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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1996
REGISTRATION NO. 333-4325
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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, (312) 399-1300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LEE S. HILLMAN
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND TREASURER
8700 WEST BRYN MAWR AVENUE, CHICAGO, ILLINOIS 60631, (312) 399-1300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
With a copy to:
MARK D. GERSTEIN
LAWRENCE D. LEVIN
KATTEN MUCHIN & ZAVIS
525 WEST MONROE STREET, SUITE 1600, CHICAGO, ILLINOIS 60661, (312) 902-5200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: / /
If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT PRICE (1) FEE
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<S> <C> <C> <C> <C>
Primary Offering:
Debt Securities........................................... |
Preferred Stock, par value $1.00 per share................ |
Depositary Shares (2)..................................... | (3) (3) $711,020,034 $245,180
Common Stock, par value $.66 2/3 per share (including
preferred stock purchase rights) (4)................... |
Warrants to purchase Common Stock......................... |
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Secondary Offering: |
Common Stock, par value $.66 2/3 per share (including | 1,457,195 $26.75(6) $ 38,979,966 $ 13,441
preferred stock purchase rights) (4)...................... | shares
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Total........................................................................................................... $258,621(5)
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(1) The maximum aggregate offering price of Debt Securities, Preferred Stock
(par value $1.00 per share), Depositary Shares, Common Stock (par value
$.66 2/3 per share) and Warrants to purchase Common Stock registered
hereunder shall not exceed $711,020,034.
(2) There also are being registered hereunder an indeterminate number of
Depositary Shares to be evidenced by Depositary Receipts issued pursuant to
a Deposit Agreement. In the event that fractional interests in shares of the
Preferred Stock registered hereunder are offered, Depositary Receipts may be
distributed to those persons purchasing such fractional interests and the
shares of Preferred Stock will be deposited with the Depositary under the
Deposit Agreement.
(3) Not applicable pursuant to General Instruction II.D. of Form S-3 under the
Securities Act of 1933.
(4) Preferred stock purchase rights accompany shares of the Registrant's Common
Stock. In addition, the Registrant is registering Common Stock that may be
issued from time to time upon conversion of convertible Debt Securities or
convertible Preferred Stock. Because this additional Common Stock is
issuable only upon the conversion of convertible Debt Securities or
convertible Preferred Stock, no registration fee is required with respect
to such Common Stock pursuant to the provisions of Rule 457(i).
(5) Previously paid.
(6) Estimated solely for the purpose of determining the registration fee on the
basis of the average high and low prices of the Common Stock on the New York
Stock Exchange on August 21, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 23, 1996
PROSPECTUS
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[BALLY LOGO]
BALLY ENTERTAINMENT CORPORATION
DEBT SECURITIES
PREFERRED STOCK (PAR VALUE $1.00 PER SHARE)
DEPOSITARY SHARES
COMMON STOCK (PAR VALUE $.66 2/3 PER SHARE)
WARRANTS TO PURCHASE COMMON STOCK
Bally Entertainment Corporation (the "Company") may from time to time
offer (i) unsecured debt securities ("Debt Securities") consisting of
debentures, notes and/or other unsecured evidences of indebtedness in one or
more series, (ii) shares of preferred stock, par value $1.00 per share
("Preferred Stock"), in one or more series, (iii) shares of Preferred Stock
represented by depositary shares ("Depositary Shares"), (iv) shares of common
stock, par value $.66 2/3 per share ("Common Stock"), or (v) warrants
("Warrants") to purchase Common Stock (the Debt Securities, Preferred Stock,
Depositary Shares, Common Stock and Warrants to be offered by the Company are
collectively referred to as "Securities"), or any combination of the foregoing.
This Prospectus also covers the resale by Bally's Grand Property Sub 1, Inc.
(the "Selling Stockholder") of up to 1,457,915 shares of Common Stock. The
aggregate initial offering price of the Securities will not exceed
$711,020,034, and shall be offered at prices and on terms to be determined at
or prior to the time of the sale.
Specific terms of the Securities to be offered by the Company in
respect of which this Prospectus is being delivered (the "Offered Securities")
will be set forth in an accompanying Prospectus Supplement ("Prospectus
Supplement"), together with the terms of the offering of such Securities and
the initial price and the net proceeds to the Company from their sale. The
Company will not receive any of the proceeds of any Common Stock offered by the
Selling Stockholder. The Prospectus Supplement will set forth with regard to
the Offered Securities, the following: (i) in the case of Debt Securities, the
specific designation, aggregate principal amount, ranking as senior debt or
subordinated debt, authorized denomination, maturity, rate or method of
calculation of interest and dates for payment thereof, any exchangeability,
conversion, redemption, prepayment or sinking fund provisions, the currency or
currencies or currency unit or currency units in which principal, premium, if
any, or interest, if any, is payable and additional covenants and conditions,
if any; (ii) in the case of Preferred Stock, the designation, number of shares,
liquidation preference per share, initial public offering price, dividend rate
(or method of calculation thereof), dates on which dividends, if any, shall be
payable and from which dividends shall accrue, voting rights, if any, any
redemption or sinking fund provisions, and any conversion or exchange rights;
(iii) in the case of Depositary Shares, the fractional share of Preferred Stock
represented by each such Depositary Share; (iv) in the case of Common Stock,
the number of shares of Common Stock and the terms of the offering and sale
thereof; and (v) in the case of Warrants, the number and terms thereof, the
number of shares of Common Stock issuable upon their exercise, the exercise
price, the terms of the offering and sale thereof and, where applicable, the
duration and detachability thereof.
The Company and the Selling Stockholder may sell the Securities
directly, through agents designated from time or through underwriters or
dealers. See "Plan of Distribution." If any agents of the Company and the
Selling Stockholder or any underwriters or dealers are involved in the sale of
the Securities, the names of such agents, underwriters or dealers and any
applicable commissions and discounts will be set forth in the Prospectus
Supplement.
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See "Risk Factors," commencing on page 4 of this Prospectus, for a
discussion of certain matters that should be considered in evaluating the
Securities.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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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 PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED
HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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NEITHER THE NEW JERSEY CASINO CONTROL COMMISSION NOR THE NEW JERSEY DIVISION OF
GAMING ENFORCEMENT HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Prospectus is August , 1996.
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AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in exhibits to the Registration
Statement as permitted by the rules and regulations of the Securities and
Exchange Commission (the "Commission"). For further information, reference is
hereby made to the Registration Statement. Statements made in this Prospectus as
to the contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports and other information with the Commission.
The Registration Statement, as well as such reports, proxy and information
statements, and other information filed by the Company with the Commission, can
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: New York Regional Office, 7 World
Trade Center, New York, New York 10048; and Chicago Regional Office, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material also can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company's Common
Stock is listed on the New York Stock Exchange ("NYSE"). Reports, proxy and
information statements may also be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act, are incorporated herein by reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Annual Report");
(2) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996 and June 30, 1996 (the "Quarterly
Report");
(3) the Company's Current Reports on Form 8-K dated May 21, 1996
and June 6, 1996; and
(4) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the
Commission on July 24, 1975.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities shall be deemed
incorporated by reference in this Prospectus and a part hereof from the
respective date of filing each such document. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company undertakes to provide, without charge, to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of any such person, a copy of any or all of the documents referred to
above that have been incorporated in this Prospectus by reference, other than
exhibits to such documents. Requests for such copies should be directed to the
Secretary and General Counsel, Bally Entertainment Corporation, 8700 West Bryn
Mawr Avenue, Chicago, Illinois 60631, telephone (312) 399-1300.
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THE COMPANY
The Company, through its subsidiaries, is engaged in the operation of
casinos, some with supporting hotel operations. The Company's principal casino
operations are: Bally's Park Place Casino * Resort in Atlantic City, New Jersey
("Bally's Park Place"); The Grand casino hotel resort in Atlantic City ("The
Grand"); Bally's Las Vegas casino hotel resort in Las Vegas, Nevada ("Bally's
Las Vegas"); Bally's Saloon * Gambling Hall * Hotel, a dockside casino and
hotel in Robinsonville, Mississippi near Memphis, Tennessee ("Bally's
Mississippi"); and Bally's Casino * Lakeshore Resort, a riverboat casino on
Lake Pontchartrain in New Orleans, Louisiana ("Bally's New Orleans").
Bally's Park Place and The Grand are wholly-owned by the Company. The
Company's other principal casino operations are partially owned in conjunction
with other investors. The Company indirectly owns approximately 85% of the
outstanding common shares of Bally's Grand, Inc., the publicly traded company
that owns and operates Bally's Las Vegas. In addition, the Company indirectly
owns a 58% interest in the entity that owns Bally's Mississippi, and
approximately 50% of Belle of Orleans, L.L.C., the entity that owns Bally's New
Orleans. The Company manages both Bally's Mississippi and Bally's New Orleans
under separate management and fee arrangements through its subsidiaries.
In June 1996, the Company and Hilton Hotels Corporation ("Hilton")
entered into an agreement pursuant to which the Company will merge with and into
Hilton. If the merger is consummated, each share of the Company's Common Stock
issued and outstanding immediately prior to the merger would be converted into
the right to receive one share of Hilton common stock, after giving effect to a
contemplated 4 for 1 stock split of Hilton common stock. In the event that the
trading price of Hilton common stock (after giving effect to the contemplated
stock split) for a specified period of time prior to the effective time of the
merger is less than $27.00 per share, each holder of the Company's Common Stock
will receive an additional cash payment for each share of the Company's Common
Stock held by such holder, up to a maximum of $3.00 per share, equal to the
excess of $27.00 over such trading price. In addition, upon consummation of
the merger, each share of 8% PRIDES Convertible Preferred Stock of the Company
issued and outstanding immediately prior to the merger will be converted into
the right to receive one share of newly authorized 8% PRIDES Convertible
Preferred Stock of Hilton having the same rights and preferences. The
transaction, which has been approved by the Board of Directors of the Company
and Hilton, is subject to approval by the companies' shareholders and gaming
regulators of several states, and is expected to close by year-end 1996.
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.
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RISK FACTORS
Prospective investors should consider, among other matters, the
following factors in connection with a decision to purchase Securities.
HOLDING COMPANY STRUCTURE AND SUBSTANTIAL CONSOLIDATED LEVERAGE
The Company is a holding company, with no material operations of its
own, and 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 for the foreseeable future are expected to be recovered
substantially by cost allocations to, and management fees from, its
subsidiaries. Cash requirements of the Company also include income tax payments,
debt service requirements and preferred stock dividend payments. Accordingly,
the Company is dependent on its subsidiaries to pay management fees, cost
allocations, income taxes pursuant to tax sharing agreements and dividends or to
advance funds in order to satisfy these obligations.
The Company and its subsidiaries have a substantial amount of
indebtedness on a consolidated basis. The Company's consolidated leverage may
adversely impact the Company's ability to obtain financing on terms satisfactory
to the Company for new gaming projects (including its planned Paris
Casino-Resort in Las Vegas) and expansion of existing properties.
RESTRICTIONS ON DISTRIBUTIONS FROM SUBSIDIARIES
Various financial covenants and regulatory restrictions limit the
payment of dividends and other distributions of funds to the Company by its
subsidiaries. The terms of the various instruments governing the indebtedness of
the Company's subsidiaries also impose restrictions on their ability to incur
debt, issue preferred stock, make acquisitions and certain restricted payments,
create liens, sell assets or enter into transactions with affiliates. These
restrictions may have an adverse impact on the ability of these subsidiaries to
raise capital and, therefore, on the Company's liquidity. The future performance
of the Company and its subsidiaries and their ability to satisfy or refinance
their obligations are also affected by prevailing economic conditions and are
subject to financial, business and other factors, including factors beyond the
control of the Company. Accordingly, there can be no assurance that the Company
will receive distributions and payments from its subsidiaries in amounts
sufficient to satisfy its cash obligations.
Bally's Casino Holdings, Inc. ("Casino Holdings"), a wholly owned
subsidiary of the Company, serves as a holding company for Bally's Park Place,
all of the Company's investment in Bally's Grand, Inc., the entity which owns
Bally's Las Vegas, and the Company's interests in Bally's Mississippi and
Bally's New Orleans. Dividends received by Casino Holdings from Bally's Park
Place may be paid to the Company if they were paid under a separate net income
test (generally limited to 50% of Bally's Park Place's aggregate consolidated
net income since April 1, 1994). Bally's Park Place must maintain a
consolidated fixed charge coverage ratio (as defined) of at least 2.25:1 in
order to pay such dividends. In 1994 and 1995, Bally's Park Place, pursuant to
its net income test, paid approximately $12.3 million and $19.2 million,
respectively, in dividends to Casino Holdings, which were then paid to the
Company. Other dividends from Casino Holdings are not available to be paid to
the Company unless (i) 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
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Place) and (ii) Casino Holdings has a consolidated fixed charge coverage ratio
(as defined) of 2:1 or greater. No such dividends have been paid to date.
Limitations on dividends and other distributions to the Company from
its subsidiaries other than Bally's Park Place, and the financial requirements
of those subsidiaries, substantially limit and may preclude the receipt of
dividends and distributions by the Company for the near term. Other than from
Bally's Park Place (approximately $12 million was available at June 30, 1996)
and possibly The Grand, no dividends are expected to be paid to the Company
over the next twelve months.
