AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 5, 2001
REGISTRATION NO. 333-69566
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
BOYD GAMING CORPORATION
(Exact name of registrant as specified in its charter)
---------------------
<Table>
NEVADA 88-0242733
(State or Other Jurisdiction of (I.R.S. Employe
Incorporation or Organization) Identification No.)
</Table>
AND ITS GUARANTOR SUBSIDIARIES
<Table>
INDIANA BLUE CHIP CASINO, LLC 35-2087676
NEW JERSEY BOYD ATLANTIC CITY, INC. 93-1221994
INDIANA BOYD INDIANA, INC. 88-0310766
LOUISIANA BOYD KENNER, INC. 88-0319489
NEVADA BOYD LOUISIANA L.L.C. 86-0880651
MISSISSIPPI BOYD TUNICA, INC. 64-0829658
NEVADA CALIFORNIA HOTEL AND CASINO 88-0121743
NEVADA CALIFORNIA HOTEL FINANCE CORPORATION 88-0217850
NEVADA ELDORADO, INC. 88-0093922
NEVADA MARE-BEAR, INC. 88-0203692
NEVADA M.S.W., INC. 88-0310765
ILLINOIS PAR-A-DICE GAMING CORPORATION 37-1268902
NEVADA SAM-WILL, INC. 88-0203673
LOUISIANA TREASURE CHEST CASINO, L.L.C. 72-1248550
(State or Other Jurisdiction of (Exact name of registrant (I.R.S. Employer
Incorporation or Organization) as specified in its charter) Identification No.)
</Table>
---------------------
7990
(Primary Standard Industrial Classification Code No.)
---------------------
2950 INDUSTRIAL ROAD
LAS VEGAS, NEVADA 89109
(702) 792-7200
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
ELLIS LANDAU
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
BOYD GAMING CORPORATION
2950 INDUSTRIAL ROAD
LAS VEGAS, NEVADA 89109
(702) 792-7200
(Name, address, including zip code, and telephone number, including area code of
agent for service)
COPY TO:
ROBERT M. MATTSON, JR.
TAMARA P. TATE
BRANDON C. PARRIS
MORRISON & FOERSTER LLP
19900 MACARTHUR BOULEVARD
TWELFTH FLOOR
IRVINE, CALIFORNIA 92612
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
---------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT 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 SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
[BOYD GAMING LOGO]
$200,000,000
OFFER TO EXCHANGE
9 1/4% SENIOR NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING 9 1/4% SENIOR NOTES DUE 2009
---------------------
THE EXCHANGE NOTES
We are offering to exchange $200 million aggregate principal amount of our
9 1/4% senior notes due 2009 that we have registered under the Securities Act of
1933, as amended (the exchange notes) for any and all outstanding 9 1/4% senior
notes due 2009 that we issued on July 26, 2001 (the old notes). The terms of the
exchange notes will be substantially similar to our old notes, except for the
elimination of some transfer restrictions, registration rights and certain
liquidated damages provisions relating to the old notes.
The exchange notes will mature on August 1, 2009. Interest on the exchange
notes will accrue at 9 1/4% per year, and the interest will be payable
semi-annually in arrears on February 1 and August 1, beginning February 1, 2002.
We may redeem the exchange notes at any time on or after August 1, 2005. In
addition, at any time prior to August 1, 2004, we may redeem up to 35% of the
notes with the net proceeds of one or more public equity offerings.
If we undergo a change of control or sell certain of our assets, we may be
required to offer to purchase exchange notes from holders. The exchange notes
will be our unsecured senior obligations and will rank senior to all of our
existing and future subordinated debt. The exchange notes will be effectively
subordinated to any secured debt, including debt under our bank credit facility.
Substantially all of our significant subsidiaries will guarantee the exchange
notes with unconditional guarantees that will be unsecured senior obligations of
such subsidiaries and will rank senior to all of such subsidiaries' existing and
future subordinated debt. The guarantees will be effectively subordinated to any
secured debt of our guarantor subsidiaries, including debt under our bank credit
facility, and to all liabilities of the non-guarantor subsidiaries.
MATERIAL TERMS OF THE EXCHANGE OFFER
The exchange offer expires at 5:00 p.m., New York City time, on January 7,
2002, unless extended.
Our completion of the exchange offer is subject to customary conditions
which we may waive.
Upon our completion of the exchange offer, all old notes that are validly
tendered and not withdrawn will be exchanged for an equal principal amount of
exchange notes that are registered under the Securities Act of 1933, as amended.
Tenders of old notes may be withdrawn at any time prior to the expiration of the
exchange offer.
The exchange of the exchange notes for old notes pursuant to the exchange
offer will not be a taxable exchange for U.S. Federal income tax purposes.
We will not receive any proceeds from the exchange offer.
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange note. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for old notes where such old
notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. We have agreed that, for a period of 180
days after the expiration date, we will make this prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
---------------------
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 11 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER BEFORE PARTICIPATING IN
THIS EXCHANGE OFFER.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE NEVADA GAMING
COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE MISSISSIPPI GAMING
COMMISSION, THE NEW JERSEY CASINO CONTROL COMMISSION, THE NEW JERSEY DIVISION OF
GAMING ENFORCEMENT, THE LOUISIANA GAMING CONTROL BOARD, THE ILLINOIS GAMING
BOARD, THE INDIANA GAMING COMMISSION NOR ANY STATE SECURITIES COMMISSION, OTHER
STATE GAMING COMMISSION OR OTHER GAMING AUTHORITY OR OTHER REGULATORY AGENCY HAS
APPROVED OR DISAPPROVED OF THE NOTES OFFERED HEREBY OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
---------------------
The date of this prospectus is December 5, 2001
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Where You Can Find Additional Information................... ii
Incorporation of Certain Documents by Reference............. ii
Forward-Looking Statements.................................. iii
Market Data................................................. iii
Prospectus Summary.......................................... 1
Risk Factors................................................ 11
Use of Proceeds............................................. 20
Capitalization.............................................. 21
Selected Consolidated Financial Data........................ 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 25
Governmental Gaming Regulation.............................. 33
Description of Other Indebtedness........................... 34
The Exchange Offer.......................................... 37
Description of Exchange Notes............................... 47
Certain Federal Income Tax Considerations................... 84
Plan of Distribution........................................ 87
Legal Matters............................................... 88
Experts..................................................... 88
Index to Consolidated Financial Statements.................. F-1
</Table>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission (the "SEC") under the Exchange Act of 1934, as amended.
You may read and copy this information at the SEC's Public Reference Room, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
You also may obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Further information on the operation of the
SEC's Public Reference Room in Washington, D.C. can be obtained by calling the
SEC at 1-800-SEC-0330.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, such as us, who
file electronically with the SEC. The address of that site is
http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
Information with respect to us also may be obtained from us at 2950
Industrial Road, Las Vegas, Nevada 89109 or by telephone at (702) 792-7200.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the SEC and are incorporated
by reference in this prospectus:
- our Annual Report on Form 10-K for the year ended December 31, 2000;
- our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;
- our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001;
- our current report on Form 8-K filed with the SEC on July 12, 2001;
- our Quarterly Report on Form 10-Q for the quarter ended September 30,
2001; and
- all other documents filed by us pursuant to Section 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.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus is modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus 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 statement so modified or superseded does not, except as so
modified or superseded, constitute a part of this prospectus. We will provide
without charge to each person to whom a copy of this prospectus is delivered,
upon the request of such person, a copy of any or all of the documents that are
incorporated by reference herein, other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into such documents.
Written or telephone requests should be directed to Boyd Gaming Corporation,
2950 Industrial Road, Las Vegas, Nevada 89109, Attention: Investor Relations;
telephone (702) 792-7200.
TO OBTAIN TIMELY DELIVERY OF DOCUMENTS INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, YOU MUST REQUEST THE INFORMATION NO LATER THAN FIVE BUSINESS DAYS
PRIOR TO THE EXPIRATION OF THE EXCHANGE OFFER. THE EXCHANGE OFFER WILL EXPIRE ON
JANUARY 7, 2002, UNLESS EXTENDED.
ii
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act, and Section 21E of the Securities Exchange
Act. Such statements include statements regarding our expectations, hopes or
intentions regarding the future, including but not limited to statements
regarding our strategy, competition (including the expansion of gaming into
additional markets), expenses, development plans (including anticipated costs,
timing and eventual acceptance of new facilities by the market), financing,
indebtedness, revenues, operations, regulations and compliance with applicable
laws. Forward-looking statements involve certain risks and uncertainties, and
actual results may differ materially from those discussed in any such statement.
Factors that could cause actual results to differ materially from such
forward-looking statements include the risks described in greater detail in
"Risk Factors" and elsewhere in this prospectus. All forward-looking statements
in this document are made as of the date hereof, based on information available
to us as of the date hereof, and we caution you not to rely on these statements
without also considering the risks and uncertainties associated with these
statements and our business that are addressed in this prospectus. We assume no
obligation to update any forward-looking statement.
MARKET DATA
Market data used throughout this prospectus, including information relating
to our relative position in the gaming industry, is based on the good faith
estimates of management, which estimates are based upon their review of internal
surveys, independent industry publications and other publicly available
information. Although we believe that such sources are reliable, we do not
guarantee the accuracy or completeness of this information, and we have not
independently verified such information.
iii
PROSPECTUS SUMMARY
The following summary contains basic information about this offering. It
does not contain all of the information that is important to you. For a more
complete understanding of this offering, we encourage you to read the entire
document and the documents we have referred you to, especially the risks of
investing in the notes discussed under "Risk Factors," before investing in these
notes. Unless the context otherwise indicates and except with respect to any
description of the notes, references to "we," "us," and "our" are to Boyd Gaming
Corporation and its subsidiaries, taken as a whole.
THE COMPANY
We are a multi-jurisdictional gaming company that has operated successfully
for over 25 years. We currently own and operate twelve gaming facilities. Our
facilities are located in eight distinct gaming markets in five states.
On May 31, 2001 we acquired substantially all of the assets of the Delta
Downs Racetrack, a horse racing facility near Vinton, Louisiana. We are
currently expanding this property and plan to add slot machines once we receive
the appropriate regulatory approvals. Our gaming license to operate slot
machines at Delta Downs is currently the subject of litigation. For more
information, see "-- Recent Developments" and "Risk Factors -- If the injunction
preliminarily enjoining our license to operate slot machines at Delta Downs is
not overturned, or if the action proceeds to trial and we are not ultimately
successful in defending against the action, we will not be able to operate slot
machines at Delta Downs." If the casino opens, Delta Downs will be the closest
casino to Houston, Texas. In addition, we are currently constructing The
Borgata, a $1 billion casino resort in Atlantic City, New Jersey. We expect to
open The Borgata in the summer of 2003 and will manage it upon completion. The
property is owned in a 50/50 joint venture with MGM MIRAGE.
The following table sets forth information regarding our properties as of
June 30, 2001.
<Table>
<Caption>
YEAR CASINO OWNED OR
FACILITY OPENED OR SPACE SLOT TABLE HOTEL LEASED
STATE TYPE ACQUIRED (SQ. FEET) MACHINES GAMES ROOMS ACREAGE
----------- ---------- --------- ---------- -------- ----- ----- ---------
LAS VEGAS STRIP
Stardust Resort and
Casino................... Nevada Land-based 1985 75,000 1,598 69 1,552 61
DOWNTOWN LAS VEGAS
California Hotel and
Casino................... Nevada Land-based 1975 36,000 1,109 35 781 16
Fremont Hotel and Casino... Nevada Land-based 1985 32,000 1,133 28 447 2
Main Street Station Casino,
Brewery and Hotel........ Nevada Land-based 1993 28,500 930 20 406 15
BOULDER STRIP
Sam's Town Hotel and
Gambling Hall............ Nevada Land-based 1979 133,000 3,028 39 648 63
Eldorado Casino............ Nevada Land-based 1993 16,000 583 11 -- 4
Jokers Wild Casino......... Nevada Land-based 1993 22,500 640 11 -- 13
CENTRAL REGION
Sam's Town Hotel and
Gambling Hall............ Mississippi Dockside 1994 75,000 1,578 57 843 150
Par-A-Dice Hotel and
Casino................... Illinois Dockside 1996 33,000 1,122 34 208 19
Treasure Chest Casino...... Louisiana Dockside 1997 24,000 981 47 -- 14
Blue Chip Casino........... Indiana Riverboat 1999 37,400 1,512 47 188 35
Delta Downs Racetrack...... Louisiana Land-based 2001 Pending Pending -- -- 206
------- ------- --- ----- ---
TOTAL.............. 512,400 14,214 398 5,073 598
======= ======= === ===== ===
</Table>
1
BUSINESS STRATEGY AND COMPETITIVE STRENGTHS
Our business strategy is to provide our customers with a high-quality
casino entertainment experience at an affordable price. We emphasize customer
service and offer a comfortable environment in order to develop and maintain
customer loyalty. We offer a variety of amenities to complement our guests'
gaming experiences, such as quality hotel rooms, varied dining choices and
appealing entertainment options. We draw upon our extensive experience in the
gaming industry to make each of our facilities appealing to a broad range of
customers and employ a variety of marketing and promotional activities to
attract customers. We regularly invest in our facilities to maintain their
quality, appeal and competitiveness. In evaluating new opportunities, we seek
gaming markets with strong demographics, good locations and limited potential
for new competition that will enable us to obtain a competitive advantage and
strong returns on investment.
Geographic Diversity. We own and operate twelve facilities, including
seven in Nevada, two in Louisiana and one in each of Illinois, Indiana and
Mississippi. Our properties in Nevada are located in three distinct markets
around Las Vegas: the Las Vegas Strip, downtown Las Vegas and the Boulder Strip.
The Borgata, our development project, is located in Atlantic City, New Jersey.
This geographic diversity reduces our dependency on any one market.
Emphasis on Slot Revenues. We emphasize slot revenues, the most
consistently profitable segment of the gaming business. We offer a wide variety
of games to attract customers, encourage them to play for longer periods of time
and thereby promote the stability of our gaming revenues. For the twelve months
ended June 30, 2001, slot revenues comprised approximately 80% of our gaming
revenues and approximately 59% of our gross revenues.
Comprehensive Marketing and Promotion. We actively promote our casino
entertainment offerings, hotels, restaurants and live entertainment using a
variety of media including outdoor, print, broadcast and the Internet. We have
developed and maintain an extensive customer database. We expand the database
daily by obtaining mailing addresses and other marketing information from our
casino customers. We employ a direct mail program targeting our database
customers with a variety of product offerings, including incentives to visit our
facilities frequently. During the year ended December 31, 2000, we distributed
approximately 9.2 million pieces of mail.
Downtown Properties Tap a Unique Niche Market. We have developed a
distinct niche for our downtown properties by focusing on customers from Hawaii.
We believe that for more than twenty years the California, and more recently the
Fremont and Main Street Station, have been the leading Las Vegas destinations
for visitors from Hawaii. We own a travel agency in Hawaii that currently
operates seven charter flights from Honolulu to Las Vegas each week, helping to
ensure a stable supply of reasonably-priced air seats. We also have strong,
informal relationships with other Hawaiian travel agencies and offer affordable,
all-inclusive packages.
Opportunistic Acquisitions. We have been opportunistic in acquiring gaming
properties at attractive prices. Our acquired properties have historically
generated a majority of their revenues from slot machines. Over the past five
years, we have made three acquisitions of gaming properties which generated an
average first year cash-on-cash return of approximately 26%. In the future, we
will continue to look for growth opportunities that allow us to maintain a
balanced capital structure.
Experienced Management Team. We are an experienced gaming operator and
have operated casinos in Las Vegas for over 25 years. Our senior management team
is an experienced group of industry veterans with an average tenure in the
gaming industry or applicable fields of expertise of more than twenty years.
2
DELTA DOWNS ACQUISITION
On May 31, 2001, we acquired substantially all of the assets of the Delta
Downs Racetrack near Vinton, Louisiana, together with an off-track betting
facility in Mound, Louisiana. Delta Downs has historically conducted horse races
on a seasonal basis and operated year-round simulcast facilities for customers
to place bets on races held at other tracks. Our gaming license to operate slot
machines at Delta Downs is currently the subject of litigation. For more
information, see "-- Recent Developments" and "Risk Factors -- If the injunction
preliminarily enjoining our license to operate slot machines at Delta Downs is
not overturned, or if the action proceeds to trial and we are not ultimately
successful in defending against the action, we will not be able to operate slot
machines at Delta Downs." We have begun a $35 million renovation project to
expand the facility and equip a new casino. The property will feature a 350-seat
buffet, a 200-seat fine dining restaurant, a sports bar and small food outlets,
some of which will be located in the existing 82,000 square foot clubhouse.
There are approximately 3.7 million adults living within 150 miles of Delta
Downs, including residents of Houston, Texas, which is approximately 122 miles
from our property. Lake Charles, Louisiana is currently the closest gaming
market to Houston. If our casino opens, it will be 25 miles closer to Houston
than the gaming properties in Lake Charles. Customers traveling from Houston,
Beaumont and other parts of southeastern Texas will generally have to drive past
Delta Downs to reach Lake Charles, and we intend to market to those customers.
We purchased the property for $125 million. The purchase price is subject
to adjustment based on the number of slot machines we may receive approval to
operate and certain other performance-based criteria.
THE BORGATA DEVELOPMENT PROJECT
We are constructing The Borgata in Atlantic City. The Borgata is expected
to cost approximately $1.035 billion and will include a 40-story hotel tower
with 2,010 guest rooms, and a 120,000 square foot casino with 3,500 slot
machines and 120 table games. The property will also feature several specialty
restaurants and boutiques, a European-style health spa, meeting space and
several entertainment venues. We expect the property to open in the summer of
2003. When it opens, The Borgata will be the first new casino in Atlantic City
in over thirteen years. Situated on approximately 28 acres, The Borgata will be
served by the Brigantine Connector roadway, which will make the property one of
the most convenient properties in Atlantic City to access. We will operate the
property upon its completion.
We and MGM MIRAGE each own a 50% interest in the project and have each
invested approximately $121 million as of September 30, 2001. We will each
invest an additional $86 million over the next two years. The remaining $621
million is being financed by a bank credit facility that is non-recourse to both
us and MGM MIRAGE. We have provided an unlimited completion guarantee for the
project but have no other financial obligations to support the property. As of
September 30, 2001, approximately 85% of the total construction hard costs have
either been spent or are subject to fixed-price contracts. In addition, as of
September 30, 2001, there was a cost contingency of approximately $90 million
that has not yet been allocated. The construction is currently on time and
within budget.
RECENT DEVELOPMENTS
On October 30, 2001, the Louisiana Gaming Control Board granted us a gaming
license to operate slot machines at Delta Downs. However, on November 2, 2001,
Isle of Capri Casinos, Inc. and certain of its subsidiaries filed an action in
state district court in Louisiana against the Louisiana Gaming Control Board,
and later named Delta Downs to the action, seeking to enjoin the legal effect of
our gaming license to operate slot machines at Delta Downs. On November 20,
2001, the state district court granted Isle of Capri's petition and
preliminarily enjoined the legal effect of the gaming license to operate slot
machines at Delta Downs, pending a trial on the merits. On November 21, 2001, we
filed a supervisory writ asking the Louisiana appellate court to reverse the
state district court's decision. On December 3, 2001, the Louisiana appellate
court denied our supervisory writ on procedural grounds, citing that the state
district court's November 20, 2001 decision to grant Isle of Capri's preliminary
injunction was an appealable final judgment, and remanded
3
it to the state district court. In remanding our supervisory writ, the Louisiana
appellate court instructed the state district court to treat our supervisory
writ as a direct appeal of the state district court's November 20, 2001 decision
and to certify our appeal to the appellate court. We are not required to take
any additional action to effectuate our appeal of the state district court's
decision at this time. In addition to proceeding with our appeal of the state
district court's decision, we intend to request an expedited trial on the
merits. No determination will be made as to the final number of slot machines
until the gaming license issue has been resolved. As a result, we are presently
unable to determine when, or if, we will commence slot operations at Delta
Downs.
We can provide no assurances that the injunction will be overturned, or if
the action proceeds to trial, that we will ultimately be successful in defending
against the action at trial. In the event the claim seeking to permanently
enjoin the legal effect of our license to operate slot machines at Delta Downs
is ultimately successful, we would not be able to commence the operation of slot
machines at Delta Downs, which would materially affect our ability to experience
increased cash flow from Delta Downs, would reduce the value of the Delta Downs
acquisition and could have a material adverse effect on our financial condition
and results of operations. Moreover, if the claim seeking to permanently enjoin
the legal effect of our license to operate slot machines at Delta Downs is
ultimately successful, we would have to look at strategic alternatives for the
property, including the sale of Delta Downs to a third party. For more
information, see "Risk Factors -- If the injunction preliminarily enjoining our
license to operate slot machines at Delta Downs is not overturned, or if the
action proceeds to trial and we are not ultimately successful in defending
against the action, we will not be able to operate slot machines at Delta
Downs."
4
THE EXCHANGE OFFER
The Exchange Offer............ We are offering to exchange an aggregate of
$200 million principal amount of our exchange
notes for $200 million of our old notes. Old
notes may be exchanged in integral multiples of
$1,000 principal amount. To be exchanged, an
old note must be properly tendered and
accepted. All outstanding old notes that are
validly tendered and not validly withdrawn will
be exchanged for exchange notes issued on or
promptly after the expiration date of the
exchange offer. Currently, there is $200
million aggregate principal amount of old notes
outstanding and no exchange notes outstanding.
The form and terms of the exchange notes will
be substantially identical to those of the old
notes except that the exchange notes will have
been registered under the Securities Act.
Therefore, the exchange notes will not be
subject to certain transfer restrictions,
registration rights and certain liquidated
damage provisions applicable to the old notes
prior to consummation of the exchange offer.
Expiration Date............... The exchange offer will expire at 5:00 p.m.,
New York City time on January 7, 2002, unless
extended, in which case the term "expiration
date" shall mean the latest date and time to
which the exchange offer is extended.
Withdrawal.................... You may withdraw the tender of your old notes
at any time prior to the expiration date of the
exchange offer. See "The Exchange
Offer -- Withdrawal Rights."
Conditions to the Exchange
Offer......................... The exchange offer is not subject to any
conditions other than that it not violate
applicable law or any applicable interpretation
of the staff of the SEC. The exchange offer is
not conditioned upon any minimum principal
amount of old notes being tendered for
exchange. See "The Exchange Offer -- Conditions
to the Exchange Offer."
Procedures for Tendering Old
Notes......................... If you are a holder of old notes who wishes to
accept the exchange offer, you must:
- properly complete, sign and date the
accompanying letter of transmittal (including
any documents required by the letter of
transmittal), or a facsimile of the letter of
transmittal, according to the instructions
contained in this prospectus and the letter
of transmittal, and mail or otherwise deliver
the letter of transmittal, together with your
old notes, to the exchange agent at the
address set forth under "The Exchange
Offer -- Exchange Agent;" or
- arrange for The Depository Trust Company to
transmit certain required information,
including an agent's message forming part of
a book-entry transfer in which you agree to
be bound by the terms of the letter of
transmittal, to the exchange agent in
connection with a book-entry transfer.
See "The Exchange Offer -- Procedures for
Tendering Old Notes."
5
By tendering your old notes in either manner,
you will be representing, among other things,
that:
- you are acquiring the exchange notes issued
to you in the exchange offer in the ordinary
course of your business;
- you are not engaged in, and do not intend to
engage in, and have no arrangement or
understanding with any person to participate
in, a distribution of the exchange notes
issued to you in the exchange offer; and
- you are not an "affiliate" of ours.
Special Procedures for
Beneficial Owners............. If you beneficially own old notes registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee and wish to
tender your beneficially owned old notes in the
exchange offer, you should contact the
registered holder promptly and instruct it to
tender the old notes on your behalf. See "The
Exchange Offer -- Procedures for Tendering Old
Notes."
Guaranteed Delivery
Procedures.................... If you wish to tender your old notes, but:
- your old notes are not immediately available;
or
- you cannot deliver your old notes, the letter
of transmittal or any other documents
required by the letter of transmittal to the
exchange agent prior to the expiration date;
or
- the procedures for book-entry transfer of
your old notes cannot be completed prior to
the expiration date,
you may tender your old notes pursuant to the
guaranteed delivery procedures set forth in
this prospectus and the letter of transmittal.
See "The Exchange Offer -- Guaranteed Delivery
Procedures."
Acceptance of Old Notes for
Exchange and Delivery of
Exchange Notes.............. Upon effectiveness of the registration
statement of which this prospectus is a part
and commencement of the exchange offer, we will
accept any and all old notes that are properly
tendered in the exchange offer prior to 5:00
p.m., New York City time, on the expiration
date. The exchange notes issued pursuant to the
exchange offer will be delivered promptly
following the expiration date. See "The
Exchange Offer -- Acceptance of Old Notes For
Exchange and Delivery of Exchange Notes."
Certain Federal Income Tax
Considerations.............. The exchange of exchange notes for old notes in
the exchange offer will not be a taxable
exchange for U.S. federal income tax purposes.
See "Certain Federal Income Tax
Considerations."
Use of Proceeds............... We will not receive any proceeds from the
issuance of exchange notes pursuant to the
exchange offer.
Fees and Expenses............. We will pay all expenses incident to the
consummation of the exchange offer and
compliance with the registration rights
agreement. We will also pay certain transfer
taxes applicable to the exchange offer. See
"The Exchange Offer -- Fees and Expenses."
6
Termination of Certain
Rights........................ The old notes were issued and sold in a private
offering to Deutsche Banc Alex. Brown Inc.,
Lehman Brothers Inc., Bear, Stearns & Co. Inc.,
CIBC World Markets Corp., Dresdner Kleinwort
Wasserstein-Grantchester, Inc., Scotia Capital
(USA) Inc., Wells Fargo Brokerage Services,
LLC, Credit Lyonnais Securities (USA) Inc.,
Fleet Securities, Inc. and SG Cowen Securities
Corporation as the initial purchasers, on July
26, 2001. In connection with that sale, we
executed and delivered a registration rights
agreement for the benefit of the noteholders.
Pursuant to the registration rights agreement,
holders of old notes: (i) have rights to
receive liquidated damages in certain
instances; and (ii) have certain rights
intended for the holders of unregistered
securities. Holders of exchange notes will not
be, and upon consummation of the exchange
offer, holders of old notes will no longer be,
entitled to the right to receive liquidated
damages in certain instances, as well as
certain other rights under the registration
rights agreement for holders of unregistered
securities. See "The Exchange Offer."
Resale of Exchange Notes...... We believe, based on an interpretation by the
staff of the SEC contained in no-action letters
issued to third parties in other transactions,
that you may offer to sell, sell or otherwise
transfer the exchange notes issued to you in
this exchange offer without complying with the
registration and prospectus delivery
requirements of the Securities Act, provided
that:
- you are acquiring the exchange notes issued
to you in the exchange offer in the ordinary
course of your business;
- you are not engaged in, and do not intend to
engage in, and have no arrangement or
understanding with any person to participate
in, a distribution of the exchange notes
issued to you in the exchange offer; and
- you are not an "affiliate" of ours within the
meaning of Rule 144 under the Securities Act.
If you are a broker-dealer and you receive
exchange notes for your own account in exchange
for old notes, you must acknowledge that you
will deliver a prospectus if you decide to
resell your exchange notes. See "Plan of
Distribution."
Consequences of Failure to
Exchange...................... If you do not tender your old notes or if you
tender your old notes improperly, you will
continue to be subject to the restrictions on
transfer of your old notes as contained in the
legend on the old notes. In general, you may
not sell or offer to sell the old notes, except
pursuant to a registration statement under the
Securities Act or any exemption from
registration thereunder and in compliance with
all applicable state securities laws. See "The
Exchange Offer -- Consequences of Failure to
Exchange."
Exchange Agent................ The Bank of New York is the exchange agent for
the exchange offer.
7
THE EXCHANGE NOTES
The form and terms of the exchange notes will be substantially identical to
those of the old notes except that the exchange notes will have been registered
under the Securities Act. Therefore, the exchange notes will not be subject to
certain transfer restrictions, registration rights and certain liquidated damage
provisions applicable to the old notes prior to the consummation of the exchange
offer.
Issuer........................ Boyd Gaming Corporation
2950 Industrial Road
Las Vegas, Nevada 89109
(702) 792-7200
Total Amount of Exchange Notes
Offered..................... Up to $200 million in aggregate principal
amount of 9 1/4% senior notes due 2009.
Maturity...................... August 1, 2009.
Interest...................... 9 1/4% per year.
Interest Payment Dates........ Interest on the exchange notes will be payable
semi-annually in arrears on February 1 and
August 1, beginning on February 1, 2002.
Ranking....................... The exchange notes will be our unsecured senior
obligations and will rank senior to all of our
subordinated debt and equal with all of our
other senior debt except to the extent of the
value of any collateral securing such other
senior debt. The guarantees of the exchange
notes by certain of our subsidiaries will be
unsecured senior obligations of such
subsidiaries and will rank senior to all
subordinated debt and equal with all other
senior debt of such subsidiaries except to the
extent of the value of any collateral securing
such other debt.
As of June 30, 2001, as adjusted for the
completion of the offering of the old notes and
pro forma for the repayment of the Delta Downs
note, we estimate that we and our subsidiaries
would have had $864.0 million of senior debt,
of which $464.0 million would have been
secured. In addition, approximately $171.1
million would have been available to borrow
under our bank credit facility, $50 million of
which must remain unused until the opening of
The Borgata.
Guarantees.................... Substantially all of our significant
subsidiaries will guarantee the exchange notes.
If we cannot make payments required by the
exchange notes, our guarantor subsidiaries must
make them, subject to the ranking limitations
discussed above. The guarantees may be released
under certain circumstances. We are generally
not required to cause future subsidiaries to
become guarantors. See "Description of Exchange
Notes -- Subsidiary Guarantees."
Optional Redemption........... On or after August 1, 2005, we may redeem some
or all of the exchange notes at the redemption
prices listed in the "Description of Exchange
Notes" section under the heading "Optional
Redemption," plus accrued and unpaid interest.
8
Optional Redemption After
Equity Offerings.............. At any time before August 1, 2004, we can
choose to redeem up to 35% of the outstanding
exchange notes with money that we raise in one
or more public equity offerings, as long as:
- we pay 109.25% of the principal amount of the
exchange notes, plus accrued and unpaid
interest to the date of redemption;
- we redeem the exchange notes within 45 days
of closing the public equity offering; and
- at least 65% of the aggregate principal
amount of the exchange notes issued remains
outstanding afterwards (excluding notes held
by Boyd Gaming and its subsidiaries).
See "Description of Exchange Notes -- Optional
Redemption."
Redemption Based Upon Gaming
Laws........................ The exchange notes are subject to redemption
requirements imposed by gaming laws and
regulations of gaming authorities in
jurisdictions in which we conduct gaming
operations. See "Description of Exchange
Notes -- Mandatory Disposition or Redemption
Pursuant to Gaming Laws."
Change of Control Offer....... If a change of control of our company occurs,
we must give holders of the exchange notes the
opportunity to sell us their exchange notes at
101% of their principal amount, plus accrued
and unpaid interest.
Asset Sale Proceeds........... If we or certain of our subsidiaries engage in
asset sales, we generally must either invest
the net cash proceeds from such sales in our
business within a specified period of time,
prepay debt or make an offer to purchase a
principal amount of the exchange notes equal to
the excess net cash proceeds. The purchase
price of the exchange notes would be 100% of
their principal amount, plus accrued and unpaid
interest.
Certain Indenture
Provisions.................... The indenture governing the exchange notes
contains covenants that, among other things,
limit our (and our restricted subsidiaries')
ability to:
- incur additional debt;
- pay dividends or distributions on our capital
stock or repurchase our capital stock;
- make certain investments;
- create liens on our assets to secure debt;
- enter into transactions with affiliates;
- merge or consolidate with another company;
and
- transfer and sell assets.
These covenants are subject to a number of
important limitations and exceptions. See
"Description of Exchange Notes."
Risk Factors.................. See the section entitled "Risk Factors" for a
description of certain of the risks you should
consider before participating in the exchange
offer, including factors affecting
forward-looking statements.
9
SUMMARY FINANCIAL DATA
We have derived the following summary historical financial data for each of
the three years ended December 31 from our audited consolidated financial
statements. We have derived the summary historical financial data for the six
months ended June 30, 2001 and 2000 from our unaudited condensed consolidated
financial statements, which include all adjustments, consisting only of normal
recurring adjustments, which are, in our opinion, necessary for a fair
presentation of our results of operations for such periods. Certain amounts have
been reclassified from those previously reported. See Note 17 to the
consolidated financial statements included in this prospectus. The results of
operations for the six months ended June 30, 2001 are not necessarily indicative
of the results for the full year. The summary data below should be read in
conjunction with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical consolidated financial statements and the notes thereto included
in this prospectus, as well as those incorporated by reference in this
prospectus.
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30, FISCAL YEARS ENDED DECEMBER 31,
-------------------- ----------------------------------
2001 2000 2000 1999 1998
-------- -------- ---------- -------- --------
(IN THOUSANDS, EXCEPT RATIOS)
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $561,702 $612,260(1) $1,131,538(1) $970,925 $960,639
Operating income................. 63,718 142,520 179,553 136,611 123,688
Interest expense, net............ 39,407 39,368 79,303 69,230 74,162
Net income....................... 14,466 63,722 62,765 38,301 28,600
OTHER FINANCIAL DATA:
EBITDA(2)........................ 112,756 117,548 203,939 212,218 203,020
Capital expenditures(3).......... 28,610 61,332 139,281 96,888 70,848
Depreciation and amortization.... 48,626 43,684 90,480 74,118 73,407
Ratio of earnings to fixed
charges(4).................... 1.4x 3.4x 2.1x 1.9x 1.7x
</Table>
- ---------------
(1) Includes $71.0 million of net fee revenue which we received upon the
termination of the Silver Star management agreement in 2000.
(2) EBITDA consists of operating income plus depreciation, amortization,
preopening expenses of $4.9 million in 2000 and $1.5 million in 1999 and a
restructuring charge of $5.9 million in 1998 and minus $71.0 million of net
fees received from the termination of the Silver Star management agreement
in 2000. EBITDA information is presented solely as a supplemental disclosure
because we believe that it is a widely used measure of operating performance
in the gaming industry and for companies with a significant amount of
depreciation and amortization. EBITDA should not be construed as an
alternative to operating income (as determined in accordance with generally
accepted accounting principles), as an indicator of our operating
performance, or as an alternative to cash flow from operating activities (as
determined in accordance with generally accepted accounting principles) as a
measure of liquidity. We have significant uses for our cash flow, including
capital expenditures and debt principal repayments that are not reflected in
EBITDA. It should also be noted that not all gaming companies that report
EBITDA information calculate EBITDA in the same manner as we do.
(3) Includes capital expenditures for regular maintenance of $28.6 million and
$27.6 million for the six months ended June 30, 2001 and 2000, respectively,
and $69.9 million, $52.0 million and $57.8 million for the fiscal years
ended December 31, 2000, 1999 and 1998, respectively.
(4) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as earnings before income taxes, plus fixed charges. Fixed
charges consist of interest expense, including amortization of debt issuance
costs.
10
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before participating in the exchange
offer. As used herein, the term "notes" means both the exchange notes and the
old notes, unless otherwise indicated.
RISKS RELATED TO OUR INDEBTEDNESS
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR OPERATIONS AND FINANCIAL
RESULTS AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THESE NOTES.
We have now, and after the exchange offer will continue to have, a
significant amount of indebtedness. As of June 30, 2001, we had approximately
$1.1 billion of indebtedness and stockholders' equity of approximately $345
million.
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
these notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, which would reduce the
availability of our cash flow to fund working capital, capital
expenditures, expansion efforts and other general corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors that
have less debt; and
- limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds.
Failure to comply with these covenants could result in an event of
default which, if not cured or waived, could have a significant adverse
effect on us.
TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR
ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness,
including these notes, and to fund planned capital expenditures and expansion
efforts will depend on our ability to generate cash in the future. This, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control.
It is unlikely that our business will generate sufficient cash flow from
operations, or that future borrowings will be available to us under our bank
credit facility, in amounts sufficient to enable us to pay our indebtedness,
including these notes, as it matures and to fund our other liquidity needs. We
believe that we will need to refinance all or a portion of our indebtedness,
including these notes, on or before maturity. We cannot assure you that we will
be able to refinance any of our indebtedness, including our bank credit facility
and these notes, on commercially reasonable terms or at all. We could have to
adopt one or more alternatives, such as reducing or delaying planned expenses
and capital expenditures, selling assets, restructuring debt, or obtaining
additional equity or debt financing or joint venture partners. There can be no
assurance that any of these financing strategies could be effected on
satisfactory terms, if at all. In addition, certain states' laws contain
restrictions on the ability of companies engaged in the gaming business to
undertake certain financing transactions. Some restrictions may prevent us from
obtaining necessary capital.
11
WE AND OUR SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS
COULD FURTHER EXACERBATE THE RISKS DESCRIBED ABOVE.
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture that govern these notes
do not fully prohibit us or our subsidiaries from doing so. As of June 30, 2001,
pro forma for the offering of the old notes, including the application of the
net proceeds from the offering of the old notes, and for the repayment of the
Delta Downs note, our bank credit facility would permit additional borrowing of
up to $171.1 million. All of those borrowings would be effectively senior to the
notes and the guarantees of our subsidiary guarantors. If new debt is added to
our and our subsidiaries' current debt levels, the related risks that we and
they now face could intensify.
RISKS RELATED TO THIS OFFERING
THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO OUR SECURED INDEBTEDNESS AND THE
SECURED INDEBTEDNESS OF OUR GUARANTOR SUBSIDIARIES.
The old notes are, and upon exchange, the exchange notes will be, unsecured
and therefore will be effectively subordinated to any secured indebtedness we,
or our guarantor subsidiaries, may incur to the extent of the value of the
assets securing such indebtedness. In the event of a bankruptcy, liquidation or
reorganization or similar proceeding involving us, or our guarantor
subsidiaries, our assets and those of our guarantor subsidiaries that serve as
collateral will be available to satisfy the obligations under any secured
indebtedness before any payments are made on the notes. The notes will also be
effectively subordinated to the liabilities of our non-guarantor subsidiaries.
As of June 30, 2001, assuming we had completed the exchange offer and
repaid the Delta Downs note, these notes would have been effectively
subordinated to $464.0 million of secured debt and approximately $171.1 million
would have been available for borrowing as additional debt under our bank credit
facility.
WE ARE A HOLDING COMPANY AND DEPEND ON THE BUSINESS OF OUR SUBSIDIARIES TO
SATISFY OUR OBLIGATIONS UNDER THE NOTES.
We are a holding company. Our subsidiaries conduct substantially all of our
consolidated operations and own substantially all of our consolidated assets.
Consequently, our cash flow and our ability to pay our debts depends on our
subsidiaries' cash flow and their payment of funds to us. Our non-guarantor
subsidiaries, including the subsidiaries through which we own Delta Downs, are
not obligated to make funds available to us for payment on the notes or
otherwise. In addition, our subsidiaries' ability to make any payments to us
will depend on their earnings, the terms of their indebtedness, business and tax
considerations, legal and regulatory restrictions and economic conditions. The
ability of our subsidiaries to make payments to us is also governed by the
gaming laws of certain jurisdictions, which place limits on the amount of funds
which may be transferred to us and may require prior or subsequent approval for
any payments to us. Payments to us are also subject to legal and contractual
restrictions. Under the terms of The Borgata credit facility, the entity that
owns The Borgata project will be prohibited from paying dividends or otherwise
advancing funds to us except under certain limited circumstances.
CERTAIN OF OUR SUBSIDIARIES ARE NOT CURRENTLY GUARANTORS OF THESE NOTES.
Certain of our subsidiaries are not guarantors of these notes, including
the subsidiaries through which we own Delta Downs. However, pursuant to the
indenture for these notes, we are obligated to cause any subsidiary in existence
as of the date of the offering for the old notes, which subsequently contributes
more than 5% of our consolidated EBITDA (as defined) in any fiscal year
commencing after the date of the offering for the old notes, to become a
guarantor of these notes. There can be no assurance that any subsidiary will
reach such threshold and become a guarantor. We are generally not required to
cause future subsidiaries to become guarantors of these notes.
12
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
OF CONTROL OFFER REQUIRED BY THE INDENTURE.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding notes. However, it is
possible that we will not have sufficient funds at the time of the change of
control to make the required repurchase of notes or that restrictions on our
bank credit facility will not allow such repurchases. See "Description of
Exchange Notes -- Repurchase at the Option of Holders -- Change of Control."
Our failure to repurchase the notes would be a default under the indenture
and also our bank credit facility. In addition, events constituting a change of
control and certain asset sales would generally require us to offer to
repurchase our 9.25% senior notes due 2003, of which an aggregate principal
amount of $200 million is outstanding, and our 9.50% senior subordinated notes
due 2007, of which an aggregate principal amount of $250 million is outstanding.
FRAUDULENT CONVEYANCE MATTERS -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER
SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN
PAYMENTS RECEIVED FROM GUARANTORS.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that guarantor, if the
guarantor at the time it incurred the indebtedness evidenced by its guarantee:
- received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee and was insolvent or rendered insolvent
by reason of such incurrence;
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor or to a fund for the
benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of all of its assets;
- the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
The considerations described above will also apply to the guarantees. See
"Description of Exchange Notes -- The Guarantees."
