<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
TENDER OFFER STATEMENT PURSUANT TO
SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 13E-4 THEREUNDER
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
BALLY ENTERTAINMENT CORPORATION
(Name of Issuer)
BALLY ENTERTAINMENT CORPORATION
(Name of Person(s) Filing Statement)
6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 1998
(Title of Class of Securities)
05873CAA4
(CUSIP Number of Class of Securities)
CAROL STONE DEPAUL
BALLY ENTERTAINMENT CORPORATION
8700 WEST BRYN MAWR AVENUE
CHICAGO, ILLINOIS 60631
(312) 399-1300
WITH A COPY TO:
MARK D. GERSTEIN
KATTEN MUCHIN & ZAVIS
525 WEST MONROE STREET, SUITE 1600
CHICAGO, ILLINOIS 60661-3693
(312) 902-5200
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and
Communications on Behalf of the Person(s)
Filing Statement)
JUNE 7, 1995
(Date Tender Offer First Published,
Sent or Given to Security Holders)
CALCULATION OF FILING FEE
Transaction Valuation: *$13,427,775 Amount of Filing Fee: *$2,686.00
* On June 2, 1995, the average of the high and low prices reported per
$100 principal amount of the 6% Convertible Subordinated Debentures
was $87 1/4 and the aggregate principal amount outstanding was
$15,390,000. Based on the foregoing, the aggregate transaction
valuation on such date for the 6% Convertible Subordinated Debentures
was $13,427,775.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid:
----------------------------------------------
Form or Registration No.:
--------------------------------------------
Filing Party:
-------------------------------------------------------
Date Filed:
---------------------------------------------------------
<PAGE> 2
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Bally Entertainment Corporation (the
"Company"), a Delaware corporation. The address of its principal
executive office is 8700 West Bryn Mawr Avenue, Chicago, Illinois
60631.
(b) The Company is offering to exchange $1,000 principal amount of its
8% Convertible Senior Subordinated Debentures due December 15,
2000 (the "New Debentures") for each $1,000 principal amount of
its 6% Convertible Subordinated Debentures due 1998 (the "Old
Debentures") outstanding and tendered on or before 5 p.m. New York
City time, July 6, 1995, on the terms and subject to the
conditions set forth in the Offering Circular and Consent
Solicitation dated June 7, 1995 (the "Offering Circular") and the
related Letter of Transmittal and Consent. The offer to exchange
New Debentures for Old Debentures is referred to herein as the
"Exchange Offer."
There is $15,390,000 in aggregate principal amount of Old
Debentures outstanding. The Exchange Offer seeks the exchange of
all outstanding Old Debentures. See the Cover Page and "Purpose
and Effects of the Exchange Offer" in the Offering Circular.
George N. Aronoff, a director of the Company, owned, as of March
31, 1995, $13,000 principal amount of Old Debentures, which may be
tendered in the Exchange Offer. No other officer, director or
affiliate of the Company owns any Old Debentures.
(c) The Old Debentures are listed on the New York Stock Exchange (the
"NYSE"). The Company has received a verbal confirmation from the
NYSE that the New Debentures will be approved for listing on the
NYSE, subject to official notice of issuance. For trading
information, see "Price Range of Common Stock and the Old
Debentures; Dividend Policy" in the Offering Circular.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The Company is offering to exchange $1,000 principal amount of New
Debentures for each $1,000 principal amount of Old Debentures
tendered up to the aggregate principal amount outstanding of
$15,390,000. No funds are being borrowed for the purpose of such
Exchange Offer.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER
OR AFFILIATE.
For the purpose of the Exchange Offer and the disposition of
tendered Old Debentures, see "Purpose and Effects of the Exchange
Offer" in the Offering Circular, incorporated herein by reference.
(a) and (b) None.
(c) See "Purpose and Effects of the Exchange Offer" and "The Proposed
Modifications" in the Offering Circular.
(d) None.
(e) See "Purpose and Effects of the Exchange Offer" and "The Proposed
Modifications" in the Offering Circular.
(f) See "Purpose and Effects of the Exchange Offer" and "The Proposed
Modifications" in the Offering Circular.
-2-
<PAGE> 3
(g) None.
(h) See "Certain Consequences to Non-Exchanging Holders of Old
Debentures" in the Offering Circular.
(i) See "Certain Consequences to Non-Exchanging Holders of Old
Debentures" in the Offering Circular.
(j) None.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
On April 11, 1995, the Company repurchased Old Debentures in the
principal amount of $25,000 and $300,000 in two transactions on
the New York Stock Exchange at the prices of $85 1/4 and $86 1/2
per $100 principal amount, respectively.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH
RESPECT TO THE ISSUER'S SECURITIES.
None.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
None.
ITEM 7. FINANCIAL INFORMATION.
(a)(1)
and (2) See the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, and the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, each of which is
incorporated herein by reference.
(a)(3) See "Other Financial Data" in the Offering Circular.
(a)(4) See "Selected Consolidated Financial Data" in the Offering
Circular.
(b)(1),
(2) and (3) See "Other Financial Data" in the Offering Circular.
ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) None, except for compliance with the Securities Exchange Act of
1934 and Rule 13e-4 promulgated thereunder and compliance with
applicable requirements of state securities or "blue sky" laws.
(c) Not applicable.
(d) None.
(e) See the Offering Circular, generally.
-3-
<PAGE> 4
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Exhibit (a)(1). Offering Circular and Consent Solicitation dated
June 7, 1995.
Exhibit (a)(2). Letter of Transmittal and Consent.
Exhibit (a)(3). Notice of Guaranteed Delivery.
Exhibit (a)(4). Letter to brokers.
Exhibit (a)(5). Letter from brokers to clients.
Exhibit (a)(6). Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(b) None.
(c) None.
(d) Exhibit (d)(1). Opinion of Katten Muchin & Zavis, relating to tax
matters.
(e) None.
(f) None.
-4-
<PAGE> 5
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true,
complete and correct.
Dated: June 7, 1995 BALLY ENTERTAINMENT CORPORATION
By: /s/ LEE S. HILLMAN
----------------------------
Name: Lee S. Hillman
---------------------------
Title: Executive Vice President
--------------------------
-5-
<PAGE> 1
OFFERING CIRCULAR AND CONSENT SOLICITATION
BALLY (LOGO)
BALLY ENTERTAINMENT CORPORATION
OFFER TO EXCHANGE
ITS
8% CONVERTIBLE SENIOR SUBORDINATED DEBENTURES DUE DECEMBER 15, 2000
FOR ITS
6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 1998
Bally Entertainment Corporation (the "Company") hereby offers $1,000
principal amount of its 8% Convertible Senior Subordinated Debentures due
December 15, 2000 (the "New Debentures") in exchange for each $1,000 principal
amount of its 6% Convertible Subordinated Debentures due 1998 (the "Old
Debentures"), upon the terms and subject to the conditions set forth in this
Offering Circular and Consent Solicitation (the "Offering Circular") and in the
accompanying Letter of Transmittal and Consent (the "Letter of Transmittal").
The offer to exchange New Debentures for Old Debentures is referred to below as
the "Exchange Offer."
The New Debentures will be convertible at any time prior to maturity
(unless previously redeemed) into shares of common stock of the Company, par
value $.66 2/3 per share (the "Common Stock"), at a conversion price of $13.00
per share, unless the Average Closing Price (as defined) of the Common Stock
equals or exceeds $11 1/8, in which case the conversion price per share will be
118% of the Average Closing Price. The conversion price also is subject to
adjustment under certain other circumstances following issuance of the New
Debentures. On June 5, 1995, the closing price of the Common Stock on the New
York Stock Exchange ("NYSE") was $10 1/4 per share.
Interest on the New Debentures will be payable semiannually in cash on
March 15 and September 15 (each such date an "Interest Payment Date"),
commencing September 15, 1995. Interest on the New Debentures will accrue from
March 15, 1995 at a rate of 8% per annum; accordingly, accrued interest will
not be paid on Old Debentures accepted in the Exchange Offer.
The Old Debentures are listed on the NYSE. The Company has received a
verbal confirmation from the NYSE that the New Debentures will be approved for
listing on the NYSE, subject to official notice of issuance.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JULY 6,
1995, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD DEBENTURES TENDERED IN THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE. THE
WITHDRAWAL OF TENDERED OLD DEBENTURES WILL BE DEEMED A REVOCATION OF THE
CONSENT TO THE PROPOSED MODIFICATIONS IN RESPECT OF SUCH OLD DEBENTURES.
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED IN EVALUATING THE EXCHANGE OFFER.
THE EXCHANGE OFFER IS BEING MADE BY THE COMPANY IN RELIANCE ON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, AFFORDED BY SECTION 3(A)(9) THEREOF. NEITHER THIS TRANSACTION
NOR THE SECURITIES OFFERED HEREBY HAVE BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS
OR MERITS OF THIS TRANSACTION OR UPON THE ACCURACY
OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS
OFFERING CIRCULAR. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
June 7, 1995
(cover continued on next page)
<PAGE> 2
Holders of Old Debentures who tender in the Exchange Offer will be
consenting to each of a waiver (the "Waiver") and an amendment (the
"Amendment"; together with the Waiver, the "Proposed Modifications") concerning
the indenture pursuant to which the Old Debentures were issued (the "Old
Indenture"). If either the Waiver is granted or the Amendment is adopted, the
Company will have the ability to effect distributions to the Company's
stockholders of all or any portion of its direct or indirect interests in the
operations of Bally's Health & Tennis Corporation and its direct or indirect
subsidiaries ("Bally's Health & Tennis"); such transactions are herein referred
to as the "Distribution." If the Amendment is adopted, the Company no longer
would be subject to any Old Indenture restrictions on paying dividends on, or
repurchasing or redeeming, any shares of its capital stock.
Consummation of the Exchange Offer is subject to: (i) Old Debentures
representing not less than a majority in aggregate outstanding principal amount
of the Old Debentures being validly tendered and not withdrawn prior to the
Expiration Date, (ii) the Company being satisfied, in its sole discretion, that
either the Waiver or the Amendment will become effective upon acceptance of the
Old Debentures for exchange pursuant to the Exchange Offer, and (iii) certain
other customary conditions. COMPLETION OF THE DISTRIBUTION IS NOT A CONDITION
TO CONSUMMATION OF THE EXCHANGE OFFER; ACCORDINGLY, THE COMPANY MAY CONSUMMATE
THE EXCHANGE OFFER WHETHER OR NOT THE DISTRIBUTION OCCURS. Old Debentures will
be accepted for exchange only in principal amounts of $1,000 and integral
multiples thereof. Only holders of Old Debentures on the register for such
securities ("Registered Holders") can effectively consent to the Proposed
Modifications. HOLDERS OF OLD DEBENTURES REGISTERED IN THE NAME OF A BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE ARE URGED TO CONTACT SUCH
REGISTERED HOLDER PROMPTLY IF SUCH HOLDER DESIRES TO TENDER OLD DEBENTURES.
See "The Exchange Offer -- Withdrawal Rights."
As with the Old Debentures currently outstanding, the Company has the
option to redeem the New Debentures at any time, in whole or in part, at 100%
of the principal amount of the New Debentures, plus accrued interest to the
redemption date. The New Debentures will be (i) subordinated in right of
payment to all Senior Indebtedness (as defined) of the Company, (ii) pari passu
in right of payment with the Company's 10% Convertible Subordinated Debentures
due 2006 (the "10% Debentures") and (iii) prior in right of payment to the Old
Debentures. As of March 31, 1995, the aggregate amount of Senior Indebtedness
was approximately $46.2 million. In addition, as a result of the Company's
holding company structure, the New Debentures will effectively rank junior to
all indebtedness and other liabilities of the Company's subsidiaries, which
were (excluding deferred income taxes) approximately $1.3 billion as of March
31, 1995. As with the Old Indenture, the indenture for the New Debentures (the
"New Indenture") does not limit or prohibit the incurrence of additional Senior
Indebtedness or the incurrence of indebtedness by the Company's subsidiaries.
The Company will not pay any commission or other remuneration to any
broker, dealer, salesman or other person for soliciting tenders of the Old
Debentures. Regular employees of the Company may solicit exchanges from
holders of the Old Debentures, but they will not receive additional
compensation therefor. The Company has made no arrangements for and has no
understanding with any dealer, salesman or other person regarding the
solicitation of tenders hereunder, and no person has been authorized by the
Company to give any information or to make any representations in connection
with the Exchange Offer other than those contained or incorporated by reference
in this Offering Circular and, if given or made, such other information or
representations may not be relied upon as having been authorized. Neither the
delivery of this Offering Circular nor the exchange of New Debentures for Old
Debentures shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof.
EXCHANGE AGENT AND INFORMATION AGENT
United States Trust Company of New York has agreed to provide certain
services as Exchange Agent in connection with the Exchange Offer and MacKenzie
Partners, Inc. has agreed to provide certain services as Information Agent in
connection with the Exchange Offer. Holders of Old Debentures who require
assistance should contact the Exchange Agent at (800) 548-6565; the Information
Agent at (212) 929-5500 (collect) or (800) 322-2885 (toll free); or the Company
at (312) 399-7628.
(cover continued on next page)
<PAGE> 3
THE EXCHANGE OFFER IS NOT BEING MADE TO, AND THE COMPANY WILL NOT
ACCEPT TENDERS FROM, HOLDERS OF OLD DEBENTURES IN ANY JURIS-
DICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE
THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURI-
TIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
THE SECURITIES OFFERED HEREBY ARE SUBJECT TO THE NEVADA GAMING
CONTROL ACT AND THE REGULATIONS OF THE NEVADA GAMING COMMISSION.
NEITHER THE NEVADA STATE GAMING CONTROL BOARD NOR THE NEVADA
GAMING COMMISSION HAS PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS OFFERING CIRCULAR OR THE INVESTMENT MERITS OF THE
SECURITIES OFFERED HEREBY. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
NEITHER THE NEW JERSEY CASINO CONTROL COMMISSION NOR THE NEW
JERSEY DIVISION OF GAMING ENFORCEMENT HAS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE> 4
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files periodic reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information filed with the Commission can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at certain of its regional offices located at:
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661; and 13th Floor,
Seven World Trade Center, New York, New York 10048. Copies of such material
can also be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company has also filed with the Commission an application on Form
T-3 under the Trust Indenture Act of 1939, as amended (the "TIA"), which
contains additional information about the New Indenture. Such document and any
amendments thereto may be examined, and copies may be obtained from the
Commission in the manner set forth above. Copies of the New Indenture and the
Old Indenture may also be obtained from the Company upon request to the Company
at its principal executive offices.
Important information about the business, management and financial
condition of the Company is contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1994 (the "Form 10-K") and the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 (the
"Quarterly Report"), which accompany this Offering Circular and are also
available from the Commission as noted above. All documents filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Offering Circular and prior to the Expiration Date shall be
deemed to be incorporated herein by reference and to be a part hereof from the
respective dates of filing of such documents. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Offering Circular to the extent that a
statement contained herein, or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Offering Circular.
1
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Comparison of New Debentures and Old Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Other Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Price Range of Common Stock and the Old Debentures; Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . 16
Investment Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Purpose and Effects of the Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Certain Consequences to Non-Exchanging Holders of Old Debentures . . . . . . . . . . . . . . . . . . . . . . . . 26
The Proposed Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Description of the New Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Description of the Old Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Description of the Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Certain Federal Income Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
2
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by the more
detailed information contained elsewhere in and financial statements
accompanying this Offering Circular.
THE COMPANY
Bally Entertainment Corporation (the "Company"), formerly known as
Bally Manufacturing Corporation, and the subsidiaries which it controls, are
engaged primarily in the operation of casinos, some with adjacent hotels, and
fitness centers. Principal casino operations include: Bally's Park Place
casino hotel resort in Atlantic City, New Jersey ("Bally's Park Place"), which
is operated through Bally's Park Place, Inc.; The Grand casino hotel resort in
Atlantic City ("The Grand"), which is operated through GNAC, CORP. ("GNAC");
Bally's Las Vegas casino hotel resort in Las Vegas, Nevada ("Bally's Las
Vegas"), which is operated through Bally's Grand, Inc.; and Bally's Saloon and
Gambling Hall dockside gaming facility, which is being relocated to
Robinsonville, Mississippi and is 58% owned through, and will be operated by,
Bally's Tunica, Inc. ("Bally's Mississippi"). In addition, Bally's Casino
Lakeshore Resort ("Bally's New Orleans"), which is expected to commence the
operation of a riverboat casino facility in New Orleans, Louisiana by mid-1995,
will be 50% owned through, and operated pursuant to a management agreement by,
Bally's Louisiana, Inc.
The Company also recently announced plans for its second Las Vegas
casino hotel resort, Paris Casino-Resort, which will be operated through
Bally's Grand, Inc. The new resort has a projected cost of approximately $420
million and will be developed on 24 acres of land situated on the Las Vegas
Strip adjacent to Bally's Las Vegas. The new resort is expected to have 2,500
guest rooms, more than 78,000 square feet of gaming space and 90,000 square
feet of convention space. The Company expects the groundbreaking to occur in
late 1995, with a completion time of approximately two years, subject to
various conditions and contingencies, including financing for the planned
resort.
Bally's Health & Tennis, a wholly-owned subsidiary of the Company,
operates the nation's largest chain of fitness centers, with approximately 335
facilities primarily located in major metropolitan markets. On June 28, 1994,
the Company's Board of Directors (the "Board") approved a plan to spin-off
Bally's Health & Tennis (the "Spin-off"). The Spin-off is expected to be
accomplished by distributing substantially all of the issued and outstanding
stock of Bally's Health & Tennis to the Company's stockholders. See "The
Proposed Modifications -- The Distribution." As a result of the Board's
action, Bally's Health & Tennis has been reflected as a discontinued operation
in the Company's consolidated financial statements, and the Company's
continuing operations constitute one segment, with all significant revenues
arising from its casino operations and, where applicable, supporting hotel
operations.
The Company is organized under the laws of the State of Delaware. Its
executive offices are located at 8700 West Bryn Mawr Avenue, Chicago, Illinois
60631, and its telephone number is (312) 399-1300.
3
<PAGE> 7
PURPOSE AND EFFECTS OF THE EXCHANGE OFFER
The principal purpose of the Exchange Offer is to effect the Proposed
Modifications to the Old Indenture to permit the Company to effect the
Distribution.
Registered Holders of Old Debentures who validly tender into the
Exchange Offer and receive New Debentures will be consenting to the Proposed
Modifications, and will benefit from (1) an increase in the interest rate to 8%
from 6% per annum, which increase will be retroactive to the period commencing
March 15, 1995, and (2) a reduction in the conversion price from $28.99 per
share to $13.00 per share, unless the Average Closing Price of the Common Stock
equals or exceeds $11 1/8, in which case the conversion price per share will be
118% of the Average Closing Price. Each such conversion price is subject to
reduction to give effect to the Distribution. See "The Proposed Modifications
- -- The Distribution." As used in this Offering Circular, "Average Closing
Price" means the average reported closing sales price of the Common Stock on
the NYSE during the ten trading days ending on the sixth business day prior to
the Expiration Date.
In addition, the New Debentures will rank senior in right of payment
to the Old Debentures and the New Indenture provides for adjustments to the
conversion rate in certain circumstances which do not cause an adjustment under
the Old Indenture.
If either the Waiver is granted or the Amendment is adopted, the
Company will have the ability to effect the Distribution. The impact of the
Distribution on the Company's financial condition is reflected in
"Capitalization." If the Amendment is adopted, the Company will no longer be
restricted from paying dividends on, or repurchasing or redeeming, shares of
its capital stock.
For a summary of the consequences to the holders of Old Debentures who
do not exchange their Old Debentures in the Exchange Offer, see "Certain
Consequences to Non-Exchanging Holders of Old Debentures."
4
<PAGE> 8
INVESTMENT CONSIDERATIONS
See "Investment Considerations" for a discussion of certain matters
which should be considered in evaluating the Exchange Offer.
THE EXCHANGE OFFER
THE EXCHANGE . . . . . . . . . . . . . . . For each $1,000
principal amount of Old
Debentures properly tendered,
the exchanging holder will
receive $1,000 principal
amount of New Debentures.
EXPIRATION DATE . . . . . . . . . . . . . . The Exchange Offer
expires at 5:00 p.m., New
York City time, on July 6,
1995, unless extended by the
Company. The date of such
expiration, as such may be
extended pursuant to the
procedures described herein,
is referred to herein as the
"Expiration Date."
WITHDRAWAL RIGHTS . . . . . . . . . . . . . Old Debentures tendered
in the Exchange Offer may be
withdrawn at any time prior
to the Expiration Date, and
unless previously accepted
for exchange by the Company
pursuant to the Exchange
Offer, also may be withdrawn
at any time after August 2,
1995.
CONDITIONS OF THE EXCHANGE OFFER . . . . . The Company's
obligation to complete the
Exchange Offer is subject to:
(i) Old Debentures
representing not less than a
majority in aggregate
outstanding principal amount
of the Old Debentures being
validly tendered and not
withdrawn prior to the
Expiration Date (the "Minimum
Condition"), (ii) the Company
being satisfied, in its sole
discretion, that either the
Waiver or the Amendment will
become effective upon
acceptance of the Old
Debentures for exchange
pursuant to the Exchange
Offer (the "Modifications
Condition"), and (iii)
certain other customary
conditions. Any of the
foregoing conditions may be
waived by the Company.
THE CONSENT SOLICITATION . . . . . . . . . Registered Holders of
Old Debentures who tender in
the Exchange Offer are
consenting to (i) a waiver of
any breach or default of the
terms of the Old Indenture
arising out of the
Distribution, and (ii) an
amendment to the Old
Indenture which would delete
the covenant limiting
distributions and dividends
which, among other things,
precludes the Distribution.
If two-thirds or more in
principal amount of the Old
Debentures are accepted for
exchange in the Exchange
Offer, the Waiver and
Amendment will become
effective. If a majority in
principal amount of the Old
Debentures, but less than
two- thirds are accepted for
payment, only the Waiver will
become effective.
5
<PAGE> 9
PROCEDURES FOR TENDERING
OLD DEBENTURES . . . . . . . . . . . . . Registered Holders of
Old Debentures desiring to
accept the Exchange Offer
must complete and sign the
accompanying Letter of
Transmittal in accordance
with the instructions
contained therein and deliver
it to the Exchange Agent at
its address set forth in the
Letter of Transmittal,
together with the Old
Debentures and any other
required documents prior to
the Expiration Date. Tenders
of Old Debentures with
respect to the Exchange Offer
will be accepted only in
principal amounts of $1,000
and integral multiples
thereof. Only Registered
Holders of Old Debentures can
effectively consent to the
Proposed Modifications.
HOLDERS OF OLD DEBENTURES
REGISTERED IN THE NAME OF A
BROKER, DEALER, COMMERCIAL
BANK, TRUST COMPANY OR
NOMINEE ARE URGED TO CONTACT
SUCH REGISTERED HOLDER
PROMPTLY IF SUCH HOLDER
DESIRES TO TENDER OLD
DEBENTURES. Certain
financial institutions may
also effect tenders by
book-entry delivery. LETTERS
OF TRANSMITTAL AND OLD
DEBENTURES SHOULD NOT BE SENT
TO THE COMPANY OR THE
INFORMATION AGENT.
DELIVERY OF NEW DEBENTURES . . . . . . . . Upon satisfaction or
waiver of the conditions to
the Exchange Offer, the
Company will accept all Old
Debentures properly tendered
and will issue the New
Debentures promptly following
acceptance of the Old
Debentures.
CERTAIN TAX CONSIDERATIONS . . . . . . . . The Company believes
that the exchange of Old
Debentures for New Debentures
will not be a taxable
transaction for federal
income tax purposes.
However, if the New
Debentures are issued with
original issue discount, a
holder of New Debentures will
have gross income in the
amount of original issue
discount accrued thereon.