SUBORDINATION TO SUBSIDIARIES' CREDITORS
Due to the Company's holding company structure, holders of Securities
of the Company have a position effectively junior to any creditors of the
Company's subsidiaries. Any rights of the Company and its creditors 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, there can be no assurance that holders of
securities will receive any proceeds in the event of a liquidation or
reorganization of the Company or any of its subsidiaries.
COMPETITION
The Company's casinos face considerable competition from both
established casinos and newly emerging gaming operations. 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. In
addition, proposals for several new casino hotel resorts were recently
announced for Atlantic City, and, if and when such resorts are opened, capacity
and competition will further increase.
Bally's Las Vegas competes principally with other casino hotels located
in Las Vegas. Currently, there are approximately thirty major casino hotels
located on or near the Strip, approximately ten 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, Las Vegas gaming space
and hotel room capacity increased significantly since 1991. In addition, there
have been various public announcements concerning the expansion of existing
casino hotel resorts and the development of new casino hotel resorts in Las
Vegas, certain of which have commenced construction. If and when such
expansions are completed and new casino hotel resorts are opened, capacity and
competition will further increase.
The extent and effects of competition in new gaming markets are also
unpredictable. Mississippi gaming law does not limit the number of gaming
licenses that may be granted. As a result, management believes there was a
saturation of gaming facilities in and around the Memphis, Tennessee market,
which led to the closing of six casinos in that market since April 1994. As of
August 15, 1996, ten gaming facilities were operating in this market. Four of
these gaming facilities are located adjacent to Bally's Mississippi, one of
which commenced operations in June 1996 somewhat closer to Memphis than Bally's
Mississippi. These gaming facilities present, and any others which subsequently
commence operations in Tunica County or in nearby DeSoto County (if legalized)
could present, significant competition for Bally's Mississippi.
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Louisiana law currently limits to fifteen the number of riverboat
gaming licenses that may be granted (all but one of which have been granted as
of August 15, 1996), with a maximum of six riverboats in any one parish. Four
riverboats are presently operating in the New Orleans area (including that of
Bally's New Orleans). However, one riverboat has expressed its intention to
leave the New Orleans area, subject to regulatory approval. During 1995,
Bally's New Orleans also competed with a land-based casino which was operating
at a temporary location and was expected to become the largest land-based
casino in the United States when it moved to its permanent location. However,
in November 1995, the competitor filed for protection under the bankruptcy
laws, ceased operations at the temporary location and suspended construction
at the permanent site. It is presently not known if, or when, operations at the
temporary location or construction of the permanent land-based facility will
resume.
Legalization of gaming in additional jurisdictions would also 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 planned operations. The Company believes that the
adoption of legislation approving casino gaming in any jurisdiction near New
Jersey or Nevada or the advent of full-scale gaming on nearby Native American
lands could have a material adverse effect on its present operations.
Similarly, the legalization of gaming in additional jurisdictions adjacent to
or within Mississippi or Louisiana could have a material adverse effect upon
the operations of Bally's Mississippi or Bally's New Orleans. 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 often faces intense competition
for licenses, desirable sites, qualified personnel and, ultimately, customers
from other companies in the gaming industry.
The effects of competition, as well as other factors, may affect the
Company's decision to proceed with any projects or affect the scope of such
projects.
NEW DEVELOPMENTS AND EMERGING GAMING MARKETS
The initial and long-term success of gaming in a market which has never
supported gaming operations previously or only recently permitted gaming cannot
be accurately predicted or assured. Factors such as the number of prospective
visitors, the number of licenses issued in a jurisdiction and the propensity of
visitors to wager cannot always be predicted with any certainty and may
materially affect the success of a casino.
The development of new gaming projects in new or mature markets also
entails risks associated with development and construction. Any new project
entails significant construction risks which could delay development or result
in a substantial increase in costs. The Company also needs to obtain approvals
and permits in order to commence the construction of new gaming projects.
Unexpected changes required by local, state or federal authorities could involve
significant additional costs and delay the opening of a project. Further, there
can be no assurance that the Company will receive necessary permits and
approvals for any project or that such permits and approvals will be obtained
within an anticipated time frame.
The Company has invested substantial sums in obtaining interests
in properties in jurisdictions based upon the prospects of gaming being
legalized in such jurisdictions. Whether and when gaming will be legalized in
such jurisdictions is dependent upon a variety of matters, including economic
and political considerations, and there can be no assurance which, if any,
jurisdictions in which the Company has made investments will legalize gaming, or
that, if gaming is legalized in any such jurisdiction, the Company or any
venture in which it participates will be granted a license in that jurisdiction.
Development of new gaming and expansion projects generally requires
third-party financing, and there can be no assurance that such financing will be
available or, if available, will be on terms satisfactory to the Company or that
such financing will be approved, if necessary, by the governing
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gaming authorities. The consolidated leverage of the Company may adversely
affect its ability to obtain such financing or the terms of such financing.
The success of the Company's expansion in new gaming jurisdictions is
also dependent in part on its ability to attract and retain qualified management
and operating personnel in those jurisdictions. Competition for such personnel
is often intense and there can be no assurance that in the future the Company
will be able to attract and retain such personnel.
GAMING 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.
Changes in these regulations could have a material adverse effect upon the
Company. In addition, floating gaming ventures require compliance with certain
maritime laws and United States Coast Guard (the "U.S. 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 Casino Control
Commission (the "New Jersey Commission") and other applicable laws. No casino
may operate unless the required permits or licenses and approvals are obtained
from the New Jersey Commission. The New Jersey Commission is authorized under
the New Jersey Act to adopt regulations covering a broad spectrum of gaming and
gaming-related activities and to prescribe the methods and forms of applications
for all classes of licensees.
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 Las Vegas' 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." Mississippi
and Louisiana have adopted regulatory requirements which are similar to Nevada's
with respect to the discretion given regulators in granting licenses, financial
qualification of licensees and qualification of officers, directors and key
employees.
For a more complete discussion of gaming regulations, see "Business and
Properties -- Gaming Regulation" in the Annual Report.
REGULATORY RESTRICTIONS ON OWNERSHIP AND TRANSFER OF SECURITIES
As described below, the New Jersey Act and the Nevada Act impose
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. If the New Jersey Commission or Nevada Commission finds that a
holder or beneficial owner of the Securities must be licensed, qualified or
found suitable to hold or own the Securities under the New Jersey Act or Nevada
Act, and if such holder or such beneficial owner is not licensed, qualified or
found suitable within any time period specified by the New Jersey Commission or
Nevada Commission or the New Jersey Act or Nevada Act, the Company has 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
7
<PAGE> 9
owner's Securities within 120 days after receipt of notice by such holder or
beneficial owner of its disqualification under the New Jersey Act or Nevada Act
(the "Notice Date") (or such different period as may be prescribed by the New
Jersey Commission or Nevada Commission), or (ii) to redeem Securities held by
such holder, by action of the Board of Directors, if in the judgment of the
Board of Directors such action should be taken pursuant to Section 151(b) of the
Delaware General Corporation Law or any other applicable provision of law, to
the extent necessary to prevent the loss or secure the reinstatement of any
government-issued license or franchise held by the Company or any subsidiary to
conduct any portion of the business of the Company or any subsidiary, which
license or franchise is conditioned upon some or all of the holders of the
Company's securities possessing prescribed qualifications. Such unsuitable or
disqualified holder is required to indemnify the Company for any and all direct
or indirect costs, including attorneys' fees, incurred by the Company as a
result of such holder's continuing ownership or failure to divest promptly.
The Company, Casino Holdings 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 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.
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 has reason to believe that such ownership would otherwise
be inconsistent with the declared policies of the State of Nevada.
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, and thus require qualification, 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.
The redemption price of Securities to be redeemed would be equal to the
lesser of (i) the holder's original purchase price for the security or (ii) the
lowest closing sale price of such security between the Notice Date and the date
120 days after Notice Date.
8
<PAGE> 10
Commencing on the date the Nevada Commission or the New Jersey
Commission serves notice upon the Company of the determination of unsuitability
or disqualification, it is unlawful under the Nevada Act and the New Jersey Act
for the unsuitable or disqualified holder (i) to receive any interest or
dividend payment upon the Securities; (ii) to exercise, directly or through any
trustee or nominee, any right conferred by the Securities; or (iii) to receive
any remuneration in any form from the Company for services rendered or
otherwise.
Neither the Company, Casino Holdings or Bally's Grand, Inc. may make a
public offering of its securities without the prior approval of the Nevada
Commission if the securities or proceeds therefrom are intended to be used to
construct, acquire or finance gaming facilities in Nevada, or to retire or
extend obligations incurred for such purposes. On August 22, 1996, the Nevada
Commission granted the Company prior approval to make offerings for a period of
one year, subject to certain conditions ("Shelf Approval"). The Shelf Approval
may be rescinded for good cause without prior notice upon the issuance of an
interlocutory stop order by the Chairman of the Nevada Board and must be
renewed annually. The Shelf Approval also applies to any affiliated company
wholly owned by the Company (an "Affiliate") which is a publicly traded
corporation or would thereby become a publicly traded corporation pursuant to a
public offering. The offerings of the Offered Securities will be made pursuant
to the Shelf Approval. The Shelf Approval does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus or the investment merits of the
securities offered. Any representation to the contrary is unlawful.
Mississippi and Louisiana have adopted regulatory requirements similar
to those of New Jersey and Nevada governing the qualification of security
holders. 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. 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 Gaming
Control Board may conduct a suitability investigation of security holders at any
time. For a more complete discussion of regulatory restrictions on ownership and
transfer of securities, see "Business and Properties -- Gaming Regulation" in
the Annual Report.
LOUISIANA GAMING REFERENDA
On April 19, 1996, the Louisiana legislature approved legislation
mandating statewide local elections on a parish-by-parish basis to determine
whether to prohibit or continue to permit three individual types of gaming. The
referendum will be brought before the Louisiana voters in the November 1996
presidential election and will determine whether each of the following types of
gaming will be prohibited or permitted in the following described Louisiana
parishes: (i) the operation of video draw poker devices in each parish; (ii) the
conduct of riverboat gaming in each parish that is contiguous to a statutorily
designated river or gateway; or (iii) the conduct of land based casino gaming
operations in Orleans Parish. If a majority of the voters in a parish elect to
prohibit one or more of the above-described gaming activities in such parish,
then no license or permit may be issued to conduct such gaming activity in such
parish and no such gaming activity may be permitted in that parish. If, however,
riverboat gaming was previously permitted in such parish, the legislation
permits the current gaming operator to continue riverboat gaming in the parish
until the expiration of its gaming license. Further, in parishes where riverboat
gaming is currently authorized and voters elect to prohibit riverboat gaming,
the legislation provides that the gaming license shall not be reissued or
transferred to any parish other than a parish in which a riverboat upon which
gaming is conducted is berthed. The current legislation, however, does not
provide for any moratorium on future local elections on gaming. Further, the
current legislation does not provide for any moratorium that must expire before
future elections on gaming could be mandated or allowed.
Bally's New Orleans' riverboat gaming license expires on March 23,
1999. If the local election in Orleans Parish were to prohibit riverboat
gaming, absent alternative relief (through legislation or otherwise) Bally's
New Orleans would cease operations upon the expiration of its license. At this
time, the outcome of the local election is uncertain. If riverboat gaming were
so prohibited, Bally's New Orleans would explore all alternatives available to
it to otherwise utilize its vessel and other assets. In any event, the Company
does not believe such a cessation of gaming would have a material adverse
effect upon the Company as a whole.
9
<PAGE> 11
USE OF PROCEEDS
Unless otherwise provided in the Prospectus Supplement, the net
proceeds from the sale of the Securities offered by the Company pursuant to this
Prospectus and any Prospectus Supplement will be added to the Company's general
funds to be used to provide the Company with the flexibility to fund expansion
of existing properties and development of new projects, to fund strategic
investments and acquisitions or for such other purposes as may be set forth in
the Prospectus Supplement.
The Company will not receive any proceeds from the sale of any Common
Stock by the Selling Stockholder.
SELLING STOCKHOLDER
The Selling Stockholder is a wholly owned subsidiary of Bally's Grand,
Inc. The Company indirectly owns approximately 85% of the outstanding shares of
Bally's Grand, Inc., the publicly traded company that owns and operates Bally's
Las Vegas. On the date of this Prospectus, the Selling Stockholder owned
1,457,195 shares of Common Stock representing approximately 3% of the Company's
total outstanding Common Stock. If all of the shares of Common Stock offered on
behalf of the Selling Stockholder are sold, the Selling Stockholder will not own
any Common Stock of the Company.
10
<PAGE> 12
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data for the Company presented
below for and as of the end of each of the five years ended December 31, 1995
are derived from the audited consolidated financial statements of the Company.
