Stock
prior to the Company's initial public offering, in a
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single transaction or in a related series of transactions, by way of merger,
consolidation or other business combination or purchase of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provision) of 40% or more of the total voting power entitled to vote in the
election of the Board of Directors of the Company or such other Person surviving
the transaction; or (iv) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such board or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Company's Board of Directors then in office.
"CONSOLIDATED CASH FLOW" means, for any period, Consolidated Net Income for
such period after deducting therefrom an amount equal to any extraordinary gain
(to the extent such gain was included in computing Consolidated Net Income) and
after adding thereto (i) an amount equal to any extraordinary loss plus any net
loss realized in connection with a sale, lease, conveyance, transfer or other
disposition of property or other assets (other than the disposition of inventory
in the ordinary course of business), to the extent such losses were deducted in
computing Consolidated Net Income, plus (ii) provision for taxes based on income
or profits to the extent such provision for taxes was included in computing
Consolidated Net Income, plus (iii) consolidated interest expense of the Company
and its Restricted Subsidiaries for such period, whether paid or accrued
(including amortization of original issue discount, non-cash interest payments,
amortization of, deferred financing charges and the interest component of
capital lease obligations), to the extent such expense was deducted in computing
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles) and other non-cash charges
(excluding any such non-cash charge that requires an accrual of or reserve for
cash charges for any future period and excluding any such non-cash charge that
is included in consolidated interest expense or consolidated tax expense) of the
Company and its Restricted Subsidiaries for such period to the extent such
depreciation, amortization and other non-cash charges were deducted in computing
Consolidated Net Income, plus (v) any capitalized pre-opening expenses incurred
in connection with the Harveys Kanesville Queen Riverboat Gaming Facility and
related land-based amenities which were reflected on the Company's Consolidated
Statement of Operations for any period ended on or before December 31, 1996 to
the extent that any such expenses were deducted in computing Consolidated Net
Income, in each case, on a consolidated basis, determined in accordance with
GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the Net Income of the
Company and its Restricted Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP, PROVIDED that: (i) the Net Income of
any Person that is not a Subsidiary of the Company or that is accounted for by
the equity method of accounting or that is an Unrestricted Subsidiary is
permitted to be included only to the extent of the amount of dividends or
distributions paid to the Company or a wholly-owned Restricted Subsidiary; (ii)
solely for the purpose of determining the amount of Restricted Payments and
Restricted Investments that are permitted to be made pursuant to the provisions
described under the captions, "-- Certain Covenants -- Restricted Payments" and
"-- Certain Covenants -- Restricted Investments", the Net Income of any other
Person acquired by the Company or any Restricted Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition is
required to be excluded (except to the extent permitted to be included pursuant
to clause (i) above); and (iii) the cumulative effect of a change in accounting
principles is required to be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person, the sum of (i)
the consolidated equity of the common stockholders reported on the most recent
balance sheet of such Person and its consolidated Subsidiaries plus (ii) the
respective amounts reported on such balance sheet with respect to any series of
preferred stock (other than Disqualified Stock) that by its terms is not
entitled to the payment of dividends unless such dividends may be declared and
paid only out of net earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such Person upon
issuance of such preferred stock, after deducting the sum of (x) all write-ups
(other than write-ups resulting from foreign currency translations and write-ups
of tangible assets of a going concern business made within 12 months
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after the acquisition of such business) subsequent to the date of the Indenture
in the book value of any asset owned by such Person or a consolidated Subsidiary
of such Person, (y) all investments in unconsolidated Subsidiaries and in
Persons that are not Subsidiaries (except, in each case, Permitted Investments),
and (z) all unamortized debt discount and expense and unamortized deferred
charges, all of the foregoing determined on a consolidated basis in accordance
with GAAP.
"CREDIT FACILITY" means the Reducing Revolving Credit Agreement dated as of
August 14, 1995 among the Borrower and the banks named therein, as amended or
modified from time to time, including any replacement credit agreement between
the Company and various commercial banks providing for a substantially similar
or equivalent facility.
"DEFAULT" means any event that constitutes, or with the passage of time or
the giving of notice or both would constitute, an Event of Default.
"DESIGNATED SENIOR DEBT" means each issue of Senior Debt of the Company that
(i) has an outstanding principal amount of at least $25,000,000 (including the
amount of all reimbursement obligations pursuant to letters of credit thereunder
and the maximum principal amount available to be drawn thereunder, assuming in
the case of the Credit Facility that all conditions precedent to any such
drawing could be satisfied) and (ii) has been designated as Designated Senior
Debt pursuant to an Officer's Certificate of the Company received by the
Trustee.
"DIRECTOR" means any Person who has been duly elected and qualified as a
member of the Board of Directors of the Company until the expiration of such
Person's term and until his successor has been duly elected and qualified.
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the stated
maturity of the Notes for consideration other than Capital Stock that does not
itself so mature and is not itself so redeemable.
"EQUITY INTEREST" in any Person means Capital Stock of such Person and any
warrant, option or other right to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"EVENT OF DEFAULT" has the meaning specified under the caption "-- Events of
Default and Remedies".
"EXISTING GAMING FACILITY" means any Gaming Facility wholly or partially
owned, used or managed by the Company or a Restricted Subsidiary on the date of
the Indenture.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company or any Restricted
Subsidiary (other than under the Credit Facility) outstanding on the date of the
Indenture.
"EXISTING MANAGEMENT" means the executive officers of the Company on the
date of the Indenture.
"FF&E" means furniture, fixtures and equipment, including gaming equipment,
used in connection with any Gaming Business.
"FF&E FINANCING" means the incurrence of Indebtedness, the proceeds of which
will be used to finance the acquisition by the Company or a Restricted
Subsidiary of FF&E used in connection with any Gaming Facility whether or not
secured by a Lien on such FF&E; PROVIDED that such Indebtedness does not exceed
the fair market value of such FF&E at the time of its acquisition.
"FIXED CHARGES" means for any period the sum of (i) consolidated interest
expense (including the interest component of lease payments under capitalized
leases) of the Company and its Restricted Subsidiaries for such period, in
either case whether paid or accrued, to the extent such expense was deducted in
computing Consolidated Net Income (including amortization of original issue
discount, non-cash interest payments and the interest component of capital
leases but excluding amortization of deferred financing fees and excluding
capitalized interest) and (ii) the product of (A) all cash dividend payments on
any series of
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preferred stock of the Company, times (B) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of the Company, expressed as a decimal, in
each case, on a consolidated basis, in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means for any period the ratio of Consolidated
Cash Flow for such period to Fixed Charges for such period; PROVIDED that: (i)
in the event that the Company or any Restricted Subsidiary incurs, assumes,
guarantees or redeems any Indebtedness or issues preferred stock subsequent to
the commencement of the period for which the Fixed Charge Coverage Ratio is
made, the Fixed Charge Coverage Ratio shall be calculated giving PRO FORMA
effect to such incurrence, assumption, guarantee or redemption of Indebtedness,
or such issuance or redemption of preferred stock, as if the same had occurred
at the beginning of the applicable period; (ii) in making such computation, the
Fixed Charges attributable to interest on any Indebtedness bearing a floating
interest rate shall be computed on a PRO FORMA basis as if the rate in effect on
the date of computation had been the applicable rate for the entire period;
(iii) in making such computation, the Fixed Charges attributable to interest on
any Indebtedness under a revolving credit facility shall be computed on a PRO
FORMA basis based upon the average daily balance of such Indebtedness
outstanding during the applicable period; (iv) in the event that the Company or
any Restricted Subsidiary consummates either (A) a Material Acquisition or (B) a
sale, lease, conveyance, transfer or other disposition of property or other
assets (other than the disposition of inventory in the ordinary course of
business) with a fair market value of more than $5.0 million in any one year, in
either case subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated, the Fixed Charge Coverage Ratio shall
be calculated giving pro forma effect to such Material Acquisition or
disposition (including the incurrence of any Indebtedness in connection
therewith), as if the same had occurred at the beginning of the applicable
period; (v) in the event that the Company or any Restricted Subsidiary purchases
any assets or property which was previously leased by the Company or any
Restricted Subsidiary subsequent to the commencement of the period for which the
calculation of the Fixed Charge Coverage Ratio is being calculated but prior to
the event for which the calculation of the Fixed Charge Coverage Ratio is made,
the Fixed Charge Coverage Ratio shall be calculated giving PRO FORMA effect to
such purchase as if the same had occurred at the beginning of the applicable
period; and (vi) in the event that the Company or any Restricted Subsidiary is
responsible or liable as obligor, guarantor or otherwise for the Indebtedness of
any other Person (other than the Company or a Restricted Subsidiary), the Fixed
Charge Coverage Ratio shall be calculated giving PRO FORMA effect to the
interest paid or payable on such Indebtedness during the applicable period as if
such Indebtedness had been outstanding at the beginning of the applicable
period.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect from time to time.
"GAMING AUTHORITY" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States federal or foreign government, any state, province or any city or other
political subdivision or otherwise, and whether now or hereafter in existence,
or any officer or official thereof, including the Nevada State Gaming
Commission, the Nevada State Gaming Control Board, the Colorado Gaming
Commission, the Iowa Racing & Gaming Commission and any other applicable gaming
regulatory authority with authority to regulate any gaming operation (or
proposed gaming operation) owned, managed or operated by the Company or any of
its Subsidiaries.
"GAMING BUSINESS" means the gaming business and includes all businesses
necessary for, incident to, connected with or arising out of the gaming business
(including developing and operating lodging facilities, sports or entertainment
facilities, transportation services or other related activities or enterprises
and any additions or improvements thereto) to the extent that they are operated
in connection with a gaming business.
"GAMING FACILITY" means any tangible vessel, building, or other structure
used or expected to be used to enclose space in which a Gaming Business is
conducted and (i) wholly or partially owned, directly or
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indirectly, by the Company or any Restricted Subsidiary or (ii) any portion or
aspect of which is managed or used, or expected to be managed or used, by the
Company or a Restricted Subsidiary; PROVIDED that the term Gaming Facility does
not include any real property whether or not such vessel, building or other
structure is located thereon or adjacent thereto or any FF&E.
"GAMING LICENSE" means any license, permit, franchise or other authorization
from any Gaming Authority required on the date of the 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 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 the Indenture, be
subject.
"GUARANTOR" means each Restricted Subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions described under the captions,
"Certain Covenants -- Additional Subsidiary Guarantees" and "Subsidiary
Guarantees", including any successor and assign of such Restricted Subsidiary
until released from its obligations as a Guarantor pursuant to the Indenture.
"INDEBTEDNESS" of any specified Person means, without duplication: (i) the
principal of and premium (if any) in respect of (A) indebtedness of such Person
for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is responsible or
liable; (ii) all capitalized (but not operating) lease obligations of such
Person; (iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction; (v) the
amount of all obligations of such Person with respect to the redemption,
repayment or other repurchase of any Disqualified Stock; (vi) all obligations
existing at the time under interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements, foreign currency swaps and other
similar agreements and arrangements; (vii) all obligations of the types referred
to in clauses (i) through (vi) above of other Persons and all dividends and
distributions of other Persons for the payment of which, in either case, such
specified Person is responsible or liable as obligor, guarantor or otherwise
(including Investment Guarantees, but not including completion bonds,
performance guarantees or similar suretyship arrangements ensuring the
performance of obligations other than obligations of the types referred to in
clauses (i) through (vi) above); and (viii) all obligations of the type referred
to in clauses (i) through (vi) above of other Persons secured by any Lien on any
property or asset of such specified Person (whether or not such obligation is
assumed by such specified Person), the amount of any non-recourse obligation
being deemed to be the lesser of (A) the fair market value of such property or
assets or (B) the amount of the obligation so secured.
"INDEPENDENT", when used to describe a Person, means that neither such
Person nor any member of such Person's immediate family (i) has a material
direct or indirect financial interest in the Company or any other obligor on the
Notes or in any Affiliate of the Company or of any other obligor on the Notes or
(ii) serves as an officer or employee of the Company or any other obligor on the
Notes or any such Affiliate; PROVIDED that for the purpose of this definition
(A) beneficial or record ownership of less than 0.5% of the outstanding Capital
Stock of any class of the Company or any other obligor on the Notes or any such
Affiliate will not be deemed to constitute a material financial interest in the
Company or such other obligor on the Notes or such Affiliate and (B) service on
the board of directors of the Company or any other obligor on the Notes or any
such Affiliate will not be deemed to constitute service as an officer or
employee thereof.
"INTEREST RATE PROTECTION AGREEMENTS" means, with respect to any Person,
interest rate swap agreements, interest rate cap agreements, interest rate
collar agreements and other agreements or arrangements, but only to the extent
that such agreements or arrangements are designed to protect such Person against
fluctuations in interest rates.
"INVESTMENT" means any investment by the Company or a Restricted Subsidiary
in another Person (including an Affiliate of the Company or a Restricted
Subsidiary) in the form of a loan, Investment Guarantee, advance (other than
commission, travel and similar advances to officers and employees of the Company
or a Restricted Subsidiary made in the ordinary course of business), capital
contribution or
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purchase or other acquisition for consideration of Indebtedness, an Equity
Interest or other interest that is or would be classified as an investment on
the balance sheet of the Company or a Restricted Subsidiary prepared in
accordance with GAAP.
"INVESTMENT GUARANTEE" means any direct or indirect liability, contingent or
otherwise, of the Company or a Restricted Subsidiary with respect to any
Indebtedness of another Person, including (i) any Indebtedness directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in the
ordinary course of business) or discounted or sold with recourse by the Company
or a Restricted Subsidiary, or in respect of which the Company or a Restricted
Subsidiary is otherwise directly or indirectly liable, (ii) any other obligation
or contract under which the Company or a Restricted Subsidiary is directly or
indirectly liable for any Indebtedness of another Person and which, in economic
effect, is substantially equivalent to a guarantee, (iii) any Indebtedness of a
partnership in which the Company or a Restricted Subsidiary is a general partner
or of a joint venture in which the Company or a Restricted Subsidiary is a joint
venturer, and (iv) any Indebtedness in effect guaranteed by the Company or a
Restricted Subsidiary through any agreement (contingent or otherwise) to
purchase, repurchase or otherwise acquire such Indebtedness or any security
therefor, or to provide funds for the payment or discharge of such Indebtedness
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise), or to maintain the solvency or any balance sheet or other
financial condition of the obligor of such Indebtedness, or to make payment for
any products, materials or supplies or for any transportation or services
regardless of the non-delivery or nonfurnishing thereof, in any such case if the
purpose or intent of such agreement is to provide assurance that such
Indebtedness will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such Indebtedness will be
protected against loss in respect thereof.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance (other than an operating lease) of any kind in
respect of such asset, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"MARKETABLE SECURITIES" owned by any Person means: (i) U.S. Government
Obligations; (ii) any certificate of deposit, maturing not more than 270 days
after the date of acquisition, issued by, or time deposit of, a commercial
banking institution that has combined capital and surplus of not less than
$500,000,000 or its equivalent in foreign currency, whose debt is rated at the
time as of which any investment is made, of "A" (or higher) according to S&P or
Moody's, or if none of S&P or Moody's shall then exist, the equivalent of such
rating by any other nationally recognized securities rating agency, (iii)
commercial paper, maturing not more than 270 days after the date of acquisition,
issued by a corporation (other than an Affiliate or Subsidiary of such Person)
with a rating, at the time as of which any investment therein is made, of "A-1"
(indicating that the degree of timely payment is strong) (or higher) according
to S&P or "P-1" (having a superior capacity for punctual repayment of short-term
promissory obligations) (or higher) according to Moody's, or if neither of S&P
and Moody's shall then exist, the equivalent of such rating by any other
nationally recognized securities ratings agency; (iv) any bankers acceptances or
any money market deposit accounts, in each case, issued or offered by any
commercial bank having capital and surplus in excess of $500,000,000 or its
equivalent in foreign currency, whose debt is rated at the time as of which any
investment there is made of "A" (an upper medium grade bond obligation) (or
higher) according to S&P or Moody's, or if none of S&P or Moody's shall then
exist, the equivalent of such rating by any other nationally recognized
securities rating agency; and (v) any fund investing exclusively in investments
of the types described in clauses (i) through (iv) above, and if such fund has
at least $500,000,000 under management, including investments in repurchase
obligations of the foregoing investments.
"MATERIAL ACQUISITION" means any acquisition of a business, including the
acquisition of operating commercial real estate, by the Company or a Restricted
Subsidiary that has a fair market value in excess of $5.0 million and which the
Company or a Restricted Subsidiary intends to operate.
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"MATERIAL GAMING FACILITY" on any date means any Existing Gaming Facility
(other than the Hard Rock Hotel) and any other Gaming Facility either (i) which
has contributed more than 20% of the Consolidated Cash Flow of the Company
during the Company's most recently completed four full fiscal quarters for which
internal financial statements are available preceding such date (such
contribution to be annualized if such Gaming Facility has not been in full
operation for all of such four fiscal quarters) or (ii) the book value of which
on such date constitutes more than 10% of the total assets of the Company and
its Restricted Subsidiaries as of the end of the most recently completed fiscal
quarter for which internal financial statements are available.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, EXCLUDING, HOWEVER, (i) any
gain or loss, together with any related provision for taxes on such gain or
loss, realized in connection with any sale, lease, conveyance, transfer or other
disposition of property or other assets of such Person (other than the
disposition of inventory in the ordinary course of business), including
dispositions pursuant to sale and leaseback transactions, and (ii) any
extraordinary gain or loss, together with any related provision for taxes on
such extraordinary gain or loss.
"NET PROCEEDS" means the aggregate case proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including
insurance proceeds), net of the direct costs relating to such Asset Sale
(including legal, accounting and investment banking fees, and sales commissions)
and any relocation expenses incurred as a result thereof, taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets which are
the subject of such Asset Sale and any reserve for adjustment in respect of the
sale price of such asset or assets.
"NON-RECOURSE DEBT" means Indebtedness or that portion of Indebtedness (i)
as to which none of the Company, any Guarantor and any Restricted Subsidiary (A)
provides credit support (including any undertaking, agreement or instrument
which would constitute Indebtedness), (B) is directly or indirectly liable, or
(C) constitutes the lender; and (ii) no default with respect to which (including
any rights which the holders thereof may have to take enforcement action against
an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both)
any holder of any other Indebtedness of the Company, any Guarantor or any
Restricted Subsidiary to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity.
"OBLIGATIONS" means any principal, premium, interest (including
post-petition interest), penalties, fees, indemnifications, reimbursements,
damages and other monetary liabilities payable under the documentation governing
any Indebtedness.
"PAYING AGENT" means the office or agency of the Company designated as such
pursuant to the Indenture.
"PERMITTED INVESTMENT" means: (i) any tangible asset or Marketable
Securities owned by the Company or a Restricted Subsidiary; (ii) any Investment
in the Company or in a Restricted Subsidiary that is a Guarantor; and (iii) any
Investment in any other Person, if immediately after the making of such
Investment (A) such Person becomes a wholly owned Restricted Subsidiary engaged
in the Gaming Business or (B) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a wholly owned Restricted Subsidiary engaged in
the Gaming Business.
"PERMITTED JOINT VENTURE INVESTMENT" means any Investment in (i) a Person
primarily engaged or preparing to engage in the Gaming Business if, at the time
of such Investment, the Company or a Restricted Subsidiary controls the
day-to-day operations of such Person, including the construction or other
acquisition of any buildings, vessels or other facilities and FF&E necessary
for, incident to or connected with such Person's Gaming Business, pursuant to a
management contract or otherwise; PROVIDED that, if such Permitted Joint Venture
Investment in such Person has been made partially or wholly by means of an
Investment Guarantee, (A) the amount of Indebtedness of such Person is not
permitted to exceed 200% of the amount invested in Capital Stock of such Person
prior to the earlier of (x) the date on which all amounts payable under the
Notes and the Indenture have been paid or duly provided for and (y) the maturity
of such loan or
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the termination of such Investment Guarantee and (B) any Indebtedness of such
Person covered by such Investment Guarantee matures by its terms prior to the
time the Company or a Restricted Subsidiary no longer controls the day-to-day
operations of such Person pursuant to a management contract or otherwise unless
all amounts payable under the Notes and the Indenture have been paid or duly
provided for by such time; or (ii) a Person primarily engaged or preparing to
engage in the Gaming 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, including the construction or other acquisition of any buildings,
vessels or other facilities and FF&E necessary for, incident to or connected
with such Person's Gaming Business, pursuant to a management contract or
otherwise, unless such Person is managed solely by its executive officers; or
(iii) a Person primarily engaged in the Gaming Business at the time of such
Investment in Lake Tahoe, Nevada.
"PERMITTED LIENS" means: (i) Liens granted by Restricted Subsidiaries in
favor of the Company; (ii) Liens granted by the Company or a Restricted
Subsidiary in favor of a Restricted Subsidiary that is a Guarantor; (iii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Restricted Subsidiary; PROVIDED, that such
Liens were in existence prior to the contemplation of such merger or
consolidation; (iv) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary; PROVIDED, that such Liens
were in existence prior to the contemplation of such acquisition; (v) Liens to
secure the performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the ordinary
course of business; (vi) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted; PROVIDED,
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (vii) ground leases in
respect of the real property on which facilities owned or leased by the Company
or any Subsidiary are located; (viii) Liens arising from UCC financing
statements regarding property leased by the Company or any Restricted
Subsidiary; (ix) easements, rights-of-way, navigational servitudes,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances which do not interfere in any material respect with the ordinary
conduct of business of the Company or any Restricted Subsidiary; (x) Liens
securing purchase money obligations incurred or assumed in connection with the
purchase of real or Personal property to be used in the business of the Company
or any Restricted Subsidiary within 180 days of such incurrence or assumption;
and (xi) Liens on the Capital Stock of an Unrestricted Subsidiary securing
Investment Guarantees with respect to the Indebtedness of such Unrestricted
Subsidiary.
"PERSON" means any individual, corporation, partnership, trust, incorporated
or unincorporated association, joint venture, joint stock company, government or
other entity.
"REFINANCING INDEBTEDNESS" has the meaning assigned to such term in the
provisions described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness" above.
"REGULAR QUARTERLY DIVIDEND" means the quarterly dividend determined by the
Board of Directors of the Company in its reasonable judgment to be its regular
and normal quarterly dividend and paid by the Company in accordance with the
Company's prior business practices in an amount not to exceed $500,000 per
fiscal quarter.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED PAYMENT" has the meaning assigned to such term in the provisions
described under the caption "-- Certain Covenants -- Restricted Payments" above.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that either (i)
has never been designated as an Unrestricted Subsidiary in accordance with the
provisions described under the caption, "-- Certain Covenants- Designation of a
Subsidiary as an Unrestricted Subsidiary" or (ii) (if such Subsidiary has been
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previously designated as a Unrestricted Subsidiary) has thereafter been
designated as a Restricted Subsidiary in accordance with the provisions
described under the caption "-- Certain Covenants-Designation of an Unrestricted
Subsidiary as a Restricted Subsidiary".
"SENIOR DEBT" means (i) with respect to the Company, (A) the Obligations of
the Company with respect to the Credit Facility and (B) any other Indebtedness
permitted to be incurred by the Company under the terms of the Indenture, unless
the instrument under which such Indebtedness is incurred expressly provides that
it is PARI PASSU with or subordinated in right of payment to the Notes, and (ii)
with respect to any Guarantor, (A) the Obligations of such Guarantor with
respect to the Credit Facility, (B) any Guarantee by such Guarantor of any
Senior Debt of the Company and (C) any other Indebtedness permitted to be
incurred by such Guarantor under the terms of the Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is PARI PASSU with or subordinated in right of payment to the Subsidiary
Guarantee of such Guarantor. Notwithstanding anything to the contrary in the
foregoing, Senior Debt does not include (v) any obligation of the Company or any
Guarantor to, in respect of or imposed by any environmental, landfill, waste
management or other regulatory or governmental agency, statute, law or court
order, (w) any liability for federal, state, local or other taxes owed or owing
by the Company or any Guarantor, (x) any Indebtedness of the Company or any
Guarantor to any of the Company's Subsidiaries, (y) any trade payables or (z)
any Indebtedness that is incurred in violation of the Indenture.
"SUBSIDIARY" of any specified Person means any Person of which more than 50%
of the total voting power of shares of Capital Stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees (or Persons performing similar functions) thereof is at the
time owned or controlled, directly or indirectly, by any such specified Person
or one or more of the other Subsidiaries of such specified Person or a
combination thereof.
"SUBSIDIARY GUARANTEE" has the meaning specified under the caption
"Subsidiary Guarantees".
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that has been
designated as an Unrestricted Subsidiary in accordance with the provisions
described under the caption, "-- Certain Covenants -- Designation of a
Subsidiary as an Unrestricted Subsidiary".
"U.S. GOVERNMENT OBLIGATIONS" means securities that are (a) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
also includes a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to
any such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt; PROVIDED that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness; PROVIDED, HOWEVER, that with respect to any
revolving Indebtedness, the foregoing calculation of Weighted Average Life to
Maturity will be determined based upon the total available commitments and the
required reductions of commitments in lieu of the outstanding principal amount
and the required payments of principal, respectively.
83
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax considerations applicable to the initial holders purchasing the Notes
at the issue price as defined in Section 1273(b)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations promulgated thereunder and
is based upon laws, regulations, rulings and decisions currently in effect, all
of which are subject to change. There can be no assurance that future changes in
the law will not significantly affect the tax treatment of holders of the Notes
("Holders") as described herein. The discussion does not purport to deal with
all aspects of federal taxation that may be relevant to particular investors in
light of their personal investment circumstances, nor does it discuss federal
tax laws applicable to special classes of taxpayers (for example, life insurance
companies, tax-exempt organizations, financial institutions, foreign
corporations and non-resident alien individuals). In addition, the description
does not consider the effect of any foreign, state, local or other tax laws that
may be applicable to a particular investor. Also unaddressed are the tax
consequences to subsequent holders of the Notes. The description assumes that
investors will hold the Notes as capital assets within the meaning of Section
1221 of the Code. Prospective investors are strongly urged to consult their own
tax advisers regarding the tax consequences of purchasing, holding and disposing
of the Notes.
STATED INTEREST
Income from the Notes is subject to federal income tax. Under general
principles of current law, interest on a Note shall be included in income by a
Holder when the interest is received or when it accrues in accordance with the
Holder's regular method of tax accounting.
SALE OR REDEMPTION
A Holder will recognize taxable gain or loss on the sale, exchange,
redemption, retirement or other disposition of the Notes equal to the difference
between the amount realized from such sale, exchange, redemption or retirement
(other than amounts attributable to accrued stated interest which would be
taxable as interest) and the Holder's adjusted tax basis in such Notes. Such
gain or loss generally will be capital gain or loss and will be long-term
capital gain or loss if the holding period for the Notes is more than one year.
BACKUP WITHHOLDING
Under federal income tax law, a Holder may, under certain circumstances, be
subject to "backup withholding" unless such Holder (i) is a corporation, or is
otherwise exempt and, when required, demonstrates this fact or (ii) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. The withholding rate is 31% of "reportable payments" which
include interest and, under certain circumstances, principal payments. A Holder
who does not provide the Company with the correct taxpayer identification number
may be subject to penalties imposed by the IRS. Backup withholding is not an
additional tax. The amount of any backup withholding will be allowed as a credit
against the Holder's federal income tax liability and may entitle such Holder to
a refund, provided that the required information is furnished to the IRS.
OTHER TAX CONSIDERATIONS
There may be other federal, state, local or foreign tax considerations
applicable to the circumstances of a particular prospective purchaser of the
Notes as to which such prospective purchaser should consult a tax advisor.
ACCORDINGLY, EACH INVESTOR SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO
PARTICULAR TAX CONSEQUENCES TO SUCH PURCHASER OF PURCHASING, HOLDING AND
DISPOSING OF THE NOTES.
84
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") among the Company and Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), Salomon Brothers Inc and Bear, Stearns
& Co. Inc. (the "Underwriters"), the Company has agreed to issue and sell to the
Underwriters, and the Underwriters severally have agreed to purchase from the
Company, at the public offering price set forth on the cover page of this
Prospectus less the Underwriting discount, the following respective principal
amounts of the Notes:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- ----------------------------------------------------------------- ------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.............. $
Salomon Brothers Inc.............................................
Bear, Stearns & Co. Inc..........................................
------------
Total.......................................................... $150,000,000
------------
------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
thereunder are subject to certain conditions precedent. The Underwriting
Agreement also provides that the Company will indemnify the Underwriters against
certain liabilities and expenses, including liabilities under the Securities
Act, or will contribute to payments that the Underwriters may be required to
make in respect thereof. The nature of the Underwriters' obligations is such
that they are committed to purchase all of the Notes if any Notes are purchased.
The Underwriters propose to offer the Notes directly to the public initially
at the public offering price set forth on the cover page of this Prospectus.
After the initial public offering of the Notes, the offering price and other
selling terms may be changed by the Underwriters.
In 1995, the Company paid DLJ fees of approximately $100,000 for investment
banking services.
LEGAL MATTERS
Certain matters with respect to the legality of the issuance of the Notes
offered hereby are being passed upon for the Company by Milbank, Tweed, Hadley &
McCloy, Los Angeles, California, and Scarpello & Alling, Ltd., Stateline,
Nevada. Ronald D. Alling, a partner of Scarpello & Alling, Ltd., owns 7,300
shares of Common Stock of the Company. Certain matters with respect to the
legality of the issuance of the Notes offered hereby are being passed upon for
the Underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
The consolidated financial statements of Harveys Casino Resorts as of
November 30, 1993, 1994 and 1995 and for each of the three years in the period
ended November 30, 1995, included in this Prospectus and included elsewhere in
the Registration Statement have been audited by Grant Thornton LLP, independent
certified public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing.
85
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, information statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements, information statements and other information filed by
the Company can be inspected and copied at the public reference facilities
maintained by the Commission at the principal offices of the Commission, Room
1024, 450 Fifth Street, N.W., Washington, D,C. 20549; and at the Commission's
regional offices located at Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661-2511, and at Suite 1300, Seven World
Trade Center, New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. In addition, material filed by the
Company can be inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York, on which exchange the Company's Common Stock
is listed.
The Company has filed with the Commission a Registration Statement on Form
S-1 (herein together with all amendments thereto called the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the Notes offered by this Prospectus. This Prospectus does not
contain all the information set forth or incorporated by reference in the
Registration Statement and the exhibits and schedules relating thereto, certain
portions of which have been omitted as permitted by the rules and regulations of
the Commission. For further information with respect to the Company and the
Notes offered by this Prospectus, reference is made to the Registration
Statement and the exhibits and schedules thereto which are on file at the
offices of the Commission and may be obtained upon payment of the fee prescribed
by the Commission, or may be examined without charge at the offices of the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and are
qualified in all respects by such reference.
The Company intends to furnish Noteholders with annual reports containing
consolidated financial statements audited by independent certified public
accountants following the end of each fiscal year, and with quarterly reports
containing unaudited financial information for each of the first three quarters
of each fiscal year following the end of each such quarter.
86
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HARVEYS CASINO RESORTS
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets -- November 30, 1994 and 1995 and February 29, F-3
1996.....................................................................
Consolidated Statements of Income -- Three Years Ended November 30, 1995 F-4
and Three Months Ended February 28, 1995 and February 29, 1996...........
Consolidated Statements of Stockholders' Equity -- Three Years Ended F-5
November 30, 1995 and Three Months Ended February 29, 1996...............
Consolidated Statements of Cash Flows -- Three Years Ended November 30, F-6
1995 and Three Months Ended February 28, 1995 and February 29, 1996......
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Harveys Casino Resorts
We have audited the accompanying consolidated balance sheets of Harveys
Casino Resorts as of November 30, 1994 and 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended November 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Harveys Casino
Resorts as of November 30, 1994 and 1995, and the consolidated results of its
operations and its consolidated cash flows for each of the three years in the
period ended November 30, 1995, in conformity with generally accepted accounting
principles.
GRANT THORTON LLP
Reno Nevada
January 12, 1996
F-2
<PAGE>
HARVEYS CASINO RESORTS
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------------- FEBRUARY 29,
1994 1995 1996
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets
Cash and cash equivalents................................. $ 7,446,126 $ 10,492,817 $ 15,078,379
Marketable securities..................................... 2,352,346 2,090,896 2,000,172
Accounts receivable, net.................................. 2,628,725 7,739,816 7,241,319
Inventories............................................... 2,889,660 2,689,836 2,685,318
Prepaid expenses.......................................... 5,091,308 5,380,902 3,106,222
Deferred income taxes..................................... 2,954,500 2,479,436 2,475,171
Note receivable........................................... 2,804,107 -- --
------------- ------------- -------------
Total current assets.................................... 26,166,772 30,873,703 32,586,581
------------- ------------- -------------
Property and equipment
Land...................................................... 14,373,178 18,411,985 18,411,853
Buildings and improvements................................ 138,057,370 178,355,013 178,520,651
Leasehold improvements.................................... 20,470,030 20,798,795 20,798,795
Equipment, furniture and fixtures......................... 72,458,798 85,720,036 126,997,898
Construction in progress.................................. 39,874,407 48,425,315 41,829,329
------------- ------------- -------------
285,233,783 351,711,144 386,558,526
Less: Accumulated depreciation............................ (92,994,029) (100,934,188) (104,266,917)
------------- ------------- -------------
192,239,754 250,776,956 282,291,609
------------- ------------- -------------
Notes receivable-affiliates................................. 2,161,912 2,064,771 1,962,774
------------- ------------- -------------
Notes receivable-other...................................... -- 2,796,715 2,796,715
------------- ------------- -------------
Other assets................................................ 7,103,128 12,993,496 13,252,487
------------- ------------- -------------
Investment in unconsolidated affiliates..................... 10,872,919 13,738,103 13,964,717
------------- ------------- -------------
Total assets............................................ $ 238,544,485 $ 313,243,744 $ 346,854,883
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt -- banks and others..... $ 59,267 $ 2,500,153 $ 5,309,372
Current portion of long-term debt -- affiliates........... 3,967,167 3,967,167 3,967,167
Accounts and contracts payable............................ 7,370,561 4,676,008 11,887,723
Accrued expenses.......................................... 8,206,666 13,014,764 16,877,789
Income taxes payable...................................... 259,510 -- 180,981
------------- ------------- -------------
Total current liabilities............................... 19,863,171 24,158,092 38,223,032
Long-term debt, net of current portion
Banks and others.......................................... 56,961,207 118,741,457 139,428,228
Affiliates................................................ 7,934,333 7,934,333 7,934,333
Deferred income taxes....................................... 16,017,828 15,895,084 14,590,808
Minority interest in subsidiary............................. 2,434,867 1,757,659 1,590,803
Other liabilities........................................... 11,722,131 12,456,033 13,307,677
------------- ------------- -------------
Total liabilities....................................... 114,933,537 180,942,658 215,074,881
------------- ------------- -------------
Commitments and contingencies............................... -- -- --
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000 shares
authorized; none issued.................................. -- -- --
Common stock, $.01 par value; 30,000,000 shares
authorized; issued 9,348,823 (1994), 9,402,657 (1995),and
9,421,323 (1996), respectively........................... 93,488 94,026 94,213
Paid-in capital........................................... 30,511,349 31,524,152 31,785,289
Treasury stock, at cost; 2,101 shares (1994), 5,350 shares
(1995) and 8,333 shares (1996)........................... (28,765) (79,733) (122,366)
Deferred compensation..................................... (1,181,719) (1,196,828) (963,329)
Retained earnings......................................... 94,216,595 102,063,739 101,111,805
Net unrealized loss on marketable securities.............. -- (104,270) (125,610)
------------- ------------- -------------
Total stockholders' equity.............................. 123,610,948 132,301,086 131,780,002
------------- ------------- -------------
Total liabilities and stockholders' equity.............. $ 238,544,485 $ 313,243,744 $ 346,854,883
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
HARVEYS CASINO RESORTS
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED NOVEMBER 30, ---------------------------
---------------------------------------- FEBRUARY 28, FEBRUARY 29,
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues
Casino.......................................... $ 87,523,577 $ 83,991,219 $121,368,981 $26,826,708 $36,935,145
Lodging......................................... 22,291,995 21,870,098 25,499,036 5,725,977 6,064,864
Food and beverage............................... 31,010,918 29,768,248 33,969,834 7,865,099 8,428,423
Other........................................... 5,865,682 5,598,637 6,287,024 1,533,333 1,541,052
Management fees and joint venture............... -- -- 1,668,934 -- 1,059,988
Less: Casino promotional allowances............. (14,433,104) (12,942,596) (15,593,778) (3,614,517) (4,555,922)
------------ ------------ ------------ ------------ ------------
Total net revenues............................ 132,259,068 128,285,606 173,200,031 38,336,600 49,473,550
------------ ------------ ------------ ------------ ------------
Costs and expenses
Casino.......................................... 43,235,130 40,990,905 57,379,793 13,469,015 19,762,515
Lodging......................................... 6,533,818 6,737,382 9,073,023 2,077,344 2,289,036
Food and beverage............................... 17,271,479 17,408,117 20,255,928 4,985,354 4,346,290
Other operating................................. 2,733,352 2,557,249 2,844,044 674,217 645,179
Selling, general and administrative............. 38,158,629 40,505,964 50,813,623 12,497,060 14,384,995
Depreciation and amortization................... 10,300,187 9,703,705 12,332,956 3,015,316 3,560,829
Nonrecurring compensation charges............... 1,833,500 -- -- -- --
Pre-opening expenses............................ -- -- 2,146,667 2,146,667 3,590,012
------------ ------------ ------------ ------------ ------------
Total costs and expenses...................... 120,066,095 117,903,322 154,846,034 38,864,973 48,578,856
------------ ------------ ------------ ------------ ------------
Operating income (loss)......................... 12,192,973 10,382,284 18,353,997 (528,373) 894,694
------------ ------------ ------------ ------------ ------------
Other income (expense)
Interest income................................. 302,915 679,940 950,525 161,059 197,601
Interest expense................................ (4,559,061) (3,566,055) (8,910,714) (1,886,496) (2,151,123)
Life insurance benefits......................... -- 371,449 2,245,520 -- --
Other, net...................................... (134,184) (229,703) 605,933 506,646 163,077
------------ ------------ ------------ ------------ ------------
(4,390,330) (2,744,369) (5,108,736) (1,218,791) (1,790,445)
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes............. 7,802,643 7,637,915 13,245,261 (1,747,164) (895,751)
Income tax (provision) benefit.................... (2,993,881) (2,500,000) (3,900,000) 630,000 320,000
------------ ------------ ------------ ------------ ------------
Net income (loss)................................. $ 4,808,762 $ 5,137,915 $ 9,345,261 $(1,117,164) $ (575,751)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net income (loss) per share....................... $ 0.67 $ 0.58 $ 0.99 $ (0.12) $ (0.06)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Weighted average shares used in calculating
earnings per share............................... 7,181,730 8,885,525 9,456,051 9,360,095 9,483,449
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
HARVEYS CASINO RESORTS
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30, THREE MONTHS ENDED
--------------------------------------- FEBRUARY 29,
1993 1994 1995 1996
----------- ------------ ------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Common Stock
Balance at beginning the period............ $ 70,262 $ 69,022 $ 93,488 $ 94,026
Common stock acquired for retirement....... (1,240) -- -- --
Net proceeds from public stock offering.... -- 22,500 -- --
Issuance of restricted stock............... -- 1,765 505 --
Issuance of employees' stock............... -- 201 -- --
Stock options exercised.................... -- -- 33 187
----------- ------------ ------------ ------------------
Balance at end of the period........... 69,022 93,488 94,026 94,213
----------- ------------ ------------ ------------------
Additional Paid-in capital
Balance at beginning of the period......... -- -- 30,511,349 31,524,152
Net proceeds from public stock offerings... -- 27,760,453 -- --
Issuance of restricted stock............... -- 2,469,235 969,245 --
Issuance of employees' stock............... -- 281,661 -- --
Stock options exercised.................... -- -- 43,558 261,137
----------- ------------ ------------ ------------------
Balance at end of the period........... -- 30,511,349 31,524,152 31,785,289
----------- ------------ ------------ ------------------
Treasury Stock
Balance at beginning of the period......... -- -- (28,765) (79,733)
Forfeiture of restricted stock............. -- (15,750) (24,500) (38,500)
Acquisition of treasury stock.............. -- (13,015) (26,468) (4,133)
----------- ------------ ------------ ------------------
Balance at end of the period........... -- (28,765) (79,733) (122,366)
----------- ------------ ------------ ------------------
Deferred Compensation
Balance at beginning of the period......... -- -- (1,181,719) (1,196,828)
Issuance of restricted stock............... -- (1,853,250) (969,750) --
Amortization of deferred compensation...... -- 655,781 930,141 194,999
Forfeiture of restricted stock............. -- 15,750 24,500 38,500
----------- ------------ ------------ ------------------
Balance at end of the period........... -- (1,181,719) (1,196,828) (963,329)
----------- ------------ ------------ ------------------
Retained Earnings
Balance at beginning of the period......... 87,199,248 90,200,350 94,216,595 102,063,739
Net income (loss).......................... 4,808,762 5,137,915 9,345,261 (575,751)
Cash dividends declared.................... (800,000) (1,121,670) (1,498,117) (376,183)
Common stock acquired for retirement....... (1,007,660) -- -- --
----------- ------------ ------------ ------------------
Balance at end of the period........... 90,200,350 94,216,595 102,063,739 101,111,805
----------- ------------ ------------ ------------------
Minimum Pension Liability Adjustment
Balance at beginning of the period......... -- (261,013) -- --
Minimum pension liability adjustments...... (261,013) 261,013 -- --
----------- ------------ ------------ ------------------
Balance at end of the period........... (261,013) -- -- --
----------- ------------ ------------ ------------------
Net Unrealized Gain (Loss) on Marketable
Securities
Balance at beginning of the period......... -- -- -- (104,270)
Recognized loss on marketable securities... -- -- 16,683 4,456
Net unrealized loss on marketable
securities................................ -- -- (120,953) --
Change in unrealized loss on marketable
securities................................ -- -- -- (25,796)
----------- ------------ ------------ ------------------
Balance at end of the period........... -- -- (104,270) (125,610)
----------- ------------ ------------ ------------------
Total Stockholders' Equity................... $90,008,359 $123,610,948 $132,301,086 $131,780,002
----------- ------------ ------------ ------------------
----------- ------------ ------------ ------------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
HARVEYS CASINO RESORTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED NOVEMBER 30, -----------------------------
---------------------------------------- FEBRUARY 28, FEBRUARY 29,
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Increase (decrease) in cash and cash
equivalents
Cash flows from operating activities:
Net income (loss).......................... $ 4,808,762 $ 5,137,915 $ 9,345,261 $ (1,117,164) $ (575,751)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............ 10,300,187 9,703,705 12,332,956 3,015,316 3,560,829
Net loss on disposition of assets........ 189,899 63,547 72,247 -- --
Equity in loss of unconsolidated
affiliates............................... -- 206,604 731,724 3,071 (281,947)
Net loss on sale of marketable
securities............................... -- 53,975 16,682 -- 4,456
Amortization of deferred compensation.... -- 655,781 930,141 149,165 194,999
Minority interest in loss of consolidated
subsidiary.............................. -- (26,408) (677,008) (492,473) (166,856)
Deferred income taxes.................... 1,699,281 572,422 352,320 (430,679) (1,300,011)
Accrued pension costs.................... 1,153,245 1,707,187 1,683,018 626,215 371,302
Accrued long-term compensation........... (295,036) 348,020 51,170 74,004 110,520
(Increase) decrease in assets:
Accounts receivable, net............... (721,220) 587,169 (5,111,091) (2,192,074) 498,497
Inventories............................ 222,684 (510,725) 116,986 17,648 (79,745)
Prepaid expenses....................... (433,365) (2,600,014) (289,594) 892,474 2,274,680
Other assets........................... (1,189,307) (1,032,071) (6,100,952) 1,988,552 (348,957)
Increase (decrease) in liabilities:
Accounts and contracts payable......... 693,115 (1,394,086) (2,694,274) 1,243,770 2,311,864
Accrued expenses....................... 138,990 (1,458,259) 4,808,098 966,767 3,311,128
Income taxes payable................... (1,004,000) 259,510 (259,510) -- 180,981
Other liabilities...................... -- 1,832,145 (1,038,482) 1,480,149 851,644
------------ ------------ ------------ ------------- -------------
Net cash provided by operating
activities........................... 15,563,235 14,106,417 14,269,692 6,224,741 10,917,633
------------ ------------ ------------ ------------- -------------
Cash flows from investing activities:
Proceeds from disposition of assets........ 410,045 109,660 220,455 -- --
Capital expenditures....................... (10,648,152) (32,456,134) (70,709,232) (9,548,967) (29,654,607)
Proceeds from sale of marketable
securities................................. 2,169,450 536,776 300,000 -- 100,000
Purchase of marketable securities.......... (202,612) (172,778) (159,498) (38,915) (35,072)
Advances to related party trust............ (688,497) (455,275) -- -- --
Investment in real estate and other
assets..................................... (3,527,221) -- -- -- --
Acquisition of subsidiary, net of cash
acquired................................... (3,105,380) -- -- -- --
Investment in unconsolidated affiliates.... (10,000,000) (806,400) (4,000,500) (4,000,500) --
Advances to employees...................... -- (491,498) (184,949) -- --
Proceeds from notes receivable............. -- 230,749 289,482 56,314 101,997
------------ ------------ ------------ ------------- -------------
Net cash used in investing
activities........................... (25,592,367) (33,504,900) (74,244,242) (13,532,068) (29,487,682)
------------ ------------ ------------ ------------- -------------
Cash flows from financing activities:
Proceeds from short-term financing......... 483,156 498,001 675,356 -- --
Principal payments on short-term
financing.................................. (716,607) (535,635) (394,257) (182,947) (221,386)
Proceeds from long-term debt............... 36,000,000 31,550,000 188,957,237 20,475,000 49,000,000
Principal payments on long-term debt....... (34,326,391) (42,881,518) (124,736,101) (5,517,821) (25,504,011)
Principal payments on related party debt... (261,426) -- -- -- --
Acquisition and retirement of stock........ (1,008,900) -- -- -- --
Stock options exercised.................... -- -- 43,591 -- 261,324
Dividends paid............................. (900,000) (1,421,670) (1,498,117) (373,856) (376,183)
Net proceeds from public stock offering.... -- 28,310,123 -- -- --
Acquisition of treasury stock.............. -- (13,015) (26,468) (7,657) (4,133)
------------ ------------ ------------ ------------- -------------
Net cash provided by (used in)
financing activities................ (730,168) 15,506,286 63,021,241 14,392,719 23,155,611
------------ ------------ ------------ ------------- -------------
Increase (decrease) in cash and cash
equivalents......................... (10,759,300) (3,892,197) 3,046,691 7,085,392 4,585,562
Cash and cash equivalents at beginning of
period...................................... 22,097,623 11,338,323 7,446,126 7,446,126 10,492,817
------------ ------------ ------------ ------------- -------------
Cash and cash equivalents at end of period... $ 11,338,323 $ 7,446,126 $ 10,492,817 $ 14,531,518 $ 15,078,379
------------ ------------ ------------ ------------- -------------
------------ ------------ ------------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION
Harveys Casino Resorts, a Nevada corporation, is a company engaged in the
casino entertainment industry. Harveys Casino Resorts owns and operates Harveys
Resort Hotel/Casino on the south shore of Lake Tahoe, Nevada. Through its wholly
owned subsidiary, Harveys C. C. Management Company, Inc. ("HCCMC"), the Company
owns 70% of the equity interest in Harveys Wagon Wheel Casino Limited Liability
Company ("HWW") which owns Harveys Wagon Wheel Hotel/Casino in Central City,
Colorado. HCCMC has a contract to manage the Central City hotel and casino which
opened for business on December 2, 1994. Through its wholly owned subsidiary,
Harveys L. V. Management Company, Inc.("HLVMC"), the Company owns 40% of the
equity interest in Hard Rock Hotel, Inc. which owns the Hard Rock Hotel and
Casino in Las Vegas, Nevada. HLVMC has a contract to manage the Las Vegas hotel
and casino which opened for business on March 9, 1995. Additionally, the
Company's wholly owned subsidiary, Harveys Iowa Management Company, Inc.
