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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER: 1-7244
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BALLY MANUFACTURING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware
(STATE OR OTHER JURISDICTION OF INCORPORATION)
36-2512405
(I.R.S. EMPLOYER IDENTIFICATION NO.)
8700 West Bryn Mawr Avenue, Chicago, Illinois
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
60631
(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 399-1300
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<S> <C>
Common Stock, par value $.66 2/3 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
6% Convertible Subordinated Debentures New York Stock Exchange
due 1998
10% Convertible Subordinated Debentures New York Stock Exchange
due 2006
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
The aggregate market value of the registrant's voting stock held by
nonaffiliates of the registrant as of March 24, 1994 was approximately $382
million. As of March 24, 1994, 46,864,519 shares of the registrant's Common
Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's definitive proxy statement which the registrant intends to
file with the Securities and Exchange Commission within 120 days of the close of
the fiscal year ended December 31, 1993 pursuant to Regulation 14A of the
Securities Exchange Act of 1934 shall be deemed to be incorporated by reference
in Part III of this Annual Report on Form 10-K from the date of filing such
document.
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PART I
Except as otherwise stated, the information contained in this Annual Report is
as of December 31, 1993, the end of the registrant's last fiscal year.
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
The business of the registrant, Bally Manufacturing Corporation ("Bally") and
the subsidiaries which it controls (collectively, the "Company") includes two
industry segments. The Casinos segment includes the operation of: (i) Bally's
Park Place casino hotel and tower in Atlantic City, New Jersey ("Bally's Park
Place") by Bally's Park Place, Inc., (ii) The Grand casino hotel in Atlantic
City ("The Grand") by GNAC, CORP. ("GNAC"), (iii) Bally's Las Vegas casino
resort in Las Vegas, Nevada ("Bally's Las Vegas") by Bally's Grand, Inc. and
(iv) Bally's Saloon and Gambling Hall dockside gaming facility in Tunica,
Mississippi ("Bally's Tunica") by Bally's Tunica, Inc. The Fitness Centers
segment includes the operation of 339 fitness centers by Bally's Health & Tennis
Corporation ("Bally's Health & Tennis"). For additional information concerning
industry segments, see Notes to consolidated financial statements -- Industry
segments.
In April 1993, Bally's Casino Holdings, Inc. ("Casino Holdings") was formed as a
holding company for Bally's Park Place, Inc. and for acquiring and developing
gaming operations, including those in newly emerging gaming jurisdictions. In
June 1993, Casino Holdings completed a private placement of $220.0 million
principal amount of Senior Discount Notes due 1998 (the "Senior Discount Notes")
and received net proceeds therefrom of approximately $127.9 million which have
been and are being used to: (i) construct and equip Bally's Tunica (which
commenced operations in December 1993), (ii) acquire a significant equity
interest in Bally's Las Vegas, (iii) fund initial payments for construction of a
riverboat (including dockside improvements) for eventual operation in New
Orleans, Louisiana, (iv) fund an option agreement to acquire certain riverfront
property in Philadelphia for the purpose of developing a dockside gaming
facility if gaming were to be legalized in Pennsylvania and (v) pursue other
gaming opportunities.
In August 1993, Bally's Grand, Inc. (a company originally acquired by Bally in
1986) emerged from bankruptcy. For almost two years prior thereto, Bally's
Grand, Inc. operated its business and managed its properties as a debtor-in-
possession under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code"). During 1993, Casino Holdings and another subsidiary of Bally
acquired approximately 5.2 million shares (approximately 50% of the shares
presently outstanding) of reorganized Bally's Grand, Inc. common stock. Bally's
Grand, Inc. has been consolidated since December 1, 1993 as a result of Bally's
controlling interest. Prior to December 1, 1993, Bally's investment in Bally's
Grand, Inc. was principally recorded on the equity method of accounting. See
Notes to consolidated financial statements -- Acquisition of Bally's Grand, Inc.
for additional information.
In September 1993, the Company disposed of its remaining investment in Bally
Gaming International, Inc. ("Gaming"). See Notes to consolidated financial
statements -- Discontinued operations for additional information.
CASINOS
FACILITIES
BALLY'S PARK PLACE. Bally's Park Place is situated on an eight-acre site with
ocean frontage at the well-known intersection of Park Place and the Boardwalk in
Atlantic City, New Jersey. The casino hotel complex is centrally located among
the nine other casino hotels adjacent to the Boardwalk and is within four blocks
of Atlantic City's Convention Hall and the new convention corridor currently
under development, which will include a new convention facility. Bally's Park
Place's strategic location on the Boardwalk contributes to its success in
attracting significant walk-in casino business, including strong crossover
business from competing casinos located nearby. Equipped with two multi-story
parking garages and surface valet parking lots, management believes that Bally's
Park Place is also strongly positioned to attract the desirable drive-in
business.
Bally's Park Place is one of the largest casino hotel facilities in Atlantic
City, currently encompassing approximately 2.2 million square feet of space,
including approximately 68,000 square feet of casino floor space, a 30-story
hotel tower, a 12-story hotel facility and two multi-story parking garages
providing over 2,000
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parking spaces. The casino features approximately 2,000 slot machines and 115
table games including baccarat, blackjack, craps, roulette and poker, among
others. Bally's Park Place employs the latest slot machine technology and places
particular emphasis on the location, design and lighting of its slot machine
areas in its efforts to further develop, expand and compete for slot machine
play, which generates higher margins than table game play.
Bally's Park Place has more than 1,250 rooms (including 77 suites), making it
the largest four-star hotel in New Jersey, and contains approximately 50,000
square feet of meeting and exhibition space and a 38,000-square foot health spa
facility. Dining areas include three specialty restaurants, a cocktail lounge, a
coffee shop, a buffet, a delicatessen, two fast-food facilities and a restaurant
with a bar and lounge in the spa. Bally's Park Place offers a variety of other
facilities and amenities to its patrons.
Bally's Park Place's operating strategy capitalizes on its central location and
quality facilities and promotes the diversity of its casino games and courteous
approach to guests. Historically believed to be a leader in Atlantic City's
middle to upper-middle tier slot player segments, Bally's Park Place devotes
significant managerial and promotional resources to the maintenance and
expansion of slot machine play, including higher denomination slot business.
Bally's Park Place also targets middle-market table game players. The marketing
strategy of Bally's Park Place is to generate a high volume of play from casino
customers from New York, Philadelphia and other northeastern metropolitan areas,
as well as to develop its position in all segments of the Atlantic City hotel
and convention market.
Bally's Park Place's revenues and earnings peak during the summer season, with
less favorable operating results during the winter. Bally's Park Place employs
approximately 4,100 persons in the operation of its business.
THE GRAND. The Grand is situated on approximately three acres at Boston Avenue
and Pacific Avenue at the southern end of the Boardwalk in proximity to one of
the major highways that leads into Atlantic City. This location enables
destination-oriented patrons, primarily customers that drive in by automobile or
bus, to reach The Grand by avoiding much of the traffic congestion experienced
in the midtown section of Atlantic City. As Atlantic City International Airport
continues to develop, and as the new Atlantic City convention corridor develops,
management believes The Grand is well-positioned to benefit from an increase in
destination-oriented patrons.
The Grand encompasses approximately 1.2 million square feet of space contained
within a 22-story tower, a low-rise complex and a multi-story parking garage and
transportation center. The Grand presently has approximately 46,100 square feet
of gaming space, which features approximately 1,480 slot machines and
approximately 90 table games. The Grand regularly updates and modernizes the
type of slot games it offers, including state-of-the-art reel-type machines and
increasingly popular video games (such as video poker), to attract slot
customers and provide diversity of play. In addition, The Grand offers a full
selection of table games including baccarat, blackjack, craps, pai gow poker,
red dog and roulette, among others.
The Grand has more than 500 oceanview hotel rooms (including approximately 200
suites), approximately 20,000 square feet of convention and meeting room space,
three specialty restaurants, a coffee shop, a buffet, a fast-food facility, an
ice cream parlor, a beauty salon and three retail gift shops. Entertainment
facilities include a 540-seat showroom, two cocktail entertainment lounges and
an exclusive penthouse lounge area for select gaming patrons. Recreational
facilities include a health spa and a large swimming pool area. To accommodate
drive-in and bus patrons, The Grand owns a multi-story parking garage and
transportation center which provides valet and self-parking for approximately
1,100 cars and contains 11 bays for buses. In addition, surface parking space
located directly across the street from The Grand accommodates approximately 520
cars.
The Grand's operating strategy is to capitalize on its first-class hotel
facility. In addition to providing a full selection of casino games, The Grand
offers its guests several categories of deluxe rooms, a variety of specialty
restaurants, headline entertainment and other amenities. The first-class nature
of the facility is complemented by an emphasis on personalized service, which is
facilitated by the size of the facility, thereby lending itself to a more
intimate, personal atmosphere for guests. Consistent with this strategy, The
Grand targets both high-end and destination-oriented patrons, primarily drive-in
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patrons. The quality of the facility, together with its proximity to a major
highway, assist in attracting these gaming patrons. The Grand directs its
marketing efforts towards expanding its domestic customer base and attracting
international gaming patrons.
The Grand's revenues and earnings peak during the summer season, with less
favorable operating results during the winter. The Grand employs approximately
3,200 persons in the operation of its business.
BALLY'S LAS VEGAS. Bally's Las Vegas is situated on an approximately 30-acre
site on the Las Vegas "Strip" at the well-known "Four Corners" intersection of
Las Vegas Boulevard South and Flamingo Road. Bally's Las Vegas is centrally
located and is within walking distance of many of the other major casino hotels
on the Strip, which management believes enhances its visibility and provides it
with an advantage in attracting hotel guests and convention business.
Bally's Las Vegas currently encompasses approximately 3.2 million square feet of
space in two high-rise hotel towers connected by a low-rise structure containing
a 56,000-square foot casino. The casino features approximately 1,500 slot
machines, 72 table games, a Keno area and a race and sports book area. In order
to promote slot machine play, which generates higher margins than table game
play, Bally's Las Vegas emphasizes the configuration and location of its slot
machine areas. In addition, Bally's Las Vegas offers a full selection of table
games, including baccarat, blackjack, craps, roulette, pai gow poker, Caribbean
stud poker and a "big-six" wheel.
Bally's Las Vegas, which has recently completed an extensive renovation program,
has more than 2,800 hotel rooms (including 237 suites) and one of the largest
casino hotel convention facilities in Las Vegas with approximately 175,000
square feet of meeting space. The complex also includes two entertainment
showrooms (with a combined seating capacity of 2,500), a theater, five
restaurants, a coffee shop, two bars, a casino lounge, a state-of-the-art health
spa, a swimming pool and cabana area, 10 tennis courts and a retail shopping
arcade. In addition, separate subsidiaries of Bally's Grand, Inc. own
approximately 24 acres of land situated adjacent to Bally's Las Vegas (on which
a small retail shopping center is located), approximately 14 acres of land
situated adjacent to Bally's Las Vegas (on which a parking lot is located) and 5
acres of land situated in North Las Vegas, Nevada (on which supporting
facilities used by Bally's Las Vegas are located).
Bally's Las Vegas targets consistent wagerers in the middle to upper-middle tier
of the gaming market and convention business. Bally's Las Vegas' operating
strategy is designed to attract and retain these customers by capitalizing on
the quality of its facilities and providing its guests with a full range of
resort amenities and personalized services and attention, emphasizing its "Touch
of Class" motto. Management believes that the spacious configuration of Bally's
Las Vegas' casino and the size of its standard hotel rooms, which are among the
largest offered on the Strip, contribute to its upscale image and help it to
attract these targeted customers. Convention business also represents an
important segment of Bally's Las Vegas' operating strategy as it provides the
hotel with mid-week occupancy at generally higher room rates than standard
mid-week rates. Management believes that the size of Bally's Las Vegas'
convention meeting space combined with its extensive convention amenities and
services makes it one of the principal convention forums in Las Vegas.
Bally's Las Vegas has commenced the construction of improvements to its frontage
area along the Strip (with completion expected in mid-1994) and has formed a
joint venture with a subsidiary of MGM Grand, Inc. to construct and operate a
monorail that will transport passengers between Bally's Las Vegas and The MGM
Grand Hotel and Theme Park (with completion expected in mid-1995). These capital
improvement projects are expected to cost Bally's Las Vegas approximately $28
million and are intended to increase traffic into its casino.
Business at Bally's Las Vegas is somewhat seasonal, usually declining in the
summer months and in December. Bally's Las Vegas employs approximately 4,200
persons in the operation of its business.
BALLY'S TUNICA. Bally's Tunica, which commenced operations in December 1993, is
a western-themed entertainment complex with a dockside casino and saloon and
land-based food court located on 20 acres of leased property at Mhoon Landing in
Tunica, Mississippi (located
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approximately 35 miles from Memphis, Tennessee).
Bally's Tunica is presently one of the largest casinos in Tunica with 40,000
square feet of casino floor space. The casino features approximately 1,150 slot
machines (including over a dozen with progressive slot links) and 65 table games
(including blackjack, craps, mini-baccarat, poker and roulette, among others).
Bally's Tunica's 4,000 square-foot saloon is adjacent to the casino and features
live Country & Western music nightly plus a giant screen television for sporting
events. The saloon features Country & Western dance lessons and karaoke in the
afternoons. Bally's Tunica also has a 20,000 square-foot food court which offers
a variety of menu items. The atmosphere at Bally's Tunica is open and airy, with
wide aisles and ample space between games. A "Wild West" theme with exposed
wooden beams along the ceiling and wall treatments of wood, stone and wallpaper
reminiscent of the 1800's is intended to create a rustic feel for its patrons.
Valet or self-parking is available for approximately 1,100 vehicles.
Bally's Tunica's operating strategy is to provide its patrons with an enjoyable
gaming experience through a well-trained, friendly staff in a well-maintained,
spacious facility. The marketing strategy of Bally's Tunica is to generate a
high volume of play from casino customers in the regional area.
Management of Bally's Tunica believes its twenty-acre size provides flexibility
to grow with the Tunica marketplace. Developers of the Mhoon Landing site have
announced plans to add hotel rooms and additional non-casino entertainment in
the area. In addition, each dockside gaming property in Tunica incorporates an
80 foot easement along the Mississippi River to allow for future construction of
a walkway along the riverfront connecting each property.
Bally's Tunica employs approximately 1,000 persons in the operation of its
business.
COMPETITION
GENERAL. The Company's casinos face significant competition from both
established casinos and newly emerging gaming operations. The Company believes
that the legalization of casino gaming in jurisdictions such as Mississippi,
Louisiana, South Dakota, Iowa, Illinois and Colorado, and Indian gaming in
Connecticut and elsewhere, has not, to date, had a material adverse impact on
its Atlantic City or Las Vegas operations. The Company, however, believes that
the adoption of legislation approving casino gaming in any jurisdiction near New
Jersey (particularly Maryland, New York or
Pennsylvania) or near Nevada (particularly California or the other southwestern
states) could have a material adverse effect on its present operations. There
have been proposals made for water-based casinos in a number of other
jurisdictions and several large metropolitan areas, including Chicago, where the
Company is headquartered and Philadelphia, where the Company holds an option on
a large tract of waterfront property. The Company also competes with other forms
of legalized gaming, including state-sponsored lotteries, jai alai, off-track
wagering and card parlors. In markets in which the Company commences operations,
it faces intense competition for desirable sites, qualified personnel and,
ultimately, customers from other companies in the gaming industry. Legalization
of gaming in additional jurisdictions will provide opportunities for expansion
by the Company's competitors, which could adversely affect the Company's
existing and proposed operations.
The Company believes that casino competition in the markets in which it competes
is based primarily on the location and physical design of the casino and, where
applicable, hotel accommodations, the extent and quality of personalized service
offered to guests and casino customers, the price and quality of rooms and food
and beverages, the number and quality of its restaurants, convention and other
public facilities, promotional allowances, the entertainment offered, the
variety of table games and slot machines, table limits, casino credit granted to
customers and parking capacity. Management believes that the reputation of each
of the Company's casinos as a first-class facility enhances their
competitiveness in each of their markets.
ATLANTIC CITY. Since April 1990, there have been 10 casino hotel facilities
operating in Atlantic City in competition with Bally's Park Place and The Grand,
which are also in competition with each other. There have been no public
announcements concerning new casino openings; however, several Atlantic City
casinos have announced
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plans for expansion or are currently in the process of expanding their
facilities. These expansions will increase competition in the Atlantic City
market, particularly as additional slot machines are added. Bally's Park Place
has a central location which positively affects its competitive position. The
Grand, however, is geographically removed from the newest Atlantic City casino
hotels and others that have made significant capital improvements, which has
adversely affected its competitive position.
LAS VEGAS. Bally's Las Vegas competes principally with other casino hotels and
casinos located in Las Vegas. Currently, there are approximately 30 major casino
hotels located on or near the Strip, 10 major casino hotels located in the Las
Vegas downtown area and several major facilities located elsewhere in the Las
Vegas area. As a result of new construction projects and certain expansions by
casino hotels located on or near the Strip, between September 1989 and December
1993, Las Vegas casino space increased significantly and hotel and motel room
capacity increased by approximately 23,000 rooms or 40%. A significant portion
of the increase is a result of The Luxor, Treasure Island and The MGM Grand
Hotel and Theme Park, three new major casino hotels which opened during the
latter part of 1993. Bally's Las Vegas believes that the increases in casino and
hotel room capacity during the past four years, combined with a weak economy,
although partially offset by an increase in the number of visitors to Las Vegas,
have had and may continue to have, a negative impact on Bally's Las Vegas'
results of operations. However, management believes that Bally's Las Vegas'
central location has had and will continue to have a positive effect on its
competitive position. Further, Bally's Las Vegas has recently completed
renovations to approximately 2,000 of its hotel rooms, certain suites, the
corridors in its main tower, a restaurant, casino lounge and reception area and,
as previously described, has plans for significant capital improvement projects,
which are intended to enhance its competitiveness in the Las Vegas market.
TUNICA. Currently, twenty-five gaming operators' licenses have been issued and
forty-four additional operators' applications were pending before the
Mississippi Gaming Commission. Sixteen of these operators' applications are for
facilities located in Tunica County, Mississippi. Including Bally's Tunica, six
gaming facilities are presently operating in Tunica County. Facilities which
have already commenced or subsequently commence operations in or near the Tunica
market present significant competition for Bally's Tunica.
GAMING REGULATION
GENERAL. Gaming is regulated in every jurisdiction in which it is currently
legalized, and regulations generally require receipt of a license prior to
commencement of gaming operations. The regulatory frameworks may impose
restrictions or costs including additional taxes that materially detract from
the feasibility or profitability of gaming operations. Gaming regulations and
their enforcement are within the discretion of the regulating jurisdictions, and
the Company cannot predict what these regulations will be, how they will be
enforced or what effect, if any, these regulations will have on the Company. In
addition, floating gaming ventures such as Bally's Tunica require compliance
with certain maritime laws and United States Coast Guard regulations.
NEW JERSEY REGULATION. Gaming activities in Atlantic City are subject to the New
Jersey Casino Control Act (the "New Jersey Act"), regulations of the New Jersey
Casino Control Commission (the "New Jersey Commission") and other applicable
laws. No casino may operate unless the required permits or licenses and
approvals are obtained from the New Jersey Commission. The New Jersey Commission
is authorized under the New Jersey Act to adopt regulations covering a broad
spectrum of gaming and gaming-related activities and to prescribe the methods
and forms of applications from all classes of licensees. These laws and
regulations concern primarily: (i) the financial stability, integrity,
responsibility, good character, honesty and business ability of casino service
suppliers and casino operators, their directors, officers and employees, their
security holders and others financially interested in casino operations, (ii)
the nature of casino hotel facilities, and (iii) the operating methods and
financial and accounting practices used in connection with the casino
operations. Taxes are imposed by the State of New Jersey on gaming operations at
the rate of 8% of gross gaming revenues. In addition, the New Jersey Act
provides for an investment alternative tax of 2.5% of gross gaming revenues.
This investment alternative tax may be offset by investment tax credits, which
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are obtained by purchasing bonds issued by or investing in housing or other
development projects approved by the New Jersey Casino Reinvestment Development
Authority, a state agency. New laws and regulations, as well as amendments to
existing laws and regulations, relating to gaming activities in Atlantic City
are periodically introduced or proposed and sometimes adopted.
The New Jersey Commission has broad discretion with regard to the issuance,
renewal and revocation or suspension of casino licenses. A casino license is not
transferable, is issued for a term of up to one year for the first two renewals
and thereafter for a term of up to two years (subject to discretionary reopening
of the licensing hearing by the New Jersey Commission at any time), and must be
renewed by filing an application which must be acted on by the New Jersey
Commission prior to the expiration of the license in force. At any time, upon a
finding of disqualification or noncompliance, the New Jersey Commission may
revoke or suspend a license or impose fines.
The New Jersey Act imposes certain restrictions on the ownership and transfer of
securities issued by a corporation that holds a casino license or is deemed a
holding company, intermediary company, subsidiary or entity qualifier (each, an
"affiliate") of a casino licensee. "Security" is defined by the New Jersey Act
to include instruments that evidence either a beneficial ownership in an entity
(such as common stock and preferred stock) or a creditor interest in an entity
(such as a bond, note or mortgage). Pursuant to the New Jersey Act, the
corporate charter of a publicly traded affiliate of a casino licensee must
require that a holder of the company's securities dispose of such securities if
the holder's continued holding would result in the company or any other
affiliate being no longer qualified to continue as a casino licensee under the
New Jersey Act. The corporate charter of a casino licensee or any privately held
affiliate of the licensee must: (i) establish the right of prior approval by the
New Jersey Commission with regard to a transfer of any security in the company
and (ii) create the absolute right of the company to repurchase at the market
price or purchase price, whichever is less, any security in the company in the
event the New Jersey Commission disapproves a transfer of such security under
the New Jersey Act. The corporate charters of the Company's subsidiaries that
operate Bally's Park Place and The Grand and the charters of their privately
held affiliates conform with the New Jersey Act's requirements described above
for privately held companies.
If the New Jersey Commission finds that an individual owner or holder of
securities of a corporate licensee or an affiliate of such corporate licensee is
not qualified under the New Jersey Act, the New Jersey Commission may propose
remedial action. The New Jersey Commission may require divestiture of the
securities held by any disqualified holder who is required to be qualified under
the New Jersey Act (e.g., officers, directors, security holders and key casino
and other employees). In the event that disqualified persons fail to divest
themselves of such securities, the New Jersey Commission may revoke or suspend
the license. However, if an affiliate of a casino licensee is a publicly traded
company and the New Jersey Commission finds disqualified any holder of any
security thereof who is required to be qualified, and the New Jersey Commission
also finds that: (i) such company has complied with aforesaid charter
provisions, (ii) such company has made a good faith effort, including the
prosecution of all legal remedies, to comply with any order of the New Jersey
Commission requiring the divestiture of the security interest held by the
disqualified holder, and (iii) such disqualified holder does not have the
ability to control the corporate licensee or any affiliate thereof, or to elect
one or more members of the board of directors of such affiliate, the New Jersey
Commission will not take action against the casino licensee or its affiliate
with respect to the continued ownership of the security interest by the
disqualified holder.
For purposes of the New Jersey Act, a security holder is presumed to have the
ability to control a publicly traded corporation, or to elect one or more
members of its board of directors, if such holder owns or beneficially holds 5%
or more of the equity securities of such corporation, unless such presumption of
control or ability to elect is rebutted by clear and convincing evidence. An
"institutional investor," as that term is defined under the New Jersey Act, is
entitled to a waiver of qualification if it holds less than 10% of the equity
securities of a publicly traded holding or intermediary company of a casino
licensee and: (i) the holdings were purchased for
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investment purposes only, (ii) there is no cause to believe the institutional
investor may be found unqualified, and (iii) upon request by the New Jersey
Commission, the institutional investor files a certified statement to the effect
that it has no intention of influencing or affecting the affairs of the issuer,
the casino licensee or its other affiliates. The New Jersey Commission may grant
a waiver of qualification to an institutional investor holding 10% or more of
such securities upon a showing of good cause and if the conditions specified
above are met.
With respect to debt securities, the New Jersey Commission generally requires a
person holding 15% or more of a debt issue of a publicly traded affiliate of a
casino licensee to qualify as a "financial source" where the use of the proceeds
from the debt issue is related in any way to the financing of the casino
licensee. There can be no assurance that the New Jersey Commission will continue
to apply the 15% threshold, and the New Jersey Commission could at any time
establish a lower threshold for qualification. An exception to the qualification
requirement is made for institutional investors, in which case the institutional
holder is entitled to a waiver of qualification if the holder's position in the
aggregate is less than 20% of the total outstanding debt of the affiliate and
less than 50% of any outstanding publicly traded issue of such debt, and if the
conditions specified in the above paragraph are met. As with equity securities,
a waiver of qualification may be granted to institutional investors holding
larger positions upon a showing of good cause and if all conditions specified in
the above paragraph are met.
Generally, the New Jersey Commission would require each institutional holder
seeking a waiver of qualification to execute a certificate to the effect that:
(i) the holder has reviewed the definition of institutional investor under the
New Jersey Act and believes that it meets the definition of institutional
investor, (ii) the holder purchased the securities for investment purposes only
and holds them in the ordinary course of business, (iii) the holder has no
involvement in the business activities of, and no intention of influencing or
affecting the affairs of, the issuer, the casino licensee or any affiliate, and
(iv) if the holder subsequently determines to influence or affect the affairs of
the issuer, the casino licensee or any affiliate, it shall provide not less than
30 days' notice of such intent and shall file with the New Jersey Commission an
application for qualification before taking any such action. Commencing on the
date the New Jersey Commission serves notice on a corporate licensee or an
affiliate of such corporate licensee that a security holder of such corporation
has been found disqualified, it will be unlawful for the security holder to: (i)
receive any dividends or interest upon any such securities, (ii) exercise,
directly or through any trustee or nominee, any right conferred by such
securities, or (iii) receive any remuneration in any form from the corporate
licensee for services rendered or otherwise.
Persons who are required to qualify under the New Jersey Act by reason of
holding debt or equity securities are required to place the securities into an
Interim Casino Authorization ("ICA") trust pending qualification. Unless and
until the New Jersey Commission has reason to believe that the investor may not
qualify, the investor will retain the ability to direct the trustee how to vote,
or whether to dispose of, the securities. If at any time the New Jersey
Commission finds reasonable cause to believe that the investor may be found
unqualified, it can order the trust to become "operative," in which case the
investor will lose voting power, if any, over the securities but will retain the
right to petition the New Jersey Commission to order the trustee to dispose of
the securities.
Once an ICA trust is created and funded, and regardless of whether it becomes
operative, the investor has no right to receive a return on the investment until
the investor becomes qualified. Should an investor ultimately be found
unqualified, the trustee would dispose of the trust property, and the proceeds
would be distributed to the unqualified applicant only in an amount not
exceeding the actual cost of the trust property. Any excess proceeds would be
paid to the State of New Jersey. If the securities were sold by the trustee
pending qualification, the investor would receive only actual cost, with
disposition of the remainder of the proceeds, if any, to await the investor's
qualification hearing.
In the event it is determined that a licensee has violated the New Jersey Act or
its regulations, then under certain circumstances, the licensee could be subject
to fines or have its license suspended or revoked. In addition, if a person
required to qualify under the New Jersey Act fails
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to qualify, or if a security holder who is required to qualify fails to qualify
and does not dispose of his securities in the licensee or in any affiliate of
the licensee, as may be required by the New Jersey Act, then, under certain
circumstances, the licensee could have its license suspended or revoked.
If a casino license were not renewed, were suspended for more than 120 days or
were revoked, the New Jersey Commission could appoint a conservator. The
conservator would be charged with the duty of conserving and preserving the
assets so acquired and continuing the operation of the hotel and casino of a
suspended licensee or with operating and disposing of the casino hotel
facilities of a former licensee. Such suspended licensee or former licensee,
however, would be entitled only to a fair return on its investment, to be
determined under New Jersey law, with any excess to go to the State of New
Jersey, if so directed by the New Jersey Commission. Suspension or revocation of
any licenses or the appointment of a conservator by the New Jersey Commission
would have a material adverse effect on the business of Bally's Park Place, Inc.
and GNAC.
In September 1992, the casino licenses of Bally's subsidiaries that operate
Bally's Park Place and The Grand were renewed by the New Jersey Commission for a
two-year period ending September 30, 1994. The Company is not aware of any
reasons that the licenses would not be renewed during 1994 for an additional two
years.
NEVADA REGULATION. The ownership and operation of casino gaming facilities in
Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, the "Nevada Act"), and (ii) various local
ordinances and regulations. Bally's Grand, Inc.'s gaming operations are subject
to the licensing and regulatory control of the Nevada Gaming Commission (the
"Nevada Commission"), the Nevada State Gaming Control Board (the "Nevada
Board"), and the Clark County Liquor and Gaming Licensing Board (the "Clark
County Board"). The Nevada Commission, the Nevada Board and the Clark County
Board are collectively referred to herein as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity, (ii) the establishment and maintenance of responsible accounting
practices and procedures, (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities, (iv) the prevention of cheating and
fraudulent practices, and (v) providing a source of state and local revenues
through taxation and licensing fees. Change in such laws, regulations and
procedures could have an adverse effect on Bally's Las Vegas' gaming operations.
Bally is registered by the Nevada Commission as a publicly traded corporation (a
"Registered Corporation") and has been found suitable (i) to acquire control of
Bally's Grand, Inc. and (ii) to indirectly own the stock of Bally's Grand
Management Co., Inc. ("Management Co."), which is the manager of Bally's Grand,
Inc. Bally's Grand, Inc. is also a Registered Corporation and has been found
suitable to own the stock of Grand Resorts, Inc. ("GRI"), which operates the
Bally's Las Vegas casino. GRI is required to be licensed by the Nevada Gaming
Authorities. The gaming license held by GRI requires the payment of fees and
taxes and is not transferable. GRI is also licensed as a manufacturer and
distributor of gaming devices. Such manufacturer's and distributor's licenses
are not transferable and require the annual payment of fees. Management Co. is
licensed by the Nevada Commission as a manager for Bally's Grand, Inc. and such
license is not transferable. GRI and Management Co. are each a corporate
licensee (individually a "Corporate Licensee" and collectively, the "Corporate
Licensees") under the terms of the Nevada Act. As Registered Corporations, Bally
and Bally's Grand, Inc. are required periodically to submit detailed financial
and operating reports to the Nevada Commission and furnish any other information
which the Nevada Commission may require. No person may become a stockholder of,
or receive any percentage of profits from the Corporate Licensees without first
obtaining licenses and approvals from the Nevada Gaming Authorities. Bally,
Bally's Grand, Inc. and the Corporate
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Licensees have obtained from the Nevada Gaming Authorities the various
registrations, approvals, permits and licenses required in order to engage in
gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a material
relationship to, or material involvement with, Bally, Bally's Grand, Inc. or the
Corporate Licensees in order to determine whether such individual is suitable or
should be licensed as a business associate of a gaming licensee. Officers,
directors and certain key employees of the Corporate Licensees must file
applications with the Nevada Gaming Authorities and may be required to be
licensed or found suitable by the Nevada Gaming Authorities. Officers, directors
and key employees of Bally or Bally's Grand, Inc. who are actively and directly
involved in gaming activities of the Corporate Licensees may be required to be
licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming
Authorities may deny an application for licensing for any cause which they deem
reasonable. A finding of suitability is comparable to licensing, and both
require submission of detailed personal and financial information followed by a
thorough investigation. The applicant for licensing or a finding of suitability
must pay all the costs of the investigation. Changes in licensed positions must
be reported to the Nevada Gaming Authorities and, in addition to their authority
to deny an application for a finding of suitability or licensure, the Nevada
Gaming Authorities have jurisdiction to disapprove a change in a corporate
position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with Bally, Bally's Grand, Inc. or the Corporate Licensees, the
companies involved would have to sever all relationships with such person. In
addition, the Nevada Commission may require Bally, Bally's Grand, Inc. or the
Corporate Licensees to terminate the employment of any person who refuses to
file appropriate applications. Determination of suitability or of questions
pertaining to licensing are not subject to judicial review in Nevada.
Bally, Bally's Grand, Inc. and the Corporate Licensees are required to submit
detailed financial and operating reports to the Nevada Commission. Substantially
all material loans, leases, sales of securities and similar financing
transactions by the Corporate Licensees must be reported to or approved by the
Nevada Commission.
If it were determined that the Nevada Act was violated by a Corporate Licensee,
the gaming licenses it holds could be limited, conditioned, suspended or
revoked, subject to compliance with certain statutory and regulatory procedures.
In addition, the Corporate Licensees, Bally, Bally's Grand, Inc. and the persons
involved could be subject to substantial fines for each separate violation of
the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor
could be appointed by the Nevada Commission to operate the Bally's Las Vegas
casino and, under certain circumstances, earnings generated during the
supervisors' appointment (except for reasonable rental value of the casino)
could be forfeited to the State of Nevada. Limitation, conditioning or
suspension of any gaming license or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect Bally's Las
Vegas' gaming operations.
Any beneficial holder of Bally's or Bally's Grand, Inc.'s voting securities,
regardless of the number of shares owned, may be required to file an
application, be investigated, and have his suitability determined as a
beneficial holder of such voting securities if the Nevada Commission has reason
to believe that such ownership would otherwise be inconsistent with the declared
policies of the State of Nevada. The applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in conducting any such
investigation.
The Nevada Act requires any person who acquires more than 5% of a Registered
Corporation's voting securities to report the acquisition to the Nevada
Commission. The Nevada Act requires that beneficial owners of more than 10% of a
Registered Corporation's voting securities apply to the Nevada Commission for a
finding of suitability within thirty days after the Chairman of the Nevada Board
mails a written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires more than
10%, but not more than 15%, of the Registered Corporation's voting securities
may apply to the Nevada Commission for a waiver of such finding of suitability
if such institutional investor holds the voting securities for investment
purposes only. An institutional
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investor shall not be deemed to hold voting securities for investment purposes
unless the voting securities were acquired and are held in the ordinary course
of business as an institutional investor and not for the purpose of causing,
directly or indirectly, the election of a majority of the members of the board
of directors of the Registered Corporation, any change in the Registered
Corporation's corporate charter, bylaws, management, policies or operations of
the Registered Corporation, or any of its gaming affiliates, or any other action
which the Nevada Commission finds to be inconsistent with holding the Registered
Corporation's voting securities for investment purposes only. Activities which
are not deemed to be inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by stockholders, (ii)
making financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations, and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent. If
the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock
beyond such period of time as may be prescribed by the Nevada Commission may be
guilty of a criminal offense. Bally and Bally's Grand, Inc. would be subject to
disciplinary action if, after they receive notice that a person is unsuitable to
be a stockholder or to have any other relationship with Bally, Bally's Grand,
Inc. or the Corporate Licensees, Bally or Bally's Grand, Inc.: (i) pays that
person any dividend or interest upon voting securities of Bally or Bally's
Grand, Inc., (ii) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person, (iii) pays
remuneration in any form to that person for services rendered or otherwise, or
(iv) fails to pursue all lawful efforts to require such unsuitable person to
relinquish his voting securities including, if necessary, the immediate purchase
of said voting securities for cash at fair market value. Additionally, the Clark
County Board has taken the position that it has the authority to approve all
persons owning or controlling the stock of any corporation controlling a gaming
license.
The Nevada Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated and
be found suitable to own the debt security of a Registered Corporation. If the
Nevada Commission determines that a person is unsuitable to own such security,
then pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend, interest, or any
distribution whatsoever, (ii) recognizes any voting right by such unsuitable
person in connection with such securities, (iii) pays the unsuitable person
remuneration in any form, or (iv) makes any payment to the unsuitable person by
way of principal, redemption, conversion, exchange, liquidation or similar
transaction.
Bally and Bally's Grand, Inc. are required to maintain a current stock ledger in
Nevada which may be examined by the Nevada Gaming Authorities at any time. If
any securities are held in trust by an agent or by a nominee, the record holder
may be required to disclose the identity of the beneficial owner to the Nevada
Gaming Authorities. A failure to make such disclosure may be grounds for finding
the record holder unsuitable. Bally and Bally's Grand, Inc. are also required to
render maximum assistance in determining the identity of the beneficial owner.
The Nevada Commission has the power to require the stock certificates of Bally
and Bally's Grand, Inc. to bear a legend indicating that the securities are
subject to the Nevada Act. However, to date, the Nevada Commission has not
imposed such a requirement on Bally or Bally's Grand, Inc.
Neither Bally nor Bally's Grand, Inc. may make a public offering of its
securities without the prior approval of the Nevada Commission if the securities
or proceeds therefrom are intended to be used to construct, acquire or finance
gaming
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facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding, recommendation
or approval by the Nevada Commission or the Nevada Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities offered.
Any representation to the contrary is unlawful.
Changes in control of Bally or Bally's Grand, Inc. through merger,
consolidation, stock or asset acquisitions, management or consulting agreements,
or any act or conduct by a person whereby he obtains control, may not occur
without the prior approval of the Nevada Commission. Entities seeking to acquire
control of a Registered Corporation must satisfy the Nevada Board and the Nevada
Commission in a variety of stringent standards prior to assuming control of such
Registered Corporation. The Nevada Commission may also require controlling
stockholders, officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process relating to the
transaction.
The Nevada legislature has declared that some corporate acquisitions opposed by
management, repurchases of voting securities and corporate defense tactics
affecting Corporate Licensees, and Registered Corporations that are affiliated
with those operations, may be injurious to stable and productive corporate
gaming. The Nevada Commission has established a regulatory scheme to ameliorate
the potentially adverse effects of these business practices upon Nevada's gaming
industry and to further Nevada's policy to: (i) assure the financial stability
of Corporate Licensees and their affiliates, (ii) preserve the beneficial
aspects of conducting business in the corporate form, and (iii) promote a
neutral environment for the orderly governance of corporate affairs. Approvals
are, in certain circumstances, required from the Nevada Commission before a
Registered Corporation can make exceptional repurchases of voting securities
above the current market price thereof and before a corporate acquisition
opposed by management can be consummated. The Nevada Act also requires prior
approval of a plan of recapitalization proposed by the Registered Corporation's
Board of Directors in response to a tender offer made directly to the Registered
Corporation's stockholders for the purposes of acquiring control of the
Registered Corporation.
License fees and taxes, computed in various ways depending on the type of gaming
or activity involved, are payable to the State of Nevada and to the counties and
cities in which the Nevada licensee's respective operations are conducted.
Depending upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon either: (i) a
percentage of the gross revenues received, (ii) the number of gaming devices
operated or (iii) the number of table games operated. A casino entertainment tax
is also paid by casino operations where entertainment is furnished in connection
with the selling of food or refreshments. Nevada gaming licensees that hold a
license as an operator of a slot route, or a manufacturer's or distributor's
license, also pay certain fees and taxes to the State of Nevada.
Any person who is licensed, required to be licensed, registered, required to be
registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation by
the Nevada Board of their participation in such foreign gaming. The revolving
fund is subject to increase or decrease in the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operations, fail to
conduct the foreign gaming operations in accordance with the standards of
honesty and integrity required of Nevada gaming operations, engage in activities
that are harmful to the State of Nevada or its ability to collect gaming taxes
and fees, or employ a person in the foreign operation who has been denied a
license or finding of suitability in Nevada on the grounds of personal
unsuitability.
MISSISSIPPI REGULATION. Mississippi has adopted regulatory requirements which
are similar to Nevada's with respect to the discretion given the regulators in
granting licenses, financial qualification of licensees and qualification of
security holders, officers, directors and key
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employees. The Mississippi regulations also restrict the ability to pay interest
to debt security holders who are not found suitable and require redemption of
such debt securities from those holders who are denied licensing. The
Mississippi Gaming Commission may conduct a suitability investigation of holders
at any time. Mississippi regulation requires prior approval to recapitalize or
engage in gaming outside of Mississippi.
FEDERAL REGISTRATION. The operating subsidiaries of Bally that are involved in
gaming activities are required to make annual filings with the Attorney General
of the United States in connection with the operation of slot machines. All
requisite filings for the present year have been made.
FITNESS CENTERS
Bally's Health & Tennis is the largest (and the only nationwide) commercial
operator of fitness centers in the United States in terms of revenues, members,
and number and square footage of facilities. Bally's Health & Tennis operates
339 fitness centers located in 27 states with approximately 4.2 million members.
The fitness centers operate under the "Bally's" name in conjunction with various
well-recognized names, including Holiday Health, Jack LaLanne, Holiday Spa,
Chicago Health Clubs, Scandinavian, President's First Lady, Vic Tanny and
Aerobics Plus, and as The Vertical Clubs. Most of the Company's fitness centers
are located in major metropolitan markets in the United States, including Los
Angeles, New York, Chicago, Washington, D.C., Philadelphia, Houston, Dallas,
Minneapolis, Detroit, Miami, Atlanta, Cleveland, Seattle, Phoenix and Denver. In
addition, the Company operates three fitness centers in Canada. Bally's Health &
Tennis owns 34 locations and leases space, generally pursuant to long-term
leases which are renewable, in the other locations where it operates fitness
centers. The average size of the Company's fitness centers is approximately
30,000 square feet.
Bally's Health & Tennis' strategy is to offer members value by providing
state-of-the-art facilities and membership programs at economical prices. The
fitness centers offer prospective members the option of financing their initial
membership fees as an alternative to a lump sum cash payment, and considers
payment flexibility to be a competitive advantage over most of its competitors.
As part of Bally's Health & Tennis' strategy, fitness centers are clustered in
major metropolitan areas in order to achieve advertising, marketing and
operating efficiencies.
Bally's Health & Tennis offers, on a membership basis, the use of its fitness
centers, including planned exercise programs and instruction stressing
cardiovascular conditioning, strength development and improved appearance. Most
fitness centers provide a wide variety of progressive resistance, cardiovascular
and conditioning exercise equipment and free weights in addition to aerobic
exercise rooms, steam rooms, whirlpools and saunas, and many centers offer
additional spa areas as well as indoor swimming pools, jogging tracks and, in
some cases, tennis and racquetball courts.
Bally's Health & Tennis currently offers its members four basic membership
plans. The membership plans primarily differ by the inclusion of additional
in-club services (such as racquetball facilities and child care), accessibility
to other fitness centers operated by Bally's Health & Tennis, either locally or
nationally, and the ability to transfer the membership. From time to time,
Bally's Health & Tennis also offers special membership plans which limit access
to fitness centers to certain days and non-peak hours. Members can also choose
from several payment mechanisms and downpayment options. In addition to the
one-time initial membership fee, members must pay membership dues in order to
maintain their membership privileges. As one way of emphasizing the value and
affordability of its memberships, Bally's Health & Tennis offers different
renewal plans with prices that vary depending on the member's historical usage
of the fitness center facilities.
Bally's Health & Tennis is the largest operator or is among the largest
operators in every major market in which it has fitness centers. Management
believes its fitness centers generally offer a high level of amenities to its
target market, the 18 to 34-year old, middle income segment of the population.
Within each market, Bally's Health & Tennis competes with other fitness centers,
physical fitness and recreational facilities established by local governments
and businesses for their employees, the YMCA and similar organizations and, to a
certain extent, with racquet and tennis and other athletic clubs, country clubs,
weight reducing salons and retail
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stores selling home-use fitness equipment. However, Bally's Health & Tennis
believes that its operating experience, its ability to allocate advertising
costs over all its fitness centers, and its account processing and collection
infrastructure give it an advantage over its competitors. Bally's Health &
Tennis believes that its membership plans are affordable and have the
flexibility to be responsive to economic conditions. However, Bally's Health &
Tennis also competes with other unrelated end-users of the discretionary income
of its targeted market group.
Bally's Health & Tennis' focus is on increasing cash flows and revenues from its
existing fitness centers through greater penetration of its target market, the
18 to 34-year old, middle income segment of the population. The fitness centers
have programs such as "Step Aerobics" and "The 30-Minute Workout" to expand the
appeal of its services. Additional amenities planned for 1994 include providing
its fitness center members with offerings of health and fitness-related
merchandise, as well as a co-branded Bally's VISA(R) credit card. Bally's Health
& Tennis also believes that the spread of the fitness commitment to older
Americans represents a substantial growth opportunity. Accordingly, the fitness
centers seek to capitalize on this opportunity by providing and marketing
special fitness programs for the 35 to 49-year old and older age groups. Special
fitness activities such as personal training, water and other low-impact
aerobics programs and walking programs as well as special services such as child
care at many fitness centers are examples of Bally's Health & Tennis' efforts to
attract prospective members in these age groups, and Bally's Health & Tennis
expects these efforts to enhance its competitive advantage in attracting new
members and retaining existing members as members age.
Bally's Health & Tennis intends to continue its program of upgrading its fitness
centers by remodeling, expanding or replacing older, smaller fitness centers,
closing selected existing facilities that management believes do not present
sufficient growth opportunities and selectively constructing new facilities,
primarily in established markets. Recently constructed fitness centers have been
and will continue to be somewhat smaller than those constructed in the 1980's as
the design of new fitness centers focuses on fitness services that members most
frequently use rather than on a broader range of fitness services that have very
low usage, such as pools, sauna and steam facilities or jogging tracks.
Historically, Bally's Health & Tennis has experienced greater sales in the first
quarter of the year. In recent years, Bally's Health & Tennis has lessened this
seasonal effect by the use of sales incentives and awards for sales personnel
and members, as well as other marketing initiatives. Bally's Health & Tennis
employs approximately 19,200 persons in the operation of its business, including
approximately 9,900 part-time employees.
COPYRIGHTS AND TRADEMARKS
The Company owns or is licensed under a number of copyrights, trademarks and
trade names. Several of the copyrights, trademarks and trade names used by the
Company are considered to have substantial value in its businesses.
ITEM 3. LEGAL PROCEEDINGS
Several purported derivative actions against Bally and certain of its
current and former directors, originally filed in December 1990 and January
1991, have been consolidated under the caption "In re: Bally Manufacturing
Corporation Shareholders Litigation in the Court of Chancery of the State of
Delaware, New Castle County." The consolidated complaint alleges, among other
things, breach of fiduciary duty, corporate mismanagement, and waste of
corporate assets in connection with certain actions including, among other
things, payment of compensation, certain acquisitions by Bally, the
dissemination of allegedly materially false and misleading information, the
proposed restructuring of Bally's debt, and a subsidiary's allegedly
discriminatory practices. The plaintiffs seek, among other things: (i)
injunctions against payment of certain termination compensation benefits and
implementation of the proposed restructuring plan, (ii) rescission of
consummated transactions and a declaration that the complained of transactions
are null and void, (iii) an accounting by individual defendants of damages to
Bally and benefits received by such defendants, (iv) the appointment of a
representative to negotiate on behalf of the stockholders in connection with
any proposed restructuring, and (v) costs and disbursements, including a
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reasonable allowance for the fees and expenses of plaintiffs' attorneys,
accountants and experts.
In January 1992, a purported holder of Bally's Grand, Inc.'s bonds filed an
action in the United States District Court for the Central District of
California entitled "Nehus v. Bally Manufacturing Corporation, et al." against
Bally, Bally's Grand, Inc. and certain of Bally's current and former officers
and directors. The complaint alleged, among other things, that defendants
violated the federal securities laws and the California Corporation Code, made
intentional misrepresentations and breached their fiduciary obligations to
plaintiff in connection with a purported exchange of Bally's Grand, Inc.'s
bonds. In December 1992, the claims against former officers and a former
director were dismissed for failure to effect proper service and in July 1993,
Bally and Bally's Grand, Inc. settled the alleged claims against them.
The Internal Revenue Service ("IRS") has completed an audit of the federal
income tax returns of certain of the Company's fitness center subsidiaries for
periods ending on the day these subsidiaries were acquired. Among other things,
the IRS is asserting that these subsidiaries owe additional taxes of
approximately $32 million and substantial amounts of interest with respect to
issues arising pursuant to the Company's election in 1983 to treat the purchases
of stock of these subsidiaries as if they were purchases of assets. The Company
vigorously opposes the IRS' assertions and has filed petitions in the United
States Tax Court contesting the IRS' proposed deficiencies with respect to these
issues. This matter has been docketed for trial in October 1994, however, a
resolution may occur sooner if the Company and the IRS resolve all or some of
these issues by stipulation or otherwise. Based on the information presently
available, there can be no assurance of the outcome of this matter. However, in
the opinion of management, payment, if any, to the IRS of amounts which may be
ultimately deemed owing will not have a material adverse effect on the Company's
consolidated financial position or results of operations, since the Company
believes that it has adequately provided deferred and current taxes related to
this matter, although it could, though it is not expected to, have a material
adverse effect on the Company's liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 4 is inapplicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Arthur M. Goldberg was elected Chairman of the Board of Directors and Chief
Executive Officer of the Company in October 1990 and President of the Company in
January 1993. He is also Chairman of the Company's Executive Committee. In June
1993, he was elected Chairman of the Board of Directors, President and Chief
Executive Officer of Casino Holdings. Since January 1993, Mr. Goldberg has been
Chairman of the Board of Directors and Chief Executive Officer of both Bally's
Park Place, Inc. and GNAC. He has also served as Chief Executive Officer of
Bally's Tunica, Inc. since April 1993 and as a director of Bally's Health &
Tennis since 1990. Mr. Goldberg was elected Chairman of the Board of Directors
and President of Bally's Grand, Inc. in August 1992, and its Chief Executive
Officer in September 1992. Since 1990, he has been Chairman of the Board of
Directors, Chief Executive Officer and President of Di Giorgio Corporation, a
food distributor. Mr. Goldberg is also Managing Partner of Arveron Investments
L.P. and a director of First Fidelity Bancorp. From 1985 to 1989, he was Chief
Executive Officer, President and a director of International Controls
Corporation, a manufacturing and engineering company. Mr. Goldberg is 52 years
of age.
Lee S. Hillman was elected Vice President, Chief Financial Officer and Treasurer
of the Company in November 1991 and Executive Vice President in August 1992. He
has been an Executive Vice President, Chief Financial Officer and a director of
Casino Holdings since June 1993. Mr. Hillman has served as a director of Bally's
Park Place, Inc. since January 1993 and a director of GNAC since February 1993.
He has also been Chief Financial Officer of Bally's Tunica, Inc. since April
1993 and Vice President -- Administration of Bally's Grand, Inc. since August
1993. In addition, he has served as Senior Vice President of Bally's Health &
Tennis since April 1991, Chief Financial Officer of that company since January
1992, one of its directors since September 1992 and its Treasurer since October
1992. From October 1989 to April 1991, he was a partner with the accounting firm
of Ernst & Young. From 1987 to October 1989, he was a
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principal with the accounting firm of Arthur Young & Company, a predecessor to
Ernst & Young. Mr. Hillman is 38 years of age.
Robert G. Conover was elected Vice President, Management Information Systems and
Chief Information Officer of the Company in December 1992. He has been Senior
Vice President, Management Information Systems of Casino Holdings since June
1993 and Senior Vice President of GNOC, CORP. (a subsidiary of GNAC) since 1987.
Mr. Conover was elected a Senior Vice President of Bally's Park Place, Inc. in
January 1993 and for approximately ten years prior thereto, he was a Vice
President of that company. Mr. Conover has also been President of the Bally
Systems division of Gaming since October 1990. From January 1987 to September
1992, he was Vice President, Management Information Systems of Bally's Grand,
Inc. Mr. Conover is 48 years of age.
John W. Dwyer was elected Corporate Controller of the Company in June 1992 and
Vice President in December 1992. He has been a Vice President and Controller of
Casino Holdings since June 1993. From October 1989 to June 1992, he was a
partner with the accounting firm of Ernst & Young. From 1986 to October 1989,
Mr. Dwyer was a partner with the accounting firm of Arthur Young & Company, a
predecessor to Ernst & Young. Mr. Dwyer is 41 years of age.
Harold Morgan was elected Vice President, Human Resources of the Company in
December 1992. Since August 1991, he has been employed by Bally's Health &
Tennis and was elected a Vice President of that company in January 1992. From
1985 until August 1991, Mr. Morgan was Director of Employee and Labor Relations
of the Hyatt Corporation. Mr. Morgan is 37 years of age.
Bernard J. Murphy was elected Vice President, Corporate Affairs and Governmental
Relations of the Company in November 1991. From March 1991 to November 1991, Mr.
Murphy was employed as an executive of Bally and since March 1991, he has been a
Senior Vice President of Bally's Health & Tennis. For 20 years prior to 1990, he
had been with the Federal Bureau of Investigation. Mr. Murphy is 47 years of
age.
Jerry W. Thornburg was elected Vice President, Audit of the Company in July
1993. For approximately five years prior thereto, he was Director of Internal
Audit of the Company. Mr. Thornburg is 50 years of age.
Carol Stone DePaul was elected Secretary of the Company in December 1992. She
has been a Vice President and Secretary of Casino Holdings since June 1993. For
more than four years prior to December 1992, she was Assistant Secretary of the
Company and a member of its law department. Ms. DePaul is 37 years of age.
------------------------------------
Wallace R. Barr was elected President and a director of Bally's Park Place, Inc.
in February 1993 and has served as its Chief Operating Officer since January
1993. He has also been an Executive Vice President, Chief Operating Officer and
a director of Casino Holdings since June 1993 and President of Bally's Tunica,
Inc. since April 1993. Mr. Barr was a Senior Vice President of GNAC from June
1991 to February 1993, has served that company as its Chief Operating Officer
since January 1993 and has been its President and a director since February
1993. From March 1984 to June 1991, he served as Senior Vice President --
Operations of Bally's Park Place, Inc. and from January 1987 to September 1992,
he was Senior Vice President and Treasurer of Bally's Grand, Inc. Mr. Barr is 48
years of age.
Michael G. Lucci, Sr. was elected President of Bally's Health & Tennis in April
1993 and Chief Operating Officer in October 1992. He has been a director of
Bally's Health & Tennis since September 1992. From 1991 to April 1993, he served
as Executive Vice President of Bally's Health & Tennis and supervised the
eastern region of that company for more than two years prior to 1991. Mr. Lucci
is 54 years of age.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Bally Common Stock, par value $.66 2/3 per share (the "Common Stock"), is traded
on the New York Stock Exchange and Chicago Stock Exchange. The Company suspended
cash dividend payments on the Common Stock beginning with the fourth quarter of
1990. The high and low quarterly sales prices on the New York Stock Exchange for
the past two years are as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
1993
High..................................................... $8 1/8 $12 3/4 $10 3/4 $10 3/8
Low...................................................... 6 6 3/8 8 1/8 8 3/8
1992
High..................................................... 8 1/8 6 5/8 6 1/8 7 7/8
Low...................................................... 4 7/8 4 1/8 4 3/8 4 1/4
</TABLE>
The number of record holders of the Common Stock at March 24, 1994 was 16,555.
For restrictions on the ability of Bally's subsidiaries to pay dividends, see
Liquidity and Capital Resources in Item 7 of this Report.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
(In millions, except per share data)
Years ended December 31:
Revenues.................................... $1,320.1 $1,297.0 $1,262.5 $1,374.6 $1,354.1
Equity in net loss of Bally's Grand, Inc.
(pre-reorganization)..................... (186.6) (17.1)
Loss from continuing operations............. (16.0) (9.0) (67.7) (277.0) (26.6)
Loss from continuing operations per common
and common equivalent share.............. (.40) (.28) (2.08) (10.03) (1.29)
Cash dividends per common share............. .225 .285
At December 31:
Total assets................................ 2,539.6 1,924.6 2,050.1 2,353.0 2,497.2
Total debt.................................. 1,494.7 1,021.5 1,130.9 1,453.8 1,340.0
Stockholders' equity........................ 364.1 410.2 364.7 332.5 596.6
</TABLE>
- ---------------
Note:
During 1993, Casino Holdings and another subsidiary of Bally acquired
approximately 5.2 million shares (approximately 50% of the shares presently
outstanding) of reorganized Bally's Grand, Inc. common stock. Bally's Grand,
Inc. has been consolidated since December 1, 1993 as a result of Bally's
controlling interest. Prior to December 1, 1993, Bally's investment in Bally's
Grand, Inc. was principally recorded on the equity method of accounting. See
Notes to consolidated financial statements -- Acquisition of Bally's Grand, Inc.
for additional information.
ITEM 7. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
In late 1992, after completing a major restructuring effort which began in
October 1990, the Company began actively pursuing new casino gaming projects. In
April 1993, Casino Holdings was formed as a holding company for Bally's Park
Place, Inc. and for acquiring and developing gaming operations, including those
in newly emerging gaming jurisdictions. In June 1993, Casino Holdings completed
a private placement of $220.0 million principal amount of Senior Discount Notes
and received net proceeds therefrom of approximately $127.9 million which
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have been and are being used to: (i) construct and equip Bally's Tunica (which
commenced operations in December 1993), (ii) acquire a significant equity
interest in Bally's Las Vegas (which caused its consolidation effective December
1, 1993), (iii) fund initial payments for construction of a riverboat (including
dockside improvements) for eventual operation in New Orleans, (iv) fund an
option agreement to acquire certain riverfront property in Philadelphia for the
purpose of developing a dockside gaming facility if gaming were to be legalized
in Pennsylvania and (v) pursue other gaming opportunities.
RESULTS OF OPERATIONS
Revenues and operating income (loss) from continuing operations are as follows
(in millions):
<TABLE>
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Casinos...................................................... $ 619.2 $ 552.8 $ 536.2
Fitness centers.............................................. 694.8 741.9 720.4
Corporate.................................................... 8.0 2.5 8.0
Intersegment eliminations and other.......................... (1.9) (.2) (2.1)
-------- -------- --------
Consolidated revenues from continuing operations............. $1,320.1 $1,297.0 $1,262.5
-------- -------- --------
-------- -------- --------
OPERATING INCOME (LOSS)
Casinos...................................................... $ 104.4 $ 92.0 $ 83.3
Fitness centers.............................................. .8 23.2 (4.4)
Corporate.................................................... 2.3 (4.2) (14.4)
Intersegment eliminations and other.......................... 1.6 .2 (3.9)
-------- -------- --------
Consolidated operating income from continuing operations..... $ 109.1 $ 111.2 $ 60.6
-------- -------- --------
-------- -------- --------
</TABLE>
1993 VERSUS 1992
CASINOS
Revenues of the Company's casinos for 1993 were $619.2 million compared to
$552.8 million for 1992, an increase of $66.4 million (12%). Operating income
for 1993 was $104.4 million compared to $92.0 million for 1992, an increase of
$12.4 million (13%).
ATLANTIC CITY. Revenues of Bally's Park Place for 1993 were $352.8 million
compared to $331.1 million for 1992, an increase of $21.7 million (7%). Casino
revenues for 1993 were $297.7 million compared to $278.0 million for 1992, an
increase of $19.7 million (7%). Slot revenues, which include the discontinuation
of certain progressive slot jackpots, increased $14.7 million (8%) due to an 11%
increase in slot handle (volume) offset, in part, by a decline in the slot win
percentage from 9.9% in 1992 to 9.6% in 1993. Bally's Park Place added 112 slot
machines (a 6% increase) during 1993. Slot revenues represented 69% of Bally's
Park Place's casino revenues in 1993 compared to 68% in 1992. Table game
revenues, excluding poker, increased $2.4 million (3%) from 1992 primarily due
to a 6% increase in the drop (amount wagered) offset, in part, by a decline in
the hold percentage from 17.0% in 1992 to 16.5% in 1993. Bally's Park Place's
poker operations, which commenced in July 1993, contributed $2.6 million to its
casino revenues. Rooms revenue increased $1.3 million (5%) due to an increase in
rooms occupied in 1993 compared to 1992 offset, in part, by a reduction in the
average room rate. Food and beverage revenue remained essentially unchanged.
Interest income declined $.9 million from 1992 due to the elimination of an
intercompany loan. Operating income for 1993 was $85.8 million compared to $62.7
million in 1992, an increase of $23.1 million (37%), due to the aforementioned
increase in revenues and, to a lesser extent, to a $1.4 million (1%) decrease in
operating expenses. Operating expenses decreased due to a 10% reduction in
selling, general and administrative expenses (due in part to a reduction in
costs associated with a management restructuring) which was offset, in part, by
increased marketing and promotional costs and food and beverage expenses.
In July 1993, The Grand introduced a comprehensive marketing program designed to
emphasize the first-class nature of the facility, personalized service provided
to guests, frequent special events and entertainment offered. The Grand has
directed its marketing efforts toward
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expanding its domestic customer base and attracting international gaming
patrons. To attract and retain these gaming patrons, The Grand is providing
increased complimentary services (room, food, beverage and entertainment),
increased promotional expenses (customer transportation, gifts and coin
giveaways) and frequent special events. Revenues of The Grand for 1993 were
$239.8 million compared to $223.7 million for 1992, an increase of $16.1 million
(7%). Casino revenues for 1993 were $216.3 million compared to $199.6 million in
1992, an increase of $16.7 million (8%). Table game revenues increased $13.3
million (18%) due primarily to a 19% increase in the drop. Slot revenues
increased $3.4 million (3%). Slot revenues include approximately $1.2 million
and $1.9 million from the discontinuation of certain progressive slot jackpots
in 1993 and 1992, respectively. Excluding these adjustments, slot revenues
increased $4.1 million (3%) due to a 9% increase in slot handle offset, in part,
by a decline in the slot win percentage from 10.0% in 1992 to 9.5% in 1993. The
Grand added 28 slot machines (a 2% increase) during 1993. Slot revenues
represented 60% of The Grand's casino revenues in 1993 compared to 63% in 1992.
Rooms revenue decreased $1.5 million (22%) due primarily to a reduction in the
average room rate. Food and beverage revenue remained essentially unchanged.
Other revenues increased $.9 million from 1992 due principally to an adjustment
to the reserve for unclaimed gaming chips and tokens in 1993. Operating income
for 1993 was $21.7 million compared to $30.6 million in 1992, a decrease of $8.9
million (29%), as the aforementioned increase in revenues was more than offset
by a $25.0 million (13%) increase in operating expenses. Operating expenses
increased primarily due to the increase in casino volume and the increased
marketing efforts described above which increased the cost of providing
complimentary services, promotional expenses and special events, payroll and
payroll-related expenses and state gaming taxes. Management of The Grand
believes the initial costs of the comprehensive marketing program are
proportionately greater during implementation and, because the incremental
revenues generally trail such costs, the marketing program had an adverse effect
on operating results for 1993.
Atlantic City city-wide casino revenues for all operators in 1993, excluding
poker and horse race simulcasting, increased approximately 2% from 1992, which
was primarily attributable to a 5% increase in slot revenues offset, in part, by
a 3% decrease in table game revenues. Atlantic City's 1993 results were
negatively impacted by severe weather conditions that hampered attendance on
several weekends in the first quarter. The number of slot machines in Atlantic
City increased approximately 8% during 1993 while the number of Atlantic City
table games, excluding poker tables, declined approximately 1%. Slot revenues in
1993 represented 67% of total gaming revenues in Atlantic City compared to 66%
in 1992. Changes in gaming regulations, including modifications allowing more
slot machines on existing casino floor space and permitting unrestricted 24-hour
gaming effective July 1992, have aided Atlantic City slot revenue growth. In
addition to the ongoing slot revenue trend, the introduction in the second
quarter of 1993 of poker and horse race simulcasting has also improved the
Atlantic City gaming climate. The Company's competitors in Atlantic City
intensified their promotional slot marketing efforts during 1992 to expand their
share of slot revenues and this trend continued through 1993. The Company
believes it is well-positioned to compete for its share of casino revenues by
continuing to offer promotional slot and table game programs and special events
at Bally's Park Place and through the comprehensive marketing program at The
Grand. However, the Company believes that as a result of the aggressive
competition for slot patrons, the slot win percentage will continue to be
subject to competitive pressure and may further decline.
LAS VEGAS. As described previously, Bally's Grand, Inc. has been consolidated
since December 1, 1993. Revenues of Bally's Grand, Inc. for December 1993 were
$21.1 million. Casino revenues were $12.2 million, which primarily consisted of
table game revenues of $6.7 million and slot revenues of $5.0 million. Rooms
revenues were $2.9 million and food and beverage revenues were $2.8 million.
Other revenues were $3.1 million and primarily resulted from entertainment.
Operating income for December 1993 was $1.0 million.
TUNICA. Revenues of Bally's Tunica, which included 24 days of operations in
December 1993, were $4.2 million and included casino revenues of $4.0 million
(slot revenues were $2.7 million and table game revenues were $1.3 million).
18
<PAGE> 20
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Operating loss for Bally's Tunica was $1.7 million, principally resulting from
the amortization of $3.1 million of pre-opening costs ($3.1 million is also
being amortized in the first quarter of 1994).
FITNESS CENTERS
In late 1991, the Company implemented a value pricing strategy which lowered the
average selling price of membership contracts thereby lowering the monthly
payment for financed memberships. This strategy was designed to improve the
collection experience on financed memberships. In addition, commencing at the
end of the third quarter of 1992, the Company implemented programs designed to
increase its emphasis on the sale of financed contracts with payments made by
direct bank account electronic funds transfer ("EFT") and automatic credit card
payment plans by adjusting sales commission and member incentive levels. This
was done to further improve the Company's collection experience on financed
membership contracts based on Company studies which indicated better collection
experience for financed memberships sold under these plans compared to those
sold with standard coupon book payment plans. While these changes were intended
to reduce the Company's exposure to risks associated with collection of financed
membership contracts, the emphasis on EFT and credit card payment programs
negatively affected the number of new memberships sold. In April 1993, the
Company reduced the average selling price of membership contracts even further
in an attempt to increase unit volume. Management now believes that the selling
price decreases implemented in April 1993 were greater than required and such
price decreases did not measurably increase the number of new memberships sold.
Therefore, in mid-October 1993, the Company began increasing prices modestly,
which has continued into 1994. Management believes that increased prices have
not resulted in significant reductions in unit sales volume or exposure to
higher collection risk because the prices of the Company's memberships are
comparable to or less than its competitors and significantly less than
memberships sold by the Company prior to the implementation of the value pricing
strategy in 1991. These price increases coupled with the changes in selling
methods and cost reduction programs implemented in the last fifteen months are
intended to improve the Company's operating results.
Revenues for 1993 were $694.8 million compared to $741.9 million in 1992, a
decrease of $47.1 million (6%). Revenues in 1992 included a gain of $3.9 million
on the retirement of a portion of Bally's Health & Tennis' public debt acquired
for sinking fund purposes. Excluding this gain, revenues decreased $43.2 million
(6%). Revenues for the same fitness centers selling memberships throughout both
years decreased $88.4 million (12%), which management believes was principally
due to the changes in its sales and pricing policies described above. Revenues
from new fitness centers opened during 1993 or 1992 were $45.2 million. The
number of fitness centers selling memberships increased from 331 at December 31,
1992 to 339 at December 31, 1993. New membership revenues decreased $31.5
million (6%) in 1993 due to a 5% decline in the average selling price and a 4%
decrease in unit volume. Management believes that unit volume has been and
continues to be affected by the weak retail economy, increased competition and
prevailing general economic uncertainties. Dues and renewals increased $23.3
million (16%) in 1993 due to the continuing emphasis on memberships requiring
the payment of monthly dues beginning in the first month of membership and an
improvement in member retention rates. Finance charges earned decreased $12.4
million (22%) due principally to a decrease in installment contracts receivable
due to lower sales volume and, to a lesser extent, a lower effective interest
rate on installment contracts receivable. Deferred revenues earned during 1993
decreased $22.8 million from 1992 due to an increase in the liability for
membership services at December 31, 1993 as compared to December 31, 1992 and
1991.
Operating income for 1993 decreased $22.4 million from 1992. Excluding the
aforementioned gain on debt, operating income was $.8 million for 1993 compared
to $19.3 million in 1992, a decline of $18.5 million. Excluding the provision
for doubtful receivables, operating expenses increased $19.0 million (3%) in
1993 from 1992 primarily due to $26.8 million of costs related to new clubs
partially offset by a $9.4 million decrease in costs related to the same fitness
centers selling memberships in both years. This decrease was primarily due to
reductions in payroll, commissions and employee benefits as
19
<PAGE> 21
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a function of the aforementioned decline in sales and as a result of the
continuation of cost reduction programs. As a percentage of revenues (excluding
the gain on debt), these operating expenses were 82% in 1992 and 89% in 1993.
The provision for doubtful receivables for 1993 was $72.5 million compared to
$116.2 million in 1992, a decrease of $43.7 million (38%). The provision for
doubtful receivables as a percentage of net financed sales was reduced from 39%
in 1992 to 26% in 1993, which reflects expected improvement in the
collectibility of memberships sold during 1993 due to increased emphasis on EFT
and automatic credit card payment programs and lower prices as described above.
CORPORATE
Revenues for 1993 were $8.0 million compared to $2.5 million in 1992, an
increase of $5.5 million. The increase was due principally to the forgiveness of
a tax liability of $1.7 million previously owed to Gaming, the billing of $1.7
million additional insurance costs to subsidiaries and an increase in interest
income and other revenues from subsidiaries of $2.0 million.
Operating income for 1993 was $2.3 million compared to an operating loss of $4.2
million in 1992, an improvement of $6.5 million. Results in 1993, as compared to
1992, were positively impacted by the aforementioned revenue items totalling
$5.4 million and a $1.1 million reversal of a tax accrual no longer deemed
necessary. The allocation of corporate overhead (including executive salaries
and benefits, public company reporting costs and other corporate headquarters'
costs) to subsidiaries remained essentially unchanged. Allocations for 1993 and
1992 were, and management expects allocations in subsequent years will be, based
upon similar cost categories and allocation methods subject to changes in
circumstances which may warrant modifications.
INTEREST EXPENSE
Interest expense, net of capitalized interest, was $129.8 million in 1993
compared to $126.1 million in 1992. The increase of $3.7 million (3%) was due
principally to higher average levels of debt in 1993 due, in part, to the
issuance of the Senior Discount Notes in June 1993 offset, in part, by the
reversal in 1993 of a $2.0 million interest reserve no longer necessary and
interest in 1992 on accrued but unpaid interest for debt in default (which did
not occur in 1993).
INCOME TAXES
Effective rates of the income tax benefit were 20% in 1993 and 39% in 1992. The
1993 income tax rate differed from the U.S. statutory tax rate (35%) due
principally to nondeductible goodwill amortization and state income taxes,
partially offset by adjustments of prior years' taxes. In addition, the income
tax benefit for 1993 was reduced by $1.7 million as a result of applying the
change in the U.S. statutory tax rate from 34% to 35% to deferred tax balances.
The 1992 income tax rate differed from the U.S. statutory tax rate (34%) due
principally to adjustments of prior years' taxes, partially offset by
nondeductible amortization and depreciation and state income taxes. A
reconciliation of the income tax benefit with amounts determined by applying the
U.S. statutory tax rate to loss from continuing operations before income taxes
and minority interests is included in Notes to consolidated financial
statements -- Income taxes.
Effective January 1, 1993, the Company changed its method of accounting for
income taxes as required by Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes." SFAS No. 109 retains the requirement to
record deferred income taxes for temporary differences that are reported in
different years for financial reporting and for tax purposes; however, the
methodology for calculating and recording deferred income taxes has changed.
Under the liability method adopted by SFAS No. 109, deferred tax liabilities or
assets are computed using the tax rates expected to be in effect when the
temporary differences reverse. Also, requirements for recognition of deferred
tax assets and operating loss and tax credit carryforwards were liberalized by
requiring their recognition when and to the extent that their realization is
deemed to be more likely than not. As permitted by SFAS No. 109, the Company
elected to use the cumulative effect approach rather than to restate the
consolidated financial statements of any prior years to apply the provisions of
SFAS No. 109. The cumulative effect on prior years of this change in accounting
for income taxes as of January 1, 1993 was a charge of $28.2 million ($.61 per
share). The effect of this change in accounting for income taxes on the income
tax benefit for 1993 was to reduce the income tax benefit by $1.7 million as a
result of
20
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applying the change in the U.S. statutory tax rate described above.
In 1992, the Company utilized tax loss carryforwards to offset taxable income
principally arising from the sale of Gaming common stock in July 1992 and the
related tax benefit of $10.6 million was reflected as an extraordinary credit.
1992 VERSUS 1991
CASINOS
Revenues of the Company's Atlantic City casino hotels for 1992 were $552.8
million compared to $536.2 million for 1991, an increase of $16.6 million (3%).