The selected consolidated financial data presented below for and as of the end
of each of the six months ended June 30, 1996 and 1995 is unaudited; however, in
the opinion of management, such data includes all adjustments (which were of a
normal recurring nature) 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 six months ended June 30, 1996 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
applicable Annual Report and Quarterly Report.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
----------------------- ---------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ----------- ----------- ----------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (1):
Revenues................................. $ 584.3 $ 473.3 $ 1,023.9 $ 942.3 $ 628.2 $ 556.0 $ 544.5
Operating income......................... $ 114.0 $ 86.4 $ 186.8 $ 125.1 $ 107.9 $ 86.5 $ 66.2
Income (loss) from continuing
operations (2) (3) (4) (5)............. $ 26.6 $ 13.4 $ 76.7 $ (1.9) $ 10.2 $ -- $ (33.4)
Income (loss) from discontinued
operations............................. (11.0) (46.1) (20.0) .6 (1.2)
Extraordinary items...................... (.7) .5 .4 (20.4) (8.5) 11.2 56.1
Cumulative effect on prior years of
change in accounting for income taxes.. (28.2)
---------- ---------- ---------- ----------- ----------- ----------- ----------
Net income (loss) (2) (3) (4) (5)........ $ 25.9 $ 13.9 $ 66.1 $ (68.4) $ (46.5) $ 11.8 $ 21.5
========== ========== ========== =========== =========== =========== ==========
Per common and common equivalent
share:
Income (loss) from continuing
operations........................... $ .35 $ .24 $ 1.34 $ (.10) $ .16 $ (.06) $ (1.07)
Income (loss) from discontinued
operations........................... (.20) (.98) (.43) .01 (.03)
Extraordinary items.................... (.01) .01 .01 (.44) (.18) .27 1.65
Cumulative effect on prior years of
change in accounting for income taxes (.61)
---------- ---------- ---------- ----------- ----------- ----------- ----------
Net income (loss)...................... $ .34 $ .25 $ 1.15 $ (1.52) $ (1.06) $ .22 $ .55
========== ========== ========== =========== =========== =========== ==========
Average common and common
equivalent shares outstanding.......... 53.7 50.6 55.5 46.9 46.6 41.1 33.9
BALANCE SHEET DATA (AT END OF PERIOD) (1):
Cash and equivalents..................... $ 304.1 $ 145.9 $ 285.8 $ 178.4 $ 192.1 $ 26.0 $ 26.5
Total assets............................. 1,900.9 1,958.2 1,889.2 1,936.2 1,991.6 1,357.6 1,389.8
Total debt............................... 1,275.7 1,296.0 1,289.6 1,266.2 1,186.3 731.2 795.4
Minority interests....................... 36.5 39.1 36.1 37.4 42.4
Stockholders' equity..................... 290.7 307.8 250.6 293.6 364.1 410.2 364.7
OTHER FINANCIAL DATA (1):
EBITDA (6)............................... $ 160.0 $ 121.3 $ 267.4 $ 217.5 $ 159.1 $ 135.1 $ 114.1
EBITDA margin (6)........................ 27.4% 25.6% 26.1% 23.1% 25.3% 24.3% 21.0%
Cash provided by (used in):
Operating activities................... $ 60.4 $ 51.7 $ 120.1 $ 62.8 $ 49.7 $ 14.7 $ 37.9
Investing activities................... (28.9) (114.3) (196.7) (102.8) (56.0) (24.0) (14.0)
Financing activities................... (13.1) 22.3 176.0 25.1 156.7 (58.3) (164.4)
</TABLE>
- ------------------
(1) Bally's Las Vegas has been consolidated since December 1, 1993 as a result
of the Company's controlling interest in 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. As of June 30,
1996, the Company (through a subsidiary of which it is the sole common
stockholder) owned approximately 85% of the outstanding common stock of
Bally's Grand, Inc. In addition, Bally's New Orleans commenced operation of
its riverboat casino in July 1995 and Bally's Mississippi reopened its
dockside casino in December 1995. Between December 1993 and February 1995,
Bally's Mississippi operated the dockside casino at a different site.
11
<PAGE> 13
(2) Income (loss) from continuing operations and net income (loss) for the six
months ended June 30, 1996 and 1995 and the years ended December 31, 1995,
1994 and 1993 include charges (net of taxes and minority interests)
incurred in the pursuit and development of new gaming projects and for
amortization of pre-opening costs of $2.1 million ($.04 per share), $1.2
million ($.02 per share), $5.4 million ($.11 per share), $10.7 million
($.23 per share) and $2.7 million ($.06 per share), respectively.
(3) Income (loss) from continuing operations and net income (loss) for the year
ended December 31, 1995 includes a credit of $41.0 million ($.76 per share)
for certain adjustments to prior years' income taxes.
(4) Income (loss) from continuing operations and net income (loss) for the six
months ended June 30, 1996 and 1995 and the years ended December 31, 1995
and 1994 include gains (net of taxes and minority interests) from sales of
marketable securities of $1.1 million ($.02 per share), $.7 million ($.01
per share), $1.5 million ($.03 per share) and $4.8 million ($.10 per
share), respectively.
(5) Income (loss) from continuing operations and net income (loss) for the year
ended December 31, 1994 includes a charge (net of taxes) of $8.5 million
($.18 per share) to write-off certain assets which were abandoned upon the
relocation of Bally's Mississippi's operations closer to Memphis,
Tennessee.
(6) EBITDA represents operating income before depreciation, amortization and
abandonment loss. The Company has presented EBITDA supplementally because
the Company believes it allows for a more complete analysis of its results
of operations. The EBITDA margin represents EBITDA divided by revenues and
is intended to indicate the operating efficiency of the Company. This data
should not be considered as an alternative to any measure of performance or
liquidity as promulgated under generally accepted accounting principles
(such as net income or cash provided by or used in operating, investing and
financing activities) nor should it be considered as an indicator of the
Company's overall financial performance.
12
<PAGE> 14
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges
and earnings to combined fixed charges and preferred stock dividends for the
Company and its consolidated subsidiaries for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(1)........................ 1.7X 1.3x 1.4x 1.0x 1.2x (2) (2)
Ratio of earnings to combined
fixed charges and preferred stock
dividends(3)...................... 1.4x 1.3x 1.3x 1.0x 1.1x (4) (4)
<FN>
- ------------------
(1) The ratio of earnings to fixed charges is calculated by dividing (i) income (loss) from continuing operations before income
taxes and minority interests plus fixed charges (adjusted for capitalized interest) by (ii) fixed charges. Fixed charges
consist of interest incurred (expensed or capitalized) and the portion of rent expense which is deemed representative
of interest.
(2) Earnings were insufficient to cover fixed charges for the years ended December 31, 1992 and 1991 by $6.5 million and $50.2
million, respectively.
(3) The ratio of earnings to combined fixed charges and preferred stock dividends is calculated by dividing (i) income (loss)
from continuing operations before income taxes and minority interests plus fixed charges (adjusted for capitalized interest
and preferred stock dividend requirements of consolidated subsidiaries) by (ii) fixed charges plus total preferred
stock dividend requirements.
(4) Earnings were insufficient to cover combined fixed charges and preferred stock dividends for the years ended December 31,
1992 and 1991 by $9.3 million and $53.0 million, respectively.
</TABLE>
13
<PAGE> 15
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain
general terms and provisions of the Debt Securities to which any Prospectus
Supplement may relate ("Offered Debt Securities"). The particular terms of the
Offered Debt Securities and the extent to which such general provisions may
apply will be described in the Prospectus Supplement relating to such Offered
Debt Securities.
The Debt Securities will be general unsecured obligations of the
Company and each series of Offered Debt Securities will constitute either senior
debt securities or subordinated debt securities. In the case of senior debt
securities ("Senior Debt Securities"), the Debt Securities will be issued under
an Indenture (the "Senior Indenture") to be executed by the Company and First
Bank National Association, as trustee under the Senior Indenture. In the case of
subordinated debt securities ("Subordinated Debt Securities"), the Debt
Securities will be issued under an Indenture (the "Subordinated Indenture") to
be executed by the Company and First Bank National Association, as trustee under
the Subordinated Indenture. The Senior Indenture and the Subordinated Indenture
are sometimes hereinafter referred to herein individually as an "Indenture" and
collectively as the "Indentures." The trustee under each Indenture (and any
successor thereto under each Indenture) is referred to herein as the "Trustee."
The statements under this caption relating to the Debt Securities and the
Indentures are summaries only and do not purport to be complete. Such summaries
make use of terms defined in the Indentures. Wherever such terms are used herein
or particular provisions of the Indentures are referred to, such terms or
provisions, as the case may be, are incorporated by reference as part of the
statements made herein, and such statements are qualified in their entirety by
such reference. Certain defined terms in the Indenture are capitalized herein.
PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES
General. The Indentures do not limit the aggregate principal amount of
Debt Securities which can be issued thereunder and provide that Debt Securities
may be issued from time to time thereunder in one or more series, each in an
aggregate principal amount authorized by the Company prior to issuance. The
Indentures do not limit the amount of other unsecured indebtedness or securities
which may be issued by the Company.
Unless otherwise indicated in a Prospectus Supplement, the Debt
Securities will not benefit from any covenant or other provision that would
afford Holders of such Debt Securities special protection in the event of a
highly leveraged transaction or change of control involving the Company.
Reference is made to the Prospectus Supplement for the following terms
of the Offered Debt Securities: (i) the title and aggregate principal amount;
(ii) the maturity date or dates; (iii) the interest rate or rates (which may be
fixed or variable) per annum, if any, or the method of determining such rate or
rates; (iv) the date or dates from which such interest, if any, will accrue and
the date or dates at which such interest, if any, will be payable; (v) the terms
for redemption or early payment, if any, including any mandatory or optional
sinking fund or analogous provision; (vi) the terms for conversion or exchange,
if any; (vii) the classification as Senior Debt Securities or Subordinated Debt
Securities; (viii) whether such Offered Debt Securities will be issued in fully
registered form or in bearer form or any combination thereof; (ix) whether such
Offered Debt Securities will be issued in the form of one or more global
securities and whether such global securities are to be issuable in temporary
global form or permanent global form; (x) if other than U.S. dollars, the
currency, currencies or currency unit or units in which such Offered Debt
Securities will be denominated and in which in the principal of, and premium and
interest, if any, thereon will be payable; (xi) whether, and the terms and
conditions on which, the Company or a Holder may elect that, or the other
circumstances under which, payment of principal of, or premium or interest, if
any, is to be made in a currency or currencies or currency unit or units other
than that in which such Offered Debt Securities are denominated; (xii) a summary
of the tax consequences
14
<PAGE> 16
to Holders under United States laws of owning the Offered Debt Securities,
including the possible imposition of withholding taxes; and (xiii) any other
specific terms of the Offered Debt Securities. Reference is also made to the
Prospectus Supplement for information with respect to any additional covenants
that may be included in the terms of the Offered Debt Securities.
No service charge will be made for any registration of transfer or
exchange of the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Offered Debt Securities may be sold at a discount (which may be
substantial) below their stated principal amount or bear no interest or interest
at a rate which at the time of issuance is below market rates or both. Any
material United States federal income tax consequences and other special
considerations applicable to Offered Debt Securities will be described in the
Prospectus Supplement.
If any of the Offered Debt Securities are sold for any foreign currency
or currency unit or if the principal of, or premium or interest, if any, on any
of the Offered Debt Securities is payable in any foreign currency or currency
unit, the restrictions, elections, tax consequences, specific terms and other
information with respect to such Offered Debt Securities and such foreign
currency or currency unit will be set forth in the Prospectus Supplement.
Events of Default. Unless otherwise provided in the Prospectus
Supplement with respect to any series of Offered Debt Securities, the following
are Events of Default under each Indenture with respect to each series of Debt
Securities issued under such Indenture: (a) failure to pay any interest on any
Debt Security of such series when due, continued for 30 days; (b) failure to pay
principal of (or premium, if any, on) any Debt Security of such series when due;
(c) failure to deposit any mandatory sinking fund payment, when due, in respect
of the Debt Securities of such series, continued for 60 days; (d) failure to
perform any other covenant of the Company in the Indenture (other than a
covenant included in the Indenture for the benefit of a series of Debt
Securities other than such series), continued for 90 days after written notice
as provided in the Indenture; (e) certain events of bankruptcy, insolvency or
reorganization; and (f) any other Event of Default as may be specified in the
Prospectus Supplement with respect to the Offered Debt Securities. If an Event
of Default with respect to any outstanding series of Debt Securities occurs and
is continuing, either the Trustee or the Holders of at least 25% in principal
amount of the outstanding Debt Securities of such series (in the case of an
Event of Default described in clause (a), (b), (c) or (f) above) or at least 25%
in principal amount of all outstanding Debt Securities under the applicable
Indenture (in the case of other Events of Default) may declare the principal
amount of all the Debt Securities of the applicable series (or of all
outstanding Debt Securities under the applicable Indenture, as the case may be)
to be due and payable immediately. At any time after a declaration of
acceleration has been made, but before a judgment has been obtained, the Holders
of a majority in principal amount of the outstanding Debt Securities of such
series (or of all outstanding Debt Securities under the applicable Indenture, as
the case may be) may, under certain circumstances, rescind and annul such
acceleration. Depending on the terms of other indebtedness of the Company
outstanding from time to time, an Event of Default under an Indenture may give
rise to cross defaults on such other indebtedness of the Company.