On the basis of historical financial information, recent operating history
and other factors, we believe that each guarantor, after giving effect to its
guarantee of the notes, and its guarantee of our bank credit facility will not
be insolvent, will not have unreasonably small capital for the business in which
it is engaged and will not have incurred debts beyond its ability to pay such
debts as they mature. We cannot assure you, however, as to what standard a court
would apply in making such determinations or that a court would agree with our
conclusions in this regard.
13
AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THESE NOTES.
We are offering the exchange notes to the holders of the old notes. The old
notes were sold in July 2001 to a small number of qualified institutional buyers
in the United States and to investors outside of the United States under
Regulation S and are eligible for trading in the Private Offerings, Resale and
Trading through Automatic Linkages (PORTAL) Market. To the extent that old notes
are tendered and accepted in the exchange offer, the trading market for
untendered and tendered but unaccepted old notes will be adversely affected. We
cannot assure you that this market will provide liquidity for you if you want to
sell your old notes. The liquidity of the trading market in these notes, and the
market price quoted for these notes, may be adversely affected by:
- changes in the overall market for high yield securities;
- changes in our financial performance or prospects;
- the prospects for companies in our industry generally;
- the number of holders of the notes;
- the interest of securities dealers in making a market for the notes; and
- prevailing interest rates.
As a result, you cannot be sure that an active trading market will develop
for the old notes or the exchange notes.
The exchange notes are new securities for which there is currently no
market. We cannot assure you as to the liquidity of markets that may develop for
the exchange notes, your ability to sell the exchange notes or the price at
which you would be able to sell the exchange notes. If such markets were to
exist, the exchange notes could trade at prices lower than their principal
amount or purchase price depending on many factors, including prevailing
interest rates and the markets for similar securities. The initial purchasers of
the old notes have advised us that they currently intend to make a market with
respect to the exchange notes. However, they are not obligated to do so, and any
market making activities may be discontinued at any time without notice. In
addition, such market making activity may be limited during the pendency of the
exchange offer.
YOU MAY HAVE TO DISPOSE OF THE NOTES IF YOUR OWNERSHIP OF THE NOTES IS
DETERMINED HARMFUL TO US.
If the ownership of any of the notes by any person or entity will preclude,
interfere with, threaten or delay the issuance, maintenance, existence or
reinstatement of any gaming or liquor license, permit or approval, or result in
the imposition of burdensome terms or conditions on such license, permit or
approval, as determined by any governmental authority or our Board of Directors,
the holder must dispose of the notes within a specified time. If the holder of
the notes fails to dispose of them within such time, we have the right to redeem
the notes at a price, without accrued interest, if any, equal to the lowest of
the holder's cost, the principal amount of such notes or the average of the
current market prices of such notes. See "Description of Exchange
Notes -- Mandatory Disposition or Redemption Pursuant to Gaming Laws."
RESTRICTIONS ON EXCHANGE OFFER.
Issuance of exchange notes in exchange for old notes pursuant to the
exchange offer will be made only after timely receipt by the exchange agent of a
properly completed and duly executed letter of transmittal, or an agent's
message in lieu thereof, including all other documents required by such letter
of transmittal. Therefore, holders of old notes desiring to tender such old
notes in exchange for exchange notes should allow sufficient time to ensure
timely delivery. We and the exchange agent are under no duty to give
notification of defects or irregularities with respect to the tenders of old
notes for exchange. Each broker-dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. See "The
Exchange Offer -- Resale of Exchange Notes" and "Plan of Distribution."
14
CONSEQUENCES OF FAILURE TO EXCHANGE.
Holders of old notes who do not exchange their old notes for exchange notes
pursuant to the exchange offer will continue to be subject to the restrictions
on transfer of such old notes as set forth in the legend on the old notes. In
general, the old notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. To the
extent that old notes are tendered and accepted in the exchange offer, the
trading market for untendered and tendered but unaccepted old notes could be
adversely affected. See "The Exchange Offer -- Consequences of Failure to
Exchange."
RISKS RELATED TO BOYD GAMING AND THE GAMING INDUSTRY
INTENSE COMPETITION EXISTS IN THE GAMING INDUSTRY AND WE EXPECT COMPETITION TO
CONTINUE TO INTENSIFY.
The gaming industry is highly competitive. If other properties operate more
successfully, if existing properties are enhanced or expanded, or if additional
hotels and casinos are established in and around the locations in which we
conduct business, we may lose market share. In particular, the expansion of
casino gaming in or near any geographic area from which we attract or expect to
attract a significant number of our customers could have a significant adverse
effect on our business, financial condition and results of operations.
We also compete with legalized gaming from casinos located on Native
American tribal lands. In March 2000, California voters approved an amendment to
the California Constitution permitting Native American tribes in California to
operate a limited number of slot and video poker machines and house-banked card
games. The Governor of California has entered into compacts with numerous tribes
in California. The federal government has approved approximately 60 such
compacts, and casino-style gaming is now legal on those tribal lands. A
proliferation of Native American gaming in California, or a proliferation of
Native American gaming in other areas located near our properties, could have an
adverse effect on our operating results in those markets.
In Michigan, the Pokagon Band of Potawatomi Indians, a federally recognized
Native American tribe, has announced its intention to construct a land-based
gaming operation in or near the City of New Buffalo, Michigan, which is located
less than fifteen miles from our Blue Chip Casino. Although the Pokagons have
several legal and regulatory issues that must be resolved prior to construction
of the proposed gaming facility, if their facility is constructed and begins
operations, it could have a significant adverse impact on the operations of Blue
Chip.
The casinos owned and being developed by us compete, and will in the future
compete, with all forms of existing legalized gaming and with any new forms of
gaming that may be legalized in the future. Additionally, we face competition
from all other types of entertainment.
OUR EXPANSION, DEVELOPMENT AND RENOVATION PROJECTS MAY FACE SIGNIFICANT RISKS
INHERENT IN THE ESTABLISHMENT OF A NEW ENTERPRISE OR MARKETING STRATEGY,
INCLUDING RECEIPT OF NECESSARY GOVERNMENT APPROVALS.
We regularly evaluate expansion, development and renovation opportunities
and are currently involved in developing The Borgata and expanding and
renovating Delta Downs. Each of these projects will be subject to the many risks
inherent in the establishment of a new business enterprise or expansion or
renovation of an existing enterprise, including unanticipated design,
construction, litigation, regulatory, environmental and operating problems, and
the significant risks commonly associated with implementing a marketing strategy
in new markets. In particular, we may experience:
- shortages of materials (including slot machines or other gaming
equipment);
- shortages of skilled labor or work stoppages;
- unforeseen construction scheduling, engineering, environmental or
geological problems;
15
- weather interference, floods, fires or other casualty losses; and
- unanticipated cost increases.
Our anticipated costs and construction period for projects are based upon
budgets, conceptual design documents and construction schedule estimates
prepared by us in consultation with our architects and contractors. The cost of
any project may vary significantly from initial expectations, and we may have a
limited amount of capital resources to fund cost overruns on any project. If we
cannot finance cost overruns on a timely basis, the completion of one or more
projects may be delayed until adequate funding is available. The completion
dates of any of our projects could also differ significantly from expectations
for construction-related or other reasons. We cannot assure you that any project
will be completed, if at all, on time or within established budgets. Significant
delays or cost overruns on our projects could have a material adverse effect on
our business, financial condition and results of operations.
Many permits, licenses and approvals necessary for our current projects
have not yet been obtained. In addition, on November 20, 2001 a state district
court in Louisiana granted a competitor's petition to preliminarily enjoin the
legal effect of our license to operate slot machines at Delta Downs, pending a
trial on the merits. For more information see "Summary -- Recent Developments"
and "-- If the injunction preliminarily enjoining our license to operate slot
machines at Delta Downs is not overturned, or if the action proceeds to trial
and we are not ultimately successful in defending against the action, we will
not be able to operate slot machines at Delta Downs." The scope of the approvals
required for projects of this nature is extensive, including gaming approvals,
state and local land-use permits, building and zoning permits and liquor
licenses. Unexpected changes or concessions required by local, state or federal
regulatory authorities could involve significant additional costs and delay the
scheduled openings of the facilities. We may not receive the necessary permits,
licenses and approvals or obtain the necessary permits, licenses and approvals
within the anticipated time frame. If we experience any of these problems, our
ability to expand, develop or renovate any of our projects, including Delta
Downs, could be adversely affected. For example, if we experience any of these
problems, we may not be able to commence slot operations at Delta Downs as
anticipated, or at all.
In addition, although we design our projects for existing facilities to
minimize disruption of business operations, expansion and renovation projects
require, from time to time, portions of the existing operations to be closed or
disrupted. Any significant disruption in operations could have a significant
adverse effect on our business, financial condition and results of operations.
IF THE INJUNCTION PRELIMINARILY ENJOINING OUR LICENSE TO OPERATE SLOT MACHINES
AT DELTA DOWNS IS NOT OVERTURNED, OR IF THE ACTION PROCEEDS TO TRIAL AND WE ARE
NOT ULTIMATELY SUCCESSFUL IN DEFENDING AGAINST THE ACTION, WE WILL NOT BE ABLE
TO OPERATE SLOT MACHINES AT DELTA DOWNS.
On October 30, 2001, the Louisiana Gaming Control Board granted us a gaming
license to operate slot machines at Delta Downs. However, on November 2, 2001,
Isle of Capri Casinos, Inc. and certain of its subsidiaries filed an action in
state district court in Louisiana against the Louisiana Gaming Control Board,
and later named Delta Downs to the action, seeking to enjoin the legal effect of
our gaming license to operate slot machines at Delta Downs. On November 20,
2001, the state district court granted Isle of Capri's petition and
preliminarily enjoined the legal effect of the gaming license to operate slot
machines at Delta Downs, pending a trial on the merits. On November 21, 2001, we
filed a supervisory writ asking the Louisiana appellate court to reverse the
state district court's decision. On December 3, 2001, the Louisiana appellate
court denied our supervisory writ on procedural grounds, citing that the state
district court's November 20, 2001 decision to grant Isle of Capri's preliminary
injunction was an appealable final judgment, and remanded it to the state
district court. In remanding our supervisory writ, the Louisiana appellate court
instructed the state district court to treat our supervisory writ as a direct
appeal of the state district court's November 20, 2001 decision and to certify
our appeal to the appellate court. We are not required to take any additional
action to effectuate our appeal of the state district court's decision at this
time. In addition to proceeding with our appeal of the state district court's
decision, we intend to request an expedited trial on the merits. No
determination will be made as to the final number of slot machines until the
gaming license issue has been
16
resolved. As a result, we are presently unable to determine when, or if, we will
commence slot operations at Delta Downs.
We can provide no assurances that the injunction will be overturned, or if
the action proceeds to trial, that we will ultimately be successful in defending
against the action at trial. In the event the claim seeking to permanently
enjoin the legal effect of our license to operate slot machines at Delta Downs
is ultimately successful, we would not be able to commence the operation of slot
machines at Delta Downs, which would materially affect our ability to experience
increased cash flow from Delta Downs, would reduce the value of the Delta Downs
acquisition and could have a material adverse effect on our financial condition
and results of operations. Moreover, if the claim seeking to permanently enjoin
the legal effect of our license to operate slot machines at Delta Downs is
ultimately successful, we would have to look at strategic alternatives for the
property, including the sale of Delta Downs to a third party.
In the event the injunction is overturned, or the action proceeds to trial
and we are ultimately successful, we can provide no assurances that we will
receive approval to operate the number of slot machines for which we have
applied.
IF WE ARE UNABLE TO FINANCE OUR EXPANSION, DEVELOPMENT AND RENOVATION PROJECTS
AS WELL AS CAPITAL EXPENDITURES THROUGH CASH FLOW AND BORROWINGS UNDER OUR BANK
CREDIT FACILITY, OUR EXPANSION, DEVELOPMENT AND RENOVATION EFFORTS WILL BE
JEOPARDIZED.
We intend to finance our current and future expansion, development and
renovation projects primarily with cash flow from operations and borrowings
under our bank credit facility. If we are unable to finance such projects in
this manner, we will have to adopt one or more alternatives, such as reducing or
delaying planned expansion, development and renovation projects as well as
capital expenditures, selling assets, restructuring debt or obtaining additional
equity financing or joint venture partners or modify our bank facility. These
sources of funds may not be sufficient to finance our expansion, and other
financing may not be available on acceptable terms, in a timely manner or at
all. In addition, our existing indebtedness contains certain restrictions on our
ability to incur additional indebtedness. If we are unable to secure additional
financing, we could be forced to limit or suspend expansion, development and
renovation projects, which may adversely affect our business, financial
condition and results of operations.
WE MAY BE REQUIRED TO PAY OR PERFORM CERTAIN OBLIGATIONS PURSUANT TO AN
UNLIMITED COMPLETION GUARANTY THAT WE ENTERED INTO IN CONNECTION WITH THE
CONSTRUCTION OF THE BORGATA.
A subsidiary of the entity that owns The Borgata entered into a $630
million credit agreement to provide financing for the development and
construction of The Borgata. Pursuant to the terms of that credit agreement, we
entered into an unlimited completion guaranty which requires us to guarantee the
performance of certain obligations of that entity. Under the completion
guarantee, if certain specified obligations are not met in connection with the
construction of the project, we are required to bring the project into
compliance. This may require us to provide additional funds to complete the
construction. The completion guarantee is a senior unsecured obligation of Boyd
Gaming. If we are required to provide additional funds to complete The Borgata,
we may be required to seek consents or waivers from our existing lenders under
the bank credit facility.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL GAMING REGULATION, WHICH MAY HARM OUR
BUSINESS.
We are subject to a variety of regulations in the jurisdictions in which we
operate. Regulatory authorities at the federal, state and local level have broad
powers with respect to the licensing of casino operations and may revoke,
suspend, condition or limit our gaming or other licenses, impose substantial
fines and take other actions, any one of which could have a significant adverse
effect on our business, financial condition and results of operations. If
additional gaming regulations are adopted in a jurisdiction in which we operate,
such regulations could impose restrictions or costs that could have a
significant adverse effect on us. From time to time, various proposals are
introduced in the legislatures of some of the jurisdictions in which we have
existing or planned operations that, if enacted, could adversely affect the tax,
regulatory, operational or other aspects of
17
the gaming industry and our company. Legislation of this type may be enacted in
the future. The federal government has also previously considered a federal tax
on casino revenues and may consider such a tax in the future. In addition,
gaming companies are currently subject to significant state and local taxes and
fees in addition to normal federal and state corporate income taxes, and such
taxes and fees are subject to increase at any time. Any material increase in
these taxes or fees could adversely affect us.
Our directors, officers and key employees must also be approved by certain
state regulatory authorities. If state regulatory authorities were to find a
person occupying any such position unsuitable, we would be required to sever our
relationship with that person. Certain public issuances of securities and
certain other transactions by us also require the approval of certain state
regulatory authorities.
A SUCCESSFUL CHALLENGE TO THE 1999 ILLINOIS LEGISLATION AUTHORIZING DOCKSIDE
GAMING COULD REQUIRE US TO ELIMINATE DOCKSIDE GAMING OPERATIONS.
In June 1999, Illinois passed an amendment to the Illinois Riverboat
Gambling Act to permit casinos to offer continuous dockside gaming with
unlimited ingress and egress. In addition to legalizing dockside gaming, the
amendment authorized the non-operational license in East Dubuque to relocate to
a new home dock. The licensee applied for renewal of its license and to relocate
its operation to Rosemont, Illinois. A group of plaintiffs filed a lawsuit
requesting the court to declare that the 1999 amendment violates the Illinois
and U.S. Constitutions because the grant of the Rosemont license amounted to
"special legislation." If a court invalidates the grant of the Rosemont license,
all of the provisions of the 1999 amendment, including the provisions legalizing
dockside gaming, would be invalidated. In such event, we would be required to
resume cruising at our dockside gaming activities at our Par-A-Dice Casino until
such time as the Illinois legislature passed a law reauthorizing dockside
gaming. On January 25, 2001, the court dismissed the lawsuit concluding that the
plaintiffs lacked standing. The plaintiffs have filed an appeal. Since the
challenge to the Illinois Act is on-going, there is no assurance that the
Illinois Act will be upheld as constitutional. The loss of dockside gaming at
our Par-A-Dice Casino could adversely affect our financial results.
RIVERBOATS AND DOCKSIDE FACILITIES ARE SUBJECT TO RISKS RELATING TO WEATHER OR
MECHANICAL FAILURE AND MUST COMPLY WITH APPLICABLE REGULATIONS.
Gaming operations conducted on riverboat casinos or at dockside facilities
could be lost from service for a variety of reasons, including casualty, forces
of nature, mechanical failure or extended or extraordinary maintenance.
Our riverboats must comply with U.S. Coast Guard requirements as to boat
design, on-board facilities, equipment, personnel and safety. Each riverboat
must hold a Certificate of Inspection or must be approved by the American Bureau
of Shipping for stabilization and floatation, and may also be subject to local
zoning and building codes. The U.S. Coast Guard requirements establish design
standards, set limits on the operation of the vessels and require individual
licensing of all personnel involved with the operation of the vessels. Loss of a
vessel's Certificate of Inspection or American Bureau of Shipping approval would
preclude its use as a casino.
U.S. Coast Guard regulations require a hull inspection for all riverboats
at five-year intervals. Under certain circumstances, extensions may be approved.
The U.S. Coast Guard may require that such hull inspections be conducted at a
U.S. Coast Guard-approved dry-docking facility, and if so required, the travel
to and from such docking facility, as well as the time required for inspections
of the Treasure Chest, Par-A-Dice and Blue Chip riverboats, could be
significant. The loss of a dockside casino or riverboat casino from service for
any period of time could adversely affect our business, financial condition and
results of operations.
WE DRAW A SIGNIFICANT PERCENTAGE OF OUR CUSTOMERS FROM LIMITED GEOGRAPHIC
REGIONS AND BY AIR TRAVEL. CHANGES ADVERSELY IMPACTING THESE REGIONS, OR THE
AIRLINE INDUSTRY, MAY ALSO IMPACT OUR BUSINESS.
The California, Fremont and Main Street Station draw a substantial portion
of their customers from the Hawaiian market. During the fiscal year ended
December 31, 2000, patrons from Hawaii comprised approximately 67% of the room
nights sold at the California, 57% at the Fremont and 51% at Main Street
Station. An increase in fuel costs or transportation prices, a decrease in
airplane seat availability or a
18
deterioration of relations with tour and travel agents, as they affect travel
between the Hawaiian market and our facilities, could adversely affect our
business, financial condition and results of operations.
Our Las Vegas properties also draw a substantial number of customers from
certain other specific geographic areas, including Southern California, Arizona,
Las Vegas and the Midwest. With the amendment of the California Constitution,
Native American casinos may divert potential visitors away from Nevada, which
could negatively affect Nevada gaming markets. Each of our other properties
depends primarily on visitors from their respective surrounding regions. Adverse
economic conditions in any of these regions could have a significant adverse
effect on our business, financial condition and results of operations.
In addition, to the extent that the airline industry is negatively impacted
due to terrorist or similar activity, increased security restrictions or the
public's general reluctance to travel, our business, financial condition and
results of operation could be significantly adversely affected.
ENERGY PRICE INCREASES MAY ADVERSELY AFFECT OUR COST OF OPERATIONS AND OUR
REVENUES.
Our casino properties use significant amounts of electricity, natural gas
and other forms of energy. While no shortages of energy have been experienced,
the recent substantial increases in the cost of electricity and natural gas in
the United States have and may continue to negatively affect our operating
results. The extent of the impact is subject to the magnitude and duration of
the energy price increases, but this impact could be material. In addition,
energy price increases in cities that constitute a significant source of
customers for our properties could result in a decline in disposable income of
potential customers and a corresponding decrease in visitation and spending at
our properties, which would negatively impact revenues.
THE BOYD FAMILY OWNS A CONTROLLING INTEREST IN OUR CAPITAL STOCK AND MAY
SIGNIFICANTLY INFLUENCE OUR AFFAIRS.
William S. Boyd, our Chairman and Chief Executive Officer, together with
his immediate family, beneficially owned approximately 49% of our outstanding
shares of common stock as of June 30, 2001. As a result, the Boyd family has the
ability to significantly influence our affairs, including the election of our
directors and, except as otherwise provided by law, approving or disapproving
other matters submitted to a vote of our stockholders, including a merger,
consolidation or sale of assets. In addition, if the Boyd family were to sell
its shares to a single investor or limited group of investors, resulting in
those investors' beneficial ownership of 50% or more of our voting stock, a
change in control could be deemed to have occurred in connection with the notes.
19
USE OF PROCEEDS
We will not receive any proceeds from the exchange of the exchange notes
for the old notes pursuant to the exchange offer.
We used the aggregate net proceeds from the offering of the old notes,
which were approximately $194 million, after deducting selling and offering
expenses, to:
- repay $125 million of revolving loans under our bank credit facility; and
- permanently repay an aggregate of $69 million of the term loans B and C
under our bank credit facility.
We prepaid the $65 million Delta Downs Note in October 2001 with additional
borrowings under our bank credit facility.
Borrowings under our bank credit facility mature in June 2003 and bear
interest based on the agent bank's reference rate or the eurodollar rate, at our
discretion. As of June 30, 2001, the blended interest rate under the bank credit
facility was 6.8% per annum.
20
CAPITALIZATION
The following table sets forth our cash position and our historical
consolidated capitalization:
- as of June 30, 2001;
- as adjusted to give effect to the completion of the offering of the old
notes (and the application of the net proceeds of $194 million from the
offering of the old notes) as if such transaction occurred on June 30,
2001; and
- pro forma for the repayment of the Delta Downs note, as if such
transaction occurred on June 30, 2001.
<Table>
<Caption>
AS OF JUNE 30, 2001
----------------------------------------------
PRO FORMA
AS ADJUSTED FOR FOR REPAYMENT
THE OFFERING OF OF THE DELTA
ACTUAL THE OLD NOTES DOWNS NOTE
-------- ------------------- -------------
(IN MILLIONS)
Cash and cash equivalents............................. $ 83.9 $ 83.9 $ 83.9
======== ======== ========
Long-term debt (including current maturities):
Bank credit facility(1)............................. $ 586.1 $ 392.1 $ 457.1
Delta Downs note(2)................................. 65.0 65.0 --
9.25% senior notes due 2003......................... 200.0 200.0 200.0
9.25% senior notes due 2009......................... -- 200.0 200.0
9.50% senior subordinated notes due 2007............ 250.0 250.0 250.0
Other............................................... 7.0 7.0 7.0
-------- -------- --------
Total long-term debt............................. 1,108.1 1,114.1 1,114.1
Stockholders' equity.................................. 344.7 344.7 344.7
-------- -------- --------
Total capitalization.................................. $1,452.8 $1,458.8 $1,458.8
======== ======== ========
</Table>
- ---------------
(1) At June 30, 2001, the outstanding borrowings under our $700 million bank
credit facility consisted of $388.8 million of borrowings under our $500
million revolving credit facility and $197.3 million in term loans. As of
June 30, 2001, as adjusted for the completion of the offering of the old
notes and pro forma for the repayment of the Delta Downs note, approximately
$171.1 million would have been available for future borrowing under our bank
credit facility. Until The Borgata is open, we must maintain not less than
$50 million of unused availability under our bank credit facility.
(2) We entered into this secured note on May 31, 2001 in connection with our
acquisition of Delta Downs. We prepaid the $65 million Delta Downs Note in
October 2001 with additional borrowings under our bank credit facility.
21
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below is derived from
our audited consolidated financial statements, except for the financial data for
the six month periods ended June 30 which is derived from our unaudited
condensed consolidated financial statements which include all adjustments,
consisting only of normal recurring adjustments, which are, in our opinion,
necessary for a fair presentation of our results of operations for such periods.
Certain amounts have been reclassified from those previously reported. See Note
17 to the consolidated financial statements included in this prospectus. The
results of operations for the six months ended June 30, 2001 are not necessarily
indicative of the results for the full year. The summary data below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the historical consolidated financial
statements and the notes thereto included in this prospectus, as well as those
incorporated by reference in this prospectus.
<Table>
<Caption>
SIX MONTHS
SIX MONTHS ENDED ENDED FISCAL YEAR ENDED
JUNE 30, FISCAL YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30,
------------------- ---------------------------------- ------------ -------------------
2001 2000 2000 1999 1998 1997 1997 1996
-------- -------- ---------- --------- --------- ------------ -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS
DATA:
Gaming revenues......... $462,465 $441,118 $ 868,983 $ 733,677 $ 722,124 $323,707 $573,782 $548,167
Food and beverage
revenues.............. 81,827 79,731 160,139 158,982 161,582 78,658 151,261 142,420
Room revenues........... 39,409 37,700 75,114 71,478 74,053 38,330 74,209 69,645
Other revenues.......... 39,994 36,071 73,125 69,988 70,903 39,074 58,311 49,895
Management fees and
joint venture......... -- 3,815 3,815 47,463 40,206 20,310 42,747 41,576
Termination fee, net.... -- 70,988 70,988 -- -- -- -- --
Promotional
allowances............ (61,993) (57,163) (120,626) (110,663) (108,229) (50,744) (91,396) (84,939)
-------- -------- ---------- --------- --------- -------- -------- --------
Net revenues............ 561,702 612,260 1,131,538 970,925 960,639 449,335 808,914 766,764
Total operating
expense............... 497,984 469,740 951,985 834,314 836,951 391,189 853,340 665,978
-------- -------- ---------- --------- --------- -------- -------- --------
Operating income
(loss)................ 63,718 142,520 179,553 136,611 123,688 58,146 (44,426) 100,786
Interest income......... 2 462 1,807 253 365 261 650 1,174
Interest expense, net... (39,407) (39,368) (79,303) (69,230) (74,162) (37,571) (61,672) (52,360)
-------- -------- ---------- --------- --------- -------- -------- --------
Income (loss) before
provision (benefit)
for income taxes,
cumulative effect of a
change in accounting
principle and
extraordinary items... 24,313 103,614 102,057 67,634 49,891 20,836 (105,448) 49,600
Provision (benefit) for
income taxes.......... 9,847 39,892 39,292 27,595 21,291 8,736 (34,025) 20,021
-------- -------- ---------- --------- --------- -------- -------- --------
Income (loss) before
cumulative effect of a
change in accounting
principle and
extraordinary items... 14,466 63,722 62,765 40,039 28,600 12,100 (71,423) 29,579
Cumulative effect of a
change in accounting
for start-up
activities, net of
tax................... -- -- -- (1,738) -- -- -- --
-------- -------- ---------- --------- --------- -------- -------- --------
Income (loss) before
extraordinary items... 14,466 63,722 62,765 38,301 28,600 12,100 (71,423) 29,579
Extraordinary items, net
of tax................ -- -- -- -- -- (7,240) (6,069) (1,435)
-------- -------- ---------- --------- --------- -------- -------- --------
Net income (loss)....... $ 14,466 $ 63,722 $ 62,765 $ 38,301 $ 28,600 $ 4,860 $(77,492) $ 28,144
======== ======== ========== ========= ========= ======== ======== ========
</Table>
22
<Table>
<Caption>
SIX MONTHS
SIX MONTHS ENDED ENDED FISCAL YEAR ENDED
JUNE 30, FISCAL YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30,
------------------- ---------------------------------- ------------ -------------------
2001 2000 2000 1999 1998 1997 1997 1996
-------- -------- ---------- --------- --------- ------------ -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PER SHARE DATA:
Basic and diluted net
income (loss) per
common share:
Income (loss) before
cumulative effect
of a change in
accounting
principle and
extraordinary
items............. $ 0.23 $ 1.02 $ 1.01 $ 0.65 $ 0.46 $ 0.20 $ (1.19) $ 0.52
Cumulative effect of
a change in
accounting for
start-up
activities, net of
tax............... -- -- -- (0.03) -- -- -- --
Extraordinary
items............. -- -- -- -- -- (0.12) (0.10) (0.03)
-------- -------- ---------- --------- --------- -------- -------- --------
Net income (loss)... $ 0.23 $ 1.02 $ 1.01 $ 0.62 $ 0.46 $ 0.08 $ (1.29) $ 0.49
======== ======== ========== ========= ========= ======== ======== ========
Dividends on Common
Stock............. -- -- -- -- -- -- -- --
Weighted average
common shares:
Basic.......... 62,235 62,229 62,232 62,124 61,749 61,525 60,248 57,058
Diluted........ 62,248 62,303 62,278 62,293 61,850 61,786 60,248 57,058
OTHER FINANCIAL DATA:
EBITDA(a)............. $112,756 $117,548 $ 203,939 $ 212,218 $ 203,020 $ 93,243 $157,636 $171,416
Cash flow from
operating
activities.......... 72,153 150,393 213,127 159,147 121,749 57,742 82,009 103,879
Cash flow used in
investing
activities.......... (100,044) (62,821) (246,699) (357,120) (57,511) (125,226) (250,311) (105,734)
Cash flow from (used
in) financing
activities.......... 23,770 (101,695) 35,439 208,228 (66,578) 90,811 174,542 (32,334)
Depreciation and
amortization........ 48,626 43,684 90,480 74,118 73,407 35,097 67,242 60,626
Ratio of earnings to
fixed charges(b).... 1.4x 3.4x 2.1x 1.9x 1.7x 1.6x (c) 1.8x
</Table>
23
<Table>
<Caption>
DECEMBER 31, JUNE 30,
JUNE 30, ------------------------------------------------- ---------------------
2001 2000 1999 1998 1997 1997 1996
---------- ---------- ---------- ---------- ---------- ---------- --------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents...... $ 83,938 $ 88,059 $ 86,192 $ 75,937 $ 78,277 $ 55,220 $ 48,980
Total assets................... 1,684,527 1,577,614 1,443,981 1,146,256 1,152,415 1,030,185 953,425
Long-term debt................. 1,108,063 1,019,298 983,893 776,851 844,760 741,633 594,839
Stockholders' equity........... 344,736 329,778 266,979 227,306 197,141 191,316 233,257
</Table>
- ---------------
(a) EBITDA consists of operating income plus depreciation, amortization,
preopening expenses of $4.9 million in 2000 and $1.5 million in 1999 and a
restructuring charge of $5.9 million in 1998 and minus $71.0 million of net
fees received from the termination of the Silver Star management agreement
in 2000. EBITDA information is presented solely as a supplemental disclosure
because we believe that it is a widely used measure of operating performance
in the gaming industry and for companies with a significant amount of
depreciation and amortization. EBITDA should not be construed as an
alternative to operating income (as determined in accordance with generally
accepted accounting principles), as an indicator of our operating
performance, or as an alternative to cash flow from operating activities (as
determined in accordance with general accepted accounting principles) as a
measure of liquidity. We have significant uses for our cash flow, including
capital expenditures and debt principal repayments that are not reflected in
EBITDA. It shall also be noted that not all gaming companies that report
EBITDA information calculate EBITDA in the same manner as we do.
(b) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as earnings before income taxes, cumulative effect of a change
in accounting principle and extraordinary items plus fixed charges. Fixed
charges consist of interest expense, including amortization of debt issuance
costs.
(c) Earnings were insufficient to cover fixed charges by $109 million for the
fiscal year ended June 30, 1997.
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a multi-jurisdictional gaming company that has operated successfully
for over 25 years. We currently own and operate twelve gaming facilities. Our
facilities are located in eight distinct gaming markets in five states.
Our business strategy is to provide our customers with a high-quality
casino entertainment experience at an affordable price. We emphasize customer
service and offer a comfortable environment in order to develop and maintain
customer loyalty. We offer a variety of amenities to complement our guests'
gaming experience, such as quality hotel rooms, varied dining choices and
appealing entertainment options. We draw upon our extensive experience in the
gaming industry to make each of our facilities appealing to a broad range of
customers and employ a variety of marketing and promotional activities to
attract these customers. We regularly invest in our facilities to maintain their
quality, appeal and competitiveness. In evaluating new opportunities, we seek
gaming markets with strong demographics, good locations and limited potential
for new competition that will enable us to obtain a competitive advantage and
strong returns on investment.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
operating data for our properties. As used herein, "Boulder Strip Properties"
consist of Sam's Town Hotel and Gambling Hall, the Eldorado Casino and Jokers
Wild Casino; "Downtown Properties" consist of the California Hotel and Casino,
the Fremont Hotel and Casino, Main Street Station Casino, Brewery and Hotel and
Vacations Hawaii, our wholly-owned travel agency which operates for the benefit
of the Downtown casino properties; and "Central Region Properties" consist of
Sam's Town Hotel and Gambling Hall in Tunica County, Mississippi, Par-A-Dice
Hotel and Casino, Treasure Chest Casino, Blue Chip Casino, and management fee
income from Silver Star Resort and Casino (through January 31, 2000). Net
revenues displayed in this table and discussed in this section are net of
promotional allowances; as such, references to casino, room, and food and
beverage revenues do not agree with the amounts on the Consolidated Statements
of Operations. For the purpose of this table, information enclosed therein
excludes corporate expense, including related depreciation and amortization,
preopening expense and the termination fee.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
---------- -------- --------
(IN THOUSANDS)
Net revenues
Stardust.................................................. $ 150,048 $144,950 $159,199
Boulder Strip Properties.................................. 171,794 185,103 190,820
Downtown Properties(a).................................... 223,819 217,189 206,120
Central Region Properties................................. 514,889 423,683 404,500
---------- -------- --------
Total properties.................................. $1,060,550 $970,925 $960,639
========== ======== ========
Operating income
Stardust.................................................. $ 1,286 $ 2,182 $ 10,326
Boulder Strip Properties(b)............................... 8,126 20,631 24,690
Downtown Properties....................................... 25,989 22,735 13,390
Central Region Properties(b)(c)........................... 103,455 121,538 102,932
---------- -------- --------
Total properties.................................. $ 138,856 $167,086 $151,338
========== ======== ========
</Table>
25
- ---------------
(a) Includes revenues related to Vacations Hawaii, our Honolulu Travel Agency,
of $42.1 million, $37.5 million and $32.3 million, respectively, for the
years ended December 31, 2000, 1999 and 1998.
(b) Before preopening expense.
(c) Before restructuring charge.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
REVENUES
Consolidated net revenues before the termination fee increased 9.2% for the
year ended December 31, 2000 compared to 1999. Company-wide casino revenues
increased 18.0%, while food and beverage revenues and room revenues remained
virtually unchanged. The increase in net revenues is due primarily to the
acquisition of Blue Chip in November 1999. Blue Chip contributed $181 million in
net revenues during 2000 compared to $23 million during 1999. Partially
offsetting the increase related to Blue Chip were declines in net revenues at
Sam's Town Las Vegas, Sam's Town Tunica and Treasure Chest of 8.4%, 15.4% and
14.4%, respectively. The declines in net revenues at both Sam's Town operations
are primarily due to significant construction disruption as well as the
competitive environment in their respective gaming markets. The decline in net
revenues at Treasure Chest is due primarily to intense promotional competition
from its land-based competitor. Also offsetting the increase in net revenues
from Blue Chip is the January 2000 termination of the management contract for
Silver Star which contributed $3.8 million in revenues during 2000 compared to
$47 million during 1999.
OPERATING INCOME
For the year ended December 31, 2000 consolidated operating income before
preopening expense and termination fee decreased 17.8% to $113 million from $138
million during 1999. The acquisition of Blue Chip contributed $62 million of
operating income during 2000 and Silver Star (which terminated in January 2000)
contributed $3.8 million in operating income during 2000 compared to operating
income of $7.8 million from Blue Chip and $46 million from Silver Star during
1999. Offsetting the effects of Blue Chip and Silver Star were declines in
operating income at Sam's Town Las Vegas, Sam's Town Tunica and Treasure Chest
mainly related to their decline in revenues.
STARDUST
For the year ended December 31, 2000, net revenues at the Stardust
increased 3.5% compared to 1999. Casino revenues increased 0.7% due primarily to
an increase in slot wagering. Room revenues declined 1.4% due mainly to a 2.5%
decline in available rooms as a result of the closure of the motor inn rooms in
1999. Operating income declined 41% to $1.3 million during 2000 compared to $2.2
million during 1999 due to the competitive environment on the Las Vegas Strip as
well as an increase in showroom expenses. Operating results during 1999 were
impacted by a renovation project that was completed at the end of 1999.
BOULDER STRIP PROPERTIES
For the year ended December 31, 2000, net revenues at the Boulder Strip
Properties declined 7.2% compared to the year ended December 31, 1999. The
decline is mainly attributable to construction disruption related to the Sam's
Town Las Vegas' renovation and expansion project as well as increased
competition. Sam's Town Las Vegas' renovation and expansion project was
substantially complete at December 31, 2000. We are revamping and enhancing our
marketing programs for Sam's Town Las Vegas to build revenues following the
disruptive construction period. Casino revenues at the Boulder Strip Properties
declined 3.9% due to declines in slot and table game wagering and non-gaming
revenues declined 19.7% due mainly to the permanent closure of Sam's Town Las
Vegas' Western Emporium. Operating income at the Boulder Strip Properties
declined 61% during 2000 as compared to 1999. The decline in operating income is
primarily attributable to the decline in net revenues.
26
DOWNTOWN PROPERTIES
Net revenues at the Downtown Properties increased 3.1% during the year
ended December 31, 2000 compared to 1999. The increase is attributable to a
12.1% increase in net revenues at Vacations Hawaii. Hawaiian customers comprise
a significant portion of the available room nights at these Downtown casino
properties. Operating income at the Downtown Properties increased $3.3 million
or 14.3% during 2000 compared to 1999. The increase in operating income is
primarily attributable to cost consolidation efforts and more effective
marketing at the Downtown casino properties.
CENTRAL REGION
During the year ended December 31, 2000, net revenues from the Central
Region increased 22% compared to 1999. The majority of the increase is due to
the November 1999 acquisition of Blue Chip, which contributed $181 million in
net revenues during 2000 as compared to $23 million during 1999. Also
contributing to the increase in net revenues was a 10.2% increase at Par-A-Dice
due mainly to the change to dockside operations in June 1999. Sam's Town Tunica
and Treasure Chest experienced declines in net revenues of 15.4% and 14.4%,
respectively, due to their highly competitive environments as well as
significant construction disruption at Sam's Town Tunica involving its main
entry, casino and restaurant operations. The renovation project at Sam's Town
Tunica was substantially complete at December 31, 2000. We are aggressively
marketing all aspects of the Sam's Town Tunica property to build revenues
following the disruptive construction period. Management fees from Silver Star
declined $44 million as the management contract was terminated on January 31,
2000. Operating income in the Central Region declined 14.9% during 2000 as
compared to 1999. The increase in operating income from the acquisition of Blue
Chip as well as the increase in net revenues at Par-A-Dice did not offset the
declines in operating income related to the reduction in net revenues from
Treasure Chest, termination of the management contract and related fee income
from Silver Star or the operating loss of $9.8 million experienced at Sam's Town
Tunica.
TERMINATION FEE
On October 20, 1999, we agreed to terminate our management contract with
the Tribe prior to the contract's expiration date in June 2001 in exchange for a
one-time payment of $72 million. Pursuant to that agreement, we continued to
manage Silver Star under the terms of the management contract through January
31, 2000, at which time the Tribe made the one-time termination payment and we
recorded the termination fee, net of certain expenses.
OTHER EXPENSES
Depreciation and amortization expense increased 22% during the year ended
December 31, 2000 compared to 1999, primarily as a result of depreciation and
amortization expense related to the fixed assets, intangible license rights and
deferred acquisition costs of Blue Chip (acquired in November 1999).
Preopening expense increased $3.4 million during the year ended December
31, 2000 compared to 1999 due primarily to an increase in our share of
preopening expense in The Borgata, our Atlantic City joint venture, as well as a
result of unsuccessful efforts to assist in the development and operation of a
Rhode Island Indian casino with the Narragansett Indian Tribe.
OTHER INCOME (EXPENSE)
Other income and expense is primarily comprised of interest expense, net of
capitalized interest. Net interest expense increased by $10.1 million during the
year ended December 31, 2000 compared to 1999. The increase is primarily
attributable to higher average debt levels as a result of the borrowings related
to the November 1999 acquisition of Blue Chip. Net interest expense was
partially offset by $6.3 million in capitalized interest costs during 2000
compared to $1.8 million during 1999.
27
NET INCOME
As a result of these factors, we reported net income of $63 million and $38
million, respectively, during the years ended December 31, 2000 and 1999.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUES
Consolidated net revenues increased 1.1% during the year ended December 31,
1999 compared to the year ended December 31, 1998. Company-wide casino revenues
increased 1.4%, food and beverage revenues declined 2.6% and room revenues
declined 3.6%. Net revenues from the Nevada Region decreased 1.6% during 1999
compared to 1998 due to a 5.4% increase at the Downtown Properties, offset by
declines of 8.9% at the Stardust and 3.0% at the Boulder Strip Properties. The
decline in net revenues at the Stardust is attributable in part to increased
competition on the Las Vegas Strip as well as construction disruption related to
its year-long renovation project that was substantially completed by the end of
1999. The decline in net revenues at the Boulder Strip Properties is
attributable to the competitive environment on the Boulder Strip as well as
construction disruption experienced at Sam's Town Las Vegas related to its $84
million renovation and expansion project that began in August 1999. Net revenues
in the Central Region increased 4.7% during the year ended December 31, 1999
compared to the year ended December 31, 1998. The increase is attributable, in
part, to the acquisition of Blue Chip Casino on November 10, 1999, a 15.2%
increase at Par-A-Dice due to the change to dockside operations which began on
June 26, 1999, and an 18.0% increase from Silver Star due mainly to the July 1,
1999 increase in the management fee percentage from 30% to 40% of operating
income. These increases in the Central Region were partially offset by a decline
in net revenues due to the closure of the Sam's Town Kansas City property on
July 15, 1998.
