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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) FEBRUARY 2, 1999
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HARVEYS CASINO RESORTS
(Exact Name of registrant as specified in its charter)
NEVADA 0-25093 88-0066882
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization File Number) Identification No.)
HIGHWAY 50 AND STATELINE AVENUE, P.O. BOX 128 89449
LAKE TAHOE, NEVADA (Zip Code)
Address of principal executive offices)
Registrant's telephone number, including area code (775) 588-2411
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(Former Name or Former Address, if Changed Since Last Report
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ITEM 1. CHANGE OF CONTROL.
On February 2, 1999, Harveys Acquisition Corporation, a Nevada
corporation ("HAC"), which was formed at the direction of Colony Investors
III, L.P., a Delaware limited partnership ("Colony III") and an affiliate of
Colony Capital, Inc. ("Colony Capital") of Los Angeles, California, merged
(the "Merger") with and into Harveys Casino Resorts, a Nevada corporation
(the "Company").
The Merger occurred pursuant to an Agreement and Plan of Merger dated as
of February 1, 1998 (the "Merger Agreement") between the Company and HAC. In
the Merger, each share of common stock ("Common Stock") of the Company
outstanding at the time the Merger became effective (the "Effective Time")
(other than shares of Common Stock held in the Company's treasury) was
converted into the right to receive $28.7343 in cash as provided in the
Merger Agreement. The aggregate consideration received by holders of Common
Stock at the Effective Time was $289,252,000 in cash. The capital stock of
HAC prior to the Merger became the capital stock of the Company after the
Merger, and the Articles of Incorporation and the Bylaws of HAC became the
Articles of Incorporation and the Bylaws of the Company. The Company was the
surviving corporation in the Merger and is continuing its business operations
as conducted prior to the Merger. A copy of the Merger Agreement is filed
herewith as Exhibit 2.1 and incorporated herein by this reference.
In connection with the Merger, HAC issued (i) shares of its Class A
Common Stock (the "Class A Common") and shares of its 13 1/2% Series A Senior
Redeemable Convertible
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Preferred Stock (the "Series A Preferred") to Colony HCR Voteco LLC, a
Delaware limited liability company ("Voteco") whose sole members, owners and
managers are Thomas J. Barrack, Jr., the Chairman and Chief Executive Officer
of the indirect general partner of Colony III, and Kelvin L. Davis, the
President and Chief Operating Officer of the indirect general partner of
Colony III, and (ii) shares of its Class B Common Stock (the "Class B Common")
and shares of its 13 1/2% Series B Senior Redeemable Convertible Preferred
Stock (the "Series B Preferred") to Colony III. Holders of Class A Common are
entitled to one vote per share in all matters to be voted on by stockholders
of the Company. Holders of Class B Common have no voting rights except as
required by law. The Series A Preferred and Series B Preferred are
convertible into Class A Common and Class B Common, respectively, at a rate
of 28.7309164 shares of Class A Common or Class B Common for each share of
Series A Preferred or Series B Preferred, subject to adjustment in customary
circumstances to prevent dilution.
Prior to the Merger, the Company was a publicly held company.
Approximately 41% percent of the outstanding Common Stock was owned by the
Ledbetter Family (William B. Ledbetter, Kirk B. Ledbetter, Jessica L.
Ledbetter and a trust affiliated with the Ledbetter family). Following the
Merger, Colony III owns 97% of the Class B Common, which represents
approximately 96% of the common equity interest in the Company. Voteco owns
97% of the voting power in the Company through the ownership of 97% of the
Class A Common. As a result, Voteco is able to govern all matters of the
Company that are subject to the vote of the Company's stockholders, including
the appointment of directors and the amendment of the Company's Articles of
Incorporation and Bylaws. In addition, Colony III owns 99.99% of the
outstanding shares of the Company's preferred stock and Voteco owns .01% of
the outstanding shares of preferred stock.
In addition, in the Merger the directors of HAC, consisting of Mr.
Barrack and Mr. Davis, became directors of the Company, with Mr. Barrack
becoming the Chairman of the Board of Directors. Charles W. Scharer, Chairman
of the Board of Directors, President and Chief Executive Officer of the
Company prior to the Merger, was appointed a director of the Company at the
Effective Time.
At the Effective Time, the Company granted to certain executive officers
of the Company 660 shares of Class A Common and 66,000 shares of Class B
Common in the aggregate, and committed to granting 540 shares of Class A
Common and 54,000 shares of Class B Common to certain other executive
officers.
HAC financed the Merger and paid related fees and expenses with (1)
proceeds of $75 million from the issuance of its Class A Common and Class B
Common to Voteco and Colony III, respectively, (2) proceeds of $55,000,000
from the issuance of Series A Preferred and Series B Preferred to Voteco and
Colony III, (3) borrowings in the amount of $172 million under a loan
agreement dated as of January 28, 1999 (the "HAC Loan") between HAC as
borrower and Wells Fargo Bank, National Association ("Wells Fargo") as
lender, and (4) the Company's available cash.
Immediately following the Merger, the Company used an initial
disbursement of $172 million under an Amended and Restated Credit Agreement
dated December 9, 1998 among the Company and certain of its subsidiaries as
borrowers, Wells Fargo Bank as swingline lender, letter of credit issuer and
agent and the lenders party thereto to repay the $172 million outstanding
under the HAC Loan. Interest on the outstanding principal balance accrues at
a base rate equal to the higher of (i) the prime rate, and (ii) the Federal
Funds Rate (as defined in the Amended and Restated Credit Agreement) plus
one-half of one percent; plus an applicable margin which is initially 1.75%.
The Company may under certain circumstances elect to have interest accrue at
LIBOR plus an applicable margin. The credit facility, which has a total
availability of $185 million, provides for a revolving loan facility under
which the Company may repay and reborrow amounts outstanding, and a swingline
facility and a letter of credit facility under each of which the Company may
borrow up to $5 million.
At the time the Merger Agreement was signed, HAC and each individual
member of the Ledbetter Family entered into a Noncompetition and Trade Secret
Agreement. This agreement provides that for a period of three years
following the Merger, none of the individual members of the Ledbetter family
shall compete with the Company (except for certain permitted activities).
The agreement also (i) provides that William Ledbetter is entitled to
participate in the Company's Senior Supplemental Executive Retirement Plan
and to receive the perquisites provided for in his employment agreement dated
November 12, 1993 until he reaches age 80; (ii) designates Jessica Ledbetter
a
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Director Emerita of the Company and entitles her to complimentary services of
up to $8,000 per year at Company facilities; and (iii) provides that Kirk
Ledbetter will receive a payment of $195,000 and will have a life insurance
policy maintained by the Company until February 2, 2009, and entitles him and
his immediate family to complimentary services of up to $8,000 per year at
Company facilities.
ITEM 7. EXHIBITS
The following exhibit is incorporated by reference into this report:
Exhibit
Number Description
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2.1 Agreement and Plan of Merger dated as of February 1, 1998 by and
between Harveys Acquisition Corporation, a Nevada corporation, and
Harveys Casino Resorts, a Nevada corporation (incorporated herein by
reference to Harveys Acquisition Corporation's Registration Statement
on Form 10 (File no. 0-25093), filed November 20, 1998).
3.1 Amendments to Articles of Incorporation of Harveys Casino Resorts
as Surviving Constituent Entity (filed as Exhibit A to Articles of
Merger of Harveys Acquisition Corporation into Harveys Casino
Resorts). (Articles of Incorporation are incorporated herein by
reference to Harveys Acquisition Corporation's Registration
Statement on Form 10 (File no. 0-25093), filed November 20, 1998.)
3.2 Certificate of Designation of the 13-1/2% Series A Senior Redeemable
Convertible Cumulative Preferred Stock ($.01 par value per share)
and the 13-1/2% Series B Senior Redeemable Convertible Cumulative
Preferred Stock ($.01 par value per share) of Harveys Casino
Resorts.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARVEYS CASINO RESORTS
Date: February 12, 1999 /s/ John J. McLaughlin
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John J. McLaughlin
Senior Vice President,
Chief Financial Officer
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EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Exhibit
Number Description
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2.1 Agreement and Plan of Merger dated as of February 1, 1998 by and
between Harveys Acquisition Corporation, a Nevada corporation, and
Harveys Casino Resorts, a Nevada corporation (incorporated herein by
reference to Harveys Acquisition Corporation's Registration Statement
on Form 10 (File no. 0-25093), filed November 20, 1998).
3.1 Amendments to Articles of Incorporation of Harveys Casino Resorts
as Surviving Constituent Entity (filed as Exhibit A to Articles of
Merger of Harveys Acquisition Corporation into Harveys Casino
Resorts). (Articles of Incorporation are incorporated herein by
reference to Harveys Acquisition Corporation's Registration
Statement on Form 10 (File no. 0-25093), filed November 20, 1998.)
3.2 Certificate of Designation of the 13-1/2% Series A Senior Redeemable
Convertible Cumulative Preferred Stock ($.01 par value per share)
and the 13-1/2% Series B Senior Redeemable Convertible Cumulative
Preferred Stock ($.01 par value per share) of Harveys Casino
Resorts.
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ARTICLES OF MERGER
OF
HARVEYS ACQUISITION CORPORATION, a Nevada corporation
INTO
HARVEYS CASINO RESORTS, a Nevada corporation
The undersigned, as the President and the Assistant Secretary of Harveys
Casino Resorts, a Nevada corporation (the "Surviving Constituent Entity"),
and as the President and Secretary of Harveys Acquisition Corporation, a
Nevada corporation (the "Merging Constituent Entity"), as and for the purpose
of complying with the provisions of Nevada Revised Statutes ("NRS") 92A.005
ET SEQ., and in order to effectuate the merger of the Merging Constituent
Entity into the Surviving Constituent Entity, hereby certify as follows:
1. The name of the Merging Constituent Entity is "Harveys Acquisition
Corporation" and its jurisdiction of organization is the State of Nevada.