Each Indenture provides that the Trustee will, within 90 days after the
occurrence of a default in respect of any series of Debt Securities, give to the
Holders of the Debt Securities of such series notice of all uncured and unwaived
defaults known to it; provided, however, that except in the case of a default in
the payment of the principal of (or premium, if any) or any interest on, or any
sinking fund installment with respect to, any Debt Securities of such series,
the Trustee will be protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the interest of the Holders
of the Debt Securities of such series; and provided, further, that such notice
shall not be given until at
15
<PAGE> 17
least 60 days after the occurrence of a default in the performance, or breach,
of any covenant or warranty of the Company under such Indenture other than for
the payment for the principal of (or premium, if any) or any interest on, or any
sinking fund installment with respect to, any Debt Securities of such series.
For the purpose of this provision, "default" with respect to Debt Securities of
any series means any event which is, or after notice or lapse of time or both,
would become, an Event of Default with respect to the Debt Securities of such
series.
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt Securities
under the applicable Indenture) have the right, subject to certain limitations,
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 with respect to the Debt Securities of such series (or of all
outstanding Debt Securities under the applicable Indenture). Each Indenture
provides that in case an Event of Default shall occur and be continuing, the
Trustee shall exercise such of its rights and powers under the applicable
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under either Indenture at the
request of any of the Holders of the Debt Securities unless they 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.
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt Securities
under the applicable Indenture) may on behalf of the Holders of all Debt
Securities of such series (or of all outstanding Debt Securities under the
applicable Indenture) waive any past default under the applicable Indenture,
except a default in the payment of the principal of (or premium, if any) or
interest on any Debt Security or in respect of a provision which under the
applicable Indenture cannot be modified or amended without the consent of the
Holder of each outstanding Debt Security affected. The Holders of a majority in
principal amount of the outstanding Debt Securities affected thereby may on
behalf of the Holders of all such Debt Securities waive compliance by the
Company with certain restrictive provisions of the Indentures.
The Company is required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under each
Indenture and as to any default in such performance.
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
Debt Securities must be found licensed or qualified or suitable to hold or own
such Debt Securities 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 Debt Securities 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 (the "Notice Date") (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 such Debt
Securities 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 such Debt Securities, 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
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Board of Directors of the Company) and (ii) the price at which such holder or
beneficial owner acquired such Debt Securities, 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 date of redemption,
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.
Commencing on the date the Nevada Commission or the New Jersey
Commission serves notice upon the Company of the determination of unsuitability
or disqualification, it is unlawful under the Nevada Act and the New Jersey Act
for the unsuitable or disqualified holder (i) to receive interest upon such Debt
Securities; (ii) to exercise, directly or through any trustee or nominee, any
right conferred by such Debt Securities; or (iii) to receive any remuneration in
any form from the Company for services rendered or otherwise.
Modification. Modifications and amendments of each Indenture may be
made by the Company and the Trustee with the consent of the Holders of a
majority in principal amount of the outstanding Debt Securities under the
Indenture affected thereby; provided, however, that no such modification or
amendment may, without the consent of the Holder of each outstanding Debt
Security affected thereby, (a) change the stated maturity date of the principal
of, or any installment of interest on, any Debt Security, (b) reduce the
principal amount of, or the premium (if any) or interest on, any Debt Security,
(c) change the place or currency, currencies, or currency unit or units or
payments of principal of, or premium (if any) or interest on, any Debt Security,
(d) impair the right to institute suit for the enforcement of any payment on or
with respect to any Debt Security, or (e) reduce the percentage in principal
amount of outstanding Debt Securities the consent of whose Holders is required
for modification or amendment of such Indenture or for waiver of compliance with
certain provisions of such Indenture or for waiver of certain defaults;
provided, however, that the Holders of 75% in principal amount of the
outstanding Debt Securities of any series may, on behalf of the Holders of all
Debt Securities of such series, consent to the postponement of any interest
payment for a period not exceeding three years from its due date.
Each Indenture provides that the Company and the Trustee may, without
the consent of any Holders of Debt Securities, enter into supplemental
indentures for the purposes, among other things, of adding to the Company's
covenants, adding additional Events of Default, establishing the form or terms
of Debt Securities or curing ambiguities or inconsistencies in the applicable
Indenture, provided such action to cure ambiguities or inconsistencies shall not
adversely affect the interests of the Holders of the Debt Securities in any
material respect.
Consolidation, Merger and Sale of Assets. The Company, without the
consent of any Holders of outstanding Debt Securities, may consolidate with or
merge into, or convey, transfer or lease its assets substantially as an entirety
to, any Person, provided that the Person formed by such consolidation or into
which the Company is merged or which acquires or leases the assets of the
Company substantially as an entirety is a corporation, partnership, limited
liability company or trust organized under the laws of any United States
jurisdiction and assumes by supplemental indenture the Company's obligations in
respect of the Securities and under the Indentures, that after giving effect to
the 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 occurred and be
continuing, and that certain other conditions are met. Upon compliance with
these provisions by a successor Person, the Company will (except in the case of
a lease) be relieved of its obligations under the Indentures and the Debt
Securities.
Discharge and Defeasance. The Company may terminate its obligations
under each Indenture, other than its obligation to pay the principal of (and
premium, if any) and interest on the Debt Securities of any series and certain
other obligations, if it (i) irrevocably deposits or causes to be irrevocably
deposited with the Trustee as trust funds money or U.S. Government Obligations
maturing as to principal and interest sufficient to pay the principal of (and
premium, if any, on), any interest on, and any mandatory sinking funds in
respect of, all outstanding Debt Securities of such series on the stated
maturity of such payments or on any redemption date and (ii) complies with any
additional conditions specified to be applicable with respect to the covenant
defeasance of Debt Securities of such series.
The terms of any series of Debt Securities may also provide for legal
defeasance pursuant to each Indenture. In such case, if the Company (i)
irrevocably deposits or causes to be irrevocably deposited money or U.S.
Government Obligations as described above, (ii) makes a request to the Trustee
to be discharged from its obligations on the Debt Securities of such series and
(iii) complies with any additional conditions specified to be applicable with
respect to legal defeasance of Debt Securities of such series, then the Company
shall be deemed to have paid and discharged the entire indebtedness on all the
outstanding Debt Securities of such series, and the obligations of the Company
under the applicable Indenture and the Debt Securities of such series to pay the
principal of (and premium, if any) and interest on the Debt Securities of such
series shall cease, terminate and be completely discharged, and the Holders
thereof shall thereafter be entitled only to payment out of the money or U.S.
Government Obligations so deposited with the Trustee, unless the Company's
obligations are revived and reinstated because the Trustee is unable to apply
such trust fund by reason of any legal proceeding, order or judgment.
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Form, Exchange, Registration and Transfer. Each Debt Security will be
represented by either a global security (a "Global Debt Security") registered in
the name of The Depository Trust Company, as Depository (the "Depository") or a
nominee of the Depository (each such Debt Security represented by a Global Debt
Security being herein referred to as a "Book-Entry Debt Security") or a
certificate issued in definitive registered form (a "Certificated Debt
Security"), as set forth in the applicable Prospectus Supplement. Except as set
forth below, Book-Entry Debt Securities will not be issuable in certificated
form.
Certificated Debt Securities may be transferred or exchanged at the
Trustee's office or paying agencies in accordance with the terms of the
Indenture. No service charge will be made for any transfer or exchange or
Certificated Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Certificated Debt Securities will not be exchangeable for Book-Entry
Debt Securities, except under the circumstances described below.
The transfer of Certificated Debt Securities and the right to the
principal of, premium, if any, and interest on such Certificated Debt Securities
may be effected only by surrender of the old certificate representing such
Certificated Debt Securities and either reissuance by the Company or the Trustee
of the old certificate to the new Holder or the issuance by the Company or the
Trustee of a new certificate to the new Holder.
Each Global Debt Security representing Book-Entry Debt Securities will
be deposited with, or on behalf of, the Depository, and registered in the name
of the Depository or a nominee of the Depository. Except as set forth below,
Book-Entry Debt Securities will not be exchangeable for the Certificated Debt
Securities and will not otherwise be issuable as Certificated Debt Securities.
The procedures that the Depository has indicated it intends to follow
with respect to Book-Entry Debt Securities are set forth below.
Ownership of beneficial interests in Book-Entry Debt Securities will be
limited to persons that have accounts with the Depository for the related Global
Debt Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Global Debt Security, the Depository will
credit, on its book-entry registration and transfer system, the participants'
accounts with the respective principal amounts of the Book-Entry Debt Securities
represented by such Global Debt Security beneficially owned by such
participants. The accounts to be credited shall be designated by any dealers,
underwriters or agents participating in the distribution of such Book-Entry Debt
Securities. Ownership of Book-Entry Debt Securities will be shown on, and the
transfer of such ownership interests will be effected only through, records
maintained by the Depository for the related Global Debt Security (with respect
to interests of participants) and on the records of participants (with respect
to interests of persons holding through participants). The laws of some states
may require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the ability
to own, transfer or pledge beneficial interest in Book-Entry Debt Securities.
So long as the Depository for a Global Debt Security, or its nominee,
is the registered owner of such Global Debt Security, such Depository or such
nominee, as the case may be, will be considered the sole owner or holder of the
Book-Entry Debt Securities represented by such Global Debt Security for all
purposes under the indenture. Except as set forth below, owners of Book-Entry
Debt Securities will not be entitled to have such securities registered in their
names, will not receive or be entitled to receive physical delivery of a
certificate in definitive form representing such securities and will not be
considered the owners or holders thereof under the Indenture. Accordingly, each
person owning Book-Entry Debt Securities must rely on the procedures of the
Depository for the related Global Debt Security and, if such
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person is not the Depository for the related Global Debt Security and, if such
person is not a participant, on the procedures of the participant through which
such person owns its interest, to exercise any rights of a holder under the
Indenture.
The Company understands, however, that under existing industry
practice, the Depository will authorize the direct participants on whose behalf
it holds a Global Debt Security to exercise certain rights of holders of Debt
Securities, and the Indenture provides that the Company, the Trustee and their
respective agents will treat as the holder of a Debt Security the persons
specified in a written statement of the Depository with respect to such Global
Debt Security for purposes of obtaining any consents or directions required to
be given by holders of the Debt Securities pursuant to the Indenture.
Payments of principal, premium, if any, and interest on Book-Entry Debt
Securities will be made to the Depository or its nominee, as the case may be, as
the registered holder of the related Global Debt Security. None of the Company,
the Trustee or any other agent of the Company or any agent of the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interest in such Global Debt
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that the Depository, upon receipt of any payment of
principal, premium, if any, or interests on a Global Debt Security, will
immediately credit participants' accounts with payments in amounts proportionate
to the respective amounts of Book-Entry Debt Securities held by each such
participant as shown on the records of such Depository. The Company also expects
that payments by participants to owners of beneficial interests in Book-Entry
Debt Securities held through such participants will be governed by standing
customer instructions and customary practices, as is now the case with the
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such participants.
If the Depository is at any time unwilling or unable to continue as
Depository or ceases to be a clearing agency registered under the Exchange Act,
and a successor Depository registered as a clearing agency under the Exchange
Act is not appointed by the Company within 90 days, the Company will issue
Certificated Debt Securities in exchange for such Global Debt Security. In
addition, the Company may at any time and in its sole discretion determine not
to have any of the Book-Entry Debt Securities represented by one or more Global
Debt Securities and, in such event, will issue Certificated Debt Securities in
exchange for such Global Debt Security or Securities. Any Certificated Debt
Securities issued in exchange for a Global Debt Security will be registered in
such name or names as the Depository shall instruct the Trustee. It is expected
that such instructions will be based upon directions received by the Depository
from participants with respect to ownership of Book-Entry Debt Securities
relating to such Global Debt Security.
THE FOREGOING INFORMATION IN THIS SECTION CONCERNING THE DEPOSITORY AND
THE DEPOSITORY'S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM THE DEPOSITORY, AND
THE COMPANY BELIEVES SUCH INFORMATION TO BE RELIABLE, BUT THE COMPANY TAKES NO
RESPONSIBILITY FOR ITS ACCURACY.
Meetings. The Indentures contain provisions for convening meetings of
the Holders of Debt Securities of a series. A meeting may be called at any time
by the Trustee, and also, upon request, by the Company, in any such case upon
notice given as described under "Notices" below. Except for any consent that
must be given by the Holder of each or not less than 75% of the Outstanding Debt
Securities affected thereby, as described under "Modification" above, any
resolution presented at a meeting or adjourned meeting at which a quorum is
present may be adopted by the affirmative vote of the Holders of a majority in
principal amount of the Outstanding Debt Securities of that series; provided,
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however, that except for any consent that must be given by the Holder of each
Outstanding Debt Security affected thereby, as described under "Modification"
above, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that may be made, given or
taken by the Holders of a specified percentage which is less than a majority in
principal amount of the Outstanding Debt Securities of a series may be adopted
at a meeting or adjourned meeting duly reconvened at which a quorum is present
by the affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Debt Securities of that series. Subject to the proviso
set forth above, any resolution passed or decision taken at any meeting of
Holders of Debt Securities of any series duly held in accordance with the
Indenture will be binding on all Holders of Debt Securities of that series. The
quorum at any meeting called to adopt a resolution, and at any reconvened
meeting, will be Persons holding or representing a majority in principal amount
of the Outstanding Debt Securities of a series.