OPERATING INCOME
For the year ended December 31, 1999, consolidated operating income before
preopening expense and impairment and restructuring charges increased by 6.5% to
$138 million compared to $130 million in the prior year. Operating income in the
Nevada Region declined 5.9% as the 70% gain experienced at the Downtown
Properties did not overcome the declines experienced at the Stardust and the
Boulder Strip due to increased competition and construction disruption at the
Stardust and Sam's Town Las Vegas. In the Central Region, operating income
increased 18.1% due to the acquisition of Blue Chip Casino, a 37% increase in
operating income at Par-A-Dice due to the change to dockside operations which
began on June 26, 1999 and an 18.5% increase at Silver Star related to the
change in the management fee percentage from 30% to 40% of operating income.
These increases were offset by declines in operating income at Sam's Town Tunica
(24%) and Treasure Chest (18.2%) due to increased competition in their
respective gaming markets.
STARDUST
For the year ended December 31, 1999, net revenues at the Stardust declined
by 8.9% versus the prior year due to increased competition as well as
construction disruption related to the year-long renovation project that was
substantially completed by the end of 1999. Casino revenues declined 8.5% due
primarily to a decline in slot and table game wagering. Room revenues declined
11.0% resulting from a 25% decline in the number of available rooms due to the
April 1999 closure of motor inn rooms and the renovation of guest rooms in both
hotel towers. Operating income declined 79% to $2.2 million during 1999 from
$10.3 million in 1998. Operating income margin declined to 1.5% during 1999 from
6.3% in 1998. These declines in operating income and operating income margin are
a result of the decline in revenues.
BOULDER STRIP PROPERTIES
Net revenues at the Boulder Strip Properties declined 3.0% during the year
ended December 31, 1999 compared to the year ended December 31, 1998 due mainly
to construction disruption related to the ongoing $84 million renovation and
expansion project at Sam's Town Las Vegas, which began during the last half of
1999. Casino revenues remained virtually unchanged as a slight increase in slot
win percentage offset a 7.5%
28
decline in table game wagering. Non-gaming revenues declined 14.3% due primarily
to the permanent closure of Sam's Town Las Vegas' Western Emporium in September
1999 as part of the property's renovation and expansion project. During 1999,
operating income decreased 16.4% or $4.1 million compared to 1998. Operating
income margin declined to 11.1% for 1999 compared to 12.9% for 1998. The decline
in operating income and margin is attributable to the decline in revenues, an
increase in marketing expense for 1999 compared to 1998 and the inventory
liquidation of the Western Emporium.
DOWNTOWN PROPERTIES
Net revenues at the Downtown Properties increased 5.4% during 1999 compared
to 1998. Casino revenues increased 3.9% due primarily to increased slot wagering
at each of the Downtown casino properties. Non-gaming revenues during the year
ended December 31, 1999 increased 6.3% compared to 1998 due to a 16.0% increase
in revenues related to Vacations Hawaii, our Honolulu travel agency. Hawaiian
customers comprise a significant portion of the available room nights at these
Downtown casino properties. Operating income at the Downtown Properties
increased $9.3 million or 70% during 1999 compared to 1998, and operating income
margin increased to 10.4% during 1999 from 6.5% during 1998. These increases in
operating income and operating income margin are attributable to the increase in
net revenues coupled with cost consolidation and effective marketing at the
Downtown casino properties.
CENTRAL REGION
Net revenues from the Central Region increased 4.7% during 1999 compared to
1998. The increase is attributable, in part, to Blue Chip Casino, which
generated $23.2 million in revenues from the November 10, 1999 date of
acquisition through the end of calendar 1999, as well as a 15.2% increase in
revenues at Par-A-Dice and an 18.0% increase in management fees from Silver
Star. The increase at Par-A-Dice is due mainly to the change to dockside
operations which began in Illinois on June 26, 1999. The increase in revenues at
Silver Star is due mainly to the increase in the management fee percentage from
30% to 40% of operating income on July 1, 1999 pursuant to the terms of the
management agreement. Net revenues at Treasure Chest declined 1.3% and net
revenues at Sam's Town Tunica declined 4.8% due to reductions in slot and table
game wagering related to increased competition in both gaming markets. Operating
income for the Central Region increased to $122 million during 1999 from $103
million during 1998 due primarily to the acquisition of Blue Chip Casino and the
increase in net revenues at Par-A-Dice and Silver Star, partially offset by
declines in operating income at Sam's Town Tunica and Treasure Chest.
OTHER EXPENSES
Depreciation expense remained virtually unchanged during 1999 compared to
1998 as an increase in depreciation expense related to the fixed assets of Blue
Chip Casino (acquired on November 10, 1999) was offset by declines related to
fully depreciated fixed assets at certain properties that have been operating
for over five years. Amortization expense of intangible license rights and
acquisition costs increased 10.0% during 1999 compared to 1998 due to the
acquisition of Blue Chip Casino. Preopening expense during 1999 was $1.5 million
and relates primarily to our share of preopening expense in The Borgata, our
Atlantic City joint venture.
OTHER INCOME (EXPENSE)
Other income and expense is primarily comprised of interest expense.
Interest expense decreased by $4.9 million during the year ended December 31,
1999 compared to the prior year. The decline is attributable to lower average
debt levels during the year combined with a decline in interest rates on
floating rate debt. In addition, we capitalized $1.8 million in interest costs
during 1999. There were no such costs capitalized during the year ended December
31, 1998.
29
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING FOR START-UP ACTIVITIES
We reported a charge of $1.7 million, net of $0.9 million in tax benefits,
as the cumulative effect of a change in accounting for start-up activities. The
American Institute of Certified Public Accountants issued Statement of Position
98-5, "Reporting on the Costs of Start-Up Activities" that required us to
expense certain previously capitalized costs of start-up activities as the
cumulative effect of a change in accounting principle.
NET INCOME
As a result of these factors, we reported net income of $38.3 million and
$28.6 million, respectively, during the years ended December 31, 1999 and 1998.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATING ACTIVITIES AND WORKING CAPITAL
During 2000, we generated operating cash flow of $213 million compared to
$159 million during 1999. The increase in operating cash flow is primarily
attributable to the $72 million termination payment received from Silver Star as
well as the incremental earnings from Blue Chip, which was acquired in November
1999, partially offset by declines in earnings principally at Sam's Town Tunica,
Treasure Chest and Sam's Town Las Vegas. As of December 31, 2000 and 1999, we
had balances of cash and cash equivalents of $88 million and $86 million,
respectively, and a working capital deficit of $28 million at December 31, 2000
compared to working capital of $5.7 million at December 31, 1999. We have
historically operated with minimal or negative levels of working capital in
order to minimize borrowings and related interest costs under the bank credit
facility.
CASH FLOW FROM INVESTING ACTIVITIES
We are committed to continually maintaining and enhancing our existing
facilities, most notably by upgrading and remodeling our casinos, hotel rooms,
restaurants and other public spaces, and by providing the latest slot machines
for our customers. Our capital expenditures primarily related to these purposes
were approximately $59 million and $60 million, respectively, during the years
ended December 31, 2000 and 1999. In addition to these capital expenditures, we
expanded and/or renovated Sam's Town Las Vegas and Sam's Town Tunica. Capital
expenditures for these projects were approximately $81 million in 2000. During
1999, the Company incurred approximately $19 million in capital expenditures for
the renovation of the Stardust and incurred approximately $13 million in capital
expenditures for the renovation and expansion of Sam's Town Las Vegas.
On November 10, 1999, we acquired the Blue Chip Casino, a riverboat casino
in Michigan City, Indiana for $261 million in net cash. Included as part of the
acquisition was a partially constructed hotel and parking facility attached to
the existing casino complex. The hotel opened in February 2000. We funded the
acquisition and completion of the project from borrowings under our bank credit
facility.
During 2000, we invested $102 million in our unconsolidated subsidiaries,
substantially all of which relates to our Atlantic City joint venture as
compared to $4.7 million during 1999. See "-- Expansion and Other Projects."
CASH FLOW FROM FINANCING ACTIVITIES
Substantially all of the funding for our acquisitions and renovation and
expansion projects comes from cash flow from existing operations as well as debt
financing. Cash flow provided by financing activities totaled $35 million during
2000, substantially all of which was borrowed from our bank credit facility.
During 1999, cash flow provided by financing activities totaled $208 million,
substantially all of which was borrowed from our bank credit facility to
partially fund the acquisition of Blue Chip and other capital expenditures.
30
EXPANSION AND OTHER PROJECTS
The Borgata. Our subsidiary, Boyd Atlantic City, Inc., or BAC, owns half
of the membership interests in Marina District Development Holding Co., LLC, or
the Holding Company. MAC, Corp., or MAC, a subsidiary of MGM MIRAGE, owns the
other half of the membership interests. The Holding Company owns all of the
membership interests of Marina District Development Company, LLC, or the
Operating Company. The Operating Company is developing The Borgata, a casino
resort in Atlantic City. We, through BAC, will control the development and
operation of The Borgata. The Borgata will be constructed on property adjacent
to and connected to MGM MIRAGE's planned wholly-owned resort. The operating
agreement contemplates a total project cost of $1.035 billion for The Borgata.
We expect to open The Borgata during the summer of 2003.
The operating agreement requires us and MGM MIRAGE to make equity
contributions aggregating $207 million each towards the development of The
Borgata. We have invested $107 million as of June 30, 2001, while MGM MIRAGE has
contributed land, personal property and intangible property valued at $90
million and cash of $17 million. We expect that we will each invest an
additional $75 million between now and March 31, 2002, and post a letter of
credit for the remaining $25 million.
The remaining $621 million of total project costs will be drawn from a $630
million credit agreement that a subsidiary of the Operating Company entered into
on December 13, 2000. Under the terms of this agreement, no dividends or funds
may be advanced to us except for our share of taxes based on income or upon
achievement of certain performance milestones. Except for an unlimited
completion guaranty, pursuant to which we have agreed to guaranty performance of
certain obligations of this entity, the credit agreement is non-recourse to us
and MGM MIRAGE. If we contribute additional cash, there will be no proportionate
increase in our ownership of The Borgata.
Customer Information System. We have undertaken a Customer Information
System, or CIS, project that will standardize our customer tracking systems. The
purpose of the CIS project is to link all points of customer contact at a
particular property to enable us to better monitor customer activity in order to
enhance and direct marketing efforts. For the year ended December 31, 2000, we
incurred $10.9 million in costs associated with the CIS project, $9.5 million of
which has been capitalized. We expect to spend $10 million in 2001 on the next
phases of the CIS project. We have incurred $23 million in cumulative costs
related to the CIS project, $21 million of which has been capitalized. We have
never undertaken a technology project of this magnitude and may experience
difficulties in the integration and implementation of this project. In addition,
given the inherent difficulties of a project of this magnitude and the resources
required, the timing and costs involved could differ materially from those that
we anticipate. There can be no assurance that the CIS project will be completed
successfully, on schedule, or within budget.
Substantial funds are required for the completion of The Borgata and the
CIS project. There can be no assurances that any of the above mentioned projects
will go forward on a timely basis, if at all, or ultimately become operational.
The source of funds required to meet our working capital needs (including
maintenance capital expenditures) is expected to be cash flow from operations
and availability under our bank credit facility. The source of funds for our
expansion and other projects may come from cash flow from operations and
availability under our bank credit facility, incremental bank financing,
additional debt or equity offerings, joint venture partners or other sources. No
assurance can be given that additional financing will be available or that, if
available, such financing will be obtainable on terms favorable to us or our
stockholders.
The Borgata project is subject to the many risks inherent in the
development and operation of a new business enterprise, including potential
unanticipated design, construction, regulatory, environmental and operating
problems, increased project costs, timing delays, lack of adequate financing and
the significant risks commonly associated with implementing a marketing strategy
for a market in which we have not previously operated. If The Borgata project
does not become operational within the time frames and budgets currently
contemplated or does not compete successfully in its new markets, it could have
a material adverse effect on our business, financial condition and results of
operations.
31
INDEBTEDNESS
Our $700 million bank credit facility consists of a $500 million revolving
credit facility and two term loan components (the term loan B and the term loan
C) each with original principal balances of $100 million. Our revolving credit
facility, term loan B and term loan C all mature in June 2003. At December 31,
2000, $198.3 million of borrowings were outstanding under our term loans and
$363.9 million was outstanding under our revolving credit facility. Pursuant to
the terms of The Borgata credit agreement, we are required to maintain $50
million of unused availability under our revolving credit facility until The
Borgata opens. Availability under the revolving credit facility will be reduced
by $15.6 million on December 31, 2001 and at the end of each quarter thereafter
until March 31, 2003. Term loan B repayments are in increments of $0.25 million
per quarter which began on September 30, 1999 and will continue through March
31, 2003. Term loan C repayments are in increments of $0.25 million per quarter,
which began on December 31, 2000 and will continue through March 31, 2003. The
interest rate on the bank credit facility is based upon either the alternate
base rate or the eurodollar rate, plus an applicable margin that is determined
by the level of a predefined financial leverage ratio. The blended interest rate
under the bank credit facility at December 31, 2000 was 8.8%. In addition, we
incur a commitment fee on the unused portion of the revolving credit facility
which ranges from 0.375% to 0.50% per annum. The bank credit facility is secured
by substantially all of our real and personal property and that of our
subsidiaries. Our obligations under the bank credit facility are guaranteed by
all of our significant subsidiaries. See "Description of Indebtedness" for a
description of certain covenants under our bank credit facility, as well as our
9.25% notes and our 9.50% notes.
We believe that our bank credit facility and cash flow from operating
activities will be sufficient to meet our operating and capital expenditure
requirements for the next twelve months. In the longer term, or if we experience
a significant decline in revenues, or in the event of unforeseen circumstances,
we may require additional funds and may seek to raise such funds through public
or private equity or debt financing, bank lines of credit or other sources. We
can make no assurances that additional financing will be available or, if
available, will be on terms favorable to us.
Our ability to service our debt will be dependent on our future
performance, which will be affected by, among other things, prevailing economic
conditions and financial, business and other factors, certain of which are
beyond our control.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Notes 1 and 17 to the consolidated financial statements included in
this prospectus for a complete discussion of recently issued accounting
standards and their expected impact on our consolidated financial statements.
MARKET RISK
Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. Our primary exposure to market risk is interest rate risk
associated with our long-term debt. We attempt to limit our exposure to interest
rate risk by managing the mix of our long-term fixed-rate borrowings and
short-term borrowings under our bank credit facility. Borrowings under our bank
credit facility bear interest, at our option, at the agent bank's quoted base
rate or the eurodollar rate plus a specified premium in each case. However, the
amount of outstanding borrowings is expected to fluctuate and may be reduced
from time to time. At December 31, 2000, we did not utilize any hedging
instruments.
A subsidiary of the Operating Company entered into a credit agreement to
borrow up to $630 million to be used in connection with the development of The
Borgata. Except for an unlimited completion guaranty, the credit agreement is
non-recourse to Boyd Gaming. The credit agreement requires the borrower to enter
into interest rate protection agreements. At December 31, 2000, the subsidiary
did not utilize any interest rate protection agreements.
32
GOVERNMENTAL GAMING REGULATION
We are subject to extensive regulation under laws, rules and supervisory
procedures primarily in the jurisdictions where our facilities are located or
docked. Some jurisdictions, including Nevada, Illinois, Indiana, Louisiana,
Mississippi and New Jersey, empower their regulators to investigate
participation by licensees in gaming outside their jurisdiction and require
access to and periodic reports respecting those gaming activities. Violations of
laws in one jurisdiction could result in disciplinary action in other
jurisdictions.
Under provisions of gaming laws in jurisdictions in which we have
operations and under our organizational documents certain of our securities are
subject to restrictions on ownership which may be imposed by specified
governmental authorities. The restrictions may require a holder of our
securities to dispose of the securities or, if the holder refuses, or is unable,
to dispose of the securities, we may be required to repurchase the securities.
For additional information see "Item 1 -- Investment
Considerations -- Governmental Gaming Regulation" in our Annual Report on Form
10-K for the year ended December 31, 2000, which is incorporated herein by
reference.
Each holder of a note, by accepting any note, will be deemed to have agreed
to be bound by the requirements imposed on holders of our debt securities by the
gaming authority of any jurisdiction in which we conduct or propose to conduct
gaming activity. In addition, the indenture governing the notes provides that if
a holder of a note or beneficial owner of a note is required to be licensed,
qualified or found suitable under the applicable gaming laws and is not so
licensed, qualified or found suitable within any time period specified by the
applicable gaming authority, the holder will be required, at our request, to
dispose of its notes within a time period that either we prescribe or such other
time period prescribed by the applicable gaming authority, and thereafter, we
shall have the right to redeem such holder's notes. See "Description of Exchange
Notes -- Mandatory Disposition or Redemption Pursuant to Gaming Laws."
33
DESCRIPTION OF OTHER INDEBTEDNESS
The following is a summary of the material terms of our outstanding
indebtedness. For further details, you should refer to the various governing
instruments. See "Where You Can Find Additional Information."
BANK CREDIT FACILITY
On June 30, 1999, we entered into a senior secured credit facility with a
syndicate of commercial lending institutions. We amended the bank credit
facility as of July 26, 2000, and further amended the facility as of May 21,
2001. The $700 million bank credit facility is comprised of a $500 million
reducing revolving credit facility and two term loans, each with an original
balance of $100 million. The bank credit facility matures in June 2003.
Availability under the $500 million revolving credit facility will reduce
at the rate of $15.625 million per calendar quarter beginning on December 31,
2001 and will terminate on June 15, 2003. Each of the two term loans requires
repayments in increments of $0.25 million per quarter, which continue through
March 31, 2003. There is a 0.25% repayment fee on one of the term loans. A final
payment of $124.75 million is required to repay the term loans in June 2003.
Prepayments, including the $69 million term loan prepayment made upon
consummation of the offering of the old notes, will reduce the amount of this
final payment. The revolving credit facility contains a $60 million sublimit for
the issuance of letters of credit associated with The Borgata and a $15 million
sublimit for the issuance of other letters of credit. The revolving credit
facility also includes a sublimit for a swingline loan facility of $15 million.
Until construction of The Borgata is completed, we have agreed to maintain at
least $50 million of unused availability on our revolving credit facility.
Indebtedness outstanding under the bank credit facility has the first claim
on the assets pledged to secure the indebtedness under the bank credit facility.
Borrowings under the bank credit facility bear interest, at our option, at
a margin above (a) the eurodollar rate, or (b) the "alternate base rate,"
defined as the higher of (1) the reference rate as announced by the
administrative agent, and (2) the federal funds rate plus 0.50%. Swingline loans
bear interest at the alternate base rate plus the alternate base rate margin
minus 0.50%. The margin above the eurodollar rate and the alternate base rate,
and the fee on the unfunded portions of the revolving facility, vary from 1.00%
to 3.25%, 0.00% to 2.00%, and 0.375% and 0.50%, respectively, based on our total
leverage ratio, as defined in the bank credit facility.
The bank credit facility requires us to prepay the term loans until they
have been repaid in full, and thereafter to reduce the revolving bank credit
facility, in the following amounts:
- the net cash proceeds received by us from the issuance after July 21,
1999 of (1) senior unsecured notes, and (2) subordinated unsecured notes
in excess of $250 million, excluding, in each case, certain refinancing
indebtedness;
- the net cash proceeds received by us or any of our subsidiaries from
significant asset dispositions;
- all cash insurance proceeds received by us or any of our subsidiaries
from any condemnation award or casualty loss, unless such proceeds are
used to repair or replace the property subject to such casualty; and
- net cash proceeds in excess of $125 million received by us in connection
with the issuance of the old notes were required to be used to partially
prepay the terms loans.
Our obligations under the bank credit facility are guaranteed by all of our
significant subsidiaries and must be guaranteed by future significant
subsidiaries. If we cannot make payments required by the bank credit facility,
these guarantor subsidiaries must make them instead.
The obligations under the bank credit facility are secured by first deeds
of trust on each of our properties and a first preferred ship mortgage on
Treasure Chest, Par-A-Dice and Sam's Town Tunica. Additionally, the lenders
under the credit agreement have a first security interest in substantially all
of our assets and assets of the bank credit facility guarantors, excluding
certain personal property with respect to which applicable
34
contracts or law prohibit the granting of a security interest. These security
interests are, in each case, subject to permitted liens.
The bank credit facility contains certain financial and other covenants
including, without limitation, various covenants (i) requiring the maintenance
of a minimum net worth, (ii) requiring the maintenance of a minimum interest
coverage ratio, (iii) establishing a maximum permitted total leverage ratio and
senior secured leverage ratio, (iv) imposing limitations on the incurrence of
additional indebtedness, (v) imposing limitations on the maximum permitted
expansion capital expenditures during the term of the bank credit facility, (vi)
imposing limits on the maximum permitted maintenance capital expenditures during
each year of the term of the bank credit facility and (vii) imposing
restrictions on investments, dividends and certain other payments. We believe
that we were in compliance with the bank credit facility covenants at June 30,
2001.
9.25% SENIOR NOTES
In October 1996, we issued $200 million of senior notes that mature on
October 1, 2003 and bear interest at a rate of 9.25% per year. Certain of our
subsidiaries have guaranteed payment of the 9.25% notes on a senior basis. The
9.25% notes and the guarantees thereof are senior unsecured obligations, ranking
equal in right of payment with all of our existing and future senior debt and
senior to all subordinated debt.
The 9.25% notes are not subject to redemption at our option prior to
maturity. If the 9.25% notes are not rated "investment grade," then upon a
change of control, or if the 9.25% notes have been rated "investment grade,"
upon a change in control and a ratings decline, each holder of 9.25% notes has
the option to require us to repurchase its 9.25% notes at a purchase price in
cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any.
Our 9.25% notes contain limitations on, among other things, (a) the
incurrence of liens, (b) transactions with affiliates, (c) payment restrictions
affecting restricted subsidiaries and (d) certain consolidations, mergers and
transfers of assets.
During any period of time that the 9.25% notes have investment grade
status, and no default or event of default has occurred and is continuing under
the 9.25% indenture, we and our restricted subsidiaries will not be subject to
certain limitations of the 9.25% indenture, including limitations on (a) our
ability and the ability of our restricted subsidiaries (as defined in the 9.25%
indenture) to incur additional indebtedness, (b) the payment of dividends and
other distributions with respect to our capital stock and the capital stock of
our restricted subsidiaries and the purchase, redemption or retirement of our
capital stock and the capital stock of our restricted subsidiaries, (c) the
making of certain investments and (d) asset sales. In the event that we and our
restricted subsidiaries are not subject to such covenants with respect to the
9.25% notes for any period of time as a result of the preceding sentence and,
subsequently, at least two of three specified rating agencies withdraw their
ratings or assign the 9.25% notes a rating below the required ratings, then we
and our restricted subsidiaries will thereafter again be subject to such
covenants for the benefit of the holders of 9.25% notes.
We believe that we and our subsidiaries were in compliance with the
covenants related to the 9.25% notes at June 30, 2001.
9.50% SENIOR SUBORDINATED NOTES
In July 1997, we issued $250 million of senior subordinated notes that
mature on July 15, 2007 and bear interest at a rate of 9.50% per year. The 9.50%
notes are our unsecured senior subordinated obligations, are subordinated in
right of payment to all of our existing and future senior debt, rank equal to
any future senior subordinated debt and senior to any of our junior subordinated
debt. The 9.50% notes are effectively subordinated to all of our subsidiaries'
existing and future debt and other liabilities, including trade payables and
preferred stock, if any.
The 9.50% notes are redeemable, at our option, in whole or in part, at any
time on or after July 15, 2002 at the redemption prices set forth in the
indenture governing the notes, plus accrued and unpaid interest, if any, to the
date of redemption. If the 9.50% notes are not rated "investment grade," then
upon a change of control, or if the 9.50% notes are rated "investment grade,"
upon a change of control and a ratings decline, each holder
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of notes has the option to require us to repurchase such holder's notes, at a
cash purchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, if any.
Our 9.50% notes contain limitations on, among other things, (a) the payment
of dividends and other distributions with respect to our capital stock and the
capital stock of our restricted subsidiaries and the purchase, redemption or
retirement of our capital stock and the capital stock of our restricted
subsidiaries, (b) the making of certain investments, (c) the incurrence of
liens, (d) transactions with affiliates, (e) payment restrictions affecting
restricted subsidiaries and (f) certain consolidations, mergers and transfers of
assets.
During any period of time that the 9.50% notes have investment grade status
and no default or event of default has occurred and is continuing under the
9.50% indenture, we and our restricted subsidiaries will not be subject to
certain limitations of the 9.50% indenture including limitations on (a) our
ability and the ability of our restricted subsidiaries (as defined in the 9.50%
indenture) to incur additional indebtedness and (b) asset sales. In the event
that we are not subject to the covenants with respect to the 9.50% notes for any
period of time as a result of the preceding sentence and, subsequently, at least
two of three specified rating agencies withdraw their ratings or assign the
9.50% notes a rating below the required ratings, then we will thereafter again
be subject to such covenants for the benefit of the holders of 9.50% notes.
We believe that we and our subsidiaries were in compliance with the
covenants related to the 9.50% notes at June 30, 2001.
DELTA DOWNS PROMISSORY NOTE
In connection with the purchase of substantially all of the assets of the
Delta Downs Racetrack, we issued a promissory note to the sellers dated May 31,
2001. We prepaid this $65 million note in October 2001 with additional
borrowings under our bank credit facility.
36
THE EXCHANGE OFFER
The following summary of certain provisions of the registration rights
agreement does not purport to be complete and reference is made to the
provisions of the registration rights agreement, which has been filed as an
exhibit to the registration statement of which this prospectus is a part.
PURPOSE OF THE EXCHANGE OFFER
The old notes were issued and sold in a private offering to Deutsche Banc
Alex. Brown Inc., Lehman Brothers Inc., Bear, Stearns & Co. Inc., CIBC World
Markets Corp., Dresdner Kleinwort Wasserstein-Grantchester, Inc., Scotia Capital
(USA) Inc., Wells Fargo Brokerage Services, LLC, Credit Lyonnais Securities
(USA) Inc., Fleet Securities, Inc. and SG Cowen Securities Corporation as the
initial purchasers pursuant to a purchase agreement, on July 26, 2001. The
initial purchasers subsequently sold the old notes to "qualified institutional
buyers," as defined in Rule 144A under the Securities Act, in reliance on Rule
144A, and outside the United States under Regulation S of the Securities Act. As
a condition to the sale of the old notes, we entered into a registration rights
agreement with the initial purchasers on July 26, 2001. Pursuant to the
registration rights agreement, we and the guarantors agreed that we would:
1) cause to be filed, on or prior to September 24, 2001, an exchange
offer registration statement with the SEC under the Securities Act
concerning the exchange offer;
2) use commercially reasonable efforts to:
a) cause such registration statement to be declared effective by
the SEC on or prior to December 23, 2001;
b) keep the registration statement effective until the exchange
offer is consummated;
c) consummate the exchange offer on or prior to 30 business days
after the registration statement is declared effective by the SEC; and
d) keep the registration statement effective for a period of 180
days after the expiration of the exchange offer.
We are making the exchange offer to satisfy certain of our obligations
under the registration rights agreement. Other than pursuant to the registration
rights agreement, we are not required to file any registration statement to
register any outstanding old notes. Holders of old notes who do not tender their
old notes or whose old notes are tendered but not accepted in the exchange offer
must rely on an exemption from the registration requirements under the
securities laws, including the Securities Act, if they wish to sell their old
notes.
RESALE OF EXCHANGE NOTES
We are making the exchange offer in reliance on the position of the staff
of the SEC as set forth in interpretive letters addressed to third parties in
other transactions. However, we have not sought our own interpretive letter and
we can provide no assurance that the staff would make a similar determination
with respect to the exchange offer as it has in interpretive letters to third
parties. Based on these interpretations by the staff, we believe that the
exchange notes issued in the exchange offer in exchange for old notes may be
offered for resale, resold and otherwise transferred by a holder other than any
holder who is a broker-dealer, without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that:
- holders are acquiring the exchange notes issued in the exchange offer in
the ordinary course of their business;
- holders are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of the exchange notes issued in the exchange offer; and
- holders are not an "affiliate" of ours within the meaning of Rule 144
under the Securities Act.
37
If you are a broker-dealer, an "affiliate" of ours, or have an arrangement
or understanding with any person to participate in, a distribution of the
exchange notes issued in the exchange offer, you cannot rely on the position of
the staff of the SEC contained in the no-action letters mentioned above and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available.
Each broker-dealer that receives exchange notes for its own account in
exchange for old notes, which the broker-dealer acquired as a result of
market-making activities or other trading activities, may be deemed an
"underwriter" with in the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of the exchange notes. Each such broker-dealer that
receives exchange notes for its own account in exchange for old notes, where the
broker-dealer acquired the old notes as a result of market-making activities or
other trading activities, must acknowledge, as provided in the letter of
transmittal, that it will deliver a prospectus in connection with any resale of
such exchange notes. For more detailed information, see "Plan of Distribution."
In addition, to comply with the securities laws of various jurisdictions,
if applicable, the exchange notes may not be offered or sold unless they have
been registered or qualified for sale in the jurisdiction or an exemption from
registration or qualification is available and is complied with. We have agreed,
pursuant to the registration rights agreement and subject to specified
limitations therein, to register or qualify the exchange notes for offer or sale
under the securities or blue sky laws of the jurisdictions as any holder of the
exchange notes reasonably requests.
TERMS OF THE EXCHANGE
We are offering to exchange, subject to the conditions described in this
prospectus and in the letter of transmittal accompanying this prospectus, an
aggregate of $200 million principal amount of our exchange notes for $200
million of our old notes. Old notes may be exchanged in integral multiples of
$1,000 principal amount. To be exchanged, an old note must be properly tendered
and accepted. All outstanding old notes that are validly tendered and not
validly withdrawn will be exchanged for exchange notes issued on or promptly
after the expiration date of the exchange offer. Currently, there is $200
million principal amount of old notes outstanding and no exchange notes
outstanding.
We will accept for exchange any and all old notes that are validly tendered
on or prior to 5:00 p.m., New York City time, on the expiration date. Tenders of
the old notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the expiration date. The exchange offer is not conditioned upon any
minimum principal amount of the old notes being tendered for exchange. However,
the exchange offer is subject to the terms and provisions of the registration
rights agreement. See "-- Conditions to the Exchange Offer."
The exchange notes will evidence the same indebtedness as the old notes and
will be entitled to the benefits of the indenture. The form and terms of the
exchange notes will be substantially identical to those of the old notes except
that the exchange notes will have been registered under the Securities Act.
Therefore, the exchange notes will not be subject to certain transfer
restrictions, registration rights and certain liquidated damage provisions
applicable to the old notes. See "Description of Exchange Notes."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m. New York City time, on January
7, 2002, unless we, in our sole discretion, extend the exchange offer. The time
and date, as it may be extended, is referred to herein as the "expiration date."
In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice and will make a public announcement
thereof, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date of the exchange offer.
38
We expressly reserve the right at our sole discretion:
- to delay accepting the old notes;
- to extend the exchange offer;
- to terminate the exchange offer and not accept the old notes not
previously accepted if any of the conditions listed under "-- Conditions
to the Exchange Offer" are not satisfied or waived by us, by giving oral
or written notice of such delay, extension or termination to the exchange
agent; or
- to amend the terms of the exchange offer in any manner.
We will follow any delay in acceptance, extension or termination as
promptly as practicable by oral or written notice to the exchange agent. If we
amend the exchange offer in a manner we determine constitutes a material change,
we will promptly disclose the amendment in a prospectus supplement that we will
distribute to the registered holders of the old notes. We may also extend the
exchange offer for a period of at least five business days, depending upon the
significance of the amendment and the manner of disclosure.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange the exchange notes for, any old
notes, and may terminate the exchange offer as provided in this prospectus
before the acceptance of the old notes, if, in our sole judgment, the exchange
offer violates applicable law, rules or regulations or an applicable
interpretation of the staff of the SEC.
If we determine in our sole discretion that any of these conditions are not
satisfied, we may:
- refuse to accept any old notes and return all tendered old notes to you;
- extend the exchange offer and retain all old notes tendered before the
exchange offer expires, subject, however, to your rights to withdraw the
old notes;
- waive the unsatisfied conditions with respect to the exchange offer and
accept all properly tendered old notes that have not been withdrawn; or
- amend the terms of the exchange offer in any manner.
If the waiver or amendment constitutes a material change to the exchange
offer, we will promptly disclose the waiver or amendment by means of a
prospectus supplement that we will distribute to the registered holders of the
old notes, and may extend the exchange offer for a period of at least five
business days, depending on the significance of the waiver and the manner of
disclosure to the registered holders of the old notes.
The exchange offer is not conditioned upon any minimal principal amount of
notes being tendered.
ACCRUED INTEREST
Interest on the exchange notes will accrue at the rate of 9.25% per annum
and will be payable semi-annually in arrears on February 1 and August 1,
commencing on February 1, 2002. Interest on the exchange notes will accrue from
the date of original issuance or, if interest has already been paid, from the
date it was most recently paid. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. Interest on the old notes
accepted for exchange, which interest accrued at the rate of 9.25% per annum,
will cease to accrue on the day prior to the issuance of the exchange notes.
PROCEDURES FOR TENDERING OLD NOTES
Our acceptance of old notes tendered by a holder will constitute a binding
agreement between the tendering holder and us upon the terms and subject to the
conditions described in this prospectus and in the letter of transmittal
accompanying this prospectus.
39
A holder of old notes may tender the old notes by:
- properly completing and signing the letter of transmittal;
- properly completing any required signature guarantees;
- properly completing any other documents required by the letter of
transmittal; and
- delivering all of the above, together with the certificate or
certificates representing the old notes being tendered, to the exchange
agent at its address set forth under "-- Exchange Agent" on or prior to
the expiration date; or
- complying with all the procedures for book-entry transfer described
below; or
- complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF THE DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY. HOLDERS SHOULD NOT SEND OLD NOTES OR LETTERS OF
TRANSMITTAL TO US.
The signature on the letter of transmittal need not be guaranteed if:
- tendered old notes are registered in the name of the signer of the letter
of transmittal; and
- the exchange notes to be issued in exchange for the old notes are to be
issued in the name of the holder; and
- any untendered old notes are to be reissued in the name of the holder.
In any other case:
- the certificates representing the tendered old notes must be properly
endorsed for transfer by the registered holder or be accompanied by a
properly completed bond power from the registered holder or appropriate
powers of attorney, in form satisfactory to us;
- the tendered old notes must be duly executed by the holder; and
- signatures on the endorsement, bond power or powers of attorney must be
guaranteed by a bank, broker, dealer, credit union, savings association,
clearing agency or other institution, each an "eligible institution" that
is a member of a recognized signature guarantee medallion program within
the meaning of Rule 17Ad-15 under the Exchange Act.
If the exchange notes and/or old notes not exchanged are to be delivered to
an address other than that of the registered holder appearing on the note
registrar for the old notes, the signature in the letter of transmittal must be
guaranteed by an eligible institution.
If the letter of transmittal or any old notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
us, such persons must submit proper evidence satisfactory to us of their
authority to so act.
The exchange agent will make a request within two business days after the
date of receipt of this prospectus to establish accounts with respect to the old
notes at The Depository Trust Company, the "book-entry transfer facility," for
the purpose of facilitating the exchange offer. We refer to The Depository Trust
Company in this prospectus as "DTC." Subject to establishing the accounts, any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of old notes by causing the
book-entry transfer facility to transfer the old notes into the exchange agent's
account with respect to the old notes in accordance with the book-entry transfer
facility's procedures for the transfer. Although delivery of
40
old notes may be effected through book-entry transfer into the exchange agent's
account at the book-entry transfer facility, an appropriate letter of
transmittal with any required signature guarantee and all other required
documents, or an agent's message, must in each case be properly transmitted to
and received or confirmed by the exchange agent at its address set forth below
prior to the expiration date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures.
The exchange agent and DTC have confirmed that the exchange offer is
eligible for the DTC Automated Tender Offer Program. We refer to the Automated
Tender Offer Program in this prospectus as "ATOP." Accordingly, DTC participants
may, in lieu of physically completing and signing the letter of transmittal and
delivering it to the exchange agent, electronically transmit their acceptance of
the exchange offer by causing DTC to transfer old notes to the exchange agent in
accordance with DTC's ATOP procedures for transfer. DTC will then send an
agent's message.
The term "agent's message" means a message which:
- is transmitted by DTC;
- received by the exchange agent and forming part of the book-entry
transfer;
- states that DTC has received an express acknowledgment from a participant
in DTC that is tendering old notes which are the subject of the
book-entry transfer;
- states that the participant has received and agrees to be bound by all of
the terms of the letter of transmittal; and
- states that we may enforce the agreement against the participant.
Each broker-dealer that receives exchange notes for its own account in
exchange for old notes, where the broker-dealer acquired the old notes as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of the exchange
notes. For additional information, see "Plan of Distribution."
If you beneficially own the old notes registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and wish to tender your
beneficially owned old notes in the exchange offer, you should contact the
registered holder promptly and instruct it to tender the old notes on your
behalf. The beneficial owner may also obtain and include with the letter of
transmittal the old notes properly endorsed for transfer by the registered
holder or accompanied by a properly completed bond power from the registered
holder, with signatures on the endorsement or bond power guaranteed by an
eligible institution. If the beneficial owner wishes to tender directly, the
beneficial owner must, prior to completing and executing the letter of
transmittal and tendering the old notes, make appropriate arrangements to
register ownership of the old notes in the beneficial owner's name. Beneficial
owners should be aware that the transfer of registered ownership may take
considerable time.
By tendering, each registered holder of old notes will represent to us
that, among other things:
- the exchange notes to be acquired in connection with the exchange offer
by the holder and each beneficial owner of the old notes are being
acquired by the holder and each beneficial owner in the ordinary course
of business of the holder and each beneficial owner;
- the holder and each beneficial owner are not participating, do not intend
to participate, and have no arrangement or understanding with any person
to participate, in the distribution of the exchange notes;
- the holder and each beneficial owner acknowledge and agree that any
person participating in the exchange offer for the purpose of
distributing the exchange notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with
a secondary resale transaction of the exchange notes acquired by such
person and cannot rely on the position of the staff of the SEC set forth
in no-action letters that are discussed herein under "-- Resales of
Exchange Notes";
41
- that if the holder is a broker-dealer that acquired old notes as a result
of market making or other trading activities, it will deliver a
prospectus in connection with any resale of exchange notes acquired in
the exchange offer;
- the holder and each beneficial owner understand that a secondary resale
transaction described above should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K of the
Commission;
- neither the holder nor any beneficial owner is an "affiliate," as defined
under Rule 144 of the Securities Act, of ours; and
- in connection with a book-entry transfer, each participant will confirm
that it makes the representations and warranties contained in the letter
of transmittal.
All questions as to the validity, form, eligibility, including time of
receipt, and acceptance of old notes tendered for exchange will be determined by
us in our sole discretion, which determination will be final and binding. We
reserve the absolute right to reject any and all tenders of any old notes not
properly tendered or not to accept any old notes which acceptance might, in our
judgment or the judgment of our counsel, be unlawful. We also reserve the
absolute right to waive any defects or irregularities or conditions of the
exchange offer as to any old notes either before or after the expiration date,
including the right to waive the ineligibility of any holder who seeks to tender
old notes in the exchange offer.
The interpretation of the terms and conditions of the exchange offer
including the letter of transmittal and the instructions contained in the letter
of transmittal by us will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of old notes for
exchange must be cured within such reasonable period of time as we determine.
Neither we, the exchange agent nor any other person has any duty to give
notification of any defect or irregularity with respect to any tender of old
notes for exchange, nor will any of us incur any liability for failure to give
such notification.
GUARANTEED DELIVERY PROCEDURES
If you desire to tender your old notes, but:
- your old notes are not immediately available; or
- you cannot deliver your old notes, the letter of transmittal or any other
documents required by the letter of transmittal to the exchange agent
prior to the expiration date; or
- the procedures for book-entry transfer of your old notes cannot be
completed prior to the expiration date,
you may effect a tender according to the guaranteed delivery procedures set
forth in the letter of transmittal.
Pursuant to such procedures:
- your tender of old notes must be made by or through an eligible
institution and you must properly complete and duly execute a notice of
guaranteed delivery (as defined in the letter of transmittal);
- on or prior to the expiration date, the exchange agent must have received
from you and the eligible institution a properly completed and duly
executed notice of guaranteed delivery (by facsimile transmission, mail
or hand delivery) setting forth the name and address of the holder, the
certificate number or numbers of the tendered old notes, and the
principal amount of tendered old notes, stating that the tender is being
made thereby and guaranteeing that, within three (3) business days after
the date of delivery of the notice of guaranteed delivery, the tendered
old notes, a duly executed letter of transmittal and any other required
documents will be deposited by the eligible institution with the exchange
agent; and
- such properly completed and executed documents required by the letter of
transmittal and the tendered old notes in proper form for transfer (or
confirmation of a book-entry transfer of such old notes into the exchange
agent's account at DTC) must be received by the exchange agent within
three (3) business days after the expiration date.
