AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 2003
REGISTRATION NO. 333-
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
====================
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
====================
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 7011 54-2131349
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
C/O SANDS HOTEL & CASINO
INDIANA AVENUE & BRIGHTON PARK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-4000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
PHYLLIS LETART, ESQ.
C/O SANDS HOTEL & CASINO
INDIANA AVENUE & BRIGHTON PARK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-4633
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
====================
WITH A COPY TO:
JOEL A. YUNIS, ESQ.
WAYNE A. WALD, ESQ.
KATTEN MUCHIN ZAVIS ROSENMAN
575 MADISON AVENUE
NEW YORK, NEW YORK 10022
(212) 940-8800
====================
Approximate date of commencement of proposed sale to the public: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT IS DECLARED EFFECTIVE AND THE
CONDITIONS TO THE CONSUMMATION OF THE OFFER DESCRIBED HEREIN HAVE BEEN SATISFIED
OR, TO THE EXTENT PERMITTED, WAIVED.
====================
If any of the securities being registered on this Form are to be
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 statement number of the earlier effective registration statement
for the same offering.
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED(1) REGISTERED PER UNIT PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01
per share (2) 2,750,000(2) $10.93(3) $30,057,500(3) $2,431.65(3)
===================================================================================================================================
Warrants to purchase Common
Stock 10,000,000 $.01(4) $1,000,000(4) $80.90(4)
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01
per share (5) 2,750,000(5) $.01 (6) (6)
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01
per share (7) 1(7) $10.93(7) $10.93(8) $1(8)
- -----------------------------------------------------------------------------------------------------------------------------------
Total $31,057,510.44 $2,513.55
===================================================================================================================================
(1) This registration statement relates to the offer by the Registrant of
securities ("Securities") of the Registrant, which may include either
(a) common stock and/or (b) warrants to purchase common stock, to GB
Holdings, Inc. and the subsequent distribution by GB Holdings, Inc. of
all or a portion of such Securities to stockholders of GB Holdings,
Inc. Any Securities not distributed by GB Holdings, Inc. to
stockholders of GB Holdings, Inc. will be retained by GB Holdings, Inc.
(2) This amount represents the maximum number of shares of Registrant's
common stock that may be issued by the Registrant to GB Holdings, Inc.
and subsequently distributed to the stockholders of GB Holdings, Inc.
(3) The amount of the registration fee paid herewith was calculated
pursuant to Rule 457(f) under the Securities Act of 1933, as amended,
based on an offering price equal to the book value of the common stock.
(4) The amount of the registration fee paid herewith was calculated
pursuant to Rule 457(g) under the Securities Act of 1933, as amended,
based on an offering price equal to the exercise price of the warrants
to be offered.
(5) Represents common stock issuable upon the exercise of the warrants
registered hereunder.
(6) Pursuant to Rule 457(g), no registration fee is payable in connection
with the common stock underlying the warrants registered hereunder.
(7) Represents the maximum number of shares of Registrant's common stock
that may be issued by the Registrant to GB Holdings, Inc.
(8) The amount of the registration fee paid herewith was calculated
pursuant to Rule 457(f) under the Securities Act of 1933, as amended,
based on an offering price equal to the book value of the common stock.
--------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
--------------------
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the Registration Statement
filed with the Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell, nor does it seek an offer to
buy these securities in any jurisdiction where the offer or sale is not
permitted.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
[GB HOLDINGS LOGO] Subject to Completion dated November 14, 2003
[ATLANTIC LOGO]
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
2,750,000 SHARES OF COMMON STOCK
WARRANTS TO PURCHASE 2,750,000 SHARES OF COMMON STOCK
To the Stockholders of GB Holdings, Inc.:
GB Holdings, Inc. (which we refer to as "Parent") has called a special meeting
of its stockholders to seek your approval of a proposed transaction, the effect
of which will be the transfer of substantially all of the assets of Parent and
its subsidiaries to Atlantic Coast Entertainment Holdings, Inc. (which we refer
to as "Atlantic"), a Delaware corporation and a newly formed, wholly-owned
subsidiary of Parent's wholly owned subsidiary Greate Bay Hotel and Casino, Inc.
(which we refer to as "Operating"), a New Jersey corporation and a wholly-owned
subsidiary of Parent. Upon consummation of the proposed transaction, up to an
aggregate of 72.5% (on a fully diluted basis) of the issued and outstanding
common stock of Atlantic may be beneficially owned by holders of debt securities
issued by Atlantic, thereby resulting in such noteholders beneficially owning up
to 72.5% of an entity that through its wholly-owned subsidiary owns
substantially all of the assets initially owned by Parent and its subsidiaries.