Holders of Old Debentures
should read carefully
"Certain Federal Income Tax
Considerations" and are urged
to consult their own tax
advisors.
CERTAIN CONSEQUENCES TO
NON-EXCHANGING HOLDERS . . . . . . . . . The completion of the
Exchange Offer will have
significant adverse
consequences for non-
exchanging holders of the Old
Debentures. The New
Debentures will rank senior
in right of payment to the
Old Debentures. Accordingly,
holders of New Debentures
will have claims in
bankruptcy or liquidation of
the Company prior to those of
the holders of unexchanged
Old Debentures. This
situation could have an
adverse impact on the market
price of Old Debentures and
would in all likelihood
reduce the amounts realizable
on such holders' claims in
the event of bankruptcy.
6
<PAGE> 10
The reduced amount of
outstanding Old Debentures
as a result of consummation
of the Exchange Offer
may adversely affect
the trading market, liquidity
and market price of the Old
Debentures, and the NYSE may
delist the Old Debentures if
less than $1 million in
principal amount remain
outstanding after
consummation of the Exchange
Offer. In addition,
application of Old Debentures
accepted for exchange to
fulfill sinking fund
obligations will extend the
average life of the
unexchanged Old Debentures;
accordingly, if the Exchange
Offer is consummated, the
Company would not be
obligated to make any sinking
fund payments on the Old
Debentures prior to their
final maturity in 1998.
EXCHANGE AGENT . . . . . . . . . . . . . . United States Trust
Company of New York is
serving as Exchange Agent in
connection with the Exchange
Offer.
INFORMATION AGENT . . . . . . . . . . . . . MacKenzie Partners,
Inc. is serving as
Information Agent in
connection with the Exchange
Offer. The Information Agent
can be contacted at (212)
929-5500 (collect) or (800)
322- 2885 (toll free).
FURTHER INFORMATION . . . . . . . . . . . . For further information,
contact the Company at
(312) 399-7628.
7
<PAGE> 11
THE NEW DEBENTURES
INTEREST PAYMENTS; ACCRUED INTEREST . . . . Cash interest on the
New Debentures will accrue
from March 15, 1995 at the
rate of 8% per annum, and
will be payable semi-annually
on each March 15 and
September 15, commencing
September 15, 1995. No
payment or credit will be
provided for accrued interest
on the Old Debentures
accepted in the Exchange
Offer.
MANDATORY SINKING FUND . . . . . . . . . . None
OPTIONAL REDEMPTION . . . . . . . . . . . . The Company has the
option to redeem the New
Debentures, in whole or in
part, at any time at 100% of
principal amount, plus
accrued interest to the date
of redemption.
SUBORDINATION . . . . . . . . . . . . . . . The New Debentures are
subordinated in right of
payment to all existing and
future Senior Indebtedness
(as defined in the New
Indenture). The New
Debentures will rank senior
in right of payment to the
Old Debentures and pari passu
with the 10% Debentures.
NYSE LISTING . . . . . . . . . . . . . . . The Company has
received a verbal
confirmation from the NYSE
that the New Debentures will
be approved for listing on
the NYSE, subject to official
notice of issuance.
COMMON STOCK . . . . . . . . . . . . . . . The Common Stock is
listed on the NYSE under
the symbol "BLY."
8
<PAGE> 12
COMPARISON OF NEW DEBENTURES AND OLD DEBENTURES
The following table compares the principal features of the New
Debentures and the Old Debentures. Such comparison is a summary which does not
purport to be complete and is qualified in its entirety by reference to the New
Debentures, the New Indenture, the Old Debentures and the Old Indenture. For
further details, see "Description of the New Debentures" and "Description of
the Old Debentures." Terms not otherwise defined herein have the meaning set
forth in the applicable indenture.
<TABLE>
<CAPTION>
NEW DEBENTURES OLD DEBENTURES
----------------------------------- -----------------------------
<S> <C> <C>
Aggregate Principal Amount . . . . $7,700,000 - $15,390,000 $15,390,000
Maturity . . . . . . . . . . . . . December 15, 2000 September 15, 1998
Interest Rate . . . . . . . . . . . 8% per annum, retroactive to the 6% per annum
period commencing March 15, 1995
Trustee . . . . . . . . . . . . . . First Bank National Association United States Trust Company of New
York
Conversion Price . . . . . . . . . $13.00 per share, unless the $28.99 per share, subject to
Average Closing Price of the certain adjustments, including for
Common Stock equals or exceeds $11 the Distribution.
1/8, in which case the conversion
price per share will be 118% of
the Average Closing Price, and
subject to certain other
adjustments after issuance,
including for the Distribution.
Interest Payment Dates . . . . . . March 15, September 15 March 15, September 15
Optional Redemption . . . . . . . . At any time at 100% of principal At any time at 100% of principal
amount plus accrued interest amount plus accrued interest
Sinking Fund Provisions . . . . . . None On each September 15 commencing
September 15, 1988, through and
including September 15, 1997, the
Company must deposit with the
Trustee cash or Old Debentures
equal in amount to 7.5% of the
aggregate principal amount of Old
Debentures which were outstanding
on July 15, 1988. SEE "CERTAIN
CONSEQUENCES TO NON-EXCHANGING
HOLDERS OF OLD DEBENTURES."
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
NEW DEBENTURES OLD DEBENTURES
----------------------------------- -----------------------------
<S> <C> <C>
Ranking . . . . . . . . . . . . . . The New Debentures will be The Old Debentures are unsecured
unsecured obligations of the obligations of the Company,
Company, subordinated to all subordinated to all Superior
Senior Indebtedness (as defined in Indebtedness (as defined in the
the New Indenture) of the Company Old Indenture) of the Company,
and effectively subordinated to which would include the New
all indebtedness and other Debentures, and effectively
liabilities of the Company's subordinated to all indebtedness
subsidiaries. The New Debentures and other liabilities of the
will rank senior in right of Company's subsidiaries. As of
payment to the Old Debentures and March 31, 1995, the aggregate
pari passu with the 10% amount of such Superior
Debentures. As of March 31, 1995, Indebtedness was approximately
the aggregate amount of Senior $46.2 million and the indebtedness
Indebtedness was approximately and other liabilities (excluding
$46.2 million and the indebtedness deferred income taxes) of the
and other liabilities (excluding Company's subsidiaries were
deferred income taxes) of the approximately $1.3 billion. If
Company's subsidiaries were the Exchange Offer is consummated,
approximately $1.3 billion. Superior Indebtedness will
increase by the aggregate
principal amount of Old Debentures
accepted for exchange.
Listing . . . . . . . . . . . . . . The Company has received verbal The Old Debentures are listed on
confirmation from the NYSE that the NYSE. IN THE EVENT THE
the New Debentures will be EXCHANGE OFFER IS CONSUMMATED, THE
approved for listing on the NYSE, OLD DEBENTURES MAY BE DELISTED.
subject to official notice of SEE "CERTAIN CONSEQUENCES TO NON-
issuance. EXCHANGING HOLDERS OF OLD
DEBENTURES."
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
NEW DEBENTURES OLD DEBENTURES
----------------------------------- -----------------------------
<S> <C> <C>
Dividends, Redemption and
Repurchase Restrictions . . . . . None Subject to certain limited
exceptions, so long as any of the
Old Debentures are outstanding,
the Company may not declare any
dividends (other than dividends
payable solely in stock of the
Company or in rights or warrants
entitling them to subscribe for or
to purchase stock of the Company)
on any stock of the Company or
make, or permit any Subsidiary (as
defined in the Old Indenture) to
make, any payment for the
purchase, redemption or other
retirement of any shares of such
stock or make, or permit any
Subsidiary to make, any
distribution in respect thereof,
either directly or indirectly,
unless such dividends are declared
to be payable not more than 90
days after the date of declaration
and unless, after giving effect to
such proposed dividend or other
payment or distribution and to any
other dividend declared but not
paid, at the date (the
"Computation Date") of such
declaration (in the case of a
dividend) or of such other payment
or distribution, (1) there exists
no Event of Default (as defined
below) and (2) the sum of the
aggregate amount of all dividends
declared and all such other
payments and distributions made
during the period commencing
January 1, 1978 to and including
the Computation Date does not
exceed the sum of certain computed
amounts.
IF THE AMENDMENT SOUGHT IN THE
EXCHANGE OFFER IS ADOPTED, THIS
COVENANT WILL BE DELETED.
</TABLE>
11
<PAGE> 15
<TABLE>
<CAPTION>
NEW DEBENTURES OLD DEBENTURES
----------------------------------- -----------------------------
<S> <C> <C>
Adjustment to Conversion Price . . The conversion price of the New The conversion price of the Old
Debentures will, subsequent to Debentures is subject to
issuance, be subject to adjustment adjustment in certain events,
in certain events, including (a) including (a) the issuance of
the payment of dividends and other stock of the Company as a stock
distributions in Common Stock on dividend; (b) the combination,
any class of capital stock of the subdivision or reclassification of
Company; (b) the issuance to all the Common Stock; (c) the issuance
holders of Common Stock of rights, to all holders of Common Stock of
options or warrants entitling them rights or warrants to subscribe
to subscribe for or purchase for or purchase Common Stock at
Common Stock at a price per share less than the current market price
less than the current market price (as defined) of the Common Stock;
per share (as defined) at the time or (d) the distribution to all
of such issuance (provided that holders of Common Stock of
the conversion price will be evidences of indebtedness or
readjusted to the extent any such assets (excluding cash dividends
warrants, options or rights are or other cash distributions to the
not exercised prior to the extent permitted by the Old
expiration thereof); (c) Indenture provision summarized
subdivisions and combinations of herein under "Dividend
Common Stock; (d) distributions to Restrictions") or rights or
all holders of Common Stock of warrants to subscribe (other than
shares of any class of capital those mentioned above). No
stock, evidences of indebtedness adjustment of the conversion price
of the Company or assets; (e) will be required until an
distributions consisting adjustment would require a
exclusively of cash to all holders cumulative increase or decrease of
of Common Stock in an aggregate at least $.25 per share.
amount that, together with all-
cash distributions or tender
offers made or concluded by the
Company or any of its subsidiaries
made within the preceding 12
months to all holders of Common
Stock exceeds 12.5% of the
Company's then current market
capitalization; (f) the successful
completion of a tender offer made
by the Company or any of its
subsidiaries for the Company's
Common Stock which involves an
aggregate consideration that,
together with any cash
distributions or any cash and
other consideration paid in
respect of any tender offer by the
Company or any of its subsidiaries
for the Company's Common Stock
expiring within the 12 months
preceding the expiration of such
tender offer exceeds 12.5% of the
Company's market capitalization at
the expiration of such tender
offer; and (g) certain
reclassifications. No adjustment
of the conversion price will be
required until an adjustment would
require a cumulative increase or
decrease of at least 1% in such
price.
Limitations on Future
Indebtedness . . . . . . . . . . None None
</TABLE>
12
<PAGE> 16
<TABLE>
<CAPTION>
NEW DEBENTURES OLD DEBENTURES
----------------------------------- -----------------------------
<S> <C> <C>
Modification and Amendment . . . . Except in certain circumstances Except in certain circumstances
where consent of all of the where consent of all of the
holders is required, waivers or holders is required, waivers of
amendments of the terms of the New the terms of the Old Indenture
Indenture require the approval of require the consent of a majority
a majority in principal amount of in principal amount of the
the New Debentures. Debentures and amendments to the
Old Indenture require the consent
of two-thirds in principal amount
of the Old Debentures.
Events of Default . . . . . . . . . The following constitute Events of The following constitute Events of
Default: (i) failure to pay the Default: (i) default in the
principal of any New Debenture payment of any interest upon any
when due; (ii) failure to pay any Old Debenture when the same
interest upon any New Debenture becomes due and payable, and
when due, which failure continues continuance of such default for a
for 30 days; (iii) failure to period of 30 days; (ii) default in
perform any other covenant of the making any sinking fund payment,
Company in the New Indenture (as when the same becomes due and
defined below), which continues payable, and continuance of such
for 90 days after written notice; default for a period of 30 days;
or (iv) certain events of (iii) default in the payment of
bankruptcy, insolvency, the principal of (or premium, if
receivership or reorganization. any, on) any Old Debenture at its
maturity, except any maturity
occurring by reason of a call for
redemption through the sinking
fund; (iv) default in the
performance, or breach, of any
covenant or warranty of the
Company in the Old Indenture
(other than a covenant or warranty
a default in the performance of
which or the breach of which is
specifically dealt with elsewhere
in this definition), and
continuance of such default or
breach for a period of 60 days
thereafter; or (v) certain events
of bankruptcy, insolvency,
receivership or reorganization.
</TABLE>
13
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data for the Company presented
below under the captions "Statement of Operations Data" and "Balance Sheet
Data" for and as of the end of each of the five years ended December 31, 1994
are derived from the audited consolidated financial statements of the Company.
The data that is presented for and as of the end of each of the three months
ended March 31, 1995 and 1994 is unaudited; however, in the opinion of
management, such data includes all adjustments (which were of a normal
recurring nature, except for those required to present Bally's Health & Tennis
as a discontinued operation and to reflect a refinancing of indebtedness of a
subsidiary) necessary for a fair presentation of the information set forth
therein. The Company's operations are subject to seasonal factors and,
therefore, the results of operations for the three months ended March 31, 1995
are not necessarily indicative of results for the full year. This data should
be read in conjunction with the Company's consolidated financial statements and
the related notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations, which are set forth in the Company's Form
10-K and Quarterly Report, each of which accompanies this Offering Circular.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ---------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- -------- ------ ------ ------ ----- -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (1):
Revenues . . . . . . . . . . . . . . $228.3 $212.3 $942.3 $628.2 $556.0 $544.5 $564.8
Operating income before depreciation,
amortization and abandonment loss . $57.7 $40.6 $217.5 $159.1 $135.1 $114.1 $102.3
Income (loss) from continuing
operations . . . . . . . . . . . . $ 4.2 $(9.6) $ (1.9) $ 10.2 $ -- $ (33.4) $(248.6)
Income (loss) from discontinued
operations . . . . . . . . . . . . 5.0 (46.1) (20.0) .6 (1.2) (43.7)
Extraordinary items . . . . . . . . . .3 (20.7) (20.4) (8.5) 11.2 56.1 12.0
Cumulative effect on prior years of
change in accounting for income
taxes . . . . . . . . . . . . . . . (28.2)
------ ------ ------ ----- ------ ------ -------
Net income (loss) . . . . . . . . . . $ 4.5 $(25.3) $(68.4) $(46.5) $ 11.8 $ 21.5 $(280.3)
====== ====== ====== ====== ====== ====== =======
Per common and common equivalent
share:
Income (loss) from continuing
operations . . . . . . . . . . . $ .07 $ (.23) $ (.10) $ .16 $ (.06) $ (1.07) $ (9.03)
Income (loss) from discontinued
operations . . . . . . . . . . . .11 (.98) (.43) .01 (.03) (1.54)
Extraordinary items . . . . . . . . .01 (.44) (.44) (.18) .27 1.65 .42
Cumulative effect on prior years of
change in accounting for income
taxes . . . . . . . . . . . . . . (.61)
------ ------ ------ ----- ------ ------ -------
Net income (loss) . . . . . . . . . $.08 $(.56) $ (1.52) $ (1.06) $ .22 $ .55 $(10.15)
====== ====== ====== ====== ====== ====== =======
Average common and common
equivalent shares outstanding . . . 48.7 46.9 46.9 46.6 41.1 33.9 28.4
BALANCE SHEET DATA
(AT END OF PERIOD) (1):
Total assets . . . . . . . . . . . . $1,920.6 $1,974.2 $1,936.2 $1,991.6 $1,357.6 $1,389.8 $1,620.9
Total debt . . . . . . . . . . . . . 1,276.9 1,268.2 1,266.2 1,186.3 731.2 795.4 1,076.4
Minority interests . . . . . . . . . 25.2 40.2 37.4 42.4
Stockholders' equity (2) . . . . . . 297.6 338.2 293.6 364.1 410.2 364.7 332.5
Book value per common share . . . . . $6.33 $7.21 $6.25 $7.77 $8.92 $10.01 $10.72
- ------------------
<FN>
(1) The selected consolidated financial data has been presented to reflect
Bally's Health & Tennis as a discontinued operation because of the
Spin-off. See "The Proposed Modifications -- The Distribution." Bally's
Las Vegas has been consolidated since December 1, 1993 as a result of the
Company attaining a controlling interest in reorganized Bally's Grand, Inc.
at that date. Prior to December 1, 1993, the Company's investment in
Bally's Grand, Inc. was principally recorded on the equity method of
accounting. Loss from continuing operations for the year ended December
31, 1990 includes equity in net loss of pre-reorganized Bally's Grand, Inc.
of $186.6 million which includes a write-off of the Company's investment in
and advances to pre-reorganized Bally's Grand, Inc. because of the expected
loss of control pursuant to the reorganization. As of March 31, 1995, the
Company (through certain wholly-owned subsidiaries) owned approximately 80%
of the outstanding common stock of reorganized Bally's Grand, Inc.
(2) See "Capitalization" for stockholders' equity at March 31, 1995 as adjusted
to give effect to the exchange of Old Debentures for New Debentures in the
Exchange Offer (assuming all of the Old Debentures are tendered) and the
consummation of the Spin-off, as if each of these transactions had occurred
as of March 31, 1995.
</FN>
</TABLE>
14
<PAGE> 18
OTHER FINANCIAL DATA
The ratio of earnings to fixed charges and the ratio of earnings to fixed
charges and preferred stock dividends for the three months ended March 31, 1995
and 1994 and the years ended December 31, 1994 and 1993, and as adjusted to
give effect to the exchange of Old Debentures for New Debentures in the
Exchange Offer (assuming all of the Old Debentures are tendered as of the
beginning of each of the periods presented), are set forth below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
-------------------------- -----------------------------
1995 1994 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges (1):
Historical . . . . . . . . . . . . 1.2x --(2) 1.0x 1.2x
As Adjusted . . . . . . . . . . . . 1.2 --(2) 1.0 1.2
Ratio of earnings to fixed charges and
preferred stock dividends (3):
Historical . . . . . . . . . . . . 1.2 --(4) 1.0 1.1
As Adjusted . . . . . . . . . . . . 1.2 --(4) 1.0 1.1
- ------------------
<FN>
(1) The ratio of earnings to fixed charges is calculated by dividing (i) income
(loss) from continuing operations before income taxes plus fixed charges
(excluding capitalized interest) by (ii) fixed charges. "Fixed charges"
consist of the total of (i) interest incurred (expensed or capitalized),
(ii) amortization of debt issuance costs and discount, and (iii) preferred
stock dividend requirements of a wholly-owned subsidiary.
(2) Earnings were insufficient to cover fixed charges on a historical basis and
as adjusted by $13.9 million and $14.0 million, respectively, for the three
months ended March 31, 1994.
(3) The ratio of earnings to fixed charges and preferred stock dividends is
calculated by dividing (i) income (loss) from continuing operations before
income taxes plus fixed charges (excluding capitalized interest) by (ii)
fixed charges plus preferred stock dividend requirements of the Company.
(4) Earnings were insufficient to cover fixed charges and preferred stock
dividends both on a historical basis and as adjusted by $15.1 million for
the three months ended March 31, 1994.
</FN>
</TABLE>
CAPITALIZATION
The capitalization of the Company as of March 31, 1995, and as adjusted to
give effect to the exchange of Old Debentures for New Debentures in the
Exchange Offer (assuming all of the Old Debentures are tendered) and the
consummation of the Spin-off, as if each of these transactions had occurred as
of March 31, 1995, is set forth below:
<TABLE>
<CAPTION>
MARCH 31, 1995
-------------------------------
ACTUAL AS ADJUSTED
------ ------------
(IN MILLIONS)
<S> <C> <C>
Short-term debt (note payable and current maturities of
long-term debt) (1) . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.1 $ 9.5
======== ========
Long-term debt, less current maturities (1) . . . . . . . . . . . . . . $1,265.8 $1,267.4
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . 25.2 25.2
Stockholders' equity (2) . . . . . . . . . . . . . . . . . . . . . . . 297.6 45.2
-------- --------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . $1,588.6 $1,337.8
======== ========
- ------------------
<FN>
(1) See the Company's Form 10-K and Quarterly Report for additional information
with respect to the Company's consolidated indebtedness.
Because Bally's Health & Tennis has been reflected as a discontinued
operation in the Company's consolidated financial statements, its
indebtedness is not included herein.
(2) At March 31, 1995, the Company's investment in and receivables from
discontinued operations (Bally's Health & Tennis) totaled $290.8 million.
As adjusted assumes that, upon consummation of the Spin-off, $30.0 million
of income taxes receivable and $8.4 million of other receivables from
Bally's Health & Tennis due to the Company will remain outstanding and
collectible.
</FN>
</TABLE>
15
<PAGE> 19
PRICE RANGE OF COMMON STOCK AND THE OLD DEBENTURES; DIVIDEND POLICY
The Common Stock and Old Debentures are traded on the NYSE; the Common
Stock also is traded on the Chicago Stock Exchange. The Company suspended cash
dividend payments on the Common Stock beginning with the fourth quarter of 1990
and does not presently intend to pay any dividends on the Common Stock in the
foreseeable future. The high and low quarterly sales prices on the NYSE for the
past two full years and each of the subsequent quarters (through June 5, 1995
for the second quarter of 1995) are as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
COMMON STOCK
1995
High . . . . . . . . . . . . . $8 7/8 $11 1/8 -- --
Low . . . . . . . . . . . . . . 6 8 1/8 -- --
1994
High . . . . . . . . . . . . . 9 5/8 7 5/8 $ 8 1/8 $ 7 5/8
Low . . . . . . . . . . . . . . 6 3/4 6 3/8 6 1/2 5 1/4
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
OLD DEBENTURES
1995
High . . . . . . . . . . . . . 85 87 1/4 -- --
Low . . . . . . . . . . . . . . 82 84 -- --
1994
High . . . . . . . . . . . . . 88 1/4 87 3/4 85 1/2 83 1/2
Low . . . . . . . . . . . . . . 85 83 81 80 1/2
1993
High . . . . . . . . . . . . . 78 86 1/2 87 88
Low . . . . . . . . . . . . . . 72 1/2 78 83 1/2 83 1/2
</TABLE>
On June 5, 1995, the reported closing sales price on the NYSE for the
Old Debentures and the Common Stock were $87 1/4 and $10 1/4, respectively.
There can be no assurance concerning the prices at which the Old Debentures, the
New Debentures and the Common Stock might be traded following the Exchange
Offer. In addition, if less than $1 million in principal amount of the Old
Debentures remain outstanding after completion of the Exchange Offer, the NYSE
may delist the Old Debentures. See "Certain Consequences to Non-Exchanging
Holders of Old Debentures." Holders are urged to obtain current information
with respect to the market prices of the Old Debentures and the Common Stock.
16
<PAGE> 20
INVESTMENT CONSIDERATIONS
In addition to the other information contained in this Offering
Circular, holders of Old Debentures should carefully consider the following
factors before tendering their Old Debentures for the New Debentures offered
hereby.