42
Any holder who wishes to tender their old notes pursuant to the guaranteed
delivery procedures described above must ensure that the exchange agent receives
the notice of guaranteed delivery relating to such old notes prior to 5:00 p.m.,
New York City time, on the expiration date.
Unless old notes being tendered by the above-described method are deposited
with the exchange agent, a tender will be deemed to have been received as of the
date when the tendering holder's properly completed and duly signed letter of
transmittal, or a properly transmitted agent's message, accompanied by the old
notes or a confirmation of book-entry transfer of the old notes into the
exchange agent's account at the book-entry transfer facility is received by the
exchange agent.
Issuances of exchange notes in exchange for old notes tendered pursuant to
a notice of guaranteed delivery will be made only against deposit of the letter
of transmittal and any other required documents and the tendered old notes or a
confirmation of book-entry and an agent's message.
WITHDRAWAL RIGHTS
Tenders of old notes may be withdrawn at any time prior to the expiration
date. For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission, with receipt confirmed by telephone, or letter
must be received by the exchange agent at the address set forth in this
prospectus prior to the expiration date. Any notice of withdrawal must:
- specify the name of the person having tendered the old notes to be
withdrawn;
- identify the old notes to be withdrawn, including the certificate number
or numbers and principal amount of such old notes;
- specify the principal amount of old notes to be withdrawn;
- include a statement that the holder is withdrawing his election to have
the old notes exchanged;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the old notes were tendered or as
otherwise described above, including any required signature guarantees,
or be accompanied by documents of transfer sufficient to have the trustee
under the indenture register the transfer of the old notes into the name
of the person withdrawing the tender; and
- specify the name in which any such old notes are to be registered, if
different from that of the person who tendered the old notes.
The exchange agent will return the properly withdrawn old notes promptly
following receipt of the notice of withdrawal. If old notes have been tendered
pursuant to the procedure for book-entry transfer, any notice of withdrawal must
specify the name and number of the account at the book-entry transfer facility
to be credited with the withdrawn old notes or otherwise comply with the
book-entry transfer facility procedure. All questions as to the validity of
notices of withdrawals, including time of receipt, will be determined by us in
our sole discretion and our determination will be final and binding on all
parties.
Any old notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the exchange offer. Any old notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder without cost to the holder. In the case of old notes
tendered by book-entry transfer into the exchange agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, the old notes will be credited to an account with the
book-entry transfer facility specified by the holder. In either case, the old
notes will be returned as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. Properly withdrawn old notes may be
retendered by following one of the procedures described under "-- Procedures for
Tendering Old Notes" above at any time prior to the expiration date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE AND DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all the conditions to the exchange offer, we
will accept any and all old notes that are properly tendered in the exchange
offer prior to 5:00 p.m., New York City time, on the expiration
43
date. The exchange notes issued pursuant to the exchange offer will be delivered
promptly following the expiration date. For purposes of the exchange offer, we
will be deemed to have accepted validly tendered old notes, when, as, and if we
have given oral or written notice thereof to the exchange agent.
In all cases, issuances of exchange notes for old notes that are accepted
for exchange pursuant to the exchange offer will be made only after timely
receipt by the exchange agent of such old notes, a properly completed and duly
executed letter of transmittal and all other required documents (or of
confirmation of a book-entry transfer of such old notes into the exchange
agent's account at DTC); provided, however, that we reserve the absolute right
to waive any defects or irregularities in the tender or conditions of the
exchange offer. If any tendered old notes are not accepted for any reason, such
unaccepted old notes will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration or termination of the
exchange offer.
EXCHANGE AGENT
The Bank of New York, has been appointed as the exchange agent for the
exchange offer. All executed letters of transmittal should be directed to the
exchange agent at one of the addresses set forth below:
THE BANK OF NEW YORK
BY REGISTERED OR CERTIFIED MAIL, OVERNIGHT DELIVERY, OR HAND DELIVERY:
The Bank of New York
15 Broad Street
Reorganization Unit
Lobby Level
New York, NY 10286
Attention: Santino Ginocchietti
BY FACSIMILE TRANSMISSION:
(212) 235-2261
CONFIRM BY TELEPHONE:
(212) 235-2363
FOR ADDITIONAL INFORMATION:
The Bank of New York
Santino Ginocchietti
15 Broad Street
Reorganization Unit
Lobby Level
New York, NY 10286
(212) 235-2363
You should direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for notices of guaranteed delivery to the exchange agent at the address
and telephone number set forth in the letter of transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF
TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
THE ONE SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID
DELIVERY.
FEES AND EXPENSES
Pursuant to the registration rights agreement, we are required to pay all
expenses incident to the consummation of the exchange offer, including our
compliance, as well as the guarantors' compliance, with
44
the registration rights agreement, regardless of whether a registration
statement becomes effective, including without limitation:
- all registration and filing fees and expenses;
- all fees and expenses of compliance with federal securities and state
blue sky or securities laws;
- all expenses of printing (including printing certificates for the
exchange notes to be issued in the exchange offer and printing of
prospectuses), messenger and delivery services and telephone;
- all fees and disbursements of our counsel;
- all application and filing fees in connection with listing the exchange
notes on a national securities exchange or automated quotation system
pursuant to the requirements of the registration rights agreement; and
- all fees and disbursements of our independent certified public
accountants (including the expenses of any special audit and comfort
letters required by or incident to such performance).
We will pay all transfer taxes, if any, applicable to the exchange of the
old notes pursuant to the exchange offer. If, however, a transfer tax is imposed
for any reason other than the exchange of the old notes pursuant to the exchange
offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption is not submitted
with the letter of transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the old
notes, as reflected in our accounting records on the date of the exchange.
Accordingly, we will not recognize a gain or loss for accounting purposes. The
expenses of the exchange offer will be amortized over the term of the exchange
notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of old notes who do not exchange their old notes for exchange notes
pursuant to the exchange offer will continue to be subject to the restrictions
on transfer of the old notes as described in the legend on the old notes. Old
notes not exchanged pursuant to the exchange offer will continue to remain
outstanding in accordance with their terms. In general, the old notes may not be
offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. We do not currently anticipate that we will
register the old notes under the Securities Act.
Participation in the exchange offer is voluntary, and holders of old notes
should carefully consider whether to participate. Holders of old notes are urged
to consult their financial and tax advisors in making their own decision on what
action to take. As a result of the making of, and upon acceptance for exchange
of all validly tendered old notes pursuant to the terms of, this exchange offer,
we will have fulfilled a covenant contained in the registration rights
agreement. Holders of old notes who do not tender their old notes in the
exchange offer will continue to hold the old notes and will be entitled to all
the rights and limitations applicable to the old notes under the indenture,
except for any rights under the registration rights agreement that by their
terms terminate or cease to have further effectiveness as a result of the making
of this exchange offer. All untendered old notes will continue to be subject to
the restrictions on transfer described in the indenture. To the extent that old
notes are tendered and accepted in the exchange offer, the trading market for
untendered old notes could be adversely affected.
45
SHELF REGISTRATION STATEMENT
If, pursuant to the terms of the registration rights agreement:
1) the exchange offer is not permitted by applicable law or policy of
the SEC; or
2) any holder of the old notes notifies us within 20 days following
the date we are required to consummate the exchange offer that:
a) such holder was prohibited by law or policy of the SEC from
participating in the exchange offer; or
b) such holder cannot resell the exchange notes acquired by it in
the exchange offer to the public without delivering a prospectus and the
prospectus contained in the exchange offer registration statement is not
appropriate or available for such resales by such holder; or
c) such holder is a broker-dealer and holds old notes acquired
directly from us or any of our affiliates,
then we and the guarantors shall use commercially reasonable efforts to file a
shelf registration statement pursuant to Rule 415 under the Securities Act
(which may be an amendment to the exchange offer registration statement),
subject to the terms set forth in the registration rights agreement, and cause
such shelf registration statement to become effective on or prior to 90 days
after such registration statement was required to be filed.
In addition, pursuant to the registration rights agreement, we are
required, to the extent necessary to ensure that the shelf registration
statement is available for sales of old notes by certain holders of old notes,
to use commercially reasonable efforts to keep any shelf registration statement
so required continuously effective, supplemented, amended and current as
required by and subject to the provisions of the registration rights agreement,
for a period ranging from at least two years to less than one, depending on the
circumstances, all as set forth in the registration rights agreement.
LIQUIDATED DAMAGES
If, pursuant to the terms of the registration rights agreement, one of the
following occurs, each a "registration default":
- we and the guarantors do not file any of the registration statements
required by the registration rights agreement with the SEC on or prior to
the applicable filing deadline; or
- such registration statement has not been declared effective by the SEC on
or prior to the applicable effectiveness deadline; or
- we and the guarantors fail to consummate the exchange offer on or prior
to 30 business days after the registration statement is declared
effective by the SEC; or
- any registration statement required by the registration rights agreement
is filed and declared effective but shall thereafter cease to be
effective for the applicable period or fail to be useable for its
intended purpose without being succeeded immediately by a post-effective
amendment or another registration statement that cures such failure and
that is itself declared effective immediately,
then we and the guarantors jointly and severally agree to pay to each holder of
old notes affected thereby liquidated damages in an amount equal to $.05 per
$1,000 in principal amount of old notes held by such holder for each week that
the registration default described above continues for the first 90-day period
immediately following the occurrence of such registration default.
The amount of the liquidated damages increase by an additional $.05 per
week per $1,000 in principal amount of notes with respect to each subsequent
90-day period until all registration defaults described above have been cured,
up to a maximum amount of liquidated damages of $.50 per week per $1,000 in
principal amount of old notes; provided that we and the guarantors shall in no
event be required to pay liquidated damages for more than one registration
default at any given time.
46
DESCRIPTION OF EXCHANGE NOTES
You can find the definitions of certain terms used in this description
under the subheading "-- Certain Definitions." In this description, the word
"Boyd Gaming" refers only to Boyd Gaming Corporation and not to any of its
subsidiaries.
Boyd Gaming will issue the exchange notes under an indenture among itself,
the Guarantors and The Bank of New York, as trustee. The terms of the exchange
notes include those stated in the indenture and those made part of the indenture
by reference to the Trust Indenture Act of 1939.
The following description is a summary of the material provisions of the
indenture. It does not restate this agreement in its entirety. We urge you to
read the indenture because the indenture, and not this description, define your
rights as holders of the exchange notes. Certain defined terms used in this
description but not defined below under "-- Certain Definitions" have the
meanings assigned to them in the indenture. A copy of the indenture is filed as
an exhibit to the registration statement of which this prospectus is a part.
Except as otherwise indicated below, the following summary applies to both
the exchange notes and the old notes. As used herein, the term "notes" means
both the exchange notes and the old notes, unless otherwise indicated.
The form and term of the exchange notes will be identical in all material
respects to the form and terms of the old notes, except that the exchange notes
will be registered under the Securities Act, and therefore the exchange notes
will not be subject to certain transfer restrictions, registration rights and
certain liquidated damage provisions applicable to the old notes prior to the
consummation of the exchange offer. See "The Exchange Offer."
The registered Holder of a note will be treated as the owner of it for all
purposes. Only registered Holders will have rights under the indenture.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
THE NOTES
- are general unsecured obligations of Boyd Gaming;
- are equal in right of payment with all existing and future unsecured
senior Indebtedness of Boyd Gaming, including its 9.25% senior notes due
2003;
- are senior in right of payment to all existing and future subordinated
Indebtedness of Boyd Gaming, including its 9.50% Senior Subordinated
Notes due 2007; and
- are unconditionally guaranteed by the Guarantors.
However, the notes are effectively subordinated to all borrowings under our
bank credit facility, which is secured by substantially all of the assets of
Boyd Gaming and the Guarantors. See "Risk Factors -- We are a holding company
and depend on the business of our subsidiaries to satisfy our obligations under
the notes" and "Risk Factors -- The notes will be effectively subordinated to
our secured indebtedness and the secured indebtedness of our guarantor
subsidiaries."
THE GUARANTEES
The notes are guaranteed by all of Boyd Gaming's current significant
subsidiaries (other than the subsidiaries owning Delta Downs). The Guarantors
will include all of the significant subsidiaries which are guarantors of our
9.25% senior notes, plus certain additional subsidiaries.
Each guarantee of the notes:
- is a general unsecured obligation of the Guarantor; and
- is equal in right of payment with all existing and future unsecured
senior Indebtedness of that Guarantor.
47
The operations of Boyd Gaming are conducted through its subsidiaries and,
therefore, Boyd Gaming depends on the cash flow of its subsidiaries to meet its
obligations, including its obligations under the notes. As indicated above, not
all of our subsidiaries will guarantee the notes. The guarantor subsidiaries
generated substantially all of our consolidated revenues in the twelve month
period ended June 30, 2001 and held substantially all of our consolidated assets
as of June 30, 2001. The subsidiaries which directly or indirectly acquired the
assets of Delta Downs subsequent to March 31, 2001 will not initially guarantee
the notes.
In the event of a bankruptcy, liquidation or reorganization of any of the
non-guarantor subsidiaries, such non-guarantor subsidiary must pay the Holders
of its debt and its trade creditors before it will be able to distribute any of
its assets to us. The notes will be effectively subordinated in right of payment
to all Indebtedness and other liabilities and commitments (including trade
payables and lease obligations) of Boyd Gaming's non-guarantor subsidiaries.
Thus, any right of Boyd Gaming to receive assets of any of its non-guarantor
subsidiaries upon the subsidiary's liquidation or reorganization (and the
consequent right of the Holders of the notes to participate in those assets)
will be effectively subordinated to the claims of that subsidiary's creditors,
except to the extent that Boyd Gaming is itself recognized as a creditor of the
subsidiary, in which case the claims of Boyd Gaming would still be subordinate
in right of payment to any security in the assets of the subsidiary and any
indebtedness of the subsidiary senior to that held by Boyd Gaming. See "Risk
Factors -- We are a holding company and depend on the business of our
subsidiaries to satisfy our obligations under the notes."
As of the date of the indenture, all of our subsidiaries will be
"Restricted Subsidiaries." Under the circumstances described below under the
subheading "Certain Definitions -- Unrestricted Subsidiary," we will, in the
future, be permitted to designate certain of our subsidiaries as "Unrestricted
Subsidiaries." Our Unrestricted Subsidiaries will not be subject to the
restrictive covenants in the indenture and will not guarantee the notes.
PRINCIPAL, MATURITY AND INTEREST
Boyd Gaming will exchange the old notes, which have an aggregate principal
amount of $200 million, for the exchange notes. Boyd Gaming will issue exchange
notes in denominations of $1,000 and integral multiples of $1,000. The exchange
notes will mature on August 1, 2009.
Boyd Gaming may issue additional notes from time to time after this
offering. Any offering of additional notes is subject to the covenants described
below under the caption "Certain Covenants -- Limitation on Indebtedness." The
notes and any additional notes subsequently issued under the indenture will be
treated as a single class for all purposes under the indenture, including,
without limitation, waivers, amendments, redemptions and offers to purchase.
Interest on the notes will accrue at the rate of 9.25% per annum and will
be payable semi-annually in arrears on February 1 and August 1, commencing on
February 1, 2002. Boyd Gaming will make each interest payment to the Holders of
record existing on the immediately preceding January 15 and July 15.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
All payments on the notes will be made at the office or agency of the
paying agent and registrar within the City and State of New York unless Boyd
Gaming elects to make interest payments by check mailed to the Holders at their
address set forth in the register of Holders. Principal and interest shall be
considered paid on the date due if on such date the trustee or paying agent
holds money sufficient to pay all principal and interest then due.
48
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar. Boyd Gaming
may change the paying agent or registrar without prior notice to the Holders of
the notes, and Boyd Gaming or any of its Subsidiaries may act as paying agent or
registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a Holder to furnish appropriate
endorsements and transfer documents in connection with a transfer of notes.
Holders will be required to pay all taxes due on transfer. Boyd Gaming is not
required to transfer or exchange any note selected for redemption. Also, Boyd
Gaming is not required to transfer or exchange any note for a period of fifteen
days before a selection of notes to be redeemed.
SUBSIDIARY GUARANTEES
The notes will be guaranteed by each of Boyd Gaming's current significant
subsidiaries, other than Boyd Louisiana Racing, Inc. and Boyd Racing, L.L.C.
(the "Delta Downs Subsidiaries"). Boyd Gaming has also agreed to cause any
non-guarantor Restricted Subsidiary which is a Restricted Subsidiary on the
Issue Date and which contributes more than 5% of Boyd Gaming's Consolidated
EBITDA in any fiscal year commencing after the Issue Date to become a Guarantor
under the indenture within 120 days after the end of the fiscal year in which
such obligation arises. The notes will also be guaranteed by any future
subsidiaries to which any Guarantor transfers assets unless:
(1) with respect to each such transfer the transfer is at least as
favorable to such Guarantor as could be obtained in a similar transaction
in arm's-length dealings with a Person who is not an Affiliate of such
Guarantor, and with respect to each transfer (a) involving aggregate
payments in excess of $5 million, Boyd Gaming delivers to the trustee an
Officers' Certificate certifying that such transfer was approved by a
majority of the disinterested members of the Board of Directors of Boyd
Gaming as complying with the foregoing standard and (b) involving aggregate
payments in excess of $10 million, Boyd Gaming delivers to the trustee an
opinion letter from an Independent Advisor to the effect that such transfer
is fair, from a financial point of view, to the Guarantor; and
(2) each such transfer is for Property other than securities of the
transferee and its Affiliates.
Any Person required by the preceding sentence to become a Guarantor because
of a transfer of assets must be or become a Restricted Subsidiary at the time of
such transfer.
These Subsidiary Guarantees will be joint and several obligations of the
Guarantors. The obligations of each Guarantor under its Subsidiary Guarantee
will be limited as necessary to prevent that Subsidiary Guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk
Factors -- Fraudulent conveyance matters."
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person, other than Boyd Gaming or
another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such consolidation
or merger assumes all the obligations of that Guarantor under the
indenture, its Subsidiary Guarantee and the registration rights
agreement pursuant to a supplemental indenture satisfactory to the
trustee; or
(b) the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the indenture.
49
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation) to a Person that is not (either before or after
giving effect to such transaction) a Subsidiary of Boyd Gaming, if the sale
or other disposition complies with the "Asset Sale" provisions of the
indenture; or
(2) in connection with any sale of all of the Capital Stock of a
Guarantor to a Person that is not (either before or after giving effect to
such transaction) a Subsidiary of Boyd Gaming, if the sale complies with
the "Asset Sale" provisions of the indenture.
See "-- Repurchase at the Option of Holders -- Asset Sales; Event of Loss."
OPTIONAL REDEMPTION
At any time prior to August 1, 2004, Boyd Gaming may on any one or more
occasions redeem up to 35% of the aggregate principal amount of the notes issued
under the indenture at a redemption price of 109.25% of the principal amount,
plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date, with the net cash proceeds of one or more Public Equity
Offerings; provided that:
(1) at least 65% of the aggregate principal amount of notes issued
under the indenture remains outstanding immediately after the occurrence of
such redemption (excluding notes held by Boyd Gaming and its Subsidiaries);
and
(2) the redemption occurs within 45 days of the date of the closing of
such Public Equity Offering.
Except pursuant to the preceding paragraph, the notes will not be
redeemable at Boyd Gaming's option prior to August 1, 2005.
On or after August 1, 2005, Boyd Gaming may redeem all or a portion of the
notes upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, on the notes
redeemed, to the applicable redemption date, if redeemed during the twelve-month
period beginning on August 1 of the years indicated below:
<Table>
<Caption>
YEAR PERCENTAGE
- ---- ----------
2005........................................................ 104.625%
2006........................................................ 102.313%
2007 and thereafter......................................... 100.000%
</Table>
MANDATORY REDEMPTION
Boyd Gaming is not required to make mandatory redemption or sinking fund
payments with respect to the notes.
MANDATORY DISPOSITION OR REDEMPTION PURSUANT TO GAMING LAWS
If a Holder or beneficial owner of a note is required to be licensed,
qualified or found suitable under applicable Gaming Laws and is not so licensed,
qualified or found suitable within any time period specified by the applicable
Gaming Authority, the Holder shall be obliged, at the request of Boyd Gaming, to
dispose of such Holder's notes within a time period prescribed by Boyd Gaming or
such other time period prescribed by such Gaming Authority (in which event Boyd
Gaming's obligation to pay any interest after the receipt of such notice shall
be limited as provided in such Gaming Laws), and thereafter, Boyd Gaming shall
have the right to redeem, on the date fixed by Boyd Gaming for the redemption of
such notes, such Holder's notes at a redemption price equal to the lesser of (1)
the lowest closing sale price of the notes on any trading day during the 120-day
period ending on the date upon which Boyd Gaming shall have received notice from
a Gaming Authority of such Holder's disqualification or (2) the price at which
such Holder or beneficial owner acquired the notes, unless a different
redemption price is required by such Gaming Authority, in which event such
50
required price shall be the redemption price. Boyd Gaming is not required to pay
or reimburse any Holder or beneficial owner of a note for the costs of licensure
or investigation for such licensure, qualification or finding of suitability.
Any Holder or beneficial owner of a note required to be licensed, qualified or
found suitable under applicable Gaming Laws must pay all investigative fees and
costs of the Gaming Authorities in connection with such qualification or
application therefor.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each Holder of notes will have the right to
require Boyd Gaming to repurchase all or any part (equal to $1,000 or an
integral multiple of $1,000) of that Holder's notes pursuant to a Change of
Control Offer on the terms set forth in the indenture. In the Change of Control
Offer, Boyd Gaming will offer a Change of Control Payment in cash equal to 101%
of the aggregate principal amount of notes repurchased plus accrued and unpaid
interest and Liquidated Damages, if any, on the notes repurchased, to the date
of purchase. Within 30 days following any Change of Control, Boyd Gaming will
mail a notice to each Holder stating, among other things:
(1) that a Change of Control has occurred and a Change of Control
Offer is being made pursuant to the covenant entitled "Repurchase at the
Option of Holders -- Change of Control" and that all notes (or portions
thereof) timely tendered will be accepted for payment;
(2) the purchase price and the Change of Control Payment Date, which
date will be no earlier than 30 days and no later than 60 days from the
date such notice is mailed, pursuant to the procedures required by the
indenture and described in such notice;
(3) that any note (or portion thereof) accepted for payment (and for
which payment has been duly provided on the Change of Control Payment Date)
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(4) that any notes (or portions thereof) not tendered will continue to
accrue interest;
(5) a description of the transaction or transactions constituting the
Change of Control; and
(6) the procedures that Holders must follow in order to tender their
notes (or portions thereof) for payment and the procedures that Holders
must follow in order to withdraw an election to tender notes (or portions
thereof) for payment.
Boyd Gaming will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with the
repurchase of the notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the Change of
Control provisions of the indenture, Boyd Gaming will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the Change of Control provisions of the indenture by virtue of
such conflict.
On the Change of Control Payment Date, Boyd Gaming will, to the extent
lawful:
(1) accept for payment all notes or portions of notes properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all notes or portions of notes properly
tendered; and
(3) deliver or cause to be delivered to the trustee the notes properly
accepted together with an officers' certificate stating the aggregate
principal amount of notes or portions of notes being purchased by Boyd
Gaming.
The paying agent will promptly mail to each Holder of notes properly
tendered the Change of Control Payment for such notes, and the trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new note equal in principal amount to any unpurchased portion of
the notes
51
surrendered, if any; provided that each new note will be in a principal amount
of $1,000 or an integral multiple of $1,000.
The provisions described above that require Boyd Gaming to make a Change of
Control Offer following a Change of Control will be applicable whether or not
any other provisions of the indenture are applicable. Except as described above
with respect to a Change of Control, the indenture does not contain provisions
that permit the Holders of the notes to require that Boyd Gaming repurchase or
redeem the notes in the event of a takeover, recapitalization or similar
transaction.
In the event the notes have Investment Grade Status at the earlier of the
public announcement of (x) the occurrence of a Change of Control or (y) (if
applicable) the intention of Boyd Gaming to effect a Change of Control, the
foregoing Change of Control provisions shall not apply unless both a Change of
Control with respect to Boyd Gaming and a Rating Decline shall occur. If the
notes have Investment Grade Status at the earlier of the public announcement of
(x) the occurrence of a Change of Control or (y) (if applicable) the intention
of Boyd Gaming to effect a Change of Control, and Boyd Gaming effects defeasance
of the notes under the indenture prior to the date of a Rating Decline, Boyd
Gaming will not be obligated to make a repurchase offer as a result of such
Change of Control and Rating Decline. While Boyd Gaming has no present intention
to defease the notes, Boyd Gaming could elect to defease the notes in the event
that a proposed corporate action could not be undertaken in compliance with the
restrictive covenants in the notes and the terms of the notes did not then
permit Boyd Gaming to effect a redemption. The effect of the preceding provision
is that in the event that the two designated ratings agencies rated the notes
"investment grade" prior to such Change of Control, Boyd Gaming would only be
required to make a Change of Control Offer if, within 90 days of the
announcement of such Change of Control, at least one of the two designated
ratings agencies have rated the notes "non-investment grade" and Boyd Gaming
does not elect to defease the notes prior to the announcement of such
"non-investment grade" ratings.
There can be no assurance that Boyd Gaming will be able to fund any
repurchase of the notes pursuant to a Change of Control Offer. Boyd Gaming's
existing bank credit facility contains, and any future credit facilities or
other agreements relating to indebtedness of Boyd Gaming may contain,
prohibitions or restrictions on Boyd Gaming's ability to effect such a
repurchase. In the event a Change of Control Offer is mandated at a time when
such prohibitions or restrictions are in effect, Boyd Gaming could seek the
consent of its lenders to the purchase of notes or could attempt to refinance
the borrowings that contain such prohibition. If Boyd Gaming does not obtain
such a consent or repay such borrowings, Boyd Gaming will be effectively
prohibited from purchasing notes. In such case, Boyd Gaming's failure to
purchase tendered notes would constitute an Event of Default under the
indenture. See "Risk Factors -- Financing a Change of Control Offer."
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of Boyd Gaming and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of notes to require Boyd Gaming to repurchase its notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of Boyd Gaming and its Subsidiaries taken as a whole to another Person or
group may be uncertain.
ASSET SALES; EVENT OF LOSS
Other than upon an Event of Loss, Boyd Gaming shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, consummate any
Asset Sale after the Issue Date, where the Property subject to such Asset Sale
has an aggregate Fair Market Value equal to or in excess of $10 million, unless:
(1) Boyd Gaming or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the Property subject to such Asset Sale;
52
(2) at least 75% of such consideration consists of cash or Temporary
Cash Investments; provided, however, that for purposes of this clause (2),
(A) the assumption of Indebtedness of Boyd Gaming or a Restricted
Subsidiary which is not subordinated to the notes or any Guarantee shall
be deemed to be Temporary Cash Investments if Boyd Gaming, such
Restricted Subsidiary, and all other Restricted Subsidiaries of Boyd
Gaming, to the extent any of the foregoing are liable with respect to
such Indebtedness, are expressly released from all liability for such
Indebtedness by the Holder thereof in connection with such Asset Sale,
(B) any securities or notes received by Boyd Gaming or such
Restricted Subsidiary from such transferee that are converted by Boyd
Gaming or such Restricted Subsidiary into cash or Temporary Cash
Investments within ten business days of the date of such Asset Sale
shall be deemed to be Temporary Cash Investments, and
(C) Boyd Gaming and its Restricted Subsidiaries may receive
consideration in the form of securities exceeding 25% of the
consideration for one or more Asset Sales so long as Boyd Gaming and its
Restricted Subsidiaries do not hold such securities having an aggregate
Fair Market Value in excess of $50 million at any time outstanding;
(3) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect, on a pro
forma basis, to, such Asset Sale; and
(4) the Board of Directors of Boyd Gaming determines in good faith
that such Asset Sale complies with clauses (1) and (2).
Upon an Event of Loss incurred by Boyd Gaming or any of its Restricted
Subsidiaries, the Net Proceeds received from such Event of Loss shall be applied
in the same manner as proceeds from Asset Sales described above and pursuant to
the procedures set forth below.
Within 270 days after the receipt of the Net Proceeds of an Asset Sale or
Event of Loss, an amount equal to 100% of the Net Proceeds from such Asset Sale
or Event of Loss may be applied by Boyd Gaming or a Restricted Subsidiary:
(1) to permanently repay, redeem or repurchase Indebtedness of Boyd
Gaming or Indebtedness of any Restricted Subsidiary or
(2) to reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net
Proceeds received by Boyd Gaming or another Restricted Subsidiary);
provided, however, that if Boyd Gaming or any Restricted Subsidiary
contractually commits within such 270-day period to apply such Net Proceeds
within 180 days of such contractual commitment in accordance with the above
clauses (1) or (2), and such Net Proceeds are subsequently applied as
contemplated in such contractual commitment, then the requirement for
application of Net Proceeds set forth in this paragraph shall be considered
satisfied.
Any Net Proceeds from an Asset Sale or Event of Loss that are not used in
accordance with the preceding paragraph shall constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $20 million (taking into account
income earned on such Excess Proceeds), Boyd Gaming shall make an offer to
purchase (prepayment offer), on a pro rata basis, from all Holders of the notes,
and, at the election of Boyd Gaming, the Holders of any other outstanding
Indebtedness equal in ranking to the notes having comparable rights, an
aggregate principal amount of notes and, if applicable, such other Indebtedness
equal to the Excess Proceeds, at a price in cash at least equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and, if applicable,
Liquidated Damages, in accordance with the procedures summarized herein and set
forth in the indenture. To the extent that any portion of the Excess Proceeds
remains after compliance with the preceding sentence and provided that all
Holders have been given the opportunity to tender the notes for repurchase in
accordance with the indenture, Boyd Gaming or such Restricted Subsidiary may use
such remaining amount for general corporate purposes and the amount of Excess
Proceeds shall be
53
reset to zero. Pending application of Net Proceeds pursuant to clause (1) and
(2) above, such Net Proceeds will be invested in Temporary Cash Investments.
Within ten Business Days after the amount of Excess Proceeds exceeds $20
million, Boyd Gaming shall send a prepayment offer notice, by first-class mail,
to the Holders, accompanied by such information regarding Boyd Gaming and its
Subsidiaries as Boyd Gaming in good faith believes will enable such Holders to
make an informed decision with respect to the prepayment offer. The prepayment
offer notice will state, among other things:
(1) that Boyd Gaming is offering to purchase notes pursuant to the
provisions of the indenture described herein;
(2) that any note (or any portion thereof) accepted for payment (and
for which payment has been duly provided on the purchase date) pursuant to
the prepayment offer shall cease to accrue interest after the purchase
date;
(3) the purchase price and purchase date, which shall be, subject to
any contrary requirements of applicable law, no less than 30 days nor more
than 60 days from the date the prepayment offer Notice is mailed;
(4) the aggregate principal amount of notes (or portions thereof) to
be purchased; and
(5) a description of the procedure which Holders must follow in order
to tender their notes (or portions thereof) and the procedures that Holders
must follow in order to withdraw an election to tender their notes (or
portions thereof) for payment.
Boyd Gaming will comply with the requirements of Rule 14e-1 under the
Exchange Act, and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of notes as a result of a prepayment offer. To the extent that the provisions of
any securities laws or regulations conflict with the provisions relating to the
prepayment offer, Boyd Gaming will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations under
the indenture described above by virtue of such conflict.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the notes are listed; or
(2) if the notes are not listed on any national securities exchange,
on a pro rata basis, by lot or by such method as the trustee deems fair and
appropriate.
No notes of $1,000 or less can be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of notes to be redeemed at its registered
address, except that redemption notices may be mailed more than 60 days prior to
a redemption date if the notice is issued in connection with a defeasance of the
notes or a satisfaction and discharge of the indenture. Notices of redemption
may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount of that note
that is to be redeemed. A new note in principal amount equal to the unredeemed
portion of the original note (so long as such amount is in a denomination of
$1,000 or integral multiples thereof) will be issued in the name of the Holder
of notes upon cancellation of the original note. Notes called for redemption
become due on the date fixed for redemption. On and after the redemption date,
interest ceases to accrue on notes or portions of them called for redemption.
54
CERTAIN COVENANTS
Set forth below are certain covenants contained in the indenture. During
any period of time that:
(1) the notes have Investment Grade Status, and
(2) no Default or Event of Default has occurred and is continuing
under the indenture with respect to the notes,
Boyd Gaming and its Restricted Subsidiaries will not be subject to the
provisions of the indenture with respect to the notes described above under
"Repurchase at Option of Holders -- Assets Sales; Event of Loss" and below under
"-- Limitation on Indebtedness" and "-- Limitation on Restricted Payments"
(collectively, the suspended covenants).
In the event that Boyd Gaming and its Restricted Subsidiaries are not
subject to the suspended covenants with respect to the notes for any period of
time as a result of the preceding sentence and, subsequently, at least one of
the two designated Rating Agencies withdraws its rating or assigns the notes a
rating below the required Investment Grade Ratings, then Boyd Gaming and its
Restricted Subsidiaries will thereafter again be subject to the suspended
covenants for the benefit of the notes and compliance with the Suspended
Covenant with respect to Restricted Payments made after the time of such
withdrawal or assignment will be calculated in accordance with the terms of the
covenant described below under "-- Limitation on Restricted Payments" as if such
covenant had been in effect during the entire period of time from the Issue Date
with respect to the notes.
LIMITATION ON INDEBTEDNESS
Boyd Gaming shall not, and shall not permit any Restricted Subsidiary to,
incur any Indebtedness; provided, however, that Boyd Gaming or any Restricted
Subsidiary may incur Indebtedness if no Event of Default has occurred and is
continuing and Boyd Gaming's Consolidated Fixed Charge Coverage Ratio would
exceed 2.0 to 1.0, after giving effect to:
(1) the Incurrence of such Indebtedness as if such Indebtedness was
Incurred at the beginning of the Reference Period and (if applicable) the
application of the net proceeds thereof to repay other Indebtedness as if
the application of such proceeds occurred at the beginning of the Reference
Period;
(2) the Incurrence and retirement of any other Indebtedness since the
first day of the Reference Period as if such Indebtedness was Incurred or
retired at the beginning of the Reference Period; and
(3) the acquisition or disposition of any company or business by Boyd
Gaming or any Restricted Subsidiary since the first day of the Reference
Period including any acquisition or disposition which will be consummated
contemporaneously with the Incurrence of such Indebtedness, as if such
acquisition or disposition occurred at the beginning of the Reference
Period.
Notwithstanding the foregoing limitation, Boyd Gaming or any Restricted
Subsidiary, as specified below, may Incur the following Indebtedness:
(1) Indebtedness of Boyd Gaming evidenced by the notes and
Indebtedness of any Restricted Subsidiary evidenced by a Guarantee of the
notes;
(2) Indebtedness of Boyd Gaming or any Restricted Subsidiary
outstanding on the Issue Date;
(3) Indebtedness of Boyd Gaming under the Credit Facility in an
aggregate amount outstanding at any time (including any Permitted
Refinancing Indebtedness with respect thereto) not to exceed $500 million,
as such amount may be permanently reduced by the lenders under the Credit
Facility as a result of repayments of Indebtedness thereunder with Net
Proceeds of Asset Sales pursuant to the covenant described above under
"Repurchase at the Option of Holders -- Asset Sales; Event of Loss," and
the Guarantee by any Restricted Subsidiary of such Indebtedness of Boyd
Gaming;
(4) Indebtedness of Boyd Gaming or a Restricted Subsidiary owing to
and held by a Restricted Subsidiary or Boyd Gaming; provided, however, that
any subsequent issuance or transfer of any Capital
55
Stock or other event that results in any such Restricted Subsidiary ceasing
to be a Restricted Subsidiary or any subsequent transfer of any such
Indebtedness except to Boyd Gaming or a Restricted Subsidiary shall be
deemed in each case to constitute the Incurrence of such Indebtedness by
the issuer thereof;
(5) Indebtedness of Boyd Gaming or a Restricted Subsidiary under
Interest Rate Agreements, provided that the obligations under such
agreements are related to payment obligations on Indebtedness otherwise
permitted by the terms of this covenant;
(6) Indebtedness of Boyd Gaming or a Restricted Subsidiary under
Currency Exchange Protection Agreements, provided that such Currency
Exchange Protection Agreements were entered into for the purpose of
limiting exchange rate risks in connection with transactions entered into
in the ordinary course of business;
(7) Indebtedness of Boyd Gaming or any Restricted Subsidiary in
connection with one or more standby letters of credit, performance bonds or
completion guarantees issued in the ordinary course of business or pursuant
to self-insurance obligations and not in connection with the borrowing of
money or the obtaining of advances or credit;
(8) Indebtedness of Boyd Gaming or any Restricted Subsidiary
outstanding under Permitted FF&E Financings which are either:
(A) Non-Recourse Indebtedness of Boyd Gaming and its Restricted
Subsidiaries; or
(B) limited in amount (including any Permitted Refinancing
Indebtedness with respect thereto) for each Gaming Facility owned or
leased by Boyd Gaming or any of its Restricted Subsidiaries to the
lesser of:
(1) the amount of FF&E used in such Gaming Facility and financed
by such Permitted FF&E Financing, or
(2) $10 million;
(9) So long as no Event of Default has occurred and is continuing,
Indebtedness of Boyd Gaming not otherwise permitted to be Incurred pursuant
to the provisions of the immediately preceding paragraph or this paragraph
in an aggregate amount Incurred not to exceed $25 million; or
(10) Permitted Refinancing Indebtedness Incurred in respect of
Indebtedness of Boyd Gaming or any Restricted Subsidiary outstanding
pursuant to the provisions of the immediately preceding paragraph or
clauses (1), (2), (3), (8) and this clause (10) of this paragraph.
For purposes of determining compliance with the "Limitation on
Indebtedness" covenant, in the event that an item of proposed Indebtedness meets
the criteria of more than one of the categories described in clauses (1) through
(10) above, or is entitled to be incurred pursuant to the first paragraph of
this covenant, Boyd Gaming will be permitted to classify such item of
Indebtedness on the date of its incurrence in any manner that complies with this
covenant. Indebtedness outstanding under the revolving facility under Boyd
Gaming's Credit Facility on the Issue Date, after giving effect to the
application of the proceeds from the issuance of the notes, will be deemed to
have been incurred under clause (3) of the second paragraph above.
LIMITATION ON RESTRICTED PAYMENTS
Boyd Gaming shall not make, and shall not permit any Restricted Subsidiary
to make, any Restricted Payment if at the time of, and after giving effect to,
such proposed Restricted Payment:
(1) a Default or an Event of Default shall have occurred and be
continuing;
(2) Boyd Gaming could not Incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of "-- Limitation on
Indebtedness;" or
56
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments made from and after July 22, 1997 (the amount of any
Restricted Payment, if made other than in cash, to be based upon Fair
Market Value) would exceed an amount equal, without duplication, to the sum
of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from April 1, 1997 to the end of the
most recent fiscal quarter ended immediately prior to the date of such
Restricted Payment (or, in the case such Consolidated Net Income shall
be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by Boyd Gaming from
the issue or sale of its Capital Stock (other than Disqualified Stock)
subsequent to March 31, 1997 (other than an issuance or sale to a
Subsidiary of Boyd Gaming or an employee stock ownership plan or other
trust established by Boyd Gaming or any of its Subsidiaries or pursuant
to clauses (3) or (4) in the following paragraph);
(C) the amount by which Indebtedness of Boyd Gaming or any
Guarantor is reduced on Boyd Gaming's balance sheet upon the conversion
or exchange (other than an issuance or sale to a Subsidiary of Boyd
Gaming or an employee stock ownership plan or other trust established by
Boyd Gaming or any of its Subsidiaries) subsequent to March 31, 1997, of
any Indebtedness of Boyd Gaming or any Guarantor convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of Boyd
Gaming (less the amount of any cash or other property distributed by
Boyd Gaming or any Restricted Subsidiary upon such conversion or
exchange);
(D) the amount equal to the net reduction in Investments subsequent
to March 31, 1997 resulting from:
(1) payments of dividends, repayments of loans or advances or
other transfers of assets to Boyd Gaming or any Guarantor or the
satisfaction or reduction (other than by means of payments by Boyd
Gaming or any Restricted Subsidiary) of obligations of other Persons
which have been Guaranteed by Boyd Gaming or any Guarantor; or
(2) the redesignation of Unrestricted Subsidiaries as Restricted
Subsidiaries which execute Guaranties, in each case such net
reduction in Investments being:
(x) valued as provided in the Definition of "Investment";
(y) in an amount not to exceed the aggregate amount of
Investments previously made by Boyd Gaming or any Guarantor which
were treated as a Restricted Payment; and
(z) included in this clause (D) only to the extent not
included in Consolidated Net Income;
(E) payments of dividends, repayments of loans or advances or other
transfers of assets to Boyd Gaming or any Guarantor from The Borgata
Joint Venture to the extent such dividends, repayments, advances or
other transfers exceed $100 million; but only to the extent that any
such payments are excluded from the computation of Consolidated Net
Income; and
(F) $75 million.