("HIMC") is developing a riverboat casino, hotel, convention center complex in
Council Bluffs, Iowa. The riverboat casino portion of the complex opened for
business on January 1, 1996.
The consolidated financial statements include the accounts of Harveys Casino
Resorts and its majority and wholly-owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated.
Investments in unconsolidated affiliates are stated at cost adjusted by equity
in undistributed earnings or losses.
On January 21, 1994, the Company effected a 2,385-for-1 split of the
Company's common stock. Retroactive effect has been given to this stock split in
the accompanying consolidated financial statements, and all share and per share
data for all periods presented has been adjusted to reflect this action.
INTERIM FINANCIAL STATEMENTS
The consolidated financial statements for the three months ended February
28, 1995 and February 29, 1996 are unaudited; however, in the opinion of
management, all adjustments, consisting of normal recurring adjustments
necessary for a fair presentation of the Company's financial position and
results of operations for such periods have been included. The results of the
three months ended February 29, 1996 are not necessarily indicative of the
results that may be expected for the year ending November 30, 1996.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and in banks, interest
bearing deposits and highly liquid debt instruments purchased with initial
maturities of three months or less. Cash equivalents are carried at cost which
approximates market value. The Company paid interest of approximately
$5,031,000, net of $210,000 capitalized, $3,513,000, net of $1,860,000
capitalized and $6,602,000, net of $1,112,364 capitalized, and income taxes of
approximately $2,900,000, $1,250,000 and $4,600,000 during the years ended
November 30, 1993, 1994 and 1995, respectively. The Company made cash payments
for interest of $1.4 million and $2.0 million during the three months ended
February 28,1995 and February 29, 1996, respectively. There was $1.1 million of
interest capitalized in the first three months of fiscal 1996, and no interest
capitalized in the same period of fiscal 1995. The Company made a cash payment
for income taxes of
F-7
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$200,000 in the first quarter of fiscal 1995. No such payment was made during
the same period of fiscal 1996. In 1993, the Company acquired a 70% ownership
interest in HWW. The investment is reflected in the consolidated statement of
cash flows as acquisition of subsidiary, net of cash acquired, calculated as
follows:
<TABLE>
<S> <C>
Land........................................................... $ 9,600,000
Construction in progress....................................... 7,862,010
Other assets................................................... 6,917
Notes payable.................................................. (11,901,500)
Minority interest in subsidiary................................ (2,462,047)
-----------
$ 3,105,380
-----------
-----------
</TABLE>
MARKETABLE SECURITIES
As of December 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES. Under SFAS No. 115, the Company's marketable
securities have been classified as "available-for-sale" and are stated at market
value, with any unrealized gains or losses excluded from income and reported as
a separate component of stockholders' equity for fiscal year 1995 and the three
months ended February 29, 1996. Market value is determined by the closing price
of the security as of the balance sheet date. Net realized gains or losses are
determined on the average cost method. Marketable securities at November 30,
1994 and 1995 and at February 29, 1996 consisted of shares in one mutual fund.
The adoption of SFAS No. 115 did not have a material effect on the Company's
financial position or net income.
CASINO REVENUES AND PROMOTIONAL ALLOWANCES
In accordance with industry practice, the Company recognizes as casino
revenues the net win from gaming activities, which is the difference between
gaming wins and losses. Promotional allowances consist principally of the retail
value of complimentary rooms, food, beverage, and other promotional allowances
provided to customers without charge. The estimated costs of providing such
complimentary services have been classified as casino operating expenses through
interdepartmental allocations as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED NOVEMBER 30, ---------------------------
----------------------------------- FEBRUARY 28, FEBRUARY 29,
1993 1994 1995 1995 1996
---------- ---------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Hotel........................................ $1,452,719 $1,234,021 $ 1,592,463 $ 408,018 $ 595,044
Food and beverage............................ 7,533,812 6,439,432 8,566,136 1,912,175 2,374,810
Other........................................ 124,824 74,115 52,596 11,273 16,702
---------- ---------- ----------- ------------ ------------
$9,111,355 $7,747,568 $10,211,195 $ 2,331,466 $ 2,986,556
---------- ---------- ----------- ------------ ------------
---------- ---------- ----------- ------------ ------------
</TABLE>
INVENTORIES
Inventories consist primarily of operating supplies and food and beverage
stock, and are stated at the lower of weighted average cost or market.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Interest incurred during
construction is capitalized and amortized over the life of the asset. Costs of
improvements are capitalized. Costs of normal repairs and maintenance are
charged to expense as incurred. Upon the sale or retirement of property and
equipment,
F-8
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the cost and related accumulated depreciation are removed from the respective
accounts, and the resulting gain or loss, if any, is included in income.
Depreciation of property and equipment is provided on the straight-line method
over the estimated useful lives of the respective assets. Leasehold improvements
are amortized over the shorter of the asset life or lease term. Depreciable
lives are as follows:
<TABLE>
<S> <C>
Buildings and improvements................... 15 to 45 years
Leasehold improvements....................... 5 to 30 years
Equipment, furniture and fixtures............ 5 to 10 years
</TABLE>
UNAMORTIZED LOAN COSTS
Loan costs incurred in connection with the establishment of a reducing,
revolving credit agreement are being amortized to interest expense over the term
of the loan using the interest method. Unamortized loan costs associated with a
loan agreement retired in fiscal 1995 were expensed during the year.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed based on the weighted average number
of shares of common stock and dilutive common stock equivalents outstanding
during the period. However, pursuant to SEC Staff Accounting Bulletins,
equivalent shares from common stock issued under certain of the Company's
benefit plans in connection with the Company's initial public offering have been
included in the computations as if they were outstanding for all periods
presented.
Fully diluted earnings per share amounts are the same as primary per share
amounts for the periods presented.
INCOME TAXES
Income taxes are recorded in accordance with the liability method specified
by SFAS No. 109. The following basic principles are applied in accounting for
income taxes: (a) a current liability or asset is recognized for the estimated
taxes payable or refundable for the current year; (b) a deferred tax liability
or asset is recognized for the estimated future tax effects attributable to
temporary differences and carryforwards; (c) the measurement of current and
deferred tax liabilities and assets is based on the provisions of the enacted
tax law, the effects of future changes in tax laws or rates are not anticipated;
and (d) the measurement of deferred taxes is reduced, if necessary, by the
amount of any tax benefits that, based upon available evidence, are not expected
to be realized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
requires the determination of fair value for certain of the Company's assets,
liabilities and contingent liabilities. When practicable, the following methods
and assumptions were used to estimate the fair value of those financial
instruments included in the following categories:
Cash and cash equivalents: The carrying amount reported in the balance
sheet approximates fair value.
Notes receivable: The fair value of notes receivable is based upon
projected cash flows discounted at estimated current market rates of interest.
Long-term debt: The fair value of long-term debt is estimated based on the
current borrowing rates offered to the Company for debt of the same remaining
maturities.
F-9
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
It is estimated that the carrying amounts of the Company's financial
instruments approximate fair value at November 30, 1995 and February 29,1996.
CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash in bank deposit accounts which, at times, may
exceed Federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business. These financial instruments include standby
letters of credit and financial guarantees. The contract amounts of those
instruments reflect the extent of involvement the Company has in particular
classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for standby letters of credit and
financial guarantees written is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. The Company
does not have collateral or other security to support financial instruments with
off-balance-sheet credit risk.
FUTURE DEVELOPMENT COSTS
The Company capitalizes costs associated with new gaming projects until: (a)
the project is no longer considered viable and the costs are expensed; or (b)
the likelihood of the project is relatively certain and the costs are
reclassified to pre-opening and expensed when operations commence. Capitalized
future development costs, relating to potential new gaming projects, of
approximately $820,000,$724,000 and $891,000 as of November 30, 1994 and
1995,and February 29, 1996, respectively, are included on the accompanying
balance sheet as other assets.
PRE-OPENING EXPENSES
Pre-opening expenses are associated with the acquisition, development and
opening of the Company's new casino resorts. These amounts will be expensed when
the casino commences operations and include items that were capitalized as
incurred prior to opening and items that are directly related to the opening of
the property and are non-recurring in nature. As of November 30, 1995
approximately $2.1 million incurred in connection with the Harveys Kanesville
Queen project in Council Bluffs, Iowa was included in prepaid expenses on the
Company's balance sheet. Approximately $3.6 million was expensed in the first
quarter of 1996 in conjunction with the Company's opening of the Harveys
Kanesville Queen project in January, 1996.
MINORITY INTEREST
Minority interest represents the minority member's proportionate share of
equity in the consolidated entity.
STOCK OPTIONS
The Company will adopt SFAS No. 123- ACCOUNTING FOR STOCK-BASED
COMPENSATION, which is effective for fiscal years beginning after December 15,
1995, or earlier as permitted. As provided by SFAS No. 123, the Company will
continue to account for employee stock options under Accounting Principles Board
(APB)
F-10
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Opinion No. 25- ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. The Company will
disclose the proforma net income and earnings per share effect, as if the
Company had used the fair value based method prescribed under SFAS No. 123.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the current year presentation. These
reclassifications have no effect on net income (loss).
2. SALE OF COMMON STOCK
During February 1994, the Company sold 2,250,000 shares of common stock in
an initial public offering which generated net proceeds of approximately $27.8
million after deducting underwriting discounts and expenses. In addition,
stockholders of the Company sold 1,200,000 shares of common stock in the public
offering and received proceeds, net of underwriting discounts, of approximately
$15.6 million.
3. ACCOUNTS RECEIVABLE, NET
Accounts receivable, net of allowance for uncollectible accounts, consist of
the following as of:
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 29,
----------------------- ------------
1994 1995 1996
---------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Casino....................................... $ 653,847 $ 1,405,834 $ 1,865,172
Hotel........................................ 813,041 593,629 1,160,578
Refundable income taxes...................... -- 799,123 799,123
Unconsolidated affiliate..................... 572,965 1,208,426 709,777
Other........................................ 730,876 3,903,017 2,927,484
---------- ----------- ------------
2,770,729 7,910,029 7,462,134
Less allowance for doubtful accounts......... (142,004) (170,213) (220,815)
---------- ----------- ------------
$2,628,725 $ 7,739,816 $ 7,241,319
---------- ----------- ------------
---------- ----------- ------------
</TABLE>
4. ACCRUED EXPENSES
Accrued expenses consist of the following as of:
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 29,
----------------------- ------------
1994 1995 1996
---------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Provision for progressive jackpot payouts.... $ 756,650 $ 1,081,537 $ 1,150,146
Accrued interest............................. 235,750 2,546,329 3,826,212
Accrued salaries, wages and other employee
benefits.................................... 3,601,995 4,316,216 4,577,340
Accrued taxes other than income taxes........ 353,653 907,128 2,207,637
Self-funded workers' compensation and medical
claims accrual.............................. 1,637,020 1,568,679 1,582,862
Outstanding gaming chips and tokens.......... 789,053 1,147,689 1,001,397
Race and sports book futures and unclaimed
winners..................................... 501,876 684,797 490,759
Other accrued liabilities.................... 330,669 762,389 2,041,436
---------- ----------- ------------
$8,206,666 $13,014,764 $ 16,877,789
---------- ----------- ------------
---------- ----------- ------------
</TABLE>
F-11
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
5. LONG-TERM DEBT
Long-term debt consists of the following as of:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------- FEBRUARY 29,
1994 1995 1996
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Subordinated notes payable to affiliates..... $11,901,500 $ 11,901,500 $ 11,901,500
Less current portion......................... 3,967,167 3,967,167 3,967,167
----------- ------------ ------------
$ 7,934,333 $ 7,934,333 $ 7,934,333
----------- ------------ ------------
----------- ------------ ------------
Banks and others
Note payable to banks...................... $56,500,000 $115,000,000 $109,500,000
Notes payable to financing company......... -- 5,799,817 5,218,845
Note payable -- riverboat financing........ -- -- 19,583,333
Note payable to private investor........... -- -- 10,000,000
Note payable to lessee, due in monthly
installments of $6,356, including interest
at 10%, collateralized by future rental
receipts, due September, 1998............. 265,951 194,509 188,138
Other...................................... 254,523 247,284 247,284
----------- ------------ ------------
57,020,474 121,241,610 144,737,600
Less current portion....................... 59,267 2,500,153 5,309,372
----------- ------------ ------------
$56,961,207 $118,741,457 $139,428,228
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
Aggregate annual maturities of long-term debt, based on amounts borrowed as
of November 30, 1995, are as follows:
<TABLE>
<CAPTION>
YEARS ENDING NOVEMBER 30, BANKS AND OTHERS AFFILIATES
- ------------------------------------------------------------ ----------------- -------------
<S> <C> <C>
1996........................................................ $ 2,500,153 $ 3,967,167
1997........................................................ 17,818,547 --
1998........................................................ 15,702,563 --
1999........................................................ 22,511,089 --
2000........................................................ 62,512,336 --
2001 and thereafter......................................... 196,922 7,934,333
----------------- -------------
$ 121,241,610 $ 11,901,500
----------------- -------------
----------------- -------------
</TABLE>
NOTE PAYABLE TO BANKS
Prior to August 16, 1995, the Company had a reducing term loan agreement
(the "Loan Agreement") with a consortium of banks. The outstanding principal
balance on the Loan Agreement was $56.5 million on November 30, 1994. As a
result of the Company selling its interest in its $28.0 million loan to its
majority owned subsidiary, HWW, to First Interstate Bank of Nevada ("FIBN") in
March, 1995, HWW was obligated to FIBN for the $28.0 million outstanding balance
on August 16, 1995.
F-12
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
5. LONG-TERM DEBT (CONTINUED)
On August 14, 1995, the Company entered into a reducing revolving credit
agreement (the "Credit Facility") with a consortium of banks. On August 16,
1995, the Company borrowed $89.0 million under the Credit Facility and used the
funds to repay the outstanding balance of the Loan Agreement, repurchase the
$28.0 million loan to HWW and pay fees related to the Credit Facility.
Under the Credit Facility, the Company could borrow up to $150,000,000. The
advanced but unpaid principal balance under the note payable, as of November 30,
1995, and February 29,1996, was $115,000,000 and $109,500,000, respectively. The
maximum available principal balance is further reduced by any letter of credit
exposure. Outstanding letters of credit amounted to approximately $1.7 million
as of November 30, 1995 and approximately $2.2 million as of February 29, 1996.
The Company may borrow additional funds up to predetermined maximum principal
balances. The loan matures in August, 2000. The annual year-end maximum
principal balances are as follows:
<TABLE>
<CAPTION>
MAXIMUM
PRINCIPAL
NOVEMBER 30, BALANCE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
1996........................................................................ $ 150,000,000
1997........................................................................ 135,000,000
1998........................................................................ 120,000,000
1999........................................................................ 97,500,000
</TABLE>
The Company pays quarterly fees at an annual rate of three-eights (0.375%)
or one-half of one percent (0.5%) on the unborrowed maximum principal balance
depending on the Company's ratio of funded debt to earnings before interest,
taxes, depreciation and amortization. The rate in affect at November 30,1995 and
February 29,1996 was 0.5%.
Interest is due and payable monthly and is provided at the higher of the
prime rate or the Federal Funds Rate plus one-half of one percent (0.5%), plus
an applicable margin determined by the Company's ratio of funded debt to
earnings before interest, taxes, depreciation and amortization. However, in
accordance with the terms of the Credit Facility, the Company has the option to
cause portions, or all, of the outstanding principal balance to accrue interest
at a rate equal to the London Inter-Bank Offering Rate (LIBOR) plus the
applicable margin. As a result of LIBOR options made by the Company, the
following principal amounts are subject to the following interest rates as of
November 30, 1995 and February 29, 1996.
<TABLE>
<CAPTION>
NOVEMBER 30, 1995 EXPIRATION DATE AMOUNT RATE
- --------------------------------------------- ---------------------- ------------- ---------
<S> <C> <C> <C>
LIBOR........................................ December 13, 1995 $ 11,000,000 8.3750%
LIBOR........................................ December 22, 1995 15,000,000 8.3125%
LIBOR........................................ May 21, 1996 89,000,000 8.2500%
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 29, 1996 EXPIRATION DATE AMOUNT RATE
- --------------------------------------------- ---------------------- ------------- ---------
<S> <C> <C> <C>
LIBOR........................................ March 13, 1996 $ 15,500,000 8.3125%
LIBOR........................................ May 21, 1996 89,000,000 8.2500%
Prime........................................ August 16,2000 5,000,000 9.2500%
</TABLE>
The note is collateralized by all of the Company's property and equipment,
contract rights, leases, intangibles and other security interest related to
Harveys Resort Hotel/Casino, Harveys Wagon Wheel Hotel/Casino and the Company's
wholly-owned subsidiary,HIMC. The Credit Agreement also contains covenants which
require the Company to maintain certain financial ratios. A member of the
Company's Board of Directors is also a director of the lead bank of the
consortium of banks making the loan.
F-13
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
5. LONG-TERM DEBT (CONTINUED)
NOTES PAYABLE TO FINANCING COMPANY
HWW entered into an equipment financing agreement with a financing company
to finance the acquisition of up to $7.5 million of gaming and associated
equipment. The principal balance of secured notes under the equipment financing
agreement as of November 30, 1995 and February 29, 1996 was $5.8 million and
$5.2 million, respectively. The notes are secured by the equipment acquired and
are payable in monthly payments of approximately $194,000 and $56,000 including
interest at 12.15%. The notes will mature in December, 1997 and July 1998,
respectively.
NOTE PAYABLE, RIVERBOAT FINANCING
On December 26, 1995, HIMC entered into a $20 million Loan and Security
Agreement ( the "Iowa Loan"). As security for the loan, HIMC granted the lender
a first preferred ship mortgage on the riverboat casino vessel known as the
Harveys Kanesville Queen and a first priority security interest in all
personalty, earnings and insurance from the riverboat only, excluding
personalty, earnings and insurance derived from casino gaming operations. The
obligation under the Iowa Loan is guaranteed by the Company.
The loan bears interest at a fixed rate of 8.42% per annum. Principal and
interst payments commenced in January, 1996 and are due monthly. The loan
matures in December 2000. Principal payments are fixed for each twelve month
period and increase annually with the January payments. The initial installment
of principal and interest was approximately $349,000 and the final installment,
due in December 2000, will be approximately $412,000.
NOTE PAYABLE TO PRIVATE INVESTOR
On February 9, 1996, the Company entered into a $10 million Loan Agreement
with a private investor (the "Promissory Note"). As security for the Promissory
Note, the Company granted a deed of trust as a first mortgage lien on real
property owned by HCCMC adjacent to Harveys Wagon Wheel Hotel/Casino. Terms of
the Promissory Note require the Construciton Commencement Date (as defined in
the Promissory Note) of a parking garage to occur no later than July 1, 1996.
The principal balance outstanding under the Promissory Note bears interest
at 12% per annum. Interest is payable monthly, beginning March 1, 1996. Equal
principal payments of $2.5 million are due on May 1, August 1 and November 1,
2000 and February 1, 2001.
SUBORDINATED NOTES PAYABLE TO AFFILIATES
In November, 1993, HWW issued subordinated notes payable to the partners of
Mountain City Casino Partners, L. P.("Mountain City"), which owns the remaining
interest in HWW. The subordinated notes bear interest, from date of issue, at
the rate of 12% per annum. Interest, beginning March, 1995 is payable monthly.
Accrued interest through and including February, 1995 of approximately $1.9
million, was payable on December 1, 1995. The notes are collateralized by a deed
of trust on real property and all other assets of HWW. Any payment of interest
or principal is subordinated in right of payment to all senior indebtedness of
HWW including indebtedness incurred for construction financing and furniture,
fixtures and equipment financing in connection with the construction of the
Company's facility in Central City, Colorado. An initial principal payment of
$3.967 million was due in November, 1995 and equal principal payments of $3.967
million each are due in November, 1996 and March, 1997. In November, 1995, HWW
did not make the required principal payment of approximately $4 million and in
December, 1995, they did not make the required interest payment of approximately
$1.9 million. In January, 1996, the Company and Mountain City Casino Partners,
L. P. entered into an agreement in principle to exchange the subordinated notes
and
F-14
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
5. LONG-TERM DEBT (CONTINUED)
accrued interest for notes issued by the Company and cash. Subsequently, the
Company filed a Registration Statement with the Securities and Exchange
Commission, which Registration Statement became effective April 1, 1996, to
register the offer to exchange. The exchange offer, which was mailed to the note
holders on April 2, 1996, will expire on April 30, 1996.
SHORT-TERM BORROWINGS
The weighted average interest rate incurred by the Company on short-term
borrowings was 3.9% and 5.6% for the fiscal years ended November 30, 1994 and
1995, respectively.
6. OPERATING LEASE COMMITMENTS
The Company's future minimum lease commitments under noncancellable
operating leases (principally for land) as of November 30, 1995 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING NOVEMBER 30,
- -------------------------------------------------------------------------------
<S> <C>
1996........................................................................... $ 3,453,677
1997........................................................................... 2,801,728
1998........................................................................... 2,421,833
1999........................................................................... 2,339,994
2000........................................................................... 2,300,251
2001 and thereafter............................................................ 30,959,312
-------------
$ 44,276,795
-------------
-------------
</TABLE>
Certain leases included above have provisions which require periodic
increases in the rental payments based upon the consumer price index, as of
certain dates. In addition, annual lease payments under an obligation on a land
lease are based upon 3% of gross gaming revenues of Harveys Resort Hotel/Casino,
or a minimum rent, as adjusted for the consumer price index, whichever is
greater. For 1993, 1994 and 1995, the Company recognized rental expense of
approximately $3.2 million, $3.1 million and $3.1 million, respectively, which
includes approximately $831,000, $1,400,000 and $740,000, respectively, above
the minimum rental amounts.
The Company is also a lessor on several noncancellable lease agreements. Of
the rental income recognized for the years ended November 30, 1993, 1994 and
1995, approximately $96,000, $81,000 and $85,000, respectively, represents rents
received as a percentage of gross receipts. The remaining amounts are
attributable to specified minimum rents. Future minimum payments due to the
Company under these noncancellable lease agreements are as follows:
<TABLE>
<CAPTION>
YEARS ENDING NOVEMBER 30,
- -------------------------------------------------------------------------------
<S> <C>
1996........................................................................... $ 667,722
1997........................................................................... 388,047
1998........................................................................... 312,615
1999........................................................................... 46,170
2000........................................................................... 27,771
-------------
$ 1,442,325
-------------
-------------
</TABLE>
F-15
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
7. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------------------
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current............................................. $ 1,294,600 $ 1,927,578 $ 3,547,680
Deferred (including approximately $304,000 due to
rate change in 1993)............................... 1,699,281 572,422 352,320
------------ ------------ ------------
$ 2,993,881 $ 2,500,000 $ 3,900,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The difference between the Company's provision for Federal income taxes as
presented in the accompanying consolidated statements of income, and the
provision for income taxes computed at the statutory rate is comprised of the
items shown in the following table as a percent of pre-tax earnings.
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Income tax at the statutory rate............................ 35.0% 35.0% 35.0%
Non-deductable expenses..................................... 1.4 0.9 0.7
Tax credits................................................. (1.0) (2.4) (1.2)
Change in statutory rate.................................... 3.9 -- --
Nontaxable life insurance benefits.......................... -- (1.7) (5.3)
Other, net.................................................. (0.9) 0.9 0.2
---- ---- ----
38.4% 32.7% 29.4%
---- ---- ----
---- ---- ----
</TABLE>
The components of the deferred income tax assets and liabilities at November
30, 1994 and 1995, as presented in the consolidated balance sheets, are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------
1994 1995
------------- -------------
<S> <C> <C>
DEFERRED TAX ASSET
Accrued expenses............................................... $ 2,567,136 $ 2,479,436
Alternative minimum tax credit carryforward.................... 387,364 --
------------- -------------
$ 2,954,500 $ 2,479,436
------------- -------------
------------- -------------
DEFERRED TAX LIABILITY
Property and equipment......................................... $ 18,096,103 $ 19,223,206
Deferred income................................................ (70,712) (331,300)
Accrued compensation........................................... (2,007,563) (2,996,822)
------------- -------------
$ 16,017,828 $ 15,895,084
------------- -------------
------------- -------------
</TABLE>
F-16
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
8. EMPLOYEE BENEFIT PLANS
401(K) PLAN
The Company maintains a defined contribution retirement savings plan for all
full-time employees who have at least one year of continuous employment and
1,000 hours of service. The Company contributes amounts equal to 50% of each
eligible employee's voluntary contributions. For purposes of determining the
Company's required contribution to the plan, the employee's voluntary
contributions cannot exceed 6% of the employee's qualified compensation. The
Company's contribution to the plan for the years ended November 30, 1993, 1994
and 1995 amounted to approximately, $887,000, $905,000, and $1,035,000,
respectively, and for the three months ended February 28, 1995 and February 29,
1996, the contributions were approximately $205,000 and $270,000, respectively.
LONG-TERM INCENTIVE PLAN
In 1990, the Company adopted a long-term incentive plan for its key
employees. Under the plan, incentives were accrued based upon annual operating
results; however, ultimate payment of these incentives was contingent upon the
Company attaining certain financial objectives over consecutive and concurrent
three-year periods. For the fiscal year ended November 30, 1993, the Company
accrued approximately $1,338,000, in connection with this long-term incentive
plan. In November 1993, the Company terminated the long-term incentive plan; all
incentives earned by participants in this plan were paid in December 1993. In
1994, the Company adopted a new long-term incentive plan for key employees.
Under the plan, incentives are accrued based upon annual operating results;
however, ultimate payment of these incentives is contingent upon the Company
attaining certain financial objectives over consecutive and concurrent
three-year periods. As of November 30, 1994 and 1995 and February 29, 1996, the
amount due to plan participants was $120,000, $461,000 and $572,000,
respectively.
DEFERRED COMPENSATION PLAN
Also during 1990, the Company established a non-qualified deferred
compensation plan for designated executives and outside directors. Individuals
electing to participate in this plan may voluntarily defer receipt of up to
twenty-five percent (25%) of the participant's annual compensation. The deferred
compensation is credited to each participant's account, and interest on such
amounts is added to the participant's account each quarter. The interest rate
paid on amounts deferred prior to calendar year 1995 is the prime rate at the
beginning of each quarter plus five percent (13.75% at November 30, 1995 and
13.50% at February 29, 1996). The interest rate paid on amounts deferred
subsequent to December 31, 1994 is the prime rate, plus two and one-half percent
(11.25% at November 30, 1995 and 11.0% at February 29, 1996). The Company is
under no obligation to fund amounts under this plan, and such amounts are
unsecured and treated as general obligations of the Company. As of November 30,
1994 and 1995 and February 29, 1996, the amount due participants in this plan
was approximately $1,277,000, $1,328,000 and $1,415,000, respectively.
1993 OMNIBUS INCENTIVE PLAN
In November 1993, the Company adopted the 1993 Omnibus Incentive Plan (the
"1993 Plan"). Under the 1993 Plan, 915,219 shares of the Company's common stock
may be granted to employees or prospective employees of the Company and/or its
subsidiaries who are responsible for the management, growth and protection of
the business of the Company. Issuance of shares of common stock under the 1993
Plan may consist of stock options, stock appreciation rights, restricted stock
grants and performance units. The 1993 Plan is administered by a committee of
the Board of Directors whose members determine who will be awarded stock
options, stock appreciation rights, restricted stock grants and performance
units.
F-17
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
Stock options may be granted alone or in addition to other awards or in
tandem with stock appreciation rights. The exercise price of stock options
granted under the 1993 Plan is established by the committee, but the exercise
price may not be less than the market price of the Company's common stock on the
date the option is granted. The term of each stock option will be fixed by the
committee. However, the term of any stock option may not exceed ten years. In
connection with the Company's public stock offering, options to acquire shares
of common stock were granted to designated executive officers and key employees.
The exercise price of the options is equal to the initial public offering price
($14 per share) of the common stock. Subsequent to the public stock offering,
the Company has also granted additional options to certain key employees. The
exercise price of these options ranged between $10.62 and $22.25 per share.
These options will be exercisable as to 33 1/3% of the shares on each of the
next three anniversaries of the date of grant. The following table summarizes
options granted, exercised and canceled during the year:
<TABLE>
<CAPTION>
NOVEMBER, 30
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Stock options outstanding at beginning of year.......................... -- 367,500
Stock options granted................................................... 374,500 116,200
Stock options exercised................................................. -- (3,334)
Stock options canceled.................................................. (7,000) (10,934)
--------- ---------
Stock options outstanding at end of year................................ 367,500 469,432
--------- ---------
--------- ---------
Stock options exercisable at end of year................................ 122,500 230,166
--------- ---------
--------- ---------
</TABLE>
Stock appreciation rights will entitle the holder to receive in cash an
amount equal to the excess of the fair market value of common stock on the date
of exercise over the fair market value of common stock on the date of grant. A
stock appreciation right may be exercised at any time following the date which
is six months after the date of grant, but not prior to the exercisability of
any stock option with which it is granted in tandem. As of November 30, 1995, no
stock appreciation rights had been granted.
Restricted stock grants are awards of shares of common stock granted subject
to such restrictions, terms and conditions as the committee deems appropriate.
The committee will determine the number of restricted shares to be granted and
may impose different terms and conditions on any particular restricted share
grant made to any employee. In connection with the Company's initial public
stock offering, the Company granted to certain executive officers and key
employees (excluding the Chairman of the Board and the Vice Chairman of the
Board), 176,500 shares of restricted common stock. The award of these restricted
shares was in consideration for past and future services provided by the
executive officers and key employees. During fiscal 1995, the Company granted an
additional 50,500 restricted shares. The restricted shares granted, in each
case, vested immediately as to 25% of the shares as of the date of the grant and
vest an additional 25% on each of the next three anniversaries of the grant. As
of November 30, 1995, grantees of the restricted shares had forfeited 2,875
shares pursuant to terms of the plan. The Company has recognized approximately
$570,000, $660,000 and $930,000 as compensation expense in 1993, 1994, and 1995,
respectively.
At November 30, 1995, 217,328 shares of the Company's common stock were
available for grant under the 1993 Omnibus Incentive Plan.
F-18
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
1993 EMPLOYEE STOCK GRANT PROGRAM
In November 1993, the Company adopted the 1993 Employee Stock Grant Program.
The plan provided for a one-time aggregate grant of 20,133 shares of the
Company's common stock to employees who had been employed by the Company for at
least one year and were not otherwise a stockholder in the Company or eligible
to participate in any of the Company's other benefit plans providing for stock
ownership. The Company has recognized compensation expense of approximately
$315,000 in 1993, which is shown as a nonrecurring compensation charge in the
accompanying consolidated statement of income.
1993 NON-EMPLOYEE DIRECTORS' STOCK OPTION PROGRAM
In November 1993, the Company adopted the 1993 Non-Employee Directors' Stock
Option Program whereby each currently serving non-employee director was granted
an option to purchase 4,500 shares of the Company's common stock, and will be
granted an option to purchase 1,500 shares of common stock immediately following
each annual meeting. The options granted will vest 33 1/3% on the date of grant
and 33 1/3% on each of the next two anniversaries of grant. The exercise price
will be the fair market value of the common stock on the date of grant. A total
of 60,000 shares have been reserved for issuance under this plan. As of November
30, 1995, 22,500 options have been granted under this plan at exercise prices of
$14 to $17.26 per share. No options have been exercised under this plan.
SUPPLEMENTAL RETIREMENT PLANS
In January 1991, the Company adopted noncontributory supplemental executive
retirement plans for certain key executives. Normal retirement under the
supplemental executive retirement plans is age 65, and participants receive
benefits based on years of service and compensation. In October 1993 the Company
adopted a noncontributory plan for members of the Company's Board of Directors.
Participants in the Board of Directors plan receive benefits based on years of
service upon retirement from the Board.
F-19
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the plans funded status and amounts
recognized in the Company's balance sheet as of November 30, 1994 and 1995:
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATION
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of $8,085,949,
and $9,409,411, respectively............................................ $ 8,279,475 $ 9,923,469
------------- -------------
------------- -------------
Projected benefit obligation for service rendered to date................ $ 10,642,685 $ 12,702,124
Plan assets at fair value................................................ -- --
------------- -------------
Projected benefit obligation in excess of plan assets.................... 10,642,685 12,702,124
Unrecognized net gain (loss)............................................. (1,940,318) (2,961,839)
Prior service cost not yet recognized in net periodic pension cost....... (2,288,143) (2,075,146)
Unrecognized net obligation at adoption date............................. (2,229,219) (2,057,520)
------------- -------------
Accrued pension cost recognized.......................................... $ 4,185,005 $ 5,607,619
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Additional liability and intangible asset:
Accumulated benefit obligation.............................................. $ 8,279,475 $ 9,923,469
Less: Plan assets at fair value............................................ -- --
------------ ------------
Unfunded accumulated benefit obligation..................................... 8,279,475 9,923,469
Less: Accrued pension cost................................................. (4,185,005) (5,607,619)
------------ ------------
Additional liability........................................................ $ 4,094,470 $ 4,315,850
------------ ------------
------------ ------------
Intangible asset -- limited to unrecognized net obligation plus prior
service cost............................................................... $ 4,094,470 $ 4,132,666
------------ ------------
------------ ------------
</TABLE>
Pension cost consists of the following components:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------------------
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Service cost -- benefits earned during the period............. $ 372,389 $ 675,383 $ 286,453
Interest cost on projected benefit obligation................. 480,938 725,369 835,627
Return on plan assets......................................... -- -- --
Net amortization and deferral................................. 314,216 556,605 451,468
------------ ------------ ------------
Net periodic pension cost..................................... $ 1,167,543 $ 1,957,357 $ 1,573,548
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The projected benefit obligation for November 30, 1994 and 1995 was
determined using assumed discount rates of 8.0% and 7.25%, respectively. The
Company has recorded additional liabilities of $4,094,470 and $4,315,850, and
intangible assets of $4,094,470 and $4,132,666, as of November 30, 1994 and
F-20
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
1995, respectively. As of November 30, 1994 and 1995 a liability of
approximately $8.3 million and $9.9 million, respectively, is included in the
consolidated balance sheets under the caption "Other liabilities" for the above
plan.
POSTRETIREMENT BENEFITS
The Company provides postretirement medical benefits for certain key
executives and members of the Company's Board of Directors. These plans have
been accounted for in accordance with the provisions of SFAS No. 106--EMPLOYERS'
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. This statement
requires that the cost of these postretirement medical benefits be recognized
under the accrual method of accounting. As permitted by SFAS No. 106, the
Company has elected to amortize over a period of 20 years the accumulated
postretirement benefit obligation (transition obligation) related to prior
service costs. The components of the periodic expense for postretirement
benefits were as follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
---------------------------------
1993 1994 1995
--------- ---------- ----------
<S> <C> <C> <C>
Service cost of benefits earned...................................... $ 40,054 $ 73,071 $ 70,372
Interest cost on liability........................................... 22,154 40,006 47,470
Amortization of transition obligation................................ 12,197 12,197 12,197
Prior service cost................................................... 835 5,012 5,012
Loss................................................................. -- 5,876 1,766
--------- ---------- ----------
Net periodic postretirement benefit cost............................. $ 75,240 $ 136,162 $ 136,817
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
The Company's current policy is to fund the plan as covered benefits are
paid. The actuarial and recorded liabilities for postretirement benefits, none
of which have been funded, were as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................................... $ 96,687 $ 34,810
Fully eligible active plan participants..................................... 57,681 84,439
Other active plan participants.............................................. 444,119 648,080
----------- -----------
598,487 767,329
Plan assets at fair value..................................................... -- --
----------- -----------
Accumulated postretirement benefit obligation in excess of plan assets........ 598,487 767,329
Prior service cost not recognized in net periodic postretirement benefit
cost......................................................................... (94,394) (109,230)
Unrecognized net gain......................................................... (83,374) (121,583)
Unrecognized transition obligation............................................ (219,534) (207,337)
----------- -----------
Postretirement benefit liability recognized in the consolidated balance
sheets....................................................................... $ 201,185 $ 329,179
----------- -----------
----------- -----------
</TABLE>
A 6% annual rate of increase in the per capita cost of covered health care
benefits was assumed for 1994 and 1995, and remaining at that percent throughout
the plan. Increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of November 30, 1994 and 1995 by approximately $92,000 and
$123,000 and increase the service and
F-21
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
interest cost components of net periodic postretirement benefit cost by
approximately $20,000 and $15,000, respectively. The weighted average discount
rate used to estimate the accumulated postretirement benefit obligation was 8%
and 7.25%, respectively.
SELF INSURED PLANS
The Company is self insured for employee medical coverage and workers'
compensation for the benefit of its employees. Estimated accrued obligations for
claims under these self- insured plans as of November 30, 1994 and 1995 and
February 29, 1996 were approximately $1.6 million, $1.6 million and $1.7
million, respectively. The Company's maximum liability under both plans is
limited by stop-loss agreements with insurance companies.
9. COMMITMENTS AND CONTINGENCIES
LETTERS OF CREDIT
In connection with regulatory requirements of the State of Nevada and the
City of Central, Colorado, the Company was required to issue three irrevocable
standby letters of credit to guarantee the Company's obligation to satisfy a
progressive slot machine jackpot payout, guarantee payment of workers
compensation benefit payments and to insure completion of public improvements.
Outstanding standby letters of credit were as follows:
<TABLE>
<CAPTION>
NOVEMBER 30, 1995 AMOUNT EXPIRATION DATE
- -------------------------------------------------------------------------- ------------ --------------------
<S> <C> <C>
Gaming Patron............................................................. $ 538,095 December 2, 1995
St. Paul Fire and Marine (workers' compensation).......................... 319,000 April 14, 1996
City of Central, Colorado................................................. 841,219 December 6, 1995
------------
$ 1,698,314
------------
------------
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 29, 1996 ANNUAL EXPIRATION DATE
- -------------------------------------------------------------------------- ------------ --------------------
<S> <C> <C>
Gaming Patron............................................................. $ 538,095 December 2, 1996
St. Paul Fire and Marine ( workers' compensation)......................... 812,500 April 14, 1996
City of Central, Colorado................................................. 841,219 December 6, 1996
------------
$ 2,191,814
------------
------------
</TABLE>
EMPLOYMENT CONTRACTS
In November 1993, the Chairman of the Board and Vice Chairman of the Board
entered into five-year employment contracts with the Company. In addition to
specified annual salaries, each received a one-time payment of $650,000. Also,
the Chairman and Vice Chairman received options to purchase 12,500 shares of
common stock and 15,000 shares of common stock, respectively, at the initial
public offering price of $14 per share. As of November 30, 1995 these options
had not been exercised. In September 1993, Beverlee A. Ledbetter resigned from
the positions of Secretary/Treasurer and Vice Chairman of the Board. At such
time, her five-year employment contract with the Company was terminated, and the
Company subsequently paid her $218,500 in consideration of the termination of
such contract. These one-time payments totaling $1,518,500 have been shown as
nonrecurring compensation charges in the accompanying consolidated statements of
income.
F-22
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company has also entered into employment agreements with certain key
executives which expire in various years to 2000. The employment agreements
provide for, among other things, annual base compensation, participation in
bonus plans, certain stock grants and stock option provisions.
LOAN GUARANTEES
The Company, with the approval of its lenders, guarantees the outstanding
balance of a reducing, revolving loan on behalf of Hard Rock Hotel, Inc. The
maximum amount available, and the current amount outstanting, under the loan is
$62.7 million.
CONSTRUCTION COMMITMENTS
On January 1, 1996, the Company opened the riverboat casino portion of its
project in Council Bluffs, Iowa. The Company is in the process of constructing
and intends to build and operate attendant land based facilities, including a
251-room hotel, a 21,000 square foot convention facility, parking facilities for
approximately 1,500 cars, as well as a staging area and dockside facilities. As
a result, the Company has entered into a number of contracts or agreements
relative to the development of the Council Bluffs project. The cost of the
project, including the riverboat casino vessel and pre-opening expenses is
expected to be approximately $108 million. Through February 29, 1996 the Company
has incurred approximately $88 million of project costs.
10. RELATED PARTY TRANSACTIONS
STOCK REDEMPTION AGREEMENT
On February 1, 1985, the Company entered into an agreement to reacquire
outstanding capital stock held by the Estate of Harvey A. Gross (the "Estate"),
which owned 65% of the outstanding shares. Under the terms of the agreement, on
May 15, 1985, the Company initially redeemed from the Estate 621 shares (without
consideration to the 2,385-for-1 split of the Company's common stock) for a base
price of $9,091 per share. In addition to this redemption, the Company granted
the Estate the right and option to sell additional shares of the Company's stock
to the Company at the same price as under the initial redemption, plus or minus
the quotient of net income or loss for the fiscal year ended November 30, 1984,
divided by the number of shares of the Company's stock outstanding immediately
prior to the initial redemption. The price was to be adjusted in the same manner
for each succeeding year until the Estate's option terminates on August 3, 1998.
In addition, the base price was to be adjusted in the event that the value per
share of the Company's stock determined for estate tax purposes varies from the
base price. During 1991, the Estate and the Internal Revenue Service reached
agreement as to the value per share of the Company's stock for estate tax
purposes. As a result, the shares redeemed by the Company in 1991 take into
account the adjustment to the base price as a result of the Internal Revenue
Service examination of the share value of the Company's stock for estate tax
purposes. In November 1993 the Company and the Estate of Harvey A. Gross agreed
to modify the Stock Redemption Agreement described above to provide for
termination of the agreement as of the effective date of the Company's public
stock offering. Accordingly, the common stock owned by the estate is included in
stockholders' equity for the periods presented.
NOTES RECEIVABLE FROM RELATED PARTY TRUST
Jessica L. Ledbetter, Kirk B. Ledbetter and Franklin K. Rahbeck, all
directors of the Company, and FIBN are the co-trustees of the William B.
Ledbetter and Beverlee A. Ledbetter Irrevocable Trust ("the Trust"). The Trust
owns survivorship life insurance policies on the lives of William B. Ledbetter
and Beverlee A. Ledbetter, deceased. William B. Ledbetter is an officer and
director of the Company and , until her death on September 12, 1995, Beverlee A.
Ledbetter was the largest shareholder of the Company. Prior to fiscal
F-23
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
10. RELATED PARTY TRANSACTIONS (CONTINUED)
1995, the Company had paid premiums on the life insurance policies owned by the
Trust. The Company has no further obligation to pay such premiums. The Trust has
issued two notes payable to the Company for the amounts of the premiums
previously paid by the Company. The notes are in the principal amounts of
$1,376,995 and $455,272 and bear interest at the rate of 5.84% and 6.30%,
respectively. Interest on the notes is payable on December 31 of each year and
the entire unpaid principal amount becomes due on the earlier of November 15,
2001 or the death of William B. Ledbetter.
INVESTMENT IN EXPANSION PROJECTS
In September, 1993, the Company made a capital contribution of $10.0 million
cash in Hard Rock Hotel, Inc., for purposes of developing the Hard Rock Hotel
and Casino. During 1994, the Company contributed an additional $806,400 and, in
January 1995, the Company made an additional capital contribution of $4.0
million. The Company has a 40% equity interest in Hard Rock Hotel, Inc. The
Company accounts for this investment on the equity method. The Hard Rock Hotel
opened March 9, 1995.
In November 1993, the Company made a capital contribution of $9.4 million in
HWW for the purposes of developing Harveys Wagon Wheel Hotel/Casino. The Company
has a 70% equity interest in HWW. During the first quarter of fiscal 1995, the
Company recognized pre-opening expenses relative to the opening of Harveys Wagon
Wheel Hotel/Casino amounting to approximately $2.1 million.
Pursuant to management agreements, the Company earns a base management fee
of 4% of adjusted gross revenue (as defined in the agreement), and up to an
additional 2% of adjusted gross revenue if certain financial targets are met,
from Hard Rock Hotel, Inc. As of November 30, 1995 and February 29, 1996 there
were approximately $2.4 million and $1.1 million, respectively of management
fees relative to the Hard Rock Hotel included in revenues. The Company also
receives a management fee of 5% of adjusted gross revenue (as defined in the
agreement) from HWW. These fees are for services the Company renders as the
project manager for each of the hotel/casinos. The management fees from HWW are
eliminated in consolidation.
11. UNCONSOLIDATED AFFILIATES
The Company owns a 40% equity interest in Hard Rock Hotel, Inc. Pursuant to
a management agreement, the Company earns a base management fee of 4% of
adjusted gross revenue (as defined in the
F-24
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
11. UNCONSOLIDATED AFFILIATES (CONTINUED)
agreement), and up to an additional 2% of adjusted gross revenue if certain
financial targets are met, from Hard Rock Hotel, Inc. Summarized balance sheet
and statement of operations information for Hard Rock Hotel, Inc. were as
follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------- FEBRUARY 29,
1994 1995 1996
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Summarized Balance Sheet Information (in
thousands)
Current assets............................. $ 1,142 $ 7,604 $ 8,543
Land, buildings and equipment, net......... 52,294 88,133 87,545
Other assets............................... 3,134 4,083 2,504
------- ------- ------------
Total assets............................. 56,570 99,820 98,592
------- ------- ------------
Current liabilities........................ 12,467 12,712 11,488
Long-term debt............................. 25,828 60,813 59,589
------- ------- ------------
Total liabilities........................ 38,295 73,525 71,077
------- ------- ------------
Net assets............................... $18,275 $26,295 $27,515
------- ------- ------------
------- ------- ------------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
NOVEMBER 20, FEBRUARY 29,
1995 1996
------------ -----------------
(UNAUDITED)
<S> <C> <C>
Summarized Statement of Operations (in
thousands)
Revenues................................... $55,863 $18,080
Operating income........................... 2,100 2,659
Net income(loss)........................... (1,981) 705
</TABLE>
The Company accounts for its investment in Hard Rock Hotel, Inc. on the
equity method. The Hard Rock Hotel opened on March 9, 1995. Operating results
prior to the opening were immaterial.
12. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth unaudited selected quarterly financial
information for each quarter of fiscal 1993, 1994. and 1995. This information,
in the opinion of management, includes all normal recurring
F-25
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
12. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
adjustments necessary for a fair representation of the information set forth
therein. The operating results for any quarter are not indicative of results for
any future period. Quarterly results may not be comparative due to the seasonal
nature of operations.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) FIRST SECOND THIRD FOURTH (C)
- --------------------------------------------------------------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C>
Fiscal 1993
Revenue............................................................ $ 25,426 $ 32,065 $ 41,191 $ 33,576
Operating income (loss)............................................ (2,392) 3,388 8,999 2,198
Income (loss) before income taxes.................................. (3,378) 2,275 7,808 1,098
Net income (loss).................................................. (2,204) 1,524 5,039 451
Net income (loss) per common share (a)............................. $ (0.31) $ 0.21 $ 0.70(b) $ 0.06
Fiscal 1994
Revenue............................................................ $ 28,133 $ 28,777 $ 40,773 $ 30,602
Operating income (loss) (d)........................................ (614) 866 8,585 1,545
Income (loss) before income taxes.................................. (1,626) 52 7,850 1,361
Net income (loss).................................................. (1,031) 32 5,176 961
Net income (loss) per common share (a)............................. $ (0.14) $ 0.00 $ 0.55 $ 0.10
Fiscal 1995
Revenue (d)........................................................ $ 38,337 $ 40,648 $ 50,854 $ 43,361
Operating income (loss) (d) (e).................................... (528) 3,555 9,644 5,683
Income (loss) before income taxes.................................. (1,747) 1,506 8,111 5,375
Net income (loss).................................................. (1,117) 961 5,318 4,183
Net income (loss) per common share (a)............................. $ (0.12) $ 0.10 $ 0.56 $ 0.44
</TABLE>
- ------------------------
(a) Net income (loss) per share calculations for each quarter are based on the
weighted average number of common stock and common stock equivalents
outstanding during the respective quarters; accordingly, the sum of the
quarters does not equal the full-year income per share.
(b) Net income per share for the third quarter of fiscal 1993 differs from the
amount originally reported in the Company's Quarterly Report on Form 10-Q
for the period ended May 31, 1994 ($0.72) due to a correction in the
calculation of the weighted average number of shares of common stock
outstanding for the quarter.
(c) The fourth quarter of fiscal 1993 included nonrecurring compensation charges
of approximately $1.8 million.