CONSOLIDATED LEVERAGE AND HOLDING COMPANY STRUCTURE
The Company is principally a holding company, with no material
operations of its own. Nevertheless, the Company has certain cash obligations
that must be satisfied by utilizing cash on hand, obtaining cash from its
subsidiaries, disposing of or leveraging certain assets or issuing additional
securities. The Company's corporate cash operating costs in the foreseeable
future are expected to be recovered substantially by allocations to, and
management fees from, its subsidiaries. Cash requirements for the Company over
the next twelve months include income tax payments, which the Company expects to
be recovered substantially from subsidiaries pursuant to tax sharing
agreements. In addition, the Company has debt service (without giving effect
to the Exchange Offer) and preferred stock dividend payments of approximately
$18 million over the next twelve months. Accordingly, the Company also is
dependent on dividends and distributions from its subsidiaries in order to
satisfy its obligations. Various financial covenants and legal restrictions
limit the ability of the Company's subsidiaries to pay dividends or otherwise
distribute funds to the Company. These limitations are described more fully
below, and amounts available under these limitations are set forth in
"Liquidity and Capital Resources" in the Quarterly Report. The Company's
principal direct subsidiaries are Bally's Casino Holdings, Inc. ("Casino
Holdings"), GNAC and Bally's Health & Tennis. The Company also owns an
approximately 80% common stock interest in Bally's Grand, Inc. through its
wholly-owned subsidiaries, BGR, Inc. and Bally's Casino, Inc., and its indirect
wholly-owned subsidiary, Bally's CHLV, Inc. ("CHLV").
Casino Holdings serves as a holding company for Bally's Park Place,
Inc., which owns and operates Bally's Park Place in Atlantic City, New Jersey.
Casino Holdings also indirectly owns through its subsidiaries a portion of the
Company's investment in Bally's Grand, Inc. and the Company's interests in
Bally's Mississippi and Bally's New Orleans. The terms and conditions of the
Indenture (the "Discount Note Indenture") for Casino Holdings' Senior Discount
Notes due 1998 (the "Senior Discount Notes") restrict, among other things, the
ability of Casino Holdings to pay dividends to the Company. Casino Holdings is
similarly dependent on dividends and distributions from Bally's Park Place,
Inc., Bally's Grand, Inc. and the subsidiaries which directly or indirectly own
Bally's Mississippi and Bally's New Orleans in order to satisfy its
obligations. Under the terms of the Senior Discount Notes, dividends received
by Casino Holdings other than from Bally's Park Place, Inc. are not available
to be paid to the Company unless available pursuant to a net income test
(generally limited to 50% of Casino Holdings' consolidated net income
exclusive of income attributable to Bally's Park Place, Inc.); however, any
dividends paid by Bally's Park Place, Inc. to Casino Holdings that are
permitted by Bally's Park Place, Inc.'s financing agreements pursuant to a net
income test (generally limited to 50% of Bally's Park Place, Inc.'s aggregate
consolidated net income, as defined, earned since April 1, 1994) (the "Net
Income Test") may be declared as a dividend by Casino Holdings and paid to the
Company. Casino Holdings' ability to pay dividends also is subject to
limitations imposed by law. The terms and conditions of Bally's Park Place,
Inc.'s revolving credit facility (the "Credit Facility") and the Indenture (the
"Mortgage Note Indenture") for Bally's Park Place, Inc.'s 9 1/4% First Mortgage
Notes due 2004 (the "Mortgage Notes") restrict, among other things, the ability
of Bally's Park Place, Inc. to pay dividends, which dividends are limited in
the aggregate to the sum of: (i) 50% of aggregate consolidated net income from
April 1, 1994 through the end of the fiscal quarter ending immediately prior to
the proposed distribution date, (ii) the aggregate net cash proceeds received
after the date of the Mortgage Note Indenture by Bally's Park Place, Inc. from
the issuance or sale of shares of capital stock of Bally's Park Place, Inc.
(with certain limited exceptions) or warrants, options or rights to purchase
such shares, (iii) the aggregate cash proceeds received after the date of the
Mortgage Note Indenture as capital contributions to Bally's Park Place, Inc.,
17
<PAGE> 21
(iv) the aggregate net cash proceeds received after the date of the Mortgage
Note Indenture by Bally's Park Place, Inc. upon the exercise of options,
warrants or rights to purchase shares of capital stock (with certain limited
exceptions), and (v) $50 million. Bally's Park Place, Inc.'s ability to pay
dividends or otherwise distribute funds to Casino Holdings also is subject to
limitations imposed by law, including restrictions of the New Jersey Casino
Control Commission (the "New Jersey Commission"), which require, among other
things, that dividends paid by Bally's Park Place, Inc. to Casino Holdings
which are not paid pursuant to the Net Income Test receive prior approval of
the New Jersey Commission.
The terms of the Discount Note Indenture restrict and in certain
circumstances preclude the ability of Casino Holdings to pay dividends. The
terms of the Discount Note Indenture also impose restrictions on Casino
Holdings' and Bally's Park Place, Inc.'s ability to incur debt, issue preferred
stock, make acquisitions and certain restricted payments, create liens, sell
assets or enter into transactions with affiliates. The Discount Note
Indenture's restrictions and other restrictions on the ability of subsidiaries
of the Company to incur debt may have an adverse impact on the ability of the
Company to raise capital and, therefore, on the Company's liquidity.
The terms of Bally's Grand, Inc.'s 10 3/8% First Mortgage Notes due 2003
restrict and in certain circumstances preclude the ability of Bally's Grand,
Inc. to pay dividends. In addition, most of any dividends paid by Bally's
Grand, Inc. to subsidiaries of the Company would be received initially by CHLV,
which is prohibited from paying dividends to Casino Holdings, its parent, under
the terms of the Term Loan Agreement between CHLV and Merrill Lynch Capital
Corporation. Bally's Grand, Inc.'s ability to pay dividends is also subject to
limitations imposed by law.
GNAC's revolving credit agreement and the indenture for GNAC's 10 5/8%
First Mortgage Notes due 2003 limit the payment of dividends by GNAC to 50% of
its aggregate consolidated net income (as defined) earned after June 1, 1993.
As of March 31, 1995, no dividends were available for payment under such
limitation and no dividends are expected in 1995. GNAC's ability to pay
dividends is also subject to limitations imposed by law.
Bally's Health & Tennis' revolving credit agreement and 13% Senior
Subordinated Notes due 2003 (the "13% Notes") each restrict the payment of
dividends by Bally's Health & Tennis on its common stock. The more restrictive
covenants under the 13% Notes and the revolving credit agreement permit, but
limit, payments of cash dividends and the purchase or retirement of Bally's
Health & Tennis common stock. At the present time, no amount is available to
pay dividends or retire common stock. In addition to limiting dividends, the
covenants limit transactions with affiliates and payments to the Company for
principal and interest on loans or advances by the Company to Bally's Health &
Tennis and for other obligations arising in the ordinary course of business.
Bally's Health & Tennis' ability to pay dividends also is subject to limitations
imposed by law.
Any rights of the Company and its creditors, including holders of the
New Debentures and the Old Debentures, to participate in the distribution of the
assets of any of the Company's subsidiaries upon any liquidation or
reorganization of any of its subsidiaries will be subject to the prior claims of
that subsidiary's creditors, including trade creditors (except to the extent the
Company may itself be a creditor of such subsidiary). Accordingly, the New
Debentures and the Old Debentures are effectively subordinated to all
liabilities, including trade payables, of the Company's subsidiaries.
The future performance of the Company and its subsidiaries and their
ability to satisfy or refinance their obligations are affected by prevailing
economic conditions and are subject to financial, business and other factors,
including factors beyond the control of the Company. There can be no assurance
that the Company will receive distributions and payments from its subsidiaries
in amounts sufficient to repay the Old Debentures or the New Debentures at their
maturity. Consequently, the
18
<PAGE> 22
Company may have to refinance all or a portion of the Old Debentures or the New
Debentures prior to their maturity. There can be no assurance that, if
required, the Company could refinance all or a portion of the Old Debentures or
the New Debentures on satisfactory terms or that any such refinancing would be
permitted by law or regulatory bodies.
COMPETITION
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 various jurisdictions over the last several
years and the opening of gaming facilities operated by Native Americans have
not, to date, had a material adverse impact on its Atlantic City or Las Vegas
operations. However, proposals have been made for significant casinos,
generally water-based, in a number of other jurisdictions and several large
metropolitan areas, including Chicago, Illinois, where the Company is
headquartered and Philadelphia, Pennsylvania, where the Company holds an option
on a large tract of waterfront property. The Company believes that the adoption
of legislation approving casino gaming in any jurisdiction near New Jersey
(particularly New York or Pennsylvania) or near Nevada (particularly California
or the other southwestern states) or the advent of full-scale gaming on nearby
Native American lands could have a material adverse effect on its present
operations. The Company also competes with other forms of legalized gaming,
including state-sponsored lotteries and off-track wagering. In markets in which
the Company commences operations or seeks to commence operations, it faces
intense competition for licenses, 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, some of which have greater financial resources
than the Company, 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 availability. 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.
Since April 1990, there have been ten 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. Several Atlantic City casino hotels have
recently expanded 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 and rooms 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 historically adversely affected its competitive
position.
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 Las Vegas Strip, approximately 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, over the last three years Las Vegas casino space increased
significantly and hotel and motel room capacity increased by approximately
12,000 rooms or 15%. A significant portion of the increase is a result of the
opening during the latter part of 1993 of three new major casino hotels that
contain 370,000 total square feet of casino space, 10,400 total guest rooms and
19
<PAGE> 23
a theme park. In addition, there have been several public announcements
concerning new casino projects in Las Vegas which, if and when opened, will
further expand capacity. Management believes that the additional casino and
hotel room capacity resulting from the opening of new casino hotels had a
short-term negative impact on Bally's Las Vegas, but that, over the long term,
Bally's Las Vegas benefits from the increase in the number of visitors to Las
Vegas that these new properties attract.
Mississippi gaming law does not limit the number of gaming licenses that
may be granted, and management believes this has resulted in a saturation of
gaming facilities in and around the Memphis market. As of May 1, 1995, nine
gaming facilities were operating in this market and these facilities (as well as
any others which subsequently commence operations there) present significant
competition for the venture in which Bally's Mississippi holds a majority
interest.
Louisiana law currently limits the number of riverboat gaming licenses
that may be granted to fifteen (all of which have been granted), with a maximum
of six riverboats in any one parish. Five riverboats are presently operating in
the New Orleans area and an additional two riverboats (including that of Bally's
New Orleans) are expected to commence operations there during the remainder of
1995. In addition to the riverboat casinos, a license for a single, large-scale
land-based casino has been awarded by the City of New Orleans to a competitor.
This casino, which commenced operations at a temporary location in May 1995 and
is expected to move to a permanent location in mid-1996, is expected to be the
largest land-based casino in the United States. As a result, Bally's New
Orleans expects to face significant competition in the New Orleans market.
REGULATION
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 require compliance with certain maritime laws
and United States Coast Guard regulations.
Gaming activities in Atlantic City are subject to the New Jersey Casino
Control Act (the "New Jersey Act"), regulations of 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 for 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. 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. In January 1995, a
comprehensive package of amendments to the New Jersey Act was enacted into law,
which amendments, among other things, reduce certain regulatory requirements.
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 four years (subject to
discretionary reopening of the licensing hearing by the New Jersey Commission at
any time), and must
20
<PAGE> 24
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 or 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.
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. In the event that disqualified persons fail to divest
themselves of such securities, the New Jersey Commission may revoke or suspend
the license.
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 any class 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 any class of the equity securities of a publicly traded holding or
intermediary company of a casino licensee and: (i) the holdings were purchased
for 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.
21
<PAGE> 25
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 who is required to qualify under the New Jersey Act fails
to qualify, or if a security holder who is required to qualify fails to qualify
and does not dispose of the related 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 was not renewed, was suspended for more than 120
days or was 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.
22
<PAGE> 26
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.
If it were determined that the Nevada Act was violated by a Corporate
Licensee (as defined in the Nevada Act), 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, the
Company, Casino Holdings, 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 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.
The Company and Bally's Grand, Inc. are each registered by the Nevada
Commission as a publicly traded corporation (a "Registered Corporation"). Any
beneficial holder of the Company'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 be subject to a suitability determination 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 the
voting securities of a Registered Corporation 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 30 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 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 or its
23
<PAGE> 27
gaming affiliates' corporate charter, bylaws, management, policies or
operations, 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 of its securities. The
applicant is required to pay all cost of investigation.
Any person who fails or refuses to apply for a finding of suitability or
a license within 30 days after being ordered to do so by the 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. The Company, Casino Holdings 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 the Company, Casino Holdings, Bally's Grand, Inc. or the Corporate
Licensees, the Company, Casino Holdings or Bally's Grand, Inc.: (i) pays that
person any dividend or interest upon the voting securities of the Company 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 that person's voting securities including, if necessary,
the immediate purchase of said voting securities for cash at fair market value.
Additionally, the Clark County Board has the authority to approve all persons
owning or controlling the stock of any corporation controlling a Corporate
Licensee.
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.
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 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 security holders at any time. Mississippi
regulation requires prior approval to recapitalize or to engage in gaming
outside of Mississippi. A Mississippi gaming license is valid for two years, is
not transferable and requires the periodic payment of fees.
Louisiana also 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 employees. In addition, significant
contracts and leases entered into by a licensee must be reported to the
Louisiana regulators, and certain enterprises
24
<PAGE> 28
which transact business with a licensee must be licensed. The Louisiana
regulations restrict the payment of dividends, interest or remuneration for
services rendered or otherwise to security holders who are not found suitable
and requires disposition of such securities from those holders who are found
disqualified. The Louisiana Riverboat Gaming Enforcement Division may conduct
a suitability investigation of security holders at any time. A Louisiana
gaming license is not transferable and requires the periodic payment of fees.
The operating subsidiaries of the Company 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.
PURPOSE AND EFFECTS OF THE EXCHANGE OFFER
The principal purpose of the Exchange Offer is to effect the Proposed
Modifications to the Old Indenture so as to permit the Company to effect the
Distribution. The completion of the Distribution is not, however, a condition
to consummation of the Exchange Offer and there can be no assurance when or if
the Distribution will occur.
Registered Holders of Old Debentures who validly tender into the
Exchange Offer and receive New Debentures will be consenting to the Proposed
Modifications and will benefit from an increase in the interest rate to 8% from
6% per annum, which increase will be retroactive to the period commencing March
15, 1995, and a reduction in the conversion price from $28.99 per share to
$13.00 per share, unless the Average Closing Price of the Common Stock equals or
exceeds $11 1/8, in which case the conversion price per share will be 118% of
the Average Closing Price. Each such conversion price is subject to reduction
to give effect to the Distribution. See "The Proposed Modifications -- The
Distribution."
In addition, the New Debentures will rank senior in right of payment to
the Old Debentures and the New Indenture provides for adjustments to the
conversion rate in certain circumstances which do not cause an adjustment under
the Old Indenture.
If either the Waiver is granted or the Amendment is adopted, the Company
will have the ability to effect the Distribution. The impact of the
Distribution on the Company's financial condition is reflected in
"Capitalization." If the Amendment is adopted, the Company will no longer be
restricted from paying dividends on, or repurchasing or redeeming, shares of its
capital stock.
For a summary of the consequences to the holders of Old Debentures who
do not exchange their Old Debentures in the Exchange Offer, see "Certain
Consequences to Non-Exchanging Holders of Old Debentures."
25
<PAGE> 29
CERTAIN CONSEQUENCES TO NON-
EXCHANGING HOLDERS OF OLD DEBENTURES
The completion of the Exchange Offer will have significant adverse
consequences for non-exchanging holders of the Old Debentures.
The New Debentures will rank senior in right of payment to the Old
Debentures. Accordingly, holders of New Debentures will have claims in
bankruptcy or liquidation of the Company prior to those of the holders of
unexchanged Old Debentures. This situation could have an adverse impact on the
market price of Old Debentures and would in all likelihood reduce the amounts
realizable on such holders' claims in the event of bankruptcy.
To the extent that Old Debentures are validly tendered and accepted in
the Exchange Offer, trading of the Old Debentures may become more limited and
sporadic and information concerning trading prices and volumes may become more
difficult to obtain. The extent of the market for the Old Debentures would
depend upon the number of holders of the Old Debentures remaining after
consummation of the Exchange Offer, the interest in maintaining a market in the
Old Debentures on the part of securities firms and other factors. There can be
no assurance as to the liquidity of the trading market for the Old Debentures
after consummation of the Exchange Offer. Further, if less than $1 million in
principal amount of the Old Debentures remain outstanding after completion of
the Exchange Offer, the NYSE may delist the Old Debentures, which would further
adversely affect the market for the Old Debentures.
In the event of the delisting of the Old Debentures by the NYSE, it is
possible that the Old Debentures would continue to trade on another securities
exchange or in the over-the-counter market and that price quotations would be
reported by such exchange, by the NASD through Nasdaq or by other sources. The
extent of the public market for the Old Debentures and the availability of such
quotations would, however, depend upon such factors as the number of holders
remaining at such time, the interest in maintaining a market in the Old
Debentures on the part of securities firms and other factors.
The Old Indenture provides that the Company will deposit with the
trustee under such indenture, prior to September 15 in each year, commencing in
the year 1988 and ending with the year 1997, cash or Old Debentures sufficient
to redeem 7.5% of the aggregate principal amount of the Old Debentures
outstanding on July 15, 1988 (which amounted to $2,587,000), plus interest
accrued to the date of redemption. Old Debentures accepted for exchange
pursuant to the Exchange Offer will be utilized to fulfill sinking fund
obligations under the Old Indenture, which will extend the average life of the
unexchanged Old Debentures until the final maturity date of September 15, 1998.
Accordingly, if the Exchange Offer is consummated, the Company would not be
obligated to make any sinking fund payments on the Old Debentures prior to their
final maturity in 1998.
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. Accordingly, a holder of Old Debentures which does not
tender in the Exchange Offer may inadvertently hold 15% or more of the Old
Debentures as a result of the reduction in the principal amount of the
outstanding Old Debentures caused by consummation of the Exchange Offer. The
New Jersey Commission might then require such holder to qualify as a "financial
source" or seek a waiver from such requirement. There is no assurance a
non-tendering holder of Old Debentures will receive such a waiver. See
"Investment Considerations -- Regulation."
26
<PAGE> 30
THE PROPOSED MODIFICATIONS
Registered Holders of Old Debentures who tender in the Exchange Offer
are consenting to the Waiver and the Amendment. The Proposed Modifications are
intended to permit the Company to effect the Distribution.
The Old Indenture provides that the approval of the holders of not less
than a majority in aggregate principal amount of the Old Debentures must consent
to a waiver of compliance by the Company with the terms of any covenant or
condition of the Old Indenture, and that two-thirds in aggregate principal
amount of the Old Debentures must consent to any amendment to the Old
Indenture. Accordingly, if Old Debentures representing at least a majority
but less than two-thirds in aggregate outstanding principal amount of the Old
Debentures are accepted in the Exchange Offer, only the Waiver would become
effective, which will have the effect of permitting the Distribution to occur,
but will not have the effect of permanently deleting the provision of the Old
Indenture which limits dividends, redemptions and distributions by the Company
(the "Restrictive Covenant"). See "The Restrictive Covenant" below. If more
than two-thirds in aggregate outstanding principal amount of the Old Debentures
are accepted in the Exchange Offer, the Waiver would become effective and the
Amendment to the Old Indenture would be adopted, with the effect of permanently
deleting the Restrictive Covenant from the Old Indenture.
THE DISTRIBUTION
On June 28, 1994, the Company's Board of Directors approved the
Spin-off. Accordingly, the Distribution is expected to be accomplished by
distributing substantially all of the issued and outstanding stock of Bally's
Health & Tennis to the Company's stockholders. The Distribution is anticipated
to be completed during the third quarter of 1995 and is subject to the
satisfaction of certain conditions and receipt of certain consents, including
the Proposed Modifications. Completion of the Distribution is not a condition
of the Exchange Offer; accordingly, the Company may consummate the Exchange
Offer whether or not the Distribution occurs.
If the Distribution is consummated, the Old Indenture requires that the
Company adjust the conversion price of the Old Debentures to give effect to the
Distribution, such adjustment to be effective retroactively immediately after
the record date for the determination of stockholders entitled to receive the
Distribution (the "Distribution Date"). See "Description of the Old Debentures
- -- Conversion Rights." In compliance with such covenant, the Company will
reduce the conversion price for the Old Debentures to a price equal to $28.99
divided by a fraction, the numerator of which is the "current market price" per
share of the Common Stock and the denominator of which is the "current market
price" per share of the Common Stock LESS the "fair market value" of the
Distribution applicable to one share of Common Stock. The Old Indenture defines
"current market price" as the average of the daily closing prices for the thirty
consecutive business days commencing forty-five business days before the
Distribution Date. The closing price for each day shall be the closing price on
the NYSE-Composite Tape. Under the Old Indenture, "fair market value" of the
Distribution is "determined by the Board of Directors of the Company, whose
determination shall be conclusive."
If the Distribution is consummated, the New Indenture requires the
Company to adjust the conversion price of the New Debentures to give effect to
the Distribution, such adjustment to become effective immediately prior to the
opening of business on the day following the date fixed for the determination of
stockholders entitled to receive the Distribution. The conversion price is to
be adjusted so that the conversion price will equal the price determined by
multiplying the conversion price in effect immediately prior to the close of
business on the date fixed for the determination of stockholders entitled to
receive such Distribution by a fraction of which the numerator is the current
market price per share (as determined pursuant to the terms of the New
Indenture) of the Common Stock on such record date
27
<PAGE> 31
less the then fair market value (as determined by the Company's Board of
Directors, whose determination shall be conclusive and described in a board
resolution) of the Distribution applicable to one share of Common Stock and the
denominator will be such current market price per share of Common Stock.
THE RESTRICTIVE COVENANT
The Old Indenture prohibits the payment of dividends and other
distributions on the stock of the Company (other than dividends payable in stock
of the Company) and the purchase, redemption or other retirement of any shares
of such stock (except fractional shares) by the Company or any subsidiary of the
Company unless after giving effect thereto the aggregate amount expended for
such purposes during the period commencing January 1, 1978, does not exceed the
sum of (i) the aggregate amount of Consolidated Net Income (as defined) accrued
subsequent to January 1, 1978, (ii) the aggregate net cash proceeds received by
the Company subsequent to issuance of the Old Debentures from sales of shares of
its stock for cash and (iii) the aggregate net cash proceeds received by the
Company subsequent to the issuance of the Old Debentures from sales of
indebtedness of the Company convertible into stock of the Company, to the extent
such indebtedness has been converted into such stock.
Under the terms of the Restrictive Covenant, the Distribution would be
treated as a distribution and would not be permitted.
THE WAIVER
If approved, the Waiver would permit the Distribution, but would not
have the effect of permanently deleting the Restrictive Covenant. Further, by
granting the Waiver, each Registered Holder of Old Debentures would waive any
future breach of the Restrictive Covenant which might arise out of the inclusion
of the amount of the Distribution in the calculation of the aggregate amount of
dividends, distributions, repurchases, redemptions and other retirements of
stock which are limited by the Restrictive Covenant, the effect of which will be
that the Trustee under the Old Indenture and the Company will be permitted to
exclude from such calculation the amount of the Distribution in determining
compliance with the Restrictive Covenant.
THE AMENDMENT
If adopted, the Amendment would not only permit the Distribution, but
would permanently delete the Restrictive Covenant from the Old Indenture.
Accordingly, after the date of the adoption of the Amendment, there would be no
restriction imposed on dividends upon, or repurchases or redemptions by the
Company of, any shares of its capital stock.
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions of the Exchange Offer
(including, if the Exchange Offer is amended or extended, the terms and
conditions of any extension or amendment), the Company will accept for exchange,
and will issue New Debentures in exchange for, all Old Debentures properly
tendered under the Exchange Offer prior to the Expiration Date (and not properly
withdrawn) promptly after the later to occur of (i) the Expiration Date and (ii)
the satisfaction or waiver of the conditions set forth under "Conditions of the
Exchange Offer." Subject to applicable rules of the Commission, the Company
expressly reserves the right, in its discretion, to delay acceptance for
exchange of, or exchange for, Old Debentures pending receipt of any regulatory
approvals specified under "Conditions of the Exchange Offer." For purposes of
the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Old Debentures when, as and if the Company has given oral or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering holders of Old
28
<PAGE> 32
Debentures for the purposes of receiving the New Debentures from the Company
and transmitting the New Debentures to each exchanging holder of Old
Debentures.