The provisions of the preceding paragraph shall not prohibit:
(1) the payment of any dividend within 60 days after the date of its
declaration if such dividend could have been paid on the date of its
declaration in compliance with such provisions; provided that at the time
of payment of such dividend no Default under any provision of the indenture
other than this covenant shall have occurred and be continuing (or would
result therefrom);
57
(2) the redemption or repurchase of any Capital Stock or Indebtedness
of Boyd Gaming (other than any Capital Stock or Indebtedness which is held
or beneficially owned by, or issued by, any member of the Boyd Family, Boyd
Gaming or any Affiliate of Boyd Gaming),
(A) if the Holder or beneficial owner of such Capital Stock or
Indebtedness is required to qualify under the Gaming Laws and does not
so qualify; or
(B) if necessary in the reasonable, good faith judgment of the
Board of Directors, as evidenced by a Board Resolution, to prevent the
loss or secure the reinstatement of any Gaming License which if lost or
not reinstated, as the case may be, would have a material adverse effect
on the business of Boyd Gaming and its Subsidiaries, taken as a whole,
or would restrict the ability of Boyd Gaming or any of its Subsidiaries
to conduct business in any gaming jurisdiction;
(3) any purchase, redemption or other acquisition or retirement of
Capital Stock of Boyd Gaming made by exchange for, or out of the proceeds
of the substantially concurrent sale of, Capital Stock (other than
Disqualified Stock) of Boyd Gaming;
(4) any purchase, redemption or other acquisition or retirement of the
Indebtedness of any Person made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Capital Stock (other than
Disqualified Stock) of Boyd Gaming;
(5) any purchase, redemption, defeasance or other acquisition or
retirement for value of Indebtedness from the proceeds of Permitted
Refinancing Indebtedness;
(6) Investments not to exceed $100 million in The Borgata Joint
Venture made subsequent to March 31, 1997;
(7) Investment Guarantees to the extent permitted by the provisions
described under the caption, "-- Limitation on Indebtedness" above that
constitute Permitted Joint Venture Investments and Guarantee (with full
rights of subrogation) Indebtedness Incurred by a Permitted Joint Venture
to acquire or construct Gaming Facilities; provided that such Indebtedness:
(A) is not expressly subordinated in right of payment or otherwise
to any other Indebtedness of such Permitted Joint Venture; and
(B) is secured by first priority security interests in such Gaming
Facilities;
(8) payments pursuant to Investment Guarantees which were entered into
in compliance with clause (7) of this paragraph; and
(9) any Permitted Stardust Contribution.
The full amount of any Restricted Payments made subsequent to March 31,
1997 pursuant to clauses (1) and (2) of the preceding paragraph (but not
pursuant to clauses (3), (4), (5), (6) and (9) of the preceding paragraph) shall
be included in the calculation of the aggregate amount of the Restricted
Payments referred to in the next preceding paragraph.
With respect to any Investment Guarantee:
(1) if at any time Boyd Gaming or any Restricted Subsidiary ceases to
control the day-to-day operations of the Permitted Joint Venture the
Indebtedness of which is Guaranteed by the Investment Guarantee, the full
amount of such Investment Guarantee shall thereafter be included in the
calculation of the aggregate amount of Restricted Payments referred to in
the first paragraph under this section; and
(2) if Boyd Gaming or a Restricted Subsidiary retains such control,
any amount actually paid pursuant to such Investment Guarantee shall be
included in the calculation of the aggregate amount of Restricted Payments
referred to in first paragraph under this section.
58
LIMITATION ON LIENS
Boyd Gaming shall not, and shall not permit any existing or future
Guarantor or any Restricted Subsidiary existing on the Issue Date (such
Guarantors and Restricted Subsidiaries being referred to as "Specified
Subsidiaries") to, directly or indirectly, incur or suffer to exist, any Lien
upon any of its Property, whether now owned or hereafter acquired, or any
interest therein or any income or profits therefrom, unless it has made or will
make effective provision whereby the notes will be secured by such Lien equally
and ratably with (or prior to) all other Indebtedness of Boyd Gaming or any such
Specified Subsidiary secured by such Lien except for:
(1) Permitted Liens;
(2) Liens on assets financed through Permitted FF&E Financings
securing Indebtedness permitted under clause (8) in the second paragraph of
"-- Limitation on Indebtedness";
(3) Liens on the Property of Boyd Gaming or any Specified Subsidiary
existing on the date of the indenture;
(4) Liens securing Indebtedness Incurred pursuant to the Credit
Facility;
(5) Liens in favor of Boyd Gaming or a Specified Subsidiary;
(6) Liens on the Property of a Person at the time such Person becomes
a Specified Subsidiary; provided, however, that:
(A) any such Lien may not extend to any other Property of Boyd
Gaming or any Specified Subsidiary; and
(B) any such Lien was not Incurred in anticipation of or in
connection with the transaction or series of related transactions
pursuant to which such Person became a Specified Subsidiary; or
(7) Liens to secure any refinancing, refunding, extension, renewal or
replacement (or successive refinancings, refundings, extensions, renewals
or replacements) as a whole or in part of any Indebtedness secured by any
Lien referred to in the foregoing clauses (2), (3), (6) and (7); provided,
however, that:
(A) such new Lien shall be limited to all or part of the same
Property subject to the original Lien (plus improvements on such
Property); and
(B) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of:
(1) the outstanding principal amount or, if greater, committed
amount of the Indebtedness described under clauses (2), (3), (6) or
(7); and
(2) an amount necessary to pay any fees and expenses, including
premiums, related to such refinancing, refunding, extension, renewal
or replacement.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
Boyd Gaming shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions to Boyd Gaming or
any other Restricted Subsidiary on its Capital Stock or with respect to any
other interest or participation in, or measured by, its profits;
(2) pay any indebtedness owed to Boyd Gaming or any other Restricted
Subsidiary;
(3) make loans or advances to Boyd Gaming or any other Restricted
Subsidiary; or
59
(4) transfer any of its Property to Boyd Gaming or any other
Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of:
(A) agreements in effect on the Issue Date;
(B) applicable law;
(C) customary nonassignment provisions in leases entered into in
the ordinary course of business and consistent with past practices;
(D) Permitted Refinancing Indebtedness; provided, however, that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in
the agreements governing the Indebtedness being refinanced; or
(E) agreements in existence with respect to a Restricted Subsidiary
at the time it is so designated; provided, however, that such agreements
are not entered into in anticipation or contemplation of such
designation.
Nothing contained in this covenant shall prevent Boyd Gaming or any
Restricted Subsidiary from granting any Lien permitted by the "-- Limitation on
Liens" covenant.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
Boyd Gaming shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, conduct any business or enter into or suffer to exist
any transaction or series of transactions (including the purchase, sale,
transfer, lease or exchange of any Property, the making of any Investment, the
giving of any Guarantee or the rendering or receiving of any service) with, from
or for the benefit of any Affiliate, any Related Person or any officer or
director of any Affiliate or a Related Person (an affiliate transaction) unless:
(1) the terms of such affiliate transaction are in writing, in the
best interest of Boyd Gaming or such Restricted Subsidiary, as the case may
be, and at least as favorable to Boyd Gaming or such Restricted Subsidiary,
as the case may be, as those that could be obtained at the time of such
affiliate transaction in a similar transaction in arm's-length dealings
with a Person who is not such an Affiliate, Related Person or officer or
director of an Affiliate or Related Person;
(2) with respect to each affiliate transaction involving aggregate
payments to either party in excess of $5 million, Boyd Gaming delivers to
the trustee an Officers' Certificate certifying that such affiliate
transaction was approved by a majority of the disinterested members of the
Board of Directors and that such affiliate transaction complies with clause
(1); and
(3) with respect to each affiliate transaction involving aggregate
payments in excess of $10 million, Boyd Gaming delivers to the trustee an
opinion letter from an Independent Advisor to effect that such affiliate
transaction is fair, from a financial point of view.
Notwithstanding the foregoing limitation, Boyd Gaming may enter into or
suffer to exist the following:
(1) any transaction pursuant to any contract in existence on the Issue
Date;
(2) any Restricted Payment permitted to be made pursuant to
"-- Limitation on Restricted Payments";
(3) any transaction or series of transactions between Boyd Gaming and
one or more of its Restricted Subsidiaries or between two or more of its
Restricted Subsidiaries; and
(4) the payment of compensation (including amounts paid pursuant to
employee benefit plans) for the personal services of officers, directors
and employees of Boyd Gaming or any of its Restricted Subsidiaries, so long
as the Board of Directors in good faith shall have approved the terms
thereof and deemed the services theretofore or thereafter to be performed
for such compensation or fees to be fair consideration therefor.
60
MAINTENANCE OF PROPERTIES AND OTHER MATTERS
Boyd Gaming shall, and shall cause each of its Subsidiaries to, maintain
its Properties in good working order and condition and make all necessary
repairs, renewals and replacements; provided, however, that nothing in this
provision shall prevent Boyd Gaming or any of its Subsidiaries from
discontinuing the operation and maintenance of any of its Properties, if such
discontinuance is, in the judgment of Boyd Gaming, both desirable in the conduct
of the business of Boyd Gaming and its Subsidiaries, taken as a whole, and not
disadvantageous in any material respect to the Holders.
Boyd Gaming shall, and shall cause each of its Subsidiaries to, insure and
keep insured, with financially sound and reputable insurers, so much of their
respective Properties and in such amounts as is usually and customarily insured
by Persons engaged in a similar business with respect to Properties of a similar
character against loss by fire and the extended coverage perils. None of Boyd
Gaming or any of its Subsidiaries shall maintain a system of self-insurance in
lieu of or in combination with the foregoing insurance with respect to its
Properties; provided that deductibles under the insurance policy or policies of
Boyd Gaming and its Subsidiaries shall not be considered to be self-insurance as
long as such deductibles accord with financially sound and approved practices of
Persons owning or operating Properties of a similar character and maintaining
similar insurance coverage.
Boyd Gaming shall, and shall cause each of its Subsidiaries to, keep proper
books and records of accounts in which full and correct entries will be made of
all its business transactions in accordance with GAAP. Boyd Gaming shall cause
the books and records of accounts of Boyd Gaming and its Subsidiaries to be
examined, either on a consolidated or on an individual basis, by one or more
firms of independent public accountants not less frequently than annually. Boyd
Gaming shall, and shall cause each of its Subsidiaries to, prepare its financial
statements in accordance with GAAP.
Boyd Gaming shall, and shall cause each of its Subsidiaries to, comply with
all Legal Requirements and to obtain any licenses, permits, franchises or other
authorizations, including Gaming Licenses, from Governmental Authorities
necessary to the ownership or operation of its Properties or to the conduct of
its business.
Notwithstanding the foregoing provisions in this covenant, failure by Boyd
Gaming or any of its Subsidiaries to comply with such provisions shall not be
deemed to be a breach of such provisions to the extent that such failure would
not have a material adverse effect on Boyd Gaming and its Subsidiaries, taken as
a whole.
LIMITATION ON ACTIVITIES OF BOYD GAMING
Boyd Gaming shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in (through acquisition or otherwise) any business other
than a Related Business.
LIMITATION ON STATUS AS AN INVESTMENT COMPANY
Boyd Gaming shall not, and shall not permit any of its Subsidiaries to,
become an "investment company" (as that term is defined in the Investment
Company Act of 1940), to the extent such status would subject Boyd Gaming or any
such Subsidiary to regulation under the Investment Company Act, except for
Subsidiaries established for the purpose of financing the operating businesses
of Boyd Gaming and its Subsidiaries.
PAYMENT FOR CONSENT
Boyd Gaming will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the indenture or the notes unless
such consideration is offered to be paid and is paid to all Holders of the notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
61
MERGER, CONSOLIDATION AND SALE OF ASSETS
Neither Boyd Gaming nor any Guarantor shall merge or consolidate with or
into any other entity (other than a merger or consolidation of a Guarantor with
or into Boyd Gaming or another Guarantor, and other than a merger or
consolidation of a Guarantor where the surviving entity is not Boyd Gaming or a
Subsidiary of Boyd Gaming) or in one transaction or a series of related
transactions sell, convey, assign, transfer, lease or otherwise dispose of all
or substantially all of its Property unless:
(1) the entity formed by or surviving any such consolidation or merger
(if Boyd Gaming or such Guarantor is not the surviving entity) or the
Person to which such sale, assignment, transfer, lease or conveyance is
made (the "Successor"):
(A) shall be a corporation organized and existing under the laws of
the United States of America or a State thereof or the District of
Columbia and such corporation expressly assumes, by supplemental
indenture satisfactory to the trustee, executed and delivered to the
trustee by such corporation, the due and punctual payment of the
principal, premium, if any, and interest on all the notes, according to
their tenor, and the due and punctual performance and observance of all
the covenants and conditions of the indenture to be performed by Boyd
Gaming or such Guarantor, as the case may be; and
(B) the Successor shall have all Gaming Licenses required to
operate all Gaming Facilities to be owned by such Successor;
(2) in the case of a sale, transfer, assignment, lease, conveyance or
other disposition of all or substantially all of Boyd Gaming's Property or
of such Guarantor's Property, such Property shall have been transferred as
an entirety or virtually as an entirety to one Person;
(3) immediately before and after giving effect to such transaction or
series of transactions on a pro forma basis, no Default or Event of Default
shall have occurred and be continuing;
(4) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
transaction or series of transactions), Boyd Gaming or the Successor, as
the case may be, would be able to Incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of "-- Limitation of
Indebtedness"; and
(5) immediately after giving effect to such transaction or series of
transactions on a pro forma basis including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
transaction or series of transactions), Boyd Gaming or the Successor shall
have a Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of Boyd Gaming immediately prior to the transaction or series of
transactions.
REPORTS
Whether or not required by the Commission, so long as any notes are
outstanding, Boyd Gaming will furnish to the Holders of notes, within 15 days
after the time periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if Boyd Gaming were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report on
the annual financial statements by Boyd Gaming's certified independent
accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if Boyd Gaming were required to file such reports.
In addition, following the consummation of the exchange offer contemplated
by the registration rights agreement, whether or not required by the Commission,
Boyd Gaming will file a copy of all of the information
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and reports referred to in clauses (1) and (2) above with the Commission for
public availability within the time periods specified in the Commission's rules
and regulations (unless the Commission will not accept such a filing). In
addition, Boyd Gaming and the Subsidiary Guarantors have agreed that, until the
consummation of the exchange offer and, in the event that, at any time
thereafter, Boyd Gaming is no longer subject to the reporting requirements under
the Exchange Act for so long as any notes remain outstanding, they will furnish
to the Holders and to prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default with respect to payment of interest on any of the notes
when it becomes due and payable, and the continuance of such default for a
period of 30 days;
(2) default with respect to payment of principal or premium, if any,
on any of the notes when due at maturity, upon acceleration, required
purchase or otherwise;
(3) failure by Boyd Gaming or any Guarantor to observe, perform or
comply with the covenants and agreements described in "-- Merger,
Consolidation and Sale of Assets" herein;
(4) failure by Boyd Gaming or the Guarantors to observe, perform or
comply with any of the other covenants and agreements in the indenture and
such failure to observe, perform or comply continues for a period of 30
days after receipt by Boyd Gaming of a written notice from the trustee or
Holders of not less than 25% in aggregate principal amount of the notes
then outstanding;
(5) Indebtedness of Boyd Gaming or any Restricted Subsidiary is not
paid when due within any applicable grace period or is accelerated by the
Holders thereof and, in either case, the total amount of such unpaid or
accelerated Indebtedness exceeds $10 million;
(6) the entry by a court of competent jurisdiction of one or more
judgments or orders against Boyd Gaming or any Restricted Subsidiary in an
uninsured aggregate amount in excess of $10 million and such judgment or
order is not discharged, waived, stayed or satisfied for a period of 60
consecutive days;
(7) certain events of bankruptcy, insolvency or reorganization
affecting Boyd Gaming or any Restricted Subsidiary;
(8) any revocation, suspension or loss of any Gaming License which
results in the cessation of business for a period of more than 90
consecutive days of the business of any Gaming Facility owned, leased or
operated directly or indirectly by Boyd Gaming or any of its Subsidiaries
(other than any voluntary relinquishment of a Gaming License if such
relinquishment is, in the reasonable, good faith judgment of the Board of
Directors, evidenced by a Board Resolution, both desirable in the conduct
of the business of Boyd Gaming and its Subsidiaries, taken as a whole, and
not disadvantageous in any material respect to the Holders); and
(9) any Guaranty ceases to be in full force and effect (other than
pursuant to the terms of the indenture) or is declared null and void or any
Guarantor denies that it has any further liability under its Guaranty or
gives notice to such effect.
A Default under clauses (5), (6) or (8) above is not an Event of Default
until the trustee or Holders of not less than 25% in aggregate principal amount
of the notes notify Boyd Gaming of the Default.
Boyd Gaming shall deliver to the trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default, its status and what action Boyd Gaming is taking or
proposes to take with respect thereto.
The indenture provides that the trustee, within 90 days after the
occurrence of any continuing Default or Event of Default that is known to the
trustee, will give notice to the Holders; provided, however, that, except
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in the case of a default in payment of principal of or interest on the notes,
the trustee may withhold such notice as long as it in good faith determines that
such withholding is in the interest of the Holders.
The indenture provides that if an Event of Default with respect to the
notes (other than an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization with respect to Boyd Gaming or a
Restricted Subsidiary) shall have occurred and be continuing, the trustee or the
registered Holders of not less than 25% in aggregate principal amount of the
notes then outstanding may accelerate the maturity of all the notes in which
event the notes shall become immediately due and payable; provided, however,
that after such acceleration but before a judgment or decree based on
acceleration is obtained by the trustee, the registered Holders of a majority in
aggregate principal amount of the notes then outstanding, may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the nonpayment of accelerated principal, have been cured or waived as
provided in the indenture. In case an Event of Default resulting from certain
events of bankruptcy, insolvency or reorganization with respect to Boyd Gaming
or a Restricted Subsidiary shall occur, the notes shall be due and payable
immediately without any declaration or other act on the part of the trustee or
the Holders.
The Holders of a majority in principal amount of the notes then outstanding
shall have the right to waive any existing Default with respect to the notes or
compliance with any provision of the indenture or the notes and to direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee, subject to certain limitations specified in the indenture.
No Holder will have any right to institute any proceeding with respect to
the indenture or for any remedy thereunder, unless:
(1) such Holder shall have previously given to the trustee written
notice of a continuing Event of Default;
(2) Holders of at least 25% in aggregate principal amount of the notes
then outstanding shall have made written request and offered reasonable
indemnity to the trustee to institute such proceeding as a trustee; and
(3) the trustee shall not have received from the Holders of a majority
in aggregate principal amount of the notes then outstanding a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a Holder for
enforcement of payment of the principal of and premium, if any, or interest on
such Holder's note on or after the respective due dates expressed in such note.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Boyd Gaming
or any Guarantor, as such, will have any liability for any obligations of Boyd
Gaming or the Guarantors under the notes, the indenture, the Subsidiary
Guarantees, or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Boyd Gaming may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes and all obligations
of the Guarantors discharged with respect to their Subsidiary Guarantees ("Legal
Defeasance") except for:
(1) the rights of Holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and Liquidated Damages,
if any, on such notes when such payments are due from the trust referred to
below;
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(2) Boyd Gaming's obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and Boyd Gaming's and the Guarantor's obligations in connection therewith;
and
(4) the Legal Defeasance provisions of the indenture.
In addition, Boyd Gaming may, at its option and at any time, elect to have
the obligations of Boyd Gaming and the Guarantors released with respect to
certain covenants that are described in the indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants will not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events with respect to Boyd Gaming)
described under "Events of Default and Remedies" will no longer constitute an
Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Boyd Gaming must irrevocably deposit with the trustee, in trust,
for the benefit of the Holders of the notes, cash in U.S. dollars,
non-callable U.S. Government Obligations, or a combination of cash in U.S.
dollars and non-callable U.S. Government Obligations, in amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, or interest and premium and
Liquidated Damages, if any, on the outstanding notes on the stated maturity
or on the applicable redemption date, as the case may be, and Boyd Gaming
must specify whether the notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, Boyd Gaming has delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that:
(a) Boyd Gaming has received from, or there has been published by,
the Internal Revenue Service a ruling or
(b) since the date of the indenture, there has been a change in the
applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of
counsel will confirm that, the Holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Boyd Gaming has delivered to
the trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the Holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default has occurred and is continuing on
the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the indenture) to which Boyd Gaming is
a party or by which Boyd Gaming is bound;
(6) Boyd Gaming must deliver to the trustee an officers' certificate
stating that the deposit was not made by Boyd Gaming with the intent of
preferring the Holders of notes over the other creditors of Boyd
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Gaming with the intent of defeating, hindering, delaying or defrauding
creditors of Boyd Gaming or others; and
(7) Boyd Gaming must deliver to the trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the indenture,
the notes and the guarantees may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the notes then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, notes), and any existing
default or compliance with any provision of the indenture, the notes or the
guarantees may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding notes (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, notes).
Without the consent of each Holder of an outstanding note, an amendment or
waiver may not, among other things:
(1) reduce the principal amount of notes whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any note;
(3) reduce the principal of or extend the stated maturity of any note,
reduce the premium payable upon the redemption of any note or change the
time at which note may be redeemed (other than provisions relating to the
covenants described above under the caption "-- Repurchase at the Option of
Holders");
(4) impair the right of any Holder to receive payment of principal of,
or interest or premium, or Liquidated Damages, if any, on the notes on or
after the due dates therefor or to institute suit for the enforcement of
any payment on or with respect to such Holder's notes;
(5) make any note payable in money other than that stated in the
notes;
(6) subordinate in right of payment, or otherwise subordinate the
notes to any other obligation of Boyd Gaming or any Guarantor;
(7) release any security interest in favor of the notes or guarantees;
or
(8) make any change in any guarantee that would adversely affect the
Holders.
Notwithstanding the preceding, without the consent of any Holder of notes,
Boyd Gaming, the Guarantors and the trustee may amend or supplement the
indenture, among other things:
(1) to cure any ambiguity, defect, omission or inconsistency;
(2) to provide for the assumption by a successor corporation of Boyd
Gaming's or any Guarantor's obligations under the indenture;
(3) to provide for uncertificated notes in addition to or in place of
certificated notes; provided that the uncertificated notes are issued in
registered form for purposes of Section 163(f) of the Internal Revenue
Code, or in a manner such that the uncertificated notes are described in
Section 163(f)(2)(B) of the Internal Revenue Code;
(4) to add additional guarantees with respect to the notes or to
secure the notes;
(5) to add to the covenants of Boyd Gaming or any Guarantor for the
benefit of the Holders of the notes or to surrender any right or power
conferred upon Boyd Gaming or any Guarantor;
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(6) to release a Guarantor which has been sold, or whose assets have
been sold, in accordance with the provisions of the indenture;
(7) to make any change that does not adversely affect the rights of
any Holder of notes;
(8) to comply with requirements of the Commission in order to effect
or maintain the qualification of the indenture under the Trust Indenture
Act; or
(9) to provide for the issuance of additional notes in accordance with
the limitations set forth in the indenture on the Issue Date.
The consent of the Holders of the notes is not necessary under the
indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment of the indenture becomes effective, Boyd Gaming is
required to mail to the Holders of notes a notice brief describing such
amendment. However, the failure to give such notice to all Holders of notes, or
any defect therein, will not impair or affect the validity of the amendment.
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect as
to all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated, except lost, stolen or
destroyed notes that have been replaced or paid and notes for whose
payment money has been deposited in trust and thereafter repaid to Boyd
Gaming, have been delivered to the trustee for cancellation; or
(b) all notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the mailing of a
notice of redemption or otherwise or will become due and payable within
one year and Boyd Gaming or any Guarantor has irrevocably deposited or
caused to be deposited with the trustee as trust funds in trust solely
for the benefit of the Holders, cash in U.S. dollars, non-callable U.S.
Government Obligations, or a combination of cash in U.S. dollars and
non-callable U.S. Government Obligations, in amounts as will be
sufficient without consideration of any reinvestment of interest, to pay
and discharge the entire indebtedness on the notes not delivered to the
trustee for cancellation for principal, premium and Liquidated Damages,
if any, and accrued interest to the date of maturity or redemption;
(2) Boyd Gaming or any Guarantor has paid or caused to be paid all
other sums payable by it under the indenture;
(3) other than with respect to a discharge when the notes have become
due and payable, no Default or Event of Default has occurred and is
continuing on the date of the deposit or will occur as a result of the
deposit and the deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which Boyd Gaming is a
party or by which Boyd Gaming is bound; and
(4) Boyd Gaming has delivered irrevocable instructions to the trustee
under the indenture to apply the deposited money toward the payment of the
notes at maturity or the redemption date, as the case may be.
In addition, Boyd Gaming must deliver an officers' certificate and an opinion of
counsel to the trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of Boyd Gaming or any Guarantor, the
indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. The trustee will be permitted to engage in other transactions;
however, if it
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acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then-outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man 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 the indenture at the request of any
Holder of notes, unless such Holder has offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
The exchange notes will be issued in the form of one or more global notes.
The global notes will be deposited with, or on behalf of, The Depository Trust
Company ("DTC") and registered in the name of DTC or its nominee, who will be
the global notes Holder. Except as set forth below, the global notes may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Investors may hold their beneficial interests
in the global notes directly through DTC if they are participating organizations
or "participants" in such system or indirectly through organizations that are
participants in such system. Beneficial interests in the global notes may not be
exchanged for notes in certificated form except in the limited circumstances
described below.
So long as the global note Holder is the registered owner of any notes, the
global note Holder will be considered the sole Holder under the indenture of any
notes evidenced by the global notes. Beneficial owners of notes evidenced by the
global notes will not be considered the owners or Holders of the notes under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the trustee thereunder. Neither Boyd
Gaming nor the trustee will have any responsibility or liability for any aspect
of the records of DTC or for maintaining, supervising or reviewing any records
of DTC relating to the notes.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC and Cedel
are provided solely as a matter of convenience. These operations and procedures
are solely within the control of the respective settlement systems and are
subject to changes by them. Boyd Gaming takes no responsibility for these
operations and procedures and urges investors to contact the system or their
participants directly to discuss these matters.
DTC has advised Boyd Gaming that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the participants) and to facilitate the clearance and settlement of transactions
in those securities between participants through electronic book-entry changes
in accounts of its participants. The participants include securities brokers and
dealers (including the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly (collectively, the indirect participants). Persons
who are not participants may beneficially own securities held by or on behalf of
DTC only through the participants or the indirect participants. The ownership
interests in, and transfers of ownership interests in, each security held by or
on behalf of DTC are recorded on the records of the participants and indirect
participants.
DTC has also advised Boyd Gaming that, pursuant to procedures established
by it:
(1) upon deposit of the global notes, DTC will credit the accounts of
participants designated by the exchange agent with portions of the
principal amount of the global notes; and
(2) ownership of these interests in the global notes will be shown on,
and the transfer of ownership of these interests will be effected only
through, records maintained by DTC (with respect to the
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participants) or by the participants and the indirect participants (with
respect to other owners of beneficial interest in the global notes).
Except as described below, owners of interest in the global notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
"Holders" thereof under the indenture for any purpose.
Payments in respect of the principal of, and interest and premium and
Liquidated Damages, if any, on a global note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the indenture. Under the terms of the indenture, Boyd Gaming and the
trustee will treat the Persons in whose names the notes, including the global
notes, are registered as the owners of the notes for the purpose of receiving
payments and for all other purposes. Consequently, neither Boyd Gaming, the
Guarantors, the trustee nor any agent of Boyd Gaming, the Guarantors or the
trustee has or will have any responsibility or liability for:
(1) any aspect of DTC's records or any participant's or indirect
participant's records relating to or payments made on account of beneficial
ownership interest in the global notes or for maintaining, supervising or
reviewing any of DTC's records or any participant's or indirect
participant's records relating to the beneficial ownership interests in the
global notes; or
(2) any other matter relating to the actions and practices of DTC or
any of its participants or indirect participants.
DTC has advised Boyd Gaming that its current practice, upon receipt of any
payment in respect of securities such as the notes (including principal and
interest), is to credit the accounts of the relevant participants with the
payment on the payment date unless DTC has reason to believe it will not receive
payment on such payment date. Each relevant participant is credited with an
amount proportionate to its beneficial ownership of an interest in the principal
amount of the relevant security as shown on the records of DTC. Payments by the
participants and the indirect participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will be
the responsibility of the participants or the indirect participants and will not
be the responsibility of DTC, the trustee or Boyd Gaming. Neither Boyd Gaming
nor the trustee will be liable for any delay by DTC or any of its participants
in identifying the beneficial owners of the notes, and Boyd Gaming and the
trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A global note is exchangeable for definitive notes in registered
certificated form (certificated notes) if:
(1) DTC (a) notifies Boyd Gaming that it is unwilling or unable to
continue as depositary for the global notes or (b) has ceased to be a
clearing agency registered under the Exchange Act, and, in either case,
Boyd Gaming fails to appoint a successor depositary;
(2) Boyd Gaming, at its option, notifies the trustee in writing that
it elects to cause the issuance of the certificated notes; or
(3) there has occurred and is continuing a Default or Event of Default
with respect to the notes.
In addition, beneficial interests in a global note may be exchanged for
certificated notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, certificated notes
delivered in exchange for any global note or beneficial interests in global
notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures) and will bear the applicable restrictive legends, unless that legend
is not required by applicable law.
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EXCHANGE OF CERTIFICATED NOTES FOR GLOBAL NOTES
Certificated notes may not be exchanged for beneficial interests in any
global note unless the transferor first delivers to the trustee a written
certificate (in the form provided in the indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such notes.
SAME DAY SETTLEMENT AND PAYMENT
We will make payments in respect of the notes represented by the global
notes (including principal, premium, if any, interest and Liquidated Damages, if
any) by wire transfer of immediately available funds to the accounts specified
by the global note Holder. Boyd Gaming will make all payments of principal,
interest and premium and Liquidated Damages, if any, with respect to
certificated notes, by mailing a check to each such Holder's registered address.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Additional Assets" means:
(1) any Property (other than cash, cash equivalents or securities) to
be owned by Boyd Gaming or a Restricted Subsidiary and used in a Related
Business;
(2) the costs of improving, restoring, replacing or developing any
Property owned by Boyd Gaming or a Restricted Subsidiary which is used in a
Related Business; or
(3) Investments in any other Person engaged primarily in a Related
Business (including the acquisition from third parties of Capital Stock of
such Person) as a result of which such other Person becomes a Restricted
Subsidiary in compliance with the procedure for designation of Restricted
Subsidiaries set forth below in the Definition of "Restricted Subsidiary."
"Affiliate" means, with respect to any Person, a Person
(1) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such
Person,
(2) which directly or indirectly through one or more intermediaries
beneficially owns or holds 10% or more of any class of the Voting Stock of
such Person (or a 10% or greater equity interest in a Person which is not a
corporation), or
(3) of which 10% or more of any class of the Voting Stock (or, in the
case of a Person which is not a corporation, 10% or more of the equity
interest) is beneficially owned or held directly or indirectly through one
or more intermediaries by such Person.
The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Asset Sale" means the sale, conveyance, transfer, lease or other
disposition, whether in a single transaction or a series of related transactions
(including, without limitation, dispositions pursuant to Sale/ Leaseback
Transactions or pursuant to the merger of Boyd Gaming or any of its Restricted
Subsidiaries with or into any person other than Boyd Gaming or one of its
Restricted Subsidiaries), by Boyd Gaming or one of its Restricted Subsidiaries
to any Person other than Boyd Gaming or one of its Restricted Subsidiaries of:
(1) any of the Capital Stock or other ownership interests of any
Subsidiary of Boyd Gaming; or
(2) any other Property of Boyd Gaming or any Property of its
Restricted Subsidiaries,
in each case not in the ordinary course of business of Boyd Gaming or such
Restricted Subsidiary.
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Notwithstanding the foregoing, the following items will not be deemed to be
Asset Sales:
(A) any issuance or other such disposition of Capital Stock or other
ownership interests of any Restricted Subsidiary to Boyd Gaming or another
Restricted Subsidiary;
(B) any such disposition of Property between or among Boyd Gaming and
its Restricted Subsidiaries;
(C) the sale or other disposition of cash or Temporary Cash
Investments;
(D) any exchange of like Property pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended, for use in a Related Business;
and
(E) a Restricted Payment that is Permitted by the covenant described
above under the caption "-- Certain Covenants -- Limitation on Restricted
Payments."
"Attributable Indebtedness" means Indebtedness deemed to be Incurred in
respect of a Sale/Leaseback Transaction and shall be, at the date of
determination, the present value (discounted at the actual rate of interest
implicit in such transaction, compounded annually), of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"Board of Directors" means the Board of Directors of Boyd Gaming or any
committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of Boyd Gaming to have been duly adopted by the Board
of Directors, to be in full force and effect on the date of such certification
and delivered to the trustee.
"Borgata Facility" means the casino facility in Atlantic City, New Jersey
developed pursuant to The Borgata Joint Venture.
"Borgata Joint Venture" means the joint venture pursuant to that certain
Joint Venture Agreement dated as of May 29, 1996, by and between MAC, CORP., a
wholly-owned subsidiary of Mirage Resorts, Incorporated, a Nevada corporation,
and Grand K, Inc., a wholly-owned subsidiary of Boyd Gaming, which subsequently
assigned its interest to Boyd Atlantic City, Inc., as such agreement is amended
from time to time.
"Boyd Family" means William S. Boyd, any direct descendant or spouse of
such person, or any direct descendant of such spouse, and any trust or other
estate in which each person who has a beneficial interest, directly or
indirectly through one or more intermediaries, in Capital Stock of Boyd Gaming
is one of the foregoing persons.
"Capital Lease Obligations" means Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP and the amount of such Indebtedness shall be
the capitalized amount of such obligations determined in accordance with GAAP.
For purposes of "-- Certain Covenants -- Limitation on Liens," Capital Lease
Obligations shall be deemed secured by a Lien on the Property being leased.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of corporate stock, partnership interests
or any other participation, right, warrants, options or other interest in the
nature of an equity interest in such Person, but excluding any debt security
convertible or exchangeable into such equity interest.
A "Change of Control" shall be deemed to occur if:
(1) any "person" or "group" (within the meaning of Sections 13(d)(3)
and 14(d)(2) of the Exchange Act or any successor provision to either of
the foregoing, including any group acting for the purpose of acquiring,
holding or disposing of securities within the meaning of Rule 13d-5(b)(1)
under the Exchange Act), other than the Permitted Holders and other than a
Restricted Subsidiary, becomes
71
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time) of 50% or more
of the total voting power of all classes of the Voting Stock of Boyd Gaming
and/or warrants or options to acquire such Voting Stock, calculated on a
fully diluted basis; provided that for purposes of this clause (1), the
members of the Boyd Family shall be deemed to beneficially own any Voting
Stock of a corporation held by any other corporation (the "parent
corporation") so long as the members of the Boyd Family beneficially own
(as so defined), directly or indirectly through one or more intermediaries,
in the aggregate 50% or more of the total voting power of the Voting Stock
of the parent corporation;
(2) the sale, lease, conveyance or other transfer of all or
substantially all of the Property of Boyd Gaming (other than to any
Restricted Subsidiary) shall have occurred;
(3) the stockholders of Boyd Gaming shall have approved any plan of
liquidation or dissolution of Boyd Gaming;
(4) Boyd Gaming consolidates with or merges into another Person or any
Person consolidates with or merges into Boyd Gaming in any such event
pursuant to a transaction in which the outstanding Voting Stock of Boyd
Gaming is reclassified into or exchanged for cash, securities or other
property, other than any such transaction where:
(A) the outstanding Voting Stock of Boyd Gaming is reclassified
into or exchanged for Voting Stock of the surviving corporation that is
Capital Stock; and
(B) the Holders of the Voting Stock of Boyd Gaming immediately
prior to such transaction own, directly or indirectly, not less than a
majority of the Voting Stock of the surviving corporation immediately
after such transaction in substantially the same proportion as before
the transaction; or
(5) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election or appointment by such board or whose
nomination for election by the stockholders of Boyd Gaming was approved by
a vote of either:
(A) 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved; or
(B) members of the Boyd Family who beneficially own (as defined for
purposes of clause (1) above), directly or indirectly through one or
more intermediaries, in the aggregate 50% or more of the total voting
power of the Voting Stock of Boyd Gaming),
cease for any reason to constitute a majority of the Board of Directors then in
office.
"Consolidated EBITDA" means, for any period, without duplication, the sum
of:
(1) Consolidated Net Income; and
(2) to the extent Consolidated Net Income has been reduced thereby:
(a) Consolidated Fixed Charges; (b) provisions for taxes based on income;
(c) consolidated depreciation expense; (d) consolidated amortization
expense; (e) all preopening expenses paid or accrued; and (f) other noncash
items reducing Consolidated Net Income,
minus other noncash items increasing Consolidated Net Income;
all as determined on a consolidated basis for Boyd Gaming and its Restricted
Subsidiaries in conformity with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of Consolidated
EBITDA during the Reference Period to the aggregate amount of Consolidated Fixed
Charges during the Reference Period.
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"Consolidated Fixed Charges" means, for any period, the total interest
expense of Boyd Gaming and its consolidated Subsidiaries (other than
Unrestricted Subsidiaries), including:
(1) the interest component of Capital Lease Obligations;
(2) one-third of the rental expense attributable to operating leases;
(3) amortization of Indebtedness discount and commissions, discounts
and other similar fees and charges owed with respect to Indebtedness;
(4) noncash interest payments;
(5) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing;
(6) net costs pursuant to Interest Rate Agreements;
(7) dividends on all Preferred Stock of Restricted Subsidiaries held
by Persons other than Boyd Gaming or a Restricted Subsidiary;
(8) interest attributable to the Indebtedness of any other Person for
which Boyd Gaming or any Restricted Subsidiary is responsible or liable as
obligor, guarantor or otherwise (including Indebtedness Guaranteed pursuant
to Investment Guarantees) and
(9) any dividend or distribution, whether in cash, property or
securities, on Disqualified Stock of Boyd Gaming.
"Consolidated Net Income" means for any period, the net income (loss) of
Boyd Gaming and its Subsidiaries determined in accordance with GAAP; provided,
however, that the following items shall be excluded from the computation of
Consolidated Net Income:
(1) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that, subject to the limitations contained in
(4) below,
(A) the net income (or, if applicable, Boyd Gaming's equity in the
net income) of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to Boyd Gaming or a
Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution to a Restricted Subsidiary,
to the limitations contained in clause (3) below), and
(B) Boyd Gaming's equity in a net loss of any such Person (other
than an Unrestricted Subsidiary) for such period shall be included in
determining such Consolidated Net Income;
(2) any net income (loss) of any Person acquired by Boyd Gaming or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(3) any net income (loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to Boyd Gaming, except that:
(A) subject to the limitations contained in (4) below, Boyd
Gaming's equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to Boyd Gaming or another
Restricted Subsidiary as a dividend (subject, in the case of a dividend
to another Restricted Subsidiary, to the limitation contained in this
clause), and
(B) Boyd Gaming's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(4) any gain or loss realized upon the sale or other disposition of
any Property of Boyd Gaming or its consolidated Subsidiaries (including
pursuant to any Sale/Leaseback Transaction) which is not sold
73
or otherwise disposed of in the ordinary course of business and any gain or
loss realized upon the sale or other disposition of any Capital Stock of
any Person;
(5) items classified as extraordinary or any non-cash item classified
as nonrecurring; and
(6) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of Boyd Gaming and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as
(1) the par or stated value of all outstanding Capital Stock plus,
(2) paid-in capital or capital surplus relating to such Capital Stock
plus,
(3) any retained earnings or earned surplus, less
(A) any accumulated deficit, and
(B) any amounts attributable to Disqualified Stock.
"Credit Facility" means the senior secured credit facility outstanding on
the Issue Date, as amended from time to time, among Boyd Gaming, certain
Subsidiaries and a syndicate of banks, and any extensions, revisions,
refinancings or replacements thereof by an institutional lender or syndicate of
institutional lenders.
"Currency Exchange Protection Agreement" means, in respect of a Person, any
foreign exchange contract, currency swap agreement, currency option or other
similar agreement or arrangement designed to protect such Person against
fluctuations in currency exchange rates.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" of a Person means any Capital Stock of such Person:
(1) that by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or otherwise:
(A) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
(B) is or may become redeemable or repurchaseable at the option of
the Holder thereof, in whole or in part; or
(C) is convertible or exchangeable or exercisable for Indebtedness;
and
(2) as to which the maturity, mandatory redemption, conversion or
exchange or redemption at the option of the Holder thereof occurs, or may
occur, in the case of each of clauses (1) or (2) on or prior to the first
anniversary of the Stated Maturity of the notes; provided, however, that
such Capital Stock of Boyd Gaming or any of its Subsidiaries shall not
constitute Disqualified Stock if it is redeemable prior to the first
anniversary of the Stated Maturity of the notes only if:
(A) the Holder or a beneficial owner of such Capital Stock is
required to qualify under the Gaming Laws and does not so qualify; or
(B) the Board of Directors determines in its reasonable, good faith
judgment, as evidenced by a Board Resolution, that as a result of a
Holder or beneficial owner owning such Capital Stock, Boyd Gaming or any
of its Subsidiaries has lost or may lose any Gaming License, which if
lost or not reinstated, as the case may be, would have a material
adverse effect on the business of Boyd Gaming and its Subsidiaries,
taken as a whole, or would restrict the ability of Boyd Gaming or any of
its Subsidiaries to conduct business in any gaming jurisdiction.