The name of the Surviving Constituent Entity is "Harveys Casino Resorts" and
its jurisdiction of organization is the State of Nevada.
2. A plan of merger (the "Plan") has been adopted by the Board of
Directors of each entity that is a constituent of or party to this merger.
The Plan was adopted by the written consent of the sole stockholder of the
Merging Constituent Entity entitled to vote thereon. The Plan was submitted
to the holders of all common stock of the Surviving Constituent Entity in
accordance with NRS 92A.120. Eighty-one-and-four-tenths percent (81.4%)
(comprised of 8,197,258 votes in favor of the Plan of an aggregate 10,066,507
votes entitled to vote) of the holders of common stock of the Surviving
Constituent Entity voted in favor of the Plan, which was sufficient for
approval by the owners of that class.
3. As of the effective date of this merger, the Articles of
Incorporation of the Surviving Constituent Entity shall be amended as set
forth in Exhibit A hereto, which is incorporated herein by this reference.
4. The complete executed Plan is on file at the registered office of
the Surviving Constituent Entity, currently: Scarpello & Alling, Ltd., 276
Kingsbury Grade, Suite 2000, Post Office Box 2290, Stateline, Nevada 89449.
5. A copy of the Plan will be furnished by the Surviving Constituent
Entity on request and without any cost to any stockholder of any entity which
is a party to this merger.
6. This merger is effective upon the filing of these Articles of
Merger with the Secretary of the State of Nevada.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, we have set forth our hands as of the 28th day of
January 1999.
Merging Constituent Entity
HARVEYS ACQUISITION CORPORATION, a
Nevada corporation
By: /s/ Kelvin L. Davis
Kelvin L. Davis
President and Secretary
Surviving Constituent Entity
HARVEYS CASINOS RESORTS, a Nevada
corporation
By: /s/ Charles W. Scharer
Charles W. Scharer
President
By: /s/ Diane Shevlin
Diane Shevlin
Assistant Secretary
State of Nevada )
)ss.
County of Clark )
This instrument was acknowledged before me on January 28, 1999 by Kelvin
L. Davis as President of Harveys Acquisition Corporation, a Nevada
corporation.
Notary Public
State of Nevada )
)ss.
County of Clark )
This instrument was acknowledged before me on January 28, 1999 by
Charles W. Scharer as President of Harveys Casino Resorts, a Nevada
corporation.
Notary Public
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EXHIBIT A
AMENDMENTS TO ARTICLES OF INCORPORATION
OF THE SURVIVING CONSTITUENT ENTITY
The amendments to the Restated Articles of Incorporation (the
"Articles") of Harveys Casino Resorts (the "Company") shall be as follows:
1. Article III of the Articles is hereby deleted and replaced in its
entirety with the following:
"ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under Chapter 78 of
the Nevada Revised Statutes (the "Nevada Private Corporation Law")."
2. Article IV of the Articles is hereby deleted and replaced in its
entirety with the following:
"ARTICLE IV
Section 4.1 AUTHORIZED SHARES. The total number of shares of
stock which the Corporation shall have authority to issue is (a)
20,000,000 shares of Common Stock, consisting of 10,000,000 shares of
Class A Common Stock, par value $.01 per share (the "Class A Common
Stock"), and 10,000,000 shares of Class B Common Stock, par value $.01
per share (the "Class B Common Stock" and, together with the Class A
Common Stock, the "Common Stock"), and (b) 1,000,000 shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock").
Section 4.2 PREFERRED STOCK. The Board of Directors is
expressly authorized to provide for the issuance of all or any shares
of the Preferred Stock in one or more classes or series, and to fix
for each such class or series such voting powers, full or limited, or
no voting powers, and such distinctive designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the
Board of Directors providing for the issuance of such class or series
and as may be permitted by the Nevada Private Corporation Law,
including, without limitation, the authority to provide that any such
class or series may be (i) subject to redemption at such time or times
and at such price or prices; (ii) entitled to receive dividends (which
may be cumulative or non-cumulative) at such rates, on such
conditions, and at such times, and payable in preference
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to, or in such relation to, the dividends payable on any other class or
classes or any other series; (iii) entitled to such rights upon the
dissolution of, or upon any distribution of the assets of, the
Corporation; or (iv) convertible into, or exchangeable for, shares of
any other class or classes of stock, or of any other series of the same
or any other class or classes of stock, of the Corporation at such price
or prices or at such rates of exchange and with such adjustments, all as
may be stated in such resolution or resolutions.
Section 4.3 CLASS A COMMON STOCK AND CLASS B COMMON STOCK.
(a) RANKING. Except as provided in this Section 4.3, the
Class A Common Stock and the Class B Common Stock shall have the same
rights and privileges and shall rank equally, share ratably and be
identical in all respects as to all matters, including rights in
liquidation.
(b) DIVIDENDS. Subject to the rights of holders of
Preferred Stock, when, as and if dividends are declared on the Common
Stock, whether payable in cash, in property or in securities of the
Corporation, the holders of Class A Common Stock and Class B Common
Stock shall be entitled to share equally, share for share, in such
dividends; PROVIDED that if dividends or distributions are declared
that are payable in shares of, or in subscription or other rights to
acquire shares of, Class A Common Stock or Class B Common Stock,
dividends or distributions payable in shares of, or in subscription or
other rights to acquire shares of, any particular class of Common
Stock shall be payable only to holders of such class of Common Stock.
(c) CONVERSION. Each of Colony Investors III, L.P., a
Delaware limited partnership, and its successor entities and
affiliates (as such term is defined in Rule 501(b) under the
Securities Act of 1933, as amended) (collectively, the "Designated
Class B Holders") shall have the right at any time, at their option,
to convert any of their shares of Class B Common Stock into an equal
number of shares of Class A Common Stock, without cost. So long as
the Designated Class B Holders in the aggregate hold at least one
share of Class B Common Stock, no holder of Class B Common Stock who
is not a Designated Class B Holder may convert such stock into Class A
Common Stock without the prior written consent of Designated Class B
Holders holding a majority of the outstanding Class B Common Stock
then held by Designated Class B Holders (which consent may be granted
in each such holder's sole and absolute discretion). At any time that
no Designated Class B Holder holds any Class B Common Stock, each
holder of Class B Common Stock who is not a Designated Class B Holder
shall have the right, at its option, to convert any of its shares of
Class B Common Stock into an equal number of shares of Class A Common
Stock, without cost. Notwithstanding the foregoing, the rights of each
holder of Class B Common Stock
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to convert such stock into Class A Common Stock shall be subject at all
times to compliance with all gaming and other statutes, laws, rules and
regulations applicable to the Corporation and such holder at that time.
(d) SUBDIVISIONS AND COMBINATIONS OF SHARES. If the
Corporation in any manner subdivides or combines the outstanding
shares of one class of Common Stock, the outstanding shares of the
other class of Common Stock will be likewise subdivided or combined.
(e) LIQUIDATION OR DISSOLUTION. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, holders of Class A Common Stock and holders of Class B
Common Stock shall receive a pro rata distribution of any remaining
assets after payment or provision for liabilities and the liquidation
preference on Preferred Stock, if any.
(f) RESERVATION OF CLASS A COMMON STOCK FOR CONVERSION.
The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Class A Common Stock or its
treasury shares, solely for the purpose of issuance upon the
conversion of the Class B Common Stock, such number of shares of Class
A Common Stock as may be issued upon conversion of all outstanding
Class B Common Stock.
(g) VOTING RIGHTS. The holders of Class A Common Stock
shall be entitled to one vote per share on all matters to be voted on
by the stockholders of the Corporation, and except as otherwise
expressly required by law, the holders of the Class B Common Stock
shall have no right to vote on any matter to be voted on by the
stockholders of the Corporation (including, without limitation, any
election or removal of the directors of the Corporation) and the Class
B Common Stock shall not be included in determining the number of
shares voting or entitled to vote on such matters.
(h) CONSIDERATION FOR SHARES. The Common Stock and
Preferred Stock authorized by this Article shall be issued for such
consideration as shall be fixed, from time to time, by the Board of
Directors.
(i) ASSESSMENT OF STOCK. The capital stock of the
Corporation, after the amount of the subscription price has been fully
paid in, shall not be assessable for any purpose, and no stock issued
as fully paid shall ever be assessable or assessed. No stockholder of
the Corporation is individually liable for the debts or liabilities of
the Corporation.
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(j) CUMULATIVE VOTING FOR DIRECTORS. No stockholder of the
Corporation shall be entitled to cumulative voting of his shares for
the election of directors.
(k) PREEMPTIVE RIGHTS. No stockholder of the Corporation
shall have any preemptive rights."
3. Article V of the Articles is hereby deleted and replaced in its
entirety with the following:
"ARTICLE V
Section 5.1 ISSUANCE OF SECURITIES IN ACCORDANCE WITH GAMING
LAWS. The Corporation shall not issue any stock or securities except
in accordance with the provisions of the Nevada Gaming Control Act
(the "NGCA") and the regulations promulgated thereunder. The issuance
of any stock or securities in violation thereof shall be ineffective
and such stock or securities shall be deemed not to be issued and
outstanding until (a) the Corporation shall cease to be subject to the
jurisdiction of the Nevada Gaming Commission (the "Commission"), or
(b) the Commission shall, by affirmative action, validate said
issuance or waive any defect in issuance.
Section 5.2 TRANSFER OF SECURITIES IN ACCORDANCE WITH THE NGCA.
No stock or securities issued by the Corporation and no interest,
claim or charge therein or thereto shall be transferred in any manner
whatsoever, except in accordance with the provisions of the NGCA and
the regulations promulgated thereunder. Any transfer in violation
thereof shall be ineffective until (a) the Corporation shall cease to
be subject to the jurisdiction of the Commission, or (b) the
Commission shall, by affirmative action, validate said transfer or
waive any defect in said transfer.