The Trustee. Each Indenture contains certain limitations on the right
of the Trustee, as a creditor of the Company, to obtain payment of claims in
certain cases and to realize on certain property received with respect to any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions, except that, if it acquires any conflicting interest (as
defined), it must eliminate such conflict or resign.
PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES
Senior Debt Securities will be issued under the Senior Indenture and
will rank pari passu with all other unsecured and unsubordinated debt of the
Company.
PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
General. Subordinated Debt Securities will be issued under the
Subordinated Indenture and will rank pari passu with certain other subordinated
debt of the Company that may be outstanding from time to time and junior to all
Senior Indebtedness of the Company (including any Senior Debt Securities) that
may be outstanding from time to time.
Subordination. The payment of the principal of (and premium, if any)
and interest on the Subordinated Debt Securities is expressly subordinated, to
the extent and in the manner set forth in the Subordinated Indenture, in right
of payment to the prior payment in full of all Senior Indebtedness of the
Company.
In the event of any dissolution or winding up, or total or partial
liquidation or reorganization of the Company, whether in bankruptcy,
reorganization, insolvency, receivership or similar proceeding, the holders of
Senior Indebtedness will be entitled to receive payment in full of all amounts
due or to become due on or in respect of all Senior Indebtedness before the
Holders of the Subordinated Debt Securities are entitled to receive any payment
on account of principal (or premium, if any) or interest on the Subordinated
Debt Securities.
Unless otherwise indicated in the applicable Prospectus Supplement, no
payment in respect of the Subordinated Debt Securities shall be made if, at the
time of such payment, there exists a default in payment of all or any portion of
any Senior Indebtedness, and such default shall not have been cured or waived in
writing or the benefits of such subordination in the Subordinated Indenture
shall not have been waived in writing by or on behalf of the holders of such
Senior Indebtedness. In addition, during the continuation of any event of
default (other than a default referred to in the immediately preceding sentence)
with respect to any Senior Indebtedness permitting the holders to accelerate the
maturity thereof and upon written notice thereof given to the Trustee, with a
copy to the Company (the delivery of which shall not affect the validity of the
notice to the Trustee), by any holder of Senior Indebtedness or its
representative, then, unless and until such an event of default shall have been
cured or waived or shall
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have ceased to exist, no payment shall be made by the Company with respect to
the principal of or interest on the Subordinated Debt Securities or to acquire
any of the Subordinated Debt Securities or on account of the redemption
provisions for the Subordinated Debt Securities; provided, however, that if the
holders of the Senior Indebtedness to which the default relates have not
declared such Senior Indebtedness to be immediately due and payable within 180
days after the occurrence of such default (or have declared such Senior
Indebtedness to be immediately due and payable and within such period have
rescinded such declaration of acceleration), then the Company shall resume
making any and all required payments in respect of the Subordinated Debt
Securities (including any missed payments). Only one such payment blockage
period may be commenced within any consecutive 365-day period with respect to
the Subordinated Debt Securities. No event of default which existed or was
continuing on the date of the commencement of any 180-day payment blockage
period with respect to the Senior Indebtedness initiating such payment blockage
period shall be, or be made, the basis for the commencement of a second payment
blockage period by a holder or representative of such Senior Indebtedness,
whether or not within a period of 365 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days.
The term "Senior Indebtedness" is defined in the Subordinated Indenture
as Indebtedness, either outstanding as of the date of the Subordinated Indenture
or issued subsequent to the date of the Subordinated Indenture, which is not
subordinated by its terms in right of payment to any other unsecured
Indebtedness of the Company or ranks pari passu with Subordinated Debt
Securities of any series, provided that the term "Senior Indebtedness" shall not
include (i) Indebtedness of the Company to any Subsidiary for money borrowed or
advanced from such Subsidiary or (ii) amounts owed (except to banks and other
financial institutions) for goods, materials or services purchased in the
ordinary course of business.
The term "Indebtedness," as applied to any Person, is defined in the
Subordinated Indenture as all indebtedness, whether or not represented by bonds,
debentures, notes or other securities, created or assumed by such Person for the
repayment of money borrowed, and obligations, computed in accordance with
generally accepted accounting principles, as lessee under leases that should be,
in accordance with generally accepted accounting principles, treated as capital
leases. All Indebtedness secured by a lien upon property owned by the Company or
any Subsidiary and upon which Indebtedness such Person customarily pays
interest, although such Person has not assumed or become liable for the payment
of such Indebtedness, shall be deemed to be Indebtedness of such Person. All
Indebtedness of others guaranteed as to payment of principal by such Person or
in effect guaranteed by such Person through a contingent agreement to purchase
such Indebtedness shall also be deemed to be Indebtedness of such Person.
Indebtedness (i) shall not include accounts payable to trade creditors or other
indebtedness for goods or services created or assumed in the ordinary course of
business and (ii) shall include only the principal component of any obligation
described in this definition.
If Subordinated Debt Securities are issued under the Subordinated
Indenture, the aggregate principal amount of Senior Indebtedness outstanding as
of a recent date will be set forth in the applicable Prospectus Supplement. The
Subordinated Indenture does not restrict the amount of Senior Indebtedness that
the Company may incur.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The following description of the capital stock of the Company is
qualified in its entirety by reference to the Company's Restated Certificate of
Incorporation, as amended (the "Restated Certificate"), which has been filed
with and is available from the offices of the Commission as referred to under
"Available Information."
The Restated Certificate authorizes the issuance of 150,000,000 shares
of capital stock of which 30,000,000 shares shall be designated preferred
stock, par value $1.00 per share ("Preferred Stock"), and 120,000,000 shares
shall be designated common stock, par value $.66 2/3 per share ("Common
Stock"). As of August 15, 1996, there were shares of Preferred Stock
authorized for issuance as follows: 15,525,000 shares of 8% PRIDES(sm)
Convertible Preferred Stock ("PRIDES"), 2,000,000 shares of Series D
Convertible Exchangeable Preferred Stock ("Series D Preferred Stock"), and
800,000 shares of Series B Junior Participating Preferred Stock ("Series B
Preferred Stock"). As of August 15, 1996, 14,832,700 shares of PRIDES, no
shares of Series D Preferred Stock, no shares of Series B Preferred Stock and
51,620,865 shares of Common Stock were issued and outstanding. Additionally, as
described in the Annual Report, certain shares of Common Stock are reserved for
issuance upon the exercise of stock options and conversion of the PRIDES, the
Company's 6% Convertible Subordinated Debentures due 1998 and the Company's 10%
Convertible Subordinated Debentures due 2006. All outstanding shares of Common
Stock and Preferred Stock are fully paid and nonassessable, and Common Stock
and Preferred Stock offered hereby will, upon full payment of the purchase
price therefor, likewise be fully paid and nonassessable.
PREFERRED STOCK
Under the Restated Certificate, the Board of Directors of the Company
may provide for the issuance of Preferred Stock in one or more series, and the
rights, preferences, privileges and restrictions, including dividend rights,
voting rights, conversion rights, terms of redemption and liquidation
preferences, of the Preferred Stock of each series will be fixed or designated
by the Board of Directors pursuant to a certificate of designation without any
further vote or action by the Company's stockholders.
The description of Preferred Stock set forth below and the description
of the terms of a particular series of Preferred Stock that will be set forth in
a Prospectus Supplement do not purport to be complete and are qualified in their
entirety by reference to the Restated Certificate and the certificate of
designation relating to such series. The specific terms of a particular series
of Preferred Stock offered hereby will be described in a Prospectus Supplement
relating to such series and will include the following:
(i) the maximum number of shares to constitute the series
and the distinctive designation thereof;
(ii) the annual dividend rate, if any, on shares of the
series, whether such rate is fixed or variable or both, the date or
dates from which dividends will begin to accrue or accumulate and
whether dividends will be cumulative;
(iii) whether the shares of the series will be redeemable
and, if so, the price at and the terms and conditions on which the
shares of the series may be redeemed, including the time during which
shares of the series may be redeemed and any accumulated dividends
thereon that the holders of shares of the series shall be entitled to
receive upon the redemption thereof;
(iv) the liquidation preference, if any, applicable to
shares of the series;
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(v) whether the shares of the series will be subject to
operation of a retirement or sinking fund and, if so, the extent and
manner in which any such fund shall be applied to the purchase or
redemption of the shares of the series for retirement or for other
corporate purposes, and the terms and provisions relating to the
operation of such fund;
(vi) the terms and conditions, if any, on which the shares
of the series shall be convertible into, or exchangeable for, shares of
any other class or classes of capital stock of the Company or another
corporation or any series of any other class or classes, or of any
other series of the same class, including the price or prices or the
rate or rates of conversion or exchange and the method, if any, of
adjusting the same;
(vii) the voting rights, if any, of the shares of the
series; and
(viii) any other preferences and relative, participating,
optional or other special rights or qualifications, limitations or
restrictions thereof.
Shares of Preferred Stock are subject to redemption or forced sale for
regulatory reasons upon the same terms and grounds as Common Stock, as described
below in "Common Stock -- Redemption or Forced Sale for Regulatory Reasons."
DEPOSITARY SHARES
General. The Company may, at its option, elect to issue fractional
shares of Preferred Stock, rather than full shares of Preferred Stock. In the
event such option is exercised, the Company may elect to have a Depositary (as
defined below) issue receipts for Depositary Shares, each receipt representing a
fraction (to be set forth in the Prospectus Supplement relating to a particular
series of Preferred Stock) of a share of a particular series of Preferred Stock
as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement ("Deposit Agreement") between
the Company and a bank or trust company selected by the Company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000 ("Depositary"). Subject to the terms of the Deposit
Agreement, each owner of a Depositary Share will be entitled, in proportion to
the applicable fraction of a share of Preferred Stock represented by such
Depositary Share, to all the rights and preferences of the share of Preferred
Stock represented thereby (including dividend, voting, redemption and
liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of an offering of the Preferred
Stock. Copies of the forms of Deposit Agreement and Depositary Receipt are filed
as exhibits to the Registration Statement of which this Prospectus is a part,
and the following summary is qualified in its entirety by reference to such
exhibits.
Pending the preparation of definitive Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Company's expense.
Upon surrender of Depositary Receipts at the office of the Depositary
and upon payment of the charges provided in the Deposit Agreement and subject to
the terms thereof, a holder of Depositary Receipts is entitled to have the
Depositary deliver to such holder the whole shares of Preferred Stock
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relating to the surrendered Depositary Receipts. Holders of Depositary Shares
will be entitled to receive whole shares of the related series of Preferred
Stock on the basis set forth in the related Prospectus Supplement for such
series of Preferred Stock, but holders of such whole shares will not thereafter
be entitled to receive Depositary Shares therefor. If the Depositary Receipts
delivered by the holder evidence a number of Depositary Shares in excess of the
number of Depositary Shares representing the number of whole shares of the
related series of Preferred Stock to be withdrawn, the Depositary will deliver
to such holder at the same time a new Depositary Receipt evidencing such excess
number of Depositary Shares.
Dividends and Other Distributions. The Depositary will distribute all
cash dividends or other cash distributions received in respect of the Preferred
Stock to the record holders of Depositary Shares relating to such Preferred
Stock in proportion to the numbers of such Depositary Shares owned by such
holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
Redemption of Depositary Shares. If a series of Preferred Stock
represented by Depositary Shares is subject to redemption, the Depositary Shares
will be redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred Stock. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
Preferred Stock so redeemed. If less than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata as may be determined by the Depositary.
Voting the Preferred Stock. Upon receipt of (i) notice of any meeting
at which the holders of the Preferred Stock are entitled to vote or (ii) a
solicitation of written consents, the Depositary will mail the information
contained in such notice of meeting or solicitation of written consents to the
record holders of the Depositary Shares relating to such Preferred Stock. Each
record holder of such Depositary Shares on the record date (which will be the
same date as the record date for the Preferred Stock) will be entitled to
instruct the Depositary as to the exercise of the voting rights or the execution
of a written consent pertaining to the amount of the Preferred Stock represented
by such holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote or execute the written consent with respect to the amount
of the Preferred Stock represented by such Depositary Shares in accordance with
such instructions, and the Company will agree to take all action which may be
deemed reasonably necessary by the Depositary in order to enable the Depositary
to do so. The Depositary will abstain from voting shares or executing written
consents with respect to the Preferred Stock to the extent it does not receive
specific instructions from the holders of Depositary Shares representing such
Preferred Stock.
Redemption or Forced Sale for Regulatory Reasons. Depositary Shares are
subject to redemption or forced sale for regulatory reasons upon the same terms
and grounds as the Common Stock, as described below in "Common Stock --
Redemption or Forced Sale for Regulatory Reasons."
Amendment and Termination of the Deposit Agreement. The form of
Depositary Receipt evidencing the Depositary Shares and any provision of the
Deposit Agreement may at any time be amended by agreement between the Company
and the Depositary. However, any amendment which materially and adversely alters
the rights of the holders of Depositary Shares will not be effective unless
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<PAGE> 26
such amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement may be terminated by
the Company or the Depositary only if (i) all outstanding Depositary Shares have
been redeemed or (ii) there has been a final distribution in respect of the
Preferred Stock in connection with any liquidation, dissolution or winding up of
the Company and such distribution has been distributed to the holders of
Depositary Receipts.