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"Event of Loss" means, with respect to any Property, any loss, destruction
or damage of such Property, or any condemnation, seizure or taking, by exercise
of the power of eminent domain or otherwise, of such Property, or confiscation
or requisition of the use of such Property.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means with respect to any Property, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided:
(1) if such Property has a Fair Market Value of less than $5 million,
by any Officer of Boyd Gaming; or
(2) if such Property has a Fair Market Value in excess of $5 million,
by a majority of the Board of Directors and evidenced by a Board
Resolution, dated within 30 days of the relevant transaction, delivered to
the trustee.
"GAAP" means accounting principles generally accepted in the United States
of America in effect on the date of the indenture.
"Gaming Authority" means any of the Nevada Gaming Commission, the Nevada
State Gaming Control Board, the Louisiana Gaming Control Board, the Mississippi
Gaming Commission, the New Jersey Casino Control Commission, the New Jersey
Division of Gaming Enforcement, the Illinois Gaming Board, the Indiana Gaming
Commission and any other agency (including, without limitation, any agency
established by a federally-recognized Indian tribe to regulate gaming on such
tribe's reservation) which has, or may at any time after the date of the
indenture have, jurisdiction over the gaming activities of Boyd Gaming or any of
its Subsidiaries or any successor to such authority.
"Gaming Facility" means any gaming or parimutuel wagering establishment and
other property or assets directly ancillary thereto or used in connection
therewith, including any building, restaurant, hotel, theater, parking
facilities, retail shops, land, golf courses and other recreation and
entertainment facilities, vessel, barge, ship and equipment or 100% of the
equity interest of a Person the primary business of which is ownership and
operation of any of the foregoing.
"Gaming Laws" means the gaming laws of a jurisdiction or jurisdictions to
which Boyd Gaming or any of its Subsidiaries is, or may at any time after the
date of the indenture be, subject.
"Gaming License" means any license, permit, franchise or other
authorization from any governmental authority required on the date of the
indenture or at any time thereafter to own, lease, operate or otherwise conduct
the gaming business of Boyd Gaming and its Subsidiaries, including all licenses
granted under Gaming Laws and other Legal Requirements.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such first Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such other Person (whether arising by
virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay or to
maintain financial statement conditions or otherwise); or
(2) entered into for the purpose of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in
part); provided, however, that the term "Guarantee" shall not include (i)
endorsements for collection or deposit in the ordinary course of business;
or (ii) any obligation in the nature of a completion guaranty which is
limited solely to an obligation to complete the development, construction
or opening of any new Gaming Facility entered into on behalf of any
Permitted Joint Venture. The term "Guarantee" used as a verb has a
corresponding meaning.
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"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), extend,
assume, Guarantee or become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or obligation on the consolidated balance sheet of such Person
including by merger or operation of law (and "Incurrence," "Incurred,"
"Incurrable" and "Incurring" shall have meanings correlative to the foregoing).
The accretion of principal of a noninterest bearing or other discount security
shall not be deemed the Incurrence of Indebtedness so long the amount thereof is
included in the computation of "Consolidated Fixed Charges" for all purposes
under the indenture.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness, secured or unsecured, contingent or otherwise, which is for
borrowed money (whether or not the recourse of the lender is to the whole of the
Property of such Person or only to a portion thereof), or the principal amount
of such indebtedness evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding any balances that constitute customer advance
payments and deposits, accounts payable or trade payables, and other accrued
liabilities arising in the ordinary course of business) if and to the extent any
of the foregoing indebtedness would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, and shall also include, to the
extent not otherwise included:
(1) any Capital Lease Obligations;
(2) Indebtedness of other Persons secured by a Lien to which the
Property owned or held by such Person is subject, whether or not the
obligation or obligations secured thereby shall have been assumed (the
amount of such Indebtedness being deemed to be the lesser of the value of
such Property or the amount of the Indebtedness so secured);
(3) Guarantees of Indebtedness of other Persons;
(4) any Disqualified Stock;
(5) any Attributable Indebtedness;
(6) all obligations of such Person in respect of letters of credit,
bankers' acceptances or other similar instruments or credit transactions
issued for the account of such Person (including reimbursement obligations
with respect thereto), other than obligations with respect to letters of
credit securing obligations (other than obligations described in this
definition) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third
business day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit;
(7) in the case of Boyd Gaming, Preferred Stock of its Restricted
Subsidiaries; and
(8) obligations pursuant to any Interest Rate Agreement or Currency
Exchange Protection Agreement.
Notwithstanding the foregoing, Indebtedness shall not include any interest
or accrued interest until due and payable. For purposes of this definition, the
maximum fixed repurchase price of any Disqualified Stock or Preferred Stock that
does not have a fixed repurchase price shall be calculated in accordance with
the terms of such Disqualified Stock or Preferred Stock as if such Disqualified
Stock or Preferred Stock were repurchased on any date on which Indebtedness
shall be required to be determined pursuant to the indenture; provided, however,
that if such Disqualified Stock or Preferred Stock is not then permitted to be
repurchased, the repurchase price shall be the book value of such Disqualified
Stock or Preferred Stock. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and the maximum liability of any other obligations described
in clauses (1) through (8) above in respect thereof at such date.
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"Independent Advisor" means, an investment banking firm of national
standing with non-investment grade debt underwriting experience or any third
party appraiser of national standing; provided, however, that such firm or
appraiser is not an Affiliate of Boyd Gaming.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of cash
or other Property to others or payments for Property or services for the account
or use of others), in connection with the performance of obligations under any
completion guaranty or otherwise, to, or Incurrence of an Investment Guarantee
or a Guarantee of any obligation of, or purchase or acquisition of Capital
Stock, bonds, notes, debentures or other securities or evidence of Indebtedness
issued by, any other Person, including the designation by the Board of Directors
of a Person to be an Unrestricted Subsidiary. In determining the amount of any
Investment in respect of any Property other than cash, such Property shall be
valued at its Fair Market Value at the time of such Investment.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's (or any successor to the rating agency business
thereof) and BBB- (or the equivalent) by S&P (or any successor to the rating
agency business thereof).
"Investment Grade Status" means any time at which the ratings of the notes
by each of Moody's (or any successor to the rating agency business thereof) and
S&P (or any successor to the rating agency business thereof) are Investment
Grade Ratings.
"Investment Guarantee" means any Guarantee by Boyd Gaming or a Restricted
Subsidiary of Indebtedness of a Permitted Joint Venture; provided, such
Guarantee complies with the requirements of clause (8) of the second paragraph
of "-- Limitation on Restricted Payments"; provided, further, that only such
Indebtedness of such Permitted Joint Venture Guaranteed by Boyd Gaming or a
Restricted Subsidiary that matures by its terms prior to the time (if any) that
the ability of Boyd Gaming or a Restricted Subsidiary to control the day-to-day
operations of such Permitted Joint Venture (pursuant to a management contract or
otherwise) is scheduled to expire may constitute Indebtedness subject to an
Investment Guarantee.
"Issue Date" means the date on which the notes are initially issued.
"Legal Requirements" means all laws, statutes and ordinances and all rules,
orders, rulings, regulations, directives, decrees, injunctions and requirements
of all governmental authorities, that are now or may hereafter be in existence,
and that may be applicable to Boyd Gaming or any Subsidiary or Affiliate thereof
or the trustee (including building codes, zoning and environmental laws,
regulations and ordinances and Gaming Laws), as modified by any variances,
special use permits, waivers, exceptions or other exemptions which may from time
to time be applicable.
"Lien" means with respect to any Property of any Person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority, or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such Property (including any Capital Lease
Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing). Any
Sale/Leaseback Transaction shall be deemed to constitute a Lien on the Property
which is the subject of such Sale/Leaseback Transaction securing the
Attributable Indebtedness represented thereby.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale, net of attorney's fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually Incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
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"Net Proceeds" from any Asset Sale or Event of Loss by any Person or its
Restricted Subsidiaries means cash and cash equivalents received in respect of
the Property sold or with respect to which an Event of Loss occurred, net of:
(1) all reasonable out-of-pocket expenses of such Person or such
Restricted Subsidiary Incurred in connection with an Asset Sale of such
type, including, without limitation, all legal, title and recording tax
expenses, commissions and fees and expenses incurred (but excluding any
finder's fee or broker's fee payable to any Affiliate of such Person) and
all Federal, state, provincial, foreign and local taxes arising in
connection with such Asset Sale or Event of Loss that are paid or required
to be accrued as a liability under GAAP by such Person or its Restricted
Subsidiaries;
(2) all payments made by such Person or its Restricted Subsidiaries on
any Indebtedness which is secured by such Property in accordance with the
terms of any Lien upon or with respect to such Property or which must, by
the terms of such Lien, or in order to obtain a necessary consent to such
Asset Sale or by applicable law, be repaid out of the proceeds from such
Asset Sale or Event of Loss; and
(3) all contractually required distributions and other payments made
to minority interest Holders (but excluding distributions and payments to
Affiliates of such Person) in Restricted Subsidiaries of such Person as a
result of such Asset Sale or Event of Loss; provided, however, that, in the
event that any consideration for an Asset Sale (which would otherwise
constitute Net Proceeds) is required to be held in escrow pending
determination of whether a purchase price adjustment will be made, such
consideration (or any portion thereof) shall become Net Proceeds only at
such time as it is released to such Person or its Restricted Subsidiaries
from escrow; and provided further, however, that any noncash consideration
received in connection with an Asset Sale or Event of Loss which is
subsequently converted to cash shall be deemed to be Net Proceeds at and
from the time of such conversion.
"Non-Recourse Indebtedness" means Indebtedness of a Person to the extent
that under the terms thereof or pursuant to applicable law:
(1) no personal recourse shall be had against such Person for the
payment of the principal of or interest or premium, if any, on such
Indebtedness; and
(2) enforcement of obligations on such Indebtedness is limited only to
recourse against interests in Property purchased with the proceeds of the
Incurrence of such Indebtedness and as to which neither Boyd Gaming nor any
of its Restricted Subsidiaries provides any credit support or is liable.
"Officer" means the Chief Executive Officer, President, Treasurer, any
Executive Vice President, Senior Vice President or any Vice President of Boyd
Gaming.
"Officers' Certificate" means a certificate signed by two Officers at least
one of whom shall be the principal executive officer, principal accounting
officer or principal financial officer of Boyd Gaming.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the trustee. The counsel may be an employee of or counsel to Boyd
Gaming or the trustee.
"Permitted FF&E Financing" means Indebtedness of Boyd Gaming or any of its
Restricted Subsidiaries that is Incurred to finance the acquisition or lease
after the date of the indenture of newly acquired or leased furniture, fixtures
or equipment (FF&E) used directly in the operation of a Gaming Facility owned or
leased by Boyd Gaming or its Restricted Subsidiaries and secured by a Lien on
such FF&E in an amount not to exceed 100% of the cost of the FF&E so purchased
or leased.
"Permitted Holders" means the Boyd Family and any group (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) comprised solely of
members of the Boyd Family.
"Permitted Investment" means an Investment by Boyd Gaming or any Restricted
Subsidiary in:
(1) a Restricted Subsidiary or a Person which will, upon the making of
such Investment, become a Restricted Subsidiary; provided, however, that
the primary business of such Restricted Subsidiary is a Related Business;
78
(2) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, Boyd Gaming or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related
Business;
(3) Temporary Cash Investments;
(4) receivables owing to Boyd Gaming or any Restricted Subsidiary, if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as Boyd
Gaming or any such Restricted Subsidiary deems reasonable under the
circumstances;
(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(6) loans or advances to employees made in the ordinary course of
business consistent with past practices of Boyd Gaming or such Restricted
Subsidiary, as the case may be;
(7) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to Boyd Gaming or any
Restricted Subsidiary or in satisfaction of judgments; and
(8) securities received pursuant to clause (2) of the first paragraph
under "-- Redemption at the Option of Holders -- Asset Sales; Events of
Loss."
"Permitted Joint Venture" means a Person in which a Permitted Joint Venture
Investment has been made by Boyd Gaming or any Restricted Subsidiary.
"Permitted Joint Venture Investment" means any Investment in a Person
primarily engaged or preparing to engage in a Related Business if (1) other than
with respect to any Person which is a Native American tribe or an agency or
instrumentality thereof, immediately after giving effect to such Investment,
Boyd Gaming or a Restricted Subsidiary will own at least 35% of the shares of
Capital Stock (including at least 35% of the total voting power thereof) of such
Person, and will control the day-to-day operations of such Person pursuant to a
management contract or otherwise; or (2) with respect to any Person which is a
Native American tribe or an agency or instrumentality thereof, there is in
effect a written agreement which has been approved by all required Gaming
Authorities, pursuant to which Boyd Gaming or one of its Restricted Subsidiaries
will manage such tribe's gaming activities at the facility or facilities for
which the Investment is being made in exchange for customary fees and
reimbursements.
"Permitted Liens" means:
(1) Liens for taxes, assessments or governmental charges or levies on
the Property of Boyd Gaming or any Specified Subsidiary if the same shall
not at the time be delinquent or thereafter can be paid without penalty, or
are being contested in good faith and by appropriate proceedings;
(2) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens and other similar Liens on the Property of Boyd Gaming or
any Specified Subsidiary which secure payment of obligations arising in the
ordinary course of business;
(3) Liens on the Property of Boyd Gaming or any Specified Subsidiary
in favor of issuers of performance bonds and surety bonds obtained in the
ordinary course of business;
(4) other Liens on the Property of Boyd Gaming or any Specified
Subsidiary incidental to the conduct of their respective businesses or the
ownership of their respective Properties which were not created in
connection with the Incurrence of Indebtedness or the obtaining of advances
or credit and which do not in the aggregate materially detract from the
value of their respective Properties or materially impair the use thereof
in the operation of their respective businesses;
(5) pledges or deposits by Boyd Gaming or any Specified Subsidiary
under workmen's compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness) or leases to which
Boyd Gaming or
79
any Specified Subsidiary is a party, or deposits to secure public or
statutory obligations of Boyd Gaming or any Specified Subsidiary, or
deposits for the payment of rent, in each case Incurred in the ordinary
course of business;
(6) utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and do not
materially detract from the value of such Property; and
(7) Liens securing obligations to the trustee pursuant to the
compensation and indemnity provisions of the indenture.
"Permitted Refinancing Indebtedness" means any renewals, extensions,
substitutions, refinancings or replacements of any Indebtedness, including any
successive extensions, renewals, substitutions, refinancings or replacements
(and including refinancings by Boyd Gaming of Indebtedness of a Restricted
Subsidiary) so long as:
(1) the aggregate amount of Indebtedness represented thereby is not
increased by such renewal, extension, substitution, refinancing or
replacement;
(2) the average life and Stated Maturity is not shortened; and
(3) the new Indebtedness shall not be senior in right of payment to
the Indebtedness that is being extended, renewed, substituted, refinanced
or replaced; provided, however, that Permitted Refinancing Indebtedness
shall not include:
(a) Indebtedness of a Subsidiary that refinances Indebtedness of
Boyd Gaming or another Subsidiary; or
(b) Indebtedness of Boyd Gaming that refinances the Indebtedness of
an Unrestricted Subsidiary.
"Permitted Stardust Contribution" shall mean the contribution by Mare-Bear,
Inc. (or any other Guarantor which owns the Stardust Casino facility on the Las
Vegas Strip) of the Stardust real estate (and improvements thereon) to a
Permitted Joint Venture which is not a Subsidiary of Boyd Gaming, which
contribution shall be permitted if (i) it occurs subsequent to the opening of
The Borgata Facility; (ii) pro forma for such contribution the Consolidated
Fixed Charge Coverage Ratio of Boyd Gaming and its Restricted Subsidiaries is
2.5 to 1 or greater; (iii) at the time Boyd Gaming enters into a binding
agreement to make any such contribution the notes have ratings from S&P and
Moody's which are not less than the ratings assigned by such rating agencies to
the notes on the Issue Date, respectively (and there is no announced review
pending for a possible downgrade of such ratings); (iv) the terms of any such
contribution comply with the requirements of the provision described above under
"-- Certain Covenants -- Limitation on Transactions with Affiliates," without
regard to the exception set forth in clause (2) of the second paragraph thereof;
and (v) Boyd Gaming shall have delivered to the trustee under the indenture for
payment to the Holders of the notes, an amount equal to the greater of (a) $7.50
per each $1,000 principal amount of notes then outstanding; or (b) an amount per
$1,000 principal amount of notes then outstanding equal to the amount, if any,
paid (per $1,000 principal amount) to the Holders of Boyd Gaming 9.50% Senior
Subordinated Notes due 2007 as consideration for their consent to such
contribution of the Stardust property to a permitted joint venture.
"Person" means any individual, corporation, company (including limited
liability company), partnership, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the Holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the Holders of other
Capital Stock issued by such Person.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Capital Stock in any other Person
(but excluding Capital Stock or other securities issued by such first Person).
80
"Public Equity Offering" means an underwritten public offering of Capital
Stock of the Company pursuant to an effective registration statement under the
Securities Act.
"Qualified Non-Recourse Debt" means Indebtedness:
(1) as to which neither Boyd Gaming nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
or (b) is directly or indirectly liable as a guarantor or otherwise;
provided, however, that the provision by Boyd Gaming of a completion
guaranty or the making of payments with respect thereto, in each case, to
the extent permitted under the covenant described above under "-- Certain
Covenants -- Limitation on Restricted Payments," shall not prevent any
Indebtedness from constituting Qualified Non-Recourse Debt;
(2) no default with respect to which (including any rights that the
Holders of the Indebtedness may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or both
any Holder of any Indebtedness of Boyd Gaming or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment of the Indebtedness to be accelerated or payable prior to its
stated maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of Boyd Gaming or any of
its Restricted Subsidiaries.
"Rating Agencies" means S&P and Moody's or any successor to the respective
rating agency businesses thereof.
"Rating Decline" shall have occurred if at any date within 90 calendar days
after the date of public disclosure of the occurrence of a Change of Control
(which period will be extended for so long as Boyd Gaming's debt ratings are
under publicly announced review for possible downgrading (or without an
indication of the direction of a possible ratings change) by either Moody's or
S&P or their respective successors) the notes no longer have Investment Grade
Status.
"Reference Period" means the period of four consecutive fiscal quarters
ending with the last full fiscal quarter immediately preceding the date of a
proposed Incurrence, Restricted Payment or other transaction.
"Related Business" means the business conducted (or proposed to be
conducted) by Boyd Gaming and its Subsidiaries in connection with any Gaming
Facility and any and all reasonably related businesses necessary for, in
support, furtherance or anticipation of and/or ancillary to or in preparation
for, such business including, without limitation, the development, expansion or
operation of any Gaming Facility (including any land-based, dockside, riverboat
or other type of casino), owned, or to be owned, leased or managed by Boyd
Gaming or one of its Subsidiaries.
"Related Person" means any legal or beneficial owner of 5% or more of any
class of Capital Stock of Boyd Gaming or any of its Subsidiaries.
"Restricted Payment" means:
(1) any dividend or distribution (whether made in cash, property or
securities) declared or paid on or with respect to any shares of Capital
Stock of Boyd Gaming or to Boyd Gaming's stockholders except for such
dividends or distributions payable solely in Capital Stock of Boyd Gaming
(other than Disqualified Stock of Boyd Gaming);
(2) a payment made by Boyd Gaming or any Restricted Subsidiary (other
than to Boyd Gaming or a Restricted Subsidiary) to purchase, redeem,
acquire or retire any Capital Stock of Boyd Gaming or Capital Stock of any
Affiliate of Boyd Gaming or any warrants, rights or options, to directly or
indirectly purchase or acquire any such Capital Stock or any securities
exchangeable for or convertible into any such Capital Stock;
(3) a payment made by Boyd Gaming or any Restricted Subsidiary to
redeem, repurchase, defease or otherwise acquire or retire for value, prior
to any scheduled maturity, scheduled sinking fund or
81
mandatory redemption payment (other than the purchase, repurchase, or other
acquisition of any Indebtedness subordinate in right of payment to the
notes purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year
of the date of acquisition), Indebtedness of Boyd Gaming or any Guarantor
which is subordinate (whether pursuant to its terms or by operation of law)
in right of payment to the notes or the Guarantees; or
(4) any Investment (other than a Permitted Investment) in any Person.
"Restricted Subsidiary" means any Subsidiary of Boyd Gaming that:
(a) has not been designated by the Board of Directors of Boyd Gaming
as an Unrestricted Subsidiary; or
(b) was an Unrestricted Subsidiary, but has been redesignated by the
Board of Directors of Boyd Gaming as a Restricted Subsidiary,
in each case as provided under the definition of Unrestricted Subsidiary;
provided, however, that no Subsidiary shall become a Restricted Subsidiary
unless, immediately after giving pro forma effect to such designation, Boyd
Gaming would be able to incur at least $1.00 of additional Indebtedness pursuant
to the first paragraph of "Certain Covenants -- Limitation on Indebtedness."
"Sale/Leaseback Transaction" means, with respect to any Person, any direct
or indirect arrangement pursuant to which Property is sold or transferred by
such Person or a Restricted Subsidiary of such Person and is thereafter leased
back from the purchaser or transferee thereof by such Person or one of its
Restricted Subsidiaries.
"S&P" means Standard &Poor's Ratings Group, a division of the McGraw-Hill
Companies, Inc.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which a payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the Holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subsidiary" of any Person means any corporation, association, partnership,
limited liability company or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by:
(1) such Person;
(2) such Person and one or more Subsidiaries of such Person; or
(3) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following:
(1) Investments in U.S. Government Obligations maturing within 90 days
of the date of acquisition thereof;
(2) Investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 90 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America or any state thereof having capital,
surplus and undivided profits aggregating in excess of $500,000,000 and
whose long-term debt is rated "A-3" or higher, "A--" or higher or "A--" or
higher according to Moody's, S&P or Fitch Credit Rating Co. (or such
similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the
Securities Act)), respectively;
82
(3) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above;
and
(4) Investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than Boyd
Gaming or an Affiliate of Boyd Gaming) organized and in existence under the
laws of the United States of America with a rating at the time as of which
any Investment therein is made of "P-1" (or higher) according to Moody's
"A-1" (or higher) according to S&P or "A-1" (or higher) according to Fitch
Credit Rating Co. (or such similar equivalent rating by at least one
"nationally recognized statistical rating organization" (as defined in Rule
436 under the Securities Act)); and
(5) investments in money market funds substantially all of whose
assets comprise securities of the types described in clauses (1) through
(4) above.
"Unrestricted Subsidiary" means (1) any Subsidiary of Boyd Gaming which at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors) and (2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of Boyd Gaming
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary (unless such Subsidiary owns any Capital Stock of or owns or holds
any Lien on any Property of Boyd Gaming or any other Subsidiary of Boyd Gaming
which is not a Subsidiary of the Subsidiary to be so designated); provided,that
such Subsidiary has no Indebtedness other than Qualified Non-Recourse Debt and:
(A) the Subsidiary to be so designated has total assets of $1,000 or
less; or
(B) such designation is effective immediately upon such entity
becoming a Subsidiary of Boyd Gaming.
Subject to clause (2) above, the Board of Directors may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that immediately
after giving pro forma effect to such redesignation, Boyd Gaming would be able
to incur at least $1.00 of additional Indebtedness pursuant to the first
paragraph of "Certain Covenants -- Limitation on Indebtedness."
If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirement with respect to Qualified Non-Recourse Debt, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of Boyd Gaming as of such date (and, if such Indebtedness
is not permitted to be incurred as of such date under the covenant described
above under the caption "Limitation on Indebtedness," Boyd Gaming shall be in
Default of such covenant).
Any such designation by the Board of Directors will be evidenced to the
trustee by filing with the trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying:
(1) that such designation complies with the foregoing provisions; and
(2) giving the effective date of such designation,
such filing with the trustee to occur within 75 days after the end of the fiscal
quarter of Boyd Gaming in which such designation is made (or, in the case of a
designation made during the last fiscal quarter of the fiscal year, within 120
days after the end of such fiscal year).
"U.S. Government Obligations" means direct obligations (or Certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" means securities of any class or classes of a Person, the
Holders of which are ordinarily, in the absence of contingencies, entitled to
vote for corporate directors (or Persons performing equivalent functions).
83
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In this section we summarize some of the tax considerations relevant to the
exchange of your old notes for exchange notes in the exchange offer and the
ownership and disposition of the exchange notes by holders who acquire the
exchange notes pursuant to the exchange offer and who or which hold the exchange
notes as capital assets for purposes of the U.S. Internal Revenue Code. This
summary does not purport to be a complete analysis of all potential tax
considerations relating to the exchange notes. The U.S. Internal Revenue Code
contains rules relating to securities held by special categories of holders,
including financial institutions, certain insurance companies, broker-dealers,
tax-exempt organizations, traders in securities that elect to mark-to-market,
investors liable for the alternative minimum tax, investors that hold shares as
part of a straddle or a hedging or conversion transaction, and investors whose
functional currency is not the U.S. dollar. We do not discuss these rules and
holders who are in special categories should consult their own tax advisors.
This discussion is based on the current provisions of:
- the U.S. Internal Revenue Code and current and proposed regulations under
the U.S. Internal Revenue Code;
- the administrative policies published by the U.S. Internal Revenue
Service or "IRS"; and
- judicial decisions;
all of which are subject to change either prospectively or retroactively.
We intend this summary to be a general description of the U.S. federal
income tax considerations material to the exchange of your old notes for
exchange notes in the exchange offer and the ownership and disposition of the
exchange notes by holders who acquire the exchange notes pursuant to the
exchange offer. We do not discuss U.S., state, local, foreign or other tax laws,
including gift and estate tax laws, that may apply.
YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION
OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION AS
WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE FEDERAL ESTATE OR GIFT TAX RULES
OR UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN OR OTHER TAXING JURISDICTION OR
UNDER ANY APPLICABLE TAX TREATY.
We have not sought and will not seek any rulings from the IRS on the
matters discussed in this section. The IRS may take a different position on the
tax consequences of the exchange of your old notes for exchange notes in the
exchange offer and the ownership and disposition of the exchange notes by
holders who acquire the exchange notes pursuant to the exchange offer and that
position may be sustained.
We refer to you as a "U.S. Holder" if you are an individual or entity who
or that is:
- for purposes of the U.S. Internal Revenue Code, a citizen or resident in
the U.S.;
- a corporation or other entity created or organized under the laws of the
U.S. or any political subdivision of the U.S.;
- an estate, the income of which is subject to U.S. federal income taxation
regardless of its source;
- a trust which either (1) is subject to supervision of a court within the
U.S. and the control of one or more U.S. persons, or (2) has elected to
be treated as a U.S. person; or
- otherwise subject to U.S. federal income tax on a net income basis on the
exchange notes.
We refer to persons who or that are not "U.S. holders" as "non-U.S.
holders."
84
U.S. HOLDERS
Interest. If you are a U.S. holder, the stated interest on the exchange
notes generally will be taxable to you as ordinary income at the time that it is
paid or accrued, in accordance with your method of accounting for U.S. federal
income tax purposes.
Sale, Exchange or Other Taxable Disposition of an Exchange Note. As a U.S.
holder, you will recognize gain or loss on the sale, retirement, redemption or
other taxable disposition of an exchange note in an amount equal to the
difference between (1) the amount of cash and the fair market value of other
property received in exchange for the exchange note, other than amounts for
accrued but unpaid stated interest, and (2) your adjusted tax basis in the
exchange note. Any gain or loss recognized will generally be capital gain or
loss. The capital gain or loss will generally be long-term capital gain or loss
your holding period for the exchange note is more than one year. Otherwise, the
capital gain or loss will be a short-term capital gain or loss.
Market Discount. U.S. holders should be aware that the resale of the
exchange notes may be affected by the "market discount" rules of the U.S.
Internal Revenue Code under which a purchaser of an exchange note acquiring the
exchange note at a market discount generally would be required to include as
ordinary income a portion of the gain realized upon the disposition or
retirement of such exchange note, to the extent of the market discount that has
accrued but not been included in income while the debt instrument was held by
such purchaser.
Exchange Offer. As a U.S. holder, you will not recognize taxable gain or
loss from exchanging notes for exchange notes in the registered exchange offer.
The holding period of the exchange notes will include the holding period of the
old notes that are exchanged for the exchange notes. The adjusted tax basis of
the exchange notes will be the same as the adjusted tax basis of the old notes
exchanged for the exchange notes immediately before the exchange.
Consent Payments. The indenture requires the Company to make a consent
payment to holders in the event of certain transfers of the Stardust property.
Any such payment, if made, will be taxable to you as ordinary income when
received or accrued in accordance with your method of accounting for U.S.
federal income tax purposes.
Effectively Connected Income. Holders whose income on the exchange notes
is subject to U.S. federal income tax on a net income basis because such income
is effectively connected with the conduct of a trade or business within the
United States should consult their own tax advisors concerning the U.S. tax
consequences of the exchange notes.
Backup Withholding and Information Reporting. As a U.S. holder, you may be
subject to information reporting and possible backup withholding. If applicable,
backup withholding would apply at a maximum rate of 31% on interest on, or the
proceeds of a sale, exchange, redemption, retirement, or other disposition of,
an exchange note, unless you (1) are a corporation or come within other exempt
categories and, when required, demonstrate this fact, or (2) provide us or our
agent with your taxpayer identification number, certify as to no loss of
exemption from backup withholding, and otherwise comply with the backup
withholding rules.
NON-U.S. HOLDERS
INTEREST
If you are a non-U.S. holder, interest paid to you on the exchange notes
will not be subject to U.S. withholding tax if:
- you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock;
- you are not a "controlled foreign corporation" for U.S. federal income
tax purposes that is related to us through stock ownership;
85
- you are not a bank that received the interest on an extension of credit
made under a loan agreement entered into in the ordinary course of your
trade or business; and
- either (1) you, as the beneficial owner of the exchange note, provide us
or our agent with a statement, on U.S. Treasury Form W-8 BEN or a
suitable substitute form, signed under penalties of perjury that includes
your name and address and certifies that you are not a U.S. person, or
(2) an exemption is otherwise established. If you hold your exchange
notes through certain foreign intermediaries or certain foreign
partnerships, such foreign intermediaries or partnerships must also
satisfy the certification requirements of applicable U.S. Treasury
Regulations.
If these requirements are not met, you will be subject to U.S. withholding
tax at a rate of 30%, or lower treaty rate, if applicable, on interest payments.
Sale, Exchange or Other Taxable Disposition of an Exchange Note. As a
non-U.S. holder, gain realized by you on the sale, exchange or redemption of an
exchange note generally will not be subject to U.S. withholding tax. However,
gain will be subject to U.S. tax if (1) you are an individual who is present in
the U.S. for a total of 183 days or more during the taxable year in which the
gain is realized and other conditions are satisfied, or (2) you are subject to
tax under U.S. tax laws that apply to certain U.S. expatriates.
BACKUP WITHHOLDING AND INFORMATION REPORTING.
The amount of any interest paid to, and the tax withheld with respect to, a
non-U.S. holder must generally be reported annually to the IRS and to such
non-U.S. holder regardless of whether any tax was actually withheld.
Payments on the exchange notes made by us or our paying agent to
noncorporate non-U.S. holders may be subject to information reporting and
possibly to "backup withholding" at a maximum rate of 31%. Information reporting
and backup withholding generally do not apply, however, to payments made by us
or our paying agent on an exchange note if we (1) have received from you the
U.S. Treasury Form W-8 BEN or a suitable substitute form as described above
under "Non-U.S. Holders -- Interest," or otherwise establish an exemption and
(2) do not have actual knowledge that you are a U.S. holder.
Payment of proceeds from a sale of an exchange note to or through the U.S.
office of a broker is subject to information reporting and backup withholding
unless you certify as to your non-U.S. status or otherwise establish an
exemption from information reporting and backup withholding and the broker does
not have actual knowledge that you are a U.S. holder. Payment outside the United
States of the proceeds of the sale of an exchange note to or through a foreign
office of a "broker," as defined in the applicable U.S. Treasury Regulations,
should not be subject to information reporting or backup withholding. However,
U.S. information reporting, but not backup withholding, generally will apply to
a payment made outside the U.S. of the proceeds of a sale an exchange note
through an office outside the U.S. of a broker if the broker:
- is a U.S. person;
- is a foreign person who derives 50% or more of its gross income from the
conduct of a U.S. trade or business;
- is a "controlled foreign corporation" for U.S. federal income tax
purposes; or
- is a foreign partnership, if at any time during its taxable year, one or
more of its partners are U.S. persons, as defined in U.S. Treasury
Regulations, who in the aggregate hold more than 50% of the income or
capital interest in the partnership or if, at any time during its taxable
year, the foreign partnership is engaged in a U.S. trade or business.
However, information reporting will not apply if (1) you certify as to your
non-U.S. status or the broker has documentary evidence in its records that you
are a non-U.S. holder, and certain other conditions are met or (2) an exemption
is otherwise established.
Any amounts withheld under the backup withholding regulations from a
payment to you will be allowed as a refund or credit against your U.S. federal
income tax liability, provided that you follow the requisite procedures.
86
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of the exchange notes. Broker-dealers
may use this prospectus, as it may be amended or supplemented from time to time,
in connection with the resale of exchange notes received in exchange for old
notes where the broker-dealer acquired the old notes as a result of
market-making activities or other trading activities. We have agreed that,
starting at the expiration date and ending 180 days after the expiration date,
we will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers or any other persons. Broker-dealers may sell exchange notes
received by them for their own account pursuant to the exchange offer from time
to time in one or more transactions:
- in the over-the-counter market;
- in negotiated transactions;
- through the writing of options on the exchange notes; or
- through a combination of the above methods of resale,
at market prices prevailing at the time of resale, at prices related to the
prevailing market prices or negotiated prices. Broker-dealers may resell
exchange notes directly to purchasers or to or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any
broker-dealer and/or the purchasers of the exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of the exchange notes may be deemed to be "underwriters" within the
meaning of the Securities Act and any profit on any resale of exchange notes and
any commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
We have agreed to pay certain expenses incident to the exchange offer
(including the expenses of one counsel for the holders of old notes), other than
commissions and concessions of any broker-dealer. We also will provide
indemnification against specified liabilities, including liabilities that may
arise under the Securities Act, to holders of old notes in the exchange offer
for exchange notes. By its acceptance of the exchange offer, any broker-dealer
that receives exchange notes pursuant to the exchange offer agrees to notify us
before using the prospectus in connection with the sale or transfer of exchange
notes. The broker-dealer further acknowledges and agrees that, upon receipt of
notice from us of the happening of any event which:
- makes any statement in the prospectus untrue in any material respect; or
- requires the making of any changes in the prospectus to make the
statements in the prospectus not misleading,
which notice we agree to deliver promptly to the broker-dealer, the
broker-dealer will suspend use of the prospectus until we have notified the
broker-dealer that delivery of the prospectus may resume and have furnished
copies of any amendment or supplement to the prospectus to the broker-dealer.
87
LEGAL MATTERS
The validity of the exchange notes and the guarantees will be passed upon
for Boyd Gaming Corporation and its guarantor subsidiaries by Morrison &
Foerster LLP, Irvine, California.
EXPERTS
The consolidated financial statements of Boyd Gaming Corporation and
Subsidiaries as of December 31, 2000 and 1999, and for each of the three years
in the period ended December 31, 2000, included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is included herein, and has been so included in reliance upon the
report of such firm given upon their authority as experts in auditing and
accounting.
88
BOYD GAMING CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<Table>
<Caption>
PAGE
----
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets
As of December 31, 2000 and 1999.......................... F-3
Consolidated Statements of Operations
For the years ended December 31, 2000, 1999 and 1998...... F-4
Consolidated Statements of Changes in Stockholders' Equity
For the years ended December 31, 2000, 1999 and 1998...... F-5
Consolidated Statements of Cash Flows
For the years ended December 31, 2000, 1999 and 1998...... F-6
Notes to Consolidated Financial Statements.................. F-7
Selected Quarterly Financial Information (unaudited)........ F-30
</Table>
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Boyd Gaming Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Boyd Gaming
Corporation and Subsidiaries (the "Company") as of December 31, 2000 and 1999,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the three years in the period ended December
31, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Boyd Gaming Corporation and
Subsidiaries at December 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2000, in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 14, 2001 (except for Note 17 as to
which the date is July 11, 2001)
F-2
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<Table>
<Caption>
DECEMBER 31,
-----------------------
2000 1999
---------- ----------
ASSETS
Current assets
Cash and cash equivalents................................. $ 88,059 $ 86,192
Accounts receivable, net.................................. 14,260 17,585
Inventories............................................... 6,200 6,181
Prepaid expenses and other................................ 11,837 14,718
Income taxes receivable................................... 66 1,108
Deferred income taxes..................................... 8,149 16,835
---------- ----------
Total current assets................................. 128,571 142,619
Property and equipment, net................................. 959,966 901,014
Investment in unconsolidated subsidiaries, net.............. 105,560 5,708
Other assets and deferred charges, net...................... 38,213 39,981
Intangible assets, net...................................... 345,304 354,659
---------- ----------
Total assets......................................... $1,577,614 $1,443,981
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt...................... $ 2,485 $ 1,744
Accounts payable.......................................... 38,540 36,531
Construction payables..................................... 9,816 8,609
Accrued liabilities
Payroll and related.................................... 36,115 31,184
Interest and other..................................... 70,061 58,862
---------- ----------
Total current liabilities............................ 157,017 136,930
Long-term debt, net of current maturities................... 1,016,813 982,149
Deferred income taxes and other liabilities................. 74,006 57,923
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000 shares
authorized............................................. -- --
Common stock, $.01 par value; 200,000,000 shares
authorized; 62,234,954 and 62,227,753 shares
outstanding............................................ 622 622
Additional paid-in capital................................ 142,020 141,986
Retained earnings......................................... 187,136 124,371
---------- ----------
Total stockholders' equity........................... 329,778 266,979
---------- ----------
Total liabilities and stockholders' equity........... $1,577,614 $1,443,981
========== ==========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
Revenues
Casino................................................. $ 868,983 $ 733,677 $ 722,124
Food and beverage...................................... 160,139 158,982 161,582
Room................................................... 75,114 71,478 74,053
Other.................................................. 73,125 69,988 70,903
Management fees and joint venture...................... 3,815 47,463 40,206
Termination fee, net................................... 70,988 -- --
---------- ---------- ----------
Gross revenues........................................... 1,252,164 1,081,588 1,068,868
Less promotional allowances.............................. 120,626 110,663 108,229
---------- ---------- ----------
Net revenues........................................ 1,131,538 970,925 960,639
---------- ---------- ----------
Costs and expenses
Casino................................................. 423,017 355,284 352,289
Food and beverage...................................... 103,056 103,439 106,195
Room................................................... 22,292 22,532 24,724
Other.................................................. 70,256 63,825 65,626
Selling, general and administrative.................... 167,678 145,788 147,647
Maintenance and utilities.............................. 49,053 41,972 41,144
Depreciation........................................... 80,678 67,793 67,656
Amortization of intangible license rights and
acquisition costs................................... 9,802 6,325 5,751
Corporate expense...................................... 21,259 25,867 19,994
Preopening expense..................................... 4,894 1,489 --
Restructuring charge................................... -- -- 5,925
---------- ---------- ----------
Total............................................... 951,985 834,314 836,951
---------- ---------- ----------
Operating income......................................... 179,553 136,611 123,688
---------- ---------- ----------
Other income (expense)
Interest income........................................ 1,807 253 365
Interest expense, net of amounts capitalized........... (79,303) (69,230) (74,162)
---------- ---------- ----------
Total............................................... (77,496) (68,977) (73,797)
---------- ---------- ----------
Income before provision for income taxes and cumulative
effect................................................. 102,057 67,634 49,891
Provision for income taxes............................... 39,292 27,595 21,291
---------- ---------- ----------
Income before cumulative effect.......................... 62,765 40,039 28,600
Cumulative effect of a change in accounting for start-up
activities, net of tax benefit of $936................. -- (1,738) --
---------- ---------- ----------
Net income............................................... $ 62,765 $ 38,301 $ 28,600
========== ========== ==========
Basic and diluted net income per common share:
Income before cumulative effect........................ $ 1.01 $ 0.65 $ 0.46
Cumulative effect, net of tax.......................... -- (0.03) --
---------- ---------- ----------
Net income.......................................... $ 1.01 $ 0.62 $ 0.46
========== ========== ==========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT SHARE DATA)
<Table>
<Caption>
COMMON STOCK ADDITIONAL TOTAL
------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------- ------ ---------- -------- -------------
Balances, January 1, 1998.............. 61,669,628 $617 $139,054 $ 57,470 $197,141
Net income............................. -- -- -- 28,600 28,600
Stock issued in connection with
employee stock purchase plan......... 357,886 3 1,562 -- 1,565
---------- ---- -------- -------- --------
Balances, December 31, 1998............ 62,027,514 620 140,616 86,070 227,306
Net income............................. -- -- -- 38,301 38,301
Stock issued in connection with
employee stock purchase plan......... 179,801 2 1,256 -- 1,258
Stock options exercised................ 20,438 -- 114 -- 114
---------- ---- -------- -------- --------
Balances, December 31, 1999............ 62,227,753 622 141,986 124,371 266,979
Net income............................. -- -- -- 62,765 62,765
Stock options exercised................ 7,201 -- 34 -- 34
---------- ---- -------- -------- --------
Balances, December 31, 2000............ 62,234,954 $622 $142,020 $187,136 $329,778
========== ==== ======== ======== ========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
--------- --------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 62,765 $ 38,301 $ 28,600
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization........................... 90,480 74,118 73,407
Cumulative effect of a change in accounting principle... -- 2,674 --
Deferred income taxes................................... 24,023 20,010 26,259
Preopening expense...................................... 4,894 1,489 --
Restructuring charge.................................... -- -- 5,925
Equity loss in unconsolidated subsidiaries.............. 1,942 1,356 --
Changes in assets and liabilities:
Accounts receivable, net................................ 3,491 3,055 (616)
Inventories............................................. (19) 3,569 339
Prepaid expenses and other.............................. 2,881 366 (574)
Other assets............................................ 972 (4,906) (814)
Other current liabilities............................... 19,910 8,632 (3,350)
Other liabilities....................................... 746 526 851
Income taxes receivable................................. 1,042 9,957 (8,278)
--------- --------- --------
Net cash provided by operating activities............. 213,127 159,147 121,749
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash paid for acquisition of Blue Chip Casino......... -- (261,195) --
Investments in and advances to unconsolidated
subsidiaries............................................ (101,960) (4,717) --
Proceeds from sale of Sam's Town Kansas City's assets..... -- 2,000 10,500
Acquisition of property, equipment and other assets....... (139,845) (91,719) (68,011)
Preopening expense........................................ (4,894) (1,489) --
--------- --------- --------
Net cash used in investing activities................. (246,699) (357,120) (57,511)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt.................. -- -- 8,000
Payments on long-term debt................................ (745) (1,958) (2,909)
Net borrowings (payments) under credit agreements......... 36,150 209,000 (73,000)
Proceeds from issuance of common stock.................... 34 1,186 1,331
--------- --------- --------
Net cash provided by (used in) financing activities... 35,439 208,228 (66,578)
--------- --------- --------
Net increase (decrease) in cash and cash equivalents........ 1,867 10,255 (2,340)
Cash and cash equivalents, beginning of year................ 86,192 75,937 78,277
--------- --------- --------
Cash and cash equivalents, end of year...................... $ 88,059 $ 86,192 $ 75,937
========= ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized........ $ 72,934 $ 67,329 $ 74,080
Cash paid for income taxes, net of refunds................ 14,226 7,882 5,992
========= ========= ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Property additions acquired on construction and trade
payables which were accrued, but not yet paid........... $ 10,045 $ 10,609 $ 5,440
Receivable from sale of Sam's Town Kansas City's assets... -- -- 2,000
Acquisition of Blue Chip Casino
Fair value of non-cash assets acquired.................. $ -- $ 267,074 $ --
Net cash paid to seller................................. -- 261,195 --
--------- --------- --------
Liabilities assumed..................................... $ -- $ 5,879 $ --
========= ========= ========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Boyd Gaming Corporation and its wholly-owned subsidiaries, collectively referred
to herein as the "Company." The Company owns and operates eleven casino
entertainment facilities located in Las Vegas, Nevada, Tunica, Mississippi, East
Peoria, Illinois, Kenner, Louisiana, and Michigan City, Indiana as well as a
travel agency located in Honolulu, Hawaii. In addition, the Company managed a
casino entertainment facility in Philadelphia, Mississippi for which it had a
management contract that terminated on January 31, 2000 (see Note 3). All
material intercompany accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with an
original maturity of three months or less. These investments are stated at cost
which approximates fair value.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out and retail inventory methods.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful lives of
the assets. Costs of major improvements are capitalized, while costs of normal
repairs and maintenance are charged to expense as incurred. Gains or losses on
disposal of assets are recognized as incurred.