Operating income for 1992 was $92.0 million compared to $83.3 million for 1991,
an increase of $8.7 million (10%).
Revenues of Bally's Park Place for 1992 were $331.1 million compared to $322.8
million for 1991, an increase of $8.3 million (3%). Casino revenues increased
$12.3 million (5%), with slot revenues increasing $15.0 million (9%) as a result
of a 13% increase in the slot handle, partially offset by a 4% decline in the
win percentage from 10.3% in 1991 to 9.9% in 1992. Table game revenues decreased
$2.7 million (3%) as a result of a decline in the table game drop of $21.6
million (4%), partially offset by an improvement in the hold percentage from
16.8% in 1991 to 17.0% in 1992. Bally's Park Place increased its number of slot
machines by 119 machines (7%) since December 1991. Slot revenues in 1992
represented 68% of casino revenues compared to 66% in 1991. All other operating
revenues were essentially unchanged. Interest income from Bally in 1992 was $.8
million compared to $4.2 million in 1991. This decrease was primarily due to the
declaration as a dividend to Bally by Bally's Park Place of an amount totalling
$50.0 million formerly classified as a demand note receivable and the
discontinuation of interest payments on such note effective April 1, 1992.
Operating income for 1992 was $62.7 million compared to $54.4 million for 1991,
an increase of $8.3 million (15%) due primarily to the increase in revenues.
Operating expenses include charges for Bally overhead expenses allocated to
Bally's Park Place of $3.7 million and $1.0 million in 1992 and 1991,
respectively. Operating income was adversely impacted in 1992 by the
aforementioned decrease in interest income and increase in the allocation of
overhead expenses from Bally. In 1991, operating income was adversely impacted
by a $3.5 million charge related to the closing and demolition of an ancillary
motel property operated by Bally's Park Place and a $2.0 million charge for the
estimated cost of settling certain liabilities.
Revenues of The Grand for 1992 were $223.7 million compared to $215.2 million
for 1991, an increase of $8.5 million (4%). Casino revenues increased $8.0
million (4%), with slot revenues increasing $9.7 million (8%), which was
attributable to increased slot volume and the positive impact of discontinuation
of certain progressive slot jackpots and the reversal of related reserves in
1992. Table game revenues decreased $1.7 million (2%) as a result of a decline
of $21.6 million (5%) in the table game drop partially offset by an improvement
in the hold percentage from 16.0% in 1991 to 16.4% in 1992. During the first
half of 1992, The Grand increased its number of slot machines by 86 machines
(6%) and expanded its slot marketing efforts. Slot revenues in 1992 represented
63% of casino revenues compared to 61% in 1991. All other revenues were
essentially unchanged. Operating income for 1992 was $30.6 million compared to
$29.8 million for 1991, an increase of $.8 million (3%), due to the increase in
revenues offset, in part, by a $7.7 million (4%) increase in operating expenses.
The operating expense increase includes additional spending in 1992 of $2.6
million in conjunction with intensified slot marketing efforts and $1.8 million
of additional selling, general and administrative expenses. Operating expenses
include charges for Bally overhead expenses allocated to The Grand of $2.2
million and $.7 million in 1992 and 1991, respectively.
Atlantic City city-wide casino revenues for all operators in 1992 increased
approximately 8% from 1991, which was negatively impacted in the first quarter
by the Persian Gulf war. The increase was due to a 14% increase in slot
revenues, partially offset by a 3% decrease in table game revenues. Slot
revenues for 1992 represented 66% of total gaming revenue in Atlantic City
compared to 62% in 1991. During 1992, the Company's competitors in Atlantic City
intensified their promotional slot marketing efforts to expand their share of
slot revenues. Additionally, changes in gaming regulations, including
modifications allowing more slot machines in existing casino floor space and
permitting unrestricted 24-hour gaming effective
21
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July 1992, have aided Atlantic City slot revenue growth. Management believes,
however, that a weak economy in the northeastern United States during 1992 and
1991 and the increased competitive pressure had a negative impact on the
operating results of the Company's Atlantic City casino hotels.
FITNESS CENTERS
Revenues for 1992 were $741.9 million compared to $720.4 million for 1991, an
increase of $21.5 million (3%). Revenues for 1992 and 1991 include gains of $3.9
million and $10.8 million, respectively, on the retirement of Bally's Health &
Tennis' public debt acquired for sinking fund purposes. Excluding these gains,
revenues increased $28.4 million (4%) of which $10.7 million related to 19
fitness centers acquired in September 1992. The remaining increase of $17.7
million was due principally to the same fitness centers selling memberships
throughout both years. New membership revenues increased $8.2 million (2%) in
1992 due to a 31% increase in the number of new memberships sold offset, in
part, by a 22% decline in the average selling price which reflects the value
pricing strategy implemented by the Company in the second half of 1991. Dues and
renewals increased $20.9 million (17%) in 1992 due to the continued emphasis on
memberships requiring the payment of monthly dues beginning in the first month
of membership, a practice which began in mid-1991. Finance charges earned
decreased 10% from $62.8 million in 1991 to $56.8 million in 1992 due
principally to a decrease in net installment contracts receivable and, to a
lesser extent, a lower effective interest rate on installment contracts
receivable.
Management believes that the weak economy had a negative effect on revenues in
both years and that the Persian Gulf war and unfavorable publicity regarding
Bally's financial condition negatively affected revenues in 1991. New membership
sales in the second half of 1992 were negatively affected by the introduction of
new selling practices and incentive compensation programs emphasizing EFT and
automatic credit card charge payment plans for sales of financed memberships.
The emphasis on EFT and credit card payment plans was intended to improve the
Company's collection experience on financed membership contracts based on
Company studies which indicate better collection experience for financed
memberships sold with EFT or credit card payment plans compared to those sold
with standard coupon book payment plans. It has been the Company's experience
that new membership sales are adversely affected when significant changes in
sales and commission programs are implemented. EFT and credit card sales as a
percentage of total financed sales increased commencing in the third quarter and
were approximately 50% of sales initiated during the fourth quarter of 1992. For
the previous six quarters, such sales accounted for approximately 25% of
financed sales.
Operating income for 1992 was $23.2 million compared to an operating loss of
$4.4 million in 1991. Excluding the aforementioned gains on debt, operating
income was $19.3 million for 1992 compared to an operating loss of $15.2 million
in 1991, an improvement of $34.5 million. This improvement was due primarily to
the aforementioned revenue increase and a decrease of $5.8 million (5%) in the
provision for doubtful receivables. Excluding the provision for doubtful
receivables, operating expenses increased $.3 million in 1992 from 1991, due to
a $2.3 million increase in the cost of membership services partially offset by a
$1.4 million decrease in selling and promotion expenses. As a percentage of
revenues (excluding the gains on debt), these operating expenses declined to 82%
in 1992 from 85% in 1991. The provision for doubtful receivables as a percentage
of net financed sales was 39% in both years.
CORPORATE
Revenues for 1992 were $2.5 million compared to $8.0 million in 1991, a decrease
of $5.5 million. The decrease was due principally to lower gains on the purchase
of debt for sinking fund purposes in 1992 ($.6 million compared to $5.5 million
in 1991) and reductions in interest and other income from subsidiaries in 1992
($.1 million compared to $1.4 million in 1991), partially offset by foreign
currency transaction losses of $1.2 million in 1991.
Operating loss for 1992 was $4.2 million compared to $14.4 million in 1991, an
improvement of $10.2 million. Excluding the gains on the purchase of debt
securities, the reductions in income from subsidiaries and the foreign currency
transaction losses, the year-to-year improvement was $15.2 million. Operating
results in 1992 were positively impacted by an
22
<PAGE> 24
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$8.6 million reduction in general and administrative expenses, a $3.0 million
reduction in restructuring costs, the elimination of litigation accruals
totalling $2.7 million relating to matters which were favorably settled and a
$1.0 million commission on the July 1992 sale by Bally's Grand, Inc. of the
casino resort complex formerly known as "Bally's Reno." Allocations of corporate
overhead to subsidiaries remained essentially unchanged.
INTEREST EXPENSE
Interest expense, net of capitalized interest, was $126.1 million in 1992
compared to $158.5 million in 1991. The decrease of $32.4 million (20%) was due
principally to lower average levels of debt and, to a lesser extent, lower
average interest rates and a decline in the amount of interest provided on prior
years' income tax matters.
INCOME TAXES
Effective rates of the income tax benefit were 39% in 1992 and 31% in 1991. The
1992 income tax rate differed from the U.S. statutory tax rate (34%) due
principally to adjustments of prior years' taxes, partially offset by
nondeductible amortization and depreciation and state income taxes. The 1991
income tax rate differed from the U.S. statutory tax rate (34%) due principally
to nondeductible amortization and depreciation. A reconciliation of the income
tax benefit with amounts determined by applying the U.S. statutory tax rate to
loss from continuing operations before income taxes and minority interests is
included in Notes to consolidated financial statements -- Income taxes.
In 1992, the Company utilized tax loss carryforwards to offset taxable income
principally arising from the sale of Gaming common stock in July 1992 and the
related tax benefit of $10.6 million was reflected as an extraordinary credit.
LIQUIDITY AND CAPITAL RESOURCES
PARENT COMPANY
Bally is a holding company without operations of its own. Nevertheless, Bally
has certain cash obligations that must be satisfied by obtaining cash from its
subsidiaries or disposing of or leveraging certain assets. Bally's corporate
cash operating costs, net of allocations to its subsidiaries, are expected to be
less than $3 million in 1994. Bally has debt service and preferred stock
dividend cash requirements of approximately $20 million in 1994. Cash
requirements for Bally in 1994 may also include income tax payments which
management estimates to be approximately $36 million, net of amounts to be
collected from subsidiaries pursuant to tax sharing agreements.
Sources of cash available to Bally are generally limited to existing cash
balances ($43.5 million at December 31, 1993), dividends, management fees or
cost allocations to subsidiaries, capital transactions and asset sales. Each of
Bally's principal operating subsidiaries presently have debt covenants which
limit the payment of dividends to Bally and the redemption of stock owned by
Bally. Under the terms of the Senior Discount Notes, an amount equal to certain
dividends paid pursuant to a net income test by Bally's Park Place, Inc. to
Casino Holdings may be declared as a dividend by Casino Holdings and paid to
Bally. In 1993, $16.7 million in dividends were paid by Bally's Park Place, Inc.
to Casino Holdings and by Casino Holdings to Bally. Additional dividends may be
available from Casino Holdings and are generally limited to 50% of its
consolidated net income exclusive of income attributable to Bally's Park Place,
Inc. Pursuant to the terms of GNAC's 10 5/8% First Mortgage Notes due 2003 (the
"10 5/8% Notes") and its credit agreement, GNAC paid dividends to Bally of $7.5
million in 1993. GNAC is not expected to be able to pay dividends to Bally in
1994. Bally's Health & Tennis, which paid a $15 million dividend to Bally in
January 1993, is not expected to be able to pay dividends in 1994. In addition,
Casino Holdings has an obligation to Bally of approximately $18.3 million to be
paid in 1994 for shares of Bally's Grand, Inc. common stock purchased from Bally
during 1993. Bally believes that it will be able to satisfy its cash needs
throughout 1994, but remains dependent upon the ability of subsidiaries to pay
dividends and allocations to meet its cash requirements in the future.
SUBSIDIARIES
CASINO HOLDINGS
CASINO HOLDINGS. Casino Holdings is a holding company without operations of its
own and relies on obtaining cash from its subsidiaries to meet its cash
obligations. Casino Holdings has no scheduled interest or principal payments on
the Senior Discount Notes until 1998, but expects to incur substantial costs in
the pursuit of new gaming ventures. The proceeds from the Senior Discount Notes
have been and are being used to:
23
<PAGE> 25
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(i) construct and equip Bally's Tunica, (ii) acquire a significant equity
interest in Bally's Las Vegas, (iii) fund initial payments for construction of a
riverboat (including dockside improvements) for eventual operation in New
Orleans, (iv) fund an option agreement to acquire certain riverfront property in
Philadelphia for the purpose of developing a dockside gaming facility if gaming
were to be legalized in Pennsylvania and (v) pursue other gaming opportunities.
To the extent Casino Holdings requires additional funds for existing ventures or
to develop new ventures, Casino Holdings expects that it will be able to obtain
financing for a significant portion of the total development costs of new gaming
ventures from a combination of third party sources, including banks, suppliers
and debt markets.
Sources of cash available to Casino Holdings are generally limited to existing
cash balances ($25.4 million at December 31, 1993) and loan repayments,
dividends and management fees from subsidiaries. Bally's Park Place, Inc. and
Bally's Grand, Inc. are both limited with respect to amounts which may be paid
as dividends to Casino Holdings under the terms of their respective public debt
indentures. In March 1994, Bally's Park Place, Inc. paid a $30 million dividend
to Casino Holdings from a portion of the proceeds of the sale of its 9 1/4%
First Mortgage Notes due 2004 (the "9 1/4% Notes"), which is not available to be
paid by Casino Holdings to Bally. Bally's Grand, Inc. is not expected to pay
dividends or make any other distributions on its common stock to Casino Holdings
in 1994. Bally's Tunica, which commenced operations in December 1993, is
expected to generate a significant amount of unrestricted cash flows in 1994
which will be used to reduce an advance from Casino Holdings. The New Orleans
project is not expected to commence operations until February 1995. Although
Casino Holdings believes it will be able to satisfy its cash needs throughout
1994, Casino Holdings remains dependent upon the ability of its subsidiaries to
generate cash to repay advances and pay dividends.
BALLY'S PARK PLACE, INC. In March 1994, a subsidiary of Bally's Park Place, Inc.
issued $425 million principal amount of the 9 1/4% Notes. The net proceeds from
the sale of the 9 1/4% Notes were used to purchase and retire certain of its
11 7/8% First Mortgage Notes due 1999 (the "11 7/8% Notes"), defease the
remaining 11 7/8% Notes at a price of 104.45% of their principal amount plus
accrued interest through the redemption date, thereby satisfying all obligations
thereunder, and pay a $30 million dividend to Casino Holdings. In connection
with the sale of the 9 1/4% Notes, Bally's Park Place terminated its existing
credit facility and entered into an agreement for a new $50 million revolving
credit facility which expires on December 31, 1996.
As adjusted for the refinancing described above, Bally's Park Place, Inc. has no
scheduled principal payments under its public indebtedness until 2004, and its
scheduled principal payments under other indebtedness outstanding at December
31, 1993 are not significant. Management expects to make capital expenditures of
approximately $18 million in 1994. As of December 31, 1993, after giving effect
to the new credit facility, Bally's Park Place, Inc. had unused lines of credit
totalling $48 million. The Company believes that Bally's Park Place, Inc. will
be able to satisfy its debt service and capital expenditure requirements in 1994
out of cash flow from operations.
BALLY'S GRAND, INC. In December 1993, Bally's Grand, Inc. issued $315 million
principal amount of 10 3/8% First Mortgage Notes due 2003 (the "10 3/8% Notes").
Bally's Grand, Inc. used a substantial portion of the net proceeds from the sale
of the 10 3/8% Notes to redeem $252.5 million principal amount of its 12% First
Mortgage Notes due 2001 (the "12% Notes") at a price of 103% of their principal
amount plus accrued interest, thereby satisfying all obligations thereunder, and
to pay approximately $9 million to Bally under a tax sharing agreement between
Bally's Grand, Inc. and Bally, which amount became due and payable in connection
with the redemption of the 12% Notes. The remaining proceeds are primarily being
used for capital expenditures.
Bally's Grand, Inc. has no scheduled principal payments on its indebtedness
outstanding at December 31, 1993 until 2003, however, it expects to make several
major capital improvements during 1994 and 1995. Bally's Las Vegas has commenced
the construction of improvements to its frontage area along the Strip (with
completion expected in mid-1994) and has formed a joint venture with a
subsidiary of
24
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MGM Grand, Inc. to construct and operate a monorail that will transport
passengers between Bally's Las Vegas and The MGM Grand Hotel and Theme Park
(with completion expected in mid-1995). These capital improvement projects are
expected to cost Bally's Las Vegas approximately $28 million and are intended to
increase traffic into its casino. Other major capital projects currently
anticipated to commence in 1994 include the renovation of the south tower rooms
and corridors, the retail shopping arcade and other common areas which, with
other capital expenditures required to maintain Bally's Las Vegas, are estimated
to cost approximately $26 million. The Company believes that Bally's Grand, Inc.
will be able to satisfy its debt service and capital expenditure requirements in
1994 out of existing cash balances ($97 million at December 31, 1993) and cash
flow from operations.
BALLY'S TUNICA. Construction of Bally's Tunica was completed in early November
and operations commenced in December 1993. The total cost to construct and equip
Bally's Tunica was approximately $39 million, which was advanced by Casino
Holdings and is being repaid out of available cash flow. Bally's Tunica may seek
third party financing to enable it to repay part or all of Casino Holdings'
advance to Bally's Tunica. However, there can be no assurance that third party
financing will be available on terms favorable to Bally's Tunica. Bally's Tunica
expects capital expenditures during 1994 to be insignificant.
OTHER. A subsidiary of Casino Holdings owns a 45% interest in Belle of Orleans,
L.L.C. ("Belle"). In June 1993, Belle received a Certificate of Preliminary
Approval from the Louisiana Riverboat Gaming Commission to commence construction
of a riverboat casino facility (including dockside improvements) for operation
in New Orleans, Louisiana. In March 1994, the Louisiana Riverboat Gaming
Commission awarded Belle a permanent operating license. In August 1993, the
Casino Holdings subsidiary entered into a formal operating agreement for the
capitalization and development of Belle. Simultaneously, Casino Holdings and
Belle entered into a management agreement with a term of five years and an
option for a second five-year term granting responsibility for the development
and management of Belle to Casino Holdings. Casino Holdings will receive
management fees based on a percentage of the earnings of Belle. Construction of
the riverboat commenced in January 1994 and operations are expected to begin in
February 1995. Management estimates that as much as $75 million will be needed
to develop Belle, and anticipates the cost will be funded either through third
party financing (there can be no assurance that third party financing will be
available on terms favorable to Belle) or by Casino Holdings, though not
required to be.
Another subsidiary of Casino Holdings has entered into an option agreement to
acquire a 31-acre site along the Delaware River in Philadelphia for the purpose
of developing a dockside gaming facility (the "Philadelphia Venture") if gaming
were to be legalized in Pennsylvania. The site includes a 550 foot pier and is
easily accessed by three ramps off of a major highway nearby. Pursuant to the
terms of the agreement, Casino Holdings has agreed to pay $10 million,
consisting of an initial cash payment of $5 million (paid in 1993) and $5
million payable over the next three years. These payments are due whether or not
gaming is legalized in Pennsylvania. Additionally, in the event Casino Holdings
elects to take title to the property, it will be required to deliver the balance
of the purchase price in the form of a pre-payable, non-recourse note for
approximately $55 million (including interest) at the closing of the
transaction, which is payable in various installments over the five-year period
subsequent to the closing of the transaction. Assuming legalization, the closing
of the transaction is scheduled for January 1997, unless accelerated by Casino
Holdings. Certain of Casino Holdings' obligations under the agreement are
guaranteed by Bally.
THE GRAND
The Grand has no scheduled principal payments on its indebtedness outstanding at
December 31, 1993 until 2003. Management expects to make capital expenditures of
approximately $15 million in 1994. As of December 31, 1993, The Grand had unused
lines of credit totalling $20 million. The Company believes that The Grand will
be able to satisfy its debt service and capital expenditure requirements in 1994
out of cash flow from operations.
25
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BALLY'S HEALTH & TENNIS
Bally's Health & Tennis has no scheduled principal payments of public
indebtedness until 2003. The Bally's Health & Tennis revolving credit agreement
has scheduled reductions of availability totalling $20 million in 1994, however,
as of December 31, 1993, $26.6 million of borrowing capacity was available under
the credit line. Management expects to make capital expenditures of
approximately $30 million in 1994 which will be used primarily for maintaining
and refurbishing its present fitness centers, leasehold improvements for 11
planned new fitness centers and acquisition of new fitness equipment. The
Company believes that Bally's Health & Tennis will be able to satisfy its debt
service and capital expenditure requirements in 1994 out of cash flow from
operations.
The Bally's Health & Tennis revolving credit agreement requires maintenance by
Bally's Health & Tennis of certain financial ratios. Certain provisions of the
revolving credit agreement applicable to those financial ratios were amended as
of September 30, 1993. Although Bally's Health & Tennis was in compliance with
these financial ratio requirements as of December 31, 1993, there can be no
assurance that it will not be necessary in the future to amend the financial
ratio requirements and, if necessary, that such amendments will be obtained.
TAX MATTER
The IRS has completed an audit of the federal income tax returns of certain of
the Company's fitness center subsidiaries for periods ending on the day these
subsidiaries were acquired. Among other things, the IRS is asserting that these
subsidiaries owe additional taxes of approximately $32 million and substantial
amounts of interest with respect to issues arising pursuant to the Company's
election in 1983 to treat the purchases of stock of these subsidiaries as if
they were purchases of assets. The Company vigorously opposes the IRS'
assertions and has filed petitions in the United States Tax Court contesting the
IRS' proposed deficiencies with respect to these issues. This matter has been
docketed for trial in October 1994, however, a resolution may occur sooner if
the Company and the IRS resolve all or some of these issues by stipulation or
otherwise. Based on the information presently available, there can be no
assurance of the outcome of this matter. However, in the opinion of management,
payment, if any, to the IRS of amounts which may be ultimately deemed owing will
not have a material adverse effect on the Company's consolidated financial
position or results of operations, since the Company believes that it has
adequately provided deferred and current taxes related to this matter, although
it could, though it is not expected to, have a material adverse effect on the
Company's liquidity.
26
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27
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ITEM 8. CONSOLIDATED FINANCIAL
STATEMENTS AND
SUPPLEMENTARY DATA
INDEX
<TABLE>
<CAPTION>
REFERENCE
-----------
<S> <C>
Report of independent auditors....... 29
Consolidated balance sheet........... 30
Consolidated statement of
operations......................... 32
Consolidated statement of
stockholders' equity............... 33
Consolidated statement of cash
flows.............................. 34
Notes to consolidated financial
statements......................... 36
Supplementary data:
Quarterly consolidated financial
information (unaudited)......... 51
</TABLE>
28
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REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS
BALLY MANUFACTURING CORPORATION
We have audited the accompanying consolidated balance sheet of Bally
Manufacturing Corporation as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1993. Our audits also
included the financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Bally
Manufacturing Corporation at December 31, 1993 and 1992, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
As discussed in the "Summary of significant accounting policies -- Income taxes"
note to the consolidated financial statements, in 1993 the Company changed its
method of accounting for income taxes.
ERNST & YOUNG
Chicago, Illinois
February 25, 1994, except for the
seventh paragraph of the
"Long-term debt" note, as to which
the date is March 8, 1994
29
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BALLY MANUFACTURING CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31
----------------------------
1993 1992
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
(In thousands)
ASSETS
Current assets:
Cash and equivalents................................................ $ 203,058 $ 36,609
Receivables, net.................................................... 201,719 197,218
Other current assets................................................ 33,649 30,961
----------- -----------
Total current assets...................................... 438,426 264,788
Long-term receivables, net............................................ 149,966 146,188
Property and equipment, at cost:
Land................................................................ 241,402 173,015
Buildings and leasehold improvements................................ 1,571,133 1,246,190
Equipment, furniture and fixtures................................... 419,678 346,370
----------- -----------
2,232,213 1,765,575
Accumulated depreciation............................................ 640,075 565,364
----------- -----------
Net property and equipment................................ 1,592,138 1,200,211
Investment in discontinued operations................................. 17,166
Other assets.......................................................... 105,167 53,439
Intangible assets, at cost less accumulated amortization
($58,126 and $50,599)............................................... 253,950 242,844
----------- -----------
$ 2,539,647 $ 1,924,636
=========== ===========
</TABLE>
See accompanying notes.
30
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<TABLE>
<CAPTION>
December 31
----------------------------
1993 1992
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
(In thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 72,156 $ 41,788
Income taxes payable................................................ 42,580 22,618
Deferred income taxes............................................... 10,009 39,827
Deferred revenues................................................... 78,132 74,706
Accrued liabilities................................................. 176,551 145,514
Current maturities of long-term debt................................ 10,288 11,193
----------- -----------
Total current liabilities................................. 389,716 335,646
Long-term debt, less current maturities............................... 1,484,389 1,010,263
Deferred income taxes................................................. 192,092 82,967
Deferred revenues..................................................... 43,468 46,159
Other liabilities..................................................... 23,457 39,374
Minority interests.................................................... 42,384
Stockholders' equity:
Preferred stock, $1 par value: Authorized 30,000,000 shares--
Series B Junior Participating: Authorized 800,000 shares; none issued
Series D Convertible Exchangeable: Authorized 2,000,000 shares;
issued 694,497 shares; liquidation preference of $34,725........ 694 694
Common stock, $.66 2/3 par value: Authorized 80,000,000 shares;
issued 46,986,313 and 46,095,761 shares.......................... 31,325 30,731
Capital in excess of par value...................................... 294,413 289,311
Retained earnings................................................... 39,507 88,783
Cumulative translation adjustments.................................. 2,506
Common stock in treasury, 109,956 shares at cost.................... (1,798) (1,798)
----------- -----------
Total stockholders' equity................................ 364,141 410,227
----------- -----------
$2,539,647 $ 1,924,636
=========== ===========
</TABLE>
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BALLY MANUFACTURING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31
-----------------------------------------
1993 1992 1991
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Revenues:
Casino operations--
Casino.................................................. $ 530,250 $ 477,557 $ 457,324
Rooms................................................... 33,380 30,697 30,937
Food and beverage....................................... 34,163 30,781 31,608
Other................................................... 21,395 13,804 16,367
----------- ----------- -----------
619,188 552,839 536,236
Fitness center operations.................................. 694,752 741,891 720,373
Other...................................................... 6,157 2,272 5,903
----------- ----------- -----------
1,320,097 1,297,002 1,262,512
Operating costs and expenses:
Casino operations--
Casino.................................................. 253,879 223,951 221,828
Rooms................................................... 14,301 10,407 10,967
Food and beverage....................................... 32,483 27,688 28,629
Other................................................... 129,934 120,553 108,804
----------- ----------- -----------
430,597 382,599 370,228
Fitness center operations.................................. 599,512 620,532 631,857
Selling, general and administrative........................ 177,796 182,682 193,074
Other, net................................................. 3,052 (16) 6,760
----------- ----------- -----------
1,210,957 1,185,797 1,201,919
----------- ----------- -----------
Operating income............................................. 109,140 111,205 60,593
Interest expense............................................. (129,750) (126,060) (158,482)
----------- ----------- -----------
Loss from continuing operations before income taxes and
minority interests......................................... (20,610) (14,855) (97,889)
Income tax benefit........................................... 4,100 5,827 30,201
Minority interests........................................... 484
----------- ----------- -----------
Loss from continuing operations.............................. (16,026) (9,028) (67,688)
Income from discontinued operations.......................... 6,215 9,585 33,163
----------- ----------- -----------
Income (loss) before extraordinary items and cumulative
effect on prior years of change in accounting for income
taxes...................................................... (9,811) 557 (34,525)
Extraordinary items:
Gain (loss) on extinguishment of debt...................... (8,490) 612 56,053
Credit for utilization of tax loss carryforwards........... 10,605
Cumulative effect on prior years of change in accounting for
income taxes............................................... (28,197)
----------- ----------- -----------
Net income (loss)............................................ (46,498) 11,774 21,528
Preferred stock dividend requirement......................... 2,778 2,778 2,778
----------- ----------- -----------
Net income (loss) applicable to common stock................. $ (49,276) $ 8,996 $ 18,750
----------- ----------- -----------
----------- ----------- -----------
Per common and common equivalent share:
Loss from continuing operations............................ $ (.40) $ (.28) $ (2.08)
Income from discontinued operations........................ .13 .23 .98
Extraordinary items--
Gain (loss) on extinguishment of debt................... (.18) .01 1.65
Credit for utilization of tax loss carryforwards........ .26
Cumulative effect on prior years of change in accounting
for income taxes........................................ (.61)
----------- ----------- -----------
Net income (loss).......................................... $ (1.06) $ .22 $ .55
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes.
32
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BALLY MANUFACTURING CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Capital
Series D in Cumulative Common
preferred Common excess of Retained translation stock in
DOLLAR AMOUNTS stock stock par value earnings adjustments treasury
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Balance at December 31, 1990............... $ 1,205 $23,674 $308,862 $ 61,037 $19,508 $(80,496)
Net income............................... 21,528
Issuance of common/treasury stock:
In exchange for debt................... 667 (31,629 ) 47,317
Upon conversion of preferred stock..... (511) 680 (169 )
For stock option and benefit plan stock
transactions......................... (12,970 ) 15,470
Amortization of unearned compensation....
Effect of disposal of discontinued
operations............................. (4,263)
Foreign currency translation
adjustments............................ (4,892)
--------- ------- --------- -------- ----------- --------
Balance at December 31, 1991............... 694 25,021 264,094 82,565 10,353 (17,709)
Net income............................... 11,774
Issuance of common/treasury stock:
In satisfaction of certain interest
obligations.......................... 3,873 23,719
In satisfaction of preferred stock
dividends -- $8.00 per share......... 780 4,776 (5,556)
In exchange for debt................... (10,090 ) 15,581
For acquisition of business............ 648 3,966
In settlement of litigation............ 166 1,396
For stock option and benefit plan stock
transactions......................... 243 1,450 330
Amortization of unearned compensation....
Effect of disposal of discontinued
operations............................. (7,922)
Foreign currency translation
adjustments............................ 75
--------- ------- --------- -------- ----------- --------
Balance at December 31, 1992............... 694 30,731 289,311 88,783 2,506 (1,798)
Net loss................................. (46,498)
Issuance of common stock:
In satisfaction of preferred stock
dividends -- $4.00 per share......... 221 2,557 (2,778)
In satisfaction of certain
obligations.......................... 180 1,232
For stock option transactions.......... 193 1,313
Effect of disposal of discontinued
operations............................. (2,506)
--------- ------- --------- -------- ----------- --------
Balance at December 31, 1993............... $ 694 $31,325 $294,413 $ 39,507 $ -- $ (1,798)
--------- ------- --------- -------- ----------- --------
--------- ------- --------- -------- ----------- --------
<CAPTION>
Total
Unearned stock-
compen- holders'
DOLLAR AMOUNTS sation equity
<S> <C> <C>
- ------------------------------------------------------------------
(In thousands, except per share data)
Balance at December 31, 1990............... $(1,279 ) $332,511
Net income............................... 21,528
Issuance of common/treasury stock:
In exchange for debt................... 16,355
Upon conversion of preferred stock.....
For stock option and benefit plan stock
transactions......................... 729 3,229
Amortization of unearned compensation.... 224 224
Effect of disposal of discontinued
operations............................. (4,263)
Foreign currency translation
adjustments............................ (4,892)
-------- --------
Balance at December 31, 1991............... (326 ) 364,692
Net income............................... 11,774
Issuance of common/treasury stock:
In satisfaction of certain interest
obligations.......................... 27,592
In satisfaction of preferred stock
dividends -- $8.00 per share.........
In exchange for debt................... 5,491
For acquisition of business............ 4,614
In settlement of litigation............ 1,562
For stock option and benefit plan stock
transactions......................... 2,023
Amortization of unearned compensation.... 326 326
Effect of disposal of discontinued
operations............................. (7,922)
Foreign currency translation
adjustments............................ 75
-------- --------
Balance at December 31, 1992............... -- 410,227
Net loss................................. (46,498)
Issuance of common stock:
In satisfaction of preferred stock
dividends -- $4.00 per share.........
In satisfaction of certain
obligations.......................... 1,412
For stock option transactions.......... 1,506
Effect of disposal of discontinued
operations............................. (2,506)
-------- --------
Balance at December 31, 1993............... $ -- $364,141
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
Series D Common stock
preferred -----------------------
SHARE AMOUNTS stock Issued Treasury
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
(In thousands)
Balance at December 31, 1990................................................... 1,205 35,510 4,495
Issuance of common/treasury stock:
In exchange for debt....................................................... 1,000 (2,639)
Upon conversion of preferred stock......................................... (511) 1,021
For stock option and benefit plan stock transactions....................... (773)
--------- --------- ---------
Balance at December 31, 1991................................................... 694 37,531 1,083
Issuance of common/treasury stock:
In satisfaction of certain interest obligations............................ 5,809
In satisfaction of preferred stock dividends............................... 1,170
In exchange for debt....................................................... (953)
For acquisition of business................................................ 971
In settlement of litigation................................................ 250
For stock option and benefit plan stock transactions....................... 365 (20)
--------- --------- ---------
Balance at December 31, 1992................................................... 694 46,096 110
Issuance of common stock:
In satisfaction of preferred stock dividends............................... 332
In satisfaction of certain obligations..................................... 269
For stock option transactions.............................................. 289
--------- --------- ---------
Balance at December 31, 1993................................................... 694 46,986 110
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
33
<PAGE> 35
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31
-------------------------------------
1993 1992 1991
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
(In thousands)
OPERATING:
Loss from continuing operations............................... $ (16,026) $ (9,028) $ (67,688)
Adjustments to reconcile to cash provided --
Depreciation and amortization.............................. 113,824 108,942 109,029
Deferred income taxes...................................... (24,244) 9,117 (32,171)
Provision for doubtful receivables......................... 74,740 117,344 125,477
Interest accretion on discount notes....................... 7,194
Gain on repurchase of debt for sinking fund requirements... (596) (4,512) (14,694)
Change in operating assets and liabilities................. (55,722) (142,049) (31,780)
Other, net................................................. (1,704) (2,024) 816
---------- ---------- ---------
Cash provided by continuing operating
activities.................................. 97,466 77,790 88,989
INVESTING:
Acquisitions of businesses, net of cash acquired.............. 29,838 (746) (642)
Purchases of property and equipment........................... (97,277) (40,152) (39,057)
Other......................................................... (24,636) (3,387) 4,076
---------- ---------- ---------
Cash used in investing activities.............. (92,075) (44,285) (35,623)
FINANCING:
Debt transactions --
Proceeds from issuance of long-term debt................... 920,181 1,361
Net payments under revolving credit agreements............. (108,000) (73,153) (140,437)
Payments on other long-term debt........................... (616,180) (24,596) (50,271)
Debt issuance costs........................................ (35,533) (1,138) (8,685)
---------- ---------- ---------
Cash provided by (used in) debt transactions... 160,468 (98,887) (198,032)
Equity transactions --
Proceeds from exercise of stock options.................... 590 699
---------- ---------- ---------
Cash provided by (used in) financing
activities.................................. 161,058 (98,188) (198,032)
DISCONTINUED OPERATIONS:
Proceeds from disposal........................................ 58,743 94,910
Dividends received from discontinued operations and
other, net................................................. 2,913 23,111
---------- ---------- ---------
Cash provided by discontinued operations....... -- 61,656 118,021
---------- ---------- ---------
Increase (decrease) in cash and equivalents..................... 166,449 (3,027) (26,645)
Cash and equivalents, beginning of year......................... 36,609 39,636 66,281
---------- ---------- ---------
Cash and equivalents, end of year............................... $ 203,058 $ 36,609 $ 39,636
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
See accompanying notes.
34
<PAGE> 36
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
Years ended December 31
--------------------------------------
1993 1992 1991
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
(In thousands)
SUPPLEMENTAL CASH FLOWS INFORMATION:
Changes in operating assets and liabilities, net of effects
from acquisitions and dispositions, were as follows --
Increase in receivables............................... $ (79,313) $ (80,342) $ (36,050)
(Increase) decrease in other current assets and other
assets............................................. 9,295 (3,598) 11,876
Increase (decrease) in accounts payable and accrued
liabilities........................................ 10,012 (22,238) 22,529
Increase (decrease) in income taxes payable........... 12,261 (11,414) (5,519)
Increase (decrease) in deferred revenues.............. 8,229 (21,356) (18,588)
Decrease in other long-term liabilities............... (16,206) (3,101) (6,028)
---------- ---------- ----------
$ (55,722) $ (142,049) $ (31,780)
---------- ---------- ----------
---------- ---------- ----------
Cash was invested and common stock was issued in acquisitions
of businesses as follows --
Fair value of assets acquired (including goodwill of
$19,888, $7,307 and $442)............................. $ (475,833) $ (14,304) $ (442)
Liabilities assumed (including long-term debt of
$259,950 and $1,254).................................. 390,305 7,978
Minority interests in business acquired................. 43,280
Issuance of common stock................................ 4,614
Cash and equivalents acquired........................... 72,402
Increase (decrease) in earn-out liabilities............. (316) 966 (200)
---------- ---------- ----------
$ 29,838 $ (746) $ (642)
---------- ---------- ----------
---------- ---------- ----------
Cash payments for interest and income taxes for continuing
operations were as follows --
Interest paid........................................... $ 106,800 $ 119,983 $ 135,547
Interest capitalized.................................... (1,026) (432) (1,150)
Income taxes paid (refunded)............................ 7,866 (3,667) (2,705)
Investing and financing activities exclude the following
non-cash activities --
Acquisition of Bally's Grand, Inc. common stock in
exchange for Bally Gaming International, Inc. common
stock................................................. $ 18,838 $ $
Accrued purchases of property and equipment............. 8,558
Issuance of common stock in satisfaction of preferred
stock dividends, interest and other obligations....... 4,190 34,710
Securities exchanged for debt........................... 5,491 46,418
Exchange of exclusive gaming machines license for
liability reduction................................... 3,500
Common stock issued upon conversion of preferred
stock................................................. 680
Stock option and benefit plan transactions.............. 500 98 3,878
</TABLE>
35
<PAGE> 37
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Bally
Manufacturing Corporation ("Bally") and the subsidiaries which it controls
(collectively, the "Company").
Certain reclassifications have been made to prior years' financial statements to
conform with the 1993 presentation.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents. The carrying amount of
cash equivalents approximates fair value due to the short maturity of those
instruments.
PROPERTY AND EQUIPMENT
Depreciation of property and equipment is provided principally on the
straight-line method over the estimated economic lives of the related assets and
the terms of the applicable leases for leasehold improvements. Depreciation
expense was $96,945, $91,564 and $88,765 for 1993, 1992 and 1991, respectively.
DEFERRED FINANCE COSTS
Deferred finance costs associated with the Company's debt are being amortized
over the terms of the related debt using the bonds outstanding method. Included
in "Other assets" at December 31, 1993 and 1992 were deferred finance costs of
$40,995 and $14,823, respectively, net of accumulated amortization of $12,646
and $11,564, respectively.
PRE-OPENING COSTS
Personnel, marketing and other operating costs incurred that are directly
associated with the opening of new casinos are capitalized as pre-opening costs
and amortized to expense over the first two calendar quarters of operations.
During 1993, pre-opening costs of $6,105 were capitalized, of which $3,052 were
amortized.
INTANGIBLE ASSETS
Intangible assets consist principally of cost in excess of net assets of
acquired businesses (goodwill) and are being amortized on the straight-line
method over periods ranging up to forty years from dates of acquisition.
Bally periodically evaluates whether the remaining estimated useful life of
goodwill may warrant revision or that the remaining balance of goodwill may not
be recoverable. Bally has reviewed and expects to continue to evaluate the
goodwill related to its casino and fitness center operations. Based on present
operations and strategic plans, Bally believes that no impairment of goodwill
has occurred. However, if future operations do not perform as expected, or if
Bally's strategic plans for its businesses were to change and independent
measures of value reflecting such changed plans indicated an impairment of
goodwill, a reduction for impairment may be required.
REVENUE RECOGNITION
Casinos
Casino revenues consist of the net win from gaming activities, which is the
difference between gaming wins and losses. Operating revenues exclude the retail
value of complimentary food, beverages and hotel services furnished to
customers, which were $71,261, $69,177 and $65,061 for 1993, 1992 and 1991,
respectively. The estimated costs of providing such complimentary services,
which are classified as casino expenses through interdepartment allocations from
the departments granting the services, are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- ------------------------------------------------------
Rooms............. $10,010 $ 9,576 $ 8,205
Food and
beverages....... 40,541 33,527 29,904
Other............. 5,577 4,012 4,280
------- ------- --------
$56,128 $47,115 $ 42,389
------- ------- --------
------- ------- --------
</TABLE>
Fitness centers
The Company's fitness centers primarily offer a dues membership, which permits
members, after paying initial membership fees, to continue membership on a
month-to-month basis as long as monthly dues payments are made. Revenues related
to dues memberships recorded at the time of sale are limited to the portion
allocable to the initial membership fee. Dues memberships also require that
monthly payments be made for services provided at which time the revenue is
recorded.
A substantial portion of new membership revenues are collected in installments
over periods ranging up to three years. Installment
36
<PAGE> 38
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
contracts bear interest at, or are adjusted for financial accounting purposes at
the time the contracts are issued to, rates for comparable consumer financing
contracts. Unearned finance charges are amortized over the term of the contracts
on the sum-of-the-months-digits method which approximates the interest method.
Memberships with initial terms of up to three years can also be paid in full.
Revenues related to these memberships include both an initial membership fee,
which is recorded as revenue at the time of sale, and an annual service fee. The
service fee portion of such memberships is recorded as deferred revenues and is
realized over the term of the memberships. Prepaid dues and renewals revenues
are recorded in a similar manner. This policy approximates the "selling and
service" method, which provides for a profit being reported for both the selling
and service functions.
INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes as required by Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes." SFAS No. 109 retains the requirement to
record deferred income taxes for temporary differences that are reported in
different years for financial reporting and for tax purposes; however, the
methodology for calculating and recording deferred income taxes has changed.
Under the liability method adopted by SFAS No. 109, deferred tax liabilities or
assets are computed using the tax rates expected to be in effect when the
temporary differences reverse. Also, requirements for recognition of deferred
tax assets and operating loss and tax credit carryforwards were liberalized by
requiring their recognition when and to the extent that their realization is
deemed to be more likely than not. As permitted by SFAS No. 109, the Company
elected to use the cumulative effect approach rather than to restate the
consolidated financial statements of any prior years to apply the provisions of
SFAS No. 109. The cumulative effect on prior years of this change in accounting
for income taxes as of January 1, 1993 was a charge of $28,197 ($.61 per share).
The effect of this change in accounting for income taxes on the income tax
benefit for 1993 was to reduce the income tax benefit by $1,684 as a result of
applying the change in the U.S. statutory tax rate from 34% to 35% to deferred
tax balances.
OPERATING COSTS AND EXPENSES -- OTHER, NET
Operating costs and expenses -- other, net represents: (i) for 1993, the
amortization of pre-opening costs totalling $3,052 associated with Bally's
Saloon and Gambling Hall dockside gaming facility in Tunica, Mississippi
("Bally's Tunica") which commenced operations in December 1993, (ii) for 1992,
the elimination of litigation accruals totalling $2,738 relating to matters
which were favorably settled and a $1,000 commission on the July 1992 sale by
Bally's Grand, Inc. of the casino resort complex formerly known as "Bally's
Reno" offset by $3,722 of professional fees related to the Company's
reorganization and (iii) for 1991, $6,760 of similar professional fees.
EXTRAORDINARY ITEMS
In 1993, three of the Company's subsidiaries completed refinancings of their
debt which, in the aggregate, resulted in an extraordinary loss of $8,490, net
of income taxes of $5,092 and minority interests of $412. See "Long-term debt."
In 1992, the Company utilized tax loss carryforwards to offset taxable income
principally arising from the sale of Bally Gaming International, Inc. ("Gaming")
common stock in July 1992 and the related tax benefit of $10,605 has been
reflected as an extraordinary credit. See "Discontinued operations." Also in
1992, the Company purchased $11,471 principal amount of public debt securities
of Bally not related to sinking fund requirements for 952,697 shares of Bally
Common Stock, par value $.66 2/3 per share ("Common Stock") and $7,900 in cash,
which resulted in an extraordinary gain of $612, net of income taxes of $329.
In 1991, the Company purchased $157,255 principal amount of public debt
securities of Bally and a subsidiary not related to sinking fund requirements
for 3,639,000 shares of Common Stock, $33,707 in cash and substantially all of
the purchaser's debt securities received by the Company in conjunction with the
sale of Life Fitness, Inc. See "Discontinued operations." These purchases
resulted in an extraordinary gain of $56,053, net of income taxes of $27,039 and
other related costs.
37
<PAGE> 39
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Earnings (loss) per common and common equivalent share is computed by dividing
net income (loss) applicable to common stock by the weighted average number of
shares of common stock and common stock equivalents outstanding during each year
(46,558,856 in 1993, 41,110,353 in 1992 and 33,872,044 in 1991). Common stock
equivalents, which represent the dilutive effect of the assumed exercise of
certain outstanding stock options, increased the weighted average number of
shares outstanding by 1,645,348 in 1992. The assumed exercise of outstanding
stock options was not applicable in 1993 (due to losses) and not significant in
1991.
ACQUISITION OF BALLY'S GRAND, INC.
On August 20, 1993 (the "Effective Date"), the Fifth Amended Plan of
Reorganization (the "Chapter 11 Plan") of Bally's Grand, Inc. (a company
originally acquired by Bally in 1986 which owns and operates the casino resort
in Las Vegas, Nevada known as "Bally's Las Vegas") became effective and Bally's
Grand, Inc. emerged from bankruptcy. For almost two years prior thereto, Bally's
Grand, Inc. operated its business and managed its properties as a
debtor-in-possession under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code"). On the Effective Date, Bally relinquished all of its equity
interest in Bally's Grand, Inc. and Bally's net intercompany receivable from
Bally's Grand, Inc. was cancelled and extinguished. Bally's investment in and
advances to Bally's Grand, Inc. were written down to zero in 1990. Also, Bally
did not provide any type of guarantee or commitment to Bally's Grand, Inc. nor
did it assume any other obligation of Bally's Grand, Inc. in connection with the
Chapter 11 Plan. Accordingly, the Company did not reflect any equity in earnings
of Bally's Grand, Inc. for the period from January 1, 1991 through the Effective
Date.
During 1993, Bally's Casino Holdings, Inc. ("Casino Holdings") and another
subsidiary of Bally acquired approximately 5.2 million shares (approximately 50%
of the shares presently outstanding) of reorganized Bally's Grand, Inc. common
stock in several transactions in exchange for $41,714 in cash and 1,752,400
shares of Gaming common stock. The acquisitions of Bally's Grand, Inc. common
stock have been recorded using the purchase method of accounting, and the excess
of the purchase price over the estimated fair value of net assets acquired of
$19,354 is being amortized using the straight-line method over 20 years. Bally's
Grand, Inc. has been consolidated since December 1, 1993 as a result of Bally's
controlling interest. From September 29, 1993 (the date a cumulative 20% equity
interest in reorganized Bally's Grand, Inc. was attained) through November 30,
1993, Bally's investment in Bally's Grand, Inc. was recorded on the equity
method of accounting. The equity in earnings of reorganized Bally's Grand, Inc.
recognized during that period was $786.
Certain employees of Bally and certain of its subsidiaries are involved in the
management and operations of Bally's Grand, Inc. For services provided to
Bally's Grand, Inc. prior to the Effective Date, Bally was paid $1,427, $2,247
and $3,640 during 1993, 1992 and 1991, respectively. Following the Effective
Date, such services, among other things, are provided to reorganized Bally's
Grand, Inc. under a management agreement pursuant to which a subsidiary of Bally
receives $3,000 annually.
The following unaudited pro forma summary consolidated results of operations of
the Company for 1993 and 1992 were prepared to give effect to the acquisition of
the controlling interest in reorganized Bally's Grand, Inc. as if the
acquisition had occurred as of the beginning of each of the years presented.
These pro forma results have been prepared for comparative purposes only and do
not purport to present what the Company's results of operations would actually
have been if the acquisition had in fact occurred at such dates or to project
the Company's results of operations for any future year. In addition, the pro
forma summary consolidated results of operations of the Company include
adjustments to the historical results of operations of Bally's Grand, Inc. which
principally reflect: (i) the elimination of the operating results of Bally's
Reno, (ii) the elimination of the reorganization items of Bally's Grand, Inc.,
(iii) the effects of transactions related to the reorganization of Bally's
Grand, Inc. pursuant to the Chapter 11 Plan, (iv) the effects of the adoption of
"fresh-start reporting" and
38
<PAGE> 40
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(v) the income tax effects of the pro forma adjustments. The pro forma summary
consolidated results of operations are based upon available information and upon
certain assumptions that management believes are reasonable.
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
- ----------------------------------------------------
Revenues............... $1,559,844 $1,544,835
Operating income....... 145,129 143,289
Loss from continuing
operations........... (13,787) (8,249)
Net income (loss)...... (44,259) 12,553
Per common and common
equivalent share:
Loss from
continuing
operations...... $ (.35) $ (.26)
Net income
(loss).......... (1.01) .24
</TABLE>
RECEIVABLES
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
- ------------------------------------------------
Current:
Fitness center
installment
contracts......... $247,508 $261,760
Less --
Unearned finance
charges......... 23,807 25,830
Allowance for
doubtful
receivables and
cancellations... 45,926 49,263
-------- --------
177,775 186,667
Other, net........... 23,944 10,551
-------- --------
$201,719 $197,218
-------- --------
-------- --------
Long-term:
Fitness center
installment
contracts......... $191,337 $195,435
Less --
Unearned finance
charges......... 9,980 11,675
Allowance for
doubtful
receivables and
cancellations... 31,391 37,588
-------- --------
149,966 146,172
Other, net........... 16
-------- --------
$149,966 $146,188
-------- --------
-------- --------
</TABLE>
The carrying amount of the Company's receivables at December 31, 1993 and 1992
approximates fair value. The fair value of fitness center installment contracts
is based on discounted cash flow analyses, using interest rates in effect at the
end of the year comparable to similar consumer financing contracts. The fair
value of other receivables approximates their carrying amount.
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
- ------------------------------------------------
Payroll and benefit-
related
liabilities.......... $ 58,095 $ 40,155
Interest............... 53,233 41,641
Taxes other than income
taxes................ 8,261 7,099
Other.................. 56,962 56,619
-------- --------
$176,551 $145,514
-------- --------
-------- --------
</TABLE>
LONG-TERM DEBT
The carrying amounts of the Company's long-term debt at December 31, 1993 and
1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
- -------------------------------------------------------------
Bally Manufacturing Corporation:
6% Convertible Subordinated
Debentures due 1998.......... $ 18,969 $ 21,556
10% Convertible Subordinated
Debentures due 2006.......... 85,000 85,617
Bally's Casino Holdings, Inc.:
Senior Discount Notes due
1998......................... 139,418
Bally's Park Place, Inc.:
Revolving credit agreement..... 2,000 3,000
11 7/8% First Mortgage Notes
due 1999..................... 350,000 350,000
GNAC, CORP.:
10 5/8% First Mortgage Notes
due 2003 (less unamortized
discount of $1,873).......... 273,127
13 1/4% Mortgage-Backed Notes
due 1995 (includes
unamortized premium of
$5,214)...................... 264,214
Bally's Grand, Inc.:
10 3/8% First Mortgage Notes
due 2003..................... 315,000
Bally's Health & Tennis
Corporation:
Revolving credit agreement..... 80,910 187,910
13% Senior Subordinated Notes
due 2003..................... 200,000
13 5/8% Senior Subordinated
Debentures due 1997 (less
unamortized discount of
$277)........................ 69,228
Other secured and unsecured
obligations.................... 30,253 39,931
---------- ----------
Total long-term debt............ 1,494,677 1,021,456
Current maturities of long-term
debt........................... (10,288) (11,193)
---------- ----------
Long-term debt, less current
maturities..................... $1,484,389 $1,010,263
---------- ----------
---------- ----------
</TABLE>
39
<PAGE> 41
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
The indentures for Bally's debt do not contain cross-default provisions.
However, the indentures and credit agreements related to the indebtedness of
certain of Bally's subsidiaries require, among other things, that these
subsidiaries maintain certain financial ratios and restrict the amount of
additional indebtedness that can be incurred. Bally has not guaranteed the
payment of principal or interest under the publicly traded debt securities and
credit agreements of its subsidiaries.
The Bally 6% Convertible Subordinated Debentures due 1998 (the "6% Debentures")
require annual sinking fund payments of $2,587 through 1997, which will retire
75% of these debentures prior to maturity. The Company may redeem these
debentures at any time, in whole or in part, without premium. At any time prior
to maturity or redemption, these debentures are convertible into Common Stock
(current conversion price of $28.99 per share, subject to adjustment for certain
subsequent changes in the Company's capitalization). In 1993, the Company
purchased $2,587 principal amount of these debentures to satisfy the 1993
sinking fund requirement, which resulted in a pre-tax gain of $495 (included in
"Other revenues").
The Bally 10% Convertible Subordinated Debentures due 2006 (the "10%
Debentures") require annual sinking fund payments of $5,000 through 2005, which
will retire 75% of these debentures prior to maturity. The Company may redeem
these debentures at any time, in whole or in part, with premiums ranging from
1.96% at December 31, 1993 to zero in December 1996 and thereafter. At any time
prior to maturity or redemption, these debentures are convertible into Common
Stock (current conversion price of $32.68 per share, subject to adjustment for
certain subsequent changes in the Company's capitalization). In 1993, the
Company purchased $617 principal amount of these debentures to satisfy the
remaining 1993 sinking fund requirement, which resulted in a pre-tax gain of
$101 (included in "Other revenues").
The payment of the 6% Debentures and 10% Debentures is subordinated to the prior
payment, in full, of all senior indebtedness of Bally, as defined (approximately
$20,190 at December 31, 1993). In addition, almost all of the Company's business
is conducted through subsidiaries and claims of creditors of subsidiaries are
effectively senior to these debentures.
In June 1993, Casino Holdings issued $220,000 principal amount of Senior
Discount Notes due 1998 (the "Senior Discount Notes") at a discount to yield an
interest rate of 10 1/2%. The Senior Discount Notes are not subject to any
sinking fund requirement, but may be redeemed at any time, in whole or in part,
at their accreted value plus a "make-whole premium," as defined. In addition, on
or before June 15, 1996, a portion of the Senior Discount Notes may be redeemed
with premiums ranging from 8.0% of the accreted value prior to June 15, 1994 to
4.8% of the accreted value on June 15, 1996 out of the proceeds of an initial
public offering by Casino Holdings if such offering were to occur, provided that
at least $154,000 principal amount of the Senior Discount Notes remains
outstanding after the redemption. The net proceeds from the issuance of the
Senior Discount Notes were approximately $127,900, which have been and are being
used to: (i) construct and equip Bally's Tunica, (ii) acquire a significant
equity interest in Bally's Las Vegas, (iii) fund initial payments for
construction of a riverboat (including dockside improvements) for eventual
operation in New Orleans, Louisiana, (iv) fund an option agreement to acquire
certain riverfront property in Philadelphia for the purpose of developing a
dockside gaming facility if gaming were to be legalized in Pennsylvania and (v)
pursue other gaming opportunities. The Senior Discount Notes are effectively
subordinated to all liabilities of Casino Holdings' subsidiaries, which were
$779,585 at December 31, 1993.
On March 8, 1994, a subsidiary of Bally's Park Place, Inc. ("Bally's Park
Place") issued $425,000 principal amount of 9 1/4% First Mortgage Notes due 2004
(the "9 1/4% Notes"). The 9 1/4% Notes are not subject to any sinking fund
requirement, but may be redeemed beginning March 1999, in whole or in part, with
premiums ranging from 4.5% in 1999 to zero in 2002 and thereafter. In addition,
on or before March 15, 1997, a portion of the 9 1/4% Notes may be redeemed at a
premium of 9.25% out of the proceeds of one or more public equity offerings by
Bally's Park Place or Casino Holdings if such offerings were to occur, provided
that at least $100,000 principal amount of the 9 1/4% Notes remains outstanding
after the redemption. The
40
<PAGE> 42
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
9 1/4% Notes are secured by a first mortgage on and security interest in
substantially all property and equipment at Bally's Park Place, which had a net
book value of $486,498 at December 31, 1993. Bally's Park Place used the net
proceeds from the sale of the 9 1/4% Notes to purchase and retire certain of its
11 7/8% First Mortgage Notes due 1999 (the "11 7/8% Notes"), defease the
remaining 11 7/8% Notes at a price of 104.45% of their principal amount plus
accrued interest through the redemption date, thereby satisfying all obligations
thereunder, and pay a $30,000 dividend to Casino Holdings. The retirement and
defeasance of the 11 7/8% Notes results in an extraordinary loss in the first
quarter of 1994 of approximately $20,500, net of income taxes of approximately
$14,300. In connection with the sale of the 9 1/4% Notes, Bally's Park Place
terminated its existing credit facility and entered into an agreement for a new
$50,000 revolving credit facility which expires on December 31, 1996, at which
time all amounts outstanding become due. The new credit facility provides for
interest on borrowings payable, at Bally's Park Place's option, at the agent
bank's prime rate or the LIBOR rate plus 2%, each of which increases as the
balance outstanding increases. The rate of interest on borrowings was previously
based upon the agent bank's prime rate or certain other short-term rates (6% at
December 31, 1993). Bally's Park Place pays a fee of 1/2% on the unused
commitment. The new credit facility is secured by a pari passu lien on the
collateral securing the 9 1/4% Notes.
In March 1993, a subsidiary of GNAC, CORP. (which owns and operates the casino
resort in Atlantic City known as "The Grand") issued $275,000 principal amount
of 10 5/8% First Mortgage Notes due 2003 (the "10 5/8% Notes") at a discount to
yield an interest rate of 10 3/4%. The 10 5/8% Notes are not subject to any
sinking fund requirement, but may be redeemed beginning April 1998, in whole or
in part, with premiums ranging from 5.25% in 1998 to zero in 2001 and
thereafter. The 10 5/8% Notes are secured by a first mortgage on and security
interest in substantially all property and equipment of GNAC, CORP., which had a
net book value of $280,960 at December 31, 1993. GNAC, CORP. used the net
proceeds from the sale of the 10 5/8% Notes, together with the collection of
certain funds on deposit with Bally's Park Place, to redeem its 13 1/4%
Mortgage-Backed Notes due 1995 (the "13 1/4% Notes") at a price of 102.94% of
their principal amount plus accrued interest, thereby satisfying all obligations
thereunder. The redemption of the 13 1/4% Notes resulted in an extraordinary
loss of $2,091, net of income taxes of $1,405. During April 1993, GNAC, CORP.
entered into an agreement with two banks for a $20,000 revolving credit
facility. This credit facility has a term of two years, provides for interest on
borrowings at the rate of 1% above the banks' stated prime rates and is secured
by a pari passu lien on the collateral securing the 10 5/8% Notes. GNAC, CORP.
pays a fee of 1/2% on the unused commitment.
In December 1993, Bally's Grand, Inc. issued $315,000 principal amount of
10 3/8% First Mortgage Notes due 2003 (the "10 3/8% Notes"). The 10 3/8% Notes
are not subject to any sinking fund requirement, but may be redeemed beginning
December 1998, in whole or in part, with premiums ranging from 5.19% in 1998 to
zero in 2001 and thereafter. In addition, on or before December 15, 1996, a
portion of the 10 3/8% Notes may be redeemed at a premium of 9.375% out of the
proceeds of one or more public equity offerings by Bally's Grand, Inc. if such
offerings were to occur, provided that at least $100,000 principal amount of the
10 3/8% Notes remains outstanding after the redemption. The 10 3/8% Notes are
secured by a first priority lien on the fee interests in the approximately
thirty-acre site comprising Bally's Las Vegas and by a security interest in
certain personal property of Bally's Grand, Inc., which together had a net book
value of $331,448 at December 31, 1993. Bally's Grand, Inc. used a substantial
portion of the net proceeds from the issuance of the 10 3/8% Notes to redeem its
12% First Mortgage Notes due 2001 (the "12% Notes") at a price of 103% of their
principal amount plus accrued interest, thereby satisfying all obligations
thereunder, and to pay approximately $9,000 to Bally under a tax sharing
agreement between Bally's Grand, Inc. and Bally, which amount became due and
payable in connection with the redemption of the 12% Notes. The remaining
proceeds are primarily being used for capital expenditures. The redemption of
the 12% Notes resulted in an extraordinary loss of $400, net of income taxes of
$438 and minority interests of $412.
The Bally's Health & Tennis Corporation ("Bally's Health & Tennis") revolving
credit agreement,
41
<PAGE> 43
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
which was amended in January 1993, provides for borrowings of up to $107,500 and
letters of credit up to $20,000 at December 31, 1993. The commitment under the
revolving credit facility is reduced by $5,000 during each quarter of 1994 and
by increasing amounts thereafter through December 31, 1997. The rate of interest
on the borrowings (blended rate of 6 3/4% at December 31, 1993) is at Bally's
Health & Tennis' option, based upon either the agent bank's prime rate plus
1 3/4% or the Euro-dollar rate plus 3 1/4%. Bally's Health & Tennis pays an
annual fee of 1/2% on the unused commitment. Outstanding letters of credit as
of December 31, 1993 totalled $11,370, for which Bally's Health & Tennis pays an
annual fee of 1 3/4% on outstanding letters of credit and a fee of 1/2% on the
unused commitment. The revolving credit agreement is secured by substantially
all real and personal property of Bally's Health & Tennis, which had a net book
value of $759,848 at December 31, 1993, and a pledge of the stock of Bally's
Health & Tennis. The Bally's Health & Tennis revolving credit agreement requires
maintenance by Bally's Health & Tennis of certain financial ratios. Certain
provisions of the revolving credit agreement applicable to those financial
ratios were amended as of September 30, 1993. Although Bally's Health & Tennis
was in compliance with these financial ratio requirements as of December 31,
1993, there can be no assurance that it will not be necessary in the future to
amend the financial ratio requirements and, if necessary, that such amendments
will be obtained.
Also in January 1993, Bally's Health & Tennis issued $200,000 principal amount
of 13% Senior Subordinated Notes due 2003 (the "13% Notes"). The 13% Notes are
not subject to any sinking fund requirement, but may be redeemed beginning
January 1998, in whole or in part, with premiums ranging from 6.5% in 1998 to
zero in 2000 and thereafter. The payment of the 13% Notes is subordinated to the
prior payment in full of all senior indebtedness of Bally's Health & Tennis, as
defined ($124,463 at December 31, 1993). Bally's Health & Tennis used the net
proceeds from the sale of the 13% Notes to prepay $101,500 of indebtedness under
the Bally's Health & Tennis revolving credit agreement, redeem $69,505 principal
amount of its 13 5/8% Senior Subordinated Debentures due 1997 (the "13 5/8%
Debentures") at a price of 105.71% of their principal amount plus accrued
interest, thereby satisfying all obligations thereunder, and pay a $15,000
dividend to Bally. The redemption of the 13 5/8% Debentures and the amendment to
the revolving credit agreement resulted in an extraordinary loss of $5,999, net
of income taxes of $3,249.
Other secured and unsecured obligations are payable through 2018 and are
collateralized by land, buildings and equipment which have a net book value of
$43,395 at December 31, 1993. Interest rates averaged 8% at December 31, 1993.
DIVIDEND RESTRICTIONS
Each of Bally's principal subsidiaries presently have debt covenants which limit
the payment of dividends to Bally. Under the terms of the Senior Discount Notes,
an amount equal to certain dividends paid pursuant to a net income test by
Bally's Park Place to Casino Holdings may be declared as a dividend by Casino
Holdings and paid to Bally. In February 1994, Bally's Park Place declared and
paid a $595 dividend (amount of unrestricted retained earnings at December 31,
1993) to Casino Holdings which subsequently declared and paid a dividend in the
same amount to Bally. In addition, Bally's Park Place paid a $30,000 dividend to
Casino Holdings from a portion of the proceeds of the sale of the 9 1/4% Notes
in March 1994, which is not available to be paid by Casino Holdings to Bally. In
connection with the sale of the 9 1/4% Notes, the New Jersey Casino Control
Commission (the "New Jersey Commission") requires, among other things, that the
payment of certain dividends by Bally's Park Place to Casino Holdings which are
not based on net income receive prior approval from the New Jersey Commission.
GNAC, CORP. and Bally's Health & Tennis are not expected to be able to pay
dividends to Bally in 1994. Also, the terms of the 10 3/8% Notes limit the
ability of Bally's Grand, Inc. to pay dividends, and no dividends are expected
to be paid in 1994.
42
<PAGE> 44
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
Annual maturities
Aggregate annual maturities of long-term debt for the five years after December
31, 1993 (adjusted for the Bally's Park Place refinancing described above) are
as follows:
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bally Manufacturing
Corporation........ $ 7,587 $ 7,587 $ 7,587 $ 7,587 $ 13,621
Casino Holdings..... 220,000
Bally's Park
Place.............. 44 46 2,048 50 52
Bally's Health &
Tennis............. 2,657 19,207 26,503 46,700 6,559
------- ------- ------- ------- --------
$10,288 $26,840 $36,138 $54,337 $240,232
------- ------- ------- ------- --------
------- ------- ------- ------- --------
</TABLE>
Fair value
The fair value of the Company's long-term debt at December 31, 1993 and 1992 was
$1,520,926 and $1,013,552, respectively. The fair value of publicly traded debt
securities is based on quoted market prices. The fair value of borrowings under
revolving credit agreements and of other secured and unsecured obligations
approximates their carrying amount.
INCOME TAXES
The income tax benefit applicable to loss from continuing operations before
income taxes and minority interests consists of the following:
<TABLE>
<CAPTION>
Liability
Method Deferred method
-------- ---------------------
1993 1992 1991
- ----------------------------------------------------
<S> <C> <C> <C>
Current:
Federal........ $ 16,492 $(16,459) $ 2,398
State.......... 3,652 1,515 (428)
-------- -------- --------
20,144 (14,944) 1,970
Deferred:
Federal........ (24,522) 8,596 (31,488)
State.......... 278 521 (683)
-------- -------- --------
(24,244) 9,117 (32,171)
-------- -------- --------
$ (4,100) $ (5,827) $(30,201)
-------- -------- --------
-------- -------- --------
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and income tax purposes. Significant components of the Company's deferred tax
assets and liabilities as of December 31, 1993 and January 1, 1993, along with
their classification, are as follows:
<TABLE>
<CAPTION>
Liability method
-----------------------------------------------
December 31, 1993 January 1, 1993
---------------------- ----------------------
Assets Liabilities Assets Liabilities
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fitness center
installment contract
revenues................ $ $ 53,865 $ $ 46,249
Expenses which are not
currently deductible for
tax purposes:
Bad debts............. 39,385 39,451
Other................. 65,598 73,254
Depreciation and
capitalized costs....... 202,769 118,978
Basis difference of
investments............. 24,154 29,188
Federal and state
carryforwards........... 132,727 102,350
Other, net............... 68,187 101,936
-------- ----------- -------- -----------
237,710 $ 348,975 215,055 $ 296,351
----------- -----------
----------- -----------
Valuation allowance...... (90,836) (78,473)
-------- --------
$146,874 $136,582
-------- --------
-------- --------
Current.................. $ 27,736 $ 37,745 $ 55,723 $ 33,247
Long-term................ 119,138 311,230 80,859 263,104
-------- ----------- -------- -----------
$146,874 $ 348,975 $136,582 $ 296,351
-------- ----------- -------- -----------
-------- ----------- -------- -----------
</TABLE>
Based on federal income tax returns as filed, as adjusted for certain agreements
with the Internal Revenue Service ("IRS"), the Company had federal net operating
loss carryforwards of approximately $185,000, which expire in 2006, and
Alternative Minimum Tax ("AMT") credits of approximately $41,000, which have no
expiration. The Company also has substantial state tax loss carryforwards which
begin to expire in 1994 and fully expire in 2008. Because of complex issues
involved in the Company's tax situation and the Company's present expectations
of ultimate settlements with the IRS, the Company has provided a valuation
allowance for substantially all of the federal and state tax loss carryforwards
and a portion of its AMT credits.
43
<PAGE> 45
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
The deferred income tax provision (benefit) applicable to loss from continuing
operations before income taxes and minority interests for 1992 and 1991 arises
from the tax effect of timing differences as follows:
<TABLE>
<CAPTION>
Deferred method
--------------------
1992 1991
- ----------------------------------------------
<S> <C> <C>
Fitness center
installment contract
revenues............... $ 1,095 $(31,175)
Expenses which are not
currently deductible
for tax purposes:
Bad debts........... 1,547 34,923
Other............... 4,382 (2,106)
Alternative minimum
tax.................... 7,648 379
Depreciation and
capitalized costs...... (2,470) (1,967)
Debt discharge income.... (5,112) 49
Federal and state
carryforwards.......... 2,004 (28,462)
Other, net............... 23 (3,812)
-------- --------
$ 9,117 $(32,171)
-------- --------
-------- --------
</TABLE>
A reconciliation of the income tax benefit with amounts determined by applying
the U.S. statutory tax rate to loss from continuing operations before income
taxes and minority interests is as follows:
<TABLE>
<CAPTION>
Liability
Method Deferred method
-------- ---------------------
1993 1992 1991
---------------------------------------------------------
<S> <C> <C> <C>
Benefit at U.S.
statutory tax rate
(35% in 1993 and 34%
in 1992 and 1991)..... $ (7,213) $ (5,051) $(33,282)
Add (deduct):
State income taxes,
net of related
federal income tax
benefit............. 2,295 1,257 (725)
Amortization and
depreciation........ 2,423 4,189 3,583
Effect of change in
U.S. statutory tax
rate on deferred tax
balances............ 1,684
Prior years' taxes.... (3,949) (5,882) (634)
Other, net............ 660 (340) 857
-------- -------- --------
Income tax benefit...... $ (4,100) $ (5,827) $(30,201)
-------- -------- --------
-------- -------- --------
</TABLE>
The IRS has completed an audit of the federal income tax returns of certain of
the Company's fitness center subsidiaries for periods ending on the day these
subsidiaries were acquired. Among other things, the IRS is asserting that these
subsidiaries owe additional taxes of approximately $32,000 and substantial
amounts of interest with respect to issues arising pursuant to the Company's
election in 1983 to treat the purchases of stock of these subsidiaries as if
they were purchases of assets. The Company vigorously opposes the IRS'
assertions and has filed petitions in the United States Tax Court contesting the
IRS' proposed deficiencies with respect to these issues. This matter has been
docketed for trial in October 1994; however, a resolution may occur sooner if
the Company and the IRS resolve all or some of these issues by stipulation or
otherwise. Based on the information presently available, there can be no
assurance of the outcome of this matter. However, in the opinion of management,
payment, if any, to the IRS of amounts which may be ultimately deemed owing will
not have a material adverse effect on the Company's consolidated financial
position or results of operations, since the Company believes that it has
adequately provided deferred and current taxes related to this matter, although
it could, though it is not expected to, have a material adverse effect on the
Company's liquidity.
STOCKHOLDERS' EQUITY
Preferred stock
The Series B Junior Participating Preferred Stock, par value $1 per share (the
"Series B Junior Stock"), if issued, will have a minimum preferential quarterly
dividend of $5 per share, but will be entitled to an aggregate dividend of 100
times the dividend declared on shares of Common Stock. Each share of Series B
Junior Stock will have 100 votes, voting together with Common Stock, except as
Delaware law may otherwise provide. In the event of liquidation, the holders of
Series B Junior Stock will receive a preferred liquidation payment of $100 per
share, but will be entitled to receive an aggregate liquidation payment equal to
100 times the payment made per share of Common Stock.
The Series D Convertible Exchangeable Preferred Stock, par value $1 per share
(the "Preferred Stock"), with a face value of $34,725 as of December 31, 1993,
bears a dividend rate of 8%. The holders of Preferred Stock do not have voting
rights, except that the holders would have the right to elect two additional
directors of Bally if dividends on the Preferred Stock are in arrears
44
<PAGE> 46
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
in an amount equal to at least six quarterly dividends and except as Delaware
law may otherwise provide. The Preferred Stock is redeemable, in whole or in
part, at the option of Bally at $51.60 per share as of December 31, 1993,
declining each February 1 in equal annual amounts to $50 per share on and after
February 1, 1997, in each case plus accrued and unpaid dividends. The Preferred
Stock is convertible into Common Stock at a price of $25 per share, equivalent
to a conversion rate of two shares of Common Stock for each share of Preferred
Stock, subject to adjustment. The Preferred Stock is exchangeable at the option
of Bally, in whole but not in part, on any dividend payment date for 8%
Convertible Subordinated Debentures due February 1, 2007. In the event of
liquidation, the holders of the Preferred Stock will receive a preferred
liquidation payment of $50 per share, plus an amount equal to any dividends
accrued and unpaid to the payment date, before any distribution is made to
holders of junior securities.
