<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES
UNDER TRUST INDENTURE ACT OF 1939
BALLY ENTERTAINMENT CORPORATION
(Name of Applicant)
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631-3547
(Address of principal executive office)
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
TITLE OF CLASS AMOUNT
8% Convertible Senior Up to aggregate principal
Subordinated Debentures amount of $15,390,000
Approximate date of proposed public offering: June 7, 1995
Name and address of agent for service: With a copy to:
Carol Stone DePaul Mark D. Gerstein
Bally Entertainment Corporation Katten Muchin & Zavis
8700 West Bryn Mawr Avenue 525 West Monroe Street, #1600
Chicago, Illinois 60631-3547 Chicago, Illinois 60661-3693
<PAGE> 2
1. GENERAL INFORMATION.
(a) The applicant, Bally Entertainment Corporation (the
"Company"), is a corporation.
(b) The Company was organized under the laws of Delaware.
2. SECURITIES ACT EXEMPTION APPLICABLE.
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"). The terms and conditions of this
transaction are set forth in an Offering Circular and Consent Solicitation (the
"Offering Circular") and an accompanying Letter of Transmittal and Consent
(which together constitute 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. No sales of the New Debentures
have been or will be made by either the Company or through an underwriter at or
about the same time as the Exchange Offer. The Company will not pay any
commission or other remuneration to any broker, dealer, salesman or other
person for soliciting the tenders of the Old Debentures pursuant to the
Exchange Offer.
3. AFFILIATIONS.
The entities set forth in Attachment 3 may be deemed affiliates of the
Company.
4. DIRECTORS AND EXECUTIVE OFFICERS.
The following table lists the names of all directors and executive
officers of the Company, and all offices held with the Company by each such
person:
<TABLE>
<CAPTION>
NAME ADDRESS OFFICE
---- ------- ------
<S> <C> <C>
Arthur M. Goldberg 6 Kimball Drive Chairman of the Board, Chief
Westfield, New Jersey 07090 Executive Officer and President
George N. Aronoff 2760 Chesterton Road Director
Shaker Heights, Ohio 44122
Barrie K. Brunet 1510 Patrick Avenue Director
Reno, Nevada 89509
Edwin M. Halkyard 163 Power Point Lane Director
Lexington, South Carolina 29072
J. Kenneth Looloian 1380 Outlook Drive West Director
Mountainside, New Jersey 07092
Rocco J. Marano 153 Van Houton Avenue Director
Chatham, New Jersey 07928
Patrick L. O'Malley 229 East Lake Shore Drive Director
Chicago, Illinois 60611
James M. Rochford 6881 North Tonty Director
Chicago, Illinois 60646
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
NAME ADDRESS OFFICE
---- ------- ------
<S> <C> <C>
Lee S. Hillman 2554 Wellington Court Executive Vice President, Chief
Evanston, Illinois 60201 Financial Officer and Treasurer
Robert G. Conover 42 Village Drive Vice President, Management
Somers Point, New Jersey 08244 Information Systems and Chief
Information Officer
John W. Dwyer 566 Prince Edward Vice President and Corporate
Glen Ellyn, Illinois 60137 Controller
Harold Morgan 1013 South Grove Vice President, Human Resources
Barrington, Illinois 60010
Bernard J. Murphy 528 Henry Street Vice President, Corporate Affairs
South Amboy, New Jersey 08879 and Governmental Relations
Jerry W. Thornburg 26W384 Durfee Road Vice President, Audit
Wheaton, Illinois 60187
Carol Stone DePaul 1432 Norwood Secretary
Chicago, Illinois 60660
</TABLE>
5. PRINCIPAL OWNERS OF VOTING SECURITIES.
As of May 31, 1995, no person was known to the Company to own
beneficially 10% or more of the voting securities of the Company.
6. UNDERWRITERS.
(a) None.
(b) There is no underwriter for the New Debentures.
7. CAPITALIZATION.
(a) Authorized Securities:
<TABLE>
<CAPTION>
Capital Stock
As of May 31, 1995
TITLE OF CLASS NUMBER OF SHARES AUTHORIZED NUMBER OF SHARES OUTSTANDING
-------------- --------------------------- ----------------------------
<S> <C> <C>
Common Stock, $.66 2/3 par value 80,000,000 47,077,989
Preferred Stock, $1.00 par value 30,000,000 694,497
Series B Junior Participating
Preferred Stock ("Series B
Preferred Stock") 800,000 --
</TABLE>
-2-
<PAGE> 4
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF SHARES AUTHORIZED NUMBER OF SHARES OUTSTANDING
-------------- --------------------------- ----------------------------
<S> <C> <C>
Series C Cumulative Preferred 400,000 --
Stock ("Series C Preferred Stock")
Series D Convertible Exchangeable 2,000,000 694,497
Preferred Stock ("Series D
Preferred Stock")
Series E Increasing Dividend 500,000 --
Preferred Stock ("Series E
Preferred Stock")
</TABLE>
<TABLE>
<CAPTION>
Debt Securities
As of May 31, 1995
DESIGNATION OF DEBT AMOUNT AUTHORIZED AMOUNT OUTSTANDING
------------------- ----------------- ------------------
<S> <C> <C>
10% Convertible Subordinated $100,000,000 $80,000,000
Debentures due 2006
6% Convertible Subordinated
Debentures due 1998 $ 50,000,000 $15,390,000
</TABLE>
(b) Description of Voting Rights:
The holders of the Common Stock are entitled to one vote for each
share held on all matters submitted to stockholders. 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.
Pursuant to the Restated Certificate of Incorporation, as amended, the
Board of Directors of the Company has the authority to issue, from time to
time, the preferred stock of any series and to state in the resolution or
resolutions providing for the issuance of any series, the voting powers,
designations, privileges or other rights, and the qualifications, limitations
or restrictions thereof. Each holder of Series B Preferred Stock will have 100
votes, together with common stock, except as Delaware law may provide. The
holders of Series C Preferred Stock will have no voting rights, except that
each holder thereof will be entitled to one vote for the election of two
additional directors of the Company if dividends on the stock are in arrears in
an amount equal to at least six quarterly dividends (the "Preferred Stock
Voting Event") and except as Delaware law may otherwise provide. Holders of
Series D Preferred Stock will have voting rights only upon the occurrence of a
Preferred Stock Voting Event. Holders of Series E Preferred Stock will be
entitled, upon the occurrence of a Preferred Stock Voting Event, to the
exclusion of the holders of all other classes of capital stock of the Company,
to elect two additional directors of the Company, each share of Series E
Preferred Stock entitling the holder thereof to one vote. However, if at the
time of a Preferred Stock Voting Event, the holders of Series D Preferred Stock
are entitled to and do elect directors of the Company, the holders of the
Series E Preferred Stock will be
-3-
<PAGE> 5
entitled to elect only one director; if the holders of the Series E Preferred
Stock have elected two directors, one of the two directors elected by the
holders of the Series E Preferred Stock shall resign.
8. ANALYSIS OF INDENTURE PROVISIONS.
The New Debentures will be issued under an Indenture (the "New
Indenture") between the Company and First National Bank Association, as Trustee
(the "New Trustee"). The following is a general description of certain
provisions of the Indenture to be qualified and filed as an exhibit hereto.
Terms used herein without definition have the same meanings as in the New
Indenture.
(a) Events of Default; Withholding of Notice. The following are
Events of Default under the New Indenture: (i) failure to pay principal of any
New Debenture when due; (ii) failure to pay any interest on any New Debenture
when due, which failure continues for 30 days; (iii) 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 (iv) 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
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.
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
-4-
<PAGE> 6
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.
(b) Authentication and Delivery of New Debentures; Application of
Proceeds. The New Debentures shall be executed on behalf of the Company by two
officers under its corporate seal (or a facsimile thereof). Signatures of
officers of the Company may be manual or by facsimile. A New Debenture shall
not be valid until authenticated by a manual signature of the Registrar.
The New Debentures are being offered in exchange for the Old
Debentures.
(c) Release or Substitution of Property. Not applicable.
(d) Satisfaction and Discharge of the Indenture and the New
Debentures. The Company may discharge its obligations under the New Indenture
while New Debentures remain outstanding if (i) all outstanding New Debentures
will become due and payable at their scheduled maturity within one year, (ii)
all outstanding New Debentures are scheduled for redemption within one year or
(iii) all outstanding New Debentures are delivered to the New Trustee for
conversion in accordance with the New Indenture and in the case of (i) or (ii)
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.
(e) Statement as to Compliance. 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.
9. OTHER OBLIGORS.
No person other than the Company is an obligor on the New Debentures.
10. CONTENTS OF APPLICATION FOR QUALIFICATION.
This application for qualification comprises:
(a) Pages numbered 1 through 7 consecutively.
(b) A statement of eligibility and qualification of the New
Trustee on Form T-1.
(c) The following exhibits are in addition to those to be filed as
part of the statement of eligibility and qualification of the New Trustee:
-5-
<PAGE> 7
<TABLE>
<S> <C>
T3A Restated Certificate of Incorporation, as amended, of Bally Entertainment Corporation, is
incorporated herein by reference to the Company's Registration Statement on Form S-8 dated
December 13, 1994, registration no. 33-56831.
T3B By-laws of Bally Entertainment Corporation, as amended, are incorporated herein by
reference to the Company's Annual Report on Form 10-K, file no. 1-7244, for the year ended
December 31, 1992.
T3C Form of Indenture to be entered into between Bally Entertainment Corporation and First Bank
National Association, as Trustee, relating to the New Debentures.
T3E.1 Form of Offering Circular and Consent Solicitation dated June 7, 1995.
T3E.2 Letter of Transmittal and Consent.
T3E.3 Notice of Guaranteed Delivery.
T3E.4 Letter to brokers.
T3E.5 Letter from brokers to clients.
T3E.6 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
T3F Cross reference sheet (included as part of Exhibit T3C).
</TABLE>
-6-
<PAGE> 8
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
applicant, Bally Entertainment Corporation, a corporation organized and
existing under the laws of Delaware, has duly caused this application to be
signed on its behalf by the undersigned, thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the City of Chicago, and State
of Illinois, on the 7th day of June, 1995.
BALLY ENTERTAINMENT CORPORATION
By: /s/ Lee S. Hillman
---------------------------------------
a duly authorized signatory
Attest:
By: /s/ Carol S. DePaul
---------------------------------
a duly authorized signatory
-7-
<PAGE> 9
ATTACHMENT 3: AFFILIATIONS
BALLY ENTERTAINMENT CORPORATION AND SUBSIDIARIES
OWNERSHIP CHART
COMPANIES DIRECTLY OWNED BY BALLY ENTERTAINMENT CORPORATION:
100% - Bally Data Systems, Inc.
100% - Bally Corporation
100% - Lincoln Indemnity Company
100% - Bally Manufacturing Corporation
100% - Bally Services Corporation
100% - Bally's Health & Tennis Corp.
100% - Bally's HHC Partner, Inc.
100% - Bally's Encino Partner, Inc.
100% - Health & Tennis Corp. of America (See pages 4-6)
50% - Spa Associates Limited Partnership
50% - Penn Hills Spa Limited Partnership
8.81% - Bally's Grand, Inc.
<PAGE> 10
BALLY ENTERTAINMENT CORPORATION
OWNERSHIP CHART
COMPANIES DIRECTLY OWNED BY BALLY ENTERTAINMENT CORPORATION:
100% - Bally's Casino, Inc. (d)
100% - Bally's Intermediate Sub, Inc.
100% - Bally's Intermediate Sub No. 1, Inc.
100% - Bally's Intermediate Sub No. 2, Inc.
100% - Bally's Intermediate Sub No. 3, Inc.
100% - Bally's Sub, Inc.
100% Bally's Casino Holdings, Inc. (See page 3)
100% - Bally's Intermediate Sub No. 4, Inc.
100% - Bally's Intermediate Sub No. 5, Inc.
100% - Bally's Intermediate Sub No. 6, Inc.
8.832% - Bally's Grand, Inc.
100% - BGR, Inc.
1.173% - Bally's Grand, Inc.
100% - GNAC, Corp.
100% - GNOC, Corp.
100% - GNF, Corp.
(d) Arthur Goldberg owns 1,685,994 shares of Bally's Casino, Inc.
Series A Exchangeable Preferred Stock.
Page 2
<PAGE> 11
BALLY ENTERTAINMENT CORPORATION
OWNERSHIP CHART
COMPANIES DIRECTLY OWNED BY BALLY'S CASINO HOLDINGS, INC.:
100% - Bally's Park Place, Inc. (a)
100% - Bally's Park Place, Inc. (b)
100% - Bally's Park Place Realty Co.
100% - B.W. Realty Corp.
100% - Bally Warwick, Inc.
100% - Bally's Park Place Funding, Inc.
100% Bally's Intermediate Casino Holdings, Inc.
100% - Bally's Entertainment Florida, Inc.
100% - Bally's Casino Chicago, Inc.
100% - Bally's Limited (Chicago), Inc.
100% - Bally's Florida Casino, Inc.