(d) Revenue and operating income (loss) for the second, third and fourth
quarters of fiscal 1995 differ from the amounts originally reported in the
Company's Annual Report on Form 10K for the fiscal year ended November 30,
1995 and in the Company's Quarterly Reports on Form 10-Q for the quarters
ended May 31, 1995 and August 31, 1995 due to the reclassification, to
revenue, of the Company's 40% equity share of undistributed earnings (loss)
of Hard Rock Hotel, Inc. (an unconsolidated affiliate managed by the
Company), in the amounts of ($704), ($169) and $141 for the second, third
and fourth quarters, respectively.
(e) Operating income for the fourth quarter of fiscal 1994 and for the third
quarter of fiscal 1995 differ from the amounts originally reported in the
Company's Annual Report on Form 10-K for the fiscal year ended November
30,1994 ($1,915) and in the Company's Quarterly Report on Form 10-Q for the
quarter ended August 31, 1995 ($10,084), respectively, due to the
reclassification of life insurance benefits to other income.
F-26
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1993, 1994 AND 1995
AND FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DATA RELATED TO FEBRUARY 28, 1995 AND FEBRUARY 29, 1996 ARE UNAUDITED)
13. SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARIES
Debt obligations expected to be issued by Harveys Casino Resorts (the
Parent) are to be guaranteed by all direct and indirect subsidiaries of the
Parent, except for four subsidiaries for which the Parent's share of assets, net
investment in assets, and income before income taxes are inconsequential to
consolidated total assets and consolidated income before income taxes. The
guarantees are to be full and unconditional and joint and several. The following
summarized combined financial information of the guarantor subsidiaries includes
the accounts of Harveys C.C. Management Company, Inc., Harveys Wagon Wheel
Casino Limited Liability Company (which became wholly owned in April 1996),
Harveys L.V. Management Company, Inc., and Harveys Iowa Management Company, Inc.
Results of operations for the years ended November 30, 1993 and 1994 of the
subsidiaries are inconsequential. Full separate financial statements of the
guarantor subsidiaries have not been included because management has determined
that they are not material to investors.
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 29,
----------------- ------------
1994 1995 1996
------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA (IN THOUSANDS)
ASSETS:
Total current assets....................... $ 4,011 $ 6,591 $ 10,581
Total noncurrent assets.................... 60,108 130,627 163,696
------- -------- ------------
Total assets............................. $64,119 $137,218 $174,277
------- -------- ------------
------- -------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Total current liabilities.................. $ 8,444 $ 16,862 $ 29,673
Noncurrent liabilities..................... 33,268 83,371 107,980
Minority interest in subsidiary............ 2,435 1,758 1,591
Stockholders' equity....................... 19,972 35,227 35,033
------- -------- ------------
Total liabilities and stockholders'
equity.................................. $64,119 $137,218 $174,277
------- -------- ------------
------- -------- ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
------------ ---------------------------
NOVEMBER 30, FEBRUARY 28, FEBRUARY 29,
1995 1995 1996
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (IN THOUSANDS)
Net revenues............................... $ 42,580 $ 10,219 $ 21,616
Costs and expenses......................... (36,080) (10,270) (20,542)
Other income (expense)..................... (4,587) (581) (1,379)
Income tax (provision) benefit............. (659) 203 111
------------ ------------ ------------
Net Income (Loss)........................ $ 1,254 $ (429) $ (194)
------------ ------------ ------------
------------ ------------ ------------
STATEMENT OF CASH FLOWS DATA (IN THOUSANDS)
Net cash provided by operating
activities................................ $ 2,128 $ 2,096 $ 11,268
Net cash used in investing activities...... (70,176) (12,261) (32,551)
Net cash provided by financing
activities................................ 69,168 14,010 27,295
------------ ------------ ------------
Increase in cash and cash equivalents...... $ 1,120 $ 3,845 $ 6,012
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-27
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary of Prospectus.......................... 3
Risk Factors................................... 10
Use of Proceeds................................ 15
Capitalization................................. 16
Selected Consolidated Financial Data........... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 19
Business....................................... 29
Management..................................... 45
Certain Transactions........................... 57
Principal Stockholders......................... 57
Description of the Notes....................... 59
Certain Federal Income Tax Considerations...... 84
Underwriting................................... 85
Legal Matters.................................. 85
Experts........................................ 85
Available Information.......................... 86
Index to Financial Statements.................. F-1
</TABLE>
$150,000,000
[LOGO]
HARVEYS CASINO RESORTS
% SENIOR SUBORDINATED
NOTES DUE 2006
-----------------
PROSPECTUS
-----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
BEAR, STEARNS & CO. INC.
, 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all estimated expenses incurred or
expected to be incurred by the Registrant in connection with the issuance and
distribution of the securities being registered hereby, other than underwriting
discounts and commissions.
<TABLE>
<CAPTION>
ITEM AMOUNT
- ------------------------------------------------------------ -------------
<S> <C>
SEC Registration Fee........................................ $ 51,724.14
NASD Fee.................................................... 15,500.00
Blue Sky Filing Fees and Expenses........................... 20,000.00
Printing and Engraving Costs................................ 110,000.00
Trustee Expenses............................................ 15,000.00
Legal Fees and Expenses..................................... 325,000.00
Accounting Fees and Expenses................................ 50,000.00
Miscellaneous Fees and Expenses............................. 12,775.86
-------------
Total................................................... $ 600,000.00
-------------
-------------
</TABLE>
- ------------------------
All amounts are estimated except for the SEC Registration Fee and the NASD
fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of Chapter 78 of the Nevada Revised Statutes and the
Company's Articles of Incorporation and Bylaws contain provisions for
indemnification of officers and directors of the Company and in certain cases
employees and other persons. The Bylaws require the Company to indemnify such
persons to the full extent permitted by Nevada law. Each such person will be
indemnified in any proceeding if he acted in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Company. Indemnification would cover expenses, including attorney's fees,
judgments, fines and amounts paid in settlement.
The Company's Bylaws also provide that the Company's Board of Directors may
cause the Company to purchase and maintain insurance on behalf of any present or
past director or officer insuring against any liability asserted against such
person incurred in the capacity of director or officer or arising out of such
status, whether or not the Company would have the power to indemnify such
person. The Company has obtained directors' and officers' liability insurance.
On January 21, 1994, the Company entered into indemnity agreements with
Stephen L. Cavallaro, Richard F. Kudrna, Sr., Kirk B. Ledbetter, Jessica L.
Ledbetter, William B. Ledbetter, Franklin K. Rahbeck, Charles W. Scharer, Verne
H. Welch, Jr., and Thomas M. Yturbide; on July 28, 1994, the Company entered
into an indemnity agreement with Luther Mack, Jr.; on August 5, 1995, the
Company entered into an indemnity agreement with Gary R. Selesner; on August 8,
1995, the Company entered into an indemnity agreement with Gary D. Armentrout;
on August 14, 1995, the Company entered into an indemnity agreement with Kevin
O. Servatius; on August 24, 1995, the Company entered into an indemnity
agreement with Edward B. Barraco; and on September 6, 1995, the Company entered
into an indemnity agreement with John J. McLaughlin. The indemnity agreements
indemnify such persons against certain liabilities arising out of their service
in their capacities as directors and/or officers and constitute binding
agreements of the Company. The Company may from time to time enter into
indemnity agreements with additional individuals who become officers and/or
directors of the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
A list of exhibits included as part of this Registration Statement is set
forth in the Exhibit Index which immediately precedes such exhibits and is
hereby incorporated by reference herein.
(b) Financial Statement Schedules. All schedules have been omitted and are
either inapplicable or not required under the instructions contained in
Regulation S-X.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel that matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Stateline, State of Nevada, on this 13th day of May, 1996.
HARVEYS CASINO RESORTS
By: /s/ John J. McLaughlin
-----------------------------------------
Name: John J. McLaughlin
Title: SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------ ------------
<C> <S> <C>
* Chairman of the Board and
- ----------------------------------- Director May 13, 1996
Thomas M. Yturbide
* Vice Chairman of the Board and
- ----------------------------------- Director May 13, 1996
William B. Ledbetter
* President, Chief Executive
- ----------------------------------- Officer and Director May 13, 1996
Charles W. Scharer (Principal Executive Officer)
Senior Vice President, Chief
/s/ John J. McLaughlin Financial Officer and
- ----------------------------------- Treasurer (Principal May 13, 1996
John J. McLaughlin Financial Officer)
* Corporate Controller
- ----------------------------------- (Principal Accounting May 13, 1996
John P. Hewitt Officer)
*
- ----------------------------------- Chairman Emeritus and Director May 13, 1996
Richard F. Kudrna, Sr.
*
- ----------------------------------- Director May 13, 1996
Jessica L. Ledbetter
*
- ----------------------------------- Director May 13, 1996
Kirk B. Ledbetter
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------ ------------
<C> <S> <C>
*
- ----------------------------------- Director May 13, 1996
Luther Mack, Jr.
*
- ----------------------------------- Director May 13, 1996
Franklin K. Rahbeck
*By /s/ John J.
McLaughlin
---------------------------------
John J. McLaughlin
ATTORNEY IN FACT
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Stateline, State of Nevada, on this 13th day of May, 1996.
HARVEYS C. C. MANAGEMENT COMPANY, INC.
By: /s/ Charles W. Scharer
-----------------------------------------
Name: Charles W. Scharer
CHIEF FINANCIAL OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Charles W. Scharer and John J. McLaughlin and
each or any of them, as his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any or all amendments or post-effective amendments to
this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------ ------------
<C> <S> <C>
/s/ Thomas M. Yturbide President and Director
- ----------------------------------- (Principal Executive Officer) May 13, 1996
Thomas M. Yturbide
Chief Financial Officer and
/s/ Charles W. Scharer Director
- ----------------------------------- (Principal Financial and May 13, 1996
Charles W. Scharer Accounting Officer)
- ----------------------------------- Director May 13, 1996
William B. Ledbetter
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Stateline, State of Nevada, on this 13th day of May, 1996.
HARVEYS WAGON WHEEL CASINO LIMITED LIABILITY
COMPANY
By: /s/ Charles W. Scharer
-----------------------------------------
Name: Charles W. Scharer
CHIEF FINANCIAL OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Charles W. Scharer and John J. McLaughlin and
each or any of them, as his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any or all amendments or post-effective amendments to
this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------ ------------
<C> <S> <C>
/s/ Thomas M. Yturbide President and Director
- ----------------------------------- (Principal Executive Officer) May 13, 1996
Thomas M. Yturbide
Chief Financial Officer and
/s/ Charles W. Scharer Director
- ----------------------------------- (Principal Financial and May 13, 1996
Charles W. Scharer Accounting Officer)
- ----------------------------------- Director May 13, 1996
William B. Ledbetter
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Stateline, State of Nevada, on this 13th day of May, 1996.
HARVEYS L.V. MANAGEMENT COMPANY, INC.
By: /s/ Charles W. Scharer
-----------------------------------------
Name: Charles W. Scharer
CHIEF FINANCIAL OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Charles W. Scharer and John J. McLaughlin and
each or any of them, as his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any or all amendments or post-effective amendments to
this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------ ------------
<C> <S> <C>
/s/ Thomas M. Yturbide President and Director
- ----------------------------------- (Principal Executive Officer) May 13, 1996
Thomas M. Yturbide
Chief Financial Officer and
/s/ Charles W. Scharer Director
- ----------------------------------- (Principal Financial and May 13, 1996
Charles W. Scharer Accounting Officer)
- ----------------------------------- Director May 13, 1996
William B. Ledbetter
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Stateline, State of Nevada, on this 13th day of May, 1996.
HARVEYS IOWA MANAGEMENT COMPANY, INC.
By: /s/ Charles W. Scharer
-----------------------------------------
Name: Charles W. Scharer
CHIEF FINANCIAL OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Charles W. Scharer and John J. McLaughlin and
each or any of them, as his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any or all amendments or post-effective amendments to
this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------ ------------
<C> <S> <C>
/s/ Thomas M. Yturbide President and Director
- ----------------------------------- (Principal Executive Officer) May 13, 1996
Thomas M. Yturbide
Chief Financial Officer and
/s/ Charles W. Scharer Director
- ----------------------------------- (Principal Financial and May 13, 1996
Charles W. Scharer Accounting Officer)
- ----------------------------------- Director May 13, 1996
William B. Ledbetter
</TABLE>
II-8
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Restated Articles of Incorporation of the Registrant (1)
3.2 Bylaws of the Registrant (1)
4.1 Indenture, dated as of , 1996, between the Registrant and IBJ Schroder Bank & Trust
Company, as trustee (including form of Note)
5.1 Opinion re Legality of Scarpello & Alling, Ltd.
5.2 Opinion re Legality of Brownstein, Hyatt, Farber & Strickland, P.C. (2)
10.1 Amended and Restated Loan Agreement, dated April 20, 1989, between the Registrant and First Interstate
Bank of Nevada, N.A., First Interstate Bank of California, First Interstate Bank of Oregon, N.A., First
Interstate Bank of Washington, N.A., First Interstate Bank of Denver, N.A., West One Bank, Idaho, N.A.,
National Bank of Detroit and First Interstate Bank of Utah, N.A. (1)
10.2 Amended and Restated Promissory Note, dated April 20, 1989, between the Registrant and First Interstate
Bank of Nevada, N.A., First Interstate Bank of California, First Interstate Bank of Oregon, N.A., First
Interstate Bank of Washington, N.A., First Interstate Bank of Denver, N.A., West One Bank, Idaho, N.A.,
National Bank of Detroit and First Interstate Bank of Utah, N.A. (1)
10.3 Rate Reduction Agreement, dated February 27, 1990, between First Interstate Bank of Nevada, N.A., First
Interstate Bank of California, First Interstate Bank of Oregon, N.A., First Interstate Bank of
Washington, N.A., First Interstate Bank of Denver, N.A., West One Bank, Idaho, N.A., National Bank of
Detroit and First Interstate Bank of Utah, N.A. and the Registrant (1).
10.4 First Amendment to Amended and Restated Loan Agreement, dated August 30, 1991, between the Registrant
and First Interstate Bank of Nevada, N.A., First Interstate Bank of California, First Interstate Bank
of Denver, N.A., West One Bank, Idaho, N.A., National Bank of Detroit and First Interstate Bank of
Utah, N.A. (1)
10.5 Second Amended and Restated Promissory Note, dated August 30, 1991, between the Registrant and First
Interstate Bank of Nevada, N.A., First Interstate Bank of California, First Interstate Bank of Denver,
N.A., West One Bank, Idaho, N.A., National Bank of Detroit and First Interstate Bank of Utah, N.A. (1)
10.6 Second Amendment to Amended and Restated Loan Agreement and Amendment to A/R Note, dated March 30, 1992,
between the Registrant and First Interstate Bank of Nevada, N.A., First Interstate Bank of California,
First Interstate Bank of Denver, N.A., West One Bank, Idaho, N.A., National Bank of Detroit and First
Interstate Bank of Utah, N.A. (1)
10.7 Letter Agreement, dated November 25, 1992, between the Registrant and First Interstate Bank of Nevada,
N.A., First Interstate Bank of California, First Interstate Bank of Denver, N.A., West One Bank, Idaho,
N.A., National Bank of Detroit and First Interstate Bank of Utah, N.A. (1)
10.8 Third Amendment to Amended and Restated Loan Agreement, dated January 8, 1993, between the Registrant
and First Interstate Bank of Nevada, N.A., First Interstate Bank of California, First Interstate Bank
of Denver, N.A., West One Bank, Idaho, N.A., NBD Bank, N.A., and First Interstate Bank of Utah, N.A.
(1)
</TABLE>
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10.9 Third Amended and Restated Promissory Note, dated January 15, 1993, between the Registrant and First
Interstate Bank of Nevada, N.A., First Interstate Bank of California, First Interstate Bank of Denver,
N.A., West One Bank, Idaho, N.A., NBD Bank, N.A., and First Interstate Bank of Utah, N.A. (1)
10.10 Fourth Amendment to Amended and Restated Loan Agreement (1)
10.11 Interest Rate Swap Agreement, dated as of August 1, 1989, between the Registrant and First Interstate
Bank of Nevada, N.A. (1)
10.12 Net Lease Agreement, dated February 28, 1985, between Park Cattle Co. and the Registrant (1)
10.13 Lease, dated July 9, 1973, between Park Cattle Co. and the Registrant (1)
10.14 Deed of Trust with Assignment of Rents and Security Agreement (Nevada Property), dated March 15, 1985,
between the Registrant and Lawyers Title of Northern Nevada, as Trustee, and First Interstate Bank of
Nevada, N.A., First Interstate Bank of California, National Bank of Detroit, First Interstate Bank of
Denver, N.A., First Interstate of Washington, N.A., and First Interstate Bank of Utah, N.A. (1)
10.15 First Amendment to Deed of Trust with Assignment of Rents and Security Agreement (Nevada Property),
dated April 20, 1989, between the Registrant and Western Title Company, Inc., as Trustee, and First
Interstate Bank of Nevada, N.A., First Interstate Bank of California, National Bank of Detroit, First
Interstate Bank of Denver, N.A.,First Interstate Bank of Washington, N.A., First Interstate Bank of
Utah, N.A., First Interstate Bank of Oregon, N.A., and West One Bank, Idaho, N.A. (1)
10.16 Deed of Trust and Assignment of Rents (California Property), dated March 15, 1985, between the
Registrant and Lawyers Title Insurance Corporation, as Trustee, and First Interstate Bank of Nevada,
N.A., First Interstate Bank of California, National Bank of Detroit, First Interstate Bank of Denver,
N.A., First Interstate Bank of Washington, N.A., and First Interstate Bank of Utah, N.A. (1)
10.17 First Amendment to Deed of Trust with Assignment of Rents and Security Agreement (California Property),
dated April 20, 1989, between the Registrant and Western Title Company, Inc., as Trustee, and First
Interstate Bank of Nevada, N.A., First Interstate Bank of California, National Bank of Detroit, First
Interstate Bank of Denver, N.A.,First Interstate of Washington, N.A., and First Interstate Bank of
Utah, N.A., First Interstate Bank of Oregon, N.A., and West One Bank Idaho, N.A. (1)
10.18 Second Amendment to Deed of Trust with Assignment of Rents and Security Agreement (Nevada Property),
dated January 12, 1993, between the Registrant and Western Title Company, Inc., as Trustee, and First
Interstate Bank of Nevada, N.A., First Interstate Bank of California, First Interstate Bank of Denver,
N.A., First Interstate Bank of Utah, N.A., West One Bank, Idaho, and NBD Bank, N.A. (1)
10.19 Second Amendment to Deed of Trust with Assignment of Rents and Security Agreement (California Property),
dated January 12, 1993, between the Registrant and Western Title Company, Inc., as Trustee, and First
Interstate Bank of Nevada, N.A., First Interstate Bank of California, First Interstate Bank of Denver,
N.A., First Interstate Bank of Utah, N.A., West One Bank, Idaho, and NBD Bank, N.A. (1)
10.20 Employment Agreement between Richard F. Kudrna, Sr. and the Registrant (1)
10.21 Employment Agreement between Thomas M. Yturbide and the Registrant (1)
10.22 Employment Agreement between William B. Ledbetter and the Registrant (1)
</TABLE>
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10.23 Collective Bargaining Agreements between the Registrant and International Alliance of Theatrical Stage
Employees and Moving Picture Machine Operators (1)
10.24 Outside Directors Retirement Plan, Amended (1)
10.25 Director Emerita Resolution -- Beverlee Ledbetter (1)
10.26 Supplemental Executive Retirement Plan (1)
10.27 Senior Supplemental Executive Retirement Plan (1)
10.28 Honorary Director Resolution -- Vera Gross (1)
10.29 Form of Indemnification Agreement for Directors and Executive Officers (1)
10.30 Stockholders Agreement among the Registrant, Lily Pond Investments, Inc. and Hard Rock Hotel, Inc. (1)
10.31 Management Agreement between the Registrant and Hard Rock Hotel, Inc. (1)
10.32 Agreement Relating to Sale and Purchase of Corporate Stock, dated as of February 1, 1985 among the
Registrant, Beverlee Ledbetter, Fenn Barkley, Sr., and First Interstate Bank of Nevada, N.A.,
co-executors of the estate of Harvey A. Gross (1)
10.33 Amendment to Agreement Relating to Sale and Purchase of Corporate Stock, dated as of March 15, 1993
between the Registrant, Beverlee Ledbetter, Charles Lindekugel and First Interstate Bank of Nevada,
N.A., as co-executors of the Estate (1)
10.34 Definitive Agreement between Harveys C.C. Management Company and Mountain City Casino Partners, L.P. (1)
10.35 Management Agreement between the Registrant and Harveys Wagon Wheel Casino Limited Liability Company (1)
10.36 Form of Assignment and Assumption Agreement between Mountain City Casino Partners, L.P. and Harveys
Wagon Wheel Casino Limited Liability Company (1)
10.37 Loan Agreement between Harveys Wagon Wheel Casino Limited Liability Company and Mountain City Casino
Partners, L.P. (1)
10.38 Employment Agreement between Charles W. Scharer and the Registrant (1)
10.39 Employment Agreement between Verne Welch and the Registrant (1)
10.40 1993 Omnibus Incentive Plan (3)
10.41 1993 Non-Employee Directors Stock Option Program (3)
10.42 Form of Deferred Compensation Agreement and Schedule of 1994 Participants (3)
10.43 Form of Indemnification Agreement for Directors and Officers and Schedule of Indemnities (3)
10.44 Loan Agreement among Hard Rock Hotel, Inc., as borrower, the Registrant, as guarantor, First Interstate
Bank of Nevada, N.A., as agent, and the several lenders thereunder (3)
10.45 Promissory Note among Hard Rock Hotel, Inc., as borrower, the Registrant, as guarantor, First Interstate
Bank of Nevada, N.A., as agent, and the several lenders thereunder (3)
10.46 Guaranty of Loan executed by the Registrant (3)
10.47 Amendment No. 1 to 1993 Non-Employee Directors Stock Option Program (3)
10.48 $22,200,000 Construction Loan Agreement between Harveys Wagon Wheel Casino Limited Liability Company, as
borrower, and the Registrant, as lender (4)
10.49 Secured Promissory Note between Harveys Wagon Wheel Casino Limited Liability Company, as maker, and the
Registrant, as holder (4)
</TABLE>
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NUMBER
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10.50 Deed of Trust, Security Agreement and Financing Agreement among Harveys Wagon Wheel Casino Limited
Liability Company, as grantor, the Public Trustee of the County of Gilpin, State of Colorado, as
trustee, and the Registrant, as beneficiary (4)
10.51 Security Agreement between Harveys Wagon Wheel Casino Limited Liability Company, as obligor, and the
Registrant, as lender (4)
10.52 Assignment of Rents, Income and Other Contract Rights between Harveys Wagon Wheel Casino Limited
Liability Company, as borrower, and the Registrant, as lender (4)
10.53 Subordination Agreement among 150 Rodeo Partners, Inc., the Registrant, and Harveys Wagon Wheel Casino
Limited Liability Company (4)
10.54 Fifth Amendment to Amended and Restated Loan Agreement, dated November 8, 1994, between the Registrant,
and First Interstate Bank of Nevada, N.A., West One Bank, Idaho, Society Generale, The Daiwa Bank,
Limited, United States National Bank of Oregon, U.S. Bank of Nevada and First Security Bank of Idaho,
N.A. (5)
10.55 First Amendment to Construction Loan Agreement, dated November 1, 1994, between Harveys Wagon Wheel
Casino Limited Liability Company and the Registrant (5)
10.56 Amended and Restated Secured Promissory Note, dated November 1, 1994, between Harveys Wagon Wheel Casino
Limited Liability Company and the Registrant (5)
10.57 First Amendment to Deed of Trust, Security Agreement and Financing Statement, dated November 1, 1994,
between Harveys Wagon Wheel Casino Limited Liability Company and the Registrant (5)
10.58 First Amendment to Security Agreement, dated November 1, 1994, between Harveys Wagon Wheel Casino
Limited Liability Company and the Registrant (5)
10.59 First Amendment to Assignment of Rents, Income and Other Contract Rights, dated November 1, 1994,
between Harveys Wagon Wheel Casino Limited Liability Company and the Registrant (5)
10.60 Amended and Restated Subordination Agreement, dated November 1, 1994, by and between 150 Rodeo Partners,
Inc. and the Registrant and Harveys Wagon Wheel Casino Limited Liability Company (5)
10.61 First Amendment to Loan Agreement, dated November 8, 1994, by and among First Interstate Bank of Nevada,
N.A., Societe Generale, NBD Bank, N.A., United States National Bank of Oregon, West One Bank, Idaho,
First Security Bank of Idaho, N.A., The Daiwa Bank, Limited, and U.S. Bank of Nevada and First
Interstate of Nevada, N.A., Hard Rock Hotel, Inc., and Harveys Wagon Wheel, Inc. (5)
10.62 First Amendment to Guaranty of Loan, dated November 8, 1994, between the Registrant and First Interstate
Bank of Nevada, N.A., Societe Generale, NBD Bank, N.A., United States National Bank of Oregon, West One
Bank, Idaho, First Security Bank of Idaho, N.A., The Daiwa Bank, Limited, and U.S. Bank of Nevada (5)
10.63 Employment Agreement dated November 17, 1993, by and between the Registrant and Bob Hall (5)
10.64 Employment Agreement dated January 13, 1994, by and between the Registrant and Stephen L. Cavallaro (5)
10.65 Excursion Boat Sponsorship and Operations Agreement, dated August 22, 1994, by and between Iowa West
Racing Association and Harveys Iowa Management Company, Inc. (5)
10.66 Purchase Agreement, dated September 12, 1994, by and between the City of Council Bluffs and Harveys Iowa
Management Co. (5)
</TABLE>
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NUMBER
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10.67 Commitment Letter, dated January 18, 1995, between the Registrant and First Interstate Bank of Nevada,
N.A. (5)
10.68 Form of Deferred Compensation Agreement and Schedule of 1995 Participants (6)
10.69 Long-term Incentive Plan Guidelines (1994-1996 Performance Period) (6)
10.70 Short-term Incentive Plan (6).
10.71 Employment Agreement dated May 9, 1995, by and between the Registrant and Gary Armentrout (7)
10.72 Loan Purchase Agreement (with Full Recourse to Seller) dated March 10, 1995 by and between the
Registrant ("Seller") and First Interstate Bank of Nevada, N.A. ("Buyer") (7)
10.73 Option Agreement dated March 10, 1995, by and between First Interstate Bank of Nevada, N.A. and the
Registrant (7)
10.74 Employment Agreement dated August 5, 1995, by and between the Registrant and Gary R. Selesner (8)
10.75 Employment Agreement dated August 14, 1995, by and between the Registrant and John McLaughlin (8)
10.76 Employment Agreement dated August 14, 1995, by and between the Registrant and Kevin Servatius (8)
10.77 Employment Agreement dated August 24, 1995, by and between the Registrant and Edward B. Barraco (8)
10.78 Employment Agreement dated August 21, 1995, by and between the Registrant and David J. Hurst (8)
10.79 Employment Agreement dated August 21, 1995, by and between the Registrant and Lou R. Kelmanson (8)
10.80 Reducing Revolving Credit Agreement, dated as of August 14, 1995, by and among the Registrant and
Harveys C.C. Management Company, Inc., Harveys Iowa Management Company, Inc., (the "Borrowers") and
First Interstate Bank of Nevada, N.A., First Interstate Bank of California, Bank of the West, First
Security Bank of Idaho, N.A., Imperial Bank, Norwest Bank of Nebraska, N.A., NBD Bank, Societe
Generale, The Daiwa Bank, Limited, U.S. Bank of Nevada, West One Bank, Idaho and Argentbank, (the
"Lenders") (8)
10.81 Second Amendment to Loan Agreement, dated November 7, 1995, by and among First Interstate Bank of
Nevada, N.A., Societe Generale, NBD Bank, N.A., United States National Bank of Oregon, West One Bank,
Idaho, First Security Bank of Idaho, N.A., The Daiwa Bank, Limited, U.S. Bank of Nevada, Hard Rock
Hotel, Inc. and the Registrant (9)
10.82 Second Amended and Restated Reducing Revolving Credit Promissory Note, dated November 7, 1995 between
First Interstate Bank of Nevada, N.A. as Agent Bank and Hard Rock Hotel, Inc. (9)
10.83 Second Amendment to Guaranty of Loan, dated November 7, 1995, between the Registrant and First
Interstate Bank of Nevada, N.A., Societe Generale, NBD Bank, N.A., United State National Bank of
Oregon, West One Bank, Idaho, First Security Bank of Idaho, N.A., The Daiwa Bank, Limited and U.S. Bank
of Nevada (9)
10.84 Employment Agreement, dated October 22, 1995 and effective December 1, 1995 by and between the
Registrant and Thomas M. Yturbide (9)
10.85 Employment Agreement, dated October 22, 1995 and effective December 1, 1995 by and between the
Registrant and Charles W. Scharer (9)
</TABLE>
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NUMBER
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10.86 Modification of Employment Agreement, dated November 21, 1995 by and between the Registrant and Richard
F. Kudrna, Sr. (9)
10.87 Management Incentive Plan, approved August 8, 1995 (9)
10.88 Long-Term Incentive Plan Guidelines (1995-1997 Performance Period) (9)
10.89 1996 Omnibus Incentive Plan (10)
21.1 List of Subsidiaries of the Registrant (8)
23.1 Consent of Grant Thornton LLP (10)
23.2 Consent of Scarpello & Alling, Ltd. (included in Exhibit 5.1)
23.3 Consent of Brownstein, Hyatt, Farber & Strickland, P.C. (2)
24.1 Power of Attorney (Previously filed by Harveys Casino Resorts, filed on the signature pages hereof by
Harveys C.C. Management Company, Inc., Harveys Wagon Wheel Casino Limited Liability Company, Harveys
Iowa Management Company, Inc. and Harveys L.V. Management Company, Inc.)
25.1 Statement of Eligibility of Trustee
</TABLE>
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(1) Incorporated herein by reference to Registration Statement No. 33-70670.
(2) To be filed by amendment.
(3) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q for the period ended February 28, 1994.
(4) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q for the period ended May 31, 1994.
(5) Incorporated herein by reference to Registrant's Annual Report on Form 10-K
for the period ended November 30, 1994.
(6) Incorporated herein by reference to Registrant's Quarterly Report on Form
10-Q for the period ended February 28, 1995.
(7) Incorporated herein by reference to Registrant's Quarterly Report on Form
10-Q for the period ended May 31, 1995.
(8) Incorporated herein by reference to Registrant's Quarterly Report on Form
10-Q for the period ended August 31, 1995.
(9) Incorporated herein by reference to Registrant's Annual Report on Form 10-K
for the period ended November 30, 1995.
(10) Previously filed.
II-14
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EXHIBIT INDEX
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NUMBER DESCRIPTION PAGE
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1.1 Form of Underwriting Agreement..................................................................
3.1 Restated Articles of Incorporation of the Registrant (1)........................................
3.2 Bylaws of the Registrant (1)....................................................................
4.1 Indenture, dated as of , 1996, between the Registrant and IBJ Schroder Bank &
Trust Company, as trustee (including form of Note).............................................
5.1 Opinion re Legality of Scarpello & Alling, Ltd..................................................
5.2 Opinion re Legality of Brownstein, Hyatt, Farber & Strickland, P.C. (2).........................
10.1 Amended and Restated Loan Agreement, dated April 20, 1989, between the Registrant and First
Interstate Bank of Nevada, N.A., First Interstate Bank of California, First Interstate Bank of
Oregon, N.A., First Interstate Bank of Washington, N.A., First Interstate Bank of Denver, N.A.,
West One Bank, Idaho, N.A., National Bank of Detroit and First Interstate Bank of Utah, N.A.
(1)............................................................................................
10.2 Amended and Restated Promissory Note, dated April 20, 1989, between the Registrant and First
Interstate Bank of Nevada, N.A., First Interstate Bank of California, First Interstate Bank of
Oregon, N.A., First Interstate Bank of Washington, N.A., First Interstate Bank of Denver, N.A.,
West One Bank, Idaho, N.A., National Bank of Detroit and First Interstate Bank of Utah, N.A.
(1)............................................................................................
10.3 Rate Reduction Agreement, dated February 27, 1990, between First Interstate Bank of Nevada,
N.A., First Interstate Bank of California, First Interstate Bank of Oregon, N.A., First
Interstate Bank of Washington, N.A., First Interstate Bank of Denver, N.A., West One Bank,
Idaho, N.A., National Bank of Detroit and First Interstate Bank of Utah, N.A. and the
Registrant (1).................................................................................
10.4 First Amendment to Amended and Restated Loan Agreement, dated August 30, 1991, between the
Registrant and First Interstate Bank of Nevada, N.A., First Interstate Bank of California,
First Interstate Bank of Denver, N.A., West One Bank, Idaho, N.A., National Bank of Detroit and
First Interstate Bank of Utah, N.A. (1)........................................................
10.5 Second Amended and Restated Promissory Note, dated August 30, 1991, between the Registrant and
First Interstate Bank of Nevada, N.A., First Interstate Bank of California, First Interstate
Bank of Denver, N.A., West One Bank, Idaho, N.A., National Bank of Detroit and First Interstate
Bank of Utah, N.A. (1).........................................................................
10.6 Second Amendment to Amended and Restated Loan Agreement and Amendment to A/R Note, dated March
30, 1992, between the Registrant and First Interstate Bank of Nevada, N.A., First Interstate
Bank of California, First Interstate Bank of Denver, N.A., West One Bank, Idaho, N.A., National
Bank of Detroit and First Interstate Bank of Utah, N.A. (1)....................................
10.7 Letter Agreement, dated November 25, 1992, between the Registrant and First Interstate Bank of
Nevada, N.A., First Interstate Bank of California, First Interstate Bank of Denver, N.A., West
One Bank, Idaho, N.A., National Bank of Detroit and First Interstate Bank of Utah, N.A. (1)....
10.8 Third Amendment to Amended and Restated Loan Agreement, dated January 8, 1993, between the
Registrant and First Interstate Bank of Nevada, N.A., First Interstate Bank of California,
First Interstate Bank of Denver, N.A., West One Bank, Idaho, N.A., NBD Bank, N.A., and First
Interstate Bank of Utah, N.A. (1)..............................................................
10.9 Third Amended and Restated Promissory Note, dated January 15, 1993, between the Registrant and
First Interstate Bank of Nevada, N.A., First Interstate Bank of California, First Interstate
Bank of Denver, N.A., West One Bank, Idaho, N.A., NBD Bank, N.A., and First Interstate Bank of
Utah, N.A. (1).................................................................................
</TABLE>
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NUMBER DESCRIPTION PAGE
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10.10 Fourth Amendment to Amended and Restated Loan Agreement (1).....................................
10.11 Interest Rate Swap Agreement, dated as of August 1, 1989, between the Registrant and First
Interstate Bank of Nevada, N.A. (1)............................................................
10.12 Net Lease Agreement, dated February 28, 1985, between Park Cattle Co. and the Registrant (1)....
10.13 Lease, dated July 9, 1973, between Park Cattle Co. and the Registrant (1).......................
10.14 Deed of Trust with Assignment of Rents and Security Agreement (Nevada Property), dated March 15,
1985, between the Registrant and Lawyers Title of Northern Nevada, as Trustee, and First
Interstate Bank of Nevada, N.A., First Interstate Bank of California, National Bank of Detroit,
First Interstate Bank of Denver, N.A., First Interstate of Washington, N.A., and First
Interstate Bank of Utah, N.A. (1)..............................................................
10.15 First Amendment to Deed of Trust with Assignment of Rents and Security Agreement (Nevada
Property), dated April 20, 1989, between the Registrant and Western Title Company, Inc., as
Trustee, and First Interstate Bank of Nevada, N.A., First Interstate Bank of California,
National Bank of Detroit, First Interstate Bank of Denver, N.A.,First Interstate Bank of
Washington, N.A., First Interstate Bank of Utah, N.A., First Interstate Bank of Oregon, N.A.,
and West One Bank, Idaho, N.A. (1).............................................................
10.16 Deed of Trust and Assignment of Rents (California Property), dated March 15, 1985, between the
Registrant and Lawyers Title Insurance Corporation, as Trustee, and First Interstate Bank of
Nevada, N.A., First Interstate Bank of California, National Bank of Detroit, First Interstate
Bank of Denver, N.A., First Interstate Bank of Washington, N.A., and First Interstate Bank of
Utah, N.A. (1).................................................................................
10.17 First Amendment to Deed of Trust with Assignment of Rents and Security Agreement (California
Property), dated April 20, 1989, between the Registrant and Western Title Company, Inc., as
Trustee, and First Interstate Bank of Nevada, N.A., First Interstate Bank of California,
National Bank of Detroit, First Interstate Bank of Denver, N.A.,First Interstate of Washington,
N.A., and First Interstate Bank of Utah, N.A., First Interstate Bank of Oregon, N.A., and West
One Bank Idaho, N.A. (1).......................................................................
10.18 Second Amendment to Deed of Trust with Assignment of Rents and Security Agreement (Nevada
Property), dated January 12, 1993, between the Registrant and Western Title Company, Inc., as
Trustee, and First Interstate Bank of Nevada, N.A., First Interstate Bank of California, First
Interstate Bank of Denver, N.A., First Interstate Bank of Utah, N.A., West One Bank, Idaho, and
NBD Bank, N.A. (1).............................................................................
10.19 Second Amendment to Deed of Trust with Assignment of Rents and Security Agreement (California
Property), dated January 12, 1993, between the Registrant and Western Title Company, Inc., as
Trustee, and First Interstate Bank of Nevada, N.A., First Interstate Bank of California, First
Interstate Bank of Denver, N.A., First Interstate Bank of Utah, N.A., West One Bank, Idaho, and
NBD Bank, N.A. (1).............................................................................
10.20 Employment Agreement between Richard F. Kudrna, Sr. and the Registrant (1)......................
10.21 Employment Agreement between Thomas M. Yturbide and the Registrant (1)..........................
10.22 Employment Agreement between William B. Ledbetter and the Registrant (1)........................
10.23 Collective Bargaining Agreements between the Registrant and International Alliance of Theatrical
Stage Employees and Moving Picture Machine Operators (1).......................................
10.24 Outside Directors Retirement Plan, Amended (1)..................................................
10.25 Director Emerita Resolution -- Beverlee Ledbetter (1)...........................................
10.26 Supplemental Executive Retirement Plan (1)......................................................
10.27 Senior Supplemental Executive Retirement Plan (1)...............................................
10.28 Honorary Director Resolution -- Vera Gross (1)..................................................
</TABLE>
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NUMBER DESCRIPTION PAGE
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<C> <S> <C>
10.29 Form of Indemnification Agreement for Directors and Executive Officers (1)......................
10.30 Stockholders Agreement among the Registrant, Lily Pond Investments, Inc. and Hard Rock Hotel,
Inc. (1).......................................................................................
10.31 Management Agreement between the Registrant and Hard Rock Hotel, Inc. (1).......................
10.32 Agreement Relating to Sale and Purchase of Corporate Stock, dated as of February 1, 1985 among
the Registrant, Beverlee Ledbetter, Fenn Barkley, Sr., and First Interstate Bank of Nevada,
N.A., co-executors of the estate of Harvey A. Gross (1)........................................
10.33 Amendment to Agreement Relating to Sale and Purchase of Corporate Stock, dated as of March 15,
1993 between the Registrant, Beverlee Ledbetter, Charles Lindekugel and First Interstate Bank
of Nevada, N.A., as co-executors of the Estate (1).............................................
10.34 Definitive Agreement between Harveys C.C. Management Company and Mountain City Casino Partners,
L.P. (1).......................................................................................
10.35 Management Agreement between the Registrant and Harveys Wagon Wheel Casino Limited Liability
Company (1)....................................................................................
10.36 Form of Assignment and Assumption Agreement between Mountain City Casino Partners, L.P. and
Harveys Wagon Wheel Casino Limited Liability Company (1).......................................
10.37 Loan Agreement between Harveys Wagon Wheel Casino Limited Liability Company and Mountain City
Casino Partners, L.P. (1)......................................................................
10.38 Employment Agreement between Charles W. Scharer and the Registrant (1)..........................
10.39 Employment Agreement between Verne Welch and the Registrant (1).................................
10.40 1993 Omnibus Incentive Plan (3).................................................................
10.41 1993 Non-Employee Directors Stock Option Program (3)............................................
10.42 Form of Deferred Compensation Agreement and Schedule of 1994 Participants (3)...................
10.43 Form of Indemnification Agreement for Directors and Officers and Schedule of Indemnities (3)....
10.44 Loan Agreement among Hard Rock Hotel, Inc., as borrower, the Registrant, as guarantor, First
Interstate Bank of Nevada, N.A., as agent, and the several lenders thereunder (3)..............
10.45 Promissory Note among Hard Rock Hotel, Inc., as borrower, the Registrant, as guarantor, First
Interstate Bank of Nevada, N.A., as agent, and the several lenders thereunder (3)..............
10.46 Guaranty of Loan executed by the Registrant (3).................................................
10.47 Amendment No. 1 to 1993 Non-Employee Directors Stock Option Program (3).........................
10.48 $22,200,000 Construction Loan Agreement between Harveys Wagon Wheel Casino Limited Liability
Company, as borrower, and the Registrant, as lender (4)........................................
10.49 Secured Promissory Note between Harveys Wagon Wheel Casino Limited Liability Company, as maker,
and the Registrant, as holder (4)..............................................................
10.50 Deed of Trust, Security Agreement and Financing Agreement among Harveys Wagon Wheel Casino
Limited Liability Company, as grantor, the Public Trustee of the County of Gilpin, State of
Colorado, as trustee, and the Registrant, as beneficiary (4)...................................
10.51 Security Agreement between Harveys Wagon Wheel Casino Limited Liability Company, as obligor, and
the Registrant, as lender (4)..................................................................
10.52 Assignment of Rents, Income and Other Contract Rights between Harveys Wagon Wheel Casino Limited
Liability Company, as borrower, and the Registrant, as lender (4)..............................
</TABLE>
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<TABLE>
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10.53 Subordination Agreement among 150 Rodeo Partners, Inc., the Registrant, and Harveys Wagon Wheel
Casino Limited Liability Company (4)...........................................................
10.54 Fifth Amendment to Amended and Restated Loan Agreement, dated November 8, 1994, between the
Registrant, and First Interstate Bank of Nevada, N.A., West One Bank, Idaho, Society Generale,
The Daiwa Bank, Limited, United States National Bank of Oregon, U.S. Bank of Nevada and First
Security Bank of Idaho, N.A. (5)...............................................................
10.55 First Amendment to Construction Loan Agreement, dated November 1, 1994, between Harveys Wagon
Wheel Casino Limited Liability Company and the Registrant (5)..................................
10.56 Amended and Restated Secured Promissory Note, dated November 1, 1994, between Harveys Wagon
Wheel Casino Limited Liability Company and the Registrant (5)..................................
10.57 First Amendment to Deed of Trust, Security Agreement and Financing Statement, dated November 1,
1994, between Harveys Wagon Wheel Casino Limited Liability Company and the Registrant (5)......
10.58 First Amendment to Security Agreement, dated November 1, 1994, between Harveys Wagon Wheel
Casino Limited Liability Company and the Registrant (5)........................................
10.59 First Amendment to Assignment of Rents, Income and Other Contract Rights, dated November 1,
1994, between Harveys Wagon Wheel Casino Limited Liability Company and the Registrant (5)......
10.60 Amended and Restated Subordination Agreement, dated November 1, 1994, by and between 150 Rodeo
Partners, Inc. and the Registrant and Harveys Wagon Wheel Casino Limited Liability Company
(5)............................................................................................
10.61 First Amendment to Loan Agreement, dated November 8, 1994, by and among First Interstate Bank of
Nevada, N.A., Societe Generale, NBD Bank, N.A., United States National Bank of Oregon, West One
Bank, Idaho, First Security Bank of Idaho, N.A., The Daiwa Bank, Limited, and U.S. Bank of
Nevada and First Interstate of Nevada, N.A., Hard Rock Hotel, Inc., and Harveys Wagon Wheel,
Inc. (5).......................................................................................
10.62 First Amendment to Guaranty of Loan, dated November 8, 1994, between the Registrant and First
Interstate Bank of Nevada, N.A., Societe Generale, NBD Bank, N.A., United States National Bank
of Oregon, West One Bank, Idaho, First Security Bank of Idaho, N.A., The Daiwa Bank, Limited,
and U.S. Bank of Nevada (5)....................................................................
10.63 Employment Agreement dated November 17, 1993, by and between the Registrant and Bob Hall (5)....
10.64 Employment Agreement dated January 13, 1994, by and between the Registrant and Stephen L.
Cavallaro (5)..................................................................................
10.65 Excursion Boat Sponsorship and Operations Agreement, dated August 22, 1994, by and between Iowa
West Racing Association and Harveys Iowa Management Company, Inc. (5)..........................
10.66 Purchase Agreement, dated September 12, 1994, by and between the City of Council Bluffs and
Harveys Iowa Management Co. (5)................................................................
10.67 Commitment Letter, dated January 18, 1995, between the Registrant and First Interstate Bank of
Nevada, N.A. (5)...............................................................................
10.68 Form of Deferred Compensation Agreement and Schedule of 1995 Participants (6)...................
10.69 Long-term Incentive Plan Guidelines (1994-1996 Performance Period) (6)..........................
10.70 Short-term Incentive Plan (6)...................................................................
10.71 Employment Agreement dated May 9, 1995, by and between the Registrant and Gary Armentrout (7)...
</TABLE>
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10.72 Loan Purchase Agreement (with Full Recourse to Seller) dated March 10, 1995 by and between the
Registrant ("Seller") and First Interstate Bank of Nevada, N.A. ("Buyer") (7)..................
10.73 Option Agreement dated March 10, 1995, by and between First Interstate Bank of Nevada, N.A. and
the Registrant (7).............................................................................
10.74 Employment Agreement dated August 5, 1995, by and between the Registrant and Gary R. Selesner
(8)............................................................................................
10.75 Employment Agreement dated August 14, 1995, by and between the Registrant and John McLaughlin
(8)............................................................................................
10.76 Employment Agreement dated August 14, 1995, by and between the Registrant and Kevin Servatius
(8)............................................................................................
10.77 Employment Agreement dated August 24, 1995, by and between the Registrant and Edward B. Barraco
(8)............................................................................................
10.78 Employment Agreement dated August 21, 1995, by and between the Registrant and David J. Hurst
(8)............................................................................................
10.79 Employment Agreement dated August 21, 1995, by and between the Registrant and Lou R. Kelmanson
(8)............................................................................................
10.80 Reducing Revolving Credit Agreement, dated as of August 14, 1995, by and among the Registrant
and Harveys C.C. Management Company, Inc., Harveys Iowa Management Company, Inc., (the
"Borrowers") and First Interstate Bank of Nevada, N.A., First Interstate Bank of California,
Bank of the West, First Security Bank of Idaho, N.A., Imperial Bank, Norwest Bank of Nebraska,
N.A., NBD Bank, Societe Generale, The Daiwa Bank, Limited, U.S. Bank of Nevada, West One Bank,
Idaho and Argentbank, (the "Lenders") (8)......................................................
10.81 Second Amendment to Loan Agreement, dated November 7, 1995, by and among First Interstate Bank
of Nevada, N.A., Societe Generale, NBD Bank, N.A., United States National Bank of Oregon, West
One Bank, Idaho, First Security Bank of Idaho, N.A., The Daiwa Bank, Limited, U.S. Bank of
Nevada, Hard Rock Hotel, Inc. and the Registrant (9)...........................................
10.82 Second Amended and Restated Reducing Revolving Credit Promissory Note, dated November 7, 1995
between First Interstate Bank of Nevada, N.A. as Agent Bank and Hard Rock Hotel, Inc. (9)......
10.83 Second Amendment to Guaranty of Loan, dated November 7, 1995, between the Registrant and First
Interstate Bank of Nevada, N.A., Societe Generale, NBD Bank, N.A., United State National Bank
of Oregon, West One Bank, Idaho, First Security Bank of Idaho, N.A., The Daiwa Bank, Limited
and U.S. Bank of Nevada (9)....................................................................
10.84 Employment Agreement, dated October 22, 1995 and effective December 1, 1995 by and between the
Registrant and Thomas M. Yturbide (9)..........................................................