COMMON STOCK
At December 31, 1993, shares of Common Stock were reserved for future issuance
as follows:
<TABLE>
<S> <C>
Stock options and awards (includes
2,342,000 shares reserved
subject to stockholder approval
in 1994)........................ 5,578,065
Conversion of 10% Debentures and
6% Debentures................... 3,255,308
Acquisitions of businesses........ 2,000,000
Conversion of Preferred Stock..... 1,388,994
Other............................. 28,050
----------
12,250,417
----------
----------
</TABLE>
STOCK PLANS, AWARDS AND RIGHTS
INCENTIVE PLANS
In May 1989, the stockholders approved the 1989 Incentive Plan of Bally (the
"1989 Plan") for officers and key employees that provides for the grant of stock
options, stock appreciation rights ("SARs"), stock depreciation rights ("SDRs")
and restricted stock (collectively "Awards"). In June 1992, the stockholders
approved an increase in the number of shares of Common Stock available for
issuance under the 1989 Plan from 2,500,000 shares to 4,000,000 shares.
Amendments to the 1989 Plan increasing the aggregate number of shares of common
stock which may be sold or delivered under the 1989 Plan from 4,000,000 to
6,022,000 shares and limiting the number of stock options, stock appreciation
rights or stock options in tandem with stock appreciation rights that may be
granted during any one calendar year to certain executive officers of the
Company are subject to stockholder approval in 1994. No Awards may be granted
after March 9, 1999.
The 1989 Plan provides for granting incentive as well as non-qualified stock
options. Generally, non-qualified stock options will be granted with an option
price equal to the fair market value of the stock at the date of grant.
Incentive stock options must be granted at not less than the fair market value
of the stock at the date of grant. Option grants generally become exercisable in
three equal annual installments commencing one year after the date of grant, but
the Compensation and Stock Option Committee of the Board ("Compensation
Committee"), in its discretion, may alter such terms.
SARs are rights granted to an officer or key employee to receive shares of stock
and/or cash in an amount equal to the excess of the fair market value of the
stock on the date the SARs are exercised over the fair market value of the stock
on the date the SARs were granted or, at the discretion of the Compensation
Committee, the date the option was granted, if granted in tandem with an option
granted on a different date. Upon exercise of stock appreciation rights, the
optionee surrenders the related option in exchange for payment, in cash, of the
excess of the fair market value on the date of surrender over the option price.
SDRs are rights granted to an officer or key employee in conjunction with an
option to receive a payment of stock and/or cash equal to the excess, if any, of
the option price of stock acquired on the exercise of the related option over
the greater of: (i) the fair market value of the stock, as of the date six
months and one day after the option was exercised (or such other date as the
Compensation Committee, in its discretion, shall determine), or (ii) if such
stock was sold prior to such date, the gross sale proceeds from the sale of such
stock. Stock options, SARs and SDRs granted under the 1989
45
<PAGE> 47
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
Plan may be exercisable for a term of not more than ten years after the date of
grant. At December 31, 1993, no SDRs had been granted and Bally has no current
intention of granting SDRs under the 1989 Plan.
Restricted stock awards are rights granted to an employee to receive shares of
stock without payment but subject to forfeiture and other restrictions as set
forth in the 1989 Plan. Generally, the restricted stock awarded, and the right
to vote such stock or to receive dividends thereon, may not be sold, exchanged
or otherwise disposed of during the restricted period. Except as otherwise
determined by the Compensation Committee, the restrictions and risks of
forfeiture will, after one year from the date of grant, lapse as to not more
than 20% of the stock originally awarded, after two years lapse as to an
aggregate of not more than 40% of the stock originally awarded, and after three
years shall lapse as to all the stock originally awarded. There have been no
restricted stock awards granted under this plan since 1989 and there are no
shares outstanding with restrictions under this plan at December 31, 1993.
In October 1993, the Board of Directors of the Company adopted, subject to
stockholder approval in 1994, the 1993 Non-Employee Directors' Stock Option Plan
of Bally Manufacturing Corporation (the "1993 Plan"). The 1993 Plan provides for
the grant of non-qualified stock options to purchase an aggregate of 120,000
shares of Common Stock to directors of the Company who are not officers or key
employees of Bally or any of its subsidiaries. Under this plan, stock options
are granted with an option price equal to the fair market value of the stock on
the date of grant. Option grants generally become exercisable in three equal
annual installments commencing one year after the date of grant, with such
options expiring ten years after the date of grant. No options may be granted
under this plan after October 13, 1998.
The Company also has a non-qualified and incentive stock option and stock
appreciation rights plan for officers and key employees (the "1985 Plan") which
has been terminated except as to options and stock appreciation rights
outstanding, all of which are vested.
A summary of 1993 stock option activity under the 1989 Plan, the 1993 Plan and
the 1985 Plan is as follows:
<TABLE>
<CAPTION>
Shares
------------------------
Stock
Price Stock appreciation
per share options rights
- -------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at
December 31, 1992.... $1.75-22.88 3,024,868 564,669
Granted (includes
1,192,500 shares
granted subject to
stockholder
approval)............ 6.75-9.63 1,673,000
Exercised............. 1.75-3.88 (289,467)
Cancelled or
expired.............. 3.88-22.88 (213,795) (56,335)
----------- -----------
Outstanding at
December 31, 1993.... 1.75-22.50 4,194,606 508,334
----------- -----------
----------- -----------
</TABLE>
At December 31, 1993, options on 2,296,018 shares were exercisable and 1,103,459
shares and 80,000 shares were reserved for future grants under the 1989 Plan and
1993 Plan, respectively. Outstanding options at December 31, 1993 expire between
1994 and 2003. Included in the stock options outstanding at December 31, 1993
are options for 1,416,666 shares (options for 250,000 shares were exercised
during 1993) comprising non-qualified stock options the Company granted in 1991
to two executives to each purchase 1,000,000 shares of Common Stock at an
exercise price of $2 per share less than the fair market value of Common Stock
at the date of grant. The awards also provided for accelerated vesting under
certain circumstances. During the first quarter of 1993, the required
circumstances were met, and the related compensation expense, which was being
amortized over the three-year vesting period of the awards, was fully expensed.
In December 1993, Bally's Board of Directors adopted, subject to stockholder
approval in 1994, the Bally's Employee Stock Purchase Plan (the "Stock Purchase
Plan"). The Stock Purchase Plan provides for the purchase of an aggregate of
200,000 shares of Common Stock by eligible employees (as defined) electing to
participate in the plan. The stock can generally be purchased every six months
at a price equal to the lesser of: (i) 85% of the fair market value of the stock
on the date when a particular offering begins or (ii) 85% of the fair market
value of the stock on the date when a particular offering terminates. On each
offering made under the Stock Purchase Plan, each eligible employee electing to
46
<PAGE> 48
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
participate in the Stock Purchase Plan will automatically be granted shares of
Common Stock equal to the number of full shares which may be purchased from the
employee's elected payroll deduction, with a maximum payroll deduction equal to
10% of eligible compensation, as defined. Assuming stockholder approval, the
first offering under this plan commences on July 1, 1994 and the last offering
terminates on June 30, 2004.
AWARDS OF SUBSIDIARY STOCK
During 1993, 600,000 shares of reorganized Bally's Grand, Inc. common stock were
awarded to certain employees of Bally's Grand, Inc. (300,000 shares) and certain
executive officers of Bally who also serve as executive officers of Bally's
Grand, Inc. (300,000 shares) pursuant to the Bally's Grand, Inc. 1993 Incentive
Stock Plan. The shares awarded to employees of Bally's Grand, Inc. are subject
to forfeiture if the employee's employment by Bally's Grand, Inc. is terminated
and are subject to restrictions which lapse as to approximately one-third of the
shares awarded on each of December 31, 1993, 1994 and 1995 and the fair value of
such shares on the date of award is being charged to expense over such period.
The shares awarded to executive officers of Bally were not subject to
restrictions and, accordingly, the fair value of the awards was expensed in
1993. In December 1993, the executive officers of Bally sold the shares of
Bally's Grand, Inc. common stock awarded to them to a subsidiary of Bally at the
fair market value of the shares at the date of sale.
RIGHTS TO PURCHASE PREFERRED STOCK
One preferred stock purchase right is attributable to each outstanding share of
Common Stock. Under certain conditions, each right may be exercised to purchase
for $60 one 1/100th of a share of Series B Junior Stock. The rights are not
exercisable or transferable apart from the stock until the occurrence of one of
the following: (i) ten days after the date ("Stock Acquisition Date") of a
public announcement by a person or a group of beneficial ownership of 20% or
more of Common Stock (an "Acquiring Person"), (ii) ten business days after a
public announcement by a person or group of a tender offer for 30% or more of
Common Stock, or (iii) the occurrence of a Flip-In Event. A Flip-In Event is any
of: (i) a final court or administrative order finding that a person or group
having beneficial ownership of 10% or more of Common Stock (a "10% Stockholder")
has violated Nevada or New Jersey gaming, casino or similar laws in connection
with such 10% Stockholder's interest in the Company, (ii) the failure of a 10%
Stockholder to eliminate or reduce to an acceptable level its beneficial
ownership of Common Stock within 20 days after a final court or administrative
order finding that such 10% Stockholder is unsuitable or unqualified to hold its
interest in the Company, (iii) the acquisition by a person or group of 20% or
more of Common Stock without having obtained prior Nevada Gaming Commission
approval to acquire control of the Company, and (iv) the consummation of certain
"self-dealing" transactions between an Acquiring Person and the Company,
including a merger with an Acquiring Person in which Bally is the surviving
corporation and Common Stock is not changed or exchanged. Upon the occurrence of
a Flip-In Event, each right, other than those held by the Acquiring Person or
10% Stockholder causing such occurrence, will entitle the holder to purchase
shares of Common Stock or, in certain cases, other assets or securities of the
Company having a value of $120 for $60. In the event that the Company is
acquired in a merger or other business combination transaction (other than a
merger with an Acquiring Person in which the Company is the surviving
corporation and Common Stock is not changed or exchanged) or 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a right
shall have the right to receive, upon exercise, common stock of the acquiring
company having a calculated value equal to twice the purchase price of the
right. The rights, which do not have voting privileges, are subject to
adjustment to prevent dilution, expire on December 4, 1996 and may be redeemed
by the Company at a price of five cents per right at any time until 20 days
(subject to extension by the Board) following the Stock Acquisition Date.
EMPLOYEE BENEFIT PLANS
Bally and certain subsidiaries sponsor employee savings plans which cover
certain full-time employees and which are considered part of the Company's
overall retirement program. Pursuant to these savings plans, participating
employees may contribute (defer) a percent of eligible
47
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BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
compensation. Employee contributions to the savings plans, up to certain limits,
are partially matched by the Company. The expense applicable to continuing
operations for the Company's savings plans and a profit-sharing plan which was
terminated on January 1, 1993 was $5,243, $3,724 and $5,082 for 1993, 1992 and
1991, respectively.
In addition, Bally and Bally's Park Place have noncontributory supplemental
executive retirement plans for certain key executives. Normal retirement under
these plans is age 60 to 65 and participants receive benefits based on years of
service and compensation. Pension costs of these plans are unfunded except for
one executive's benefits which are funded through annual contributions to a
trust. Net periodic pension cost for these plans was $4,482, $1,627 and $6,664
for 1993, 1992 and 1991, respectively. The accrued pension liability related to
the unfunded supplemental executive retirement plans in the consolidated balance
sheet (principally classified as long-term) was $9,994 and $6,890 at December
31, 1993 and 1992, respectively. The weighted average discount rate and rate of
increase in future compensation levels used in determining actuarial present
value of the projected benefit obligations were 6.1% and 6.0% in 1993, 8.1% and
6.0% in 1992 and 8.3% and 5.5% in 1991.
In 1991, Bally's Park Place and one of its executives entered into an agreement
to terminate the executive's participation in a noncontributory supplemental
executive retirement plan sponsored by the subsidiary. Pursuant to this
agreement, the subsidiary agreed to pay the executive $27,600 over five years.
The subsidiary recorded the settlement in an amount equal to the net present
value of the required payments. No charge against operations in 1991 was
required, as the subsidiary had fully accrued in prior years the value of this
settlement as part of its pension liability. The net present value of the
remaining payments under this termination agreement was $16,042 at December 31,
1992. On January 8, 1993, Bally and Bally's Park Place entered into a retirement
and separation agreement with this executive which, among other things, reduced
the remaining amount payable under the termination agreement to $13,500, which
Bally's Park Place paid on such date.
Certain employees of the Company's casinos are covered by union-sponsored,
collectively bargained, multiemployer defined benefit pension plans. The
contributions and charges to expense for these plans were $1,314, $942 and $915
in 1993, 1992 and 1991, respectively.
COMMITMENTS AND CONTINGENCIES
LEASES
Minimum future rent payments totalling $918,254 under commitments for
noncancellable operating leases with initial terms in excess of one year in
effect at December 31, 1993, principally for fitness center facilities, are
payable $77,874, $76,204, $73,493, $72,017 and $70,073 in 1994 through 1998 and
$548,593 thereafter. Rent expense was $80,514, $74,891 and $74,046 for 1993,
1992 and 1991, respectively.
LITIGATION
Several purported derivative actions originally filed against Bally and certain
of its current and former directors and officers have been consolidated. The
consolidated complaint seeks, among other things, unspecified damages and
compensatory and punitive damages and costs in connection with allegations of
breach of fiduciary duty, corporate mismanagement, and waste of corporate assets
in connection with certain actions including, among others, payment of
compensation, certain acquisitions by Bally, the dissemination of allegedly
materially false and misleading information, the proposed restructuring of debt,
and a subsidiary's allegedly discriminatory practices. The Company is also
involved in various other matters of litigation as both plaintiff and defendant.
Management believes, based upon the advice of its counsel, that the ultimate
disposition of these matters will not have a materially adverse effect on the
Company's consolidated financial statements.
DISCONTINUED OPERATIONS
In September 1993, the Company disposed of its remaining 1,752,400 shares of
Gaming common stock pursuant to stock exchange agreements. This disposition,
including the recognition of previously deferred cumulative translation
adjustment credits of $2,506, resulted in a net gain of $6,215, including an
income tax benefit of $1,452. The income tax benefit resulted from the
utilization of tax loss carryforwards to offset taxable income arising from this
disposition of
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BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
Gaming common stock, and is included in income from discontinued operations. In
1992 and 1991, the Company sold 4,547,600 shares and 3,000,000 shares,
respectively, of Gaming common stock it owned in public offerings and received
net proceeds of $51,243 and $33,300, respectively, which, including the
recognition of previously deferred cumulative translation adjustment credits of
$7,922 and $4,263, respectively, resulted in a net gain of $6,706 and $5,219,
respectively, net of income taxes of $8,529 and $3,807, respectively, and other
related costs. As a result of the Company's disposal of its investment in
Gaming, the consolidated financial statements reflect Gaming as a discontinued
operation. Income from discontinued operations in 1992 and 1991 also includes
equity in earnings of Gaming of $2,879 and $4,644, respectively. Gaming's
revenues in 1992 and 1991 were $163,781 and $153,648, respectively.
Also in 1991, the Company sold the assets of its Life Fitness, Inc. computerized
fitness equipment business and Scientific Games, Inc. lottery business in
separate transactions for a total consideration of approximately $100,000, of
which approximately $69,500 was paid in cash and the remainder was paid in the
form of a new issue of one of the purchaser's debt securities. These sales
resulted in a net gain of $18,010, net of income taxes of $18,172 and other
related costs. The Company subsequently exchanged substantially all of the
purchaser's debt securities received by the Company in connection with one of
the sales and 800,000 shares of Common Stock with a third party for
approximately $48,400 principal amount of public debt securities of Bally and
one of its subsidiaries that were held by the third party, which resulted in an
extraordinary gain of $10,800, net of income taxes of $4,800 and other related
costs. See "Extraordinary items." The income from operations of these businesses
has also been reflected as discontinued operations in the consolidated financial
statements. Sales and income from operations of these businesses totalled
$126,481 and $5,290 (after income taxes of $4,297), respectively, prior to their
disposal dates in 1991.
INDUSTRY SEGMENTS
The Company operates in two segments: (i) Casinos -- includes the operation of
two casino hotels in Atlantic City, New Jersey, a casino resort in Las Vegas,
Nevada and a dockside gaming facility in Tunica, Mississippi; and (ii) Fitness
centers -- includes the operation of 339 fitness centers. Revenues and assets of
operations outside the United States are insignificant.
During 1991, Bally began allocating its corporate overhead (including executive
salaries and benefits, public company reporting costs and other corporate
headquarters' costs) to its subsidiaries. Bally's method for allocating costs to
its subsidiaries is designed to apportion its costs to its subsidiaries based
upon many subjective factors including size of operations and extent of Bally's
oversight requirements. The allocations by Bally to its subsidiaries for 1993,
1992 and 1991 totalled $8,732, $9,591 and $9,175, respectively.
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BALLY MANUFACTURING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS (CONTINUED) 1993 1992 1991
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Revenues:
Casinos.................................................. $ 619,188 $ 552,839 $ 536,236
Fitness centers.......................................... 694,752 741,891 720,373
Corporate................................................ 8,047 2,488 8,035
Intersegment eliminations and other...................... (1,890) (216) (2,132)
---------- ---------- ----------
Consolidated revenues............................ $1,320,097 $1,297,002 $1,262,512
---------- ---------- ----------
---------- ---------- ----------
Operating income (loss):
Casinos.................................................. $ 104,445 $ 92,022 $ 83,262
Fitness centers.......................................... 847 23,149 (4,368)
Corporate................................................ 2,295 (4,211) (14,359)
Intersegment eliminations and other...................... 1,553 245 (3,942)
---------- ---------- ----------
Consolidated operating income.................... 109,140 111,205 60,593
Interest expense......................................... (129,750) (126,060) (158,482)
---------- ---------- ----------
Loss from continuing operations before
income taxes and minority interests............ $ (20,610) $ (14,855) $ (97,889)
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets:
Casinos.................................................. $1,566,578 $ 944,583 $ 969,303
Fitness centers.......................................... 928,574 954,319 1,013,045
Corporate................................................ 57,382 20,724 29,148
Investment in discontinued operations.................... 17,166 56,542
Intersegment eliminations and other...................... (12,887) (12,156) (17,896)
---------- ---------- ----------
Consolidated identifiable assets................. $2,539,647 $1,924,636 $2,050,142
---------- ---------- ----------
---------- ---------- ----------
Capital expenditures:
Casinos.................................................. $ 70,824 $ 18,931 $ 13,368
Fitness centers.......................................... 34,940 22,511 27,581
Corporate................................................ 111
Intersegment eliminations and other...................... 71 (1,290) (2,003)
---------- ---------- ----------
Consolidated capital expenditures................ $ 105,835 $ 40,152 $ 39,057
---------- ---------- ----------
---------- ---------- ----------
Depreciation and amortization:
Casinos.................................................. $ 54,149 $ 47,173 $ 46,897
Fitness centers.......................................... 62,325 60,553 59,643
Corporate................................................ 644 3,170 5,321
Intersegment eliminations and other...................... (3,294) (1,954) (2,832)
---------- ---------- ----------
Consolidated depreciation and amortization....... $ 113,824 $ 108,942 $ 109,029
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
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BALLY MANUFACTURING CORPORATION
SUPPLEMENTARY DATA
QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Quarters ended
-----------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- ----------------- ----------------- -----------------
1993 1992 1993 1992 1993 1992 1993 1992
------ ------ ------ ------ ------ ------ ------ ------
(In millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues..................................... $335.0 $331.8 $327.9 $332.2 $332.4 $333.4 $324.8 $299.6
Operating income (loss)...................... 38.2 37.5 33.7 36.4 38.5 35.3 (1.3) 2.0
Income (loss) from continuing operations..... 3.8 2.7 2.4 3.1 (.3) 1.4 (21.9) (16.2)
Income from discontinued operations.......... 1.2 1.1 6.2 7.2 .1
Income (loss) before extraordinary items and
cumulative effect on prior years of change
in accounting for income taxes............. 3.8 3.9 2.4 4.2 5.9 8.6 (21.9) (16.1)
Extraordinary gain (loss).................... (8.1) .6 9.2 (.4) 1.4
Cumulative effect on prior years of change in
accounting for income taxes................ (28.2)
Net income (loss)............................ (32.5) 4.5 2.4 4.2 5.9 17.8 (22.3) (14.7)
Per common and common equivalent share:
Income (loss) from continuing operations... $ .07 $ .05 $ .04 $ .06 $ (.02) $ .02 $ (.48) $ (.37)
Income from discontinued operations........ .03 .03 .13 .18
Extraordinary gain (loss).................. (.18) .02 .23 (.01) .03
Cumulative effect on prior years of change
in accounting for income taxes........... (.61)
Net income (loss).......................... (.72) .10 .04 .09 .11 .43 (.49) (.34)
</TABLE>
- ---------------
NOTES:
1. The quarterly consolidated financial information reflects Bally Gaming
International, Inc. ("Gaming") as a discontinued operation as a result of the
Company's disposition of its remaining investment in September 1993.
2. Income from continuing operations for the quarters ended March 31 and June
30, 1993 includes gains of $.2 million and $.2 million, respectively,
resulting from market purchases of the Company's public debt for sinking fund
requirements.
3. Loss from continuing operations for the quarter ended September 30, 1993
includes a charge of $1.7 million ($.04 per share) as a result of applying
the change in the U.S. statutory tax rate from 34% to 35% to deferred tax
balances.
4. Loss from continuing operations for the quarter ended December 31, 1993
includes a charge of $1.9 million ($.04 per share) for the amortization of
pre-opening costs associated with Bally's Saloon and Gambling Hall which
commenced operations in December 1993.
5. Income from discontinued operations for the quarter ended September 30, 1993
represents a gain from the sale of Gaming common stock.
6. The extraordinary losses for the quarters ended March 31 and December 31,
1993 are due to early redemptions of debt.
7. The cumulative effect on prior years of change in accounting for income
taxes for the quarter ended March 31, 1993 is a result of the Company
changing its method of accounting for income taxes (effective January 1,
1993) as required by Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes." As permitted by SFAS No. 109, the
Company elected to use the cumulative effect approach rather than to restate
the financial statements of any prior years to apply the provisions of SFAS
No. 109.
8. Income from continuing operations for the quarters ended March 31 and
September 30, 1992 includes gains of $2.5 million ($.07 per share) and $.4
million ($.01 per share), respectively, resulting from market purchases of
the Company's public debt for sinking fund requirements.
9. Income (loss) from continuing operations for the quarters ended March 31 and
December 31, 1992 includes the elimination of litigation accruals relating
to matters which were favorably settled amounting to $1.0 million ($.03 per
share) and $1.2 million ($.03 per share), respectively.
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10. Income from continuing operations for the quarter ended September 30, 1992
includes charges for professional fees related to the Company's
reorganization of $3.2 million ($.08 per share) offset, in part, by a
commission on the July 1992 sale by Bally's Grand, Inc. of the casino resort
complex formerly known as "Bally's Reno" of $.7 million ($.02 per share).
11. Income from discontinued operations for the quarter ended September 30, 1992
includes a gain of $6.7 million ($.17 per share) from the sale of Gaming
common stock.
12. The extraordinary gain for the quarter ended March 31, 1992 relates to the
extinguishment of debt as a result of market purchases of the Company's
public debt.
13. The extraordinary gains for the quarters ended September 30, 1992 and
December 31, 1992 represent credits for the utilization of tax loss
carryforwards.
14. The Company's operations are subject to seasonal factors.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Item 9 is inapplicable.
PART III
Part III, except for certain information relating to Executive Officers included
in Part I, is omitted inasmuch as the Company intends to file with the
Securities and Exchange Commission within 120 days of the close of the fiscal
year ended December 31, 1993 a definitive proxy statement containing such
information pursuant to Regulation 14A of the Securities Exchange Act of 1934
and such information shall be deemed to be incorporated herein by reference from
the date of filing such document.
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) 1. INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
REFERENCE
---------
<S> <C>
Report of independent auditors...... 29
Consolidated balance sheet at
December 31, 1993 and 1992........ 30
For each of the three years in the
period ended December 31, 1993:
Consolidated statement of
operations................... 32
Consolidated statement of
stockholders' equity......... 33
Consolidated statement of cash
flows........................ 34
Notes to consolidated financial
statements........................ 36
Supplementary data:
Quarterly consolidated
financial information
(unaudited).................. 51
</TABLE>
(A) 2. INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
REFERENCE
---------
<S> <C>
Schedule II -- Amounts receivable
from related parties and
underwriters, promoters, and
employees other than related
parties for each of the three
years in the period ended December
31, 1993.......................... S-1
Schedule III -- Condensed financial
information of registrant:
Condensed balance sheet at
December 31, 1993 and 1992... S-2
Condensed statement of
operations for each of the
three years in the period
ended December 31, 1993...... S-3
Condensed statement of cash
flows for each of the three
years in the period ended
December 31, 1993............ S-4
Notes to condensed financial
information.................. S-5
Schedule V -- Property and equipment
for each of the three years in the
period ended December 31, 1993.... S-6
Schedule VI -- Accumulated
depreciation and amortization of
property and equipment for each of
the three years in the period
ended December 31, 1993........... S-7
Schedule VIII -- Valuation and
qualifying accounts for each of
the three years in the period
ended December 31, 1993........... S-8
Schedule IX -- Short-term borrowings
for each of the three years in the
period ended December 31, 1993.... S-9
Schedule X -- Supplementary income
statement information for each of
the three years in the period
ended December 31, 1993........... S-10
</TABLE>
All other schedules specified under Regulation S-X are omitted because they are
not applicable, not required under the instructions or all information required
is set forth in the Notes to consolidated financial statements.
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(A) 3. INDEX TO EXHIBITS
<TABLE>
<S> <C>
*3.(i)-1 Restated Certificate of Incorporation of Bally, as amended (filed as an exhibit to
Bally's Annual Report on Form 10-K, file no. 1-7244, for the fiscal year ended
December 31, 1992).
*3.(i)-2 Certificate of Designation, Preferences and Rights of Series B Junior Participating
Preferred Stock, par value $1 per share, of Bally (filed as an exhibit to Bally's
Annual Report on Form 10-K, file no. 1-7244, for the fiscal year ended December 31,
1992).
*3.(i)-3 Certificate of Designations, Preferences and Relative, Participating, Optional or
other Rights of the Series D Convertible Exchangeable Preferred Stock, par value $1
per share, of Bally, as amended (filed as an exhibit to Bally's Annual Report on Form
10-K, file no. 1-7244, for the fiscal year ended December 31, 1992).
*3.(ii) By-laws of Bally, as amended (filed as an exhibit to Bally's Annual Report on Form
10-K, file no. 1-7244, for the fiscal year ended December 31, 1992).
*4.(ii)-1 Registration Statement on Form 8-A dated July 24, 1975 (file no. 1-7244).
*4.(ii)-2 Registration Statement on Form S-7 (registration no. 2-62399) filed September 19,
1978 and Indenture dated as of September 15, 1978, between Bally and United States
Trust Company of New York, as successor Trustee, filed as an exhibit thereto.
*4.(ii)-3 Registration Statement on Form 8-A, as amended, relating to 6% Convertible
Subordinated Debentures due 1998 of Bally (filed as an exhibit to Bally's Annual
Report on Form 10-K, file no. 1-7244, for the fiscal year ended December 31, 1992).
*4.(ii)-4 Registration Statement on Form S-16 (registration no. 2-75379) filed December 31,
1981 and Indenture dated as of December 15, 1981, between Bally and United States
Trust Company of New York, as successor Trustee, filed as an exhibit thereto.
*4.(ii)-5 Registration Statement on Form 8-A, as amended, relating to 10% Convertible
Subordinated Debentures due 2006 of Bally (filed as an exhibit to Bally's Annual
Report on Form 10-K, file no. 1-7244, for the fiscal year ended December 31, 1992).
*4.(ii)-6 Registration Statement on Form S-1 (registration no. 33-26464) filed August 24, 1989
and Indenture dated as of August 31, 1989 between Bally's Park Place Funding, Inc.,
Bally's Park Place, Inc.(a Delaware corporation), Bally's Park Place, Inc. (a New
Jersey corporation), Bally's Park Place Realty Co. and First Fidelity Bank, National
Association, New Jersey, as Trustee, filed as an exhibit thereto.
*4.(ii)-7 Registration Statement on Form S-1 (registration no. 33-52868) filed January 15, 1993
by Bally's Health & Tennis Corporation.
4.(ii)-8 Indenture dated as of January 15, 1993 between Bally's Health & Tennis Corporation
and Amalgamated Bank of Chicago, as Trustee.
*4.(ii)-9 Registration Statement on Form 8-A dated December 11, 1986, relating to Preferred
Stock Purchase Rights (file no. 1-7244).
*4.(ii)-10 Registration Statement on Form S-1 (registration no. 33-65438) filed November 23,
1993 and Indenture dated as of June 15, 1993 between Bally's Casino Holdings, Inc.
and Amalgamated Bank of Chicago, as Trustee, filed as an exhibit thereto.
4.(ii)-11 Amendment dated as of February 8, 1994 to Indenture between Bally's Casino Holdings,
Inc. and Amalgamated Bank of Chicago, as Trustee.
*4.(ii)-12 Registration Statement on Form S-1 (registration no. 33-51765) filed February 28,
1994 by Bally's Park Place Funding, Inc. and Bally's Park Place, Inc. (a Delaware
corporation).
4.(ii)-13 Indenture dated as of March 8, 1994 among Bally's Park Place Funding, Inc., Bally's
Park Place, Inc. (a Delaware corporation), Bally's Park Place, Inc. (a New Jersey
corporation), Bally's Park Place Realty Co. and First Bank, National Association, as
Trustee.
*4.(ii)-14 Registration Statement on Form S-1 (registration no. 33-59660) filed May 11, 1993 by
GNF, CORP. and GNAC, CORP. and Indenture dated as of March 10, 1993 between GNF,
CORP., GNAC, CORP., GNOC, CORP. and Amalgamated Bank of Chicago, as Trustee (filed as
an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for the fiscal
year ended December 31, 1992).
*4.(ii)-15 Registration Statement on Form S-1 (registration no. 33-74330) filed January 24, 1994
and Indenture dated as of December 15, 1993 between Bally's Grand, Inc. and
Continental Bank, National Association, as Trustee, filed as an exhibit thereto.
*10.(i)-1 Agreement dated September 11, 1990, between Bally and Nugget Partners, L.P. (filed as
an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for the fiscal
year ended December 31, 1990).
*10.(i)-2 Amended and Restated Intercorporate Agreement dated as of July 8, 1992, between Bally
and Bally Gaming International, Inc. (filed as an exhibit to Bally's Annual Report on
Form 10-K, file no. 1-7244, for the fiscal year ended December 31, 1992).
</TABLE>
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<TABLE>
<S> <C>
*10.(i)-3 Agreement dated January 8, 1993, between Bally and Bally Gaming International, Inc.
(filed as an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for the
fiscal year ended December 31, 1992).
*10.(i)-4 Amended and Restated Credit Agreement dated as of January 25, 1993 among Bally's
Health & Tennis Corporation and a group of banks with Chemical Bank, as agent (filed
as an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for the fiscal
year ended December 31, 1992).
*10.(i)-5 First Amendment dated as of February 24, 1993 to the Amended and Restated Credit
Agreement dated as of January 25, 1993 among Bally's Health & Tennis Corporation and
a group of banks with Chemical Bank, as agent (filed as an exhibit to Bally's
Quarterly Report on Form 10-Q, file no. 1-7244, for the quarter ended September 30,
1993).
*10.(i)-6 Second Amendment dated as of September 30, 1993 to the Amended and Restated Credit
Agreement dated as of January 25, 1993 among Bally's Health & Tennis Corporation and
a group of banks with Chemical Bank, as agent (filed as an exhibit to Bally's
Quarterly Report on Form 10-Q, file no. 1-7244, for the quarter ended September 30,
1993).
*10.(iii)-1 1985 Stock Option and Stock Appreciation Right Plan of Bally Manufacturing
Corporation, effective February 22, 1985 (filed as an exhibit to Bally's Annual
Report on Form 10-K, file no. 1-7244, for the fiscal year ended December 31, 1985).
*10.(iii)-2 First Amendment to the 1985 Stock Option and Stock Appreciation Right Plan of Bally
Manufacturing Corporation, effective as of January 1, 1987 (filed as an exhibit to
Bally's Annual Report on Form 10-K, file no. 1-7244, for the fiscal year ended
December 31, 1986).
*10.(iii)-3 Second Amendment to the 1985 Stock Option and Stock Appreciation Right Plan of Bally
Manufacturing Corporation, effective December 9, 1988 (filed as an exhibit to Bally's
Annual Report on Form 10-K, file no. 1-7244, for the fiscal year ended December 31,
1988).
*10.(iii)-4 1989 Incentive Plan of Bally Manufacturing Corporation, effective March 9, 1989
(filed as an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for the
fiscal year ended December 31, 1989).
10.(iii)-5 Amendment to 1989 Incentive Plan of Bally Manufacturing Corporation effective June
16, 1992.
10.(iii)-6 Bally's Executive Medical Plan, underwritten by the Travelers Insurance Company,
effective January 1, 1992.
10.(iii)-7 Bally's Executive Medical Plan, underwritten by Connecticut General Life Insurance
Company, effective January 1, 1994.
*10.(iii)-8 Employment Agreement effective as of November 1, 1990, between Bally and Arthur M.
Goldberg (filed as an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244,
for the fiscal year ended December 31, 1990).
*10.(iii)-9 First Amendment to Employment Agreement effective as of November 1, 1991, between
Bally and Arthur M. Goldberg (filed as an exhibit to Bally's Annual Report on Form
10-K, file no. 1-7244, for the fiscal year ended December 31, 1992).
10.(iii)-10 Second Amendment to Employment Agreement dated as of September 29, 1993, between
Bally and Arthur M. Goldberg.
*10.(iii)-11 Award Agreements dated as of July 9, 1991, between Bally and Arthur M. Goldberg
(filed as an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for the
fiscal year ended December 31, 1992).
*10.(iii)-12 Amended and Restated Award Agreement dated as of March 25, 1992, between Bally and
Arthur M. Goldberg (filed as an exhibit to Bally's Annual Report on Form 10-K, file
no. 1-7244, for the fiscal year ended December 31, 1992).
*10.(iii)-13 Split-Dollar Life Insurance Agreement and Collateral Assignment by and between Bally
and Veronica Goldberg and Richard B. Neff, as trustees of the Arthur M. Goldberg 1989
Irrevocable Trust dated November 14, 1989 (filed as an exhibit to Bally's Annual
Report on Form 10-K, file no. 1-7244, for the fiscal year ended December 31, 1991).
*10.(iii)-14 Option Agreement dated as of October 25, 1991, between Bally and Arthur M. Goldberg
(filed as an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for the
fiscal year ended December 31, 1991).
*10.(iii)-15 Amended and Restated Employment Agreement effective as of November 12, 1991, between
Bally, Bally's Health & Tennis Corporation and Lee S. Hillman (filed as an exhibit to
Bally's Annual Report on Form 10-K, file no. 1-7244, for the fiscal year ended
December 31, 1991).
10.(iii)-16 Second Amendment to Employment Agreement effective as of December 8, 1993, between
Bally, Bally's Health & Tennis Corporation and Lee S. Hillman.
</TABLE>
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<TABLE>
<S> <C>
*10.(iii)-17 Employment Agreement effective as of July 1, 1992, between Bally and Robert G.
Conover (filed as an exhibit to Bally's Casino Holdings, Inc.'s Registration
Statement on Form S-1, registration no. 33-65438, filed November 23, 1993).
*10.(iii)-18 Employment Agreement effective as of July 6, 1992, between Bally and John W. Dwyer
(filed as an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for the
fiscal year ended December 31, 1992).
*10.(iii)-19 Employment Agreement effective as of January 1, 1993, between Bally, Bally's Health &
Tennis Corporation and Harold Morgan (filed as an exhibit to Bally's Annual Report on
Form 10-K, file no. 1-7244, for the fiscal year ended December 31, 1992).
*10.(iii)-20 Letter Agreement dated March 17, 1991, between Bally and Bernard J. Murphy (filed as
an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for the fiscal
year ended December 31, 1991).
10.(iii)-21 Employment Agreement effective as of July 28, 1993, between Bally and Jerry W.
Thornburg.
*10.(iii)-22 Employment Agreement effective as of January 1, 1993, between Bally and Wallace R.
Barr (filed as an exhibit to Bally's Casino Holdings, Inc.'s Registration Statement
on Form S-1, registration no. 33-65438, filed November 23, 1993).
*10.(iii)-23 Employment Agreement effective as of January 1, 1992, between Bally's Health & Tennis
Corporation and Michael G. Lucci, Sr. (filed as an exhibit to Bally's Health & Tennis
Corporation's Registration Statement on Form S-1, registration no. 33-52868, filed
January 15, 1993).
*10.(iii)-24 Employment Agreement dated April 6, 1983, between Health & Tennis Corporation of
America and Donahue L. Wildman (filed as an exhibit to Bally's Annual Report on Form
10-K, file no. 1-7244, for the fiscal year ended December 31, 1988).
*10.(iii)-25 Supplemental Agreement dated July 24, 1985, among Bally, Donahue L. Wildman, Roy
Zurkowski and Bally's Health & Tennis Corporation (filed as an exhibit to Bally's
Annual Report on Form 10-K, file no. 1-7244, for the fiscal year ended December 31,
1988).
*10.(iii)-26 Extension Agreement dated June 27, 1986, between Health & Tennis Corporation of
America, Bally's Health & Tennis Corporation and Donahue L. Wildman (filed as an
exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for the fiscal year
ended December 31, 1988).
*10.(iii)-27 Amendment to Employment Agreement dated April 12, 1990, between Bally, Bally's Health
& Tennis Corporation, Health & Tennis Corporation of America and Donahue L. Wildman
(filed as an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for the
fiscal year ended December 31, 1990).
10.(iii)-28 Consulting Agreement dated September 30, 1993, between Bally's Health & Tennis
Corporation and Donahue L. Wildman.
*10.(iii)-29 Retirement and Separation Agreement dated January 8, 1993, between Bally and Richard
Gillman (filed as an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244,
for the fiscal year ended December 31, 1992).
*10.(iii)-30 Bally's Park Place, Inc. Supplemental Executive Retirement Plan, effective January 1,
1987 (filed as an exhibit to Bally's Annual Report on Form 10-K, file no. 1-7244, for
the fiscal year ended December 31, 1992).
21 Listing of subsidiaries of Bally.
23 Consent of Ernst & Young.
</TABLE>
- ---------------
* Incorporated herein by reference as indicated.
56
<PAGE> 58
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALLY MANUFACTURING CORPORATION
Dated: March 21, 1994 By /s/ ARTHUR M. GOLDBERG
------------------------------------
Arthur M. Goldberg
Chairman of the Board,
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated. This Annual Report
may be signed in multiple identical counterparts all of which, taken together,
shall constitute a single document.
<TABLE>
<S> <C>
Dated: March 21, 1994 /s/ ARTHUR M. GOLDBERG
-----------------------------------------------
Arthur M. Goldberg
Chairman of the Board, Chief Executive Officer and
President (Principal Executive Officer)
Dated: March 21, 1994 /s/ LEE S. HILLMAN
-----------------------------------------------
Lee S. Hillman
Executive Vice President, Chief Financial Officer
and Treasurer (Principal Financial Officer)
Dated: March 21, 1994 /s/ JOHN W. DWYER
-----------------------------------------------
John W. Dwyer
Vice President and Corporate Controller
(Principal Accounting Officer)
Dated: March 21, 1994 /s/ GEORGE N. ARONOFF
-----------------------------------------------
George N. Aronoff
Director
Dated: March 21, 1994 /s/ BARRIE K. BRUNET
-----------------------------------------------
Barrie K. Brunet
Director
Dated: March 21, 1994 /s/ EDWIN M. HALKYARD
-----------------------------------------------
Edwin M. Halkyard
Director
Dated: March 21, 1994 /s/ J. KENNETH LOOLOIAN
-----------------------------------------------
J. Kenneth Looloian
Director
Dated: March 21, 1994 /s/ ROCCO J. MARANO
-----------------------------------------------
Rocco J. Marano
Director
Dated: March 21, 1994 /s/ PATRICK L. O'MALLEY
-----------------------------------------------
Patrick L. O'Malley
Director
Dated: March 21, 1994 /s/ JAMES M. ROCHFORD
-----------------------------------------------
James M. Rochford
Director
</TABLE>
57
<PAGE> 59
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(ALL DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at
Balance end of period
at -------------------
beginning Amount Non-
Name of debtor of period Additions collected Current current
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
1993:
Darrell A. Luery................. $ -- $ 125 $ 50 $ 75 $ --
--------- --------- --------- ------- -------
--------- --------- --------- ------- -------
1992:
Neil Jenkins..................... $ -- $ 174 $ 174 $ -- $ --
--------- --------- --------- ------- -------
--------- --------- --------- ------- -------
1991:
None
</TABLE>
- ---------------
NOTE:
Amounts are exclusive of accrued interest.
S-1
<PAGE> 60
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET (PARENT COMPANY ONLY)
DECEMBER 31, 1993 AND 1992
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
- -----------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and equivalents.......................................... $ 43,516 $ 1,314
Note receivable from a subsidiary............................. 12,563
Receivables --
Subsidiaries............................................... 4,080 5,523
Other...................................................... 116 2,013
Deferred income taxes......................................... 8,315
Other current assets.......................................... 657 7,189
-------- --------
Total current assets.................................. 60,932 24,354
Investments in subsidiaries related to continuing operations.... 463,585 558,552
Investment in discontinued operations........................... 17,166
Deferred income taxes........................................... 69,884 5,188
Other assets.................................................... 8,065 16,799
-------- --------
$602,466 $622,059
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to a subsidiary.................................. $ 2,324 $ 3,617
Accounts payable.............................................. 363 681
Income taxes payable.......................................... 35,098 351
Deferred income taxes......................................... 10,892
Deferred revenues............................................. 2,061 338
Accrued liabilities........................................... 24,107 28,166
Current maturities of long-term debt.......................... 7,587 3,204
-------- --------
Total current liabilities............................. 82,432 36,357
Long-term debt, less current maturities......................... 96,382 106,687
Long-term payables to subsidiaries.............................. 39,363 46,860
Other liabilities and deferred credits.......................... 20,148 21,928
Stockholders' equity:
Preferred stock, $1 par value: Authorized 30,000,000 shares --
Series B Junior Participating: Authorized 800,000 shares;
none issued..............................................
Series D Convertible Exchangeable: Authorized 2,000,000
shares; issued 694,497 shares; liquidation preference of
$34,725.................................................. 694 694
Common stock, $.66 2/3 par value: Authorized 80,000,000
shares; issued 46,986,313 and 46,095,761 shares............ 31,325 30,731
Capital in excess of par value................................ 294,413 289,311
Retained earnings............................................. 39,507 88,783
Cumulative translation adjustments............................ 2,506
Common stock in treasury, 109,956 shares at cost.............. (1,798) (1,798)
-------- --------
Total stockholders' equity............................ 364,141 410,227
-------- --------
$602,466 $622,059
-------- --------
-------- --------
</TABLE>
See accompanying notes.
S-2
<PAGE> 61
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
CONDENSED STATEMENT OF OPERATIONS (PARENT COMPANY ONLY)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(ALL DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Revenues:
Interest --
Subsidiaries................................................ $ 1,457 $ 105 $ 1,009
Other....................................................... 453 403 4,476
Gain (loss) on the sale/contribution of subsidiary
debentures.................................................. (1,272) 1,272
Other.......................................................... 5,919 1,107 5,592
-------- -------- --------
7,829 343 12,349
Costs and expenses:
General and administrative..................................... 5,752 6,714 17,668
Interest --
Subsidiaries................................................ 298 1,223 9,342
Other....................................................... 9,328 13,958 34,747
Other, net..................................................... (16) 6,760
-------- -------- --------
15,378 21,879 68,517
-------- -------- --------
Loss from continuing operations before income taxes and equity in
net loss of subsidiaries related to continuing operations...... (7,549) (21,536) (56,168)
Income tax benefit............................................... 22,996 15,520 23,369
Equity in net loss of subsidiaries related to continuing
operations..................................................... (31,473) (3,012) (34,889)
-------- -------- --------
Loss from continuing operations.................................. (16,026) (9,028) (67,688)
Equity in earnings and gains from dispositions of subsidiaries
related to discontinued operations............................. 6,215 9,585 33,163
-------- -------- --------
Income (loss) before extraordinary items and cumulative effect on
prior years of change in accounting for income taxes........... (9,811) 557 (34,525)
Extraordinary items:
Equity in extraordinary items of subsidiaries.................. (8,490) 1,224
Gain on extinguishment of debt................................. 612 54,829
Credit for utilization of tax loss carryforwards............... 10,605
Cumulative effect on prior years of change in accounting for
income taxes................................................... (6,535)
Equity in cumulative effect on prior years of change in
accounting for income taxes of subsidiaries.................... (21,662)
-------- -------- --------
Net income (loss)................................................ $(46,498) $ 11,774 $ 21,528
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes.
S-3
<PAGE> 62
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--(CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS (PARENT COMPANY ONLY)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(ALL DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
OPERATING:
Loss from continuing operations...................................... $ (16,026) $ (9,028) $ (67,688)
Adjustments to reconcile to cash provided --
Deferred income taxes.............................................. (44,292) (14,266) (20,479)
Equity in net loss of subsidiaries related to continuing
operations....................................................... 31,473 3,012 34,889
Gain on repurchase of debt for sinking fund requirements........... (596) (598) (6,785)
Cash dividends from subsidiaries................................... 39,200
Change in operating assets and liabilities......................... 27,966 (11,802) 34,886
Other, net......................................................... 637 4,062 7,120
--------- --------- ----------
Cash provided by (used in) operating activities............. 38,362 (28,620) (18,057)
INVESTING:
Other, net........................................................... (200) 3,090 (1,902)
--------- --------- ----------
Cash provided by (used in) investing activities............. (200) 3,090 (1,902)
FINANCING:
Debt transactions --
Retirement of long-term debt....................................... (2,496) (32,304) (106,735)
Net change in receivables from and payables to subsidiaries........ 5,946 4,707 52,049
Debt issuance costs................................................ (2,470)
--------- --------- ----------
Cash provided by (used in) debt transactions.................. 3,450 (27,597) (57,156)
Equity transactions --
Proceeds from exercise of stock options............................ 590 699
--------- --------- ----------
Cash provided by (used in) financing activities............. 4,040 (26,898) (57,156)
DISCONTINUED OPERATIONS:
Proceeds from disposal............................................... 51,243 33,300
Dividends received from discontinued operations and other, net....... 22,415
--------- --------- ----------
Cash provided by discontinued operations.................... -- 51,243 55,715
--------- --------- ----------
Increase (decrease) in cash and equivalents............................ 42,202 (1,185) (21,400)
Cash and equivalents, beginning of year................................ 1,314 2,499 23,899
--------- --------- ----------
Cash and equivalents, end of year...................................... $ 43,516 $ 1,314 $ 2,499
--------- --------- ----------
--------- --------- ----------
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash payments for interest and income taxes for continuing operations
were as follows --
Interest paid.................................................... $ 2,442 $ 9,878 $ 15,830
Income taxes paid (refunded)..................................... 3,351 (3,696) (2,196)
Operating, investing and financing activities exclude the following
non-cash activities --
Acquisition of Bally's Grand, Inc. common stock in exchange for
Bally Gaming International, Inc. common stock................. $ 18,838 $ $
Receipt of promissory note in connection with sale of Bally's
Grand, Inc. common stock to a subsidiary...................... 22,533
Forgiveness of income tax receivable from a subsidiary........... 15,000
Sale of certain fitness-related assets to a subsidiary........... 8,525
Transfer of a receivable from a subsidiary....................... 17,000
Non-cash dividends from subsidiaries............................. 122,000
Issuance of common stock in satisfaction of preferred stock
dividends, interest and other obligations..................... 4,190 34,710
Securities exchanged for debt.................................... 5,491 16,355
Exchange of exclusive gaming machines license for liability
reduction..................................................... 3,500
Common stock issued upon conversion of preferred stock........... 680
Stock option and benefit plan transactions....................... 500 98 3,878
</TABLE>
See accompanying notes.
S-4
<PAGE> 63
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--(CONTINUED)
NOTES TO CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
BASIS OF PRESENTATION
The accompanying condensed financial information of Bally Manufacturing
Corporation ("Bally") includes the accounts of Bally, and on an equity basis,
the subsidiaries which it controls. The accompanying condensed financial
information should be read in conjunction with the consolidated financial
statements of Bally.
LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt
---------------------
1993 1992
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
6% Convertible Subordinated Debentures due 1998.......................... $ 18,969 $ 21,556
10% Convertible Subordinated Debentures due 2006......................... 85,000 85,617
Other secured and unsecured obligations.................................. 2,718
-------- --------
Total.................................................................... 103,969 109,891
Current maturities of long-term debt..................................... (7,587) (3,204)
-------- --------
Long-term debt, less current maturities.................................. $ 96,382 $106,687
-------- --------
-------- --------
</TABLE>
Scheduled annual maturities of long-term debt for the five years after December
31, 1993 are $7,587, $7,587, $7,587, $7,587 and $13,621.
S-5
<PAGE> 64
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
SCHEDULE V -- PROPERTY AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(ALL DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Other
Balance at changes Balance
beginning Additions -- add at end
Description of period at cost Retirements (deduct) of period
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
1993:
Property and equipment --
Land.......................... $ 173,015 $ 306 $ 19 $68,100 $ 241,402
Buildings and leasehold
improvements................ 1,246,190 52,031 4,453 277,365 1,571,133
Equipment, furniture and
fixtures.................... 346,370 53,498 24,263 44,073 419,678
---------- ---------- ----------- -------- ----------
$1,765,575 $105,835 $28,735 $389,538 $2,232,213
---------- ---------- ----------- -------- ----------
---------- ---------- ----------- -------- ----------
1992:
Property and equipment --
Land.......................... $ 173,015 $ $ $ $ 173,015
Buildings and leasehold
improvements................ 1,236,426 21,530 7,070 (4,696 ) 1,246,190
Equipment, furniture and
fixtures.................... 342,030 18,622 23,255 8,973 346,370
---------- ---------- ----------- -------- ----------
$1,751,471 $ 40,152 $30,325 $ 4,277 $1,765,575
---------- ---------- ----------- -------- ----------
---------- ---------- ----------- -------- ----------
1991:
Property and equipment --
Land.......................... $ 173,568 $ 20 $ 575 $ 2 $ 173,015
Buildings and leasehold
improvements................ 1,245,698 19,595 25,887 (2,980 ) 1,236,426
Equipment, furniture and
fixtures.................... 331,422 19,442 11,296 2,462 342,030
---------- ---------- ----------- -------- ----------
$1,750,688 $ 39,057 $37,758 $ (516 ) $1,751,471
---------- ---------- ----------- -------- ----------
---------- ---------- ----------- -------- ----------
</TABLE>
- ---------------
NOTES:
(a) Other changes include $372,792 and $4,289 arising from acquisitions of
businesses in 1993 and 1992, respectively, an adjustment of $16,061 due to
temporary differences resulting from the implementation of SFAS No. 109 in
1993 and reclassifications between categories in each of the years.
(b) Depreciable lives are equal to the estimated economic lives of the related
assets and the terms of the applicable leases for leasehold improvements.
Depreciation is provided principally on the straight-line method over
depreciable lives ranging from two to forty years.
S-6
<PAGE> 65
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
SCHEDULE VI -- ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(ALL DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Balance Additions Other
at charged to changes Balance
beginning costs and -- add at end
Description of period expenses Retirements (deduct) of period
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
1993:
Property and equipment --
Buildings and leasehold
improvements................ $338,103 $ 58,401 $ 4,790 $ 3,627 $ 395,341
Equipment, furniture and
fixtures.................... 227,261 38,544 23,558 2,487 244,734
--------- ---------- ----------- -------- ---------
$565,364 $ 96,945 $28,348 $ 6,114 $ 640,075
--------- ---------- ----------- -------- ---------
--------- ---------- ----------- -------- ---------
1992:
Property and equipment --
Buildings and leasehold
improvements................ $289,447 $ 55,339 $ 6,630 $ (53 ) $ 338,103
Equipment, furniture and
fixtures.................... 213,333 36,225 22,357 60 227,261
--------- ---------- ----------- -------- ---------
$502,780 $ 91,564 $28,987 $ 7 $ 565,364
--------- ---------- ----------- -------- ---------
--------- ---------- ----------- -------- ---------
1991:
Property and equipment --
Buildings and leasehold
improvements................ $255,718 $ 58,452 $20,969 $(3,754 ) $ 289,447
Equipment, furniture and
fixtures.................... 191,101 30,313 10,947 2,866 213,333
--------- ---------- ----------- -------- ---------
$446,819 $ 88,765 $31,916 $ (888 ) $ 502,780
--------- ---------- ----------- -------- ---------
--------- ---------- ----------- -------- ---------
</TABLE>
- ---------------
NOTE:
Other changes include $3,876 arising from the acquisition of a business in 1993,
$2,342 due to temporary differences resulting from the implementation of SFAS
No. 109 in 1993 and reclassifications between categories in each of the years.
S-7
<PAGE> 66
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(ALL DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Additions
---------------------
Balance Charged
at to Charged
beginning costs to Balance
of and other at end
Description period expenses accounts Deductions of period
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
1993:
Allowance for doubtful
receivables and
cancellations................. $ 97,786 $ 74,740 $110,364 $197,701 $ 85,189
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
1992:
Allowance for doubtful
receivables and
cancellations................. $ 99,363 $117,344 $127,981 $246,902 $ 97,786
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
1991:
Allowance for doubtful
receivables and
cancellations................. $174,186 $125,477 $108,447 $308,747 $ 99,363
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
</TABLE>
- ---------------
NOTES:
(a) Additions charged to accounts other than costs and expenses consist of the
following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
Charged to revenues........................................... $110,044 $127,652 $ 108,445
Acquisitions.................................................. 257 326
Other......................................................... 63 3 2
-------- -------- ---------
$110,364 $127,981 $ 108,447
-------- -------- ---------
-------- -------- ---------
</TABLE>
(b) Deductions include write-offs of uncollectible amounts, net of recoveries.
In addition, for 1992 the allowance for doubtful receivables and
cancellations also includes reclassifications of amounts ($7,040) previously
reported as unearned finance charges that represent the portion of balances
estimated to be related to uncollectible amounts.
S-8
<PAGE> 67
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
SCHEDULE IX--SHORT-TERM BORROWINGS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(ALL DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Weighted Maximum Average Weighted
average amount amount average
Balance interest outstanding outstanding interest rate
Category of aggregate at end rate at end during the during the during the
short-term borrowings of period of period period period period
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Notes payable:
1993............................. -- -- -- -- --
--------- ----------- ---------- ---------- -----
1992............................. -- -- $ 3,459 $ 577 6.5%
--------- ----------- ---------- ---------- -----
1991............................. $3,459 8.4% $ 15,414 $7,693 8.4%
--------- ----------- ---------- ---------- -----
</TABLE>
- ---------------
NOTE:
The average amount outstanding during 1992 and 1991 was computed by averaging
the month-end balances during the year. The weighted average interest rate
during 1992 and 1991 was computed by dividing interest expense by the weighted
average amount of short-term borrowings outstanding.
S-9
<PAGE> 68
- --------------------------------------------------------------------------------
BALLY MANUFACTURING CORPORATION
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(ALL DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Charged to costs and expenses
-------------------------------
Item 1993 1992 1991
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maintenance and repairs......................................... $55,159 $51,939 $47,886
------- ------- -------
------- ------- -------
Amortization of intangible and other assets..................... $17,020.. $17,180 $20,378
------- ------- -------
------- ------- -------
Taxes other than payroll and income taxes:
State gaming taxes............................................ $43,214 $39,517 $37,216
Real estate and personal property taxes....................... 38,380 37,241 35,779
Other, net.................................................... 1,346 2,109 (815)
------- ------- -------
$82,940 $78,867 $72,180
------- ------- -------
------- ------- -------
Advertising..................................................... $62,134 $62,026 $69,084
------- ------- -------
------- ------- -------
</TABLE>
- ---------------
NOTE:
Royalties are not shown as they are less than one percent of consolidated
revenues in all years presented.
S-10
<PAGE> 1
=============================================================================
BALLY'S HEALTH & TENNIS CORPORATION,
Issuer,
and
AMALGAMATED BANK OF CHICAGO,
Trustee
--------------------------
INDENTURE
Dated as of January 15, 1993
--------------------------
13% Senior Subordinated Notes
due 2003
=============================================================================
<PAGE> 2
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of January 15, 1993*
----------------------------------------------------
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
Section 310(a)(1) .................... 608
(a)(2) .................... 608
(b) .................... 607, 609
Section 312(c) .................... 701
Section 314(a) .................... 703
(a)(4) .................... 1018
(c)(1) .................... 103
(c)(2) .................... 103
(e) .................... 103
Section 315(b) .................... 601
Section 316(a)(last
sentence) .................... 101 ("Outstanding")
(a)(1)(A) .................... 502, 512
(a)(1)(B) .................... 513
(b) .................... 508
(c) .................... 105
Section 317(a)(1) .................... 503
(a)(2) .................... 504
Section 318(a) .................... 108
<FN>
- -----------------
* This reconciliation and tie shall not, for any purpose, be deemed to be
part of the Indenture.
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
-----------------
PAGE
----
Parties . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
Definitions and Other Provisions of
General Application
Section 101. Definitions . . . . . . . . . . . . . . 1
Acquired Indebtedness . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . 2
Asset Sale . . . . . . . . . . . . . . . 3
Average Life to Stated
Maturity . . . . . . . . . . . . . . . 3
Bally . . . . . . . . . . . . . . . . . 3
Bank Agent . . . . . . . . . . . . . . . 3
Board of Directors . . . . . . . . . . . 3
Board Resolution . . . . . . . . . . . . 3
Business Day . . . . . . . . . . . . . . 4
Capital Lease Obligation . . . . . . . . 4
Capital Stock . . . . . . . . . . . . . 4
Cash EBITDA . . . . . . . . . . . . . . 4
Change in Control . . . . . . . . . . . 4
Commission . . . . . . . . . . . . . . . 5
Company . . . . . . . . . . . . . . . . 5
Company Request; Company Order . . . . . 5
Consolidated Fixed Charge
Coverage Ratio . . . . . . . . . . . . 6
Consolidated Interest Expense . . . . . 6
Consolidated Net Income . . . . . . . . 6
Consolidated Net Worth . . . . . . . . . 7
Consolidated Rental Payments . . . . . . 7
Contract Receivables . . . . . . . . . . 7
Corporate Trust Office . . . . . . . . . 7
Corporation . . . . . . . . . . . . . . 8
Credit Documents . . . . . . . . . . . . 8
- -------------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of this Indenture.
i
<PAGE> 4
PAGE
----
Currency Agreement . . . . . . . . . . . 8
Default . . . . . . . . . . . . . . . . 8
Deferred Revenues . . . . . . . . . . . 8
Event of Default . . . . . . . . . . . . 8
Exchange Act . . . . . . . . . . . . . . 8
Fair Market Value . . . . . . . . . . . 8
Federal Bankruptcy Code . . . . . . . . 8
Generally Accepted Accounting
Principles; GAAP . . . . . . . . . . . 8
Guaranty . . . . . . . . . . . . . . . . 9
Holder . . . . . . . . . . . . . . . . . 9
Indebtedness . . . . . . . . . . . . . . 9
Indenture . . . . . . . . . . . . . . . 10
Intercompany Agreement . . . . . . . . . 10
Intercompany Debt Obligations . . . . . 10
Interest Payment Date . . . . . . . . . 10
Interest Swap Obligations . . . . . . . 10
Investment . . . . . . . . . . . . . . . 10
Lien . . . . . . . . . . . . . . . . . . 11
Master Agreement . . . . . . . . . . . . 11
Material Subsidiary . . . . . . . . . . 11
Maturity . . . . . . . . . . . . . . . . 11
Moody's . . . . . . . . . . . . . . . . 11
Net Proceeds . . . . . . . . . . . . . . 11
1993 Credit Agreement . . . . . . . . . 11
Officers' Certificate . . . . . . . . . 12
Opinion of Counsel . . . . . . . . . . . 12
Outstanding . . . . . . . . . . . . . . 12
Paying Agent . . . . . . . . . . . . . . 13
Permitted Indebtedness . . . . . . . . . 13
Permitted Investment . . . . . . . . . . 16
Permitted Joint Venture . . . . . . . . 17
Permitted Joint Venture
Subsidiary . . . . . . . . . . . . . . 18
Permitted Liens . . . . . . . . . . . . 18
Person . . . . . . . . . . . . . . . . . 18
Predecessor Security . . . . . . . . . . 19
Preferred Stock . . . . . . . . . . . . 19
Redeemable Capital Stock . . . . . . . . 19
Redemption Date . . . . . . . . . . . . 19
Redemption Price . . . . . . . . . . . . 19
Registration Statement . . . . . . . . . 19
Regular Record Date . . . . . . . . . . 19
Representative . . . . . . . . . . . . . 20
Responsible Officer . . . . . . . . . . 20
ii
<PAGE> 5
PAGE
----
Restricted Payments . . . . . . . . . . 20
Security; Securities . . . . . . . . . . 20
Senior Indebtedness . . . . . . . . . . 20
Special Record Date . . . . . . . . . . 21
Specified Senior Indebtedness . . . . . 21
Specified Subsidiary . . . . . . . . . . 22
Standard & Poor's . . . . . . . . . . . 22
Stated Maturity . . . . . . . . . . . . 22
Subordinated Indebtedness . . . . . . . 22
Subsidiary . . . . . . . . . . . . . . . 22
Transferred Assets . . . . . . . . . . . 22
Trust Indenture Act . . . . . . . . . . 23
Trustee . . . . . . . . . . . . . . . . 23
Voting Stock . . . . . . . . . . . . . . 23
Section 102. Other Definitions . . . . . . . . . . . 23
Section 103. Compliance Certificates and
Opinions . . . . . . . . . . . . . . . 24
Section 104. Form of Documents Delivered to
Trustee . . . . . . . . . . . . . . . 25
Section 105. Acts of Holders . . . . . . . . . . . . 25
Section 106. Notices, etc., to Trustee and
Company . . . . . . . . . . . . . . . 27
Section 107. Notice to Holders; Waiver . . . . . . . 27
Section 108. Conflict of Any Provision of
Indenture with Trust
Indenture Act . . . . . . . . . . . . 28
Section 109. Effect of Headings and Table
of Contents . . . . . . . . . . . . . 28
Section 110. Successors and Assigns . . . . . . . . . 29
Section 111. Separability Clause . . . . . . . . . . 29
Section 112. Benefits of Indenture . . . . . . . . . 29
Section 113. Governing Law . . . . . . . . . . . . . 29
Section 114. Legal Holidays . . . . . . . . . . . . . 29
Section 115. No Recourse against Others . . . . . . . 30
ARTICLE TWO
Security Forms
Section 201. Forms Generally . . . . . . . . . . . . 30
Section 202. Form of Face of Security . . . . . . . . 31
Section 203. Form of Reverse of Security . . . . . . 32
Section 204. Form of Trustee's Certificate
of Authentication . . . . . . . . . . 36
iii
<PAGE> 6
ARTICLE THREE
The Securities
Section 301. Title and Terms . . . . . . . . . . . . 37
Section 302. Denominations . . . . . . . . . . . . . 37
Section 303. Execution, Authentication,
Delivery and Dating . . . . . . . . . 38
Section 304. Temporary Securities . . . . . . . . . . 39
Section 305. Registration, Registration of
Transfer and Exchange . . . . . . . . 40
Section 306. Mutilated, Destroyed, Lost and
Stolen Securities . . . . . . . . . . 41
Section 307. Payment of Interest; Interest
Rights Preserved . . . . . . . . . . . 42
Section 308. Persons Deemed Owners . . . . . . . . . 44
Section 309. Cancellation . . . . . . . . . . . . . . 44
Section 310. Computation of Interest . . . . . . . . 44
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of
Indenture . . . . . . . . . . . . . . 45
Section 402. Application of Trust Money . . . . . . . 46
ARTICLE FIVE
Remedies
Section 501. Events of Default . . . . . . . . . . . 47
Section 502. Acceleration of Maturity;
Rescission . . . . . . . . . . . . . . 50
Section 503. Collection of Indebtedness and
Suits for Enforcement by
Trustee . . . . . . . . . . . . . . . 51
Section 504. Trustee May File Proofs of
Claim . . . . . . . . . . . . . . . . 52
Section 505. Trustee May Enforce Claims
without Possession of
Securities . . . . . . . . . . . . . . 53
Section 506. Application of Money Collected . . . . . 53
iv
<PAGE> 7
PAGE
----
Section 507. Limitation on Suits . . . . . . . . . . 53
Section 508. Unconditional Right of Holders
to Receive Principal,
Premium and Interest . . . . . . . . . 54
Section 509. Restoration of Rights and
Remedies . . . . . . . . . . . . . . . 55
Section 510. Rights and Remedies Cumulative . . . . . 55
Section 511. Delay or Omission Not Waiver . . . . . . 55
Section 512. Control by Holders . . . . . . . . . . . 55
Section 513. Waiver of Past Defaults . . . . . . . . 56
Section 514. Undertaking for Costs . . . . . . . . . 56
Section 515. Waiver of Stay, Extension or
Usury Laws . . . . . . . . . . . . . . 57
ARTICLE SIX
The Trustee
Section 601. Notice of Defaults . . . . . . . . . . . 57
Section 602. Certain Rights of Trustee . . . . . . . 58
Section 603. Not Responsible for Recitals
or Issuance of Securities . . . . . . 59
Section 604. May Hold Securities . . . . . . . . . . 60
Section 605. Money Held in Trust . . . . . . . . . . 60
Section 606. Compensation and Reimbursement . . . . . 60
Section 607. Conflicting Interests . . . . . . . . . 61
Section 608. Corporate Trustee Required;
Eligibility . . . . . . . . . . . . . 61
Section 609. Resignation and Removal;
Appointment of Successor . . . . . . . 62
Section 610. Acceptance of Appointment by
Successor . . . . . . . . . . . . . . 63
Section 611. Merger, Conversion,
Consolidation or Succession
to Business . . . . . . . . . . . . . 64
Section 612. Preferential Collection of
Claims against Company . . . . . . . . 64
v
<PAGE> 8
PAGE
----
ARTICLE SEVEN
Holders' Lists and Reports by
Trustee and Company
Section 701. Disclosure of Names and
Addresses of Holders . . . . . . . . . 65
Section 702. Reports by Trustee . . . . . . . . . . . 65
Section 703. Reports by Company . . . . . . . . . . . 65
ARTICLE EIGHT
Consolidation, Merger, Conveyance,
Transfer or Lease
Section 801. Company May Consolidate, etc.,
Only on Certain Terms . . . . . . . . 66
Section 802. Successor Substituted . . . . . . . . . 68
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures
without Consent of Holders . . . . . . 68
Section 902. Supplemental Indentures with
Consent of Holders . . . . . . . . . . 69
Section 903. Execution of Supplemental
Indentures . . . . . . . . . . . . . . 70
Section 904. Effect of Supplemental
Indentures . . . . . . . . . . . . . . 70
Section 905. Conformity with Trust
Indenture Act . . . . . . . . . . . . 71
Section 906. Reference in Securities to
Supplemental Indentures . . . . . . . 71
vi
<PAGE> 9
PAGE
----
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium
and Interest . . . . . . . . . . . . . 71
Section 1002. Maintenance of Office or
Agency . . . . . . . . . . . . . . . . 71
Section 1003. Money for Security Payments to
Be Held in Trust . . . . . . . . . . . 72
Section 1004. Corporate Existence . . . . . . . . . . 74
Section 1005. Payment of Taxes and Other
Claims . . . . . . . . . . . . . . . . 74
Section 1006. Maintenance of Properties . . . . . . . 75
Section 1007. Limitation on Indebtedness . . . . . . . 75
Section 1008. Limitation on Restricted
Payments . . . . . . . . . . . . . . . 76
Section 1009. Limitation on Transactions
with Affiliates . . . . . . . . . . . 80
Section 1010. Limitation on Liens Securing
Subordinated Indebtedness . . . . . . 81
Section 1011. Limitation on Other Senior
Subordinated Indebtedness . . . . . . 82
Section 1012. Restriction on Preferred Stock
of Subsidiaries . . . . . . . . . . . 82
Section 1013. Limitation on Dividends and
Other Payment Restrictions
Affecting Subsidiaries . . . . . . . . 82
Section 1014. Maintenance of Consolidated
Net Worth . . . . . . . . . . . . . . 83
Section 1015. Change in Control . . . . . . . . . . . 87
Section 1016. Limitation on Use of Proceeds
from Asset Sales . . . . . . . . . . . 88
Section 1017. Compliance with Securities
Laws upon Purchase of
Securities . . . . . . . . . . . . . . 93
Section 1018. Statement as to Compliance;
Notice of Default; Provision
of Financial Statements . . . . . . . 93
Section 1019. Waiver of Certain Covenants . . . . . . 95
Section 1020. Limitation on Joint Ventures . . . . . . 95
vii
<PAGE> 10
PAGE
----
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Right of Redemption . . . . . . . . . . 96
Section 1102. Applicability of Article . . . . . . . . 96
Section 1103. Election to Redeem; Notice to
Trustee . . . . . . . . . . . . . . . 96
Section 1104. Selection by Trustee of
Securities to Be Redeemed . . . . . . 96
Section 1105. Notice of Redemption . . . . . . . . . . 97
Section 1106. Deposit of Redemption Price . . . . . . 98
Section 1107. Securities Payable on
Redemption Date . . . . . . . . . . . 98
Section 1108. Securities Redeemed in Part . . . . . . 98
ARTICLE TWELVE
Subordination
Section 1201. Securities Subordinate to
Senior Indebtedness . . . . . . . . . 99
Section 1202. Payment Over of Proceeds upon
Dissolution, etc. . . . . . . . . . . 100
Section 1203. No Payment When Specified
Senior Indebtedness in
Default . . . . . . . . . . . . . . . 102
Section 1204. Payment Permitted If No
Default . . . . . . . . . . . . . . . 104
Section 1205. Subrogation to Rights of
Holders of Senior
Indebtedness . . . . . . . . . . . . . 104
Section 1206. Provisions Solely to Define
Relative Rights . . . . . . . . . . . 105
Section 1207. Trustee to Effectuate
Subordination . . . . . . . . . . . . 105
Section 1208. No Waiver of Subordination
Provisions . . . . . . . . . . . . . . 105
viii
<PAGE> 11
PAGE
----
Section 1209. Notice to Trustee . . . . . . . . . . . 106
Section 1210. Reliance on Judicial Order or
Certificate of Liquidating
Agent . . . . . . . . . . . . . . . . 107
Section 1211. Rights of Trustee as a Holder
of Senior Indebtedness;
Preservation of Trustee's
Rights . . . . . . . . . . . . . . . . 108
Section 1212. Article Applicable to Paying
Agents . . . . . . . . . . . . . . . . 108
ARTICLE THIRTEEN
Defeasance
Section 1301. Defeasance and Discharge . . . . . . . . 108
Section 1302. Conditions to Defeasance . . . . . . . . 110
Section 1303. Deposited Money and U.S.