CAPITALIZED INTEREST
Interest costs associated with major construction projects are capitalized.
When no debt is incurred specifically for a project, interest is capitalized on
amounts expended for the project using the Company's weighted average cost of
borrowing. Capitalization of interest ceases when the project or discernible
portions of the project are substantially complete. Capitalized interest during
the years ended December 31, 2000 and 1999 was $6.3 million and $1.8 million,
respectively. There were no such interest costs capitalized during the year
ended December 31, 1998.
INTANGIBLE ASSETS
The excess of total acquisition costs over the fair market value of net
assets acquired is amortized using the straight-line method over forty years.
Management periodically assesses the recoverability of intangible assets by
comparing its carrying value to the undiscounted cash flows expected to be
generated by the acquired operation during the anticipated period of benefit.
DEBT ISSUANCE COSTS
Debt issuance costs incurred in connection with the issuance of long-term
debt are capitalized and amortized to interest expense over the terms of the
related debt agreements.
REVENUE AND PROMOTIONAL ALLOWANCES
Casino revenue represents the net win from gaming activities, which is the
difference between gaming wins and losses. Revenues include the estimated retail
value of rooms, food and beverage, and other goods and
F-7
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
services provided to customers on a complimentary basis. Such amounts are then
deducted as promotional allowances. The estimated cost of providing these
promotional allowances is charged to the casino department in the following
amounts:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
---------------------------
2000 1999 1998
------- ------- -------
(IN THOUSANDS)
Room.................................................... $12,672 $11,101 $12,190
Food and beverage....................................... 73,284 70,822 71,663
Other................................................... 7,430 7,217 5,123
------- ------- -------
Total................................................. $93,386 $89,140 $88,976
======= ======= =======
</Table>
PREOPENING EXPENSES
In accordance with Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities," the Company expenses certain costs of start-up activities
as incurred. During the year ended December 31, 2000, the Company expensed $4.9
million in preopening costs, including $1.5 million relating to the Company's
share of preopening expenses in The Borgata, the Company's Atlantic City joint
venture (see Note 7) and $1.5 million relating to the Company's unsuccessful
efforts to assist in the development and operation of a Rhode Island Indian
casino with the Narragansett Indian Tribe. During the year ended December 31,
1999, the Company expensed $1.5 million in preopening costs that related
primarily to the Company's share of preopening expense in The Borgata. The
initial application of this statement in January 1999 required the Company to
expense certain previously capitalized items as a cumulative effect of a change
in accounting principle. As such, the Company reported a charge of $1.7 million,
net of tax, to the consolidated statement of operations during the three month
period ended March 31, 1999 as the cumulative effect of the change in accounting
principle.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates used by the Company
include the estimated useful lives for depreciable and amortizable assets, the
estimated allowance for doubtful accounts receivable, the estimated valuation
allowance for deferred tax assets, and estimated cash flows in assessing the
recoverability of long-lived assets. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain prior period amounts in the consolidated financial statements have
been reclassified to conform to the December 31, 2000 presentation. These
reclassifications had no effect on the Company's net income.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities" and SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities (an amendment of SFAS 133)." These
statements establish accounting and reporting standards for derivative
instruments for fiscal years beginning after June 15, 2000. At December 31,
2000, the Company did not have any significant
F-8
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
derivative instruments or hedging activities, and therefore, management believes
that the initial application of these statements will not have a material impact
on the Company's consolidated financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 clarifies existing accounting principles related to revenue
recognition in financial statements. The Company adopted SAB 101 during the
fourth quarter of 2000 and the adoption did not affect the Company's
consolidated financial statements for the year ended December 31, 2000.
NOTE 2. ACQUISITIONS
On November 10, 1999, the Company acquired Blue Chip Casino, L.L.C. ("Blue
Chip") for approximately $261 million in net cash, including $10.3 million for a
hotel and parking facility that was under construction and attached to the
existing casino complex. Intangible license rights, representing the excess of
the purchase price over the fair value of the net assets acquired, was
approximately $158 million. The purchase price excludes a contingent purchase
price payment of $5.0 million. The contingent purchase price payment will be
made to the former owners of Blue Chip Casino, Inc. in the event that, over a
period of 36 months, Blue Chip's aggregated earnings before interest, taxes,
depreciation and amortization and certain other qualified expenses exceeds a
specified amount. Blue Chip Casino opened in August 1997. The Company's pro
forma consolidated results of operations, as if the acquisition had occurred on
January 1, 1998, are as follows:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998
---------- ----------
Pro forma (in thousands, except per share data):
Net revenues.............................................. $1,131,781 $1,122,853
Income before cumulative effect........................... $ 60,656 $ 42,994
Net income................................................ $ 55,635 $ 42,994
Basic and diluted net income per common share:
Income before cumulative effect........................... $ 0.98 $ 0.70
Net income................................................ $ 0.90 $ 0.70
</Table>
NOTE 3. TERMINATION OF MANAGEMENT CONTRACT
On October 20, 1999, the Company signed an agreement with the Mississippi
Band of Choctaw Indians (the "Tribe") to terminate the Company's management of
the Silver Star Resort and Casino in Philadelphia Mississippi. Under the
agreement, the Company continued to manage Silver Star under the terms of the
management contract through January 31, 2000, at which time the Tribe made and
the Company recorded a one-time payment of $72 million. The agreement with the
Tribe terminated the Company's original management contract 17 months prior to
the contract's scheduled maturity date. The one-time payment accelerated the
utilization of the Company's tax credits and net operating losses carried
forward from prior years.
NOTE 4. RESTRUCTURING CHARGE
On June 30, 1998, the Company recorded a $5.9 million restructuring charge
in connection with its announcement to cease operations at Sam's Town Kansas
City. Termination benefits of approximately $3 million for substantially all of
the property's 646 employees were paid and included as part of the restructuring
charge. Other costs to exit the Kansas City gaming market of approximately $3
million were included in the restructuring charge and principally represent the
recognition of liabilities for various long-term commitments which the Company
intends to honor. The Company paid approximately $0.1 million related to the
long-term commitments during each of the years ended December 31, 2000 and 1999.
At
F-9
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2000, the $0.1 million current portion and the $0.3 million
non-current portion of the remaining restructuring charge liabilities are
included in "Interest and other" and "Deferred income taxes and other
liabilities," respectively, on the accompanying consolidated balance sheet.
During July 1998, the Company closed Sam's Town Kansas City and sold
substantially all of its tangible assets for $12.5 million, which approximated
net book value for those assets. In connection with the sale, the Company
generated a tax loss of approximately $100 million. At December 31, 2000, the
federal income tax benefit associated with this loss has been realized.
NOTE 5. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
<Table>
<Caption>
DECEMBER 31,
-----------------
2000 1999
------- -------
(IN THOUSANDS)
Casino...................................................... $12,883 $11,186
Hotel....................................................... 2,935 2,594
Other....................................................... 4,733 8,444
------- -------
Total....................................................... 20,551 22,224
Less allowance for doubtful accounts........................ 6,291 4,639
------- -------
Accounts receivable, net.................................... $14,260 $17,585
======= =======
</Table>
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<Table>
<Caption>
ESTIMATED DECEMBER 31,
LIFE -----------------------
(YEARS) 2000 1999
--------- ---------- ----------
(IN THOUSANDS)
Land............................................... -- $ 162,664 $ 161,443
Buildings and leasehold improvements............... 3 - 40 778,745 691,165
Furniture and equipment............................ 3 - 10 428,387 383,094
Riverboats and barges.............................. 12 - 40 100,818 101,211
Construction in progress........................... -- 37,500 46,838
---------- ----------
Total.............................................. 1,508,114 1,383,751
Less accumulated depreciation and amortization..... 548,148 482,737
---------- ----------
Property and equipment, net........................ $ 959,966 $ 901,014
========== ==========
</Table>
NOTE 7. INVESTMENT IN JOINT VENTURE AND OTHER UNCONSOLIDATED SUBSIDIARIES
The Company, through Boyd Atlantic City, Inc. ("BAC") and Mirage Resorts
Incorporated, through its subsidiary's MAC, Corp. ("MAC"), entered into a
certain joint venture agreement ("The Joint Venture Agreement") and formed a
joint venture (the "Joint Venture") for the purpose of developing and owning a
casino hotel entertainment facility in the Marina District of Atlantic City, New
Jersey. The Joint Venture originated on May 29, 1996. In May 2000, Mirage was
acquired by MGM Grand, Inc. which subsequently changed its name to MGM MIRAGE
("MGM").
F-10
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On December 13, 2000, (a) MAC contributed certain real property as well as
certain tangible and intangible personal property to the Joint Venture, and (b)
BAC contributed $90 million in cash to the Joint Venture. BAC and MAC each
received a credit to its capital account in the amount of $90 million upon
making the foregoing contributions.
Following the foregoing contributions, on December 13, 2000, the Joint
Venture was merged with and into Marina District Development Company, LLC
("MDDC, LLC"). MDDC, LLC is the surviving entity of such merger. The sole member
of MDDC, LLC is Marina District Development Holding Co., LLC ("Holding Co.").
BAC and MAC each have a 50% interest in Holding Co. Pursuant to terms of a
certain Contribution and Adoption Agreement made effective December 13, 2000,
the members adopted the Joint Venture Agreement as the Operating Agreement of
Holding Co. (the "Operating Agreement").
The Operating Agreement provides for the development and ownership of a
casino/hotel complex to be comprised of at least 2,000 rooms, a casino and
related amenities to be known as The Borgata (the "Project"). The Project will
be constructed on property adjacent to and connected to MGM's planned
wholly-owned resort. The Operating Agreement contemplates a total cost of $1.035
billion for the Project. Certain project costs exceeding the $1.035 billion
budget would be funded by the Company without any proportionate increase in the
ownership of the Project by the Company. The Company, through BAC, will control
the development and operation of the Project. The Operating Agreement provides
for BAC and MAC to make equity contributions aggregating $207 million each and
further contemplates $621 million in non-recourse financing for the Project. On
December 13, 2000, MDDC, LLC entered into a $630 million credit agreement.
Except for a completion guaranty, by which the Company has agreed to guaranty
performance of certain obligations to MDDC, LLC, the credit agreement is
non-recourse to the Company and MGM. Pursuant to the terms of the Operating
Agreement, certain project costs exceeding $1.035 billion are permitted to be
added to the amount of Project financing. At December 31, 2000 and 1999, the
Company's net equity method investment in and advances to The Borgata was $104
million and $4.2 million, respectively.
The Company has a one-third investment in Tunica Golf Course, L.L.C.
(d.b.a. River Bend Links) located in Tunica, Mississippi which had its grand
opening in April 1999. The Company accounts for its share of the golf course's
net income or loss under the equity method of accounting. At December 31, 2000
and 1999, the Company's net investment in and advances to the golf course was
$1.7 million and $2.3 million, respectively.
NOTE 8. INTANGIBLE ASSETS
Intangible assets consists of the following:
<Table>
<Caption>
DECEMBER 31,
-------------------
2000 1999
-------- --------
(IN THOUSANDS)
Par-A-Dice license rights................................... $115,999 $115,999
Treasure Chest license rights............................... 84,858 84,858
Blue Chip license rights.................................... 158,019 158,019
Other....................................................... 15,209 15,209
-------- --------
Total intangible assets..................................... 374,085 374,085
Less accumulated amortization............................... 28,781 19,426
-------- --------
Intangible assets, net.................................... $345,304 $354,659
======== ========
</Table>
F-11
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. LONG-TERM DEBT
Long-term debt consists of the following:
<Table>
<Caption>
DECEMBER 31,
---------------------
2000 1999
---------- --------
(IN THOUSANDS)
Bank Credit Facility........................................ $ 562,150 $526,000
9.25% Senior Notes.......................................... 200,000 200,000
9.50% Senior Subordinated Notes............................. 250,000 250,000
Other....................................................... 7,148 7,893
---------- --------
Total long-term debt........................................ 1,019,298 983,893
Less current maturities..................................... 2,485 1,744
---------- --------
Total..................................................... $1,016,813 $982,149
========== ========
</Table>
Effective July 28, 2000, the Company amended its bank credit facility
("Bank Credit Facility") primarily to allow for an increase in its investment in
The Borgata for an aggregate investment of $225 million and to reduce and modify
the Company's capital raising requirement for The Borgata. At December 31, 2000,
the Bank Credit Facility consisted of a $500 million revolver component (the
"Revolver") and two term loan components with original principal balances of
$100 million each ("Term Loan B" and "Term Loan C"). The Revolver, Term Loan B
and Term Loan C all mature in June 2003. Availability under the Revolver will be
reduced by $15.6 million on December 31, 2001 and at the end of each quarter
thereafter until March 31, 2003. Term Loan B will be repaid in increments of
$0.25 million per quarter which began on September 30, 1999 and will continue
through March 31, 2003. Term Loan C will be repaid in increments of $0.25
million per quarter which began on December 31, 2000 and will continue through
March 31, 2003. As of December 31, 2000, the Company had unused availability of
$136.1 million under the Bank Credit Facility. Pursuant to the terms of The
Borgata credit agreement, the Company must maintain $50 million of unused
availability under the Bank Credit Facility until construction of The Borgata is
complete. The interest rate on the Bank Credit Facility is based upon either the
alternate base rate or the eurodollar rate, plus an applicable margin that is
determined by the level of a predefined financial leverage ratio. The blended
interest rate under the Bank Credit Facility at December 31, 2000 was 8.8%. In
addition, the Company incurs a commitment fee on the unused portion of the
Revolver which ranges from 0.375% to 0.50% per annum. The Bank Credit Facility
is secured by substantially all of the real and personal property of the Company
and its subsidiaries, including eleven casino properties. The obligations of the
Company under the Bank Credit Facility are guaranteed by the significant
subsidiaries of the Company.
The Bank Credit Facility contains certain financial and other covenants
including, without limitation, various covenants (i) requiring the maintenance
of a minimum net worth, (ii) requiring the maintenance of a minimum interest
coverage ratio, (iii) establishing a maximum permitted total leverage ratio and
senior secured leverage ratio, (iv) imposing limitations on the incurrence of
additional indebtedness, (v) imposing limitations on the maximum permitted
expansion capital expenditures during the term of the Bank Credit Facility, (vi)
imposing limits on the maximum permitted maintenance capital expenditures during
each year of the term of the Bank Credit Facility, and (vii) imposing
restrictions on investments, dividends and certain other payments. Management
believes the Company and its subsidiaries are in compliance with the Bank Credit
Facility covenants.
On October 4, 1996, the Company issued $200 million of 9.25% Senior Notes
(the "9.25% Notes") due October 1, 2003. The 9.25% Notes require semi-annual
interest payments in April and October of each year through October 2003, at
which time the entire principal balance becomes due and payable. The 9.25% Notes
contain certain restrictive covenants regarding, among other things, incurrence
of debt, sales of assets, mergers
F-12
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and consolidations and limitations on restricted payments (as defined in the
indenture relating to the 9.25% Notes). In addition, the 9.25% Notes are
guaranteed by a majority of the Company's significant subsidiaries that existed
at the time the 9.25% Notes were issued. The guaranties are full, unconditional,
and joint and several. (See Note 16 for a presentation of separate condensed
financial statement information on a combined basis for the parent only, as well
as the Company's guarantor subsidiaries and non-guarantor subsidiaries).
On July 22, 1997, the Company issued $250 million principal amount of 9.50%
Senior Subordinated Notes (the "9.50% Notes") due July 2007. The 9.50% Notes
require semi-annual interest payments in January and July of each year through
July 2007, at which time the entire principal balance becomes due and payable.
The 9.50% Notes contain certain restrictive covenants regarding, among other
things, incurrence of debt, sales of assets, mergers and consolidations and
limitations on restricted payments (as defined in the indenture relating to the
9.50% Notes). The 9.50% Notes may be redeemed at the Company's option anytime
after July 15, 2002 at redemption prices ranging from 104.75% in 2002 to 100% in
2005 and thereafter.
The estimated fair value of the Company's long-term debt at December 31,
2000 was approximately $983 million, versus its book value of $1.0 billion. At
December 31, 1999, the estimated fair value of the Company's long-term debt was
approximately $976 million, versus its book value of $984 million. The estimated
fair value amounts were based on quoted market prices on or about December 31,
2000 and 1999 for the Company's debt securities that are traded. For the debt
securities that are not traded, fair value was based on estimated discounted
cash flows using current rates offered to the Company for debt securities having
the same remaining maturities.
Interest rates on the Company's other long-term debt are approximately
7.0%. Management believes the Company is in compliance with all covenants
contained in its long-term debt agreements at December 31, 2000.
The scheduled maturities of long-term debt for the years ending December 31
are as follows:
<Table>
<Caption>
(IN THOUSANDS)
2001........................................................ $ 2,485
2002........................................................ 2,455
2003........................................................ 758,637
2004........................................................ 522
2005........................................................ 560
Thereafter.................................................. 254,639
----------
Total..................................................... $1,019,298
==========
</Table>
F-13
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. COMMITMENTS AND CONTINGENCIES
Future minimum lease payments required under noncancelable operating leases
(principally for land) as of December 31, 2000 are as follows:
<Table>
<Caption>
(IN THOUSANDS)
2001........................................................ $ 5,865
2002........................................................ 3,748
2003........................................................ 2,296
2004........................................................ 1,890
2005........................................................ 1,889
Thereafter.................................................. 68,026
-------
Total..................................................... $83,714
=======
</Table>
Rent expense for the years ended December 31, 2000, 1999 and 1998 was $5.3
million, $4.4 million and $3.2 million, respectively, and is included in
selling, general and administrative expenses on the consolidated statements of
operations.
The Company is required to pay, to the City of Kenner, Louisiana, a
boarding fee of $2.50 for each passenger boarding the Company's Treasure Chest
riverboat casino during the year. The future minimum payment due in 2001 to the
City of Kenner, based upon a portion of actual passenger counts from the prior
year, is approximately $4.0 million.
The Company is subject to various claims and litigation in the normal
course of business. In the opinion of management, all pending legal matters are
either adequately covered by insurance or, if not insured, will not have a
material adverse impact on the Company's consolidated financial statements.
NOTE 11. EMPLOYEE BENEFIT PLANS
The Company contributes to multi-employer pension plans under various union
agreements. Contributions, based on wages paid to covered employees, totaled
approximately $2.0 million, $2.3 million and $2.4 million for the years ended
December 31, 2000, 1999 and 1998, respectively. The Company's share of the
unfunded liability related to multi-employer plans, if any, is not determinable.
The Company has retirement savings plans under Section 401(k) of the
Internal Revenue Code covering its non-union employees. The plans allow
employees to defer up to the lesser of the Internal Revenue Code prescribed
maximum amount or 15% of their income on a pre-tax basis through contributions
to the plans. The Company expensed voluntary contributions of $4.4 million, $2.8
million and $2.8 million for the years ended December 31, 2000, 1999 and 1998,
respectively, to the Company's 401(k) profit-sharing plans and trusts.
F-14
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. INCOME TAXES
A summary of the provision for income taxes is as follows:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
---------------------------
2000 1999 1998
------- ------- -------
(IN THOUSANDS)
Current
Federal............................................... $13,579 $ 5,845 $(7,021)
State................................................. 2,053 1,740 1,465
------- ------- -------
15,632 7,585 (5,556)
------- ------- -------
Deferred
Federal............................................... 20,820 18,697 25,532
State................................................. 2,840 1,313 1,315
------- ------- -------
23,660 20,010 26,847
------- ------- -------
Total.............................................. $39,292 $27,595 $21,291
======= ======= =======
</Table>
The following table provides a reconciliation between the federal statutory
rate and the effective income tax rate from continuing operations where both are
expressed as a percentage of income.
<Table>
<Caption>
DECEMBER 31,
------------------
2000 1999 1998
---- ---- ----
Tax provision at statutory rate............................. 35.0% 35.0% 35.0%
Increase resulting from:
State income tax, net of federal benefit.................. 3.1 2.9 3.6
Company provided benefits................................. 0.2 0.3 1.9
Other, net................................................ 0.2 2.6 2.2
---- ---- ----
Total.................................................. 38.5% 40.8% 42.7%
==== ==== ====
</Table>
F-15
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax items comprising the Company's net deferred tax liability are as
follows:
<Table>
<Caption>
DECEMBER 31,
-----------------
2000 1999
------- -------
(IN THOUSANDS)
Deferred tax liabilities:
Difference between book and tax basis of property......... $60,068 $44,645
Difference between book and tax basis of amortizable
assets................................................. 13,821 10,855
State tax liability....................................... 4,170 3,574
Other..................................................... 2,152 895
------- -------
Gross deferred liability.................................. 80,211 59,969
------- -------
Deferred tax assets:
Tax credit carryforward................................... 7,324 12,600
Reserve for employee benefits............................. 3,209 1,249
Net operating loss carryforward........................... -- 2,774
Provision for doubtful accounts........................... 1,994 1,516
Reserve differential for gaming activities................ 1,950 982
Preopening expense amortized for tax purposes............. 914 666
Other..................................................... 1,085 471
------- -------
Gross deferred tax asset.................................. 16,476 20,258
------- -------
Net deferred tax liability............................. $63,735 $39,711
======= =======
</Table>
At December 31, 1999, the Company had approximately $8.0 million of federal
tax net operating loss carryforwards which were fully utilized during the year
ended December 31, 2000. Additionally, the Company has tax credit carryforwards
that can be utilized to offset its future regular federal income tax liability.
At December 31, 2000 and 1999, the Company had approximately $7.2 million and
$9.4 million, respectively, of federal alternative minimum tax credit
carryforwards which may be carried forward indefinitely. At December 31, 1999,
the Company had approximately $3.2 million of general business credit
carryforwards that were fully utilized during the year ended December 31, 2000.
The Internal Revenue Service has completed examinations of the Company's
federal consolidated income tax returns through the fiscal year ended June 30,
1992. The Company is currently under examination for fiscal years ended June 30,
1993 and 1994. The Internal Revenue Service has proposed adjustments in
connection with the examination of the 1993 and 1994 returns but no final
determinations have been made. The Mississippi State Tax Commission is examining
the Mississippi income tax returns for the years ended December 31, 1997 through
1999. In the opinion of management, any tax liability arising from these
examinations will not have a material adverse impact on the Company's
consolidated financial statements.
NOTE 13. STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS
EMPLOYEE STOCK PURCHASE PLAN
Under the terms of the Company's Employee Stock Purchase Plan (the "Plan"),
eligible employees had been able to purchase the Company's common stock,
semi-annually, through payroll deductions, at 85% of the market price either on
the purchase date or the offering date, whichever price is lower. The Company
canceled the Plan on July 1, 1999.
F-16
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS
As of December 31, 2000, the Company had in effect various stock option
plans. Stock options awarded under these plans are granted primarily to
employees and directors of the Company. The maximum number of shares of common
stock available for issuance under these plans is approximately 9.6 million
shares.
Options granted under the plans generally become exercisable ratably over a
three or four year period from the date of grant. Options granted under the
plans have an exercise price equal to the market price of the Company's common
stock on the date of grant and expire no later than ten years after the date of
grant.
Summarized information for the stock options plans is as follows:
<Table>
<Caption>
OPTIONS OPTION PRICES
--------- --------------
Options outstanding at January 1, 1998..................... 4,702,010 $5.50 - $17.00
Options granted............................................ 1,112,600 4.56 - 7.50
Options canceled........................................... (115,400) 4.56 - 13.63
--------- --------------
Options outstanding at December 31, 1998................... 5,699,210 $4.56 - $17.00
Options granted............................................ 1,079,000 5.56 - 6.56
Options canceled........................................... (317,909) 4.56 - 17.00
Options exercised.......................................... (20,438) 4.56 - 5.75
--------- --------------
Options outstanding at December 31, 1999................... 6,439,863 $4.56 - $17.00
Options granted............................................ 1,490,000 4.50 - 4.69
Options canceled........................................... (276,653) 4.56 - 17.00
Options exercised.......................................... (7,201) 4.56 - 4.56
--------- --------------
Options outstanding at December 31, 2000................... 7,646,009 $4.50 - $17.00
========= ==============
Exercisable options at December 31, 2000................... 5,166,328
=========
Options available for grant at December 31, 2000........... 1,924,018
=========
</Table>
The following table summarizes the information about stock options
outstanding at December 31, 2000:
<Table>
<Caption>
OPTIONS OUTSTANDING
----------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED AVERAGE ----------------------------
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------- ----------- ---------------- -------------- ----------- --------------
$ 4.50 - $ 5.56 3,446,509 8.85 $ 4.83 977,911 $ 4.91
5.75 - 8.37 2,896,000 5.19 6.80 2,884,917 6.80
11.50 - 17.00 1,303,500 3.25 16.06 1,303,500 16.06
--------- ---- ------ --------- ------
7,646,009 6.51 $ 7.49 5,166,328 $ 8.78
========= ==== ====== ========= ======
</Table>
The Company accounts for employee stock options in accordance with
Accounting Principle Board Opinion No. 25. The following table discloses the
Company's pro forma net income and net income per share assuming compensation
cost for employee stock options had been recognized under SFAS No. 123,
"Accounting for Stock-Based Compensation." In addition, the table includes the
excess of the compensation cost under SFAS No. 123 over the cost recognized
related to the Employee Stock Purchase Plan. The table also discloses the
weighted-average assumptions used in estimating the fair value of each option
grant on the date of grant using the Black-Scholes option pricing model and the
estimated weighted-average fair value of
F-17
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the options granted. The model assumes no expected future dividend payments on
the Company's common stock for the options granted since July 1, 1995.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Income before cumulative effect
As reported......................................... $62,765 $40,039 $28,600
Pro forma........................................... 61,321 38,768 26,694
Net income
As reported......................................... $62,765 $38,301 $28,600
Pro forma........................................... 61,321 37,030 26,694
Basic and diluted income per share before cumulative
effect
As reported......................................... $ 1.01 $ 0.65 $ 0.46
Pro forma -- basic.................................. 0.99 0.62 0.43
Pro forma -- diluted................................ 0.98 0.62 0.43
Basic and diluted net income per share
As reported......................................... $ 1.01 $ 0.62 $ 0.46
Pro forma -- basic.................................. 0.99 0.60 0.43
Pro forma -- diluted................................ 0.98 0.59 0.43
Weighted-average assumptions
Expected stock price volatility..................... 57.58% 64.56% 57.16%
Risk-free interest rate............................. 5.39% 6.65% 5.02%
Expected option lives (years)....................... 3.90 2.82 3.39
Estimated fair value of options granted............. $ 2.18 $ 2.55 $ 1.83
</Table>
Because the accounting method prescribed by SFAS No. 123 is not applicable
to options granted prior to July 1, 1995, the compensation cost reflected in the
pro forma amounts shown above may not be representative of that to be expected
in future years.
F-18
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. SEGMENT INFORMATION
The Company's management reviews the results of operations, certain assets,
and additions to property and equipment based on distinct geographic gaming
market segments: the Stardust Resort and Casino on the Las Vegas Strip; Sam's
Town Hotel and Gambling Hall, the Eldorado Casino and Jokers Wild Casino on the
Boulder Strip; the Downtown Properties; Sam's Town Hotel and Gambling Hall in
Tunica, Mississippi; Par-A-Dice Hotel and Casino in East Peoria, Illinois;
Treasure Chest Casino in Kenner, Louisiana; Blue Chip Casino in Michigan City,
Indiana (acquired November 10, 1999); and management fee income from Silver Star
Resort and Casino located near Philadelphia, Mississippi (through January 31,
2000). As used herein, "Downtown Properties" consist of the California Hotel and
Casino, the Fremont Hotel and Casino, Main Street Station Casino, Brewery and
Hotel and Vacations Hawaii.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
Casino Revenue
Stardust.................................................. $ 99,798 $ 98,926 $107,857
Sam's Town Las Vegas...................................... 112,477 117,673 117,954
Eldorado and Jokers Wild.................................. 29,617 30,182 29,150
Downtown Properties....................................... 134,634 133,138 127,948
Sam's Town Tunica......................................... 85,682 98,644 103,556
Sam's Town Kansas City.................................... -- -- 17,666
Par-A-Dice................................................ 127,951 113,945 97,650
Treasure Chest............................................ 102,168 118,688 120,343
Blue Chip................................................. 176,656 22,481 --
-------- -------- --------
Total casino revenue................................... $868,983 $733,677 $722,124
======== ======== ========
EBITDA(1)
Stardust.................................................. $ 16,325 $ 14,403 $ 22,114
Sam's Town Las Vegas...................................... 18,446 26,891 31,366
Eldorado and Jokers Wild.................................. 6,008 7,626 8,134
Downtown Properties....................................... 42,392 38,649 28,314
Sam's Town Tunica......................................... 35 22,818 27,802
Sam's Town Kansas City.................................... -- -- (2,534)
Par-A-Dice................................................ 47,050 41,965 33,229
Treasure Chest............................................ 16,007 30,597 36,087
Silver Star............................................... 74,803 45,626 38,502
Blue Chip................................................. 75,120 9,510 --
-------- -------- --------
Property EBITDA........................................ 296,186 238,085 223,014
-------- -------- --------
Other Costs and Expenses
Corporate expense......................................... 21,259 25,867 19,994
Depreciation and amortization............................. 90,480 74,118 73,407
Restructuring charge...................................... -- -- 5,925
Preopening expense........................................ 4,894 1,489 --
Other expense, net........................................ 77,496 68,977 73,797
-------- -------- --------
Total other costs and expenses......................... 194,129 170,451 173,123
-------- -------- --------
Income before provision for income taxes and other items.... 102,057 67,634 49,891
Provision for taxes......................................... 39,292 27,595 21,291
-------- -------- --------
Income before cumulative effect............................. 62,765 40,039 28,600
Cumulative effect, net of tax............................... -- (1,738) --
-------- -------- --------
Net income.................................................. $ 62,765 $ 38,301 $ 28,600
======== ======== ========
</Table>
F-19
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
DECEMBER 31,
---------------------------
2000 1999
-------------- ----------
(IN THOUSANDS)
Assets(2)
Stardust................................................. $ 162,096 $ 173,727
Sam's Town Las Vegas..................................... 220,594 159,152
Eldorado and Jokers Wild................................. 17,201 18,249
Downtown Properties...................................... 154,026 162,007
Sam's Town Tunica........................................ 161,060 146,221
Par-A-Dice............................................... 153,701 158,410
Treasure Chest........................................... 111,806 113,799
Blue Chip................................................ 263,881 268,617
---------- ----------
Total properties' assets.............................. 1,244,365 1,200,182
Corporate Entities....................................... 60,905 55,491
---------- ----------
Total property, equipment and intangible assets,
net................................................. $1,305,270 $1,255,673
========== ==========
</Table>
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
----------------------------
2000 1999 1998
-------- ------- -------
(IN THOUSANDS)
Additions to Property and Equipment
Stardust............................................. $ 3,566 $25,960 $14,705
Sam's Town Las Vegas................................. 75,191 27,740 14,331
Eldorado and Jokers Wild............................. 1,190 2,461 1,745
Downtown Properties.................................. 8,317 11,917 7,683
Sam's Town Tunica.................................... 24,673 7,578 5,903
Sam's Town Kansas City............................... -- -- 53
Par-A-Dice........................................... 2,840 2,346 4,686
Treasure Chest....................................... 5,307 3,090 1,016
Blue Chip............................................ 8,762 4,820 --
-------- ------- -------
Total properties' additions....................... 129,846 85,912 50,122
Corporate Entities................................... 9,435 10,976 20,726
-------- ------- -------
Total additions to property and equipment......... $139,281 $96,888 $70,848
======== ======= =======
</Table>
- ---------------
(1) EBITDA is earnings before interest, taxes, depreciation, amortization,
preopening expense and restructuring charge. The Company believes that
EBITDA is a useful financial measurement for assessing the operating
performances of its properties. EBITDA does not represent net income or cash
flows from operating, investing or financing activities as defined by
accounting principles generally accepted in the United States of America.
(2) Assets represent property and equipment and intangible assets, net of
accumulated depreciation and amortization.
F-20
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. EARNINGS PER SHARE
A reconciliation of income and shares outstanding for basic and diluted
earnings per share is as follows:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Income before cumulative effect....................... $62,765 $40,039 $28,600
======= ======= =======
Weighted average common stock outstanding............. 62,232 62,124 61,749
Dilutive effect of stock options outstanding.......... 46 169 101
------- ------- -------
Weighted average common and potential shares
outstanding......................................... 62,278 62,293 61,850
======= ======= =======
Basic and diluted earnings per share.................. $ 1.01 $ 0.65 $ 0.46
======= ======= =======
</Table>
Options to purchase approximately 5.3 million, 4.8 million and 5.7 million,
shares of common stock, respectively, at December 31, 2000, 1999 and 1998 at
prices of $5.56 - $17.00, $5.56 - $17.00 and $5.56 - $17.00, respectively, were
outstanding during the period but not included in the computation of diluted
earnings per share because their exercise price was in excess of the average
market price of the common stock for the period presented.
NOTE 16. GUARANTOR INFORMATION
The Company's 9.25% Notes (see Note 9) are guaranteed by a majority of the
Company's wholly-owned existing significant subsidiaries. These guaranties are
full, unconditional, and joint and several. The following consolidating
schedules present separate condensed financial statement information on a
combined basis for the parent only, as well as the Company's guarantor
subsidiaries and non-guarantor subsidiaries, as of and for the years ended
December 31, 2000 and 1999 and for the year ended December 31, 1998.
F-21
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
AS OF DECEMBER 31, 2000
<Table>
<Caption>
COMBINED
COMBINED NON- ELIMINATION
PARENT GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
---------- ---------- ---------- ----------- ------------
(IN THOUSANDS)
ASSETS
Current assets.................. $ 1,354 $ 96,701 $ 30,285 $ 231(1) $ 128,571
Property and equipment, net..... 44,493 766,603 148,870 -- 959,966
Investment in unconsolidated
subsidiaries, net............. -- 1,700 103,860 -- 105,560
Other assets and deferred
charges, net.................. 1,285,373 (459,081) 462,906 (1,250,985)(1)(2) 38,213
Intangible assets, net.......... -- 112,849 232,455 -- 345,304
---------- --------- -------- ----------- ----------
Total assets............... $1,331,220 $ 518,772 $978,376 $(1,250,754) $1,577,614
========== ========= ======== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities............. $ 30,304 $ 86,993 $ 39,516 $ 204(1) $ 157,017
Long-term debt, net of current
maturities.................... 959,150 57,663 -- -- 1,016,813
Deferred income taxes and other
liabilities................... 11,988 55,321 6,697 -- 74,006
Stockholders' equity............ 329,778 318,795 932,163 (1,250,958)(2) 329,778
---------- --------- -------- ----------- ----------
Total liabilities and
stockholders' equity..... $1,331,220 $ 518,772 $978,376 $(1,250,754) $1,577,614
========== ========= ======== =========== ==========
</Table>
- ---------------
Elimination Entries
(1) To eliminate intercompany payables and receivables.
(2) To eliminate investment in subsidiaries and subsidiaries' equity.
F-22
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
AS OF DECEMBER 31, 1999
<Table>
<Caption>
COMBINED
COMBINED NON- ELIMINATION
PARENT GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
---------- ---------- ---------- ----------- ------------
(IN THOUSANDS)
ASSETS
Current assets.................. $ 17,583 $ 100,696 $ 26,599 $ (2,259)(1) $ 142,619
Property and equipment, net..... 43,559 708,072 149,383 -- 901,014
Investment in unconsolidated
subsidiaries, net............. -- 2,098 3,610 -- 5,708
Other assets and deferred
charges, net.................. 1,163,857 (526,786) 460,752 (1,057,842)(1)(2) 39,981
Intangible assets, net.......... -- 116,107 238,552 -- 354,659
---------- --------- -------- ----------- ----------
Total assets............... $1,224,999 $ 400,187 $878,896 $(1,060,101) $1,443,981
========== ========= ======== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities............. $ 36,470 $ 62,993 $ 39,640 $ (2,173)(1) $ 136,930
Long-term debt, net of current
maturities.................... 914,028 68,088 33 -- 982,149
Deferred income taxes and other
liabilities................... 7,522 49,059 1,342 -- 57,923
Stockholders' equity............ 266,979 220,047 837,881 (1,057,928)(2) 266,979
---------- --------- -------- ----------- ----------
Total liabilities and
stockholders' equity..... $1,224,999 $ 400,187 $878,896 $(1,060,101) $1,443,981
========== ========= ======== =========== ==========
</Table>
- ---------------
Elimination Entries
(1) To eliminate intercompany payables and receivables.
(2) To eliminate investment in subsidiaries and subsidiaries' equity.
F-23
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2000
<Table>
<Caption>
COMBINED
COMBINED NON- ELIMINATION
PARENT GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
-------- ---------- ---------- ----------- ------------
(IN THOUSANDS)
Revenues
Casino........................... $ -- $590,159 $278,824 $ -- $ 868,983
Food and beverage................ -- 142,918 17,221 -- 160,139
Room............................. -- 72,656 2,458 -- 75,114
Other............................ 11,997 29,338 46,774 (14,984)(1) 73,125
Management fee................... 154,880 6,411 67,509 (224,985)(1) 3,815
Termination fee, net............. -- 70,988 -- -- 70,988
-------- -------- -------- --------- ----------
Gross revenues..................... 166,877 912,470 412,786 (239,969) 1,252,164
Less promotional allowances........ -- 102,670 17,956 -- 120,626
-------- -------- -------- --------- ----------
Net revenues.................. 166,877 809,800 394,830 (239,969) 1,131,538
-------- -------- -------- --------- ----------
Costs and expenses
Casino........................... -- 320,381 102,636 -- 423,017
Food and beverage................ -- 83,794 19,262 -- 103,056
Room............................. -- 21,093 1,199 -- 22,292
Other............................ -- 84,694 66,441 (80,879)(1) 70,256
Selling, general and
administrative................ -- 116,157 51,521 -- 167,678
Maintenance and utilities........ -- 36,011 13,042 -- 49,053
Depreciation and amortization.... 2,535 66,556 21,389 -- 90,480
Corporate expense................ 34,233 145 1,865 (14,984)(1) 21,259
Preopening expense............... 1,890 1,362 1,642 -- 4,894
-------- -------- -------- --------- ----------
Total......................... 38,658 730,193 278,997 (95,863) 951,985
-------- -------- -------- --------- ----------
Operating income................... 128,219 79,607 115,833 (144,106) 179,553
Other income (expense), net........ (73,056) (5,113) 673 -- (77,496)
-------- -------- -------- --------- ----------
Income before income taxes and
cumulative effect................ 55,163 74,494 116,506 (144,106) 102,057
Provision (benefit) for income
taxes............................ (7,602) 37,972 8,922 -- 39,292
-------- -------- -------- --------- ----------
Net income......................... $ 62,765 $ 36,522 $107,584 $(144,106) $ 62,765
======== ======== ======== ========= ==========
</Table>
- ---------------
Elimination Entries
(1) To eliminate intercompany revenue and expense.