100% - Bally's Louisiana, Inc.
49.9% - Belle of Orleans, L.L.C.
100% - Bally's Biloxi, Inc.
100% - Bally's Tunica, Inc.
57% - Bally's Olympia Limited Partnership
100% - Bally's Operator, Inc.
1% - Bally's Olympia Limited Partnership
100% - CH Concord, Inc.
100% - Bally's Missouri, Inc.
100% - Bally's Indiana, Inc.
50% - Bally's Indiana Limited Partnership
100% - Bally's Casino Indiana, Inc.
1% - Bally's Indiana Limited Partnership
100% - Bally's Philadelphia, Inc.
100% - Bally's St. Louis, Inc.
100% - Bally's Rising Sun, Inc.
100% - Bally's Renaissance Harbor, Inc.
100% - Bally's Arizona, Inc.
100% - Bally's CMI, Inc.
100% - Bally's CHLV, Inc.
61.198% - Bally's Grand, Inc.
100% - Grand Reservations Services, Inc.
100% - Bally's International Marketing Corp.
100% - Bally's Grand Property Sub. II, Inc.
100% - Bally's Grand Laundry Corporation
100% - Grand Resorts, Inc.
100% - Grand Resorts Sub 1, Inc.
100% - Bally's Grand Property Sub 1, Inc.
100% - Bally's Casino Management, Inc.
100% - Bally's Canada, Inc.
100% - Bally's Ontario Casinos, Inc. (c)
100% - Bally's Grand Management Co., Inc.
(a) Delaware (b) New Jersey (c) Canada
Page 3
<PAGE> 12
HEALTH & TENNIS CORPORATION OF AMERICA
OWNERSHIP CHART
COMPANIES DIRECTLY OWNED BY HEALTH & TENNIS CORPORATION OF AMERICA:
100% - Chicago Health Clubs, Inc.
100% - Chicago Health Clubs II, Inc.
85% - Nycon Holding Co., Inc., 850 HTCA; 150 other, 127,220 pref. HTCA
80% (87.5%) - Rhode Island Holding Co., 800 Nycon Holding Co., Inc.
75 HTCA, 125 other, 15,070 pref. Nycon Holding Co., Inc.
80% Providence Fitness Centers, Inc., 15,070 pref. Rhode Island
Holding Co., 200 other, 800 Rhode Island Holding
Company
80% (93.5%) - New Fitness Holding Co., Inc. 800 Nycon Holding Co.,
Inc. 65 other, 135 HTCA, 112,150 pref. Nycon Holding
Co., Inc.
80% (83%) - Holiday Health & Fitness Centers of New York, Inc.
800 New Fitness Holding Co., Inc., 170 other, 30 HTCA,
65,670 pref.
80% (87%) - Connecticut Valley Fitness Centers, Inc.
800 New Fitness Holding Co., Inc., 130 other, 70 HTCA,
18,790 pref. New Fitness Holding Co., Inc.
80% (98%) - Connecticut Coast Fitness Centers, Inc.
800 New Fitness Holding Co., Inc., 20 other, 180 HTCA,
8,010 pref. New Fitness Holding Co., Inc.
100% - Scandinavian Health Spa, Inc.
100% - Scandinavian U.S. Swim & Fitness, Inc.
100% - Scandinavian Development Company
50% - Spa Associates Limited Partnership
50% - Penn Hills Spa Limited Partnership
Page 4
<PAGE> 13
HEALTH & TENNIS CORPORATION OF AMERICA
OWNERSHIP CHART
COMPANIES DIRECTLY OWNED BY HEALTH & TENNIS CORPORATION OF AMERICA:
88.6% - Bally Matrix Fitness Centre, Ltd. (c)
8,855 HTCA, 852 Canadian Fitness Holding Company, 293 Daniel
Whitaker
100% - C.Z.W. Health Limited (c)
85% - Greater Philly No. 1 Holding Company; 800 HTCA; 50 BHTC; 150 other
80% (100%) - Greater Philly No. 2 Holding Company; 800 Greater Philly
No. 1 Holding Company; 200 HTCA
80% (100%) - Physical Fitness Centers of Philadelphia, Inc;
800 Greater Philly No. 2 Holding Company; 200 HTCA
100% - Vic Tanny International of Greater Michigan, Inc.
100% - Vic Tanny International of Cleveland, Inc.
100% - Holiday Spa Health Clubs of California
100% - Vic Tanny International of Toledo, Inc.
100% - Bally's PacWest, Inc.
100% - Health & Tennis Corporation of New York, Inc.
100% - U.S. Health, Inc.
100% - Holiday Universal, Inc.
100% - Bally's S.C. Management, Inc.
100% - So. Cal. Nautilus Fitness Center, Inc.
(c) Canada
Page 5
<PAGE> 14
HEALTH & TENNIS CORPORATION OF AMERICA
OWNERSHIP CHART
COMPANIES DIRECTLY OWNED BY HEALTH & TENNIS CORPORATION OF AMERICA:
50% (100%) - Holiday Health Clubs of the East Coast, Inc., 500B HTCA; 500A U.S.
Health, Inc. 80% (100%) - Holiday/Southeast Holding Corp.; 800
Holiday Health Clubs of the East Coast, Inc.; 200 HTCA
80% (100%) - Tidelands Holiday Health Clubs, Inc.; 800
Holiday/Southeast Holding Corp; 200 HTCA
80% (100%) - Holiday Health Clubs of the Southeast, Inc.; 800
Holiday/Southeast Holding Corp.;
200 HTCA
100% - Houston Health Clubs, Inc.
100% - Holiday Health Clubs and Fitness Centers, Inc.
100% - Jack LaLanne Holding Corp.
100% - Vertical Fitness and Racquet Club, Ltd.
100% - Jack LaLanne Fitness Centers, Inc.
100% - Manhattan Sports Club, Inc.
100% - Vic Tanny International, Inc.
100% - Vic Tanny International of Missouri, Inc.
100% - Health & Tennis (U.K.) Limited (d)
100% - Bally's Fitness & Racquet Clubs, Inc.
(d) U.K.
Page 6
<PAGE> 15
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM T-1
Statement of Eligibility and Qualification Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
FIRST BANK NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0256895
(State of Incorporation) (I.R.S. Employer
Identification No.)
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
BALLY ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-2512405
(State of Incorporation) (I.R.S. Employer
Identification No.)
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631
(Address of Principal Executive Offices) (Zip Code)
8% CONVERTIBLE SENIOR SUBORDINATED DEBENTURES DUE DECEMBER 15, 2000
(Title of the Indenture Securities)
<PAGE> 16
GENERAL
1. General Information Furnish the following information as to the
Trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this
statement of eligibility and qualification. Each of the exhibits listed
below is incorporated by reference from a previous registration.
1. Copy of Articles of Association.
2. Copy of Certificate of Authority to Commence Business.
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).
4. Copy of existing By-Laws.
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the
act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority.
<PAGE> 17
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors or affiliates, are based
upon information furnished to the Trustee by the obligors, While the Trustee
has no reason to doubt the accuracy of any such information, it cannot accept
any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, First Bank National Association, an Association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested,
all in the City of Saint Paul and State of Minnesota on the 18th day of May,
1995.
FIRST BANK NATIONAL ASSOCIATION
[SEAL]
/s/ Richard Prokosch
--------------------------------
Richard Prokosch
Trust Officer
/s/ David H. Bluhm
- ----------------------------------
David H. Bluhm
Assistant Secretary
<PAGE> 18
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, FIRST BANK NATIONAL ASSOCIATION hereby consents that reports
of examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: May 18, 1995
FIRST BANK NATIONAL ASSOCIATION
/s/ Richard Prokosch
---------------------------------
Richard Prokosch
Trust Officer
<PAGE> 1
================================================================================
BALLY ENTERTAINMENT CORPORATION
TO
FIRST BANK NATIONAL ASSOCIATION
Trustee
--------------------------
INDENTURE
Dated as of July ___, 1995
--------------------------
$[__________]
8% Convertible Senior Subordinated Debentures
due December 15, 2000
================================================================================
<PAGE> 2
BALLY ENTERTAINMENT CORPORATION
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939, as amended:
<TABLE>
<S> <C> <C>
SECTION 310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608, 610
SECTION 311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
SECTION 312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701, 702(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(c)
SECTION 313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101, 1004
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(b)
SECTION 314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514
SECTION 316 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502, 512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104(c)
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
----------- -------
<S> <C> <C>
SECTION 317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003
SECTION 318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
______________________________
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-ii-
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
CCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
Closing Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Company Request" or "Company Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Constituent Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Conversion Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
nonelecting share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C>
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-5-
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-6-
Security Register" and "Security Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-6-
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-6-
Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
10% Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
Trading Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-8-
SECTION 104. ACTS OF HOLDERS; RECORD DATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-8-
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 106. NOTICE TO HOLDERS; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 109. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 110. SEPARABILITY CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 111. BENEFITS OF INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 112. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 113. LEGAL HOLIDAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
ARTICLE TWO
Security Forms
SECTION 201. FORMS GENERALLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
SECTION 202. FORM OF FACE OF SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
SECTION 203. FORM OF REVERSE OF SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
SECTION 204. FORM OF CONVERSION NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
ARTICLE THREE
The Securities
SECTION 301. TITLE AND TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
SECTION 302. DENOMINATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
SECTION 304. TEMPORARY SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
SECTION 305. REGISTRATION, REGISTRATION OF
TRANSFER AND EXCHANGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
SECTION 306. MUTILATED, DESTROYED,
LOST AND STOLEN SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
SECTION 307. PAYMENT OF INTEREST;
INTEREST RIGHTS PRESERVED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
SECTION 308. PERSONS DEEMED OWNERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
SECTION 309. CANCELLATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
SECTION 310. COMPUTATION OF INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
SECTION 402. APPLICATION OF TRUST MONEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
ARTICLE FIVE
Remedies
SECTION 501. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
SECTION 502. ACCELERATION OF MATURITY;
RESCISSION AND ANNULMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
SECTION 503. COLLECTION OF INDEBTEDNESS AND
SUITS FOR ENFORCEMENT BY TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS
WITHOUT POSSESSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
SECTION 506. APPLICATION OF MONEY COLLECTED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
SECTION 507. LIMITATION ON SUITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO
RECEIVE PRINCIPAL AND
INTEREST AND TO CONVERT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
SECTION 511. DELAY OR OMISSION NOT WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
SECTION 512. CONTROL BY HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
SECTION 513. WAIVER OF PAST DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
</TABLE>
-v-
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 514. UNDERTAKING FOR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
SECTION 515. WAIVER OF USURY, STAY OR EXTENSION LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
ARTICLE SIX
The Trustee
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
SECTION 602. DEFAULTS: NOTICE AND DUTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
SECTION 603. CERTAIN RIGHTS OF TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
SECTION 604. NOT RESPONSIBLE FOR RECITALS
OR ISSUANCE OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . -36-
SECTION 605. MAY HOLD SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
SECTION 606. MONEY HELD IN TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
SECTION 607. COMPENSATION AND REIMBURSEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. . . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. . . . . . . . . . . . . . . . . . . -38-
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. . . . . . . . . . . . . . . . . . . . . . . . -39-
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES
AND ADDRESSES OF HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
SECTION 702. PRESERVATION OF INFORMATION;
COMMUNICATIONS TO HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
SECTION 703. REPORTS BY TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
SECTION 704. REPORTS BY COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
ARTICLE EIGHT
Consolidation, Merger, Sale, Transfer, or Lease
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 801. COMPANY MAY CONSOLIDATE, ETC.,
ONLY ON CERTAIN TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
SECTION 802. SUCCESSOR SUBSTITUTED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
ARTICLE NINE
Supplemental Indentures
SECTION 901. SUPPLEMENTAL INDENTURES
WITHOUT CONSENT OF HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
SECTION 902. SUPPLEMENTAL INDENTURES
WITH CONSENT OF HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
SECTION 906. REFERENCE IN SECURITIES TO
SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
ARTICLE TEN
Covenants
SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
SECTION 1003. MONEY FOR SECURITIES PAYMENTS
TO BE HELD IN TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -46-
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
SECTION 1005. EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
SECTION 1006. MAINTENANCE OF PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. RIGHT OF REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
SECTION 1102. APPLICABILITY OF ARTICLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
SECTION 1104. SELECTION BY TRUSTEE OF
SECURITIES TO BE REDEEMED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
SECTION 1105. NOTICE OF REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
SECTION 1106. DEPOSIT OF REDEMPTION PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
</TABLE>
-vii-
<PAGE> 9
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
SECTION 1108. SECURITIES REDEEMED IN PART. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
SECTION 1109. REDEMPTION OR FORCED SALE PURSUANT TO THE CASINO CONTROL ACT OR OTHER APPLICABLE REGULATION. . . . -50-
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
SECTION 1202. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
SECTION 1203. PRIOR PAYMENT OF SENIOR INDEBTEDNESS UPON ACCELERATION OF SECURITIES . . . . . . . . . . . . . . . -54-
SECTION 1204. NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
SECTION 1205. WHEN PAYMENT PERMITTED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
SECTION 1206. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . -55-
SECTION 1207. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
SECTION 1208. TRUSTEE TO EFFECTUATE SUBORDINATION AND PAYMENT PROVISIONS . . . . . . . . . . . . . . . . . . . . -55-
SECTION 1209. NO WAIVER OF SUBORDINATION PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -56-
SECTION 1210. NOTICE TO TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -56-
SECTION 1211. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT . . . . . . . . . . . . . . . . . . -57-
SECTION 1212. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . -57-
SECTION 1213. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS; PRESERVATION OF TRUSTEE'S RIGHTS . . . . . . . -57-
SECTION 1214. ARTICLE APPLICABLE TO PAYING AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
SECTION 1215. CERTAIN CONVERSIONS DEEMED PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
ARTICLE THIRTEEN
Conversion of Securities
</TABLE>
-viii-
<PAGE> 10
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1301. CONVERSION PRIVILEGE AND CONVERSION PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
SECTION 1302. EXERCISE OF CONVERSION PRIVILEGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
SECTION 1303. FRACTIONS OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -60-
SECTION 1304. ADJUSTMENT OF CONVERSION PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -60-
SECTION 1305. NOTICE OF ADJUSTMENTS OF CONVERSION PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
SECTION 1306. TRUSTEE'S ADJUSTMENT DISCLAIMER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
SECTION 1307. NOTICE OF CERTAIN CORPORATE ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
SECTION 1308. COMPANY TO RESERVE COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -67-
SECTION 1309. TAXES ON CONVERSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
SECTION 1310. COVENANT AS TO COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
SECTION 1311. CANCELLATION OF CONVERTED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
SECTION 1312. PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE OF ASSETS . . . . . . . . . . . . . . . . . -68-
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
</TABLE>
-ix-
<PAGE> 11
INDENTURE, dated as of July __, 1995, between Bally Entertainment
Corporation, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
8700 West Bryn Mawr, Chicago, Illinois 60631, and FIRST BANK NATIONAL
ASSOCIATION duly organized and existing under the laws of the United States, as
Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 8%
Convertible Senior Subordinated Debentures due December 15, 2000 (herein called
the "Securities") of substantially the tenor and amount hereinafter set forth,
and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises, and the exchange of the 6%
Debentures (hereinafter defined) for the Securities evidenced hereby and the
purchase of the Securities by the Holders thereof, it is mutually agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. DEFINITIONS
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation;
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or Section, as the case may
be, of this Indenture; and
<PAGE> 12
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 614 to act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which national banking institutions in New York, New York
are authorized or obligated by law or executive order to close.