10.85 Employment Agreement, dated October 22, 1995 and effective December 1, 1995 by and between the
Registrant and Charles W. Scharer (9)..........................................................
10.86 Modification of Employment Agreement, dated November 21, 1995 by and between the Registrant and
Richard F. Kudrna, Sr. (9).....................................................................
10.87 Management Incentive Plan, approved August 8, 1995 (9)..........................................
10.88 Long-Term Incentive Plan Guidelines (1995-1997 Performance Period) (9)..........................
10.89 1996 Omnibus Incentive Plan (10)................................................................
21.1 List of Subsidiaries of the Registrant (8)......................................................
23.1 Consent of Grant Thornton LLP (10)..............................................................
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23.2 Consent of Scarpello & Alling, Ltd. (included in Exhibit 5.1)...................................
23.3 Consent of Brownstein, Hyatt, Farber & Strickland, P.C. (2).....................................
24.1 Power of Attorney (Previously filed by Harveys Casino Resorts, filed on the signature pages
hereof by Harveys C.C. Management Company, Inc., Harveys Wagon Wheel Casino Limited Liability
Company, Harveys Iowa Management Company, Inc. and Harveys L.V. Management Company, Inc.)......
25.1 Statement of Eligibility of Trustee.............................................................
</TABLE>
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(1) Incorporated herein by reference to Registration Statement No. 33-70670.
(2) To be filed by amendment.
(3) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q for the period ended February 28, 1994.
(4) Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q for the period ended May 31, 1994.
(5) Incorporated herein by reference to Registrant's Annual Report on Form 10-K
for the period ended November 30, 1994.
(6) Incorporated herein by reference to Registrant's Quarterly Report on Form
10-Q for the period ended February 28, 1995.
(7) Incorporated herein by reference to Registrant's Quarterly Report on Form
10-Q for the period ended May 31, 1995.
(8) Incorporated herein by reference to Registrant's Quarterly Report on Form
10-Q for the period ended August 31, 1995.
(9) Incorporated herein by reference to Registrant's Annual Report on Form 10-K
for the period ended November 30, 1995.
(10) Previously filed.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
$150,000,000
HARVEYS CASINO RESORTS
___% Senior Subordinated Notes Due 2006
UNDERWRITING AGREEMENT
May __, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
BEAR, STEARNS & CO. INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10127
Dear Sirs:
Harveys Casino Resorts, a Nevada corporation (the "Company"), proposes
to issue and sell $150,000,000 principal amount of its ___% Senior Subordinated
Notes Due 2006 (the "Securities") to the several underwriters named in Schedule
I hereto (the "Underwriters"). The Securities are to be issued pursuant to the
provisions of an Indenture to be dated as of May 1, 1996 (the "Indenture")
between the Company, Harveys C.C. Management Company, Inc., ("HCCMC") Harveys
Wagon Wheel Casino Limited Liability Company ("HWW"), Harveys Iowa Management
Company, Inc. ("HIMC") and Harveys L.V. Management Company, Inc. ("HLVMC"), as
Guarantors (each a "Guarantor") and IBJ Schroder Bank & Trust Company (the
"Trustee"). The obligations of the Company under the Securities and the
Indenture will be jointly and severally guaranteed on a subordinated basis
pursuant to Section 11.1 of the Indenture (each a "Subsidiary Guarantee") by
each Guarantor.
<PAGE>
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"Act"), a registration statement on Form S-1 including a prospectus relating to
the Securities and the Subsidiary Guarantees, which may be amended. The
registration statement as amended at the time when it becomes effective,
including information (if any) deemed to be part of the registration statement
at the time of effectiveness pursuant to Rule 430A under the Act, or, if
applicable, at the time any post-effective amendment thereto becomes effective,
is hereinafter referred to as the Registration Statement; and the prospectus in
the form first used to confirm sales of Securities is hereinafter referred to as
the Prospectus.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell, and each Underwriter
agrees, severally and not jointly, to purchase from the Company the principal
amount of Securities set forth opposite the name of such Underwriter in Schedule
I hereto, at _____% of the principal amount thereof (the "Purchase Price") plus
accrued interest thereon, if any, from _____________, 1996, to the date of
payment and delivery.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Securities as soon after the effective date of the Registration Statement
as in your judgment is advisable and (ii) initially to offer the Securities upon
the terms set forth in the Prospectus.
4. DELIVERY AND PAYMENT. Delivery of and payment for the Securities
shall be made at 10:00 A.M., New York City time, on the third business day (the
"Closing Date") following the date of the initial public offering, at such place
as Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") shall designate.
The Closing Date and the location of delivery of and the form of payment for the
Securities may be varied by agreement between DLJ and the Company.
The Securities shall be delivered in the form of one or more Global
Certificates registered in the name of Cede & Co. or in certificates registered
in such names and issued in such denominations as you shall request in writing
not later than one full business day prior to the Closing Date. Such
certificates shall be made available to you for inspection not later than 9:30
A.M., New York City time, on the business day next preceding the
- 2 -
<PAGE>
Closing Date. Such certificates shall be delivered to you on the Closing Date
with any transfer taxes thereon duly paid by the Company, for the respective
accounts of the several Underwriters, against payment of the Purchase Price
therefor by wire transfer in immediately available funds in accordance with
instructions furnished by the Company on the business day next preceding the
Closing Date.
5. AGREEMENTS OF THE COMPANY. The Company agrees with you:
(a) To use its best efforts to cause the Registration Statement (if
the Registration Statement has not been declared effective prior to
execution and delivery of this Agreement) and any post-effective amendment
thereto to become effective at the earliest possible time.
(b) To advise you promptly and, if requested by DLJ, to confirm such
advice in writing, (i) when the Registration Statement has become effective
and when any post-effective amendment to the Registration Statement becomes
effective, (ii) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
the suspension of qualification of the Securities or the Subsidiary
Guarantees for offering or sale in any jurisdiction, or the initiation of
any proceeding for such purposes, and (iv) of the happening of any event
during the period referred to in paragraph (e) below which makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires the making of any additions to or
changes in the Registration Statement or the Prospectus in order to make
the statements therein not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration
Statement, the Company will make every reasonable effort to obtain the
withdrawal or lifting of such order at the earliest possible time.
(c) To furnish to you, without charge, four signed copies of the
Registration Statement as first filed with the Commission and of each
amendment thereto, including all exhibits, and to furnish to you and each
Underwriter designated by DLJ such number of conformed copies of the
Registration Statement as so filed and of each amendment thereto, without
exhibits, as DLJ may reasonably request.
- 3 -
<PAGE>
(d) Not to file any amendment or supplement to the Registration
Statement, or to make any amendment or supplement to the Prospectus of
which you shall not previously have been advised or to which you shall
reasonably object; and to prepare and file with the Commission, promptly
upon the reasonable request of DLJ, any amendment to the Registration
Statement or supplement to the Prospectus which may be necessary or
advisable in connection with the distribution of the Securities by you, and
to use its best efforts to cause the same to become promptly effective.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of counsel
for the Underwriters a prospectus is required by law to be delivered in
connection with sales by an Underwriter or a dealer, to furnish to each
Underwriter and dealer as many copies of the Prospectus (and of any
amendment or supplement to the Prospectus) as such Underwriter or dealer
may reasonably request.
(f) If during the period specified in paragraph (e) any event shall
occur as a result of which, in the opinion of counsel for the Underwriters
it becomes necessary to amend or supplement the Prospectus in order to make
the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with any law,
forthwith to prepare and file with the Commission an appropriate amendment
or supplement to the Prospectus so that the statements in the Prospectus,
as so amended or supplemented, will not in the light of the circumstances
when it is so delivered, be misleading, or so that the Prospectus will
comply with law, and to furnish to each Underwriter and to such dealers as
DLJ shall specify, such number of copies thereof as such Underwriter or
dealers may reasonably request.
(g) Prior to any public offering of the Securities, to cooperate with
you and counsel for the Underwriters in connection with the registration or
qualification of the Securities and the Subsidiary Guarantees for offer and
sale by the several Underwriters and by dealers under the state securities
or Blue Sky laws of such jurisdictions as DLJ may reasonably request, to
continue such qualification in effect so long as required for distribution
of the Securities and to file such consents to service of process or other
documents as may be necessary in order to effect such registration or
qualification; PROVIDED that neither the Company nor any Guarantor shall be
required to register or
- 4 -
<PAGE>
qualify as a foreign corporation or to take any action which would subject it to
the service of process in suits, other than as to matters and transactions
relating to the offer and sale of the Securities and the Subsidiary Guarantees,
in any jurisdiction in which it is not now so subject.
(h) To mail and make generally available to its security holders as
soon as reasonably practicable an earnings statement covering a period of
at least twelve months after the effective date of the Registration
Statement (but in no event commencing later than 90 days after such date)
which shall satisfy the provisions of Section 11(a) of the Act, and to
advise you in writing when such statement has been so made available.
(i) During the period of five years after the date of this Agreement,
(i) to mail as soon as reasonably practicable after the end of each fiscal
year to the record holders of the Securities a financial report of the
Company and its subsidiaries on a consolidated basis (and a similar
financial report of all unconsolidated subsidiaries, if any), all such
financial reports to include a consolidated balance sheet, a consolidated
statement of operations, a consolidated statement of cash flows and a
consolidated statement of shareholders' equity as of the end of and for
such fiscal year, together with comparable information as of the end of and
for the preceding year, certified by independent certified public
accountants, and (ii) to mail and make generally available as soon as
practicable after the end of each quarterly period (except for the last
quarterly period of each fiscal year) to such holders, a consolidated
balance sheet, a consolidated statement of operations and a consolidated
statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such period,
and for the period from the beginning of such year to the close of such
quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(j) During the period referred to in paragraph (i), to furnish to you
as soon as available a copy of each report or other publicly available
information of the Company mailed to the security holders of the Company or
filed with the Commission and such other publicly available information
concerning the Company and its subsidiaries as DLJ may reasonably request.
(k) To pay all costs, expenses, fees (other than fees, document
production charges and disbursements of counsel for
- 5 -
<PAGE>
the Underwriters, except as contemplated by clauses (iii) and (iv) below) and
taxes incident to (i) the preparation, printing, filing and distribution under
the Act of the Registration Statement (including financial statements and
exhibits), each preliminary prospectus and all amendments and supplements to any
of them prior to or during the period specified in paragraph (e), (ii) the
printing and delivery of the Prospectus and all amendments or supplements to it
during the period specified in paragraph (e), (iii) the preparation and delivery
of this Agreement, the Indenture, the Securities, the Preliminary and
Supplemental Blue Sky Memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in connection with the
offering of the Securities and the Subsidiary Guarantees (including in each case
any document production charges and disbursements of counsel for the
Underwriters relating to such preparation and delivery), (iv) the registration
or qualification of the Securities and the Subsidiary Guarantees for offer and
sale under the securities or Blue Sky laws of the several states (including in
each case the fees (not to exceed $10,000) and document production charges and
disbursements (not to exceed an additional $10,000) of counsel for the
Underwriters relating to such registration or qualification and memoranda
relating thereto), (v) filings and clearance with the National Association of
Securities Dealers, Inc. and the Gaming Authorities (as defined below) in
connection with the offering and (vi) furnishing such copies of the Registration
Statement, the Prospectus and all amendments and supplements thereto as may be
requested for use in connection with the offering or sale of the Securities by
the Underwriters or by dealers to whom Securities may be sold.
(l) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise dispose of any debt securities of the Company or warrants to
purchase debt securities of the Company substantially similar to the
Securities, without the prior written consent of DLJ.
(m) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Securities.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
- 6 -
<PAGE>
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) Each part of the Registration Statement, when such part
became effective, did not contain and each such part, as amended or
supplemented, if applicable, will not contain any 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, (ii)
the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Act and (iii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set
forth in this paragraph (b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through DLJ expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act; and did not 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, in the light of the
circumstances under which they were made, not misleading.
(d) The Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power
and authority to carry on its business as it is currently being conducted
and to own, lease and operate its properties, and each is duly qualified
and is in good standing as a foreign corporation authorized to do business
in each jurisdiction in which the nature of its business or its ownership
or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
- 7 -
<PAGE>
(e) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Company's subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable, and
except as otherwise stated in the Registration Statement and Prospectus,
are owned by the Company, free and clear of any security interest, claim,
lien, encumbrance or adverse interest of any nature; except as otherwise
stated in the Registration Statement and the Prospectus, the Company owns
40% of the issued and outstanding capital stock of Hard Rock Hotel, Inc.,
free and clear of any security interest, claims, lien, encumbrance or
adverse interest of any nature.
(f) The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to the Underwriters against payment therefor as
provided by this Agreement, will be entitled to the benefits of the
Indenture and the Subsidiary Guarantees, and will be valid and binding
obligations of the Company, enforceable in accordance with their terms,
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
(g) Each Subsidiary Guarantee has been duly and validly authorized by
the Guarantor issuing such Subsidiary Guarantee and, when executed,
authenticated and delivered by such Guarantor in accordance with the
provisions of the Indenture such Subsidiary Guarantee, will be a valid and
binding obligation of such Guarantor, enforceable in accordance with its
terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability.
(h) This Agreement has been duly authorized, executed and delivered
by the Company.
(i) The Indenture has been duly qualified under the Trust Indenture
Act of 1939, as amended, has been duly authorized by the Company and the
Guarantors and, when executed and delivered by the Company, the Guarantors
and the Trustee, will be a valid and binding agreement of the Company and
the Guarantors, enforceable in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting
- 8 -
<PAGE>
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
(j) The Securities and the Subsidiary Guarantees conform to the
descriptions thereof contained in the Prospectus.
(k) Neither the Company nor any of its subsidiaries is in violation
of its charter or by-laws or in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note
or any other evidence of indebtedness or in any other agreement, indenture
or instrument material to the conduct of the business of the Company and
its subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
or their respective property is bound.
(l) The execution, delivery and performance of this Agreement, the
Indenture and the Securities by the Company, and the execution, delivery
and performance by the Guarantors of the Indenture and the Subsidiary
Guarantees, compliance by the Company and the Guarantors with the
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not require any consent, approval,
authorization, order, registration, filing, qualification, license or
permit of or with any court or any public, governmental or regulatory
authority, agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their respective properties or assets (including
(i) the Nevada Gaming Commission, the Nevada State Gaming Control Board,
the Clark County Liquor and Gaming Licensing Board and all other state,
county and local regulatory authorities in the State of Nevada that have
jurisdiction over the gaming activities of the Company or any of its
subsidiaries (collectively, the "Nevada Gaming Authorities"), (ii) the
Colorado Division of Gaming and the Colorado Limited Gaming Control
Commission and all other state, county and local regulatory authorities in
the State of Colorado that have jurisdiction over the gaming activities of
the Company or any of its subsidiaries (collectively, the "Colorado Gaming
Authorities") and (iii) the Iowa Racing and Gaming Commission and all other
state, county and local regulatory authorities in the State of Iowa that
have jurisdiction over the gaming activities of the Company and its
subsidiaries (collectively with the Nevada Gaming Authorities and the
Colorado Gaming Authorities, the "Gaming Authorities")), except such as may
be required under the Act, the
- 9 -
<PAGE>
regulations promulgated thereunder, state securities, Blue Sky or real
estate syndication laws, the Nevada Gaming Control Act and other state
gaming laws, all of which have been obtained and are in full force and
effect on the Closing Date and have not been revoked or have been waived;
nor will the execution, delivery and performance of this Agreement, the
Indenture and the Securities by the Company or the execution, delivery and
performance by the Guarantors of the Indenture and the Subsidiary
Guarantees by the Guarantors and compliance by the Company and the
Guarantors with the provisions hereof and thereof and the consummation of
the transactions contemplated hereby and thereby conflict with or
constitute a breach of any of the terms or provisions of, or a default
under, the charter or by-laws of the Company or any of its subsidiaries or
any agreement, indenture or other instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, or violate or conflict
with any laws, administrative regulations or rulings or court decrees
applicable to the Company, any of its subsidiaries or any property of the
Company or any of its subsidiaries, which conflict, breach, default or
violation would have a material adverse effect on the business or financial
condition of the Company and its subsidiaries, taken as a whole; provided
that notice of the completion of the offering must be filed with certain of
the Gaming Authorities after the Closing Date.
(m) Except as otherwise set forth in the Prospectus, there are no
material legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any of their respective
property is the subject, and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated. No contract or document
of a character required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement
is not so described or filed as required.
(n) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws") nor any federal or state law relating to discrimination in the
hiring, promotion or pay of employees nor any applicable federal or state
wages and hours laws, nor any provisions of the Employee Retirement Income
Security Act or the rules and regulations promulgated thereunder, which in
each case the
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Company reasonably believes is likely to result in any material adverse
change in the financial condition or results of operations of the Company
and its subsidiaries, taken as a whole.
(o) Each of the Company and its subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits"), including under any applicable Environmental Laws
and any applicable permits from Gaming Authorities, as are necessary to
own, lease and operate its respective properties and to conduct its
business as such business is presently conducted by it as described in the
Prospectus, except to the extent that the Company reasonably believes the
failure to have or obtain any such permit would not have a material adverse
effect on the financial condition and results of operations of the Company
and its subsidiaries, taken as a whole; each of the Company and its
subsidiaries has fulfilled and performed all of its material obligations
with respect to such permits; to the best of the Company's knowledge, no
event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results, or after notice or
lapse of time would result, in any other material impairment of the rights
of the holder of any such permit; and, except as described in the
Registration Statement and the Prospectus, such permits contain no
restrictions that are materially burdensome to the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries has any
reason to believe that any governmental body or agency is considering
limiting, suspending or revoking any such permit, or that any such permit
necessary in the future to conduct the business of the Company and its
subsidiaries as described in the Prospectus would not be granted upon
application, or that the Gaming Authorities or any other governmental
agencies are investigating the Company or any of its subsidiaries, other
than in ordinary course administrative reviews or an ordinary course review
of the transactions contemplated hereby.
(p) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws or
any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties). On the
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basis of such review, the Company has reasonably concluded that such
associated costs and liabilities would not, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(q) Except as otherwise set forth in the Registration Statement and
the Prospectus, each of the Company and its subsidiaries has good and
marketable title, free and clear of all liens, claims, encumbrances and
restrictions (except liens for taxes not yet due and payable), to all
property and assets described in the Registration Statement and Prospectus
as being owned by it, except for such liens, claims, encumbrances and
restrictions as are not material to the business, prospects, financial
condition or results of operations of the Company and its subsidiaries,
taken as a whole (whether or not contained in any title insurance policy
relating thereto). All leases to which the Company or any of its
subsidiaries is a party are valid and binding, and no default by the
Company has occurred or is continuing thereunder which might result in any
material adverse change in the business, prospects, financial condition or
results of operation of the Company and its subsidiaries taken as a whole;
the Company and its subsidiaries enjoy peaceful and undisturbed possession
under all such leases to which any of them is a party as lessee with such
exceptions (whether or not contained in any title insurance policy relating
thereto) as do not materially interfere with the use made by the Company or
such subsidiary.
(r) Each of the Company and its subsidiaries maintains insurance
covering its properties, operations, personnel and businesses. Such
insurance insures against such losses and risks to an extent which the
Company reasonably believes is adequate in accordance with customary
industry practice to protect the Company and its subsidiaries and their
businesses. All such insurance is outstanding and in force on the date
hereof.
(s) Grant Thornton LLP are independent public accountants with
respect to the Company as required by the Act.
(t) The financial statements, together with related schedules and
notes forming part of the Registration Statement and the Prospectus (and
any amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial position
of the Company and its subsidiaries on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which
they
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apply; such statements and related schedules and notes have been prepared
in accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed therein; and
the other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) is, in all material respects, accurately presented and prepared on
a basis consistent with such financial statements and the books and records
of the Company.
(u) All tax returns required to be filed by the Company and any of
its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other
charges due or claimed to be due from such entities have been paid, other
than (i) those being contested in good faith and for which adequate
reserves have been provided, (ii) those currently payable without penalty
or interest and (iii) those which, if not paid, would not have a material
adverse effect on the financial condition or results of operations of the
Company and its subsidiaries, taken as a whole.
(v) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(w) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
7. INDEMNIFICATION. (a) The Company agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), from and against any and
all losses, claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to any Underwriters furnished in writing to the Company by or on behalf of any
Underwriter directly or through DLJ expressly for
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use therein; PROVIDED, HOWEVER, that the foregoing indemnity agreement with
respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased Securities, or any person controlling such Underwriter, if
a copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Securities to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such losses, claims, damages or
liabilities.
(b) In case any action shall be brought against any Underwriter or
any person controlling such Underwriter, based upon any preliminary prospectus,
the Registration Statement or the Prospectus or any amendment or supplement
thereto and with respect to which indemnity may be sought against the Company,
such Underwriter shall promptly notify the Company in writing and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and expenses.
Any Underwriter or any such controlling person shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter or such controlling person unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or (iii) the
named parties to any such action (including any impleaded parties) include both
such Underwriter or such controlling person and the Company and such Underwriter
or such controlling person shall have been advised by such counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the Company (in which case the Company shall
not have the right to assume the defense of such action on behalf of such
Underwriter or such controlling person, it being understood, however, that the
Company shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all such Underwriters and controlling persons, which firm shall be
designated in writing by DLJ and that all such fees and expenses shall be
reimbursed as they are incurred). The Company shall not be liable for any
settlement of any such action effected without its written consent but if
settled with the written consent of the Company, the Company agrees to indemnify
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and hold harmless any Underwriter and any such controlling person from and
against any loss or liability by reason of such settlement. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and any person controlling 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 Underwriter but only with
reference to information relating to such Underwriter furnished in writing by or
on behalf of such Underwriter directly or through DLJ expressly for use in the
Registration Statement, the Prospectus or any preliminary prospectus. In case
any action shall be brought against the Company, any of its directors, any such
officer or any person controlling the Company based on the Registration
Statement, the Prospectus or any preliminary prospectus and in respect of which
indemnity may be sought against any Underwriter, the Underwriter shall have the
rights and duties given to the Company (except that if the Company shall have
assumed the defense thereof, such Underwriter shall not be required to do so,
but may employ separate counsel therein and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of such
Underwriter), and the Company, its directors, any such officers and any person
controlling the Company shall have the rights and duties given to the
Underwriter, by Section 7(b).
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Underwriters in connection with the statements or omissions which resulted
in
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such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Underwriters shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company, and the total underwriting discounts and commissions received by the
Underwriters, bear to the total price to the public of the Securities, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault of the Company and the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to Section 7(d) are several in proportion to the respective number of
Securities purchased by each of the Underwriters hereunder and not joint.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations
of the Underwriters to purchase the Securities under this Agreement are subject
to the satisfaction of each of the following conditions:
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(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the Closing Date with the
same force and effect as if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective not later
than 5:00 P.M., New York City time, on the date of this Agreement or at
such later date and time as DLJ may approve in writing, and at the Closing
Date no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall
have been commenced or shall be pending before or contemplated by the
Commission.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have been any downgrading, nor
shall any notice have been given of any intended or potential downgrading
or of any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating organization",
as such term is defined for purposes of Rule 436(g)(2) under the Act.
(d) (i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, affairs or business prospects, whether or not arising in the
ordinary course of business, of the Company, (ii) since the date of the
latest balance sheet included in the Registration Statement and the
Prospectus there shall not have been any material adverse change, or any
development involving a prospective material adverse change, in the capital
stock or in the long-term debt of the Company from that set forth in or
contemplated by the Registration Statement and Prospectus, (iii) the
Company and its subsidiaries shall have no liability or obligation, direct
or contingent, which is material to the Company and its subsidiaries, taken
as a whole, other than those reflected in the Registration Statement and
the Prospectus and (iv) on the Closing Date you shall have received a
certificate dated the Closing Date, signed by Charles W. Scharer and John
McLaughlin, in their respective capacities as the Chief Executive Officer
and Chief Financial Officer of the Company, confirming the matters set
forth in paragraphs (a), (b), (c) and (d) of this Section 8. Such officers
signing and delivering such certificate may rely upon the best of
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their knowledge as to proceedings threatened or contemplated.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Scarpello & Alling, Ltd., counsel for the Company, to the effect
that:
(i) each of the Company and HCCMC, HIMC and HLVMC (each of
HCCMC, HIMC and HLVMC being referred to as a "Nevada Subsidiary") has
been duly incorporated, is validly existing as a corporation in good
standing under the laws of the State of Nevada and has the corporate
power and authority required to carry on its business as it is
currently being conducted and to own, lease and operate its
properties;
(ii) each of the Company and the Nevada Subsidiaries is duly
qualified and is in good standing as a foreign corporation authorized
to do business in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole;
(iii) all of the outstanding shares of capital stock of each
Nevada Subsidiary have been duly and validly authorized and issued and
are fully paid and non-assessable; except as otherwise stated in the
Registration Statement and the Prospectus, the Company owns directly
100% of the issued and outstanding shares of capital stock of each
Nevada Subsidiary, free and clear of any security interest, claim,
lien, encumbrance or adverse interest of any nature; except as
otherwise stated in the Registration Statement and the Prospectus, the
Company owns 40% of the issued and outstanding capital stock of Hard
Rock Hotel, Inc., free and clear of any security interest, claim,
lien, encumbrance or adverse interest of any nature;
(iv) this Agreement, the Indenture and the Securities have been
duly authorized, executed and delivered by the Company;
(v) the Indenture and the Subsidiary Guarantees have been duly
authorized, executed and delivered by the Nevada Subsidiaries;
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(vi) the statements under the captions "Risk Factors -- Gaming
Regulation" (insofar as they relate to matters of Nevada law),
"Management", "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources", "Regulatory Matters -- Nevada Gaming Laws and Regulations"
and "Certain Transactions" in the Prospectus and Item 14 of Part II of
the Registration Statement, insofar as such statements constitute a
summary of legal matters, documents or proceedings referred to
therein, fairly present the information called for with respect to
such legal matters, documents and proceedings;
(vii) neither the Company nor any Nevada Subsidiary is in
violation of its Articles of Incorporation or by-laws and, to the best
of such counsel's knowledge after due inquiry, neither the Company nor
any Nevada Subsidiary is in default in the performance of any
obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any other agreement,
indenture or instrument material to the conduct of the business of the
Company and the Subsidiaries, taken as a whole, to which the Company
or any Nevada Subsidiary is a party or by which the Company, or any
Nevada Subsidiary or the property of the Company or any Nevada
Subsidiary is bound;
(viii) the execution, delivery and performance of this Agreement,
the Indenture and the Securities by the Company, and the execution,
delivery and performance of the Indenture and the Subsidiary
Guarantees by the Guarantors, compliance by the Company and the
Guarantors with the provisions hereof and thereof and the consummation
of the transactions contemplated hereby and thereby will not require
any consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory authority, agency or body of the State of
Nevada or any political subdivision thereof having jurisdiction over
the Company, any of its subsidiaries or any of their respective
properties or assets (including the Gaming Authorities), except such
as may be required under the Act, the regulations promulgated
thereunder, state securities, Blue Sky or real estate syndication
laws, the Nevada Gaming Control Act and other gaming laws of the State
of Nevada, all of which have been obtained and are in full force and
effect on the Closing Date;
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nor will the execution, delivery and performance of this Agreement,
the Indenture and the Securities by the Company or the execution,
delivery and performance of the Indenture and the Subsidiary
Guarantees by the Guarantors or compliance by the Company and the
Guarantors with the provisions hereof and thereof or the consummation
of the transactions contemplated hereby and thereby conflict with or
constitute a breach of any of the terms or provisions of, or a default
under, the charter or by-laws of the Company or any Nevada Subsidiary
or any agreement, indenture or other instrument to which the Company
or any Nevada Subsidiary is a party or by which the Company or any
Nevada Subsidiary or the property of the Company or any Nevada
Subsidiary is bound, or violate or conflict with any laws,
administrative regulations or rulings or court decrees applicable to
the Company or any Nevada Subsidiary or the property of the Company or
any Nevada Subsidiary, which conflict, breach, default or violation
would have a material adverse effect on the business or financial
condition of the Company and its subsidiaries, taken as a whole;
provided that notice of the completion of the offering must be given
to certain of the Gaming Authorities after the Closing Date;
(ix) after due inquiry, such counsel does not know of any legal
or governmental proceeding pending or threatened to which the Company
or any of its subsidiaries is a party or to which any of their
respective property is subject which is required to be described in
the Registration Statement or the Prospectus and is not so described,
or of any contract or other document which is required to be described
in the Registration Statement or the Prospectus or is required to be
filed as an exhibit to the Registration Statement which is not
described or filed as required;
(x) to the best of such counsel's knowledge, after due inquiry,
neither the Company nor any of its subsidiaries has violated any
Environmental Laws, nor any federal or state law relating to
discrimination in the hiring, promotion or pay of employees nor any
applicable federal or state wages and hours laws, nor any provisions
of the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in each case might result in
any material adverse change in the business, prospects, financial
condition or results of operations of the Company and its
subsidiaries, taken as a whole;
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(xi) to the best of such counsel's knowledge, after due inquiry,
except as otherwise set forth in the Registration Statement and the
Prospectus or such as are not material to the financial condition or
results of operations of the Company and its subsidiaries, taken as a
whole, each of the Company and the Nevada Subsidiaries has good and
marketable title, free and clear of all liens, claims, encumbrances
and restrictions, except liens for taxes not yet due and payable, to
all property and assets described in the Registration Statement and
the Prospectus as being owned by it;
(xii) to the best of such counsel's knowledge, after due inquiry,
all leases to which the Company or any of the Nevada Subsidiaries is a
party are valid and binding and no default has occurred or is
continuing thereunder, which might result in any material adverse
change in the financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, and the Company and
each of the Nevada Subsidiaries, enjoy peaceful and undisturbed
possession under all such leases to which any of them is a party as
lessee with such exceptions as do not materially interfere with the
use made by the Company or the Nevada Subsidiaries, as the case may
be;
(xiii) each of the Company and the Nevada Subsidiaries has such
permits, licenses, franchises and authorizations of governmental or
regulatory authorities (collectively, "permits"), including under any
applicable Environmental Laws and any applicable permits from Gaming
Authorities (other than permits relating to the laws of the States of
Colorado and Iowa, as to which such counsel need express no opinion),
as are necessary to own, lease and operate its respective properties
and to conduct its business as such business is presently conducted by
it as described in the Registration Statement and the Prospectus,
except to the extent that the failure to have or obtain such permit
would not have a material adverse effect on the Company and the Nevada
Subsidiaries, taken as a whole; to the best of such counsel's
knowledge, after due inquiry, each of the Company and the Nevada
Subsidiaries has fulfilled and performed all of its material
obligations with respect to such permits; no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results, or after notice or lapse of time would
result, in any other material
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impairment of the rights of the holder of any such permit, subject in
each case to such qualification as may be set forth in the Prospectus;
and, except as described in the Registration Statement and the
Prospectus, such permits contain no restrictions that are materially
burdensome to the Company or any of the Nevada Subsidiaries; to the
best of such counsel's knowledge, after due inquiry, there is no
reason to believe that any governmental body or agency is considering
limiting, suspending or revoking any such permit, or that any such
permit necessary in the future to conduct the business of the Company
or any of the Nevada Subsidiaries as described in the Registration
Statement and the Prospectus would not be granted upon application, or
that the Gaming Authorities (other than the authorities of the States
of Colorado and Iowa, as to which such counsel need express no
opinion) or any other governmental agencies are investigating the
Company or any of the Nevada Subsidiaries other than in ordinary
course administrative reviews or an ordinary course review of the
transactions contemplated hereby; and
(xiv) such counsel believes that (except for the financial
statements, schedules and other financial and statistical data
included therein and that part of the Registration Statement that
constitutes the Form T-1, as to which no belief need be expressed) the
Registration Statement and the Prospectus included therein at the time
the Registration Statement became effective did not contain any 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 that the Prospectus, as amended or supplemented, if
applicable (except for the financial statements, schedules and other
financial and statistical data included therein, as to which no belief
need be expressed) does not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
In giving such opinion with respect to the matters covered by clause
(xiv), such counsel may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification except as specified.
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(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Brownstein, Hyatt, Farber & Strickland, P.C., special Colorado
counsel for the Company, HCCMC and HWW to the effect that:
(i) HWW has been duly organized, is validly existing as a
limited liability company in good standing under the laws of the State
of Colorado and has the power and authority required to carry on its
business as described in the Prospectus and to own, lease and operate
its properties as described in the Prospectus;
(ii) to the best of such counsel's knowledge, all of the
outstanding membership interests of HWW have been duly and validly
authorized and issued and are fully paid and non-assessable;
(iii) HCCMC owns directly a 70% membership interest in, and the
Company owns directly the remaining 30% membership interest in, HWW
free and clear of any security interest, claim, lien, encumbrance or
adverse interest of any nature, except for the encumbrances set forth
in the Definitive Agreement of Harveys Wagon Wheel Casino Limited
Liability Company dated November 2, 1993, and described in
Registration Statement and the Prospectus; such membership interests
constitute the only outstanding ownership interests in HWW;
(iv) the statements under the captions "Risk Factors -- Gaming
Regulation" and "Regulatory Matters -- Colorado Gaming Laws and
Regulations" in the Prospectus, insofar as such statements relate to
matters concerning Colorado gaming laws and regulations, when taken
together, fairly summarize the information called for with respect to
such legal matters;
(v) the Subsidiary Guarantee issued by HWW as part of the
Indenture has been duly authorized, executed and delivered by HWW;
(vi) to the knowledge of such counsel, the execution, delivery
and performance of this Agreement, the Indenture and the Securities by
the Company, and the execution, delivery and performance of the
Indenture and the Subsidiary Guarantees by the Guarantors, and
compliance by the Company and the Guarantors with all of the
provisions hereof and
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thereof and the consummation of the transactions contemplated hereby
and thereby, will not conflict with, result in a breach of any of the
terms or provisions of, or constitute a default under the Articles of
Organization or operating agreement of HWW or any agreement, document
or other instrument to which the Company, HCCMC or HWW are bound, or
violate or conflict with any Colorado laws, administrative regulations
or rulings or court decrees applicable to the Company, HCCMC or HWW or
the property of the Company, HCCMC or HWW;
(vii) to the knowledge of such counsel, without having made any
special investigation concerning any law or the applicability of any
laws, no consent, or approval, authorization, order, registration,
filing, qualification, license or permit (collectively, "Consents"),
of any court or public, governmental, or regulatory authority, agency
or body of the State of Colorado (including applicable gaming
regulatory authorities) is required under the laws of the State of
Colorado for the Company to execute, deliver and perform this
Agreement, the Indenture and the Securities or for the Guarantors to
execute, deliver and perform the Indenture and the Subsidiary
Guarantees or for the Company or the Guarantors to comply with the
provisions hereof and thereof and consummate the transactions provided
for herein and therein, except such Consents as may be required under
state securities or Blue Sky laws or gaming laws of the State of
Colorado, all of which have been obtained and are in full force and
effect on the Closing Date; provided that notice of the completion of
the offering must be given to certain of such gaming regulatory
authorities after the Closing Date; and
(viii) each of the Company, HCCMC and HWW has such permits,
licenses, franchises and authorizations of governmental and regulatory
authorities of the State of Colorado and any political subdivision
thereof (collectively, "Colorado permits"), including under any
applicable Environmental Laws of the State of Colorado or any
political subdivision thereof and any applicable Colorado permits from
Gaming Authorities in the State of Colorado, as are necessary to own,
lease and operate its respective properties in the State of Colorado
and to conduct its business in the State of Colorado as such business
is presently conducted by it and as described in the Registration
Statement and the Prospectus, except to the extent that the failure to
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<PAGE>
have or obtain such Colorado permits would not have a material adverse
effect on the Company, HCCMC and HWW, taken as a whole; to the best of
such counsel's knowledge, after due inquiry, each of the Company,
HCCMC and HWW has fulfilled and performed all of its material
obligations with respect to such Colorado permits; no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results, or after notice or lapse
of time would result, in any other material impairment of the rights
of the holder of any such Colorado permit; and such Colorado permits
contain no restrictions that are materially burdensome to the Company,
HCCMC or HWW; to the best of such counsel's knowledge, after due
inquiry, there is no reason to believe that any governmental body or
agency is considering limiting, suspending or revoking any such
Colorado permit, or that any such Colorado permit necessary in the
future to conduct the business of the Company, HCCMC or HWW as
described in the Registration Statement and the Prospectus would not
be granted upon application, or that the Colorado Gaming Authorities
or any other governmental agencies of the State of Colorado or any
political subdivision thereof are investigating the Company, HCCMC or
HWW other than in ordinary course administrative reviews or an
ordinary course review of the transactions contemplated hereby.
(g) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Davis, Brown, Shors & Roberts, special Iowa counsel for the
Company and HIMC, to the effect that:
(i) Iowa West is a qualified non-profit organization existing
under the laws of the State of Iowa and has the power and authority to
authorize the Company and HIMC to operate their gambling facilities
and activities on the riverboat casino at Harveys Casino/Hotel under
Iowa West's gaming license;
(ii) the Excursion Sponsorship and Operating Agreement dated
August 22, 1994 between HIMC and Iowa West (the "Operating Agreement")
is a valid and binding agreement of Iowa West, enforceable in
accordance with its terms;
(iii) the statements under the captions "Risk Factors -- Gaming
Regulation" and "Regulatory Matters -- Iowa Gaming Laws and
Regulations" in the Prospectus,
- 25 -
<PAGE>
insofar as such statements constitute a summary of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents
and proceedings and fairly summarize the matters referred to therein;
(iv) to the knowledge of such counsel, the execution, delivery
and performance of this Agreement, the Indenture and Securities by the
Company and the execution, delivery and performance of the Indenture
and the Subsidiary Guarantees by the Guarantors, and compliance by the
Company and the Guarantors with all of the provisions hereof and
thereof and the consummation of the transactions contemplated hereby
and thereby, will not conflict with, result in a breach of any of the
terms or provisions of, or constitute a default under the Operating
Agreement or any other agreement, document or other instrument to
which the Company, HIMC or Iowa West are bound, or violate or conflict
with any law, administrative regulations or rulings or court decrees
of the State of Iowa or any political subdivision thereof applicable
to the Company or HIMC or the property of the Company or HIMC;
(v) to the knowledge of such counsel, without having made any
special investigation concerning any law or the applicability of any
laws, no consent, or approval, authorization, order, registration,
filing, qualification, license or permit (collectively, "Consents"),
of any court or public, governmental, or regulatory authority, agency
or body of the State of Iowa or any political subdivision thereof
(including applicable gaming regulatory authorities) is required under
the laws of the State of Iowa for the Company to execute, deliver and
perform this Agreement, the Indenture and the Securities or for the
Guarantors to execute, deliver and perform the Indenture and the
Subsidiary Guarantees, comply with the provisions hereof and thereof
and consummate the transactions provided for herein and therein,
except such Consents as may be required under state securities or Blue
Sky laws or gaming laws of the State of Iowa, all of which have been
obtained and are in full force and effect on the Closing Date;
provided that notice of the completion of the offering must be given
to certain of such gaming regulatory authorities after the Closing
Date; and
- 26 -
<PAGE>
(vi) each of the Company and HIMC has such permits, licenses,
franchises and authorizations of governmental and regulatory
authorities of the State of Iowa and any political subdivision thereof
(collectively, "Iowa permits"), including under any applicable
Environmental Laws of the State of Iowa or any political subdivision
thereof and any applicable Iowa permits from Gaming Authorities in the
State of Iowa, as are necessary to own, lease and operate its
respective properties in the State of Iowa and to conduct its business
in the State of Iowa as such business is presently conducted by it and
as described in the Registration Statement and the Prospectus, except
to the extent that the failure to have or obtain such Iowa permits
would not have a material adverse effect on the Company and HIMC,
taken as a whole; to the best of such counsel's knowledge, after due
inquiry, each of the Company and HIMC has fulfilled and performed all
of its material obligations with respect to such Iowa permits; no
event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results, or after
notice or lapse of time would result, in any other material impairment
of the rights of the holder of any such Iowa permit; and such Iowa
permits contain no restrictions that are materially burdensome to the
Company or HIMC; to the best of such counsel's knowledge, after due
inquiry, there is no reason to believe that any governmental body or
agency is considering limiting, suspending or revoking any such Iowa
permit, or that any such Iowa permit necessary in the future to
conduct the business of the Company or HIMC as described in the
Registration Statement and the Prospectus would not be granted upon
application, or that the Iowa Gaming Authorities or any other
governmental agencies of the State of Iowa or any political
subdivision thereof are investigating the Company or HIMC other than
in ordinary course administrative reviews or an ordinary course review
of the transactions contemplated hereby.
(h) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Milbank, Tweed, Hadley & McCloy, counsel for the Company, to the
effect that:
(i) the Registration Statement has become effective under the
Act; to the knowledge of such counsel, no stop order suspending its
effectiveness has
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<PAGE>
been issued and no proceedings for that purpose are pending before or
contemplated by the Commission;
(ii) assuming due authorization of the Securities by the Company
and due authorization of the Subsidiary Guarantees by the Guarantors,
when the Securities and the Subsidiary Guarantees have been duly
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement, the Securities will be
valid and binding obligations of the Company, each Subsidiary
Guarantee will be a valid and binding obligation of the Guarantor
issuing such Subsidiary Guarantee, the Securities will be entitled to
the benefits of the Indenture and the Subsidiary Guarantees, and the
Securities and the Subsidiary Guarantees will be enforceable in
accordance with their respective terms, except as (a) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (b) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability;
(iii) assuming due authorization, execution and delivery thereof
by the parties thereto, the Indenture is a valid and binding agreement
of the Company and the Guarantors, enforceable in accordance with its
terms except as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (b) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability;
(iv) the Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(v) after due inquiry, such counsel does not know of any legal
or governmental proceeding pending or threatened to which the Company
or any of its subsidiaries is a party or to which any of their
respective property is subject which is required to be described in
the Registration Statement or the Prospectus and is not so described,
or of any contract or other document which is required to be described
in the Registration Statement or the Prospectus or is
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<PAGE>
required to be filed as an exhibit to the Registration Statement which
is not described or filed as required;
(vi) the statements under the captions "Description of Notes" and
"Underwriting" in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein, fairly present
the information called for with respect to such documents; and
(vii) (1) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for the financial statements,
schedules and other financial and statistical data included therein
and that part of the Registration Statement that constitutes the Form
T-1, as to which no opinion need be expressed) appear on their face to
comply as to form in all material respects with the Act, and (2) such
counsel believes that (except for the financial statements, schedules
and other financial and statistical data included therein and that
part of the Registration Statement that constitutes the Form T-1, as
to which no belief need be expressed) the Registration Statement and
the prospectus included therein at the time the Registration Statement
became effective did not contain any 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 that the
Prospectus, as amended or supplemented, if applicable (except for the
financial statements, schedules and other financial and statistical
data included therein, as to which no belief need be expressed) does
not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
In giving such opinion with respect to the matters covered by clause
(vii), such counsel may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification except as specified.
(i) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Davis Polk & Wardwell, counsel for the Underwriters, as to
the matters referred to
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<PAGE>
in clauses (ii), (iii), (vi) and (vii) of the foregoing paragraph (h).
In giving such opinion with respect to the matters covered by clause
(vii) of the foregoing paragraph (h), such counsel may state that their
opinion and belief are based upon their participation in the preparation of
the Registration Statement and Prospectus and any amendments or supplements
thereto and review and discussion of the contents thereof, but are without
independent check or verification except as specified.
The opinions of Scarpello & Alling, Ltd., Brownstein, Hyatt, Farber &
Strickland, P.C., Davis, Brown, Shors & Roberts and Milbank, Tweed, Hadley
& McCloy described in paragraphs (e) through (h) above shall be rendered to
you at the request of the Company, and shall so state therein.
(j) You shall have received a letter on and as of the Closing Date,
in form and substance satisfactory to you, from Grant Thornton LLP,
independent public accountants, with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus and substantially in the form and substance of the
letter delivered to you by Grant Thornton LLP on the date of this
Agreement.
(k) The Company shall not have failed at or prior to the Closing Date
to perform or comply with any of the agreements herein contained and
required to be performed or complied with by the Company at or prior to the
Closing Date.
9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the later of (i) execution of this Agreement and
(ii) when notification of the effectiveness of the Registration Statement has
been released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date
by you by written notice to the Company if any of the following has occurred:
(i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any adverse change or development
involving a prospective adverse change in the condition, financial or otherwise,
of the Company or any of its subsidiaries or the earnings, affairs, or business
prospects of the Company or any of its subsidiaries, whether or not arising in
the ordinary course of business, which would, in your judgment, make it
impracticable to market the Securities on the terms and in the manner
- 30 -
<PAGE>
contemplated in the Prospectus, (ii) any outbreak or escalation of hostilities
or other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in your judgment, is material and adverse and would, in your judgment, make it
impracticable to market the Securities on the terms and in the manner
contemplated in the Prospectus, (iii) the suspension or material limitation of
trading in securities on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ National Market System or limitation on prices for
securities on any such exchange or National Market System, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects, or will materially and adversely
affect, the business or operations of the Company or any of its subsidiaries,
(v) the declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date any one or more of the Underwriters shall fail
or refuse to purchase the Securities which it or they have agreed to purchase
hereunder on such date and the aggregate number of Securities which such
defaulting Underwriter or Underwriters, as the case may be, agreed but failed or
refused to purchase is not more than one-tenth of the total number of Securities
to be purchased on such date by all Underwriters, each non-defaulting
Underwriter shall be obligated severally, in the proportion which the number of
Securities set forth opposite its name in Schedule I bears to the total number
of Securities which all the non-defaulting Underwriters, as the case may be,
have agreed to purchase, or in such other proportion as you may specify, to
purchase the Securities which such defaulting Underwriter or Underwriters, as
the case may be, agreed but failed or refused to purchase on such date; PROVIDED
that in no event shall the number of Securities which any Underwriter has agreed
to purchase pursuant to Section 2 hereof be increased pursuant to this Section 9
by an amount in excess of one-ninth of such number of Securities without the
written consent of such Underwriter. If on the Closing Date any Underwriter or
Underwriters shall fail or refuse to purchase Securities and the aggregate
number of Securities with respect to which such default occurs is more than
one-tenth of the aggregate number of Securities to be purchased on such date by
all Underwriters and arrangements satisfactory to you and the Company for
purchase of such Securities are not made within 48 hours after such default,
this Agreement will terminate without
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<PAGE>
liability on the part of any non-defaulting Underwriter and the Company. In
any such case which does not result in termination of this Agreement, either you
or the Company shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
any such Underwriter under this Agreement.
10. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, to Charles W.
Scharer, Harveys Casino Resorts, Highway 50 & Stateline Avenue, P.O. Box 128,
Lake Tahoe, Nevada 89449, with a copy to Scarpello & Alling, Ltd., Attention:
Ronald D. Alling, 276 Kingsbury Grade, Suite 2000, P.O. Box 3390, Stateline,
Nevada 89449, and (b) if to any Underwriter or to you, to you, c/o Donaldson,
Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York
10127, Attention: Fixed-Income Syndicate Department, or in any case to such
other address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, its officers and directors and
of the several Underwriters set forth in or made pursuant to this Agreement
shall remain operative and in full force and effect, and will survive delivery
of and payment for the Securities, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of any Underwriter or
by or on behalf of the Company, the officers or directors of the Company or any
controlling person of the Company, (ii) acceptance of the Securities and payment
for them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because of
any failure or refusal on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
the several Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a
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<PAGE>
purchaser of any of the Securities from any of the several Underwriters merely
because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
HARVEYS CASINO RESORTS
By
---------------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
BEAR, STEARNS & CO. INC.
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By
-----------------------------
Name:
Title:
- 34 -
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SCHEDULE I
Principal
Amount of Securities
Underwriters To Be Purchased
------------ --------------------
Donaldson, Lufkin & Jenrette
Securities Corporation . . . . . . . . . . . . . . . $
Salomon Brothers Inc . . . . . . . . . . . . . . . . .
Bear, Stearns & Co. Inc. . . . . . . . . . . . . . . .