The Exchange Offer is conditioned upon, among other things, satisfaction
of the Minimum Condition and the Modifications Condition. The Exchange Offer is
also subject to certain other conditions set forth below under "Conditions of
the Exchange Offer." If these or any of the other conditions referred to as
"Conditions of the Exchange Offer" are not satisfied, or any events specified in
"Conditions of the Exchange Offer" have occurred or are determined by the
Company to have occurred prior to the Expiration Date, the Company reserves the
right (but is not obligated) to (i) decline to exchange any of the Old
Debentures tendered in the Exchange Offer and terminate the Exchange Offer, and
return all tendered Old Debentures to the tendering holders, or (ii) waive or
amend any or all conditions to the Exchange Offer, to the extent permitted by
applicable law, and, subject to complying with applicable rules and regulations
of the Commission, exchange all Old Debentures validly tendered.
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend for any reason the period of time during
which the Exchange Offer is open, including the occurrence of any of the events
specified under "Conditions of the Exchange Offer," by giving oral or written
notice of such extension to the Exchange Agent. During any such extension, all
Old Debentures previously tendered and not withdrawn will remain subject to the
Exchange Offer, subject to the rights of a tendering holder to withdraw its Old
Debentures.
Subject to the applicable regulations of the Commission, the Company
also expressly reserves the right, in its sole discretion, at any time and from
time to time, by giving oral or written notice thereof of such amendment to the
Exchange Agent and by making a public announcement thereof, to (i) delay
acceptance for exchange of or exchange for (regardless of whether such Old
Debentures were previously accepted for exchange), any Old Debentures pending
receipt of any regulatory approval described in this Offering Circular or to
comply with any other applicable law; (ii) terminate the Exchange Offer and
refuse to accept for exchange any Old Debentures and return all tendered Old
Debentures to tendering holders thereof, if any of the events set forth below
under "The Exchange Offer -- Conditions of the Exchange Offer" shall have
occurred and shall not have been validly waived by the Company, (iii) extend the
Exchange Offer and retain all tendered Old Debentures until the Expiration Date,
subject, however, to all withdrawal rights of the holders, see "The Exchange
Offer -- Withdrawal Rights," (iv) waive or modify certain unsatisfied conditions
with respect to the Exchange Offer (other than the receipt of an order of the
Commission pursuant to the TIA, which cannot be waived) and accept all properly
tendered Old Debentures; or (v) amend the terms of the Exchange Offer in any
respect.
The Company acknowledges that (i) Rule 13e-4(f)(5) under the Exchange
Act requires the Company to pay the consideration offered or return the Old
Debentures tendered promptly after the termination or withdrawal of the Exchange
Offer, and (ii) the Company may not delay acceptance for exchange of, or
exchange for (except as provided in clause (i) of the first sentence of the
preceding paragraph) any Old Debentures upon the occurrence of any of the
conditions specified under "Conditions of the Exchange Offer" without extending
the period of time during which the Exchange Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, with such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 13e-4(e)(2),
13e-4(f)(1)(ii) and 14e-1 under the Exchange Act, which require that material
changes be promptly disseminated to holders in a manner reasonably designed to
inform them of such changes) and without limiting the manner in which the
Company may choose to make any public announcement, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a press release to the Dow Jones News
Service.
29
<PAGE> 33
If the Company makes a material change in the terms of the Exchange
Offer or the information concerning the Exchange Offer, or if it waives a
material condition of the Exchange Offer, the Company will extend the Exchange
Offer to the extent required by Rules 13e-4(e)(2), 13e- 4(f)(1)(ii) and 14e-1
under the Exchange Act.
Although the Company has no plan or intention to do so, it reserves the
right to make purchases of any Old Debentures that remain outstanding subsequent
to the Expiration Date. The terms of any such purchases could differ from the
terms of the Exchange Offer and would be substantially restricted by the terms
of the New Indenture.
Tendering holders of Old Debentures will not be required to pay
brokerage commissions or fees or, except as otherwise stated in the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Debentures pursuant to the Exchange Offer. The Company will pay certain charges
and expenses in connection with the Exchange Offer. See "The Exchange Offer --
Payment of Expenses."
Holders of Old Debentures who desire to tender their Old Debentures will
be required to consent to the Proposed Modifications. REVOCATIONS OF CONSENTS
TO THE PROPOSED MODIFICATIONS MAY ONLY BE EFFECTED BY REGISTERED HOLDERS BY A
PROPER WITHDRAWAL OF THE OLD DEBENTURES TO WHICH SUCH REVOCATIONS PERTAIN AS
DESCRIBED BELOW IN "THE EXCHANGE OFFER -- WITHDRAWAL RIGHTS." SUCH WITHDRAWAL
WILL EXCLUDE THE WITHDRAWN OLD DEBENTURES FROM THE EXCHANGE OFFER.
ONLY REGISTERED HOLDERS OF OLD DEBENTURES CAN EFFECTIVELY CONSENT TO THE
PROPOSED MODIFICATIONS. HOLDERS OF OLD DEBENTURES REGISTERED IN THE NAME OF A
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE ARE URGED TO CONTACT
SUCH REGISTERED HOLDER PROMPTLY IF SUCH HOLDER DESIRES TO TENDER OLD DEBENTURES.
The Exchange Offer will expire at 5:00 p.m., New York City time, on July
6, 1995, unless extended. The Company reserves the right to extend the Exchange
Offer at its discretion, in which event the term "Expiration Date" shall mean
the latest date to which the Exchange Offer has been extended.
PROCEDURES FOR TENDERING AND GIVING CONSENTS
The tendering by a Registered Holder of Old Debentures in the Exchange
Offer pursuant to the procedures set forth below will constitute an agreement
between such Registered Holder and the Company in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal.
Tenders of Old Debentures will be accepted only in principal amounts of $1,000
and integral multiples thereof.
For Old Debentures to be tendered effectively in the Exchange Offer, the
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message (as
defined below) in connection with a book-entry delivery of the Old Debentures,
and any other required documents, must be received by the Exchange Agent at one
of its addresses set forth on the back cover of this Offering Circular prior to
5:00 p.m., New York City time, on the Expiration Date and either (i) the Old
Debentures must be received by the Exchange Agent at such address or the Old
Debentures must be tendered pursuant to the procedure for book-entry transfer
described below and confirmation of a book-entry transfer (a "Book-Entry
Confirmation") must be received by the Exchange Agent, in such case prior to the
Expiration Date, or (ii) the tendering Registered Holder must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD DEBENTURES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY (AS
DEFINED BELOW), IS AT THE OPTION AND RISK OF THE TENDERING HOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
30
<PAGE> 34
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY. LETTERS OF TRANSMITTAL AND OLD DEBENTURES
SHOULD NOT BE SENT TO THE COMPANY OR THE INFORMATION AGENT.
The Exchange Agent will establish an account with respect to the Old
Debentures at each Book-Entry Transfer Facility for purposes of the Exchange
Offer within two business days after the date of this Exchange Offer, and any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Old Debentures by causing a
Book-Entry Transfer Facility to transfer such Old Debentures into the Exchange
Agent's account at a Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Debentures may be effected through book-entry transfer at a
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
with any required signature guarantees, or an Agent's Message and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at one of its addresses set forth on the back cover of this
Offering Circular prior to the Expiration Date or the tendering holder must
comply with the guaranteed delivery procedures described below. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
Signatures on all Letters of Transmittal must be guaranteed by a firm
which is a member of the Medallion Signature Guarantee Program or by any other
"eligible guarantor institution", as such term is defined in Rule 17Ad-15 under
the Exchange Act (each, an "Eligible Institution"), unless the Old Debentures
tendered thereby are tendered (i) by a Registered Holder of Old Debentures who
has not completed either the box entitled "Special Delivery Instructions" or the
box entitled "Special Issuance Instructions" on the Letter of Transmittal, or
(ii) for the account of an Eligible Institution. See Instruction 4 of the
Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Exchange Agent forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Old Debentures, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Company may enforce such agreement against such participant.
The Exchange Agent will establish accounts with respect to the Old
Debentures at The Depository Trust Company ("DTC"), The Midwest Securities Trust
Company ("MSTC"), and The Philadelphia Depository Trust Company ("PDTC" and,
together with DTC and MSTC, collectively referred to herein as the "Book-Entry
Transfer Facilities" or each individually as a "Book-Entry Transfer Facility")
for the purpose of the Exchange Offer, and any financial institution that is a
participant in any of the Book-Entry Transfer Facilities' systems may make
book-entry transfer of the Old Debentures by causing DTC, MSTC or PDTC to
transfer such Old Debentures into the Exchange Agent's account in accordance
with such Book-Entry Transfer Facility's procedure for such transfer. Although
delivery of Old Debentures may be effected through book-entry transfer in the
Exchange Agent's account at DTC, MSTC or PDTC, the Letter of Transmittal (or
facsimile thereof), with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received or
confirmed by the Exchange Agent at one of its addresses set forth on the back
cover of this Offering Circular prior to 5:00 p.m., New York City time, on the
Expiration Date, except as otherwise provided below under the caption "The
Exchange Offer--Guaranteed Delivery Procedure." DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. NOTWITHSTANDING COMPLIANCE WITH
BOOK-ENTRY TENDER DELIVERY PROCEDURES, FAILURE TO DELIVER TO THE EXCHANGE
31
<PAGE> 35
AGENT AN EXECUTED LETTER OF TRANSMITTAL PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE EXPIRATION DATE MAY RESULT IN THE TENDERED OLD DEBENTURES NOT BEING
ACCEPTED FOR EXCHANGE.
If the Letter of Transmittal or Notice of Guaranteed Delivery or any Old
Debentures or powers of attorney are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
By executing a Letter of Transmittal as set forth above, or providing an
Agent's Message in connection with a book-entry transfer, a tendering Registered
Holder consents to the Proposed Modifications. Such consent may not be revoked
except by a proper withdrawal of the Old Debentures tendered in the Exchange
Offer to which such revocation pertains in compliance with the terms set forth
below in "The Exchange Offer -- Withdrawal Rights."
If any tendered Old Debentures are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein, the
withdrawal of tendered Old Debentures under circumstances, as described herein,
permitting such withdrawal or otherwise, or if Old Debentures are submitted for
a greater principal amount than the Registered Holder thereof desires to
exchange, any such unaccepted or non-exchanged Old Debentures will be
returned, without expense, to the tendering Registered Holder thereof (or, in
the case of the Old Debentures tendered by book-entry transfer, to an account
maintained at such Book-Entry Transfer Facility), as promptly as practicable
after the expiration or termination of the Exchange Offer.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Debentures tendered for exchange will be
determined by the Company in its sole discretion, whose determination will be
final and binding. The Company reserves the absolute right to reject any or
all tenders that are not in proper form or the acceptance of which would, in
the opinion of the Company or counsel for the Company, be unlawful. The
Company also reserves the right to waive certain of the conditions to the
Exchange Offer or any irregularities or defects in the tender of Old
Debentures. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will
be final and binding on all parties. Unless waived, any irregularities in
connection with tenders of Old Debentures must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent, the
Information Agent nor any other person shall be under any duty to give
notification of defects or irregularities in such tenders or shall incur any
liability for failure to give such notification. Tenders of Old Debentures
will not be deemed to have been made until such defects or irregularities have
been cured or waived.
GUARANTEED DELIVERY PROCEDURE
If a holder of the Old Debentures desires to tender such Old
Debentures, and the Old Debentures are not immediately available, or time will
not permit such holder's Old Debentures or any other required documents to
reach the Exchange Agent before 5:00 p.m., New York City time, on the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender for exchange may be effected if:
(a) the tender for exchange is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Company herewith, is received by
the Exchange Agent as provided below prior to the Expiration Date; and
32
<PAGE> 36
(c) all tendered Old Debentures, or a Book-Entry Confirmation, together
with a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) with any required signature guarantee
(or, in the case of book-entry transfer, an Agent's Message) and any other
documents required by such Letter of Transmittal, are received by the
Exchange Agent within five NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery.
Any notice of Guaranteed Delivery may be delivered by hand or
transmitted by telegram, facsimile transmission or mail to the Exchange Agent
and must include a guarantee by an Eligible Institution in the form set forth
in the Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, acceptance of tendered Old
Debentures pursuant to the Exchange Offer will, in all cases, by made only
after timely receipt by the Exchange Agent of (i) the Old Debentures, or a
Book-Entry Confirmation of the delivery of such Old Debentures, if available,
(ii) a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) or, in the case of book-entry transfer, an Agent's
Message and (iii) any other documents required by the Letter of Transmittal.
ISSUANCE OF NEW DEBENTURES IN EXCHANGE FOR OLD DEBENTURES WILL BE MADE
ONLY AGAINST RECEIPT OF THE TENDERED OLD DEBENTURES BY THE COMPANY.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, and in
addition to (and not in limitation of) the Company's rights to extend and amend
the Exchange Offer at any time in its sole discretion, the Company shall not be
required to accept for exchange of or, subject to any applicable rules and
regulations of the Commission, including Rule 13e-4(f)(5) under the Exchange
Act (relating to the Company's obligation to pay for or return tendered Old
Debentures promptly after termination or withdrawal of the Exchange Offer),
exchange for, and may delay the acceptance for exchange of or, subject to the
restriction referred to above, the exchange for, any tendered Old Debentures,
and may terminate the Exchange Offer as to any Old Debentures not then
exchanged for, if (i) the Commission shall not have issued an order declaring
the New Indenture qualified under the TIA, (ii) the Minimum Condition has not
been satisfied, (iii) the Modifications Condition shall not have been satisfied
or (iv) at any time on or after June 7, 1995 and before the time of issuance of
the New Debentures, any of the following events shall occur or shall be
determined by the Company to have occurred:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental authority or other regulatory or
administrative agency, domestic or foreign, with respect to the Exchange
Offer which, in the sole judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or have a
material adverse effect on the contemplated benefits of the Exchange Offer
to the Company, or there shall have occurred any material adverse
developments in any existing action or proceeding with respect to the
Company or any of its subsidiaries;
(b) there shall have been proposed (including any proposed or pending
legislation in existence as of the date hereof), adopted, or enacted into
law any legislation, rule or regulation, or any action shall have been
taken or proposed (i) limiting the deductibility of interest on
indebtedness attributable, directly or indirectly, to the Exchange Offer,
(ii) that would materially increase the after-tax cost of the Exchange
Offer, or the transactions contemplated hereby or (iii) might, in the sole
judgment of the Company, have any of the effects set forth in (a) above;
(c) there shall have occurred or be likely to occur any change, or
development involving a prospective change, in or affecting the business
or financial affairs of the Company
33
<PAGE> 37
or any of its subsidiaries which, in the sole judgment of the Company, would
or might prohibit, restrict or delay consummation of the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company;
(d) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation which, in the sole judgment of the Company, might
materially prohibit, restrict or delay consummation of the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company; or
(e) there shall have occurred (i) any general suspension of, shortening
of hours for, or limitation on prices for, trading in securities listed on
the New York Stock Exchange, the American Stock Exchange or in the
over-the-counter market (whether or not mandatory); (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks or
savings and loan associations by federal or state authorities in the United
States (whether or not mandatory); (iii) a commencement of a war, armed
hostilities or other international or national crisis directly or indirectly
involving the United States; (iv) any limitation (whether or not mandatory)
by any governmental authority on, or other event having a reasonable
likelihood of affecting, the extension of credit by banks or other lending
institutions in the United States; (v) any significant change in the United
States currency exchange rates or a suspension of, or limitation on, the
markets therefor (whether or not mandatory); (vi) any significant adverse
change in the United States securities or financial markets generally; or
(vii) in the case of any of the foregoing existing at the time of the
commencement of the Exchange Offer, a material acceleration or worsening
thereof.
If any of the foregoing events shall have occurred, the Company may (i)
delay acceptance for exchange of or exchange for (regardless of whether such
Old Debentures were previously accepted for exchange), any Old Debentures
pending receipt of any regulatory approval described above or to comply with
any other applicable law; (ii) terminate the Exchange Offer and refuse to
accept for exchange any Old Debentures and return all tendered Old Debentures
to tendering holders thereof, (iii) extend the Exchange Offer and retain all
tendered Old Debentures until the Expiration Date, subject, however, to all
withdrawal rights of the holders, see "The Exchange Offer--Withdrawal Rights,"
(iv) waive or modify certain of the unsatisfied conditions with respect to the
Exchange Offer (other than the receipt of an order of the Commission pursuant
to the TIA, which cannot be waived) and accept all properly tendered Old
Debentures; or (v) amend the terms of the Exchange Offer in any respect.
Although the Company has no present intention of waiving or modifying any of
the conditions of the Exchange Offer, the Company expressly reserves the right
to waive or modify, to the extent permitted by law, any of such conditions to
which the Company and/or the holders of Old Debentures may be exposed or any
additional risks which cannot now be predicted or evaluated.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances giving rise to
such conditions or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion, except that the Company may not
waive the condition that the Commission declare the New Indenture qualified
under the TIA. Any determination made by the Company concerning an event,
development or circumstance described or referred to above will be final and
binding on all parties. If the Company waives any material condition of the
Exchange Offer, the Company will promptly disclose such waiver and extend the
Exchange Offer to the extent required by Rules 13e-4(e)(2), 13e-4(f)(1)(ii) and
14e-1 under the Exchange Act.
The minimum period during which the Exchange Offer must remain open
following material changes in the terms of the Exchange Offer or the
information concerning the Exchange Offer depends upon the facts and
circumstances, including the relative materiality of such terms or information.
See
34
<PAGE> 38
"The Exchange Offer -- Terms of the Exchange Offer." If, prior to the
Expiration Date, the Company increases the consideration to be offered per Old
Debenture pursuant to the Exchange Offer, the Company will pay such increased
consideration for all such Old Debentures tendered pursuant to the Exchange
Offer, whether or not such Old Debentures were tendered prior to such increase
in consideration.
WITHDRAWAL RIGHTS
Tenders of Old Debentures made pursuant to the Exchange Offer are
irrevocable, except that such Old Debentures may be withdrawn at any time prior
to the Expiration Date, and unless theretofore accepted for exchange by the
Company pursuant to the Exchange Offer, also may be withdrawn at any time after
August 2, 1995.
If the Company extends the Exchange Offer, is delayed in its acceptance
for exchange or is unable to accept Old Debentures for exchange pursuant to the
Exchange Offer for any reason, then, without prejudice to the Company's rights
under the Exchange Offer, the Exchange Agent may, nevertheless, on behalf of
the Company, retain tendered Old Debentures, and such Old Debentures may not be
withdrawn except to the extent that tendering Registered Holders are entitled
to withdrawal rights as described below.
To be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at the
address set forth on the back cover hereof, and must specify the name of the
person having tendered the Old Debentures to be withdrawn, the aggregate
principal amount of Old Debentures to be withdrawn and the name of the
Registered Holder, if different from that of the person who tendered such Old
Debentures. If Old Debentures have been delivered or otherwise identified to
the Exchange Agent, then prior to the physical release of the withdrawn Old
Debentures the serial numbers of the particular Old Debentures to be withdrawn
must be furnished to the Exchange Agent as aforesaid and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution, unless
such Old Debentures have been tendered (i) by a Registered Holder of Old
Debentures, who has not completed either the box entitled "Special Delivery
Instructions" or the box "Special Issuance Instructions" on the Letter of
Transmittal, or (ii) for the account of an Eligible Institution. If Old
Debentures have been tendered pursuant to the procedures for book-entry
transfer as set forth herein, any notice of withdrawal also must specify the
name and number of the account at the appropriate Book-Entry Transfer Facility
to be credited with the withdrawn Old Debentures. Withdrawals of tenders of
Old Debentures may not be rescinded, and any Old Debentures withdrawn
thereafter will be deemed not validly tendered for purposes of the Exchange
Offer; provided, however, that withdrawn Old Debentures may be retendered again
by following one of the appropriate procedures described herein at any time
prior to 5:00 p.m., New York City time, on the Expiration Date.
Registered Holders seeking to revoke consents to the Proposed
Modifications must properly withdraw the Old Debentures to which such
revocation pertains in accordance with the foregoing procedures in order for
such revocation to become effective.
All questions as to validity (including time of receipt) of notices of
withdrawal will be determined by the Company, such determination to be final
and binding. A purported notice of withdrawal which lacks any of the required
information will not be an effective withdrawal of a tender previously made.
None of the Company, the Exchange Agent, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
EXCHANGE AGENT; INFORMATION AGENT AND ASSISTANCE
United States Trust Company of New York has been appointed as Exchange
Agent, and MacKenzie Partners, Inc. has been appointed Information Agent for
the Exchange Offer. All correspondence, questions and requests for assistance
in connection with the Exchange Offer and the
35
<PAGE> 39
Letter of Transmittal should be addressed to the Exchange Agent or Information
Agent at their respective addresses and telephone numbers set forth on the back
cover of this Offering Circular. The Company also has agreed to indemnify the
Information Agent and the Exchange Agent against certain liabilities and
expenses.
Requests for information or additional copies of this Offering Circular
or the Letter of Transmittal should be directed to the Exchange Agent, the
Information Agent or the Company.
PAYMENT OF EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the Exchange Offer. The Company,
however, will pay the Exchange Agent and Information Agent reasonable and
customary fees for their services and will reimburse them for their reasonable
out-of-pocket expenses in connection therewith. The Company will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Offering
Circular and related documents to the beneficial owners of the Old Debentures,
and in handling or forwarding tenders for their customers.
The cash expenses to be incurred in connection with the Exchange Offer,
including the fees and expenses of the Exchange Agent and the Information
Agent, and printing, accounting and legal fees, will be paid by the Company and
are estimated at $135,000.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Debentures for New Debentures pursuant to the Exchange Offer,
except if New Debentures or substitute Old Debentures for principal amounts not
exchanged are to be delivered to, or are to be registered or issued in the name
of, any person other than the Registered Holder of the Old Debentures tendered
hereunder, or if tendered Old Debentures are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old
Debentures for New Debentures pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the Registered Holder or any
other persons) will be payable by the tendering holder of the Old Debentures.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
DESCRIPTION OF THE NEW DEBENTURES
The New Debentures are to be issued under an indenture (the "New
Indenture") between the Company and First Bank National Association, as New
Trustee (the "New Trustee"), a form of which has been filed with the Commission
on Form T-3. The following summaries of certain provisions of the New Indenture
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the New Indenture, including
the definitions in the New Indenture of certain terms. Wherever particular
sections or defined terms of the New Indenture are referred to, such sections
or defined terms are incorporated herein by reference.
GENERAL
The New Debentures will be unsecured subordinated obligations of the
Company, will be limited to $15,390,000 in aggregate principal amount and will
mature on December 15, 2000. The New Debentures will bear interest at eight
percent (8%) per annum from March 15, 1995, payable semi-annually on March 15
and September 15 of each year, commencing September 15, 1995, to the person in
whose name such New Debenture is registered at the close of business on the
preceding March 1 or September 1, as the case may be. Principal of and
interest on the New Debentures will be
36
<PAGE> 40
payable at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, The City of New York, or the City of Chicago,
Illinois, and the New Debentures may be surrendered for transfer, exchange or
conversion at that office or agency. In addition, payment of interest may be
made at the option of the Company by check mailed to the address of the person
entitled thereto as it appears in the Security Register.
The New Debentures will be issued only in registered form.
CONVERSION RIGHTS
The New Debentures will be convertible into Common Stock at any time
prior to redemption or maturity, initially at the conversion price set forth on
the cover page hereof. The right to convert New Debentures which have been
called for redemption will terminate at the close of business on the Trading
Day prior to the Redemption Date. See "Optional Redemption" and "Redemption or
Forced Sale for Regulatory Reasons" below.