Section 5.3 UNSUITABILITY TO HOLD SECURITIES. If the Commission
at any time determines that a holder of stock or other securities of
this Corporation is unsuitable to hold such securities, then until
such securities are held by persons found by the Commission to be
suitable to hold them, (a) the Corporation shall not be required or
permitted to pay any dividend or interest with regard to the
securities, (b) the holder of such securities shall not be entitled to
vote on any matter as the holder of the securities, or to exercise,
directly or indirectly or through any proxy, trustee or nominee, any
voting or other right conferred by such securities, and such
securities shall not for any purposes be included in the securities of
the Corporation entitled to vote, and (c) neither the Corporation nor
any affiliate of the Corporation shall pay any remuneration in any
form to the holder of the securities."
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4. Article VI of the Articles is hereby deleted and replaced in its
entirety with the following:
"ARTICLE VI
Each director and each officer shall meet the qualifications for
a license or finding of suitability as set forth in Section 463.170 of
the Nevada Revised Statutes and shall, in all other respects, comply
with all requirements of the NGCA for the filing and processing of
licensing applications. Each director and officer shall also comply
with all applicable state, local and municipal gaming and liquor
licensing laws in Nevada and any other jurisdiction in which the
Corporation does business."
5. Article VII of the Articles is hereby deleted and replaced in its
entirety with the following:
"ARTICLE VII
The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the By-Laws of
the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) No director or officer shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach
of fiduciary duty as a director or officer, except for liability (i)
for acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or (ii) for the payment of distributions in
violation of Section 78.300 of the Nevada Private Corporation Law.
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(5) In addition to any other rights of indemnification permitted
by the law of the State of Nevada as may be provided for by the
Corporation in its By-Laws or by agreement, the expenses of officers
and directors incurred in defending a civil or criminal action, suit
or proceeding, involving alleged acts or omissions of such officer or
director in his or her capacity as an officer or director of the
Corporation, must be paid by the Corporation or through insurance
purchased and maintained by the Corporation or through other financial
arrangements made by the Corporation, as they are incurred and in
advance of the final disposition of the action, suit or proceeding,
upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court
of competent jurisdiction that he or she is not entitled to be
indemnified by the Corporation.
(6) Any repeal or modification of this Article VII by the
stockholders of the Corporation shall not adversely affect any right
or protection of a director of the Corporation existing at the time of
such repeal or modification with respect to acts or omissions
occurring prior to such repeal or modification.
(7) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the Nevada Private Corporation Law, these
Articles of Incorporation, and any By-Laws adopted by the
stockholders; PROVIDED, HOWEVER, that no By-Laws hereafter adopted by
the stockholders shall invalidate any prior act of the directors which
would have been valid if such By-Laws had not been adopted."
6. Article VIII of the Articles is hereby deleted and replaced in its
entirety with the following:
"ARTICLE VIII
Meetings of stockholders may be held within or without the State
of Nevada, as the By-Laws may provide. The books of the Corporation
may be kept (subject to any provision contained in the Nevada Private
Corporation Law) outside the State of Nevada at such place or places
as may be designated from time to time by the Board of Directors or in
the By-Laws of the Corporation."
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7. Article IX of the Articles is hereby deleted and replaced in its
entirety with the following:
"ARTICLE IX
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights
conferred upon stockholders herein are granted subject to this
reservation."
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CERTIFICATE OF DESIGNATION
OF THE
13 1/2% SERIES A SENIOR REDEEMABLE CONVERTIBLE CUMULATIVE PREFERRED STOCK
($.01 PAR VALUE PER SHARE)
AND THE
13 1/2% SERIES B SENIOR REDEEMABLE CONVERTIBLE CUMULATIVE PREFERRED STOCK
($.01 PAR VALUE PER SHARE)
OF
HARVEYS CASINO RESORTS
___________________________
PURSUANT TO SECTION 78.1955 OF THE
NEVADA REVISED STATUTES
___________________________
The undersigned, being the president and the assistant secretary of
Harveys Casino Resorts, a Nevada corporation (the "COMPANY"), each hereby
certifies that the Board of Directors of the Company adopted the following
resolution by unanimous written consent, with the same force and effect as if
it were approved and adopted at a duly constituted meeting of the Board of
Directors, pursuant to the authority of Section 78.315(2) of the Nevada
Revised Statutes and Article VIII of the Articles of Incorporation of the
Company, as of the First day of February, 1999:
RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Directors of the Company by the Articles of Incorporation of
the Company, as amended (the "ARTICLES OF INCORPORATION"), the Board of
Directors hereby authorizes the creation of two series of preferred stock,
each $0.01 par value per share, of the Company, consisting of 100,000 shares
of 13 1/2% Series A Senior Redeemable Convertible Cumulative Preferred Stock
and 99,990 shares of 13 1/2% Series B Senior Redeemable Convertible Cumulative
Preferred Stock upon the terms and conditions set forth in this Certificate
of Designation (this "CERTIFICATE"), and hereby fixes the designation and
number of shares thereof and fixes the powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof (in addition to those set forth in the
Articles of Incorporation that may be applicable to the Preferred Stock) as
follows:
Section 1. DESIGNATION AND AMOUNT; LIQUIDATION PRICE. There
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shall be a series of Preferred Stock of the Company designated as "13 1/2%
Series A Senior Redeemable Convertible Cumulative Preferred Stock" (the
"SERIES A PREFERRED STOCK") and the number of shares constituting such series
shall be 100,000. There shall also be a series of Preferred Stock of the
Company designated as "13 1/2% Series B Senior Redeemable Convertible
Cumulative Preferred Stock" (the "SERIES B PREFERRED STOCK" and, together
with the Series A Preferred Stock, the "PREFERRED STOCK") and the number of
shares constituting such series shall be 99,990. Except as otherwise
provided herein, the Series A Preferred Stock and the Series B Preferred
Stock shall have the same rights and privileges and shall rank equally, share
ratably and be identical in all respects as to all matters, including rights
in liquidation. The Preferred Stock is issuable solely in whole shares that
shall entitle the holder thereof to participate in the distributions and to
have the benefit of all other rights of holders of Preferred Stock as set
forth herein and in the Articles of Incorporation. The liquidation
preference (the "LIQUIDATION PREFERENCE") of each share of Preferred Stock
shall be $550.
SECTION 2. RANK. The Series A Preferred Stock and the Series B
Preferred Stock shall, with respect to dividend rights and rights on
liquidation, winding up or dissolution of the Company ("LIQUIDATION"), rank
senior in right of payment to all classes or series of capital stock of the
Company as to distributions and upon Liquidation of the Company. The Company
may at any time authorize, create (by way of reclassification or otherwise)
or issue any class or series of capital stock of the Company, including
preferred shares, ranking on a parity with the Preferred Stock as to
distributions and upon Liquidation of the Company ("PARITY SECURITIES").
SECTION 3. DIVIDENDS. (a) The holders of the Preferred Stock
shall be entitled to receive, when, as and if dividends are declared by the
Board of Directors, out of funds of the Company legally available therefor,
fully cumulative preferential dividends from the date of issuance of the
Preferred Stock, accruing at the rate per share of 13 1/2% per annum from the
Issue Date or from the most recent Dividend Payment Date (as defined below)
occurring thereafter, payable quarterly in arrears on February 1, May 1,
August 1 and November 1 of each year (each, a "DIVIDEND PAYMENT DATE")
commencing on May 1, 1999, to the holders as of the preceding January 15,
April 15, July 15 and October 15 (each, a "RECORD DATE"). Holders at the
close of business on a Record Date of shares of Preferred Stock that are
called for redemption on a redemption date during the period (the
"EX-DIVIDEND PERIOD") between such Record Date and the corresponding Dividend
Payment Date shall not, in their capacity as such holders, be entitled to
receive the dividend payment on such Dividend Payment Date pursuant to this
Section 3.
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(1) Dividends on the Preferred Stock shall cumulate whether
or not the Company has earnings or profits, whether or not there are funds
legally available for the payment of such dividends and whether or not
dividends are declared. To the extent not declared and paid in cash,
dividends in respect of any Dividend Payment Date shall cumulate and be
compounded quarterly at the rate of 13 1/2% per annum until paid.
(2) The aggregate dividend payable to a holder of Preferred
Stock shall be based on the aggregate number of shares of Preferred Stock
held by such holder at the close of business on the applicable Record Date
and rounded to the nearest whole cent (with one-half cent rounded upward).
Dividends payable on the Preferred Stock shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
(3) Unless full cumulative dividends on all outstanding
Preferred Stock due for all past quarterly periods ending on a Record Date
(each, a "DIVIDEND PERIOD") shall have been declared and paid in cash, or
declared and a sufficient sum for the payment thereof irrevocably set apart
in trust, then, except as set forth in the following sentence: (i) no
dividend (other than a dividend payable solely in stock of any class of stock
ranking junior to the Preferred Stock as to the payment of dividends and as
to rights in Liquidation of the Company ("JUNIOR SECURITIES")), shall be
declared or paid upon, or any sum set apart for the payment of dividends
upon, any shares of Parity Securities or Junior Securities; (ii) no other
distribution shall be declared or made upon, or any sum set apart for the
payment of any distribution upon, any shares of Parity Securities or Junior
Securities; (iii) no shares of Parity Securities or Junior Securities shall
be purchased, redeemed or otherwise acquired or retired for value (excluding
an exchange for shares of other Parity Securities or Junior Securities,
respectively) by the Company or any of its Restricted Subsidiaries; and (iv)
no monies shall be paid into or set apart or made available for a sinking or
other like fund for the purchase, redemption or other acquisition or
retirement for value of any shares of Parity Securities or Junior Securities
by the Company or any of its Restricted Subsidiaries. When dividends are not
paid in full in cash (or a sum sufficient for such full payment in cash is
not so set apart) upon the Preferred Stock and any other Parity Securities
for all past Dividend Payment Dates, all dividends declared upon Preferred
Stock and any other Parity Securities shall be declared pro rata so that the
amount of dividends declared per share of Preferred Stock and each Parity
Security shall in all cases bear to each other the same ratio that
accumulated dividends per share of Preferred Stock and each such Parity
Security (which shall not include any accumulation in respect of unpaid
dividends for prior periods if such Parity Securities do not have a
cumulative
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dividend) bear to each other. Holders of the Preferred Stock are not
entitled to any dividends, whether payable in cash, property or stock, in
excess of the full cumulative dividends as herein described.