Charges of Depositary. The Company will pay all transfer and other
taxes and governmental charges arising solely from the existence of the
depositary arrangements. The Company will pay charges of the Depositary in
connection with the initial deposit of the Preferred Stock and any redemption of
the Preferred Stock. Holders of Depositary Receipts will pay other transfer and
other taxes and governmental charges and such other charges as are expressly
provided in the Deposit Agreement to be for their accounts.
Miscellaneous. The Depositary will forward to the record holders of the
Depositary Shares relating to such Preferred Stock all reports, notices and
communications from the Company which are delivered to the Depositary.
Neither the Depositary nor the Company will be liable if it is
prevented or delayed by law or any circumstance beyond its control in performing
its obligations under the Deposit Agreement. The obligations of the Company and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder, and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares or
Preferred Stock unless satisfactory indemnity is furnished. They may rely upon
written advice of counsel or accountants, or information provided by persons
presenting Preferred Stock for deposit, holders of Depositary Receipts or other
persons believed to be competent and on documents believed to be genuine.
Resignation and Removal of Depositary. The Depositary may resign at any
time by delivering to the Company notice of its election to do so, and the
Company may at any time remove the Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its acceptance
of such appointment. Such successor Depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
DESCRIPTION OF AUTHORIZED SERIES OF PREFERRED STOCK
The following summary descriptions of the designated series of existing
Preferred Stock of the Company do not purport to be complete and are qualified
in their entirety by reference to the Restated Certificate, including the
respective certificates of designation, preferences and rights relating to such
series (the "Certificates of Designation").
8% PRIDES(SM) CONVERTIBLE PREFERRED STOCK
Dividends. Holders of shares of PRIDES are entitled to receive annual
cumulative dividends at a rate per annum of 8% of the stated liquidation
preference (equivalent to a rate of $.89 per annum for each share of PRIDES),
from the date of initial issuance, payable quarterly in arrears.
Mandatory Conversion. On October 3, 1999 (the "Mandatory Conversion
Date"), unless previously redeemed or converted, each outstanding share of
PRIDES will mandatorily convert into (i) 1.12 shares of Common Stock, subject to
adjustment in certain events, and (ii) the right to receive cash in an amount
equal to all accrued and unpaid dividends thereon (other than previously
declared dividends payable to a holder of record as of a prior date).
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<PAGE> 27
Optional Redemption. Shares of PRIDES are not redeemable prior to
October 3, 1998. At any time and from time to time on or after October 3, 1998,
and ending immediately prior to the Mandatory Conversion Date, the Company may
redeem any or all of the outstanding shares of PRIDES. Upon any such redemption,
each holder will receive, in exchange for each share of PRIDES, the number of
shares of Common Stock equal to (A) the sum of (i) $11.348, declining after
October 3, 1998 to $11.125 until the Mandatory Conversion Date and (ii) all
accrued and unpaid dividends thereon (other than previously declared dividends
payable to a holder of record as of a prior date) (the "Call Price") divided by
(B) the "Current Market Price" (as calculated in a manner set forth in the
Certificate of Designation for the PRIDES) on the applicable date of
determination, but in no event less than .92 of a share of Common Stock, subject
to adjustment in certain events. The number of shares of Common Stock to be
delivered in payment of the applicable Call Price is determined on the basis of
the Current Market Price of the Common Stock prior to the announcement of the
redemption.
Conversion at the Option of the Holder. At any time prior to the
Mandatory Conversion Date, unless previously redeemed, each share of PRIDES is
convertible at the option of the holder thereof into .92 of a share of Common
Stock, subject to adjustment in certain events (the "Optional Conversion Rate"),
equivalent to a conversion price of $12.092 per share of Common Stock (the
"Conversion Price"), subject to adjustment as described in the Certificate of
Designation for the PRIDES. The right of holders to convert shares of PRIDES
called for redemption terminates immediately prior to the close of business on
the redemption date.
Voting Rights. The holders of shares of PRIDES have the right with the
holders of Common Stock to vote in the election of Directors and upon each other
matter coming before any meeting of the holders of Common Stock on the basis of
4/5 of a vote for each share of PRIDES. On such matters, the holders of shares
of PRIDES and the holders of Common Stock will vote together as one class except
as otherwise provided by law or the Restated Certificate. In addition, (i)
whenever dividends on the shares of PRIDES or any other series of the Preferred
Stock with like voting rights are in arrears and unpaid for six quarterly
dividend periods, and in certain other circumstances, the holders of the shares
of PRIDES (voting separately as a class with holders of all other series of
outstanding Preferred Stock upon which like voting rights have been conferred
and are exercisable) will be entitled to vote, on the basis of one vote for each
share of PRIDES, for the election of two Directors of the Company, such
Directors to be in addition to the number of Directors constituting the Board of
Directors immediately prior to the accrual of such right and (ii) the holders of
the shares of PRIDES will have voting rights with respect to certain alterations
of the Restated Certificate and certain other matters, voting on the same basis
or separately as a series.
Liquidation Preference and Ranking. The shares of PRIDES rank senior to
the Common Stock, but junior to the Series D Preferred Stock, as to payment of
dividends and distribution of assets upon liquidation. The liquidation
preference of each share of PRIDES is an amount equal to the sum of (i) $11.125
and (ii) all accrued and unpaid dividends thereon.
SERIES D CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
Dividends. Holders of the Series D Preferred Stock are entitled to
receive quarterly cumulative dividends at an annual rate of $4.00 per share.
Unless cumulative dividends on the Series D Preferred Stock have been paid or
declared in full, no dividends may be paid or declared on any capital stock of
the Company ranking junior to the Series D Preferred Stock, including the shares
of PRIDES.
Conversion Rights. Holders of the Series D Preferred Stock have the
right to convert such shares into shares of Common Stock at a conversion rate of
$22.52 per share, equivalent to a conversion rate of 2.22 shares of Common Stock
for each share of Preferred Stock. The conversion rate is subject to adjustment
in certain cases, as provided in the Certificate of Designation of the Series D
Preferred Stock,
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<PAGE> 28
including the issuance of Common Stock 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 determined in accordance with the
provisions of the Certificate of Designation of the Series D Preferred Stock) of
the Common Stock; or the distribution to all holders of Common Stock of shares
of capital stock (other than Common Stock), evidence of indebtedness or assets
or rights or warrants (other than those mentioned above). No adjustment in the
conversion rate is required unless it would amount to at least 1/100th of a
share; however, any such adjustment not made as a result of such restriction is
carried forward and taken into account in any subsequent adjustment.
Exchangeability. The Series D Preferred Stock is exchangeable at the
option of the Company in whole, but not in part, on any dividend payment date
for 8% Convertible Subordinated Debentures due 2007 that would be issued by the
Company.
Optional Redemption. The Series D Preferred Stock may be redeemed at
the option of the Company, in whole or in part, for $50.40 per share as of
February 1, 1996, declining on and after February 1, 1997 to $50 per share, in
each case plus accrued and unpaid dividends.
Voting Rights. The Series D Preferred Stock does not carry any voting
rights other than (i) the right to elect two additional directors to the Board
of Directors of the Company in the event that dividends on the Series D
Preferred Stock are in arrears in an amount equal to at least six quarterly
dividends and (ii) as the General Corporation Law of the State of Delaware (the
"GCL") may provide.
Liquidation Rights. In the event of the liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, holders of the
Series D Preferred Stock are entitled to receive a preferred liquidation payment
of $50 per share plus an amount equal to the dividends accrued and unpaid to the
distribution date, before any distributions are made to holders of Junior
Securities (as defined in the Certificate of Designation).
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
The Series B Preferred Stock is issuable pursuant to purchase rights
attributable to each outstanding share of Common Stock. Under certain
conditions, each right may be exercised to purchase a unit consisting of one
1/100th of a share of Series B Preferred Stock for $60. The rights are not
exercisable or transferable apart from the Common Stock until the occurrence of
one of the following: (i) ten days after the date ("Stock Acquisition Date") of
a public announcement by a person or a group of beneficial ownership of 10% or
more of the Common Stock (an "Acquiring Person"), (ii) ten business days after a
public announcement by a person or group of a tender or exchange offer which
would result in such person or group beneficially owning 20% or more of the
Common Stock, or (iii) ten days after the occurrence of a Gaming Law Event. A
Gaming Law Event is: (i) a final court or administrative order finding that a
person or group having beneficial ownership of 5% or more of the Common Stock (a
"5% Stockholder") has violated any state gaming, casino or similar laws in
connection with such 5% Stockholder's interest in the Company, (ii) the failure
of a 5% Stockholder to eliminate or reduce to an acceptable level its beneficial
ownership of the Common Stock within 20 days after a final court or
administrative order finding that such 5% Stockholder is unsuitable or
unqualified to hold its interest in the Company under any state gaming, casino
or similar laws or regulations, and (iii) the acquisition by a person or group
of a percentage of the Common Stock at a time when the Company or any of its
subsidiaries has one or more licenses from any governmental authority
administering any gaming, casino or similar laws or regulations, which
percentage exceeds the percentage ownership that any such governmental authority
shall have determined that such person or group may acquire without such
acquisition constituting, or being presumed to constitute, control of the
Company, unless such governmental authority by final order shall have granted
its prior approval to such person or group to
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<PAGE> 29
acquire control of the Company. Upon the occurrence of a Gaming Law Event, each
right, other than those held by the Acquiring Person or 5% Stockholder causing
such occurrence, will entitle the holder to purchase shares of the Common Stock
or, in certain cases, other assets or securities of the Company, having a value
at the time of the transaction equal to two times the exercise price. In the
event that the Company is acquired in a merger or other business combination
transaction (other than a merger with an Acquiring Person in which the Company
is the surviving corporation and the Common Stock is not changed or exchanged)
or 50% or more of the Company's assets or earning power is sold or transferred,
each holder of a right shall have the right to receive, upon exercise, common
stock of the acquiring company having a calculated value equal to twice the
purchase price of the right. The rights, which do not have voting privileges,
are subject to adjustment to prevent dilution, expire on December 4, 1996 and
may be redeemed by the Company at a price of five cents per right at any time
until 10 days (subject to extension by the Board of Directors of the Company)
following the Stock Acquisition Date. See "Common Stock -- Limitation on Changes
in Control."
COMMON STOCK
Dividends and Voting Rights. Subject to the dividend preferences of any
outstanding shares of Preferred Stock, 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 and Bylaws. 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 GCL. 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 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 of 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.
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<PAGE> 30
Limitation on Changes in Control. Certain of the above provisions of
the Restated Certificate, the provisions of Section 203 of the GCL and the
Series B Preferred Stock 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.
Redemption or Forced Sale for Regulatory Reasons. If the New Jersey
Commission or Nevada Commission finds that a holder or beneficial owner of
shares of Common Stock must be found licensed or suitable to hold or own shares
of Common Stock under the New Jersey Act or Nevada Act, 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 or Nevada Commission or the
New Jersey Act or Nevada Act, the Company has 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 shares of Common Stock within 120 days after
receipt of notice by such holder or beneficial owner of its disqualification
under the New Jersey Act or Nevada Act (the "Notice Date") (or such different
period as may be prescribed by the New Jersey Commission or Nevada Commission),
or (ii) to redeem shares of Common Stock held by such holder, by action of the
Board of Directors, if in the judgment of the Board of Directors such action
should be taken pursuant to Section 151(b) of the Delaware General Corporation
Law or any other applicable provision of law, to the extent necessary to prevent
the loss or secure the reinstatement of any government-issued license or
franchise held by the Company or any subsidiary to conduct any portion of the
business of the Company or any subsidiary, which license or franchise is
conditioned upon some or all of the holders of the Company's securities
possessing prescribed qualifications. Such unsuitable or disqualified holder is
required to indemnify the Company for any and all direct or indirect costs,
including attorneys' fees, incurred by the Company as a result of such holder's
continuing ownership or failure to divest promptly.
The redemption price of shares of Common Stock to be redeemed would be
equal to the lesser of (i) the holder's original purchase price for the security
or (ii) the lowest closing sale price of such security between the Notice Date
and the date 120 days after Notice Date.
Commencing on the date the Nevada Commission or the New Jersey
Commission serves notice upon the Company of the determination of unsuitability
or disqualification, it is unlawful under the Nevada Act and the New Jersey Act
for the unsuitable or disqualified holder (i) to receive any dividends upon such
shares; (ii) to exercise, directly or through any trustee or nominee, any right
conferred by such shares; or (iii) to receive any remuneration in any form from
the Company for services rendered or otherwise.
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<PAGE> 31
DESCRIPTION OF WARRANTS
The Warrants may be issued independently of or together with any other
Securities and may be attached to or separate from such Securities. Each series
of Warrants will be issued under a separate Warrant Agreement (each, a "Warrant
Agreement") to be entered into between the Company and a Warrant Agent (the
"Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrant of such series and will not assume any obligation
or relationship of agency for or with holders or beneficial owners of the
Warrants.