"CCC" means the Casino Control Commission of the State of New Jersey, or
any successor New Jersey agency or New Jersey agencies with authority over
matters currently subject to the authority of the CCC.
"Casino Control Act" means the New Jersey Casino Control Act, as now or
hereinafter amended, and the regulations promulgated thereunder.
"Closing Price" on any Trading Day with respect to the per share price of
the Common Stock means the last reported sales price, regular way on such day,
or, if no sale takes place on such day, the average of the reported closing bid
and asked prices on such day, regular way, in either case as reported on the
New York Stock Exchange ("NYSE") or, if such security is not listed or admitted
for trading on the NYSE, on the principal national securities exchange on which
such security is listed or admitted for trading or, if not listed or admitted
for trading on any national securities exchange, on the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotations
System ("Nasdaq") or, if such security is not quoted on such National Market
System, the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by Nasdaq or, if bid and asked prices for
such security on each day shall not have been reported through Nasdaq, the
average of the bid and asked prices on such day as furnished by any NYSE member
firm selected by the Company for such purpose.
-2-
<PAGE> 13
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or, if at
any time after the execution of this Indenture such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act,
then the body performing such duties at such time.
"Common Stock" includes any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which is not subject to redemption by the Company, other than pursuant to a
Regulatory Redemption; provided, however that subject to the provisions of
Section 1312, shares issuable on conversion of Securities shall include only
shares of the class designated as Common Stock of the Company at the date of
this Indenture or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which are
not subject to redemption by the Company other than pursuant to a Regulatory
Redemption; provided that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares
of all such classes resulting from all such reclassifications.
"Company" means the Person named as the "Company" in the first paragraph
of this Indenture until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall
mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
or an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Constituent Person" has the meaning specified in Section 1312.
"Conversion Agent" means any Person authorized by the Company to convert
Securities in accordance with Article Thirteen.
"Conversion Price" has the meaning specified in Section 1301.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be
administered.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Defaulted Interest" has the meaning specified in Section 307.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended.
-3-
<PAGE> 14
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this Indenture as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including,
for all purposes of this Indenture and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and
govern this Indenture and any such supplemental indenture, respectively.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"nonelecting share" has the meaning specified in Section 1312.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company, and delivered to the Trustee. One of the officers signing up
an Officers' Certificate given pursuant to Section 1004 shall be the principal
executive, financial or accounting officer of the Company. Such officers'
certificate shall conform to the provisions of Section 102.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company (including its internal general counsel), and who shall
be reasonably acceptable to the Trustee. Such opinion of counsel shall conform
to the provisions of Section 102.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Payment Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that, if such
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid obligations of the
Company.
-4-
<PAGE> 15
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
(as of the record date established pursuant to Section 104, or if not so
established as of the date of effectiveness of such request, demand,
authorization, direction, notice, consent or waiver) by the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledge establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
Initially, the Trustee shall act as Paying Agent under this Indenture.
"Person" means any individual, corporation, company, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivisions thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security. For the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" has the meaning set forth in the form of Security.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the close of business on February 28 or August 31 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
"Regulatory Redemption" means the right or obligation of the Company to
redeem its stock pursuant to Article Thirteen of its Certificate of
Incorporation (or any successor provision thereto), or as otherwise mandated by
the laws, rules or regulations of any governmental or quasi-governmental
authority having jurisdiction over gaming activities or interests of the
Company or its Affiliates.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or any
-5-
<PAGE> 16
assistant controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers
and also means, with respect to a particular corporate trust matter, any other
employee to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Securities" has the meaning specified in the Recitals of this Indenture.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Senior Indebtedness" when used with respect to the Company, means the
principal of and interest due on, and other obligations in respect of,
indebtedness of the Company, whether outstanding on the date of this Indenture
or thereafter created, incurred or assumed, which is (a) indebtedness for money
borrowed, except (i) the 6% Debentures, (ii) the 10% Debentures, to which the
Securities are hereby expressly ranked as pari passu in right of payment and
(iii) any such other indebtedness that by the terms of the instrument or
instruments by which such indebtedness was created or incurred expressly
provides that it (x) is junior in right of payment to the Securities or (y)
ranks pari passu in right of payment with the Securities, or (b) any
amendments, renewals, extensions, modifications and refundings 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 (including, without limitation, fees, penalties, indemnities,
commissions, enforcement expenses and other obligations in respect thereof and
all interest accruing after the filing of a petition by or against the Company
under any bankruptcy or insolvency law at the rate (including overdue rate)
specified in the agreements creating or evidencing such indebtedness, whether
or not the claim for such interest is allowed as a claim after such filing in
any proceeding under such law), whether or not evidenced by bonds, debentures,
notes or other written instruments, including, without limitation, matured or
unmatured reimbursement and other obligations with respect to letters of
credit, (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 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, and (iv) any
obligation of the Company for the payment of amounts due under any interest
rate or other swap, cap or collar agreement or other similar instrument or
agreement or foreign currency hedge, exchange or similar interest or agreement,
and (v) any obligation of the Company guaranteeing any indebtedness of the kind
described in clauses (i), (ii), (iii) and (iv) above of any other Person
(whether arising under guarantee, by virtue of partnership arrangements, or by
agreement to keep-well, to purchase assets, goods, securities or services, or
to maintain financial statement conditions or otherwise); provided that
endorsements for collection or deposits in the ordinary course of business
shall not be considered guarantees of the Company.
-6-
<PAGE> 17
"6% Debentures" means the Company's 6% Convertible Subordinated Debentures
due 1998, issued under that certain Indenture dated September 15, 1978 between
the Company and United States Trust Company of New York, as successor trustee,
as amended.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
"10% Debentures" means the Company's 10% Convertible Subordinated
Debentures due 2006, issued under that certain Indenture dated December 15,
1981 between the Company and American National Bank and Trust Company of
Chicago.
"Trading Day" means any Monday, Tuesday, Wednesday, Thursday or Friday,
other than any day on which the Common Stock is not traded on the NYSE or, if
the Common Stock is not traded on the NYSE, on the principal exchange or market
on which the Common Stock is traded or quoted.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall
mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this Indenture was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate, stating that all conditions precedent, if
any, provided in this Indenture (including any covenant compliance which
constitutes a condition precedent) relating to the proposed action have
complied with, if to be given by an officer of the Company, or an Opinion of
Counsel, if
-7-
<PAGE> 18
to be given by counsel, stating that in the opinion of such counsel, all such
conditions precedent, if any, have been complied with. With respect to any
such request for action, the Company also shall comply with any other
requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representation by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representation by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate of opinion, or representations, with respect
to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS; RECORD DATES.
-8-
<PAGE> 19
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by Holders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
Without limiting the generality of the foregoing, a Holder may make, give
or take, by a proxy, or proxies, duly appointed in writing, any request,
demand, authorization, direction, notice, consent, waiver or other action
provided in this Indenture to be made, given or taken by Holders. The
ownership of Securities shall be proved by the Security Register.
The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such
instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may, in the circumstances permitted by the Trust Indenture
Act, fix any day as the record date for the purpose of determining the Holders
entitled to give or take any request, demand, authorization, direction, notice,
consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of
the most recent list of Holders required to be provided pursuant to Section
701) prior to such first solicitation or vote, as the case may be. With regard
to any record date, only the Holders on such date (or their duly designated
proxies) shall be entitled to give or take, or vote on, the relevant action.
Without limiting the foregoing, a Holder entitled hereunder to give or
take any such action with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents, each of which may
-9-
<PAGE> 20
do so pursuant to such appointment with regard to all or any discrete part of
such principal amount.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office,
______________________, _______________, _______, Attention: Corporate
Trust Division (or the principal corporate trust office of any successor
Trustee), or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at (i) the address of its principal office specified in
the first paragraph of this Indenture or (ii) if any subsequent address
therefor shall have been furnished by the Company to the Trustee, at the
then most recent such other address previously furnished in writing to the
Trustee by the Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give such notice by mail, then
such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter
-10-
<PAGE> 21
provision shall control. If any provision of this Indenture modifies or
excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, the Holders of Senior Indebtedness and the Holders of Securities,
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security or the last date on which a Holder has the right to
convert his Securities shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal or conversion of the Securities need not be made on such date, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the Interest Payment Date or Redemption Date, or at the Stated
Maturity, or on such last day for conversion, provided that no interest shall
accrue on the amount of such payment for the period from and after such
Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
SECTION 114. COUNTERPARTS
-11-
<PAGE> 22
This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
ARTICLE TWO
Security Forms
SECTION 201. FORMS GENERALLY.
The Securities and the Trustee's certificates of authentication shall be
in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities.
Conversion notices with respect to any Security shall be in substantially
the form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods on steel engraved borders or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 202. FORM OF FACE OF SECURITY.
Bally Entertainment Corporation
8% Convertible Senior Subordinated Debentures
due December 15, 2000
No. R-___________ $___________
Bally Entertainment Corporation, a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company", which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to ________________, or
registered assigns, the principal sum of ______________ Dollars on December 15,
2000, and to pay interest thereon from March 15, 1995 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on March 15 and September 15 in each year, commencing September
15, 1995, at the rate of 8% per annum, until the principal hereof is paid or
made available for payment. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
-12-
<PAGE> 23
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the close of business on February
28 or August 31 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either, at the election of the Company, be paid to
the Person in whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of the securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture. Payment of the principal of and interest on
this Security will be made at the office or agency of the Company maintained
for that purpose in New York, New York and at any other office or agency
maintained by the Company for such purpose, in such coin or currency of the
United States of America as, at the time of payment, is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
BALLY ENTERTAINMENT CORPORATION
By:
___________________________
Title:
[Corporate Seal]
Attest:
________________________
Title:
-13-
<PAGE> 24
This is one of the Securities referred to in the within-mentioned Indenture.
FIRST BANK NATIONAL ASSOCIATION,
AS TRUSTEE
By:
_____________________________
AUTHORIZED SIGNATURE
Date:___________________________
-14-
<PAGE> 25
SECTION 203. FORM OF REVERSE OF SECURITY.