-------------
Total. . . . . . . . . . . . . . . . . . . . . . $ 150,000,000
-------------
-------------
<PAGE>
========================================================
HARVEYS CASINO RESORTS,
Issuer
HARVEYS C.C. MANAGEMENT COMPANY, INC.,
HARVEYS WAGON WHEEL CASINO LIMITED LIABILITY COMPANY,
HARVEYS IOWA MANAGEMENT COMPANY, INC.
and
HARVEYS L.V. MANAGEMENT COMPANY, INC.,
as Guarantors
and
IBJ SCHRODER BANK & TRUST COMPANY,
Trustee
Indenture
Dated as of _____, 1996
__________
$150,000,000
% SENIOR SUBORDINATED NOTES DUE 2006
========================================================
<PAGE>
TABLE OF CONTENTS
__________
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms Defined. . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Other Definitions. . . . . . . . . . . . . . . . . . . . 18
ARTICLE II
ISSUE, EXECUTION, FORM AND
REGISTRATION OF SECURITIES
SECTION 2.1 Authentication and Delivery of Securities. . . . . . . . 19
SECTION 2.2 Execution of Securities. . . . . . . . . . . . . . . . . 19
SECTION 2.3 Certificate of Authentication. . . . . . . . . . . . . . 20
SECTION 2.4 Form and Denomination. . . . . . . . . . . . . . . . . . 20
SECTION 2.5 Date of Securities; Payments of Interest . . . . . . . . 21
SECTION 2.6 Registration, Transfer and Exchange. . . . . . . . . . . 22
SECTION 2.7 Depositary Procedures. . . . . . . . . . . . . . . . . . 23
SECTION 2.8 Book-Entry . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.9 Same-Day Settlement and Payment. . . . . . . . . . . . . 24
SECTION 2.10 Mutilated, Defaced, Destroyed, Lost and
Stolen Securities. . . . . . . . . . . . . . . . . . . . 24
SECTION 2.11 Cancellation of Securities; Destruction
Thereof. . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.12 Temporary Securities . . . . . . . . . . . . . . . . . . 25
ARTICLE III
COVENANTS OF THE ISSUER AND THE TRUSTEE
SECTION 3.1 Payment of Principal and Interest. . . . . . . . . . . . 26
SECTION 3.2 Offices for Payments, etc. . . . . . . . . . . . . . . . 26
SECTION 3.3 Appointment to Fill a Vacancy in Office of Trustee . . . 26
SECTION 3.4 Paying Agents. . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.5 Certificate to Trustee . . . . . . . . . . . . . . . . . 27
SECTION 3.6 Securityholders Lists. . . . . . . . . . . . . . . . . . 28
SECTION 3.7 Reports by the Issuer. . . . . . . . . . . . . . . . . . 28
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SECTION 3.8 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.9 Stay, Extension and Usury Laws . . . . . . . . . . . . . 28
SECTION 3.10 Reports by the Trustee . . . . . . . . . . . . . . . . . 29
SECTION 3.11 Restricted Payments. . . . . . . . . . . . . . . . . . . 29
SECTION 3.12 Restricted Investments . . . . . . . . . . . . . . . . . 30
Section 3.13 Incurrence of Indebtedness . . . . . . . . . . . . . . . 32
SECTION 3.14 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.15 Dividends and Other Payment Restrictions
Affecting Subsidiaries . . . . . . . . . . . . . . . . . 34
SECTION 3.16 Additional Subsidiary Guarantees . . . . . . . . . . . . 35
SECTION 3.17 Limitation on Issuance of Other Subordinated
Debt Senior to the Securities or the
Subsidiary Guarantees. . . . . . . . . . . . . . . . . . 35
SECTION 3.18 Transactions With Affiliates . . . . . . . . . . . . . . 36
SECTION 3.19 Business Activities. . . . . . . . . . . . . . . . . . . 37
SECTION 3.20 Designation of an Unrestricted Subsidiary as
a Restricted Subsidiary. . . . . . . . . . . . . . . . . 37
SECTION 3.21 Designation of a Subsidiary as an
Unrestricted Subsidiary. . . . . . . . . . . . . . . . . 38
SECTION 3.22 Payments for Consent . . . . . . . . . . . . . . . . . . 39
SECTION 3.23 Asset Sales. . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.24 Change of Control. . . . . . . . . . . . . . . . . . . . 41
ARTICLE IV
REMEDIES OF THE TRUSTEE AND
SECURITYHOLDERS ON EVENT OF DEFAULT
SECTION 4.1 Event of Default Defined . . . . . . . . . . . . . . . . 41
SECTION 4.2 Acceleration; Waiver of Default. . . . . . . . . . . . . 43
SECTION 4.3 Collection of Indebtedness by Trustee;
Trustee May Prove Debt . . . . . . . . . . . . . . . . . 44
SECTION 4.4 Application of Proceeds. . . . . . . . . . . . . . . . . 46
SECTION 4.5 Suits for Enforcement. . . . . . . . . . . . . . . . . . 47
SECTION 4.6 Restoration of Rights on Abandonment of
Proceedings. . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.7 Limitations on Suits by Securityholders. . . . . . . . . 48
SECTION 4.8 Powers and Remedies Cumulative; Delay or
Omission Not Waiver of Default . . . . . . . . . . . . . 48
SECTION 4.9 Control by Securityholders . . . . . . . . . . . . . . . 49
SECTION 4.10 Waiver of Past Defaults. . . . . . . . . . . . . . . . . 49
SECTION 4.11 Notice to Trustee. . . . . . . . . . . . . . . . . . . . 50
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<PAGE>
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ARTICLE V
CONCERNING THE TRUSTEE
SECTION 5.1 Duties and Responsibilities of the Trustee;
During Default; Prior to Default . . . . . . . . . . . . 50
SECTION 5.2 Certain Rights of the Trustee. . . . . . . . . . . . . . 51
SECTION 5.3 Trustee Not Responsible for Recitals,
Disposition of Securities or Application of
Proceeds Thereof . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.4 Trustee and Agents May Hold Securities;
Collections, etc.. . . . . . . . . . . . . . . . . . . . 53
SECTION 5.5 Moneys Held by Trustee . . . . . . . . . . . . . . . . . 53
SECTION 5.6 Compensation and Indemnification of Trustee
and Its Prior Claim. . . . . . . . . . . . . . . . . . . 53
SECTION 5.7 Right of Trustee to Rely on Officers'
Certificate, etc.. . . . . . . . . . . . . . . . . . . . 54
SECTION 5.8 Persons Eligible for Appointment as Trustee. . . . . . . 54
SECTION 5.9 Resignation and Removal; Appointment of
Successor Trustee. . . . . . . . . . . . . . . . . . . . 54
SECTION 5.10 Acceptance of Appointment by Successor
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.11 Merger, Conversion, Consolidation or
Succession to Business of Trustee. . . . . . . . . . . . 56
ARTICLE VI
CONCERNING THE SECURITYHOLDERS
SECTION 6.1 Evidence of Action Taken by Securityholders. . . . . . . 57
SECTION 6.2 Proof of Execution of Instruments and of
Holding of Securities; Record Date . . . . . . . . . . . 57
SECTION 6.3 Holders to be Treated as Owners. . . . . . . . . . . . . 58
SECTION 6.4 Securities Owned by Issuer Deemed Not
Outstanding. . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.5 Right of Revocation of Action Taken. . . . . . . . . . . 59
ARTICLE VII
SUPPLEMENTAL INDENTURES
SECTION 7.1 Supplemental Indentures Without Consent of
Holders. . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.2 Supplemental Indentures With Consent of
Securityholders. . . . . . . . . . . . . . . . . . . . . 60
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SECTION 7.3 Compliance with TIA. . . . . . . . . . . . . . . . . . . 61
SECTION 7.4 Revocation and Effect of Consents. . . . . . . . . . . . 61
SECTION 7.5 Trustee to Sign Amendments, etc. . . . . . . . . . . . . 62
SECTION 7.6 Effect of Supplemental Indenture . . . . . . . . . . . . 62
SECTION 7.7 Documents to Be Given to Trustee . . . . . . . . . . . . 62
SECTION 7.8 Notation on Securities in Respect of
Supplemental Indentures. . . . . . . . . . . . . . . . . 62
ARTICLE VIII
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 8.1 Merger, Consolidation or Sale of Assets. . . . . . . . . 63
SECTION 8.2 Successor Corporation Substituted. . . . . . . . . . . . 64
SECTION 8.3 Opinion of Counsel to Trustee. . . . . . . . . . . . . . 65
ARTICLE IX
DISCHARGE OF INDENTURE
SECTION 9.1 Defeasance Within One Year of Payment. . . . . . . . . . 65
SECTION 9.2 Legal Defeasance . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.4 Application by Trustee of Funds Deposited for
Payment of Securities. . . . . . . . . . . . . . . . . . 70
SECTION 9.5 Repayment of Moneys Held by Paying Agent . . . . . . . . 70
SECTION 9.6 Return of Moneys Held by Trustee and Paying
Agent Unclaimed for Three Years. . . . . . . . . . . . . 70
ARTICLE X
REDEMPTION OR PURCHASE OF SECURITIES
SECTION 10.1 Optional Redemption. . . . . . . . . . . . . . . . . . . 70
SECTION 10.2 Selection of Securities to be Purchased or
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.3 Notice of Redemption . . . . . . . . . . . . . . . . . . 72
SECTION 10.4 Effect of Notice of Redemption . . . . . . . . . . . . . 73
SECTION 10.5 Deposit of Redemption or Purchase Price. . . . . . . . . 73
SECTION 10.6 Payment of Securities Called for Redemption. . . . . . . 74
SECTION 10.7 Exclusion of Certain Securities form
Eligibility for Selection for Redemption . . . . . . . . 75
SECTION 10.8 Securities Redeemed or Purchased in Part . . . . . . . . 75
SECTION 10.9 Offers to Purchase . . . . . . . . . . . . . . . . . . . 75
SECTION 10.10 Notice and Officers' Certificate to Trustee. . . . . . . 78
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Page
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ARTICLE XI
SUBSIDIARY GUARANTEES
SECTION 11.1 Subsidiary Guarantee . . . . . . . . . . . . . . . . . . 78
ARTICLE XII
SUBORDINATION OF SECURITIES
SECTION 12.1 Agreement to Subordinate . . . . . . . . . . . . . . . . 81
SECTION 12.2 Payment to Securityholders . . . . . . . . . . . . . . . 81
SECTION 12.3 Subrogation of Securities. . . . . . . . . . . . . . . . 84
SECTION 12.4 Authorization by Securityholders . . . . . . . . . . . . 85
SECTION 12.5 Notice to Trustee. . . . . . . . . . . . . . . . . . . . 85
SECTION 12.6 Trustee's Relation to Senior Debt Holders. . . . . . . . 86
SECTION 12.7 No Impairment of Subordination . . . . . . . . . . . . . 87
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 Incorporators, Stockholders, Officers and
Directors of Issuer Exempt from Individual
Liability. . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 13.2 Provisions of Indenture for the Sole Benefit
of Parties and Securityholders . . . . . . . . . . . . . 87
SECTION 13.3 Successors and Assigns of Issuer Bound by
Indenture. . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 13.4 Notices and Demands on Issuer, Trustee and
Securityholders. . . . . . . . . . . . . . . . . . . . . 88
SECTION 13.5 Officers' Certificates and Opinions of
Counsel; Statements to Be Contained Therein. . . . . . . 88
SECTION 13.6 Payments Due on Saturdays, Sundays and
Holidays . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 13.7 Conflict of Any Provision of Indenture with
Trust Indenture Act of 1939. . . . . . . . . . . . . . . 90
SECTION 13.8 New York Law to Govern . . . . . . . . . . . . . . . . . 90
SECTION 13.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 13.10 Effect of Headings . . . . . . . . . . . . . . . . . . . 90
TESTIMONIUM. . . . . . . . . . . . . . . . . . . . . . . 100
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SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100
Exhibit A Form of Note. . . . . . . . . . . . . . . . . . . . A-1
Exhibit B Form of Trustee's Certificate of Authentication . . B-1
Exhibit C Form of Assignment. . . . . . . . . . . . . . . . . C-1
Exhibit D Option Election Form. . . . . . . . . . . . . . . . D-1
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<PAGE>
THIS INDENTURE, dated as of [ ] among HARVEYS CASINOS
RESORTS, a Nevada Corporation (the "Issuer"), HARVEYS WAGON WHEEL CASINO LIMITED
LIABILITY COMPANY, a Colorado corporation, HARVEYS C.C. MANAGEMENT COMPANY,
INC., a Nevada corporation, HARVEYS IOWA MANAGEMENT COMPANY, INC., a Nevada
corporation and HARVEYS L.V. MANAGEMENT COMPANY, INC., a Nevada corporation (the
"Guarantors") and IBJ SCHRODER BANK & TRUST COMPANY, [jurisdiction] (the
"Trustee"),
W I T N E S S E T H :
WHEREAS, the Issuer has duly authorized the issuance of % Senior
Subordinated Notes Due 2006 (the "Securities") and, to provide, among other
things, for the authentication, delivery and administration thereof, the Issuer
has duly authorized the execution and delivery of this Indenture; and
WHEREAS, the Securities and the Trustee's certificate of
authentication shall be substantially in the Form attached hereto as Exhibits A
and B:
AND WHEREAS, all things necessary to make the Securities, when
executed by the Issuer and authenticated and delivered by the Trustee as in this
Indenture provided, the valid, binding and legal obligations of the Issuer, and
to constitute these present a valid indenture and agreement according to its
terms, have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities
by the holders thereof, the Issuer, the Guarantors and the Trustee mutually
covenant and agree for the equal and proportionate benefit of the respective
Holders from time to time of the Securities as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN TERMS DEFINED. The following terms (except as
otherwise expressly provided or unless the context otherwise clearly requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section. All other terms
used in this Indenture which are defined in the TIA or the
<PAGE>
definitions of which in the Securities Act of 1933 are referred to in the TIA
(except as herein otherwise expressly provided or unless the context otherwise
clearly requires), shall have the meanings assigned to such terms in said TIA
and in said Securities Act as in force at the date of this Indenture. All
accounting terms used herein and not expressly defined shall have the meanings
given to them in accordance with generally accepted accounting principles. The
words "herein", "hereof" and "hereunder" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or other
subdivision. The terms defined in this Article include the plural as well as
the singular.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling, or controlled by, or under direct or indirect common
control with, such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that in all cases beneficial ownership of 10% or more of the voting securities
of a Person is deemed to be control.
"AGENT" means any registrar, Paying Agent or co-registrar.
"ASSET SALE" means (a) the sale, lease, conveyance, transfer or other
disposition (whether in a single transaction or a series of related
transactions) of property or other assets (including by way of merger,
consolidation or sale-leaseback) of the Issuer or any Restricted Subsidiary
(each referred to in this definition as a "disposition") or (b) the issuance or
sale of Equity Interests of any Restricted Subsidiary (whether in a single
transaction or a series of related transactions); provided that for purposes of
this definition, any Asset Sale shall not include: (i) dispositions of
inventory or gaming equipment in the ordinary course of business or pursuant to
an established program for the maintenance and upgrading of such equipment; (ii)
dispositions of all or substantially all of the assets of the Issuer in a manner
permitted pursuant to Article VIII; (iii) any disposition that is a Restricted
Payment or that is a dividend or distribution permitted under Section 3.11; (iv)
any Investment that is not prohibited by the provisions described above pursuant
to Section 3.12; and (iv) any single disposition, or related series of
dispositions of assets with an aggregate fair market value of less than $5.0
million.
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<PAGE>
"BANKRUPTCY LAW" means Title XI, U.S. Code or any similar federal or
state law for the relief of debtors.
"BOARD OF DIRECTORS" means either the Board of Directors of the Issuer
or any committee of such Board duly authorized to act hereunder.
"BUSINESS DAY" means a day which in the city (or in any in the cities,
if more than one) where amounts are payable in respect of the Securities, as
specified on the face of the form set forth in Exhibit A, is neither a Legal
Holiday nor a day on which banking institutions are authorized by law or
regulation to close.
"CAPITAL STOCK" of any Person means any and all shares, interests,
participations, rights or other equivalents (however designated) in the
ownership or profits of such Person.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) the sale, lease, transfer, conveyance or other
disposition, in one or a series of related transactions, of all or substantially
all of the assets of the Issuer and its Subsidiaries, taken as a whole; (ii) the
liquidation or dissolution of the Issuer; (iii) the Issuer becomes aware (by way
of a report or any other filing pursuant to Section 13(d) of the Exchange Act,
proxy vote, written notice or otherwise) of the acquisition by any "Person" or
related group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act, or any successor provision to either of the foregoing, including
any "group" acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d5(b)(1) under the Exchange Act), other
than a group consisting of the Issuer's Existing Management and any Person or
heirs of any Person that owned more than 1.3% of the Issuer's Common Stock prior
to the Issuer's initial public offering, in a single transaction or in a related
series of transactions, by way of merger, consolidation or other business
combination or purchase of beneficial ownership (within the meaning of Rule 13d-
3 under the Exchange Act, or any successor provision) of 40% or more of the
total voting power entitled to vote in the election of the Board of Directors of
the Issuer or such other Person surviving the transaction; or (iv) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Issuer's Board of Directors (together with any new directors
whose election or appointment by such board or whose nomination for election by
the shareholders of the Issuer was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was
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<PAGE>
previously so approved) cease for any reason to constitute a majority of the
Issuer's Board of Directors then in office.
"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATED CASH FLOW" means for any period, Consolidated Net Income
for such period after deducting therefrom an amount equal to any extraordinary
gain (to the extent such gain was included in computing Consolidated Net Income)
and after adding thereto (a) an amount equal to any extraordinary loss plus any
net loss realized in connection with a sale, lease, conveyance, transfer or
other disposition of property or other assets (other than the disposition of
inventory in the ordinary course of business), to the extent such losses were
deducted in computing Consolidated Net Income, plus (b) provision for taxes
based on income or profits to the extent such provision for taxes was included
in computing Consolidated Net Income, plus (c) consolidated interest expense of
the Issuer and its Restricted Subsidiaries for such period, whether paid or
accrued (including amortization of original issue discount, non-cash interest
payments, amortization of, deferred financing charges and the interest component
of capital lease obligations), to the extent such expense was deducted in
computing Consolidated Net Income, plus (d) depreciation, amortization
(including amortization of goodwill and other intangibles) and other non-cash
charges (excluding any such non-cash charge that requires an accrual of or
reserve for cash charges for any future period and excluding any such non-cash
charge that is included in consolidated interest expense or consolidated tax
expense) of the Issuer and its Restricted Subsidiaries for such period to the
extent such depreciation, amortization and other non-cash charges were deducted
in computing Consolidated Net Income, plus, (e) any capitalized preopening
expenses incurred in connection with the Harveys Kanesville Queen Riverboat
Gaming Facility and related landbased amenities which were reflected in the
Issuer's Consolidated Statement of Operations for any period ended on or before
December 31, 1996 to the extent that any such expenses were deducted in
computing Consolidated Net Income, in each case, on a consolidated basis,
determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" means for any period, the Net Income of the
Issuer and its Restricted Subsidiaries for such period on a consolidated basis,
determined in accordance with GAAP; provided that: (a) the Net Income of any
Person that is not a Subsidiary of the Issuer or that is accounted for by the
equity method of accounting or that is an Unrestricted Subsidiary is permitted
to be included only to the extent of the amount of dividends or distributions
paid to the Issuer or a wholly-owned Restricted Subsidiary; (b) solely for the
purpose of determining the amount of Restricted Payments and Restricted
Investments permitted under Sections 3.11 and 3.12, the Net Income of any other
Person acquired by the Issuer or any Restricted Subsidiary
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<PAGE>
in a pooling of interests transaction for any period prior to the date of such
acquisition is required to be excluded (except to the extent permitted to be
included pursuant to clause (a)); and (c) the cumulative effect of a change in
accounting principles is required to be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person, the sum of
(a) the consolidated equity of the common stockholders reported on the most
recent balance sheet of such Person and its consolidated Subsidiaries plus (b)
the respective amounts reported on such balance sheet with respect to any series
of preferred stock (other than Disqualified Stock) that by its terms is not
entitled to the payment of dividends unless such dividends may be declared and
paid only out of net earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such Person upon
issuance of such preferred stock, after deducting the sum of (i) all write-ups
(other than write-ups resulting from foreign currency translations and write-ups
of tangible assets of a going concern business made within 12 months after the
acquisition of such business) subsequent to the date of the Indenture in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (ii) all investments in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges, all
of the foregoing determined on a consolidated basis in accordance with GAAP.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located at [ ].
"CREDIT FACILITY" means the Reducing Revolving Credit Agreement dated
as of August 14, 1995 among the Borrower and the banks named therein, as amended
or modified from time to time, including any replacement credit agreement
between the Issuer and various commercial banks providing for a substantially
similar or equivalent facility.
"DEFAULT" means any event that constitutes, or with the passage of
time or the giving of notice or both would constitute, an Event of Default.
"DESIGNATED SENIOR DEBT" means each issue of Senior Debt of the Issuer
that (i) has an outstanding principal amount of at least $25,000,000 (including
the amount of all reimbursement obligations pursuant to letters of credit
thereunder and the maximum principal amount available to be drawn thereunder,
assuming in the case of the Credit Facility that all conditions precedent to any
such drawing could be satisfied) and (ii) has
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<PAGE>
been designated as Designated Senior Debt pursuant to an Officers' Certificate
of the Issuer received by the Trustee.
"DIRECTOR" means any Person who has been duly elected and qualified as
a member of the Board of Directors of the Issuer until the expiration of such
Person's term and until his successor has been duly elected and qualified.
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the stated
maturity of the Securities for consideration other than Capital Stock that does
not itself so mature and is not itself so redeemable.
"EQUITY INTERESTS" in any Person means Capital Stock of such Person
and any warrant, option or other right to acquire Capital Stock (but excluding
any debt security that is convertible into, or exchangeable for, Capital Stock).
"EVENT OF DEFAULT" means any event or condition specified as such in
Section 4.1 which shall have continued for the period of time, if any, therein
designated.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING GAMING FACILITY" means any Gaming Facility wholly or
partially owned, used or managed by the Issuer or a Restricted Subsidiary on the
date of the Indenture.
"EXISTING INDEBTEDNESS" means Indebtedness of the Issuer or any
Restricted Subsidiary (other than under the Credit Facility) outstanding on the
date hereof.
"EXISTING MANAGEMENT" means the executive officers of the Issuer on
the date hereof.
"FF&E" means furniture, fixtures and equipment, including gaming
equipment, used in connection with any Gaming Business.
"FF&E FINANCING" means the incurrence of Indebtedness, the proceeds of
which will be used to finance the acquisition by the Issuer or a Restricted
Subsidiary of FF&E used in connection with any Gaming Facility whether or not
secured by a Lien on such FF&E; provided that such Indebtedness does not exceed
the fair market value of such FF&E at the time of its acquisition.
- 6 -
<PAGE>
"FIXED CHARGES" means for any period, the sum of (a) consolidated
interest expense (including the interest component of lease payments under
capitalized leases) of the Issuer and its Restricted Subsidiaries for such
period, in either case whether paid or accrued, to the extent such expense was
deducted in computing Consolidated Net Income (including amortization of
original issue discount, non-cash interest payments and the interest component
of capital leases but excluding amortization of deferred financing fees and
excluding capitalized interest) and (b) the product of (i) all cash dividend
payments on any series of preferred stock of the Issuer, times (ii) a fraction,
the numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of the Issuer,
expressed as a decimal, in each case, on a consolidated basis, in accordance
with GAAP.
"FIXED CHARGE COVERAGE RATIO" means for any period the ratio of the
Consolidated Cash Flow for such period to the Fixed Charges for such period;
PROVIDED that: (a) in the event that the Issuer or any Restricted Subsidiary
incurs, assumes, guarantees or redeems any Indebtedness or issues preferred
stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is made, the Fixed Charge Coverage Ratio shall be calculated
giving PRO FORMA effect to such incurrence, assumption, guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable period; (b) in making such
computation, the Fixed Charges attributable to interest on any Indebtedness
bearing a floating interest rate shall be computed on a PRO FORMA basis as if
the rate in effect on the date of computation had been the applicable rate for
the entire period; (c) in making such computation, the Fixed Charges
attributable to interest on any Indebtedness under a revolving credit facility
shall be computed on a PRO FORMA basis based upon the average daily balance of
such Indebtedness outstanding during the applicable period; (d) in the event
that the Issuer or any Restricted Subsidiary consummates either (i) a Material
Acquisition or (ii) a sale, lease, conveyance, transfer or other disposition of
property or other assets (other than the disposition of inventory in the
ordinary course of business) with a fair market value of more than $5.0 million
in any one year, in either case subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated, the Fixed Charge
Coverage Ratio shall be calculated giving PRO FORMA effect to such Material
Acquisition or disposition (including the incurrence of any Indebtedness in
connection therewith), as if the same had occurred at the beginning of the
applicable period; (e) in the event that the Issuer or any Restricted Subsidiary
purchases any assets or property which was previously leased by the Issuer or
any Restricted Subsidiary subsequent to the commencement of the period for which
the calculation of the Fixed Charge Coverage Ratio is being calculated but prior
to the event
- 7 -
<PAGE>
for which the calculation of the Fixed Charge Coverage Ratio is made, the Fixed
Charge Coverage Ratio shall be calculated giving PRO FORMA effect to such
purchase as if the same had occurred at the beginning of the applicable period;
and (f) in the event that the Issuer or any Restricted Subsidiary is responsible
or liable as obligor, guarantor or otherwise for the Indebtedness of any other
Person (other than the Issuer or a Restricted Subsidiary), the Fixed Charge
Coverage Ratio shall be calculated giving PRO FORMA effect to the interest paid
or payable on such Indebtedness during the applicable period as if such
Indebtedness had been outstanding at the beginning of the applicable period.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect from time to time.
"GAMING AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States federal or foreign government, any state, province or any city
or other political subdivision or otherwise, and whether now or hereafter in
existence, or any officer or official thereof, including the Nevada State Gaming
Commission, the Nevada State Gaming Control Board, the Colorado Gaming
Commission, the Iowa Racing & Gaming Commission and any other applicable gaming
regulatory authority with authority to regulate any gaming operation (or
proposed gaming operation) owned, managed or operated by the Issuer or any of
its Subsidiaries.
"GAMING BUSINESS" means the gaming business and includes all
businesses necessary for, incident to, connected with or arising out of the
gaming business (including developing and operating lodging facilities, sports
or entertainment facilities, transportation services or other related activities
or enterprises and any additions or improvements thereto) to the extent that
they are operated in connection with a gaming business.
"GAMING FACILITY" means any tangible vessel, building, or other
structure used or expected to be used to enclose space in which a Gaming
Business is conducted and (a) wholly or partially owned, directly or indirectly,
by the Issuer or any Restricted Subsidiary or (b) any portion or aspect of which
is managed or used, or expected to be managed or used, by the Issuer or a
Restricted Subsidiary; provided that the term Gaming Facility does not include
any real property whether or not such vessel, building or other structure is
located thereon or adjacent thereto or any FF&E.
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<PAGE>
"GAMING LICENSE" means any license, permit, franchise or other
authorization from any Gaming Authority required on the date of the Indenture or
at any time thereafter to own, lease, operate or otherwise conduct the Gaming
Business of the Issuer and its Subsidiaries, including all licenses granted
under the gaming laws of a jurisdiction or jurisdictions to which the Issuer or
any of its Subsidiaries is, or may at any time after the date of the Indenture,
be subject.
"GUARANTOR" means each Restricted Subsidiary that executes this
Indenture and each Restricted Subsidiary that is required to issue a Subsidiary
Guarantee in accordance with Section 3.16 and Article XI, including any
successor and assign of such Restricted Subsidiary, until any such Person is
released from its obligations as a Guarantor.
"HOLDER", "holder of Securities", "Securityholder" or other similar
terms means the registered holder of any Security.
"INDEBTEDNESS" of any specified Person means, without duplication:
(a) the principal of and premium (if any) in respect of (i) indebtedness of such
Person for money borrowed and (ii) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such Person is
responsible or liable; (b) all capitalized (but not operating) lease obligations
of such Person; (c) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of such
Person and all obligations of such Person under any title retention agreement
(but excluding trade accounts payable arising in the ordinary course of
business); (d) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction; (e) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock; (f) all
obligations existing at the time under interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, foreign currency swaps and
other similar agreements and arrangements; (g) all obligations of the types
referred to in clauses (a) through (f) above of other Persons and all dividends
and distributions of other Persons for the payment of which, in either case,
such specified Person is responsible or liable as obligor, guarantor or
otherwise (including Investment Guarantees, but not including completion bonds,
performance guarantees or similar suretyship arrangements ensuring the
performance of obligations other than obligations of the types referred to in
clauses (a) through (f) above); and (h) all obligations of the type referred to
in clauses (a) through (f) above of other Persons secured by any Lien on any
property or asset of such specified Person (whether or not such obligation is
assumed by such specified Person), the amount of any non-recourse obligation
being deemed to be the lesser of (i) the fair market value of
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<PAGE>
such property or assets or (ii) the amount of the obligation so secured.
"INDENTURE" means this instrument as originally executed and delivered
or, if amended or supplemented as herein provided, as so amended or
supplemented.
"INDEPENDENT", when used to describe a Person, means that neither such
Person nor any member of such Person's immediate family (a) has a material
direct or of any indirect financial interest in the Issuer or any other obligor
on the Securities or in any Affiliate of the Issuer or other obligor on the
Securities or (b) serves as an officer or employee of the Issuer or any other
obligor on the Securities or any such Affiliate; provided that for the purpose
of this definition (i) beneficial or record ownership of less than 0.5% of the
outstanding Capital Stock of any class of the Issuer or any other obligor on the
Securities or any such Affiliate will not be deemed to constitute a material
financial interest in the Issuer or such other obligor on the Securities or such
Affiliate and (ii) service on the board of directors of the Issuer or any other
obligor on the Securities or any such Affiliate will not be deemed to constitute
service as an officer or employee thereof.
"INTEREST RATE PROTECTION AGREEMENTS" means, with respect to any
Person, interest rate swap agreements, interest rate cap agreements, interest
rate collar agreements and other agreements or arrangements, but only to the
extent that such agreements or arrangements are designed to protect such Person
against fluctuations in interest rates.
"INVESTMENT" means any investment by the Issuer or a Restricted
Subsidiary in another Person (including an Affiliate of the Issuer or a
Restricted Subsidiary) in the form of a loan, Investment Guarantee, advance
(other than commission, travel and similar advances to officers and employees of
the Issuer or a Restricted Subsidiary made in the ordinary course of business),
capital contribution or purchase or other acquisition for consideration of
Indebtedness, an Equity Interest or other interest that is or would be
classified as an investment on the balance sheet of the Issuer or a Restricted
Subsidiary prepared in accordance with GAAP.
"INVESTMENT GUARANTEE" means any direct or indirect liability,
contingent or otherwise, of the Issuer or a Restricted Subsidiary with respect
to any Indebtedness of another Person, including (a) any Indebtedness directly
or indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business) or discounted or sold with recourse by the
Company or a Restricted Subsidiary, or in respect of which the Company or a
Restricted Subsidiary is otherwise directly or indirectly liable, (b) any other
obligation or contract under
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which the Issuer or a Restricted Subsidiary is directly or indirectly liable for
any Indebtedness of another Person and which, in economic effect, is
substantially equivalent to a guarantee, (c) any Indebtedness of a partnership
in which the Company or a Restricted Subsidiary is a general partner or of a
joint venture in which the Company or a Restricted Subsidiary is a joint
venturer, and (d) any Indebtedness in effect guaranteed by the Company or a
Restricted Subsidiary through any agreement (contingent or otherwise) to
purchase, repurchase or otherwise acquire such Indebtedness or any security
therefor, or to provide funds for the payment or discharge of such Indebtedness
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise), or to maintain the solvency or any balance sheet or other
financial condition of the obligor of such Indebtedness, or to make payment for
any products, materials or supplies or for any transportation or services
regardless of the non-delivery or nonfurnishing thereof, in any such case if the
purpose or intent of such agreement is to provide assurance that such
Indebtedness will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such Indebtedness will be
protected against loss in respect thereof.
"ISSUER" means (except as otherwise provided in Article V) Harveys
Casino Resorts, a Nevada Corporation, and, subject to Article VIII, its
successors and assigns.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance (other than an operating lease) of any
kind in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"MARKETABLE SECURITIES" owned by any Person means: (a) U.S.
Government Obligations; (b) any certificate of deposit, maturing not more than
270 days after the date of acquisition, issued by, or time deposit of, a
commercial banking institution that has combined capital and surplus of not less
than $500,000,000 or its equivalent in foreign currency, whose debt is
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rated at the time as of which any investment is made, of "A" (or higher)
according to S&P or Moody's, or if none of S&P or Moody's shall then exist, the
equivalent of such rating by any other nationally recognized securities rating
agency, (c) commercial paper, maturing not more than 270 days after the date of
acquisition, issued by a corporation (other than an Affiliate or Subsidiary of
such Person) with a rating, at the time as of which any investment therein is
made, of "A-1" (indicating that the degree of timely payment is strong) (or
higher) according to S&P or "P-1" (having a superior capacity for punctual
repayment of short-term promissory obligations) (or higher) according to
Moody's, or if neither of S&P and Moody's shall then exist, the equivalent of
such rating by any other nationally recognized securities ratings agency; (d)
any bankers acceptances or any money market deposit accounts, in each case,
issued or offered by any commercial bank having capital and surplus in excess of
$500,000,000 or its equivalent in foreign currency, whose debt is rated at the
time as of which any investment there is made of "A" (an upper medium grade bond
obligation) (or higher) according to S&P or Moody's, or if none of S&P or
Moody's shall then exist, the equivalent of such rating by any other nationally
recognized securities rating agency; and (e) any fund investing exclusively in
investments of the types described in clauses (a) through (d) above, and if such
fund has at least $500,000,000 under management, including investments in
repurchase obligations of he foregoing investments.
"MATERIAL ACQUISITION" means any acquisition of a business, including
the acquisition of operating commercial real estate, by the Issuer or a
Restricted Subsidiary that has a fair market value in excess of $5.0 million and
which the Issuer or a Restricted Subsidiary intends to operate.
"MATERIAL GAMING FACILITY" on any date means any Existing Gaming
Facility (other than the Hard Rock Hotel) and any other Gaming Facility either
(a) which has contributed more than 20% of the Consolidated Cash Flow of the
Issuer during the Issuer's most recently completed four full fiscal quarters for
which internal financial statements are available preceding such date (such
contribution to be annualized if such Gaming Facility has not been in full
operation for all of such four fiscal quarters) or (b) the book value of which
on such date constitutes more than 10% of the total assets of the Issuer and its
Restricted Subsidiaries as of the end of the most recently completed fiscal
quarter for which internal financial statements are available.
"NET INCOME" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP, excluding, (a) any gain or
loss, together with any related provision for taxes on such gain or loss,
realized in connection with any sale, lease, conveyance, transfer or other
disposition of property or other assets of such Person (other than the
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disposition of inventory in the ordinary course of business), including
dispositions pursuant to sale and leaseback transactions, and (b) any
extraordinary gain or loss, together with any related provision for taxes on
such extraordinary gain or loss.
"NET PROCEEDS" means the aggregate gross proceeds received by the
Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale
(including insurance proceeds), net of the direct costs relating to such Asset
Sale (including legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), amounts required to be
applied to the repayment of Indebtedness secured by a Lien on the asset or
assets which are the subject of such Asset Sale and any reserve for adjustment
in respect of the sale price of such asset or assets.
"NON-RECOURSE DEBT" means Indebtedness (a) as to which none of the
Issuer, any Guarantor and any Restricted Subsidiary (i) provides credit support
(including any undertaking, agreement or instrument which would constitute
Indebtedness); (ii) is directly or indirectly liable; or (iii) constitutes the
lender; and (b) no default with respect to which (including any rights which the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness of the Issuer, any Guarantor or any Restricted Subsidiary to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"OBLIGATIONS" means any principal, premium, interest (including post-
petition interest), penalties, fees, indemnifications, reimbursements, damages
and other monetary liabilities payable under the documentation governing any
Indebtedness.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of
the Board of Directors or the President or any Vice President (whether or not
designated by a number or numbers or a word or words added before or after the
title "Vice President") and by the Treasurer or the Secretary or any Assistant
Secretary of the Issuer and delivered to the Trustee. Each such certificate
shall comply with Section 314 of the TIA and include the statements provided for
in Section 13.5.
"OPINION OF COUNSEL" means an opinion in writing signed by legal
counsel who may be an employee of or counsel to the Issuer or who may be other
counsel satisfactory to the Trustee. Each such opinion shall comply with
Section 314 of the TIA and
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include the statements provided for in Section 13.5, if and to the extent
required hereby.
"ORIGINAL ISSUE DATE" of any Security (or portion thereof) means the
earlier of (i) the date of such Security or (ii) the date of any Security (or
portion thereof) for which such Security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
"OUTSTANDING", when used with reference to Securities, shall, subject
to Section 6.4, mean, as of any particular time, all Securities authenticated
and delivered by the Trustee under this Indenture, except
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities, or portions thereof, for the payment or redemption
of which moneys in the necessary amount shall have been deposited in trust
with the Trustee or with any paying agent (other than the Issuer) or shall
have been set aside, segregated and held in trust by the Issuer (if the
Issuer shall act as its own paying agent), provided that if such Securities
are to be redeemed prior to the maturity thereof, notice of such redemption
shall have been given as herein provided, or provision satisfactory to the
Trustee shall have been made for giving such notice; and
(iii) Securities in substitution for which other Securities shall
have been authenticated and delivered, or which shall have been paid,
pursuant to the terms of Section 2.10 (unless proof satisfactory to the
Trustee is presented that any of such Securities is held by a Person in
whose hands such Security is a legal, valid and binding obligation of the
Issuer).
"PARTICIPANTS" means Persons for whom the Depositary holds Securities.
"PERMITTED INVESTMENT" means: (a) any tangible asset or Marketable
Securities owned by the Issuer or a Restricted Subsidiary; (b) any Investment in
the Issuer or in a Restricted Subsidiary that is a Guarantor; and (c) any
Investment in any other Person, if immediately after the making of such
Investment (i) such Person becomes a wholly owned Restricted Subsidiary engaged
in the Gaming Business or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Issuer or a wholly owned Restricted
Subsidiary engaged in the Gaming Business.
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"PERMITTED JOINT VENTURE INVESTMENT" means any Investment in (a) a
Person primarily engaged or preparing to engage in the Gaming Business if, at
the time of such Investment, the Issuer or a Restricted Subsidiary controls the
day-to-day operations of such Person, including the construction or other
acquisition of any buildings, vessels or other facilities and FF&E necessary
for, incident to or connected with such Person's Gaming Business, pursuant to a
management contract or otherwise; provided, that if such Permitted Joint Venture
Investment in such Person has been made partially or wholly by means of an
Investment Guarantee, (i) the amount of Indebtedness of such Person is not
permitted to exceed 200% of the amount invested in Capital Stock of such Person
prior to the earlier of (A) the date on which all amounts payable under the
Securities and the Indenture have been paid or duly provided for and (B) the
maturity of such loan or the termination of such Investment Guarantee and (ii)
any Indebtedness of such Person covered by such Investment Guarantee matures by
its terms prior to the time the Issuer or a Restricted Subsidiary no longer
controls the day-to-day operations of such Person pursuant to a management
contract or otherwise unless all amounts payable under the Securities and the
Indenture have been paid or duly provided for by such time; or (b) a Person
primarily engaged or preparing to engage in the Gaming Business if, immediately
after giving effect to such Investment, the Issuer 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, including the construction or other acquisition
of any buildings, vessels or other facilities and FF&E necessary for, incident
to or connected with such Person's Gaming Business, pursuant to a management
contract or otherwise, unless such Person is managed solely by its executive
officers; or (c) a Person primarily engaged in the Gaming Business at the time
of such Investment in Lake Tahoe, Nevada.
"PERMITTED LIENS" means (a) Liens granted by Restricted Subsidiaries
in favor of the Issuer; (b) Liens granted by the Issuer or a Restricted
Subsidiary in favor of a Restricted Subsidiary that is a Guarantor; (c) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Issuer or any Restricted Subsidiary; provided, that such
Liens were in existence prior to the contemplation of such merger or
consolidation; (d) Liens on property existing at the time of acquisition thereof
by the Issuer or any Restricted Subsidiary; provided, that such Liens were in
existence prior to the contemplation of such acquisition; (e) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (f) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently
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conducted; provided, that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (g) ground
leases in respect of the real property on which facilities owned or leased by
the Issuer or any Subsidiary are located; (h) Liens arising from UCC financing
statements regarding property leased by the Issuer or any Restricted Subsidiary;
(i) easements, rights-of-way, navigational servitudes, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
which do not interfere in any material respect with the ordinary conduct of
business of the Issuer or any Restricted Subsidiary; (j) Liens securing purchase
money obligations incurred or assumed in connection with the purchase of real or
Personal property to be used in the business of the Issuer or any Restricted
Subsidiary within 180 days of such incurrence or assumption; and (k) Liens on
the Capital Stock of an Unrestricted Subsidiary securing Investment Guarantees
with respect to the Indebtedness of such Unrestricted Subsidiary.
"PERSON" means any individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government or other entity.
"REGULAR QUARTERLY DIVIDEND" means the quarterly dividend determined
by the Board of Directors of the Issuer in its reasonable judgment to be its
regular and normal quarterly dividend and paid by the Issuer in accordance with
the Issuer's prior business practices in an amount not to exceed $500,000 per
fiscal quarter.
"REPRESENTATIVE" means, for the purposes of Article XII, the indenture
trustee or other trustee, agent or representative for any Senior Indebtedness
or, with respect to any Guarantor, for any Senior Indebtedness of such
Guarantor.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Issuer that either
(i) has never been designated as an Unrestricted Subsidiary or (ii) (if such
Subsidiary has been previously designated as an Unrestricted Subsidiary) has
thereafter been designated as a Restricted Subsidiary in accordance with the
provision of Section 3.20.
"SECURITY" or "SECURITIES" means any _% Senior Subordinated Note or
Notes authenticated and delivered under this Indenture.
"SENIOR DEBT" means (a) with respect to the Issuer, (i) the
Obligations of the Issuer with respect to the Credit Facility and (ii) any other
Indebtedness permitted to be incurred by the
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Issuer under the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is pari passu with or
subordinated in right of payment to the Securities, and (b) with respect to any
Guarantor, (i) the Obligations of such Guarantor with respect to the Credit
Facility, (ii) any Guarantee by such Guarantor of any Senior Debt of the Issuer
and (iii) any other Indebtedness permitted to be incurred by such Guarantor
under the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is pari passu with or
subordinated in right of payment to the Subsidiary Guarantee of such Guarantor.
Notwithstanding anything to the contrary in the foregoing, Senior Debt does not
include (A) any obligation of the Issuer or any Guarantor to, in respect of or
imposed by any environmental, landfill, waste management or other regulatory or
governmental agency, statute, law or court order, (B) any liability for federal,
state, local or other taxes owed or owing by the Issuer or any Guarantor, (C)
any Indebtedness of the Issuer or any Guarantor to any of the Issuer's
Subsidiaries, (D) any trade payables or (E) any Indebtedness that is incurred in
violation of the Indenture.
"SUBSIDIARY" of any specified Person means any Person of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees (or Persons performing similar functions)
thereof is at the time owned or controlled, directly or indirectly, by any such
specified Person or one or more of the other Subsidiaries of such specified
Person or a combination thereof.
"SUBSIDIARY GUARANTEE" has the meaning specified in Section 11.1.
"TIA" (except as otherwise provided in Sections 7.1 and 7.2) means the
Trust Indenture Act of 1939 as in force at the date as of which this Indenture
was originally executed.
"TRUSTEE" means the entity identified as "Trustee" in the first
paragraph hereof and, subject to Article V, shall also include any successor
trustee.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Issuer that has
been designated as an Unrestricted Subsidiary in accordance with the provisions
of Section 3.21.
"U.S. GOVERNMENT OBLIGATIONS" means securities that are (a) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed
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as a full faith and credit obligation by the United States of America, which, in
either case, are not callable or redeemable at the option of the issuer thereof,
and also includes a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to
any such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt; provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness; PROVIDED, however, that with respect to any
revolving Indebtedness, the foregoing calculation of Weighted Average Life to
Maturity will be determined based upon the total available commitments and the
required reductions of commitments in lieu of the outstanding principal amount
and the required payments of principal, respectively.
SECTION 1.2 OTHER DEFINITIONS.
TERM SECTION DEFINED IN
---- ------------------
Affiliate Transaction 3.18
Asset Sale Offer 3.23
Benefitted Party 11.1
Change of Control Payment Date 3.24
Change of Control Offer 3.24
Commencement Date 10.9
Covenant Defeasance 9.3
Excess Proceeds 3.23
Issuer Preamble
Legal Defeasance 9.2
Offer Period 10.9
Offer Amount 10.9
Other Asset Sale Offer Indebtedness 3.23
Paying Agent 2.8
Payment Default 4.1
Payment Blockage Notice 12.2
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TERM SECTION DEFINED IN
---- ------------------
Purchase Offer 10.9
Purchase Date 10.9
Record Date 2.5
Refinancing Indebtedness 3.13
Restricted Payments 3.11
Securities Preamble
Trustee Preamble
ARTICLE II
ISSUE, EXECUTION, FORM AND
REGISTRATION OF SECURITIES
SECTION 2.1 AUTHENTICATION AND DELIVERY OF SECURITIES. Upon the
execution and delivery of this Indenture, or from time to time thereafter,
Securities in an aggregate principal amount not in excess of the amount
specified in the form of Security hereinabove recited (except as otherwise
provided in Section 2.10) may be executed by the Issuer and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Securities to or upon the written order of the Issuer, signed by
both (i) its Chairman of the Board of Directors, or any Vice Chairman of the
Board of Directors, or its President or any Vice President (whether or not
designated by a number or numbers or a word or words added before or after the
title "Vice President") and (ii) by its Treasurer or any Assistant Treasurer or
its Secretary or any Assistant Secretary without any further action by the
Issuer.
SECTION 2.2 EXECUTION OF SECURITIES. (a) The Securities shall be
signed on behalf of the Issuer by both (i) its Chairman of the Board of
Directors or any Vice Chairman of the Board of Directors or its President or any
Vice President (whether or not designated by a number or numbers or a word or
words added before or after the title "Vice President") and (ii) by its
Treasurer or any Assistant Treasurer or its Secretary or any Assistant
Secretary, under its corporate seal which may, but need not, be attested. Such
signatures may be the manual or facsimile signatures of the present or any
future such officers. The seal of the Issuer may be in the form of a facsimile
thereof and may be impressed, affixed, imprinted or otherwise reproduced on the
Securities. Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Security which has been duly authenticated and delivered
by the Trustee.
(b) In case any officer of the Issuer who shall have signed any of
the Securities shall cease to be such officer
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before the Security so signed shall be authenticated and delivered by the
Trustee or disposed of by the Issuer, such Security nevertheless may be
authenticated and delivered or disposed of as though the person who signed such
Security had not ceased to be such officer of the Issuer; and any Security may
be signed on behalf of the Issuer by such persons as, at the actual date of the
execution of such Security, shall be the proper officers of the Issuer, although
at the date of the execution and delivery of this Indenture any such person was
not such officer.
SECTION 2.3 CERTIFICATE OF AUTHENTICATION. Only such Securities as
shall bear thereon a certificate of authentication substantially in the form set
forth in Exhibit B, executed by the Trustee by manual signature of one of its
authorized officers, shall be entitled to the benefits of this Indenture or be
valid or obligatory for any purpose. Such certificate by the Trustee upon any
Security executed by the Issuer shall be conclusive evidence that the Security
so authenticated has been duly authenticated and delivered hereunder and that
the holder is entitled to the benefits of this Indenture.
SECTION 2.4 FORM AND DENOMINATION. (a) The Securities will
initially be issued in the form of one or more Global Notes (the "Global Note").
The Global Note will be deposited on the date of the closing of the sale of the
Securities offered hereby (the "Closing Date") with, or on behalf of, The
Depository Trust Company or its successors and assigns (the "Depositary") and
registered in the name of IBJ Schroder Bank & Trust Company, as nominee of the
Depositary (such nominee being referred to herein the "Global Note Holder").