The conversion price will be subject to adjustment in certain events,
including (a) the payment of dividends and other distributions in Common Stock
on any class of capital stock of the Company, (b) the issuance to all holders
of Common Stock of rights, options or warrants entitling them to subscribe for
or purchase Common Stock at a price per share less than the current market
price per share (as defined) at the time of such issuance (provided that the
conversion price will be readjusted to the extent any such warrants, options or
rights are not exercised prior to the expiration thereof), (c) subdivisions and
combinations of Common Stock, (d) distributions to all holders of Common Stock
of shares of any class of capital stock, evidences of indebtedness of the
Company or assets (including securities, but excluding those dividends and
distributions referred to above, any rights, options and warrants, and any
dividends or distributions paid exclusively in cash), (e) distributions
consisting exclusively of cash to all holders of Common Stock in an aggregate
amount that, together with (i) other all-cash distributions made within the
preceding 12 months to all holders of Common Stock and (ii) any cash and the
fair market value of other consideration paid in respect of any tender offer by
the Company or any of its subsidiaries for the Company's Common Stock concluded
within the preceding 12 months, exceeds 12.5% of the Company's then current
market capitalization (being the product of the current market price per share
(as defined in the New Indenture) of the Common Stock times the number of
shares of Common Stock then outstanding), (f) the successful completion of a
tender offer made by the Company or any of its subsidiaries for the Company's
Common Stock which involves an aggregate consideration that, together with (i)
any cash and other consideration paid in respect of any tender offer by the
Company or any of its subsidiaries for the Company's Common Stock expiring
within the 12 months preceding the expiration of such tender offer and (ii) the
aggregate amount of any all-cash distributions to all holders of the Company's
Common Stock within the 12 months preceding the expiration of such tender
offer, exceeds 12.5% of the Company's market capitalization (being the product
of the current market price per share (as defined in the New Indenture) of the
Common Stock times the number of shares of Common Stock then outstanding) at
the expiration of such tender offer, and (g) certain reclassifications. No
adjustment of the conversion price will be required unless an adjustment would
require a cumulative increase or decrease of at least 1% in such price;
provided, however, that any adjustment that would otherwise be required to be
made, but is not made as a result of the foregoing limitation, shall be carried
forward and taken into account in a subsequent adjustment. No adjustment of
the conversion price will result in zero or in a negative number or will reduce
the conversion price below the then par value of the Common Stock (in which
case the conversion price would be reduced to such par value), unless the
Common Stock has no par value at such time (in which case the conversion price
would be reduced to $.01 per share).
37
<PAGE> 41
If the Company distributes any rights, options or warrants (other than
those referred to in clause (b) of the preceding paragraph) ("Rights") to all
holders of Common Stock, in lieu of a conversion price reduction, each Holder
who converts after the record date for the distribution and prior to the
expiration or redemption of the Rights will be entitled to receive, in addition
to the shares of Common Stock issuable upon such conversion, the same number of
Rights to which a holder of the number of shares of Common Stock into which the
principal amount of the New Debenture so converted was convertible would have
been entitled.
In addition to the foregoing adjustments, the Company, at its option,
will be permitted to make such reductions in the conversion price as it
considers advisable (including such reductions in the conversion price as it
considers to be advisable in order that any event treated for United States
federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the recipients). In case of certain consolidations or mergers to
which the Company is a party or the transfer of the property and assets of the
Company substantially as an entirety, each New Debenture then outstanding
would, without the consent of any Holder of New Debentures, become convertible
only into the kind and amount of securities, cash and other property receivable
upon the consolidation, merger, sale or transfer by a holder of the number of
shares of Common Stock into which such New Debenture might have been converted
immediately prior to such consolidation, merger, sale or transfer (assuming
such holder of Common Stock failed to exercise any rights of election and
received per share the kind and amount received per share by a plurality of
non-electing shares).
Fractional shares of Common Stock will not be issued upon conversion,
but, in lieu thereof, the Company will pay a cash adjustment based upon the
market price of the Common Stock. New Debentures surrendered for conversion
during the period from the close of business on any Regular Record Date next
preceding any interest Payment Date to the opening of business on such interest
Payment Date (except New Debentures called for redemption during such period)
must be accompanied by payment of an amount equal to the interest thereon which
the Registered Holder is to receive. In the case of any New Debenture which
has been converted after any Regular Record Date but on or before the next
Interest Payment Date (except New Debentures whose Maturity is prior to such
Interest Payment Date), interest whose Stated Maturity is on such Interest
Payment Date shall be payable on such Interest Payment Date notwithstanding
such conversion, and such interest shall be paid to the Holder of such New
Debenture on such Regular Record Date. Except as described above, no interest
on converted New Debentures will be payable by the Company on any Interest
Payment Date subsequent to the date of conversion. No other payment or
adjustment for interest or dividends is to be made upon conversion.
SUBORDINATION
The indebtedness represented by the New Debentures and the payment of
the principal of, interest on, and other obligations in respect of, the New
Debentures will, to the extent set forth in the New Indenture, be subordinated
in right of payment to the prior payment in full in cash of all Senior
Indebtedness. Senior Indebtedness does not include the Old Debentures, to
which the New Debentures will rank senior in right of payment. Upon any
liquidation, dissolution, winding up, assignment for the benefit of creditors,
marshalling of assets or any bankruptcy, insolvency or similar proceedings of
the Company, the holders of all Senior Indebtedness will be entitled to receive
payment in full in cash of all amounts due or to become due thereon before the
Holders of the New Debentures will be entitled to receive any payment in
respect of the principal of, interest on, or other cash obligations in respect
of, the New Debentures. In the event of the acceleration of the maturity of
any New Debentures, the holders of all Senior Indebtedness will be entitled to
receive payment in full in cash of all amounts due or to become due thereon
before the Holders of the New Debentures will be entitled to receive any
payment for the principal of, interest on, or other cash obligations in respect
of, the New Debentures. No payments on account for the principal of, interest
on, or other obligations in respect of, the New Debentures may be made if there
has occurred and is continuing a default in any payment with respect
38
<PAGE> 42
to Senior Indebtedness or an event of default with respect to any Senior
Indebtedness permitting the holders thereof to accelerate the maturity thereof,
or if any judicial proceeding shall be pending with respect to any such
default. In the event that notwithstanding any of the foregoing prohibitions,
the New Trustee or the Holders of the New Debentures receive any payment or
distribution on account of or in respect of the New Debentures, such payment or
distribution will be paid over and delivered to the holders of Senior
Indebtedness or, in the case of a bankruptcy, insolvency or similar proceeding
of the Company, to the trustee, receiver or other person making payment or
distribution of the assets of the Company. For purposes of the subordination
provisions, the payment, issuance or delivery of cash, property or securities
(other than stock, and certain subordinated securities of the Company) upon
conversion of a New Debenture will be deemed to constitute payment on account
of the principal of such New Debenture.
"Senior Indebtedness" with respect to the Company, is defined to mean
the principal of and premium, if any, and interest due on, and other
obligations in respect of, indebtedness of the Company, whether outstanding on
the date of the New Indenture or thereafter created, incurred or assumed which
is (a) indebtedness for money borrowed, except the Old Debentures and the 10%
Debentures (to which the 8% Debentures will state they are pari passu in right
of payment), and except any other indebtedness that by the terms of the
instrument or instruments by which such indebtedness was created or incurred
expressly provides that it (i) is junior in right of payment to the New
Debentures or (ii) ranks pari passu in right of payment with the New
Debentures, or (b) any amendment, renewal, extension, modification and
refunding of any such indebtedness. For the purposes of this definition,
"indebtedness for money borrowed" means (i) any obligation of the Company for
the repayment of borrowed money, whether or not evidenced by bonds, debentures,
notes or other written instruments, (ii) any deferred payment obligation of the
Company, evidenced by bonds, debentures, notes or other written instruments,
including obligations assumed or incurred in connection with the acquisition of
property, assets or businesses (provided, however, that the deferred purchase
price of any property, assets or business shall not be considered indebtedness
if the purchase price thereof is payable in full in accordance with customary
trade terms), (iii) any obligation of the Company as lessee under leases
required to be capitalized on the balance sheet of the Company under generally
accepted accounting principles and leases of property or assets made as part of
any sale and leaseback transaction to which the Company is a party, (iv) any
obligation of the Company for the payment of amounts due under an interest rate
or other swap, cap or collar agreement or other similar instrument or agreement
or foreign currency hedge, exchange or similar instrument or agreement, and (v)
any guarantees by the Company of another person's indebtedness of the kind
described in clauses (i), (ii), (iii) or (iv) above.
As of March 31, 1995, the aggregate amount of Senior Indebtedness was
approximately $46.2 million. In addition, as a result of the Company's holding
company structure, the New Debentures will effectively rank junior to all
indebtedness and other liabilities of the Company's subsidiaries, which were
(excluding deferred income taxes) approximately $1.3 billion as of March 31,
1995.
The New Indenture does not limit or prohibit the incurrence of
additional Senior Indebtedness. The Company expects from time to time to incur
additional Senior Indebtedness.
OPTIONAL REDEMPTION
The New Debentures are redeemable at any time, at the Company's option,
in whole or in part, upon not less than 30 nor more than 60 days' notice mailed
to each Holder of New Debentures to be redeemed at the Holder's address
appearing in the Security Register at any time at 100% of principal amount plus
accrued interest to the date of redemption (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
39
<PAGE> 43
No sinking fund is provided for the New Debentures.
REDEMPTION OR FORCED SALE FOR REGULATORY REASONS
If the New Jersey Commission, Nevada Commission or any other gaming
authority in another jurisdiction finds that a holder or beneficial owner of
New Debentures must be found licensed or qualified or suitable to hold or own
the New Debentures under the New Jersey Act, Nevada Act or any other gaming
regulation in such other jurisdiction, and if such holder or such beneficial
owner is not found qualified, licensed or suitable within any time period
specified by the New Jersey Commission, Nevada Commission or such other gaming
authority or the New Jersey Act, Nevada Act or such other gaming regulation,
the Company will 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 New Debentures within 120 days after receipt of notice by such holder
or beneficial owner of its disqualification under the New Jersey Act, Nevada
Act or any other applicable gaming regulation (or such different period as may
be prescribed by the New Jersey Commission, Nevada Commission or such other
gaming authority), or (ii) to call for redemption of the New Debentures held by
either 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 New Jersey
Commission, Nevada Commission or any such other gaming authority).
On any such redemption of New Debentures, 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
Company) and (ii) the price at which such holder or beneficial owner acquired
the New Debentures, together with (if permitted by the New Jersey Act or any
other gaming regulation in another jurisdiction or by the orders of the New
Jersey Commission or any such other gaming authority in such other
jurisdiction) accrued interest, if any, to the Redemption Date, unless a
different redemption price or other payment, remuneration or related terms or
restrictions is required by the New Jersey Commission or any such other gaming
authority, in which event such price, terms and restrictions shall be the
Redemption Price and terms of redemption. If redemption is required by the
Nevada Commission pursuant to the Nevada Act, accrued interest will only be to
the date of the finding of unsuitability.
MERGER AND CONSOLIDATION
The Company may not (a) consolidate with or merge into any other Person
or sell, transfer or lease its properties and assets substantially as an
entirety to any Person, or (b) permit any Person to consolidate with or merge
into the Company or sell, transfer or lease its properties and assets
substantially as an entirety to the Company, unless after giving effect to such
transaction, no Event of Default or event which, after notice or lapse of time
or both, would become an Event of Default shall have happened and be continuing
under the New Indenture and the Person formed by such consolidation or into
which the Company is merged, or which acquires or leases the properties and
assets of the Company substantially as an entirety assumes all of the
obligations of the Company under the New Debentures and the New Indenture and
provides for conversion rights as provided in the New Indenture.
EVENTS OF DEFAULT
The following are Events of Default under the New Indenture: (a)
failure to pay principal of any New Debenture when due; (b) failure to pay any
interest on any New Debenture when due, which failure continues for 30 days;
(c) failure to perform any other covenant of the Company in the New Indenture
that continues for 90 days after written notice as provided in the New
Indenture; and (d) certain events of bankruptcy, insolvency, receivership or
reorganization of the Company.
Subject to the provisions of the New Indenture relating to the duties
of the New Trustee in case an Event of Default shall occur and be continuing,
the New Trustee will be under no obligation to exercise any of its rights or
powers under the New Indenture at the request or direction of any of the
40
<PAGE> 44
Holders, unless such Holders shall have offered to the New Trustee reasonable
indemnity. Subject to such provisions for the indemnification of the New
Trustee, the Holders of a majority in aggregate principal amount of Outstanding
New Debentures will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the New Trustee or
exercising any trust or power conferred on the New Trustee.
If an Event of Default (other than in respect of certain events of
bankruptcy, insolvency or reorganization of the Company) shall occur and be
continuing, either the New Trustee or the Holders of at least 25% in aggregate
principal amount of Outstanding New Debentures may, by written declaration to
the Company, accelerate the maturity of all New Debentures. If an Event of
Default occurs in respect of certain events of bankruptcy, insolvency or
reorganization of the Company, then the entire principal amount of the New
Debentures shall become immediately due and payable without declaration or
other notice to the Company or the New Trustee. After any such acceleration,
but before a judgment or decree based on acceleration, the Holders of a
majority in aggregate principal amount of Outstanding New Debentures may, under
certain circumstances, rescind and annul such acceleration if (x) all Events of
Default, other than the non-payment of accelerated principal, have been cured
or waived as provided in the New Indenture or are otherwise no longer
continuing and (y) the Company has paid all amounts that have otherwise become
due under the New Debentures. For information as to waiver of defaults, see
"Description of the New Debentures -- Modifications, Amendments and Waivers."
No Holder of any New Debenture will have any right to institute any
proceeding with respect to the New Indenture or for any remedy thereunder,
unless such Holder shall have previously given to the New Trustee written
notice of a continuing Event of Default, the Holders of at least 25% in
aggregate principal amount of Outstanding New Debentures shall have made
written request to the New Trustee to institute such proceeding, such Holder
has offered to the New Trustee reasonable indemnity, the New Trustee for 60
days after receipt of such notice has failed to institute such proceeding, and
no direction inconsistent with such request shall have been given to the New
Trustee during such 60-day period by the Holders of a majority in aggregate
principal amount of Outstanding New Debentures. However, such limitations do
not apply to a suit instituted by a Holder of a New Debenture for enforcement
of payment of the principal of, or interest on such New Debenture on or after
the respective due dates expressed in such New Debenture or of the right to
convert such New Debenture in accordance with the New Indenture.
The Company will be required to furnish to the New Trustee within 120
days after the end of each fiscal year of the Company a statement of certain
officers of the Company as to their knowledge of the performance by the Company
of certain of its obligations under the New Indenture and any default in such
performance.
MODIFICATIONS, AMENDMENTS AND WAIVERS
Modifications and amendments of the New Indenture may be made by the
Company and the New Trustee with the consent of the Holders of a majority in
aggregate principal amount of Outstanding New Debentures; provided, however,
that no such modification or amendment may, without the consent of the Holder
of each outstanding New Debenture, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any New Debenture, (b) reduce
the principal amount of or interest on any New Debenture, (c) adversely affect
the right to convert the New Debentures, (d) amend the provisions of the New
Indenture with respect to subordination of the New Debentures in a manner
adverse to the Holders, (e) change the place or currency of payment of
principal of, or interest on, any New Debenture, (f) impair the right to
institute suit for the enforcement of any such payment on or with respect to
any New Debenture, or (g) reduce the percentage of outstanding New Debentures
necessary to modify or amend the New Indenture or for waiver of compliance with
certain provisions of the New Indenture or for waiver of certain defaults.
41
<PAGE> 45
The Holders of a majority in aggregate principal amount of Outstanding
New Debentures may waive any past default under the New Indenture, except a
default in the payment of principal or interest or in respect of a provision
which under the New Indenture cannot be modified or amended without consent of
the Holder of each outstanding New Debenture.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the New Indenture while
New Debentures remain outstanding if (a) all outstanding New Debentures will
become due and payable at their scheduled maturity within one year, (b) all
outstanding New Debentures are scheduled for redemption within one year or (c)
all outstanding New Debentures are delivered to the New Trustee for conversion
in accordance with the New Indenture and in the case of (a) or (b) above, the
Company has deposited with the New Trustee an amount sufficient to pay and
discharge the entire indebtedness on all outstanding New Debentures on the date
of their scheduled maturity or the scheduled date of redemption.
GOVERNING LAW
The New Indenture and the New Debentures will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE NEW TRUSTEE
First Bank National Association (the "New Trustee") will serve as
trustee under the New Indenture. The New Indenture contains certain
limitations on the rights of the New Trustee, should it become a creditor of
the Company, to obtain payment of claims in certain cases or to realize certain
property received in respect of any such claim as security or otherwise. The
New Trustee will generally be permitted to engage in other transactions with
the Company. The New Indenture also provides that the Company will indemnify
the New Trustee against loss, liability or expense incurred without gross
negligence or bad faith on the part of the New Trustee arising out of or in
connection with the trust under the New Indenture.
An affiliate of the New Trustee currently is a secured lender to one of
the Company's subsidiaries.
DESCRIPTION OF THE OLD DEBENTURES
The Old Debentures were issued under an indenture dated as of September
15, 1978 (the "Old Indenture"), between the Company and the American National
Bank and Trust Company of Chicago, as trustee. United States Trust Company of
New York subsequently was appointed successor trustee under the Old Indenture
(the "Old Trustee"). Interest at six percent (6%) per annum is payable
semi-annually on March 15 and September 15 to the persons in whose names the
Old Debentures are registered on the Old Debenture Register at the close of
business on the interest record date next preceding such March 15 and September
15 and may be paid by checks mailed to such persons.
The Old Debentures mature on September 15, 1998, are unsecured
obligations of the Company and were originally limited to $50,000,000 aggregate
principal amount. The Old Debentures were issued in full registered form, in
denominations of $1,000 and integral multiples of $1,000. At June 7, 1995,
$15,390,000 in aggregate principal amount of the Old Debentures were
outstanding.
Principal and any premium on the Old Debentures are payable at the
corporate trust office of the Old Trustee in New York, New York. Old
Debentures may be presented for registration of transfer, exchange or
conversion at such office of the Old Trustee, and for conversion at the
corporate trust office
42
<PAGE> 46
of Chemical Bank, in the Borough of Manhattan, New York, New York, without any
service charge and subject to the limitations provided in the Old Indenture.
A copy of the Old Indenture in the form in which it has been executed
is filed as an exhibit to the Company's Form 10-K. The statements under this
caption relating to the Old Debentures and the Old Indenture are summaries and
are subject to the detailed provisions of the Old Indenture, to which reference
is hereby made for a complete statement of such provisions. Whenever
particular provisions of the Old Indenture or terms defined therein are
referred to herein, such provisions or definitions are incorporated by
reference as a part of the statements made, and the statements are qualified in
their entirety by such reference.
CONVERSION RIGHTS
The Old Debentures are convertible at their principal amount or any
portion thereof which is an integral multiple of $1,000 into Common Stock at
any time on or prior to September 15, 1998, at the conversion price per share
set forth on the cover page of this Offering Circular, subject to earlier
redemption and to adjustment of the conversion price. The conversion price is
subject to adjustment in certain cases, including the issuance of stock of the
Company as a stock dividend; the combination, subdivision or reclassification
of the Common Stock; the issuance to all holders of Common Stock of rights or
warrants to subscribe for or purchase Common Stock at less than the current
market price (as defined) of the Common Stock; or the distribution to all
holders of Common Stock of evidences of indebtedness or assets (excluding cash
dividends or other cash distributions to the extent permitted by the Old
Indenture provision summarized herein under "Dividend Restrictions") or rights
or warrants to subscribe (other than those mentioned above). No adjustment of
the conversion price is required unless it would amount to at least $.25 per
share; however, any such adjustment not made as a result of such restriction is
carried forward and taken into account in any subsequent adjustment.
In the event of a capital reorganization, or reclassification of the
Common Stock, of the Company, or a consolidation or merger of the Company with
or into, or a disposition of its properties and assets substantially as an
entirety to, any other corporation, the Old Debentures then outstanding are
thereafter convertible into the kind and amount of shares of stock or other
securities or property (including cash) to which the holders thereof would have
been entitled if they had converted such Old Debentures into Common Stock
immediately prior to such reorganization, reclassification, consolidation,
merger or disposition.
No fractional shares of Common Stock or securities representing
fractional shares are issued upon conversion; any fractional interest resulting
from conversion shall be paid in cash based on the market price of the Common
Stock on the last business day prior to the date of conversion. On conversion
prior to an interest record date, no payment of accrued interest is made. Any
Old Debentures surrendered for conversion during any period beginning
subsequent to an interest record date and ending at the opening of business on
the interest payment date next following such interest record date (excluding
Old Debentures or portions thereof called for redemption on a redemption date
during such period) must be accompanied by payment in funds reasonably
acceptable to the Company of an amount equal to the interest payable on such
interest payment date on the principal amount of Old Debentures then being
converted. The right to convert Old Debentures called for redemption
terminates at the close of business on the date fixed for redemption.
SUBORDINATION OF OLD DEBENTURES
The payment of the principal, sinking fund requirements and interest
(and premium, if any) on the Old Debentures is subordinated in right of
payment, as set forth in the Old Indenture, to the prior payment in full of all
Superior Indebtedness of the Company, whether outstanding on the date of the
Old
43
<PAGE> 47
Indenture or thereafter incurred. There are no restrictions in the Old
Indenture upon creation of Superior Indebtedness or any other indebtedness;
accordingly, the New Debentures rank senior in right of payment to the Old
Debentures. Such Superior Indebtedness to which the Old Debentures are
subordinate was approximately $46.2 million on March 31, 1995. If the Exchange
Offer is consummated, the amount of Superior Indebtedness will increase by the
aggregate principal amount of Old Debentures accepted for exchange. In
addition, as a result of the Company's holding company structure, the Old
Debentures effectively rank junior to all indebtedness and other liabilities of
the Company's subsidiaries. As of March 31, 1995, the outstanding indebtedness
and other liabilities (excluding deferred income taxes) of the Company's
subsidiaries were approximately $1.3 billion.
No payment on account of principal, sinking fund requirements or
interest (and premium, if any) on the Old Debentures may be made if at the time
of such payment there exists a default with respect to any Superior
Indebtedness. Upon any distribution of the assets of the Company as a result
of any dissolution, total or partial liquidation, or reorganization of the
Company, the holders of the Superior Indebtedness are entitled to receive
payment in full before the holders of Old Debentures are entitled to receive
any payment.
Superior Indebtedness is defined in the Old Indenture as the principal
of, and premium, if any, and accrued and unpaid interest on, (a) indebtedness
of the Company for money borrowed, (b) guarantees by the Company of
indebtedness for money borrowed by or performance obligations due from any
other person, (c) purchase money indebtedness evidenced by notes,
lease-purchase agreements or similar instruments for the payment of which the
Company is responsible or liable, (d) amounts payable by the Company under any
agreement to lease, or lease of, any real or personal property which is
required to be capitalized in accordance with generally accepted accounting
principles or which is expressly designated as Superior Indebtedness, (e)
performance, completion or similar bonds and (f) modifications, renewals,
extensions and refundings of any such indebtedness or obligations; unless in
the instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such indebtedness or obligations are not
superior in right of payment to the Old Debentures.
SINKING FUND
The Old Indenture requires the Company to redeem through a mandatory
sinking fund commencing on September 15, 1988, and on each succeeding September
15 to and including September 15, 1997, Old Debentures in an aggregate amount
equal to 7.5% of the total principal amount of Old Debentures outstanding on
July 15, 1988, at a redemption price equal to the principal amount thereof plus
accrued interest thereon to the redemption date. At its option the Company may
also pay as an optional sinking fund for the redemption of Old Debentures,
commencing on September 15, 1988, and on each succeeding September 15 to and
including September 15, 1997, an additional amount not to exceed the amount of
the mandatory sinking fund payment required to be made on such date. Such
option to make an additional redemption is not cumulative, and any such
additional redemption may not be used to reduce the amount of any mandatory
sinking fund payment. Old Debentures acquired and delivered, converted or
redeemed by the Company after July 15, 1988, otherwise than through the
mandatory or optional sinking fund may be used, at the principal amount
thereof, to reduce the amount of any mandatory sinking fund payment. The right
to convert Old Debentures called for redemption through the mandatory or
optional sinking funds terminates at the close of business on the date fixed
for redemption.