The following is a summary of the proposed transaction. For a more complete
discussion of the proposed transaction, please read the enclosed materials,
including the section of the proxy statement/prospectus entitled "The
Transaction". The proposed transaction will include the following series of
events:
(a) Upon receipt of the necessary approval from the holders of a
majority of the $110 million aggregate principal amount
outstanding of 11% Notes due 2005 (which we refer to as the
"Existing Notes") issued by GB Property Funding Corp. (which we
refer to as "Funding"), a Delaware corporation and a wholly-owned
subsidiary of Parent and their exchange of the Existing Notes for
3% Notes due 2008 (which we refer to as the "New Notes"), issued
by Atlantic, guaranteed by Ace Gaming, LLC (which we refer to as
"Licensee"), a New Jersey limited liability company and a
wholly-owned subsidiary of Atlantic, and secured by the assets of
Atlantic and Licensee:
(i) Parent will transfer all of its assets (other than the stock
of Funding and Operating) to Operating;
(ii) Operating will transfer all of the assets which it received
from Parent and substantially all of its assets (other than
the stock of Atlantic) to Atlantic in exchange for either:
(A) 27.5% of the outstanding common stock of Atlantic (on a
fully diluted basis) (if 100% of the Existing Notes are
exchanged for New Notes); or
(B) (1) warrants to purchase 27.5% of the outstanding
common stock of Atlantic (on a fully diluted basis) at
a purchase price of $.01 per share (if less than 100%
of the Existing Notes are exchanged for New Notes); and
(2) Atlantic will transfer to Operating additional
common stock of Atlantic so that Operating has a pro
rata share of 72.5% of the common stock of Atlantic
which shall be proportional to the principal amount of
the Existing Notes that are not exchanged; and
i
(iii) immediately thereafter Atlantic will transfer to Licensee
(A) the cash it received, except for an amount of cash that
Atlantic will pay to the holders of the Existing Notes that
exchange for New Notes and (B) all of the assets it received
from Operating;
(b) Atlantic will offer the holders of the outstanding Existing Notes
the opportunity to exchange such Existing Notes for (i) $100 in
cash for every $1,000 in principal amount of the Existing Notes
exchanged in such transaction, (ii) on a dollar for dollar basis,
the New Notes which, at the election of the holders of a majority
of the aggregate principal amount of New Notes outstanding, will
be payable in the form of 72.5% of the issued and outstanding
shares of common stock of Atlantic (on a fully diluted basis,
assuming 100% of the $110 million Existing Notes are exchanged for
the New Notes) as full consideration for the principal and accrued
interest owed thereunder, and (iii) a cash payment of accrued, but
unpaid interest on the Existing Notes;
(c) Through a series of mergers, Parent, Operating, and Funding will
merge and Parent will be the surviving entity so that:
(i) The Existing Notes exchanged for the New Notes will be
cancelled;
(ii) Parent will be the obligor of the Existing Notes (which
shall no longer be secured by liens on the collateral);
(iii) Parent will own the shares of Atlantic common stock or
warrants to purchase Atlantic common stock; and
(iv) Atlantic will be a wholly-owned subsidiary of Parent
(immediately prior to the completion of the transaction);
and
(d) Parent will distribute, to you as its stockholders, pro rata,
either:
(i) 0.275 shares of Atlantic common stock for every one share of
common stock of Parent that you currently own, so that the
stockholders of Parent will own an aggregate of 27.5% of the
issued and outstanding common stock of Atlantic (on a fully
diluted basis, if 100% of the Existing Notes are exchanged
for New Notes); or
(ii) warrants to purchase 0.275 shares of Atlantic common stock,
at a purchase price of $.01 per share, for every one share
of common stock of Parent that you currently own, so that
the stockholders of Parent will own, upon exercise of the
warrants, an aggregate of 27.5%, on a fully diluted basis,
of the outstanding common stock of Atlantic (if less than
100% of the Existing Notes are exchanged for New Notes).
Affiliates of Carl C. Icahn own approximately 77% of the outstanding common
stock of Parent and have indicated their intent to vote in favor of the proposed
transaction. Because of their significant ownership of the outstanding common
stock of Parent, as long as they vote in favor of the proposed transaction, the
proposed transaction will be approved.
This proxy statement/prospectus explains the proposed transaction and the
procedures for voting with respect to the proposed transaction. Please read
these materials carefully.
The Board of Directors of Parent is soliciting proxies for the special meeting.
Parent will bear the cost of preparing, assembling and mailing the enclosed form
of proxy, this proxy statement/prospectus, and other material which may be sent
to holders of common stock of Parent in connection with this solicitation.
Parent may reimburse persons holding shares in their names or in the names of
nominees for their reasonable expenses in sending proxies and proxy material to
their principals. [insert name of proxy solicitor]
The place, date and time of the special meeting is as follows:
ii
[To be inserted]
The address of both Atlantic Coast Entertainment Holdings, Inc. and GB Holdings,
Inc. is c/o Sands Hotel & Casino, Indiana Avenue & Brighton Park, Atlantic City,
New Jersey 08401, (609) 441-4000.
The common stock of GB Holdings, Inc. is traded on the American Stock Exchange.
On November __, 2003, the last reported sale price of the common stock was $___
per share. The common stock of Atlantic is not listed for trading on any
exchange.
GB HOLDINGS, INC. HAS THE ABILITY IN ITS SOLE DISCRETION, TO TERMINATE THE
TRANSACTIONS DESCRIBED HEREIN AT ANY TIME PRIOR TO CONSUMMATION.
SEE "RISK FACTORS" BEGINNING ON PAGE [__] FOR A DISCUSSION OF ISSUES THAT YOU
SHOULD CONSIDER WITH RESPECT TO THE TRANSACTION.
See "SUMMARY -- Interests of Directors and Management in the Transaction."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE TRANSACTION AND OTHER TRANSACTIONS
DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS OR THE ATLANTIC COMMON STOCK,
ATLANTIC WARRANTS OR ATLANTIC COMMON STOCK UNDERLYING SUCH WARRANTS TO
BE ISSUED IN CONNECTION WITH THE TRANSACTION, PASSED UPON THE MERITS OR
FAIRNESS OF THIS TRANSACTION, PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS PROXY STATEMENT/PROSPECTUS, OR DETERMINED IF THIS PROXY
STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE NEW JERSEY CASINO CONTROL COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated [________] __, 2003, and is first being
mailed to stockholders on or about [________] __, 2003.