This Security is one of a duly authorized issue of Securities of the
Company designated as its "8% Convertible Senior Subordinated Debentures due
December 15, 2000" (herein called the "Securities"), limited in aggregate
principal amount to $15,390,000 issued under an Indenture, dated as of
_________ __, 1995 (herein called the "Indenture"), between the Company and
[___________________] as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee, the holders of Senior Indebtedness (as defined in the
Indenture) and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time on or before
the close of business on December 15, 2000, or in case this Security or a
portion hereof is called for redemption, then in respect of this Security or
such portion hereof until and including, but (unless the Company defaults in
making the payment due upon redemption) not after, the close of business on the
Trading Day immediately preceding the Redemption Date, to convert this Security
(or any portion of the principal amount hereof which is $1,000 or an integral
multiple thereof), at the principal amount hereof, or of such portion, into
fully paid and non-assessable shares (calculated as to each conversion to the
nearest 1/100 of a share) of Common Stock of the Company at a conversion price
equal to $_____ aggregate principal amount of Securities for each share of
Common Stock (or at the current adjusted conversion price if an adjustment has
been made as provided in the Indenture) by surrender of this Security, duly
endorsed or assigned to the Company or in blank, to the Company at its office
or agency in New York, New York or at any other office or agency maintained by
the Company for such purpose (each a "Conversion Agent"), accompanied by
written notice to the Company that the Holder hereof elects to convert this
Security, or if less than the entire principal amount hereof is to be
converted, the portion hereof to be converted, and, in case such surrender
shall be made 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 (unless this Security or the portion thereof
being converted has been called for redemption on a Redemption Date within such
period), also accompanied by payment in funds acceptable to the Company of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of this Security then being converted. Subject to the
aforesaid requirement for payment and, in the case of a conversion after the
Regular Record Date next preceding any Interest Payment Date and on or before
such Interest Payment Date, to the right of the Holder of this Security (or any
Predecessor Security) of record at the close of business on such Regular Record
Date to receive an installment of interest (with certain exceptions provided in
the Indenture), no payment or adjustment is to be made on conversion for
interest accrued hereon or for dividends on the Common Stock issued on
conversion. No fractions of shares or scrip representing fractions of shares
will be issued on conversion, but instead of any fractional interest the
Company shall pay a cash adjustment as provided in the Indenture. The
conversion price is subject to adjustment as provided in the Indenture. In
addition, the Indenture provides that in case of certain consolidations or
mergers to which the Company is a party or the sale or transfer of the
properties and assets of the Company substantially as an entirety, the
Indenture shall be amended, without the consent of any Holders
-15-
<PAGE> 26
of Securities, so that this Security, if then outstanding, will be convertible
thereafter, during the period this Security shall be convertible as specified
above, only into the kind and amount of securities, cash and other property, if
any, receivable upon the consolidation, merger, sale or transfer by a holder of
the number of shares of Common Stock into which this Security 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).
No sinking fund is provided for the Securities. The Securities are
subject to redemption upon not less than 30 nor more than 60 days' notice by
mail, at any time as a whole or in part, at the election of the Company, at a
Redemption Price equal to 100% of principal amount of the securities being
redeemed together with accrued interest to the Redemption Date, but interest
installments whose Stated Maturity is on or prior to such Redemption Date will
be payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates
referred to on the face hereof, all as provided in the Indenture.
Securities (or portions thereof) for whose redemption and payment
provision is made in accordance with the Indenture shall cease to bear interest
from and after the date fixed for redemption. In the event of redemption or
conversion of this Security in part only, a new Security or Securities for the
unredeemed or unconverted portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
The indebtedness evidenced by this Security, and the payment of the
principal of and interest on, and other obligations in respect of, this
Security, to the extent and in the manner provided in the Indenture, are
subordinate and subject in right of payment to the prior payment in full in
cash of all Senior Indebtedness, and this Security is issued subject to such
provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.
If an Event of Default shall occur and be continuing, the principal of all
the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the
time Outstanding. The Indenture also contains provisions permitting the
Holders of specified percentages in aggregate principal amount of the
Securities at the time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company of with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Security.
-16-
<PAGE> 27
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this
Security at the times, place and rate, and in the coin and currency, herein
prescribed or to convert this Security as provided in the Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in New York, New York or any other office or
agency maintained by the Company for such purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by the Holder hereof, or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for the like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer,
exchange or conversion, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to the presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for
all purposes, whether or not this Security is overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
If a Holder (or beneficial owner of this Security) is not found qualified
within any time period specified by the CCC or the New Jersey Act, the
Indenture provides that the Company may, at its option, (i) call for the
redemption of this Security on not less than 30 nor more than 60 days notice
(or such other period prescribed by the CCC), or (ii) require the Holder (or
beneficial owner of this Security) to dispose of this Security within 120 days
following such Holder's (or beneficial owner's) receipt of notification of
disqualification under the New Jersey Act (or such other period prescribed by
the CCC). As provided in the Indenture, this Security is redeemable by the
Company, or disposition of this Security by the Holder may be mandated, to the
extent, and on such terms, as may be required by the gaming laws or regulations
or the authorities in any jurisdiction to which the Company or its Subsidiaries
are or may become subject.
The Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-17-
<PAGE> 28
SECTION 204. FORM OF CONVERSION NOTICE.
TO BALLY ENTERTAINMENT CORPORATION
The undersigned owner of this Security hereby irrevocably exercises the
option to convert this Security or portion hereof below designated (which is
$1,000 or an integral multiple thereof), into shares of Common Stock of Bally
Entertainment Corporation in accordance with the terms of the Indenture
referred to in this Security, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares and any Securities representing any unconverted principal amount hereof,
be issued and delivered to the registered Holder hereof unless a different name
has been indicated below. If shares are to be issued in the name of a Person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto. Any amount required to be paid by the undersigned on
account of interest accompanies this Security.
Dated:
Signature(s) must be Your Signature:
guaranteed by a Member
of the Medallion Signature
Guarantee Program or other ________________________________
"Eligible Guarantor Signature
Institution" (as defined in
Rule 17Ad-15 of the
Exchange Act) if shares of Common
Stock are to be delivered
or Securities to be issued,
other than to and in the name
of the registered Holder.
___________________________________
Signature Guarantee
Fill in for registration of
shares of Common Stock and
Securities if to be issued
otherwise than to the
registered Holder.
___________________________________
Name
___________________________________
Address
___________________________________
-18-
<PAGE> 29
Please print name and address
(including zip code number)
SOCIAL SECURITY OR TAXPAYER
IDENTIFICATION NUMBER
___________________________________ Portion of Security to be
Converted (in an integral
multiple of $1,000, if
less than all):
________________________________
-19-
<PAGE> 30
[FORM OF ASSIGNMENT]
For value received _____________________ hereby sell(s), assign(s) and
transfer(s) unto __________________________ (please insert social security or
other identifying number of assignee) the within Security and hereby
irrevocably constitutes and appoints ________________ attorney to transfer the
said Security on the books of the Company, with full power of substitution in
the premises.
Dated:
________________________________ _________________________________
Signature(s)
Signature(s) must be guaranteed
by a Member of the Medallion
Signature Guarantee Program
or other "Eligible Guarantor
Institution" (as defined in
Rule 17Ad-15 of the
Exchange Act).
___________________________________
Signature Guarantee
NOTICE: The signature on the conversion notice or the assignment must
correspond with the name as written upon the face of the Security in every
particular without alteration or enlargement or any change whatever.
-20-
<PAGE> 31
ARTICLE THREE
The Securities
SECTION 301. TITLE AND TERMS.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $15,390,000 except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other securities pursuant to Sections 304, 305,
306, 906, 1108 or 1302.
The Securities shall be known and designated as the "8% Convertible Senior
Subordinated Debentures due December 15, 2000" of the Company. Their Stated
Maturity shall be December 15, 2000, and they shall bear interest at the rate
of 8% per annum, from March 15, 1995 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, as the case may be,
payable semi-annually on March 15, and September 15, commencing September 15,
1995, until the principal thereof is paid or made available for payment.
The principal of and interest on the Securities shall be payable at the
office or agency of the Company in New York, New York maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
The Securities shall be redeemable as provided in Article Eleven.
The Securities are not subject to a Sinking Fund.
The Securities shall be subordinated in right of payment to Senior
Indebtedness of the Company as provided in Article Twelve.
The Securities shall be convertible as provided in Article Thirteen.
SECTION 302. DENOMINATIONS.
The Securities shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
-21-
<PAGE> 32
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities executed by the Company to the
Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Securities which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Securities in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities
of authorized denominations. Until so exchanged the temporary Securities shall
in all respects be entitled to the same benefits under this Indenture as
definitive Securities.
SECTION 305. REGISTRATION, REGISTRATION OF
TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
-22-
<PAGE> 33
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an office
or agency of the Company designated pursuant to Section 1002 for such purpose,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferees, one or more new Securities of any
authorized denominations and of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or by his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1108 and 1202 not involving any
transfer.
The Company shall not be required (i) to issue, register the transfer of
or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1104 and ending at the close of business
on the date of such mailing, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
SECTION 306. MUTILATED, DESTROYED,
LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless,
-23-
<PAGE> 34
then, in the absence of notice to the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Company shall execute and the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security, a new Security of like tenor and principal amount and bearing
a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST;
INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee
-24-
<PAGE> 35
for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this clause provided. Thereupon, the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and,
in the name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and shall
no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
In the case of any Security which is converted after any Regular Record
Date next preceding any Interest Payment Date and on or before such Interest
Payment Date (other than any Security 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 to the Holder of such Security
(or one or more Predecessor Securities) at the close of business on such
Regular Record Date notwithstanding such conversion. Except as otherwise
expressly provided in the immediately preceding sentence, in the case of any
Security which is converted, interest whose Stated Maturity is after the date
of conversion of such Security shall not be payable.
SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of and (subject to Section
307) interest on such Security and for all other purposes whatsoever, whether
or not such Security is overdue, and neither the Company, the Trustee nor any
agent of the Company or the Trustee shall be affected by notice to the
contrary.
-25-
<PAGE> 36
SECTION 309. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or conversion shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Securities held
by the Trustee shall be disposed of as directed by a Company Order.
SECTION 310. COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to any
surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(a) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such trust,
as provided in Section 1003) have been delivered to the Trustee for
cancellation; or
(b) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
-26-
<PAGE> 37
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the
expense, of the Company, or
(iv) are delivered to the Trustee for conversion in
accordance with Article Thirteen,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee, as trust funds
in trust for that purpose, an amount sufficient to pay and discharge
the entire indebtedness on such Securities not theretofore delivered
to the Trustee for cancellation, for principal and interest to the
date of such deposit (in the case of Securities which have become
due and payable) or to the Stated Maturity or Redemption Date, as
the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (b) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee. All monies
deposited with the Trustee pursuant to Section 401 (and held by it or any
Paying Agent) for the payment of Securities subsequently converted shall be
returned to the Company upon Company Request.
ARTICLE FIVE
Remedies
SECTION 501. EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary
-27-
<PAGE> 38
or be effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of any interest upon any Security when
it becomes due and payable, and continuance of such default for a period
of 30 days; or
(2) default in the payment of the principal of any Security at its
Maturity; or
(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default or
breach for a period of 90 days after there has been given, by registered
or certified mail, to the Company by the Trustee, or to the Company and
the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(4) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (B) a decree or order
adjudging the Company a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under any applicable Federal
or State law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect
for a period of 60 consecutive days; or
(5) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under any applicable Federal or
State law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company
or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due.
-28-
<PAGE> 39
SECTION 502. ACCELERATION OF MATURITY;
RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
paragraph (4) or (5) of Section 501) occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Securities may declare the principal of all the
Securities to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by the Holders), and upon any such
declaration such principal shall become immediately due and payable; provided
that notwithstanding the foregoing, so long as any Senior Indebtedness remains
outstanding, no such declaration shall result in such Securities becoming due
and payable until the earlier of (i) ten Business Days after such declaration,
provided such Event of Default is then continuing, and (ii) any acceleration of
Senior Indebtedness under the terms thereof. If an Event of Default specified
in paragraph (4) or (5) of Section 501 occurs, then and in every such case the
principal of all the Securities shall become immediately due and payable
without declaration or any other notice to the Trustee or the Company.
Notwithstanding anything contained in this Indenture to the contrary, no Holder
shall be entitled to receive the Redemption Price with respect to any Security
that has become due and payable as a result of acceleration of payment of the
Securities upon such declaration or the occurrence of such Event of Default, as
the case may be, to the extent the Redemption Price exceeds the principal
amount of such Security, other than in respect of any Security as to which
notice of redemption has been given under this Indenture prior to the
occurrence of an Event of Default.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may on behalf of the Holders of all the Securities
rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of any Securities which have become due
otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities,
and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
-29-
<PAGE> 40
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such declaration
of acceleration, have been cured or waived as provided in Section 513 or
are otherwise no longer continuing.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND
SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of any
Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest, and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue principal and on
any overdue interest, at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustees, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or any other
obligor upon the Securities), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any monies
or other property payable or deliverable on any such claims and to distribute
the same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
607.