(b) Notwithstanding Section 2.4(a), notes that are issued in
accordance with Section 2.4(c) will be issued in the form of registered
definitive certificates (the "Certificated Notes"). Such Certificated Notes
may, unless the Global Note has previously been exchanged for Certificated
Notes, be exchanged for an interest in the Global Note representing the
principal amount of Securities being transferred.
(c) Any Person owning a beneficial interest in the Global Note may,
upon request to the Trustee, exchange such beneficial interest for Securities in
the form of Certificated Notes. Upon any such issuance, the Trustee is required
to register such Certificated Notes in the name of, and cause the same to be
delivered to, such Person or Persons (or the nominee of any thereof). In
addition, if: (i) the Issuer notifies the Trustee in writing that the Depositary
is no longer willing or able to act as a depository and the Issuer is unable to
locate a qualified successor within 90 days; or (ii) the Issuer, at its option,
notifies the Trustee in writing that it elects to cause the issuance of
Securities in the form of Certificated Notes under the Indenture, then, upon
surrender by the Global Note
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Holder of its Global Note, Certificated Notes will be issued to each Person that
the Global Note Holder and the Depositary identify as being the beneficial owner
of the related Securities. If the Issuer determines to replace the Depositary
with another qualified securities depository, the Issuer shall prepare or cause
to be prepared a new fully-registered Global Note, registered in the name of
such successor or substitute securities depository or its nominee, or make such
other arrangements as are acceptable to the Issuer, the Trustee and the
securities depository and not inconsistent with the terms of this Indenture.
(d) Neither the Issuer nor the Trustee will be liable for any delay
by the Global Note Holder or the Depositary in identifying the beneficial owners
of the Securities, and the Issuer and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
(e) The Securities and the Trustee's certificates of authentication
shall be substantially in the form set forth in Exhibits A and B hereto. The
Securities shall be issuable as registered securities without coupons and in
denominations of $1,000 and integral multiples thereof. The Securities shall be
numbered, lettered, or otherwise distinguished in such manner or in accordance
with such plans as the officers of the Issuer executing the same may determine
with the approval of the Trustee.
(f) Any of the Securities may be issued with appropriate insertions,
omissions, substitutions and variations, and may have imprinted or otherwise
reproduced thereon such legend or legends, not inconsistent herewith, as may be
required to comply with any law or with any rules or regulations pursuant
thereto, or with the rules of any securities market in which the Securities are
admitted to trading, or to conform to general usage.
SECTION 2.5 DATE OF SECURITIES; PAYMENTS OF INTEREST. (a) Each
Security shall be dated the date of its authentication, shall bear interest from
the applicable date and shall be payable on the dates specified on the face of
the form of Security set forth in Exhibit A.
(b) The person in whose name any Security is registered at the close
of business on any Record Date with respect to any interest payment date shall
be entitled to receive the interest, if any, payable on such interest payment
date notwithstanding any transfer or exchange of such Security subsequent to the
Record Date and prior to such interest payment date, except if and to the extent
the Issuer shall default in the payment of the interest due on such interest
payment date, in which case such defaulted interest shall be paid to the Persons
in whose names outstanding Securities are registered at the close of business on
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a subsequent Record Date (which shall be not less than five business days prior
to the date of payment of such defaulted interest) established by notice given
by mail by or on behalf of the Issuer to the Holders not less than 15 days
preceding such subsequent Record Date. The term "Record Date" as used with
respect to any interest payment date (except a date for payment of defaulted
interest) shall mean if such interest payment date is the fifteenth day of a
calendar month, the first day of such calendar month, whether or not such
Record Date is a Business Day.
SECTION 2.6 REGISTRATION, TRANSFER AND EXCHANGE. (a) The Issuer
will keep at each office or agency to be maintained for the purpose as provided
in Section 3.2, a register or registers in which, subject to such reasonable
regulations as it may prescribe, it will register, and will register the
transfer of, Securities as in this Article provided. Such register shall be in
written form in the English language or in any other form capable of being
converted into such form within a reasonable time. At all reasonable times such
register or registers shall be open for inspection by the Trustee.
(b) Upon due presentation for registration of transfer of any
Security at each such office or agency, the Issuer shall execute and the Trustee
shall authenticate and deliver in the name of the transferee a new Security or
Securities in authorized denominations for a like aggregate principal amount.
(c) Any Security or Securities may be exchanged for a Security or
Securities in other authorized denominations, in an equal aggregate principal
amount. Securities to be exchanged shall be surrendered at each office or
agency to be maintained by the Issuer for the purpose as provided in Section
3.2, and the Issuer shall execute and the Trustee shall authenticate and deliver
in exchange therefor the Security or Securities which the Securityholder making
the exchange shall be entitled to receive, bearing numbers not contemporaneously
outstanding.
(d) All Securities presented for registration of transfer, exchange,
redemption or payment shall (if so required by the Issuer or the Trustee) be
duly endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to the Issuer and the Trustee duly executed by,
the Holder or his attorney duly authorized in writing.
(e) The Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
exchange or registration of transfer of Securities. No service charge shall be
made for any such transaction.
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(f) The Issuer shall not be required to exchange or register a
transfer of (i) any Securities selected for redemption or (ii) any Securities
for a period of 15 days before a selection of Securities to be redeemed except,
in the case of any Security where public notice has been given that such
Security is to be redeemed in part, the portion thereof not so to be redeemed.
(g) All Securities issued upon any transfer or exchange of Securities
shall be valid obligations of the Issuer, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Securities surrendered upon
such transfer or exchange.
SECTION 2.7 DEPOSITARY PROCEDURES. (a) The following procedures
will be established: (i) upon deposit of the Global Note, the Depositary will
credit the accounts of Participants designated by the Underwriters with portions
of the principal amount of the Global Note; and (ii) ownership of the Securities
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests in the Depositary's Participants), the
Depositary's Participants and the Depositary's indirect Participants.
(b) So long as the Global Note Holder is the registered holder of the
Global Note, the Global Note Holder will be considered for all purposes under
the Indenture as the sole and absolute owner of the Securities evidenced by the
Global Note. Beneficial owners of Securities evidenced by the Global Note will
not be considered the owners or holders thereof under the Indenture for any
purpose. Without limiting the foregoing sentence, neither the Issuer nor the
Trustee will have any responsibility or liability for (i) any aspect of the
records of the Depositary, (ii) for maintaining, supervising or reviewing any
records of the Depositary relating to the Securities, (iii) the selection by the
Depositary of beneficial interests in the Securities to be redeemed in part or
(iv) the payment to any beneficial owner or other Person, other than the
Depositary, of any amount with respect to principal of, premium, if any, or
interest with respect to the Securities.
SECTION 2.8 BOOK-ENTRY. Payments in respect of the principal of,
premium, if any, and interest on, any Securities registered in the name of the
Global Note Holder on the applicable record date will be payable by an office or
agency established by the Issuer under the Indenture for such purpose (a "Paying
Agent") to or at the direction of the Global Note Holder in its capacity as the
holder of the Global Note. The Issuer and the Trustee may treat the Persons in
whose names Securities, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Issuer nor the Trustee has or will have any
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responsibility or liability for the payment of such amounts to beneficial owners
of Securities. Payments by the Participants to the beneficial owners of
Securities will be governed by standing instructions and customary practice and
will be the responsibility of the Depositary's Participants.
SECTION 2.9 SAME-DAY SETTLEMENT AND PAYMENT. Payments in respect
of the Securities represented by the Global Note (including principal, premium,
if any, and interest) shall be made in immediately available funds. With
respect to Certificated Notes, the Issuer will make all payments of principal,
premium, if any, and interest in immediately available funds to the holders
thereof, either at the office or agency of a Paying Agent or by mailing a check
to each such holder's registered address. The Securities represented by the
Global Note are expected to trade in the Depositary's Same-Day Funds Settlement
System, and secondary market trading activity in such Securities will,
therefore, be required by the Depositary to be settled in immediately available
funds.
SECTION 2.10 MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN
SECURITIES. (a) In case any temporary or definitive Security shall become
mutilated, defaced or be apparently destroyed, lost or stolen, the Issuer in its
discretion may execute, and upon the written request of any officer of the
Issuer, the Trustee shall authenticate and deliver, a new Security, bearing a
number not contemporaneously outstanding, in exchange and substitution for the
mutilated or defaced Security, or in lieu of and substitution for the Security
so apparently destroyed, lost or stolen. In every case the applicant for a
substitute Security shall furnish to the Issuer and to the Trustee and any agent
of the Issuer or the Trustee such security or indemnity as may be required by
them to indemnify and defend and to save each of them harmless and, in every
case of destruction, loss or theft evidence to their satisfaction of the
apparent destruction, loss or theft of such Security and of the ownership
thereof.
(b) Upon the issuance of any substitute Security, the Issuer may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith. In case any Security
which has matured or is about to mature, or has been called for redemption in
full, shall become mutilated or defaced or be apparently destroyed, lost or
stolen, the Issuer may, instead of issuing a substitute Security, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated or defaced Security), if the applicant for such payment shall
furnish to the Issuer and to the Trustee and any agent of the Issuer or the
Trustee such security or indemnity as any of them may require to save each of
them harmless from all risks,
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however remote, and, in every case of apparent destruction, loss or theft, the
applicant shall also furnish to the Issuer and the Trustee and any agent of the
Issuer or the Trustee evidence to their satisfaction of the apparent
destruction, loss or theft of such Security and of the ownership thereof.
(c) Every substitute Security issued by virtue of the fact that any
Security is apparently destroyed, lost or stolen shall constitute an additional
contractual obligation of the Issuer, whether or not the apparently destroyed,
lost or stolen Security shall be at any time enforceable by anyone and shall be
entitled to all the benefits of (but shall be subject to all the limitations of
rights set forth herein equally and proportionately with any and all other
Securities duly authenticated and delivered hereunder). All Securities shall be
held and owned upon the express condition that, to the extent permitted by law,
the foregoing provisions are exclusive with respect to the replacement or
payment of mutilated, defaced, or apparently destroyed, lost or stolen
Securities and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement or payment of negotiable instruments or other
securities without their surrender.
SECTION 2.11 CANCELLATION OF SECURITIES; DESTRUCTION THEREOF. All
Securities surrendered for payment, redemption, registration of transfer or
exchange, if surrendered to the Issuer or any agent of the Issuer or the
Trustee, shall be delivered to the Trustee for cancellation or, if surrendered
to the Trustee, shall be canceled by it; and no Securities shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Indenture. The Trustee shall destroy canceled Securities held by it and deliver
a certificate of destruction to the Issuer. If the Issuer shall acquire any of
the Securities, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Securities unless and until
the same are delivered to the Trustee for cancellation.
SECTION 2.12 TEMPORARY SECURITIES. Pending the preparation of
definitive Securities, the Issuer may execute and the Trustee shall authenticate
and deliver temporary Securities (printed, lithographed, typewritten or
otherwise reproduced, in each case in form satisfactory to the Trustee).
Temporary Securities shall be issuable as registered Securities without coupons,
of any authorized denomination, and substantially in the form of the definitive
Securities but with such omissions, insertions and variations as may be
appropriate for temporary Securities, all as may be determined by the Issuer
with the concurrence of the Trustee. Temporary Securities may contain such
reference to any provisions of this Indenture as may be appropriate. Every
temporary Security shall be executed by the
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Issuer and be authenticated by the Trustee upon the same conditions and in
substantially the same manner, and with like effect, as the definitive
Securities. Without unreasonable delay the Issuer shall execute and shall
furnish definitive Securities and thereupon temporary Securities may be
surrendered in exchange therefor without charge at each office or agency to be
maintained by the Issuer for the purpose pursuant to Section 3.2, and the
Trustee shall authenticate and deliver in exchange for such temporary Securities
a like aggregate principal amount of definitive Securities of authorized
denominations. Until so exchanged the temporary Securities shall be entitled to
the same benefits under this Indenture as definitive Securities.
ARTICLE III
COVENANTS OF THE ISSUER AND THE TRUSTEE
SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST. The Issuer
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of, premium, if any and interest on, each of the Securities at the
place or places, at the respective times and in the manner provided in the
Securities. Each instalment of interest on the Securities may be paid by
mailing checks for such interest payable to or upon the written order of the
Holders entitled thereto as they shall appear on the registry books of the
Issuer.
SECTION 3.2 OFFICES FOR PAYMENTS, ETC. So long as any of the
Securities remain outstanding, the Issuer will maintain in the Borough of
Manhattan, The City and State of New York, the following: (a) an office or
agency where the Securities may be presented for payment, (b) an office or
agency where the Securities may be presented for registration of transfer and
for exchange as in this Indenture provided and (c) an office or agency where
notices and demands to or upon the Issuer in respect of the Securities or of
this Indenture may be served. The Issuer will give to the Trustee written
notice of the location of any such office or agency and of any change of
location thereof. The Issuer hereby initially designates the Corporate Trust
Office of the Trustee as the office or agency for each such purpose. In case
the Issuer shall fail to maintain any such office or agency or shall fail to
give such notice of the location or of any change in the location thereof,
presentations and demands may be made and notices may be served at the Corporate
Trust Office.
SECTION 3.3 APPOINTMENT TO FILL A VACANCY IN OFFICE OF TRUSTEE.
The Issuer, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 5.9, a Trustee, so that
there shall at all times be a Trustee hereunder.
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SECTION 3.4 PAYING AGENTS. (a) Whenever the Issuer shall appoint
a Paying Agent other than the Trustee, it will cause such Paying Agent to
execute and deliver to the Trustee an instrument in which such agent shall agree
with the Trustee, subject to this Section,
(i) that it will hold all sums received by it as such agent for the
payment of the principal of or interest on the Securities (whether such
sums have been paid to it by the Issuer or by any other obligor on the
Securities) in trust for the benefit of the Holders or of the Trustee,
(ii) that it will give the Trustee notice of any failure by the
Issuer (or by any other obligor on the Securities) to make any payment of
the principal of or interest on the Securities when the same shall be due
and payable, and
(iii) pay any such sums so held in trust by it to the Trustee upon
the Trustee's written request at any time during the continuance of the
failure referred to in Section 3.4(a)(ii) above.
(b) The Issuer will, prior to each due date of the principal of or
interest on the Securities, (i) deposit with the Paying Agent a sum sufficient
to pay such principal or interest, and (unless such Paying Agent is the Trustee)
promptly notify the Trustee of any failure to take such action and, (ii) if the
Issuer shall act as its own Paying Agent, it shall set aside, segregate and hold
in trust for the benefit of the Holders a sum sufficient to pay such principal
or interest so becoming due and promptly notify the Trustee of any failure to
take such action.
(c) Anything in this Section 3.4 to the contrary notwithstanding, the
Issuer may at any time, for the purpose of obtaining Legal Defeasance, Covenant
Defeasance or a satisfaction and discharge of this Indenture or for any other
reason, pay or cause to be paid to the Trustee all sums held in trust by the
Issuer or any Paying Agent hereunder, as required by this Section, such sums to
be held by the Trustee upon the trusts herein contained.
(d) Anything in this Section to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section are subject to
Sections 9.5 and 9.6.
SECTION 3.5 CERTIFICATE TO TRUSTEE. The Issuer will furnish to the
Trustee on or before February 28 of each year beginning with 1997 a brief
certificate (which need not comply with Section 13.5) from the principal
executive, financial or accounting officer of the Issuer as to his or her
knowledge of the Issuer's compliance with all conditions and covenants under the
Indenture (such compliance to be determined without regard to
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any period of grace or requirement of notice provided under the Indenture).
SECTION 3.6 SECURITYHOLDERS LISTS. If and so long as the Trustee
shall not be the registrar, the Issuer will furnish or cause to be furnished to
the Trustee a list in such form as the Trustee may reasonably require of the
names and addresses of the Holders pursuant to Section 312 of the TIA (a)
semiannually not more than 15 days after each Record Date for the payment of
semiannual interest on the Securities, as hereinabove specified, as of such
Record Date, and (b) at such other times as the Trustee may request in writing,
within thirty days after receipt by the Issuer of any such request as of a date
not more than 15 days prior to the time such information is furnished.
SECTION 3.7 REPORTS BY THE ISSUER. Whether or not required by the
rules and regulations of the Commission, so long as any Securities are
outstanding, the Issuer shall (i) furnish to the Trustee and to all Holders all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Issuer
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and with respect to
the annual information only, a report thereon by the Issuer's certified
independent accountants and (ii) file a copy of all such information with the
Commission for public availability (unless the Commission will not accept such a
filing) and file such information with the Trustee and make such information
available to investors and securities analysts who request in writing. The
Issuer shall at all times comply with TIA Section 314(a).
SECTION 3.8 TAXES. The Issuer shall pay, and shall cause each of
its Subsidiaries to pay, prior to delinquency, all material taxes, assessments,
and governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders.
SECTION 3.9 STAY, EXTENSION AND USURY LAWS. Subject to existing
law, the Issuer will not, and will not permit any Restricted Subsidiary to
insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law wherever created, now or at any
time hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Issuer shall and shall cause each Restricted Subsidiary
to (to the extent that it may lawfully do so) waive all benefit or advantage of
any such law, and covenant it shall not, and shall not permit any Restricted
Subsidiary to resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall
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suffer and permit the execution of every such power though no such law has been
enacted.
SECTION 3.10 REPORTS BY THE TRUSTEE. Any Trustee's report required
under Section 313(a) of the TIA shall be transmitted on or before the first
date for the regular payment of semiannual interest on the Securities next
succeeding ______ in each year, and shall be dated as of a date convenient to
the Trustee no more than 60 nor less than 45 days prior thereto (unless such
______ is less than 45 days prior to such interest payment date, in which case
such report shall be (a) so transmitted on or before the second such interest
payment date next succeeding such ______ and (b) as of a date determined as
provided above).
SECTION 3.11 RESTRICTED PAYMENTS. (a) The Issuer will not, and
will not permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution on
account of the Issuer's or any Restricted Subsidiary's Equity Interests
other than dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of the Issuer or such Restricted Subsidiary or
dividends or distributions by a Restricted Subsidiary which, to the extent
that a portion of such dividend or distribution is paid to a Holder other
than the Issuer or a Restricted Subsidiary do not exceed an amount equal to
such Holder's PRO RATA aggregate common Equity Interest in such Restricted
Subsidiary;
(ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Issuer or any Subsidiary of the Issuer (other
than any such Equity Interests owned by the Issuer or any Restricted
Subsidiary); or
(iii) voluntarily purchase, redeem, defease or otherwise acquire
or retire for value any Indebtedness that is subordinated to the Securities
or any Indebtedness that is pari passu with the Securities and that has a
stated maturity that is later than the stated maturity of the Securities or
a Weighted Average Life to Maturity that is longer than the Weighted
Average Life to Maturity of the Securities at such time, all such payments
and other actions set forth in clauses (i) through (iii) above being
collectively referred to as "Restricted Payments"),
unless, at the time of such Restricted Payment:
(A) no Default shall have occurred and be continuing or would occur
as a consequence thereof;
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(B) the Issuer would, after giving PRO FORMA effect to such
Restricted Payment as if such Restricted Payment had been made at the
beginning of the Issuer's most recently completed four full fiscal quarters
for which internal financial statements are available preceding the date of
such Restricted Payment, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to Section 3.13(a); and
(C) such Restricted Payment, together with the aggregate of all other
Restricted Payments and all Restricted Investments made by the Issuer and
its Restricted Subsidiaries after the date hereof including all Restricted
Payments made in reliance on Section 3.11(b), but excluding all Restricted
Investments made in reliance on Section 3.12(b) is less than the sum of (x)
50% of Consolidated Net Income for the period (taken as one accounting
period) from March 1, 1996 to the end of the Issuer's most recently ended
fiscal quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if Consolidated Net Income for such
period is a deficit, 100% of such deficit) plus (y) 100% of the aggregate
net cash proceeds received by the Issuer from the issuance or sale of
Equity Interests of the Issuer (other than Equity Interests sold to a
Restricted Subsidiary and other than Disqualified Stock).
(b) Notwithstanding the provisions of subsection (a) of this Section
3.11, the Issuer and the Restricted Subsidiaries may make the following
Restricted Payments:
(i) the payment of any Regular Quarterly Dividend;
(ii) the payment of any other dividend within 60 days after the date
of declaration thereof if, at the date of such declaration, such payment
would have been permitted pursuant to Section 3.11(a); or
(iii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Issuer either (A) in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Issuer) of other Equity Interests of the Issuer (other
than Disqualified Stock) or (B) to the extent required by a final order of
a Gaming Authority.
SECTION 3.12 RESTRICTED INVESTMENTS. (a) The Issuer will not, and
will not permit any Restricted Subsidiary to, directly or indirectly make any
Restricted Investment, unless, at the time of such Restricted Investment:
(i) no Default shall have occurred and be continuing or would occur
as a consequence thereof;
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(ii) the Issuer would, after giving PRO FORMA effect to such
Restricted Investment as if such Restricted Investment had been made at the
beginning of the Issuer's most recently completed four full fiscal quarters
for which internal financial statements are available preceding the date of
such Restricted Investment, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to Section 3.13(a); and
(iii) such Restricted Investment, together with the aggregate of all
other Restricted Investments and all Restricted Payments including all
Restricted Payments made in reliance on Section 3.11(b), other than
Restricted Investments made in reliance on the provisions of subsection (b)
of this Section 3.12, is less than the sum of (A) 50% of Consolidated Net
Income for the period (taken as one accounting period) from March 1, 1996
to the end of the Issuer's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Investment (or, if Consolidated Net Income for such period is a deficit,
100% of such deficit) plus (B) 100% of the aggregate net cash proceeds
received by the Issuer from the Issuance or sale of Equity Interests of the
Issuer (other than Equity Interests sold to a Subsidiary and other than
Disqualified Stock).
(b) Notwithstanding the provisions of subsection (a) of this Section
3.12, the Issuer may, and may permit Restricted Subsidiaries to, make the
following Restricted Investments:
(i) Restricted Investments not otherwise permitted by this Section
3.12 in an amount not to exceed the sum of (A) $5.0 million in the
aggregate (the amount of each such Restricted Investment being measured as
of the date such Restricted Investment was made) in any one or more
Persons, plus (B) any dividends or other payments or transfers of cash,
marketable Securities or tangible assets (at the fair market value of such
tangible assets at the time of such transfer) made to the Issuer or any
Restricted Subsidiary by Persons in which such Restricted Investments were
made but not exceeding the aggregate amount so invested in all such
Persons;
(ii) Restricted Investments not otherwise permitted by this Section
3.12 in an amount not to exceed the sum of (A) $15.0 million in the
aggregate (the amount of each such Restricted Investment being measured as
of the date such Restricted Investment was made) in one or more Permitted
Joint Venture Investments, plus (B) any dividends or other payments or
transfers of cash, marketable Securities or tangible assets (at the fair
market value of such tangible assets at the time of such transfer) made to
the Issuer or any Restricted Subsidiary by the Persons in which such
Restricted Investments
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were made but not exceeding the aggregate amount so invested in all such
Persons; and
(iii) Investment Guarantees to the extent permitted by Section 3.13
that constitute Permitted Joint Venture Investments and guarantee (with
full rights of subrogation) Indebtedness incurred to acquire or construct
Gaming Facilities (A) which is not expressly subordinated in right of
payment or otherwise to any other Indebtedness of such Person and (B) which
is secured by first priority security interests in such Gaming Facilities;
PROVIDED that any payments required to be made by the Issuer or a
Restricted Subsidiary pursuant to such Investment Guarantee will not be
treated for the purposes of this subsection(b) as being permitted by this
clause (iii).
For the purposes of this subsection (b), if any Person is designated as a
Restricted Subsidiary in accordance herewith, such designation shall be deemed
to constitute a transfer of tangible assets to the Issuer in an amount equal to
the fair market value of the net tangible assets of such Person on the date of
such designation as determined in good faith by the Board of Directors of the
Issuer.
(c) Any Investment in a Restricted Subsidiary that is designated as
an Unrestricted Subsidiary pursuant to Section 3.21 will be deemed to be a
Restricted Investment made on the date that such Restricted Subsidiary is
designated as an Unrestricted Subsidiary in an amount equal to the greater of
(i) the book value of the Investment in such Subsidiary on such date and (ii)
the fair market value of the Investment in such Subsidiary on such date as
determined (x) in good faith by the Board of Directors of the Issuer if such
fair market value is determined to be less than or equal to $15.0 million and
(y) by an investment banking firm of national standing with high yield
underwriting expertise if such fair market value is determined to be in excess
of $15.0 million.
(d) For the purposes of subsections (b) and (c) of this Section 3.12,
any Investment Guarantee with respect to the Indebtedness of any Person will
cease to be deemed an Investment (and will be deemed not to have been made) to
the extent that such Investment Guarantee is released without payment by the
Issuer or a Restricted Subsidiary.
Section 3.13 INCURRENCE OF INDEBTEDNESS. (a) The Issuer will not,
and will not permit any Restricted Subsidiary, directly or indirectly, to
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to or become responsible for (collectively,
"incur") any Indebtedness, unless, at the time of the incurrence of such
Indebtedness, (i) no Default shall have occurred and be
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continuing or would occur as a consequence thereof; and (ii) the Fixed Charge
Coverage Ratio for the Issuer for its most recently ended four full fiscal
quarters for which internal financial statements are available preceding the
date on which such additional Indebtedness is incurred is greater than 2.00 to
1, determined on a PRO FORMA basis (including a PRO FORMA application of the net
proceeds therefrom) as if the additional Indebtedness have been incurred at the
beginning of such four-quarter period.
(b) Notwithstanding the provisions of subsection (a) of this Section
3.13, the Issuer and the Restricted Subsidiaries may incur the following
Indebtedness:
(i) Non-Recourse Debt in an FF&E Financing to acquire gaming
equipment and secured only by a security interest in such gaming equipment
and the proceeds thereof;
(ii) Recourse Indebtedness in one or more FF&E Financings for each
Gaming Facility not to exceed $7.0 million in aggregate principal amount
outstanding at any one time incurred to finance newly acquired FF&E to be
used in such Gaming Facility;
(iii) Indebtedness under (x) the Credit Facility or (y) as a
Permitted Joint Venture Investment to the extent that the aggregate
principal amount of Indebtedness outstanding at any one time under the
Credit Facility or constituting Permitted Joint Venture Investments does
not exceed $115 million;
(iv) Indebtedness represented by the Securities;
(v) Subsidiary Guarantees;
(vi) Indebtedness incurred in connection with Interest Rate
Protection Agreements with respect to Indebtedness otherwise permitted by
the provisions of this Section 3.13;
(vii) Indebtedness incurred in exchange for, or the proceeds of which
are used to extend, refinance, renew, replace, or refund any Existing
Indebtedness ("Refinancing Indebtedness"); PROVIDED, HOWEVER, that (A) the
principal amount of such Refinancing Indebtedness shall not exceed the
principal amount of Indebtedness so extended, refinanced, renewed,
replaced, substituted or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (B) such Refinancing Indebtedness shall
have a Weighted Average Life to Maturity equal to or greater than the
remaining Weighted Average Life to Maturity of the Indebtedness being
extended, refinanced, renewed, replaced or refunded; (C) if the
Indebtedness being extended, refinanced, renewed, replaced or refunded is
subordinated to the Securities, such
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Refinancing Indebtedness shall be similarly subordinated on terms at least
as favorable to the Holders as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced or
refunded; and (D) no Default shall have occurred and be continuing or would
occur as a consequence thereof;
(viii) Indebtedness incurred by the Issuer or a Restricted Subsidiary
and owing to the Issuer or a Restricted Subsidiary; and
(ix) Indebtedness that is not otherwise permitted pursuant to this
Section 3.13 in an aggregate principal amount outstanding at any one time
not to exceed $10.0 million.
(c) The Issuer will not issue any Disqualified Stock and will not
permit a Restricted Subsidiary to issue any shares of preferred stock;
(d) The Issuer will not permit any Unrestricted Subsidiary to issue
any Disqualified Stock or incur any Indebtedness other than Non-Recourse Debt;
PROVIDED, HOWEVER, that, if an Unrestricted Subsidiary is designated as a
Restricted Subsidiary pursuant to Section 3.20, such designation will be deemed
to constitute at such time the incurrence by a Restricted Subsidiary of any such
previously incurred Non-Recourse Debt.
SECTION 3.14 LIENS. The Issuer will not, and will not permit any
Restricted Subsidiary to, create, incur, assume or suffer to exist, directly or
indirectly, any Lien on any asset now owned or hereafter acquired, or any income
or profits therefrom or assign or convey any right to receive income therefrom,
except: (i) Liens securing Obligations under Senior Debt permitted to be
incurred under Section 3.13 or (ii) Permitted Liens.
SECTION 3.15 DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. (a) Subject to the provisions of subsection (b) of this Section
3.15, the Issuer will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective, directly or
indirectly, any encumbrance or restriction on the ability of a Restricted
Subsidiary to:
(i) pay dividends or make any other distributions to the Issuer or
another Restricted Subsidiary (x) on its Capital Stock or (y) with respect
to any other interest or participation in, or measured by, its profits;
(ii) pay any Indebtedness owed to the Issuer or another Restricted
Subsidiary;
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(iii) make loans or advances to the Issuer or another Restricted
Subsidiary; or
(iv) transfer any of its properties or assets to the Issuer or another
Restricted Subsidiary.
(b) The provisions of subsection (a) of this Section 3.15 shall not
prohibit encumbrances or restrictions existing under (i) documentation
concerning Existing Indebtedness as in effect on the date of this Indenture,
(ii) provisions of the Credit Facility no more restrictive than the provisions
contained in the Credit Facility as in effect on the date of this Indenture,
(iii) this Indenture and the Securities, (iv) applicable law, (v) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Issuer or a
Restricted Subsidiary as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred or such Capital Stock was issued in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided, that
the Consolidated Cash Flow of such Person was not taken into account in
determining whether such acquisition was permitted pursuant to Section 3.13, or
3.21 (vi) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (vii) Permitted
Liens, (viii) permitted Refinancing Indebtedness if the restrictions contained
in the agreements governing such Refinancing Indebtedness are not substantially
more restrictive taken as a whole than those contained in the agreements
governing the Indebtedness being refinanced or (ix) Non-Recourse Debt incurred
in accordance with Section 3.13.
SECTION 3.16 ADDITIONAL SUBSIDIARY GUARANTEES. If any Restricted
Subsidiary becomes the owner or lessee of assets, businesses, divisions, real
property or equipment having a book value in excess of $5.0 million, then the
Issuer shall cause such Restricted Subsidiary (i) to execute an Indenture
Supplemental hereto in accordance with Section 7.1 providing for the issuance of
a Subsidiary Guarantee and (ii) to deliver an Opinion of Counsel to the Trustee
in accordance with Section 14.5 to the effect that such Subsidiary Guarantee is
a valid and binding obligation of such Restricted Subsidiary enforceable in
accordance with the terms thereof, subject to the effect of applicable
bankruptcy, insolvency or similar laws affecting creditors, rights generally and
equitable principles of general applicability.
SECTION 3.17 LIMITATION ON ISSUANCE OF OTHER SUBORDINATED DEBT
SENIOR TO THE SECURITIES OR THE SUBSIDIARY GUARANTEES. The Issuer and each of
the Guarantors will not incur, create, issue, assume, guarantee or otherwise
become liable for
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any Indebtedness that is subordinate in right of payment to any Senior Debt of
the Issuer or such Guarantor, as the case may be, and senior in any respect in
right of payment to the Holders.
SECTION 3.18 Transactions With Affiliates. (a) The Issuer will
not, and will not permit any Restricted Subsidiary to, sell, lease, transfer or
otherwise dispose of any of its properties or assets, or purchase any property
or assets from, or enter into or maintain any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless such
Affiliate Transaction is on terms no less favorable to the Issuer or such
Restricted Subsidiary, as the case may be, than those that could have been
obtained in a comparable transaction by the Issuer or such Restricted Subsidiary
with an unrelated Person; and
(i) with respect to any Affiliate Transaction with an Unrestricted
Subsidiary which, either individually or when combined with all other
Affiliate Transactions with Unrestricted Subsidiaries during the past year,
involves aggregate payments in excess of $1.0 million, a majority of the
Board of Directors approves each such transaction;
(ii) with respect to any Affiliate Transaction (other than with an
Unrestricted Subsidiary) involving aggregate payments in excess of $1.0
million, or with respect to any Affiliate Transaction with all Unrestricted
Subsidiaries, which, either individually or when combined with all other
Affiliate Transactions with Unrestricted Subsidiaries during the 365 days
preceding, involves aggregate payments in excess of $3.0 million, the
Issuer delivers to the Trustee a resolution of the Board of Directors set
forth in an Officers' Certificate certifying that any such Affiliate
Transaction (x) is on terms no less favorable to the Issuer or such
Restricted Subsidiary, as the case may be, than those that could have been
obtained in a comparable transaction by the Issuer or such Restricted
Subsidiary with an unrelated Person and (y) has been approved by a majority
of the Board of Directors and a unanimous vote of the Independent
Directors; and
(iv) with respect to any Affiliate Transaction involving aggregate
payments in excess of $15.0 million, the Issuer delivers to the Trustee (A)
a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction (x) is on terms no
less favorable to the Issuer or such Restricted Subsidiary, as the case may
be, than those that could have been obtained in a comparable transaction by
the Issuer or such Restricted Subsidiary with an unrelated Person and (y)
has been approved by a majority of the Board of Directors and a unanimous
vote of the Independent Directors and (B) an opinion as to the
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fairness of such Affiliate Transaction to the Issuer or such Restricted
Subsidiary from a financial point of view issued by an investment banking
firm of national standing with expertise in high yield debt offerings and,
in the case of a transaction involving the sale or transfer of assets
subject to valuation, such as real estate, an appraisal by a nationally
recognized appraisal firm;
(b) Notwithstanding the provisions of subsection (a) of this Section
3.18, the following transactions shall not be deemed Affiliate Transactions:
(i) any employment agreement entered into by the Issuer or any Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Issuer or such Restricted Subsidiary; (ii) transactions between
or among the Issuer and Restricted Subsidiaries; (iii) Restricted Payments made
in accordance with Section 3.11; (iv) Restricted Investments made in accordance
with Section 3.12; and (v) payments by the Issuer pursuant to any
indemnification agreement with its directors and officers with respect to any
action taken or omitted to be taken by such director or officer in such
director's or officer's capacity as a director or officer of the Issuer or a
Restricted Subsidiary.
SECTION 3.19 BUSINESS ACTIVITIES. (a) The Issuer will not, and
will not permit any Restricted Subsidiary to, (i) engage, directly or
indirectly, in any business other than a Gaming Business, and (ii) such other
businesses as the Issuer or any Restricted Subsidiary is engaged in on the date
of this Indenture.
(b) The Issuer will not, and will not permit any of its Subsidiaries
to, conduct a Gaming Business in any gaming jurisdiction in which the Issuer or
such Subsidiary is not licensed on the date of this Indenture if the Holders
would be required to be licensed as a result thereof; provided that this
subsection (b) shall not be deemed to prohibit the Issuer or any of its
Subsidiaries from conducting a Gaming Business in any jurisdiction that does not
require the licensing or qualification of all of the Holders, but reserves the
discretionary right to require the licensing or qualification of any Holder.
SECTION 3.20 DESIGNATION OF AN UNRESTRICTED SUBSIDIARY AS A
RESTRICTED SUBSIDIARY. The Issuer shall not designate an Unrestricted
Subsidiary as a Restricted Subsidiary unless:
(i) Such Unrestricted Subsidiary has been designated as a Restricted
Subsidiary by the Board of Directors;
(ii) at the time of such designation after giving PRO FORMA effect
thereto as if such designation had occurred, and any Non-Recourse Debt
previously incurred by such Unrestricted Subsidiary had been incurred, at
the beginning of the Issuer's
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most recently completed four fiscal quarters for which internal financial
statements are available preceding the date of such designation, the Issuer
was permitted to incur $1.00 of additional Indebtedness pursuant to the
provisions of Section 3.13(a);
(iii) if such newly designated Restricted Subsidiary owned or leased
assets, businesses, divisions, real property or equipment having a book
value in excess of $5.0 million at the time of such designation, such
newly-designated Restricted has executed and delivered a Subsidiary
Guarantee and an Opinion of Counsel to the Trustee in accordance with the
provisions of Section 3.16;
(iv) no Default had occurred and was continuing immediately preceding
such designation and after giving PRO FORMA effect thereto; and
(v) the Issuer has delivered to the Trustee an Officers' Certificate
to the effect that such designation complies with the requirements of
clauses (i) through (iv) of this Section 3.20.
SECTION 3.21 DESIGNATION OF A SUBSIDIARY AS AN UNRESTRICTED
SUBSIDIARY. (a) The Issuer shall not designate any Subsidiary of the Issuer as
an Unrestricted Subsidiary unless (i) such Subsidiary has been designated as an
Unrestricted Subsidiary by the Board of Directors; (ii) such subsidiary is being
so designated at the time of its formation, (iii) the total assets of such
Subsidiary at the time of such designation are less than $1,000 and (iv) the
Issuer has delivered to the Trustee an Officers' Certificate to the effect that
such designation complies with the requirements of clauses (i) through (iii) of
this subsection (a).
(b) The Issuer shall not designate a Restricted Subsidiary as an
Unrestricted Subsidiary unless:
(i) such Restricted Subsidiary has been designated as an
Unrestricted Subsidiary by the Board of Directors;
(ii) at the time of such designation after giving PRO FORMA
effect thereto as if such designation had occurred at the beginning of the
Issuer's most recently completed four fiscal quarters for which internal
financial statements are available preceding the date of such designation,
(A) the Issuer was permitted to incur $1.00 of additional Indebtedness
pursuant to the provisions of Section 3.13(a) and (B) the Issuer's Fixed
Charge Coverage Ratio was not less than 80% of the Issuer's Fixed Charge
Coverage Ratio for such period without giving PRO FORMA effect to such
designation;
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(iii) such Restricted Subsidiary did not wholly or partially own,
operate or manage directly or indirectly, or otherwise use in its business,
any portion or aspect of Harveys Resort Hotel/Casino in Lake Tahoe, Nevada;
(iv) no Default had occurred and was continuing immediately
preceding such designation and after giving PRO FORMA effect thereto,
including the requirement of Section 3.12(c) that any Investment in such
Restricted Subsidiary be deemed to be a Restricted Investment made on the
date of such designation; and
(v) The Issuer has delivered to the Trustee an Officers'
Certificate to the effect that such designation complies with the
requirements of clauses (i) through (iv) of this Section 3.21.
SECTION 3.22 PAYMENTS FOR CONSENT. The Issuer shall not, and shall
not permit any of its Subsidiaries to, 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 of this Indenture or of the Securities unless such consideration is
offered to be paid or agreed to be paid to all Securityholders that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
SECTION 3.23 ASSET SALES. (a) Subject to the provisions of Article
VIII, the Issuer will not make, and will not permit any Restricted Subsidiary to
make, any Asset Sale unless:
(i) no Default exists or is continuing immediately prior to and
after giving effect to such Asset Sale;
(ii) the Issuer 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 (as determined in good faith and evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests sold or
otherwise disposed of;
(iii) not less than 85% of the consideration received by the
Issuer or such Restricted Subsidiary, as the case may be, is in the form of
cash or one or more Permitted Investments; PROVIDED, HOWEVER, that the
amount of (A) any liabilities on the Issuer's most recent internally
available balance sheet (or the notes thereto), as the case may be other
than liabilities that are by their terms subordinated to the Securities or
any Subsidiary Guarantee) that are assumed by
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the transferee of any such assets or Equity Interests and (B) any notes or
other obligations received by the Issuer or any such Restricted Subsidiary,
as the case may be, from such transferee that is immediately converted into
cash, shall be deemed to be cash (to the extent of the cash received) for
purposes of this clause (iii); and
(iv) within 180 days after such Asset Sale, the Issuer shall
either (A) apply or cause to be applied the Net Proceeds from such Asset
Sale to the payment of the principal of and interest on any Senior Debt of
the Issuer and, to the extent that such Net Proceeds exceed the amount of
the principal of such Senior Debt outstanding and interest thereon, to the
payment of the principal of and interest on any Senior Debt of a Guarantor
or (B) have entered into a contract pursuant to which such Net Proceeds
will be reinvested within 270 days after such Asset Sale in a Permitted
Investment (other than Marketable Securities); PROVIDED, that such
condition shall be deemed not to have been fulfilled if such Net Proceeds
have not been so applied pursuant to such contract.
(b) To the extent that, after such Net Proceeds have been applied in
accordance with subsection (a) of this Section 3.23, any such Net Proceeds
remain ("Excess Proceeds"), the Issuer shall make an offer (an "Asset Sale
Offer") to all Securityholders and to all holders of any other Indebtedness of
the Issuer that is pari passu with the Securities (if required to do so by the
terms thereof) ("Other Asset Sale Offer Indebtedness") to purchase the maximum
principal amount of Securities and Other Asset Sale Offer Indebtedness that may
be purchased out of the Excess Proceeds at a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
fixed for the closing of such Asset Sale Offer in accordance with the respective
procedures set forth in (i) subsection (c) of this Section 3.23 and in Section
10.9 and (ii) the documentation relating to such Indebtedness; PROVIDED that the
Issuer shall not be required to make an Asset Sale Offer for Securities and
Other Asset Sale Offer Indebtedness by this Section 3.23 if the Excess Proceeds
available therefore are less than $25,000,000 (which lesser amounts not applied
to an Asset Sale Offer shall be carried forward and cumulated for purposes of
determining whether an Asset Sale Offer is required with respect to any Excess
Proceeds from any subsequent Asset Sale). If the aggregate purchase price of
Securities and Other Asset Sale Offer Indebtedness tendered pursuant to the
Asset Sale Offer is less than the Excess Proceeds allotted to the purchase of
the Securities or Other Asset Sale Offer Indebtedness, the Issuer may use the
remaining Excess Proceeds for general corporate purposes.
(c) Promptly, and in any event within 30 days after the date on which
Excess Proceeds that are required by subsection (b)
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of this Section 3.23 to be applied to an Asset Sale Offer exceed $25,000,000,
the Issuer shall deliver to the Trustee and send by first-class mail to each
Holder a written notice complying with the requirements of Section 10.9(d) and
10.9(e).
(d) Whenever Net Proceeds are received by the Issuer, and prior to the
allocation of such Net Proceeds pursuant to subsections (a) and (b) of this
Section 3.23, such Net Proceeds shall be set aside by the Issuer, in a separate
account pending allocation.
SECTION 3.24 CHANGE OF CONTROL. (a) Upon a Change of Control, each
Holder shall have the right to require the Issuer to repurchase all or any part
of such Holder's Securities at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
repurchase, in accordance with the procedures set forth in subsection (b) of
this Section 3.24 and in Section 10.9 (the "Change of Control Offer"). Prior to
the mailing of the notice referred to in subsection (b) of this Section 3.24,
but in any event within 90 days following any Change of Control, the Issuer
shall either (i) repay all outstanding Senior Debt or (ii) obtain requisite
consents under all agreements governing outstanding Senior Debt to permit the
repurchase of Securities pursuant to this Section 3.24. The Issuer shall first
comply with the covenant in the preceding sentence before it shall be required
to repurchase Securities pursuant to this Section 3.24.
(b) Within 45 days following a Change of Control, the Issuer shall
deliver to the Trustee and send by first-class mail to each Holder a written
notice complying with the requirements of Sections 10.9(d) and 10.9(f).
(c) The Issuer shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
ARTICLE IV
REMEDIES OF THE TRUSTEE AND
SECURITYHOLDERS ON EVENT OF DEFAULT
SECTION 4.1 Event of Default Defined. Each of the following events
(whatever the reason for such event and whether it shall be voluntary or
involuntary or be 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) shall be an Event of Default:
(a) default in the payment of any instalment of interest upon any of
the Securities as and when the same shall become
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due and payable, and continuance of such default for a period of 30 days; or
(b) default in the payment of all or any part of the principal on any
of the Securities as and when the same shall become due and payable either
at maturity, upon any redemption, by declaration or otherwise; or
(c) failure on the part of the Issuer to comply with any of the
provisions of Article VIII; or
(d) failure on the part of the Issuer duly to observe or perform any
other of the covenants or agreements on the part of the Issuer in the
Securities or in this Indenture contained for a period of 30 days after the
date on which written notice specifying such failure, stating that such
notice is a "Notice of Default" hereunder and demanding that the Issuer
remedy the same, shall have been given by registered or certified mail,
return receipt requested, to the Issuer by the Trustee, or to the Issuer
and the Trustee by the holders of at least 25% in aggregate principal
amount of the Securities at the time outstanding; or
(e) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Issuer or any
Guarantor, or the payment of which is guaranteed by the Issuer or any
Guarantor, which default (i) is caused by a failure to pay when due
principal or interest on such Indebtedness within the grace period PROVIDED
in the documentation relating to such Indebtedness (a "Payment Default") or
(ii) results in the acceleration of such Indebtedness prior to its stated
maturity and, in either case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $10.0 million or more; or
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Issuer
or any Guarantor or any Restricted Subsidiary and such judgments are not
paid, discharged or stayed for a period 60 days, PROVIDED that the
aggregate of all such undischarged judgments exceeds $5.0 million; or
(g) except as permitted pursuant to Section 11.1(f), any Subsidiary
Guarantee with respect to the Securities shall become or be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, its successors or
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assigns, or any Person acting on behalf of any Guarantor, its successors or
assigns, shall deny or disaffirm its obligations or shall fail to comply
with any obligations under its Subsidiary Guarantee; or
(h) any Gaming License relating to a Material Gaming Facility is
revoked, terminated or suspended or otherwise ceases to be effective,
resulting in the cessation or suspension of operation for a period of more
than 30 days of any material portion or aspect of the Gaming Business of
any Material Gaming Facility; or
(i) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Issuer, any of its Restricted
Subsidiaries or any Guarantor in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Issuer, any Restricted Subsidiary
or Guarantor or for any substantial part of any of their property or
ordering the winding up or liquidation of its affairs, and such decree or
order shall remain unstayed and in effect for a period of 60 consecutive
days; or
(j) the Issuer, any of its Restricted Subsidiaries or any Guarantor
shall commence a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consent to the entry of
an order for relief in an involuntary case under any such law, or consent
to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Issuer or for any substantial part of its property, or make any general
assignment for the benefit of creditors or generally is not paying its
debts as they become due.
SECTION 4.2 ACCELERATION; WAIVER OF DEFAULT. (a) If any Event of
Default with respect to the Issuer, any of its Restricted Subsidiaries occurs
and is continuing, then, and in each and every such case, unless the principal
of all of the Securities shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Securities then outstanding hereunder, by notice in writing to the Issuer (and
to the Trustee if given by Securityholders), may declare the entire principal of
all the Securities and the interest accrued thereon, to be due and payable
immediately and upon any such declaration the same shall become immediately due
and payable.
(b) Notwithstanding Section 4.2(a), if, at any time after the
principal of the Securities shall have been so declared due
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and payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the Issuer shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all the Securities and the principal of any and
all Securities which shall have become due otherwise than by acceleration (with
interest upon such principal and, to the extent that payment of such interest is
enforceable under applicable law, on overdue installments of interest, at the
same rate as the rate of interest specified in the Securities, to the date of
such payment or deposit) and such amount as shall be sufficient to cover
reasonable compensation to the Trustee and each predecessor Trustee, their
respective agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee
except as a result of negligence or bad faith, and if any and all Events of
Default under the Indenture, other than the non-payment of the principal of
Securities which shall have become due by acceleration, shall have been cured,
waived or otherwise remedied as provided herein - then and in every such case,
notwithstanding Section 4.10(a)(ii), the holders of a majority in aggregate
principal amount of the Securities then outstanding, by written notice to the
Issuer and to the Trustee, may waive all defaults and rescind and annul such
declaration and its consequences, but no such waiver or rescission and annulment
shall extend to or shall affect any subsequent default or shall impair any right
consequent thereon.