The Solicitation Agent for the exchange offer and consent
solicitation and this proxy statement/prospectus is:
-------------------
The date of this Proxy Statement/Prospectus is _________, 2003
iii
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ____________
To the Stockholders of GB Holdings, Inc.:
GB Holdings Inc. (which we refer to as "Parent") will hold a special meeting of
its stockholders on ________, at ______, local time, at _______________________,
to consider and vote on the following proposal:
1) A proposed transaction, the effect of which will be the transfer of
substantially all of the assets of Parent and its subsidiaries to
Atlantic Coast Entertainment Holdings, Inc. (which we refer to as
"Atlantic"), a Delaware corporation and a newly formed, wholly-owned
subsidiary of Parent's wholly owned subsidiary Greate Bay Hotel and
Casino, Inc. (which we refer to as "Operating"), a New Jersey
corporation. Upon consummation of the proposed transaction, up to an
aggregate of 72.5% (on a fully diluted basis) of the issued and
outstanding common stock of Atlantic may be beneficially owned by
holders of debt securities issued by Atlantic, thereby resulting in
such noteholders beneficially owning up to 72.5% of an entity that
through its wholly-owned subsidiary owns substantially all of the
assets initially owned by Parent and its subsidiaries. The proposed
transaction will include the following series of events:
(a) Upon receipt of the necessary approval from the holders of
a majority of the $110 million aggregate principal amount
outstanding of 11% Notes due 2005 (which we refer to as the
"Existing Notes") issued by GB Property Funding Corp.
(which we refer to as "Funding"), a Delaware corporation
and a wholly-owned subsidiary of Parent and their exchange
of the Existing Notes for 3% Notes due 2008 (which we refer
to as the "New Notes"), issued by Atlantic, guaranteed by
Ace Gaming, LLC (which we refer to as "Licensee"), a New
Jersey limited liability company and a wholly-owned
subsidiary of Atlantic, and secured by the assets of
Atlantic and Licensee:
(i) Parent will transfer all of its assets (other than
the stock of Funding and Operating) to Operating;
(ii) Operating will transfer all of the assets which it
received from Parent and substantially all of its
assets (other than the stock of Atlantic) to Atlantic
in exchange for either:
(A) 27.5% of the outstanding common stock of Atlantic
(on a fully diluted basis) (if 100% of the
Existing Notes are exchanged for New Notes); or
(B) (1) warrants to purchase 27.5% of the outstanding
common stock of Atlantic (on a fully diluted
basis) at a purchase price of $.01 per share (if
less than 100% of the Existing Notes are
exchanged for New Notes); and (2) Atlantic will
transfer to Operating additional common stock of
Atlantic so that Operating has a pro rata share
of 72.5% of the common stock of Atlantic which
shall be proportional to the principal amount of
the Existing Notes that are proportionate to the
principal amount of the Existing Notes that are
not exchanged; and
(iii) immediately thereafter Atlantic will transfer to
Licensee (A) the cash it received, except for an
amount of cash that Atlantic will pay to the holders
of the Existing Notes that exchange for New Notes and
(B) all of the assets it received from Operating;
(b) Atlantic will offer the holders of the outstanding Existing
Notes the opportunity to exchange such Existing Notes for
(i) $100 in cash for every $1,000 in principal amount of
the Existing Notes exchanged in such transaction, (ii) on a
dollar for dollar basis, the New Notes which, at the
election of the holders of a majority of the aggregate
principal amount of New Notes outstanding, will be payable
in the form of 72.5% of the issued and outstanding shares
of common stock of Atlantic (on a fully diluted basis,
assuming 100% of the $110 million Existing Notes are
iv
exchanged for the New Notes) as full consideration for the
principal and accrued interest owed thereunder, and (iii) a
cash payment of accrued, but unpaid interest on the
Existing Notes;
(c) Through a series of mergers, Parent, Operating, and Funding
will merge and Parent will be the surviving entity so that:
(i) The Existing Notes exchanged for the New Notes will
be cancelled;
(ii) Parent will be the obligor of the Existing Notes
(which shall no longer be secured by liens on the
collateral);
(iii) Parent will own the shares of Atlantic common stock
or warrants to purchase Atlantic common stock; and
(iv) Atlantic will be a wholly-owned subsidiary of Parent
(immediately prior to the completion of the
transaction); and
(d) Parent will distribute, to you as its stockholders,
pro rata, either:
(i) 0.275 shares of Atlantic common stock for every one
share of common stock of Parent that you currently
own, so that the stockholders of Parent will own an
aggregate of 27.5% of the issued and outstanding
common stock of Atlantic (on a fully diluted basis,
if 100% of the Existing Notes are exchanged for New
Notes); or
(ii) warrants to purchase 0.275 shares of Atlantic common
stock, at a purchase price of $.01 per share, for
every one share of common stock of Parent that you
currently own, so that the stockholders of Parent
will own, upon exercise of the warrants, an aggregate
of 27.5%, on a fully diluted basis, of the
outstanding common stock of Atlantic (if less than
100% of the Existing Notes are exchanged for New
Notes).
2) To act on any other matters that may properly be brought before the
special meeting or any adjournment or postponement of the special
meeting.
Only record holders of shares of common stock at the close of business on
___________, are entitled to notice of and to vote at the special meeting or any
adjournment or postponement of the special meeting. On such date, there were ten
million shares of common stock outstanding. A complete list of the stockholders
of record of Parent entitled to vote at the special meeting will be available 10
days before the special meeting at Parent's executive offices for inspection by
Parent stockholders during ordinary business hours for proper purposes.