-30-
<PAGE> 41
No provision of this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS
WITHOUT POSSESSION OF SECURITIES
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any such proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name, as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Subject to Article Twelve, any money collected by the Trustee pursuant to
this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Securities for principal and interest, respectively.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee a reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
-31-
<PAGE> 42
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all of the Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO
RECEIVE PRINCIPAL AND
INTEREST AND TO CONVERT.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and (subject to Section 307) interest on such
Security on the respective Stated Maturities expressed in such Security (or, in
the case of redemption, on the Redemption Date) and to convert such Security in
accordance with Article Thirteen and to institute suit for the enforcement of
any such payment and right to convert, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
-32-
<PAGE> 43
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
any acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. WAIVER OF PAST DEFAULTS.
In addition to the rights of the Holders of a majority in principal amount
of the Outstanding Securities, on behalf of the Holders of all the Securities,
to rescind and annul a declaration of acceleration in accordance with Section
502, the Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of or interest on any Security,
or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and may assess costs
against any such party litigant, in the manner and to the extent provided in
the Trustee Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to request such an
undertaking or to make such an assessment in any suit by the Company instituted
or in any suit for the enforcement of the right to convert any Security in
accordance with Article Thirteen.
-33-
<PAGE> 44
SECTION 515. WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
No provision of this Indenture shall require the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers,
if it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured
to it. Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 602. DEFAULTS: NOTICE AND DUTIES.
A. The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; provided, however, that
in the case of any default of the character specified in Section 501(3), no
such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purposes of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default.
B. (1) If an Event of Default or default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
as a prudent person would exercise or use under the circumstances in the
conduct of its own affairs.
(2) Except during the continuance of an Event of Default or default:
(a) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture which are adverse to
the Trustee.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions
-34-
<PAGE> 45
expressed therein, upon Opinions of Counsel or Officers' Certificates
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine such Opinions of
Counsel and Officers' Certificates to determine whether or not they
conform to the requirements of this Indenture.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(2) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel, and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee
-35-
<PAGE> 46
shall not be responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder.
SECTION 604. NOT RESPONSIBLE FOR RECITALS
OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof.
SECTION 605. MAY HOLD SECURITIES.
The Trustee, any Paying Agent, any Security Registrar or any other agent
of the Company, in its individual or any other capacity, may become the owner
or pledgee of Securities and, subject to Sections 608 and 613, may otherwise
deal with the Company with the same rights it would have if it were not
Trustee, Paying Agent, Security Registrar or such other agent.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under
no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its gross negligence or
bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without gross negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
-36-
<PAGE> 47
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and whose
parent has a combined capital and surplus of at least $50,000,000 and its
Corporate Trust Office in New York, New York. If such Person publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 611.
The Trustee may resign at any time by giving written notice thereof to the
Company. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 60 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
The Trustee may be removed at any time by Act of the Holders of a majority
in principal amount of the Outstanding Securities, delivered to the Trustee and
to the Company.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation.
-37-
<PAGE> 48
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
If the Trustee shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of Trustee for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee. If, within
one year after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided, any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee.
The Company shall give notice of each resignation and each removal of the
Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective, and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all
-38-
<PAGE> 49
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper or
any further act on the part of any of the parties hereto. In case any
Securities shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversation or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents which shall be
authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer, partial
conversion or partial redemption or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the authentication
and delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the
United States of America, any State thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $50,000,000 and subject to supervision or
examination by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purpose
of this Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an Authenticating
Agent shall cease to be eligible in accordance with the provisions of this
Section, such Authenticating Agent shall resign immediately in the manner and
with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an
-39-
<PAGE> 50
Authenticating Agent by giving written notice thereof to such Authenticating
Agent and to the Company. Upon receiving such a notice of resignation or upon
such a termination, or in case at any time such Authenticating Agent shall
cease to be eligible in accordance with the provisions of this Section the
Trustee may appoint a successor Authenticating Agent which shall be acceptable
to the Company and shall mail written notice of such appointment by first-class
mail, postage prepaid, to all Holders as their names and addresses appear in
the Security Register. Any successor Authenticating Agent upon acceptance of
its appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named as
an Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 607.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned Indenture.
FIRST BANK NATIONAL ASSOCIATION,
AS TRUSTEE
By:____________________________
AS AUTHENTICATING AGENT
By:_____________________________
AUTHORIZED SIGNATURE
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES
AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(1) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
-40-
<PAGE> 51
(2) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior
to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. PRESERVATION OF INFORMATION;
COMMUNICATIONS TO HOLDERS.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar or Paying Agent. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by Section
312 of the Trust Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
agent of either of them shall be held accountable by reason of any disclosure
of information as to names and addresses of Holders made pursuant to Section
312 of the Trust Indenture Act.
SECTION 703. REPORTS BY TRUSTEE.
Within 60 days after May 15 of each year commencing with the first May 15
following the date on which this Indenture is qualified under the Trust
Indenture Act, the Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
Section 313 of the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 704. REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission, and transmit
to Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to Section 314 of the Trust Indenture Act
at the times and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission. The Trustee has no duty to review financial and other reports for
purposes of determining
-41-
<PAGE> 52
compliance with this or any other Section of this Indenture. The Trustee shall
not be responsible for determining whether the Company has filed such
information, documents and other reports.
ARTICLE EIGHT
Consolidation, Merger, Sale, Transfer, or Lease
SECTION 801. COMPANY MAY CONSOLIDATE, ETC.,
ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge into any other Person or
sell, transfer or lease its properties and assets substantially as an entirety
to any Person, and the Company shall not 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:
(1) in case the Company shall consolidate with or merge into
another Person or sell, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation, or into which the Company is merged or the Person which
acquires by sale or transfer, or which leases, the properties and assets
of the Company substantially as an entirety shall be a corporation,
limited liability company, partnership or trust, shall be organized and
validly existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the
principal of and interest on all the Securities and the performance or
observance of every covenant of this Indenture on the part of the Company
to be performed or observed and shall have provided for conversion rights
in accordance with Section 1312;
(2) immediately after giving effect to such transaction, no Event
of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing;
and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture comply with this Article and that all conditions
precedent herein provided for relating to such transaction have been
complied with.
SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the Company into,
any other Person or any sale, transfer or lease of the properties and assets of
the Company substantially as an entirety in accordance with Section 801, the
successor Person formed by such consolidation or into which the Company is
merged or to which such sale, transfer or lease is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein, and thereafter, except in the case of a lease, the
predecessor Person
-42-
<PAGE> 53
shall be relieved of, and released from, all obligations and covenants under
this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. SUPPLEMENTAL INDENTURES
WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company (when authorized by a
Board Resolution) and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
herein and in the Securities;
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company;
(3) to add any additional Events of Default;
(4) to secure the Securities;
(5) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Section 1312;
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provisions herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions
of this Indenture, provided that such action pursuant to this clause (6)
shall not adversely affect the interests of the Holders or the holders of
any Senior Indebtedness in any material respect;
(7) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities; or
(8) to make any other change that does not adversely affect the
rights of any Holder or any holder of Senior Indebtedness.
SECTION 902. SUPPLEMENTAL INDENTURES
WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities, by Act of said Holders delivered to the
Company and the Trustee, the
-43-
<PAGE> 54
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to, changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Security affected
thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon, or change the place of payment
where, or the coin or currency in which, any Security or any interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date),
adversely affect the right to convert any Security as provided in Article
Thirteen (except as permitted by Section 901(5)), or modify the provisions
of this Indenture with respect to subordination of the Securities in a
manner adverse to the Holders;
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for
any waiver of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences provided for in this
Indenture; or
(3) modify any of the provisions of this Section or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining Holders of Outstanding Securities entitled to consent to
any indenture supplemental hereto. If such a record date is fixed, any Holder
on such record date shall be entitled to consent in writing to such
supplemental indenture, regardless of whether such Holder (or such beneficial
owner) remains a Holder (or a beneficial owner) after such record date or is a
Holder (or a beneficial owner) when joining such notice; and no Person who
becomes a Holder after such record date shall be entitled to consent to such
supplemental indenture. Unless Holders on such record date of the requisite
principal amount of the Outstanding Securities shall have consented in writing
to such supplemental indenture within 180 days after such record date, such
consent shall automatically and without further action by any Holder (or
beneficial owner) be canceled and of no further effect. Nothing in this
paragraph shall be construed to prevent the Trustee from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph if the Holders on such record date previously set do not take
action within 180 days of such record date (whereupon the record date
previously set shall automatically and with no action by any Person be canceled
and of no further effect).
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
-44-
<PAGE> 55
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
Indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. REFERENCE IN SECURITIES TO
SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the executions of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.
ARTICLE TEN
Covenants
SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST.
The Company will duly and punctually pay the principal of and interest on
the Securities in accordance with the terms of the Securities and this
Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in New York, New York an office or agency where
Securities may be presented or surrendered for payment, where Securities may be
surrendered for registration of transfer or exchange, where Securities may be
surrendered for conversion and
-45-
<PAGE> 56
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The Company will give prompt written notice
to the Trustee of the locations, and any change in the location, of such office
or agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other offices
or agencies (in or outside New York, New York) where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in New York, New York for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
SECTION 1003. MONEY FOR SECURITIES PAYMENTS
TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it will,
subject to Article Twelve, on each due date of the principal of or interest on
any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal or interest so
becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, on or
prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by Section 317(b) of the Trust Indenture Act, subject to
Article Twelve, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will, subject to Article Twelve: (i) hold in trust for the benefit of the
Holders or the Trustee all sums held by such Paying Agent for the payment of
the principal of or interest on the Securities, and shall give to the Trustee
notice of any default by the Company or any other obligor upon the Securities
in the making of any such payment, and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same terms as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent
-46-
<PAGE> 57
to the Trustee, such Paying Agent shall be released from all further liability
with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of or interest on any
Security and remaining unclaimed for two years after such principal or interest
has become due and payable shall, subject to Article Twelve, be paid to the
Company on Company Request or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers
thereof the Company is in default in the performance and observance of any of
the terms, provisions and conditions of this Indenture (without regard to any
period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge. Each such Officer's
Certificate shall comply in all respects with the requirements set forth in
Sections 102 and 103.
SECTION 1005. EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve its existence or any such right or
franchise if the failure to preserve its existence or any such right or
franchise would not have a material adverse effect on the financial condition
of the Company.
SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company will cause all properties used or useful in the conduct of its
business to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or maintenance of any of
such properties if such discontinuance would not have a material adverse effect
on the financial condition of the Company.
SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed
-47-
<PAGE> 58
upon the Company or upon the income, profits or property of the Company, and
(2) all lawful claims for labor, materials and supplies which, if unpaid, might
by law become a lien upon the property of the Company; provided, however, that
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings or if the failure to pay or discharge or cause to be paid or
discharged any such tax assessment, charge or claim would not have a material
adverse effect on the financial condition of the Company.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. RIGHT OF REDEMPTION.
The Securities may be redeemed at the election of the Company, at any
time, as a whole or from time to time in part, at the Redemption Prices
specified in the form of Security herein before set forth, together with
accrued interest to the Redemption Date.
SECTION 1102. APPLICABILITY OF ARTICLE.
Redemption of Securities at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at
the election of the Company of less than all the Securities, the Company shall,
at least 45 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of
such Redemption Date and of the principal amount of Securities to be redeemed.
SECTION 1104. SELECTION BY TRUSTEE OF
SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $1,000 or any integral multiple thereof) of the principal amount of
Securities of a denomination larger than $1,000.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed
(so far as may be) to be the portion selected for redemption.
-48-
<PAGE> 59
Securities which have been converted during a selection of Securities to be
redeemed shall be treated by the Trustee as Outstanding for the purpose of such
selection.
The Trustee shall promptly notify the Company and each Security Registrar
in writing of the Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption of any
Securities, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date, (or, in the event of
a redemption pursuant to Section 1109, and if applicable, a statement that
no interest is payable with respect to such Security),
(5) the conversion price, the date on which the right to convert
the Securities to be redeemed will terminate and the place or places where
such Securities may be surrendered for conversion, and
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. DEPOSIT OF REDEMPTION PRICE.
-49-
<PAGE> 60
Prior to any Redemption Date, the Company shall deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date other than any Securities called for
redemption on that date which have been converted prior to the date of such
deposit.
If any Security called for redemption is converted, any money deposited
with the Trustee or with any Paying Agent or so segregated and held in trust
for the redemption of such Security shall (subject to any right of the Holder
of such Security or any Predecessor Security to receive interest as provided in
the last paragraph of Section 307) be paid to the Company upon Company Request
or, if then held by the Company, shall be discharged from such trust.
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with accrued
interest, if any, from the last Interest Payment Date to which interest has
been paid or duly provided for to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
307.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal shall, until paid, bear interest from the
Redemption Date at the rate borne by the Security.
SECTION 1108. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered at
an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a new Security or Securities, of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
SECTION 1109. REDEMPTION OR FORCED SALE PURSUANT TO THE CASINO CONTROL ACT OR
OTHER APPLICABLE REGULATION.