Government Obligations to Be
Held in Trust; Other
Miscellaneous Provisions . . . . . . . 112
Section 1304. Reinstatement . . . . . . . . . . . . . 113
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . 114
SIGNATURE AND SEALS . . . . . . . . . . . . . . . . . . 114
ACKNOWLEDGMENTS
ix
<PAGE> 12
BALLY'S HEALTH & TENNIS CORPORATION, a Delaware
corporation (hereinafter called the "Company"), and AMALGAMATED BANK OF
CHICAGO, an Illinois bank, trustee (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 13%
Senior Subordinated Notes due 2003 (hereinafter called the "Securities"), of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture;
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act that are required to be part of and to govern
indentures qualified under the Trust Indenture Act;
All acts and things necessary have been done to make the Securities,
when executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid, binding and legal obligations of the Company,
and to make this Indenture a valid agreement of the Company in accordance with
its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders of the Securities,
as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE> 13
(a) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as are
generally accepted in the United States as of the date hereof; and
(d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Articles Five and Ten, are defined
in those Articles.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at
the time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from a Person, other than Indebtedness incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary or
such acquisition, as the case may be. Acquired Indebtedness shall be deemed to
have been incurred on the date of the related acquisition of assets from any
Person or the date the acquired Person becomes a Subsidiary.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any spouse, immediate
family member or other relative who has the same principal residence of any
Person described in (i) above and (iii) any trust in which any such Person
described in clause ( i) or (ii) above has a beneficial interest. For
purposes of this definition, control of a Person means the power, direct or
indirect, to direct or
2
<PAGE> 14
cause the direction of the management or policies of such Person, whether by
contract or otherwise; and the terms "controlling," "controlled" and "under
common control" have meanings correlative to the foregoing. For purposes of
this definition, beneficial ownership of 10% or more of voting common equity
(on a fully diluted basis) or warrants to purchase such equity (whether or not
currently exercisable) of a Person shall be deemed to be control of such
Person.
"Asset Sale" means, with respect to the Company or any Subsidiary, the
sale, lease, conveyance, disposition or other transfer by the Company or such
Subsidiary of any of its assets (including by way of a sale and lease-back
transaction and including the sale or other transfer of any of the Capital
Stock of any Subsidiary of the Company); PROVIDED, HOWEVER, that,
notwithstanding the foregoing, the term "Asset Sale" shall not include (i) the
sale, lease, conveyance, disposition or other transfer of any assets in the
ordinary course of business and consistent with past practice or (ii) the sale,
lease, conveyance, disposition or other transfer of any assets by the Company
or a Subsidiary to a Specified Subsidiary, or by a Subsidiary to the Company or
a Specified Subsidiary.
"Average Life to Stated Maturity" means, as of the date of
determination, with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date
of determination to the date or dates of each successive scheduled principal
payment of such Indebtedness multiplied by (b) the amount of each such
principal payment by (ii) the sum of all such principal payments.
"Bally" means Bally Manufacturing Corporation.
"Bank Agent" means the Representative under the 1993 Credit Agreement;
PROVIDED, HOWEVER, that as long as Chemical Bank is a Representative under the
1993 Credit Agreement, Chemical Bank shall be the Bank Agent.
"Board of Directors" of any Person means the board of directors of
such Person or any duly authorized committee of such board.
"Board Resolution" of any Person means a copy of a resolution
certified by the Secretary or an Assis-
3
<PAGE> 15
tant Secretary of such Person to have been duly adopted by
the Board of Directors of such Person and to be in full force and effect on the
date of such certification and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in either The City of
New York or the City of Chicago are authorized or obligated by law, regulation
or executive order to close.
"Capital Lease Obligation" of any Person means any obligations of such
Person and its Subsidiaries on a consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligations determined
in accordance with GAAP.
"Capital Stock" of any Person means any and all shares, interests,
participations, or other equivalents (however designated) of such Person's
capital stock whether now outstanding or issued after the date of this
Indenture.
"Cash EBITDA" means, with respect to the Company and its Subsidiaries
on a consolidated basis, without duplication, for any period of determination,
(i) Consolidated Net Income (loss), PLUS (ii) provision for taxes, PLUS (iii)
Consolidated Interest Expense, PLUS (iv) depreciation and amortization, PLUS
(v) provision for doubtful receivables, PLUS (MINUS) (vi) the increase
(decrease) in Deferred Revenues, MINUS (vii) gains on repurchases of debt,
MINUS (PLUS) (viii) the increase (decrease) in Contract Receivables net of
unearned finance charges and reserves for bad debts, in accordance with GAAP
and consistent with past practices of the Company.
"Change in Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of more than fifty percent (50%) of the total voting power of the then
outstanding Voting Stock of the Company (other than Bally Services Corporation
or Bally Manufacturing Corporation) or Bally Services Corporation (other
4
<PAGE> 16
than Bally Manufacturing Corporation) or Bally Manufacturing Corporation or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of any of the
Company, Bally Services Corporation or Bally Manufacturing Corporation
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of such company was approved
by a vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company, Bally Services Corporation
or Bally Manufacturing Corporation, respectively, then in office.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person. To the extent necessary to comply
with the requirements of the provisions of Sections 310 through 317 of the Trust
Indenture Act as they are applicable to the Company, the term "Company" shall
include any other obligor with respect to the Securities for the purposes of
complying with such provisions.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company (i) by its Chairman, a Vice Chairman, its
President or a Vice President and (ii) by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary and delivered to the
Trustee; PROVIDED, HOWEVER, that such written request or order may be signed
by any two of the officers or directors listed in clause (i) above in lieu of
being signed by one of such officers or directors listed in such clause (i)
and one of the officers listed in clause (ii) above.
5
<PAGE> 17
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for any
period, the ratio of (a) the sum of Cash EBITDA and one-third of Consolidated
Rental Payments, of the Company and its Subsidiaries on a consolidated basis,
as determined in accordance with GAAP to (b) the sum of (i) Consolidated
Interest Expense for such period and (ii) one-third of Consolidated Rental
Payments for such period; PROVIDED that in making such computation, the
Consolidated Interest Expense attributable to interest on any Indebtedness
computed on a PRO FORMA basis and (A) bearing a floating interest rate shall
be computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of the Company, a fixed or floating rate of interest, the Company shall
apply, at its option, either the fixed or floating rate for purposes of
calculating the Consolidated Fixed Charge Coverage Ratio.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest that, in accordance with GAAP, would be set forth opposite
the caption "interest expense" or any like caption on a consolidated income
statement of the Company and its Subsidiaries (including, but not limited to,
imputed interest on Capitalized Lease Obligations, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, the net costs associated with hedging obligations,
amortization of other financing fees and expenses, the interest portion of
any deferred payment obligation, amortization of discount or premium, if any,
and all other non-cash interest expense (other than previously capitalized
interest amortized to cost of sales)) plus, without duplication in each case,
all capitalized interest of the Company and its Subsidiaries for such period
and all interest accrued or paid by the Company or any of its Subsidiaries
under any Guaranty of Indebtedness (including a Guaranty of principal,
interest or any combination thereof) of any Person for such period, in each
case determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of the Company means, for any period, the
consolidated net income (or loss) of the Company and its Subsidiaries for such
period as determined in accordance with GAAP, adjusted, to the extent included
in calculating such net income (or loss), by
6
<PAGE> 18
excluding (i) all extraordinary gains or losses (less all fees and expenses
relating thereto), (ii) the portion of net income (or loss) of the Company
and its Subsidiaries allocable to minority interests in unconsolidated
Persons to the extent that cash dividends or distributions have not actually
been received by the Company or one of its Subsidiaries, (iii) net income (or
loss) of any Person combined with the Company or any of its subsidiaries in a
"pooling of interests" basis attributable to any period prior to the date of
combination, (iv) any gain or loss, net of taxes, realized upon the
termination of any employee pension benefit plan, (v) any gains or losses
(less all fees and expenses relating thereto) in respect of dispositions of
assets other than in the ordinary course of business, or (vi) the net income
of any Subsidiary to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity (excluding Redeemable Capital Stock) of such Person and
its consolidated subsidiaries, as set forth on the most recent consolidated
balance sheet of such Person and its consolidated subsidiaries determined in
accordance with GAAP.
"Consolidated Rental Payments" of the Company means, for any period, the
aggregate rental obligations of the Company and its Subsidiaries under
operating leases (not including taxes, insurance, maintenance and similar
expenses that the lessee is obligated to pay under the terms of the relevant
leases and not including any contingent or performance-based portions of such
rental obligations), determined on a consolidated basis in accordance with
GAAP.
"Contract Receivables" means, during any period of determination, gross
accounts receivable of the Company and its Subsidiaries created from the sale
to customers, on an installment payment basis, of membership contracts for the
use of fitness or exercise centers.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate
7
<PAGE> 19
trust business shall be principally administered, which office at the date of
execution of this Indenture is located at One West Monroe Street, Chicago,
Illinois 60603; Attention: Corporate Trust Department.
"corporation" includes corporations, associations, partnerships,
companies and business trusts.
"Credit Documents" means the 1993 Credit Agreement and any agreements
executed and delivered from time to time by the Company or any Subsidiary
providing direct or indirect credit support or collateral for the 1993 Credit
Agreement.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Subsidiary against fluctuations in currency values.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Deferred Revenues" means, during any period of determination,
revenues that have been received in cash or recorded as Contract Receivables
and in each case recognition of which as revenue has been postponed consistent
with the past practices of the Company.
"Event of Default" has the meaning specified in Article Five.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the
sale value that would be obtained in an arm's length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the
United States Code, as amended from time to time.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied,
that are in
8
<PAGE> 20
effect from time to time; PROVIDED, HOWEVER, that with respect to the
obligations of any Person under Article Eight and Sections 1007, 1014 and 1016
and the definitions applicable thereto, "GAAP" means generally accepted
accounting principles in the United States as in effect on the date hereof.
"Guaranty" means, as applied to any obligation, (1) a guaranty (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (2) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, any indebtedness,
contingent or otherwise, in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to
a portion thereof and including any indebtedness issued in exchange for
indebtedness for borrowed money), or evidenced by bonds, notes, debentures or
similar instruments or representing the balance deferred and unpaid of the
purchase price of any property, if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared on a consolidated basis in accordance with GAAP consistently applied
and, to the extent not cash collateralized, letters of credit (or
reimbursement obligations related thereto); PROVIDED, HOWEVER, that (a)
"Indebtedness" shall not include accounts payable to trade creditors or other
indebtedness for goods or services created or assumed in the ordinary course
of business and (b) Indebtedness shall include only the principal component of
any obligations described above. "Indebtedness" shall also include the
principal component of any Capital Lease Obligations and Guaranties of items
that would be included within this definition (regardless of whether such
items would appear upon such balance sheet); PROVIDED that for purposes of
computing Indebtedness outstanding at any time, such items shall be excluded
to the extent
9
<PAGE> 21
that they would otherwise be eliminated as intercompany items in
consolidation. Any reference in the Indenture to any Indebtedness shall be
deemed to include any renewals, extensions, refundings, amendments and
modifications of any such Indebtedness.
"Indenture" means this instrument as originally executed (including all
exhibits and schedules hereto) and as it may from time to time be supplemented
or amended by one or more indentures supplemental hereto entered into pursuant
to the applicable provisions hereof.
"Intercompany Agreement" means the Intercompany Agreement among the
Company and its Subsidiaries in the form of Exhibit A to the Indenture, as
amended from time to time.
"Intercompany Debt Obligations" means any Indebtedness of the Company
or any Subsidiary which, in the case of the Company, is owing to any
Subsidiary and which, in the case of any Subsidiary, is owing to the Company
or any other Subsidiary of the Company.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a fixed or floating rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or floating rate of interest on the same
notional amount or pursuant to any interest rate protection agreement,
interest rate future, interest rate option or other interest rate hedge
arrangement.
"Investment" by any Person means, directly or indirectly, any advance,
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any stock, bonds, notes, debentures or other securities issued
or owned by, any other Person. Investments shall exclude extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices.
10
<PAGE> 22
"Lien" means any mortgage, charge, pledge, lien, privilege, security
interest or encumbrance of any kind.
"Master Agreement" means that certain Master Agreement dated
January 22, 1993 among the Company, Health & Tennis Corporation of America,
Bally's S.C. Management, Inc., Talla Holding Company and certain partnerships
and limited partnerships, as amended from time to time.
"Material Subsidiary" means, at the time of determination, any
Subsidiary of the Company that (a) accounted for more than ten percent of the
consolidated net income of the Company for the most recently completed fiscal
year of the Company or (b) was the owner of more than ten percent of the
consolidated assets of the Company as at the end of such fiscal year, all as
shown on the consolidated financial statements of the Company for such fiscal
year.
"Maturity" when used with respect to any Security means the date on
which the principal of (and premium, if any) and interest on such Security
becomes due and payable as therein or herein provided, whether at Stated
Maturity, Change in Control Payment Date, Accelerated Payment Date, any
payment date for an Excess Proceeds Offer or Redemption Date and whether by
declaration of acceleration, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc.
"Net Proceeds" means the aggregate proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale, net of the out-of-pocket
costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees and sales commissions) and any
relocation expenses and severance and shutdown costs incurred as a result
thereof, taxes paid or payable as a result thereof, amounts required to be
applied to the repayment of Indebtedness secured by a Lien on the asset or
assets which are the subject of such Asset Sale and any reserve for adjustment
in respect of the sale price of such asset or assets.
"1993 Credit Agreement" means that certain Amended and Restated Credit
Agreement dated as of January 25, 1993 among the Company, the lenders named
therein and
11
<PAGE> 23
Chemical Bank, as agent, as the same may be amended, amended and
restated, supplemented, extended, renewed or otherwise modified from time to
time (in whole or in part, and without limitation as to amount, terms,
conditions, covenants and other provisions from time to time) and any agreement
or agreements with the same or other lenders providing for aggregate extensions
of credit not in excess of $145,000,000 in aggregate principal amount
refunding, refinancing or replacing such Amended and Restated Credit Agreement
or any such agreements.
"Officers' Certificate" means a certificate signed by (i) the Chairman,
a Vice Chairman, the President, a Vice President or the Treasurer of the
Company and (ii) the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee; PROVIDED, HOWEVER, that such certificate may be
signed by two of the officers or directors listed in clause (i) above in lieu
of being signed by one of such officers or directors listed in such clause
(i) and one of the officers listed in clause (ii) above.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee. Each
such opinion (i) shall include the statements provided for in Trust Indenture
Act Section 314(e) to the extent applicable and (ii) may state that the
counsel rendering such opinion have relied upon an Officers' Certificate with
respect to factual matters which are set forth in such opinion.
"Outstanding" when used with respect to the Securities means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment, redemp-
tion or purchase money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust or set
aside and segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities, and the Trustee or such
Paying Agent is not prohibited from paying such money to the Holders on that
date pursuant to the terms of Article
12
<PAGE> 24
Twelve hereof; PROVIDED that, if such Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(c) Securities, except to the extent provided in Section 1301,
with respect to which the Company has effected defeasance as provided in
Article Thirteen; and
(d) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this Indenture,
other than any such Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such Securities are
held by a bona fide purchaser in whose hands the Securities are valid
obligations of the Company;
PROVIDED, HOWEVER, that, in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
direction, consent or waiver hereunder, Securities owned by the Company, or any
other obligor upon the Securities or any Affiliate of the Company or any other
obligor upon the Securities shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, direction, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (or premium, if any) or interest on any Securities on behalf of
the Company.
"Permitted Indebtedness" means, without duplication, any of the
following Indebtedness of the Company or any Subsidiary, as the case may be:
(i) Indebtedness (including letters of credit) of the Company
outstanding at
13
<PAGE> 25
any time under the 1993 Credit Agreement, or any successor or successors
thereto, in an aggregate principal amount not to exceed the aggregate
commitments as in effect on the date hereof;
(ii) Any Guaranty by a Subsidiary under the 1993 Credit
Agreement;
(iii) (a) Indebtedness and obligations of the Company under
the Securities, (b) any Indebtedness and obligations outstanding on the
date hereof, (c) Indebtedness and obligations arising after the date
hereof in respect of agreements existing as of the date hereof providing
for indemnification, adjustment of purchase price or similar obligations
incurred in connection with the acquisition of any business and (d) the
subordinated note payable to Bally in connection with the acquisition of
the Transferred Assets, and any Indebtedness assumed in connection with
the Transferred Assets;
(iv) Indebtedness of a Specified Subsidiary to the Company or
a Specified Subsidiary and of the Company to a Subsidiary;
(v) Indebtedness the proceeds of which are used, directly or
indirectly, to refinance outstanding Indebtedness of the Company or any
Subsidiary (which outstanding Indebtedness shall include, in the case of
the 1993 Credit Agreement or any successor thereto, the amount of the
aggregate commitments under the 1993 Credit Agreement as in effect on the
date hereof) in a principal amount (or, if such Indebtedness does not
require cash payments prior to maturity, with an original issue price of
such Indebtedness) not to exceed the principal amount of the Indebtedness
so refinanced (or, if the Indebtedness being refinanced was issued with
an original issue discount, the original issue price plus the amortized
portion of the original issue discount to the date that such refinancing
Indebtedness was incurred); PROVIDED that if the Indebtedness being
refinanced is Indebtedness of the Company, such
14
<PAGE> 26
refinancing shall be Indebtedness of the Company; PROVIDED FURTHER that
Indebtedness the proceeds of which are used to refinance Indebtedness of
the Company that is expressly subordinated in right of payment to the
Securities will only be permitted if (x) such Indebtedness is expressly
subordinated in right of payment to the Securities at least to the same
extent that the Indebtedness to be refinanced is subordinated to the
Securities, (y) the Average Life to Stated Maturity of such Indebtedness
exceeds the Average Life to Stated Maturity of the Securities, and (z) the
final scheduled maturity of such Indebtedness exceeds the final Stated
Maturity of the Securities;
(vi) Indebtedness which represents the assumption by the
Company of Indebtedness of any Subsidiary and refinancings thereof;
(vii) Indebtedness under Currency Agreements, Interest Swap
Obligations and other agreements between the Company or a Subsidiary and
one or more financial institutions providing for "swap", "cap", "collar"
or other interest rate protection;
(viii) obligations in respect of performance bonds and surety
bonds provided by the Company or any Subsidiary in the ordinary course of
business and any renewals, extensions or amendments, modifications or
supplements thereto;
(ix) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business, PROVIDED
that such Indebtedness is extinguished within two Business Days of its
incurrence;
(x) additional Indebtedness not to exceed $40,000,000 in the
aggregate at any one time; and
15
<PAGE> 27
(xi) Intercompany Debt Obligations of the Company and each of
its Subsidiaries in connection with the Company's cash management system
incurred in the ordinary course of business and consistent with past
practice; PROVIDED, that the obligations of each obligor of such indebted-
ness shall be subject to the terms of the Intercompany Agreement.
For the purpose of determining the amount of outstanding Indebtedness
under any of the foregoing clauses, there shall be included (A) the principal
amount then outstanding that was originally incurred pursuant to such clause;
(B) any outstanding Indebtedness incurred pursuant to clause (v) or (vi) to
refinance or refund Indebtedness originally incurred pursuant to such clause;
and (C) any subsequent refinancings or refundings thereof.
"Permitted Investment" means an Investment which consists of any one
or more of the following:
(i) Investment in a Subsidiary or another Person which,
immediately after such Investment, will be a wholly owned Subsidiary,
provided in each case that such Subsidiary conducts a business which is
substantially identical to any business conducted by the Company or its
Subsidiaries on the date hereof or related to any such business;
(ii) any Investment in a Specified Subsidiary, other than the
purchase or acquisition of any Capital Stock of such Subsidiary or any
options, warrants or other rights to acquire such Capital Stock;
(iii) any Investment in a Permitted Joint Venture in
accordance with Section 1020, exclusive of Investments made pursuant to
clause (ii) thereof;
(iv) Investments by Subsidiaries in the Company and
transactions pursuant to the Intercompany Agreement, in the ordinary
course of business and consistent with past practice;
16
<PAGE> 28
(v) (a) commercial paper rated P-1 by Moody's or A-1 by
Standard & Poor's on the date of acquisition, (b) certificates of deposit
of United States commercial banks (having a combined capital and surplus
in excess of $100,000,000), (c) obligations of, or guaranteed by, the
United States government or any agency thereof, (d) money market funds
organized under the laws of the United States or any state thereof that
invest substantially all their assets in any of the types of investments
described in subclause (a), (b) or (c) of this clause (v), or (e) to the
extent not comprehended by subclauses (a) through (d) of this clause (v),
temporary investments of cash balances in investments deemed to be cash
equivalents under GAAP;
(vi) negotiable instruments held for collection; outstanding
travel, moving and other like advances to officers, employees and
consultants; lease, utility and other similar deposits; or stock,
obligations or securities received in settlement of debts owing to the
Company or a Subsidiary as a result of foreclosure, perfection or enforce-
ment of any Lien, in each of the foregoing cases in the ordinary course of
business of the Company or a Subsidiary, as the case may be;
(vii) sales of goods or services on trade credit terms
consistent with the Company's and its Subsidiaries' past practices or as
otherwise consistent with trade credit terms in common use in the industry;
and
(viii) the non-cash portion of the consideration received in
Asset Sales.
"Permitted Joint Venture" means a Person (i) not an Affiliate of
Bally or Bally Services Corporation (unless such Person is also a Subsidiary
of the Company); (ii) formed by any Permitted Joint Venture Subsidiary, such
Permitted Joint Venture Subsidiary being created to offer equity
participations in the assets or businesses owned or to be acquired by such
Person; (iii) prohibited by the terms of its charter or other organizational
documents from entering into a line of
17
<PAGE> 29
business that is not substantially identical to any business
conducted by the Company and its Subsidiaries on the date hereof or any
business related to any such business; and (iv) the Company's equity interest
in which shall be held directly by a Permitted Joint Venture Subsidiary.
"Permitted Joint Venture Subsidiary" means any wholly owned Subsidiary
of the Company that has no material assets other than an equity interest in a
Permitted Joint Venture.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims which are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if a reserve or
other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor; (ii) statutory Liens of landlords and
carriers', warehousemen's, mechanics' , suppliers', materialmen's, repairmen's,
or other like Liens arising in the ordinary course of business and with
respect to amounts not yet delinquent or being contested in good faith by
appropriate proceedings, and if a reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been made
therefor; (iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security; (iv) Liens incurred or deposits made to secure
the performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, government contracts, performance and return-of-money bonds and
other obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect with
the business of the Company or any of its Subsidiaries incurred in the ordinary
course of business; (vi) any interest or title of a lessor in the property
subject to any capital lease obligation or operating lease and; (vii) Liens
arising from filing Uniform Commercial Code financing statements regarding
leases.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint-stock company, trust,
unincorporated organi-
18
<PAGE> 30
zation or government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the date hereof, and includes, without limitation, all classes and series of
preferred or preference stock.
"Redeemable Capital Stock" means Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event or passage of
time would be required to be redeemed prior to the final Stated Maturity of
principal on the Securities or is redeemable at the option of the holder
thereof at any time prior to such final Stated Maturity, or is convertible
into or exchangeable for debt securities at any time prior to such final
Stated Maturity.
"Redemption Date", when used with respect to any Securities to be
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Statement" means the Registration Statement on Form S-1
of the Company, No. 33-52868, filed with the Commission on October 2, 1992, as
amended at the time such Registration Statement was declared effective by the
Commission under the Securities Act of 1933.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the January 1 or July
19
<PAGE> 31
1 (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date.
"Representative" means the indenture trustee or other trustee, agent or
representative for an issue of Senior Indebtedness.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller and any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers or assigned
by the Trustee to administer corporate trust matters at its Corporate Trust
Office and also means, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Payments" has the meaning specified in Section 1008.
"Security" and "Securities" have the meaning set forth in the second
paragraph of this Indenture.
"Senior Indebtedness" means (i) the principal of, premium, if any, and
accrued and unpaid interest on, and letters of credit (and matured and unmatured
reimbursement obligations with respect thereto) and any fees, expenses,
indemnities and other amounts payable under or in connection with the 1993
Credit Agreement and the related Credit Documents, whether outstanding on the
date of this Indenture or thereafter created, assumed or incurred; PROVIDED,
HOWEVER, that (a) any Indebtedness under any refinancing, refunding or
replacement of the 1993 Credit Agreement shall not constitute Senior
Indebtedness to the extent that Indebtedness thereunder is by its terms
expressly subordinate in right of payment to any other Indebtedness of the
Company and (b) all interest which would accrue after the filing of a petition
by or against the Company under any federal, state or foreign bankruptcy or
similar law, whether or not such interest is allowed as a claim after such
filing in any
20
<PAGE> 32
proceeding under such bankruptcy or similar law, shall constitute Senior
Indebtedness; and (ii) the principal of, premium, if any, and accrued and
unpaid interest on Indebtedness of the Company, contingent or otherwise, in
respect of borrowed money, whether outstanding on the date of this Indenture or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Securities. Notwithstanding the
foregoing, "Senior Indebtedness" shall not include (i) Indebtedness evidenced
by the Securities, (ii) Indebtedness that is expressly subordinate or junior
in right of payment to any Indebtedness of the Company, (iii) any liability for
federal, state, provincial, local or other taxes owed or owing by the Company,
(iv) Indebtedness of or amounts owed by the Company for compensation to
employees and for services, (v) Indebtedness of the Company to a Subsidiary of
the Company or any other Affiliate of the Company or any of such Affiliate's
Subsidiaries, (vi) the subordinated note issued to Bally as consideration for
the Transferred Assets, (vii) any Indebtedness which at the time of issuance is
issued in violation of this Indenture, and (viii) amounts owing under leases
(other than Capital Lease Obligations).
Special Record Date" means a date fixed by the Trustee for the payment
of any Defaulted Interest pursuant to Section 307.
"Specified Senior Indebtedness" means any issue of (i) all Senior
Indebtedness under the 1993 Credit Agreement and (ii) Senior Indebtedness,
which, at the time of determination, has an outstanding principal amount of
at least $20 million and is designated as such by Board Resolution of the
Company. For purposes of this definition: (a) the amount of the Indebtedness
of the Company with respect to any Interest Swap Obligation shall be deemed to
be the lesser of (x) 25% of the notional amount of such Interest Swap
Obligation, or (y) the maximum amount the Company could be required to pay
under such Interest Swap Obligation; and (b) a refinancing of any such
Indebtedness shall be treated as such only if it ranks or would rank PARI PASSU
with the Indebtedness refinanced.
21
<PAGE> 33
"Specified Subsidiary" means (i) any Subsidiary at least 80% of the
Capital Stock of which is owned, directly or indirectly, by the Company on the
date hereof and at the time of application, (ii) any of Nycon Holding Co., Inc.,
Rhode Island Holding Co., Inc., Providence Fitness Centers, Inc., New Fitness
Holding Co., Inc., Connecticut Valley Fitness Centers, Inc., Connecticut Coast
Fitness Centers, Inc., Holiday Health & Fitness Centres of New York, Inc.,
Greater Philly No. 1 Holding Co., Greater Philly No. 2 Holding Co., Physical
Fitness Centers of Philadelphia, Inc. and Bally Matrix Fitness Center Ltd.;
PROVIDED, HOWEVER, the Company's percentage ownership interest in any of such
Subsidiaries does not decrease subsequent to the date hereof and (iii) any
wholly owned Subsidiary.
"Standard & Poor's" means Standard & Poor's Corporation.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subordinated Indebtedness" means all Indebtedness of the Company that
is expressly subordinated in right of payment to any other Indebtedness of the
Company.
"Subsidiary" means any Person a majority of the total voting power of
the Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more such Subsidiaries, or by the Company and one or more
such Subsidiaries.
"Transferred Assets" means certain assets of Bally Manufacturing
Corporation transferred to the Company, including (i) a 1% general partner
interest and a 49% limited partner interest in each of Penn Hills Spa Limited
Partnership, an Ohio limited partnership, Spa Associates Limited Partnership,
an Ohio limited partnership, Keystone Crossing Spa Limited Partnership, an
Ohio limited partnership, and Davie Spa Limited Partnership, an Ohio limited
partnership, (ii) those certain assets leased pursuant an Agreement of Lease
dated as of December 29, 1988, between Life Fitness Products, Inc. and the
Company, (iii) the Hilltop fitness center located in
22
<PAGE> 34
Kansas City, Missouri and (iv) all the capital stock of So. Cal Nautilus
Fitness Centers, Inc.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, and as in force at the date as of which this Indenture was executed,
except as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
Section 102. Other Definitions.
------------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Accelerated Payment" . . . . . . . . . . . . . 1014
"Accelerated Payment Date" . . . . . . . . . . 1014
"Acceleration Date" . . . . . . . . . . . . . . 1014
"Act" . . . . . . . . . . . . . . . . . . . . . 105
"Asset Sale Payment" . . . . . . . . . . . . . 1016
"Asset Sale Payment Date" . . . . . . . . . . . 1016
"Change in Control Payment Date" . . . . . . . 1015
"defeasance" . . . . . . . . . . . . . . . . . 1301
"Default Notice" . . . . . . . . . . . . . . . 1202
"Defaulted Interest" . . . . . . . . . . . . . 307
"Excess Proceeds" . . . . . . . . . . . . . . . 1016
"incorporated provision" . . . . . . . . . . . 108
"Offer" . . . . . . . . . . . . . . . . . . . . 1014
"Security Register" . . . . . . . . . . . . . . 305
"Security Registrar" . . . . . . . . . . . . . 305
"U.S. Government Obligations" . . . . . . . . . 1302
</TABLE>
23
<PAGE> 35
Section 103. Compliance Certificates and Opinions.
-------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture (including any covenant compliance with
which constitutes a condition precedent) relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that, in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate
or opinion need be furnished.
Every certificate or opinion (other than the certificates required by
Section 1018(a)) with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
24
<PAGE> 36
Section 104. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 105. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is
25
<PAGE> 37
hereby expressly required, to the Company. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Trust Indenture Act Section 315) conclusive in favor
of the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the
Security Register.
(d) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of such Holders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or
other Act, but the Company shall have no obligation to do so. Notwithstanding
Trust Indenture Act Section 316(c), any such record date shall be the record
date specified in or pursuant to such Board Resolution, which shall be a date
not more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than the date such solicitation is completed.
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or after
such record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for the purposes of determining
whether Holders of the requisite proportion of Securities then Outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for this purpose the
Securities then Outstanding shall be computed as of such record date; PROVIDED
that no such request, demand, authorization, direction, notice, consent, waiver
or other Act by the Holders on such record date shall be deemed effective
26
<PAGE> 38
unless it shall become effective pursuant to the provisions of this Indenture
not later than six months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act by the Holder of any Security shall bind every
future Holder of the same Security or the Holder of every Security issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof, in respect of anything done, suffered or omitted to be done by the
Trustee, any Paying Agent or the Company in reliance thereon, whether or not
notation of such action is made upon such Security.
Section 106. Notices, etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder, the Bank Agent or the Company
shall be sufficient for every purpose hereunder if made, given, furnished or
delivered, in writing, to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Department; or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if made, given, furnished or delivered in writing to the Company
addressed to it at Bally's Health & Tennis Corporation, 8700 W. Bryn Mawr
Avenue, Chicago, Illinois 60631, Attention: President, or at any other
address furnished in writing to the Trustee by the Company.
Section 107. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event at his address as it appears in the Security Register not later
than the latest date and not earlier than the earliest date prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail
27
<PAGE> 39
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders.
Any notice when deposited for mailing to a Holder in the aforesaid manner
shall be conclusively deemed to have been received by such Holder whether or
not actually received by such Holder. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service by reason
of any other cause, it shall be impracticable to mail notice of any event as
required by any provision of this Indenture, then any method of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Section 108. Conflict of Any Provision of Indenture with Trust
-------------------------------------------------
Indenture Act.
- -------------
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 318,
inclusive, of the Trust Indenture Act, or conflicts with any provision (an
"incorporated provision") required by or deemed to be included in this
Indenture by operation of such Trust Indenture Act Sections, such imposed
duties or incorporated provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act that
may be so modified or excluded, the latter provision shall be deemed to apply
to this Indenture as so modified or excluded, as the case may be.
Section 109. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
28
<PAGE> 40
Section 110. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its respective successors and assigns, whether so expressed or not.
Section 111. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 112. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person (other than the parties hereto and their successors
hereunder, any Paying Agent, the Holders and the holders of Senior
Indebtedness) any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 113. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws rules thereof.
Section 114. Legal Holidays.
--------------
In any case where any Interest Payment Date, any date established for
payment of Defaulted Interest pursuant to Section 307, or any Maturity with
respect to any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest
or principal (and premium, if any) need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on the Interest Payment Date or date established for payment of Defaulted
Interest pursuant to Section 307 or Maturity, and no interest shall accrue with
respect to such payment for the period from and after such Interest Payment
Date or date established for payment of Defaulted Interest pursuant to Section
307 or Maturity, as the case may be, to the next succeeding Business Day.
29
<PAGE> 41
Section 115. No Recourse against Others.
--------------------------
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting any of
the Securities waives and releases all such liability.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
---------------
The Securities and the Trustee's certificate of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any portion of the text of
any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the
Securities may be listed, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
30
<PAGE> 42
Section 202. Form of Face of Security.
------------------------
BALLY'S HEALTH & TENNIS CORPORATION
13% Senior Subordinated Note
due 2003
No. _______ $_______
Bally's Health & Tennis Corporation, a Delaware corporation (herein
called the "Company", which term includes any successor entity under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to ____________ or registered assigns, the principal sum of ___________
Dollars on January 15, 2003, at the office or agency of the Company referred
to below, and to pay interest thereon on July 15, 1993 and semiannually
thereafter, on January 15 and July 15 in each year, from January 25, 1993 or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, at the rate of 13% per annum, until the principal hereof is
paid or duly provided for. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the January 1 or July 1 (whether
or not a Business Day), as the case may be, next preceding such Interest
Payment Date. Any such interest not so punctually paid or duly provided for,
and interest on such defaulted interest rate at the same interest rate borne
by the Securities, to the extent lawful, shall forthwith cease to be payable
to the Holder on such Regular Record Date, and may be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given
to Holders of Securities not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may
be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture. Payment of the principal of (and
premium, if any) and interest on this Security will be made at the office or
agency of the Company maintained for that purpose in
31
<PAGE> 43
The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; PROVIDED, HOWEVER, that payment of interest may be
made at the option of the Company by check mailed to the address of the Person
entitled thereto as such address shall appear on the Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: BALLY'S HEALTH & TENNIS
CORPORATION
By _______________________
Attest:
___________________________
Authorized Signature
Section 203. Form of Reverse of Security.
---------------------------
This security is one of a duly authorized issue of securities of the
Company designated as its 13% Senior Subordinated Notes due 2003 (herein
called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $200,000,000,
which may be issued under an indenture (herein called the "Indenture") dated
as of January 15, 1993, between the Company and Amalgamated Bank of Chicago,
trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement
32
<PAGE> 44
of the respective rights, limitations of rights, duties, obligations and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
The Securities are subject to redemption upon not less than 30 nor
more than 60 days' notice, in amounts of $1,000 or an integral multiple of
$1,000 at any time on or after January 15, 1998, as a whole or in part, at the
election of the Company, at a Redemption Price equal to the percentage of the
principal amount set forth below if redeemed during the 12-month period
beginning January 15, of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
1998 106.50%
1999 103.25%
2000 and thereafter 100%
</TABLE>
together in the case of any such redemption with accrued interest to the
Redemption Date (subject to the right of Holders of record on relevant Regular
Record Dates to receive interest due on an Interest Payment Date), all as
provided in the Indenture.
In the event that a Change in Control occurs, each Holder shall have
the right, as provided in, and subject to the terms of, the Indenture, to
require that the Company repurchase such Holder's Securities in whole or in
part in integral multiples of $1,000 at a purchase price in cash in an amount
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase.
In the event that (a) the Company's Consolidated Net Worth falls below
a certain specified level on the last day of each of two consecutive fiscal
quarters or (b) certain Asset Sales are consummated and the Net Proceeds
thereof are not reinvested within 12 months in the Company's existing lines of
business or related businesses, each Holder shall have the right, as provided
in, and subject to the terms of, the Indenture, to require the Company to
repurchase a specified principal amount of Securities in whole or in part in
integral multiples of $1,000 at a purchase price in cash in an amount equal to
33
<PAGE> 45
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase.
The Securities are not entitled to the benefit of any sinking fund.
In the case of any redemption of Securities, interest installments
whose Stated Maturity is on or prior to the Redemption Date will be payable to
the Holders of such Securities, or one or more Predecessor Securities, of
record at the close of business on the relevant Regular Record Date referred
to on the face hereof. Securities (or portions thereof) for whose redemption
and payment provision is made in accordance with the Indenture shall cease to
bear interest from and after the Redemption Date.
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof shall be issued in
the name of the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of the Company on this Security upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Security.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by or on behalf of the Holder of this Security shall be conclusive and
bind-
34
<PAGE> 46
ing upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
therefore or in lieu hereof whether or not notation of such consent or waiver
is made upon this Security.
The Securities are subordinated in right of payment, in the manner and
to the extent set forth in the Indenture, to the prior payment in full in cash
of all Senior Indebtedness of the Company whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder
by his acceptance hereof agrees to be bound by such provisions and authorizes
and expressly directs the Trustee, on his behalf, to take such action as may be
necessary or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee his attorney-in-fact for such purpose.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place, and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable on the
Security Register of the Company, upon surrender of this Security for
registration of transfer at the office or agency of the Company maintained for
such purpose in The City of New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denom-
35
<PAGE> 47
ination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of
a sum sufficient to pay all documentary, stamp or similar issue or transfer
taxes or other governmental charges payable in connection with any
registration of transfer or exchange.
Prior to the time of due presentment of this Security for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any agent shall be affected by notice to
the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
Section 204. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Amalgamated Bank of Chicago
as Trustee
By___________________________
Authorized Signatory
36
<PAGE> 48
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $200,000,000,
except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities pursuant to
Section 303, 304, 305, 306, 906, 1014, 1015, 1016 or 1108.
The Securities shall be known and designated as the "13% Senior
Subordinated Notes due 2003" of the Company. Their Stated Maturity shall be
January 15, 2003, and they shall bear interest at the rate of 13% per annum
from January 25, 1993, or the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, payable on
July 15, 1993 and semiannually thereafter on January 15 and July 15 in each
year and at said Stated Maturity, until the principal thereof is paid or duly
provided for.
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose; PROVIDED, HOWEVER, that,
at the option of the Company, interest may be paid by check mailed to
addresses of the Persons entitled thereto as such addresses shall appear on
the Security Register.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall not be entitled to the benefits of any sinking
fund.
Section 302. Denominations.
-------------
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
37
<PAGE> 49
Section 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by any two
of the following: its Chairman, its President or one of its Vice Presidents,
under its corporate seal reproduced thereon and attested by its Secretary or
one of its Assistant Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
The Trustee shall (upon Company Order) authenticate and deliver
Securities for original issue in an aggregate principal amount of up to
$200,000,000.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
duly executed by the Trustee by manual signature of one of its duly authorized
signatories, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated
and delivered hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be consolidated
or merged with or into any other Person or shall convey, transfer, lease or
otherwise dispose of substantially all of its properties and assets to any
Person, and the successor Person resulting from such consolidation, or
surviving such merger, or into which the Company shall have been merged, or
the successor Person which shall have recieved a conveyance, transfer, lease
or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Securities authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Securities
38
<PAGE> 50
executed in the name of the successor Person with such changes in phraseology
and form as may be appropriate, but otherwise in substance of like tenor as the
Securities surrendered for such exchange and of like principal amount; and the
Trustee, upon Company Order of the successor Person, shall authenticate and
deliver Securities as specified in such request for the purpose of such
exchange. If Securities shall at any time be authenticated and delivered in
any new name of a successor Person pursuant to this Section in exchange or
substitution for or upon registration of transfer of any Securities, such
successor Person, at the option of any Holder but without expense to such
Holder, shall provide for the exchange of all Securities at the time
Outstanding held by such Holder for Securities authenticated and delivered in
such new name.
Section 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively
evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 1002,
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all
39
<PAGE> 51
respects be entitled to the same benefits under this Indenture as definitive
Securities.
Section 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. Said office or
agency is hereby initially appointed "Security Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denomination or denominations and of a like
aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations of a like
aggregate principal amount upon surrender of the Securities to be exchanged
at such office or agency. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer,
or for exchange or redemption, shall (if so required by the Company or the
Security Registrar) be duly endorsed, or be accompanied by a writ-
40
<PAGE> 52
ten instrument of transfer in form satisfactory to the Company and the
Security Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to pay all documentary, stamp or similar issue or transfer
taxes or other governmental charges that may be imposed in connection with any
registration of transfer or exchange of Securities, other than exchanges
pursuant to Section 303, 304, 306, 906, 1014, 1015, 1016 or 1108 not involving
any transfer.
The Company shall not be required (a) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of
business (i) 15 days before the mailing of a notice of redemption of the
Securities selected for redemption under Section 1104 and ending at the close
of business on the day of such mailing or (ii) 15 days before an Interest
Payment Date and ending on the close of business on the Interest Payment Date,
or (b) to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of Securities
being redeemed in part.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If (a) any mutilated Security is surrendered to the Trustee, or (b)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them
to save each of them and any agent of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and upon Company Order the
Trustee shall authenticate and deliver, in exchange for any such mutilated
Security or in lieu of any such destroyed, lost or stolen Security, a
replacement Security of like tenor and principal amount, and bearing a number
not contemporaneously outstanding.
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<PAGE> 53
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a replacement Security, pay such Security.
Upon the issuance of any replacement Securities under this Section,
the Company may require the payment of a sum sufficient to pay all documentary,
stamp or similar issue or transfer taxes or other governmental charges that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee) connected therewith.
Every replacement Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute a contractual
obligation of the Company, whether or not the destroyed, lost or stolen
Security shall be at any time enforceable by anyone, and shall be entitled to
all benefits of this Indenture equally and proportionately with any and all
other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall provide
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date and interest on such
defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
shall forthwith cease to be payable to the Holder on the relevant Regular
Record Date by virtue of having been such Holder; and such Defaulted Interest
may be paid by the Company, at its election in each case, as provided in
Subsection (a) or (b) below:
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<PAGE> 54
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited for the benefit of the Persons entitled to
such Defaulted Interest as in this Subsection provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date. In the name and at the expense
of the Company, the Trustee shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed, first
class postage prepaid, to each Holder at his address as it appears in the
Security Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so mailed, such Defaulted Interest shall be
paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following Subsection
(b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this Subsection, such payment
shall be deemed practicable by the Trustee.
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<PAGE> 55
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners.
---------------------
Prior to the time of due presentment for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name any Security is registered as the owner of such Security
for the purpose of receiving payment of principal of (and premium, if any) and
(subject to Section 307) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
Section 309. Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly cancelled by it.
The Company shall deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in
lieu of or in exchange for any Securities cancelled as provided in this
Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be destroyed and certification of their
destruction delivered to the Company unless by a Company Order the Company
shall direct that cancelled Securities be returned to it.
Section 310. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a year of
twelve 30-day months.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall, upon Company Request, cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
Securities herein expressly provided for) and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(a) either
(1) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(2) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the expense,
of the Company, and the Company, in the case of (i), (ii) or (iii)
above, has irrevocably deposited or
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<PAGE> 57
caused to be deposited with the Trustee, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds in trust solely for the benefit of the Holders
for that purpose cash in U.S. dollars sufficient to pay and discharge
the entire indebtedness on such Securities not theretofore delivered to
the Trustee for cancellation, for principal of (and premium, if any)
and interest to the date of such deposit (in the case of Securities
which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(b) the making of such Company Request does not constitute a
default under the Indenture or any other material agreement or instrument to
which the Company is a party or by which it is bound;
(c) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(d) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if money shall
have been deposited with the Trustee pursuant to subclause (2) of Subsection
(a) of this Section, the obligations of the Trustee under Section 402 and the
last paragraph of Section 1003 shall survive.
Section 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in
trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may determine, to
the Persons entitled thereto, of the principal (and premium, if any) and
interest for whose payment such
46
<PAGE> 58
money has been deposited with the Trustee.
Money so held in trust shall not be subject to the provisions of Article Twelve
of this Indenture.
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
-----------------
An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest on any
Security when the same becomes due and payable and such default continues for
a period of 30 days, whether or not such payment shall be prohibited by the
provisions of Article Twelve hereof; or
(b) the Company defaults in the payment of the principal of
(or premium, if any, on) any Security when the same becomes due and payable,
whether at its Stated Maturity, upon redemption or otherwise, whether or not
such payment shall be prohibited by the provisions of Article Twelve hereof; or
(c) the Company defaults in the performance of, or breaches,
any covenant or warranty of the Company hereunder (other than a default in the
performance, or breach, of a covenant or warranty that is specifically dealt
with elsewhere in this Section), and continuance of such default or breach for
the period and after the notice specified below; or
(d) an event or events of default as defined in any mortgage,
bond, indenture, loan agreement or other evidence of Indebtedness under which
there may be issued or by which there may be secured or evidenced any
outstanding Indebtedness of the Company or any Subsidiary in excess of
$10,000,000 in the aggregate, which default or defaults extend beyond any
period of grace provided with respect thereto and which default or defaults
relate to (i) the obligation to pay the principal of or interest on any such
Indebtedness, in either case, at the final maturity date set forth in the
agreement under which such Indebtedness is issued or (ii) any other obligation
which shall result in the holders of such Indebtedness causing such
Indebtedness to become or to be
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<PAGE> 59
declared due and payable prior to the date on which it would otherwise become
due and payable; or
(e) final judgments or orders are rendered against the
Company or any Subsidiary which require the payment in money, either
individually or in an aggregate amount, that is more than $10,000,000 (to the
extent not covered by insurance) and such judgment or order shall remain
unsatisfied or unstayed for 60 days; or
(f) a decree or order is entered by a court having
jurisdiction in the premises (i) for relief in respect of the Company or any
Material Subsidiary or one or more Subsidiaries which, in the aggregate, would
constitute a Material Subsidiary in an involuntary case or proceeding under
the Federal Bankruptcy Code or any other federal or state bankruptcy,
insolvency, reorganization or similar law or ( ii) adjudging the Company or
any Material Subsidiary or one or more Subsidiaries which, in the aggregate,
would constitute a Material Subsidiary as bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Material Subsidiary or one
or more Subsidiaries which, in the aggregate, would constitute a Material
Subsidiary under the Federal Bankruptcy Code or any other similar applicable
federal or state law for the relief of debtors, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Material Subsidiary or one or more
Subsidiaries which, in the aggregate, would constitute a Material Subsidiary or
of any substantial part of any of their properties, or ordering the winding
up or liquidation of any of their affairs, and any such decree or order
remains unstayed and in effect for a period of 60 consecutive days; or
(g) the Company or any Material Subsidiary or one or more
Subsidiaries which, in the aggregate, would constitute a Material Subsidiary
institutes a voluntary case or proceeding under the Federal Bankruptcy Code or
any other similar applicable federal or state law for the relief of debtors or
any other case or proceedings to be adjudicated as bankrupt or insolvent, or
the Company or any Material Subsidiary or one or more Subsidiaries which, in
the aggregate, would constitute a Material Subsidiary consents to the entry of
a decree or order for relief in respect of the Company or any Material
Subsidiary or one or more Subsidiaries which, in the aggregate, would
constitute a Material Subsidiary in any involuntary case or proceeding under
the Federal Bankruptcy Code or any other similar applicable federal or state
law for the relief of debtors or to the institution of bankruptcy or insolvency
proceedings against the Company or any Material Subsidiary or one or more
Subsidiaries which, in the aggregate, would constitute a Material Subsidiary
or the Company or any Materi-
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<PAGE> 60
al Subsidiary or one or more Subsidiaries which, in the aggregate, would
constitute a Material Subsidiary files a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or any other similar
applicable federal or state law for the relief of debtors, or consents to the
filing of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of any of the Company or any Material Subsidiary or one or
more Subsidiaries which, in the aggregate, would constitute a Material
Subsidiary or of any substantial part of its property, or makes an assignment
for the benefit of creditors, or is or are unable to pay debts generally as
they come due, or admits in writing its or their inability to pay its or their
debts generally as they become due or takes corporate action in furtherance of
any such action; or
(h) there is a failure by the Company to (i) make an Offer
under Section 1014, (ii) provide the notice to Holders required by Section
1015, (iii) make an Excess Proceeds Offer under Section 1016 or (iv) make the
payments required by the foregoing provisions, or there is a default in the
performance or breach of the provisions of Article Eight.
A default under clause (c) (other than defaults under Sections 1009
and 1011 which defaults shall be Events of Default with the notice but without
the passage of time specified in this paragraph) is not an Event of Default
until the continuance of such default for a period of 30 days after there has
been given, by registered or certified mail, to the Company by the Trustee or
to the Company and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities a written notice specifying such default
and stating that such notice is a "Notice of Default" hereunder.
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Section 502. Acceleration of Maturity; Rescission.
------------------------------------
If an Event of Default (other than an Event of Default specified in
Section 501(f) or 501(g)) occurs and is continuing, the Trustee or the Holders
of at least 25% of the principal amount of the Securities then Outstanding, by
written notice to the Company (and to the Trustee if such notice is given by
the Holders), may, and the Trustee at the request of such Holders of at least
25% of the principal amount of the Securities shall, declare all unpaid
principal of, premium, if any, and accrued interest on all the Securities to be
due and payable immediately, and upon any such declaration such principal,
premium and accrued interest shall become immediately due and payable. If an
Event of Default specified in Section 501(f) or 501(g) occurs and is
continuing, the amounts described above shall IPSO FACTO become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
Notwithstanding the foregoing, as long as the 1993 Credit Agreement
shall be in full force and effect and at least $30,000,000 is owed thereunder,
if an Event of Default shall have occurred and be continuing (other than as
specified in clauses (f) and (g) above), any acceleration of the Securities
shall not be effective until the earlier of (i) three Business Days following
a notice of acceleration given to the Bank Agent under the 1993 Credit
Agreement (which notice shall be given only after an Event of Default has
occurred) unless such Event of Default is theretofore cured and (ii) the
acceleration of the Indebtedness under the 1993 Credit Agreement.
After a declaration of acceleration, but before a judgment or decree
for payment of the money due has been obtained by the Trustee, the Holders of a
majority in aggregate principal amount of the Securities Outstanding, by
written notice to the Company and the Trustee, may annul such declaration if
(a) the Company has paid or deposited with the Trustee a sum sufficient to pay
(i) all sums paid or advanced by the Trustee under this Indenture and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, (ii) all overdue interest on all Securities, (iii) the
principal of and premium, if any, on any Securities which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate
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<PAGE> 62
borne by the Securities, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest at the rate borne by the
Securities; and (b) all Events of Default, other than the non-payment of
principal of the Securities which have become due solely by the declaration of
acceleration, have been cured or waived.
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
-------------------------------------------------------
The Company covenants that if
(a) default is made in the payment of any interest on any
Securities when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, with interest upon
the overdue principal (and premium, if any) and, to the extent that payment of
such interest shall be legally enforceable, upon overdue installments of
interest, at the rate borne by the Securities; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders
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<PAGE> 63
under this Indenture by such appropriate private or judicial
proceedings as the Trustee shall deem most effectual to protect and enforce
such rights.
Section 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in respect of
the Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or similar
official in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any
proposal, plan of reorganization, arrangement, adjustment or composition or
other similar arrangement affecting the Securities or
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<PAGE> 64
the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
505. Trustee May Enforce Claims without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name and as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
Section 506. Application of Money Collected.
------------------------------
Subject to Article Twelve, any money collected by the Trustee pursuant
to this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities for principal (and premium, if any) and interest, in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Securities for principal (and premium, if any) and interest;
and
THIRD: The balance, if any, to the Company.
Section 507. Limitation on Suits.
-------------------
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise,
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<PAGE> 65
with respect to this Indenture or the Securities, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture except in the manner provided in
this Indenture and for the equal and ratable benefit of all the Holders.
Section 508. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest.
- --------------------
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and interest on such Security
on the respective due dates expressed in such Security (or, in the case of
redemption, on the Redemption Date) and to institute suit for
54
<PAGE> 66
the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
------------------------------
Except as provided in Section 306, no right or remedy herein conferred
upon or reserved to the Trustee or to the Holders is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 512. Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to
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<PAGE> 67
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, PROVIDED that
(a) such direction shall not be in conflict with any rule of
law or with this Indenture or expose the Trustee to personal liability, and
(b) subject to the provisions of Trust Indenture Act Section
315, the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities
waive any past Default or Event of Default hereunder and its consequences,
except a Default or Event of Default
(a) in the payment of the principal of (or premium, if any)
or interest on any Security, or
(b) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the Holder
of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent
or other default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may
in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and that such
court may in its discretion
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<PAGE> 68
assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in such suit, having due regard to the merits and good faith of
the claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Outstanding Securities, or to any suit
instituted by any Holder for the enforcement of the payment of the principal of
(or premium, if any) or interest on any Security on or after the respective
Stated Maturities expressed in such Security (or, in the case of redemption,
on or after the Redemption Date).
Section 515. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantages of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults.
------------------
Within 90 days after the occurrence of any Default that is known to the
Trustee, the Trustee shall transmit by mail to all Holders, as their names and
addresses appear in the Security Register, notice of such Default; provided,
however, that, except in the case of a default in the payment of the principal
of (or premium, if any) or interest on any Security, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers
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of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders.
Section 602. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Trust Indenture Act Sections 315(a) through
315(d):
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document delivered by
it to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors of the Company may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be provided or established prior
to taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
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(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled
to examine the books, records and premises of the Company, personally or by
agent or attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder;
(h) no provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it; and
(i) the Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within
the rights or powers conferred upon it by this Indenture.
Section 603. Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof, except
that the Trustee represents that it is duly authorized to execute and deliver
this Indenture, authenticate the Securities and perform its obligations
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hereunder and that the statements made by it in a Statement of Eligibility and
Qualification on Form T-1 supplied to the Company are true and accurate,
subject to the qualifications set forth therein.
Section 604. May Hold Securities.
-------------------
The Trustee and any Paying Agent, Security Registrar or other agent of
the Company, in its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to Trust Indenture Act Sections 310(b) and
311, may otherwise deal with the Company with the same rights it would have if
it were not Trustee, Paying Agent, Security Registrar or such other agent.
Section 605. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 606. Compensation and Reimbursement.
------------------------------
The Company agrees:
(a) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of
a trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
(c) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance
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or administration of this trust, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the Company
under this Section, the Trustee shall have a claim prior to the Securities
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the benefit of Holders of particular Securities.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in Section 501(f) or (g), the
expenses and compensation for such services are intended to constitute
expenses of administration under Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
Section 607. Conflicting Interests.
---------------------
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act.
Section 608. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under Trust Indenture Act Section 310(a)(1) and
which shall have a combined capital and surplus of at least $20,000,000 and
have its Corporate Trust Office located in The City of New York (or if its
Corporate Trust Office shall not be located in The City of New York, which
shall maintain an office in The City of New York where the Securities may be
presented or surrendered and notices and demands hereunder may be made or
served) to the extent there is such an institution eligible and willing to
serve. If such corporation publishes reports of condition at least annually
pursuant to law or to the requirements of Federal, State, Territorial or
District of Columbia supervising or examining authority, then, for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this
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Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 609. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 610.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by an Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and the Company.
(d) If at any time:
(1) the Trustee fails to comply with the provisions of
Trust Indenture Act Section 310(b), or
(2) the Trustee shall cease to be eligible under
Section 608, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed or any public officer
shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii), subject to Section 514, the Holder of any Security,
on behalf of himself and all others similarly situated, petition any
court of compe-
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tent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with Section 610, become the successor Trustee and
supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders of the
Securities and so accepted appointment within 60 days, the Company or the
Holders of at least 10% in principal amount of the Securities may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee by
mailing written notice of such event by first class mail, postage prepaid, to
the Holders of Securities as their names and addresses appear in the Security
Register. Each notice shall include the name of the successor Trustee and
the address of its Corporate Trust Office.
Section 610. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; provided, however, that the
retiring Trustee shall continue to be entitled to the benefit of Section
606(c). Such retiring Trustee shall, on request of the Company or the
successor Trustee, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all
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such rights, powers and trusts of the retiring Trustee, and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers
and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
Section 611. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business.
- --------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
Section 612. Preferential Collection of Claims against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor under the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS
BY TRUSTEE AND COMPANY
Section 701. Disclosure of Names and Addresses of Holders.
--------------------------------------------
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee or
any agent of either of them shall be held accountable by reason of the
disclosure of any information as to the names and addresses of the Holders in
accordance with Trust Indenture Act Section 312, regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
Trust Indenture Act Section 312.
Section 702. Reports by Trustee.
------------------
Within 60 days after May 15 of each year commencing with the first May
15 after the first issuance of Securities, the Trustee shall transmit by mail
to all Holders, as their names and addresses appear in the Security Register, as
provided in Trust Indenture Act Section 313(c), a brief report dated as of such
May 15 if required by Trust Indenture Act Section 313(a).
Section 703. Reports by Company.
------------------
The Company shall:
(a) file with the Trustee, within 30 days after the Company
is required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934; or, if the Company is not required to file information,
documents or reports pursuant to either of such Sections, then it shall file
with the Trustee and the Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such of the supplementary and
periodic infor-
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mation, documents and reports which may be required pursuant to Section 13 of
the Securities Exchange Act of 1934 in respect of a security listed and
registered on a national securities exchange as may be prescribed from time
to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to compliance
by the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(c) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, within 30 days after the filing
thereof with the Trustee, in the manner and to the extent provided in Trust
Indenture Act Section 313(c), such summaries of any information, documents and
reports required to be filed by the Company pursuant to Subsections (a) and
(b) of this Section as may be required by rules and regulations prescribed
from time to time by the Commission. At the Company's request and at the
Company's expense, the Trustee shall deliver such documents to the Holders.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
Section 801. Company May Consolidate, etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not consolidate with or merge with or into any other
Person or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets substantially as an entirety to
any Person or group of affiliated Persons unless at the time and after giving
effect thereto:
(i) either (a) the Company shall be the continuing
corporation or (b) the Person (if other than the Company) formed by
such consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or disposition shall have been made (the
"Sur-
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viving Entity"), is a corporation duly organized and validly existing
under the laws of the United States of America, any state thereof or
the District of Columbia and shall, in either case, expressly assume
by supplemental indenture hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of
the Company under the Securities and this Indenture shall remain in
full force and effect;
(ii) immediately prior to such transaction, and immediately
after giving effect to such transaction on a PRO FORMA basis, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Consolidated Fixed Charge Coverage Ratio of
the Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture), for the four full fiscal
quarters for which financial information in respect thereof is
available immediately preceding such transaction, taken as one period,
calculated on the assumption that such transaction had occurred on
the first day of such four-quarter period, would be such that the
Company would be entitled to incur, immediately following the
transaction, $1.00 of additional Indebtedness under Section 1007 hereof;
(iv) immediately after giving effect to such transaction on a
PRO FORMA basis, the Consolidated Net Worth of the Company (or the
Surviving Entity if the Company is not the continuing obligor under
the Indenture) is at least equal to the Consolidated Net Worth of the
Company immediately before such transaction; and
(v) the Company has delivered to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture, if
one is required by this Section 801, comply
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with this Section 801 and that all conditions precedent herein provided
for relating to such transaction have been complied with.
Section 802. Successor Substituted.
---------------------
Upon any consolidation or merger or any sale, assignment, transfer,
lease or conveyance or other disposition of all or substantially all of the
assets of the Company in accordance with Section 801, the successor
corporation formed by such consolidation or into which the Company is merged
or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture with the same
effect as if such successor corporation had been named as the Company herein.
When a successor assumes all the obligations of its predecessor under this
Indenture and the Securities, the predecessor will be released from those
obligations, PROVIDED that, in the case of a transfer by lease, the
predecessor corporation shall not be released from the payment of principal of
and interest on the Securities and amounts due to the Trustee up to the date of
such transfer by lease under Section 6.06 hereof.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto in form satisfactory to
the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of the
Company herein and in the Securities;
(b) to add to the covenants of the Company for the benefit of
the Holders, or to surrender
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any right or power herein or in the Securities conferred upon the Company;
(c) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; PROVIDED that, in each case, such
provisions shall not adversely affect the interests of the Holders;
(d) to secure the Securities; or
(e) to make any other change that does not adversely affect
the rights of any Holder.
Section 902. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of such Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into one or more indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of waiving
or modifying in any manner the rights of the Holders under this Indenture;
PROVIDED, HOWEVER, that no such supplemental indenture, amendment or waiver
shall, without the consent of the Holder of each Outstanding Security affected
thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Security or reduce the principal amount thereof
or the rate of interest thereon or any premium payable upon the redemption
thereof, or change the coin or currency in which the principal of any Security
or any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date) or modify the obligation of the Company to purchase Securities under
Sections 1014, 1015 and 1016 hereof;
(b) reduce the percentage in principal amount of the
Outstanding Securities, the consent of
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whose Holders is required for any such supplemental indenture or
the consent of whose Holders is required for any waiver (of compliance with
certain provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture; or
(c) modify any of the provisions of this Section or Section
513 or Section 1019, except to increase any of the percentages set forth in
such Sections or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Holder of each
Security affected thereby; or
(d) modify any of the provisions of Article Twelve in a
manner adverse to the Holders of the Securities.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, a
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Trust Indenture Action Section 315(a) through 315(d)
and Section 602 hereof) shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter
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authenticated and delivered hereunder shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared
and executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
------------------------------------------
The Company will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
The Company shall pay interest on overdue principal at the rate borne
by the Securities; it shall pay interest on overdue installments of interest
at the same rate to the extent lawful.
Section 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain, in The City of New York, an office or
agency where Securities may be presented or surrendered for payment, where
Securities may
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be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. If the Corporate Trust Office is located in New York City, then
it shall be such office or agency of the Company, unless the Company shall
designate and maintain some other office or agency for one or more of such
purposes. The Company will give prompt written notice to the Trustee of any
change in the location of any such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other offices or
agencies (in or outside of The City of New York) where the Securities may be
presented or surrendered for any or all such purposes, and may from time to
time rescind such designation; PROVIDED, HOWEVER, that no designation or
recission shall in any manner relieve the Company of its obligation to maintain
an office or agency in The City of New York for such purposes. The Company
will give prompt written notice to the Trustee of any such designation or
rescission and any change in the location of any such office or agency.
Section 1003. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
Subject to Article Twelve, if the Company shall at any time act as its
own Paying Agent, it will, on or before each due date of the principal of (and
or interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due until such sums shall be
paid to such Persons or otherwise disposed of as herein provided, and will
promptly notify the Trustee of its action or failure so to act.
Subject to Article Twelve, whenever the Company shall have one or more
Paying Agents for the Securities, it will, on or before 11:00 a.m. New York
City time on each due date of the principal of (and premium, if any) premium,
if any)
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or interest on any Securities, deposit with a Paying Agent a sum in same day
funds (or New York Clearing House funds if such deposit is made prior to the
date on which such deposit is required to be made) sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal,
premium or interest and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of such action or any failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying agent will, subject to Article Twelve:
(a) hold all sums held by it for the payment of the principal
of (and premium, if any) or interest on Securities in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any payment or
principal (and premium, if any) or interest; and
(c) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
Subject to Article Twelve, the Company may at any time, for the
purpose of obtaining the satisfaction and discharge of this Indenture or for
any other purpose, pay, or by Company Order direct any Paying Agent to pay, to
the Trustee all sums held in trust by the Company or such Paying Agent, such
sums to be held by the Trustee upon the same trusts at those upon which such
sums were held by the Company or such Paying Agent; and, upon such payment by
any Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
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Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such
trust money, and all liability of the Company as trustee thereof, shall
thereupon cease.
Section 1004. Corporate Existence.
-------------------
Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and that of each Subsidiary of the Company and the corporate rights
(charter and statutory), corporate licenses and corporate franchises of the
Company and its Subsidiaries, except where a failure to do so, singly or in
the aggregate, is not likely to have a materially adverse effect upon the
business, assets, financial conditions or results of operations of the Company
and the Subsidiaries taken as a whole determined on a consolidated basis in
accordance with Generally Accepted Accounting Principles; PROVIDED that the
Company shall not be required to preserve any such existence (except of the
Company), right, license or franchise if the Board of Directors of the Company,
or of the Subsidiary concerned, shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company or such
Subsidiary and that the loss thereof is not disadvantageous in any material
respect to the Holders.
Section 1005. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon it or any Subsidiary or upon the
income, profits or property
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of the Company or any of its Subsidiaries and (b) all material lawful claims
for labor, materials and supplies, which, if unpaid, might by law become a
lien upon the property of the Company or any of its Subsidiaries that could
produce a material adverse effect on the consolidated financial condition of
the Company; PROVIDED, HOWEVER, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings.
Section 1006. Maintenance of Properties.
-------------------------
The Company shall cause all material properties owned by or leased to
it or any Subsidiary of the Company and necessary in the conduct of its
business or the business of such Subsidiary to be maintained and kept in
normal condition, repair and working order, ordinary wear and tear excepted;
PROVIDED that nothing in this Section shall prevent the Company or any
Subsidiary of the Company from discontinuing the use, operation or maintenance
of any of such properties, or disposing of any of them, if such discontinuance
or disposal is, in the judgment of the Board of Directors of the Company or
the Subsidiary concerned, or of any officer (or other agent employed by the
Company or any Subsidiary of the Company) of the Company or such Subsidiary
having managerial responsibility for any such property, desirable in the
conduct of the business of the Company or any Subsidiary of the Company and if
such discontinuance or disposal is not adverse in any material respect to the
Holders of the Securities.
The Company shall provide or cause to be provided, for itself and any
Subsidiaries of the Company, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties in the same general areas in
which the Company or such Subsidiaries operate.
Section 1007. Limitation on Indebtedness.
--------------------------
The Company will not, and will not permit any of its Subsidiaries to,
create, incur, assume, or directly or indirectly guarantee or in any other
manner become directly or indirectly liable for the payment of (collectively,
"incur"), any Indebtedness (excluding Permitted Indebtedness and including
Acquired Indebtedness) unless, at the time of such event and after giving
effect there
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to, on a pro forma basis the Company's Consolidated Fixed Charge
Coverage Ratio for the four full fiscal quarters for which financial
information in respect thereof is available immediately preceding such event,
taken as one period, calculated on the assumption that (i) such Indebtedness
and any other outstanding Indebtedness incurred since the first day of such
four-quarter period had been incurred on the first day of such four-quarter
period, (ii) any acquisition or disposition by the Company and its Subsidiaries
of any assets outside the ordinary course of business since the first day of
such last four full fiscal quarters had been consummated on the first day of
such four-quarter period and (iii) any prepayments of Indebtedness prior to the
stated maturity thereof since the first day of such last four full fiscal
quarters had occurred on the first day of such four-quarter period, is at least
1.80 to 1 if the Indebtedness is incurred on or prior to December 31, 1993 and
2.00 to 1 thereafter.
Notwithstanding the foregoing, nothing in this Section shall prohibit
the Company from allocating corporate overhead costs to any Subsidiary, provided
that such allocations are in the ordinary course of business and consistent
with past practice.
Section 1008. Limitation on Restricted Payments.
---------------------------------
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly,
(i) declare or pay any dividend on, or make any
distribution to holders of, any shares of the Company's Capital Stock
(other than dividends or distributions payable in shares of its
Capital Stock or in options, warrants or other rights to purchase such
Capital Stock, but excluding dividends or distributions payable in
Redeemable Capital Stock or in options, warrants or other rights to
purchase Redeemable Capital Stock),
(ii) purchase, redeem or acquire or retire for value,
any Capital Stock of the Company or any Subsidiary or any op-
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tions, warrants or other rights to acquire such Capital Stock,
(iii) declare or pay any dividend or distribution on
any Capital Stock of any Subsidiary to any Person (other than the
Company or any of its Specified Subsidiaries),
(iv) prepay, repay, redeem, defease or otherwise
acquire or retire, for value prior to Stated Maturity, scheduled
repayment or scheduled sinking fund payment, any Indebtedness of the
Company that expressly ranks junior or PARI PASSU in right of payment
to the Securities,
(v) incur, create or assume any guarantee of
Indebtedness of any Affiliate (other than a Specified Subsidiary)
PROVIDED, HOWEVER, that any Subsidiary may guarantee any Senior
Indebtedness of the Company, or
(vi) make any Investment (other than any Permitted
Investment) in any Person
(such payments or other actions described in the foregoing clauses (i) through
(vi), are collectively referred to as "Restricted Payments"), unless at the
time of and after giving effect to the proposed Restricted Payment (the amount
of any such Restricted Payment, if other than cash, shall be as determined by
the Board of Directors of the Company, whose determination, if reasonable and
based on the good faith business judgment of the Board of Directors, shall be
conclusive, and evidenced by a Board Resolution), (1) no Default or Event of
Default shall have occurred and be continuing or shall occur as a result of
such Restricted Payment and (2) the aggregate amount of all Restricted
Payments declared or made after the date hereof shall not exceed the sum of:
(A) 35% of the Consolidated Net Income of the Company accrued
on a cumulative basis during the period beginning on January 1, 1993,
and ending on the last day of the Company's last fiscal quarter ending
prior to the date of such proposed Restricted Payment (or, if such
aggregate cumulative Consoli-
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dated Net Income shall be a loss, minus 100% of such loss);
(B) the aggregate net cash proceeds received after the date
hereof by the Company from the issuance or sale (other than to any of
its Subsidiaries) of shares of Capital Stock of the Company (other
than Redeemable Capital Stock) or warrants, options or rights to
purchase such shares of Capital Stock of the Company (other than
Redeemable Capital Stock);
(C) the aggregate net cash proceeds received after the date
hereof by the Company as capital contributions to the Company;
(D) the aggregate net cash proceeds received after the date
hereof by the Company (other than from any of its Subsidiaries) upon
the exercise of options, warrants or rights to purchase shares of
Capital Stock of the Company (other than Redeemable Capital Stock); and
(E) the aggregate net cash proceeds received after the date
hereof by the Company from the issue or sale of debt securities or
Redeemable Capital Stock that have been converted into or exchanged
for Capital Stock of the Company (other than Redeemable Capital Stock),
plus the aggregate cash received by the Company at the time of such
conversion or exchange.
The foregoing provision will not be violated by reason of
(i) the payment of any dividend within 60 days after
the date of declaration thereof, if at such declaration date such
declaration complied with the foregoing provision (in which event such
dividend shall be deemed to have been paid on such date of declaration
thereof for purposes of the foregoing provision);
(ii) a dividend of $15,000,000 to be paid by the
Company to Bally Services Corporation out of the proceeds of the sale
of the Securities by the Company;
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(iii) the redemption, repurchase or other acquisition
or retirement for value of any Capital Stock of a Specified Subsidiary,
such redemptions, repurchases or other acquisitions or retirements for
value in the aggregate not to exceed $1,000,000;
(iv) the redemption, repurchase or other acquisition
or retirement for value of Subordinated Indebtedness of the Company
made in exchange for, or out of proceeds of the substantially
concurrent issue and sale (other than to a Subsidiary) of (A) shares
of Capital Stock (other than Redeemable Capital Stock) of the Company,
PROVIDED, HOWEVER, that any net cash proceeds from such issue are
excluded from clause 2(B) of the preceding paragraph or (B) new
Indebtedness of the Company, so long as (1) such Indebtedness is
expressly subordinated to the Securities at least to the same extent
as the Subordinated Indebtedness being so refinanced; (2) such
Indebtedness has an Average Life to Stated Maturity equal to or
greater than the remaining Average Life to Stated Maturity of the
Securities; and (3) such Indebtedness has a final scheduled maturity
which exceeds the final Stated Maturity of the Notes; or
(v) the advance, contribution or deposit of not more
than an aggregate of $575,000 pursuant to the Master Agreement or any
agreement entered into pursuant to the Master Agreement.
The Restricted Payments described in clauses (i), (iii) and
(iv) and any payment made pursuant to clause (ii) under Section 1020 hereof
shall be included in any computation of the aggregate amount of Restricted
Payments by the Company and its Subsidiaries.
Notwithstanding the foregoing, nothing in this Section shall prohibit
the Company from allocating corporate overhead costs to any Subsidiary, PROVIDED
that such allocations are in the ordinary course of business and consistent
with past practice.
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Section 1009. Limitation on Transactions with Affiliates.