The applicable Prospectus Supplement will describe the terms of any
Warrants, including the following: (i) the title; (ii) the offering price, if
any; (iii) the aggregate number; (iv) the designation and terms of the Common
Stock purchasable upon exercise of such Warrants; (v) if applicable, the
designation and terms of the Securities with which such Warrants are issued and
the number of such Warrants issued with each such Security; (vi) if applicable,
the date from and after which such Warrants and any Securities issued therewith
will be separately transferable; (vii) the number of shares of Common Stock
purchasable upon exercise of a Warrant and the exercise price at which such
shares may be purchased; (viii) the date on which the right to exercise such
Warrants shall commence and the date on which such right shall expire; (ix) if
applicable, the minimum or maximum amount of such Warrants which may be
exercised at any one time; (x) the currency, currencies or currency units in
which the offering price, if any, and the exercise price are payable; (xi) if
applicable, a discussion of certain United States federal income tax
considerations; (xii) the antidilution provisions, if any; (xiii) the applicable
redemption or call provisions, if any; and (xiv) any additional terms, including
terms, procedures and limitations relating to the exchange and exercise of such
Warrants.
The Warrants are subject to redemption or forced sale for regulatory
reasons upon the same terms and grounds as the Common Stock, as described above
in "Common Stock -- Redemption or Forced Sale for Regulatory Reasons."
PLAN OF DISTRIBUTION
Both the Company and the Selling Stockholder may offer the Securities
directly to purchasers, to or through underwriters, through dealers or agents
or through a combination of any such methods. The Selling Stockholder may sell
all or a portion of the Common Stock, in privately negotiated transactions or
otherwise, at fixed prices that may be changed, at market prices prevailing at
the time of sale, at prices related to such market prices or at negotiated
prices. The Selling Stockholder may elect to engage a broker or dealer to
effect sales in one or more of the following transactions: (a) block trades in
which the broker or dealer so engaged will attempt to sell the Common Stock as
agent but may position and resell a portion of the block as principal to
facilitate the transaction, (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus
and (c) ordinary brokerage transactions and transactions in which the broker
solicits purchases. In effecting sales, brokers and dealers engaged by the
Selling Stockholder may arrange for other brokers or dealers to participate.
Brokers or dealers may receive commissions or discounts from the Selling
Stockholder (or, if any such broker-dealer acts as agent for the purchaser of
such shares, from such purchaser) in amounts to be negotiated which are not
expected to exceed those customary in the types of transactions involved.
Broker-dealers may agree with the Selling Stockholder to sell a specified
number of such securities at a stipulated price per share, and, to the extent
such broker-dealer is unable to do so acting as agent for the Selling
Stockholder, to purchase as principal any unsold Common Stock at the price
required to fulfill the broker-dealer commitment to the Selling Stockholder.
Broker-dealers who acquire Common Stock as principal may thereafter resell such
securities from time to time in transactions (which may involve block
transactions and sales to and through other broker-dealers, including
transactions of the nature described above) in the over-the-counter market or
otherwise at prices and on terms then prevailing at the time of sale, at prices
then related to the then-current market price or in negotiated transactions
and, in connection with such resales, may pay to or receive from the purchasers
of such Securities commissions as described above.
Any underwriter(s), broker(s), dealer(s) or agent(s) involved in the
offer and sale of the Securities in respect of which this Prospectus is
delivered will be named in the Prospectus Supplement. The Prospectus Supplement
with respect to such Securities also will set forth the terms of the offering of
such Securities, including the purchase price of such Securities and the
proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers and any
securities exchanges on which such Securities may be listed and any information
required with respect to the Selling Stockholder.
If underwriters are used in an offering of Securities, the Company and
the Selling Stockholder will execute an underwriting agreement with such
underwriters, and the name of each managing underwriter, if any, and any other
30
<PAGE> 32
underwriters and the terms of the transaction, including any underwriting
discounts and other items constituting compensation of the underwriters and
dealers, if any, will be set forth in the Prospectus Supplement relating to such
offering, and the Securities will be acquired by the underwriters for their own
accounts and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
If a dealer is used in an offering of Securities, the Company and the
Selling Stockholder will sell such Securities to the dealer, as principal. The
dealer then may resell such Securities to the public at varying prices to be
determined by such dealer at the time of resale. The name of the dealer and the
terms of the transaction will be set forth in the Prospectus Supplement relating
thereto.
If an agent is used in an offering of Securities, the agent will be
named, and the terms of the agency will be set forth, in the Prospectus
Supplement relating thereto. Unless otherwise indicated in such Prospectus
Supplement, an agent will act on a best efforts basis for the period of its
appointment.
The Selling Stockholder and any dealers and agents named in a
Prospectus Supplement may be deemed to be underwriters (within the meaning of
the Securities Act) of the Securities described therein and, under agreements
which may be entered into with the Company and the Selling Stockholder, may be
entitled to indemnification by the Company against certain civil liabilities
under the Securities Act. Underwriters, dealers and agents may be customers of,
engage in transactions with, or perform services for, the Company and the
Selling Stockholder in the ordinary course of business.
Offers to purchase Securities may be solicited, and sales thereof may
be made, by the Company and the Selling Stockholder directly to institutional
investors or others, who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resales thereof. The terms of any such
offer will be set forth in the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company will
authorize underwriters or other agents of the Company to solicit offers by
certain institutional investors to purchase Securities from the Company pursuant
to contracts providing for payment and delivery at a future date. Institutional
investors with which such contracts may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such purchasers must be
approved by the Company. The obligations of any purchaser under any such
contract will not be subject to any conditions except that (1) the purchase of
the Securities shall not at the time of delivery be prohibited under the laws of
any jurisdiction to which such purchaser is subject and (2) if the Securities
also are being sold to underwriters, the Company and the Selling Stockholder
shall have sold to such underwriters the Securities not subject to delayed
delivery. Underwriters and other agents will not have any responsibility in
respect of the validity or performance of such contracts.
The anticipated date of delivery of Securities will be set forth in the
Prospectus Supplement relating to each applicable offering.
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<PAGE> 33
LEGAL OPINIONS
The legality of the Securities will be passed upon for the Company and
the Selling Stockholder by Katten Muchin & Zavis, Chicago, Illinois.
EXPERTS
The consolidated financial statements of the Company appearing in the
Annual Report have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
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<PAGE> 34
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses will be paid by the Company:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............................ $258,621
Accounting Fees and Expenses................................................... 13,000
Legal Fees and Expenses........................................................ 75,000
Blue Sky Fees and Expenses..................................................... 5,000
Printing and Engraving Expenses................................................ 50,000
Miscellaneous Expenses......................................................... 3,379
---------
Total.................................................................. $405,000
=========
<FN>
All expenses other than the Securities and Exchange Commission registration fee
are estimated.
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the GCL empowers a Delaware corporation to indemnify any
persons who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was an officer or
director of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided that
such officer or director acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests, and, for
criminal proceedings, had no reasonable cause to believe his conduct was
illegal. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation under the same conditions against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action, except that
no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation in the performance of his
duty. Where an officer or director is successful on the merits or otherwise in
the defense of any action referred to above, the corporation must indemnify him
against the expenses which he actually and reasonably incurred.
The Company's Restated Certificate provides, in accordance with the
GCL, for the indemnification of directors and officers of the Company, and
persons who serve or served at the request of the Company as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, against all expenses, liabilities and losses (including
attorneys' fees, judgment, fines, ERISA (as defined) excise taxes or penalties
in amounts paid or to be paid in settlement) reasonably incurred with respect to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative; provided, however, that the Company shall indemnify any such
person seeking indemnification in connection with a proceeding initiated by such
person only if such proceeding was authorized by the Board of Directors of the
Company. In the event a claim for indemnification by any person has not been
paid in full by the Company after written request has been received by the
Company, the claimant may at any time thereafter bring suit against the Company
to recover the unpaid amount of the claim and, if successful
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<PAGE> 35
in whole or in part, the claimant shall also be entitled to be paid the expense
of prosecuting such claim. The right to indemnification conferred in the
Restated Certificate is a contract right and includes the right to be paid by
the Company the expenses incurred in defending any such proceeding in advance of
its final disposition. The Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Company or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Company would
have the power to indemnify such person against such expense, liability or loss
under the GCL.
The Restated Certificate provides, in accordance with the GCL, that no
director shall be personally liable to the Company or any of its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the GCL, or (iv) for any transaction from which the director derived an improper
personal benefit. If the GCL is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Company, in addition to the limitation on personal liability, shall be
limited to the fullest extent permitted by the amended GCL.
The Company has purchased directors' and officers' liability insurance
in the amount of $35,000,000, covering certain liabilities incurred by its
officers and directors and those of its subsidiaries and affiliates in
connection with the performance of their duties.
II-2
<PAGE> 36
ITEM 16. EXHIBITS.
1.1** Form of Underwriting Agreement (Debt Securities).
1.2** Form of Underwriting Agreement (Preferred Stock).
1.3** Form of Underwriting Agreement (Common Stock).
1.4** Form of Underwriting Agreement (Warrants).
2.*** Agreement and Plan of Merger dated as of June 6, 1996 between
Hilton Hotels Corporation and Bally Entertainment Corporation
(filed as an exhibit to the Company's Quarterly Report on
Form 10-Q, file no. 1-7244, for the period ended June 30,
1996.)
3.1*** Restated Certificate of Incorporation of the Company, as
amended (filed as an exhibit to the Company's Quarterly Report
on Form 10-Q, file no. 1-7244, for the period ended June 30,
1996).
3.2*** By-laws of the Company, as amended (filed as an exhibit to the
Company's Annual Report on Form 10-K, file no. 1-7244, for the
fiscal year ended December 31, 1995).
4.1* Form of Indenture between the Company and First Bank National
Association, as Trustee, governing the Senior Debt Securities.
4.2* Form of Indenture between the Company and First Bank National
Association, as Trustee, governing the Subordinated Debt
Securities.
4.3** Form of Senior Debt Securities.
4.4** Form of Subordinated Debt Securities.
4.5** Form of Certificate of Designation, Preferences and Rights for
Preferred Stock.
4.6* Form of Deposit Agreement.
4.7** Form of Warrant Agreement, including form of Warrant
Certificates.
5. Opinion of Katten Muchin & Zavis as to the legality of the
Securities being registered.
12. Statement of Computation of Ratio of Earnings to Fixed Charges
and Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends.
23.1 Consent of Independent Auditors.
23.2 Consent of Katten Muchin & Zavis (contained in its opinion
filed as Exhibit 5 hereto).
24.* Powers of Attorney
25.1* Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of First Bank National Association, trustee for
the Senior Debt Securities.
25.2* Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of First Bank National Association, trustee for
the Subordinated Debt Securities.
- ------------------
* Previously filed.
** To be filed as an exhibit to Form 8-K in reference to the specific offering
of Securities, if any, to which it relates.
*** Incorporated herein by reference as indicated.
II-3
<PAGE> 37
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
Registration Statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective
amendment any of the Securities being registered which remain unsold at
the termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-4
<PAGE> 38
D. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-5
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago, State of Illinois on the 23rd
day of August, 1996.
BALLY ENTERTAINMENT CORPORATION
By: /s/ Lee S. Hillman
----------------------------------------------
Lee S. Hillman, Executive Vice President,
Chief Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
amendment to this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------- ------------------------------------------------------ ----------------------
<S> <C> <C>
Chairman of the Board, President and Chief
* Executive Officer (Principal Executive Officer) August 23, 1996
- -----------------------------------------
Arthur M. Goldberg
Executive Vice President, Chief Financial Officer
/s/ Lee S. Hillman and Treasurer (Principal Financial Officer) August 23, 1996
- -----------------------------------------
Lee S. Hillman
Vice President and Corporate Controller
* (Principal Accounting Officer) August 23, 1996
- -----------------------------------------
John W. Dwyer
* Director August 23, 1996
- -----------------------------------------
George N. Aronoff
* Director August 23, 1996
- -----------------------------------------
Barrie K. Brunet
* Director August 23, 1996
- -----------------------------------------
Edwin M. Halkyard
* Director August 23, 1996
- -----------------------------------------
J. Kenneth Looloian
* Director August 23, 1996
- -----------------------------------------
Rocco J. Marano
* Director August 23, 1996
- -----------------------------------------
Patrick L. O'Malley
* Director August 23, 1996
- -----------------------------------------
James M. Rochford
*By: /s/ Lee S. Hillman Director August 23, 1996
- -----------------------------------------
Lee S. Hillman
Attorney-in-Fact, pursuant to
Power of Attorney
</TABLE>
II-6
<PAGE> 40
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- ------ -----------------------
<S> <C>
1.1** Form of Underwriting Agreement (Debt Securities).
1.2** Form of Underwriting Agreement (Preferred Stock).
1.3** Form of Underwriting Agreement (Common Stock).
1.4** Form of Underwriting Agreement (Warrants).
2.*** Agreement and Plan of Merger dated as of June 6, 1996 between
Hilton Hotels Corporation and Bally Entertainment Corporation
(filed as an exhibit to the Company's Quarterly Report on
Form 10-Q, file no. 1-7244, for the period ended June 30,
1996.)
3.1*** Restated Certificate of Incorporation of the Company, as
amended (filed as an exhibit to the Company's Quarterly Report
on Form 10-Q, file no. 1-7244, for the period ended June 30,
1996).