-50-
<PAGE> 61
(1) Notwithstanding the other provisions of this Article Eleven, if
the CCC or any other gaming authority in another jurisdiction finds that a
Holder or beneficial owner of Securities must be found licensed or
qualified or suitable to hold or own the Securities under the Casino
Control 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 CCC or such other
gaming authority or the Casino Control Act or such other gaming
regulation, the Company shall have the right pursuant to this Section 1109
and the Securities, at its option, (i) to require such Holder or
beneficial owner to dispose of all or a portion of such Holder's or
beneficial owner's Securities within 120 days after receipt of notice by
such Holder or beneficial owner of its disqualification under the Casino
Control Act or any other applicable gaming regulation (or such different
period as may be prescribed by the CCC or such other gaming authority), or
(ii) to call for redemption the Securities of 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 CCC or any such other
gaming authority).
(2) If such Holder or beneficial owner, having been given the
opportunity by the Company to dispose of such Holder's or beneficial
owner's Securities, shall have failed to do so within the prescribed time
period, the Company shall have the right to redeem such Holder's or
beneficial owner's Securities on five days' notice.
(3) On any redemption of Securities pursuant to this Section 1109,
the price for redemption 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 Securities, together
with (if permitted by the Casino Control Act or any other gaming
regulation in another jurisdiction or by the orders of the CCC or any such
other gaming authority in such other jurisdiction) accrued interest, if
any, to the Redemption Date, unless a different price for redemption or
other payment, remuneration or related terms or restrictions are required
by the CCC or any such other gaming authority, in which event such price,
terms and restrictions shall be the price for redemption and terms of
redemption. Each holder and beneficial owner by accepting a Security
agrees to the provisions of this Section 1109 and the Securities and
agrees to inform the Company and provide evidence, upon request made
pursuant to this Section 1109 of the price at which such Holder or
beneficial owner acquired such Holder's or beneficial owner's Securities.
(4) Any redemption notice given by the Company under this Section
1109 shall state (i) that the Securities are being called for redemption
as a result of the Holder's or beneficial owner's status under the Casino
Control Act or any other gaming regulation of another jurisdiction or with
the CCC or such other gaming authority, (ii) whether accrued interest is
payable to the Holder under the Casino Control Act or other applicable
gaming regulation and (iii) the information required by subsections (1),
(2), (3), (4) and (6) of Section 1105.
SECTION 1110. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION.
-51-
<PAGE> 62
In connection with any redemption of Securities, the Company may arrange
for the purchase and conversion of any Securities called for redemption by an
agreement with one or more investment bankers or other purchasers to purchase
such Securities by paying to the Trustee or Paying Agent in trust for the
Holders, on or before the close of business on the Redemption Date, an amount
that, together with any amounts deposited with the Trustee or Paying Agent by
the Company for the redemption of such Securities is not less than the
Redemption Price, together with accrued but unpaid interest to the Redemption
Date, of such Securities. Notwithstanding anything to the contrary contained
in this Article Eleven, the obligation of the Company to pay the Redemption
Price for the Securities, together with all accrued but unpaid interest, shall
be deemed to be satisfied and discharged to the extent such amount is so paid
by such purchasers. If such an agreement is entered into, any Securities not
duly surrendered for conversion by the Holders thereof may, at the option of
the Company, be deemed, to the fullest extent permitted by law, acquired by
such purchasers from such Holders and (notwithstanding anything to the contrary
contained in Article Eleven) surrendered by such purchasers for conversion, all
as of the date immediately prior to the close of business on the Redemption
Date, subject to payment of the above amount as aforesaid. The Trustee or
Paying Agent shall hold and pay to the Holders whose Securities are selected
for redemption any such amount paid to it for purchase and conversion in the
same manner as it would monies deposited with it by the Company for the
redemption of Securities. Without the Trustee or Paying Agent's prior written
consent, no arrangement between the Company and such purchasers for the
purchase and conversion of any Securities shall increase or otherwise affect
any of the powers, duties, responsibilities or obligations of the Trustee or
Paying Agent as set forth in this Indenture.
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS.
Anything in this Indenture or the Securities to the contrary
notwithstanding, the Company covenants and agrees, and each Holder of a
Security, by his acceptance thereof, likewise covenants and agrees, that, to
the extent and in the manner hereinafter set forth in this Article, the
indebtedness represented by the Securities and the payment of the principal of
and interest on, and other obligations in respect of, each and all of the
Securities are hereby expressly made subordinate and subject in right of
payment to the prior payment in full in cash of all Senior Indebtedness.
Holders of Senior Indebtedness need not prove reliance on the subordination
provisions hereof. For purposes of this Indenture, "other obligations in
respect of" the Securities means, without limitation, any reimbursement,
compensation or contribution obligations, any liquidated damages, obligations,
liabilities in connection with any breach of representation or warranty, any
obligations in connection with rights of redemption, repurchase or rescission
under this Indenture or by law or otherwise and any obligations under Section
1303 to pay cash, other than fractional shares.
SECTION 1202. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
-52-
<PAGE> 63
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of the
Company, then and in any such event the holders of Senior Indebtedness shall be
entitled to receive payment in full in cash of all amounts due or to become due
on or in respect of all Senior Indebtedness, or provision shall be made for
such payment in cash before the Holders of the Securities are entitled to
receive any direct or indirect payment or distribution on account of principal
of or interest on, or other obligations in respect of, the Securities (whether
by payment, acquisition, retirement, defeasance, redemption, repurchase or
otherwise), and to that end the holders of Senior Indebtedness shall be
entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or securities,
which may be payable or deliverable in respect of the Securities in any such
case, proceeding, dissolution, liquidation or other winding up or other event
described in clause (a), (b) or (c).
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of any kind or character, whether in cash, property or
securities, before all Senior Indebtedness is paid in full in cash or payment
thereof provided for, then and in such event such payment or distribution shall
be paid over or delivered forthwith by such Holder and, if held by the Trustee,
by the Trustee to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or distribution of
assets of the Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in
full in cash, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "cash, property or
securities" shall (so long as the effect of this paragraph is not to cause the
Securities to be treated in any proceeding or other event described in this
Section as part of the same class of claims as any Senior Indebtedness or any
class of claims on a parity with or senior to any Senior Indebtedness for any
payment or distribution) not be deemed to include shares of stock of the
Company as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment which are
subordinated in right of payment to all Senior Indebtedness which may at the
time be outstanding to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the sale or
transfer of its properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Article Eight shall not be
deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshalling of assets and liabilities of the
Company for the purposes of this Section if the Person formed by such
consolidation or into which the Company is merged or which acquires by sale or
transfer such properties and assets substantially as an entirety, as the case
may be, shall, as a part of such consolidation, merger, sale or transfer,
comply with the conditions set forth in Article Eight.
-53-
<PAGE> 64
SECTION 1203. PRIOR PAYMENT OF SENIOR INDEBTEDNESS UPON ACCELERATION OF
SECURITIES.
In the event that any Securities are declared due and payable before their
Stated Maturity, then and in such event the holders of the Senior Indebtedness
outstanding at the time such Securities so become due and payable shall be
entitled to receive payment in full in cash of all amounts due or to become due
on or in respect of such Senior Indebtedness, or provision shall be made for
such payment in cash, before the Holders of the Securities are entitled to
receive any direct or indirect payment or distribution on account of the
principal of or interest on, or other obligations in respect of, the Securities
(whether by payment, acquisitions, retirement, defeasance, redemption,
repurchase or otherwise).
In the event that, notwithstanding the foregoing, the Trustee or the
Holder of any Security shall have received any payment or distribution of any
kind or character prohibited by the foregoing provisions of this Section, then
and in such event such payment shall be paid over and delivered forthwith by
such Holder and, if held by the Trustee, by the Trustee to the holders of
Senior Indebtedness or their representatives, ratably, according to the
respective amounts thereof.
The provisions of this Section shall not apply to any payment with respect
to which Section 1202 would be applicable.
SECTION 1204. NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
(i) In the event and during the continuation of any default in the payment
of principal of or interest on any Senior Indebtedness, (ii) in the event that
any event of default with respect to any Senior Indebtedness shall have
occurred and be continuing permitting the holders of such Senior Indebtedness
(or a trustee on behalf of the holders thereof) to declare such Senior
Indebtedness due and payable prior to the date on which it would otherwise have
become due and payable, unless and until such event of default shall have been
cured or waived or shall have ceased to exist and, if any such Senior
Indebtedness shall have been accelerated, such acceleration shall have been
rescinded or annulled, or (iii) in the event any judicial proceeding shall be
pending with respect to any such default in payment or event of default, then,
in each such case, no direct or indirect payment or distribution shall be made
on account of principal of or interest on, or the obligations in respect of,
the Securities (whether by payment, acquisition, retirement, defeasance,
redemption, repurchase or otherwise).
In the event that, notwithstanding the foregoing, the Trustee or the
Holder of any Security shall have received any payment or distribution of any
kind or character prohibited by the foregoing provisions of this Section, then
and in such event such payment or distribution shall be paid over and delivered
forthwith by such Holder and, if held by the Trustee, by the Trustee to the
holders of Senior Indebtedness or their representatives, ratably, according to
the respective amounts thereof.
The provisions of this Section shall not apply to any payment with respect
to which Section 1202 would be applicable.
-54-
<PAGE> 65
SECTION 1205. WHEN PAYMENT PERMITTED.
Nothing contained in this Article or elsewhere in this Indenture or in any
of the Securities shall prevent (a) the Company, at any time, except during the
pendency of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 1202 or under the conditions
described in Section 1203 or 1204, from making payments of principal of or
interest on the Securities, or (b) the application by the Trustee of any money
deposited with it hereunder to the payment of or on account of the principal of
or interest on the Securities, if, at the time of such application by the
Trustee, it did not have notice as provided in Section 1210 that such payment
would have been prohibited by the provisions of this Article.
SECTION 1206. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
Subject to the payment in full in cash of all Senior Indebtedness, the
Holders of the Securities shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments and distributions of cash,
property and securities applicable to the Senior Indebtedness until the
principal of and interest on the Securities shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of
the Senior Indebtedness of any cash, property or securities to which the
Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article, and no payments over pursuant to the provisions of
this Article to the holders of Senior Indebtedness by Holders of the Securities
or the Trustee, shall, as among the Company, its creditors other than holders
of Senior Indebtedness and the Holders of the Securities, be deemed to be a
payment or distribution by the Company to or on account of the Senior
Indebtedness.
SECTION 1207. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the purpose
of defining the relative rights of the Holders of the Securities on the one
hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities
is intended to or shall (a) impair, as among the Company, its creditors (other
than holders of Senior Indebtedness) and the Holders of the Securities, the
obligation of the Company, which is absolute and unconditional (and which,
subject to the rights under this Article of the holders of Senior Indebtedness,
is intended to rank equally with all other general obligations of the Company),
to pay to the Holders of the Securities the principal of and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms; (b) affect the relative rights against the Company of the Holders
of the Securities and creditors of the Company other than the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article of the
holders of Senior Indebtedness to receive cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder.
SECTION 1208. TRUSTEE TO EFFECTUATE SUBORDINATION AND PAYMENT PROVISIONS.
-55-
<PAGE> 66
Each Holder of a Security, by his acceptance thereof, authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination and payment provisions provided in
this Article and appoints the Trustee his attorney-in-fact for any and all
such purposes.
SECTION 1209. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders of the Securities,
without incurring responsibility to the Holders of the Securities and without
impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or, extend the time of payment of, or renew or alter,
Senior Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 1210. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to Trustee of any fact known
to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee therefor; and,
prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Section at least one Business Day
prior to the date upon which by the terms hereof any money may become payable
for any purpose (including, without limitation, the payment of the principal of
or interest on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive
such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by it within one Business Day prior to such date.
-56-
<PAGE> 67
Subject to the provisions of Section 601, the Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
to be a holder of Senior Indebtedness (or a trustee therefor) to establish that
such notice has been given by a holder of Senior Indebtedness or a trustee
therefor. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 1211. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution referred to in this Article, the Trustee,
subject to the provisions of Section 601, and the Holders of the Securities
shall be entitled to rely upon any order or decree entered by any court of
competent jurisdiction in which such insolvency, bankruptcy, receivership,
liquidation, reorganization, dissolution, winding up or similar case or
proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Trustee or
to the Holders of Securities, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of the
Senior Indebtedness and other indebtedness of the Company, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article.
SECTION 1212. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness and shall not be liable to any such holders if it shall
in good faith mistakenly pay over or distribute to Holders of Securities or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.
SECTION 1213. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS;
PRESERVATION OF TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article with respect to any Senior Indebtedness which may at
any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
-57-
<PAGE> 68
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.
SECTION 1214. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided,
however, that Sections 1210 and 1213 shall not apply to the Company or any
Affiliate of the Company if it or such Affiliate acts as Paying Agent.
SECTION 1215. CERTAIN CONVERSIONS DEEMED PAYMENT.