SECTION 4.3 COLLECTION OF INDEBTEDNESS BY TRUSTEE; TRUSTEE MAY
PROVE DEBT. (a) If an Event of Default specified in Sections 4.1(a) or (b)
hereof occurs and is continuing, then upon demand of the Trustee, the Issuer
will pay to the Trustee for the benefit of the Holders the whole amount that
then shall have become due and payable on all such Securities for principal or
interest, as the case may be (with interest to the date of such payment upon the
overdue principal and, to the extent that payment of such interest is
enforceable under applicable law, on overdue installments of interest at the
same rate as the rate of interest specified in the Securities); and in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including reasonable compensation to the Trustee and
each predecessor Trustee, their respective agents, attorneys and counsel, and
any expenses and liabilities incurred, and all advances made, by the Trustee and
each predecessor Trustee except as a result of its negligence or bad faith.
Until such demand is made by the Trustee, the Issuer may pay the principal of
and interest on the Securities to the registered Securityholder, whether or not
the Securities be overdue.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to
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institute any action or proceedings at law or in equity for the collection of
the sums so due and unpaid, and may prosecute any such action or proceedings to
judgment or final decree, and may enforce any such judgment or final decree
against the Issuer or other obligor upon the Securities and collect in the
manner PROVIDED by law out of the property of the Issuer or other obligor upon
the Securities, wherever situated the moneys adjudged or decreed to be payable.
(c) In case there shall be pending proceedings relative to the Issuer
or any other obligor upon the Securities under Title 11 of the United States
Code or any other applicable Federal or state bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor, or in case of any other comparable judicial proceedings relative to the
Issuer or other obligor upon the Securities, or to the creditors or property of
the Issuer or such other obligor, the Trustee, irrespective of whether the
principal of the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand pursuant to this Section, shall be entitled and empowered,
by intervention in such proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Securities, and
to file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for reasonable
compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the Trustee
and each predecessor Trustee, except as a result of negligence or bad
faith) and of the Securityholders allowed in any judicial proceedings
relative to the Issuer or other obligor upon the Securities, or to the
creditors or property of the Issuer or such other obligor,
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders in any election of a trustee or a standby trustee
in arrangement, reorganization, liquidation or other bankruptcy or
insolvency proceedings or Person performing similar functions in comparable
proceedings, and
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims, and to distribute all amounts received
with respect to the claims of the Securityholders and of the Trustee on
their behalf; and any
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trustee, receiver, or liquidator, custodian or other similar official is
hereby authorized by each of the Securityholders to make payments to the
Trustee, and, in the event that the Trustee shall consent to the making of
payments directly to the Securityholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the
Trustee, each predecessor Trustee and their respective agents, attorneys
and counsel, and all other expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith.
(d) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Securityholder any plan or reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding except, as aforesaid, to vote for the election of a trustee
in bankruptcy or similar Person.
(e) All rights of action and of asserting claims under this
Indenture, or under any of the Securities, may be enforced by the Trustee
without the possession of any of the Securities or the production thereof on any
trial or other proceedings relative thereto, and any such action or proceedings
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Trustee, each predecessor
Trustee and their respective agents and attorneys, shall be for the ratable
benefit of the Holders.
(f) In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party) the Trustee shall be held to represent all
the Holders, and it shall not be necessary to make any Holders parties to any
such proceedings.
SECTION 4.4 APPLICATION OF PROCEEDS. Any moneys collected by the
Trustee pursuant to this Article IV shall, subject to the subordination
provisions hereof, be applied in the following order at the date or dates fixed
by the Trustee and, in case of the distribution of such moneys on account of
principal or interest, upon presentation of the several Securities and stamping
(or otherwise noting) thereon the payment, or issuing Securities in reduced
principal amounts in exchange for the presented Securities if only partially
paid, or upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses, including reasonable
compensation to the Trustee and each predecessor Trustee and their
respective agents and attorneys and of all
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expenses and liabilities incurred, and all advances made, by the Trustee
and each predecessor Trustee except as a result of negligence or bad faith;
SECOND: In case the principal of the Securities shall not have become
and be then due and payable, to the payment of interest in default in the
order of the maturity of the installments of such interest, with interest
(to the extent that such interest has been collected by the Trustee) upon
the overdue installments of interest at the same rate as the rate of
interest specified in the Securities, such payments to be made ratably to
the Persons entitled thereto, without discrimination or preference;
THIRD: In case the principal of the Securities shall have become and
shall be then due and payable, to the payment of the whole amount then
owing and unpaid upon all the Securities for principal and interest, with
interest upon the overdue principal, and (to the extent that such interest
has been collected by the Trustee) upon overdue installments of interest at
the same rate as the rate of interest specified in the Securities; and in
case such moneys shall be insufficient to pay in full the whole amount so
due and unpaid upon the Securities, then to the payment of such principal
and interest, without preference or priority of principal over interest, or
of interest over principal, or of any instalment of interest over any other
instalment of interest, or of any Security over any other Security, ratably
to the aggregate of such principal and accrued and unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the Issuer or any
other Person lawfully entitled thereto.
SECTION 4.5 SUITS FOR ENFORCEMENT. In case an Event of Default has
occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
SECTION 4.6 RESTORATION OF RIGHTS ON ABANDONMENT OF PROCEEDINGS.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned for any
reason, or shall have been determined adversely to the Trustee, then and in
every such case the Issuer and the Trustee shall be restored respectively to
their former positions and rights hereunder, and all rights,
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remedies and powers of the Issuer, the Trustee and the Securityholders shall
continue as though no such proceedings had been taken.
SECTION 4.7 LIMITATIONS ON SUITS BY SECURITYHOLDERS. No Holder
shall have any right by virtue or by availing of any provision of this Indenture
to institute any action or proceeding at law or in equity or in bankruptcy or
otherwise upon or under or with respect to this Indenture, or for the
appointment of a trustee, receiver, liquidator, custodian or other similar
official or for any other remedy hereunder, unless such Holder previously shall
have given to the Trustee written Notice of default and of the continuance
thereof, and such Notice shall not have been rescinded, as hereinbefore
provided, and unless also the holders of not less than 25% in aggregate
principal amount of the Securities then outstanding shall have made written
request upon the Trustee to institute such action or proceedings in its own name
as trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity shall have failed to institute any
such action or proceedings and no direction inconsistent with such written
request shall have been given to the Trustee pursuant to Section 4.9; it being
understood and intended, and being expressly covenanted by the taker and holder
of every Security with every other taker and holder and the Trustee, that no one
or more Holders shall have any right in any manner whatever by virtue or by
availing of any provision of this Indenture to affect, disturb or prejudice the
rights of any other Holders, or to obtain or seek to obtain priority over or
preference to any other such Holder or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all Holders. For the protection and enforcement of this
Section, each and every Securityholder and the Trustee shall be entitled to such
relief as can be given either at law or in equity.
SECTION 4.8 POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT
WAIVER OF DEFAULT. (a) Except as provided in Section 2.10, no right or remedy
herein conferred upon or reserved to the Trustee or to the Securityholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
(b) No delay or omission of the Trustee or of any Holder to exercise
any right or power accruing upon any Event of Default
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occurring and continuing as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and, subject to Section 4.7, every power and remedy given
by this Indenture or by law to the Trustee or to the Securityholders may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Securityholders.
SECTION 4.9 CONTROL BY SECURITYHOLDERS. The holders of a majority
in aggregate principal amount of the Securities at the time outstanding shall
have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee by this Indenture; PROVIDED that such direction
shall not be otherwise than in accordance with law and the provisions of this
Indenture and; PROVIDED FURTHER that (subject to Section 5.1) the Trustee shall
have the right to decline to follow any such direction if the Trustee, being
advised by counsel, shall determine that the action or proceeding so directed
may not lawfully be taken or if the Trustee in good faith by its board of
directors, the executive committee, or a trust committee of directors or
responsible officers of the Trustee shall determine that the action or
proceedings so directed would involve the Trustee in Personal liability or if
the Trustee in good faith shall so determine that the actions or forebearances
specified in or pursuant to such direction shall be unduly prejudicial to the
interests of Holders not joining in the giving of said direction, it being
understood that (subject to Section 5.1) the Trustee shall have no duty to
ascertain whether or not such actions or forebearances are unduly prejudicial to
such Holders. Nothing in this Indenture shall impair the right of the Trustee
in its discretion to take any action deemed proper by the Trustee and which is
not inconsistent with such direction by Securityholders.
SECTION 4.10 WAIVER OF PAST DEFAULTS. (a) Prior to the declaration
of the maturity of the Securities as provided in Section 4.1, the holders of a
majority in aggregate principal amount of the then outstanding Securities
(including consents obtained in connection with a tender offer or exchange offer
for the Securities), by notice to the Trustee may on behalf of all Holders waive
any past default or Event of Default and compliance with any provision of this
Indenture or the Securities or any existing Default and rescind any resulting
acceleration and its consequences under this Indenture and its consequences,
except a default (i) in the payment of principal of, premium, if any, or
interest on any of the Securities, or (ii) subject to Section 4.2(b), with
respect to a covenant or provision hereof which cannot be modified or amended
without the consent of the holder of each Security affected pursuant to Section
7.2(a). In the case of any such waiver, the Issuer, the Trustee and the Holders
shall be restored to their former positions and rights hereunder,
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respectively; but no such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
(b) Upon any such waiver, such default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured, and not to have occurred
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 4.11 NOTICE TO TRUSTEE. Immediately upon becoming aware of
any Default, the Issuer shall deliver to the Trustee a statement specifying such
Default.
ARTICLE V
CONCERNING THE TRUSTEE
SECTION 5.1 DUTIES AND RESPONSIBILITIES OF THE TRUSTEE; DURING
DEFAULT; PRIOR TO DEFAULT. (a) The Trustee, prior to the occurrence of an
Event of Default and after the curing or waiving of all Events of Default which
may have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default has
occurred (which has not been cured or waived) the Trustee shall exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
(b) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all such Events of Default which may have occurred:
(A) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture, and the
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(B) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the
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opinions expressed therein, upon any statements, certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such statements,
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a responsible officer or responsible officers of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the holders of not less than a majority in principal amount of
the Securities at the time outstanding relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Indenture;
(iv) none of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur
Personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if there shall be reasonable
ground for believing that the repayment of such funds or adequate indemnity
against such liability is not reasonably assured to it; and
(v) this Section 5.1 is in furtherance of and subject to
Sections 315 and 316 of the TIA.
SECTION 5.2 CERTAIN RIGHTS OF THE TRUSTEE. In furtherance of and
subject to the TIA, and subject to Section 5.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, note, coupon, security or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request, direction, order or demand of the Issuer mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the
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Board of Directors may be evidenced to the Trustee by a copy thereof certified
by the secretary or an assistant secretary of the Issuer;
(c) the Trustee may consult with counsel and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, appraisal, bond, debenture, note, coupon,
security, or other paper or document unless requested in writing so to do by the
holders of not less than a majority in aggregate principal amount of the
Securities then outstanding; PROVIDED that, if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms of
this Indenture, the Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding; the reasonable expenses of
every such examination shall be paid by the Issuer or, if paid by the Trustee or
any predecessor trustee, shall be repaid by the Issuer upon demand; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys not regularly in its employ and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder.
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SECTION 5.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITION OF
SECURITIES OR APPLICATION OF PROCEEDS THEREOF. The recitals contained herein
and in the Securities, except the Trustee's certificates of authentication,
shall be taken as the statements of the Issuer, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representation as to the validity or sufficiency of this Indenture or of the
Securities. The Trustee shall not be accountable for the use or application by
the Issuer of any of the Securities or of the proceeds thereof.
SECTION 5.4 TRUSTEE AND AGENTS MAY HOLD SECURITIES; COLLECTIONS,
ETC. The Trustee or any agent of the Issuer or the Trustee, in its individual
or any other capacity, may become the owner or pledgee of Securities with the
same rights it would have if it were not the Trustee or such agent and may
otherwise deal with the Issuer and receive, collect, hold and retain collections
from the Issuer with the same rights it would have if it were not the Trustee or
such agent.
SECTION 5.5 MONEYS HELD BY TRUSTEE. Subject to Section 9.6 hereof,
all moneys received by the Trustee shall, until used or applied as herein
PROVIDED, be held in trust for the purposes for which they were received, but
need not be segregated from other funds except to the extent required by
mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or
the Trustee shall be under any liability for interest on any moneys received by
it hereunder.
SECTION 5.6 COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND ITS
PRIOR CLAIM. The Issuer covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) and the Issuer covenants and agrees to pay or
reimburse the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on behalf
of it in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all agents and other Persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
The Issuer also covenants to indemnify the Trustee and each predecessor Trustee
for, and to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this Indenture or the trusts hereunder
and its duties hereunder, including the costs and expenses of defending itself
against or investigating any claim of liability in the premises. The
obligations of the Issuer under this Section to compensate and indemnify the
Trustee and each predecessor Trustee
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and to pay or reimburse the Trustee and each predecessor Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder
and shall survive the Legal Defeasance, Covenant Defeasance, satisfaction and
discharge of this Indenture. Such additional indebtedness shall be a senior
claim to that of the Securities upon all property and funds held or collected by
the Trustee as such, except funds held in trust for the benefit of the holders
of particular Securities, and the Securities are hereby subordinated to such
senior claim.
SECTION 5.7 RIGHT OF TRUSTEE TO RELY ON OFFICERS' CERTIFICATE, ETC.
Subject to Sections 5.1 and 5.2, whenever in the administration of the trusts of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof.
SECTION 5.8 PERSONS ELIGIBLE FOR APPOINTMENT AS TRUSTEE. The
Trustee hereunder shall at all times be a corporation having a combined capital
and surplus of at least $5,000,000, and which is eligible in accordance with the
provisions of Section 310(a) of the TIA. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of a
Federal, State or District of Columbia supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published.
SECTION 5.9 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR
TRUSTEE. (a) The Trustee may at any time resign by giving written notice of
resignation to the Issuer and by mailing notice thereof by first class mail to
Holders at their last addresses as they shall appear on the Security register.
Upon receiving such notice of resignation, the Issuer shall promptly appoint a
successor trustee by written instrument in duplicate, executed by authority of
the Board of Directors, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no successor
trustee shall have been so appointed and have accepted appointment within 30
days after the mailing of such notice of resignation, the resigning trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee, or any
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Securityholder who has been a bona fide holder of a Security or Securities for
at least six months may, on behalf of himself and all others similarly situated,
petition any such court for the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of
Section 310(b) of the TIA, after written request therefor by the Issuer or
by any Securityholder who has been a bona fide holder of a Security or
Securities for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with
Section 5.8 and shall fail to resign after written request therefor by the
Issuer or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver or liquidator of the
Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Issuer may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Issuer, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or,
subject to Section 315(e) of the TIA, any Securityholder who has been a bona
fide holder of a Security or Securities for at least six months may on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Securities at the time outstanding may at any time remove the Trustee and
appoint a successor trustee by delivering to the Trustee so removed, to the
successor trustee so appointed and to the Issuer the evidence provided for in
Section 6.1 of the action in that regard taken by the Securityholders.
(d) Any resignation or removal of the Trustee and any appointment of
a successor trustee pursuant to any of the provisions of this Section 5.9 shall
become effective upon
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acceptance of appointment by the successor trustee as provided in Section 5.10.
SECTION 5.10 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE. (a)
Any successor trustee appointed as provided in Section 5.9 shall execute and
deliver to the Issuer and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Issuer or of the successor trustee, upon payment of its charges then
unpaid, the trustee ceasing to act shall, subject to Section 9.6, pay over to
the successor trustee all moneys at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor trustee all
such rights, powers, duties and obligations. Upon request of any such successor
trustee, the Issuer shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any trustee ceasing to act shall, nevertheless, retain a
prior claim upon all property or funds held or collected by such trustee to
secure any amounts then due it pursuant to Section 5.6.
(b) Upon acceptance of appointment by a successor trustee as provided
in this Section 5.10, the Issuer shall mail notice thereof by first class mail
to the Holders at their last addresses as they shall appear in the Security
register. If the acceptance of appointment is substantially contemporaneous
with the resignation, then the notice called for by the preceding sentence may
be combined with the notice called for by Section 5.9. If the Issuer fails to
mail such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Issuer.
SECTION 5.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF TRUSTEE. (a) Any corporation into which the Trustee may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided that such
corporation shall be eligible under Section 5.8, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
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(b) In case at the time such successor 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 Trustee; and in all such cases such certificate 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; provided, that the right to
adopt the certificate of authentication of any predecessor Trustee or to
authenticate Securities in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
ARTICLE VI
CONCERNING THE SECURITYHOLDERS
SECTION 6.1 EVIDENCE OF ACTION TAKEN BY SECURITYHOLDERS. Any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by Securityholders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Securityholders in Person or by agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee. Proof of execution of any instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture and (subject to
Sections 5.1 and 5.2) conclusive in favor of the Trustee and the Issuer, if made
in the manner provided in this Article VI.
SECTION 6.2 PROOF OF EXECUTION OF INSTRUMENTS AND OF HOLDING OF
SECURITIES; RECORD DATE. Subject to Sections 5.1 and 5.2, the execution of any
instrument by a Securityholder or his agent or proxy may be proved in accordance
with such reasonable rules and regulations as may be prescribed by the Trustee
or in such manner as shall be satisfactory to the Trustee. The holding of
Securities shall be proved by the Security register or by a certificate of the
registrar thereof. The Issuer may set a Record Date for purposes of determining
the identity of Holders entitled to vote or consent to any action referred to in
Section 6.1, which Record Date may be set at any time or from time to time by
notice to the Trustee, for any date or dates (in the case of any adjournment or
resolicitation) not more than 60 days nor less than five days prior to the
proposed date of such vote or
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consent, and thereafter, notwithstanding any other provisions hereof, only
Holders of record on such Record Date shall be entitled to so vote or give such
consent or to withdraw such vote or consent.
SECTION 6.3 HOLDERS TO BE TREATED AS OWNERS. The Issuer, the
Trustee and any agent of the Issuer or the Trustee may deem and treat the Person
in whose name any Security shall be registered upon the Security register as the
absolute owner of such Security (whether or not such Security shall be overdue
and notwithstanding any notation of ownership or other writing thereon) for the
purpose of receiving payment of or on account of the principal of and, subject
to the provisions of this Indenture, interest on such Security and for all other
purposes; and neither the Issuer nor the Trustee nor any agent of the Issuer or
the Trustee shall be affected by any notice to the contrary. All such payments
so made to any such Person, or upon his order, shall be valid, and, to the
extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for moneys payable upon any such Security.
SECTION 6.4 SECURITIES OWNED BY ISSUER DEEMED NOT OUTSTANDING. In
determining whether the holders of the requisite aggregate principal amount of
Securities have concurred in any direction, consent or waiver under this
Indenture, Securities which are owned by the Issuer or any other obligor on the
Securities or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Issuer or any other obligor
on the Securities shall be disregarded and deemed not to be outstanding for the
purpose of any such determination, except that for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, consent
or waiver only Securities which the Trustee knows are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Issuer or any other obligor upon the Securities or any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Issuer or any other obligor on the Securities.
In case of a dispute as to such right, the advice of counsel shall be full
protection in respect of any decision made by the Trustee in accordance with
such advice. Upon request of the Trustee, the Issuer shall furnish to the
Trustee promptly an Officers' Certificate listing and identifying all
Securities, if any, known by the Issuer to be owned or held by or for the
account of any of the above-described Persons; and, subject to Sections 5.1 and
5.2, the Trustee shall be entitled to accept such Officers' Certificate as
conclusive evidence of the facts therein set forth and of the fact that all
Securities not listed
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therein are outstanding for the purpose of any such determination.
SECTION 6.5 RIGHT OF REVOCATION OF ACTION TAKEN. At any time prior
to (but not after) the evidencing to the Trustee, as provided in Section 6.1, of
the taking of any action by the holders of the percentage in aggregate principal
amount of the Securities specified in this Indenture in connection with such
action, any holder of a Security the serial number of which is shown by the
evidence to be included among the serial numbers of the Securities the holders
of which have consented to such action may, by filing written notice at the
Corporate Trust Office and upon proof of holding as provided in this Article,
revoke such action so far as concerns such Security. Except as aforesaid any
such action taken by the holder of any Security shall be conclusive and binding
upon such holder and upon all future holders and owners of such Security and of
any Securities issued in exchange or substitution therefor, irrespective of
whether or not any notation in regard thereto is made upon any such Security.
Any action taken by the holders of the percentage in aggregate principal amount
of the Securities specified in this Indenture in connection with such action
shall be conclusively binding upon the Issuer, the Trustee and the holders of
all the Securities.
ARTICLE VII
SUPPLEMENTAL INDENTURES
SECTION 7.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
The Issuer, when authorized by a resolution of its Board of Directors, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities any property or assets;
(b) to evidence the succession of another corporation to the Issuer,
or successive successions, and the assumption by the successor corporation
of the covenants, agreements and obligations of the Issuer pursuant to
Article Eight;
(c) to add the covenants of the Issuer such further covenants,
restrictions, conditions or provisions as its Board of Directors and the
Trustee shall consider to be for the protection of the Holders, and to
make the occurrence, or the occurrence and continuance, of a default in any
such additional covenants, restrictions, conditions or provisions an Event
of Default permitting the enforcement of all or any
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of the several remedies provided in this Indenture as herein set forth;
provided, that in respect of any such additional covenant, restriction,
condition or provision such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or may provide for
an immediate enforcement upon such an Event of Default or may limit the
remedies available to the Trustee upon such an Event of Default or may
limit the right of the holders of a majority in aggregate principal amount
of the Securities to waive such an Event of Default; and
(d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any
supplemental indenture; or to make such other provisions in regard to
matters or questions arising under this Indenture or under any supplemental
indenture as the Board of Directors may deem necessary or desirable and
which shall not adversely affect the interests of the holders of the
Securities.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section may be executed without the consent of the holders of any of the
Securities at the time outstanding, notwithstanding any of the provisions of
Section 7.2.
SECTION 7.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF
SECURITYHOLDERS. (a) With the consent (evidenced as provided in Article VI) of
the holders of not less than a majority in aggregate principal amount of the
Securities at the time outstanding, the Issuer, when authorized by a resolution
of its Board of Directors, and the Trustee may, from time to time and at any
time, enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner the rights of the holders of the Securities; provided, that
(i) subject to Section 4.1, the Issuer and the Trustee may not waive or modify
the rights of the holders under Section 3.24 without the consent of the holders
of at least 66 2/3% of the principal amount of the Securities then outstanding
and (ii) no such supplemental indenture shall (A) reduce the principal amount
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of Securities whose Holders must consent to an amendment, supplement or waiver;
(B) reduce the principal of or change the stated maturity of any installment of
principal of any Security or alter the provisions with respect to the redemption
of the Securities pursuant to Article X; (iii) reduce the rate of or change the
time for payment of interest on any Security; (iv) waive a Default in the
payment of principal of or premium, if any, or interest on the Securities; (v)
change the currency in which the Securities are payable; and (vi) make any
change in the provisions of this Indenture relating to waivers of Defaults or
the rights of Holders to receive payments of principal of, premium, if any, or
interest on, the Securities or make any changes to the foregoing subsection (a)
of this Section 7.2.
(b) Upon the request of the Issuer, accompanied by a copy of a
resolution of the Board of Directors certified by the Secretary or an Assistant
Secretary of the Issuer authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the consent of
Securityholders and other documents, if any, required by Section 6.1 the Trustee
shall join with the Issuer in the execution of such supplemental indenture
unless such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be obligated to, enter into such supplemental
indenture.
(c) It shall not be necessary for the consent of the Securityholders
under this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
(d) Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Issuer
shall mail a notice thereof by first-class mail to the holders at their
addresses as they shall appear on the registry books of the Issuer, setting
forth in general terms the substance of such supplemental indenture. Any
failure of the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 7.3 COMPLIANCE WITH TIA. Every amendment or supplement to
this Indenture or the Securities shall be set forth in an amended or
supplemental Indenture that complies with the TIA as then in effect.
SECTION 7.4 REVOCATION AND EFFECT OF CONSENTS. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder is a
continuing consent by such Holder and every subsequent Holder or portion of a
Security that evidences the same debt as the consenting Holder's Security, even
if
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notation of the consent is not made on any Security. However, any such
Securityholder or subsequent Securityholder may revoke the consent as to its
Security if the Trustee receives written notice of revocations before the date
the waiver, supplement or amendment becomes effective. An amendment, supplement
or waiver becomes effective in accordance with its terms and thereafter binds
every Holder.
SECTION 7.5 TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall
sign any amended or supplemental Indenture authorized pursuant to this Article
VII if the amendment or supplement does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. The Issuer may not sign an amendment
or supplemental Indenture until the Board of Directors of the Issuer approves
it. In executing any amendment or supplemental indenture, the Trustee shall be
entitled to receive and (subject to Section 7.1) shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
SECTION 7.6 EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution
of any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Issuer and the Holders shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 7.7 DOCUMENTS TO BE GIVEN TO TRUSTEE. The Trustee, subject
to Sections 5.1 and 5.2, may receive an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any such supplemental indenture complies
with the applicable provisions of this Indenture.
SECTION 7.8 NOTATION ON SECURITIES IN RESPECT OF SUPPLEMENTAL
INDENTURES. Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may bear a notation in form
approved by the Trustee as to any matter provided for by such supplemental
indenture or as to any action taken at any such meeting. If the Issuer or the
Trustee shall so determine, new Securities so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental indenture may be prepared by the
Issuer, authenticated by the Trustee and delivered in exchange for the
Securities then outstanding.
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ARTICLE VIII
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 8.1 MERGER, CONSOLIDATION OR SALE OF ASSETS. (a) The
Issuer shall not consolidate with or merge with or into (whether or not the
Issuer is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions to, another Person unless:
(i) the Issuer is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Issuer) or to
which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia;
(ii) the Person formed by or surviving any such consolidation or
merger (if other than the Issuer) or the Person to whom such sale,
assignment, transfer, lease, conveyance or other disposition will have been
made shall expressly assume by supplemental indenture complying with the
requirements of Article VII the due and punctual payment of the principal
of, premium, if any, and interest on all of the Securities, and the due and
punctual performance and observance of all of the covenants and conditions
of this Indenture to be performed by the Issuer;
(iii) immediately after such transaction no Default exists;
(iv) the Issuer or any Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made (A) will have
Consolidated Net Worth (immediately after the transaction but prior to any
purchase accounting adjustments resulting from the transaction) equal to or
greater than the Consolidated Net Worth of the Issuer immediately preceding
the transaction and (B) will, at the time of such transaction and after
giving effect thereto on a PRO FORMA basis as if such transaction had
occurred at the beginning of the Company's most recently completed four
fiscal quarters for which internal financial statements are available
preceding the date of such transaction be permitted to incur at least $1.00
of additional Indebtedness pursuant to the provisions of Section 3.13(a);
(v) any such transaction does not require any Holder to obtain a
Gaming License or be qualified under the laws of any
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applicable gaming jurisdiction if such Holder would not have been required
to obtain a Gaming License or be qualified under the laws of any applicable
gaming jurisdiction in the absence of such transaction; and
(vi) any such transaction does not result in the loss of any
qualification or any Gaming License of the Issuer or its Subsidiaries
necessary for any Gaming Business then operated by the Issuer or its
Subsidiary.
(b) A Guarantor shall not consolidate with or merge with or into any
Person other than the Issuer or another Guarantor, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions to any Person other than the
Issuer or another Guarantor unless the surviving Person (if other than such
Guarantor) or the Person to whom such sale, assignment, transfer, lease,
conveyance or other disposition will have been made shall expressly assume by
supplemental indenture complying with the requirements of Article VII, the due
and punctual performance and observance of all the covenants and conditions of
Subsidiary Guarantee to be performed by such Guarantor.
SECTION 8.2 Successor Corporation Substituted. (a) In the case of
any consolidation, merger, sale, lease or conveyance in accordance with Section
8.1, such successor corporation shall succeed to and be substituted for the
Issuer, with the same effect as if it had been named herein.
(b) Such successor corporation may cause to be signed, and may issue
either in its own name or in the name of the Issuer prior to such succession any
or all of the Securities issuable hereunder which theretofore shall not have
been signed by the Issuer and delivered to the Trustee; and, upon the order of
such successor corporation, instead of the Issuer, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Issuer to the Trustee for
authentication, and any Securities which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All of
the Securities so issued shall in all respects have the same legal rank and
benefit under this Indenture as the Securities theretofore or thereafter issued
in accordance with the terms of this Indenture as though all of such Securities
had been issued at the date of the execution hereof.
(c) In case of any such consolidation, merger, sale, lease or
conveyance pursuant to Section 8.1(a), such changes in phraseology and form (but
not in substance) may be made in the Securities thereafter to be issued as may
be appropriate.
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(d) In the event of any such sale or conveyance (other than a
conveyance by way of lease) pursuant to Section 8.1(a), the Issuer (or any
successor Person which shall theretofore have become such in the manner
described in this Article VIII) or such Guarantor shall be discharged from all
obligations and covenants under this Indenture and the Securities and may be
liquidated and dissolved.
SECTION 8.3 OPINION OF COUNSEL TO TRUSTEE. The Trustee, subject to
Sections 5.1 and 5.2, may receive an Opinion of Counsel as conclusive evidence
that any consolidation, merger, sale, lease or conveyance, any such assumption,
and any such liquidation or dissolution, complies with the applicable provisions
of this Article VIII.
ARTICLE IX
DISCHARGE OF INDENTURE
SECTION 9.1 DEFEASANCE WITHIN ONE YEAR OF PAYMENT. (a) Except as
otherwise provided in Section 9.1(b), the Issuers obligations under this
Indenture and Securities shall terminate if:
(i) the Issuer shall have delivered to the Trustee for
cancellation all Securities previously authenticated and delivered (other
than destroyed, lost or stolen Securities that have been replaced or paid
pursuant to Section 2.10 or Securities for whose payment money or
securities have theretofore been deposited or aggregated in trust and
thereafter repaid to the Issuer as provided in Section 9.6) and the Issuer
has paid all sums payable by it hereunder; or
(ii) (A) all outstanding Securities mature within one year or are
to be called for redemption within one year under arrangements satisfactory
to the Trustee for giving the notice of redemption, (B) the Issuer
irrevocably deposits in trust with the Trustee, as trust funds solely for
the benefit of the Holders of the Securities for payment of the principal
of, premium, if any, and accrued interest on the Securities money or U.S.
Government Obligations or a combination thereof sufficient (unless such
funds consist solely of money, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee), without consideration of any
reinvestment, to pay the principal of, premium, if any, and accrued
interest on all outstanding Securities to such maturity or redemption, as
the case may be, and to pay all other sums payable by it hereunder,
(C) such deposit will not result in a breach or violation of or constitute
a default under this Indenture or a default under any other agreement or
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instrument to which the Issuer is a party or by which it or any material
assets or property of the Issuer or any of its Subsidiaries is bound and
(D) the Issuer delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent
provided for herein relating to the satisfaction and discharge of this
Indenture with respect to the Securities have been complied with.
(b) With respect to the foregoing clause (a)(i), only the Issuer's
obligations under Sections 5.6 and 9.6 in respect of the Securities shall
survive. With respect to the foregoing clause (a)(ii), only the Issuer's
obligations in Articles II and Article V and Sections 3.2, 9.4 and 9.5(b) in
respect of the Securities shall survive until the Securities are no longer
outstanding and thereafter, only the Issuer's obligations in Sections 5.6 and
9.5(b) in respect of the Securities shall survive. After satisfaction of the
conditions described in such clause (a)(i) or such clause (a)(ii) the Trustee,
upon request, shall acknowledge in writing the discharge of the Issuer's
obligations under the Securities and this Indenture except for those surviving
obligations specified above.
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SECTION 9.2 Legal Defeasance. (a) The Issuer will be deemed to
have paid and will be discharged from any and all obligations in respect of the
Securities, the provisions of this Indenture will, except as provided below, no
longer be in effect with respect to the Securities, the Trustee, at the expense
of the Issuer, shall execute proper instruments acknowledging the same and the
Securities will no longer be outstanding; provided that the following conditions
shall have been satisfied:
(i) The Issuer has irrevocably deposited in trust with the
Trustee as trust funds solely for the benefit of the Holders of the
Securities, for payment of the principal of and interest on the Securities,
money or U.S. Government Obligations or a combination thereof sufficient
(unless such funds consist solely of money, in the opinion of a nationally
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recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee) without consideration of
any reinvestment and after payment of all federal, state and local taxes or
other charges and assessments in respect thereof payable by the Trustee, to
pay and discharge the principal of the accrued interest on the outstanding
Securities to maturity or earlier redemption (irrevocably provided for
under arrangements satisfactory to the Trustee), as the case may be;
(ii) Such deposit will not result in a breach or violation of, on
constitute a default under, this Indenture or any other material agreement
or instrument to which the Issuer is a party or by which any material
assets or property of the Issuer or any of its Subsidiaries is bound;
(iii) No Default with respect to the Securities shall have
occurred and be continuing on the date of such deposit and, insofar as
Events of Default relating to bankruptcy or insolvency events are
concerned, at any time during the period ending on the 91st day of deposit;
(iv) The Issuer shall have delivered to the Trustee an Opinion of
Counsel acceptable to the Trustee confirming that (A) (x) the Issuer has
received from, or there has been published by the Internal Revenue Service,
a ruling or (y) there has been a change in the applicable provisions of the
Internal Revenue Code of 1986, as amended, since the date of the Indenture,
in each case to the effect that the holders of such Securities will not
recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance, and will be subject to federal income tax in the
same amount, in the same manner and at the same time as would have been the
case if such Legal Defeasance had not occurred and [(B) the Holders of the
Securities have a valid security interest in the trust funds subject to no
prior liens under the Uniform Commercial Code, as in effect in each
applicable jurisdiction (the "UCC")]; and
(v) The Issuer has delivered to the Trustee an Officer's
Certificate stating that [(A) such deposit was not made by the Issuer with
the intent of preferring the holders of the Securities over any other
creditors of the Issuer or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Issuer or others, and]
(B) all conditions precedent in the Indenture and the Securities relating
to the Legal Defeasance or Covenant Defeasance have been complied with.
(b) The Issuer's obligations in Article II, Article V, Sections 3.2,
9.4, 9.5, and 9.6 with respect to the Securities shall survive until such
Securities are no longer outstanding.
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Thereafter, only the Issuer's obligations in Sections 5.6 and 9.5 shall survive.
SECTION 9.3 COVENANT DEFEASANCE. (a) The Issuer and the
Guarantors, if any, may omit to comply with any term, provision or condition set
forth in Sections 3.8 through 3.24 and 8.1(ii), (iii), (iv) and (vi) (and any
other specific covenant or condition relating to such series provided for in a
Board Resolution or which may by its terms be defeased pursuant to this Section
9.3), and such omission shall be deemed not to be an Event of Default under
clauses (c) or (d) of Section 4.1, (a "Covenant Defeasance") if:
(i) the Issuer shall have irrevocably deposited in trust with the
Trustee as trust funds solely for the benefit of the Holders of the
Securities for payment of the principal of, premium, if any, and interest
on the Securities, money or U.S. Government Obligations or a combination
thereof in an amount sufficient (unless such funds consist solely of money,
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee) without consideration of any reinvestment and after payment of all
federal, state and local taxes or other charges and assessments in respect
thereof payable by the Trustee, to pay the principal of, premium, if any,
and interest on the outstanding Securities to maturity or any earlier
redemption irrevocably provided for under arrangements satisfactory to the
Trustee, as the case may be;
(ii) such deposit shall not have resulted in a breach or violation of
or constitute a default under this Indenture or any other agreement or
instrument to which the Issuer is a party or by which it or any material
assets or property of the Issuer or any of its subsidiaries is bound;
(iii) no Default with respect to the Securities shall have occurred
and be continuing on the date of such deposit and, insofar as Events of
Default relating to bankruptcy or insolvency events are concerned, at any
time during the period ending on the 91st day after the date of deposit;
(iv) the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the Holders of the Securities have a valid
security interest in the trust funds subject to no prior liens under the
UCC and (B) such Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and Covenant
Defeasance and will be subject to federal income tax on the same amount and
in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred;
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(v) the Issuer shall have delivered to the Trustee an Officers'
Certificate stating that (A) all conditions precedent in the Indenture and
the Securities relating to or Covenant Defeasance have been complied with;
and
SECTION 9.4 APPLICATION BY TRUSTEE OF FUNDS DEPOSITED FOR PAYMENT
OF SECURITIES. Subject to Section 9.6, and to Article XII all moneys deposited
with the Trustee pursuant to Sections 9.1, 9.2 and 9.3 shall be held in trust
and applied by it to the payment, either directly or through any Paying Agent
(including the Issuer acting as its own Paying Agent), to the holders of the
particular Securities for the payment or redemption of which such moneys shall
have been deposited with the Trustee, of all sums due and to become due thereon
for principal, premium, if any, and interest; but such money need not be
segregated from other funds except to the extent required by law.
SECTION 9.5 REPAYMENT OF MONEYS HELD BY PAYING AGENT. In
connection with the satisfaction and discharge of this Indenture, Legal
Defeasance or Covenant Defeasance all moneys then held by any Paying Agent
pursuant hereto shall, upon demand of the Issuer, be repaid to it or paid to the
Trustee and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
SECTION 9.6 RETURN OF MONEYS HELD BY TRUSTEE AND PAYING AGENT
UNCLAIMED FOR THREE YEARS. Any moneys deposited with or paid to the Trustee or
any Paying Agent for the payment of the principal, premium, if any, or interest
on any Security and not applied but remaining unclaimed for three years after
the date upon which such principal premium or interest shall have become due and
payable, shall, upon the written request of the Issuer and unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be repaid to the Issuer by the Trustee or such Paying Agent, and
the holder of such Security shall, unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property laws,
thereafter look only to the Issuer for any payment which such holder may be
entitled to collect, and all liability of the Trustee or any Paying Agent with
respect to such moneys shall thereupon cease.
ARTICLE X
REDEMPTION OR PURCHASE OF SECURITIES
SECTION 10.1 OPTIONAL REDEMPTION. (a) On or after ______ 2001, the
Issuer at its option may redeem the Securities pursuant to this Section 10.1 in
whole or in part, at the redemption prices (expressed as percentages of
principal amount)
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set forth below plus accrued and unpaid interest thereon, if any, to the
applicable redemption date, if redeemed during the twelve month period beginning
on _____ of the years indicated below:
YEAR PERCENTAGE
2001.............. ________ %
2002.............. ________ %
2003.............. ________ %
2004 and thereafter 100.000 %
(b) Notwithstanding any other provision hereof, if any Gaming
Authority requires that a Holder or beneficial owner of Securities must be
licensed, qualified or found suitable under any applicable gaming law in order
to maintain any gaming license or franchise of the Issuer or any Restricted
Subsidiary and such Holder or beneficial owner fails to apply for a license,
qualification or a finding of suitability within 30 days after being requested
to do so by the Gaming Authority (or such lesser period that may be required by
such Gaming Authority), or if such Holder or such beneficial owner is not so
licensed, qualified or found suitable, the Issuer shall have the right, at its
option (i) to require such Holder or beneficial owner to dispose of such
Holder's or beneficial owner's Securities within 30 days of receipt of such
notice of such finding by the applicable Gaming Authority or such earlier date
as may be ordered by such Gaming Authority or (ii) to call for the redemption of
the Securities of such Holder or beneficial owner at the lesser of the principal
amount thereof or the price at which such Holder or beneficial owner acquired
the Securities, together with, in either case, accrued interest to the earlier
of the date of redemption or such earlier date as may be required by such Gaming
Authority or the date of the finding of unsuitability by such Gaming Authority,
which may be less than 30 days following the notice of redemption, if so ordered
by such Gaming Authority. The Issuer shall notify the Trustee in writing of any
such redemption as soon as practicable. The Holder of Securities or beneficial
owner applying for a license, qualification or a finding of suitability shall
pay all costs of the licensure or investigation for such qualification or
finding of suitability. The Issuer shall not be required to pay or reimburse
any Holder of the Securities or beneficial owner who is required to apply for
such license, qualification or finding of suitability for the costs of the
licensure or investigation for such qualification or finding of suitability.
Such expense shall be the obligation of such Holder or beneficial owner.
(c) Any redemption pursuant to this Section 10.1 shall be made
pursuant to the provisions of Section 10.2 through 10.8 and 10.10.
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SECTION 10.2 SELECTION OF SECURITIES TO BE PURCHASED OR REDEEMED.
(a) If less than all the Securities are to be purchased pursuant to Section
3.23 or redeemed, the Trustee shall select, in compliance with the requirements
of the principal national securities exchange, if any, on which the Securities
are listed, or if the Securities are not so listed on a pro rata basis, by lot
or such other method as the Trustee deems fair and appropriate, Securities to be
redeemed in whole or in part. Securities may be redeemed in part in multiples
of $1,000 only. The Trustee shall promptly notify the Issuer in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed. For all
purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed.
(b) In the event the Issuer is required to purchase Securities
pursuant to 3.23 and the amount of Excess Proceeds to be applied to such
purchase would result in the purchase of a principal amount of Securities which
is not evenly divisible by $1,000, the Trustee shall promptly refund to the
Issuer the portion of such Excess Proceeds that is not necessary to purchase the
immediately lesser principal amount of Securities that is so divisible.
(c) Holders whose Securities are purchased only in part shall be
issued new Securities (accompanied by a notation of the Subsidiary Guarantee
duly endorsed by the Guarantors, if applicable) equal in principal amount to the
unpurchased portion of the Securities surrendered. Securities shall be deemed
to have been accepted for purchase at the time the Trustee, directly or through
an agent, mails or delivers payment therefor to the surrendering Holder.
SECTION 10.3 NOTICE OF REDEMPTION. (a) At least 30 days but not
more than 60 days before a redemption date, the Issuer shall mail or cause to be
mailed, by first class mail, a notice of redemption to each Holder whose
Securities are to be redeemed at its registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(i) the redemption date;
(ii) the redemption price;
(iii) the principal amount of the Securities to be redeemed;
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(iv) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion shall be
issued upon cancellation of the original Security;
(v) the name and address of the Paying Agents;
(vi) that Securities called for redemption must be surrendered to a
Paying Agent to collect the redemption price;
(vii) that, unless the Issuer defaults in making such redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the redemption date;
(viii) the paragraph of the Securities and/or Section of this Indenture
pursuant to which the Securities called for redemption are being redeemed;
and
(ix) 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.
(b) At the Issuer's request, the Trustee shall give the notice of
redemption in the Issuer's name and at its expense; PROVIDED, HOWEVER, that the
Issuer shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 10.4 EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed in accordance with Section 10.3, Securities called for
redemption become irrevocably due and payable on the redemption date at the
redemption price. A notice of redemption may not be conditional.
SECTION 10.5 DEPOSIT OF REDEMPTION OR PURCHASE PRICE. (a) On or
prior to any redemption date or Purchase Date with respect to an offer to
purchase the Securities required hereunder, the Issuer shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption or
purchase price of and accrued interest on all Securities to be redeemed or
purchased on that date. The Trustee or the Paying Agent shall promptly return
to the Issuer any money deposited with the Trustee of the Paying Agent by the
Issuer in excess of the amounts necessary to pay the redemption or purchase
price of, and accrued interest on, all Securities to be redeemed or purchased.
(b) If the Issuer complies with Section 10.5(a), on and after the
redemption date or Purchase Date, interest shall cease
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to accrue on the Securities or the portions of Securities called for redemption,
whether or not such Securities are presented for payment or on the Securities or
the portions of Securities tendered on any offer to purchase. If a Security is
redeemed or purchased on or after an interest Record Date but on or prior to the
related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Security was registered at the close of
business on such Record Date. If a redemption or purchase date is a Legal
Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such redemption date to such
succeeding Business Day. If any Security called for redemption or such tender
because of the failure of the Issuer to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Securities and
in Section 3.1.
SECTION 10.6 PAYMENT OF SECURITIES CALLED FOR REDEMPTION. (a) If a
notice of a redemption has been given as provided in Section 10.3, the
Securities or portions of Securities specified in such notice shall become due
and payable on the date and at the place stated in such notice at the applicable
redemption price, together with interest accrued to the date fixed for
redemption, and on and after said date (unless the Issuer shall default in the
payment of such Securities at the redemption price, together with interest
accrued to said date) interest on the Securities or portions of Securities so
called for redemption shall cease to accrue and, except as PROVIDED in Section
5.5 and 9.4, such Securities shall cease from and after the date fixed for
redemption to be entitled to any benefit or securities under this Indenture, and
the holders thereof shall have no right in respect of such Securities except the
right to receive the redemption price thereof and unpaid interest to the date
fixed for redemption. On presentation and surrender of such Securities at a
place of payment specified in said notice, said Securities or the specified
portions thereof shall be paid and redeemed by the Issuer at the applicable
redemption price, together with interest accrued thereon to the date fixed for
redemption; provided that any semi-annual payment of interest become due on the
date fixed for redemption shall be payable to the holders of such Securities
registered as such on the relevant record date subject to their terms and
provisions of Section 2.4.
(b) If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate borne
by the Security.
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SECTION 10.7 EXCLUSION OF CERTAIN SECURITIES FORM ELIGIBILITY FOR
SELECTION FOR REDEMPTION. Securities shall be excluded from eligibility for
selection for redemption if they are identified by registration and certificate
number in a written statement signed by an authorized officer of the Issuer and
delivered to the Trustee at least 40 days prior to the last date on which notice
of redemption may be given as being owned of record and beneficially by, and
not pledged or hypothecated by either (a) the Issuer or (b) an entity
specifically identified in such written statement directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Issuer.
SECTION 10.8 SECURITIES REDEEMED OR PURCHASED IN PART. Upon
surrender of a Security that is redeemed or purchased in part, the Issuer shall
issue and, upon the Issuer's written request, the Trustee shall authenticate for
the Holder at the expense of the Issuer a new Security (accompanied by a
notation of the Subsidiary Guarantee duly endorsed by the Guarantors, if
applicable) equal in principal amount to the unredeemed or unpurchased portion
of the Security surrendered.
SECTION 10.9 Offers to Purchase. (a) In the event that, pursuant
to Sections 3.23 or 3.24, the Issuer shall be required to commence an offer to
Holders to purchase some or all of the Securities (each, a "Purchase Offer"),
the Issuer shall follow the procedures specified herein.
(b) The Purchase Offer shall commence on the date (the "Commencement
Date") specified in Section 3.23 or Section 3.24, as the case may be, remain
open for a period specified by the Issuer, which shall be in accordance with
Sections 3.23 or 3.24, as the case may be, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Issuer shall purchase the principal amount of Securities required to be
purchased pursuant to Sections 3.23 or 3.24, (the "Offer Amount") or, if less
than the Offer Amount has been tendered, all Securities and Indebtedness
tendered in response to such Purchase Offer. Payment for any Securities and
Indebtedness so purchased shall be made in the same manner as interest payments
are made.
(c) If the Purchase Price is on or after an interest Record Date and
on or before the related Interest Payment Date, accrued and unpaid interest, if
any, shall be paid to the Person in whose name a Security or Indebtedness is
registered at the close of business on such Record Date, and no additional
interest shall be payable to Holders who tender Securities or Indebtedness
pursuant to such Purchase Offer.
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(d) Upon the commencement of a Purchase Offer, the Issuer shall send,
by first class mail, a notice to each of the Holders, with a copy to the
Trustee. Such notice, which shall govern the terms of the Purchase Offer, shall
state:
(i) that the Purchase Offer is being made pursuant to Section 3.23 or
Section 3.24, as the case may be, the Offer Period and the expiration date
of the Offer Period;
(ii) the Offer Amount and the Purchase Date (which shall not be less
than 30 days or more than 60 days after the date such notice is mailed;
(iii) that such Holder may elect to have his Securities purchased by
the Issuer either in whole or in part (subject, in the case of a Purchase
Offer pursuant to Section 3.23, to the prorationing described in Section
3.23(d)) in multiples of $1,000 principal amount at a purchase price equal
to (A) in the case of a Purchase Offer pursuant to Section 3.23, 100% or
(B) in the case of a Purchase Offer pursuant to Section 3.24, 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the
Purchase Date.