3.2*** By-laws of the Company, as amended (filed as an exhibit to the
Company's Annual Report on Form 10-K, file no. 1-7244, for the
fiscal year ended December 31, 1995).
4.1* Form of Indenture between the Company and First Bank National
Association, as Trustee, governing the Senior Debt Securities.
4.2* Form of Indenture between the Company and First Bank National
Association, as Trustee, governing the Subordinated Debt
Securities.
4.3** Form of Senior Debt Securities.
4.4** Form of Subordinated Debt Securities.
4.5** Form of Certificate of Designation, Preferences and Rights for
Preferred Stock.
4.6* Form of Deposit Agreement.
4.7** Form of Warrant Agreement, including form of Warrant
Certificates.
5. Opinion of Katten Muchin & Zavis as to the legality of the
Securities being registered.
12. Statement of Computation of Ratio of Earnings to Fixed Charges
and Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends.
23.1 Consent of Independent Auditors.
23.2 Consent of Katten Muchin & Zavis (contained in its opinion
filed as Exhibit 5 hereto).
24.* Powers of Attorney
25.1* Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of First Bank National Association, trustee for
the Senior Debt Securities.
25.2* Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of First Bank National Association, trustee for
the Subordinated Debt Securities.
- ------------------
* Previously filed.
** To be filed as an exhibit to Form 8-K in reference to the specific offering
of Securities, if any, to which it relates.
*** Incorporated herein by reference as indicated.
</TABLE>
<PAGE> 1
EXHIBIT 5
KATTEN MUCHIN & ZAVIS
525 West Monroe Street
Chicago, Illinois 60661-3693
August 23, 1996
Bally Entertainment Corporation
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631
Re: Bally Entertainment Corporation
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel for Bally Entertainment Corporation, a
Delaware corporation (the "Company"), in connection with the preparation and
filing of a Registration Statement on Form S-3 (the "Registration Statement")
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "1933 Act"). The Registration Statement relates to the offering of
up to $711,020,034 aggregate initial offering price of an indeterminate amount
of the following: (i) shares of the Company's common stock, par value $.66 2/3
per share (the "Common Stock"), (ii) unsecured debt securities ("Debt
Securities"), consisting of debentures, notes and/or other unsecured evidences
of indebtedness in one or more series which are to be issued pursuant to an
indenture (the "Indenture") between the Company and First Bank National
Association, as trustee (the "Trustee"), (iii) shares of preferred stock, par
value $1.00 per share ("Preferred Stock"), in one or more series, (iv) shares
of Preferred Stock represented by depositary shares ("Depositary Shares"), or
(v) warrants ("Warrants") to purchase Common Stock. The Registration Statement
also covers the resale by Bally's Grand Property Sub 1, Inc., (the "Selling
Stockholder") of up to 1,457,915 shares of the Common Stock. The Debt
Securities, Preferred Stock, Depositary Shares, Common Stock and Warrants
(collectively referred to as "Securities"), may be issued from time to time,
pursuant to Rule 415 under the Act, and the Securities to be offered by the
Company will be subject to specific terms pertaining to each respective series
of Securities as determined at the time of sale and as set forth in one or more
supplements to the Prospectus constituting part of the Registration Statement.
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the 1933 Act.
<PAGE> 2
Bally Entertainment Corporation
August 23, 1996
Page 2
In connection with this opinion, we have relied as to matters of fact,
without investigation, upon certificates of public officials and others and upon
affidavits, certificates and written statements of directors, officers and
employees of, and the accountants for, the Company. We also have examined
originals or copies, certified or otherwise identified to our
satisfaction, of such instruments, documents and records as we have deemed
relevant and necessary to examine for the purpose of this opinion, including (a)
the Registration Statement, (b) the Restated Certificate of Incorporation of the
Company, as amended (the "Restated Certificate of Incorporation"), (c) the
By-Laws of the Company, (d) certain resolutions adopted by the Board of
Directors of the Company (the "Resolutions") and (e) a form of the Indenture.
In connection with this opinion, we have assumed the accuracy and
completeness of all documents and records that we have reviewed, the genuineness
of all signatures, the authenticity of the documents submitted to us as
originals and the conformity to authentic original documents of all documents
submitted to us as certified, conformed or reproduced copies. We have further
assumed that all natural persons involved in the transactions contemplated by
the Registration Statement (the "Offering") have sufficient legal capacity to
enter into and perform their respective obligations and to carry out their roles
in the Offering.
Based upon and subject to the foregoing, it is our opinion that:
1. The Company is a corporation duly organized and existing
under the laws of the State of Delaware.
2. The Common Stock (including any Common Stock that may be
issuable pursuant to the conversion of any Preferred Stock or Debt
Securities or the exercise of any Warrants or as part of any Units)
will, upon the issuance and sale thereof in the manner contemplated by
the Registration Statement, be validly issued, fully paid and
nonassessable.
3. The issuance of the Preferred Stock (including any
Preferred Stock that may be issuable pursuant to the conversion of any
Debt Securities or the exercise of any Warrants or as part of any
Units) will be duly authorized by all necessary corporate action of the
Company upon (i) approval by the Company's Board of Directors of the
terms of the Preferred Stock, including the number of shares, dividend
rate, mandatory conversion rate, optional conversion rate and
liquidation preference thereof, and (ii) the completion with
appropriate insertions, execution and filing with the Secretary of
State of the State of Delaware of the Certificate of Designations and
its effectiveness in accordance with the Delaware General Corporation
Law. The Preferred Stock, when duly authorized and, assuming that (i)
in accordance with the Resolutions, the pricing
<PAGE> 3
Bally Entertainment Corporation
August 23, 1996
Page 3
committee of the Company's Board of Directors adopts resolutions fixing
the price per share at which the Preferred Shares are to be sold and
such price is at least equal to the par value of the Preferred Stock,
and (ii) the form of certificate evidencing the Preferred Stock
complies with applicable law, when sold or otherwise delivered, will be
validly issued, fully paid and nonassessable.
4. Each series of Debt Securities will be legally issued and
binding obligations of the Company (except to the extent enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws affecting the
enforcement of creditors' rights generally and by the effect of general
principles of equity, regardless of whether enforceability is
considered in a proceeding in equity or at law) when (i) the
Registration Statement, as finally amended (including any necessary
post-effective amendments), shall have become effective under the
Securities Act and the related Indenture, including any necessary
supplemental indenture, or any alternate indenture, including any
necessary supplemental indenture, filed as an exhibit to the
Registration Statement, as the case may be, shall have been qualified
under the Trust Indenture Act of 1939, as amended, and, in the case of
such alternative indenture, duly executed and delivered by the Company
and the Trustee thereunder; (ii) a Prospectus Supplement with the
respect to such series of Debt Securities shall have been filed (or
mailed for filing) with the SEC pursuant to the Securities Act and the
rules and regulations thereunder; (iii) the Company's Board of
Directors or a duly authorized committee thereof shall have duly
adopted final resolutions authorizing the issuance and sale of such
series of Debt Securities as contemplated by the Registration
Statement; and (iv) such series of Debt Securities shall have been duly
executed and authenticated and shall have been duly delivered to the
purchasers thereof against payment of the agreed consideration
therefor.
5. When (i) the Warrant Agreement relating to the Warrants
(the "Warrant Agreement") has been duly executed and delivered; (ii)
the terms of the Warrants and of their issuance and sale have been duly
established in conformity with the Warrant Agreement relating to such
Warrants so as not to violate any applicable law or result in a default
under or breach of any agreement or instrument binding upon the Company
and so as to comply with any requirement or restriction imposed by any
court or governmental or regulatory body having jurisdiction over the
Company; and (iii) the Warrants have been duly executed and
countersigned in accordance with the Warrant Agreement relating to such
Warrants, and issued and sold in the form and manner contemplated in
the Registration Statement and any prospectus supplement relating
thereto, such Warrants will be legally issued and binding obligations
of the Company (except as may be limited by applicable bankruptcy,
insolvency, reorganization,
<PAGE> 4
Bally Entertainment Corporation
August 23, 1996
Page 4
moratorium, fraudulent transfer or other similar laws affecting the
enforcement of creditors' rights generally and by the effect of general
principles of equity, regardless of whether considered in a proceeding
in equity or at law).
Our opinions expressed above are limited to the laws of the State of
Illinois, the laws of the United States of America and the General Corporation
Law of the State of Delaware.
We hereby consent to the use of our name under the heading "Legal
Matters" in the Prospectus forming a part of the Registration Statement and to
the use of this opinion for filing as Exhibit 5 to the Registration Statement.
We hereby consent to the incorporation by reference of this opinion into a
subsequent registration statement filed by the Company pursuant to Rule 462(b)
under the 1933 Act relating to the offering covered by the Registration
Statement.
Very truly yours,
KATTEN MUCHIN & ZAVIS
/s/ KATTEN MUCHIN & ZAVIS
<PAGE> 1
EXHIBIT 12
BALLY ENTERTAINMENT CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(ALL DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------ -------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- ------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing operations before
income taxes and minority interests ......... $ 48,740 $22,934 $ 56,897 $ 6,078 $ 15,070 $ (7,270) $ (50,917)
Add:
Interest expense(1) ......................... 66,872 64,606 132,361 130,834 92,876 93,795 117,156
Amortization of capitalized interest ........ 674 534 1,164 915 849 839 828
Interest component of rent expense(2) ....... 1,313 570 1,703 1,132 421 231 1,015
-------- ------- -------- -------- -------- -------- ---------
Earnings available for fixed charges .......... $117,599 $88,644 $192,125 $138,959 $109,216 $ 87,595 $ 68,082
======== ======= ======== ======== ======== ======== =========
Fixed charges:
Interest expense(1) ......................... $ 66,872 $64,606 $132,361 $130,834 $ 92,876 $ 93,795 $ 117,156
Capitalized interest ........................ 210 2,036 2,838 2,067 422 74 149
Interest component of rent expense(2) ....... 1,313 570 1,703 1,132 421 231 1,015
-------- ------- -------- -------- -------- -------- ---------
Total fixed charges ........................... $ 68,395 $67,212 $136,902 $134,033 $ 93,719 $ 94,100 $ 118,320
======== ======= ======== ======== ======== ======== =========
Ratio of earnings to fixed charges ............ 1.7x 1.3x 1.4x 1.0x 1.2x (3) (3)
<FN>
- ------------------
(1) Includes amortization of debt issuance costs and discount.
(2) Assumed interest component to be one-third of rent expense.
(3) Earnings were insufficient to cover fixed charges for the years ended
December 31, 1992 and 1991 by $6,505 and $50,238, respectively.
</TABLE>
<PAGE> 2
BALLY ENTERTAINMENT CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(ALL DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30, Years ended December 31,
------------------ -------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- ------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing operations before
income taxes and minority interests ......... $ 48,740 $22,934 $ 56,897 $ 6,078 $ 15,070 $ (7,270) $ (50,917)
Add:
Interest expense(1) ......................... 66,872 64,606 132,361 130,834 92,876 93,795 117,156
Amortization of capitalized interest ........ 674 534 1,164 915 849 839 828
Interest component of rent expense(2) ....... 1,313 570 1,703 1,132 421 231 1,015
Preferred stock dividends of consolidated
subsidiaries ............................... 457 467 572
-------- ------- -------- -------- -------- -------- ---------
Earnings available for combined fixed charges
and preferred stock dividends ............... $118,056 $89,111 $192,697 $138,959 $109,216 $ 87,595 $ 68,082
======== ======= ======== ======== ======== ======== =========
Fixed charges and preferred stock dividends:
Interest expense(1) ......................... $ 66,872 $64,606 $132,361 $130,834 $ 92,876 $ 93,795 $ 117,156
Capitalized interest ........................ 210 2,036 2,838 2,067 422 74 149
Interest component of rent expense(2) ....... 1,313 570 1,703 1,132 421 231 1,015
Total preferred stock dividends(3) .......... 13,440 2,737 6,804 5,490 4,300 2,778 2,778
-------- ------- -------- -------- -------- -------- ---------
Combined fixed charges and
preferred stock dividends ................... $ 81,835 $69,949 $143,706 $139,523 $ 98,019 $ 96,878 $ 121,098
======== ======= ======== ======== ======== ======== =========
Ratio of earnings to combined fixed charges and 1.4x 1.3x 1.3x 1.0x 1.1x (4) (4)
preferred stock dividends
<FN>
- ------------------
(1) Includes amortization of debt issuance costs and discount.
(2) Assumed interest component to be one-third of rent expense.
(3) Includes preferred stock dividends of Bally Entertainment Corporation and
its consolidated subsidiaries.
(4) Earnings were insufficient to cover combined fixed charges and preferred
stock dividends for the years ended December 31, 1992 and 1991 by $9,283
and $53,016, respectively.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the capition "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-4325) and
related Prospectus of Bally Entertainment Corporation for the registration of
$750,000,000 of its debt securities, preferred stock, depository shares, common
stock, and warrants to purchase common stock and to the incorporation by
reference therein of our report dated February 7, 1996, with respect to the
consolidated financial statements and schedules of Bally Entertainment
Corporation included in its Annual Report (Form 10-K) for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
/S/ ERNST & YOUNG LLP
Chicago, Illinois
August 20, 1996