The Board of Directors of Parent is soliciting proxies for the special meeting.
Parent will bear the cost of preparing, assembling and mailing the enclosed form
of proxy, this proxy statement/prospectus, and other materials which may be sent
to Parent stockholders in connection with this solicitation. Parent may
reimburse persons holding shares in their names or in the names of nominees for
their reasonable expenses in sending proxies and proxy material to their
principals. [insert name of proxy solicitor]
Your vote is very important. Please sign, date and return the enclosed proxy
card as soon as possible to make sure that your shares are represented at the
special meeting. To do so, you may complete and return the enclosed proxy card.
If you are a stockholder of record of common stock of Parent, you also may cast
your vote in person at the special meeting. If your shares are held in an
account at a brokerage firm or bank, you must instruct it on how to vote your
shares. If you do not vote or do not instruct your broker or bank how to vote,
it will have the same effect as voting against the transaction. You may revoke
your proxy in the manner described in the accompanying proxy
statement/prospectus at any time if it has been voted at the special meeting. If
you attend the special meeting, you may vote in person even if you returned a
proxy.
v
PARENT HAS THE ABILITY IN ITS SOLE DISCRETION, TO TERMINATE THE TRANSACTIONS
DESCRIBED HEREIN AT ANY TIME PRIOR TO CONSUMMATION.
FOR MORE INFORMATION ABOUT THE TRANSACTION DESCRIBED ABOVE, PLEASE REVIEW THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS, THE CERTIFICATE OF INCORPORATION OF
ATLANTIC, ATTACHED HERETO AS ANNEX A, THE BY-LAWS OF ATLANTIC, ATTACHED HERETO
AS ANNEX B, THE FORM OF THE CONTRIBUTION AGREEMENT, ATTACHED HERETO AS ANNEX C,
THE FORM OF THE WARRANT AGREEMENT, ATTACHED HERETO AS ANNEX D, THE AMENDED AND
RESTATED INDENTURE, ATTACHED HERETO AS ANNEX E, THE FORM OF THE AMENDMENT TO THE
AMENDED AND RESTATED INDENTURE, ATTACHED HERETO AS ANNEX F, THE FORM OF SECOND
AMENDED AND RESTATED INDENTURE, ATTACHED HERETO AS EXHIBIT G, THE FORM OF THE
INDENTURE, ATTACHED HERETO AS ANNEX H AND THE FAIRNESS OPINION ISSUED BY LIBRA
SECURITIES, LLC ATTACHED HERETO AS ANNEX I.
vi
THE PARENT BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE TRANSFER
OF SUBSTANTIALLY ALL OF THE ASSETS OF PARENT AND OPERATING AND THE TRANSACTION
DESCRIBED ABOVE AND IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
By Order of the Board of Directors of GB Holdings, Inc.
Corporate Secretary
[DATE]
[ADDRESS]
vii
TABLE OF CONTENTS
PAGE
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION.......................................................................1
SUMMARY..........................................................................................................10
ANTICIPATED ACCOUNTING TREATMENT.................................................................................22
COMPARATIVE MARKET PRICE INFORMATION.............................................................................22
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA....................................................24
COMPARATIVE UNAUDITED HISTORICAL AND PRO FORMA PER SHARE DATA....................................................26
Year Ended December 31, 2002...................................................................................27
Six Months Ended June 30, 2003.................................................................................28
Year Ended December 31, 2002...................................................................................29
Six Months Ended June 30,2003..................................................................................30
CAPITALIZATION...................................................................................................31
RISK FACTORS.....................................................................................................33
Risk Factors Related to the Transaction........................................................................33
Risk Factors Related to the Business of Atlantic...............................................................38
Risk Factors Related to the Gaming Industry....................................................................42
FORWARD-LOOKING STATEMENTS.......................................................................................44
THE SPECIAL MEETING..............................................................................................44
THE TRANSACTION..................................................................................................47
Background of the Transaction..................................................................................47
Potential Benefits Associated with the Transaction.............................................................48
Recommendation of the Board of Directors of Parent.............................................................49
Recommendation of the Special Committee........................................................................50
Opinion of Libra Securities....................................................................................51
Interests of the Directors and Management of Parent in the Transaction.........................................55
Conditions to the Completion of the Transaction................................................................56
Manner of Effecting the Asset Transfer and Distribution of Securities..........................................56
Manner of Effecting the Exchange Offer.........................................................................56
Terms of the Consent Solicitation and Exchange Offer...........................................................57
Terms of the New Notes.........................................................................................59
Results of the Asset Transfer and Distribution of Securities...................................................61
No Issuance of Fractional Shares of Atlantic Common Stock......................................................61
U.S. Federal Tax Consequences of the Asset Transfer and Distributions of Atlantic Securities...................61
Listing and Trading of the Securities..........................................................................63
APPRAISAL RIGHTS.................................................................................................64
ACCOUNTING TREATMENT.............................................................................................65
DESCRIPTION OF SECURITIES........................................................................................65
Description of Atlantic's Capital Stock.......................................................................65
Authorized Capital Stock......................................................................................66
Common Stock..................................................................................................66
Preferred Stock...............................................................................................66
Warrants......................................................................................................66
COMPARISON OF RIGHTS AND MATERIAL DIFFERENCES OF PARENT AND COMPANY STOCKHOLDERS.................................68
GOVERNMENT REGULATION............................................................................................76
DESCRIPTION OF THE BUSINESS OF PARENT AND ITS SUBSIDIARIES.......................................................82
LEGAL PROCEEDINGS................................................................................................88
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF PARENT AND ITS SUBSIDIARIES....................................................................89
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......................................................103
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE..................................................................................................103
MANAGEMENT OF PARENT AND ATLANTIC...............................................................................105
EXECUTIVE COMPENSATION OF ATLANTIC, PARENT AND ITS SUBSIDIARIES.................................................108
viii
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ATLANTIC
AND PARENT.................................................................................................111
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................................................................113
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS.................................................................114
General.......................................................................................................114
Parent........................................................................................................115
U.S. Shareholders.............................................................................................116
Non-U.S. Shareholders.........................................................................................118
Taxation of the Distribution of Atlantic Securities and a Sale, Exchange or Redemption .......................118
Backup Withholding and Information Reporting..................................................................118
LEGAL MATTERS...................................................................................................119
EXPERTS.........................................................................................................119
STOCKHOLDER PROPOSALS...........................................................................................120
WHERE YOU CAN FIND MORE INFORMATION.............................................................................120
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS................................................................121
INDEX TO FINANCIAL STATEMENTS.....................................................................................1
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002.....................................1
INDEX TO FINANCIAL STATEMENT SCHEDULE............................................................................22
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL QUARTER ENDED
JUNE 30, 2003................................................................................................25
Independent Auditors' Report...................................................................................33
GB HOLDINGS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS..........................................................................................1
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY INTRODUCTION TO
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.............................................16
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS......................................................................26
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS..................................................................1
Annex A Form of Certificate of Incorporation of Atlantic Coast Entertainment Holdings, Inc.