Old Debentures accepted for exchange pursuant to the Exchange Offer
will be utilized to fulfill sinking fund obligations under the Old Indenture,
which will extend the average life of the unexchanged Old Debentures until the
final maturity date of September 15, 1998. Accordingly, if the Exchange Offer
is consummated, the Company would not be obligated to make any sinking fund
payments on the Old Debentures prior to their final maturity in 1998.
44
<PAGE> 48
REDEMPTION
The Old Debentures are redeemable, at the Company's option, as a whole
or in part, on at least 30 but not more than 60 days' notice, given by first
class mail to each holder at his address as it appears on the Old Debenture
Register, on any date prior to maturity at 100% of principal amount plus
accrued interest to the redemption date. The right to convert an Old Debenture
called for redemption is lost unless it is exercised before the redemption is
effective.
DIVIDEND RESTRICTIONS
The Old Indenture prohibits the payment of dividends and other
distributions on the stock of the Company (other than dividends payable in
stock of the Company) and the purchase, redemption or other retirement of any
shares of such stock (except fractional shares) by the Company or any
subsidiary of the Company unless after giving effect thereto the aggregate
amount expended for such purposes during the period commencing January 1, 1978,
does not exceed the sum of (i) the aggregate amount of Consolidated Net Income
(as defined) accrued subsequent to January 1, 1978, (ii) the aggregate net cash
proceeds received by the Company from sales subsequent to the day after the
sale of the Old Debentures to the Underwriters of shares of its stock for cash
and (iii) the aggregate net cash proceeds received by the Company from sales
subsequent to the day after the sale of the Old Debentures to the Underwriters
of indebtedness of the Company convertible into stock of the Company to the
extent such indebtedness has been converted into such stock.
THIS COVENANT WILL BE DELETED IF THE AMENDMENT IS ADOPTED.
MODIFICATION OF OLD INDENTURE AND WAIVER OF CERTAIN COVENANTS
With the consent of the holders of at least 66 2/3% in aggregate
principal amount of the outstanding Old Debentures, the Old Trustee and the
Company may execute a supplemental indenture to add provisions to, or change in
any manner or eliminate any provision of, the Old Indenture or modify in any
manner the rights of the Old Debentureholders, provided that, without the
consent of the holder of each outstanding Old Debenture so affected, no such
supplemental indenture may, among other things, (a) change the date of payment
of principal or interest on any Old Debenture or reduce the principal amount
thereof or the interest thereon or any premium payable upon the redemption
thereof, (b) reduce the aforesaid percentage of Old Debentureholders whose
consent shall be required for the authorization of any such supplemental
indenture or (c) adversely affect the right to covert the Old Debentures.
Compliance by the Company with certain covenants, including those
described under "Dividend Restrictions" above, contained in the Old Indenture
may be waived by the holders of at least a majority in aggregate principal
amount of the Old Debentures at the time outstanding.
DEFAULTS AND CERTAIN RIGHTS ON DEFAULT
An Event of Default is defined in the Old Indenture as follows: default
for 30 days in payment of any interest on the Old Debentures; default in
payment of principal and premium, if any, on the Old Debentures; default for 30
days in payment of any sinking fund installment in respect of the Old
Debentures; default for 60 days after notice in performance of any other
covenant in the Old Indenture; or certain events of bankruptcy, insolvency,
receivership or reorganization. The Company is required to file with the Old
Trustee annually a written statement as to the fulfillment of its obligations
under the Old Indenture. In case an Event of Default should occur and be
continuing, the Old Trustee or the holders of at least 25% in principal amount
of the Old Debentures then outstanding may declare the principal of all the Old
Debentures to be due and payable. Such declaration may under certain
circumstances be rescinded by the holders of a majority in principal amount of
the Old Debentures at the time outstanding.
45
<PAGE> 49
Subject to the provisions of the Old Indenture relating to the duties
of the Old Trustee in case an Event of Default shall occur and be continuing,
the Old Trustee is under no obligation to exercise any of the rights or powers
under the Old Indenture at the request or direction of any of the Old
Debentureholders, unless such Old Debentureholders shall have offered to the
Old Trustee reasonable security or indemnity. Subject to such provisions for
indemnification and certain limitations contained in the Old Indenture, the
holders of a majority in principal amount of the Old Debentures at the time
outstanding have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Old Trustee or exercising any
trust or power conferred on the Old Trustee. Such holders may, in certain
cases, waive any default except a default in payment of principal of, or
premium, if any, or interest on, the Old Debentures.
DESCRIPTION OF THE COMMON STOCK
Both the Old Debentures and the New Debentures are convertible into
shares of the Common Stock of the Company. At May 31, 1995, 80,000,000 shares
of Common Stock were authorized, approximately 47,000,000 shares of Common
Stock were issued and outstanding and, as described in the Company's Form 10-K,
certain shares of Common Stock were reserved for future issuance. All issued
and outstanding shares of Common Stock are fully paid and nonassessable.
DIVIDENDS AND VOTING RIGHTS
Subject to the dividend preferences of any outstanding shares of
preferred stock of the Company, all shares of Common Stock are entitled to
participate in such dividends as may be declared by the Board of Directors of
the Company out of assets available for the payment thereof. The holders of
the Common Stock are entitled to one vote for each share held on all matters
submitted to stockholders.
PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Restated Certificate of Incorporation, as amended (the
"Restated Certificate"), provides for a classified Board of Directors,
consisting of three classes as nearly equal in size as practicable. Each class
holds office until the third annual stockholders' meeting electing directors
following the most recent election of such class. A director may only be
removed with the consent or vote of the holders of eighty percent (80%) of all
classes of stock entitled to vote at an election of directors.
Under the Restated Certificate, the vote of holders of 80% of the
voting stock of the Company is required for approval of, with certain
exceptions, a merger or consolidation of the Company with or into another
corporation, a sale or lease of all or substantially all of the assets of the
Company to another corporation, person or entity and, under certain conditions,
a sale or lease to the Company or any subsidiary of the Company of assets in
exchange for voting securities of the Company, in each case where the other
party to the transaction is a beneficial owner, directly or indirectly, of 5%
or more of the outstanding shares of any class or series of voting stock of the
Company. Any amendments to the Restated Certificate which would amend the
foregoing requirements require the same affirmative vote.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is a Delaware corporation subject to Section 203 of the
Delaware General Corporation Law (the "DGCL"). Generally, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless (i) prior to such date, either the business combination or
such transaction which resulted in the stockholder becoming an interested
stockholder is approved by the board of directors of the corporation, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested
46
<PAGE> 50
stockholder owns at least 85% of the outstanding voting stock, or (iii) on or
after such date, the business combination is approved by the board of directors
of the corporation and by the affirmative vote at least 66 2/3% of the
outstanding voting stock that is not owned by the interested stockholder. A
"business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns
(or, within three years, did own) 15% or more of the corporation's outstanding
voting stock.
LIMITATION ON CHANGES IN CONTROL
Certain of the above provisions of the Restated Certificate, the
provisions of Section 203 of the DGCL and the Company's Series B Preferred
Stock (the terms of which are described in the Company's Form 10-K) could have
the effect of delaying, deferring or preventing a change in control of the
Company or the removal of existing management or deterring potential acquirors
from making an offer to stockholders of the Company. This could be the case
notwithstanding that a majority of the stockholders might benefit from such a
change in control or offer. In addition, the issuance of shares of preferred
stock, or the issuance of rights to purchase such shares, could be used to
discourage an unsolicited acquisition proposal.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations applicable to holders whose Old Debentures are tendered and
accepted in the Exchange Offer. This summary does not discuss all aspects of
federal income taxation that may be relevant to particular holders of Old
Debentures, especially in light of a holder's personal investment
circumstances, or to certain types of holders of Old Debentures subject to
special treatment under the federal income tax laws (for example, life
insurance companies, tax-exempt organizations and foreign corporations and
individuals who are not citizens or residents of the United States) and does
not discuss any aspects of state, local or foreign taxation. The discussion is
limited to those exchanging holders who have held the Old Debentures as
"capital assets" and who will hold the New Debentures as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code").
This summary is based upon laws, regulations, rulings and decisions now
in effect and upon proposed regulations, all of which are subject to change
(possibly with retroactive effect) by legislation, administrative action or
judicial decision. Moreover, substantial uncertainties, resulting from the
lack of definitive judicial or administrative authority and interpretation,
apply to various tax aspects of an exchange pursuant to the Exchange Offer.
FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH OLD DEBENTURES
Tendering Holders of Old Debentures. The federal income tax
consequences of the exchange of Old Debentures for New Debentures pursuant to
the Exchange Offer (the "Exchange") depend on whether the Exchange is a
"recapitalization" and on whether the Old Debentures and New Debentures are
"securities" for federal income tax purposes. An exchange of securities for
securities, of like principal amount, in a recapitalization is not taxable.
The Company believes that the Exchange is a "recapitalization," and
that the Old Debentures and New Debentures are "securities" for federal income
tax purposes, and the Company has received an opinion from Katten Muchin &
Zavis, its tax counsel, that for federal income tax purposes it is more likely
than not the Exchange will be a "recapitalization" and the New Debentures will
be "securities." Thus, a holder who participates in the Exchange Offer should
not recognize gain or loss. Because such
47
<PAGE> 51
determinations are, in substantial part, fact specific, there can be no
assurance that the Internal Revenue Service will respect such
characterizations. If the Internal Revenue Service successfully establishes
that the Exchange is not a "recapitalization" or that the Old Debentures and
New Debentures are not "securities," then the Exchange would be a taxable
transaction and the holders of the Old Debentures would recognize gain equal to
the difference between the fair market value of the New Debentures and the
adjusted tax basis of the Old Debentures. Assuming the transaction is
non-taxable, a holder's initial tax basis in New Debentures would be equal to
the holder's adjusted tax basis in the Old Debentures exchanged therefor, and
the holding period of each New Debenture would include the holding period of
the Old Debenture exchanged therefor.
Market Discount on Old Debentures. In general, upon the disposition of
a "market discount" bond, any gain recognized by a holder is treated as
ordinary income to the extent of accrued market discount thereon. Market
discount is defined generally as the excess of (i) the stated redemption price
at maturity ("SRPM") of a debt obligation less any unamortized original issue
discount ("OID") over (ii) the tax basis of the debt obligation in the hands of
the holder immediately after its acquisition. The market discount rules apply
only to Old Debentures acquired after April 30, 1993.
Old Debentures held by the original holders do not bear market discount
or OID. In addition, under a de minimis exception, there would be no market
discount if the excess of the SRPM of the obligation over the holder's tax
basis is less than 0.25% of the SRPM multiplied by the number of complete years
to the maturity of the obligation.
Based on legislative history, regulations of the United States
Department of the Treasury ("Treasury Regulations") are expected to be issued
that would provide that exchanges of market discount bonds that do not result
in full recognition of gain to the holder (such as due to "recapitalization"
treatment) would not cause recognition of accrued market discount. If such
regulations are promulgated and are applicable to the Exchange, any accrued
market discount on Old Debentures would not be treated as ordinary income at
the time of the Exchange, but would carry over to the New Debentures issued in
exchange therefor.
FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH NEW DEBENTURES
Interest and Original Issue Discount. A holder of New Debentures will
be required to include in gross income for federal income tax purposes the
stated interest on such debentures in accordance with the holder's method of
tax accounting. In addition, if New Debentures are issued with OID, a holder
of New Debentures will be required to include in gross income the amount of OID
accrued thereon, determined using the New Debentures' yield to maturity (a
holder may elect another permissible method to include amounts in gross
income). New Debentures will be treated as issued with OID if (i) their stated
principal amount exceeds (ii) their "issue price" (subject to the de minimis
exception). The "issue price" will equal the fair market value of New
Debentures on the date the New Debentures are issued. Under the de minimis
exception, there will be no OID if the OID with respect to the New Debentures
is less than 0.25% of the SRPM multiplied by the number of full years from the
issue date to the maturity date. Thus, if the issue price of the New
Debentures is greater than $987.50, there will be no OID. A holder of New
Debentures must include the accrued OID thereon in gross income in advance of
the receipt of cash in respect of such income.
The Company believes that the optional redemption provisions and
convertibility features applicable to New Debentures will not affect the
calculation of OID on such debentures. However, there can be no assurance that
the Internal Revenue Service will not take a contrary position, in which case a
holder may be required to include OID in income or include greater amounts of
OID in income than anticipated.
48
<PAGE> 52
Acquisition Premium. The amount of OID, if any, required to be
included in gross income by a holder of the New Debentures is reduced if such
holder's adjusted tax basis in such New Debentures immediately after the
acquisition exceeds their "adjusted issue price" (i.e., generally the issue
price of such New Debentures). If a holder's adjusted tax basis in such New
Debentures immediately after the acquisition of such debentures exceeds their
stated principal amount, then such holder would not be required to include any
OID in income (any excess premium over their stated principal amount would be
governed by the "bond premium" provisions of the Code, as discussed below).
Tax Basis. Generally, a holder's tax basis in New Debentures will be
increased in the future by the amount of OID, if any, that is included in the
holder's income through the day preceding the date of disposition and will be
decreased by the amount of any principal payments received.
Sale or Redemption. The sale, exchange, redemption or other
disposition of a New Debenture generally will be a taxable event for federal
income tax purposes. A holder generally will recognize gain or loss equal to
the difference between (i) the amount of cash plus the fair market value of any
property received upon such sale, exchange, redemption or other taxable
disposition of a New Debenture (other than in respect of accrued interest
thereon) and (ii) the holder's adjusted tax basis in such debt instrument.
Subject to the rules relating to market discount discussed below, such gain or
loss will be capital gain or loss and would be long-term capital gain or loss
if New Debentures were held by the holder for the applicable holding period
(currently more than one year) at the time of such sale or other disposition.
The holding period of each New Debenture would include the holding period of
the Old Debenture exchanged therefor.
If the Company intended at the time of the original issuance of New
Debentures to call such debentures prior to maturity, any gain on the sale,
exchange, or redemption or other taxable disposition of New Debentures would be
considered ordinary income to the extent that the entire amount of OID with
respect to New Debentures exceeded the amount of OID previously includable in
the income of any holder. The Company does not have a present intention to
call New Debentures before their maturity.
Market Discount. Generally, gain recognized on the disposition of New
Debentures will be treated as ordinary income, and not capital gain, to the
extent of any accrued market discount, if any, carried over from Old
Debentures. The amount of market discount on New Debentures will be determined
in the same manner as described above under "Market Discount on Old
Debentures."
A holder of New Debentures having accrued market discount may elect to
include the market discount in income as it accrues. This election would apply
to all market discount obligations acquired by the electing holder on or after
the first day of the first taxable year to which the election applies and could
be revoked only with the consent of the Internal Revenue Service. If a holder
of New Debentures elects to include market discount in income, the
above-discussed rules with respect to ordinary income recognition resulting
from sale and certain other disposition transactions and to deferral of
interest deductions would not apply. A holder of New Debentures having accrued
market discount may be required to defer the deduction of all or a portion of
any interest expense on any indebtedness previously incurred or maintained to
purchase the Old Debentures or to carry such debentures.
Bond Premium. If the initial tax basis of a holder in New Debentures
(as discussed above, this amount is generally a carry-over basis from the Old
Debentures) exceeds the "amount payable on maturity" (such excess being the
"Bond Premium"), the holder may elect to amortize the Bond Premium over the
period from such debenture's acquisition date to its maturity date and, except
as Treasury Regulations may otherwise provide, reduce the amount of interest
included in income in respect of such New Debentures by such amount.
49
<PAGE> 53
A holder who elects to amortize Bond Premium must reduce his adjusted
basis in such New Debentures by the amount of such allowable amortization. An
election to amortize Bond Premium would apply to amortizable Bond Premium on
all taxable bonds held at or acquired after the beginning of the holder's
taxable year as to which the election is made, and may be revoked subsequently
only with the consent of the Service.
Conversion Feature. The New Debentures are subject to adjustments in
their conversion price in certain events. See "Description of the New
Debentures -- Conversion Rights." Under Section 305 of the Code, changes in
the conversion price of a security can in certain circumstances result in
deemed taxable dividends to the securities holders. However, under Treasury
Regulations, a change in the conversion price of convertible securities
pursuant to a bona fide reasonable adjustment formula (other than merely to
compensate for payment of cash or property dividends to shareholders) which has
the effect of preventing dilution of the interest of such security holders will
not be considered to result in a deemed distribution with respect to such
securities. The Company is of the opinion that, except in the unlikely case
that a dividend exceeding 12.5% of the Company's market capitalization is paid
or that the Distribution is deemed a taxable transaction, the adjustments to
the conversion price are solely for such reasonable anti-dilutive protection to
the securities holders, and therefore should not result in any taxable income
if such change occurs.
Backup Withholding. Unless the exchanging holder or other payee
provides his correct taxpayer identification number (employer identification
number or social security number) to the Company (as payor) and certifies that
such number is correct, generally under the federal income tax backup
withholding rules, 31% of the issue price of the New Debentures must be
withheld and remitted to the United States Department of the Treasury.
Therefore, each exchanging holder should complete and sign the Substitute Form
W-9 included so as to provide the information and certification necessary to
avoid backup withholding. However, certain exchanging holders (including,
among others, certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt foreign recipient, that exchanging holder must submit a
statement, signed under penalties of perjury, attesting to that individual's
exempt foreign status. Such statements can be obtained from United States
Trust Company of New York. For further information concerning backup
withholding and instructions for completing the Substitute Form W-9 (including
how to obtain a taxpayer identification number if you do not have one and how
to complete the Substitute Form W-9 if the Old Debentures are held in more than
one name), contact United States Trust Company of New York.
Withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the Internal Revenue Service.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER ARE COMPLEX.
THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY. EACH
HOLDER OF OLD DEBENTURES SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE EXCHANGE OFFER, INCLUDING THE
APPLICATION OF AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
50
<PAGE> 54
Holders of Old Debentures who wish to accept the Exchange Offer should
either (a) request their broker, dealer, commercial bank, trust company or
nominee to effect the transaction for them or (b) complete and sign the Letter
of Transmittal or a facsimile thereof, having their signatures thereon
guaranteed if required by instructions in the Letter of Transmittal, and
forward the Letter of Transmittal, together with such Old Debentures and all
other required documents, to the Exchange Agent.
THE EXCHANGE AGENT:
United States Trust Company of New York
<TABLE>
<CAPTION>
By Registered or
Certified Mail: By Facsimile: By Hand:
<S> <C> <C>
United States Trust Company (212) 420-6152 United States Trust Company
of New York Attention: Customer Service of New York
P.O. Box 844 Cooper Station Confirm by Telephone: Attention: Ground Level
New York, New York 10276 (800) 548-6565 Corporate Trust Operations
20 Exchange Place
New York, New York 10005
</TABLE>
By Overnight Courier:
United States Trust Company of New York
770 Broadway, 7th Floor
Corporate Trust Operations
New York, New York 10003
THE INFORMATION AGENT:
MACKENZIE PARTNERS, INC. (LOGO)
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
(800) 322-2885 (toll free)
ADDITIONAL COPIES
Requests for additional copies of this Offering Circular and Letter of
Transmittal should be directed to the Exchange Agent or the Information Agent.
<PAGE> 1
THE EXCHANGE OFFER IS BEING MADE BY THE COMPANY IN RELIANCE ON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AFFORDED BY SECTION 3(A)(9) THEREOF. ACCORDINGLY, THE COMPANY WILL NOT PAY ANY
COMMISSION OR OTHER REMUNERATION TO ANY BROKER, DEALER, SALESMAN OR OTHER PERSON
FOR SOLICITING THE TENDERS OF OLD DEBENTURES PURSUANT TO THE EXCHANGE OFFER.
LETTER OF TRANSMITTAL AND CONSENT
BALLY (LOGO)
BALLY ENTERTAINMENT CORPORATION
OFFER TO EXCHANGE
ITS
8% CONVERTIBLE SENIOR SUBORDINATED DEBENTURES DUE DECEMBER 15, 2000
FOR ITS
6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 1998
AND RELATED CONSENT SOLICITATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JULY 6,
1995, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD DEBENTURES TENDERED IN THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE. THE
WITHDRAWAL OF TENDERED OLD DEBENTURES WILL BE DEEMED A REVOCATION OF THE CONSENT
TO THE PROPOSED MODIFICATIONS IN RESPECT OF SUCH OLD DEBENTURES.
To tender and give consent, this Letter of Transmittal and Consent should be
delivered only to:
UNITED STATES TRUST COMPANY OF NEW YORK, Exchange Agent
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand:
United States Trust Company (212) 420-6152 United States Trust Company
of New York Attention: Customer Service of New York
P.O. Box 844 Cooper Station Confirmed by Telephone: Attention: Ground Level
New York, New York, 10276 (800) 548-6565 Corporate Trust Operations
20 Exchange Place
New York, New York 10005
</TABLE>
Overnight Delivery:
United States Trust Company
of New York
770 Broadway
7th Floor
Corporate Trust Operations
New York, New York 10003
TO CONFIRM RECEIPT OF THIS LETTER
OF TRANSMITTAL AND CONSENT, PLEASE
CALL THE EXCHANGE AGENT
AT (800) 548-6565.
ANY QUESTIONS CONCERNING THE EXCHANGE OFFER OR REQUESTS FOR ADDITIONAL COPIES OF
THIS LETTER OF TRANSMITTAL AND CONSENT (THE "LETTER OF TRANSMITTAL") MAY BE
DIRECTED TO THE INFORMATION AGENT AT THE ADDRESS AND TELEPHONE NUMBERS SET FORTH
ON THE BACK PAGE OF THIS LETTER OF TRANSMITTAL. DELIVERY OF THIS LETTER OF
TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA
FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY. THE
INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL (THE "INSTRUCTIONS") SHOULD
BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2
Bally Entertainment Corporation (the "Company") is offering $1,000
principal amount of its 8% Convertible Senior Subordinated Debentures due
December 15, 2000 (the "New Debentures") in exchange for each $1,000 principal
amount of its 6% Convertible Subordinated Debentures due 1998 (the "Old
Debentures"), upon the terms and subject to the conditions set forth in an
Offering Circular and Consent Solicitation dated June 7, 1995 (the "Offering
Circular"). The offer to exchange New Debentures for Old Debentures is referred
to below as the "Exchange Offer."
Holders of Old Debentures who tender in the Exchange Offer will be
consenting to each of a waiver (the "Waiver") and an amendment (the "Amendment";
together with the Waiver, the "Proposed Modifications") concerning the indenture
pursuant to which the Old Debentures were issued (the "Old Indenture"). If
either the Waiver is granted or the Amendment is adopted, the Company will have
the ability to effect distributions to the Company's stockholders of all or any
portion of its direct or indirect interests in the operations of Bally's Health
& Tennis Corporation and its direct or indirect subsidiaries ("Bally's Health &
Tennis"); such transactions are herein referred to as the "Distribution." If the
Amendment is adopted, the Company no longer would be subject to any Old
Indenture restrictions on paying dividends on, or repurchasing or redeeming, any
shares of its capital stock.