SECTION 4. LIQUIDATION PREFERENCE. (a) Upon any voluntary or
involuntary Liquidation of the Company, each holder of the Preferred Stock
shall be entitled to payment out of the assets of the Company available for
distribution of an amount equal to the aggregate Liquidation Preference of
the Preferred Stock held by such holder, plus accrued and unpaid dividends
thereon, if any, to the date fixed for Liquidation, before any distribution
is made on any Junior Securities, including, without limitation, common stock
of the Company. After payment in full of the Liquidation Preference and all
accrued dividends, if any, to which holders of Preferred Stock are entitled,
such holders shall not be entitled to any further participation in any
distribution of assets of the Company. However, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Company nor the consolidation or merger of the Company with or into one
or more corporations shall be deemed to be a voluntary or involuntary
Liquidation of the Company unless such sale, conveyance, exchange or transfer
shall be in connection with a Liquidation of the Company.
(1) If, upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the amounts payable with respect to
the Preferred Stock and all other Parity Securities are not paid in full, the
holders of the Preferred Stock and the Parity Securities shall share equally
and ratably in any distribution of remaining assets of the Company legally
available therefor in proportion to the full liquidation preference and
accumulated and unpaid dividends to which each is entitled.
SECTION 5. REDEMPTION; DISPOSITIONS.
(1) MANDATORY REDEMPTION. On February 1, 2011 (the
"MANDATORY REDEMPTION DATE"), the Company shall redeem (subject to the legal
availability of funds therefor) all outstanding Preferred Stock (including
fractional shares), in cash, at a price per share equal to the Liquidation
Preference (including in the case of fractional shares, if any, the allocable
portion of the Liquidation Preference attributable to such fractional
shares), plus accrued and unpaid dividends thereon, if any, to and including
the date of redemption.
(2) Optional Redemption. The Company may, at its
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option, at any time, redeem the Preferred Stock, in whole or in part, at a
price per share equal to the Liquidation Preference (including in the case of
fractional shares, if any, the allocable portion of the Liquidation
Preference attributable to such fractional shares), plus accrued and unpaid
dividends thereon, if any, to and including the date of redemption, upon not
less than 30 nor more than 60 days' prior written notice.
(3) Mandatory Disposition Pursuant to Gaming Laws. Each
holder of Preferred Stock, by accepting any of the Preferred Stock, shall be
deemed to have agreed that if any Gaming Authority requires that a person who
is a holder or the beneficial owner of the Preferred Stock must be licensed,
approved, qualified or found suitable or make filings or submissions under
applicable gaming laws, such holder or beneficial owner, as the case may be,
shall apply for a license, approval, qualification or a finding of
suitability, or make such filings or submissions, within the required time
period. If such person fails to make such filings or submissions or to apply
to become licensed, approved, qualified or found suitable, or is not
licensed, approved or qualified or is not found suitable, the Company shall
have the right, at its election, (i) to require such person to dispose of its
Preferred Stock or beneficial interest therein within 30 days of receipt of
notice of such election or such earlier date as may be requested or
prescribed by such Gaming Authority or (ii) to redeem such Preferred Stock at
a redemption price equal to the lesser of (1) such person's cost or (2) 100%
of the Liquidation Preference thereof plus, in either case, accrued and
unpaid dividends, if any, to the earliest of the redemption date, the date by
which such person was required and failed to apply for a license, approval,
qualification, approval or finding of suitability, or to make such filings or
submissions, and the date on which such person is found not suitable or is
denied, which may be less than 30 days following the notice of redemption if
so requested or prescribed by the applicable Gaming Authority. The Company
shall notify the transfer agent of the Preferred Stock in writing of any such
redemption as soon as practicable. The Company shall not be responsible for
any costs or expenses any such holder may incur in connection with its
filings, submissions or application for a license, approval or qualification
or finding of suitability. The transfer agent shall report the names of the
record holders of the Preferred Stock to any Gaming Authority when required
by law.
(4) PROCEDURES FOR REDEMPTIONS. On and after a redemption
date, unless the Company defaults in the payment of the applicable redemption
price, including, to the extent required, all accrued and unpaid dividends
thereon, dividends shall cease to accrue on shares of Preferred Stock called
for redemption and all rights of holders of such shares shall terminate
except for the right to receive
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the redemption price, together with all accrued and unpaid dividends thereon,
if any, without interest. The Company shall send a written notice of
redemption by first class mail to each holder of record of shares of
Preferred Stock, not fewer than 30 days nor more than 60 days prior to the
date fixed for such redemption (except as provided in the preceding
paragraph). Shares of Preferred Stock issued and reacquired shall, upon
compliance with the applicable requirements of Nevada law, have the status of
authorized but unissued shares of preferred stock of the Company undesignated
as to series and, together with any and all other authorized but unissued
shares of preferred stock of the Company, may be designated or redesignated
and issued or reissued, as the case may be, as part of any series of
preferred stock of the Company, except that any issuance or reissuance of
shares of Preferred Stock must be in compliance with the Certificate of
Designation.
SECTION 6. CONVERSION.
(1) Each share of Series A Preferred Stock shall be
convertible at the option of the holder thereof at any time on or prior to
February 1, 2002 into the amount of validly issued, fully paid and
nonassessable shares of Class A Common Stock, par value $.01 per share,
determined in accordance with Subsections 6(e) and 6(f) below. Each share of
Series B Preferred Stock shall be convertible at the option of the holder
thereof at any time on or prior to February 1, 2002 into the amount of
validly issued, fully paid and nonassessable shares of Class B Common Stock,
par value $.01 per share, determined in accordance with Subsections 6(e) and
6(f) below. Common Stock of the class into which shares of Preferred Stock
may be converted pursuant to this Subsection 6(a) is hereinafter referred to
as "CORRESPONDING COMMON STOCK."
(2) Holders who elect to convert their shares of Preferred
Stock pursuant to this Section 6 shall be entitled to any and all dividends
accrued and unpaid as of the Conversion Date on the Preferred Stock that such
Holders elect to convert. The Company shall pay such accrued and unpaid
dividends in cash, PROVIDED that the Company, at its sole option, may satisfy
such obligation to pay any or part of such dividends by issuing the number
shares of Corresponding Common Stock having a fair market value equal to such
amount of dividends as of the Conversion Date, as determined in good faith by
the Board of Directors. Except as provided in Subsection 3(a), the holder of
a share of Preferred Stock at the close of business on a Record Date shall be
entitled to receive the dividend payable thereon on the corresponding
Dividend Payment Date notwithstanding the conversion thereof during the
Ex-Dividend Period or the Company's default in the payment of the dividend
due on such Dividend Payment Date. Except as provided for above, no
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payments or adjustments in respect of dividends on shares of Preferred Stock
surrendered for conversion (whether or not in arrears) or on account of any
dividend on the Corresponding Common Stock issued upon conversion shall be
made upon the conversion of any shares of Preferred Stock.
(3) Immediately following any conversion of shares of
Preferred Stock into Corresponding Common Stock, (i) such converted shares of
Preferred Stock shall be deemed no longer outstanding and (ii) the persons
entitled to receive Corresponding Common Stock upon the conversion of
Preferred Stock shall be treated for all purposes as having become the owners
of record of such Corresponding Common Stock. Upon the issuance of shares of
Corresponding Common Stock pursuant to this Section 6, such shares of
Corresponding Common Stock shall be deemed to be duly authorized, validly
issued, fully paid and nonassessable.
(4) To convert shares of Preferred Stock into shares of the
Corresponding Common Stock pursuant to Subsection 6(a), a holder of Preferred
Stock must (i) surrender the certificate or certificates evidencing the
shares of Preferred Stock to be converted, duly endorsed in a form reasonably
satisfactory to the Company, at the office of the Company or of the transfer
agent for the Preferred Stock, (ii) give written notice to the Company at
such office that such holder elects to convert Preferred Stock into
Corresponding Common Stock, and the number of shares to be converted, (iii)
state in writing the name or names in which the certificate or certificates
for shares of Corresponding Common Stock are to be issued, (iv) provide
evidence reasonably satisfactory to the Company that such holder has
satisfied any conditions contained in any agreement or any legend on the
certificates representing the Preferred Stock relating to the transfer
thereof, if shares of Common Stock are to be issued in a name or names other
than the holder's, and (v) pay any transfer or similar tax if required as
provided in Section 6(j) below. In the event that a holder fails to notify
the Company of the number of shares of Preferred Stock to be converted, such
holder shall be deemed to have elected to convert all shares represented by
the certificate or certificates surrendered for conversion. Such conversion,
to the extent permitted by law, regulation, rule or other requirement of any
governmental authority (collectively, "LAWS") and the provisions hereof,
shall be deemed to have been effected as of the close of business on the date
on which the holder satisfies all of the foregoing requirements with respect
to such conversion (such date is referred to herein as the "CONVERSION DATE"
for purposes of any conversion of Preferred Stock pursuant to Subsection
6(a)). As soon as practical on or following the Conversion Date, the Company
shall deliver to such former holder of Preferred Stock a certificate
representing the shares of Corresponding Common Stock issued upon the
conversion, together with a new certificate representing the unconverted
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portion, if any, of the shares of Preferred Stock formerly represented by the
certificate or certificates surrendered for conversion.