Annex B Form of By-Laws of Atlantic Coast Entertainment Holdings, Inc.
Annex C Form of Contribution Agreement
Annex D Form of Warrant Agreement
Annex E The Amended and Restated Indenture, dated as of October 12, 2001,
among GB Property Funding Corp. as issuer, GB Holdings, Inc. and
Greate Bay Hotel And Casino, Inc., as guarantors, Wells Fargo Bank
Minnesota, National Association, as trustee
Annex F Form of the Amendment to the Amended and Restated Indenture and
Form of Second Amended and Restated Indenture, which is attached
as Exhibit A thereto
Annex G Form of Indenture
Annex H Opinion of Libra Securities, LLC
ix
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION
The following are some questions that you may have as a stockholder of GB
Holdings, Inc. (which we refer to as "Parent") regarding the transaction which
will result in the transfer and disposition of substantially all of the assets
of Parent and its wholly-owned subsidiaries, and the answers to those questions.
Parent urges you to read carefully the remainder of this proxy
statement/prospectus and the related proxy card because the information in this
section is not complete. Additional important information is contained in the
remainder of this proxy statement/prospectus.
Q: WHEN AND WHERE IS THE SPECIAL MEETING OF STOCKHOLDERS?
A: The special meeting of the stockholders of Parent will take place on ,
at , local time, at .
Q: WHAT STOCKHOLDER APPROVALS ARE REQUIRED TO APPROVE THE TRANSACTION?
A: The affirmative vote of a majority of the shares outstanding and entitled
to vote as of the record date is required to approve the Transaction (as
defined below).
As of the record date, affiliates of Carl C. Icahn, the Chairman of the
Board of Parent's Board of Directors, own approximately 77% of the issued
and outstanding shares of common stock of Parent and have indicated their
support and intent to vote in favor of the Transaction (as defined below).
Q: WHY IS PARENT PROPOSING TO ENTER INTO THE TRANSACTION?
A: The transaction described herein is comprised of a series of events (which
we refer to collectively as the "Transaction") initiated by Parent to
enable it to refinance its existing debt on terms more favorable than
Parent believes is available to it in the capital markets. The 11% Notes
due 2005 (which we refer to as the "Existing Notes") in the aggregate
principal amount of $110 million, issued by GB Property Funding Corp.
(which we refer to as "Funding"), a Delaware corporation and a wholly-owned
subsidiary of Parent, are due and payable, together with accrued, but
unpaid interest, on September 29, 2005 and, if Parent is not able to
refinance the Existing Notes on favorable terms or at all or accumulate
enough cash to pay the principal amount of the Existing Notes when the
Existing Notes become due in 2005, Funding and the guarantors of the
Existing Notes will be in default under the Amended and Restated Indenture
(which we refer to as the "Existing Indenture"), dated as of October 12,
2001, governing the Existing Notes. In addition, if Parent does not
consummate the Transaction, Operating may be unable to obtain renewal of
its casino license when renewal is required in 2004 due to the outstanding
debt of Parent.
Q: WHAT WILL HAPPEN IN THE TRANSACTION IF IT IS APPROVED?