------------------------------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any Affiliate of the Company
(other than the Company or a Subsidiary) unless (i) such transaction or series
of transactions is or are on the terms that are no less favorable to the
Company or such Subsidiary, as the case may be, than could have been obtained
at the time of such transaction or transactions in a comparable transaction in
arm's-length dealings with an unaffiliated third party, (ii) with respect to any
transaction or series of transactions involving aggregate payments in excess of
$1,000,000, but less than $10,000,000, the Company delivers an Officers'
Certificate to the Trustee certifying that such transaction or series of
transactions complies with clause (i) above and that such transaction or
series of transactions has received the approval of a majority of the Board of
Directors of the Company and (iii) with respect to any transaction or series of
transactions involving aggregate payments in excess of $10,000,000, the Company
has received a written opinion of a nationally recognized expert with
experience in appraising the terms and conditions of the transaction or series
of transactions for which approval is required to the effect that the
transaction or series of transactions are fair to the Company or such
Subsidiary from a financial point of view; PROVIDED, HOWEVER, that the
foregoing restriction shall not apply to (i) any transaction pursuant to
agreements in place as of the date hereof, (ii) transactions entered into
pursuant to the Master Agreement or any agreement entered into pursuant to the
Master Agreement or (iii) any transaction with an officer or director of the
Company or of any Subsidiary in their capacity as officer or director entered
into in the ordinary course of business (including compensation and employee
benefit arrangements with any officer or director of the Company or of any
Subsidiary).
Notwithstanding the foregoing, nothing in this Section shall prohibit
the Company from engaging in transactions expressly permitted by Section 1008.
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Section 1010. Limitation on Liens Securing Subordinated Indebtedness.
------------------------------------------------------
The Company will not, and will not permit any Subsidiary to, create,
incur, assume or suffer to exist any Lien of any kind (other than Permitted
Liens) upon any of their respective assets now owned or acquired after the
date hereof or any income or profits therefrom securing (i) any Subordinated
Indebtedness of the Company, unless the Company provides, and causes its
Subsidiaries to provide, concurrently or immediately thereafter, that the
Securities are equally and ratably secured, PROVIDED that, if such
Subordinated Indebtedness is expressly subordinated to the Securities, the
Lien securing such Subordinated Indebtedness shall be subordinate and junior
to the Lien securing the Securities with the same relative priority as such
Subordinated Indebtedness shall have with respect to the Securities, and
PROVIDED, FURTHER, that this clause (i) shall not be applicable to any Liens
securing any such Indebtedness which became Indebtedness of the Company
pursuant to a transaction subject to the provisions of Article Eight or which
constitutes Acquired Indebtedness of the Company and which Liens were in
existence at the time of such transaction (unless such Indebtedness was
incurred or such Lien created in connection with, or in contemplation of,
such transaction), so long as such Liens do not extend to or cover any
property or assets of the Company or any Subsidiary of the Company other than
property or assets acquired in such transaction; or (ii) any assumption,
guarantee or other liability of any Subsidiary of the Company in respect of
any Subordinated Indebtedness of the Company, unless a substantially similar
assumption, guarantee or other liability of such Subsidiary in respect of the
Securities, concurrently or immediately thereafter, shall be equally and
ratably secured, PROVIDED that if such Subordinated Indebtedness is expressly
subordinated in right of payment to the Securities, the Lien securing the
assumption, guarantee or other liability of such Subsidiary in respect of
such Subordinated Indebtedness shall be subordinate and junior to the Lien
securing the assumption, guarantee or other liability of such Subsidiary in
respect of the Securities with the same relative priority as such Subordinated
Indebtedness shall have with respect to the Securities, and PROVIDED FURTHER
that this clause (ii) shall not be applicable to Liens securing any such
assumption, guarantee or other liability which existed at the time such
Subsidiary be
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came a Subsidiary of the Company or which constitutes Acquired Indebtedness of
a Subsidiary and which Liens were in existence at the time of such transaction
(unless such assumption, guarantee or other liability was incurred or such
Lien created in connection with, or in contemplation of, such person becoming a
Subsidiary of the Company), so long as such Liens do not extend to or cover
any property or assets of the Company or any Subsidiary of the Company other
than the assets of such person.
Section 1011. Limitation on Other Senior Subordinated Indebtedness.
----------------------------------------------------
The Company will not create, incur, assume, guarantee or in any manner
become liable with respect to any Indebtedness (other than the Securities)
that is expressly subordinate in right of payment to any Senior Indebtedness
unless such Indebtedness is also PARI PASSU with or subordinate in right of
payment to the Securities, pursuant to subordination provisions substantially
similar to those contained in Article Twelve.
Section 1012. Restriction on Preferred Stock of Subsidiaries.
----------------------------------------------
The Company will not permit any of its Subsidiaries to issue any
Preferred Stock (other than to the Company or a wholly owned Subsidiary of the
Company), or permit any Person (other than the Company or a wholly owned
Subsidiary of the Company) to own or hold an interest in any Preferred Stock
of any such Subsidiary, except for Preferred Stock issued by a Person prior to
the time (a) such Person becomes a Subsidiary of the Company, (b) such Person
merges with or into a Subsidiary of the Company or (c) a Subsidiary of the
Company merges with or into such Person, PROVIDED that such Preferred Stock
was not issued by such Person in anticipation of the type of transaction
contemplated by clause (a), (b) or (c) of this Section 1012.
Section 1013. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries.
------------------------------------------------------
The Company will not, and will not permit any Subsidiary to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind, on the ability of any Subsidiary
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to (a) pay dividends or make any other distribution on its Capital Stock, (b)
pay any Indebtedness owed to the Company or any other Subsidiary, (c) make any
Investment in the Company or any other Subsidiary, (d) transfer any of its
property or assets to the Company or any other Subsidiary or (e) guarantee any
Indebtedness of the Company or any of its Subsidiaries, except (i) any
encumbrance or restriction pursuant to an agreement in effect at or entered
into on the date hereof, including the 1993 Credit Agreement; (ii) any
encumbrance or restriction, with respect to a Subsidiary that is not a
subsidiary of the Company on the date hereof, in existence at the time such
Person becomes a Subsidiary of the Company or created on the date it becomes a
Subsidiary; (iii) secured Indebtedness otherwise permitted to be incurred
pursuant to this Indenture that limits the right of the debtor to dispose of
the assets securing such Indebtedness; (iv) customary non-assignment
provisions restricting subletting or assignment of any lease or assignment of
any contract of any Subsidiary; (v) customary net worth provisions contained in
leases and other agreements entered into by a Subsidiary in the ordinary course
of business; (vi) customary restrictions with respect to a Subsidiary pursuant
to an agreement that has been entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Subsidiary; (vii)
customary provisions in instruments or agreements relating to a Lien created,
incurred or assumed in accordance with this Indenture prohibiting the transfer
of the property subject to such Lien; and (viii) any encumbrance or
restriction pursuant to any agreement that extends, refinances, renews or
replaces any agreement containing any of the restrictions described in the
foregoing clauses (i) through (vii), PROVIDED that the terms and conditions of
any such restrictions are not less favorable to the Holders of the Securities
than those under or pursuant to the agreement extended, refinanced, renewed or
replaced.
Section 1014. Maintenance of Consolidated Net Worth.
-------------------------------------
If the Company's Consolidated Net Worth at the end of each of any two
consecutive fiscal quarters (the last day of such second fiscal quarter being
referred to as the "Acceleration Date"), plus an amount equal to any one-time
adjustment decreasing Consolidated Net Worth necessary to reflect the adoption
of Statement of Financial Accounting Standards No. 109, "Accounting for Income
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<PAGE> 95
Taxes," is less than $185,000,000, then the Company shall make an offer to all
Holders (an "Offer") to acquire on a pro rata basis on or before the last day
of the next following fiscal quarter, or, if such second fiscal quarter ends on
the last day of the Company's fiscal year, 120 days following the last day of
such second fiscal quarter (the "Accelerated Payment Date"), Securities in an
aggregate principal amount equal to 10% of the aggregate principal amount of
the Securities, or such lesser principal amount as may be outstanding at the
Acceleration Date, at a purchase price of 100% of principal amount, plus
accrued interest to the Accelerated Payment Date (the "Accelerated Payment").
The Company may credit against any Accelerated Payment the principal amount of
(i) Securities acquired by the Company and surrendered for cancellation
otherwise than pursuant to this Section 1014 or (ii) Securities redeemed or
called for redemption, in each case at least 60 days before the Accelerated
Payment Date. The Company, however, may not credit a specific Security against
more than one Accelerated Payment. In no event shall the failure to meet the
minimum Consolidated Net Worth stated above at the end of any fiscal quarter be
counted toward the making of more than one Offer. The Company shall notify the
Trustee promptly after the occurrence of any of the events specified in this
Section 1014. If the Accelerated Payment Date is on or after an interest
payment record date and on or before the related interest payment date, any
accrued interest will be paid to the person in whose name a Security is
registered at the close of business on such record date, and no additional
interest will be payable to Holders who tender notes pursuant to the Offer.
The Company shall provide the Trustee with notice of the Offer at
least 60 days before any such Accelerated Payment Date and at least 10 days
before the notice of any Offer is mailed to Holders. Such notice to the
Trustee from the Company shall state whether the Company elects to credit its
obligation to repurchase Securities as provided above and set forth the amount
of the credit and the basis provided above for such credit (including
identification of any previously cancelled Securities not theretofore made
the basis for the credit to an Accelerated Payment), and shall be delivered
together with any Securities required to be delivered to the Trustee for
cancellation as provided above that are to be made the basis for such credit
to an Accelerated Payment.
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<PAGE> 96
Notice of an Offer shall be mailed by the Company to all Holders and the
Trustee not less than 30 days nor more than 60 days before the Accelerated
Payment Date at their last registered address. At the Company's request and at
the Company's expense, the Trustee shall make such mailing. The Offer shall
remain open from the time of mailing until five days before the Accelerated
Payment Date. The notice shall be accompanied by a copy of the information
regarding the Company required to be contained in a Quarterly Report on Form
10-Q for the fiscal quarter ending on the Acceleration Date if the Acceleration
Date is the end of one of the Company's first three fiscal quarters. If the
Acceleration Date is the end of the Company's fourth fiscal quarter, a copy of
the information required to be contained in an annual report to shareholders
pursuant to Rule 14a-3 under the Exchange Act for the fiscal year ending with
the Acceleration Date shall accompany the notice. The notice shall contain all
instructions and materials necessary to enable such Holders to tender
Securities pursuant to the Offer. The notice, which shall govern the terms of
the Offer, shall state:
(1) that the Offer is being made pursuant to this Section 1014;
(2) the Accelerated Payment, the purchase price (including the
amount of accrued interest) and the Accelerated Payment Date;
(3) that any Security not tendered or accepted for payment will
continue to accrue interest;
(4) that, unless the Company defaults in the making of the
Accelerated Payment, any Security accepted for payment pursuant
to the Offer shall cease to accrue interest after the
Accelerated Payment Date;
(5) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than three days prior to the
Accelerated Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder,
the principal amount of the Security the Hold-
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<PAGE> 97
er delivered for purchase and a statement that such Holder is
withdrawing his election to have the Security purchased;
(6) that if Securities in a principal amount in excess of the
Accelerated Payment are tendered pursuant to the Offer, the
Company shall purchase Securities on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company and the
Trustee so that only Securities in denominations of $1,000 or
integral multiples of $1,000 shall be acquired); and
(7) that Holders whose Securities were purchased only in part will
be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered.
Before an Accelerated Payment Date, the Company shall (i) accept for
payment Securities or portions thereof tendered pursuant to the Offer (on a
pro rata basis if required pursuant to paragraph (6) above), (ii) deposit with
the Paying Agent money sufficient to pay the purchase price of all Securities or
portions thereof so accepted and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof accepted for payment by the Company. The Paying Agent shall
promptly mail or deliver to Holders of Securities so accepted payment in an
amount equal to the purchase price, and the Company shall execute and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Offer on the Accelerated Payment Date. For
purposes of this Section 1014, the Trustee shall act as the Paying Agent.
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Section 1015. Change in Control.
-----------------
Following the occurrence of any Change in Control, each Holder shall
have the right to require the Company to purchase such Holder's Outstanding
Securities at a purchase price equal to 101% of the aggregate principal amount
of such Outstanding Securities, plus accrued and unpaid interest to the date of
purchase. The Company shall purchase such Securities on a date (the "Change in
Control Payment Date") 20 Business Days after the mailing of the notice
described in the next succeeding paragraph by mailing or delivering payment for
all Securities properly delivered to the Company pursuant hereto. If the
Change in Control Payment Date is on or after an interest payment record date
and on or before the related Interest Payment Date, any accrued interest will
be paid to the person in whose name a Security is registered at the close of
business on such record date, and no additional interest will be payable to
Holders who deliver Securities pursuant hereto. Prior to the mailing of the
notice to Holders provided in the next paragraph, but in any event within 30
days following any Change in Control, the Company shall (i) prepay in full in
cash all Senior Indebtedness of the Company under the 1993 Credit Agreement and
the other Credit Documents or offer to repay in full all such Senior
Indebtedness and repay the Senior Indebtedness of each lender who has accepted
such offer or (ii) obtain the requisite consent under the 1993 Credit Agreement
to permit the repurchase of the Securities as provided for in the next
paragraph.
Within 30 days after any Change in Control, whether or not the Company
has complied with the provisions of clause (i) or (ii) of the last sentence of
the preceding paragraph, the Company (with notice to the Trustee), or the
Trustee at the Company's request and at the Company's expense, will mail or
cause to be mailed to all Holders on the date of the Change in Control a
notice of the occurrence of such Change in Control and of the Holders' rights
arising as a result thereof. Such notice will contain all instructions and
materials necessary to enable Holders to deliver their Securities to the
Company for purchase. Such notice shall state:
(1) the events causing such Change in Control;
(2) the purchase price and the Change in Control Payment Date;
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(3) that any Security not purchased will continue to accrue interest;
(4) that any Security purchased shall cease to accrue interest on
the Change in Control Payment Date;
(5) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the day before the Change
in Control Payment Date, or such longer period as may be
required by law, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the certificate
number and the principal amount of the Security the Holder
delivered for purchase and a statement that such Holder is
withdrawing his election to have the Security purchased; and
(6) that Holders whose Securities were purchased only in part will
be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered.
On or before a Change in Control Payment Date, the Company shall (i)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Securities or portions thereof which are to be purchased on such date and (ii)
deliver to the Trustee such Securities together with an Officers' Certificate
stating the Securities or portions thereof purchased by the Company. The
Paying Agent shall promptly mail or deliver to Holders of Securities so
purchased payment in an amount equal to the purchase price, and the Company
shall execute and the Trustee shall promptly authenticate and mail or deliver
to Holders of Securities purchased only in part, a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. For
purposes of this Section 1015, the Trustee shall act as the Paying Agent.
Section 1016. Limitation on Use of Proceeds from Asset Sales.
---------------------------------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, consum-
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mate any Asset Sale unless (i) 90% of the Net Proceeds from the Asset Sale
are received in cash ("Cash Net Proceeds") at closing and (ii) the
consideration received from such Asset Sale is at least equal to the Fair
Market Value of the property sold as determined by a Board Resolution of the
Company. For purposes hereof, Net Proceeds in the form of notes or other
obligations that are converted by the Company or Subsidiary receiving the same
into cash within 60 days of the consummation of an Asset Sale shall be deemed
to be cash, and such notes or other obligations shall be valued at their face
value for purposes of determining the amount of Net Proceeds and shall be
valued at an amount equal to cash actually received for purposes of
determining whether the percentage test is met.
If all or a portion of the Cash Net Proceeds of any Asset Sale are not
required to be applied to permanently repay outstanding Senior Indebtedness as
required by the terms thereof, or the Company determines not to apply such
Cash Net Proceeds to the prepayment of such Senior Indebtedness or if no such
Senior Indebtedness is outstanding, then the Company may within one year of
the Asset Sale, invest (or enter into a legally binding agreement to invest)
the Cash Net Proceeds in properties and assets that (as determined by the
Board of Directors, whose determination shall be conclusive and evidenced by a
Board Resolution) replace the properties and assets that were the subject of the
Asset Sale or in properties and assets that will be used in the businesses of
the Company and Subsidiaries existing on the date hereof or businesses relating
to the businesses existing on the date hereof. If any such legally binding
agreement to invest any Cash Net Proceeds is terminated, then the Company may
invest such Cash Net Proceeds, prior to the end of such one-year period or six
months from such termination, whichever is later, in the businesses of the
Company and Subsidiaries or as provided above. In the event that the Company
uses Net Proceeds to repay or prepay outstanding Senior Indebtedness, such
repayment or prepayment shall permanently reduce availability of credit under
the instrument governing such Senior Indebtedness, PROVIDED, HOWEVER, the
Company is permitted to have the ability to borrow up to a total of $40,000,000
of Senior Indebtedness at any time after any such repayment or prepayment, if
such repayment or prepayment results in total Senior Indebtedness being less
than $40,000,000. The amount of such Cash Net Proceeds neither used to
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repay or prepay Senior Indebtedness nor used or invested as set forth in this
paragraph constitutes "Excess Proceeds."
When the aggregate amount of Excess Proceeds equals $20,000,000 or
more, the Company shall apply the Excess Proceeds to an offer to purchase
Securities (an "Excess Proceeds Offer") in an aggregate principal amount equal
to the Excess Proceeds at a purchase price of 100% of the principal amount of
such Securities plus accrued and unpaid interest to the date of purchase (the
"Asset Sale Payment"). Not more than 30 days after the obligation to make an
Excess Proceeds Offer is triggered, the Company will mail to all Holders a
notice of the Excess Proceeds Offer, setting a payment date (an "Asset Sale
Payment Date") not earlier than 45 days and not later than 60 days after such
notice is mailed and stating the Holders' rights arising under the Excess
Proceeds Offer.
Notice of an Excess Proceeds Offer shall be mailed by the Company, or,
at the Company's request and at the Company's expense, by the Trustee, to all
Holders at their last registered address. The Offer shall remain open from
the time of mailing until five days before the Asset Sale Payment Date. The
notice shall be accompanied by a copy of the information regarding the
Company required to be contained in a Quarterly Report on Form 10-Q (x) for
the Company's first fiscal quarter if the Asset Sale Payment Date is on or
after the end of the Company's second fiscal quarter but before the end of the
Company's third fiscal quarter, (y) for the Company's second fiscal quarter if
the Asset Sale Payment Date is on or after the end of the Company's third
fiscal quarter but before the end of the Company's last fiscal quarter or (z)
for the Company's third fiscal quarter if the Asset Sale Payment Date is on
or after the end of the Company's last fiscal quarter but before the end of
the Company's first fiscal quarter for the next fiscal year. If the Asset
Sale Payment Date is on or after the end of the Company's first fiscal quarter
but before the end of the Company's second fiscal quarter, a copy of the
information required to be contained in an annual report to shareholders
pursuant to Rule 14a-3 under the Exchange Act for the fiscal year ending
immediately prior to such Asset Sale Payment Date shall accompany the notice.
The notice shall contain all instructions and materials necessary to enable
such Holders to tender Securities pursuant to the Excess
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Proceeds Offer. The notice, which shall govern the terms of the Excess
Proceeds Offer, shall state:
(1) that the Excess Proceeds Offer is being made pursuant to this
Section 1016;
(2) the Asset Sale Payment, the purchase price (including the amount
of accrued interest) and the Asset Sale Payment Date;
(3) that any Security not tendered or accepted for payment will
continue to accrue interest;
(4) that, unless the Company defaults in the making of the Asset
Sale Payment, any Security accepted for payment pursuant to the
Excess Proceeds Offer shall cease to accrue interest after the
Asset Sale Payment Date;
(5) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than three days prior to the
Asset Sale Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Security the Holder delivered for
purchase and a statement that such Holder is withdrawing his
election to have the Security purchased;
(6) that if Securities in a principal amount in excess of the Asset
Sale Payment are tendered pursuant to the Excess Proceeds Offer,
the Company shall purchase Securities on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company and
the Trustee so that only Securities in denominations of $1,000
or integral multiples of $1,000 shall be acquired); and
(7) that Holders whose Securities were purchased only in part will
be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered.
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Before an Asset Sale Payment Date, the Company shall (i) accept for
payment Securities or portions thereof tendered pursuant to the Excess
Proceeds Offer (on a pro rata basis if required pursuant to paragraph (6)
above), (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof so accepted and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof accepted for payment
by the Company. The Paying Agent shall promptly mail or deliver to Holders of
Securities so accepted payment in an amount equal to the purchase price, and
the Company shall execute and the Trustee shall promptly authenticate and mail
or deliver to such Holders a new Security equal in principal amount to any
unpurchased portion of the Security surrendered. Any Securities not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company will publicly announce the results of the Excess
Proceeds Offer on the Asset Sale Payment Date. For purposes of this Section
1016, the Trustee shall act as the Paying Agent.
To the extent that the aggregate price of the Securities tendered
pursuant to an Excess Proceeds Offer is less than the Excess Proceeds relating
thereto (such shortfall constituting a "Deficiency"), the Company may use
such Deficiency, or a portion thereof, for general corporate purposes of the
Company and its Subsidiaries. Upon completion of the purchase of all the
Securities tendered pursuant to an Excess Proceeds Offer, the amount of Excess
Proceeds shall be reset at zero.
Whenever the Excess Proceeds received by the Company exceed $5 million,
such Excess Proceeds shall be set aside by the Company in a separate account
pending (i) deposit with the paying agent of the amount required to purchase the
Securities tendered in an Excess Proceeds Offer and (ii) application, as set
forth above, of Excess Proceeds for general corporate purposes. Such Excess
Proceeds may be invested in those Permitted Investments described in paragraph
(v) of the definition thereof provided that the maturity date of any investment
made after the amount of Excess Proceeds exceeds $10 million shall not be later
than the payment date. The Company shall be entitled to any interest or
dividends accrued, earned or paid on such Permitted Investments.
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The Company will not, and will not permit any Subsidiary to, create or
permit to exist or become effective any restriction (other than restrictions
existing under (i) Indebtedness as in effect on the date of the Indenture as
such Indebtedness may be refinanced from time to time or (ii) any Senior
Indebtedness existing on the date hereof or thereafter, in each case, provided
that such restrictions are no less favorable to the Holders of the Securities
than those existing on the date hereof) that would materially impair the
ability of the Company to make an Excess Proceeds Offer to purchase the
Securities upon an Asset Sale or, if such Excess Proceeds Offer is made, to pay
for the Securities tendered for purchase.
Asset Sales generating Net Cash Proceeds of an aggregate of less than
$1,000,000 per fiscal year, up to $10,000,000 in the aggregate over the term of
the Securities, shall not be included as Asset Sales for the purposes of this
Section 1016.
Notwithstanding the foregoing, the Company will not, and will not
permit any Subsidiary to, directly or indirectly, make any Asset Sale of any
of the Capital Stock of a Subsidiary except pursuant to an Asset Sale of all the
Capital Stock of such Subsidiary owned by the Company or except in the creation
of a Permitted Joint Venture under "Limitation on Joint Ventures".
Section 1017. Compliance with Securities Laws upon Purchase of
Securities.
------------------------------------------------
In connection with any offer to purchase or purchase of Securities under
Section 1014, 1015 or 1016 hereof, the Company shall (i) comply with Rule 14e-1
under the Exchange Act and (ii) otherwise comply with all Federal and state
securities laws so as to permit the rights and obligations under Section 1014,
1015 and 1016 to be exercised in the time and in the manner specified in
Sections 1014, 1015 and 1016.
Section 1018. Statement as to Compliance; Notice of Default;
Provision of Financial Statements.
----------------------------------------------
(a) The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year ending after the date hereof, a brief certificate
of its principal executive officer, principal financial
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officer or principal accounting officer stating whether, to such officer's
knowledge, the Company is in compliance with all covenants and conditions to
be complied with by it under this Indenture. For purposes of this Section
1018, such compliance shall be determined without regard to any period of
grace or requirement of notice under this Indenture.
(b) If a Default has occurred and is continuing, or if the
Trustee, any Holder or the trustee for or the holder of any other evidence of
Indebtedness of the Company (other than Indebtedness in the aggregate
principal amount of less than $25,000,000) gives any notice or takes any other
action with respect to a claimed default, the Company shall deliver to the
Trustee an Officers' Certificate specifying such Default, notice or other
action within five Business Days of its occurrence.
(c) The Company shall supply without cost to each Holder of
the Securities, and file with the Trustee within 30 days after the Company is
required to file the same with the Commission, copies of the annual reports
and quarterly reports and of the information, documents and other reports
which the Company may be required to file with the Commission pursuant to
Section 13(a), 13(c) or 15(d) of the Exchange Act.
(d) If the Company is not required to file with the
Commission such reports and other information referred to in Section 1018(c),
the Company shall furnish without cost to each Holder of the Securities and
file with the Trustee (x) if Bally Services Corporation is or becomes subject
to the reporting requirements of the Exchange Act, so long as the Company is
a wholly owned subsidiary of Bally Services Corporation and the capital stock
of the Company constitutes substantially all of the assets of Bally Services
Corporation, within 30 days after Bally Services Corporation is required to
file the same with the Commission, copies of the annual reports and quarterly
reports and of the information, documents and other reports which Bally
Services Corporation may be required to file with the Commission pursuant to
Section 13(a), 13(c) or 15(d) of the Exchange Act and (y) otherwise, (i)
within 120 days after the end of each fiscal year, annual reports containing
the information required to be contained in Form 10-K promulgated under the
Exchange Act, or substantially the same information
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required to be contained in comparable items of any successor
form, (ii) within 60 days after the end of each of the first three fiscal
quarters of each fiscal year, quarterly reports containing the information
required to be contained in Form 10-Q promulgated under the Exchange Act, or
substantially the same information required to be contained in any successor
form and (iii) promptly from the time after the occurrence of an event required
to be therein reported, such other reports containing information required to
be contained in Form 8-K promulgated under the Exchange Act, or substantially
the same information required to be contained in any successor form. All
quarterly and annual reports shall contain in the Management's Discussion and
Analysis of Results of Operations and Financial Condition information with
respect to Cash EBITDA. The Company shall also make such reports available to
prospective purchasers of the Securities, securities analysts and
broker-dealers upon their request.
At the Company's request and at the Company's expense, the Trustee shall
deliver to the Holders the documents required to be delivered by the Company
pursuant to this Section.
Section 1019. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 1007 through 1013 and 1020 if,
before or after the time for such compliance, the Holders of a majority in
aggregate principal amount of the Securities at the time outstanding shall,
by Act of such Holders, waive such compliance in such instance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until
such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such covenant or condition shall
remain in full force and effect.
Section 1020. Limitation on Joint Ventures.
----------------------------
The Company will not make, and will not permit any Subsidiary to make,
any Investments in Permitted Joint Ventures if, at the time thereof, the
aggregate amount of such Investments exclusive of any undistributed profits
would exceed the sum of (i) $9,000,000 plus
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(ii) the amount of Restricted Payments then permitted to be made
pursuant to Section 1008 hereof. Any Investments in Joint Ventures
permitted to be made pursuant to this provision may be made in cash or
property.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Right of Redemption.
--------------------
The Securities may be redeemed at the election of the Company as a
whole or from time to time in part subject to the conditions and at the
Redemption Prices specified in the form of Security, together with accrued
interest to the Redemption Date.
Section 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company, as permitted
by any provision of this Indenture, shall be made in accordance with such
provision and this Article.
Section 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by it (unless a shorter notice period shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities to be redeemed.
Section 1104. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the particular
Securities or portions thereof to be redeemed shall be selected not more than
60 days and not less than 30 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities not previously called for redemption, either
pro rata or by lot, and the amounts to be redeemed may be equal to $1,000 or
any integral multiple thereof.
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The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the
case of any Securities selected for partial redemption, the principal amount
thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed.
Section 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of the Securities to be redeemed, at his address appearing
in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of a Security to be redeemed in
part, the principal amount) of the particular Securities to be redeemed;
(d) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security or portion thereof, and that
interest thereon shall cease to accrue on and after said date; and
(e) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at its request, by the Trustee in the
name and at the expense of the Company.
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Section 1106. Deposit of Redemption Price.
---------------------------
At or prior to 11:00 a.m. New York City time on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money in same day funds (or New York
Clearing House funds if such deposit is made prior to the applicable Redemption
Date) sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
or portions thereof which are to be redeemed on that date.
Section 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price together with accrued
interest to the Redemption Date; PROVIDED, HOWEVER, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such on the relevant Regular Record Dates according
to the terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal thereof (and premium, if any,
thereon) shall, until paid, bear interest from the Redemption Date at the rate
borne by such Security.
Section 1108. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at the office or agency of the Company maintained for such purpose pursuant to
Section 1002 (with, if the Company, the Security Registrar or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Compa-
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ny, the Security Registrar or the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE TWELVE
SUBORDINATION
Section 1201. Securities Subordinate to Senior Indebtedness.
---------------------------------------------
Anything in this Indenture or the Securities to the contrary
notwithstanding, the Company covenants and agrees, and each Holder of a
Security, by his acceptance thereof, likewise covenants and agrees, that, to
the extent and in the manner hereinafter set forth in this Article, the
indebtedness represented by the Securities and the payment of the principal of
(and premium, if any) and interest on (including any payments required under
any provision of this Indenture and the Securities, including Sections 1014,
1015 and 1016) each and all of the Securities and other amounts owed by the
Company under this Indenture and the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full in
cash of all Senior Indebtedness (including any interest accruing after the
occurrence of an Event of Default under Section 501(f) or (g), whether or not
such interest is an allowed claim enforceable against the debtor in a case
brought under the Federal Bankruptcy Code).
As used in this Indenture and the Securities, "paying the Securities",
"payment of the Securities" and similar phrases mean any direct or indirect
payment or distribution by or on behalf of the Company on account of principal
of (or premium, if any) or interest on the Securities or other amounts owed by
the Company under this Indenture and the Securities (other than amounts owing to
the Trustee pursuant to Section 606 hereof) or to acquire or repurchase
pursuant to the provisions of this Indenture or redeem, retire or defease all
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portion of the Securities or to make any deposit, payment or transfer in
furtherance of any of the foregoing.
This Article Twelve shall constitute a continuing offer to all Persons
who become holders of, or continue to hold, Senior Indebtedness, and such
provisions are made for the benefit of the holders of Senior Indebtedness and
such holders are made obligees hereunder and any one or more of them may
enforce such provisions. Holders of Senior Indebtedness need not prove
reliance on the subordination provisions hereof.
Section 1202. Payment Over of Proceeds upon Dissolution, etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, then and in any such event:
(1) the holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all amounts due or to become due on
or in respect of all Senior Indebtedness, or provision shall be made
for such payment in accordance with the instruments governing such
Senior Indebtedness, before the Holders of the Securities are entitled
to receive any payment on account of principal of (or premium, if any)
or interest on the Securities or other amounts owed by the Company
under this Indenture and the Securities (other than amounts owing to
the trustee pursuant to Section 606 hereof); and
(2) any payment or distribution of assets or securities of
the Company of any kind or character, whether in cash, property or
securities, to which the Holders or the Trustee would be entitled but
for the provisions of this Article Twelve, including any such payment
or
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distribution which may be payable or deliverable by reason of the
payment of any other Indebtedness of the Company being subordinated to
the payment of the Securities (except for any such payment or
distribution (x) authorized by an order or decree giving effect, and
stating in such order or decree that effect is given, to the
subordination of the Securities to the Senior Indebtedness, and made
by a court of competent jurisdiction in a reorganization proceeding
under any applicable bankruptcy law, or (y) of securities that are
subordinated, to at least the same extent as the Securities, to the
payment in cash of all Senior Indebtedness then outstanding), shall be
paid by the liquidating trustee or agent or other Person making such
payment or distribution, whether a trustee in bankruptcy, a receiver
or liquidating trustee or otherwise, directly to the holders of Senior
Indebtedness or their Representative or Representatives, ratably
according to the aggregate amounts remaining unpaid on the Senior
Indebtedness, for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all
Senior Indebtedness in full in cash, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this Section, the Trustee or the Holder of any Security
shall have received any such payment or distribution of assets or
securities of the Company of any kind or character, whether in cash,
property or securities (other than payments or distributions
authorized by an order or decree giving effect to the subordination
or payments or distributions of securities that are subordinated to
the payment in cash of all Senior Indebtedness, all as described in
paragraph (2) above), including any such payment or distribution which
may be payable or deliverable by reason of the payment of any other
Indebtedness of the Company being subordinated to the payment of the
Securities, before all Senior Indebtedness is paid in full in cash or
payment thereof provided for, then and in such event
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such payment or distribution shall be received and held in trust for
the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their Representative or Representatives, ratably
according to the aggregate amount remaining unpaid on the Senior
Indebtedness, for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full in cash, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance, transfer or lease of its properties and
assets substantially as an entirety to another corporation upon the terms and
conditions set forth in Article Eight shall not be deemed a dissolution,
winding up, liquidation, reorganization, assignment for the benefit of
creditors or marshalling of assets and liabilities of the Company for the
purposes of this Section if the corporation formed by such consolidation or
into which the Company is merged or the corporation which acquires
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance, transfer or lease, comply with the
conditions set forth in Article Eight.
Section 1203. No Payment When Specified Senior Indebtedness in Default.
--------------------------------------------------------
(i) In the event of and during the continuation of any default in the
payment of any Specified Senior Indebtedness beyond any applicable grace period
with respect thereto ("payment default"), or (ii) in the event that any other
event of default with respect to any Specified Senior Indebtedness shall have
occurred and be continuing that permits the holders of such Specified Senior
Indebtedness (or a trustee on behalf of such holders) to declare such Specified
Senior Indebtedness due and payable prior to the date on which it would
otherwise have become due and payable, and written notice thereof shall have
been given to each of the Company and the Trustee by (a) in the case of the
1993 Credit Agreement, the Bank Agent under the 1993 Credit Agreement, or (b)
in the case of any other issue of Specified Senior Indebted-
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ness, the Representative for, or the holders of at least a majority of the
principal amount of, the Specified Senior Indebtedness (the "Payment Notice"),
then no payment shall be made by or on behalf of the Company on the Securities
(except from those funds held in trust for the benefit of the Holders of any
Securities to such Holders pursuant to the provisions of Article Four or
Article Thirteen) until (x) in case of a payment default described in clause
(i), unless and until such payment default shall have been cured or waived or
shall have ceased to exist or the holders of such Specified Senior Indebtedness
or their Representative have waived the benefits of this Section, or (y) in
case of an event of default specified in clause (ii), until the earlier of (1)
179 days after the date on which a Payment Notice shall have been given and
(2) the date, if any, on which such event of default is waived by the holders
of such Specified Senior Indebtedness or otherwise cured or has ceased to
exist or the Specified Senior Indebtedness to which such event of default
relates is discharged by payment in full in cash (PROVIDED that further written
notice relating to the same or any other event of default specified in clause
(ii) above with respect to any Specified Senior Indebtedness received by the
Company or the Trustee within 360 days after such prior receipt of a Payment
Notice shall not be effective to further prohibit such payments, and PROVIDED,
FURTHER, that if at least $40,000,000 is owed under the 1993 Credit Agreement,
only the Bank Agent may deliver a Payment Notice, and PROVIDED, FURTHER, that
further written notice relating to the same event of default or any other event
of default specified in clause (ii) above existing or continuing on the date of
receipt of the Payment Notice, whether or not received by the Company or
Trustee within 360 days after prior receipt of a Payment Notice, shall not be
effective to further prohibit such payments unless all events of default shall
have been cured or waived after such date for a period of not less than 90
consecutive days).
In the event that, notwithstanding the foregoing, any payment or
distribution shall be made by or on behalf of the Company to the Trustee or
the Holder of any Security prohibited by the foregoing provisions of this
Section, then and in such event such payment or distribution shall be received
and held in trust for the benefit of, and shall be paid over or delivered to,
the holders of Senior Indebtedness or their Representative or Representatives,
ratably according to the aggregate amounts
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remaining unpaid on account of the Senior Indebtedness, for application to the
payment of all Senior Indebtedness remaining unpaid, to the extent necessary to
pay all Senior Indebtedness in full in cash, after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.
The provisions of this Section shall not apply to any payment with
respect to which Section 1202 would be applicable.
Section 1204. Payment Permitted If No Default.
-------------------------------
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent the Company, at any time except under the
circumstances described in Section 1202 or under the conditions described in
Section 1203, from making payments at any time of principal of (and premium, if
any) or interest on the Securities or other amounts owed by the Company under
this Indenture and the Securities (other than amounts owing to the Trustee
pursuant to Section 606 hereof).
Section 1205. Subrogation to Rights of Holders of Senior Indebtedness.
-------------------------------------------------------
Subject to the payment in full of all Senior Indebtedness in cash, the
Holders of the Securities shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments and distributions of cash,
property and securities applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest on the Securities shall be
paid in full. For purposes of such subrogation, no payment or distributions
to the holders of Senior Indebtedness of any cash, property or securities to
which the Holders of the Securities or the Trustee would be entitled except
for the provisions of this Article, and no payments over pursuant to the
provisions of this Article to the holders of Senior Indebtedness by Holders of
the Securities or the Trustee, shall, as among the Company, its creditors other
than holders of Senior Indebtedness, and the Holders of the Securities, be
deemed to be a payment or distribution by the Company to or on account of the
Senior Indebtedness.
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Section 1206. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on
the one hand and the holders of Senior Indebtedness on the other hand.
Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Securities the principal of (and premium, if any)
and interest on the Securities as and when the same shall become due and
payable in accordance with their terms; or (b) affect the relative rights
against the Company of the Holders of the Securities and creditors of the
Company other than the holders of Senior Indebtedness; or (c) prevent the
Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
express limitations set forth in Article Five and to the rights, if any, under
this Article of the holders of Senior Indebtedness.
Section 1207. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
Section 1208. No Waiver of Subordination Provisions.
-------------------------------------
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
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Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
or the obligations hereunder of the Holders of the Securities to the holders
of Senior Indebtedness, do any one or more of the following: (a) change the
manner, place or terms of payment or extend the time of payment of, or renew
or alter or increase, Senior Indebtedness or any instrument evidencing the
same or any agreement under which Senior Indebtedness is outstanding; (b) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (c) release any Person liable in any
manner for the collection of Senior Indebtedness; and (d) exercise or refrain
from exercising any rights against the Company and any other Person.
Section 1209. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions
of this Article or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee in respect of the
Securities, unless and until the Trustee shall have received written notice
thereof from the Company or a holder of Senior Indebtedness or from any
trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of Section 601, shall
be entitled in all respects to assume that no such facts exist; PROVIDED,
HOWEVER, that if the Trustee shall not have received the notice provided for
in this Section at least one Business Day prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of (and premium, if any) or interest
on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive
such money and to apply the same to the purpose for which such money was
received and shall not be af-
106
<PAGE> 118
fected by any notice to the contrary which may be received by it within one
Business Day prior to such date.
Subject to the provisions of Section 601, the Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself to be a holder of Senior Indebtedness (or a trustee, fiduciary or
agent therefor) to establish that such notice has been given by a holder of
Senior Indebtedness (or a trustee, fiduciary or agent therefor). In the event
that the Trustee determines in good faith that further evidence is required
with respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article, the
Trustee may request that such Person furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in
such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Section 1210. Reliance on Judicial Order or Certificate of
--------------------------------------------
Liquidating Agent.
- -----------------
Upon any payment or distribution of assets or securities of the Company
referred to in Section 1202, the Trustee, subject to the provisions of Section
601, and the Holders of the Securities shall be entitled to rely upon any order
or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of Securities, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
107
<PAGE> 119
Section 1211. Rights of Trustee as a Holder of Senior Indebtedness;
-----------------------------------------------------
Preservation of Trustee's Rights.
- --------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 606.
Section 1212. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; PROVIDED,
HOWEVER, that the proviso clause in Section 1209 and Section 1211 shall not
apply to the Company or any Affiliate of the Company if it or such Affiliate
acts as Paying Agent.
ARTICLE THIRTEEN
DEFEASANCE
Section 1301. Defeasance and Discharge.
------------------------
The Company may, at its option by Board Resolution, at any time, elect
to have either paragraph (a) or (b) below applied to the outstanding
Securities upon compliance with the conditions set forth in Section 1302 below.
(a) Upon exercise of the option applicable to this paragraph
(a), the Company shall be deemed to have been released and discharged from its
obligations with respect to the Outstanding Securities on the date the
conditions set forth below are satisfied (hereinaf-
108
<PAGE> 120
ter, "legal defeasance"). For this purpose, the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the
Outstanding Securities, which shall thereafter be deemed to be "Outstanding"
only for the purposes of Section 1303 and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Securities and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
Outstanding Securities to receive solely from the trust fund described in
Section 1302 and as more fully set forth in such Section, payments in respect
of the principal of (and premium, if any) and interest on such Securities when
such payments are due, (ii) the Company's obligations with respect to such
Securities under Sections 304, 305, 306, 1002 and 1003, (iii) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith, including, but not limited to,
the obligations contained in Section 6.06 and (iv) this Article Thirteen.
(b) Upon exercise of the option applicable to this paragraph
(b), the Company shall be released and discharged from its obligations under
any covenant contained in Article Eight and in Sections 1004 through 1016 with
respect to the outstanding Securities on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance"), and the
Securities shall thereafter be deemed to be not "Outstanding" for the purpose
of any direction, waiver, consent or declaration or act of Holders of
Securities (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other
purposes hereunder. For this purpose, such covenant defeasance means that,
with respect to the Outstanding Securities, the Company may omit to comply
with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or
an Event of Default under Section 501, but, except as specified
109
<PAGE> 121
above, the remainder of this Indenture and such Securities shall be unaffected
thereby.
Section 1302. Conditions to Defeasance.
------------------------
The following shall be the conditions to application of either
paragraph (a) or (b) of Section 1301 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 608 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities, (A) cash in U.S. Dollars in
an amount, (B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day before the due
date of any payment, cash in U.S. Dollars in an amount, or (C) a
combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge the
principal of (and premium, if any) and interest on the Outstanding
Securities on the Stated Maturity of such principal (and premium, if
any) or installment of interest or upon redemption on the day on which
such payments are due and payable in accordance with the terms of this
Indenture and of such Securities; PROVIDED that the Trustee shall have
been irrevocably instructed to apply such money or the proceeds of such
U.S. Government Obligations to said payments with respect to the
Securities. For this purpose, "U.S. Government Obligations" means
securities that are (x) direct obligations of the United States of
America for the timely payment of which its full faith and credit is
pledged or (y) obliga-
110
<PAGE> 122
tions of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended), as custodian with respect to any such U.S. Government Obligation
or a specific payment of principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the holder of such
depository receipt; PROVIDED that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depository
receipt;
(2) In the case of an election under paragraph (a) of Section 1301
hereof, the Company shall have delivered to the Trustee an Opinion of Counsel
stating that (x) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (y) since the date hereof there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the Holders of
the Outstanding Securities will not recognize income, gain or loss for federal
income tax purposes as a result of such legal defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such legal defeasance had not occurred;
(3) In the case of an election under paragraph (b) of Section 1301
above, the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the Holders
111
<PAGE> 123
of the outstanding Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and will
be subject to federal income tax on the same amounts in the same manner and
at the same times as would have been the case if such covenant defeasance had
not occurred.
(4) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit or, insofar as Subsection 501(f) or 501(g) is concerned, at
any time during the period ending on the 91st day after the date of
such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period).
(5) Such defeasance shall not result in a breach or violation
of, or constitute a default under, this Indenture or any other
material agreement or instrument to which the Company is a party or by
which it is bound; and
(6) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the defeasance under
Section 1301 have been complied with.
Section 1303. Deposited Money and U.S. Government Obligations
-----------------------------------------------
to Be Held in Trust; Other Miscellaneous Provisions.
- ---------------------------------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1303, the "Trustee") pursuant to Section 1302 in
respect of the Outstanding Securities shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium,
112
<PAGE> 124
if any) and interest, but such money need not be segregated from other funds
except to the extent required by law. Money and U.S. Government Obligations
so held in trust are not subject to Article Twelve.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or U.S. Government
Obligations deposited pursuant to Section 1302 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Securities.
Anything in this Article Thirteen to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1302 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
1302(l)), are in excess of the amount thereof which would then be required to
be deposited to effect an equivalent defeasance or covenant defeasance.
The Trustee and the Paying Agent shall pay to the Company any money
held by them for the payment of principal or interest on the Securities that
remains unclaimed for two years, PROVIDED that the Company shall have first
caused notice of such payment to be published once in a newspaper of general
circulation in the City of New York or mailed to each Holder entitled thereto
no less than 30 days prior to such repayment. After that, Holders entitled to
the money must look to the Company for payment as general creditors unless
otherwise provided by law.
Section 1304. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money in
accordance with Section 1301 by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1301 until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance
114
<PAGE> 125
with Section 1301; PROVIDED, HOWEVER, that, if the Company makes any payment of
principal of (or premium, if any) or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the
money held by the Trustee or Paying Agent.
* * * * *
This Indenture may be signed in any number of counterparts with the
same effect as if the signatures to each counterpart were upon a single
instrument, and all such counterparts together shall be deemed an original of
this Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
BALLY'S HEALTH & TENNIS
CORPORATION
By:/s/Lee S. Hillman
-------------------
Title: Senior Vice President
Attest: /s/Barbara J. Snider
--------------------
Title:Secretary
AMALGAMATED BANK OF
CHICAGO, TRUSTEE
By:/s/Lawrence M. Hackett
----------------------
Title:Vice President
Attest: /s/James T. Landenberger
------------------------
Title:Vice President
114
<PAGE> 126
STATE OF New York)
) ss.:
COUNTY OF New York)
On the 25th day of January 1993, before me personally came Lee S.
Hillman, to me known, who, being by me duly sworn, did depose and say that he
resides at 2554 Wellington Court, Evanston, Illinois 60201; that he is Senior
Vice President of BALLY'S HEALTH & TENNIS CORPORATION, one of the corporations
described in and which executed the above instrument; that he knows the
corporate seal of such corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed pursuant to authority of the
Board of Directors of such corporation; and that he signed his name thereto
pursuant to like authority.
(NOTARIAL
SEAL)
/s/Philip J. Power
----------------------------
<PAGE> 127
STATE OF New York)
) ss.:
COUNTY OF New York)
On the 25th day of January 1993, before me personally came Lawrence M.
Hackett, to me known, who, being by me duly sworn, did depose and say that he
resides at 14700 Westwood Drive, Orland Park, Illinois 60462; that he is Vice
President of AMALGAMATED BANK OF CHICAGO, one of the corporations described in
and which executed the above instrument; that he knows the corporate seal of
such corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed pursuant to authority of the Board of Directors
of such corporation; and that he signed his name thereto pursuant to like
authority.
(NOTARIAL
SEAL)
/s/Philip J.Power
----------------------------
<PAGE> 1
AMENDMENT TO INDENTURE
----------------------
THIS AMENDMENT TO INDENTURE ("Amendment") is dated as of
February 8, 1994 between Bally's Casino Holdings, Inc. (the "Company) and
Amalgamated Bank of Chicago, as Trustee (the "Trustee").
RECITALS
A. The Company and the Trustee entered into an Indenture dated as of June 15,
1993 (the "Indenture") respecting the Company's Senior Discount Notes due 1998
and the Company's Senior Discount Notes to be exchanged therefor.
B. In accordance with Article IX of the Indenture, the holders of at least a
majority in Principal Amount at Maturity of the Outstanding Securities have
consented in writing to the substance of this Amendment.
AGREEMENT
The parties hereto hereby agree as follows:
1. The definition of "New Subsidiaries" contained in Section 1.01 of the
Indenture hereby is amended to read in its entirety as follows:
"New Subsidiaries" means Subsidiaries of the Company, including, but not
limited to, any Subsidiaries or business acquired by such Person after the
date of this Indenture, provided that a New Subsidiary shall not be Bally's
Park Place or a Subsidiary thereof engaged in the ownership or operation of
Bally's Park Place Casino Hotel and Tower.
2. The definition of "Permitted Debt of Bally's Park Place" contained in
Section 1.01 of the Indenture hereby is amended to read in its entirety as
follows:
"Permitted Debt of Bally's Park Place" means, without duplication, any of the
following Debt of Bally's Park Place:
(a) Debt (including letters of credit) outstanding at any time under the
Credit Agreement, or any successor thereto, in an aggregate principal amount
not to exceed $50 million;
(b) Debt outstanding at any time under the 11-7/8% First Mortgage Notes
due 1999 issued by Bally's Park Place, in the original principal amount of
$350 million;
(c) Any Debt outstanding on the date of this Indenture;
(d) Debt of Bally's Park Place to the Company;
<PAGE> 2
(e) Additional Debt which may be incurred by Bally's Park Place not to
exceed $50 million in the aggregate at any one time;
(f) Additional Debt which may be incurred by Bally's Park Place not to
exceed $10 million in the aggregate at any one time so long as such Debt is
used solely for Casino Hotel Improvements and an amount not to exceed $20
million of Debt in the form of a guaranty or payment thereon of any
obligation of an Affiliate;
(g) Debt the proceeds of which are used, directly or indirectly, to
Refinance in full the Securities or any or all outstanding Debt of Bally's
Park Place in a principal amount (or, if such Debt does not require cash
payments prior to maturity, with an original issue price of such Debt) not
to exceed the Principal Amount of such Debt being Refinanced (or, if the
Debt being Refinanced was issued with an original issue discount, the
original issue price plus the amortized portion of the original issue
discount to the date that such Refinancing Debt was incurred) plus accrued
and unpaid interest with respect to the Debt being Refinanced through and to
the date of repayment,if any, plus any premium for prepayment provided for
in the instrument governing the Debt being Refinanced, if any, plus any
premium reasonably determined by the Board of Directors of Bally's Park
Place as necessary to accomplish such Refinancing by means of a tender
offer, defeasance or privately negotiated purchase, if any, plus the
reasonable costs of such Refinancing;
(h) Debt of New Subsidiaries of Bally's Park Place subject to the
provisions of Section 4.03(c);
(i) Debt under Interest Swap Obligations and other agreements between
Bally's Park Place and one or more financial institutions providing for
"swap", "cap", "collar" or other interest rate protection;
(j) Obligations in respect of performance bonds, surety bonds and appeal
bonds provided in the ordinary course of business and any renewals,
extensions or amendments, modifications or supplements thereto; and
(k) Debt arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business, PROVIDED that such
Debt is extinguished within two Business Days of its incurrence.
2
<PAGE> 3
3. The following definitions hereby are added to Section 1.01 of the
Indenture:
"BPP Indenture" means the Indenture dated as of August 31, 1989 among Bally's
Park Place, Bally's Park Place Funding, Inc., a Delaware corporation, Bally's
Park Place, Inc., a New Jersey corporation, Bally's Park Place Realty Co., a
New Jersey corporation, and First Bank, National Association, as Trustee.
"BPP Loan Agreement" means the Loan Agreement among Bally's Park Place, a New
Jersey corporation, Bally's Park Place Realty Co., Inc., a New Jersey
corporation, Bally's Park Place, First Fidelity Bank, N.A. New Jersey, as
agent, First Fidelity Bank, N.A. New Jersey, Midlantic National Bank and
National Westminster Bank NJ dated June 30, 1992.
4. Section 4.05(b)(v) of the Indenture hereby is amended to read in its
entirety as follows:
(v) so long as (A) no Default or Event of Default has occurred and is
continuing or would result from the payment thereof, and (B) the payment of
such Restricted Payments is permitted by the CCC, the payment of such
Restricted Payments in an amount which has been received by the Company from
Bally's Park Place; PROVIDED such payments were permitted under Bally's Park
Place's financing agreements in effect on the date of this Indenture
regardless as to whether such financing agreements are later terminated or
whether any Debt is outstanding thereunder; and PROVIDED FURTHER that, for
purposes of this provision, the definition of "Consolidated Net Income"
contained in Section 1.01 of the BPP Indenture and Section 1.01 of the BPP
Loan Agreement shall be deemed to exclude extraordinary gains or losses, if
any, incurred in connection with the Refinancing of any securities issued by
Bally's Park Place; and PROVIDED FURTHER that the distribution by Bally's
Park Place of up to $35 million in connection with the Refinancing of the
securities issued under the BPP Indenture will not constitute a "Restricted
Payment" (x) for purposes of, and as that term is used in, the BPP Indenture
or (y) for purposes of, and as that term is used in, the BPP Loan Agreement
provided that, for purposes of this provision, the $35 million referenced
above remains subject to the provisions of Section 4.05(a).
5. Subsections (vi) and (vii), set forth below, hereby are added to Section
4.05(b) of the Indenture:
(vi) the guaranty or payment thereon by Bally's Park Place of up to $20
million of any obligation of an Affiliate; and
(vii) Investments in Affiliates of Bally's Park Place in gaming related
ventures, in an amount not to exceed $25 million.
3
<PAGE> 4
6. The last sentence of Section 4.05 hereby is amended to read in its
entirety as follows:
The Restricted Payments described in clauses (b)(i), (ii) and (iii)(A) above
shall be included in any computation of the aggregate amount of Restricted
Payments by the Company.
7. Section 4.08 of the Indenture hereby is amended to read in its entirety as
follows:
SECTION 4.08. LIMITATION ON OTHER BUSINESS ACTIVITIES. The Company shall
not, directly or through any Subsidiary, conduct any business other than (i)
the ownership of 100% of the Capital Stock of Bally's Park Place and (ii) the
ownership of Capital Stock and other securities of New Subsidiaries or
Permitted Ventures acquired after the date of this Indenture which New
Subsidiaries or Permitted Ventures, and Bally's Park Place, in each case,
shall be engaged solely in Gaming Activities. The restrictions contained in
this Section 4.08 shall not apply to any Restricted Payment (or any
transaction contemplated by Section 4.05 (b)). Proceeds from the sale of
Securities not invested in Bally's Park Place, New Subsidiaries or Permitted
Ventures will be invested in Cash Equivalents.
8. Capitalized terms used in this Amendment and not otherwise defined herein
are deemed to have the meanings given to them in the Indenture.
9. Except as otherwise provided in this Amendment, all terms, provisions and
conditions of the Indenture remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be executed
by their duly authorized officers as of the day and year first above written.
BALLY'S CASINO HOLDINGS, INC.
By: /S/
--------------------------
Executive Vice President and
Chief Financial Officer
AMALGAMATED BANK OF
CHICAGO, as Trustee
By: /S/
--------------------------
<PAGE> 1
===============================================================================
BALLY'S PARK PLACE FUNDING, INC.
(a Delaware corporation),
as Obligor,
BALLY'S PARK PLACE, INC.
(a Delaware corporation),
as Guarantor,
BALLY'S PARK PLACE, INC.
(a New Jersey corporation),
BALLY'S PARK PLACE REALTY CO.
(a New Jersey corporation)
and
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
____________________________
INDENTURE
Dated as of March 8, 1994
____________________________
9-1/4% First Mortgage Notes
due 2004
================================================================================
<PAGE> 2
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture dated as of , 1994*
--------------------------------------------------
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . 608
(a)(2) . . . . . . . . . . . . . . . . . . . 608
(b) . . . . . . . . . . . . . . . . . . . 607, 609
Section 312(c) . . . . . . . . . . . . . . . . . . . 701
Section 314(a) . . . . . . . . . . . . . . . . . . . 703
(a)(4) . . . . . . . . . . . . . . . . . . . 1018
(b) . . . . . . . . . . . . . . . . . . . 1202
(c)(1) . . . . . . . . . . . . . . . . . . . 103, 1204
(c)(2) . . . . . . . . . . . . . . . . . . . 103, 1204
(d) . . . . . . . . . . . . . . . . . . . 1204
(e) . . . . . . . . . . . . . . . . . . . 103
Section 315(b) . . . . . . . . . . . . . . . . . . . 601
Section 316(a)(last
sentence). . . . . . . . . . . . . . . . . . 101 ("Outstanding")
(a)(1)(A) . . . . . . . . . . . . . . . . . . 502, 512
(a)(1)(B) . . . . . . . . . . . . . . . . . . 513
(b) . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . 105
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . 504
Section 318(a) . . . . . . . . . . . . . . . . . . . 108
- ---------------
<FN>
* This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture.
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 1
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ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
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Section 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Acquired Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A.L.T.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Appraised Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Assignment of Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Average Life to Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Bally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Capital Lease Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Casino Control Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Casino Control Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Casino Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Casino Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Casino Hotel Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Collateral Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Company Request or Company Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Consolidated Fixed Charge Coverage
Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Consolidated Income Tax Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Consolidated Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Consolidated Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
- ---------------
Note: This table of contents shall not, for any purpose, be deemed to be part of this Indenture.
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Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Consolidated Rental Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Credit Facility Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Current Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Dennis Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Division of Gaming Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Eligible Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Federal Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Finance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Gaming License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Generally Accepted Accounting
Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
GNAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Indenture Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Intercorporate Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Interest Swap Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Material Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Net Cash Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Non-Recourse Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Note Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Operating Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Pari Passu Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Permitted Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Permitted Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Pro Rata Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Public Equity Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Realty Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Redeemable Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Security and Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Standard & Poor's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subsidiary Casino Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Substitute Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Tax Sharing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Unrestricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Wholly Owned Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 102. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 103. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 104. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . 29
Section 105. Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 106. Notices, etc., to Trustee and Company . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 107. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 108. Conflict of Any Provision of Indenture
with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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Section 109. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 110. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 111. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 112. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 113. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 114. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 115. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE II
SECURITY FORMS
Section 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 202. Form of Face of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 204. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 205. Form of Notation Relating to Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE III
THE SECURITIES
Section 301. Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 303. Execution, Authentication, Delivery
and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 305. Registration, Registration of Transfer
and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 306. Mutilated, Destroyed, Lost and Stolen
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 307. Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 310. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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ARTICLE IV
SATISFACTION AND DISCHARGE
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Section 401. Satisfaction and Discharge of
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 402. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE V
REMEDIES
Section 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 502. Acceleration of Maturity; Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 503. Collection of Indebtedness and Suits
for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 505. Trustee May Enforce Claims Without
Possession of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 506. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 508. Unconditional Right of Holders to
Receive Principal, Premium and
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 509. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 515. Waiver of Stay, Extension or Usury
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE VI
THE TRUSTEE
Section 601. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 602. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 603. Not Responsible for Recitals or
Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 604. May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 605. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
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Section 606. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 607. Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 608. Corporate Trustee Required;
Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 609. Resignation and Removal; Appointment
of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 610. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 611. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 612. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 613. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE VII
HOLDERS' LISTS AND REPORTS
BY TRUSTEE AND COMPANY
Section 701. Disclosure of Names and Addresses of
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 702. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 703. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
Section 801. Company May Consolidate, etc., Only on
Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures Without
Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 902. Supplemental Indentures with Consent
of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 903. Execution of Amendments, Supplements
or Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
</TABLE>
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Section 904. Effect of Amendments, Supplements or
Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 906. Reference in Securities to Amendments,
Supplements or Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE X
COVENANTS
Section 1001. Payment of Principal, Premium and
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 1003. Money for Security Payments to Be Held
in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 1004. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 1005. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 1006. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 1007. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 1008. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 1009. Limitation on Transactions with
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 1010. Limitation on Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 1011. Limitation on Preferred Stock of
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 1012. Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 1013. Ownership of Casino Hotel; Other
Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 1014. Validity of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 1015. Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 1016. Limitation on Issuance of Guaranties
by Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 1017. Compliance with Securities Laws upon
Purchase of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 1018. Limitation on Lease of Property as an
Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 1019. Activities of Finance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 1020. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 1021. Statement as to Compliance; Notice of
Default; Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 1022. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
</TABLE>
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ARTICLE XI
REDEMPTION OF SECURITIES
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Section 1101. Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Section 1102. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Section 1103. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Section 1104. Selection by Trustee of Securities to
Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Section 1105. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Section 1106. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 1107. Securities Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 1108. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 1109. Redemption Pursuant to the Casino
Control Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
ARTICLE XII
SECURITY
Section 1201. Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 1202. Recording; Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 1203. Disposition of Certain Collateral
Without Requesting Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Section 1204. Requesting Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Section 1205. Substitute Collateral Other Than Cash
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Section 1206. Substitution of Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Section 1207. Appraisals of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Section 1208. Collateral Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Section 1209. Reliance on Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Section 1210. Purchaser May Rely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Section 1211. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Section 1212. Suits to Protect the Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Section 1213. Trustee's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
ARTICLE XIII
DEFEASANCE
Section 1301. Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Section 1302. Conditions to Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
</TABLE>
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Section 1303. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Section 1304. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
ARTICLE XIV
GUARANTY
Section 1401. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Section 1402. Execution and Delivery of Company
Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
ARTICLE XV
LETTER OF CREDIT
Section 1501. Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Section 1502. Acceptance of the Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Section 1503. Notices and Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Section 1504. Events of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Section 1505. Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
SIGNATURE AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
</TABLE>
ACKNOWLEDGMENTS
EXHIBIT A Form of Mortgage Securing Notes
EXHIBIT B Form of Assignment of Leases and Rents
EXHIBIT C Form of Note Pledge Agreement
EXHIBIT D Form of Intercreditor Agreement
EXHIBIT E Form of Pari Passu Certificate
EXHIBIT F Provisions for Letter of Credit
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Indenture dated as of March 8, 1994, among BALLY'S PARK PLACE
FUNDING, INC., a Delaware corporation (the "Finance Company"), BALLY'S PARK
PLACE, INC., a Delaware corporation (the "Company"), BALLY'S PARK PLACE, INC.,
a New Jersey corporation (the "Operating Company"), BALLY'S PARK PLACE REALTY
CO., a New Jersey corporation ("Realty Co."), and FIRST BANK NATIONAL
ASSOCIATION, a national banking association, trustee (the "Trustee").
RECITALS OF THE COMPANY
The Finance Company, the Company, the Operating Company and
Realty Co. have each duly authorized the creation of an issue of the Finance
Company's 9-1/4% First Mortgage Notes due 2004 (the "Securities"), of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Finance Company, the Company, the Operating Company and Realty Co.
have duly authorized the execution and delivery of this Indenture;
This Indenture, upon qualification, shall be subject to and
governed by the provisions of the Trust Indenture Act that are required to be
part of and to govern indentures qualified under the Trust Indenture Act;
All acts and things necessary have been done to make the
Securities, when executed by the Finance Company and authenticated and
delivered hereunder and duly issued by the Finance Company, the valid, binding
and legal obligations of the Finance Company, and to make this Indenture a
valid agreement of the Finance Company, the Company, the Operating Company and
Realty Co. in accordance with its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders of the Securities, as
follows:
<PAGE> 13
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP; and
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Articles Five and Ten, are defined
in those Articles.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at
the time such Person becomes a Subsidiary or (ii) assumed in connection with
the acquisition of assets from a Person, other than Indebtedness incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary or
such acquisition, as the case may be. Acquired Indebtedness shall be deemed to
have been incurred on the date of the related acquisition of assets from any
Person or the date the acquired Person becomes a Subsidiary.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any spouse, immediate
family member or other relative who has
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<PAGE> 14
the same principal residence of any Person described in (i) above and (iii) any
trust in which any such Person described in clause (i) or (ii) above has a
beneficial interest. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management or policies of such Person, whether by contract or otherwise; and
the terms "controlling," "controlled" and "under common control" have meanings
correlative to the foregoing. For purposes of this definition, beneficial
ownership of 10% or more of voting common equity (on a fully diluted basis) or
warrants to purchase such equity (whether or not currently exercisable) of a
Person shall be deemed to be control of such Person.
"A.L.T.A." means the American Land Title Association.
"Appraised Fair Market Value" means, when used in connection
with the valuation of any property interest at any given date, the then current
fair market value of such property as set forth in the Current Appraisal
performed by a qualified and reputable independent appraiser, which appraisal
is, in the opinion of the independent appraiser, prepared in accordance with
the standards and reporting requirements of the Federal Home Loan Bank Board
and the Federal Savings and Loan Insurance Corporation, if then in effect.
"Assignment of Leases" means the Assignment of Leases and
Rents substantially in the form annexed hereto as Exhibit B and constituting a
part hereof for all purposes.
"Average Life to Stated Maturity" means, as of the date of
determination, with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date
of determination to the date or dates of each successive scheduled principal
payment of such Indebtedness multiplied by (b) the amount of each such
principal payment by (ii) the sum of all such principal payments.
"Bally" means Bally Manufacturing Corporation, a Delaware
corporation.
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<PAGE> 15
"Board of Directors" of any Person means the board of
directors of such Person or any duly authorized committee of such board.
"Board Resolution" of any Person means a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification and on the date delivered to
the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in The City of New
York are authorized or obligated by law, regulation or executive order to
close.
"Capital Lease Obligation" of any Person means any obligations
of such Person and its Subsidiaries on a consolidated basis under any capital
lease of real or personal property which, in accordance with GAAP, has been
recorded as a capitalized lease obligation, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligations determined in accordance with GAAP.
"Capital Stock" of any Person means any and all shares,
interests, participations, or other equivalents (however designated) of such
Person's capital stock whether now outstanding or issued after the date of this
Indenture.
"Cash Collateral" means U.S. Dollars or U.S. Government
Obligations, which is Collateral for the Securities under the Mortgage.
"Casino Control Act" means the New Jersey Casino Control Act,
as from time to time amended, or any successor provision of law.
"Casino Control Commission" means the New Jersey Casino
Control Commission or any successor agency appointed pursuant to the Casino
Control Act.
"Casino Holdings" means Bally's Casino Holdings, Inc., a
Delaware corporation.
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<PAGE> 16
"Casino Hotel" means the casino hotel presently known as
Bally's Park Place Casino Hotel located in Atlantic City, New Jersey, the
contiguous parking garage and property and any additions thereto or
improvements thereof or any casino hotel operated on or forming part of the
Collateral.
"Casino Hotel Improvements" means the acquisition of, or
development and construction of, an addition to or expansion of the existing
Casino Hotel facility by the Company and any Restricted Subsidiary in
connection with any proposed increase of hotel rooms and expansion of casino
floor space, and any addition to or expansion of any gaming, parking, dining,
entertainment, retail, promotional, storage, patron services, transportation or
similar facilities related thereto, in each case, after the date of the
Indenture.
"Change in Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of more than fifty percent (50%) of the total voting power of the then
outstanding Voting Stock of the Company, the Finance Company, the Operating
Company, Realty Co. (other than Casino Holdings, Bally or a subsidiary of Bally
or Casino Holdings, of which Bally or Casino Holdings, directly or indirectly,
owns a majority of the total voting power of the Voting Stock thereof), Casino
Holdings (other than Bally or a subsidiary of Bally, of which Bally, directly
or indirectly, owns a majority of the total voting power of the Voting Stock
thereof) or Bally; (ii) the Company, the Finance Company, the Operating Company
or Realty Co. consolidates or merges with or into another Person or conveys,
transfers or leases all or substantially all of its assets to any Person in one
transaction or a series of related transactions, or any Person consolidates or
merges with or into the Company, the Finance Company, the Operating Company or
Realty Co., and in any such event the holders of the Voting Stock of such
company immediately prior to such transaction or series of transactions shall
beneficially own, directly or indirectly, less than 50% of the Voting Stock of
the surviving Person immediately after such transaction or series of
transactions; PROVIDED, HOWEVER, that neither the merger or consolidation or
sale of assets by any of the Company, the Finance Company, the Operating
Company
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<PAGE> 17
or Realty Co. with or into or to any of the Company, the Finance Company, the
Operating Company or Realty Co. nor the liquidation or dissolution of the
non-surviving entity or transferor following any such transaction shall be
deemed a Change in Control; (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of any of the Company, the Finance Company, the Operating Company,
Realty Co., Casino Holdings or Bally (together with any directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company, the Finance Company, the Operating Company, Realty
Co., Casino Holdings or Bally, as the case may be, was approved by a vote of
66-2/3% of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company, the Finance Company, the Operating Company,
Realty Co., Casino Holdings or Bally then in office; or (iv) other than as
allowed in (ii) above, the Company, the Operating Company, the Finance Company,
Realty Co. or Bally is liquidated or dissolved or adopts a plan of liquidation.
"Collateral" means the real property, buildings and
improvements and other real and personal property described in or from time to
time subject to the Mortgage and the Note pledged pursuant to the Note Pledge
Agreement.
"Collateral Account" means a separate custodial account or
accounts maintained by the Trustee pursuant to Section 1208 into which all cash
received by the Trustee as Substitute Collateral pursuant to Section 1206, and
as Insurance Proceeds pursuant to Articles 6 and 7 of the Mortgage, less any
Pro Rata Share to be paid over for the benefit of holders of Pari Passu
Mortgages pursuant to Section 1206 and Articles 6 and 7 of the Mortgage, shall
be deposited.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under
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<PAGE> 18
the Trust Indenture Act, then the body performing such duties at such time.
"Companies" means the Company and the Finance Company.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Finance Company, the Company, the Operating
Company or Realty Co. (i) by its Chairman, a Vice Chairman, its President or a
Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary
or an Assistant Secretary and delivered to the Trustee; PROVIDED, HOWEVER, that
such written request or order may be signed by any two of the officers or
directors listed in clause (i) above in lieu of being signed by one of such
officers or directors listed in such clause (i) and one of the officers listed
in clause (ii) above.
"Consolidated Fixed Charge Coverage Ratio" of the Company
means, for any period, the ratio of (a) the sum of Consolidated Net Income,
Consolidated Interest Expense, Consolidated Income Tax Expense and one-third of
Consolidated Rental Payments, plus, without duplication, all depreciation,
amortization and all other non-cash charges, of the Company and its Restricted
Subsidiaries on a consolidated basis, as determined in accordance with GAAP to
(b) the sum of (i) Consolidated Interest Expense for such period and (ii)
one-third of Consolidated Rental Payments for such period; PROVIDED that in
making such computation, the Consolidated Interest Expense attributable to
interest on any Indebtedness computed on a PRO FORMA basis and (A) bearing a
floating interest rate shall be computed as if the rate in effect on the date
of computation had been the applicable rate for the entire period and (B) which
was not outstanding during the period for which the computation is being made
but which bears, at the option of the Company, a fixed or floating rate of
interest, the Company shall apply, at its option, either the fixed or floating
rate for purposes of calculating the Consolidated Fixed Charge Coverage Ratio
and
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<PAGE> 19
PROVIDED, FURTHER, that in making such computation, the Consolidated Interest
Expense attributable to interest on Indebtedness under any revolving credit
facility computed on a pro forma basis shall be computed assuming that the
amount of Indebtedness thereunder is equal to the weighted average balance
during the period for which the computation is being made.
"Consolidated Income Tax Expense" means for any period, as
applied to any Person and its Restricted Subsidiaries, the provision for
federal, state, local or foreign income taxes of such Person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest that, in conformity with GAAP, would be set forth
opposite the caption "interest expense" or any like caption on a consolidated
income statement of the Company and its Restricted Subsidiaries (including, but
not limited to, imputed interest on Capital Lease Obligations, all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, the net costs associated with hedging
obligations, the interest portion of any deferred payment obligation,
amortization of discount or premium, if any, and all other non-cash interest
expense and excluding amortization of other financing fees and expenses) plus,
without duplication, all capitalized interest of the Company and its Restricted
Subsidiaries for such period and all interest accrued or paid by the Company or
any of its Restricted Subsidiaries under any Guaranty of Indebtedness
(including a Guaranty of principal, interest or any combination thereof) of any
Person for such period, plus any amounts payable as dividends (whether or not
paid) on Preferred Stock permitted to be outstanding pursuant to the provisions
of Section 1011, in each case determined on a consolidated basis in accordance
with GAAP.
"Consolidated Net Income" of the Company means, for any
period, the consolidated net income (or loss) of the Company and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted,
to the extent included in calculating such net income (or loss), by excluding
(i) all extraordinary gains or losses (less all fees and expenses relating
thereto), (ii) the
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<PAGE> 20
portion of net income (or loss) of the Company and its Restricted Subsidiaries
allocable to minority interests in unconsolidated Persons to the extent that
cash dividends or distributions have not actually been received by the Company
or one of its Restricted Subsidiaries, (iii) net income (or loss) of any Person
combined with the Company or any of its Restricted Subsidiaries in a "pooling
of interests" basis attributable to any period prior to the date of
combination, (iv) net income (or loss) of any Unrestricted Subsidiary except to
the extent cash dividends or distributions have been made, (v) any gain or
loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (vi) any gains or losses (less all fees and expenses relating
thereto) in respect of dispositions of assets other than in the ordinary course
of business, or (vii) the net income of any Restricted Subsidiary to the extent
that the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement or instrument, or any
judgment, decree, order, statute, rule or governmental regulations (other than
those issued by or on behalf of the Casino Control Commission or the Division
of Gaming Enforcement or those to which either is a party) applicable to that
Restricted Subsidiary or its stockholders.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity (excluding Redeemable Capital Stock) of such Person and
its consolidated subsidiaries, as set forth on the most recent consolidated
balance sheet of such Person and its consolidated subsidiaries determined in
accordance with GAAP.