(5) For the purposes of the conversion of Preferred Stock
into Corresponding Common Stock pursuant to Subsection 6(a), each share of
Preferred Stock shall initially be convertible into 28.7309164 shares (the
"CONVERSION RATE") of Corresponding Common Stock. If the Company shall at
any time subdivide, by stock split, reclassification or otherwise, the
outstanding shares of a class of Corresponding Common Stock or shall issue a
dividend on a class of outstanding Corresponding Common Stock payable in
capital stock (as to which subdivision or stock dividend the holders of the
Preferred Stock have not participated), the Conversion Rate applicable to the
series of Preferred Stock which is convertible into such Corresponding Common
Stock in effect immediately prior to such subdivision or the issuance of such
dividend shall be proportionately increased, and in case the Company shall at
any time combine, by stock split, reclassification or otherwise, the
outstanding shares of Corresponding Common Stock, the Conversion Rate
applicable to the series of Preferred Stock which is convertible into such
Corresponding Common Stock in effect immediately prior to such combination
shall be proportionately decreased, in each case effective at the close of
business on the date of such subdivision, dividend, combination or other
event.
(6) No fractional shares of Corresponding Common Stock shall
be issued upon the conversion of Preferred Stock. If any fractional interest
in a share of Corresponding Common Stock would, except for the provisions of
this Subsection 6(f), be deliverable upon the conversion of any Preferred
Stock, the fractional interests in shares of Corresponding Common Stock
payable to a holder of Preferred Stock shall be aggregated, and the Company
shall deliver to such holder any resultant whole shares of Corresponding
Common Stock and, in lieu of delivering the fractional share therefor, pay to
such holder an amount in cash (computed to the nearest cent) equal to the
fair market value of such fractional interest as of the Conversion Date, as
determined in good faith by the Board of Directors.
(7) Whenever the Conversion Rate is adjusted as herein
provided, the Company shall promptly mail a notice of the adjustment to
holders of Preferred Stock by first class mail. The Company shall forthwith
maintain at its principal executive office and file with the transfer agent
for Preferred Stock a statement, signed by the Chairman of the Board, or
President, or a Vice President of the Company and by the chief financial
officer or a Treasurer or an Assistant Treasurer of the Company, showing in
reasonable detail the facts requiring such adjustment and the Conversion Rate
after such adjustment. Such transfer agent shall be
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under no duty or responsibility with respect to any such statement except to
exhibit the same from time to time to any holder of Preferred Stock desiring
an inspection thereof.
(8) If there shall occur any capital reorganization or any
reclassification of the capital stock of the Company, consolidation or merger
of the Company with or into another entity, or the conveyance of all or
substantially all of the assets of the Company to another person or entity,
each share of Preferred Stock shall thereafter be convertible into the number
of shares or other securities or property to which a holder of the number of
shares of Corresponding Common Stock deliverable upon conversion of such
Preferred Stock would have been entitled upon such reorganization,
reclassification, consolidation, merger or conveyance, and, in any such case,
appropriate adjustment (as determined in good faith by the Board of
Directors) shall be made in the application of the provisions herein set
forth with respect to the rights and interests thereafter of the holders of
the Preferred Stock, to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
Conversion Rate) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares or other property thereafter deliverable upon
the conversion of the Preferred Stock; PROVIDED that, if pursuant to any such
reorganization, reclassification, consolidation, merger or conveyance, the
holders of Class B Common receive securities that are generally entitled to
vote for the election of directors of the Company or any applicable
successor, or otherwise entitled to vote, then the Company or such successor
shall make available, upon conversion of Series B Preferred Stock, at the
request of each holder of Series B Preferred Stock, securities that are not
voting securities but which are otherwise identical to such voting securities
in all material respects.
(9) The Company shall at all times reserve and keep
available, out of its authorized but unissued shares or treasury shares of
Common Stock, solely for the purpose of issuance upon the conversion of
Preferred Stock, the full number of shares of Corresponding Common Stock
deliverable upon the conversion of all Preferred Stock from time to time
outstanding. The Company shall from time to time, in accordance with the
laws of the State of Nevada, increase the authorized amount of its Common
Stock if at any time the authorized number of shares of Common Stock
remaining unissued shall not be sufficient to permit the conversion of all of
the Preferred Stock at the time outstanding.
(10) The Company shall pay any documentary, stamp or similar
issue or transfer tax due on the issue of shares of Corresponding Common
Stock upon conversion of the Preferred Stock into Corresponding Common Stock.
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The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of
Corresponding Common Stock in a name other than that in which the Preferred
Stock so converted was registered, and no such issue or delivery shall be
made unless and until the person requesting such issue has paid to the
Company the amount of any such tax, or has established to the satisfaction of
the Company that such tax has been paid.
SECTION 7. RESET AND EXCHANGE RIGHTS. (a) Subject to Section
7(b), if the holders of the Preferred Stock at the Issue Date and/or their
Related Parties (but not any other transferees) (collectively, the "PERMITTED
HOLDERS") propose to sell or otherwise dispose of all but not less than all
of the Preferred Stock held by them to one or more persons other than the
Permitted Holders, upon notice of such proposed sale to the Company (the
"SALE NOTICE"), holders of a majority of the Series A Preferred Stock shall
be entitled to designate an Independent Financial Advisor to determine,
within 20 business days of such designation, in the opinion of such firm, the
appropriate dividend rate and other powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions (collectively, the "RESET TERMS") of the
Preferred Stock (in addition to those set forth in the Articles of
Incorporation that may be applicable to the Preferred Stock) so that,
immediately after such reset, the Preferred Stock would have a market value
of 100% of the Liquidation Value thereof plus any accrued and unpaid
dividends, PROVIDED that in no event shall the dividend rate of the Preferred
Stock be reset to a rate greater than 15 1/2% per annum. The Company shall
bear the reasonable fees and expenses, including reasonable fees and expenses
of legal counsel, if any, and customary indemnification, of the
above-referenced Independent Financial Advisor.
Upon the determination of the Reset Terms of the Preferred Stock
pursuant to the foregoing procedures, this Certificate of Designation shall
be amended without any affirmative action on the part of the Permitted
Holders, including any approval of the Permitted Holders otherwise required
pursuant to Section 78.1955 of Nevada Revised Statutes, so that the Preferred
Stock shall become entitled to dividends at the reset dividend rate and have
the other Reset Terms as of the date of consummation of the sale described in
the Sale Notice.
(1) If the Company proposes to issue a new series of
preferred stock ("NEW PREFERRED STOCK") to any person other than the
Permitted Holders, which issuance occurs on or prior to February 1, 2002,
then the Company shall give notice of such issuance to the Permitted Holders
and, upon the election of the Permitted Holders, prior to the first sale of
any New Preferred Stock to any person other than the Permitted Holders,
without any further action on the part of the
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Permitted Holders, this Certificate of Designation shall be amended without
any affirmative action on the part of the Permitted Holders, including any
approval of the Permitted Holders otherwise required pursuant to Section
78.1955 of Nevada Revised Statutes, so that, upon the issuance of the New
Preferred Stock, the dividend rate and other appropriate powers, preferences
and relative, participating, optional or other special rights, and the
qualifications, limitations and restrictions of the Preferred Stock are
identical in all material respects to the terms of the New Preferred Stock,
and the Permitted Holders shall have no rights pursuant to Subsection 7(a) in
connection with such issuance of New Preferred Stock.
(2) Notwithstanding the foregoing Subsections 7(a) and 7(b),
the Company may elect to exchange all Preferred Stock held by the Permitted
Holders for one or more series of New Preferred Stock having the terms to
which the Preferred Stock would have been reset or amended as provided in
Subsections 7(a) and 7(b), as the case may be. Any such exchange shall be
effective as of the time the applicable reset or amendment would have been
required to be effective pursuant to Subsections 7(a) and 7(b), as the case
may be. Any such exchange shall be made in compliance with all applicable
U.S. Federal and state securities laws, including the rules and regulations
of the SEC, and Permitted Holders shall make such representations and deliver
such information to the Company as may be required in connection with such
compliance by the Company.
(3) The foregoing reset and exchange rights shall in all
cases be subject to the receipt of all the applicable approvals of all Gaming
Authorities.
SECTION 8. BOARD APPOINTMENT RIGHTS. Holders of record of the
Preferred Stock have no voting rights, except as required by Nevada law.
Subject to the receipt of the applicable approvals of all Gaming Authorities,
the number of members of the Board of Directors shall be increased by, and
the holders of a majority of the outstanding Series A Preferred Stock, voting
as a separate class, shall be entitled to elect, two members of the Board of
Directors (or, if the number of members of the Board of Directors is three or
fewer, the number of members of the Board of Directors shall be increased by,
and such holders shall be entitled to elect, one member of the Board of
Directors) upon the following events: (a) the failure by the Company to
comply with (i) the change of control offer provision set forth in Section 9,
(ii) the limitation on merger or consolidation set forth in Subsection 10(c)
or (iii) the mandatory redemption obligation set forth in Subsections 5(a)
and 5(c); (b) the failure by the Company or any of its Restricted
Subsidiaries for 60 days after notice from the transfer agent or the holders
of at least 25% in Liquidation Preference of the outstanding shares of Series
A Preferred Stock to comply with any of the other
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covenants or agreements set forth herein and the continuance of such failure
for 60 consecutive days; or (c) if the Company fails to pay any Indebtedness
within any applicable grace period after final maturity (a "PAYMENT DEFAULT")
or the acceleration of any Indebtedness by the holders thereof because of a
default, and in any such case the total amount of Indebtedness so unpaid or
accelerated exceeds $10.0 million (each of the events described in clauses
(a) through (c) being referred to as a "BOARD APPOINTMENT RIGHT TRIGGERING
EVENT"). Rights of Holders of Series A Preferred Stock arising as a result
of a Board Appointment Right Triggering Event shall continue until such time
as all Board Appointment Right Triggering Events have been cured or waived.