A: The Transaction will allow Parent to refinance the Existing Notes, without
incurring excessive additional debt obligations which would materially and
adversely affect it. The effect of the Transaction will be the transfer of
substantially all of the assets of Parent and its subsidiaries to Atlantic
Coast Entertainment Holdings, Inc. (which we refer to as "Atlantic"), a
Delaware corporation and a newly formed, wholly-owned subsidiary of
Parent's wholly owned subsidiary, Greate Bay Hotel and Casino, Inc. (which
we refer to as "Operating"), a New Jersey corporation. Upon consummation of
the proposed Transaction, up to 72.5% (on a fully diluted basis) of the
issued and outstanding common stock of Atlantic, par value $.01 per share
(which we refer to as the "Atlantic Common Stock") may be beneficially
owned by noteholders of Atlantic, thereby resulting in such noteholders
beneficially owning a significant majority of the common stock of a company
which through its wholly-owned subsidiary owns substantially all of the
assets initially owned by Parent and its subsidiaries. The proposed
Transaction will include the following series of events:
(a) Upon receipt of the necessary approval from the holders of a
majority of the $110 million aggregate principal amount
outstanding of 11% Notes due 2005 (which we refer to as the
"Existing Notes") issued by GB Property Funding Corp. (which we
refer to as "Funding"), a Delaware corporation and a wholly-owned
subsidiary of Parent and their exchange of the Existing Notes for
3% Notes due 2008
(which we refer to as the "New Notes"), issued by Atlantic,
guaranteed by Ace Gaming, LLC (which we refer to as "Licensee"),
a New Jersey limited liability company and a wholly- owned
subsidiary of Atlantic, and secured by the assets of Atlantic and
Licensee:
(i) Parent will transfer all of its assets (other than the
stock of Funding and Operating) to Operating;
(ii) Operating will transfer all of the assets which it received
from Parent and substantially all of its assets (other than
the stock of Atlantic) to Atlantic in exchange for either:
(A) 27.5% of the outstanding common stock of Atlantic
(which we refer to as the "Holders Equity") (on a fully
diluted basis) (if 100% of the Existing Notes are
exchanged for New Notes); or
(B) (1) warrants (which we refer to as the "Warrants" and
collectivity with the Holders Equity as the "Atlantic
Securities") to purchase 27.5% of the outstanding
common stock of Atlantic (on a fully diluted basis) at
a purchase price of $.01 per share (if less than 100%
of the Existing Notes are exchanged for New Notes); and
(2) Atlantic will transfer to Operating additional
common stock of Atlantic so that Operating has a pro
rata share of 72.5% of the Atlantic Common Stock which
shall be proportional to the principal amount of the
Existing Notes that are not exchanged; and
(iii) immediately thereafter Atlantic will transfer to Licensee
(A) the cash it received, except for an amount of cash that
Atlantic will pay to the holders of the Existing Notes that
exchange for New Notes and (B) all of the assets it
received from Operating;
(b) Atlantic will offer the holders of the outstanding Existing Notes
the opportunity (which we refer to as the "Exchange Offer") to
tender for exchange such Existing Notes for (i) $100 in cash for
every $1,000 in principal amount of the Existing Notes exchanged
in such Transaction, (ii) on a dollar for dollar basis, the New
Notes, which at the election of the holders of a majority of the
aggregate principal amount of New Notes outstanding, will be
payable in the form of 72.5% of the issued and outstanding shares
of Atlantic Common Stock (on a fully diluted basis, assuming 100%
of the Existing Notes are exchanged for the New Notes) as full
consideration for the principal and accrued interest owed
thereunder, and (iii) a cash payment of accrued, but unpaid
interest on the Existing Notes. Such exchange by a holder of
Existing Notes will also indicate such holder's consent to (i)
the elimination of certain covenants of the Existing Indenture,
(ii) the release of the liens on collateral securing the Existing
Notes, and (iii) the terms of the indenture which will govern the
New Notes. The New Notes provide that, among other things, the
holders of a majority of the aggregate principal amount
outstanding of the New Notes may determine (i) when and whether
to require all other holders of the New Notes to accept Atlantic
Common Stock as payment in lieu of a cash payment of the
principal and accrued interest on the New Notes at or prior to
maturity, or (ii) whether each holder will have the ability to
elect to convert all or a portion of its New Notes into Atlantic
Common Stock;
(c) Through a series of mergers, Parent, Operating and Funding will
merge and Parent will be the surviving entity so that:
(i) The Existing Notes exchanged for the New Notes will be
cancelled;
(ii) Parent will be the obligor of the Existing Notes (which
shall no longer be secured by liens on the collateral);
(iii) Parent will own the Atlantic Securities transferred by
Atlantic; and
(iv) Atlantic will be a wholly-owned subsidiary of Parent
(immediately prior to the completion of the Transaction);
and
2
(d) Parent will distribute, to you as its stockholders, pro rata,
either:
(i) 0.275 shares of Atlantic Common Stock for every one share
of common stock of Parent that you currently own, so that
in the aggregate the stockholders of Parent will own an
aggregate of 27.5% (on a fully diluted basis) of the issued
and outstanding Atlantic Common Stock (if 100% of the
Existing Notes are exchanged for New Notes); or
(ii) Warrants to purchase 0.275 shares of Atlantic Common Stock,
at a purchase price of $.01 per share for every one share
of common stock of Parent that you currently own, so that
in the aggregate the stockholders of Parent will own, upon
exercise of the Warrants, 27.5% (on a fully diluted basis)
of the outstanding Atlantic Common Stock (if less than 100%
of the Existing Notes are exchanged for New Notes).
The Warrants are not immediately exercisable and will only be
exercisable pursuant to the terms and conditions described in this
proxy statement/prospectus (see "DESCRIPTION OF SECURITIES" as set
forth on page __ below). Upon the election of the holders of a majority
of the outstanding principal amount of the New Notes, the principal and
accrued interest of the New Notes will be payable in the form of
Atlantic Common Stock (in lieu of cash), and such holders shall receive
a percentage of the outstanding Atlantic Common Stock (on a fully
diluted basis) equal to the product of (a) 72.5% and (b) a fraction,
the numerator of which is the principal amount of the Existing Notes
that are exchanged for New Notes and the denominator of which is the
total principal amount of the Existing Notes outstanding immediately
prior to the consummation of the Exchange Offer.