This Letter of Transmittal is to be used only if (i) Old Debentures are to
be physically delivered herewith or (ii) delivery of Old Debentures is to be
made by book-entry transfer to the Exchange Agent's account at The Depository
Trust Company ("DTC"), The Midwest Securities Trust Company ("MSTC") or The
Philadelphia Depository Trust Company ("PDTC") (DTC, MSTC and PDTC are
hereinafter collectively referred to as the "Book-Entry Transfer Facilities")
pursuant to the procedures under the heading "The Exchange Offer -- Procedures
for Tendering and Giving Consents" in the Offering Circular. Old Debentures will
be accepted for exchange only in principal amounts of $1,000 and integral
multiples thereof. Only the holders of Old Debentures on the register for such
securities ("Holders") can effectively tender Old Debentures and thereby consent
to the Proposed Modifications.
Holders who desire to tender their Old Debentures and whose Old Debentures
are not lost but are not immediately available or who cannot deliver their Old
Debentures and all other documents required hereby to the Exchange Agent by the
Expiration Date or who are unable to complete the procedure for book-entry
transfers on a timely basis must tender their Old Debentures pursuant to the
guaranteed delivery procedure set forth in the Offering Circular under the
heading "The Exchange Offer -- Guaranteed Delivery Procedure."
Holders who wish to tender their Old Debentures, and thereby consent to the
Proposed Modifications, must, at a minimum, complete columns (1) through (3) in
the table below titled "Description of Old Debentures Tendered and In Respect of
Which Consent is Given" and complete the appropriate box below. IF ONLY THOSE
COLUMNS ARE COMPLETED, THE HOLDER WILL BE DEEMED TO HAVE CONSENTED TO THE
PROPOSED MODIFICATIONS AND WAIVED DEFAULTS (AS SET FORTH ABOVE) WITH RESPECT TO,
AND TO HAVE TENDERED, ALL OLD DEBENTURES LISTED IN THE BOX. If the Holder wishes
to tender, and thereby consent and waive with respect to, less than all of such
Old Debentures, column (4) must be completed in full. See Instruction 2.
<PAGE> 3
<TABLE>
<S><C>
- ---------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD DEBENTURES
TENDERED AND IN RESPECT OF WHICH CONSENT IS GIVEN
- ---------------------------------------------------------------------------------------------------------
(4)
PRINCIPAL AMOUNT
(3) TENDERED**
(1) PRINCIPAL (MUST BE AN
NAME(S) AND ADDRESS(ES) (2) AMOUNT INTEGRAL
OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY MULTIPLE OF
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) $1,000)
- ---------------------------------------------------------------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
TOTAL
- ---------------------------------------------------------------------------------------------------------
* Need not be completed by Book-Entry Holders (as defined below).
** Unless otherwise indicated in this column, a Holder will be deemed to have tendered and consented
with respect to the entire principal amount represented by the Old Debentures indicated in the third
column. See Instruction 2.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
/ / CHECK HERE IF CONSENT IS GIVEN AND CERTIFICATES FOR TENDERED OLD DEBENTURES
ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF CONSENT IS GIVEN AND TENDERED OLD DEBENTURES ARE BEING
DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
EXCHANGE AGENT WITH A TRANSFER FACILITY SPECIFIED BELOW AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution:
/ / DTC / / MSTC / / PDTC (check one) Account No.
Transaction Code No.
/ / CHECK HERE IF CONSENT IS GIVEN AND CERTIFICATES FOR TENDERED OLD DEBENTURES
ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY
SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING (SEE INSTRUCTION 1):
Name of Registered Owner(s):
Date of Execution of Notice of Guaranteed Delivery:
Name of Eligible Institution which guaranteed delivery:
/ / DTC / / MSTC / / PDTC (check one if applicable)
Account No. (if delivered by book-entry transfer):
<PAGE> 4
Ladies and Gentlemen:
The undersigned hereby (i) consents to the Proposed Modifications to the
indenture dated as of September 10, 1978 (the "Old Indenture") between the
Company and United States Trust Company of New York, as trustee (the "Old
Trustee"), in respect to the Old Debentures described in the Offering Circular
and (ii) tenders to the Company the Old Debentures indicated above, in exchange
for a like principal amount of New Debentures upon the terms and subject to the
conditions set forth in the Offering Circular (receipt of which is hereby
acknowledged) and in this Letter of Transmittal. The Proposed Modifications will
be effected through the execution and delivery by the Company and the Old
Trustee of a supplemental indenture (the "First Supplemental Indenture"). THE
UNDERSIGNED ACKNOWLEDGES THAT TENDERING OLD DEBENTURES IN ACCORDANCE WITH THE
EXCHANGE OFFER CONSTITUTES A CONSENT TO THE PROPOSED MODIFICATIONS WITH RESPECT
TO ALL OLD DEBENTURES SO TENDERED AND A DIRECTION TO THE OLD TRUSTEE TO ENTER
INTO THE FIRST SUPPLEMENTAL INDENTURE.
Holders will be deemed to have consented to the Proposed Modifications in
respect to any Old Debentures tendered. Holders who tender their Old Debentures
will also be deemed to have waived all existing and past defaults, if any, and
their consequences under those Old Debentures and the Old Indenture, except a
continuing default or event of default in the payment of the principal of or
interest on any Old Debentures. Subject to, and effective upon, the acceptance
for exchange of the Old Debentures tendered hereby, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Old Debentures as are being tendered
hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent the true and lawful agent and attorney-in-fact of the undersigned (with
full knowledge that said Exchange Agent also acts as the agent of the Company)
with respect to such Old Debentures with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest)
to: (a) deliver such Old Debentures or transfer ownership of such Old Debentures
on the account books maintained by any of the Book-Entry Transfer Facilities and
deliver, in any such case, all accompanying evidences of transfer and
authenticity to or upon the order of the Company upon receipt by the Exchange
Agent, as the undersigned's agent, of the New Debentures to which the
undersigned is entitled upon the acceptance by the Company of such Old
Debentures under the Exchange Offer; and (b) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Old Debentures, all in
accordance with the terms of the Exchange Offer.
Consummation of the Exchange Offer is subject to: (i) Old Debentures
representing not less than a majority in aggregate outstanding principal amount
of the Old Debentures being validly tendered and not withdrawn prior to the
Expiration Date, (ii) the Company being satisfied, in its sole discretion, that
either the Waiver or the Amendment will become effective upon acceptance of the
Old Debentures for exchange pursuant to the Exchange Offer, and (iii) certain
other customary conditions.
The undersigned hereby represents and warrants that: (a) the undersigned
(i) has full power and authority to tender, exchange, assign and transfer the
Old Debentures tendered hereby and (ii) has full power and authority to consent
to the Proposed Modifications; and (b) the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim when the same are accepted
for exchange by the Company. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
the Old Debentures tendered hereby or to perfect the undersigned's consent to
the Proposed Modifications.
The undersigned understands that tenders of Old Debentures pursuant to the
procedures described in the Offering Circular under the heading "The Exchange
Offer -- Procedures for Tendering and Giving Consents" and in the instructions
hereto will constitute a binding agreement between the undersigned and the
Company under the terms and subject to the conditions described in the Offering
Circular.
All authority conferred or agreed to be conferred in this Letter of
Transmittal and every obligation of the undersigned hereunder shall be binding
upon the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
TENDER OF OLD DEBENTURES IN ACCORDANCE WITH THIS EXCHANGE OFFER CONSTITUTES A
CONSENT TO THE PROPOSED MODIFICATIONS. TENDER OF OLD DEBENTURES MADE PURSUANT TO
THE EXCHANGE OFFER MAY NOT BE WITHDRAWN AFTER THE EXPIRATION DATE. PRIOR TO SUCH
TIME, THE WITHDRAWAL OF OLD DEBENTURES IN ACCORDANCE WITH THE PROCEDURES SET
FORTH IN THE OFFERING CIRCULAR WILL EFFECT A REVOCATION OF THE CORRESPONDING
CONSENT TO THE PROPOSED MODIFICATIONS AND WILL RENDER THE CORRESPONDING TENDER
OF OLD DEBENTURES INVALID AND INEFFECTIVE. A purported notice of withdrawal or
revocation will be effective only if delivered to the Exchange Agent in
accordance with the specific procedures set forth in the Offering Circular under
the heading "The Exchange Offer -- Withdrawal Rights."
The Exchange Offer is subject to a number of conditions (certain of which
may be waived by the Company), as more particularly set forth in the Offering
Circular. The undersigned recognizes that as a result of such conditions the
Company may not be required to exchange any of the Old Debentures tendered
hereby and, in such event, the Old Debentures not exchanged will be returned to
the undersigned at the address shown below the signature of the undersigned
unless otherwise indicated herein under the box entitled "Special Delivery
Instructions."
Unless otherwise indicated herein under the box entitled "Special Issuance
Instructions" below, please issue New Debentures (and, if applicable, substitute
Old Debentures for any principal amount of Old Debentures not exchanged) in the
<PAGE> 5
name of the undersigned. Similarly, unless otherwise indicated under the box
entitled "Special Delivery Instructions" below, please mail the New Debentures
(and, if applicable, substitute Old Debentures for any principal amount of Old
Debentures not exchanged) to the undersigned at the address shown below the
signature of the undersigned. The undersigned understands that Holders who
tender Old Debentures by book-entry transfer ("Book-Entry Holders") may request
that any Old Debentures not exchanged be returned by crediting the account
maintained by DTC, MSTC or PDTC as such Book-Entry Holders may designate by
making an appropriate entry under the box entitled "Special Issuance
Instructions" below. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Issuance Instructions" to transfer any Old
Debentures from the name of the registered Holder thereof if the Company does
not accept for exchange any of the principal amount of such Old Debentures so
tendered.
The undersigned understands that the delivery and surrender of the Old
Debentures is not effective, and the risk of loss of the Old Debentures does not
pass to the Exchange Agent, until receipt by the Exchange Agent of this Letter
of Transmittal, or a facsimile hereof, duly completed and signed, together with
all accompanying evidences of authority in form satisfactory to the Company and
any other required documents. All questions as to validity, form and eligibility
of any surrender of Old Debentures hereunder will be determined by the Company
and such determination shall be final and binding on all parties.
The undersigned understands that, subject to satisfaction of the conditions
of the Exchange Offer, as more fully described in the Offering Circular,
issuance of New Debentures for surrendered Old Debentures will be made as
promptly as practicable after surrender of the Old Debentures is made in
acceptable form.
<PAGE> 6
BY SIGNING THIS LETTER OF TRANSMITTAL THE HOLDER HEREBY CONSENTS TO THE PROPOSED
MODIFICATIONS AND DIRECTS THE OLD TRUSTEE TO EXECUTE AND DELIVER THE FIRST
SUPPLEMENTAL INDENTURE.
SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(SEE INSTRUCTIONS 1 AND 4 AND THE FOLLOWING PARAGRAPHS)
X
- --------------------------------------------------------------------------------
Signature of Holder Dated
X
- --------------------------------------------------------------------------------
Signature of Holder (if more than one) Dated
The above line(s) must be signed by the registered Holder(s) exactly as the
name(s) appear(s) on the certificate(s) for Old Debentures tendered hereby or on
a security position listing or by person(s) authorized to become registered
Holder(s) by endorsements and documents transmitted herewith. If signature is by
a trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such fiduciary or representative. See Instruction 4.
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Type or Print)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
-------------------------------------------------
MEDALLION GUARANTEE OF SIGNATURE(S)
(IF REQUIRED BY INSTRUCTION 4)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address and Telephone Number)
- --------------------------------------------------------------------------------
(Include Zip Code)
Dated: 1995
-----------------------------------
<PAGE> 7
---------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 4 and 5)
To be completed ONLY if certificates for New Debentures and/or
substitute Old Debentures (for principal amounts not exchanged) are to be
ISSUED in the name of someone other than the person or persons whose
signature(s) appear(s) on this Letter of Transmittal above or if Old
Debentures tendered by book-entry transfer which are not exchanged are to
be returned by credit to an account maintained by DTC, MSTC or PDTC.
Issue and Mail:
(check appropriate box(es)):
/ / New Debentures to:
/ / Old Debentures to:
/ / Credit unexchanged Old Debentures tendered by book-entry transfer to
the
/ / DTC, / / MSTC or / / PDTC
(check one) account set forth below:
Name(s):
------------------------------------------------------------------
(Please Type or Print)
--------------------------------------------------------------------------
(Please Type or Print)
Address:
------------------------------------------------------------------
--------------------------------------------------------------------------
(Zip Code)
--------------------------------------------------------------------------
(DTC, MSTC or PDTC Account Number)
--------------------------------------------------------------------------
Employer Identification or Social Security No.
---------------------------------------------------------------
---------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 5)
To be completed ONLY if certificates for New Debentures and/or
substitute Old Debentures (for principal amounts not exchanged) are to be
MAILED to someone other than the person or persons whose signature(s)
appear(s) on this letter above or to such person or persons at an address
other than that shown in the box entitled "Description of Old Debentures
Tendered and In Respect of Which Consent is Given" on this Letter of
Transmittal above.
Mail or deliver:
(check appropriate box(es)):
/ / New Debentures to:
/ / Old Debentures to:
Name(s):
------------------------------------------------------------------
(Please Type or Print)
--------------------------------------------------------------------------
(Please Type or Print)
Address:
------------------------------------------------------------------
--------------------------------------------------------------------------
(Zip Code)
--------------------------------------------------------------------------
Employer Identification or Social Security No.
---------------------------------------------------------------
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Debentures; Guaranteed
Delivery Procedure. This Letter of Transmittal is to be used whether
certificates for Old Debentures are to be forwarded herewith, whether tenders
are to be made pursuant to the procedures for book-entry transfer set forth in
the Offering Circular under the caption "The Exchange Offer -- Procedures for
Tendering and Giving Consents," or whether tenders are to be made pursuant to
the procedures for guaranteed delivery set forth below and in the Offering
Circular under the caption "The Exchange Offer -- Guaranteed Delivery
Procedure." Old Debentures, or any book-entry transfer into the Exchange Agent's
account at DTC, MSTC or PDTC of Old Debentures tendered electronically, as well
as a properly completed and duly executed copy of this Letter of Transmittal or
a facsimile hereof with any required signature guarantees or an Agent's Message,
and any other documents required by this Letter of Transmittal, must be received
by the Exchange Agent at one of its addresses set forth herein or in the case of
tenders by book-entry transfer confirmed to the Exchange Agent prior to 5:00
P.M., New York City time, on the Expiration Date.
Holders whose Old Debentures are not immediately available or who cannot
deliver their certificates for Old Debentures or any other required documents to
the Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration
Date may tender their Old Debentures pursuant to the guaranteed delivery
procedure set forth in the Offering Circular. Pursuant to such procedure: (i)
such tender must be made by or through an Eligible Institution (as defined in
Instruction 4); (ii) prior to 5:00 P.M., New York City time, on the Expiration
Date, the Exchange Agent must have received from such Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by telegram,
telex, facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder and the principal amount of Old Debentures tendered,
stating that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for Old Debentures and all other
documents required by this Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) all tendered Old
Debentures, or a confirmation of a book-entry transfer of such Old Debentures
into the Exchange Agent's account at DTC, MSTC or PDTC as described above as
well as a Letter of Transmittal, properly completed and duly executed with any
required signature guarantees (or facsimile thereof), and all other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
within five NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery, all as provided in the Offering Circular under the caption
"The Exchange Offer -- Guaranteed Delivery Procedure."
The method of delivery of this Letter of Transmittal, the Old Debentures
and any other required documents is at the election and risk of the Holder, but,
except as otherwise provided below, the delivery will be deemed made only when
actually received or confirmed by the Exchange Agent. The mailing of this Letter
of Transmittal, the certificates representing Old Debentures or, if applicable,
the Notice of Guaranteed Delivery, should be made sufficiently in advance of the
Expiration Date to permit delivery to the Exchange Agent prior to 5:00 P.M., New
York City time, on the Expiration Date.
See "The Exchange Offer" section of the Offering Circular.
2. Partial Tenders and Withdrawals. Old Debentures will be accepted for
exchange only in principal amounts of $1,000 and integral multiples thereof. The
aggregate amount of Old Debentures delivered to the Exchange Agent is deemed to
have been tendered, and consent to the Proposed Modifications given with respect
thereto, unless otherwise indicated. If tenders are made with respect to less
than the entire principal amount of the Old Debentures delivered herewith, enter
the principal amount (in integral multiples of $1,000) of the Old Debentures
that are to be tendered and in respect of which a consent to the Proposed
Modifications is given in column (4) in the table entitled "Description of Old
Debentures Tendered and In Respect of Which Consent is Given" in this Letter of
Transmittal. In such case, an Old Debenture for the principal amount of the
nontendered Old Debentures will be issued and sent to the Holder, unless
otherwise specified in the Special Issuance Instructions" box or the "Special
Delivery Instructions" box in this Letter of Transmittal.
Old Debentures tendered in the Exchange Offer may be withdrawn at any time
prior to the Expiration Date, and unless theretofore accepted for exchange by
the Company pursuant to the Exchange Offer, may also be withdrawn at any time
after August 2, 1995. To be effective, a notice of withdrawal must indicate the
certificate numbers for Old Debentures to which it relates (or, if the tender
was by book-entry transfer, information sufficient to enable the Exchange Agent
to identify the Old Debentures so tendered) and the aggregate principal amount
represented by such Old Debentures and be (a) signed by the Holder in the same
manner as the original signature in this Letter of Transmittal or (b)
accompanied by evidence satisfactory to the Company that the Holder withdrawing
such tender has succeeded to beneficial ownership of such Old Debentures.
3. Inadequate Space. If the space provided is inadequate, the certificate
numbers of the Old Debentures and the principal amount of Old Debentures
tendered should be listed on a separate schedule and attached hereto. The entire
principal amount of all Old Debentures delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
4. Signatures on this Letter of Transmittal, Powers of Attorney and
Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed
by the registered Holder of the Old Debenture(s) tendered hereby, the signature
must correspond exactly with the name as written on the face of the
certificate(s) for Old Debenture(s) tendered without any change whatsoever.
<PAGE> 9
If any tendered Old Debentures are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Debentures are registered in different names on several
certificates for Old Debentures, it will be necessary to complete, sign and
submit as many separate copies of this Letter of Transmittal as there are
different registrations of Old Debentures.
When this Letter of Transmittal is signed by the registered Holder(s) of
the Old Debentures specified herein and tendered hereby, no endorsements of Old
Debentures or separate powers of attorney are required. If, however, the New
Debentures are to be issued, or substitute Old Debentures for any untendered
principal amount of Old Debentures are to be issued, in the name of a person
other than the registered Holder(s), then the Old Debenture(s) transmitted
hereby must be endorsed or accompanied by appropriate powers of attorney in a
form satisfactory to the Company in either case signed exactly as the name(s) of
the registered Holder(s) appear(s) on the certificate(s) for the Old
Debenture(s) tendered.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of any Old Debenture(s) specified herein, the
certificate(s) for Old Debenture(s) must be endorsed or accompanied by
appropriate powers of attorney, in either case signed exactly as the name or
names of the registered Holder or Holders appear(s) on the Old Debenture(s).
If this Letter of Transmittal or a Notice of Guaranteed Delivery or any
certificate(s) for Old Debentures or powers of attorney are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificate(s) for Old Debentures or signatures on powers
of attorney required by this Instruction 4 must be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) which is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program (an "Eligible Institution").
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Debentures are tendered: (i) by a
registered Holder of such Old Debentures (which term, for purposes of this
Letter of Transmittal, shall include any participant in DTC, MSTC or PDTC whose
name appears on a security position listing as the owner of Old Debentures) who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on this Letter of Transmittal; or (ii) for the account of
an Eligible Institution.
5. Special Issuance and Delivery Instructions. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which New
Debentures or substitute certificates for Old Debentures for principal amounts
not exchanged are to be issued or sent, if different from the name and address
of the person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification or social security number of the
person named must also be indicated. See Instruction 6. If no such instructions
are given, such Old Debentures not exchanged will be returned to the name and
address of the person signing this Letter of Transmittal or, at the Company's
option, by crediting the account at DTC, MSTC or PDTC designated below the box
entitled "Description of Old Debentures Tendered and In Respect of Which Consent
is Given."
6. Tax Identification Number. Federal income tax law requires that a
Holder whose tendered Old Debentures are accepted for exchange must provide the
Company (as payer) with his correct Taxpayer Identification Number ("TIN"),
which, in the case of a tendering Holder who is an individual, is his social
security number. If the Company is not provided with the correct TIN or an
adequate basis for exemption, such Holder may be subject to a $50 penalty
imposed by the Internal Revenue Service (the "IRS"). In addition, delivery to
such Holder of New Debentures may be subject to backup withholding of Federal
income tax in an amount equal to 31% of the issue price of the New Debentures.
If withholding results in an overpayment of Federal income taxes, a refund may
be obtained.
Exempt Holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding of Federal income tax, each tendering Holder
must provide his correct TIN by completing the "Substitute Form W-9" set forth
herein, certifying that the TIN provided is correct (or that such Holder is
awaiting a TIN) and that (i) the Holder has not been notified by the IRS that he
is subject to backup withholding as a result of a failure to report all interest
or dividends or (ii) the IRS has notified the Holder that he is no longer
subject to backup withholding. In order to satisfy the Exchange Agent that a
foreign individual qualifies as an exempt recipient, such Holder must submit a
statement (Form W-8) signed under penalty of perjury attesting to such exempt
status. Such Form W-8 may be obtained from the Exchange Agent. If the Old
Debentures are in more than one name or are not in the name of the actual owner,
consult the W-9 Guidelines for information on which TIN to report. If you do not
have a TIN, consult the W-9 Guidelines for instructions on applying for a TIN,
and write "applied for" in lieu of your TIN in Part I of the Substitute Form
W-9. If you do not provide your TIN to the Company within 60 days, backup
withholding of Federal income tax will begin and continue until you furnish your
TIN to the Company.
<PAGE> 10
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the transfer and sale of Old Debentures to it or its order
pursuant to the Exchange Offer. If, however, New Debentures and/or substitute
Old Debentures for principal amounts not exchanged are to be delivered to, or
are to be registered or issued in the name of, any person other than the
registered Holder of the Old Debentures tendered hereby, or if tendered Old
Debentures are registered in the name of any person other than the person
signing this Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the transfer and sale of Old Debentures to the Company or its
order pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered Holder or any other persons) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted herewith, the amount of such transfer taxes
will be billed directly to such tendering Holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD DEBENTURE(S) SPECIFIED IN THIS
LETTER OF TRANSMITTAL.
8. Waiver of Conditions. The Company reserves the absolute right to waive
satisfaction of any conditions enumerated in the Offering Circular; however, the
condition that the indenture under which the New Debentures will be issued be
qualified under the Trust Indenture Act of 1939, as amended, is not waivable by
the Company.
9. No Conditional Offers. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering Holders, by execution of this
Letter of Transmittal (or a facsimile hereof), shall waive any right to receive
notice of the acceptance of their Old Debentures for exchange.
None of the Company, the Exchange Agent, the Information Agent or any other
person is obligated to give notice of defects or irregularities in any tender,
nor shall any of them incur any liability for failure to give any such notice.
10. Mutilated, Lost, Stolen or Destroyed Old Debenture Certificates. Any
Holder whose certificate(s) for Old Debentures have been mutilated, lost, stolen
or destroyed should contact the Exchange Agent for further instructions at the
address set forth on the cover page.
11. Requests for Assistance or Additional Copies. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Offering Circular and this Letter of Transmittal, may be directed to the
Exchange Agent or the Information Agent at the addresses set forth,
respectively, on the cover page and back page. Additional copies of the Offering
Circular or this Letter of Transmittal may be obtained from the Information
Agent at its address set forth on the back page.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF (TOGETHER WITH
CERTIFICATES FOR OLD DEBENTURES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY (OR FACSIMILE
THEREOF) MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
<PAGE> 11
PAYER'S NAME: BALLY ENTERTAINMENT CORPORATION
<TABLE>
<S><C>
- --------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part I -- Taxpayer Identification No. -- For All Accounts Part II -- For Payees Exempt
FORM W-9 from Backup With-
Enter your taxpayer holding (see enclosed
identification number in Guidelines)
the appropriate box. For ------------------------
most individuals and sole Social Security number
DEPARTMENT OF THE TREASURY proprietors, this is your ------------------------
INTERNAL REVENUE SERVICE social security number. For
other entities, it is your
Employer Identification
Number. If you do not have
a number, see How to Obtain OR
a TIN in the enclosed
Guidelines.