SECTION 9. CHANGE OF CONTROL. Upon the occurrence of a Change of
Control and after the earlier of (a) the date on which all of the Notes have
been repaid, repurchased or redeemed in full and (b) June 1, 2006, each
holder of Preferred Stock shall have the right to require the Company to
repurchase all or any part of such holder's Preferred Stock pursuant to the
offer described below (the "CHANGE OF CONTROL OFFER") at an offer price in
cash equal to 101% of the aggregate Liquidation Preference thereof plus
accrued and unpaid dividends, if any, to the date of repurchase (the "CHANGE
OF CONTROL PAYMENT"). Within 45 days following any Change of Control
requiring the Company to make a Change of Control Offer pursuant to the
preceding sentence, the Company shall mail a notice to each holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase all outstanding Preferred Stock on the date specified
in such notice, which date shall be no earlier than 30 days and no later than
60 days from the date such notice is mailed, unless a longer period is
required by law (the "CHANGE OF CONTROL PAYMENT DATE"), pursuant to the
procedures described herein and in such notice. The Company shall comply
with the requirements of Rule 14e-l under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Preferred
Stock as a result of a Change of Control.
On or before the Change of Control Payment Date, the Company shall,
to the extent lawful, (1) accept for payment all Preferred Stock or portions
thereof properly tendered pursuant to the Change of Control Offer, (2)
deposit with the paying agent for the Change of Control Payment (the "PAYING
AGENT") an amount equal to the Change of Control Payment in respect of all
Preferred Stock or portions thereof so tendered and (3) deliver or cause to
be delivered to the transfer agent the Preferred Stock so accepted together
with an Officers' Certificate stating the aggregate Liquidation Preference of
the Preferred Stock or portions thereof being purchased by the Company. The
Paying Agent is required to promptly mail to each
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holder of Preferred Stock so tendered the Change of Control Payment for such
Preferred Stock, and the transfer agent is required to promptly authenticate
and mail (or cause to be transferred by book entry) to each holder a new
certificate representing the Preferred Stock equal in Liquidation Preference
amount to any unpurchased portion of the Preferred Stock surrendered, if any.
The provisions of this Section 9 shall be applicable whether or not
any other provisions of this Certificate of Designation are applicable.
The Company is not required to make a Change of Control Offer to
the holders of Preferred Stock upon a Change of Control if a third party
makes the Change of Control Offer in the manner, at the times and otherwise
in compliance with the requirements set forth in this Section 9 and purchases
all Preferred Stock validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 10. COVENANTS.
(1) LIMITATIONS ON JUNIOR PAYMENTS. The Company shall not,
directly or indirectly, (i) declare or pay any dividend or make any other
payment or distribution on account of any Junior Securities (other than
dividends or distributions payable in Junior Securities (other than
Disqualified Stock)), (ii) purchase, redeem or otherwise acquire or retire
for value any Junior Securities or (iii) make any Restricted Investment in
any Person (all such dividends, distributions, purchases, redemptions,
acquisitions, retirements and Restricted Investments being collectively
referred to as "JUNIOR PAYMENTS"), if, at the time of such Junior Payment, a
Board Appointment Right Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof. Notwithstanding the
foregoing sentence, the following shall not be prohibited as Junior Payments:
(1) the redemption, repurchase, defeasance, retirement,
purchase or other acquisition of any Junior Securities of the Company
either in exchange for or out of the proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary of the Company)
of Junior Securities of the Company (other than any Disqualified Stock)
or a substantially concurrent capital contribution to the Company;
(2) any purchase, redemption, repurchase, defeasance,
retirement or other acquisition of Junior Securities upon a Change of
Control to the extent required by the agreement governing
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such Junior Securities but only if the Company shall have complied with
Section 9 and purchased all Preferred Stock required thereby, prior to
purchasing such Junior Securities, PROVIDED that the purchase price
(stated as a percentage of liquidation preference) of such Junior
Securities shall not be greater than the price for such purchase set
forth in the instrument pursuant to which such Junior Securities were
issued;
(3) the payment of any dividend, redemption or irrevocable
offer to purchase within 60 days after the date of declaration, notice
of redemption or irrevocable offer, if at said date of declaration,
notice of redemption or irrevocable offer such payment would have
complied with the provisions of this Certificate of Designation;
(4) the redemption, repurchase, retirement or other
acquisition of any Junior Securities of the Company to the extent
required by order of a Gaming Authority or otherwise pursuant to
provisions substantially comparable to those set forth in Section 5(c);
(5) the making of any Restricted Investment in exchange
for, or out of the proceeds of, the substantially concurrent sale (other
than to a Subsidiary of the Company) of, or from substantially concurrent
additional capital contributions in respect of, Equity Interests of the
Company (other than Disqualified Stock), plus, to the extent that any
such Restricted Investment made after the Issue Date is sold for cash or
Cash Equivalents or otherwise liquidated or repaid for cash or Cash
Equivalents, the amount of cash proceeds of or Cash Equivalents received
with respect to such Restricted Investment;
(6) the direct or indirect repurchase, redemption or other
acquisition or retirement for value of any Junior Securities of the
Company held by any director, officer or employee of the Company (or any
of its Subsidiaries) pursuant to any equity subscription agreement or
stock option, deferred compensation or equivalent or similar agreement
applicable to any director, officer or employee of the Company, PROVIDED
that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests
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shall not exceed, in any twelve-month period, $2.0 million, plus the
aggregate cash proceeds received by the Company during such twelve-month
period from any reissuance of Junior Securities of the Company (other
than Disqualified Stock) to directors, officers or employees of the
Company and its Subsidiaries;
(7) Restricted Investments (measured as of the date such
Restricted Investment was made) in an aggregate amount not exceeding $25
million plus (a) to the extent that any Restricted Investment made after
the applicable Board Appointment Rights Triggering Event is sold for
cash or Cash Equivalents or otherwise liquidated or repaid for cash,
Cash Equivalents or the receipt of properties used in a Permitted
Business, the amount of cash proceeds of, Cash Equivalents or the fair
market value (as determined in good faith by a resolution of the Board
of Directors) of property received with respect to such Restricted
Investment, plus (b) upon the redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary, the lesser of (x) the fair market
value (determined as set forth below) of such Unrestricted Subsidiary
and (y) the aggregate amount of all Investments made in such
Unrestricted Subsidiary subsequent to the Issue Date by the Company and
any of its Restricted Subsidiaries;
(8) Restricted Investments (measured as of the date such
Restricted Investment was made) in an amount not to exceed the sum of
(A) $5.0 million in the aggregate 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 Company 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; and
(9) Restricted Investments in an amount not to exceed
the sum of (A) $115.0 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 Company
or any Restricted Subsidiary by the Persons in
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which such Restricted Investments were made but not exceeding the
aggregate amount so invested in all such Persons.
The amount of all Junior Payments (other than cash) shall be the
fair market value on the date of the Junior Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Junior Payment.
The fair market value of any assets or securities that are required to be
valued by this covenant shall be determined by the Board of Directors (whose
resolutions with respect thereto shall be delivered to the transfer agent),
such determination to be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $15.0 million. Not later than five business days
following the date of making any Junior Payment in excess of $1 million, the
Company shall deliver to the transfer agent an Officers' Certificate setting
forth the resolution of the Board of Directors and stating that such Junior
Payment is permitted and setting forth the basis upon which the calculations
required by this Subsection 10(a) were computed, together with a copy of any
fairness opinion or appraisal required hereby.
(2) LIMITATIONS ON INCURRENCE OF INDEBTEDNESS. The Company
shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to (collectively, "INCUR") any Indebtedness (including Acquired Debt);
PROVIDED that the Company and Restricted Subsidiaries may incur Indebtedness
(including Acquired Debt), if the Fixed Charge Coverage Ratio for the
Company's most recently ended four fiscal quarter period for which internal
financial statements are available immediately preceding the date on which
such additional Indebtedness is incurred would have been at least 2 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred at
the beginning of such four fiscal quarter period.
The provisions described in the preceding paragraph shall not apply
to the incurrence by the Company or any of its Restricted Subsidiaries of any
of the following items of Indebtedness (collectively, "PERMITTED DEBT"):
(1) Indebtedness under the Credit Agreement in an aggregate
principal amount outstanding not exceeding an amount equal to the
greater of (a) $210.0 million and (b) an amount equal to three (3) times
Consolidated Cash Flow for the
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most recently ended four fiscal quarter period for which internal
financial statements are available immediately preceding the date on
which such Indebtedness is incurred, LESS in each case an amount equal
to the outstanding borrowings incurred under clause (ix) below;
(2) Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or
cost of installation, acquisition, construction or improvement of
property, plant or equipment used in the business of the Company or such
Restricted Subsidiary, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (ii), in an aggregate principal amount not to
exceed $10.0 million at any time outstanding;
(3) Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Existing Indebtedness or Indebtedness that was permitted by this
Certificate of Designation to be incurred under the first paragraph of
this Subsection 10(b), clauses (ii), (vi), (vii), (viii) or (ix) of this
paragraph or this clause (iii);
(4) intercompany Indebtedness between or among the Company
and any of its Restricted Subsidiaries; PROVIDED that (i) any subsequent
issuance or transfer of Equity Interests that results in any such
indebtedness being held by a Person other than the Company or any of its
Restricted Subsidiaries and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either the company or any of its
Restricted Subsidiaries shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause
(v);
(5) Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Certificate of
Designation to be outstanding;
(6) Purchase Money Indebtedness;
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(7) Indebtedness in one or more FF&E Financings for each
Gaming Facility incurred to acquire FF&E to be used in such Gaming
Facility, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to this
clause (vii), in an aggregate principal amount not to exceed $7.0
million at any time outstanding;
(8) Indebtedness as a Permitted Joint Venture Investment,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause
(viii), to the extent that the aggregate principal amount of
Indebtedness at any time outstanding under the Credit Agreement and
constituting Permitted Joint Venture Investments does not exceed $115.0
million; and
(9) additional Indebtedness in an aggregate principal
amount at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (x), not to exceed $10.0 million;
(10) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds entered into
by the Company and its Subsidiaries in the ordinary course of their
business; and
(11) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the ordinary course of
business.