After the distribution of Warrants or Atlantic Common Stock to the
stockholders of Parent, it is currently anticipated that the common
stock of Parent will be delisted from the American Stock Exchange.
The Transaction will result in a substantial reduction of your
proportionate equity interest in Parent and its assets. However, the
restructuring of the debt represented by the Existing Notes is of
critical importance to the continued viability of Parent, and it is
likely that in the absence of such restructuring Funding will be unable
to repay the principal amount of the Existing Notes at maturity on
September 29, 2005, and holders of the Existing Notes will elect to
exercise their remedies (including, without limitation, foreclosing on
assets securing the obligations under the Existing Notes and forcing
Parent and its subsidiaries to seek bankruptcy protection) and reduce
or eliminate your economic interest in Parent or its assets.
Affiliates of Carl C. Icahn own approximately 58% of the aggregate
principal amount outstanding of the Existing Notes and approximately
77% of the outstanding common stock of Parent and have indicated to
Parent their support of this Transaction, their intent to vote in favor
of the proposal set forth in this proxy statement/prospectus, their
intent to consent to the proposed amendments to the Existing Indenture,
and their intent to tender for exchange all of their Existing Notes in
the Exchange Offer.
Q: WILL THE WARRANTS OR THE ATLANTIC COMMON STOCK BE LISTED FOR TRADING ON
ANY STOCK EXCHANGE OR ON NASDAQ?
A: No. Atlantic does not currently anticipate listing the Warrants or the
Atlantic Common Stock.
Q: CAN THIS TRANSACTION BE TERMINATED?
A: Yes. Parent can choose to terminate the Transaction at any point prior
to the consummation of the Transaction, including by the Board of
Directors of Parent at its election.
Q: WHAT WILL OPERATING OR PARENT RECEIVE IN EXCHANGE FOR THE ASSETS BEING
TRANSFERRED TO ATLANTIC?
A: In consideration of the transfer by Parent of all of its assets (except
the stock of Funding and Operating) and the transfer by Operating of
the assets it received from Parent and substantially all of its assets
(except the
3
stock of Atlantic) to Atlantic, Operating will receive Atlantic
Securities consisting of either Holders Equity or Warrants, in either
case in an amount equal to (or, in the case of the Warrants,
exercisable for) 27.5% (on a fully diluted basis) of the outstanding
shares of Atlantic Common Stock. Depending on the principal amount of
Existing Notes which are exchanged for New Notes in the Exchange Offer,
Operating (which will be merged into Parent as part of the Transaction)
will receive (and subsequently Parent will receive) either Atlantic
Common Stock or Warrants in each case representing 27.5% (on a fully
diluted basis) of the outstanding Atlantic Common Stock. Pursuant to
the Transaction, all of the Atlantic Common Stock or Warrants
representing 27.5% (on a fully diluted basis) of the outstanding
Atlantic Common Stock will be distributed to the stockholders of Parent
on a pro rata basis.
Additionally, as a result of the Transaction, if less than 100% of the
Existing Notes are exchanged, Operating, and ultimately Parent, will
receive a percentage of Atlantic Common Stock which will be the sole
asset of Parent equal to the product of (a) 72.5% and (b) a fraction,
the numerator of which is the principal amount of the Existing Notes
that are not exchanged for New Notes and the denominator of which is
the total principal amount of Existing Notes outstanding immediately
prior to the consummation of the Exchange Offer.
Q: WHAT WILL I RECEIVE AS PART OF THE TRANSACTION?
A: If 100% of the Existing Notes are exchanged for New Notes in the
Exchange Offer, you will receive Holders Equity representing 27.5% of
the outstanding Atlantic Common Stock, and if less than 100% of the
Existing Notes are exchanged you will receive Warrants which upon
exercise will entitle all Holders to acquire 27.5% of the outstanding
Atlantic Common Stock; additionally, if less than 100% of the Existing
Notes are exchanged Parent will receive a pro rata share of 72.5% of
the Atlantic Common Stock which shall be proportional to the number of
Existing Notes that are not exchanged. The Holders Equity, the Warrants
and the shares of Atlantic Common Stock issuable upon exercise of the
Warrants will all be registered under the Securities Act of 1933, as
amended, upon the effectiveness of the registration statement of which
this proxy statement/prospectus forms a part. Assuming certain
conditions, this means that the Holders Equity, the Warrants and the
shares of Atlantic Common Stock underlying the Warrants will all be
freely transferable, subject to restrictions imposed by applicable
securities laws and New Jersey regulatory agencies (see "DESCRIPTION OF
SECURITIES" as set forth below on page 65 and "RISK FACTORS -- Holders
of Atlantic Common Stock and Warrants are Subject to the CCC and the
NJCCA" as set forth on page 43 below). If the Transaction is approved,
holders of the common stock of Parent will be issued and receive
securities of Atlantic. Atlantic's sole asset will be the outstanding
membership interests of Licensee that owns substantially the same
assets that Parent and Operating held prior to the consummation of the
Transaction (except the stock of Funding, Operating and Atlantic and
except for an amount of cash that Atlantic will pay to the holders of
the Existing Notes that elect to exchange for New Notes). However, due
to the potential payment of the New Notes in the form of, or conversion
into, Atlantic Common Stock, it is possible that the percentage of
total outstanding Atlantic Common Stock represented by your holdings in
Atlantic (upon distribution of the Atlantic Common Stock or the
exercise of the Warrants) will be lower than the percentage of the
outstanding common stock of Parent represented by your common stock of
Parent, although in the event of such payment or conversion, Atlantic
will most likely not have outstanding New Notes (assuming the holders
of a majority of the aggregate principal amount outstanding of the New
Notes elect to have all holders of the New Notes receive Atlantic
Common Stock as payment). See "RISK FACTORS --Risk Factors Related to
the Transaction" as set forth on pages 33 to 38 below.