F-24
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1999
<Table>
<Caption>
COMBINED
COMBINED NON- ELIMINATION
PARENT GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
-------- ---------- ---------- ----------- ------------
(IN THOUSANDS)
Revenues
Casino........................... $ -- $592,508 $141,169 $ -- $ 733,677
Food and beverage................ -- 147,927 11,055 -- 158,982
Room............................. -- 71,478 -- -- 71,478
Other............................ 11,380 31,990 40,787 (14,169)(1) 69,988
Management fee................... 121,996 53,490 24,172 (152,195)(1) 47,463
-------- -------- -------- --------- ----------
Gross revenues..................... 133,376 897,393 217,183 (166,364) 1,081,588
Less promotional allowances........ -- 99,892 10,771 -- 110,663
-------- -------- -------- --------- ----------
Net revenues.................. 133,376 797,501 206,412 (166,364) 970,925
-------- -------- -------- --------- ----------
Costs and expenses
Casino........................... -- 304,797 50,487 -- 355,284
Food and beverage................ -- 91,739 11,700 -- 103,439
Room............................. -- 22,532 -- -- 22,532
Other............................ -- 72,919 45,603 (54,697)(1) 63,825
Selling, general and
administrative................ -- 114,949 30,839 -- 145,788
Maintenance and utilities........ -- 35,164 6,808 -- 41,972
Depreciation and amortization.... 1,950 61,853 10,315 -- 74,118
Corporate expense................ 38,226 160 1,649 (14,168)(1) 25,867
Preopening expense............... 202 -- 1,287 -- 1,489
-------- -------- -------- --------- ----------
Total......................... 40,378 704,113 158,688 (68,865) 834,314
-------- -------- -------- --------- ----------
Operating income................... 92,998 93,388 47,724 (97,499) 136,611
Other income (expense), net........ (63,898) (6,117) 1,038 -- (68,977)
-------- -------- -------- --------- ----------
Income before income taxes and
cumulative effect................ 29,100 87,271 48,762 (97,499) 67,634
Provision (benefit) for income
taxes............................ (10,939) 37,352 1,182 -- 27,595
-------- -------- -------- --------- ----------
Income before cumulative effect.... 40,039 49,919 47,580 (97,499) 40,039
Cumulative effect, net of taxes.... (1,738) -- -- -- (1,738)
-------- -------- -------- --------- ----------
Net income......................... $ 38,301 $ 49,919 $ 47,580 $ (97,499) $ 38,301
======== ======== ======== ========= ==========
</Table>
- ---------------
Elimination Entries
(1) To eliminate intercompany revenue and expense.
F-25
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
<Table>
<Caption>
COMBINED
COMBINED NON- ELIMINATION
PARENT GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
-------- ---------- ---------- ----------- ------------
(IN THOUSANDS)
Revenues
Casino........................... $ -- $601,781 $120,343 $ -- $ 722,124
Food and beverage................ -- 151,837 9,745 -- 161,582
Room............................. -- 74,053 -- -- 74,053
Other............................ 9,517 37,903 35,180 (11,697)(1) 70,903
Management fee................... 106,903 47,439 20,174 (134,310)(1) 40,206
-------- -------- -------- --------- ----------
Gross revenues..................... 116,420 913,013 185,442 (146,007) 1,068,868
Less promotional allowances........ -- 98,374 9,855 -- 108,229
-------- -------- -------- --------- ----------
Net revenues.................. 116,420 814,639 175,587 (146,007) 960,639
-------- -------- -------- --------- ----------
Costs and expenses
Casino........................... -- 310,552 41,737 -- 352,289
Food and beverage................ -- 96,040 10,155 -- 106,195
Room............................. -- 24,724 -- -- 24,724
Other............................ -- 77,071 38,424 (49,869)(1) 65,626
Selling, general and
administrative................ -- 122,759 24,888 -- 147,647
Maintenance and utilities........ -- 35,625 5,519 -- 41,144
Depreciation and amortization.... 642 63,718 9,047 -- 73,407
Corporate expense................ 28,528 1,514 1,649 (11,697)(1) 19,994
Restructuring charge............. -- 5,925 -- -- 5,925
-------- -------- -------- --------- ----------
Total......................... 29,170 737,928 131,419 (61,566) 836,951
-------- -------- -------- --------- ----------
Operating income................... 87,250 76,711 44,168 (84,441) 123,688
Other income (expense), net........ (68,204) (6,572) 979 -- (73,797)
-------- -------- -------- --------- ----------
Income before income taxes......... 19,046 70,139 45,147 (84,441) 49,891
Provision (benefit) for income
taxes............................ (9,539) 30,825 5 -- 21,291
-------- -------- -------- --------- ----------
Net income......................... $ 28,585 $ 39,314 $ 45,142 $ (84,441) $ 28,600
======== ======== ======== ========= ==========
</Table>
- ---------------
Elimination Entries
(1) To eliminate intercompany revenue and expense.
F-26
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2000
<Table>
<Caption>
COMBINED
COMBINED NON-
PARENT GUARANTORS GUARANTORS CONSOLIDATED
-------- ---------- ---------- ------------
(IN THOUSANDS)
Cash flows from operating activities........... $(52,915) $ 123,846 $ 142,196 $ 213,127
-------- --------- --------- ---------
Cash flows from investing activities
Investment in and advances to unconsolidated
subsidiaries.............................. -- -- (101,960) (101,960)
Acquisition of property, equipment and other
assets.................................... (9,319) (115,747) (14,779) (139,845)
Preopening expense........................... (1,890) (1,362) (1,642) (4,894)
-------- --------- --------- ---------
Net cash used in investing activities..... (11,209) (117,109) (118,381) (246,699)
-------- --------- --------- ---------
Cash flows from financing activities
Receipt/(payments) on long-term debt......... 9,685 (10,396) (34) (745)
Receipt/(payment) of dividends............... 18,475 2,123 (20,598) --
Net borrowings under credit agreements....... 36,150 -- -- 36,150
Proceeds from issuance of common stock....... 34 -- -- 34
-------- --------- --------- ---------
Net cash provided by (used in) financing
activities.............................. 64,344 (8,273) (20,632) 35,439
-------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. 220 (1,536) 3,183 1,867
Cash and cash equivalents, beginning of
period....................................... 138 62,755 23,299 86,192
-------- --------- --------- ---------
Cash and cash equivalents, end of period....... $ 358 $ 61,219 $ 26,482 $ 88,059
======== ========= ========= =========
</Table>
F-27
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1999
<Table>
<Caption>
COMBINED
COMBINED NON-
PARENT GUARANTORS GUARANTORS CONSOLIDATED
--------- ---------- ---------- ------------
(IN THOUSANDS)
Cash flows from operating activities........... $(270,354) $148,012 $ 281,489 $ 159,147
--------- -------- --------- ---------
Cash flows from investing activities
Proceeds from sale of Sam's Town Kansas
City's assets............................. -- 2,000 -- 2,000
Net cash paid for acquisition of Blue Chip
Casino.................................... -- -- (261,195) (261,195)
Investment in and advances to unconsolidated
subsidiaries.............................. -- (266) (4,451) (4,717)
Acquisition of property, equipment and other
assets.................................... (8,892) (80,906) (1,921) (91,719)
Preopening expense........................... (202) -- (1,287) (1,489)
--------- -------- --------- ---------
Net cash used in investing activities..... (9,094) (79,172) (268,854) (357,120)
--------- -------- --------- ---------
Cash flows from financing activities
Payments on long-term debt................... (1,550) (408) -- (1,958)
Receipt/(payment) of dividends............... 69,896 (61,169) (8,727) --
Net borrowings under credit agreements....... 209,000 -- -- 209,000
Proceeds from issuance of common stock....... 1,186 -- -- 1,186
--------- -------- --------- ---------
Net cash provided by (used in) financing
activities.............................. 278,532 (61,577) (8,727) 208,228
--------- -------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. (916) 7,263 3,908 10,255
Cash and cash equivalents, beginning of
period....................................... 1,054 55,492 19,391 75,937
--------- -------- --------- ---------
Cash and cash equivalents, end of period....... $ 138 $ 62,755 $ 23,299 $ 86,192
========= ======== ========= =========
</Table>
F-28
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
<Table>
<Caption>
COMBINED
COMBINED NON-
PARENT GUARANTORS GUARANTORS CONSOLIDATED
-------- ---------- ---------- ------------
(IN THOUSANDS)
Cash flows from operating activities............. $ 64,427 $ 37,873 $ 19,449 $121,749
-------- -------- -------- --------
Cash flows from investing activities
Proceeds from sale of Sam's Town Kansas City's
assets...................................... -- 10,500 -- 10,500
Acquisition of property, equipment and other
assets...................................... (11,514) (54,467) (2,030) (68,011)
-------- -------- -------- --------
Net cash used in investing activities....... (11,514) (43,967) (2,030) (57,511)
-------- -------- -------- --------
Cash flows from financing activities
Proceeds from issuance of long-term debt....... -- 8,000 -- 8,000
Payments on long-term debt..................... (2,218) (562) (129) (2,909)
Receipt/(payment) of dividends................. 19,196 (4,169) (15,027) --
Net borrowings under credit agreements......... (73,000) -- -- (73,000)
Proceeds from issuance of common stock......... 1,331 -- -- 1,331
-------- -------- -------- --------
Net cash provided by (used in) financing
activities................................ (54,691) 3,269 (15,156) (66,578)
-------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents.................................... (1,778) (2,825) 2,263 (2,340)
Cash and cash equivalents, beginning of period... 2,832 58,317 17,128 78,277
-------- -------- -------- --------
Cash and cash equivalents, end of period......... $ 1,054 $ 55,492 $ 19,391 $ 75,937
======== ======== ======== ========
</Table>
NOTE 17. SUBSEQUENT EVENT
In January 2001, the Emerging Issues Task Force of the Financial Accounting
Standards Board reached a consensus in EITF Issue No. 00-22, "Accounting for
'Points' and Certain Other Time-Based or Volume-Based Sales Incentive Offers,
and Offers for Free Products or Services to be Delivered in the Future". EITF
Issue No. 00-22 requires that the redemption of "Points" for cash be recognized
as a reduction of revenue. EITF Issue No. 00-22 was required to be adopted for
quarterly financial statements ending after February 15, 2001.
The EITF also required that, after adoption, prior period financial
statements, presented for comparative purposes, be reclassified to comply with
this consensus. In accordance with the adoption of this consensus by the Company
in its March 2001 Form 10-Q, amounts in its consolidated statements of
operations and related notes for the three years in the period ended December
31, 2000 have been reclassified from that previously reported. This
reclassification had no effect on the Company's previously reported net income.
F-29
SELECTED QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2000
------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
-------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net revenues........................... $347,440 $264,820 $264,360 $254,918 $1,131,538
Operating income....................... 112,779 29,741 24,102 12,931 179,553
Net income (loss)...................... 57,069 6,653 3,700 (4,657) 62,765
======== ======== ======== ======== ==========
Basic and diluted net income (loss) per
common share:
Net income (loss)...................... $ 0.92 $ 0.11 $ 0.06 $ (0.07) $ 1.01
======== ======== ======== ======== ==========
</Table>
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 1999
----------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net revenues............................ $239,381 $237,849 $235,470 $258,225 $970,925
Operating income........................ 35,419 33,066 33,708 34,418 136,611
Cumulative effect of a change in
accounting for start-up activities,
net of tax............................ (1,738) -- -- -- (1,738)
Net income.............................. 8,902 9,705 10,337 9,357 38,301
======== ======== ======== ======== ========
Basic and diluted net income per common
share:
Income before cumulative effect......... $ 0.17 $ 0.16 $ 0.17 $ 0.15 $ 0.65
Cumulative effect, net of tax........... (0.03) -- -- -- (0.03)
-------- -------- -------- -------- --------
Net income.............................. $ 0.14 $ 0.16 $ 0.17 $ 0.15 $ 0.62
======== ======== ======== ======== ========
</Table>
F-30
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
UNTIL JULY 6, 2002 (180 DAYS AFTER THE EXPIRATION DATE OF THIS EXCHANGE
OFFER) ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THIS PROSPECTUS, THE LETTER OF
TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE
AGENT AS FOLLOWS:
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
15 Broad Street
Reorganization Unit
Lobby Level
New York, NY 10286
Attention: Santino Ginocchietti
By facsimile transmission:
(212) 235-2261
To confirm by telephone or for information:
(212) 235-2363
(ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSIMILE SHOULD BE SENT PROMPTLY
BY HAND, OVERNIGHT COURIER, OR REGISTERED OR CERTIFIED MAIL).
(BOYD GAMING LOGO)
$200,000,000
OFFER TO EXCHANGE
9 1/4% SENIOR NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING
9 1/4% SENIOR NOTES DUE 2009
-------------------------
PROSPECTUS
-------------------------
Dated December 5, 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Sections 78.751 and 78.752 of the Nevada Revised Statutes, the
Company has broad powers to indemnify and insure its directors and officers
against liabilities they may incur in their capacities as such.
Article VIII of the Company's Restated Articles of Incorporation and
Article 10 of the Company's Restated Bylaws provide for indemnification of its
directors, officers, employees and other agents to the maximum extent permitted
by law. Similar provisions are set forth in the Guarantors' charter documents.
The Company also has entered into Indemnification Agreements with its executive
officers and directors and provides indemnity insurance pursuant to which
directors and officers are indemnified or insured against liability or loss
under certain circumstances which may include liability, or related loss under
the Securities Act and the Exchange Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
3.1(7) Restated Articles of Incorporation.
3.2(10) Restated Bylaws.
3.3(14) Certificate of Amendment of Articles of Incorporation.
4.1(8) Registration Agreement, dated July 17, 1997, by and among
the Registrant, Salomon Brothers Inc., UBS Securities LLC
and CIBC Wood Gundy Securities Corp.
4.2(9) Form of Indenture relating to $200,000,000 aggregate
principal amount of 9.25% Senior Subordinated Notes due
2003, including the Form of Note.
4.3(8) Form of Indenture relating to 9.50% Senior Subordinated
Notes due 2007, dated as of July 22, 1997, between the
Registrant and State Street Bank and Trust Company,
including the Form of Note.
4.4(8) First Supplemental Indenture, by and among the Registrant,
as Issuer, certain subsidiaries of the Registrant, as
Guarantors, and The Bank of New York, as Trustee, dated as
of December 31, 1996.
4.5+ Registration Rights Agreement, dated as of July 26, 2001, by
and among the Registrant, as Issuer, certain subsidiaries of
the Registrant, as Guarantors, and the Initial Purchasers
named therein.
4.6+ Form of Indenture relating to $200,000,000 aggregate
principal amount of 9.25% Senior Notes due 2009, dated as of
July 26, 2001, by and among the Registrant, as Issuer,
certain subsidiaries of the Registrant, as Guarantors, and
The Bank of New York, as Trustee, including the Form of
Note.
5.1+ Opinion of Morrison & Foerster LLP.
10.1(1) Ninety-Nine Year Lease dated June 30, 1954, by and among
Fremont Hotel, Inc., and Charles L. Ronnow and J.L. Ronnow,
and Alice Elizabeth Ronnow.
10.2(1) Lease Agreement dated October 31, 1963, by and between
Fremont Hotel, Inc. and Cora Edit Garehime.
10.3(1) Lease Agreement dated December 31, 1963, by and among
Fremont Hotel, Inc., Bank of Nevada and Leon H. Rockwell,
Jr.
10.4(1) Lease Agreement dated June 7, 1971, by and among Anthony
Antonacci, Margaret Fay Simon and Bank of Nevada, as
Co-Trustees under Peter Albert Simon's Last Will and
Testament, and related Assignment of Lease dated February
25, 1985 to Sam-Will, Inc. and Fremont Hotel, Inc.
10.5(4) Lease Agreement dated July 25, 1973, by and between
California Hotel and Casino and William Peccole, as Trustee
of the Peter Peccole 1970 Trust.
</Table>
II-1
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
10.6(1) Lease Agreement dated July 1, 1974, by and among Fremont
Hotel, Inc. and Bank of Nevada, Leon H. Rockwell, Jr. and
Margorie Rockwell Riley.
10.7(1) Ground Lease Agreement dated July 5, 1978, by and among
California Hotel and Casino, and Irene Elizabeth Carey, as
Trustee of the Carey Survivor's Trust U/A October 18, 1972
and Irene Elizabeth Carey, as Trustee of the Carey Family
Trust U/A October 18, 1972.
10.8(1) Ninety-Nine Year Lease dated December 1, 1978 by and between
Matthew Paratore, and George W. Morgan and LaRue Morgan, and
related Lease Assignment dated November 10, 1987 to
Sam-Will, Inc., d/b/a/ Fremont Hotel and Casino.
10.9(1) Implemented Proposal dated June 15, 1992, by and between
Stardust Hotel and Casino and the Back-End Teamsters Local
Union No. 995.
10.10(1) Implemented Proposal dated June 15, 1992, by and between
Fremont Hotel and Casino and the Back-End Teamsters Local
Union No. 995.
10.11(2) Casino Management Agreement dated August 30, 1993, by and
between Treasure Chest Casino, L.L.C. and Boyd Kenner, Inc.
10.12(4) Amended and Restated Operating Agreement dated August 5,
1994, by and between Treasure Chest Casino, L.L.C. and Boyd
Kenner, Inc.
10.13(4) Development Agreement dated June 6, 1994, by and among the
Registrant, Boyd Kansas City, Inc. and Port Authority of
Kansas City, Missouri.
10.14(2) Form of Indemnification Agreement.
10.15(2)* 1993 Flexible Stock Incentive Plan and related agreements.
10.16(2)* 1993 Directors Non-Qualified Stock Option Plan and related
agreements.
10.17(11)* 1993 Employee Stock Purchase Plan and related agreements.
10.18(1) 401(k) Profit Sharing Plan and Trust.
10.19(5) Joint Venture Agreement of Stardust A.C., dated as of May
29, 1996, by and between MAC, Corp., a New Jersey
Corporation, which is a wholly-owned subsidiary of Mirage
Resorts Incorporated, a Nevada Corporation, and Grand K,
Inc., a Nevada Corporation, which is a wholly-owned
subsidiary of the Registrant. (Certain portions of this
exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for
confidential treatment for this Agreement.)
10.20(3) Amended and Restated Joint Venture Agreement of Stardust
A.C.
10.21(6) Property Purchase Agreement dated as of August 9, 1996, by
and between Steamboat Station Company, a Nevada general
partnership, and Boyd Reno, Inc., a Nevada corporation and
wholly-owned subsidiary of the Registrant.
10.22(12) Unit Purchase Agreement by and among the Registrant, Boyd
Indiana, Inc., Blue Chip Casino, Inc., Blue Chip Casino,
LLC, and certain individuals, dated as of June 27, 1999.
10.23(12) First Amended and Restated Credit Agreement, dated as of
June 30, 1999 by and among the Registrant as the Borrower,
Certain Commercial Lending Institutions, as the Lenders,
Canadian Imperial Bank of Commerce, as L/C Issuer and
Administrative Agent, Wells Fargo Bank N.A., as Swingline
Lender and Syndication Agent, and Bank of America National
Trust and Savings Association, as Documentation Agent.
10.24(13) Termination and Transition Agreement between the Registrant
and the Mississippi Band of Choctaw Indians, dated as of
October 20, 1999.
10.25(14) First Amendment to First Amended and Restated Credit
Agreement, dated as of July 26, 2000, by and among the
Registrant as the Borrower, Certain Commercial Lending
Institutions, as the Lenders, Canadian Imperial Bank of
Commerce, as letter of credit issuer and administrative
Agent, Wells Fargo Bank, N.A., as Swingline Lender and
Syndication Agent, and Bank of America, N.A., as
Documentation Agent.
10.26(19)* 2000 Executive Management Incentive Plan.
10.27(14) Certificate of Amendment of Articles of Incorporation.
10.28(14)* 1996 Stock Incentive Plan (as amended on May 25, 2000).
10.29(15) Second Amended and Restated Joint Venture Agreement with
Marina District Development Company dated as of August 31,
2000.
</Table>
II-2
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
10.30(17) Contribution and Adoption Agreement by and among Marina
District Development Holding Co., LLC, MAC, Corp. and Boyd
Atlantic City, Inc. effective as of December 13, 2000.
10.31(17) Guaranty of Performance and Completion dated December 13,
2000.
10.32(18) Second Amendment to First Amended and Restated Credit
Agreement dated as of May 21, 2001, by and among the
Registrant as the Borrower, and certain commercial lending
institutions as named therein.
12.1+ Computation of Ratio of Earnings to Fixed Charges.
21.1(17) Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2+ Consent of Morrison & Foerster LLP (included in Exhibit
5.1).
24.1+ Power of Attorney (included in Part II to this Registration
Statement).
25.1+ Statement of Eligibility of The Bank of New York, as
trustee, on Form T-1.
99.1+ Form of Letter of Transmittal.
99.2+ Form of Notice of Guaranteed Delivery.
99.3+ Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
</Table>
- ---------------
+ Previously filed.
* Management contracts or compensatory plans or arrangements.
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1, File No. 33-51672, of California Hotel and Casino and California
Hotel Finance Corporation, which was declared effective on November 18,
1992.
(2) Incorporated by reference to the Registrant's Registration Statement on
Form S-1, File No. 33-64006, which was declared effective on October 15,
1993.
(3) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated July 14, 1998.
(4) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended June 30, 1995.
(5) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 7, 1996.
(6) Incorporated by reference to the Registrant's Exhibit 2.1 of Current Report
on Form 8-K dated August 16, 1996.
(7) Incorporated by reference to Exhibit 3.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1996.
(8) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended June 30, 1997.
(9) Incorporated by reference to the Registrant's Registration Statement on
Form S-3, File No. 333-0555 which was declared effective on September 30,
1996.
(10) Incorporated by reference to Exhibit 3.2 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999.
(11) Incorporated by reference to the Registration Statement on Form S-8, File
No. 333-79895, dated June 3, 1999.
(12) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999.
(13) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999.
(14) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000.
II-3
(15) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000.
(16) Refer to page 73 in the Registrant's Annual Report on Form 10-K for the
year ended December 31, 2000.
(17) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2001.
(18) Incorporated by reference to Exhibit 10.31 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2001.
(19) Incorporated by reference to Appendix A of the Registrant's Definitive
Proxy Statement for its Annual Meeting on May 25, 2000.
(b) Financial Statement Schedules
Schedule I (incorporated by reference)
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 above, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, 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, 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.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
BOYD GAMING CORPORATION
By: /s/ ELLIS LANDAU
-----------------------------------
Ellis Landau
Executive Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* Chief Executive Officer, Chairman of November 30, 2001
- --------------------------------------------- the Board of Directors and Director
William S. Boyd (Principal Executive Officer)
* Vice Chairman, Vice President, November 30, 2001
- --------------------------------------------- Assistant Secretary and Director
Marianne Boyd Johnson
* President and Director November 30, 2001
- ---------------------------------------------
Donald D. Snyder
* Senior Executive Vice President, November 30, 2001
- --------------------------------------------- Chief Operating Officer and Director
Robert L. Boughner
* Vice President and Director November 30, 2001
- ---------------------------------------------
William R. Boyd
/s/ ELLIS LANDAU Executive Vice President, Chief November 30, 2001
- --------------------------------------------- Financial Officer and Treasurer
Ellis Landau (Principal Financial Officer)
* Vice President and Controller November 30, 2001
- --------------------------------------------- (Principal Accounting Officer)
Jeffrey G. Santoro
* Director November 30, 2001
- ---------------------------------------------
Philip J. Dion
* Director November 30, 2001
- ---------------------------------------------
Michael O. Maffie
</Table>
II-5
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* Director November 30, 2001
- ---------------------------------------------
Maj. Gen. Billy G. McCoy, Ret. USAF
* Director November 30, 2001
- ---------------------------------------------
Perry B. Whitt
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
BLUE CHIP CASINO, LLC
By: /s/ WILLIAM S. BOYD
----------------------------------
William S. Boyd
Operating Manager
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WILLIAM S. BOYD Operating Manager (Principal November 30, 2001
- --------------------------------------------- Executive Officer)
William S. Boyd
* Treasurer and Manager November 30, 2001
- --------------------------------------------- (Principal Financial and
Donald D. Snyder Accounting Officer)
* Secretary and Manager November 30, 2001
- ---------------------------------------------
Robert L. Boughner
*By/s/ ELLIS LANDAU
- ---------------------------------------------
Ellis Landau
Attorney-in-fact
</Table>
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
BOYD ATLANTIC CITY, INC.
By: /s/ ELLIS LANDAU
----------------------------------
Ellis Landau
Vice President, Chief Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons and
in the capacities indicated on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President and Director November 30, 2001
- --------------------------------------------- (Principal Executive Officer)
William S. Boyd
/s/ ELLIS LANDAU Vice President, Chief Financial November 30, 2001
- --------------------------------------------- Officer and Treasurer (Principal
Ellis Landau Financial and Accounting
Officer)
* Vice President, Secretary and November 30, 2001
- --------------------------------------------- Director
Robert L. Boughner
* Vice President and Director November 30, 2001
- ---------------------------------------------
Donald D. Snyder
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
BOYD INDIANA, INC.
By: /s/ ELLIS LANDAU
----------------------------------
Ellis Landau
Senior Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons and
in the capacities indicated on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President and Director November 30, 2001
- --------------------------------------------- (Principal Executive Officer)
William S. Boyd
/s/ ELLIS LANDAU Senior Vice President, Chief November 30, 2001
- --------------------------------------------- Financial Officer and Treasurer
Ellis Landau (Principal Financial and
Accounting Officer)
* Senior Vice President, Secretary November 30, 2001
- --------------------------------------------- and Director
Robert L. Boughner
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Donald D. Snyder
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
BOYD KENNER, INC.
By: /s/ ELLIS LANDAU
----------------------------------
Ellis Landau
Senior Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons and
in the capacities indicated on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President and Director November 30, 2001
- --------------------------------------------- (Principal Executive Officer)
William S. Boyd
/s/ ELLIS LANDAU Senior Vice President, Chief November 30, 2001
- --------------------------------------------- Financial Officer and Treasurer
Ellis Landau (Principal Financial and
Accounting Officer)
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Donald D. Snyder
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Robert L. Boughner
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
BOYD LOUISIANA L.L.C.
By: /s/ WILLIAM S. BOYD
----------------------------------
William S. Boyd
Manager
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WILLIAM S. BOYD Manager (Principal Executive November 30, 2001
- --------------------------------------------- Officer)
William S. Boyd
* Manager (Principal Financial November 30, 2001
- --------------------------------------------- and Accounting Officer)
Donald D. Snyder
* Manager November 30, 2001
- ---------------------------------------------
Robert L. Boughner
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
BOYD TUNICA, INC.
By: /s/ ELLIS LANDAU
----------------------------------
Ellis Landau
Senior Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons and
in the capacities indicated on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President and Director November 30, 2001
- --------------------------------------------- (Principal Executive Officer)
William S. Boyd
/s/ ELLIS LANDAU Senior Vice President, Chief November 30, 2001
- --------------------------------------------- Financial Officer and Treasurer
Ellis Landau (Principal Financial and
Accounting Officer)
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Donald D. Snyder
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Robert L. Boughner
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
CALIFORNIA HOTEL AND CASINO
By: /s/ ELLIS LANDAU
----------------------------------
Ellis Landau
Senior Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President and Director November 30, 2001
- --------------------------------------------- (Principal Executive Officer)
William S. Boyd
/s/ ELLIS LANDAU Senior Vice President, Chief November 30, 2001
- --------------------------------------------- Financial Officer and Treasurer
Ellis Landau (Principal Financial and
Accounting Officer)
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Donald D. Snyder
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Robert L. Boughner
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
CALIFORNIA HOTEL FINANCE CORPORATION
By: /s/ ELLIS LANDAU
----------------------------------
Ellis Landau
Vice President, Chief Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President and Director November 30, 2001
- --------------------------------------------- (Principal Executive Officer)
William S. Boyd
/s/ ELLIS LANDAU Vice President, Chief Financial November 30, 2001
- --------------------------------------------- Officer and Treasurer
Ellis Landau (Principal Financial and
Accounting Officer)
* Vice President and Director November 30, 2001
- ---------------------------------------------
Donald D. Snyder
* Vice President and Director November 30, 2001
- ---------------------------------------------
Robert L. Boughner
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
ELDORADO, INC.
By: /s/ ELLIS LANDAU
----------------------------------
Ellis Landau
Senior Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President and Director November 30, 2001
- --------------------------------------------- (Principal Executive Officer)
William S. Boyd
/s/ ELLIS LANDAU Senior Vice President, Chief November 30, 2001
- --------------------------------------------- Financial Officer and Treasurer
Ellis Landau (Principal Financial and
Accounting Officer)
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Donald D. Snyder
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Robert L. Boughner
* Vice President and Director November 30, 2001
- ---------------------------------------------
George Robert Neuman
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
MARE-BEAR, INC.
By: /s/ ELLIS LANDAU
----------------------------------
Ellis Landau
Senior Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President and Director November 30, 2001
- --------------------------------------------- (Principal Executive Officer)
William S. Boyd
/s/ ELLIS LANDAU Senior Vice President, Chief November 30, 2001
- --------------------------------------------- Financial Officer and Treasurer
Ellis Landau (Principal Financial and
Accounting Officer)
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Donald D. Snyder
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Robert L. Boughner
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
M.S.W., INC.
By: /s/ ELLIS LANDAU
----------------------------------
Ellis Landau
Senior Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President and Director November 30, 2001
- --------------------------------------------- (Principal Executive Officer)
William S. Boyd
/s/ ELLIS LANDAU Senior Vice President, Chief November 30, 2001
- --------------------------------------------- Financial Officer and Treasurer
Ellis Landau (Principal Financial and
Accounting Officer)
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Donald D. Snyder
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Robert L. Boughner
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
PAR-A-DICE GAMING CORPORATION
By: /s/ ELLIS LANDAU
----------------------------------
Ellis Landau
Senior Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President and Director November 30, 2001
- --------------------------------------------- (Principal Executive Officer)
William S. Boyd
/s/ ELLIS LANDAU Vice President, Chief Financial November 30, 2001
- --------------------------------------------- Officer and Treasurer
Ellis Landau (Principal Financial and
Accounting Officer)
* Vice President and Director November 30, 2001
- ---------------------------------------------
Donald D. Snyder
* Vice President, Secretary and November 30, 2001
- --------------------------------------------- Director
Robert L. Boughner
* Vice President and Director November 30, 2001
- ---------------------------------------------
Maunty C. Collins
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
SAM-WILL, INC.
By: /s/ ELLIS LANDAU
----------------------------------
Ellis Landau
Senior Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President and Director November 30, 2001
- --------------------------------------------- (Principal Executive Officer)
William S. Boyd
/s/ ELLIS LANDAU Senior Vice President, Chief November 30, 2001
- --------------------------------------------- Financial Officer and Treasurer
Ellis Landau (Principal Financial and
Accounting Officer)
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Donald D. Snyder
* Senior Vice President and November 30, 2001
- --------------------------------------------- Director
Robert L. Boughner
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of
Nevada, on November 30, 2001.
TREASURE CHEST CASINO, L.L.C.
By: /s/ WILLIAM S. BOYD
------------------------------------
William S. Boyd
Chief Executive Officer and Manager
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WILLIAM S. BOYD Chief Executive Officer and November 30, 2001
- --------------------------------------------- Manager (Principal Executive
William S. Boyd Officer)
* Manager (Principal Financial November 30, 2001
- --------------------------------------------- and Accounting Officer)
Donald D. Snyder
* Manager November 30, 2001
- ---------------------------------------------
Robert L. Boughner
*By /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Attorney-in-Fact
</Table>
II-20
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1(7) Restated Articles of Incorporation.
3.2(10) Restated Bylaws.
3.3(14) Certificate of Amendment of Articles of Incorporation.
4.1(8) Registration Agreement, dated July 17, 1997, by and among
the Registrant, Salomon Brothers Inc., UBS Securities LLC
and CIBC Wood Gundy Securities Corp.
4.2(9) Form of Indenture relating to $200,000,000 aggregate
principal amount of 9.25% Senior Subordinated Notes due
2003, including the Form of Note.
4.3(8) Form of Indenture relating to 9.50% Senior Subordinated
Notes due 2007, dated as of July 22, 1997, between the
Registrant and State Street Bank and Trust Company,
including the Form of Note.
4.4(8) First Supplemental Indenture, by and among the Registrant,
as Issuer, certain subsidiaries of the Registrant, as
Guarantors, and The Bank of New York, as Trustee, dated as
of December 31, 1996.
4.5+ Registration Rights Agreement, dated as of July 26, 2001, by
and among the Registrant, as Issuer, certain subsidiaries of
the Registrant, as Guarantors, and the Initial Purchasers
named therein.
4.6+ Form of Indenture relating to $200,000,000 aggregate
principal amount of 9.25% Senior Notes due 2009, dated as of
July 26, 2001, by and among the Registrant, as Issuer,
certain subsidiaries of the Registrant, as Guarantors, and
The Bank of New York, as Trustee, including the Form of
Note.
5.1+ Opinion of Morrison & Foerster LLP.
10.1(1) Ninety-Nine Year Lease dated June 30, 1954, by and among
Fremont Hotel, Inc., and Charles L. Ronnow and J.L. Ronnow,
and Alice Elizabeth Ronnow.
10.2(1) Lease Agreement dated October 31, 1963, by and between
Fremont Hotel, Inc. and Cora Edit Garehime.
10.3(1) Lease Agreement dated December 31, 1963, by and among
Fremont Hotel, Inc., Bank of Nevada and Leon H. Rockwell,
Jr.
10.4(1) Lease Agreement dated June 7, 1971, by and among Anthony
Antonacci, Margaret Fay Simon and Bank of Nevada, as
Co-Trustees under Peter Albert Simon's Last Will and
Testament, and related Assignment of Lease dated February
25, 1985 to Sam-Will, Inc. and Fremont Hotel, Inc.
10.5(4) Lease Agreement dated July 25, 1973, by and between
California Hotel and Casino and William Peccole, as Trustee
of the Peter Peccole 1970 Trust.
10.6(1) Lease Agreement dated July 1, 1974, by and among Fremont
Hotel, Inc. and Bank of Nevada, Leon H. Rockwell, Jr. and
Margorie Rockwell Riley.
10.7(1) Ground Lease Agreement dated July 5, 1978, by and among
California Hotel and Casino, and Irene Elizabeth Carey, as
Trustee of the Carey Survivor's Trust U/A October 18, 1972
and Irene Elizabeth Carey, as Trustee of the Carey Family
Trust U/A October 18, 1972.
10.8(1) Ninety-Nine Year Lease dated December 1, 1978 by and between
Matthew Paratore, and George W. Morgan and LaRue Morgan, and
related Lease Assignment dated November 10, 1987 to
Sam-Will, Inc., d/b/a/ Fremont Hotel and Casino.
10.9(1) Implemented Proposal dated June 15, 1992, by and between
Stardust Hotel and Casino and the Back-End Teamsters Local
Union No. 995.
10.10(1) Implemented Proposal dated June 15, 1992, by and between
Fremont Hotel and Casino and the Back-End Teamsters Local
Union No. 995.
10.11(2) Casino Management Agreement dated August 30, 1993, by and
between Treasure Chest Casino, L.L.C. and Boyd Kenner, Inc.
</Table>
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.12(4) Amended and Restated Operating Agreement dated August 5,
1994, by and between Treasure Chest Casino, L.L.C. and Boyd
Kenner, Inc.
10.13(4) Development Agreement dated June 6, 1994, by and among the
Registrant, Boyd Kansas City, Inc. and Port Authority of
Kansas City, Missouri.
10.14(2) Form of Indemnification Agreement.
10.15(2)* 1993 Flexible Stock Incentive Plan and related agreements.
10.16(2)* 1993 Directors Non-Qualified Stock Option Plan and related
agreements.
10.17(11)* 1993 Employee Stock Purchase Plan and related agreements.
10.18(1) 401(k) Profit Sharing Plan and Trust.
10.19(5) Joint Venture Agreement of Stardust A.C., dated as of May
29, 1996, by and between MAC, Corp., a New Jersey
Corporation, which is a wholly-owned subsidiary of Mirage
Resorts Incorporated, a Nevada Corporation, and Grand K,
Inc., a Nevada Corporation, which is a wholly-owned
subsidiary of the Registrant. (Certain portions of this
exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for
confidential treatment for this Agreement.)
10.20(3) Amended and Restated Joint Venture Agreement of Stardust
A.C.
10.21(6) Property Purchase Agreement dated as of August 9, 1996, by
and between Steamboat Station Company, a Nevada general
partnership, and Boyd Reno, Inc., a Nevada corporation and
wholly-owned subsidiary of the Registrant.
10.22(12) Unit Purchase Agreement by and among the Registrant, Boyd
Indiana, Inc., Blue Chip Casino, Inc., Blue Chip Casino,
LLC, and certain individuals, dated as of June 27, 1999.
10.23(12) First Amended and Restated Credit Agreement, dated as of
June 30, 1999 by and among the Registrant as the Borrower,
Certain Commercial Lending Institutions, as the Lenders,
Canadian Imperial Bank of Commerce, as L/C Issuer and
Administrative Agent, Wells Fargo Bank N.A., as Swingline
Lender and Syndication Agent, and Bank of America National
Trust and Savings Association, as Documentation Agent.
10.24(13) Termination and Transition Agreement between the Registrant
and the Mississippi Band of Choctaw Indians, dated as of
October 20, 1999.
10.25(14) First Amendment to First Amended and Restated Credit
Agreement, dated as of July 26, 2000, by and among the
Registrant as the Borrower, Certain Commercial Lending
Institutions, as the Lenders, Canadian Imperial Bank of
Commerce, as letter of credit issuer and administrative
Agent, Wells Fargo Bank, N.A., as Swingline Lender and
Syndication Agent, and Bank of America, N.A., as
Documentation Agent.
10.26(19)* 2000 Executive Management Incentive Plan.
10.27(14) Certificate of Amendment of Articles of Incorporation.
10.28(14)* 1996 Stock Incentive Plan (as amended on May 25, 2000).
10.29(15) Second Amended and Restated Joint Venture Agreement with
Marina District Development Company dated as of August 31,
2000.
10.30(17) Contribution and Adoption Agreement by and among Marina
District Development Holding Co., LLC, MAC, Corp. and Boyd
Atlantic City, Inc. effective as of December 13, 2000.
10.31(17) Guaranty of Performance and Completion dated December 13,
2000.
10.32(18) Second Amendment to First Amended and Restated Credit
Agreement dated as of May 21, 2001, by and among the
Registrant as the Borrower, and certain commercial lending
institutions as named therein.
12.1+ Computation of Ratio of Earnings to Fixed Charges.
21.1(17) Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2+ Consent of Morrison & Foerster LLP (included in Exhibit
5.1).
24.1+ Power of Attorney (included in Part II to this Registration
Statement).
</Table>
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
25.1+ Statement of Eligibility of The Bank of New York, as
trustee, on Form T-1.
99.1+ Form of Letter of Transmittal.
99.2+ Form of Notice of Guaranteed Delivery.
99.3+ Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
</Table>
- ---------------
+Previously filed.
*Management contracts or compensatory plans or arrangements.
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1, File No. 33-51672, of California Hotel and Casino and California
Hotel Finance Corporation, which was declared effective on November 18,
1992.
(2) Incorporated by reference to the Registrant's Registration Statement on
Form S-1, File No. 33-64006, which was declared effective on October 15,
1993.
(3) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated July 14, 1998.
(4) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended June 30, 1995.
(5) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 7, 1996.
(6) Incorporated by reference to the Registrant's Exhibit 2.1 of Current
Report on Form 8-K dated August 16, 1996.
(7) Incorporated by reference to Exhibit 3.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1996.
(8) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended June 30, 1997.
(9) Incorporated by reference to the Registrant's Registration Statement on
Form S-3, File No. 333-0555 which was declared effective on September 30,
1996.
(10) Incorporated by reference to Exhibit 3.2 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999.
(11) Incorporated by reference to the Registration Statement on Form S-8, File
No. 333-79895, dated June 3, 1999.
(12) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999.
(13) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999.
(14) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000.
(15) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000.
(16) Refer to page 73 in the Registrant's Annual Report on Form 10-K for the
year ended December 31, 2000.
(17) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2001.
(18) Incorporated by reference to Exhibit 10.31 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2001.
(19) Incorporated by reference to Appendix A of the Registrant's Definitive
Proxy Statement for its Annual Meeting on May 25, 2000.