Notwithstanding any other provision of this Subsection 10(b), a Guarantee of
Indebtedness permitted by the terms hereof at the time such Indebtedness was
incurred, or at the time the guarantor thereof, if a Subsidiary of the
Company, became a Subsidiary of the Company, shall not constitute a separate
incurrence, or amount outstanding, of Indebtedness. For purposes of
determining compliance with this section, in the event that an item of
proposed Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (i) through (x) above as of the date
of incurrence thereof, or is entitled to be incurred pursuant to the first
paragraph of the covenant described in this section as of the date of
incurrence
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thereof, the Company shall, in its sole discretion, classify such item of
Indebtedness on the date of its incurrence in any manner that complies with
the covenant described in this section. Accrual of interest, accretion or
amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms and
the payment of dividends on preferred stock in the form of additional shares
of the same series of preferred stock shall not be deemed to be an incurrence
of Indebtedness for purposes of the covenant described in this section;
PROVIDED, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued, to the extent required by the definition
of "Fixed Charges." For purposes of determining compliance with any U.S.
dollar-denominated restriction on the incurrence of indebtedness, the U.S.
dollar-equivalent principal amount of indebtedness denominated in a foreign
currency shall be calculated based on the relevant currency exchange rate in
effect on the date such indebtedness was incurred.
(3) LIMITATIONS ON MERGER OR CONSOLIDATION. The Company may
not, directly or indirectly, consolidate or merge with or into (whether or
not the Company is the surviving corporation) another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or
the Person formed by or surviving any such consolidation or merger (if other
than the Company) is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company) assumes all the obligations of the Company under the
Preferred Stock and this Certificate of Designation; and (iii) immediately
after such transaction no Board Appointment Rights Triggering Event exists.
Notwithstanding the forgoing, the Company shall not be obligated to comply
with this Subsection 10(c) in the event that, prior to consummation, such
consolidation or merger is approved by the holders of a majority of the
shares of the Series A Preferred then outstanding, voting as a separate class.
(4) LIMITATIONS ON BUSINESS ACTIVITIES. The Company shall
not, and shall not permit any Restricted Subsidiary to, engage in any
business other than Permitted Business, except to such extent as would not be
material to the Company and its Subsidiaries taken as a whole.
(5) REPORTS. Whether or not required by the rules and
regulations of the SEC, so long as any Preferred Stock is outstanding, the
Company shall furnish to the holders of Preferred Stock (i) all quarterly and
annual financial information that would be required to be contained in a
filing with the SEC on Forms 10-Q and 10-K if the Company were required to
file such Forms and, with respect to
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the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required
to be filed with the SEC on Form 8-K if the Company were required to file
such reports, in each case within the time periods specified in the SEC's
rules and regulations.
SECTION 11. TRANSFER AND EXCHANGE. If a holder of Preferred Stock
transfers or exchanges Preferred Stock in accordance with this Certificate of
Designation, such holder may be required to meet the requirements of the
transfer agent for such transfer or exchange. The transfer agent may require
a holder, among other things, to furnish appropriate endorsements and
transfer documents, and the Company may require a holder of Preferred Stock
to pay any taxes and fees required by law or permitted by this Certificate of
Designation.
SECTION 12. CERTAIN DEFINITIONS. The following definitions shall
apply to term used in this Certificate of Designation:
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or
in contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling, or controlled by, or under direct or indirect common
control with, such specified Person. For purposes of this definition,
"control" (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 that in all cases beneficial ownership of 10% or more of the voting
securities of a Person is deemed to be control. Notwithstanding the
foregoing, the limited partners of Colony Investors III, L.P. shall not be
deemed to be affiliates of Colony Investors III, L.P. or Colony Capital, Inc.
solely by reason of their investment in Colony Capital III, L.P.
"BOARD OF DIRECTORS" means the board of directors of the Company.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
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to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of assets
of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the Credit Agreement or with any domestic commercial
bank having capital and surplus in excess of $500 million and a Thompson Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clauses (ii) and (iii) above entered into with any financial institution
meeting the qualifications specified in clause (iii) above, (v) commercial
paper having the highest rating obtainable from Moody's Investors Service,
Inc. or Standard & Poor's Corporation and in each case maturing within six
months after the date of acquisition and (vi) money market funds at least 95%
of the assets of which constitute Cash Equivalents of the kinds described in
clauses (i) to (v) of this definition.
"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 Company and its Subsidiaries, taken as a whole; (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company;
(iii) prior to the time the Company or any Parent Company completes an
Initial Public Offering, the Company or any Parent Corporation 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
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securities within the meaning of Rule 13d5(b)(1) under the Exchange Act),
other than a group consisting of the Principals and their Related Parties, in
a single transaction or in a related series of transactions, by way of
merger, consolidation or other business combination or purchase of direct or
indirect beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act, or any successor provision) of 50% 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; (iv) subsequent to
the time the Company or any Parent Corporation completes an Initial Public
Offering, the Principals and their Related Parties shall directly or
indirectly beneficially own shares of capital stock representing less than
50% of the total voting power entitled to vote in the election of the Board
of Directors of the Company and any other Person directly or indirectly
beneficially owns shares of capital stock representing voting power in excess
of the voting power represented by shares of capital stock owned by the
Principals and their Related Parties; or (v) during any period of two
consecutive calendar years, individuals who at the beginning of such period
constituted the Board of Directors (together with any new directors whose
election or appointment by such board or whose nomination for election by the
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 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, without duplication, (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 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 (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, to avoid
duplication only, excluding any such non-cash charge that is included in
consolidated
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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 in each case, on a consolidated basis, determined in
accordance with GAAP, plus (e) to the extent not included above (and in any
case without duplication), all charges and expenses (including, without
limitation, legal and investment banking fees and expenses and severance and
other payments to management and directors of the Company) incurred by the
company in connection with the Merger, the amendment and restatement of the
Reducing Revolving Credit Agreement, dated as of August 14, 1995, as amended,
and entry into the Credit Agreement in connection with the Merger, any
issuance of preferred stock by the Company for the purpose of providing
financing for the Merger and any consent fees payable to holders of the Notes
pursuant to the Consent Solicitation Statement of the Company dated November
16, 1998, as amended and supplemented.
"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: (a) 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 Restricted Subsidiary; (b) solely for
the purpose of determining the amount of Junior Payments permitted pursuant
Subsection 10(a), 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 (a)); and
(c) the cumulative effect of a change in accounting principles is required to
be excluded.
"CREDIT AGREEMENT" means the Amended and Restated Credit Agreement,
dated as of December 9, 1998, as amended, by and among the Company, Harveys
C.C. Management Company, Inc., Harveys Iowa Management Company, Inc., Harveys
Tahoe Management Company, Inc., HCR Services Company, Inc., and the lenders
named therein including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, as such credit
agreements and/or related documents may be amended, restated, supplemented,
renewed, replaced or otherwise modified from time to time whether or not with
the same agent, trustee, representative lenders or holders, and, subject to
the proviso to the next succeeding sentence, irrespective of any changes in
the terms and conditions thereof. Without limiting the generality of the
foregoing, the term "Credit Agree-
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ment" shall include any amendment, amendment and restatement, renewal,
extension, restructuring, supplement or modification to any Credit Agreement
and all refundings, refinancings and replacements of any Credit Agreement,
including any agreement (i) extending the maturity of any Indebtedness
incurred thereunder or contemplated thereby, (ii) adding or deleting
borrowers or guarantors thereunder, so long as the borrowers and issuers
thereunder include one or more of the Company and its Subsidiaries and their
respective successors and assigns, or (iii) increasing the amount of
Indebtedness incurred thereunder or available to be borrowed thereunder.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, on or prior to February 1, 2011;
PROVIDED, that any Capital Stock that would constitute Disqualified Stock
solely because the holders thereof have the right to require the Company to
repurchase such Capital Stock upon the occurrence of a Change of Control
shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Company may not repurchase or redeem any such Capital Stock
pursuant to such provisions prior to the Company's compliance with Subsection
5(c) or Section 9.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXISTING INDEBTEDNESS" means up to $150.2 million in aggregate
principal amount of Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the Credit Agreement) in
existence on the Issue Date, until such amounts are repaid.
"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 shall 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
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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 (a) 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 Lease Obligations 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 Company,
times (ii) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined U.S. 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 the
Consolidated Cash Flow for such period to the Fixed Charges for such period;
PROVIDED that: (a) in the event that the Company or any Restricted Subsidiary
incurs, assumes, guarantees or redeems or otherwise retires or defeases any
Indebtedness or issues, redeems, reduces or retires 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,
redemption, retirement or defeasance 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 Company
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 or retirement of any
Indebtedness in connection therewith),
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as if the same had occurred at the beginning of the applicable period; (e) 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 (f) 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 have been approved by a significant
segment of the accounting profession, which are in effect from time to time.
"GAMING AUTHORITY" means any agency, authority, board, bureau,
commission department, office or instrumentality of any nature whatsoever of
the U.S. 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
Limited Gaming Control 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 include 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
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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
Company 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 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, registration, approval, finding of
suitability, qualification, permit, franchise or other authorization from any
Gaming Authority required on the Issue Date 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 Issue Date, be subject.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and foreign currency swaps and
(ii) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"INDEBTEDNESS" of any specified Person means the following, without
duplication, to the extent required to be disclosed as a liability on the
balance sheet of such person prepared in accordance with GAAP: (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 Capital Lease Obligations of such
Person; (c) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction; (d) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock; (e)
all net obligations existing at the time under Hedging Obligations; (f) all
obligations of the types referred to in clauses (a) through (e) above of
other Persons and all dividends and distributions of other Persons for the
payment of which, in either case, such specified
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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 (e) above); and (g) all obligations of the type referred to in
clauses (a) through (e) 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 such property
or assets or (ii) the amount of the obligation so secured; PROVIDED that any
indebtedness which has been defeased in accordance with GAAP or defeased
pursuant to the deposit of cash of U.S. Government Obligations (in an amount
sufficient to satisfy all such indebtedness obligation at maturity or
redemption, as applicable, and all payments of interests and premium, if any)
in a trust or account created or pledged for the sole benefit of the holders
of such indebtedness, and subject to no other Liens, and the other applicable
terms of the instrument governing such indebtedness, shall not constitute
"Indebtedness."