Note: If the account is in
PAYER'S REQUEST FOR more than one name, see the ------------------------
TAXPAYER IDENTIFICATION NO. chart on page 2 of the Employer identification
enclosed Guidelines to number
determine what number to ------------------------
enter.
- ------------------------------------------------------------------------------------------------------------------
Certification--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to
be issued to me), and either (a) I have mailed or delivered an application to receive a taxpayer identification
number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I
intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer
identification number within sixty (60) days, 31% of the issue price of the New Debentures distributed to me
thereafter will be withheld until I provide a number;
(2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, or (b) I have
not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding; and
(3) Any other information provided on this form is true, correct and complete.
- ------------------------------------------------------------------------------------------------------------------
SIGNATURE........................................................................ DATE............ 199........
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF THE ISSUE PRICE OF THE NEW DEBENTURES. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
THE INFORMATION AGENT FOR THE EXCHANGE OFFER IS:
MACKENZIE PARTNERS, INC. (LOGO)
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 322-2885
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
BALLY (LOGO)
Bally Entertainment Corporation
OFFER TO EXCHANGE
ITS
8% CONVERTIBLE SENIOR SUBORDINATED DEBENTURES DUE DECEMBER 15, 2000
FOR ITS
6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 1998
AND RELATED CONSENT SOLICITATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JULY 6,
1995, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD DEBENTURES TENDERED IN THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
THE WITHDRAWAL OF TENDERED OLD DEBENTURES WILL BE DEEMED A REVOCATION OF
THE CONSENT TO THE PROPOSED MODIFICATIONS IN RESPECT OF SUCH OLD
DEBENTURES.
Bally Entertainment Corporation (the "Company") is offering $1,000
principal amount of its 8% Convertible Senior Subordinated Debentures due
December 15, 2000 (the "New Debentures") in exchange for each $1,000 principal
amount of its 6% Convertible Subordinated Debentures due 1998 (the "Old
Debentures"), upon the terms and subject to the conditions set forth in an
Offering Circular and Consent Solicitation dated June 7, 1995 (the "Offering
Circular"). The offer to exchange New Debentures for Old Debentures is
referred to below as the "Exchange Offer."
This form must be used to accept the Exchange Offer if certificates
for any issuance of the Old Debentures are not immediately available, or cannot
be delivered along with other required documents to the Exchange Agent
identified below or if the procedure for book-entry transfer as set forth in
the Offering Circular cannot be completed prior to the Expiration Date. This
form may be delivered by hand or transmitted by facsimile transmission (to be
confirmed by physical delivery) or mailed to United States Trust Company of New
York, as Exchange Agent (the "Exchange Agent"), and must include a guarantee by
an Eligible Institution (as defined below) in the form set forth at the end of
this Notice of Guaranteed Delivery. See "The Exchange Offer - Procedures for
Tendering and Giving Consents" in the Offering Circular.
Deliver this Notice of Guaranteed Delivery only to:
UNITED STATES TRUST COMPANY OF NEW YORK, AS Exchange Agent
<TABLE>
<CAPTION>
BY MAIL: BY FACSIMILE: BY HAND:
<S> <C> <C>
United States Trust Company of (212) 420-6152 United States Trust Company of
New York Attention: Customer Service New York
P.O. Box 844 Cooper Station Confirmed by Telephone: Attention: Ground Level
New York, New York, 10276 (800) 548-6565 Corporate Trust Operations
20 Exchange Place
New York, New York 10005
OVERNIGHT DELIVERY:
United States Trust Company of New York
770 Broadway, 7th Floor
Corporate Trust Operations
New York, New York 10003
</TABLE>
To confirm receipt of this Notice of Guaranteed Delivery, please call the
Exchange Agent at:
(800) 548-6565.
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company upon the terms and
subject to the conditions set forth in the Offering Circular and the
accompanying Letter of Transmittal and Consent, receipt of which is hereby
acknowledged, the principal amount of the Old Debentures specified below
pursuant to the guaranteed delivery procedure set forth in the Offering
Circular under the caption "The Exchange Offer - Procedures for Tendering and
Giving Consents." The undersigned hereby tenders the Old Debentures listed
below and (i) to the extent that the undersigned is the holder of record
thereof, agrees and consents to the Proposed Modifications (as defined in the
Offering Circular) with respect to the principal amount of the Old Debentures
tendered as indicated below, and (ii) to the extent that the undersigned is not
the holder of record thereof represents and warrants to the Company that the
holder of record thereof has duly executed, and the undersigned is delivering
herewith, a valid and irrevocable proxy coupled with an interest, appointing
the undersigned with power to deliver a consent to the Proposed Modifications.
<TABLE>
<S> <C>
Principal Amount of 6% Convertible Subordinated Name(s) of Record Holder(s):
Debentures due 1998: --------------------------
- ------------------------------------------------------
Account Number:
--------------------------------------- ------------------------------------------------------
Old Debenture Certificate No(s).
(if available): Address(es):
--------------------------------------- ------------------------------------------
- ------------------------------------------------------ ------------------------------------------------------
- ------------------------------------------------------ ------------------------------------------------------
If Old Debentures will be tendered by Area Code and
book-entry transfer, check one box Telephone Number(s):
----------------------------------
[ ] The Depository Trust Company Signature(s):
-----------------------------------------
[ ] The Midwest Securities Trust Company
------------------------------------------------------
[ ] The Philadelphia Depository Trust Company
------------------------------------------------------
Account Number:
--------------------------------------- ------------------------------------------------------
Date:
------------------------------------------------ ------------------------------------------------------
</TABLE>
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
-2-
<PAGE> 3
GUARANTEE
(Not to be used for guarantees of signatures)
The undersigned, a firm that is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agent's Medallion Program (each of the foregoing being
referred to as "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, the certificates
representing all tendered Old Debentures, in proper form for transfer, or a
Book-Entry Confirmation (as defined in the Offering Circular), together with a
properly completed and duly executed Letter of Transmittal and Consent (or a
facsimile thereof), with any required signature guarantee (or, in the case of a
book-entry transfer, an Agent's Message (as defined in the Offering
Circular)), and any other documents required by the Letter of Transmittal and
Consent, are received by the Exchange Agent within five New York Stock Exchange
trading days after the date of execution of this Notice of Guaranteed Delivery.
<TABLE>
<S> <C>
Name of Firm:
----------------------------------------- ------------------------------------------------------
(Authorized Signature)
Address: Title:
---------------------------------------------- ------------------------------------------------
Name:
--------------------------------------------- -------------------------------------------------
(Zip Code)
Area Code and Telephone
Number: Date:
----------------------------------------------- -------------------------------------------------
</TABLE>
DO NOT SEND OLD DEBENTURES WITH THIS FORM. ACTUAL SURRENDER OF OLD DEBENTURES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL AND CONSENT AND ANY OTHER REQUIRED DOCUMENTS.
THE CONSENT CONTAINED IN THIS NOTICE OF GUARANTEED DELIVERY WILL BE EFFECTIVE
UPON THE RECEIPT THEREOF BY THE EXCHANGE AGENT REGARDLESS OF WHETHER OR WHEN
THE CERTIFICATES FOR TENDERED OLD DEBENTURES (OR A CONFIRMATION OF BOOK-ENTRY
TRANSFER THEREOF) AND AN EXECUTED LETTER OF TRANSMITTAL AND CONSENT ARE
RECEIVED.
-3-
<PAGE> 1
BALLY (LOGO)
Bally Entertainment Corporation
OFFER TO EXCHANGE
ITS
8% CONVERTIBLE SENIOR SUBORDINATED DEBENTURES DUE DECEMBER 15, 2000
FOR ITS
6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 1998
AND RELATED CONSENT SOLICITATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON JULY
6, 1995, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD DEBENTURES TENDERED
IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION
DATE. THE WITHDRAWAL OF TENDERED OLD DEBENTURES WILL BE DEEMED A REVOCATION
OF THE CONSENT TO THE PROPOSED MODIFICATIONS IN RESPECT OF SUCH OLD
DEBENTURES.
June 7, 1995
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Bally Entertainment Corporation (the
"Company") in connection with its offer to exchange $1,000 principal amount of
its 8% Convertible Senior Subordinated Debentures due December 15, 2000 (the
"New Debentures") for each $1,000 principal amount of its 6% Convertible
Subordinated Debentures due 1998 (the "Old Debentures") on the terms and
subject to the conditions set forth in the Offering Circular and Consent
Solicitation dated June 7, 1995 (the "Offering Circular") and the related
Letter of Transmittal and Consent (the "Letter of Transmittal"). The offer to
exchange New Debentures for Old Debentures is referred to below as the
"Exchange Offer."
Please furnish copies of the enclosed materials to those of your
clients for whose accounts you hold Old Debentures in your name or in the name
of your nominee.
Enclosed herewith for your information and forwarding to your clients
are copies of the following documents:
1. The Offering Circular.
2. The Letter of Transmittal for your use and for the
information of your clients, facsimile copies of the Letter of
Transmittal may be used to tender Old Debentures.
<PAGE> 2
3. The Notice of Guaranteed Delivery for Old Debentures
to be used to accept the Exchange Offer if neither of the two
procedures for tendering Old Debentures set forth in the Exchange
Offer can be completed on a timely basis.
4. A printed form of letter which may be sent to your
clients for whose accounts you hold Old Debentures registered in your
name or in the name of your nominee, with space provided for obtaining
such clients' instructions with regard to the Exchange Offer.
5. Guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on Substitute Form W-9.
6. A return envelope addressed to United States Trust
Company of New York, the Exchange Agent.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS
AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JULY 6, 1995, UNLESS THE OFFER IS
EXTENDED.
Please note the following:
1. The exchange rate is $1,000 principal amount of New
Debentures for each $1,000 principal amount of Old Debentures.
2. Holders who tender Old Debentures will be consenting
to the Proposed Modifications described in the Offering Circular.
3. The Exchange Offer is subject to certain conditions
which are set forth in the Offering Circular.
4. The Exchange Offer is being made for all of the
outstanding Old Debentures.
5. Tendering holders will not be obligated to pay
brokerage fees or commissions or, except as otherwise provided in
Instruction 7 of the Letter of Transmittal, transfer taxes on the
exchange of Old Debentures by the Company pursuant to the Exchange
Offer. However, federal income tax backup withholding at a rate of
31% may be required, unless an exemption is provided or unless the
required taxpayer identification information is provided. See
Instruction 6 of the Letter of Transmittal.
6. Notwithstanding any other provision of the Exchange
Offer, issuance of New Debentures in exchange for Old Debentures will
in all cases be made only after timely receipt by the Exchange Agent
of (a) Old Debentures pursuant to the procedures set forth in the
Offering Circular, or a timely Book-Entry Confirmation (as defined in
the Offering Circular) with respect to such Old Debentures, (b) the
Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature
guarantees or an Agent's Message (as defined in the Offering
Circular), and (c) any other documents required by the Letter of
Transmittal. Accordingly, issuance of New Debentures may not be made
to all tendering holders at the same time depending upon when Old
Debentures are actually received by the Exchange Agent.
In order to take advantage of the Exchange Offer, (i) a duly executed
and properly completed Letter of Transmittal (or a manually signed facsimile
thereof) and any required signature guarantee or other required documents
should be sent to the Exchange Agent and (ii) Old Debentures or a timely
-2-
<PAGE> 3
Book-Entry Confirmation should be delivered to the Exchange Agent in accordance
with the instructions set forth in the Letter of Transmittal and the Offering
Circular.
If holders of Old Debentures wish to tender, but it is impracticable
for them to forward their Old Debentures or other required documents or
complete the procedures for book-entry transfer prior to the Expiration Date, a
tender may be effected by following the guaranteed delivery procedures
specified in the Offering Circular under "The Exchange Offer - Guaranteed
Delivery Procedure."
The Company will not pay any fees or commissions to any broker, dealer
or other person for soliciting tenders of Old Debentures pursuant to the
Exchange Offer (other than to the Exchange Agent and the Information Agent as
described in the Offering Circular). The Company will, however, upon request,
reimburse you for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. The Company will pay
or cause to be paid any transfer taxes payable on the transfer of Old
Debentures to it, except as otherwise provided in Instruction 7 of the Letter
of Transmittal.
Any inquiries you may have with respect to the Exchange Offer should
be directed to and additional copies of the enclosed materials may be obtained
from the undersigned at (212) 929-5500 (call collect) or (800) 322-2885.
Very truly yours,
MacKenzie Partners, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU OR ANY OTHER PERSON, ANY AGENT OF THE COMPANY, THE EXCHANGE AGENT, THE
INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
-3-
<PAGE> 1
BALLY (LOGO)
Bally Entertainment Corporation
OFFER TO EXCHANGE
ITS
8% CONVERTIBLE SENIOR SUBORDINATED DEBENTURES DUE DECEMBER 15, 2000
FOR ITS
6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 1998
AND RELATED CONSENT SOLICITATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JULY 6,
1995, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD DEBENTURES TENDERED IN THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
THE WITHDRAWAL OF TENDERED OLD DEBENTURES WILL BE DEEMED A REVOCATION OF THE
CONSENT TO THE PROPOSED MODIFICATIONS IN RESPECT OF SUCH OLD DEBENTURES.
June 7, 1995
To Our Clients:
Enclosed for your consideration are the Offering Circular and Consent
Solicitation dated June 7, 1995 (the "Offering Circular") and the related
Letter of Transmittal and Consent (the "Letter of Transmittal") relating to the
offer by Bally Entertainment Corporation (the "Company") to exchange $1,000
principal amount of its 8% Convertible Senior Subordinated Debentures due
December 15, 2000 (the "New Debentures") for each $1,000 principal amount of
its 6% Convertible Subordinated Debentures due 1998 (the "Old Debentures") on
the terms and conditions set forth in the Offering Circular and the Letter of
Transmittal. Holders of Old Debentures whose Old Debentures are not
immediately available or who cannot deliver their Old Debentures and all other
required documents to United States Trust Company of New York, as the Exchange
Agent (the "Exchange Agent") or complete the procedures for book-entry transfer
prior to the Expiration Date must tender their Old Debentures according to the
guaranteed delivery procedures set forth in the Offering Circular.
We are (or our nominee is) the holder of record of Old Debentures held
by us for your account. A tender of such Old Debentures can be made only by us
as the holder of record and pursuant to your instructions. The Letter of
Transmittal is furnished to you for your information only and cannot be used by
you to tender Old Debentures held by us for your account.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Old Debentures held by us for your account
pursuant to the terms and condition set forth in the Exchange Offer.
Please note the following:
1. The exchange rate is $1,000 principal amount of New
Debentures for each $1,000 principal amount of Old Debentures.
2. Holders who tender Old Debentures will be consenting
to the Proposed Modifications described in the Offering Circular.
<PAGE> 2
3. The Exchange Offer is subject to certain conditions
which are set forth in the Offering Circular.
4. The Exchange Offer is being made for all of the
outstanding Old Debentures.
5. Tendering holders will not be obligated to pay
brokerage fees or commissions or, except as otherwise provided in
Instruction 7 of the Letter of Transmittal, transfer taxes on the
exchange of Old Debentures by the Company pursuant to the Exchange
Offer. However, federal income tax backup withholding at a rate of
31% may be required, unless an exemption is provided or unless the
required taxpayer identification information is provided. See
Instruction 6 of the Letter of Transmittal.
6. Notwithstanding any other provision of the Exchange
Offer, issuance of New Debentures in exchange for Old Debentures will
in all cases be made only after timely receipt by the Exchange Agent
of (a) Old Debentures pursuant to the procedures set forth in the
Offering Circular, or a timely Book-Entry Confirmation (as defined in
the Offering Circular) with respect to such Old Debentures, (b) the
Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature
guarantees or an Agent's Message (as defined in the Offering
Circular), and (c) any other documents required by the Letter of
Transmittal. Accordingly, issuance of New Debentures may not be made
to all tendering holders at the same time depending upon when Old
Debentures are actually received by the Exchange Agent.
If you wish to have us tender any or all of the Old Debentures held by
us for your account, please so instruct us by completing, executing, detaching
and returning to us the instruction form set forth below. If you authorize the
tender of your Old Debentures, all such Old Debentures will be tendered unless
otherwise specified below. An envelope to return your instructions to us is
enclosed. Your instructions should be forwarded to us in ample time to permit
us to submit a tender on your behalf prior to the expiration of the Exchange
Offer.
The Exchange Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Old Debentures residing in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be
in compliance with the securities, blue sky or other laws of such jurisdiction.
However, the Company may, in its discretion, take such action as it may deem
necessary to make the Exchange Offer in any such jurisdiction and extend the
Exchange Offer to holders of Old Debentures in that jurisdiction.
In any jurisdiction where the securities, blue sky or other laws
require the Exchange Offer to be made by a licensed broker or dealer, the
Exchange Offer will be deemed to be made on behalf of the Company by one or
more registered brokers or dealers that are licensed under the laws of such
jurisdiction.
-2-
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
BY BALLY ENTERTAINMENT CORPORATION
OF ITS 8% CONVERTIBLE SENIOR SUBORDINATED DEBENTURES
DUE DECEMBER 15, 2000 FOR ITS 6% SUBORDINATED
CONVERTIBLE DEBENTURES DUE 1998
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offering Circular dated June 7, 1995 and the related Letter of Transmittal and
Consent in connection with the Exchange Offer and Consent Solicitation by Bally
Entertainment Corporation (the "Company") to exchange $1,000 principal amount
of its 8% Convertible Senior Subordinated Debentures due December 15, 2000 (the
"New Debentures") for each $1,000 principal amount of its 6% Subordinated
Convertible Debentures due 1998 (the "Old Debentures") and the Company's
solicitation of consent of holders of the Old Debentures to each of a waiver
and amendment proposed by the Company concerning the Indenture, dated as of
September 10, 1978, between the Company and United States Trust Company of New
York (the "Old Trustee") pursuant to which the Old Debentures were issued, all
upon the terms and conditions set forth in the Offering Circular and Letter of
Transmittal and Consent.
This will instruct you to tender to the Company the principal amount
of Old Debentures indicated below (or if no principal amount is indicated
below, all Old Debentures) which are held by you for the account of the
undersigned, upon the terms and subject to the conditions set forth in the
Exchange Offer.
Dated: , 1995
Old Debentures to be Tendered* --------------------------------
--------------------------------
Signature(s)
$ principal amount of Old Debentures
-------
--------------------------------
--------------------------------
Please Print Name(s)
Address
------------------------
--------------------------------
(Include Zip Code)
Area Code and
Telephone No.
------------------
--------------------------------
(Daytime telephone number)
Taxpayer Identification
or Social Security No.(s).
------
--------------------------------
- ------------------
* Unless otherwise indicated, it will be assumed that all Old Debentures held
by us for your account are to be tendered.
-3-
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer. Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by one
hyphen: i.e., 000-00000. The table below will help determine the number to give
the payer.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
FOR THIS TYPE OF GIVE THE SOCIAL FOR THIS TYPE OF IDENTIFICATION
ACCOUNT: SECURITY NUMBER OF: ACCOUNT: NUMBER OF
------------------------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
1. An individual's account The individual 8. Sole proprietorship The Owner(4)
account
2. Two or more individuals The actual owner of the 9. A valid trust, estate, Legal entity (Do not
(joint account) account or, if combined or pension trust furnish the identifying
funds, any one of the number of the personal
individuals(1) representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(5)
3. Husband and wife (joint The actual owner of the 10. Corporate account The Corporation
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2) 11. Religious, charitable, The organization
minor (Uniform Gift to or educational
Minors Act) organization account
5. Adult and minor (joint The adult or, if the 12. Partnership account held The partnership
account) minor is the only in the name of the
contributor, the business
minor(2)
6. Account in the name of The ward, minor, or 13. Association, club, or The organization
guardian or committee incompetent person(3) other tax-exempt
for a designated ward, organization
minor, or incompetent
person
7. a. The usual revocable The grantor-trustee(1) 14. A broker or registered The broker or nominee
savings trust account nominee
(grantor is also
trustee)
b. So-called trust The actual owner(1) 15. Account with the The public entity
account that is not a Department of
legal or valid trust Agriculture in the name
under State law. of a public entity (such
as a State or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ---------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person a social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEE EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or
agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 5041, 5041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. Section 5109 requires most recipients of dividend, interest,
or other payments to give taxpayer identification numbers to payers who must
report the payments to IRS. IRS uses the numbers for identification purposes.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Beginning January 1, 1993, payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
furnish a taxpayer identification number to a payer. Certain penalties may also
apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to wilful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments to patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $800 or
more and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free convenient bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
<PAGE> 1
June 7, 1995
Bally Entertainment Corporation
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attention: Board of Directors
Ladies and Gentlemen:
We have been requested to give this federal income tax opinion in
connection with the proposed exchange (the "Exchange") of New Debentures for
Old Debentures by Bally Entertainment Corporation (the "Company") in accordance
with its Offering Circular and Consent Solicitation dated June 7, 1995 (the
"Offering Circular"). Except as otherwise provided, capitalized terms have the
meanings set forth in the Offering Circular. All section references are to the
Internal Revenue Code of 1986, as amended (the "Code").
We have acted as tax counsel to the Company in connection with the
Exchange. For the purpose of rendering this opinion, we have examined and are
relying upon the accuracy of the Offering Circular and such other instruments
and documents related to the Exchange and the transactions contemplated thereby
as we have deemed appropriate.
Based on our examination of the foregoing and subject to the
assumptions, exceptions, limitations and qualifications set forth, we are of
the opinion that for federal income tax purposes, it is more likely than not
(i) the New Debentures will be treated as "securities" for federal income tax
purposes and (ii) the Exchange will constitute a "recapitalization" as defined
in Section 368(a)(1)(E) of the Code.
This opinion is subject to the following assumptions, exceptions,
limitations and qualifications:
1. We have assumed that the Exchange will be consummated pursuant to,
and the New Debentures will exist as described in, the Offering
Circular.
2. This opinion is our legal judgment regarding the application
of federal income tax laws based on our analysis of the Code,
existing judicial decisions, administrative regulations and published
rulings and procedures. No assurance can be given that future
legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the
accuracy of the opinion expressed herein. We undertake no
responsibility to advise you of any new developments in the
application or interpretation of the federal income tax laws.
3. Our opinion is limited to the specific federal income tax
matters presented above and not any other federal income tax aspect
of the Exchange, or any transaction undertaken in connection with
the Exchange. In addition, this opinion does not address any other
federal, estate, gift, state, local or foreign tax consequences that
may result from the Exchange.
4. No opinion is expressed if any of the facts upon which we
relied vary from those described in the Offering Circular or if any
of the representations, statements and assumptions upon which we
relied are not accurate at all relevant times.
5. No ruling has been or will be requested from the Internal
Revenue Service concerning the federal income tax consequences of
the Exchange. You should be aware that an opinion of counsel has no
binding effect or official status, and that no assurance can be
given that contrary positions will not be taken by the Internal
Revenue Service or that a court considering the issues would not
hold otherwise.
6. This opinion may not be relied upon or utilized for any
other purpose or by any other person or entity, and may not be made
available to any other person or entity, without our prior written
consent. We do, however, consent to the filing of this opinion as
an exhibit to the Offering Circular and further consent to the use
of our name in the Offering Circular in the section captioned
"Certain Federal Income Tax Considerations".
Very truly yours,
KATTEN MUCHIN & ZAVIS