"Consolidated Rental Payments" of the Company means, for any
period, the aggregate rental obligations of the Company and its Restricted
Subsidiaries under operating leases (not including taxes, insurance,
maintenance and similar expenses that the lessee is obligated to pay under the
terms of the relevant leases), determined on a consolidated basis in accordance
with GAAP.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which
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<PAGE> 21
office at the date of execution of this Indenture is located at 180 E. 5th
Street, St. Paul, Minnesota 55101; Attention: Corporate Trust Department.
"corporation" includes corporations, associations, partner-
ships, companies and business trusts.
"Credit Facility" means that Loan Agreement dated as of March
8, 1994 between the Company, the Operating Company, Realty Co., First Fidelity
Bank, National Association and Midlantic National Bank.
"Credit Facility Mortgage" means the mortgage associated with
the Credit Facility.
"Current Appraisal" means the most recent appraisal of the
Appraised Fair Market Value of any property that is performed pursuant to
Section 1204 or otherwise.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Dennis Hotel" means that portion of the Casino Hotel formerly
known as the Dennis Hotel.
"Division of Gaming Enforcement" means the New Jersey Division
of Gaming Enforcement or any successor agency performing the duties thereof.
"Eligible Bank" shall mean, at any time, a domestic commercial
bank that has capital, surplus and undivided profits of at least $300,000,000
in the aggregate and a credit rating (or, if such domestic commercial bank has
no credit rating, the holding company of which has a credit rating) on its
lowest-rated unsecured public debt security of one of the two highest rating
categories used by Moody's or Standard & Poor's or such equivalent ratings by
another nationally recognized credit rating agency of similar standing if
neither of such corporations is in the business of rating unsecured bank
indebtedness.
"Event of Default" has the meaning specified in Article Five.
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<PAGE> 22
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11
of the United States Code, as amended from time to time.
"Finance Company" means the Person named as such in this
Indenture until a successor replaces it pursuant to the Indenture and
thereafter means the successor. To the extent necessary to comply with the
requirements of the provisions of Sections 310 through 317 of the Trust
Indenture Act as they are applicable to the Finance Company, the term "Finance
Company" shall include any other obligor with respect to the Securities for the
purposes of complying with such provisions.
"Gaming License" means any license, franchise or other
authorization required to own, lease, operate or otherwise conduct casino
gaming at the Casino Hotel or any Subsidiary Casino Hotel required under the
Casino Control Act, the regulations of the Casino Control Commission and other
applicable gaming laws.
"Generally Accepted Accounting Principles" or "GAAP" means
generally accepted accounting principles in the United States, consistently
applied, that are in effect from time to time; PROVIDED, HOWEVER, that with
respect to the obligations of any Person under Article Eight and Sections 1007
and 1008 and the definitions applicable thereto, "GAAP" means generally
accepted accounting principles on the date hereof.
"GNAC" means GNAC, CORP.
"Governmental Authority" means any agency, authority, board,
bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit, whether federal,
state, county, district, city or other political subdivision or otherwise and
whether now or hereafter in existence, or any officer or official of any
thereof, including, without limitation, the Casino Control Commission.
"Guarantor" means the Company until a successor replaces it
pursuant to this Indenture and thereafter means such successor.
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<PAGE> 23
"Guaranty" means, as applied to any obligation, (a) a guaranty
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Holder" means a Person in whose name a Security is registered
in the Security Register.
"Indebtedness" means, with respect to any Person, any
indebtedness, contingent or otherwise, in respect of borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof and including any indebtedness issued in exchange for
indebtedness for borrowed money), or evidenced by bonds, notes, debentures or
similar instruments or representing the balance deferred and unpaid of the
purchase price of any property, if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared on a consolidated basis in accordance with GAAP consistently applied
and letters of credit (or reimbursement obligations related thereto); PROVIDED,
HOWEVER, that (a) "Indebtedness" shall not include accounts payable to trade
creditors or other indebtedness for goods or services created or assumed in the
ordinary course of business and Indebtedness incurred pursuant to the
Intercorporate Agreement or Tax Sharing Agreement and (b) Indebtedness shall
include only the principal component of any obligations described above.
"Indebtedness" shall also include the principal component of any Capital Lease
Obligations; the maximum liquidation preference of Redeemable Capital Stock, or
Preferred Stock issued pursuant to Sections 1007 and 1011 hereof; obligations
secured by a Lien to which any property or asset owned or held by such Person
is subject, whether or not the obligations secured thereby shall have been
assumed; and Guaranties of items that would be included within this definition
(regardless of whether such items would appear upon such balance sheet);
PROVIDED that for purposes of computing Indebtedness outstanding at any time,
such items shall be
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<PAGE> 24
excluded to the extent that they would otherwise be eliminated as intercompany
items in consolidation. For purposes of the preceding sentence, the maximum
liquidation preference of any Redeemable Capital Stock shall be the greatest
amount payable in respect thereof on a liquidation, whether voluntary or
involuntary, including accrued and unpaid dividends. Any reference in the
Indenture to any Indebtedness shall be deemed to include any renewals,
extensions, refundings, amendments and modifications of any such Indebtedness.
"Indenture" means this instrument as originally executed
(including all exhibits and schedules hereto) and as it may from time to time
be supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company,
the Operating Company, the Finance Company and Realty Co. (and any other
obligor hereunder or under the Securities) to pay principal of and interest on
the Securities when due and payable, whether at Maturity or an Interest Payment
Date, by acceleration, call for redemption, acceptance of an offer to purchase
on a Change in Control Payment Date or otherwise, and interest on the overdue
principal, if any (and premium, if any), of, and (to the extent lawful)
interest, if any, on the Securities and all other amounts due or to become due
under this Indenture and the Security Documents and to perform all other
obligations of the Company, the Operating Company, the Finance Company and
Realty Co. to the Trustee and the Holders under this Indenture, the Securities,
the Company Guaranty and the Security Documents, according to the terms
hereunder and thereunder.
"Insurance Proceeds" means Awards as defined in the Mortgage
and the Company's interest in and to all proceeds which now or hereafter may be
paid under any insurance policies now or hereafter obtained by or on behalf of
the Company, the Operating Company or Realty Co. in connection with the
conversion of the Property subject to the Security Interests or any portion
thereof into cash or liquidated claims, together with the interest payable
thereon and the right to collect and receive the same, including, but without
limiting the generality of the foregoing, proceeds of casualty insurance, title
insurance, business interruption insurance and any other
13
<PAGE> 25
insurance now or hereafter maintained with respect to such Property.
"Intercorporate Agreement" means the Intercorporate Agreement
dated as of June 24, 1993 among Casino Holdings, Bally and the Company.
"Intercreditor Agreement" means the Intercreditor Agreement
substantially in the form annexed as Exhibit D, with such changes thereto as
the Finance Company may reasonably request that would not affect the Trustee's
PARI PASSU priority with respect to the Collateral or otherwise impair the
rights of the Trustee.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Interest Swap Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a fixed or floating rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or floating rate of interest on the same
notional amount or pursuant to any interest rate protection agreement, interest
rate future, interest rate option or other interest rate hedge arrangement.
"Investment" by any Person means, directly or indirectly, any
advance, loan or other extension of credit or capital contribution to (by means
of any transfer of cash or other property to others or any payment for property
or services for the account or use of others) or any purchase or acquisition by
such Person of any stock, bonds, notes, debentures or other securities issued
or owned by, any other Person. Investments shall exclude extensions of credit
on commercially reasonable terms in accordance with normal trade practices and
past practice.
"Letter of Credit" means a standby letter of credit accepted
by the Trustee in accordance with Section 1502 and containing in substance, but
not necessarily in the same format, the provisions set forth in Exhibit F to
this Indenture, and containing no materially contrary terms and no other
provisions materially limiting the
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<PAGE> 26
availability of payment, issued to the Trustee, at the request of the Finance
Company, for the benefit of Holders by an Eligible Bank, in an amount as
provided for by Section 1205.
"Lien" means any mortgage, charge, pledge, lien, privilege,
security interest or encumbrance of any kind.
"Material Subsidiary" means the Finance Company, the Operating
Company, Realty Co. and, at the time of determination, any other Subsidiary of
the Company that (a) accounted for more than 15 percent of the consolidated net
income of the Company for the most recently completed fiscal year of the
Company or (b) was the owner of more than 15 percent of the consolidated assets
of the Company as at the end of such fiscal year, all as shown on the
consolidated financial statements of the Company for such fiscal year.
"Maturity" when used with respect to any Security means the
date on which the principal of (and premium, if any) and interest on such
Security becomes due and payable as therein or herein provided, whether at
Stated Maturity, the Change in Control Payment Date, any Redemption Date and
whether by declaration of acceleration, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means the Mortgage and Security Agreement with
Assignment of Rents dated as of March 8, 1994 given by the Operating Company,
Finance Company and Realty Co., as mortgagors, to the Trustee, as mortgagee, a
copy of which is attached hereto as Exhibit A, the Assignment of Leases, and
any other security document, to which either of them is a party, which is
executed and delivered pursuant to such Mortgage or Assignment of Leases.
"Net Cash Proceeds" means with respect to any issuance or sale
of Capital Stock or warrants, or any issuance or sale of debt securities or
Redeemable Capital Stock that have been converted into Capital Stock, or
payments made upon exercise thereof, all as referred to in Section 1008, the
cash proceeds of such issuance or payment, net of attorneys' fees, accountants'
fees,
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<PAGE> 27
brokerage, consultant, underwriting and other fees and expenses actually
incurred in connection with such issuance, sale or payment and net of taxes
paid or estimated to be payable as a result thereof.
"Non-Recourse Indebtedness" means Indebtedness or that portion
of Indebtedness (a) as to which neither the Company nor any of its Restricted
Subsidiaries (i) provides credit support pursuant to any undertaking, agreement
or instrument that would constitute Indebtedness, (ii) is directly or
indirectly liable or (iii) constitutes the lender and (b) no default with
respect to which (including any rights 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.
"Note" means the promissory note dated March 8, 1994, made by
the Operating Company in the principal amount of $425,000,000 payable to the
order of the Finance Company.
"Note Pledge Agreement" means the Note Pledge Agreement dated
as of March 8, 1994, among the Finance Company and the Trustee, a form of which
is attached hereto as Exhibit C, as the same may be amended or supplemented
from time to time in accordance with the terms thereof.
"Officers' Certificate" of any Person means a certificate
signed by (i) the Chairman, a Vice Chairman, the President, a Vice President or
the Treasurer of such person and (ii) the Secretary or an Assistant Secretary
of such Person and delivered to the Trustee; PROVIDED, HOWEVER, that such
certificate may be signed by two of the officers or directors listed in clause
(i) above in lieu of being signed by one of such officers or directors listed
in such clause (i) and one of the officers listed in clause (ii) above.
"Operating Company" means Bally's Park Place, Inc., a New
Jersey corporation, until a successor re-
16
<PAGE> 28
places it pursuant to this Indenture and thereafter means the successor.
"Opinion of Counsel" means a written opinion of counsel, who
may be internal counsel for the Company, the Finance Company or the Operating
Company and who shall be acceptable to the Trustee. Each such opinion shall
include the statements provided for in Trust Indenture Act Section 314(e) to
the extent applicable.
"Outstanding" when used with respect to the Securities means,
as of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee
or delivered to the Trustee for cancellation;
(b) Securities, or portions thereof, for whose
payment, redemption or purchase money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent (other than the
Company, the Finance Company, another Subsidiary of the Company or one of their
Affiliates) in trust or set aside and segregated in trust by the Company, the
Finance Company or such other Subsidiary (if the Company, the Finance Company or
another Subsidiary shall act as Paying Agent) for the Holders of such
Securities; PROVIDED that, if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(c) Securities, except to the extent provided in
Section 1301, with respect to which the Companies, the Operating Company and
Realty Co. have effected defeasance as provided in Article Thirteen; and
(d) Securities in exchange for or in lieu of which
other Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there shall have
been presented to the Trustee proof satisfactory to it that such Securities are
held by a bona fide purchaser in whose hands the Securities are valid
obligations of the Companies;
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<PAGE> 29
PROVIDED, HOWEVER, that, in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
direction, consent or waiver hereunder, Securities owned by the Company, the
Finance Company, the Operating Company or Realty Co., or any other obligor upon
the Securities or any Affiliate of the Company, the Finance Company, the
Operating Company or Realty Co., or any other obligor upon the Securities or
such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, direction, consent or waiver, only Securities
which the Trustee knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company, the Finance Company, the Operating Company or Realty Co. or any other
obligor upon the Securities or any Affiliate of the Company, the Finance
Company, the Operating Company or Realty Co. or such other obligor.
"Pari Passu Mortgage" means any Lien on the Collateral which
is PARI PASSU to the Lien of the Mortgage and is permitted by clause (ii) of
Section 1010 of this Indenture, provided that the instrument creating such Lien
contains substantially the following statement: "Pursuant to the Mortgage and
Security Agreement with Assignment of Rents dated as of March 8, 1994 given by
the Operating Company and Realty Co., as mortgagors, to First Bank National
Association, as mortgagee, the lien created by this instrument ranks pari passu
with the lien created by said Mortgage recorded on __________ in Mortgage Book
__________at page _____ & c. in the Atlantic County, New Jersey, Clerk's
Office."
"Paying Agent" means any Person authorized by the Finance
Company to pay the principal of (or premium, if any) or interest on any
Securities on behalf of the Finance Company.
"Permitted Encumbrances" shall have the meaning provided in
the form of Mortgage attached hereto as Exhibit A.
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<PAGE> 30
"Permitted Indebtedness" means, without duplication, any of
the following Indebtedness of the Company or any Restricted Subsidiary, as the
case may be:
(i) Indebtedness (including letters of credit)
outstanding at any time under any revolving credit facility, or any
successor thereto, in an aggregate principal amount not to exceed
$50,000,000;
(ii) Any Guaranty by a Restricted Subsidiary under
subparagraph (i) above;
(iii) Indebtedness and obligations under the
Securities, including any Guaranty thereof and the Note;
(iv) Any Indebtedness and obligations outstanding
on the date hereof;
(v) Indebtedness of a Wholly Owned Subsidiary to
the Company or another Wholly Owned Subsidiary of the Company;
(vi) Indebtedness the proceeds of which are used,
directly or indirectly, to refinance outstanding Indebtedness of
the Company or any Subsidiary in a principal amount (or, if such
Indebtedness does not require cash payments prior to maturity, with
an original issue price of such Indebtedness) not to exceed the
principal amount of the Indebtedness so refinanced, plus accrued and
unpaid interest with respect to the Indebtedness being refinanced
through and to the date of repayment, plus any premium or penalty
provided for in the instrument governing such Indebtedness or any
premium reasonably determined by the Board of Directors of the
Company as necessary to accomplish such refinancing by means of a
tender offer, defeasance or privately negotiated purchase (or, if the
Indebtedness being refinanced was issued with an original issue
discount, the original issue price plus the amortized portion of the
original issue discount to the date that such refinancing
Indebtedness was incurred and any premium or penalty provided for in
the
19
<PAGE> 31
instrument governing such Indebtedness or any premium reasonably
determined by the Board of Directors of the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated purchase) plus the amount of any fees, costs or expenses
the Company incurred in connection with such refinancing; PROVIDED that
if the Indebtedness being refinanced is Indebtedness of the Company,
such refinancing Indebtedness shall be Indebtedness of the Company,
unless such refinancing Indebtedness is used in whole or in part to
refinance the entire principal amount of the Notes then outstanding;
PROVIDED, FURTHER, that Indebtedness the proceeds of which are used to
refinance Indebtedness of the Company that is expressly subordinated
in right of payment to the Securities will only be permitted if (x)
such Indebtedness is expressly subordinated in right of payment to the
Securities at least to the same extent that the Indebtedness to be
refinanced is subordinated to the Securities, (y) the Average Life to
Stated Maturity of such Indebtedness exceeds the Average Life to
Stated Maturity of the Securities, and (z) the final scheduled
maturity of such Indebtedness exceeds the final Stated Maturity of the
Securities;
(vii) Indebtedness under Interest Swap Obligations
and other agreements between the Company or a Subsidiary and one or
more financial institutions providing for "swap," "cap," "collar" or
other interest rate protection;
(viii) obligations in respect of performance bonds
and surety bonds provided by the Company or any Subsidiary in the
ordinary course of business or related to Casino Hotel Improvements
and any renewals, extensions or amendments, modifications or
supplements thereto;
(ix) Indebtedness arising from the honoring by a
bank or other financial institution of a check, draft or similar
instru-
20
<PAGE> 32
ment drawn against insufficient funds in the ordinary course of
business, PROVIDED that such Indebtedness is extinguished within two
Business Days of its incurrence;
(x) Indebtedness pursuant to letters of credit in
an amount not to exceed $5,000,000 at any one time; and
(xi) additional Indebtedness not to exceed
$15,000,000 in the aggregate at any one time.
"Permitted Investment" means an Investment which consists of any
one or more of the following:
(i) Investment in a Restricted Subsidiary or another
Person which, immediately after such Investment, will be a Wholly
Owned Subsidiary, provided in each case that such Subsidiary conducts a
business which is substantially identical to any business conducted by
the Company or its Restricted Subsidiaries on the date hereof or which
is in the business of the development, marketing, ownership or
management of casinos or casino hotels and businesses related to the
development, ownership, marketing or management of casinos or casino
hotels, including the hosting, production or promotion of conventions,
sporting events, amusements and other entertainment;
(ii) Investments by Subsidiaries in the Company;
(iii) (a) commercial paper rated P-1 by Moody's or
A-1 by Standard & Poor's on the date of acquisition, (b) certificates
of deposit of United States commercial banks (having a combined capital
and surplus in excess of $300,000,000), (c) obligations of, or
guaranteed by, the United States government or any agency thereof, (d)
repurchase agreements with terms of not more than 30 days with United
States commercial banking or other financial institutions (having a
combined capital and surplus in excess of $300,000,000) with respect
21
<PAGE> 33
to the types of investments described in subclauses (a), (b) and (c)
of this clause (iii), (e) money market funds organized under the laws
of the United States or any state thereof that invest substantially
all their assets in any of the types of investments described in
subclauses (a), (b), (c) and (d) of this clause (iii) or, (f) to the
extent not comprehended by subclauses (a) through (e) of this clause
(iii), temporary investments of cash balances in investments deemed to
be cash equivalents under GAAP;
(iv) negotiable instruments held for collection
except to the extent that they would constitute investments in
Affiliates; outstanding travel, moving and other like advances to
officers, employees and consultants; lease, utility and other similar
deposits; or stock, obligations or securities received in settlement of
debts owing to the Company or a Subsidiary as a result of foreclosure,
perfection or enforcement of any Lien, in each of the foregoing cases
in the ordinary course of business of the Company or a Subsidiary, as
the case may be, and consistent with past practice;
(v) receivables for sales of goods or services on
trade credit terms consistent with the Company's and its Subsidiaries'
past practices or as otherwise consistent with trade credit terms in
common use in the industry;
(vi) Investments in Affiliates of the Company in
gaming or gaming-related ventures, in an amount not to exceed
$25,000,000;
(vii) loans to any employee in an amount not to
exceed $250,000 for any individual and $1,000,000 for all employees
in the aggregate;
(viii) Investments in effect on the date of this
Indenture;
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<PAGE> 34
(ix) Investments required under the Casino Control
Act; and
(x) purchases of Notes by the Operating Company
and the Company.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for a mutilated security or in lieu of a lost, destroyed or stolen
Security shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Security.
"Preferred Stock" means, as applied to any Person, Capital
Stock of any class or classes (however designated) which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such corporation,
over shares of Capital Stock of any other class of such corporation.
"Property" means any assets or property of any kind or nature
whatsoever, real, personal or mixed (including fixtures), whether tangible or
intangible.
"Pro Rata Share" means that portion of Substitute Collateral
under Section 1206 and Insurance Proceeds under Articles 6 and 7 of the
Mortgage (collectively, "Collateral Proceeds") equal to the total amount of
such Collateral Proceeds multiplied by a fraction, the denominator of which is
the sum of (i) total indebtedness then outstanding under the Securities and
(ii) the total indebtedness then outstanding and secured by any Pari Passu
Mortgages covering Collateral which is the subject of a substitution or
disposition under Section 1206 or Article 6 or 7 of the Mortgage, and the
numerator of which is the total indebtedness then outstanding and secured by
any Pari Passu Mortgages covering Collateral
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<PAGE> 35
which is the subject of a substitution or disposition under Section 1206 or
Article 6 or 7 of the Mortgage.
"Public Equity Offering" means an underwritten public offering
of Capital Stock of the Company (other than Redeemable Capital Stock) or Casino
Holdings pursuant to a registration statement filed with the Commission in
accordance with the Securities Act, which public equity offering results in
gross cash proceeds to the Company or Casino Holdings, as the case may be, of
not less than $30,000,000.
"Realty Co." means Bally's Park Place Realty Co., a New Jersey
corporation, which owns a parcel of land upon which a part of the Casino Hotel
is situated, until a successor replaces it pursuant to this Indenture and
thereafter means its successor.
"Redeemable Capital Stock" means Capital Stock that, either by
its terms, by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event or passage of
time would be required to be redeemed prior to the final Stated Maturity of
principal on the Securities or is redeemable at the option of the holder
thereof at any time prior to such final Stated Maturity, or is convertible into
or exchangeable for debt securities at any time prior to such final Stated
Maturity.
"Redemption Date," when used with respect to any Securities to
be redeemed, means the date fixed for such redemption pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the March 1 or September 1 (whether or not a Business Day),
as the case may be, immediately preceding such Interest Payment Date.
"Responsible Officer," when used with respect to the Trustee,
means the Chairman or any Vice Chairman of the Board of Directors, the Chairman
or Vice Chairman of the Executive Committee of the Board of Directors, the
President, any Vice President, the Secretary, any Assis-
24
<PAGE> 36
tant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any
Assistant Cashier, any Trust Officer or Assistant Trust Officer, the Controller
and any Assistant Controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers or assigned by the Trustee to administer corporate trust matters at
its Corporate Trust Office and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means any Subsidiary that is not an
Unrestricted Subsidiary.
"Security" and "Securities" have the meaning set forth in the
second paragraph of this Indenture.
"Security Documents" means the Mortgage, the Assignment of
Leases and the Note Pledge Agreement.
"Security Interests" means the Lien on the Collateral created
by the Security Documents in favor of the Trustee.
"Special Record Date" means a date fixed by the Trustee for
the payment of any Defaulted Interest pursuant to Section 307.
"Standard & Poor's" means Standard & Poor's Corporation.
"Stated Maturity," when used with respect to any Security or
any installment of interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such installment
of interest is due and payable.
"Subordinated Indebtedness" means all Indebtedness of the
Company that is expressly subordinated in right of payment to any other
Indebtedness of the Company.
"Subsidiary" means any Person a majority of the total voting
power of the Voting Stock of which is at the time owned, directly or
indirectly, by the Company or by
25
<PAGE> 37
one or more such Subsidiaries, or by the Company and one or more such
Subsidiaries.
"Subsidiary Casino Hotel" means any casino hotel owned or
controlled directly or indirectly by the Company or any Subsidiary, except the
Casino Hotel, including any furniture, furnishing, fixtures, machinery,
equipment or supplies or other tangible personal property contained therein and
owned directly or indirectly by the Company or any Subsidiary, and any
additions thereto or improvements thereof.
"Substitute Collateral" means Property that may be substituted
for or added to the Collateral in accordance with Article Twelve hereof.
"Taking" means any taking by eminent domain, condemnation or
otherwise of all or substantially all of the Property subject to the Lien of
the Mortgage.
"Tax Sharing Agreement" means the tax sharing agreement
between Bally and the Company dated June 17, 1993, as amended, PROVIDED,
HOWEVER, that any amendments thereto shall not change or alter the substantive
provisions thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended, and as in force at the date as of which this Indenture was
executed, except as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means (i) any Subsidiary that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors of the Company in the manner provided below and (ii) any
subsidiary of an Unrestricted Subsidiary. The Board of Directors of the
Company may designate any newly formed Subsidiary to be an Unrestricted
Subsidiary, PROVIDED that such Subsidiary (A) has assets of less than $1,000 at
designation, (B) has no Indebtedness other than Non-Recourse Indebtedness and
(C) does not own any equity
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<PAGE> 38
securities of any Subsidiary (other than an Unrestricted Subsidiary). The
Board of Directors of the Company may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary of the Company; PROVIDED, HOWEVER, that immediately
after giving effect to such designation (x) the Company could incur $1.00 of
additional Indebtedness under Section 1007 and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors of
the Company shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions; PROVIDED, HOWEVER, that the failure to so file such
resolution and/or Officers' Certificate with the Trustee shall not impair or
affect the validity of such designation.
"Voting Stock" means stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a corporation (irrespective of whether or not at the time stock
of any other class or classes shall have or might have voting power by reason
of the happening of any contingency).
"Wholly Owned Subsidiary" means any Restricted Subsidiary all
of whose outstanding Voting Stock (other than directors' qualifying shares, if
any) is owned directly or indirectly by the Company.
Section 102. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
"Bank" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1502
"Change in Control Payment Date" . . . . . . . . . . . . . . . . . . . . . . . 1015
"Company Guaranty" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1401
"covenant defeasance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1301
"defeasance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1301
"Default Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1202
"Defaulted Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307
"incorporated provision" . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
"legal defeasance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1301
"Pari Passu Certificate" . . . . . . . . . . . . . . . . . . . . . . . . . . 613
</TABLE>
27
<PAGE> 39
"Restricted Encumbrance" . . . . . . . . . . . . . . . . . . . . . . . 1010
"Restricted Payments" . . . . . . . . . . . . . . . . . . . . . . . . . 1008
"Security Register" . . . . . . . . . . . . . . . . . . . . . . . . . . 305
"Security Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . 305
"U.S. Government Obligations" . . . . . . . . . . . . . . . . . . . . . 1302
Section 103. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Companies to the
Trustee to take any action under any provision of this Indenture, the Companies
shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture (including any
covenant compliance with which constitutes a condition precedent) relating to
the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that, in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or opinion (other than the certificates
required by Section 1021(a)) with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope
of the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
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<PAGE> 40
(d) a statement as to whether, in the opinion of
each such individual, such condition or covenant has been complied with.
Section 104. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Companies may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or Opinion of Counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Companies
stating that the information with respect to such factual matters is in the
possession of the Companies, unless such counsel knows that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Section 105. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to be given
or taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such
29
<PAGE> 41
Holders in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Companies, the Operating Company or Realty
Co. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and (subject to Trust Indenture Act Section 315)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any
Person of any such instrument or writing may be proved in any reasonable manner
which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by
the Security Register.
(d) If any of the Companies, the Operating Company
or Realty Co. shall solicit from the Holders any request, demand, authorization,
direction, notice, consent, waiver or other Act, it may, at its option, by or
pursuant to a Board Resolution, fix in advance a record date for the
determination of such Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the
Companies, the Operating Company or Realty Co., as the case may be, shall have
no obligation to do so. Notwithstanding Trust Indenture Act Section 316(c), any
such record date shall be the record date specified in or pursuant to such Board
Resolution, which shall be a date not more than 30 days prior to the first
solicitation of Holders generally in connection therewith and no later than the
date such solicitation is completed.
If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close
of business on such record date shall be deemed to be Holders for the purposes
of determining whether Holders of
30
<PAGE> 42
the requisite proportion of Securities then Outstanding have authorized or
agreed or consented to such request, demand, authorization, direction, notice,
consent, waiver or other Act, and for this purpose the Securities then
Outstanding shall be computed as of such record date; PROVIDED that no such
request, demand, authorization, direction, notice, consent, waiver or other Act
by the Holders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than
six months after the record date.
(e) Any request, demand, authorization, direction,
notice, consent, waiver or other Act by the Holder of any Security shall bind
every future Holder of the same Security or the Holder of every Security issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof, in respect of anything done, suffered or omitted to be done by the
Trustee, any Paying Agent or the Company in reliance thereon, whether or not
notation of such action is made upon such Security.
Section 106. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or the Companies,
the Operating Company or Realty Co. shall be sufficient for every purpose
hereunder if made, given, furnished or delivered, in writing, to or with the
Trustee at its Corporate Trust Office, Attention: Corporate Trust Department; or
(b) the Companies, the Operating Company or Realty
Co. by the Trustee or by any Holder shall be sufficient for every purpose
hereunder (unless otherwise herein expressly provided) if made, given, furnished
or delivered in writing to any of the Companies, the Operating Company or
Realty Co., addressed to it at Park Place and the Boardwalk, Atlantic City, New
Jersey 08401, Attention: President, or at any other address furnished in
writing to the Trustee by the Companies, the Operating Company or Realty Co.
31
<PAGE> 43
Section 107. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first class postage prepaid, to
each Holder affected by such event at his address as it appears in the Security
Register not later than the latest date and not earlier than the earliest date
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. Any notice when deposited for
mailing to a Holder in the aforesaid manner shall be conclusively deemed to
have been received by such Holder whether or not actually received by such
Holder. Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken
in reliance upon such waiver.
In case by reason of the suspension of regular mail service by
reason of any other cause, it shall be impracticable to mail notice of any
event as required by any provision of this Indenture, then any method of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Section 108. CONFLICT OF ANY PROVISION OF INDENTURE WITH
TRUST INDENTURE ACT.
If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with the duties imposed by Sections 310 to 318,
inclusive, of the Trust Indenture Act, or conflicts with any provision (an
"incorporated provision") required by or deemed to be included in this
Indenture by operation of such Trust Indenture Act Sections, such imposed
duties or incorporated provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act that
may be so modified or excluded, the
32
<PAGE> 44
latter provision shall be deemed to apply to this Indenture as so modified or
excluded, as the case may be.
Section 109. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
Section 110. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the
Companies, the Operating Company and Realty Co. shall bind their respective
successors and assigns, whether so expressed or not.
Section 111. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 112. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person (other than the parties hereto and their
successors hereunder, any Paying Agent and the Holders) any benefit or any
legal or equitable right, remedy or claim under this Indenture.
Section 113. GOVERNING LAW.
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York.
Section 114. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, any date
established for payment of Defaulted Interest pursuant to Section 307, or any
Maturity with respect to any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premi-
33
<PAGE> 45
um, if any) need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the
Interest Payment Date or date established for payment of Defaulted Interest
pursuant to Section 307 or Maturity, and no interest shall accrue with respect
to such payment for the period from and after such Interest Payment Date or
date established for payment of Defaulted Interest pursuant to Section 307 or
Maturity, as the case may be, to the next succeeding Business Day.
Section 115. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the
Companies shall not have any liability for any obligations of the Companies
under the Securities, the Security Documents, the Note or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting any of the Securities waives and releases
all such liability.
ARTICLE ARTICLE II
SECURITY FORMS
Section 201. FORMS GENERALLY.
The Securities and the Trustee's certificate of authentication
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities. Any portion of
the text of any Security may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Security.
The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner
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<PAGE> 46
permitted by the rules of any securities exchange on which the Securities may
be listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
Section 202. FORM OF FACE OF SECURITY.
BALLY'S PARK PLACE FUNDING, INC.
9-1/4% First Mortgage Note
due 2004
No. ______ $______
BALLY'S PARK PLACE FUNDING, INC., a Delaware corporation
(herein called the "Finance Company," which term includes any successor entity
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to ____________ or registered assigns, the principal sum of
____________ Dollars on March 15, 2004, at the office or agency of the Finance
Company referred to below, and to pay interest thereon semiannually, on March
15 and September 15 in each year, commencing September 15, 1994. Interest will
accrue from March 8, 1994 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, at the rate of 9-1/4% per
annum, until the principal hereof is paid or duly provided for. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the March 1 or September 1 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for, and interest on such defaulted interest rate at the
same interest rate borne by the Securities, to the extent lawful, shall
forthwith cease to be payable to the Holder on such Regular Record Date, and
may be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than
10 days prior to such Special Record Date, or may be paid at any
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<PAGE> 47
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture. Payment of the principal of (and premium, if any) and interest on
this Security will be made at the office or agency of the Finance Company
maintained for that purpose in The City of New York, or at such other office or
agency of the Finance Company as may be maintained for such purpose, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; PROVIDED, HOWEVER, that
payment of interest may be made at the option of the Finance Company by check
mailed to the address of the Person entitled thereto as such address shall
appear on the Security Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture, or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Finance Company has caused this
instrument to be duly executed under its corporate seal.
Dated: BALLY'S PARK PLACE
FUNDING, INC.
By_____________________________
Attest:
By______________________
Section 203. FORM OF REVERSE OF SECURITY.
This security is one of a duly authorized issue of securities
of the Finance Company designated as its 9-1/4% First Mortgage Notes due
2004 (herein called the
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<PAGE> 48
"Securities"), limited (except as otherwise provided in the Indenture referred
to below) in aggregate principal amount to $425,000,000, which may be issued
under an indenture (herein called the "Indenture") dated as of March 8, 1994,
between the Finance Company, BALLY'S PARK PLACE, INC., a Delaware corporation
(the "Company"), BALLY'S PARK PLACE, INC., a New Jersey corporation (the
"Operating Company"), BALLY'S PARK PLACE REALTY CO., a New Jersey corporation
("Realty Co."), and FIRST BANK NATIONAL ASSOCIATION, trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Finance Company, the Company, the
Operating Company, Realty Co., the Trustee and the Holders of the Securities,
and of the terms upon which the Securities are, and are to be, authenticated
and delivered.
The Securities are subject to redemption upon not less than 30
nor more than 60 days' notice, in amounts of $1,000 or an integral multiple of
$1,000 at any time on or after March 15, 1999, as a whole or in part, at the
election of the Finance Company, at a Redemption Price equal to the percentage
of the principal amount set forth below if redeemed during the 12-month period
beginning March 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
1999 104.5%
2000 103.0
2001 101.5
</TABLE>
and thereafter at 100% of principal amount together in the case of any such
redemption with accrued and unpaid interest to the Redemption Date (subject to
the right of Holders of record on relevant Regular Record Dates to receive
interest due on an Interest Payment Date), all as provided in the Indenture.
At any time, or from time to time, on or prior to March 15,
1997, the Finance Company may, at its option, use all or a portion of the net
cash proceeds of one or more Public Equity Offerings (as defined in the
Indenture) to redeem up to an aggregate of 33-1/3% of the
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<PAGE> 49
principal amount of the Securities originally issued, at a redemption price
equal to 109.25% of the principal amount thereof plus accrued and unpaid
interest, if any, to the redemption date, PROVIDED that immediately following
such redemption, at least $100,000,000 principal amount of Securities remain
outstanding. In order to effect the foregoing redemption with the proceeds of
any Public Equity Offering, the Finance Company shall send the redemption
notice not later than 60 days after the consummation of such public equity
offering.
In the event that a Change in Control occurs, the Finance
Company shall make an offer to purchase, at the option of each Holder, such
Holder's Securities in whole or in part in integral multiples of $1,000 at a
purchase price in cash in an amount equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase.
In the case of any redemption of Securities, interest
installments whose Stated Maturity is on or prior to the Redemption Date will
be payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Regular Record
Date referred to on the face hereof. Securities (or portions thereof) for
whose redemption and payment provision is made in accordance with the Indenture
shall cease to bear interest from and after the Redemption Date.
In the event of redemption of this Security in part only, a
new Security or Securities for the unredeemed portion hereof shall be issued in
the name of the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal of all the Securities may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of the entire indebtedness of the Finance Company on this Security upon
compliance by the Finance Company with certain conditions set forth therein,
which provisions apply to this Security.
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<PAGE> 50
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Finance Company, the Company, the Operating Company and
Realty Co. and the rights of the Holders under the Indenture at any time by the
Finance Company, the Company, the Operating Company and Realty Co. and the
Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Finance Company, the
Company, the Operating Company and Realty Co. with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by or on behalf of the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange therefore or in lieu hereof whether or not notation of such consent
or waiver is made upon this Security.
The Company and the Finance Company are subject to the New
Jersey Casino Control Act (the "Casino Control Act"). If the New Jersey Casino
Control Commission (the "Casino Control Commission") finds that a Holder or
beneficial owner of Securities must be found qualified or suitable to hold or
own the Securities under the Casino Control Act, and if such Holder or such
beneficial owner does not become so licensed or is not found qualified or
suitable, within any time period specified by the Casino Control Commission or
the Casino Control Act, the Finance Company shall have the right, at its
option, (i) to require such Holder or beneficial owner to dispose of all or a
portion of such Holder's or beneficial owner's Securities within 120 days after
receipt of notice by such Holder or beneficial owner of its disqualification
under the Casino Control Act (or such different period as may be prescribed by
the Casino Control Commission), or (ii) to call for redemption the Securities
of such Holder or beneficial owner, on not less than 30 nor more than 60 days'
notice (or such different period as may be prescribed by the Casino Control
Commission). If such Holder or beneficial owner, having been given the
opportunity by the Finance Company to dispose of such Holder's
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<PAGE> 51
or beneficial owner's Securities, shall have failed to do so within the
prescribed time period, the Finance Company shall have the right to redeem such
Holder's or beneficial owner's Securities on five days' notice. On any
redemption of Securities pursuant to this provision, the Redemption Price shall
be the lesser of (i) the market value thereof on the date of such notice of
redemption (as determined in good faith by the Board of Directors of the
Finance Company) and (ii) the price at which such Holder or beneficial owner
acquired the Securities, together with (if permitted by the Casino Control Act
or by the orders of the Casino Control Commission) accrued interest to the
Redemption Date, unless a Redemption Price or other payment, remuneration or
related terms or restrictions are required by the Casino Control Commission, in
which event such price, terms and restrictions shall be the Redemption Price
and terms of redemption. Each Holder or beneficial owner, by accepting a
Security, agrees to the provisions set forth in this paragraph and in the
Indenture and agrees to inform the Finance Company upon request of the price at
which such Holder or beneficial owner acquired such Securities.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Finance Company, which is absolute and unconditional, to pay the principal of
(and premium, if any) and interest on this Security at the times, place, and
rate, and in the coin or currency, herein prescribed.
Payment of principal and interest (including interest on
overdue principal and overdue interest) is unconditionally guaranteed by the
Company. The Securities are secured by the pledge by the Finance Company of
the $425,000,000 Note of the Operating Company and by the Mortgage on the
property known as the Bally's Park Place Casino Hotel and the security interest
in certain personal property of the Bally's Park Place Casino Hotel granted by
Realty Co. and the Operating Company, which own or lease and operate Bally's
Park Place Casino Hotel.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable on
the Security Register of the Finance Company, upon surrender of this Security
for registration of transfer at the office or agency of the
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<PAGE> 52
Finance Company maintained for such purpose in The City of New York, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Finance Company and the Security Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and thereupon
one or more new Securities, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any registration of
transfer or exchange or redemption of Securities, but the Finance Company may
require payment of a sum sufficient to pay all documentary, stamp or similar
issue or transfer taxes or other governmental charges payable in connection
with any registration of transfer or exchange.
Prior to the time of due presentment of this Security for
registration of transfer, the Finance Company, the Trustee and any agent of the
Finance Company or the Trustee may treat the Person in whose name this Security
is registered as the owner hereof for all purposes, whether or not this
Security be overdue, and neither the Finance Company, the Trustee nor any agent
shall be affected by notice to the contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture. In the
case of any conflict between the provisions of this Security and the Indenture,
the provisions of the Indenture shall control.
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Section 204. FORM OF TRUSTEE'S CERTIFICATE OF
AUTHENTICATION.
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
___________________________,
as Trustee
By _________________________
Authorized Signatory
Section 205. FORM OF NOTATION RELATING TO GUARANTY.
GUARANTY
BALLY'S PARK PLACE, INC., a Delaware corporation (hereinafter
referred to as the "Company," which term includes any successor person under
the Indenture referred to in the Security upon which this notation is endorsed)
(capitalized terms herein being used as defined in the Indenture unless
otherwise indicated), (i) has unconditionally guaranteed on a senior basis (a)
the due and punctual payment of the principal of (premium, if any) and interest
on the Securities, whether at Maturity or Interest Payment Date, by
acceleration, call for redemption or otherwise, and the due and punctual
payment of interest on the overdue principal and interest, if any, of the
Securities and (b) the due and punctual performance of all other obligations of
the Finance Company to the Holders or the Trustee all in accordance with the
terms set forth in Article Fourteen of the Indenture, and (ii) in case of any
extension of time for payment or renewal of any Securities or any of such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at Maturity, by
acceleration or otherwise.
No stockholder, officer, director or incorporator, as such,
past, present or future, of the Company shall have any personal liability under
this Guaranty by
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reason of his or its status as such stockholder, officer, director or
incorporator.
This Guaranty shall not be valid or obligatory for any purpose
until the certificate of authentication on the Security upon which this
Guaranty is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized signatories.
BALLY'S PARK PLACE, INC.
BY____________________________
Attest:
By______________________
ARTICLE III
THE SECURITIES
Section 301. TITLE AND TERMS.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $425,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
303, 304, 305, 306, 906, 1015 or 1108.
The Securities shall be known and designated as the "9-1/4%
First Mortgage Notes due 2004" of the Finance Company. Their Stated Maturity
shall be March 15, 2004, and they shall bear interest at the rate of 9-1/4% per
annum from March 8, 1994, or the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, payable
semiannually on March 15 and September 15 in each year, commencing September
15, 1994, and at said Stated Maturity, until the principal thereof is paid or
duly provided for.
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The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Finance Company
maintained for such purpose in The City of New York, or at such other office or
agency of the Finance Company as may be maintained for such purpose; PROVIDED,
HOWEVER, that, at the option of the Finance Company, interest may be paid by
check mailed to addresses of the Persons entitled thereto as such addresses
shall appear on the Security Register.
The Securities shall be redeemable as provided in Article
Eleven.
If the Finance Company is served with notice of the
disqualification of any Holder under Section 105(d) of the Casino Control Act
by the Casino Control Commission, such Holder will be prohibited under Section
105(e) of the Casino Control Act from (a) receiving interest on the Securities
held by such Holder, (b) exercising, directly or through any trustee or
nominee, any right conferred on such Securities, and (c) receiving any
remuneration in any form from the Operating Company for services rendered or
otherwise. Notwithstanding the foregoing, the Trustee shall be entitled to
exercise all rights with respect to the Securities held by such Holder
including, but not limited to, accelerating the Securities. If the Trustee
exercises voting rights with respect to such Securities, such votes shall be
cast in the same proportion as the votes of the other Outstanding Securities
are cast on such issue. A copy of any notice served upon the Finance Company
as described above shall be promptly delivered by the Company to the Trustee.
Any such notice to the Trustee shall be effective against the Trustee on the
Business Day after the receipt thereof.
Section 302. DENOMINATIONS.
The Securities shall be issuable only in registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof.
Section 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Finance
Company by any two of the following: its Chairman, its President or one of its
Vice Presidents,
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under its corporate seal reproduced thereon and attested by its Secretary or
one of its Assistant Secretaries. The signature of any of these officers on
the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Finance Company
shall bind the Finance Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such Securities or did not hold such offices at the date of such Securities.
The Trustee shall (upon Company Order) authenticate and
deliver Securities for original issue in an aggregate principal amount of up to
$425,000,000.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on
such Security a certificate of authentication substantially in the form
provided for herein duly executed by the Trustee by manual signature of one of
its duly authorized signatories, and such certificate upon any Security shall
be conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder and is entitled to the benefits of this
Indenture.
In case the Finance Company, pursuant to Article Eight, shall
be consolidated or merged with or into any other Person or shall convey,
transfer, lease or otherwise dispose of substantially all of its properties and
assets to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Finance Company
shall have been merged, or the successor Person which shall have received a
conveyance, transfer, lease or other disposition as aforesaid, shall have
executed an indenture supplemental hereto with the Trustee pursuant to Article
Eight, any of the Securities authenticated or delivered prior to such
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Securities executed in the name of the successor Person with
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such changes in phraseology and form as may be appropriate, but otherwise in
substance of like tenor as the Securities surrendered for such exchange and of
like principal amount; and the Trustee, upon Company Order of the successor
Person, shall authenticate and deliver Securities as specified in such request
for the purpose of such exchange. If Securities shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer
of any Securities, such successor Person, at the option of any Holder but
without expense to such Holder, shall provide for the exchange of all
Securities at the time Outstanding held by such Holder for Securities
authenticated and delivered in such new name.
Section 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Finance
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Finance Company will
cause definitive Securities to be prepared without unreasonable delay. After
the preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Finance Company designated for such
purpose pursuant to Section 1002, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities, the Finance Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Securities of authorized
denominations. Until so exchanged, the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as definitive
Securities.
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Section 305. REGISTRATION, REGISTRATION OF TRANSFER AND
EXCHANGE.
The Finance Company shall cause to be kept at the Corporate
Trust Office of the Trustee a register (the register maintained in such office
and in any other office or agency designated pursuant to Section 1002 being
herein sometimes referred to as the "Security Register") in which, subject to
such reasonable regulations as it may prescribe, the Finance Company shall
provide for the registration of Securities and of transfers of Securities.
Said office or agency is hereby initially appointed "Security Registrar" for
the purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at
the office or agency of the Finance Company designated pursuant to Section 1002
for such purpose, the Finance Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denomination or
denominations and of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomination or denominations and of a like
aggregate principal amount upon surrender of the Securities to be exchanged at
such office or agency. Whenever any Securities are so surrendered for
exchange, the Finance Company shall execute, and the Trustee shall authenticate
and deliver, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Finance Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of
transfer, or for exchange or redemption, shall (if so required by the Finance
Company or the Security Registrar) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory
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to the Finance Company and the Security Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Securities, but the Finance Company may
require payment of a sum sufficient to pay all documentary, stamp or similar
issue or transfer taxes or other governmental charges that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 303, 304, 306, 906, 1015 or 1108 not
involving any transfer.
The Finance Company shall not be required (a) to issue,
register the transfer of or exchange any Security during a period beginning at
the opening of business (i) 15 days before the mailing of a notice of
redemption of the Securities selected for redemption under Section 1104 and
ending at the close of business on the day of such mailing or (ii) 15 days
before an Interest Payment Date and ending on the close of business on the
Interest Payment Date, or (b) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of Securities being redeemed in part.
Section 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If (a) any mutilated Security is surrendered to the Trustee,
or (b) the Finance Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, and there is
delivered to the Finance Company and the Trustee such security or indemnity as
may be required by them to save each of them and any agent of them harmless,
then, in the absence of notice to the Finance Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Finance Company shall
execute and upon Company Order the Trustee shall authenticate and deliver, in
exchange for any such mutilated Security or in lieu of any such destroyed, lost
or stolen Security, a replacement Security of like tenor and principal amount,
and bearing a number not contemporaneously outstanding.
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In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Finance Company in its
discretion may, instead of issuing a replacement Security, pay such Security.
Upon the issuance of any replacement Securities under this
Section 306, the Finance Company may require the payment of a sum sufficient to
pay all documentary, stamp or similar issue or transfer taxes or other
governmental charges that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every replacement Security issued pursuant to this Section 306
in lieu of any destroyed, lost or stolen Security shall constitute a
contractual obligation of the Finance Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall
be entitled to all benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section 306 are exclusive and shall
provide (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date and interest
on such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
shall forthwith cease to be payable to the Holder on the relevant Regular
Record Date by virtue of having been such Holder; and such Defaulted
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Interest may be paid by the Finance Company, at its election in each case, as
provided in Subsection (a) or (b) below:
(a) The Finance Company may elect to make payment
of any Defaulted Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Finance Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each Security
and the date of the proposed payment, and at the same time the Finance Company
shall deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited for the benefit of the Persons
entitled to such Defaulted Interest as in this Subsection provided. Thereupon
the Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Finance Company of such Special Record Date. In the name and at the
expense of the Finance Company, the Trustee shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
mailed, first class postage prepaid, to each Holder at his address as it appears
in the Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so mailed, such Defaulted Interest shall be
paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following Subsection
(b).
(b) The Finance Company may make payment of any
Defaulted Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
and upon
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such notice as may be required by such exchange, if, after notice given by the
Finance Company to the Trustee of the proposed payment pursuant to this
Subsection, such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 307, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
Section 308. PERSONS DEEMED OWNERS.
Prior to the time of due presentment for registration of
transfer, the Finance Company, the Trustee and any agent of the Finance Company
or the Trustee may treat the Person in whose name any Security is registered as
the owner of such Security for the purpose of receiving payment of principal of
(and premium, if any) and (subject to Section 307) interest on such Security
and for all other purposes whatsoever, whether or not such Security be overdue,
and neither the Finance Company, the Trustee nor any agent of the Finance
Company or the Trustee shall be affected by notice to the contrary.
Section 309. CANCELLATION.
All Securities surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled
by it. The Finance Company shall deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Finance
Company may have acquired in any manner whatsoever, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as
provided in this Section, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee shall be destroyed and certification
of their destruction delivered to the Finance Company unless by a Company Order
the Finance Company shall direct that cancelled Securities be returned to it.
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Section 310. COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a
year of twelve 30-day months.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall, upon Company Request, cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of Securities herein expressly provided for) and the Trustee, on
demand of and at the expense of the Finance Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when
(a) either
(i) all Securities theretofore authenticated
and delivered (other than (1) Securities which have been destroyed, lost
or stolen and which have been replaced or paid as provided in Section 306
and (2) Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Finance Company
and thereafter repaid to the Finance Company or discharged from such
trust, as provided in Section 1003) have been delivered to the Trustee
for cancellation; or
(ii) all such Securities not theretofore
delivered to the Trustee for cancellation
(1) have become due and payable, or
(2) will become due and payable at
their Stated Maturity within one year, or
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(3) are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and at the
expense, of the Finance Company,
and the Finance Company, in the case of (1), (2) or (3) above, has irrevocably
deposited or caused to be deposited with the Trustee, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the Trustee,
as trust funds in trust solely for the benefit of the Holders for that purpose
cash in U.S. Dollars or U.S. Government Obligations sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore delivered
to the Trustee for cancellation, for principal of (and premium, if any) and
interest to the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(b) the Finance Company has paid or caused to be
paid all other sums payable hereunder by the Finance Company; and
(c) the Finance Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel each stating that
all conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Companies to the Trustee under Section 606
and, if money shall have been deposited with the Trustee pursuant to subclause
(ii) of Subsection (a) of this Section 401, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall survive.
The Security Documents shall not be discharged as a result of
such irrevocable deposit under subclause (ii) of Subsection (a) of this Section
401 unless the Finance Company shall have delivered to the Trustee an Opinion
of Counsel, subject to customary exclusions and exceptions reasonably
acceptable to the Trustee, to the effect that (i) the Finance Company has
authorization to establish such irrevocable trust in favor of the Trustee
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for the benefit of the Holders under applicable law and the action in
establishing the irrevocable trust has been duly and properly authorized by the
Finance Company and such authorization has not been revoked, (ii) the Trustee
is an independent trustee with respect to the irrevocable trust, (iii) a valid
trust is created at the time of such irrevocable deposit and (iv) the Holders
of the Securities will have the sole beneficial ownership interest under
applicable law in the money or U.S. Government Obligations so deposited in such
trust. The Opinion of Counsel so referred to in this paragraph may contain a
qualification that in the event that a court of competent jurisdiction were to
determine that the trust funds remained owned by the Finance Company after such
deposit, the Holders of the Securities will have a non-avoidable first-
priority perfected security interest under applicable law in the money or U.S.
Government Obligations so deposited (for the limited purpose of the Opinion of
Counsel referred to in this paragraph, such opinion may contain an assumption
that the conclusions contained in a customary solvency letter by a nationally
recognized appraisal firm, dated as of the date of the deposit and taking into
account such deposit, or a customary alternative certificate reasonably
acceptable to the Trustee, are accurate, PROVIDED that such solvency letter or
certificate is also addressed and delivered to the Trustee).
It is the intention of the parties hereto that a valid trust
for the benefit of the Holders of the Securities be created at the time that
the Finance Company makes the deposit pursuant to this Section 401. The
security interest in such deposit that is provided for herein to the Holders of
the Securities is intended solely as protection for the Holders of the
Securities in the event that a court of competent jurisdiction were to
determine either that (i) such trust had not been validly created or (ii) such
trust is not enforceable.
The Company and the Finance Company shall take any and all
acts necessary to create and perfect, in favor of the Holders of the
Securities, a first-priority security interest in the money so deposited and
shall take any other action and execute and deliver any other documents that
may reasonably be requested by the Trustee to effectuate such security
interest, and shall do all of the above at such appropriate time so that such
security
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interest shall attach to the deposit at the time such deposit is made.
Notwithstanding the foregoing, prior to the end of the 91-day
period following the irrevocable deposit referred to above, none of the
obligations of the Company, the Operating Company, the Finance Company or
Realty Co. under this Indenture or the Security Documents shall be discharged,
unless and until the Finance Company shall have delivered to the Trustee a
Current Appraisal as of a date no more than 60 days prior to the date of such
irrevocable deposit reflecting the Appraised Fair Market Value of the
Collateral as a going concern in an amount not less than 120% of the amount of
such irrevocable deposit and an Opinion of Counsel, subject to customary
exclusions and exceptions, to the effect that based on such Current Appraisal,
the irrevocable deposit will not be subject to avoidance as a preferential
transfer under 11 U.S.C. Section 547, as it may be amended from time to time.
Section 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Finance Company, the Company or another Subsidiary
acting as Paying Agent) as the Trustee may determine, to the Persons entitled
thereto, of the principal (and premium, if any) and interest for whose payment
such money has been deposited with the Trustee.
ARTICLE V
REMEDIES
Section 501. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Finance Company defaults in the payment of
interest on any Security when the same becomes due and payable and such default
continues for a period of 30 days; or
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(b) the Finance Company defaults in the payment of
the principal of (or premium, if any, on) any Security when the same becomes
due and payable, whether at its Stated Maturity, upon redemption, or otherwise;
or
(c) any of the Company, the Operating Company, the
Finance Company or Realty Co. default in the performance of, or breach, any
covenant or warranty of such company hereunder (other than a default in the
performance, or breach, of a covenant or warranty that is specifically dealt
with elsewhere in this Section) or default in the performance of, or breach, any
covenant or warranty of such company in the Security Documents and, in any such
case, continuance of such default or breach for the period and after the notice
specified below; or
(d) an event or events of default as defined in
any mortgage, bond, indenture, loan agreement or other evidence of Indebtedness
under which there may be issued or by which there may be secured or evidenced
any Indebtedness of either of the Companies or any Subsidiary in excess of
$10,000,000 in the aggregate, which default or defaults extend beyond any period
of grace provided with respect thereto and which default or defaults relate to
(i) the obligation to pay the principal of or interest on any such Indebtedness,
in either case at the final maturity set forth in the agreement under which such
Indebtedness is issued or (ii) any other obligation which shall result in such
Indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable; or
(e) final judgments or orders are rendered against
either of the Companies or any Subsidiary which require the payment of money,
either individually or in an aggregate amount, that is more than $10,000,000
and (i) an enforcement proceeding with respect thereto has been commenced or
(ii) such judgment or order shall remain unsatisfied or unstayed, by reason of
appeal or otherwise, for 60 days; or
(f) a decree or order is entered by a court having
jurisdiction in the premises (i) for relief in respect of either of the
Companies or any Material Subsidiary in an involuntary case or proceeding
under the Federal Bankruptcy Code or any other federal or state bankruptcy,
insolvency, reorganization or similar law or
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(ii) adjudging either of the Companies or any Material Subsidiary as bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of either of the
Companies or any Material Subsidiary under the Federal Bankruptcy Code or any
other applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
either of the Companies or any Material Subsidiary or of any substantial part
of any of their properties, or ordering the winding up or liquidation of any of
their affairs, and any such decree or order remains unstayed and in effect for
a period of 60 consecutive days; or
(g) either of the Companies or any Material
Subsidiary institutes a voluntary case or proceeding under the Federal
Bankruptcy Code or any other applicable federal or state law or any other
case or proceeding to be adjudicated as bankrupt or insolvent, or either of the
Companies or any Material Subsidiary consents to the entry of a decree or order
for relief in respect of either of the Companies or any Material Subsidiary in
any involuntary case or proceeding under the Federal Bankruptcy Code or any
other applicable federal or state law or to the institution of bankruptcy or
insolvency proceedings against either of the Companies or any Material
Subsidiary, or either of the Companies or any Material Subsidiary files a
petition or answer or consent seeking reorganization or relief under the Federal
Bankruptcy Code or any other applicable federal or state law, or consents to the
filing of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of either of the Companies or any Material Subsidiary or of
any substantial part of its property, or makes an assignment for the benefit of
creditors, or becomes insolvent, or is unable to pay debts generally as they
come due, or admits in writing its inability to pay its debts generally as they
become due or takes corporate action in furtherance of any such action; or
(h) there is a default in the performance or
breach of any of the provisions of Article Eight or a failure by the Finance
Company to provide the notice to
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Holders or to make the payments required by Section 1015; or
(i) an "Event of Default" under any of the Security
Documents occurs; or
(j) the revocation, suspension or loss for a period
of more than 90 consecutive days of any Gaming License (other than a voluntary
relinquishment of a Gaming License by a Subsidiary other than a Subsidiary
holding the license to operate the Casino Hotel) under which the Company
or any Material Subsidiary owns, leases or operates the Casino Hotel or any
Subsidiary Casino Hotel; or
(k) the Company Guaranty shall, at any time, cease
to be in full force and effect or shall be declared invalid or unenforceable;
or either of the Companies shall assert, in any pleading in a court of
competent jurisdiction, that such Company Guaranty is invalid or unenforceable.
A default under clause (c) is not an Event of Default until
the continuance of such default for a period of 30 days after there has been
given, by registered or certified mail, to either of the Companies by the
Trustee or to either of the Companies and the Trustee by the Holders of at
least 25% in principal amount of the Outstanding Securities a written notice
specifying such default and stating that such notice is a "Notice of Default"
hereunder.
Section 502. ACCELERATION OF MATURITY; RESCISSION.
If an Event of Default (other than an Event of Default
specified in Section 501(f) or 501(g)) occurs and is continuing, the Trustee or
the Holders of at least 25% of the principal amount of the Securities then
Outstanding, by written notice to the Company and the Finance Company (and to
the Trustee if such notice is given by the Holders), may, and the Trustee at
the request of such Holders shall, declare all unpaid principal of, premium, if
any, and accrued interest on all the Securities to be due and payable
immediately, and upon any such declaration such principal, premium and accrued
interest shall become immediately due and payable. If an Event of
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Default specified in Section 501(f) or 501(g) occurs and is continuing, the
amounts described above shall IPSO FACTO become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
After a declaration of acceleration, but before a judgment or
decree for payment of the money due has been obtained by the Trustee, the
Holders of a majority in aggregate principal amount of the Securities
Outstanding, by written notice to the Finance Company and the Trustee, may
annul such declaration if (a) the Finance Company has paid or deposited with
the Trustee a sum sufficient to pay (i) all sums paid or advanced by the
Trustee under this Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, (ii) all
overdue interest on all Securities, (iii) the principal of and premium, if any,
on any Securities which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities, and (iv)
to the extent that payment of such interest is lawful, interest upon overdue
interest at the rate borne by the Securities; and (b) all Events of Default,
other than the non-payment of principal of the Securities which have become due
solely by the declaration of acceleration, have been cured or waived.
Section 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE.
The Finance Company covenants that if
(a) default is made in the payment of any interest
on any Securities when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the
principal of (or premium, if any, on) any Security at the Maturity thereof,
the Finance Company will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal (and premium, if any) and interest,
with interest upon the overdue principal (and premium, if any)
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and, to the extent that payment of such interest shall be legally enforceable,
upon overdue installments of interest, at the rate borne by the Securities;
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Finance Company fails to pay such amounts forthwith
upon such demand, the Trustee, in its own name and as trustee of an express
trust, may institute a judicial proceeding for the collection of the sums so
due and unpaid and may prosecute such proceeding to judgment or final decree,
and may enforce the same against the Companies or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Companies or any other
obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders under this Indenture and may enforce any rights or remedies
available to it upon an Event of Default under the Security Documents by such
appropriate private or judicial proceedings as the Trustee shall deem most
effectual to protect and enforce such rights, including foreclosing upon the
Cash Collateral in the Collateral Account.
Section 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial proceeding relative to the Company, the Finance Company, the
Operating Company or Realty Co. or any other obligor upon the Securities or the
property of either of the Companies or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Companies for the payment of overdue principal or interest) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
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(a) to file and prove a claim for the whole amount
of principal (and premium, if any) and interest owing and unpaid in respect of
the Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other
property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any proposal, plan of reorganization, arrangement, adjustment or composition or
other similar arrangement affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
Section 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
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Section 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article or
Collateral foreclosed on in the Collateral Account shall be applied in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal (or premium, if any) or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid
upon the Securities for principal (and premium, if any) and interest, in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Securities for principal (and premium, if any) and
interest; and
THIRD: The balance, if any, to the Finance Company.
Notwithstanding the foregoing, if the Trustee forecloses on
any real Property comprising the Collateral, it shall pay out the proceeds of
such foreclosure in accordance with the provisions of the Mortgage and the
Intercreditor Agreement if there are any Pari Passu Mortgages on such real
Property.
Section 507. LIMITATION ON SUITS.
No Holder of any Securities shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture or the
Securities, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(a) such Holder has previously given written notice
to the Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in principal
amount of the Outstanding Securities shall have
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made written request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the
Trustee reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written
request has been given to the Trustee during such 60-day period by the Holders
of a majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture, the Note or the Security Documents to affect, disturb or
prejudice the rights of any other Holders, or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right under
this Indenture, the Note or the Security Documents except in the manner
provided in this Indenture, the Note or the Security Documents and for the
equal and ratable benefit of all the Holders.
Section 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
interest on such Security on the respective due dates expressed in such
Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
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Section 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Companies, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
Section 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as provided in Section 306, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
Section 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
Section 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the
Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
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exercising any trust or power conferred on the Trustee; provided that
(a) such direction shall not be in conflict with any
rule of law or with this Indenture or expose the Trustee to personal liability,
and
(b) subject to the provisions of Trust Indenture Act
Section 315, the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of
the Outstanding Securities may on behalf of the Holders of all the Securities
waive any past Default or Event of Default hereunder and its consequences,
except a Default or Event of Default
(a) in the payment of the principal of (or premium,
if any) or interest on any Security, or
(b) in respect of a covenant or provision hereof
which under Article Nine cannot be modified or amended without the consent of
the Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Section 514. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, the Note or the Security Documents or in
any suit against the Trustee for any action taken, suffered or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs,
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including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made
by such party litigant; but the provisions of this Section shall not apply to
any suit instituted by the Trustee, to any suit instituted by any Holder, or
group of Holders, holding in the aggregate more than 10% in principal amount of
the Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Security on or after the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on or after the Redemption Date).
Section 515. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Companies covenant (to the extent that they may lawfully
do so) that they will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantages of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Companies
(to the extent that they may lawfully do so) hereby expressly waive all benefit
or advantage of any such law, and covenant that they will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
ARTICLE VI
THE TRUSTEE
Section 601. NOTICE OF DEFAULTS.
Within 90 days after the occurrence of any Default that is
known to the Trustee, the Trustee shall transmit by mail to all Holders, as
their names and addresses appear in the Security Register, notice of such
Default; PROVIDED, HOWEVER, that, except in the case of a default in the
payment of the principal of (or premium, if any) or interest on any Security,
the Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a
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trust committee of directors and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interest of the
Holders.
Section 602. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Trust Indenture Act Sections
315(a) through 315(d):
(a) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or document
delivered by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request or direction of either of the
Companies mentioned herein shall be sufficiently evidenced by a Company
Request or Company Order and any resolution of the Board of Directors of either
of the Companies may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture
the Trustee shall deem it desirable that a matter be provided or established
prior to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the absence
of bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and
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liabilities which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate
(including, without limitation, any certificate or report of the Company
provided for in Sections 703 and 1021), statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine, upon
reasonable notice, the books, records and premises of the Companies, personally
or by agent or attorney;
(g) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder;
(h) no provision of this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it; and
(i) the Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes to be authorized or
within the rights or powers conferred upon it by this Indenture.
Section 603. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES.
(a) Prior to the occurrence of an Event of Default
with respect to the Securities and after the curing or waiving of all Events
of Default which may have occurred with respect to the Securities, the Trustee
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undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture with respect to the Securities. In case an Event of
Default with respect to the Securities has occurred (which has not been cured
or waived), the Trustee shall exercise such of the rights and powers vested in
it by this Indenture in respect of the Securities, and use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
(b) The recitals contained herein and in the
Securities, except the Trustee's certificates of authentication, shall be taken
as the statements of the Companies, and the Trustee assumes no responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. The Trustee shall not be
accountable for the use or application by the Finance Company of Securities or
the proceeds thereof, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder and that the statements made by it in a
Statement of Eligibility and Qualification on Form T-1 supplied or to be
supplied to the Finance Company are true and accurate, subject to the
qualifications set forth therein.
Section 604. MAY HOLD SECURITIES.
The Trustee or any Paying Agent, Security Registrar or other
agent of the Companies or their Affiliates, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Trust
Indenture Act Sections 310(b) and 311, may otherwise deal with the Companies or
their Affiliates with the same rights it would have if it were not Trustee,
Paying Agent, Security Registrar or such other agent.
Section 605. MONEY HELD IN TRUST.
Money or U.S. Government Obligations held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Finance
Company.
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Section 606. COMPENSATION AND REIMBURSEMENT.
The Companies agree jointly and severally:
(a) to pay to the Trustee from time to time
reasonable compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein,
to reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance
with any provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its negligence or bad
faith; and
(c) to indemnify the Trustee for, and to hold it
harmless against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the acceptance
or administration of this trust, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the
Companies under this Section, the Trustee shall have a claim prior to the
Securities upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the benefit of Holders of particular
Securities.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in Section 501(f) or (g), the
expenses and compensation for such services are intended to constitute expenses
of administration under Title 11, U.S. Code or any similar federal or state law
for the relief of debtors.
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Section 607. CONFLICTING INTERESTS.
The Trustee shall comply with the provisions of Section 310(b)
of the Trust Indenture Act.
Section 608. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under Trust Indenture Act Section 310(a)(1) and
which shall have a combined capital and surplus of at least $50,000,000 and
have its Corporate Trust Office located in The City of New York (or if its
Corporate Trust Office shall not be located in The City of New York, which
shall maintain an office in The City of New York where the Securities may be
presented or surrendered and notices and demands hereunder may be made or
served) to the extent there is such an institution eligible and willing to
serve. If such corporation publishes reports of condition at least annually
pursuant to law or to the requirements of Federal, State, Territorial or
District of Columbia supervising or examining authority, then, for the purposes
of this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article. The Trustee shall comply with the Casino Control Act to the extent
such requirements are applicable to the Trustee and are consistent with its
duties herein; PROVIDED, HOWEVER, that to the extent the provisions of the
Casino Control Act conflict with the provisions of the Trust Indenture Act, the
Trust Indenture Act shall control; PROVIDED FURTHER, that this Section 608
shall not require the Trustee to assume any duties or obligations which are in
addition to those set forth herein.
Section 609. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the
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acceptance of appointment by the successor Trustee under Section 610.
(b) The Trustee may resign at any time by giving
written notice thereof to the Companies. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by an Act
of the Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and the Companies.
(d) If at any time:
(i) the Trustee fails to comply with
the provisions of Trust Indenture Act Section 310(b), or
(ii) the Trustee shall cease to be
eligible under Section 608, or
(iii) the Trustee shall become
incapable of acting or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
(iv) the Casino Control Commission
determines that the Trustee is required to be licensed or
found qualified or suitable and the Trustee does not become
so licensed or found qualified or suitable within such period
as may be prescribed by the Casino Control Commission,
then, in any case, (1) the Finance Company by a Board Resolution may remove the
Trustee, or (2), subject to Section 514, the Holder of any Security, on behalf
of himself and all others similarly situated, may petition
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any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the office of Trustee
for any cause, the Company, by a Board Resolution, shall promptly, upon
approval of the Casino Control Commission, appoint a successor Trustee, which
Trustee shall be licensed or found qualified or suitable under the Casino
Control Act. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company, upon approval of the Casino
Control Commission, and the retiring Trustee, the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment in accordance with
Section 610, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders of the Securities and so accepted appointment
within 60 days, the Finance Company or the Holders of at least 10% in principal
amount of the Securities may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
(f) The Finance Company shall give notice of each
resignation and each removal of the Trustee and each appointment of a
successor Trustee by mailing written notice of such event by first-class mail,
postage prepaid, to the Holders of Securities as their names and addresses
appear in the Security Register. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
Section 610. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Companies and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; PRO-
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VIDED, HOWEVER, that the retiring Trustee shall continue to be entitled to the
benefit of Section 606(c). Such retiring Trustee shall, on request of the
Finance Company or the successor Trustee, upon payment of its charges, execute
and deliver an instrument transferring to such successor Trustee all such
rights, powers and trusts of the retiring Trustee, and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Finance Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
Section 611. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities.
Section 612. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the
Companies (or any other obligor under the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection
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of claims against the Companies (or any such other obligor).
Section 613. FURTHER ASSURANCES.
At the request of the Company, the Operating Company, the
Finance Company or Realty Co., the Trustee will execute and deliver to any
holder of any Pari Passu Mortgage, the Lien of which is evidenced by an
instrument containing the Pari Passu statement referred to in the definition of
Pari Passu Mortgage in Section 101 hereof, a certificate in the form of Exhibit
E hereto (the "Pari Passu Certificate") and such other assurances or
instruments all in form recordable in the Atlantic County, New Jersey mortgage
records, as the Company, the Operating Company, the Finance Company or Realty
Co. may reasonably request to confirm that the Collateral is held for the
ratable benefit of the Holders and such holders of any Pari Passu Mortgage. The
Trustee shall deliver the Pari Passu Certificate and such other assurances or
instruments only upon receipt of, and shall be fully protected in relying upon,
(i) an Opinion of Counsel stating that the execution and delivery of such
assurances or other instruments is in compliance with this Section 613 based
upon the certificates referred to in clauses (ii) and (iii) below, (ii) an
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee stating
that the Indebtedness secured by such Pari Passu Mortgage is within the
limitations set forth in Sections 1007 and 1010 and (iii) an Officers'
Certificate stating that such Pari Passu Mortgage complies with the provisions
of this Indenture, that no Default has occurred and is continuing or would
occur as a result of giving effect to such Pari Passu Mortgage and that the
holder of such Pari Passu Mortgage has executed the Intercreditor Agreement.
The delivery by the Trustee of a Pari Passu Certificate and
such other assurances or instruments that the Company, the Operating Company,
the Finance Company or Realty Co. may reasonably request as aforesaid shall
not, however, prevent or estop the Trustee or the Holders of Securities from
thereafter exercising its or their rights and remedies under this Indenture
(not including attempts to set aside or gain priority over those Liens or
mortgages the holders of which have relied on the Pari
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Passu Certificate) if the creation or incurrence of the Pari Passu Mortgage
referred to in such Pari Passu Certificate and other assurances or instruments
shall not have been permitted by Sections 1007 and 1010 of this Indenture or
does not otherwise comply with the provisions of this Indenture.
The filing for record in the Atlantic County, New Jersey
Clerk's Office of the Pari Passu Certificate and such other assurances or
instruments that the Company, the Operating Company or the Finance Company may
reasonably request, as provided above in this Section 613, shall conclusively
establish and confirm to all persons that the Lien of the holder of
Indebtedness referred to in the Pari Passu Certificate ranks PARI PASSU with
the Lien of the Mortgage and that the Collateral is held for the ratable
benefit of the Holders and such holder of Pari Passu Mortgages.
Notwithstanding any other provision of this Section 613, the holder of any such
Pari Passu Mortgage, its successors and assigns, shall be entitled to rely on
the Pari Passu Certificate and such other assurances or instruments without
further investigation or other acts.
As used in this Section 613, "ratable benefit of the Holders
and such holder(s) of any Pari Passu Mortgage(s)" shall mean that the cash that
becomes available from the sources described in Section 12 of the Intercreditor
Agreement for the redemption or repayment of the Securities and any loan
secured by the Pari Passu Mortgage shall be applied as set forth in Section 12
of the Intercreditor Agreement.
ARTICLE VII
HOLDERS' LISTS AND REPORTS
BY TRUSTEE AND COMPANY
Section 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS.