For the purposes of this Article only, (1) the issuance and delivery of
junior securities upon conversion of Securities in accordance with Article
Thirteen shall not be deemed to constitute a payment or distribution on account
of the principal of or interest on Securities or on account of the purchase or
other acquisition of Securities, and (2) the payment, distribution, issuance or
delivery of cash, property or securities (other than junior securities) upon
conversion of a Security shall be deemed to constitute payment on account of
the principal of such Security. For the purposes of this Section, the term
"junior securities" means (a) shares of any stock of any class of the Company
and (b) securities of the Company which are subordinated in right of payment to
all Senior Indebtedness which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a
greater extent than, the Securities are so subordinated as provided in this
Article. Nothing contained in this Article or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of the
Securities, the right, which is absolute and unconditional, of the Holder of
any Security to convert such Security in accordance with Article Thirteen.
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. CONVERSION PRIVILEGE AND CONVERSION PRICE.
Subject to and upon compliance with the provisions of this Article, at the
option of the Holder thereof, any Security or any portion of the principal
amount of any Security which equals $1,000 or an integral multiple thereof may
be converted at the principal amount thereof, or of such portion thereof, into
fully paid and non-assessable shares (calculated as to each conversion to the
nearest 1/100 of a share) of Common Stock, at the conversion price, determined
as hereinafter provided, in effect at the time of conversion. Such conversion
right shall expire at the close of business on the Trading Day immediately
preceding the Maturity Date. In case a Security or portion thereof is called
for redemption, such conversion right in respect of the Security or portion so
called shall expire at the close of business on the Trading Day
-58-
<PAGE> 69
immediately preceding the Redemption Date unless the Company defaults in making
the payment due upon redemption.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price") shall be initially [$ ] in
principal amount per share of Common Stock. The conversion price shall be
adjusted in certain instances as provided in this Article.
SECTION 1302. EXERCISE OF CONVERSION PRIVILEGE.
In order to exercise the conversion privilege, the Holder of any Security
to be converted shall surrender such Security, duly endorsed or assigned to the
Company or in blank, at any office or agency of the Company maintained pursuant
to Section 1002, accompanied by written notice to the Company in the form and
manner provided in the Security (or such other notice as is acceptable to the
Company) at such office or agency that the Holder elects to convert such
Security or, if less than the entire principal amount thereof is to be
converted, the portion thereof to be converted. Securities 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 shall (except in the case of Securities or portions
thereof which have been called for redemption on a Redemption Date within such
period) be accompanied by payment in funds acceptable to the Company of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of Securities being surrendered for conversion. Subject to
the provisions of Section 307 relating to the payment of Defaulted Interest by
the Company, in the case of a Security which is converted after any Regular
Record Date next preceding any Interest Payment Date and on or before such
Interest Payment Date (other than any Security whose Maturity is prior to such
Interest Payment Date) the interest whose Stated Maturity is on such Interest
Payment Date shall be payable on such Interest Payment Date to the Holder of
such Security (or one or more Predecessor Securities) at the close of business
on such Regular Record Date notwithstanding such conversion. Except as set
forth above and subject to the fourth paragraph of Section 307, no payment or
adjustment shall be made upon any conversion on account of any interest accrued
on the Securities surrendered for conversion or on account of any dividends on
the Common Stock issued upon conversion.
Securities shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of such Securities for conversion in
accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock as and
after such time. As promptly as practicable on or after the conversion date,
the Company shall issue and shall deliver at such office or agency a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in Section 1303.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in
-59-
<PAGE> 70
aggregate principal amount equal to the unconverted portion of the principal
amount of such Security.
SECTION 1303. FRACTIONS OF SHARES.
No fractional shares of Common Stock or scrip representing fractions of
shares shall be issued upon conversion of Securities. If more than one
Security shall be surrendered for conversion at one time by the same Holder,
the number of full shares which shall be issuable upon conversion thereof shall
be computed on the basis of the aggregate principal amount of the Securities
(or specified portions thereof) so surrendered. Instead of any fractional
share of Common Stock which would otherwise be issuable upon conversion of any
Security or Securities (or specified portions thereof), the Company shall,
subject to Article Twelve, pay to the Holder of such Security an amount in cash
(computed to the nearest cent) based upon the Closing Price on the Trading Day
immediately preceding the date of conversion.
SECTION 1304. ADJUSTMENT OF CONVERSION PRICE.
The conversion price shall be subject to adjustment from time to time as
follows:
(1) In case the Company shall pay or make a dividend or other
distribution on any class of its capital stock in shares of its Common Stock,
the conversion price in effect at the opening of business on the day following
the date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such conversion
price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other distribution on
the outstanding shares of such class of capital stock, such reduction to become
effective immediately after the opening of business on the day following the
date fixed for such determination. For the purposes of this paragraph (1), the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of Common
Stock.
(2) In case the Company shall issue rights, options or warrants to all
holders of its outstanding shares of Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the
current market price per share (determined as provided in paragraph (8) of this
Section) of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights, options or warrants, the
conversion price in effect at the opening of business on the day fixed for such
determination shall be reduced by multiplying such conversion price by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of Common Stock which the aggregate of the offering
price of the total number of shares of Common Stock so offered for subscription
or purchase would purchase at such current market price and the denominator
shall be the number of shares of Common Stock outstanding at the close of
business at the date fixed for such determination plus the number of shares of
Common Stock so offered for subscription or purchase, such reduction to become
effective immediately after the opening of business on the
-60-
<PAGE> 71
day following the date fixed for such determination. For the purposes of this
paragraph (2), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company but shall include
shares issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. Notwithstanding the foregoing, in case the Company
shall issue rights, options or warrants to all holders of its Common Stock
entitling the holders thereof to subscribe for or purchase shares of Common
Stock, which rights or warrants (i) are deemed to be transferred with such
shares of Common Stock, (ii) have not become exercisable and (iii) are also
issued in respect of future issuances of Common Stock ("Stockholder Rights"),
in each case in clauses (i) through (iii) until the occurrence of a specified
event or events ("Trigger Event"), such Stockholder Rights shall for purposes
of this Section 1304 not be deemed issued or distributed until the occurrence
of the earliest Trigger Event (unless such Trigger Event is waived or
eliminated generally or in a particular instance by proper action of the Board
of Directors of the Company or a court of competent jurisdiction, in which case
such Trigger Event will be deemed not to have occurred) and the conversion
price shall not be reduced until the occurrence of such earliest Trigger Event
(unless such Trigger Event is waived or eliminated generally or in a particular
instance by proper action of the Board of Directors of the Company or a court
of competent jurisdiction, in which case such Trigger Event will be deemed not
to have occurred). If the conversion price is reduced pursuant to this
paragraph (2) as a result of any rights, warrants, options that are issued by
the Company and if at the end of the period during which such warrants, options
or rights are exercisable, not all such warrants, options or rights shall have
been exercised, the conversion price shall be immediately readjusted to what it
would have been had the above fraction been computed based on the number of
shares of Common Stock actually issued in respect of such warrants, options or
rights, as the case may be.
(3) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the conversion price in effect at
the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced by multiplying
such conversion price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the day upon
which such subdivision becomes effective before giving effect to such
subdivision and the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the day such subdivision becomes
effective after giving effect to such subdivision, and, conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the conversion price in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately increased by multiplying such conversion
price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the day upon which such
combination becomes effective before giving effect to such combination and the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the day such combination becomes effective after giving
effect to such combination, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(4) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock evidences of its indebtedness, shares of any
class of capital stock, cash or
-61-
<PAGE> 72
assets (including securities, but excluding (i) those rights, options or
warrants referred to in paragraph (2) of this Section, (ii) Rights (as defined
below), (iii) Stockholder Rights, (iv) any dividend or distribution paid
exclusively in cash, and (v) any dividend or distribution referred to in
paragraph (1) of this Section), the conversion price shall be adjusted so that
the same shall 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 shall be the current market price per share
(determined as provided in paragraph (8) of this Section) of the Common Stock
on such record date minus the then fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described in a
Board Resolution) of the portion of the evidences of indebtedness, securities,
cash or assets so distributed applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common Stock,
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 such distribution. If the Board of Directors
determines the fair market value of any distribution for purposes of this
paragraph (4) by reference to the actual or when issued trading market for any
securities comprising such distribution, it must in doing so consider, among
any other facts or advice it deems relevant, the prices in such market over the
same period used in computing the current market price per share pursuant to
paragraph (8) of this Section. In case the Company shall, by dividend or
otherwise, distribute rights, options or warrants (other than those referred to
in paragraph (2) of this Section and other than Stockholder Rights) ("Rights")
to all holders of Common Stock, the conversion price shall not be reduced and
the Company shall make proper provision so that each Holder of a Security who
converts such Security (or any portion thereof) after the record date for such
distribution and prior to the expiration or redemption of the Rights shall be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion (the "Conversion Shares"), a number of
Rights to be determined as follows: (i) if such conversion occurs on or prior
to the date for the distribution to the holders of Rights of separate
certificates evidencing such Rights (the "Distribution Date"), the same number
of Rights to which a holder of a number of shares of Common Stock equal to the
number of Conversion Shares is entitled at the time of such conversion; and
(ii) if such conversion occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares of Common Stock into which the
principal amount of the Security so converted was convertible immediately prior
to the Distribution Date would have been entitled on the Distribution Date.
(5) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding any cash that is distributed as
part of a distribution referred to in paragraph (4) of this Section) in an
aggregate amount that, together with (i) the aggregate amount of any other
distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution and in
respect of which no conversion price adjustment pursuant to paragraph (5) or
(6) of this Section has been made and (ii) the aggregate of any cash plus the
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution), at the time of
payment, of consideration paid in respect of any tender offer by the Company or
a Subsidiary for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution and in respect of
which no conversion price adjustment pursuant to paragraph (5) or (6) of this
Section has been made, exceeds 12.5% of
-62-
<PAGE> 73
the product of the current market price per share (determined as provided in
paragraph (8) of this Section) of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such distribution times the
number of shares of Common Stock outstanding on such date, the conversion price
shall be reduced so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior to the
effectiveness of the conversion price reduction contemplated by this paragraph
(5) by a fraction of which the numerator shall be the current market price per
share (determined as provided in paragraph (8) of this Section) of the Common
Stock on such date minus the amount of cash so distributed applicable to one
share of Common Stock and the denominator shall be such current market price
per share of the Common Stock, such reduction to become effective immediately
prior to the opening of business on the later of (a) the date following the
date fixed for the payment of such distribution and (b) the date 20 days after
the notice relating to such distribution is given pursuant to Section 1307(a).
(6) In case a tender offer made by the Company or any Subsidiary for all
or any portion of the Common Stock shall be consummated and such tender offer
shall involve an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) at the last time (the "Expiration Time")
tenders may be made pursuant to such tender offer (as it may be amended or
extended) that, together with (i) the aggregate of the cash plus the fair
market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution), at the time of
payment, of consideration paid in respect of any tender offer by the Company or
any Subsidiary for all or any portion of the Common Stock consummated within
the 12 months preceding the Expiration Time and in respect of which no
conversion price adjustment pursuant to paragraph (5) or (6) of this Section
has been made and (ii) the aggregate amount of any distributions to all holders
of the Common Stock made exclusively in cash within the 12 months preceding the
Expiration Time and in respect of which no conversion price adjustment pursuant
to paragraph (5) or (6) of this Section has been made, exceeds 12.5% of the
product of the current market price per share (determined as provided in
paragraph (8) of this Section) of the Common Stock at the Expiration Time
multiplied by the number of shares of Common Stock outstanding (including any
tendered shares) at the Expiration Time, the conversion price shall be reduced
so that the same shall equal the price determined by multiplying the conversion
price in effect immediately prior to the Expiration Time by a fraction of which
the numerator shall be (i) the product of the current market price per share
(determined as provided in paragraph (8) of this Section) of the Common Stock
at the Expiration Time times the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time minus (ii) the fair
market value (determined as aforesaid) of the aggregate consideration payable
to stockholders based on the acceptance (up to any maximum specified in the
terms of the tender offer) of all shares validly tendered and not withdrawn at
the Expiration Time (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and the denominator shall be the
product of (i) such current market price per share times (ii) such number of
outstanding shares at the Expiration Time (including any tendered shares) minus
the number of Purchased Shares, such reduction to become effective immediately
prior to the opening of business on the day immediately following the
Expiration Time; provided, that if the number of Purchased Shares or the
aggregate consideration payable therefor have not been finally determined by
such opening of business, the adjustment required by this paragraph (6) shall,
pending such final determination, be made based upon the
-63-
<PAGE> 74
preliminary results of such tender offer announced by the Company, and, after
such final determination shall have been made, the adjustment required by this
paragraph (6) shall be made based upon the number of Purchased Shares and the
aggregate consideration payable therefor as so finally determined, effective
immediately prior to the opening of business on the day immediately following
the day such final determination shall have been made.
(7) The reclassification of Common Stock into securities including
securities other than Common Stock (other than any reclassification upon a
consolidation or merger to which Sections 1312 applies) shall (i) be deemed to
involve a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of stockholders entitled
to receive such distribution" and "such record date" and "the date fixed for
the determination" within the meaning of paragraph (4) of this Section), and
(ii) if the number of shares of Common Stock outstanding is changed as a result
of such reclassification, be deemed to involve a subdivision or combination, as
the case may be, of the number of shares of Common Stock outstanding
immediately prior to such reclassification into the number of shares of Common
Stock outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective,"
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (3) of this Section).