(iv) that any Security not tendered and accepted for payment shall
continue to accrue interest;
(v) that, unless the Issuer defaults in making such payment, any
Security accepted for payment pursuant to the Purchase Offer shall cease to
accrue interest after the Purchase Date;
(vi) that Holders electing to have a Security purchased pursuant to a
Purchase Offer shall be required to surrender the Security, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day preceding
Purchase Date;
(vii) that Holders shall be entitled to withdraw their election if the
Paying Agent receives, not later than the close of the Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Security the Holder delivered for
purchase and a statement that such Holder is withdrawing his election to
have such Security purchased; and
(viii) all instructions and materials necessary to enable each Holder to
tender Securities pursuant to such Purchase Offer, and information
concerning the business of the Issuer which the Issuer in good faith
believes will enable such Holders to make an informed decision which at a
minimum shall
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include (A) the most recently filed Annual Report on Form 10-K (including
audited consolidated financial statements) of the Issuer, the most recent
subsequently filed Quarterly Report on Form 10-Q and any current Report on
Form 8-K of the Issuer filed subsequent to such Quarterly Report, other
than Current Reports describing other asset dispositions otherwise
described in the offering materials, (B) corresponding successor reports or
reports otherwise required pursuant to Section 3.7 if the Issuer is no
longer filing reports pursuant to the Exchange Act, (C) a description of
material developments in the Issuer's business subsequent to the date of
the most recent of such reports (D) the material facts regarding such
Change of Control or Asset Sale, as the case may be, including but not
limited to, information with respect to PRO FORMA and historical financial
information after giving effect to such Asset Sale or Change of Control,
and in the case of a Change of Control, information regarding the Person or
Persons acquiring control.
(e) In the case of a Purchase Offer pursuant to Section 3.23, the
notice required by subsection (d) of this Section 10.9 shall also state that, if
the aggregate principal amount of Securities and Other Asset Sale Offer
Indebtedness surrendered in connection with such Purchase Offer exceeds the
Offer Amount, the Securities to be purchased by the Issuer pursuant to such
Purchase Offer shall be selected in accordance with the provisions of Section
10.2, and the Holders whose Securities were purchased only in part shall be
issued new Securities (accompanied by a notation of the Subsidiary Guarantee
duly endorsed by the Guarantors, if applicable) equal in aggregate principal
amount to the unpurchased portion of the Securities surrendered.
(f) In the case of a Purchase Offer pursuant to Section 3.24, the
notice required in subsection (d) of this Section 10.9, shall also state that
all Securities tendered in connection with such Purchase Offer will be accepted
for payment.
(g) On or before the Purchase Date, the Issuer shall, to the extent
lawful, accept for payment, pursuant to the terms of Section and 10.6, the Offer
Amount of Securities or Indebtedness or portions thereof tendered pursuant to
the Purchase Offer, or if less than the Offer Amount has been tendered, all
Securities and Indebtedness tendered, and shall deliver to the Trustee an
Officers' Certificate stating that such Securities or portions thereof were
accepted for payment by the Issuer in accordance with the terms of this Section
10.9. The Issuer, the depositary or the Paying Agent, as the case may be, shall
promptly (but in any case not later than five days after the Purchase Date) mail
or deliver to each tendering Holder an amount equal to the purchase price of the
Securities tendered by such Holder and accepted by the Issuer for purchase, and
the Issuer shall
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promptly issue a new Security, and the Trustee, upon written request from the
Issuer, shall authenticate and mail or deliver such new Security (accompanied by
a notation of the Subsidiary Guarantee duly endorsed by the Guarantors, if
applicable) to such Holder, in a principal amount equal to any unpaid
unpurchased portion of the Security surrendered. Any Security not so accepted
shall be promptly mailed or delivered by the Issuer to the Holder thereof. The
Issuer shall publicly announce the results of such Purchase Offer on the
Purchase Date.
Other than as specifically provided in this Section 10.9, any purchase
pursuant to this Section 10.9 shall be made pursuant to the provisions of
Sections 10.2, 10.5 and 10.8.
SECTION 10.10 NOTICE AND OFFICERS' CERTIFICATE TO TRUSTEE. (a) If
the Issuer elects to redeem Securities pursuant to Section 10.1, it shall
furnish to the Trustee, at least 30 days but not more than 60 days before a
redemption date, an Officers' Certificate setting forth (i) the Section of this
Indenture pursuant to which the redemption shall occur, (ii) the redemption
date, (iii) the principal amount of Securities to be redeemed and (iv) the
redemption price.
(b) If the Issuer is required to make an offer to purchase Securities
pursuant to Section 3.23 or 3.24, in addition to the notice requirements of
Section 10.9(g) it shall furnish to the Trustee, at least 30 days before the
scheduled Purchase Date, an Officers' Certificate setting forth (i) the Section
of this Indenture pursuant to which the offer to purchase shall occur, (ii) the
offer's terms, (iii) the purchase price, (iv) the principal amount of the
Securities that may be purchased, (v) a statement to the effect that (A) the
Issuer or one of its Subsidiaries has made an Asset Sale and there are Excess
Proceeds aggregating more than $25.0 million and the amount of such Excess
Proceeds or (B) a Change of Control has occurred and (x) in the case of a
Purchase Offer pursuant to Section 3.23, the allocation of the Net Proceeds as a
result of which such Purchase Offer is required to be made and (y) compliance of
such allocation with the provisions of subsections (a) and (b) of Section 3.23.
ARTICLE XI
SUBSIDIARY GUARANTEES
SECTION 11.1 SUBSIDIARY GUARANTEE. (a) Each Restricted Subsidiary
which has signed this Indenture or, pursuant to the provisions of Section 3.16,
is required to execute and deliver an Indenture supplemental hereto guaranteeing
the obligations of the Issuer under the Securities (each, a "Guarantor") upon
execution of this Indenture or an Indenture supplemental hereto pursuant to the
provisions of Section 7.1,
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hereby jointly and severally unconditionally guarantees (each such guarantee
being a "Subsidiary Guarantee") to each Holder authenticated and delivered by
the Trustee irrespective of the validity or enforceability of this Indenture,
the Securities or the Obligations of the Issuer under this Indenture or the
Securities, that: (i) the principal of, premium, if any and interest on the
Securities will be paid in full when due, whether at the maturity or interest
payment or mandatory redemption date, by acceleration, call for redemption or
otherwise, and interest on the overdue principal of and interest, if any, is
lawful on the Securities and all other obligations of the Issuer to the Holders
or the Trustee under this Indenture or the Securities will be promptly paid in
full or performed, all in accordance with the terms of this Indenture and the
Securities; and (ii) in case of any extension of time of payment or renewal of
any Securities or any of such other obligations, they will be paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at maturity, by acceleration or otherwise; PROVIDED, HOWEVER, the
Obligations of each Guarantor under its Subsidiary Guarantee will be limited to
the maximum amount which may be paid thereunder without resulting in any payment
thereunder being deemed to constitute a fraudulent conveyance. Failing payment
when due (including any applicable grace periods) of any amount so guaranteed
for whatever reason, each Guarantor will be obligated to pay the same pursuant
to the preceding sentence whether or not such failure to pay has become an Event
of Default which could cause acceleration pursuant to Section 4.1. Each
Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.
(b) Each Guarantor's Obligations with regard to this Subsidiary
Guarantee shall be (i) joint and several, unconditional, irrespective of the
validity or enforceability of the Securities or the obligations of the Issuer
under this Indenture, the absence of any action to enforce the same, the
recovery of any judgment against the Issuer or any other obligor with respect to
this Indenture, the Securities or the obligations of the Issuer under this
Indenture or the Securities, any action to enforce the same or any other
circumstances (other than complete performance) which might otherwise constitute
a legal or equitable discharge or defense of a Guarantor and (ii) subordinated
to the prior payment in full of all Obligations with respect to the Senior Debt
of such Guarantor (whether outstanding on the date of this Indenture or
thereafter incurred) in accordance with the provisions of Article XII.
(c) Each Guarantor, to the extent permitted by law, hereby waives
and relinquishes all claims, rights and remedies accorded by applicable law to
guarantors and to agree not to assert or take advantage of any such claims,
rights or remedies, including but not limited to: (i) any right to require the
Trustee, the Holders or the Issuer (each, a "Benefitted Party")
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to proceed against the Issuer or any other Person or to proceed against or
exhaust any security held by a Benefitted Party at any time or to pursue any
other remedy in any Benefitted Party's power before proceeding against such
Guarantor; (ii) any defense that may arise by reason of the incapacity, lack of
authority, death or disability of any other Person or the failure of a
Benefitted Party to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of any other Person; (iii)
demand, protest and notice of any kind including but not limited to notice of
the existence, creation or incurring of any new or additional Indebtedness or
Obligation or of any action or non-action on the part of such Guarantor, the
Issuer, any Benefitted Party, any creditor of such Guarantor, the Issuer or on
the part of any other Person whomsoever in connection with any Indebtedness or
obligations hereby guaranteed; (iv) any defense based upon an election of
remedies by a Benefitted Party, including but not limited to an election to
proceed against such Guarantor for reimbursement; (v) any defense based upon any
statute or rule or law which provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than that of the
principal; (vi) any defense arising because of a Benefitted Party's election, in
any proceeding instituted under the U.S.C. Section 101 et seq. of the
application of Section 1111(b)(2) of the 11. U.S.C. Section 101 et seq.; or
(vii) any defense based on any borrowing or grant of a security interest under
U.S.C. Section 364. Except as provided in paragraph (f) of this Section 11.1, a
Subsidiary Guarantee will not be discharged except by discharge of this
Indenture pursuant to Article IX hereof or by complete performance of the
obligations contained in its Subsidiary Guarantee and this Indenture.
(d) If any Holder or the Trustee is required by any court or
otherwise to return to either the Issuer or any Guarantor, or any Custodian
acting in relation to either the Issuer or such Guarantor, any amount paid by
the Issuer or such Guarantor to the Trustee or such Holder, the applicable
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect. No Guarantor shall be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
until payment in full of all obligations guaranteed pursuant to such Subsidiary
Guarantee.
(e) As between each Guarantor, on the one hand, and the Holders and
the Trustee, on the other, (i) the maturity of the Obligations guaranteed
pursuant to a Subsidiary Guarantee may be accelerated pursuant to Section 4.1,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration as to the Issuer or any other obligor on the Securities of the
obligations guaranteed hereby, and (ii) in the event of any declaration of
acceleration of those obligations as provided in Section 4.1, those Obligations
(whether or not due and payable)
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will forthwith become due and payable by such Guarantor for the purpose of the
Subsidiary Guarantee.
(f) The Trustee shall release any Subsidiary Guarantee, and such
Subsidiary Guarantee shall cease to be valid and to have any force and effect
if, (i) the Issuer and all other Restricted Subsidiaries cease to own any Equity
Interests in such Restricted Subsidiary in a transaction not prohibited by the
provisions of this Indenture or (ii) such Restricted Subsidiary is designated as
an Unrestricted Subsidiary in accordance with Section 3.21. In such event, each
of the Issuer, the Trustee and the remaining Guarantors shall, in accordance
with the provisions of Section 7.1 hereof, execute an Indenture Supplemental
hereto that reflects the release of such Subsidiary Guarantee.
ARTICLE XII
SUBORDINATION OF SECURITIES
SECTION 12.1 AGREEMENT TO SUBORDINATE. The Issuer, each Guarantor
and the Trustee agree, and each Holder by his acceptance thereof likewise
acknowledges and agrees, that all Securities and Subsidiary Guarantees shall be
issued subject to this Article XII; and each Person holding any Security and
Subsidiary Guarantee, whether upon original issue or upon transfer, assignment
or exchange thereof accepts and agrees that the payment of principal of,
premium, if any, and interest on the Securities will be subordinated to the
prior payment in full of all Obligations with respect to Senior Debt of the
Issuer and any Guarantor (whether outstanding on the date of this Indenture or
thereafter incurred).
SECTION 12.2 PAYMENT TO SECURITYHOLDERS. (a) Neither the Issuer
nor any Guarantor may make any payment upon or in respect of the Securities
(except in securities that are subordinated at least to the same extent as the
Securities to such Senior Debt and any securities issued in exchange for such
Senior Debt) if:
(i) a default in the payment of the principal of or interest on
Designated Senior Debt occurs and is continuing beyond any applicable grace
period; or
(ii) any other default occurs and is continuing with respect to
Designated Senior Debt that permits holders of the Designated Senior Debt
as to which such default relates to accelerate its maturity and the Trustee
receives a notice of such default under this Section 12.2 (a "Payment
Blockage Notice") from the Issuer or the holders of any Designated Senior
Debt.
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(b) The Issuer or any Guarantor shall resume payments on and
distributions in respect of the Securities, and all Obligations with respect
thereto, and may acquire them:
(i) in the case of a payment default, when such payment default
is cured or waived, and
(ii) in case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date
on which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
(c) No new period of payment blockage may be commenced within 360
days after the receipt by the Trustee of any prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee will be, or be made, the basis for a
subsequent Payment Blockage Notice (unless such nonpayment default shall have
been cured or waived for a period of not less than 181 days).
(d) If payment of the Securities is accelerated because of a Default,
the Issuer shall promptly notify each Representative of holders of Designated
Senior Debt.
(e) Upon (i) any acceleration of the principal amount due on the
Securities or (ii) any payment or distribution of assets of the Issuer of any
kind or character, whether in cash, property or securities, to creditors upon
any dissolution or winding up or total or partial liquidation or arrangement or
reorganization of the Issuer, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceedings, all amounts due or to become due
upon all Senior Debt shall first be paid in full, or payment thereof provided
for in accordance with its terms, before any payment is made on account of the
principal of or premium, if any, or interest on the indebtedness evidenced by
the Securities, and upon any such dissolution or winding up or liquidation,
arrangement or reorganization any payment or distribution of assets of the
Issuer of any kind or character, whether in cash, property or securities, to
which the Holders or the Trustee under this Indenture would be entitled, except
for the provisions hereof, shall be paid by the Issuer or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the Holders or by the Trustee under this
Indenture if received by them or it, directly to the holders of Senior Debt (pro
rata to such holders on the basis of the respective amounts of Senior Debt held
by such holders) or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any of
such Senior Debt may have been issued, as their respective interests may appear
to the
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extent necessary to pay all Senior Debt in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt, before
any payment or distribution is made to the holders of the indebtedness evidenced
by the Securities or to the Trustee under this Indenture.
(f) In the event that, notwithstanding the provisions of subsection
(a) or (e) of this Section 12.2, any payment or distribution of assets of the
Issuer of any kind or character, whether in cash, property or securities,
prohibited by the foregoing, shall be received by the Trustee under this
Indenture or the Holders before all Senior Debt is paid in full or provision is
made for such payment in accordance with its terms, such payment or distribution
shall be held in trust for the benefit of and shall be paid over or delivered to
the holders of such Senior Debt or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Senior Debt
remaining unpaid until all such Senior Debt shall have been paid in full in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Debt.
(g) For purposes of this Article XII, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Issuer as
reorganized or readjusted, or securities of the Issuer or any other corporation
provided for by a plan of arrangement, reorganization or readjustment, the
payment of which is subordinated (at least to the extent provided in this
Article XII with respect to the Securities) to the payment of all Senior Debt
which may at the time be outstanding; provided, that (i) the Senior Debt is
assumed by the new corporation, if any, resulting from any such arrangement,
reorganization or readjustment, and (ii) the rights of the holders of the Senior
Debt are not, without the consent of such holders, altered by such arrangement,
reorganization or readjustment. The consolidation of the Issuer with, or the
merger of the Issuer into, another corporation or the liquidation or dissolution
of the Issuer following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the terms
and conditions provided in Article VIII shall not be deemed a dissolution,
winding up, liquidation or reorganization for the purposes of this Section 12.2
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article VIII.
Nothing in this Section shall apply to claims of, or payments to, the Trustee
under or pursuant to Article VII, except as provided therein. This Section
shall be subject to the further provisions of Section 12.5.
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SECTION 12.3 SUBROGATION OF SECURITIES. (a) Subject to the payment
in full of all Senior Debt, Holders shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of cash, property or
securities of the Issuer or any Guarantor applicable to the Senior Debt until
the principal of and interest on the Securities shall be paid in full; and, for
the purposes of such subrogation, no payments or distributions to the holders of
such Senior Debt of any cash, property or securities to which the Holders or any
Guarantor or the Trustee on their behalf would be entitled except for the
provisions of this Article XII, and no payment over pursuant to the provisions
of this Article XII to the holders of such Senior Debt by Holders or the Trustee
on their behalf shall, as between the Issuer or any Guarantor, as the case may
be, its creditors other than holders of Senior Debt and the Holders, be deemed
to be a payment by the Issuer or such Guarantor to or on account of such Senior
Debt; and no payments or distributions of cash, property or securities to or for
the benefit of the Securityholders pursuant to the subrogation provision of this
Article XII, which would otherwise have been paid to the holders of Senior Debt
shall be deemed to be a payment by the Issuer or any Guarantor to or for the
account of the Securities. It is understood that the provisions of this Article
XII are and are intended solely for the purpose of defining the relative rights
of the Holders, on the one hand, and the holders of the Senior Debt, on the
other hand.
(b) Nothing contained in this Article XII or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Issuer or a Guarantor, on the one hand, and their creditors other than the
holders of Senior Debt, and the Holders, the obligation of the Issuer or such
Guarantors, which is absolute and unconditional, on the other, to pay to the
Holders the principal of and interest on the Securities as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Holders and creditors of the Issuer
or such Guarantors, as the case may be, other than the holders of the Senior
Debt, nor shall anything herein or therein prevent a Holder or the Trustee on
his behalf from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XII of the holders of Senior Debt in respect of cash, property or
securities of the Issuer or any Guarantor received upon the exercise of any such
remedy.
(c) Upon any payment or distribution of assets of the Issuer or any
Guarantor referred to in this Article XII, the Trustee, subject to Sections 5.1
and 5.2, and the Holders shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such bankruptcy, dissolution,
winding up, liquidation, arrangement or reorganization
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proceedings are pending, or a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders, for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Debt and other indebtedness of the Issuer or any
Guarantor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
XII.
SECTION 12.4 AUTHORIZATION BY SECURITYHOLDERS. Each Holder by his
acceptance thereof authorizes the Trustee in his behalf to take such action as
may be necessary or appropriate to effectuate the subordination provided in this
Article XII and appoints the Trustee his attorney in fact for any and all such
purposes.
SECTION 12.5 NOTICE TO TRUSTEE. (a) The Issuer and each Guarantor,
as the case may be, shall give prompt written notice to the Trustee and to any
Paying Agent of any fact known to the Issuer or such Guarantor which would
prohibit the making of any payment of moneys to or by the Trustee or any Paying
Agent in respect of the Securities pursuant to the provisions of this Article
XII. Regardless of anything to the contrary contained in this Article XII or
elsewhere in this Indenture, the Trustee shall not be charged with knowledge of
the existence of any Senior Debt or of any default or event of default with
respect to any Senior Debt or of any other facts which would prohibit the making
of any payment of moneys to or by the Trustee, unless and until the Trustee
shall have received notice in writing at its principal Corporate Trust Office to
that effect signed by an officer of the Issuer or Guarantor, as the case may be,
or by a holder or agent of a holder of Senior Debt who shall have been certified
by the Issuer or such Guarantor, or otherwise established to the reasonable
satisfaction of the Trustee to be such holder or agent, or by the trustee under
any indenture pursuant to which such Senior Debt shall be outstanding, and,
prior to the receipt of any such written notice, the Trustee shall, subject to
Sections 5.1 and 5.2, be entitled to assume that no such facts exist; provided
that if on a date at least three business days prior to the date upon which by
the terms hereof any such moneys shall become payable for any purpose
(including, without limitation, the payment of the principal of, or interest on
any Security) the Trustee shall not have received with respect to such moneys
the notice provided for in this Section, then, regardless of anything herein to
the contrary, the Trustee shall have full power and authority to receive such
moneys and to apply the same to the purpose for which they were received, and
shall not be affected by any notice to the contrary which may be received by it
on or after such prior date.
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<PAGE>
(b) Regardless of anything to the contrary herein, nothing shall
prevent (a) any payment by the Issuer or any Guarantor or the Trustee to the
Securityholders of amounts in connection with a redemption of Securities if (i)
notice of such redemption has been given pursuant to Article X prior to the
receipt by the Trustee of written notice as aforesaid, and (ii) such notice of
redemption is given not earlier than 60 days before the redemption date, or (b)
any payment by the Trustee to the Securityholders of amounts deposited with it
pursuant to Section 9.1.
(c) The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior Debt
(or a trustee on behalf of such holder) to establish that such notice has been
given by a holder of Senior Debt or a trustee on behalf of any such holder. In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article XII, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt held by such Person,
the extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article XII, 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.
SECTION 12.6 TRUSTEE'S RELATION TO SENIOR DEBT HOLDERS. (a) The
Trustee, any agent of the Issuer, a Guarantor or the Trustee shall be entitled
to all the rights set forth in this Article XII with respect to any Senior Debt
which may at any time be held by it in its individual or any other capacity to
the same extent as any other holder of Senior Debt and nothing in this Indenture
shall deprive the Trustee or any such agent, of any of its rights as such
holder. Nothing in this Article XII shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 5.6.
(b) With respect to the holders of Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XII, and no implied
covenants or obligations with respect to the holders of Senior Debt of the
Issuer or any Guarantor shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt and, subject to Sections 5.1 and 5.2, the Trustee
shall not be liable to any holder of Senior Debt if it shall pay over or
deliver to Holders, the Issuer, any Guarantor any other Person moneys or
assets to which any holder of Senior
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<PAGE>
Debt shall be entitled by virtue of this Article XII or otherwise.
SECTION 12.7 NO IMPAIRMENT OF SUBORDINATION. No right of any
present or future holder of any Senior Debt to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Issuer or any Guarantor or by any act or
failure to act, in good faith, by any such holder, or by any noncompliance by
the Issuer or such Guarantor with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS OF
ISSUER EXEMPT FROM INDIVIDUAL LIABILITY. No recourse under or upon any
obligation, covenant or agreement contained in this Indenture, or in any
Security, or because of any indebtedness evidenced thereby, shall be had against
any incorporator, as such or against any past, present or future stockholder,
officer or director, as such, of the Issuer or of any successor, either directly
or through the Issuer or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any legal
or equitable proceeding or otherwise, all such liability being expressly waived
and released by the acceptance of the Securities by the holders thereof and as
part of the consideration for the issue of the Securities.
SECTION 13.2 PROVISIONS OF INDENTURE FOR THE SOLE BENEFIT OF PARTIES
AND SECURITYHOLDERS. Nothing in this Indenture or in the Securities, expressed
or implied, shall give or be construed to give to any Person other than the
parties hereto and their successors and the holders of Senior Debt and the
holders of the Securities, any legal or equitable right, remedy or claim under
this Indenture or under any covenant or provision herein contained, all such
covenants and provisions being for the sole benefit of the parties hereto and
their successors and the holders of Senior Debt and of the holders of the
Securities.
SECTION 13.3 SUCCESSORS AND ASSIGNS OF ISSUER BOUND BY INDENTURE.
All the covenants, stipulations, promises and agreements in this Indenture
contained by or in behalf of the Issuer shall bind its successors and assigns,
whether so expressed or not.
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<PAGE>
SECTION 13.4 NOTICES AND DEMANDS ON ISSUER, TRUSTEE AND
SECURITYHOLDERS. (a) Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
the holders of Securities to or on the Issuer may be given or served by being
deposited postage prepaid, first class mail (except as otherwise specifically
provided herein) addressed (until another address of the Issuer is filed by the
Issuer with the Trustee) to Harveys Casinos Resorts, Highway 50 & Stateline
Avenue, Lake Tahoe, NV 89449. Any notice, direction, request or demand by the
Issuer or any Securityholder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or made at the Corporate
Trust Office.
(b) Where this Indenture provides for notice to Holders, such notice
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first class postage prepaid, to each holder entitled
thereto, at his last address as it appears in the Security register. In any
case where notice to holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular holder shall
affect the sufficiency of such notice with respect to other holders. Any notice
which is provided in the manner set forth in this Indenture shall be
conclusively presumed to have been duly given, whether or not the Holder
receives the notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
(c) In case, by reason of the suspension of or irregularities in
regular mail service, it shall be impracticable to mail notice to the Issuer and
Securityholders when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.
SECTION 13.5 OFFICERS' CERTIFICATES AND OPINIONS OF COUNSEL;
STATEMENTS TO BE CONTAINED THEREIN. (a) Upon any application or demand by the
Issuer to the Trustee to take any action under any of the provisions of this
Indenture, the Issuer shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent provided for in this Indenture relating to
the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent have been
complied with, except that in the case of any such application or demand as to
which the furnishing of such documents is specifically required by any
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<PAGE>
provision of this Indenture relating to such particular application or demand,
no additional certificate or opinion need be furnished.
(b) Each certificate or opinion PROVIDED for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (a) a statement that the person
making such certificate or opinion has read such covenant or condition, (b) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based, (c) a statement that, in the opinion of such person, he 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 (d) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
(c) Any certificate, statement or opinion of an officer of the Issuer
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of or representations by counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon which
his certificate, statement or opinion may be based as aforesaid are erroneous,
or in the exercise of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of counsel may be based, insofar as it
relates to factual matters information with respect to which is in the
possession of the Issuer, upon the certificate, statement or opinion of or
representations by an officer or officers of the Issuer, unless such counsel
knows that the certificate, statement or opinion or representations with respect
to the matters upon which his certificate, statement or opinion may be based as
aforesaid are erroneous, or in the exercise of reasonable care should know that
the same are erroneous.
(d) Any certificate, statement or opinion of an officer of the Issuer
or of counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Issuer, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
(e) Any certificate or opinion of any independent firm of public
accountants filed with the Trustee shall contain a statement that such firm is
independent.
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<PAGE>
SECTION 13.6 PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS. If
the date of maturity of interest on or principal of the Securities or the date
fixed for redemption of any Security shall not be a Business Day, then payment
of interest or principal need not be made on such date, but may be made on the
next succeeding Business Day with the same force and effect as if made on the
date of maturity or the date fixed for redemption, and no interest shall accrue
for the period after such date.
SECTION 13.7 CONFLICT OF ANY PROVISION OF INDENTURE WITH TRUST
INDENTURE ACT OF 1939. If and to the extent that any provision of this
Indenture limits, qualifies or conflicts with another provision included in this
Indenture by operation of Sections 310 to 317, inclusive, of the TIA (an
"incorporated provision"), such incorporated provision shall control.
SECTION 13.8 NEW YORK LAW TO GOVERN. This Indenture and each
Security shall be deemed to be a contract under the laws of the State of New
York, and for all purposes shall be construed in accordance with the laws of
said State, except as may otherwise be required by mandatory provisions of law.
SECTION 13.9 COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
SECTION 13.10 EFFECT OF HEADINGS. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of [AS OF DATE].
HARVEYS CASINO RESORTS
By
----------------------------
Name:
Title:
[CORPORATE SEAL]
Attest:
By
------------------------
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<PAGE>
IBJ SCHRODER BANK & TRUST COMPANY
By
----------------------------
Name:
Title:
[CORPORATE SEAL]
Attest:
By
------------------------
HARVEYS C.C. MANAGEMENT COMPANY, INC.
By
----------------------------
Name:
Title:
[CORPORATE SEAL]
Attest:
By
------------------------
HARVEYS WAGON WHEEL CASINO
LIMITED LIABILITY COMPANY
By
----------------------------
Name:
Title:
[CORPORATE SEAL]
Attest:
By
------------------------
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<PAGE>
HARVEYS IOWA MANAGEMENT
COMPANY, INC.
By
----------------------------
Name:
Title:
[CORPORATE SEAL]
Attest:
By
------------------------
HARVEYS L.V. MANAGEMENT
COMPANY, INC.
By
----------------------------
Name:
Title:
[CORPORATE SEAL]
Attest:
By
------------------------
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<PAGE>
Exhibit A
[FORM OF FACE OF SECURITY]
No. [$150,000,000]
HARVEYS CASINO RESORTS
% SENIOR SUBORDINATED NOTES DUE 2006
Harveys Casino Resorts, a Nevada corporation (the "Issuer"), for value
received hereby promises to pay to or registered assigns the
principal sum of Dollars at the Issuer's office or agency for said
purpose, within the Borough of Manhattan, The City and State of New York at such
office or, at the option of the Issuer by check mailed to the holders of the
Securities at their respective addresses set forth in the register of holders of
Securities, on ______ __, 2006, in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts, and to pay interest at such office or, at the option
of the Issuer, by check mailed to the holders of the Securities at their
respective addresses set forth in the register of holders of Securities,
semiannually on ______ __ and _______ __ of each year, on said principal sum in
like coin or currency at the rate per annum set forth above at said office or
agency from the ______ __ or _______ __, as the case may be, next preceding the
date of this Security to which interest on the Securities has been paid or duly
provided for, unless the date hereof is a date to which interest on the
Securities has been paid or duly provided for, in which case from the date of
this Security, or unless no interest has been paid or duly provided for on the
Securities, in which case from ______ __, 1996 until payment of said principal
sum has been made or duly provided for. Notwithstanding the foregoing, if the
date hereof is after _______ __ or _______ __, as the case may be, and before
the following ______ __ or _______ __, this Security shall bear interest from
such ______ __ or _______ __; provided, that if the Issuer shall default in the
payment of interest due on such ______ __ or _______ __, then this Security
shall bear interest from the next preceding ______ __ or _______ __ to which
interest on the Securities has been paid or duly provided for, or, if no
interest has been paid or duly provided for on the Securities since the Original
Issue Date of this Security, from ______ __, 1996. The interest so payable on
any ______ __ or _______ __ will, except as otherwise provided in the Indenture
referred to on the reverse hereof, be paid to the Person in whose name this
Security is registered at the close of business on the _______ __ or _______ __
preceding such ______ __ or _______ __, whether or not such day is a business
day; provided that interest may be paid, at the option of the Issuer, by mailing
a check therefor
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<PAGE>
payable to the registered holder entitled thereto at his last address as it
appears on the Security register.
This Security is guaranteed by each Guarantor as set forth in the
Indenture.
Reference is made to the further provisions set forth on the reverse
hereof, including without limitation provisions subordinating the payment of
principal of, premium, if any, and interest on the Securities to the payment in
full of all Senior Debt as defined in said Indenture.
Such further provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Security shall not be valid or obligatory until the certificate
of authentication hereon shall have been duly signed by the Trustee acting under
the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: HARVEYS CASINO RESORTS
[Seal]
By:
----------------------------
Title:
A-2
<PAGE>
In accordance with the provisions of Section 11.1 of the Indenture,
each of the undersigned hereby jointly and severally guarantees the objections
of the Issuer under this Security and this Indenture.
[Seal] HARVEYS C. C. MANAGEMENT COMPANY, INC.
By:
- ------------------------ -------------------------
Title:
[Seal] HARVEYS WAGON WHEEL CASINO LIMITED LIABILITY
COMPANY
By:
- ------------------------ -------------------------
Title:
[Seal] HARVEYS IOWA MANAGEMENT COMPANY, INC.
By:
- ------------------------ -------------------------
Title:
[Seal] HARVEYS L.V. MANAGEMENT COMPANY, INC.
By:
- ------------------------ -------------------------
Title:
A-3
<PAGE>
[Form of Reverse of Security]
__% SENIOR SUBORDINATED Security
DUE ________, 2006
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. Interest. Harveys Casino Resorts, a Nevada corporation (or any
successor thereto as provided in the Indenture, the "Issuer"), promises to pay
interest on the principal amount of this Security at the rate and in the manner
specified below.
The Issuer shall pay interest on the principal amount of this Security
at the rate per annum of __%. The Issuer will pay interest semi-annually on
______ __ and _______ __ of each year, or if any such day is not a Business Day
(as defined in the Indenture), on the next succeeding Business Day (each an
"Interest Payment Date").
Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of the
original issuance of the Securities. To the extent lawful, the Issuer shall pay
interest on overdue principal (including post-petition interest in any
proceeding under any Bankruptcy Law) at the rate of 1% per annum in excess of
the then applicable interest rate on the Securities; it shall pay interest,
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful.
2. Methods of Payment. The Issuer 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 Record Date next preceding the
Interest Payment Date, even if such Securities are canceled after such Record
Date and on or before such Interest Payment Date. The Holder hereof must
surrender this Security to a Paying Agent to collect principal payments. The
Issuer will pay principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts. The
Issuer, however, may pay principal, premium, if any, and interest by check
payable in such money. It may mail an interest check to a Holder's registered
address.
A-4
<PAGE>
3. Paying Agent and Registrar. Initially, the Trustee will act as
Paying Agent and registrar. The Issuer may change any Paying Agent, registrar
or co-registrar without notice to any Holder. The Issuer or any Guarantor may
act in any such capacity.
4. Indenture. The Issuer issued the Securities under an Indenture
dated as of ______ __, 1996 (as it may be amended from time to time, the
"Indenture") between the Issuer 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 TIA (15 U.S. Code (Section )(S) 77aaa-77bbb) as in effect on
the date of the Indenture. The Securities are subject to all such terms, and
Holders are referred to the Indenture and such act for a statement of such
terms. The terms of the Indenture shall govern any inconsistencies between the
Indenture and the Securities. The Securities are unsecured general obligations
of the Issuer limited to $150,000,000 in aggregate principal amount.
5. Optional Redemption. Except as set forth below, the Issuer shall
not have the option to redeem the Securities pursuant to Section 10.1 of the
Indenture prior to ______ __, 2001. Thereafter, the Issuer shall have the
option to redeem the Securities in whole or in part, at the redemption prices
(expressed as percentages of the principal amount) set forth below, plus accrued
and unpaid interest thereon to the applicable redemption date, if redeemed
during the 12 month period beginning on ______ __ of the years indicated below.
YEAR PERCENTAGE
2001 %
2002 %
2003 %
2004 and thereafter 100.000%
6. Redemption or Repurchase at Option of Holder. Under certain
circumstances, as provided in the Indenture, the Issuer may be required to make
an offer to purchase all or a portion of the Securities. Holders of Securities
that are subject to an offer to purchase will receive an offer to purchase from
the Issuer prior to any related purchase date, and may elect to have such
Securities purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing in Exhibit D of the Indenture.
7. Notice of Redemption. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder to be redeemed at its registered address. Securities may be redeemed in
part but only in whole multiples of $1,000, [unless all of the Securities held
A-5
<PAGE>
by a Holder are to be redeemed]. On and after the redemption date, interest
ceases to accrue on Securities or portions of Securities called for redemption.
8. Subordination. The Securities are subordinated to Senior Debt
(as defined in the Indenture) (whether outstanding on the date of the Indenture
or thereafter created, incurred, assumed or guaranteed) and all Obligations (as
defined in the Indenture) with respect thereto. To the extent provided in the
Indenture, Senior Debt must be paid before the Securities may be paid. The
Issuer agrees, and each Holder by accepting a Security agrees, to the
subordination and authorizes the Trustee to give it effect.
9. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The registrar need not exchange or register
the transfer of any Security or portion of a Security selected for redemption.
Also, it need not exchange or register the transfer of any Securities for a
period of 15 days before a selection of Securities to be redeemed or during the
period between a Record Date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. Prior to due presentment to the Trustee
for registration of the transfer of this Security, the Trustee, any Agent, the
Issuer and the Guarantors, if any, may deem and treat the Person in whose name
this Security is registered as its absolute owner for the purpose of receiving
payment of principal of and interest on this Security and for all other purposes
whatsoever, whether or not this Security is overdue, and neither the Trustee,
any Agent, the Issuer nor any Guarantor shall be affected by notice to the
contrary. The registered holder of a Security shall be treated as its owner for
all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Securities may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Securities (including consents obtained in connection with a tender offer or
exchange offer for Securities). Any Default and compliance with any provision
of the Indenture or the Securities (other than a continuing Default in the
payment of the principal of, premium, if any, or interest on, the Securities),
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Securities (including consents obtained in
A-6
<PAGE>
connection with a tender offer or exchange offer for Securities); however,
without the consent of each Holder affected thereby, an amendment or waiver of
any provision of the Securities or Indenture may not:
(a) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the stated maturity of any
installment of principal of any Security or alter or waive any of the
provisions with respect to the redemption of the Securities;
(c) reduce the rate of or change the time for payment of interest on
any Security;
(d) waive a Default in the payment of principal of or premium, if
any, or interest on the Securities;
(e) change the currency in which the Securities are payable; and
(f) make any change in the provisions of the Indenture relating to
waivers of Defaults or the rights of Holders of Securities to receive
payments of principal of or premium, if any, or interest on the Securities.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of this Indenture (and the obligations of the
Issuer to obtain any such consent otherwise required from such Holder) may be
subject to the requirements the such Holder shall have been the Holder of record
of any Securities with respect to which such consent is required to be sought as
of a date identified by the Trustee in a notice furnished to Holders in
accordance with the terms of the Indenture. Without the consent of any Holder,
the Indenture or the Securities may be amended to cure any ambiguity, defect or
inconsistency in the Indenture or the Securities, to provide for the assumption
of the Issuer's or any Guarantor's obligations to Holders in the case of a
merger, consolidation or disposition of assets in accordance with the provisions
of the Indenture, to make any change that would provide additional rights or
benefits to the Holders, or to comply with the requirements of the Commission in
order to maintain the qualification of the Indenture under the TIA, in each case
in a manner which does not materially and adversely affect the rights under the
Indenture or the Securities of any Holder.
12. Events of Default and Remedies. Events of Default include (as
more fully described, and subject to, the terms and conditions of the
Indenture):
A-7
<PAGE>
(a) default in payment when due of principal on the Securities;
(b) default for 30 days in the payment when due of interest on the
Securities;
(c) failure by the Issuer to comply with Article VIII of the
Indenture;
(d) failure by the Issuer for 30 days after notice to comply with any
other covenants or agreements in the Indenture or the Securities;
(e) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Issuer or any Guarantor, or the payment
of which is guaranteed by the Issuer or any Guarantor, which default (i) is
caused by a failure to pay when due principal or interest on such Indebtedness
within the grace period provided in the documentation relating to such
Indebtedness (a "Payment Default") or (ii) results in the acceleration of such
Indebtedness prior to its stated maturity and, in either case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $10.0 million or more,
(f) failure by the Issuer or any Guarantor or any Restricted
Subsidiary to pay any final judgments aggregating in excess of $5.0 million
which judgments are not stayed within 60 days after their entry;
(g) except as permitted by the Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid or ceases for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, denies or disaffirms its obligations under its
Subsidiary Guarantee;
(h) any Gaming License relating to a Material Gaming Facility is
revoked, terminated or suspended or otherwise ceases to be effective, resulting
in the cessation or suspension of operation for a period of more than 30 days of
any material portion or aspect of the Gaming Business of any Material Gaming
Facility; and
(i) certain events of bankruptcy or insolvency with respect to the
Issuer or any Restricted Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of
A-8
<PAGE>
the then outstanding Securities may declare all the Securities to be due and
payable immediately; provided that in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, with respect to the Issuer or
any Restricted Subsidiary, all outstanding Securities will become due and
payable without any action or notice. Holders of the Securities will only be
permitted to enforce the Indenture or the Securities in accordance with the
provisions of the Indenture. Subject to certain limitations, holders of a
majority in aggregate principal amount of the Securities then outstanding may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from holders of the Securities notice of any continuing Default (except
a Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest. The Issuer must furnish an annual
compliance certificate to the Trustee.
13. Trustee Dealings with Issuer. The Trustee under the Indenture,
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Issuer, any Guarantor or their respective
Affiliates, and may otherwise deal with the Issuer, any Guarantor of their
respective Affiliates, as if it were not Trustee.
14. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator or stockholder, as such, of the Issuer, any
Guarantor, as such, shall have any liability for any obligations of the Issuer
or any Guarantor under the Securities, the Subsidiary Guarantees or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Security and the
Subsidiary Guarantees, if any, waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Securities.
15. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer 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 Holders. 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.
17. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE SECURITIES AND THE SUBSIDIARY
GUARANTEES, IF ANY.
A-9
<PAGE>
The Issuer will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:
Harveys Casino Resorts
Highway 50 & Stateline Avenue
P.O. Box 128
Lake Tahoe, NV 89449
Attention: Chief Financial Officer
A-10
<PAGE>
Exhibit B
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the guaranteed Securities described in the within-
mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY
, as Trustee
________________________
Authorized Officer
B-1
<PAGE>
Exhibit C
Assignment Form
To assign this Security fill in the form below: (I) or (we) assign and transfer
this Security to:
[Insert assignee's soc. sec. or tax I.D. no.]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[Print or type assignee's name, address and zip code]
and irrevocably appoint
to transfer this Security on the books of the Issuer. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:
Your signature:
(sign exactly as your name appears on the face of this Security.)
Signature Guarantee.
C-1
<PAGE>
Exhibit D
Option of Holder to Elect Purchase
If you want to elect to have this Security purchased by the Issuer
pursuant to Section 3.23 of the Indenture, check the box below:
[_] Section 3.23 [_] Section 3.24
If you want to elect to have only part of the Security purchased by
the Issuer pursuant to Section 3,23 or Section 3.24 of the Indenture, state the
amount you elect to have purchased $
Date: Your Signature:
(Sign exactly as your name appears on the Security)
Tax Identification No:
Signature Guarantee.
D-1
<PAGE>
May 13, 1996
Harveys Casino Resorts
Post Office Box 128
Stateline, Nevada 89449
RE: $150,000,000 __% SENIOR SUBORDINATED NOTES DUE 2006 OF
HARVEYS CASINO RESORTS AND RELATED GUARANTEES
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-1,
File No. 333-3576 (the "Registration Statement"), filed by Harveys Casino
Resorts, a Nevada corporation (the "Company"), with the Securities and
Exchange Commission in connection with the registration under the Securities
Act of 1933, as amended, $150,000,000 principal amount of __% Senior
Subordinated Notes due 2006 (the "Notes") and the guarantees of the Notes by
each of the following subsidiaries of the Company: Harveys C.C. Management
Company, Inc., Harveys Iowa Management Company, Inc. and Harveys L.V.
Management Company, Inc. (collectively, the "Guarantees" and together with
the Notes, the "Securities").
We have examined the form of Indenture (the "Indenture") between the Company,
Harveys C.C. Management Company, Inc., Harveys Wagon Wheel Casino Limited
Liability Company, Harveys Iowa Management Company, Inc., Harveys L.V.
Management Company, Inc. as guarantors and IBJ Schroder Bank & Trust Company, as
Trustee, under which the Securities are to be issued. We are familiar with the
proceedings taken and proposed to be taken by the Company in connection with the
authorization and proposed issuance of the Securities.
Subject to (i) said proceedings being duly taken and completed by the Company
as now contemplated by us as your counsel prior to the issuance of the
Securities; (ii) the execution and delivery of the Indenture; (iii) the
qualification of the Trustee under the Indenture; and (iv) the execution,
delivery and authentication of and payment for the Securities, it is our opinion
that the Securities will, when issued for such consideration as is described in
the Registration Statement, constitute legally valid and binding obligations
of the Company, enforceable against the Company
<PAGE>
Harveys Casino Resorts
Post Office Box 128
Stateline, Nevada 89449
Page 2
in accordance with their terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and except that we advise you that the enforceability of the Notes
is subject to the effect of general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance or injunctive
relief regardless of whether considered in a proceedings in equity or at law.
Our opinion is based solely upon Nevada law and assumes that the Notes and
Guarantees are issued under Nevada law. We express no opinion as to the laws
of any other jurisdiction, including the State of New York.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name under the caption "Legal Matters" in the
Registration Statement and the Prospectus which forms a part thereof. This
opinion is furnished to you in connection with the registration of the
Securities, is solely for your benefit and may not be relied upon by, nor
copies delivered to, any other person or entity without our prior written
consent.
Respectfully submitted,
SCARPELLO & ALLING, LTD.
PA/ca
<PAGE>
------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
--------------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. employer
or organization if not a U.S. national bank) identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
HARVEYS CASINO RESORTS
(Exact name of obligor as specified in its charter)
Nevada 88-0066882
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
Highway 50 & Stateline Avenue
P.O. Box 128
Lake Tahoe, Nevada 89449
(Address of principal executive offices) (Zip code)
Senior Subordinated Notes due 2006
--------------------
(Title of indenture securities)
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
New York State Banking Department, Two
Rector Street, New York, New York
Federal Deposit Insurance Corporation,
Washington, D.C.
Federal Reserve Bank of New York Second
District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate
trust powers.
Yes
Item 2. Affiliations with the Obligors.
If the obligors are an affiliate of the trustee,
describe each such affiliation.
The obligors are not an affiliate of the trustee.
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with
respect to the securities under this indenture.
Explain the nature of any such default.
None
(b) If the trustee is a trustee under another
indenture under which any other securities, or
certificates of interest or participation in any
other securities, of the obligors are outstanding,
or is trustee for more than one outstanding series
of securities under the indenture, state whether
there has been a default under any such indenture
or series, identify the indenture or series
affected, and explain the nature of any such
default.
None
<PAGE>
List of exhibits.
List below all exhibits filed as part of this
statement of eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee
to Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate
trust powers, as amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
<PAGE>
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors or
officers, the trustee has relied upon information furnished to it by the
obligors.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as indicated
in Item 13, the obligors are not in default under any indenture under which
the applicant is trustee.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility & qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 7th day of May, 1996.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ NANCY R. BESSE
------------------------------
Nancy R. Besse
Vice President
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the issue by Harveys Casino Resorts
of its Senior Subordinated Notes due 2006, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ NANCY R. BESSE
------------------------------
Nancy R. Besse
Vice President
Dated: May 7, 1996
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF DECEMBER 31, 1995
DOLLAR AMOUNTS
IN THOUSANDS
--------------
ASSETS
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin . . . . . . .$ 22,187
Interest-bearing balances. . . . . . . . . . . . . . . . . . . . .$160,833
Securities: Held to Maturity. . . . . . . . . . . . . . . . . . . .$167,109
Available-for-sale. . . . . . . . . . . . . . . . . . .$ 27,914
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . . .$179,394
Securities purchased under agreements to resell. . . . . . . . . .$ -0-
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . . . . .$1,645,286
LESS: Allowance for loan and lease losses. . . . . . . .$ 52,532
LESS: Allocated transfer risk reserve. . . . . . . . . .$ -0-
Loans and leases, net of unearned income,
allowance, and reserve . . . . . . . . . . . . . . . . . . . . $1,592,754
Assets held in trading accounts. . . . . . . . . . . . . . . . . . .$ 220
Premises and fixed assets. . . . . . . . . . . . . . . . . . . . . .$ 7,349
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . .$ 397
Investments in unconsolidated subsidiaries and associated companies.$ -0-
Customers' liability to this bank on acceptances outstanding . . . .$ 684
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . .$ -0-
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 66,374
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . .$2,225,215
<PAGE>
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . .$623,883
Noninterest-bearing . . . . . . . . . . . . . . . .$213,535
Interest-bearing . . . . . . . . . . . . . . . . . .$410,348
In foreign offices, Edge and Agreement subsidiaries, and IBFs. . .$830,812
Noninterest-bearing . . . . . . . . . . . . . . . . $ 19,160
Interest-bearing . . . . . . . . . . . . . . . . . .$811,652
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased. . . . . . . . . . . . . . . . . . . . . .$ 38,000
Securities sold under agreements to repurchase . . . . . . . . . .$ -0-
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . .$ 118
Trading Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .$ 135
Other borrowed money:
a) With original maturity of one year or less. . . . . . . . . . .$453,347
b) With original maturity of more than one year. . . . . . . . . .$ -0-
Mortgage indebtedness and obligations under capitalized leases . . . .$ -0-
Bank's liability on acceptances executed and outstanding . . . . . . .$ 684
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . .$ -0-
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . .$ 74,052
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . .$2,021,031
Limited life preferred stock and related surplus . . . . . . . . . . .$ -0-
EQUITY CAPITAL
Perpetual preferred stock. . . . . . . . . . . . . . . . . . . . . . .$ -0-
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 29,649
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$217,008
Undivided profits and capital reserves . . . . . . . . . . . . . . . .$(42,438)
Plus: Net unrealized gains (losses) on marketable equity
securities . . . . . . . . . . . . . . . . . . . . . . . . .$ (35)
Cumulative foreign currency translation adjustments. . . . . . . . . .$ -0-
TOTAL EQUITY CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . .$204,184
TOTAL LIABILITIES AND EQUITY CAPITAL . . . . . . . . . . . . . . . .$2,225,215