Every Holder of Securities, by receiving and holding the same,
agrees with the Companies and the Trustee that none of the Companies or the
Trustee or any agent of any of them shall be held accountable by reason of the
disclosure of any information as to the names and
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addresses of the Holders in accordance with Trust Indenture Act Section 312,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material
pursuant to a request made under Trust Indenture Act Section 312 at any time
following the date on which this Indenture is qualified under the Trust
Indenture Act.
Section 702. REPORTS BY TRUSTEE.
(a) Within 60 days after May 15 of each year
commencing with the first May 15 following the date on which this Indenture is
qualified under the Trust Indenture Act, the Trustee shall transmit by mail
to all Holders, as their names and addresses appear in the Security Register, as
provided in Trust Indenture Act Section 313(c), a brief report dated as of such
May 15 if required by Trust Indenture Act Section 313(a).
A copy of each report at the time of its mailing to Holders
shall be mailed to the Finance Company and filed with the Commission and each
stock exchange, if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities become
listed on any stock exchange.
(b) The Trustee will provide to the Casino Control
Commission and the Division of Gaming Enforcement:
(i) copies of all notices, reports and
other written communications that the Trustee gives to Holders;
(ii) a list of Holders promptly after
the original issuance of the Securities and semiannually thereafter
upon the receipt of a Company Request;
(iii) notice of any Default or Event of
Default under this Indenture, any acceleration of the Indebtedness
evidenced or secured hereby, the institution of any legal actions
or proceedings before any court or governmental authority in
respect of this Indenture, including the Security Documents, the
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entering into or taking possession of any Property constituting the
Collateral and any rescission, annulment or waiver in respect of an
Event of Default under any instruments described in this clause (iii);
(iv) notice of the removal or resignation of
the Trustee within five Business Days thereof;
(v) notice of any transfer or assignment
of rights under this Indenture, or any of the Security Documents
within five Business Days thereof; and
(vi) a copy of any amendment to the
Securities or this Indenture, including the Security Documents,
within five Business Days of the later of the effectiveness or
execution thereof.
The notice specified in clause (iii) above shall be in writing and, except as
set forth below, shall be given within five Business Days after the Trustee has
actual knowledge of any circumstances requiring such notice. In the case of
any notice in respect of any Default or Event of Default under any instrument
described in clause (iii), such notice shall be accompanied by a copy of any
notice from the holders of indebtedness evidenced or secured by such
instruments or a representative thereof or trustee therefor, to such defaulting
Person and, if accompanied by any such notice to the defaulting Person, shall
be given simultaneously with the giving of any such notice to the defaulting
Person. In the case of any legal actions or proceedings, such notice shall be
accompanied by a copy of the complaint or other initial pleading or document.
The Trustee shall advise the Casino Control Commission and the Division of
Gaming Enforcement of any further action taken by the Trustee or the Holders
relating to such Default or Event of Default.
The Trustee and its trust officers shall cooperate with the
Casino Control Commission and the Division of Gaming Enforcement in order to
provide the Casino Control Commission and the Division of Gaming Enforcement
with information and documentation relevant to compliance with clause (iii)
above and as otherwise required by the
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Casino Control Act, or Casino Control Commission or the Division of Gaming
Enforcement.
Section 703. REPORTS BY COMPANY.
The Company shall file with the Commission the annual reports,
quarterly reports and other documents required to be filed with the Commission
pursuant to Sections 13 and 15 of the Exchange Act, whether or not the Company
has a class of securities registered under the Exchange Act; the Company shall
file with the Trustee and shall transmit by mail to each Holder of the
Securities (as its name and address appear on the Security Register) within 15
days after it files them with the Commission (or if any such filing is not
permitted under the Exchange Act, 15 days after the Company would have been
required to make such filing) copies of such reports and documents. The
Trustee has no duty to review any financial information or other reports for
the purpose of determining compliance with any portion of this Indenture.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
Section 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
Neither the Company nor any Restricted Subsidiary shall
consolidate with or merge with or into any other Person or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of the
Properties and assets of any of (a) the Company and its Subsidiaries taken as a
whole, (b) the Operating Company, substantially as an entirety, or (c) Realty
Co. to any Person or group of affiliated Persons unless at the time and after
giving effect thereto:
(i) either (a) the Company or such
Restricted Subsidiary shall be the continuing corporation or (b) the
Person (if other than the Company or a Subsidiary) formed by such
consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance
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or disposition shall have been made (the "Surviving Entity"), is a
corporation duly organized and validly existing under the laws of the
United States of America, any state thereof or the District of
Columbia and shall, in either case, expressly assume by supplemental
indenture hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Companies under
the Indenture and the Securities and this Indenture shall remain in
full force and effect;
(ii) immediately prior to such transaction, and
immediately after giving effect to such transaction on a PRO FORMA
basis, no default or Event of Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such
transaction on a PRO FORMA basis, the Company (or the Surviving
Entity, if the Company is not the continuing obligor under the
Indenture) could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under Section 1007 hereof;
(iv) immediately after giving effect to such
transaction on a PRO FORMA BASIS, the Consolidated Net Worth of
the Company (or the Surviving Entity if the Company is not the
continuing obligor under the Indenture) is at least equal to the
Consolidated Net Worth of the Company immediately before such
transaction;
(v) the Lien of the Security Documents and the
rights of the Trustee and the Holders thereunder and under this
Indenture have not been impaired;
(vi) the Surviving Entity has all Gaming Licenses
and other permits and approvals required to operate the Casino Hotel
and any casino hotels then owned by such Surviving Entity and the
Surviving Entity or an Affiliate thereof has had prior experience in
the operation and management of casinos or
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casino hotels, or the Surviving Entity has retained management with such
prior experience; and
(vii) the Companies have delivered to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture, if
one is required by this Section 801, comply with this Section 801 and
that all conditions precedent herein provided for relating to such
transaction have been complied with and that the Lien of the Security
Documents and the rights of the Trustee and the Holders thereunder and
under the Indenture have not been impaired.
The merger or consolidation of, or sale of assets by, any of the Company, the
Finance Company, the Operating Company or Realty Co. with or into or to any of
the Company, the Finance Company, the Operating Company or Realty Co. shall not
be restricted by the foregoing if such transaction complies with clauses (i),
(ii), (v), (vi) and (vii) above.
Section 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation or merger or any sale, assignment,
transfer, lease or conveyance or other disposition of all or substantially all
of the assets of the Company and its Subsidiaries taken as a whole, the
Operating Company or Realty Co., in accordance with Section 801, the successor
corporation formed by such consolidation or into which either the Company or a
Subsidiary is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Companies under this
Indenture with the same effect as if such successor corporation had been named
as one of the Companies herein. When a successor assumes all the obligations
of its predecessor under this Indenture and the Securities, the predecessor
will be released from those obligations, PROVIDED that, in the case of a
transfer by lease, the predecessor
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corporation shall not be released from the payment of principal of and interest
on the Securities.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS.
Without the consent of any Holders, the Companies, the
Operating Company and Realty Co., when authorized by Board Resolution, and the
Trustee, at any time and from time to time, may enter into one or more
indentures, notes or security documents supplemental hereto or to the Note or
Security Documents, as the case may be, in form satisfactory to the Trustee,
for any of the following purposes:
(a) to evidence the succession of another Person to
either of the Companies and the assumption by any such successor of the
covenants of the Company or the Finance Company, as the case may be, herein and
in the Securities;
(b) to add to the covenants of the Companies for the
benefit of the Holders, or to surrender any right or power herein or in the
Securities conferred upon the Companies;
(c) to cure any ambiguity, to correct or supplement
any provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided that, in each case, such
provisions shall not adversely affect the interests of the Holders; or
(d) to make any other change that does not adversely
affect the rights of any Holder.
Section 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding
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Securities, by Act of such Holders delivered to the Finance Company and the
Trustee, the Companies, the Operating Company and Realty Co., when authorized
by Board Resolution, and the Trustee may enter into one or more indentures,
notes or security documents supplemental hereto or to the Note or Security
Documents, as the case may be, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture,
the Note or Security Documents or of waiving or modifying in any manner the
rights of the Holders under this Indenture, the Note or the Security Documents;
PROVIDED, HOWEVER, that no such supplemental indenture, note or security
documents, amendment or waiver shall, without the consent of the Holder of each
Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of,
or any installment of interest on, any Security or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which the principal of any
Security or any premium or the interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date) or modify the obligation of the Company to purchase Securities under
Section 1015 hereof;
(b) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any
amendment, supplement or waiver; or
(c) modify any of the provisions of this Section or
Section 513 or Section 1022, except to increase any of the percentages set
forth in such Sections or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of
each Security affected thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such Act shall approve the substance
thereof.
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Section 903. EXECUTION OF AMENDMENTS, SUPPLEMENTS OR WAIVERS.
In executing, or accepting the additional trusts created by,
any amendments, supplements or waivers permitted by this Article Nine, the
Trustee shall be entitled to receive, and (subject to Trust Indenture Act
Section 315(a) through 315(d) and Section 602 hereof) shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of such
amendment, supplement or waiver is authorized or permitted by this Indenture.
The Trustee may, but shall not be obligated to, enter into any such amendment,
supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 904. EFFECT OF AMENDMENTS, SUPPLEMENTS OR WAIVERS.
Upon the execution of any amendment, supplement or waiver,
this Indenture, the Notes and the Security Documents shall be modified in
accordance therewith, and such supplemental indenture, note or security
documents shall form a part of this Indenture, the Notes or Security Documents,
as the case may be, for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
Section 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every amendment, supplement or waiver executed pursuant to
this Article Nine shall conform to the requirements of the Trust Indenture Act
as then in effect.
Section 906. REFERENCE IN SECURITIES TO AMENDMENTS,
SUPPLEMENTS OR WAIVERS.
Securities authenticated and delivered after the execution of
any amendment, supplement or waiver pursuant to this Article Nine may, and
shall, if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such amendment, supplement or waiver.
If the Finance Company shall so determine, new Securities so modified as to
conform, in the opinion of the Trustee and the Finance Company, to
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any such amendment, supplement or waiver may be prepared and executed by the
Finance Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE X
COVENANTS
Section 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Finance Company will duly and punctually pay the principal
of (and premium, if any) and interest on the Securities in accordance with the
terms of the Securities and this Indenture.
The Finance Company shall pay interest on overdue principal at
the rate borne by the Securities; it shall pay interest on overdue installments
of interest at the same rate to the extent lawful.
Section 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Finance Company will maintain, in The City of New York, an
office or agency where Securities may be presented or surrendered for payment,
where Securities may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Finance Company in respect of the
Securities and this Indenture may be served. If the Corporate Trust Office is
located in New York City, then it shall be such office or agency of the Finance
Company, unless the Finance Company shall designate and maintain some other
office or agency for one or more of such purposes. The Finance Company will
give prompt written notice to the Trustee of any change in the location of any
such office or agency. If at any time the Finance Company shall fail to
maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office, and the Finance
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
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The Finance Company may from time to time designate one or
more other offices or agencies (in or outside of The City of New York) where
the Securities may be presented or surrendered for any or all such purposes,
and may from time to time rescind such designation; PROVIDED, HOWEVER, that no
designation or recision shall in any manner relieve the Finance Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Finance Company will give prompt written notice to the Trustee
of any such designation or rescission and any change in the location of any
such office or agency.
Section 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Finance Company, the Company or another Subsidiary
shall at any time act as Paying Agent, it will, on or before each due date of
the principal of (and premium, if any) or interest on any of the Securities,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal (and premium, if any) or interest so
becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Finance Company shall have one or more Paying
Agents for the Securities, it will, on or before each due date of the principal
of (and premium, if any) or interest on any Securities, deposit with a Paying
Agent a sum in same day funds (or New York Clearing House funds if such deposit
is made prior to the date on which such deposit is required to be made)
sufficient to pay the principal (and premium, if any) or interest so becoming
due, such sum to be held in trust for the benefit of the Persons entitled to
such principal, premium or interest and (unless such Paying Agent is the
Trustee) the Finance Company will promptly notify the Trustee of such action or
any failure so to act.
The Finance Company will cause each Paying Agent other than
the Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
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(a) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the
Finance Company (or any other obligor upon the Securities) in the making of any
payment or principal (and premium, if any) or interest; and
(c) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Finance Company, the Company or another Subsidiary may at
any time, for the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, pay, or by Company Order, the Finance
Company may direct any Paying Agent to pay, to the Trustee all sums held in
trust by such company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts at those upon which such sums were held by such company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Finance Company, the Company or another Subsidiary in trust
for the payment of the principal of (and premium, if any) or interest on any
Security and remaining unclaimed for two years after such principal (and
premium, if any) or interest has become due and payable shall be paid to the
Finance Company on Company Request or (if then held by the Finance Company, the
Company or another Subsidiary) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor,
look only to the Finance Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all
liability of the Finance Company as trustee thereof, shall thereupon cease.
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Section 1004. CORPORATE EXISTENCE.
Subject to Article Eight, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and that of each Restricted Subsidiary of the Company and
the corporate rights (charter and statutory), corporate licenses and corporate
franchises of the Company and its Restricted Subsidiaries, except where a
failure to do so, singly or in the aggregate, is not likely to have a
materially adverse effect upon the business, assets, financial conditions or
results of operations of the Company and the Subsidiaries taken as a whole
determined on a consolidated basis in accordance with GAAP; PROVIDED that the
Company shall not be required to preserve any such existence (except of the
Company), right, license or franchise if the Board of Directors of the Company,
or of the Restricted Subsidiary concerned, shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company or such Restricted Subsidiary and that the loss thereof is not
disadvantageous in any material respect to the Holders.
Section 1005. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all material taxes,
assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of the Company or any of its
Subsidiaries and (b) all material lawful claims for labor, materials and
supplies, which, if unpaid, would by law become a lien upon the property of the
Company or any of its Subsidiaries that could produce a material adverse effect
on the consolidated financial condition of the Company; PROVIDED, HOWEVER, that
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings. The foregoing provision shall not apply to the Company's payment
or discharge of any taxes, assessments or governmental charges governed by the
Mortgage.
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Section 1006. MAINTENANCE OF PROPERTIES.
The Company shall cause all material properties owned by or
leased to it or any Subsidiary and necessary in the conduct of its business or
the business of such Subsidiary to be maintained and kept in all material
respects in normal condition, repair and working order, ordinary wear and tear
excepted.
The Company shall provide or cause to be provided, for itself
and any Subsidiaries of the Company, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties in the same
general areas in which the Company or such Subsidiaries operate.
Section 1007. LIMITATION ON INDEBTEDNESS.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume, or directly or (other than
through Unrestricted Subsidiaries) indirectly guaranty or in any other manner
become directly or (other than through Unrestricted Subsidiaries) indirectly
liable for the payment of (collectively, "incur"), any Indebtedness (excluding
Permitted Indebtedness and including Acquired Indebtedness and Indebtedness
which is a Guaranty permitted pursuant to clause (v) of Section 1008(b))
unless, at the time of such event and after giving effect thereto, on a pro
forma basis the Company's Consolidated Fixed Charge Coverage Ratio for the four
full fiscal quarters for which financial information in respect thereof is
available immediately preceding such event, taken as one period, calculated on
the assumption that (i) such Indebtedness and any other Indebtedness incurred
since the first day of such four-quarter period had been incurred on the first
day of such four-quarter period, (ii) any acquisition or disposition by the
Company and its Restricted Subsidiaries of any assets outside the ordinary
course of business since the first day of such last four full fiscal quarters
had been consummated on the first day of such four-quarter period and (iii) any
prepayment of Indebtedness prior to the scheduled maturity thereof since the
first day of such last four fiscal quarters had been consummated on the first
day of such four-quarter period, is at least equal
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to the ratios set forth below during the years indicated below:
Year Ratio
---- -----
1994 2.00:1
1995 and thereafter 2.25:1
Any Indebtedness (other than Permitted Indebtedness or
Acquired Indebtedness or Indebtedness that is a Guaranty permitted pursuant to
clause (v) of Section 1008(b)) may be incurred hereunder only if (i) such
Indebtedness has an Average Life to Stated Maturity (A) greater than the
remaining Average Life to Stated Maturity of the Securities, if such
Indebtedness ranks junior to the Securities, or (B) equal to or greater than
the remaining Average Life to Stated Maturity of the Securities, if such
Indebtedness ranks PARI PASSU to the Securities and (ii) such Indebtedness has
a final scheduled maturity which (A) exceeds the final Stated Maturity of the
Securities, if such Indebtedness ranks junior to the Securities, or (B) is
equal to or exceeds the final Stated Maturity of the Securities, if such
Indebtedness ranks PARI PASSU to the Securities.
Section 1008. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or (other than through an Unrestricted
Subsidiary) indirectly,
(i) declare or pay any dividend on, or
make any distribution to holders of, any shares of the Company's
Capital Stock (other than dividends or distributions payable in shares
of its Capital Stock or in options, warrants or other rights to purchase
such Capital Stock, but excluding dividends or distributions payable in
Redeemable Capital Stock or in options, warrants or other rights to
purchase Redeemable Capital Stock),
(ii) purchase, redeem or acquire or
retire for value, any Capital Stock of the Company or any Subsidiary
or any options, war-
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rants or other rights to acquire such Capital Stock,
(iii) declare or pay any dividend or distribution
on any Capital Stock of any Subsidiary to any Person (other
than the Company or any of its Wholly Owned Subsidiaries),
(iv) prepay, repay, redeem, defease or
otherwise acquire or retire, for value prior to stated
maturity of principal, scheduled repayment or scheduled sinking
fund payment, any Indebtedness of the Company or the Finance
Company that ranks junior to the Securities in right of payment,
(v) incur, create or assume any Guaranty of
Indebtedness of any Affiliate (other than with respect to (a)
Guaranties of Indebtedness of any Wholly Owned Subsidiary by the
Company or by any Restricted Subsidiary or (b) Guaranties of
Indebtedness of the Company by any Restricted Subsidiary, in
each case in accordance with the terms of this Indenture), or
(vi) make any Investment (other than any Permitted
Investment) in any Person
(such payments or other actions described in the foregoing clauses (i) through
(vi), are collectively referred to as "Restricted Payments"), unless at the
time of and after giving effect to the proposed Restricted Payment (the amount
of any such Restricted Payment, if other than cash, shall be as determined by
the Board of Directors of the Company, whose determination, if reasonable and
based on the good-faith business judgment of the Board of Directors of the
Company, shall be conclusive, and evidenced by a Board Resolution), (1) no
Default or Event of Default shall have occurred and be continuing or shall
occur as a result of such Restricted Payment, (2) immediately before and
immediately after giving effect to such transaction on a pro forma basis, the
Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the provisions of Section 1007 and (3) the aggregate amount
of all Restricted Payments
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declared or made after the date the Securities are issued shall not exceed the
sum of:
(A) 50% of the Consolidated Net Income of the Company
accrued on a cumulative basis during the period beginning on April 1,
1994, and ending on the last day of the Company's last fiscal quarter
ending prior to the date of such proposed Restricted Payment (or, if
such aggregate cumulative Consolidated Net Income shall be a loss,
minus 100% of such loss);
(B) the aggregate Net Cash Proceeds received after the
date hereof by the Company from the issuance or sale (other than to
any of its Subsidiaries) of shares of Capital Stock of the Company
(other than Redeemable Capital Stock) or warrants, options or rights
to purchase such shares of Capital Stock of the Company (other than
Redeemable Capital Stock);
(C) the aggregate cash proceeds received after the date
hereof by the Company as capital contributions to the Company;
(D) the aggregate Net Cash Proceeds received after the
date hereof by the Company (other than from any of its Subsidiaries)
upon the exercise of options, warrants or rights to purchase shares of
Capital Stock of the Company (other than Redeemable Capital Stock);
(E) the aggregate Net Cash Proceeds received after the
date hereof by the Company from the issuance or sale of debt
securities or Redeemable Capital Stock that have been converted into
or exchanged for Capital Stock of the Company (other than Redeemable
Capital Stock), plus the aggregate Net Cash Proceeds received by the
Company at the time of such conversion or exchange; and
(F) $50,000,000.
(b) The foregoing provision will not be violated by reason of
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(i) the payment of any dividend within 60 days after
the date of declaration thereof, if at such declaration date
such declaration complied with the foregoing provision (in which
event such dividend shall be deemed to have been paid on such
date of declaration thereof for purposes of the foregoing
provision);
(ii) redemption of any Capital Stock or Subordinated
Indebtedness of the Company or any Subsidiary required by the
Casino Control Commission or the Division of Gaming Enforcement
or any other agency regulating gaming activities of the Company
or any Subsidiary.
(iii) the redemption, repurchase or other acquisition
or retirement for value of Subordinated Indebtedness of
the Company which is made at a time when there is no Default or
Event of Default continuing and which is made in exchange for,
or out of proceeds of the substantially concurrent issue and
sale (other than to a Subsidiary) of (A) shares of Capital Stock
(other than Redeemable Capital Stock) of the Company, PROVIDED,
HOWEVER, that any Net Cash Proceeds from such issue are ex-
cluded from clause 3(B) of the preceding paragraph or (B) new
Indebtedness of the Company, so long as (1) such Indebtedness is
expressly subordinated to the Securities at least to the same
extent as the Subordinated Indebtedness being so refinanced; (2)
such Indebtedness has an Average Life to Stated Maturity equal
to or greater than the remaining Average Life to Stated Maturity
of the Securi- ties; and (3) such Indebtedness has a final
scheduled maturity which exceeds the final Stated Maturity of
the Securities, PROVIDED, HOWEVER, that any Net Cash Proceeds
from such issue are excluded from clause 3(E) of the preceding
paragraph;
(iv) redemption, repurchase or other acquisition or
retirement for value of Capital Stock of the Company or any
options, warrants or rights to acquire such Capital
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Stock of the Company which is made at a time when there is no Default
or Event of Default continuing and which is made in exchange for, or
out of proceeds of the substantially concurrent issue and sale (other
than to a Subsidiary) of shares of Capital Stock (other than
Redeemable Capital Stock) of the Company, PROVIDED, HOWEVER, that any
Net Cash Proceeds from such issue are excluded from clause 3(B) of the
preceding paragraph;
(v) Guaranties of Indebtedness of
Affiliates of the Company in an amount not to exceed $20,000,000;
PROVIDED, HOWEVER, that such Restricted Payment shall comply with
clauses (1) and (2) of paragraph (a) of this Section 1008; and
(vi) payments permitted pursuant to clauses
(iv) and (v) under the proviso contained in Section 1009.
The Restricted Payments described in clauses (b)(i) and (ii) shall be included
in any computation of the aggregate amount of Restricted Payments by the
Company and its Subsidiaries. Notwithstanding the foregoing, neither (i) the
payment of dividends out of the net proceeds of the issuance of the Securities
nor (ii) any payment in an amount equal to any amounts returned by the trustee
under the indenture relating to the Company's 11-7/8% First Mortgage Notes due
1999 to the Finance Company in connection with a defeasance deposit thereunder
shall be deemed a Restricted Payment for purposes of the calculation of the
aggregate amount of all Restricted Payments in clause (3) of paragraph (a) of
this Section 1008.
Section 1009. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or (other than through an Unrestricted
Subsidiary) indirectly, enter into any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any Affiliate of the Company (other
than the Company or a Wholly Owned Subsidiary of the Company) unless (i) such
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transaction or series of transactions is or are on terms that are no less
favorable to the Company or such Restricted Subsidiary, as the case may be,
than could have been obtained at the time of such transaction or transactions
in a comparable transaction in arm's-length dealings with an unaffiliated third
party, (ii) with respect to any transaction or series of transactions involving
aggregate payments in excess of $1,000,000, but less than $10,000,000, the
Company delivers an Officers' Certificate to the Trustee certifying that such
transaction or series of transactions complies with clause (i) above and that
such transaction or series of transactions has received the approval of a
majority of the Board of Directors of the Company and (iii) with respect to any
transaction or series of transactions involving aggregate payments equal to or
in excess of $10,000,000, the Company delivers an Officers' Certificate to the
Trustee certifying that such transaction or series of transactions complies
with clause (i) above and that such transaction or series of transactions has
received the approval of a majority of the disinterested directors of the Board
of Directors of the Company; PROVIDED, HOWEVER, that the foregoing restrictions
shall not apply to (i) the payment of reasonable and customary fees to the
directors of the Company and its Restricted Subsidiaries who are not employees
of the Company or any such Restricted Subsidiary, (ii) loans and advances to
and other employment arrangements with any officer, director or employee of the
Company or of any Restricted Subsidiary entered into in the ordinary course of
business and consistent with past practice, (iii) transactions pursuant to the
lease agreements relating to the lease by the Company of surface parking lots
(located adjacent to Bally's Grand Casino Hotel) and the lease by the Company
of a surface parking lot and building in Ventnor, New Jersey to GNAC, (iv)
transactions, including payments and reimbursements, in connection with certain
management and administrative services and insurance coverage provided to the
Company by Bally, Casino Holdings and certain consolidated GNAC/Company
operations pursuant to the Intercorporate Agreement, (v) payments to Bally
pursuant to the Tax Sharing Agreement, (vi) Investments that are Permitted
Investments pursuant to clause (vi) of the definition of Permitted Investments
and (vii) Guaranties permitted pursuant to clause (v) of Section 1008(b). For
purposes of this provision, a director who is neither (i) an officer or an
employee of the other party to such
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transaction nor (ii) a person who has a personal interest directly or
indirectly in the transaction shall be deemed "disinterested."
Section 1010. LIMITATION ON ENCUMBRANCES.
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or otherwise
suffer to exist or cause or otherwise suffer to become effective any Lien in or
on any right, title or interest to the Mortgage or any Property (real or
personal) that constitutes all or any portion of the Collateral subject to the
Lien of the Mortgage (a "Restricted Encumbrance," which term excludes the Lien
created by the Mortgage and the Credit Facility Mortgage), unless (i) such
Restricted Encumbrance is a Permitted Encumbrance or (ii) such Restricted
Encumbrance secures Indebtedness that ranks junior to or is PARI PASSU to the
Lien of the Mortgage and is granted to secure Indebtedness that, together with
all other Indebtedness secured pursuant to this clause (ii), is in an aggregate
principal amount not to exceed the sum (without duplication) of (A) the
original principal amount of the Securities (less the principal amount of the
Securities outstanding at the time of any calculation), (B) the amount
available under the revolving credit facility described in clause (i) of the
definition of Permitted Indebtedness, (C) $100 million and (D) 66-2/3% of the
cost of all Casino Hotel Improvements reflected on the consolidated balance
sheet of the Company since the date hereof.
If the Lien of a Restricted Encumbrance permitted under clause
(ii) of the preceding paragraph is created, the Trustee shall, at the request
of the Company, enter into the Intercreditor Agreement with the holder or
holders of the Indebtedness secured by such Restricted Encumbrance.
Notwithstanding the foregoing provisions of this Section 1010,
the Company or any Restricted Subsidiary may create or incur or permit to exist
purchase money Restricted Encumbrances upon any personal Property acquired by
the Company or any Restricted Subsidiary; provided that no such purchase money
Restricted Encumbrance upon any personal Property acquired by the Company or
any Restricted Subsidiary after the date hereof shall
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extend to or cover any other Property or, at the time incurred, secure
Indebtedness in excess of 90% of the lesser of the cost or fair market value of
the Property subject to such purchase money Restricted Encumbrance; and
PROVIDED FURTHER that the aggregate principal amount of all Indebtedness at any
time outstanding and secured by Restricted Encumbrances permitted by this
paragraph plus the aggregate amount of all leases on personal Property
comprising the Collateral and secured by Restricted Encumbrances shall not, at
any time, exceed $20,000,000.
Section 1011. LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES.
The Company will not permit any Restricted Subsidiary to issue
any Preferred Stock other than (i) Preferred Stock issued to the Company or a
Wholly Owned Subsidiary or (ii) Preferred Stock (other than Redeemable Capital
Stock) issued to any person (other than the Company or a Wholly Owned
Subsidiary), PROVIDED that at the time of such issuance, and after giving pro
forma effect thereto, a Restricted Subsidiary of the Company would be entitled
to issue Indebtedness in an amount equal to the maximum liquidation preference
of the Preferred Stock under Section 1007. The Company will not sell, transfer
or otherwise dispose of Preferred Stock issued by a Restricted Subsidiary of
the Company or permit a Wholly Owned Subsidiary to sell, transfer or otherwise
dispose of Preferred Stock issued by a Restricted Subsidiary other than (i) to
the Company or a Wholly Owned Subsidiary or (ii) to any Person (other than the
Company or a Wholly Owned Subsidiary), PROVIDED that such Preferred Stock is
not Redeemable Capital Stock and that at the time of such sale, transfer or
disposition, and after giving pro forma effect thereto, a Restricted Subsidiary
of the Company would be entitled to issue Indebtedness in an amount equal to
the maximum liquidation preference of the Preferred Stock under Section 1007.
Notwithstanding the foregoing, nothing in this Section 1011 will prohibit the
ownership of Preferred Stock (other than Redeemable Capital Stock) issued by a
Person (other than an Unrestricted Subsidiary) prior to the time (A) such
Person becomes a Restricted Subsidiary of the Company, (B) such Person merges
with or into a Restricted Subsidiary of the Company or (C) a Restricted
Subsidiary of the Company merges with or into such Per-
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son; PROVIDED, FURTHER, that such Preferred Stock was not issued or incurred by
such Person in anticipation of a transaction contemplated by subclause (A), (B)
or (C) of this Section 1011.
Section 1012. LIMITATION ON DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distribution on
its Capital Stock, (b) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary, (c) make any Investment in the Company or any other
Restricted Subsidiary, (d) transfer any of its property or assets to the
Company or any other Restricted Subsidiary or (e) guarantee any Indebtedness of
the Company or any of its Restricted Subsidiaries, except (i) any encumbrance
or restriction pursuant to an agreement in effect at or entered into on the
date hereof; (ii) any encumbrance or restriction with respect to a Restricted
Subsidiary that is not a Subsidiary of the Company on the date hereof, in
existence at the time such Person becomes a Subsidiary of the Company or
created on the date it becomes a Subsidiary; and (iii) any encumbrance or
restriction pursuant to any agreement that extends, refinances, renews or
replaces any agreement containing any of the restrictions described in the
foregoing clauses (i) and (ii), PROVIDED that the terms and conditions of any
such restrictions, taken as a whole, are not less favorable to the Holders of
the Securities than those under or pursuant to the agreement extended,
refinanced, renewed or replaced. Notwithstanding the foregoing, this covenant
shall not be violated by any restriction required by the Casino Control
Commission or the Division of Gaming Enforcement, except where such restriction
would affect the ability of the Company to make payments on the Promissory
Note.
Section 1013. OWNERSHIP OF CASINO HOTEL; OTHER BUSINESSES.
Except as permitted by and in compliance with Article Eight,
if required, the Operating Company and Realty Co. will own and the Operating
Company will oper-
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ate the Casino Hotel. In addition, neither the Company nor the Operating
Company shall conduct or engage in any business other than the development,
marketing, ownership or management of casinos or casino hotels and businesses
directly related to the development, marketing, ownership or management of
casinos or casino hotels, including the hosting, production or promotion of
conventions, sporting events, amusements and other entertainment or investments
in entities conducting or engaged in the foregoing to the extent otherwise
permitted by the terms of this Indenture.
Section 1014. VALIDITY OF LIENS.
Each of the Company, the Operating Company, the Finance
Company and Realty Co. represents and warrants that it has, and covenants that
it shall continue to have, full power and lawful authority to grant, release,
convey, assign, transfer, mortgage, pledge, hypothecate and otherwise create
the Security Interests referred to in Article Twelve; and the Company shall
warrant, preserve and defend the interest of the Trustee in the Collateral
against the claims of all persons, except as permitted by the Security
Documents or by Section 1010 hereof, and will maintain and preserve the
Security Interests contemplated by Article Twelve.
Section 1015. CHANGE IN CONTROL.
Subject to Section 1017, following the occurrence of any
Change in Control, the Finance Company shall make an offer to purchase, at the
option of each Holder, such Holder's Outstanding Securities at a purchase price
equal to 101% of the aggregate principal amount of such Outstanding Securities,
plus accrued and unpaid interest to the date of purchase. The Finance Company
shall purchase such Securities on a date (the "Change in Control Payment Date")
20 Business Days after the mailing of the notice described in the next
succeeding paragraph by mailing or delivering payment for all Securities
properly delivered to the Finance Company pursuant hereto. If the Change in
Control Payment Date is on or after an interest payment record date and on or
before the related Interest Payment Date, any accrued interest will be paid to
the person in whose name a Security is registered at the close of business on
such record date, and no additional
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interest will be payable to Holders who deliver Securities pursuant hereto.
Within 30 days after any Change in Control, the Finance
Company (with notice to the Trustee), or the Trustee at the Finance Company's
request and expense, will mail or cause to be mailed to all Holders on the date
of the Change in Control a notice of the occurrence of such Change in Control
and of the Holders' rights arising as a result thereof. Such notice will
contain all instructions and materials necessary to enable Holders to deliver
their Securities to the Finance Company for purchase. Such notice shall state:
(1) the events causing such Change in Control;
(2) the purchase price and the Change in Control Payment
Date;
(3) that any Security not purchased will continue to
accrue interest;
(4) that any Security purchased shall cease to accrue
interest on the Change in Control Payment Date; and
(5) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than
the day before the Change in Control Payment Date, or
such longer period as may be required by law, a
telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the certificate
number and the principal amount of the Security the
Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have the
Security purchased.
On or before a Change in Control Payment Date, the Finance
Company shall (i) deposit with the Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof which are to be purchased
on such date and (ii) deliver to the Trustee such Securities together with an
Officers' Certificate stating the Securities or portions thereof are being
purchased by the Finance Company. The Paying Agent shall promptly mail or
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deliver to Holders of Securities so purchased payment in an amount equal to the
purchase price. For purposes of this Section 1015, the Trustee shall act as
the Paying Agent.
The Finance Company shall not be required to make an offer to
purchase pursuant to this Section 1015 if a third party makes such an offer and
purchases Securities in the manner, at the times and otherwise in compliance
with the requirements applicable to the Finance Company pursuant to this
Indenture and the Securities.
Section 1016. LIMITATION ON ISSUANCE OF GUARANTIES BY
SUBSIDIARIES.
(a) The Company will not permit any Restricted
Subsidiary, directly or (other than through an Unrestricted Subsidiary)
indirectly, to assume, Guaranty or in any other manner become liable with
respect to any Indebtedness of the Companies, the Operating Company, Realty Co.
or any other Restricted Subsidiary of the Company unless (i) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to this
Indenture providing for a Guaranty of payment of the Securities by such
Restricted Subsidiary constituting senior Indebtedness of such Restricted
Subsidiary, (ii) the Guaranty of the Securities is on terms at least as
favorable as the assumption, Guaranty or other liability of such Restricted
Subsidiary, (iii) such Restricted Subsidiary does not create, incur, assume or
suffer to exist any Lien securing such assumption, Guaranty or other liability
unless (A) it complies with Section 1010 hereof and (B) the Guaranty of
Securities is equally and ratably secured and (iv) such Restricted Subsidiary
waives and will not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Company, the Operating Company, Realty Co. or any other
Restricted Subsidiary of the Company or as a result of any payment by such
Restricted Subsidiary under its Guaranty.
(b) Notwithstanding the foregoing, any Guaranty by
a Restricted Subsidiary of the Securities shall provide by its terms that it
shall be automatically and unconditionally released and discharged upon any
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sale, exchange or transfer, to any Person not an Affiliate of the Company, of
all of the Company's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary, which is in compliance with this Indenture.
(c) Notwithstanding the foregoing, Realty Co. may
guarantee Indebtedness under the Credit Facility.
Section 1017. COMPLIANCE WITH SECURITIES LAWS UPON PURCHASE
OF SECURITIES.
In connection with any offer to purchase or purchase of
Securities under Section 1015 hereof, the Company shall (i) comply with Rule
14e-1 under the Exchange Act and (ii) otherwise comply with all federal and
state securities laws so as to permit the rights and obligations under Section
1015 to be exercised in the time and in the manner specified in Section 1015.
Section 1018. LIMITATION ON LEASE OF PROPERTY AS AN ENTIRETY.
The Company will not, and will not permit any Restricted
Subsidiary to, lease its Properties and assets substantially as an entirety to
any person, except as otherwise permitted by Article Eight.
Section 1019. ACTIVITIES OF FINANCE COMPANY.
The Finance Company agrees that it will not conduct any
business (and will not incur any Indebtedness) whatsoever other than to collect
principal and interest (and any interest on overdue principal of, premium, if
any, or interest) under the Note, to preserve and enforce its rights under the
Note, the Securities and the Security Documents, to do or cause to be done all
things necessary or appropriate to protect the Collateral and to preserve its
rights therein, and to otherwise comply with its obligations under this
Indenture and the Securities. The Finance Company will not merge into or
consolidate or amalgamate with or transfer its properties and assets to any
person, except (a) as permitted by and in compliance with Article Eight, if
required and (b) any transaction involving the Company or the Operating
Company.
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Section 1020. USE OF PROCEEDS.
The Finance Company shall loan all of the proceeds from the
sale of the Securities to the Operating Company immediately after receipt
thereof in exchange for which the Operating Company shall make and deliver the
Note to the Finance Company.
Section 1021. STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT;
REPORTING REQUIREMENTS.
(a) The Company will deliver to the Trustee, within 120 days
after the end of each fiscal year ending after the date hereof, a brief
certificate of its principal executive officer, principal financial officer or
principal accounting officer stating whether, to such officer's knowledge, the
Company and its Subsidiaries are in compliance with all covenants and conditions
to be complied with by any of them under this Indenture. For purposes of this
Section 1021, such compliance shall be determined without regard to any period
of grace or requirement of notice under this Indenture.
(b) If a Default has occurred and is continuing, or
if the Trustee, any Holder or the trustee for or the holder of any other
evidence of Indebtedness of the Company or any Subsidiary (other than
Indebtedness in the aggregate principal amount of less than $25,000,000) gives
any notice or takes any other action with respect to a claimed default, the
Company shall deliver to the Trustee an Officers' Certificate specifying such
Default, notice or other action within five Business Days of its occurrence.
Section 1022. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with
any covenant or condition set forth in Sections 1007 through 1012 and Section
1016 if, before or after the time for such compliance, the Holders of a
majority in aggregate principal amount of the Securities at the time
outstanding shall, by Act of such Holders, waive such compliance in such
instance with such covenant or condition, but no such waiver shall extend to or
affect such covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of the Company
and the duties
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of the Trustee in respect of any such covenant or condition shall remain in
full force and effect.
ARTICLE XI
REDEMPTION OF SECURITIES
Section 1101. RIGHT OF REDEMPTION.
The Securities may be redeemed, at the election of the Finance
Company, as a whole or from time to time in part subject to the conditions and
at the dates and Redemption Prices specified in the form of Security, together
with accrued interest to the Redemption Date.
Section 1102. APPLICABILITY OF ARTICLE.
Redemption of Securities at the election of the Finance
Company, as permitted by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
Section 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Finance Company to redeem any Securities
pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of
any redemption at the election of the Finance Company, the Finance Company
shall, at least 5 days prior to mailing of the notice of redemption referred to
in Section 1105 (unless a shorter notice period shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date and of the principal
amount of Securities to be redeemed.
Section 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE
REDEEMED.
If less than all the Securities are to be redeemed, the
particular Securities or portions thereof to be redeemed shall be selected not
more than 60 days and not less than 30 days prior to the Redemption Date by the
Trustee, from the Outstanding Securities not previously called for redemption,
either pro rata or by lot, and the amounts to be redeemed may be equal to
$1,000 or any integral multiple thereof.
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The Trustee shall promptly notify the Finance Company and the
Security Registrar in writing of the Securities selected for redemption and, in
the case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Securities shall
relate, in the case of any Security redeemed or to be redeemed only in part, to
the portion of the principal amount of such Security which has been or is to be
redeemed.
Section 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of the Securities to be redeemed, at his
address appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to
be redeemed, the identification (and, in the case of a Security to be redeemed
in part, the principal amount) of the particular Securities to be redeemed;
(d) that on the Redemption Date the Redemption Price
will become due and payable upon each such Security or portion thereof, and
that interest thereon shall cease to accrue on and after said date; and
(e) the place or places where such Securities are
to be surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the
election of the Finance Company shall be given by the Finance Company or, at
its request, by the Trustee in the name and at the expense of the Finance
Company.
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Section 1106. DEPOSIT OF REDEMPTION PRICE.
At or prior to 11:00 A.M. New York City time on any Redemption
Date, the Finance Company shall deposit with the Trustee or with a Paying Agent
(or, if the Finance Company is acting as its own Paying Agent, segregate and
hold in trust as provided in Section 1003) an amount of money in same day funds
(or New York Clearing House funds if such deposit is made prior to the
applicable Redemption Date) sufficient to pay the Redemption Price of, and
(except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities or portions thereof which are to be redeemed on
that date.
Section 1107. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified and from and after such date
(unless the Finance Company shall default in the payment of the Redemption
Price and accrued interest) such Securities shall cease to bear interest. Upon
surrender of any such Security for redemption in accordance with said notice,
such Security shall be paid by the Finance Company at the Redemption Price
together with accrued interest to the Redemption Date; PROVIDED, HOWEVER, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such on the relevant Regular Record Dates
according to the terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal thereof (and premium, if
any, thereon) shall, until paid, bear interest from the Redemption Date at the
rate borne by such Security.
Section 1108. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be
surrendered at the office or agency of the Finance Company maintained for such
purpose pursuant to Section 1002 (with, if the Finance Company, the Security
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Registrar or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Finance Company, the
Security Registrar or the Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing), and the Finance Company shall execute,
and the Trustee shall authenticate and deliver to the Holder of such Security
without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder in aggregate principal amount equal to
and in exchange for the unredeemed portion of the principal of the Security so
surrendered.
Section 1109. REDEMPTION PURSUANT TO THE CASINO CONTROL ACT.
(a) Notwithstanding the other provisions of this
Article Eleven, if the Casino Control Commission finds that a Holder or
beneficial owner of Securities must be found qualified or suitable to hold or
own the Securities under the Casino Control Act, and if such Holder or such
beneficial owner is not found qualified or suitable, within any time period
specified by the Casino Control Commission or the Casino Control Act, the
Finance Company shall have the right, at its option, (i) to require such Holder
or beneficial owner to dispose of all or a portion of such Holder's or
beneficial owner's Securities within 120 days after receipt of notice by such
Holder or beneficial owner of its disqualification under the Casino Control Act
(or such different period as may be prescribed by the Casino Control
Commission), or (ii) to call for redemption the Securities of either such Holder
or beneficial owner in accordance with this Section 1109, on not less than 30
nor more than 60 days' notice (or such different period as may be prescribed by
the Casino Control Commission).
(b) If such Holder or beneficial owner, having
been given the opportunity by the Finance Company to dispose of such Holder's
or beneficial owner's Securities, shall have failed to do so within the
prescribed time period, the Finance Company shall have the right to redeem
such Holder's or beneficial owner's Securities on five days' notice.
(c) On any redemption of Securities pursuant to
this Section 1109, the Redemption Price shall
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be the lesser of (i) the market value thereof on the date of such notice of
redemption (as determined in good faith by the Board of Directors of the
Company) and (ii) the price at which such Holder or beneficial owner acquired
the Securities, together with (if permitted by the Casino Control Act or by the
orders of the Casino Control Commission) accrued interest to the Redemption
Date, unless a Redemption Price or other payment, remuneration or related terms
or restrictions are required by the Casino Control Commission, in which event
such price, terms and restrictions shall be the Redemption Price and terms of
redemption. Each Holder and beneficial owner by accepting a Security agrees to
the provisions of this Section 1109 and Section 203 and agrees to inform the
Finance Company upon request made pursuant to this Section 1109 of the price at
which such Holder or beneficial owner acquired such Holder's or beneficial
owner's Securities.
(d) Any redemption notice given by the Finance
Company under this Section 1109 shall state (i) that the Securities are
being called for redemption as a result of the Holder's or beneficial owner's
status under the Casino Control Act or with the Casino Control Commission, (ii)
whether accrued interest is payable to the Holder under the Casino Control Act
and, if so, the information required by subsection (d) of Section 1105 hereof,
and (iii) the information required by subsections (a), (b), (c) and (e) of such
Section 1105.
ARTICLE XII
SECURITY
Section 1201. SECURITY INTERESTS.
(a) In order to secure the Indenture Obligations,
the Finance Company, the Operating Company and Realty Co. and the Trustee, as
applicable, have entered into the Security Documents in order to create the
Security Interests. Each Holder, by accepting a Security, agrees to all of the
terms and provisions of the Security Documents and the Trustee agrees to all of
the terms and provisions of the Security Documents signed by it.
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(b) The Trustee and each Holder, by accepting a
Security, acknowledge that, as more fully set forth in the Intercreditor
Agreement, the holders of any Pari Passu Mortgage have certain rights in and
to the Collateral and the Trustee agrees to be bound by the Intercreditor
Agreement as it may be in effect from time to time.
(c) As amongst the Holders, the Collateral as now
or hereafter constituted shall be held for the equal and ratable benefit of
the Holders without preference, priority or distinction of any thereof over
any other by reason of difference in series or in time of issuance, sale or
otherwise, as security for the Indenture Obligations.
Section 1202. RECORDING; OPINIONS OF COUNSEL.
(a) The Company, the Operating Company, the Finance
Company and Realty Co. will execute and deliver, file and record, all
instruments and documents, and have done and will do all such acts and
other things, at the Finance Company's expense, as are necessary to subject the
Collateral to the Security Interests. The Company, the Operating Company, the
Finance Company and Realty Co. will execute and deliver, file and record all
instruments and do all acts and other things as may be reasonably necessary or
advisable to perfect, maintain and protect the Security Interests.
(b) The Company shall furnish to the Trustee
promptly after the execution and delivery of this Indenture and the Security
Documents and promptly after the execution and delivery of any amendment thereto
or any other instrument of further assurance, an Opinion of Counsel stating
that in the opinion of such counsel, subject to customary exclusions and
exceptions reasonably acceptable to the Trustee, either (i) this Indenture, the
Security Documents, the financing statements and any such amendments thereto
have been properly recorded, registered and filed to the extent necessary to
make effective the Lien intended to be created by the Indenture, the Security
Documents and the financing statements, and reciting the details of such action
or referring to prior Opinions of Counsel in which such details are given, or
(ii) no such action is necessary to make the Security Interests effective.
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(c) The Company shall furnish to the Trustee within
60 days after January 1 in each year beginning January 1, 1995, an Opinion of
Counsel, dated as of such date, (i) stating that, in the opinion of such
counsel, subject to customary exclusions and exceptions reasonably acceptable to
the Trustee, either (A) all such action has been taken with respect to the
recording, registering, filing, rerecording and refiling of the Indenture, all
supplemental indentures, the Security Documents, financing statements and
continuation statements as is necessary to maintain the Security Interests and
reciting the details of such action or referring to prior Opinions of Counsel
in which such details are given, and stating that no further financing
statements and continuation statements need to be executed and filed, or (B) no
such action is necessary to maintain the Security Interests; and (ii) stating
what, if any, action of the foregoing character is necessary during the one-year
period commencing January 1 in the then current calendar year to so maintain the
Security Interests during such period.
(d) The Finance Company shall furnish to the Trustee
concurrently with execution and delivery of this Indenture an ALTA form title
insurance policy issued by First American Title Insurance Company or another
title insurance company acceptable to the Company and the Trustee in the
amount of $425,000,000 insuring that the Mortgage creates a valid first lien on
the Operating Company's and Realty Co.'s fee title in the real property
Collateral subject to the Operating Company's and Realty Co.'s Permitted
Encumbrances, and insuring the perfected first priority interest of the Trustee,
in and to the Mortgage; the Company and the Operating Company shall also obtain
such co-insurance or re-insurance as reasonably requested by the Trustee.
(e) The Finance Company shall furnish to the Trustee
concurrently with execution and delivery of this Indenture a current A.L.T.A.
as-built land title survey and a certificate from a professional licensed land
surveyor with respect to the real Property Collateral, certified to the
title insurance companies participating in the title policies and the Trustee,
and showing the location, dimensions and area of each parcel of the real
Property Collateral, including all existing buildings and improvements,
utilities, parking areas and
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spaces, internal streets, if any, external streets, rights-of-way, as well as
any easements, setback violations or encroachments on such real Property
Collateral and identifying each item with its corresponding exception, if any,
in the title policy relating thereto. Each survey shall contain the original
signature and seal of the surveyor and any additional matter reasonably
required by the title companies. In addition, the Finance Company shall
provide the Trustee with respect to the real Property Collateral a certificate
of a professional land surveyor to the effect that such real Property
Collateral is not located in a flood plain area, or, if such real Property
Collateral is in a flood plain area, the Finance Company shall deliver upon
execution of this Indenture evidence of flood insurance.
Section 1203. DISPOSITION OF CERTAIN COLLATERAL WITHOUT
REQUESTING RELEASE.
(a) Notwithstanding the provisions of Sections 1204,
1205 and 1206 hereof, the Operating Company may, without requesting the release
or consent of the Trustee:
(i) sell, assign, transfer, license or
otherwise dispose of, free from the Security Interests, any
machinery, equipment, or other personal Property constituting
Collateral that has become worn out, obsolete or unserviceable, upon
replacing the same with or substituting for the same, machinery,
equipment or other Property constituting Collateral not
necessarily of the same character but being of at least equal value
and utility as the Property so disposed of, which Property shall
without further action become Collateral subject to the Security
Interests;
(ii) (A) sell, assign, transfer,
license or otherwise dispose of, free from the Security Interests,
inventory or general intangibles that at any time are part of the
Collateral in the ordinary course of the Operating Company's
business, (B) collect, liquidate, sell, factor or otherwise dispose
of, free from the Secu- rity Interests, accounts receivable or
notes receivable that at any time are Collater-
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al in the ordinary course of the Operating Company's business or
(C) make cash payments (including scheduled repayments of
Indebtedness permitted to be incurred hereby) from cash that at any
time is part of the Collateral other than cash in the Collateral
Account in the ordinary course of business that are not otherwise
prohibited by this Indenture; and
(iii) abandon, sell, assign, transfer, license or
otherwise dispose of any personal Property the use of which is no
longer necessary or desirable in the proper conduct of the business
of the Operating Company and the maintenance of its earnings and is
not material to the conduct of the business of the Operating Company.
(b) Notwithstanding the provisions of Subsection (a)
above, (x) the Operating Company shall not dispose of or transfer (by lease,
assignment, sale or otherwise), or pledge, mortgage or otherwise encumber,
Collateral pursuant to the provisions of Section 1203(a)(ii) or (iii)
with a fair value to the obligor of 10% or more of the aggregate fair value of
all Collateral then existing (as determined in the good faith judgment of the
Company, the Operating Company, the Finance Company and, if required by the
Trust Indenture Act, an independent appraiser), in any transaction or any
series of related transactions without complying with Section 1204; and (y) the
right of the Operating Company to rely upon the provisions of Section
1203(a)(ii) and (iii) from the date of this Indenture to March 31, 1994 and for
each quarter thereafter shall be conditioned upon the Company, the Finance
Company and the Operating Company delivering to the Trustee, on or before May
31, 1994 and thereafter within 60 days following the end of such quarter
(except those quarters ending on December 31, in which case within 105 days
following the end of the quarter), an Officers' Certificate to the effect that
all of such dispositions by the Operating Company were in the ordinary course
of the Operating Company's business and that the proceeds therefrom were used
by the Operating Company in connection with its business.
(c) Any disposition of Collateral made in compliance
with the provisions of this Section 1203 shall
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be deemed not to impair the Security Interests in contravention of the
provisions of this Indenture.
(d) Upon receipt of a Company Request, the Trustee
shall execute and deliver, within five Business Days from the receipt of the
Company Request pursuant to Section 1204, any instruments deemed by the
Finance Company or the Operating Company to be necessary or appropriate to
dispose of portions of the Collateral pursuant to this Section 1203 if the
provisions of this Section 1203 have been complied with.
Section 1204. REQUESTING RELEASE OF COLLATERAL.
(a) Upon receipt of a Company Request, the Trustee
shall execute and deliver, within five Business Days from the receipt of such
Company Request pursuant to this Section 1204, any instruments deemed by the
Finance Company or the Operating Company to be necessary or appropriate to
release all or a part of the Collateral from the Security Interests, if the
provisions of this Section 1204 have been complied with. Any such Company
Request shall request the Trustee to execute one or more specifically described
release instruments (which release instruments shall accompany such Company
Request) and shall certify that no Default or Event of Default has occurred and
is continuing and such Company Request shall also certify that one of the
following conditions of this Section 1204(a) set forth below, and the conditions
of Section 1205 or 1206, if applicable, have been, or simultaneously with or
immediately following the release will be, fulfilled:
(i) there is a substitution of
Substitute Collateral in accordance with Section 1205;
(ii) there is a deposit of Cash
Collateral in accordance with Section 1206;
(iii) the Collateral to be released is
Insurance Proceeds and such Collateral is used for purposes
permitted by, and in accordance with, Articles 6 and 7 of
the Mortgage; or
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(iv) the Finance Company or the Operating
Company represents in the Company Request that the Collateral to
be released is to be released in con- nection with acquisitions or
redemptions of all Securities then outstanding pursuant to the
redemption provisions of Section 203 or Section 1109 of this
Indenture.
(b) As a condition to any release of Collateral
under this Section 1204, the Finance Company shall deliver to the Trustee any
certificate or opinion required by Trust Indenture Act Section 314(d), as
to the fair value to the obligor of any Substitute Collateral and as to the fair
value of any Collateral to be released, and by Trust Indenture Act Section
314(c)(3), as to the fulfillment of any condition precedent to such release,
dated as of a date not more than 60 days prior to the date of substitution or
release. Such certificate or opinion shall state that the proposed release of
Collateral will not impair the Security Interests in contravention of the
provisions of this Indenture. In the case of an acquisition or redemption of
all of the Securities then Outstanding, such certificate or opinion shall state
that all of the Securities then Outstanding are to be redeemed and that all of
the Collateral is to be released on or after the Redemption Date provided that
the Finance Company has not defaulted in making the redemption payment. The
person delivering such certificate or opinion must be independent with respect
to the Company, the Operating Company and the Finance Company if required by
Trust Indenture Act Section 314(d). "Independent" means, for purposes of any
certificate or opinion required by Trust Indenture Act Section 314(d), with
respect to any Person, that such Person (1) is in fact independent, (2) does not
have any direct financial interest or any material indirect financial interest
in the Finance Company, the Operating Company, the Company or other obligor upon
the Securities or in any Affiliate of the Finance Company, the Operating
Company, the Company or such other obligor, and (3) is not connected with the
Finance Company, Operating Company, the Company or such other obligor, or with
an Affiliate of the Finance Company, the Operating Company, the Company or such
other obligor as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.
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(c) In addition to any certificates or opinions
required by Section 1204(b), as a condition to any release of Collateral
pursuant to Section 1205 or 1206, the Finance Company or the Operating Company
shall deliver to the Trustee:
(i) one or more Current Appraisals and
an Officers' Certificate stating that, based on such Current
Appraisals, the Appraised Fair Market Value of the Collateral to be
released is less than or equal to the Appraised Fair Market Value of the
Substitute Collateral to be substituted for such Collateral pursuant to
Section 1205 or of the Cash Collateral to be substituted pursuant to
Section 1206; and
(ii) an Opinion of Counsel stating
that, in the opinion of such counsel, subject to customary exclusions
and exceptions reasonably acceptable to the Trustee, either (A) all
such instruments and documents have been duly and validly executed and
delivered and have been properly recorded, registered and filed (or, if
not yet so recorded, registered and filed, identifying the proper place
for such recordation, registration or filing), in each case to the
extent necessary to perfect a Security Interest in the Substitute
Collateral or to make effective the Security Interest in Cash Collateral
to be substituted for the Collateral to be released, and reciting the
details of such action or referring to prior Opinions of Counsel in
which such details are given, or (B) no further action is necessary.
(d) Any release of Collateral made in compliance
with the provisions of this Section 1204 shall be deemed not to impair the
Security Interests in contravention of the provisions of this Indenture.
Section 1205. SUBSTITUTE COLLATERAL OTHER THAN CASH COLLATERAL.
(a) The Finance Company or the Operating Company
may, at its option, obtain a release of Collateral (except Cash Collateral and
the Note), by subjecting
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other proposed Collateral which is of the same type currently covered by the
Security Documents to the Security Interests in place of and in exchange for
the Collateral to be released, all in accordance with the provision and
conditions of Section 1204 and this Section 1205 (except that the substitution
of Cash Collateral is governed by Section 1206). Substitute Collateral may
include the proceeds of the Collateral to be released, and Substitute
Collateral may be substituted for other Substitute Collateral on the terms set
forth in this Section 1205. Notwith- standing the foregoing, real Property
Collateral may not be released pursuant to this Section 1205. Other Collateral
may be released pursuant to this Section 1205, if, after giving effect to such
release and all previous releases under this Section 1205, substantially all
furniture, fixtures, machinery and equipment affixed to, located in, or used
primarily in connection with or in the business being conducted in, the Casino
Hotel would be Collateral.
(b) The Finance Company or the Operating Company
may substitute Collateral pursuant to this Section 1205 if all of the following
conditions are met:
(i) the Finance Company or the
Operating Company, as the case may be, complies with Section
1204(a) and delivers a Company Request to the Trustee stating,
in addition to the other requirements of Section 1204, that the
Finance Company or the Operating Company, as the case may be,
intends to substitute the Property specifically described
therein for the Collateral specifically described therein;
(ii) the fair value of the proposed
Substitute Collateral (including any Cash Collateral) is at
least equal to the fair value of the Collateral to be
released; and
(iii) the security interests in
Substitute Collateral are perfected pursuant to the Security
Documents and Section 1202.
(c) Notwithstanding the foregoing, the Dennis Hotel,
which comprises a portion of the real Property Collateral, may
be released pursuant to this Section 1205 if, in addition to
the other applicable
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requirements set forth in this Article Twelve, all of the following conditions
are met:
(i) the Finance Company, the Company or the
Operating Company shall deliver to the Trustee an appraisal of
the Appraised Fair Market Value of the Casino Hotel including
the Dennis Hotel (the "First Appraisal") and an appraisal of
the Appraised Fair Market Value of the Casino Hotel excluding
the Dennis Hotel and taking into account the effect on the
Casino Hotel of destruction of the Dennis Hotel (the "Second
Appraisal"), such appraisals to be as of a date not more than 90
days before the date that the Dennis Hotel is released from the
Collateral; and
(ii) the Finance Company, the Company or the
Operating Company shall substitute as Substitute Collateral (A)
real Property having an Appraised Fair Market Value, as of a
date not more than 90 days before the date that the Dennis
Hotel is released from the Collateral, or (B) a Letter of
Credit, provided that the sum of the Appraised Fair Market
Value of the real Property substituted pursuant to clause (A)
and the face value of the Letter of Credit substituted pursuant
to clause (B) is at least equal to the greater of (x) the excess
of the Appraised Fair Market Value of the Casino Hotel in the
First Appraisal over the Appraised Fair Market Value of the
Casino Hotel in the Second Appraisal and (y) the book value of
the Dennis Hotel as of the end of the most recent quarter
preceding the date that the Dennis Hotel is released from the
Collateral for which financial information is available. If the
Appraised Fair Market Value of the real Property substituted
pursuant to clause (A) is at least equal to the greater of
clause (x) and clause (y), there shall be no obligation to
substitute as Substitute Collateral a Letter of Credit.
(d) In addition to the other requirements set forth
above and those set forth in Section 1202(b), if the Substitute Collateral is
real Property, the Fi-
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nance Company or the Operating Company shall deliver to the Trustee:
(i) an A.L.T.A. form title insurance
policy or the local equivalent thereof or endorsement from a
title insurance company (or a specimen policy together with a
commitment to issue such title insurance on the basis of such
policy or specimen) in an amount equal to the fair value of the
Substitute Collateral, together with necessary coinsurance or
reinsurance insuring that the Substitute Collateral is owned by
the Finance Company or the Operating Company, as the case may
be, free and clear of all defects and Liens, other than
Permitted Encumbrances, matters excepted from coverage by the
printed form of such title insurance policy (and not removable
by affidavit or indemnity) and other exceptions to title that do
not materially impair the value of the Substitute Collateral,
and that except for such exceptions or exclusions from such
policies or endorsements, the applicable document purporting to
grant a security interest in the Substitute Collateral
constitutes a direct and valid Lien on such Substitute
Collateral; and
(ii) evidence of payment or a closing
statement indicating payments to be made by the Finance
Company or the Operating Company, as the case may be, of
all title premiums, costs and expenses, including any applicable
taxes or governmental levies and reasonable legal fees and
disbursements of the attorneys for the Trustee, that may be
incurred to validly and effectively subject the Substitute
Collateral to the Security Interests.
Section 1206. SUBSTITUTION OF CASH COLLATERAL.
(a) The Finance Company or the Operating Company
may, at its option, obtain the release of Collateral (other than the Note)
upon the substitution of Cash Collateral in accordance with the provisions
and conditions of Section 1204 and this Section 1206 as follows. The Finance
Company or the Operating Company may obtain the release of all or a portion of
the Collateral by
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delivering Cash Collateral to the Trustee for deposit in the Collateral Account
as Collateral in place of and in exchange for the released Collateral, in an
amount such that the fair value of the Cash Collateral so delivered (together
with the fair value of any other Substitute Collateral (other than Cash
Collateral) substituted for such released Collateral pursuant to Section 1205)
is at least equal to the fair value to the obligor of the Collateral to be
released; PROVIDED, HOWEVER, that to the extent any Collateral released is
subject to the Credit Facility Mortgage or one or more Pari Passu Mortgages, a
Pro Rata Share of such Cash Collateral shall be paid over for the benefit of
the holders of the Credit Facility Mortgage and Pari Passu Mortgages and shall
not be deposited in the Collateral Account.
(b) The Finance Company or the Operating Company, as
the case may be, shall deliver a Company Request to the Trustee, stating, in
addition to the other requirements of Section 1204(a), that the Finance Company
intends to substitute Cash Collateral for all or a portion of the Collateral
specifically described therein.
Section 1207. APPRAISALS OF COLLATERAL.
The Finance Company shall deliver to the Trustee on the date
of execution and delivery of this Indenture an appraisal of the Appraised Fair
Market Value of the Collateral, which appraisal is dated as of January 31, 1994
valuing the property as of January 1, 1994. On each of the 24-month intervals
from the date hereof (collectively, the "Appraisal Dates"), the Finance Company
shall deliver to the Trustee an appraisal of the Appraised Fair Market Value of
the Collateral then existing; PROVIDED, HOWEVER, that in the event the Finance
Company determines to have an appraisal of the Appraised Fair Market Value of
the Collateral performed prior to the next Appraisal Date, the next appraisal
that is required to be delivered pursuant to this Section 1207 shall not be due
until 24 months after the prior appraisal was actually performed. Each
subsequent Appraisal Date shall be adjusted accordingly. The Finance Company
shall comply with Trust Indenture Act Section 314(d).
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Section 1208. COLLATERAL ACCOUNT.
(a) The Trustee shall maintain and establish a
Collateral Account, which shall hold Cash Collateral for the equal and ratable
benefit of the Holders without preference, priority or distinction of any
thereof over any other by reason of difference in time of issuance, sale or
otherwise, as security for the Indenture Obligations. The Collateral Account
shall be entitled the "BALLY'S PARK PLACE FUNDING, INC. Cash Collateral Account,
First Bank, as trustee, secured party." The Trustee shall have sole dominion
and control over the Collateral Account and only the Trustee shall have any
right of withdrawal therefrom.
(b) All cash received by the Trustee as Substitute
Collateral pursuant to Section 1206 hereof, and as Insurance Proceeds pursuant
to Articles 6 and 7 of the Mortgage, less any Pro Rata Share paid over for
the benefit of holders of Pari Passu Mortgages pursuant to Section 1206 and
Articles 6 and 7 of the Mortgage, shall be deposited in the Collateral Account.
(c) The Finance Company may request the Trustee in
writing to, and the Trustee may, in its discretion, invest any Cash Collateral
in the Collateral Account in U.S. Government Obligations. The Collateral
Accounts and all credits thereto and investments therein shall be maintained in
such a manner in accordance with applicable law that the Trustee, for the
benefit of the Holders, shall at all times have a first priority perfected
security interest therein. The Finance Company shall deliver to the Trustee and
any bank where such Collateral Account is maintained all such notices and other
documents and shall otherwise make such filings and take such other actions as
may be required or deemed reasonably necessary by the Trustee to create and
maintain much first priority perfected security interest in the Collateral
Account and all credits thereto and investments therein.
(d) Interest and other amounts earned on the
Collateral Account shall be held in the Collateral Account for the benefit of
the Holders.
(e) As security for the Indenture Obligation, the
Company, the Finance Company, the Operating
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Company and Realty Co. hereby grant a security interest to the Trustee in all
of each of their right, title and interest in the Collateral Account and all
sums of money, funds, securities, investments or other property from time to
time held in or credited to the Collateral Account, from any source whatsoever,
now or hereafter transferred or credited to and comprising the Collateral
Account, including, without limitation, all proceeds derived from the
Collateral paid into the Collateral Account, and any and all interest and
dividends or other distribution from any such amounts, and all statements,
certificates and instruments in or representing the Collateral Account.
Section 1209. RELIANCE ON OPINION OF COUNSEL.
The Trustee shall, before taking any action under this Article
Twelve, be entitled to receive an Opinion of Counsel, stating the legal effect
of such action, and that such action will not be in contravention of the
provisions hereof, and such opinion shall be full protection to the Trustee for
any action taken or omitted to be taken in reliance thereon; PROVIDED that the
Trustee's action under this Article Twelve shall at all times be and remain
subject to its duties under Trust Indenture Act Section 315.
Section 1210. PURCHASER MAY RELY.
A purchaser in good faith of the Collateral or any part
thereof or interest therein which is purported to be transferred, granted or
released by the Trustee as provided in this Article Twelve shall not be bound
(i) to ascertain, and may rely on the authority of the Trustee to execute, such
transfer, grant or release, or (ii) to inquire as to the satisfaction of any
conditions precedent to the exercise of such authority, or (iii) to determine
whether the application of the purchase price therefor complies with the terms
hereof.
Section 1211. PAYMENT OF EXPENSES.
On demand of the Trustee, the Finance Company forthwith shall
pay or satisfactorily provide for all reasonable expenditures incurred by the
Trustee under this Article Twelve, and all such sums shall be a Lien upon the
Collateral and shall be secured thereby.
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Section 1212. SUITS TO PROTECT THE COLLATERAL.
Subject to Section 1201 of this Indenture and to the
provisions of the Security Documents, the Trustee shall have power to institute
and to maintain such suits and proceedings as it may deem expedient to prevent
any impairment of the Collateral by any acts that may be unlawful or in
violation of the Security Documents or this Indenture, including the power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid or if the enforcement of, or
compliance with, such enactment, rule or order would impair the Security
Interests in contravention of this Indenture or be prejudicial to the
interests of the Holders or of the Trustee. The Trustee shall give notice to
the Companies promptly following the institution of any such suit or
proceeding.
Section 1213. TRUSTEE'S DUTIES.
The powers conferred upon the Trustee by this Article Twelve
are solely to protect the Security Interests and shall not impose any duty upon
the Trustee to exercise any such powers except as expressly provided in this
Indenture. The Trustee shall be under no duty whatsoever to make or give any
presentment, demand for performance, notice of nonperformance, protest, notice
of protest, notice of dishonor, or other notice or demand in connection with
any Collateral, or to take any steps necessary to preserve any rights against
prior parties except as expressly provided in this Indenture. The Trustee
shall not be liable for failure to collect or realize upon any or all of the
Collateral, or for any delay in so doing, nor shall the Trustee be under any
duty to take any action whatsoever with regard thereto. The Trustee shall have
no duty to comply with any recording, filing or other legal requirements
necessary to establish or maintain the validity, priority or enforceability of
the Security Interests in, or the Trustee's rights in or to, any of the
Collateral.
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ARTICLE ARTICLE XIII
DEFEASANCE
Section 1301. DEFEASANCE AND DISCHARGE.
The Finance Company may, at its option by Board Resolution, at
any time, elect to have either paragraph (a) or (b) below applied to the
Outstanding Securities upon compliance with the conditions set forth in Section
1302 below.
(a) Upon exercise of the option applicable to this
paragraph (a), the Finance Company, the Company, the Operating Company and
Realty Co. shall be deemed to have been released and discharged from their
obligations with respect to the Outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "legal defeasance"). For
this purpose, the Finance Company shall be deemed to have paid and discharged
the entire indebtedness represented by the Outstanding Securities, which shall
thereafter be deemed to be "Outstanding" only for the purposes of Section 1303
and the other Sections of this Indenture referred to in clauses (i) and (ii)
below, and the Finance Company, the Company, the Operating Company and Realty
Co. shall be deemed to have satisfied all their other obligations under such
Securities and this Indenture (and the Trustee, on demand of and at the expense
of the Finance Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (i) the rights of Holders of Outstanding Securities to
receive solely from the trust fund described in Section 1302 and as more fully
set forth in such Section, payments in respect of the principal of (and premium,
if any) and interest on such Securities when such payments are due, (ii) the
Finance Company's and the Company's obligations with respect to such Securities
under Sections 304, 305, 306, 1002 and 1003, (iii) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and the Companies' obligations in
connection therewith and (iv) this Article Thirteen.
(b) Upon exercise of the option applicable to this
paragraph (b), the Finance Company, the Company, the Operating Company and
Realty Co. shall be
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released and discharged from their obligations under any covenant contained in
Article Eight and in Sections 1004 through 1021 with respect to the Outstanding
Securities on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"), and the Securities shall thereafter be
deemed to be not "Outstanding" for the purpose of any direction, waiver,
consent or declaration or act of Holders of Securities (and the consequences of
any thereof) in connection with such covenants, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such
covenant defeasance means that, with respect to the Outstanding Securities, the
Finance Company, the Company, the Operating Company and Realty Co. may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 501, but, except as specified above, the
remainder of this Indenture and such Securities shall be unaffected thereby.
Section 1302. CONDITIONS TO DEFEASANCE.
The following shall be the conditions to application of either
paragraph (a) or (b) of Section 1301 to the Outstanding Securities:
(1) The Finance Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee satisfying
the requirements of Section 608 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities, (A) cash in U.S. Dollars in
an amount, (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day
before the due date of any payment, cash in U.S. Dollars in an amount,
or
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(C) a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge the
principal of (and premium, if any) and interest on the Outstanding
Securities on the Stated Maturity of such principal (and premium, if
any) or installment of interest or upon redemption on the day on which
such payments are due and payable in accordance with the terms of this
Indenture and of such Securities; PROVIDED that the Trustee shall have
been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to said payments with respect to the
Securities. For this purpose, "U.S. Government Obligations" means
securities that are (x) direct obligations of the United States of
America for the timely payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America
the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in
either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by
a bank (as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt; PROVIDED that (except as
required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such
depository receipt;
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(2) In the case of an election under paragraph (a) of Section
1301 hereof, the Finance Company shall have delivered to the Trustee
an Opinion of Counsel stating that (x) the Finance Company has
received from, or there has been published by, the Internal Revenue
Service a ruling or (y) since the date hereof there has been a change
in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders
of the Outstanding Securities will not recognize income, gain or loss
for federal income tax purposes as a result of such legal defeasance
and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
legal defeasance had not occurred;
(3) In the case of an election under paragraph (b) of Section
1301 above, the Finance Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of the outstanding
Securities will not recognize income, gain or loss for federal income
tax purposes as a result of such covenant defeasance and will be
subject to federal income tax on the same amounts in the same manner
and at the same times as would have been the case if such covenant
defeasance had not occurred;
(4) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit or, insofar as Subsection 501(f) or 501(g) is concerned, at
any time during the period ending on the 91st day after the date of
such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(5) Such defeasance shall not result in a breach or violation
of, or constitute a default under, this Indenture or any other
material agreement or instrument to which any of the
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Companies, the Operating Company or Realty Co. is a party or by which
they are bound;
(6) The Finance Company, the Company, the Operating Company
and Realty Co. shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent relating to the defeasance under Section 1301
have been complied with; and
(7) (a) The Security Documents shall not be discharged as a
result of such irrevocable deposit under Section 1302 unless the
Finance Company shall have delivered to the Trustee an Opinion of
Counsel, subject to customary exclusions and exceptions reasonably
acceptable to the Trustee, to the effect that (i) the Finance Company
has authorization to establish such irrevocable trust in favor of the
Trustee for the benefit of the Holders under applicable law and the
action in establishing the irrevocable trust has been duly and
properly authorized by the Finance Company and such authorization has
not been revoked, (ii) to their knowledge, the Trustee is an
independent trustee with respect to the irrevocable trust, (iii) a
valid trust is created at the time of such irrevocable deposit and
(iv) the Holders of the Securities will have the sole beneficial
ownership interest under applicable law in the money or U.S.