(8) For the purpose of any computation under paragraphs (2), (4) and (5)
of this Section, the current market price per share of Common Stock on the date
fixed for determination of the stockholders entitled to receive the issuance or
distribution requiring such computation (the "Determination Date") shall be
deemed to be the average of the Closing Prices for the 5 consecutive Trading
Days selected by the Company commencing not more than 20 Trading Days before,
and ending not later than the Determination Date; provided, however, that (i)
if the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the conversion price
pursuant to paragraph (1), (2), (3), (4), (5), (6) or (7) above occurs on or
after the 20th Trading Day prior to the Determination Date and prior to the
"ex" date for the issuance or distribution requiring such computation, the
Closing Price for each Trading Day prior to the "ex" date for such other event
shall be adjusted by multiplying such Closing Price by the same fraction by
which the conversion price is so required to be adjusted as a result of such
other event, (ii) if the "ex" date for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
conversion price pursuant to paragraph (1), (2), (3), (4), (5), (6) or (7)
above occurs on or after the "ex" date for the issuance or distribution
requiring such computation and on or prior to the Determination Date, the
closing Price for each Trading Day on and after the "ex" date for such other
event shall be adjusted by multiplying such Closing Price by the reciprocal of
the fraction by which the conversion price is so required to be adjusted as a
result of such other event, and (iii) if the "ex" date for the issuance or
distribution requiring such computation is on or prior to the Determination
Date, after taking into account any adjustment required pursuant to clause (ii)
of this proviso, the Closing Price for each Trading Day on or after such "ex"
date shall be adjusted by adding thereto the amount of any cash and the fair
market value (as determined by the Board of Directors in a manner consistent
with any determination of such value for the purposes of paragraph (4) or (5)
of this Section, whose determination shall be conclusive and
-64-
<PAGE> 75
described in a Board Resolution) of the evidences of indebtedness, shares of
capital stock or other securities or assets being distributed (in the
distribution requiring such computation) applicable to one share of Common
Stock as of the close of business on the day before such "ex" date. For the
purpose of any computation under paragraph (6) of this Section, the current
market price per share of Common Stock at the Expiration Time for the tender
offer requiring such computation shall be deemed to be the average of the
Closing Prices for the 5 consecutive Trading Days selected by the Company
commencing on or after the latest (the "Commencement Date") of (i) the date 20
Trading Days before the Expiration Time, (ii) the date of commencement of such
tender offer and (iii) the date of the last amendment, if any, of such tender
offer involving a change in the maximum number of shares for which tenders are
sought or a change in the consideration offered, and ending not later than the
Expiration Time of such tender offer; provided, however, that if the "ex" date
for any event (other than the tender offer requiring such computation) that
requires an adjustment to the conversion price pursuant to paragraph (1), (2),
(3), (4), (5), (6) or (7) above occurs on or after the Commencement Date and
prior to the Expiration Time for the tender offer requiring such computation,
the Closing Price for each Trading Day prior to the "ex" date for such other
event shall be adjusted by multiplying such Closing Price by the same fraction
by which the conversion price is so required to be adjusted as a result of such
other event. For purposes of this paragraph, the term "ex" date, (i) when used
with respect to any issuance or distribution, means the first date on which the
Common Stock trades regular way on the relevant exchange or in the relevant
market from which the closing Price was obtained without the right to receive
such issuance or distribution, (ii) when used with respect to any subdivision
or combination of shares of Common Stock, means the first date on which the
Common Stock trades regular way on such exchange or in such market after the
time at which such subdivision or combination becomes effective, and (iii) when
used with respect to any tender offer means the first date on which the Common
Stock trades regular way on such exchange or in such market after the
Expiration Time of such tender offer (as it may be amended or extended).
Notwithstanding the foregoing, if the fraction by which the conversion price is
required to be adjusted as a result of any event (other than the issuance,
distribution or tender offer, as the case may be, requiring such computation)
cannot be determined for any Trading Day during the period of 20 Trading Days
contemplated by the first sentence of this paragraph and clause (i) of the
second sentence of this paragraph, then the 5 consecutive Trading Days selected
by the Company shall, in the case of the first sentence of this paragraph and
clause (i) of the second sentence of this paragraph, commence not more than 25
Trading Days before such Determination Date or Expiration Time, as the case may
be, instead of 20 Trading Days before such Determination Date or Expiration
Time, as the case may be, as provided above.
(9) No adjustment in the conversion price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustment which by reason of this paragraph (9) is
not required to be made shall be carried forward and taken into account in any
subsequent adjustment; and provided further that all calculations under this
paragraph (9) shall be made to the nearest cent.
(10) In addition to the adjustments in conversion price required by
paragraphs (1), (2), (3), (4), (5), (6) and (7) of this Section, the Company
may from time to time in its discretion make such decreases in the conversion
price as it considers to be advisable (including for purposes of avoiding or
diminishing any Federal income tax to any holders of shares of Common
-65-
<PAGE> 76
Stock resulting from any dividend or distribution of stock or issuance of
rights or warrants to purchase or subscribe for stock or from any event treated
as such for Federal income tax purposes for any other reason).
(11) No adjustment in the conversion price shall be required for any
increase or decrease in the par value of the Common Stock.
(12) For purposes of this Section 1304, a tender offer shall not include
privately negotiated or open market purchases of Common Stock unless such
purchases are subject to Regulation 14D or Regulation 14E promulgated under the
Exchange Act, or any successor provisions thereto.
(13) Notwithstanding any other provision of this Article 13, no
adjustment to the conversion price shall result in zero or in a negative number
or shall reduce the conversion price below the then par value per share of the
Common Stock, and any such purported adjustment shall instead reduce the
conversion price to such par value, unless the Common Stock then has no par
value (in which case such purported adjustment shall instead reduce the
conversion price to $.01 per share). The Company hereby covenants not to take
any action to increase the par value per share of the Common Stock.
SECTION 1305. NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.
Whenever the conversion price is adjusted as herein provided:
(1) the Company shall compute the adjusted conversion price in
accordance with Section 1304 and shall prepare a certificate signed by the
chief financial officer or the Treasurer of the Company setting forth the
adjusted conversion price and showing in reasonable detail the facts upon
which such adjustment is based, and such certificate shall forthwith be
filed (with a copy to the Trustee) at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 1002; and
(2) a notice stating that the conversion price has been adjusted
and setting forth the adjusted conversion price shall forthwith be
prepared, and as soon as practicable after it is prepared, such notice
shall be mailed by the Company to all Holders at their last addresses as
they shall appear in the Securities Register.
SECTION 1306. TRUSTEE'S ADJUSTMENT DISCLAIMER.
The Trustee has no duty to determine when an adjustment under this Article
13 should be made, how it should be made or what it should be. The Trustee
shall not be accountable for and makes no representation as to the validity or
value of any securities or assets issued upon conversion of Securities. The
Trustee shall not be responsible for the Company's failure to comply with this
Article 13.
SECTION 1307. NOTICE OF CERTAIN CORPORATE ACTIONS.
In case:
-66-
<PAGE> 77
(1) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable (a) otherwise than exclusively
in cash or (b) exclusively in cash in an amount that would require a
conversion price adjustment pursuant to paragraph (5) of Section 1304; or
(2) the Company shall authorize the granting to the holders of its
Common Stock of rights, options or warrants to subscribe for or purchase
any shares of capital stock of any class or of any other rights (excluding
shares of capital stock or options for capital stock issued pursuant to a
benefit plan for employees, officers or directors of the Company and
excluding Stockholder Rights); or
(3) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock), or
of any consolidation, merger or share exchange to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of the properties and assets of the
Company substantially as an entirety; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed at each office or agency maintained
pursuant to Section 1002, and shall cause to be mailed to all Holders at their
last addresses as they shall appear in the Security Register, at least 21 days
(or 10 days in any case specified in clause (1) or (2) above) prior to the
applicable record, effective or expiration date hereinafter specified, a notice
stating (a) the date on which a record is to be taken for the purpose of such
dividend, distribution or granting of rights, options or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record who will be entitled to such dividend, distribution, rights or warrants
are to be determined, or (b) the date on which such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up. Neither the failure to give
any such notice nor any defect therein shall affect the legality or validity of
any action described in this Article Thirteen. In case a Trigger Event occurs
with respect to any Stockholder Rights, then the Company shall cause to be
filed at each office or agency maintained pursuant to Section 1002, and shall
cause to be mailed to the Holders at their last addresses as they shall appear
in the Security Register within 10 days after such Trigger Event has occurred a
notice stating that such Trigger Event has occurred and the date upon which
such Trigger Event occurred (unless such Trigger Event is waived or eliminated
generally or in a particular instance by proper action of the Board of
Directors of the Company or a court of competent jurisdiction, in which case
such Trigger Event will be deemed not to have occurred).
SECTION 1308. COMPANY TO RESERVE COMMON STOCK.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of the authorized but unissued Common Stock or out of
the Common Stock held in treasury,
-67-
<PAGE> 78
for the purpose of effecting the conversion of Securities, the full number of
shares of Common Stock then issuable upon the conversion of all outstanding
Securities.
SECTION 1309. TAXES ON CONVERSIONS.
The Company will pay any and all documentary, stamp or similar issue or
transfer taxes that may be payable in respect of the issue or delivery of
shares of Common Stock on conversion of Securities pursuant hereto. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of shares of Common
Stock in a name other than that of the Holder of the Security or Securities to
be converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company that such tax has
been paid.
SECTION 1310. COVENANT AS TO COMMON STOCK.
The Company covenants that all shares of Common Stock which may be issued
upon conversion of Securities will upon issue be validly issued, fully paid and
nonassessable and, except as provided in Section 1309, the Company will pay all
documentary, stamp or similar issue or transfer taxes, liens and charges with
respect to the issue thereof.
SECTION 1311. CANCELLATION OF CONVERTED SECURITIES.
All Securities delivered for conversion shall be delivered to the Trustee
to be canceled by or at the direction of the Trustee, which shall dispose of
the same as provided in Section 309.
SECTION 1312. PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE
OF ASSETS.
In case of any consolidation of the Company with, or merger of the Company
into, any other Person, any merger or consolidation of another Person into the
Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock) or
any sale or transfer of the properties and assets of the Company substantially
as an entirety, the Person formed by such consolidation or resulting from such
merger or which acquires such properties and assets of the Company, as the case
may be, shall execute and deliver to the Trustee a supplemental indenture
providing that the Holder of each Security then outstanding shall have the
right thereafter, during the period such Security shall be convertible as
specified in Section 1301, to convert such Security only into the kind and
amount of securities, cash and other property, if any, receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which such Security might have been converted immediately
prior to such consolidation, merger, sale or transfer, assuming such holder of
Common Stock (a) is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made, as the case may be (a "Constituent Person"), or an
Affiliate of a Constituent Person, and (b) failed to exercise his rights of
election, if any, as to the kind or amount of securities, cash or other
property receivable upon such consolidation, merger, sale or transfer (provided
that if the kind or amount of securities, cash and other property receivable
-68-
<PAGE> 79
upon such consolidation, merger, sale or transfer is not the same for each
share of Common Stock held immediately prior to such consolidation, merger,
sale or transfer by other than a Constituent Person or an Affiliate thereof and
in respect of which such rights of election shall not have been exercised
("nonelecting share"), then for the purpose of this Section the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by each nonelecting share shall be deemed to be the
kind and amount so receivable per share by a plurality of the nonelecting
shares). Such supplemental indenture shall provide for adjustments which, for
events subsequent to the effective date of such supplemental indenture, shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Article. The above provisions of this Section shall similarly apply to
successive consolidations, mergers, sales or transfers. No adjustment in the
conversion price shall be made pursuant to Section 1304 as a result of any
consolidation, merger, or sale or transfer of the properties and assets of the
Company substantially as an entirety to which this Section 1312 applies.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
BALLY ENTERTAINMENT CORPORATION
By: ____________________________________
Name:
Title:
Attest:
_____________________________
FIRST BANK NATIONAL ASSOCIATION
By: ____________________________________
Name:
Title:
Attest:
_____________________________
-69-
<PAGE> 80
STATE OF ILLINOIS )
) SS:
COOK COUNTY )
On the _____ day of ________________, before me personally came
_____________________, to me known, who, being by me duly sworn, did depose and
say that he is ______________________ of Bally Entertainment Corporation, one
of the corporations described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that he signed his name thereto by
like authority.
________________________________
)
) SS:
)
On the ____ day of ____________, 1995, before me personally came
______________________, to me known, who, being by me duly sworn, did depose
and say that he is _______________ of First Bank National Association, one of
the _______________ described in and which executed the foregoing instrument;
that he knows the seal of said national banking association; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said First Bank National Association,
and that he signed his name thereto by like authority.
________________________________
-70-
<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.