"INDEPENDENT FINANCIAL ADVISOR" means a United States investment banking
firm of national standing in the United States which does not, and whose
directors, officers and employees or affiliates do not, have a direct or
indirect financial interest in the Company.
"INITIAL PUBLIC OFFERING" means the closing of a public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering shares of the Company's common stock, which shares
are approved for listing or quotation on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market.
"INVESTMENT" means any investment by the Company in another Person
(including an Affiliate of the Company) in the form of a loan, Investment
Guarantee, advance (other than commission, travel and similar advances to
officers and employees of the Company 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 Company
prepared in accordance with GAAP, PROVIDED that an acquisition of assets,
Equity Interests or other securities by the Company or any direct or indirect
parent of the Company will not be deemed to be an Investment.
"INVESTMENT GUARANTEE" means any direct or indirect liability,
contingent or otherwise, of the Company or a Restricted Subsidiary with
respect to any Indebted-
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ness 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 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, (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 shall
be paid or discharged, or that any agreements relating thereto shall be
complied with, or that the holders of such Indebtedness shall be protected
against loss in respect thereof.
"ISSUE DATE" means February 1, 1999, the date of original issuance of
the Preferred Stock.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"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 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
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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 the foregoing investments.
"MATERIAL ACQUISITION" means any acquisition or 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.
"MERGER" means the merger of Harveys Acquisition Corporation with and
into the Company, pursuant to the Agreement and Plan of Merger dated as of
February 1, 1998 between Harveys Acquisition Corporation and the Company.
"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
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.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or
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(c) constitutes the lender; and (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse
of time or both) any holder of any other Indebtedness of the Company or any
of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior
to its stated maturity.
"NOTES" means the Company's 10_% Senior Subordinated Notes due 2006.
"OFFICERS' CERTIFICATE" means a certificate signed by (i) the Chairman
of the Board of Directors, the Chief Executive Officer, the President or a
Vice President of the Company and (ii) the Chief Financial Officer or the
Secretary of the Company.
"PARENT CORPORATION" means any direct or indirect parent corporation of
the Company.
"PERMITTED BUSINESS" means the business of the Company and its
Subsidiaries as of the Issue Date and any and all businesses that in good
faith judgment of the Board of Directors are related businesses, including
reasonable extension or expansions thereof.
"PERMITTED INVESTMENT" means: (a) any tangible asset or Marketable
Securities owned by the Company or a Restricted Subsidiary; (b) any
Investment in the Company or in a Restricted Subsidiary and (c) for so long
as any of the Notes are outstanding, any Investment in any other Restricted
Subsidiary, PROVIDED that such Restricted Subsidiary is a guarantor of the
Notes; (c) any Investment in any other Person, if immediately after the
making of such Investment (i) such Person becomes a 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 Company or a Restricted Subsidiary
engaged in the Gaming Business; (d) any Investment in Cash Equivalents; (e)
Investment outstanding as of the Issue Date; (f) Investments in the form of
promissory notes of members of the Company's management in consideration of
the purchase by such members of Equity Interests (other than Disqualified
Stock) in the Company; (g) account receivable, endorsements for collection or
deposits arising in the ordinary course of business; (h) capital stock,
obligations or other securities received in settlement of debts created in
the ordinary course of business and owing to the Company or any of its
Subsidiaries; (i) Investments constituting intercompany Indebtedness between
or among the Company and its Subsidiaries, to the extent permitted by Section
10(b); and (j) Investments constituting Guarantees, to the extent
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permitted by Section 10(b).
"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 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, (i) the amount of Indebtedness of such Person is
not permitted to exceed 200% of the amount invested in Capital Stock of such
Person this Certificate of Designation 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 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 in
respect of the Preferred Stock and under the Preferred Stock 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 Company or a Restricted Subsidiary shall 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 shall 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 REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease
or refund other Indebtedness of the Company or any of its Restricted
Subsidiaries; PROVIDED that: (i) the principal amount, accreted value, or
liquidation value, as applicable, of such Permitted Refinancing Indebtedness
does not exceed the principal amount, accreted value or liquidation value, as
applicable of, plus accrued interest or dividends, as applicable, on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus an amount equal to the premiums, penalties, fees and expenses actually
incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity or mandatory redemption date, as
applica-
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ble, not earlier than the final maturity date or mandatory redemption date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iii) such
Indebtedness is incurred either by the Company or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"PERSON" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"PRINCIPALS" means Colony Investors III, L.P., Colony Capital, Inc. and
any of their respective Affiliates and any of the Company's officers and
directors.
"PURCHASE MONEY INDEBTEDNESS" means any Indebtedness which states that
it is non-recourse to the borrower and which is secured solely by the assets
purchased or acquired with the proceeds of such Indebtedness and the proceeds
from such assets.
"RELATED PARTY" with respect to any Person means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Person or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Person and/or such other Persons referred
to in the immediately preceding clause (A).
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SEC" means the U.S. Securities and Exchange Commission.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership
33
<PAGE>
(a) the sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (b) the only general partners of
which are such Person or of one or more Subsidiaries of such Person (or any
combination thereof).
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company that
is designated by the Board of Directors as an Unrestricted Subsidiary
pursuant to a board resolution, but only to the extent that at the time of
designation such designation would not cause a Board Appointment Rights
Triggering Event and such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is a Person with respect to which neither the Company
nor any of its Restricted Subsidiaries has any direct or indirect obligation
(x) to subscribe for additional Equity Interests or (y) to maintain or
preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; and (c) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any such designation
by the Board of Directors shall be evidenced to the Trustee by filing with
the Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Subsection 10(a).
The Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary if such redesignation would not
cause a Board Appointment Rights Triggering Event, PROVIDED that such
designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if such
Indebtedness is permitted under the covenant described under Subsection
10(b), calculated on a pro forma basis as if such designation had occurred at
the beginning of the most recently ended four fiscal quarter reference
period. The Board of Directors may at any time designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not
cause a Board Appointment Rights Triggering Event. In the event of any such
designation, all outstanding Investments owned by the Company and its
Restricted Subsidiaries in the Subsidiary so designated shall be deemed to be
an Investment made as of the time of such designation and shall be deemed to
constitute Restricted Investments in an amount equal to the greater of (x)
the fair market value of such Investments at the time of such designation and
(y) the book value of such Investments at the time of such designation, in
each case less an amount equal to the aggregate Restricted Investments made
in such Restricted Subsidiary to the extent that such Restricted Investments
are included in the computation of the aggregate amount of all other Junior
Payments made by the Company at the time of such
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<PAGE>
designation. Such designation shall only be permitted, however, if such
Restricted Investment would be permitted at such time and if such
Unrestricted Subsidiary otherwise meets the definition of a Restricted
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 or Disqualified Stock at any date, the number of years obtained
by dividing (i) the sum of the products obtained by multiplying (a) the
amount of each then remaining installment, sinking fund, serial maturity or
other required payments of principal or liquidation preference, as
applicable, including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that shall elapse
between such date and the making of such payment, by (ii) the then
outstanding principal amount or liquidation preference, if applicable, of
such Indebtedness or Disqualified Stock.
SECTION 13. STATUS OF ACQUIRED SHARES. Shares of Preferred Stock
acquired by the Corporation shall be restored to the status of authorized but
unissued shares of preferred stock, without designation as to class or
series, and may thereafter be issued, but not as shares of Series A Preferred
Stock or Series B Preferred Stock.
SECTION 14. PREEMPTIVE RIGHTS. The Preferred Stock is not
entitled to any preemptive or subscription rights in respect of any
securities of the Corporation.
SECTION 15. SEVERABILITY OF PROVISIONS. Whenever possible, each
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provision hereof shall be interpreted in a manner as to be effective and
valid under applicable law, but if any provision hereof is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating or otherwise adversely affecting the remaining provisions hereof.
SECTION 16. AMENDMENT, SUPPLEMENT AND WAIVER. Except as provided
in the next succeeding paragraph, this Certificate of Designation may be
amended or supplemented with the consent of the holders of at least a
majority in aggregate Liquidation Preference of the Series A Preferred Stock
then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Series
A Preferred Stock), voting as a single class, and any existing default or
compliance with any provision of this Certificate of Designation may be
waived with the consent of the holders of a majority in aggregate Liquidation
Preference of the then outstanding Series A Preferred Stock (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Preferred Stock) voting as a single
class. Except as otherwise expressly required by law, the holders of the
Series B Preferred Stock shall have no right to vote on any amendment or
supplement to this Certificate of Designation, and the Series B Preferred
Stock shall not be included in determining the number of shares or
Liquidation Preference of Preferred Stock voting or entitled to vote on such
matters.
Notwithstanding the foregoing, without the consent of any holder of
Preferred Stock, the Company may (to the extent permitted by Nevada law)
amend or supplement this Certificate of Designation to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Preferred Stock in
addition to or in place of certificated Preferred Stock or to make any change
that would provide any additional rights or benefits to the holders of
Preferred Stock or that does not adversely affect the rights hereunder of any
such holder.
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IN WITNESS WHEREOF, Harveys Casino Resorts has caused this certificate
to be signed on its behalf by Charles Scharer, its President, and Diana
Shevlin, its Assistant Secretary, this day of February, 1999.
HARVEYS CASINO RESORTS
By: /s/ CHARLES W. SCHARER
-----------------------
Charles W. Scharer
President
By: /s/ DIANE SHEVLIN
------------------
Diane Shevlin
Assistant Secretary
State of Nevada )
)ss.
County of Douglas )
This instrument was acknowledged before me on February 1, 1999 by
Charles W. Scharer as President of Harveys Casino Resorts, a Nevada
corporation.
/s/ CONNIE M. FRIEDMAN Notary
--------------------------------
State of Nevada )
)ss.
County of Douglas )
This instrument was acknowledged before me on February 1, 1999 by Dian
Shevlin as assistant secretary of Harveys Casino Resorts, a Nevada
corporation.
/s/ CONNIE M. FRIEDMAN Notary
--------------------------------