Government Obligations so deposited in such trust. The Opinion of
Counsel so referred to in this paragraph may contain a qualification
that in the event that a court of competent jurisdiction were to
determine that the trust funds remained owned by the Finance Company
after such deposit, the Holders of the Securities will have a
non-avoidable first-priority perfected security interest under
applicable law in the money or U.S. Government Obligations so
deposited (for the limited purpose of the Opinion of Counsel referred
to in this paragraph, such opinion may contain an assumption that the
conclusions contained in a customary solvency letter by a nationally
recognized appraisal firm, dated as of the date of the
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deposit and taking into account such deposit, or a customary
alternative certificate reasonably acceptable to the Trustee, are
accurate, PROVIDED that such solvency letter or certificate is also
addressed and delivered to the Trustee).
(b) It is the intention of the parties hereto that a valid
trust for the benefit of the Holders of the Securities be created at
the time that the Finance Company makes the deposit pursuant to
Section 1302. The security interest in such deposit that is granted
herein to the Trustee for the benefit of the Holders of the Securities
is intended solely as protection for the Holders of the Securities in
the event that a court of competent jurisdiction were to determine
either that (i) such trust had not been validly created or (ii) such
trust is not enforceable. The Finance Company hereby grants to the
Trustee for the benefit of the Holders a security interest in all
money, funds, investments or other property deposited with the Trustee
pursuant to Section 1302 to secure the Indenture Obligations.
(c) The Company and the Finance Company shall take any and
all acts necessary to create, perfect and maintain, in favor of the
Holders of the Securities, a first-priority security interest in the
money and U.S. Government Obligations so deposited and shall take any
other action and execute and deliver any other documents that may
reasonably be requested by the Trustee to effectuate or evidence such
security interest, and shall do all of the above at such appropriate
time so that such security interest shall attach to the deposit at the
time such deposit is made and shall at all times be perfected.
(d) Notwithstanding the foregoing, prior to the end of the
91-day period following the irrevocable deposit referred to above,
none of the obligations of the Company, the Operating Company, the
Finance Company or Realty Co. under this Indenture or the Security
Documents
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shall be discharged, unless and until the Finance Company shall have
delivered to the Trustee a Current Appraisal as of a date no more than
60 days prior to the date of such irrevocable deposit reflecting the
Appraised Fair Market Value of the Collateral in an amount not less
than 120% of the amount of such irrevocable deposit and an Opinion of
Counsel, subject to customary exclusions and exceptions, to the effect
that based on such Current Appraisal, the irrevocable deposit will not
be subject to avoidance as a preferential transfer under 11 U.S.C.
Section 547, as it may be amended from time to time.
Section 1303. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS
TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 1303, the "Trustee") pursuant to Section 1302 in
respect of the Outstanding Securities shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company or any of its Subsidiaries acting as its own Paying
Agent) as the Trustee may determine, to the Holders of such Securities of all
sums due and to become due thereon in respect of principal (and premium, if
any) and interest, but such money need not be segregated from other funds
except to the extent required by law.
The Finance Company shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the cash or
U.S. Government Obligations deposited pursuant to Section 1302 or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the Outstanding
Securities.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Finance Company from
time to time upon Company
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Request any money or U.S. Government Obligations held by it as provided in
Section 1302 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
1302(l)), are in excess of the amount thereof which would then be required to
be deposited to effect an equivalent defeasance or covenant defeasance.
The Trustee and the Paying Agent shall pay to the Finance
Company upon request any money held by them for the payment of principal or
interest on the Securities that remains unclaimed for two years; PROVIDED that
the Finance Company shall have first caused notice of such payment to be
published one in a newspaper of general circulation in the City of New York or
mailed to each Holder entitled thereto no less than 30 days prior to such
repayment. After that, Holders entitled to the money must look to the Finance
Company for payment as general creditors unless otherwise provided by law.
Section 1304. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money in
accordance with Section 1301 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Companies' obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1301 until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 1301; PROVIDED,
HOWEVER, that, if the Finance Company makes any payment of principal of (or
premium, if any) or interest on any Security following the reinstatement of its
obligations, the Finance Company shall be subrogated to the rights of the
Holders of such Securities to receive such payment from the money held by the
Trustee or Paying Agent.
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ARTICLE ARTICLE XIV
GUARANTY
Section 1401. GUARANTY.
The Company hereby unconditionally guarantees on a senior
basis (such Guaranty to be referred to herein as the "Company Guaranty") to
each Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Securities or the obligations of the
Finance Company hereunder or thereunder, that: (i) the principal of (and
premium, if any) and interest on the Securities will be promptly paid in full
when due, whether at the Maturity or Interest Payment Date, by acceleration,
call for redemption or otherwise, and interest on the overdue principal (and
premium, if any) and interest, if any, of the Securities, if lawful, and all
other obligations of the Finance Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (ii) in case of any extension
of time of payment or renewal of any Securities or any of such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at Maturity, by
acceleration or otherwise. Failing payment when due of any amount so
guaranteed for whatever reason, the Company will be obligated to pay the same
immediately. The Company hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Securities or this Indenture, the absence of any action to enforce the
same, any waiver or consent by any Holder of the Securities with respect to any
provisions hereof or thereof, any releases of Collateral, any delays in
obtaining or realizing upon or failures to obtain or realize upon Collateral,
the recovery of any judgment against the Finance Company, any action to enforce
the same or any other circumstance that might otherwise constitute a legal or
equitable discharge or defense of a guarantor. The Company hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Finance Company, any right to require
a proceeding first against the Finance
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Company, protest, notice and all demands whatsoever and covenants that this
Company Guaranty will not be discharged except by complete performance of the
obligations contained in the Securities and this Indenture. If any Holder or
the Trustee is required by any court or otherwise to return to either of the
Companies, or any custodian, Trustee, liquidator or other similar official
acting in relation to either of the Companies, any amount paid by either of the
Companies to the Trustee or such Holder, this Company Guaranty, to the extent
theretofore dis- charged, shall be reinstated in full force and effect. The
Company agrees that it shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. The Company further
agrees that as between the Company, on the one hand, and the Holders and the
Trustee, on the other hand, (i) the Maturity of the obligations guaranteed
hereby may be accelerated as provided in Section 502 for the purposes of this
Company Guaranty, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (ii) in the event of any declaration of acceleration of such obligations as
provided in Section 502, such obligations (whether or not due and payable)
shall forthwith become due and payable by the Company for the purpose of this
Company Guaranty.
Section 1402. EXECUTION AND DELIVERY OF COMPANY GUARANTY.
To evidence its Company Guaranty set forth in Section 1401,
the Company hereby agrees that a notation of such Company Guaranty
substantially in the form set forth in Section 203 shall be endorsed on each
Security authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of the Company by its Chairman of the Board, one of
its Vice Chairmen of the Board, its President, one of its Vice Presidents or
its Treasurer and attested to by another officer other than the officer
executing the Indenture, as the case may be.
The Company hereby agrees that its Company Guaranty set forth
in Section 1401 shall remain in full force and effect notwithstanding any
failure to endorse on each Security a notation of such Company Guaranty.
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If an officer whose signature is on this Indenture no longer
holds that office at the time the Trustee authenticates the Security on which a
Company Guaranty is endorsed, the Company Guaranty shall be valid nevertheless.
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Company
Guaranty set forth in this Indenture on behalf of the Company.
ARTICLE ARTICLE XV
LETTER OF CREDIT
Section 1501. LETTER OF CREDIT.
In order to permit the Operating Company to release the Dennis
Hotel from the Collateral in accordance with Section 1205 so that it may
demolish the Dennis Hotel and build a new multistory tower on the land upon
which the Dennis Hotel is currently situated, the Company, the Finance Company
or the Operating Company may cause the issuance and delivery of the Letter of
Credit to the Trustee at any time after the date hereof and may at any time
thereafter substitute a new Letter of Credit then held by the Trustee. Each
Holder, by accepting a Security, agrees to all of the terms of each Letter of
Credit.
Section 1502. ACCEPTANCE OF THE LETTER OF CREDIT.
The Letter of Credit shall not be effective for purposes of
this Indenture unless and until the Trustee shall accept delivery of the Letter
of Credit. The Trustee shall accept delivery of the Letter of Credit upon
receipt of the following: (i) an opinion of counsel to the bank that issued
the Letter of Credit (the "Bank") (such counsel to be reasonably acceptable to
the Trustee and may be an employee of the Bank, but not counsel to or an
employee of the Company or any of its Affiliates) stating that, in the opinion
of such counsel, the Letter of Credit has been duly authorized and executed
and, when delivered to and accepted by the Trustee, will constitute
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the legal, valid and binding agreement of the Bank, enforceable against the
Bank in accordance with its terms; (ii) an Opinion of Counsel to the Finance
Company stating that, in the opinion of such counsel, the Letter of Credit is
not inconsistent with Exhibit F to this Indenture; and (iii) an Officers'
Certificate of the Finance Company stating that the Letter of Credit contains
substantially those terms and conditions set forth in such Exhibit F, no
materially contrary terms and no other provisions materially limiting the
availability of payment. The Trustee may also request other opinions pursuant
to Section 103.
Section 1503. NOTICES AND CERTIFICATES.
Within five Business Days after the receipt by the Trustee of
written notice of any Event of Default or the giving by the Trustee of written
notice of any Event of Default in accordance with Section 501, the Trustee
shall (or, in the event that the Trustee otherwise has actual knowledge of an
Event of Default, the Trustee may) deliver written notice to the Bank, at the
Bank's office specified therefor in the Letter of Credit, stating that an Event
of Default has occurred under this Indenture.
In the event that the Bank delivers to the Trustee written
notice of termination of the Letter of Credit (the Trustee to give prompt
written notice thereof to the Finance Company), the Company, the Operating
Company or the Finance Company may cause the issuance and delivery of a new
Letter of Credit to the Trustee at least 20 Business Days prior to termination
of the then outstanding Letter of Credit. In the event that none of the
Company, the Operating Company or the Finance Company has caused the issuance
and delivery of a new Letter of Credit at least 20 Business Days prior to
termination of the then outstanding Letter of Credit, then the Trustee shall
deliver, within five Business Days after the commencement of such 20 Business
Day period, written notice to the Bank, along with the Bank's notice of
termination of the Letter of Credit, at the Bank's office specified therefor in
the Letter of Credit, stating that none of the Company, the Operating Company
or the Finance Company has caused the issuance and delivery of a new Letter of
Credit in accordance with this Article Fifteen.
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After the Letter of Credit has been delivered to, and accepted
by, the Trustee, within ten Business Days of the end of each of the Finance
Company's fiscal quarters, the Finance Company shall deliver to the Trustee an
Officers' Certificate of the Finance Company stating that the Bank has not
ceased to be an Eligible Bank, and further stating that, as to each Officer
signing such certificate, that to the best of his or her knowledge, during the
preceding fiscal quarter, the Bank has not ceased to be an Eligible Bank. If
the Bank has ceased to be an Eligible Bank, such certificate shall notify the
Trustee of such event. Within ten Business Days of the last day of the Finance
Company's fiscal-quarter in which the Bank ceases to be an Eligible Bank, the
Finance Company shall deliver written notice of such event to the Trustee, and,
upon such delivery (or, if earlier, upon receipt by the Trustee of written
notice from a Holder or Holders that the Bank has ceased to be an Eligible
Bank, the Trustee to give prompt written notice thereof to the Finance
Company), the Company, Operating Company or Finance Company may cause the
issuance and delivery to the Trustee of a new Letter of Credit within ten
Business Days of notice to the Trustee that the Bank has ceased to be an
Eligible Bank. In the event that none of the Company, the Operating Company or
the Finance Company has caused the issuance and delivery of a new Letter of
Credit within ten Business Days after such notice, then the Trustee shall
deliver, within five Business Days after the expiration of such ten Business
Day period, written notice to the Bank, at the Bank's office specified therefor
in the Letter of Credit, stating that the Bank has ceased to be an Eligible
Bank and that none of the Company, the Operating Company or the Finance Company
has caused the issuance and delivery of a new Letter of Credit in accordance
with this Article Fifteen.
The Trustee shall notify the Holders in writing of the
occurrence of an Event of Payment. Upon delivery to the Trustee of any new
Letter of Credit as provided herein, the Trustee shall surrender to the Finance
Company the then outstanding Letter of Credit.
Section 1504. EVENTS OF PAYMENT.
The following events shall be "Events of Payment" under the
Letter of Credit: (i) written notice is delivered to the Bank by the Trustee
stating that an
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Event of Default has occurred and is continuing under this Indenture; or (ii)
written notice is delivered to the Bank by the Trustee, along with the Bank's
written notice of termination of the Letter of Credit, stating that none of the
Company, the Operating Company or the Finance Company has caused the issuance
and delivery of a new Letter of Credit in accordance with this Article Fifteen;
or (iii) written notice is delivered to the Bank by the Trustee stating that
the Trustee has received notice that the Bank has ceased to be an Eligible Bank
and that none of the Company, the Operating Company or the Finance Company has
caused the issuance and delivery of a new Letter of Credit in accordance with
this Article Fifteen.
Upon the occurrence of an Event of Payment, the Trustee shall
demand payment under the Letter of Credit from the Bank.
Section 1505. APPLICATION OF PROCEEDS.
The proceeds of the Letter of Credit, if any, shall be applied by the Trustee.
First: only after an acceleration pursuant to Section 502, to
the Trustee for amounts due under Section 606;
Second: to the Trustee to be deposited in the Collateral
Account, less any Pro Rata Share to be paid over for the benefit of
the holders of Pari Passu Mortgages to the extent that the Dennis
Hotel was subject to one or more Pari Passu Mortgages.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and arrested, all as of the day and year first above written.
BALLY'S PARK PLACE
FUNDING, INC.
By: /s/ Joseph D'Amato
Title: Vice President and
Treasurer
Attest:/s/ Dennis P. Venuti
Title: Secretary
BALLY'S PARK PLACE, INC., a
Delaware corporation
By:/s/ Joseph D'Amato
Attest:/s/ Dennis P. Venuti
Title: Secretary
BALLY'S PARK PLACE, INC., a
New Jersey corporation
By:/s/ Joseph D'Amato
Attest:/s/ Dennis P. Venuti
Title: Secretary
BALLY'S PARK PLACE
REALTY CO.
By:/s/ Joseph D'Amato
Attest:/s/ Dennis P. Venuti
Title: Secretary
FIRST BANK NATIONAL ASSOCIATION
By:/s/ Scott Strodthoff
Attest:/s/ Frank P. Leslie III
Title: Assistant Secretary
137
<PAGE> 149
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK)
On the 8th day of March, 1994, before me personally came
Joseph D'Amato, to me known, who, being by me duly sworn, did depose and say
that he resides at 519 Forrestbrook Drive, Absecon, New Jersey 08201, that he
is Vice President and Treasurer of BALLY'S PARK PLACE FUNDING, INC., one of the
corporations described in and which executed the above instrument; that he
knows the corporate seal of such corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed pursuant to authority
of the Board of Directors of such corporation; and that he signed his name
thereto pursuant to like authority.
(NOTARIAL
SEAL)
/s/ Karen Dixon
--------------------
Karen Dixon
Notary Public, State of New York
No. 60-5003100
Qualified in Westchester County
Commission Expires Oct. 13, 1994
<PAGE> 150
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK)
On the 8th day of March, 1994, before me personally came
Joseph D'Amato, to me known, who, being by me duly sworn, did depose and say
that he resides at 519 Forrestbrook Drive, Absecon, New Jersey 08201, that he
is Vice President and Treasurer of BALLY'S PARK PLACE, INC., a Delaware
corporation, one of the corporations described in and which executed the above
instrument; that he knows the corporate seal of such corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed
pursuant to authority of the Board of Directors of such corporation; and that
he signed his name thereto pursuant to like authority.
(NOTARIAL
SEAL)
/s/ Karen Dixon
--------------------------
Karen Dixon
Notary public, State of New York
No. 60-5003100
Qualified in Westchester County
Commission Expires Oct. 13,1994
<PAGE> 151
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK)
On the 8th day of March, 1994, before me personally came
Joseph D'Amato, to me known, who, being by me duly sworn, did depose and say
that he resides at 519 Forrestbrook Drive, Absecon, New Jersey 08201, that he
is Vice President and Treasurer of BALLY'S PARK PLACE, INC., a New Jersey
corporation, one of the corporations described in and which executed the above
instrument; that he knows the corporate seal of such corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed
pursuant to authority of the Board of Directors of such corporation; and that
he signed his name thereto pursuant to like authority.
(NOTARIAL
SEAL)
/s/ Karen Dixon
----------------------
Karen Dixon
Notary Public, State of New York
No. 60-5003100
Qualified in Westchester County
Commission Expires Oct.13, 1994
<PAGE> 152
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
On the 8th day of March, 1994, before me personally came
Joseph D'Amato, to me known, who, being by me duly sworn, did depose and say
that he resides at 519 Forrestbrook Drive, Absecon, New Jersey 08201, that he
is Vice President and Treasurer of BALLY'S PARK PLACE REALTY CO., one of the
corporations described in and which executed the above instrument; that he
knows the corporate seal of such corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed pursuant to authority
of the Board of Directors of such corporation; and that he signed his name
thereto pursuant to like authority.
(NOTARIAL
SEAL)
/s/ Karen Dixon
--------------------
Karen Dixon
Notary Public, State of New York
No. 60-50033100
Qualified in Westchester County
Commission Expires Oct. 13, 1994
<PAGE> 153
STATE OF MINNESOTA )
ss.:
COUNTY OF RAMSEY
On the 8th day of March, 1994, before me personally came Scott
Strodthoff, to me known, who, being by me duly sworn, did depose and say that
he resides at St. Paul, Minnesota, that he is Assistant Vice President of FIRST
BANK NATIONAL ASSOCIATION, one of the corporations described in and which
executed the above instrument; that he knows the corporate seal of such
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed pursuant to authority of the Board of Directors of such
corporation; and that he signed his name thereto pursuant to like authority.
(NOTARIAL
SEAL)
/s/ Mary K. Reber
-------------------------
Mary K. Reber
Notary Public - Minnesota
Ramsey County
My Commission Expires Feb. 10, 1998
<PAGE> 1
AMENDMENT TO 1989 INCENTIVE PLAN OF BALLY MANUFACTURING CORPORATION
(THE "PLAN")
Section 3 of the Plan was amended on July 8, 1991 to increase the number of
shares reserved for issuance under the Plan from 2,500,000 to 4,000,000, and
that said amendment was approved by the stockholders of Bally Manufacturing
Corporation on June 16, 1992.
<PAGE> 1
[Logo] Bally
EMPLOYEE Bally Manufacturing Corporation
PROGRAMS Health & Tennis Corporation of America
Bally's Executive Medical Plan
<PAGE> 2
BALLY'S EXECUTIVE MEDICAL PLAN
Underwritten by The Travelers Insurance Company.
This booklet describes your Executive Medical Plan benefits and it is your
certificate while you are insured. The Group Policy determines all rights and
benefits which are outlined.
<PAGE> 3
INTRODUCTION
Your Bally's Executive Medical Plan is provided by the Company as protection
for you and your eligible dependents over and above that provided by the
medical and dental benefits of the Bally's Employee Group Benefits Plan.
The Company reserves the right to amend, change or terminate any of the
benefits or provisions described herein at any time.
ELIGIBLE EMPLOYEES
Officers and other designated executives of Bally Manufacturing Corporation and
its designated subsidiaries are eligible for coverage under the Executive
Medical Plan. Coverage begins on the first day of your employment.
ELIGIBLE DEPENDENTS
* Your spouse, as long as you are not divorced or legally separated;
* Your unmarried children, who are residents of the same country in
which you reside, who are under the age of 19, who are not
employed on a regular, full-time basis and, who are dependent
on you for support;
* Your unmarried children, who are residents of the same country in
which you reside, who are age 19 or over, but under the age of
23, who are full-time students at an accredited institution
and, who are dependent on you for support.
Children shall include any natural born child, any legally adopted child, any
child who has been placed under you legal guardianship, or any stepchild of
yours, provided such stepchild is dependent upon you for support and
maintenance.
If a child is incapable of self-sustaining employment due to mental retardation
or physical handicap after his 19th or 23rd birthday, (whichever is
applicable), for the purposes of Medical Care Benefits, the child will still be
considered a dependent if required medical evidence is submitted and accepted.
Coverage for your eligible dependents begins when your coverage begins, or when
the person becomes your dependent, if later.
BENEFITS
Any medical or dental charge that is covered under the medical or dental
provisions of the Bally's Employee Group Benefits Plan is covered by this
Executive Medical Plan. Total payment for such covered charges is 100%. Any
charge not covered under the medical or dental benefits provisions of the Group
Benefits Plan is not covered under the Executive Medical Plan.
Benefits under the Executive Medical Plan are not subject to a deductible.
Pre-existing conditions will be covered by the Executive Medical Plan and will
be paid in accordance with the plan provisions.
<PAGE> 4
BENEFIT CLAIMS
When you or a covered dependent incur a covered medical or dental expense you
should file a claim under the Bally's Employee Group Benefits Plan. (See claim
instructions in that Plan booklet).
The Travelers will pay applicable benefits under that Plan. Then they will
automatically re-evaluate the claim under the Executive Medical Plan and will
pay the difference between the full amount of the charge and the benefit paid
under the Bally's Employee Group Benefits Plan. You will receive two separate
benefit payments in full settlement of the claim submitted.
<PAGE> 1
[Logo] Bally
EMPLOYEE Bally Manufacturing Corporation
PROGRAMS Health & Tennis Corporation of America
Bally's Executive Medical Plan
<PAGE> 2
BALLY'S EXECUTIVE MEDICAL PLAN
Underwritten by Connecticut General Life Insurance Company.
This booklet describes your Executive Medical Plan benefits and it is your
certificate while you are insured. The Group Policy determines all rights and
benefits which are outlined.
<PAGE> 3
INTRODUCTION
Your Bally's Executive Medical Plan is provided by the Company as protection
for you and your eligible dependents over and above that provided by the
medical and dental benefits of the Bally's Employee Group Benefits Plan.
The Company reserves the right to amend, change or terminate any of the
benefits or provisions described herein at any time.
ELIGIBLE EMPLOYEES
Officers and other designated executives of Bally Manufacturing Corporation and
its designated subsidiaries are eligible for coverage under the Executive
Medical Plan. Coverage begins on the first day of your employment.
ELIGIBLE DEPENDENTS
* Your spouse, as long as you are not divorced or legally separated;
* Your unmarried children, who are residents of the same country in
which you reside, who are under the age of 19, who are not
employed on a regular, full-time basis and, who are dependent
on you for support;
* Your unmarried children, who are residents of the same country in
which you reside, who are age 19 or over, but under the age of
23, who are full-time students at an accredited institution
and, who are dependent on you for support.
Children shall include any natural born child, any legally adopted child, any
child who has been placed under you legal guardianship, or any stepchild of
yours, provided such stepchild is dependent upon you for support and
maintenance.
If a child is incapable of self-sustaining employment due to mental retardation
or physical handicap after his 19th or 23rd birthday, (whichever is
applicable), for the purposes of Medical Care Benefits, the child will still be
considered a dependent if required medical evidence is submitted and accepted.
Coverage for your eligible dependents begins when your coverage begins, or when
the person becomes your dependent, if later.
BENEFITS
Any medical or dental charge that is covered under the medical or dental
provisions of the Bally's Employee Group Benefits Plan is covered by this
Executive Medical Plan. Total payment for such covered charges is 100%. Any
charge not covered under the medical or dental benefits provisions of the Group
Benefits Plan is not covered under the Executive Medical Plan.
Benefits under the Executive Medical Plan are not subject to a deductible.
Pre-existing conditions will be covered by the Executive Medical Plan and will
be paid in accordance with the plan provisions.
<PAGE> 4
BENEFIT CLAIMS
When you or a covered dependent incur a covered medical or dental expense you
should file a claim under the Bally's Employee Group Benefits Plan. (See claim
instructions in that Plan booklet).
CIGNA will pay applicable benefits under that Plan. Then they will
automatically re-evaluate the claim under the Executive Medical Plan and will
pay the difference between the full amount of the charge and the benefit paid
under the Bally's Employee Group Benefits Plan. You will receive two separate
benefit payments in full settlement of the claim submitted.
<PAGE> 1
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment ("Amendment") to the Employment Agreement is made and
entered into this 29th day of September, 1993 between Bally
Manufacturing Corporation, a Delaware corporation with its principal office
located at 8700 West Bryn Mawr Avenue, Chicago, Illinois 60631 (together with
successors and assigns permitted under this Agreement, the "Company"), and
Arthur M. Goldberg, who resides at 6 Kimball Circle, Westfield, New Jersey
07090 (the "Executive").
W I T N E S S E T H
-------------------
WHEREAS, the Company and the Executive have entered into an Employment
Agreement as of November 1, 1990; and
WHEREAS, the Employment Agreement has been previously amended and the
Company has determined that it is in the best interest of the Company
and its shareholders to further amend said Employment Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Amendment and the Employment Agreement and for other good and
valuable consideration, the receipt of which is mutually acknowledged, the
Company and the Executive agree to modify and amend the Employment Agreement as
follows:
1. Subsection (b) of Section 2, TERM OF EMPLOYMENT, POSITIONS AND DUTIES
SHALL BE ELIMINATED AND REPLACED WITH THE FOLLOWING:
(b) Term. Subject to the provisions for termination otherwise
included in the Employment Agreement, the term of the employment of the
Executive under the Employment Agreement shall be extended from October 31,
1994 through and including October 31, 1997. Such term shall automatically be
extended for an additional one (1) year period commencing on November 1, 1995
and each November 1st thereafter unless: (i) the Employment Agreement is
terminated as a result of death or disability pursuant to Section 10(a) or (b)
of the Employment Agreement, by the Company for cause pursuant to Section 10(c)
of the Employment Agreement or voluntarily by the Executive pursuant to Section
<PAGE> 2
10(f) of the Employment Agreement; or (ii) either the Company or the Executive
shall give written notice to the other on or before October 1st of any year
during the term of this Agreement, that the term of the Executive's employment
shall be fixed for a three (3) year period commencing on the November 1st
immediately succeeding such written notice, and there shall be no further
automatic extensions. The term of the Employment Agreement, including the
extension through October 31, 1997 and any automatic extensions hereof pursuant
to this Letter Agreement is referred to as the "Term of Employment."
2. Section 6, EXPENSE REIMBURSEMENT, shall be amended by adding the following
sentence to the end thereof:
"The Executive shall be entitled to prompt reimbursement by the Company for
all reasonable legal and related expenses incurred by him in connection with
the preparation and approval of the Second Amendment of this Agreement.
3. Section 8, SUPPLEMENTAL RETIREMENT BENEFIT, shall be eliminated and
replaced with the following:
8. SUPPLEMENTAL RETIREMENT BENEFIT.
(a) AMENDMENT OF SUPPLEMENTAL RETIREMENT BENEFIT; ESTABLISHMENT OF TRUST.
Effective as of December 31, 1992, the Executive's supplemental retirement
benefit is amended by causing future Company contributions to be made to a
trust established by, and for, the Executive. The Executive shall establish a
trust (the "Trust') on or before June 15, 1993. The Trust shall be a grantor
trust, within the meaning of Sections 671 through 679 of the Code, established
by the Executive, which shall receive the Company contributions for the
supplemental retirement benefits provided under this Section 8.
(b) PAYMENT OF BENEFIT. Each year that Executive is employed by the Company
until age 62 and effective with the payment due for 1992, the Company shall
contribute for the Executive's supplemental retirement benefit, the sum of the
following amounts:
(i) the amount necessary to fund the Executive's "Target Benefit"
(determined in accordance with subsection 8(c) below) shall be paid to the
Trust;
(ii) the amount of the Tax Gross-Up Payment (determined in accordance with
subsection 8(e) below) shall be paid to the Executive (or withheld for the
payment of taxes on the Executive's behalf);
(iii) The fees of the trustee of the Executive's Trust shall be paid to the
trustee of the Trust (or, if previously paid by the Executive or from the
assets of the Trust, to the Executive or to the Trust to reimburse the
Executive or the Trust for such expense.)
2
<PAGE> 3
Contributions under this subsection may be paid directly to the Executive,
forwarded to the appropriate governmental taxing authority on the Executive's
behalf, or paid to the Executive's Trust or the trustee of the Executive's
Trust. Amounts payable for any year under this subsection 8(b) shall be
calculated as of December 31, (the "Calculation Date") of such year and shall
be payable on or before March 15 of the calendar year following the Calculation
Date, provided, that the payment for 1992 shall be made on or before the later
of the date 75 days after the execution of this Second Amendment or 30 days
after the Trust is established. In addition, subsections 8(g)(ii), (iv), (v),
and (vi) provide for certain additional contributions to be made in the event
of the Executive's death or the termination of the Executive's employment with
the Company. In such circumstances, the date of such termination shall be
deemed to be a Calculation Date. When the amount so determined for any
Calculation Date has been paid by the Company, the Company shall have no
further obligation to provide the Executive or any other person benefits which
have accrued under this Section 8 through Calculation Date.
(c) TARGET BENEFIT. The amount of the Executive's "Target Benefit" shall be
the amount calculated, as of the Calculation Date, actuarially using the
individual level aggregate method and based on the actuarial assumptions
contained in subsection 8(d), as necessary to provide funding for a retirement
benefit payable in the form of a single life annuity commencing on the January
1 following the Executive's 62nd birthday in an annual amount equal to the
excess, if any, of: (i) 50% of the average of the Executive's compensation
(determined as of such Calculation Date) for any of the three highest years
preceding the year in which he attains age 62 over (ii) the sum of $258,189
(relating to the supplemental retirement benefit assumed to be funded as of
December 31, 1992 by previous annuity purchases) and the retirement benefit,
payable in the form of a single life annuity commencing on the January 1
following the Executive's 62nd birthday, that can be provided by the value, if
any, of any other retirement or similar benefits under plans or programs of the
Company in which the Executive participates (but not including benefits
attributable to the Executive's contributions or contributions made on the
Executive's behalf pursuant to a qualified cash or deferred election under
Section 401(k) of the Internal Revenue Code and earnings thereon.) For
purposes of the preceding sentence, the Executive's compensation means Base
Salary plus the bonuses paid to him under Section 4 of this Agreement (both
before and after the First Amendment of this Agreement.)
(d) ACTUARY AND ACTUARIAL ASSUMPTIONS. The Company, with Executive's
concurrence, shall engage, at its expense, an actuary (the "Actuary") to
perform the calculations required under this Section 8. The Actuary so engaged
shall perform the necessary calculations in accordance with the timetable set
forth in subsection (f). The Actuary shall perform the necessary calculations
using the following assumptions:
(i) MORTALITY: no pre-retirement mortality and post-retirement mortality
based on the 1983 Individual Annuity Mortality Table for Males.
3
<PAGE> 4
(ii) INTEREST: As of each Calculation Date, the interest rate used in
calculating the Executive's Target Benefit for the period until the year of
the Executive's 62nd birthday and the Assumed Earnings (as defined in
subsection 8(d)(iii), below) for the period until the next Calculation Date
shall be equal to the 7-year Treasury bond rate in effect on such date plus
0.5%, rounded to the nearest 0.25%.
(iii) ASSUMED TRUST BALANCE AND ASSUMED EARNINGS: As of each Calculation
Date, the Actuary shall calculate the "Assumed Trust Balance" and the
"Assumed Earnings" for use in its actuarial determination of the Target
Benefit contribution of subsection 8(b)(i) and the Tax Gross-Up Payment. The
Assumed Trust Balance for the December 31, 1992 Calculation Date is zero.
For each Calculation Date thereafter, the Assumed Trust Balance shall be
equal to the sum of: (A) the Assumed Trust Balance as of the immediately
preceding Calculation Date, (B) the Target Benefit contribution made under
subsection 8(b)(i) with respect to the immediately preceding Calculation
Date, and (C) the Assumed Earnings on the Assumed Trust Balance since the
immediately preceding Calculation Date and the Target Benefit contribution
made under subsection 8(b)(i) with respect to the immediately preceding
Calculation Date. The Assumed Earnings between two consecutive Calculation
Dates shall be determined by applying, for the period of time between such
Calculation Dates, interest at the rate in effect under subsection 8(d)(ii)
above on the first of such consecutive Calculation Dates to the sum of: (A)
the Assumed Trust Balance as of such first Calculation Date, and (B) the
Target Benefit contribution made under subsection 8(b)(i) with respect to
such first Calculation Date.
(e) TAX GROSS-UP. The Company agrees to pay to the Executive with respect
to each Calculation Date, an amount (the "Tax Gross-Up Payment") such that the
net benefit to the Executive after the calculation and deduction of any
federal, state and local incomes taxes due with respect to the Company
contributions required by this Section 8 and any federal excise taxes (as
defined in subsection 10(g) below occurring by reason of the Company
contributions described in subsection 8(g)(vi) below) will equal the required
Company Target Benefit contributions of subsection 8(b)(i). In addition, the
Tax Gross-Up Payment will include a gross-up for such taxes incurred by the
Executive due to the Company's payment of the trustee fees described in
subsection 8(b)(iii), his inclusion of the Assumed Earnings (as calculated
pursuant to subsection 8(d)(iii)) for the period ending on such Calculation
Date in gross income.
Further, the portion of the Tax Gross-Up Payment attributable to federal
income taxes shall be reduced by the maximum reduction in federal income taxes
that could be obtained by deduction of the portion of the Tax Gross-Up payment
attributable to state and local incomes taxes. Notwithstanding anything in
this Agreement to the contrary, the Tax Gross-Up payment attributable to
federal excise taxes shall be determined as provided in subsection 10(g) below.
4
<PAGE> 5
The amount of the Tax Gross-Up Payments shall be determined by the Company
after consultation with the Executive's tax advisors and shall be paid to the
Executive on or before the due date provided in subsection 8(g) below, in
respect of which the Tax Gross-Up Payments shall be based upon tax rates and
laws in effect on the Calculation Date to which such payments relate
notwithstanding the fact that the payment may occur in the following calendar
year.
(f) FUNDING DETERMINATIONS AND TIMING. For each Calculation Date, a
contribution shall be determined for the Executive by the Actuary. With
respect to any Calculation Date corresponding to a December 31, following
December 31, 1992, on or before January 31 of each year, the Company shall
provide the Actuary with the data the Actuary deems necessary to calculate the
contribution for such preceding year. Such data shall, to the extent
necessary, include the Executive's compensation for the preceding year. The
Actuary shall supply his determination of the Company contribution required to
fund the Executive's benefit amount to the Company by February 28 of such year
and the Company shall pay the amounts required under subsection 8(b) to or on
behalf of the Executive on or prior to March 15 of such year. Contributions
for December 31, 1992 shall be made on a similar timetable within 75 days of
the execution of this Second Amendment. Additional contributions for
Calculation Dates not corresponding to December 31 required under subsection
8(g), shall be made on a similar timetable within 75 days of such Calculation
Date.
(g) EMPLOYMENT TERMINATION; ATTAINMENT OF AGE 62
(i) AGE 62. If the Executive remains in the employ of the Company until the
date he attains age 62, he will be entitled to a final full contribution
under subsection 8(b) with respect to the Calculation Date immediately
preceding such date. In addition, with respect to the Calculation Date
immediately following his 62nd birthday, an additional contribution shall be
made consisting of the trustee's fees and Tax Gross-Up Payment (with respect
to the Assumed Earnings and trustee fees for the calendar year in which his
62nd birthday occurs) which shall be the Company's final payment on the
Executive's behalf under this Section 8.
(ii) DEATH. In the event the Executive's employment is terminated by death
prior to his 62nd birthday, the Company shall make its final full
contribution under Section 8 with respect to the Calculation Date coincident
with or immediately preceding the date of the Executive's death. In
addition, following his death prior to his 62nd birthday, an additional
contribution shall be made consisting of the trustee's fees and Tax Gross-Up
Payment (with respect to the Assumed Earnings and the trustee fees for the
period from such Calculation Date until the date of the Executive's death
which shall be the Company's final payment on the Executive's behalf under
this Section 8).
5
<PAGE> 6
(iii) DISABILITY. In the event the Executive's employment is terminated
due to Disability prior to his 62nd birthday, the Executive shall continue to
be entitled to supplemental retirement benefits under this Section 8 as if his
employment had not terminated as provided in subsections 10(b)(v) and (vii),
below.
(iv) TERMINATION FOR CAUSE. In the event the Executive's employment is
terminated for Cause proor to his 62nd birthday, the Company shall make no
further contributions or payments pursuant to this Section 8.
(v) TERMINATION WITHOUT CAUSE. Upon termination of the Executive's
employment pursuant to subsection 10(d) below, the Company shall make its full
contribution under this Section 8 with respect to the Calculation Date
immediately preceding such date of termination. In addition, the company shall
immediately make an additional contribution under subsection 8(b), which will
equal the sum of the following amounts:
(A) an amount equal to three times the amount of the Target Benefit
portion (under subsection 8(b)(i) above) of the contribution provided
as of the Calculation Date immediately prior thereto; provided,
however, that the sum of the benefit provided by such additional
contribution (under this clause (A)) and the benefits provided by the
Assumed Trust Balance as of the date of such termination shall not
exceed the retirement benefit provided under subsection 8(c) above.
(B) the amount of the trustee's fees (with respect to the period from
such Calculation Date until the date of the Executive's termination of
employment), and
(C) the amount of the Tax Gross-Up Payment (with respect to the
contribution described in clause (A), above, the Assumed Earnings and
the trustee fees for the period from such Calculation Date until the
date of the Executive's termination of employment).
The contribution described in the preceding sentence shall be the Company's
final paynment on the Executive's behalf under this Section 8.
(vi) TERMINATION WITHOUT CAUSE FOLLOWING A CHANGE IN CONTROL. Upon
termination of the Executive's employment pursuant to subsection 10(e) below,
the Company shall make its full contribution under this Section 8 with respect
to the Calculation Date immediately preceding such date of termination. In
addition, the Company shall immediately make an additional contribution under
subsection 8(b) which shall equal the sum of the following amounts:
6
<PAGE> 7
(A) the amount which, together with the Assumed Trust Value
as of the date of termination (but not including annuitiess
purchased for the Executive under Section 8 of the Agreement
prior to this Second Amendment), shall provide the Executive a
retirement annuity equal to the Target Benefit provided under
subsection 8(c), above, commencing on the January 1 following his
62nd birthday.
(B) the amount of the trustee's fees (with respect to the
period from such Calculation Date until the date of the
Executive's termination of employment), and
(C) the amount of the Tax Gross-Up Payment (with respect to
the contribution described in clause (A), above, the Assumed
Earnings and the trustee fees for the period from such
Calculation Date until the date of the Executive's termination of
employment).
The contribution described in the preceding sentence shall be
the Company's final payment on the Executive's behalf under this
Section 8.
(vii) VOLUNTARY TERMINATION. In the event of the Executive's
voluntary termination of employment prior to his 62nd birthday (as
described in subsection 10(f) below), the Company shall make its final
payment under this Section 8 with respect to the Calculation Date
coinciding with or immediately preceding the date of his employment
termination.
(h) FUNDING. All benefits paid under this Section 8 shall be paid on an
annual basis from the general assets of the Company either directly to the
Executive, forwarded to the appropriate governmental taxing authority on the
Executive's behalf, to the Executive's Trust or the trustee of the Executive's
Trust.
(i) INTERESTS NOT TRANSFERABLE. The interests of the Executive under this
Section 8 are not subject to the claims of his creditors and may not
voluntarily or involuntarily transferred, assigned, alienated or encumbered.
(j) EFFECT ON OTHER BENEFIT PLANS. Amounts credited or paid under this
Section 8 shall not be considered to be compensation for the purposes of
calculating benefits under any other employee benefit plans maintained by the
Company. The treatment of such amounts under any other employee benefit plan
shall be determined pursuant to the provisions of such plan.
7
<PAGE> 8
4. Section 10, TERMINATION OF EMPLOYMENT, shall be revised effective
December 31, 1992 in order to make it consistent with changes made into Section
8, SUPPLEMENTAL RETIREMENT BENEFIT by this Second Amendment as follows:
A. By substituting the following for subsection 10(a)(vi):
"(vi) contributions required to be paid pursuant to subsection
8(g)(ii), above; and"
B. By substituting the word "contributions" for the phrase
"annuity purchases" where it appears in subsection 10(b)(v).
C. By substituting the following for subsection 10(b)(vii):
"(vii) any contributions required to be made as of any Calculation Date
prior to the termination of the Executive's employment due to
Disablility pursuant to subsection 8(b), above, but not made at the
time of his termination of employment; and"
D. By substituting the phrase "supplemental retirement
program" for the phrase "annuity program" in subsection 10(d)(iv).
E. By substituting the following for subsection 10(d)(iv):
"(vi) any contributions required to be made with respect to any
Calculation Date prior to termination of the Executive's employment
pursuant to subsection 8(b), above, but not made at the time of his
termination of employment, plus the contributions required to be made
pursuant to subsection 8(g)(v), above; and
F. By substituting the phrase" supplemental retirement
program" for the phrase "annuity program" in subsection 10(e)(iii).
G. By substituting the following for subsection 10(e)(v):
"(v) any contributions required to be made with respect to any
Calculation Date prior to termination of the Executive's employment
pursuant to subsection 8(b), above, but not made at the time of his
termination of employment, plus the contributions required to be made
pursuant to subsection 8(g)(vi);"
H. By substituting the phrase "subsection 10(e)(iii)" for the
phrase "subsection 8(e)(iii)" in both places it appears in penultimate
sentence of subsection 10(e).
8
<PAGE> 9
I. By substituting the following for subsection 10(f)(iv):
"(iv) any contributions required to be made with respect to any
Calculation Date prior to termination of the Executive's employment
pursuant to subsection 8(b), above bu not made at the time of his
termination of employment; and"
5. Section 21, BENEFICIARIES/REFERENCES shall be amended by substituting
the phrase "thr Trust specified in Section 8" for the phrase "the annuity
contract specified in Section 8".
All terms of the Employment Agreement, as amended through the First
Amendment thereto, not specifically amended herein shall remain in full force
and effect.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
BALLY MANUFACTURING CORPORATION
Attest: /S/Carol DePaul By:
-------------------------- ---------------------------------
/S/
------------------------------------
Arthur M. Goldberg, as the Executive
Acknowledged and Approved by the
Compensation and Stock Option Committee
of the Board of Dirctors
Attest: /S/ By:
-------------------------- --------------------------------
Chairman
Agreed to and guaranteed by Bally's
Park Place:
Attest: /S/ By:
-------------------------- --------------------------------
Secretary President
9
<PAGE> 1
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
----------------------------------------
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT is made, entered into and
effective the 8th day of December, 1993, by and between Bally Manufacturing
Corporation, a Delaware corporation ("Bally"), Bally's Health & Tennis
Corporation, a Delaware corporation ("BHTC") and Lee Hillman ("Employee")
(together, Bally and BHTC shall be referred to herein as "Employer").
WHEREAS, Employer and Employee desire to amend the Amended and Restated
Employment Agreement (the "Amended and Restated Employment Agreement") dated
May 29, 1991.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements herein contained and in the Amended and Restated Employment
Agreement and for other good and valuable consideration, the receipt of which
is mutually acknowledged, the parties agree as follows:
1. Every reference to the "Amended and Restated Employment Agreement"
contained therein shall be eliminated and replaced with the "Second Amendment
to Employment Agreement".
2. Section 3 TERM shall be eliminated and replaced with the following:
"The term of the employment of Employer under this Agreement shall be
extended from April 15, 1994 through and including April 14, 1997.
Notwithstanding the foregoing and subject to the provisions for termination
otherwise included herein, such term shall automatically be extended for an
additional one (1) year period commencing on April 15, 1995 and each April 15
thereafter unless: (i) this Employment Agreement is terminated due to illness,
incapacity or death of Employee pursuant to Section 7 hereof, by BHTC or Bally,
for cause or in the event of a change of control pursuant to Section 8 hereof
or voluntarily by Employee; or (ii) either Employer or Employee shall give
written notice to the other on or before March 1 of any year during the term
hereof that the term of Employee's employment shall be fixed for a three (3)
year period commencing on the April 15 immediately succeeding such written
notice, and there shall be no further automatic extensions."
3. Subsection 8(b) TERMINATION FOR CAUSE AND SEVERANCE COMPENSATION shall be
eliminated and replaced with the following:
(b) In the event of a change in control of Bally or Employer as a result of
which Employee is asked to leave Employer's employ, Employee will be entitled
to receive from Employer, in a lump sum, the full amount of Base Salary and
Annual Bonus compensation that he would be entitled to for the remainder of the
term hereof assuming Employer gives the notice to Employee referred
<PAGE> 2
to in
Section 2(ii) above. For these purposes, "change in control" shall mean a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 (as in effect on the effective date of this Employment
Agreement), whether or not Bally or BHTC is then subject to such reporting
requirements.
All terms of the Amended and Restated Employment Agreement, as amended
through this Second Amendment to Employment Agreement not specifically amended
herein shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
Employment Agreement to be duly executed as of the day and year first above
written.
BALLY MANUFACTURING CORPORATION
By: _________________________________
Vice President "Bally"
ATTEST: /S/ Carol S. DePaul
______________________
Secretary
BALLY'S HEALTH & TENNIS CORPORATION
By: _________________________________
President "BHTC"
ATTEST: /S/ Barbara J. Snider
______________________
/S/ Lee Hillman
--------------------------
Lee Hillman "Employee"
This Employment Agreement has been approved by the Compensation and Stock
Option Committee of the Board of Directors of Bally Manufacturing Corporation
as of December 8th, 1993.
By: _________________________________
Secretary of Compensation
and Stock Option Committee
-2-
<PAGE> 1
EMPLOYMENT AGREEMENT
--------------------
THE EMPLOYMENT AGREEMENT made and entered into the 8th day of December, 1993
and effective as of July 28, 1993, by and between Bally Manufacturing
Corporation, a Delaware corporation ("Employer") and Jerry Thornburg
("Employee"):
WHEREAS, Employer and Employee desire to enter into this Employment Agreement
to set forth the rights and duties of the parties herein;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements herein contained, the parties agree as follows:
1. Employment.
(a) Employer hereby employs Employee in the capacity of Vice President,
Audit, reporting directly to the independent Audit Committee of the Board of
Directors of Employer, as well as the Chairman of the Board and Chief Executive
Officer of Employer, and such additional capacity or capacities of equal status
and responsibility as the Chairman of the Board and Chief Executive Officer of
Employer, or his designated representative(s), shall determine, and Employee
hereby accepts such employment upon the terms and conditions herein set forth.
(b) During the term of his employment, Employee will devote his best
efforts to his employment and perform such duties consistent with his
capacities as Vice President, Audit, and such additional capacity or capacities
as the Chairman of the Board and Chief Executive Officer of Employer shall
determine, as are assigned to him by Employer. Employee will devote his entire
working time and attention to the business of, and will be loyal to, Employer,
and Employee agrees to render service on behalf of Employer or on behalf of its
subsidiaries. It is acknowledged that during the term of this Employment
Agreement, if Employee is required to reside outside the metropolitan area of
Chicago, Illinois, Employer shall reimburse Employee for all costs and expenses
related to Employee's relocation. It is further acknowledged that, in the
event Employee is asked to relocate and declines to do so, this Employment
Agreement shall be terminated, and Employee shall be entitled to receive an
amount equal to the Base Salary (as hereinafter defined) in full satisfaction
of Employer's obligations hereunder.
(c) Employee shall not, without prior written consent of Employer, directly
or indirectly, during the term of this Employment Agreement:
(i) Other than in the performance of duties naturally inherent to
Employer's business and in furtherance
<PAGE> 2
thereof, render services of a business,
professional or commercial nature to any other person or firm, whether for
compensation or otherwise, but this shall not be construed as preventing the
Employee from investing his assets in such form or manner as will not require
any services on the part of the Employee in the operation of the affairs of the
companies in which such investments are made and which are not in violation of
subparagraph (ii) below or from engaging in charitable activities so long as
such activities do not interfere with the performance of Employee's duties
hereunder;
(ii) Engage in any activity competitive with or adverse to Employer's
business or welfare, whether alone, as a partner, or as an officer, director,
employee or shareholder of any other corporation, or otherwise, directly or
indirectly, except that the ownership of not more than one percent (1%) of the
stock of any publicly traded corporation shall not be deemed violative of this
subparagraph (ii);
(iii) Be engaged by any entity which conducts business with or acts as
consultant or advisor to Employer, whether alone, as a partner, or as an
officer, director, employee or shareholder, or otherwise, directly or
indirectly, except that ownership of not more than one percent (1%) of the
stock of any publicly traded corporation shall not be deemed violative of this
subparagraph (iii).
2. Term.
The term of this Employment Agreement shall begin on July 28, 1993
("commencement date") and shall continue for three (3) years from such date.
3. Compensation.
(a) In consideration of the services to be rendered by the Employee
hereunder, the Employer agrees to pay to the Employee, and the Employee agrees
to accept, as compensation, the sum of One Hundred Thirty-Five Thousand Dollars
($135,000) (the "Base Salary") for each twelve month period following the
effective date of this Employment Agreement, which shall be paid on the
regularly recurring pay periods established by Employer.
(b) It is further understood by both parties that if, in the opinion of
the Compensation and Stock Option Committee of the Board of Directors of
Employer (the "Committee"), the Employee's performance warrants the payment of
additional compensation, then the Employer agrees that a discretionary bonus
payment shall be made in addition to the Base Salary above provided. The
criteria that the Committee may take into consideration in providing for such
discretionary bonus payments are Employee's ability and performance, the
success achieved by the department or group
-2-
<PAGE> 3
managed by the Employee and such other criteria as the Employer may deem
relevant.
4. Vacation and Other Benefits.
Employee shall be entitled to a reasonable vacation each year of his
employment with Employer as well as other employment benefits, including
hospitalization, life insurance, death and retirement plans, an automobile
allowance, and the like, afforded to senior executives of Employer of
comparable status.
5. Expenses.
Employer shall pay all reasonable expenses incurred by Employee in the
performance of his responsibilities and duties for Employer as well as the
promotion of Employer's business.
Employee shall submit to Employer periodic statements of all expenses so
incurred. Subject to such audits as Employer may deem necessary, Employer
shall reimburse Employee the full amount of any such expenses advanced by
Employee promptly in the ordinary course.
6. Covenants and Confidential Information.
(a) Employee agrees that for the applicable period specified below, he
will not, directly or indirectly, do any of the following:
(i) Own, manage, control, or participate in the ownership, management, or
control of, or be employed or engaged by or otherwise affiliated or associated
as a consultant, independent contractor or otherwise, with any other
corporation, partnership, proprietorship, firm, association or other business
entity, or otherwise engage in any business which is engaged in any manner in,
or otherwise competes with, the business of Employer (as conducted on the date
Employee ceases to be employed hereunder); PROVIDED, HOWEVER, that the
ownership of not more than one percent (1%) of the stock of any publicly traded
corporation shall not be deemed a violation of this covenant;
(ii) Induce any person who is an employee, officer, or agent of Employer
to terminate said relationship.
(iii) Be employed or engaged (as an employee, officer, agent,
independent contractor, or otherwise) by any competitor of Employer.
(iv) Disclose, divulge, discuss, copy or otherwise use or suffer to be
used in any manner, in competition with, or contrary to the interests of
Employer, the customer lists, inventions, ideas, discoveries, manufacturing
methods, product
-3-
<PAGE> 4
research or engineering data or other trade secrets of Employer, it being
acknowledged by Employee that all such information regarding the business of
Employer compiled or obtained by, or furnished to, Employee while he shall have
been employed by or associated with Employer is confidential information and
the exclusive property of Employer.
(b) The provisions of subparagraphs 6(a)(i) and 6(a)(iii) of this
paragraph 6 shall be operative for a period of eighteen (18) months commencing
the date Employee terminates or is terminated for cause, as hereinafter
defined, as an employee of Employer under this Employment Agreement or any
extension, renewal, modification, or amendment of same. All other obligations
created by the terms of this paragraph 6 are of a continuing nature and shall
remain in full effect at all times during and beyond Employee's period of
employment. If Employee continues in the employ of Employer beyond the
original term hereof, whether at the same or different compensation, then for
the purpose of this subparagraph (b) this Employment Agreement shall be deemed
extended during the period of such employment unless the parties agree in
writing to the contrary.
(c) Employee expressly agrees and understands that the remedy at law for
any breach by him of this paragraph 6 will be inadequate and that the damages
flowing from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that Employer shall be
entitled to immediate injunctive relief and if the court so permits, may obtain
a temporary order restraining any threatened or further breach. Nothing
contained in this paragraph 6 shall be deemed to limit Employer's remedies at
law or in equity for any breach by Employee of the provisions of this paragraph
6 which may be pursued or availed of by Employer. Any covenant on Employee's
part contained hereinabove, which may not be specifically enforceable, shall
nevertheless, if breached, give rise to a cause of action for monetary damages.
(d) Employee has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred upon Employer under
this paragraph 6, and hereby acknowledges and agrees that the same are
reasonable in time and territory, are designed to eliminate competition which
otherwise would be unfair to Employer, do not stifle the inherent skill and
experience of Employee, would not operate as a bar to Employee's sole means of
support, are fully required to protect the legitimate interests of Employer and
do not confer a benefit upon Employer disproportionate to the detriment to
Employee.
(e) For the purposes of this paragraph 6, the term "Employer" shall be
deemed to include Bally Manufacturing Corporation, Bally's Casino Holdings,
Inc., GNOC, CORP., and Bally's Health & Tennis Corporation and any of their
parent,
-4-
<PAGE> 5
affiliate or subsidiary corporations, together with their respective successors
or assigns.
(f) The covenants contained in this paragraph 6 shall be construed to extend
to separate counties of the states of the United States in which Employer
during the term of Employee's employment has been or is engaged in business,
and to the extent that any such covenant shall be illegal and/or unenforceable
with respect to any one of said counties, said covenants shall not be affected
thereby with respect to each other county, such covenants with respect to each
county being construed as severable and independent.
(g) In the event Employee shall violate any legally enforceable provision
of this Employment Agreement as to which there is a specific time period during
which Employee is prohibited from taking certain actions or from engaging in
certain activities, as set forth in such Employment Agreement, then, in such
event, such violation shall toll the running of such time period from the date
of such violation until such violation shall cease.
7. Illness, Incapacity or Death During Employment.
a) If the Employee is unable to perform his services by reason of illness
or incapacity resulting in a failure to discharge his duties under this
Employment Agreement for six (6) or more consecutive months, then upon thirty
(30) days notice, Employer may terminate the employment of Employee under this
Employment Agreement and Employee, upon such termination, shall be paid his
Base Salary on a pro-rata basis to the date of termination through the thirty
(30) day notice period.
In the event of such termination, the Employee shall have the right to the
assignment of any and all insurance policies or health protection plans if said
policies and plans permit assignment out of the group to an individual
employee.
(b) In the event of Employee's death, all obligations of Employer under
this Employment Agreement shall terminate other than the payment of that
portion of his Base Salary on a pro-rata basis accrued to the date of death,
plus reimbursement of all expenses reasonably incurred by Employee in
performing his responsibilities and duties for Employer prior to and including
such date.
8. Termination for Cause and Severance Compensation.
(a) The employment of Employee under this Employment Agreement, and the
term hereof, may be terminated by Employer for cause at any time. For purposes
hereof, the term "cause" includes but is not limited to:
-5-
<PAGE> 6
(i) Employee's insubordination, fraud, dishonesty, willful misconduct or
gross negligence in the performance of his duties hereunder, including willful
failure to perform such duties as may properly be assigned him hereunder;
(ii) Employee's material breach of any provision of this Employment Agreement;
or
(iii) Employee's failure to qualify (or having so qualified being
thereafter disqualified) under any suitability or licensing requirement to
which Employee may be subject by reason of his position with Employer and its
affiliates or subsidiaries, whether under the laws of Nevada, New Jersey or
otherwise.
Any termination by reason of the foregoing shall not be in limitation of any
other right or remedy Employer may have under this Employment Agreement or
otherwise.
(b) In the event of a change in control of Employer or Employer as a result
of which Employee is asked to leave Employer's employ, Employee will be
entitled to receive from Employer, in a lump sum, the full amount of Base
Salary compensation that he would be entitled to for the remainder of the term
of this Employment Agreement or an amount equal to twenty-four (24) months Base
Salary, whichever is greater. For purposes of this Employment Agreement,
change in control shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 (as in effect on the
effective date of this Employment Agreement), whether or not Employer or
Bally's Health & Tennis Corporation is then subject to such reporting
requirements.
9. Severable Provisions.
The provisions of this Employment Agreement are severable, and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions, and any partially unenforceable
provision to the extent enforceable in any jurisdiction, shall nevertheless be
binding and enforceable.
10. Binding Agreement.
The rights and obligations of Employer under this Employment Agreement shall
inure to the benefit of and shall be binding upon the respective successors and
assigns of Employer.
11. Attorneys' Fees.
In the event Employee is required to commence legal action to enforce the
provisions of this Employment Agreement and
-6-
<PAGE> 7
Employee prevails in such action, Employer shall pay Employee's costs and
expenses, including reasonable attorneys' fees, incurred in such action.
12. Notices.
Any notice to be given to Employer under the terms of this Employment
Agreement shall be addressed to Employer at the address of its principal place
of business, and any notice to be given to Employee shall be addressed to him
at his home address last shown on the records of the Employer, or at such other
address as either party may hereafter designate in writing to the other. Any
such notice shall have been duly given when enclosed in a properly sealed
envelope addressed as aforesaid, postage prepaid, registered or certified,
return receipt requested, and deposited in a post office or branch post office
regularly maintained by the United States Government.
13. Waiver.
Either party's failure to enforce any provision or provisions of this
Employment Agreement shall not in any way be construed as a waiver of any such
provision or provisions as to any future violations thereof, nor prevent that
party thereafter from enforcing each and every other provision of this
Employment Agreement. The rights granted the parties herein are cumulative and
the waiver by a party of any single remedy shall not constitute a waiver of
such party's right to assert all other legal remedies available to him or it
under the circumstances.
14. Governing Law.
This Employment Agreement shall be governed by and construed and interpreted
according to the internal laws of the State of Illinois, without reference to
principles of conflict of laws.
15. Captions and Paragraph Headings.
Captions and paragraph headings used herein are for convenience only and are
not a part of this Employment Agreement and shall not be used in construing it.
16. Entire Agreement.
This Employment Agreement constitutes the entire agreement between Employer
and Employee with respect to the subject matter hereof and may not be modified
or terminated orally. No modification, termination or attempted waiver of this
Employment Agreement shall be valid unless in writing and signed by the party
against whom the same is sought to be enforced.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement
to be duly executed as of the day and year first above written.
BALLY MANUFACTURING CORPORATION
By: /S/
_________________________________
Vice President "Employer"
ATTEST: /S/ Carol DePaul
______________________
Secretary
/S/Jerry Thornburg
------------------------------
Jerry Thornburg "Employee"
This Employment Agreement has been approved by the Compensation and Stock
Option Committee of the Board of Directors of Bally Manufacturing Corporation
as of December 8, 1993.
By:/S/ Carol S. DePaul
----------------------------------------
Secretary of Compensation and Stock Option
Committee
-8-
<PAGE> 1
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT ("Agreement") entered into as of the 30th day of
September, 1993 by and between Bally's Health & Tennis Corporation (for itself
and on behalf of its subsidiaries), a Delaware corporation ("Bally's") and
Donahue L. Wildman, whose address is 180 East Pearson, Chicago, Illinois 60611
("Consultant").
WHEREAS, Consultant has been a director, an officer and/or employee of
Bally's and each of its subsidiaries; and
WHEREAS, Consultant has resigned his directorships, and his offices as of
August 31, 1993 and his employment as of September 30, 1993 and Bally's desires
to retain Consultant as an independent contractor to provide consulting
services.
NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties agree as follows:
1. SERVICES. Bally's hereby engages Consultant and Consultant hereby accepts
such engagement on the terms and conditions set out in this Agreement. During
the term of this Agreement, Consultant shall consult for Bally's, upon Bally's
reasonable request, on such subjects as Bally's shall specify. All consulting
shall take place at such locations as are required by the specific consulting
assignment, or, at such locations and at such times as shall be mutually
convenient to Bally's and the Consultant. Bally's agrees to provide Consultant
with office space at a mutually agreeable location of one of Bally's
businesses.
2. TERM. Subject to the provisions for earlier termination contained herein
and elsewhere in this Agreement, the term of this Agreement shall begin on
October 1, 1993 and shall continue for a period of one year, ending on
September 30, 1994. The term may be extended for additional one year
period(s), upon the same terms and conditions, by the written agreement of both
parties hereto. In the event of Consultant's death or incapacity during the
term of this Agreement, Bally's may terminate this Agreement and all
obligations of Bally's under this Agreement shall terminate, other than the
obligation to pay that portion of Consultant's compensation which has accrued
up to and including the date of death or incapacity. The date on which this
Agreement shall terminate pursuant to this Agreement is the "End Date".
3. COMPENSATION. For Consultant's services pursuant to this Agreement, and
in consideration of Consultant's agreement to extend the term of the Covenant
Not to Compete Agreement pursuant to Section 5 hereafter, Consultant shall
receive the sum of $250,000.00 per year to be paid in equal bi-weekly
installments over the term of this Agreement. In addition, Bally's agrees to
continue making the monthly lease payment through February 15, 1994 on the 1990
Audi Quattro ("Auto") previously provided to Consultant. Consultant shall be
responsible for all other costs associated with the Auto including, but not
limited to, fuel, insurance and all maintenance. Consultant shall not be
<PAGE> 2
eligible to receive those employee benefits commonly provided by Bally's or its
subsidiaries to employees. The compensation provided for herein shall be
payable during the term hereof whether or not Bally's requests any services of
the Consultant, subject to earlier termination by Bally's pursuant to Section 6
of this Agreement.
4. EMPLOYMENT AGREEMENT. Consultant and Bally's agree that the Employment
Agreement dated April 6, 1983 as extended and amended ("Employment Agreement")
by and between Bally's subsidiary, Health & Tennis Corporation of America, and
Consultant is hereby deemed terminated and of no force and effect as of October
1, 1993. Consultant and Bally's further agree that neither party shall have
any further obligation to the other under the Employment Agreement except that
Bally's shall pay Consultant his base salary under the Employment Agreement
through September 30, 1993. Consultant agrees and acknowledges that he hereby
resigns from his employment with Bally's and all of its subsidiaries as of
September 30, 1993.
5. COVENANT NOT TO COMPETE. Notwithstanding anything herein or therein to
the contrary, the terms and provisions of the Covenant Not to Compete Agreement
dated April 6, 1983 ("Covenant") (a copy of which is attached hereto as Exhibit
A and made a part hereof) shall remain in full force and effect provided,
however, that all obligations of Consultant as Seller under the Covenant which
otherwise end 150 months after 4/6/83 shall remain in full force and effect and
be extended through July 6, 1996 or nine months following the End Date,
whichever is later. The parties further agree that (a) the confidentiality
obligations set out in Section 2(iv) of the Covenant shall also apply to
Consultant's association with Bally's in his role as Consultant and to
nonpublished or nonpublic data or information concerning the income, expenses
or results of Bally's operations, or that of its subsidiaries or clubs; and (b)
the notice provision in Section 6 of the Covenant shall be deleted in its
entirety and be replaced by the notice provisions in Section 11 hereof.
6. TERMINATION FOR CAUSE. The engagement of Consultant under this Agreement
may be terminated by Bally's for cause at any time upon prior written notice to
Consultant. For purposes hereof, the term "cause" shall mean:
(a) Consultant's fraud, dishonesty and willful misconduct; and/or
(b) Consultant's material breach of this Agreement.
Any termination by reason of the above shall not be in limitation of any other
right or remedy that Bally's may have under this Agreement or otherwise against
Consultant. In the event the Agreement is terminated by Bally's pursuant to
this Section 6, Consultant shall receive no further payments hereunder, whether
or not accrued prior to such End Date.
2
<PAGE> 3
Consultant may terminate this Agreement in the event of nonpayment hereunder
by Bally's except where such nonpayment arises because Bally's has terminated
this Agreement pursuant to Section 6 hereof. In the event of such termination
by Consultant hereunder, Consultant shall be entitled immediately to a lump sum
payment of any amount which would have been paid in due course for the
remaining portion of the then current term.
7. EXPENSES. Consultant shall bill Bally's for reasonable out-of-pocket
expenses which are incurred by Consultant in the performance of services under
this Agreement and which are in accordance with Bally's standard operating
procedures for expenses of senior executives and supported by satisfactory
documentation.
8. INDEPENDENT CONTRACTOR. The status of Consultant shall be that of an
independent contractor and not of an agent or employee of Bally's. As such,
Consultant shall not have the right or power to enter into any contracts or
commitments on behalf of Bally's. Consultant shall not at any time in his
dealings with third parties represent that he is, or permit such third parties
to deal with him on the assumption that he is, an authorized agent or officer,
director or employee of Bally's, unless Bally's expressly authorizes in writing
representation as an authorized agent.
9. MUTUAL RELEASE. Bally's for itself and its subsidiaries and its
successors and assigns and the Consultant for himself, his heirs, executors and
assigns, hereby forever release, remise, discharge and forgive any and all
claims, causes or actions, known or unknown, actual or contingent which either
party may have had, has or may in the future have, against the other party
arising out of or relating to any state of facts in existence, or event or
occurrence taking place, on or before September 30, 1993 (except for those
which may arise out of obligations specifically described in this Agreement and
agreement(s) specifically referenced hereto as Exhibit A). Consultant agrees
that the mutual general release provided above in this Section 9 shall not
operate as a release for any claims for contribution, indemnity, liability or
the like arising out of any action brought by a third party or governmental
authority against Bally's, its affiliates, subsidiaries, successors and assigns
which action arises out of the alleged wrongful acts of Consultant subject,
however, to the indemnification as set forth in Section 10 hereof.
10. INDEMNIFICATION. Bally's agrees to defend against and indemnify and
hold the Consultant harmless from any loss, damage cost, claim or injury
(including reasonable attorney's fees and costs) suffered or incurred by the
Consultant arising out of or relating to his services to Bally's and its
subsidiaries as an officer and director to the same extent as is now provided
under Bally's by laws, in effect at the date hereof.
11. NOTICES. Any notice to be given under this Agreement shall be in
writing and shall have been deemed duly given (a) when received, if manually
DELIVZered, or (b) when delivered on the date indicated on a return receipt, if
POSTEd either by certified mail, return receipt requested, or by a next day
DEL[Aivery service which maintains records of the time,
3
<PAGE>
place and recipient of delivery, to Consultant at 180 East Pearson, Chicago,
Illinois 60611 and to Bally's at 8700 West Bryn Mawr Avenue, 2nd Floor,
Chicago, Illinois 60631, Attention: General Counsel, or at such other address
as either Bally's or Consultant may hereafter designate in writing to the other
in accordance with this paragraph.
12. WAIVER. Either party's failure to enforce any provision of this
aGREEment shall not in any way be construed as a waiver of any such provision
NOR Prevent that party from thereafter enforcing each and every provision of
THIS Agreement.
13. ASSIGNMENT. The obligations of Consultant set out hereunder are
PERSOnal to Consultant and may not be assigned or transferred to any other
PERSOn, firm or corporation.
14. ENTIRE AGREEMENT AND AMENDMENT. Except for that certain Covenant Not to
cOMPEte dated April 6, 1983, this Agreement is the sole agreement between the
PARTIes on the subject matter herein and supersedes any other oral or written
AGREEments, if any, on this subject matter. It may be modified or terminated
ONLY by a writing signed by both of the parties.
15. CHOICE OF LAW. This Agreement shall be construed and enforced in
ACCORdance with the laws and decisions of the State of Illinois. The parties
SPECIfically agree that in any dispute arising out of this Agreement,
JURISdiction and venue shall reside in courts located in the Northern District
OF iLlinois or Cook County, Illinois.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
EXECUted as of the day and year first written above.
CONSULTANT BALLY'S HEALTH & TENNIS CORPORATION,
on behalf of its subsidiaries
__________________________ By: __________________________________
Donahue L. Wildman Its: Chief Financial Officer
----------------------------------
Senior Vice President & Treasurer
Section 5 is hereby accepted and agreed
to this 29th day of September, 1993.
BALLY MANUFACTURING CORPORATION
By: ________________________________
Its: Executive Vice President, Chief
law7\agree\wildman7.con Financial Officer & Treasurer
4
<PAGE> 1
<TABLE>
LIST OF SUBSIDIARIES OF
BALLY MANUFACTURING CORPORATION (a)
<CAPTION>
<S> <C>
NAME OF CORPORATION PLACE OF INCORPORATION
- ------------------- ----------------------
Bally Services Corporation Delaware
Bally's Health & Tennis Corporation(b) Delaware
Health and Tennis Corporation of America (b) Delaware
Scandinavian Health Spa, Inc. (b) Ohio
Houston Health Clubs, Inc. (b) Texas
Dallas Health Clubs, Inc. (b) Texas
Jack LaLanne Holding Corp. (b) New York
Vic Tanny International, Inc. (b) Michigan
Chicago Health Clubs, Inc. (b) Illinois
U.S. Health, Inc. (b) Delaware
Bally's Pac West, Inc. (b) Washington
So. Cal Nautilus Fitness Centers, Inc. (b) California
Bally's Holding Company, Inc. Delaware
Bally's Intermediate Sub, Inc. Delaware
Bally's Intermediate Sub, No. 1, Inc.(b) Delaware
Bally's Intermediate Sub, No. 2, Inc.(b) Delaware
Bally's Intermediate Sub, No. 3, Inc.(b) Delaware
Bally's Intermediate Sub, No. 4, Inc.(b) Delaware
Bally's Intermediate Sub, No. 5, Inc.(b) Delaware
Bally's Intermediate Sub, No. 6, Inc.(b) Delaware
Bally's Sub, Inc. (b) Delaware
Bally's Casino Holdings, Inc. (b) Delaware
Bally's Park Place, Inc. New Jersey
Bally Warwick, Inc. (b) New Jersey
Bally's Park Place Funding, Inc. (b) Delaware
Bally's Grand Management Co., Inc. (b) Nevada
Bally's Intermediate Casino Holdings, Inc. (b) Delaware
Bally's Tunica, Inc. (b) Mississippi
Bally's Louisiana, Inc. (b) Louisiana
Belle of Orleans, L.L.C. (b) (c)Louisiana
Bally's Grand Management Co., Inc. (b) Nevada
Bally's CHLV, Inc. (b) Delaware
Bally's Grand, Inc. (b) (d) Delaware
Grand Resorts, Inc. (b) Nevada
BGR, Inc. Nevada
GNAC, Corp New Jersey
GNOCF, Corp. (b) New Jersey
GNF, Corp (b) New Jersey
<FN>
(a) A number of subsidiaries, principally name holding corporations, have been omitted from the list of subsidiaries. The
unnamed subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.
(b) Subsidiaries of subsidiary companies are indented and follow the respective companies by which they are controlled.
(c) Limited liability company 45% owned by Bally's Louisiana, Inc.
(d) Approximately 50% of outstanding owned by Bally's CHLV, Inc. and BGR, Inc.
NOTE: With the exception of (c) and (d), percentage of oenership is 100%.
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement No.
2-99188 on Form S-8, No. 33-41888 on Form S-8, No. 33-44218 on Form S-8, No.
33-44219 on Form S-8, No. 2-98002 on Form S-3, and No. 33-61870 on Form S-3 of
our report dated February 25, 1994, except for the seventh paragraph of the
"Long-term debt" note, as to which the date is March 8, 1994, with respect to
the consolidated financial statements and schedules of Bally Manufacturing
Corporation included in this Annual Report (Form 10-K) for the year ended
December 31, 1993.
ERNST & YOUNG
Chicago, Illinois
March 25, 1994