For example, if you own one share of common stock of Parent, you will
receive either:
(1) 0.275 shares of Atlantic Common Stock (if 100% of the Existing
Notes are exchanged for New Notes); or
(2) Warrants to purchase 0.275 shares of Atlantic Common Stock (if
less than 100% of the Existing Notes are exchanged for New
Notes).
4
The Warrants, the Atlantic Common Stock underlying the Warrants, the
Atlantic Common Stock and the shares of Atlantic Common Stock that may
be issued to Parent will not be listed for trading on any securities
exchange.
Please also see "DESCRIPTION OF SECURITIES" as set forth below on page
65.
Q: IF I RECEIVE WARRANTS, WILL I BE ABLE TO EXERCISE SUCH WARRANTS
IMMEDIATELY?
A: No. The Warrants are not immediately exercisable. The Warrants will
only become exercisable, at the election of the holders, at any time
following the earlier of (i) the payment or conversion of any of the
New Notes; (ii) a determination of the Board of Directors of Atlantic
that the Warrants may be exercised; and (iii) payment in full of the
Existing Notes which have not been exchanged for the New Notes. An
accurate prediction cannot be made as to exactly when the first of
these conditions will be satisfied. While the Existing Notes are
scheduled to mature on September 28, 2005, neither Atlantic nor Parent
can provide any assurance that Parent will have sufficient funds to pay
the principal upon maturity.
The Warrants will expire on the seven-year anniversary of the date of
issuance. In the alternative, the Board of Directors of Atlantic may
elect at any time following the date on which the Warrants become
exercisable to provide notice to the holders of the Warrants that the
Warrants will automatically cancel at least 90 days following the date
of such notice, unless exercised prior to such date. Consequently, if
the Board of Directors of Atlantic elects, you may have only a 90-day
period beginning on the date the Warrants become exercisable to
exercise the Warrants.
Q: WHEN WILL ANY DISTRIBUTIONS BE MADE TO THE STOCKHOLDERS OF PARENT?
A: Assuming the Transaction is approved, the distribution of either
Atlantic Common Stock or Warrants, in both cases representing (after
the exercise of the Warrants) 27.5% (on a fully diluted basis) of the
outstanding Atlantic Common Stock to the stockholders of Parent will
occur, as soon as practicable, after the consummation of the
Transaction.
Q: WHAT ARE THE CONDITIONS OF THE TRANSACTION?
A: This Transaction is conditioned upon:
o Parent receiving the approval of a majority of its
stockholders for the Transaction;
o Parent receiving the consent of the holders of a majority of
the aggregate principal amount of the Existing Notes
outstanding, as a result of such holders exchanging their
Existing Notes for New Notes;
o Operating receiving the required third party and governmental
consents, including from the New Jersey Casino Control
Commission (relating to the Asset Transfer and the issuance of
a casino license to Ace Gaming, LLC on substantially the same
terms and conditions as the casino license issued to
Operating);
o the effectiveness of the Amendment to the Existing Indenture
among Funding, as issuer, Parent and Operating, as guarantors,
and Wells Fargo Bank Minnesota, National Association, as
trustee, the Second Amended and Restated Indenture, among
Parent, as issuer, and Wells Fargo Bank Minnesota, National
Association, as trustee, and the Indenture among Atlantic, as
issuer, Licensee, as guarantor, and the trustee.
Affiliates of Carl C. Icahn, which own approximately 77% of the
outstanding common stock of Parent and approximately 58% of the
aggregate principal amount of the Existing Notes outstanding, have
indicated they intend to vote in favor of the Transaction, consent to
the proposed amendments to the Existing Indenture and
5
tender for exchange their Existing Notes for New Notes. See "THE
TRANSACTION -- Conditions to the Completion of the Transaction" as set
forth on page 56.
Q: WHAT HAPPENS IF THE TRANSACTION IS NOT COMPLETED?
A: If the Transaction is not completed, Parent will have to pursue other
alternatives, including attempting to refinance the Existing Notes in
the capital markets, seeking additional financing, downsizing Parent's
operations, or other methods of restructuring the Existing Notes. There
are currently no commitments or arrangements with respect to such
financing or restructuring and there can be no assurance that any
alternative financing or arrangement for restructuring the Existing
Notes, or any additional financing, will be obtained or will be
contemplated on acceptable terms or at all. If such other alternatives
are unavailable or unsuccessful prior to the maturity of the Existing
Notes, Parent does not believe it will be able to pay the outstanding
principal amount due on the Existing Notes at maturity in September
2005. If Parent is unable to refinance the Existing Notes on favorable
terms or at all or accumulate enough cash to pay the principal amount
of the Existing Notes when the Existing Notes are due, the Existing
Notes will be in default and it is reasonably likely that Parent will
file for or be forced to resort to bankruptcy protection. In this
event, no assurance can be given as to the amount of assets, if any,
which will be available to the stockholders of Parent.
Q: WILL I RECEIVE DIVIDENDS IN THE FUTURE?
A: Other than distributions contemplated by the Transaction, Parent does
not anticipate Parent or Atlantic issuing any dividends.
Q: WHAT ARE MY U.S. FEDERAL TAX CONSEQUENCES AS A RESULT OF THE
TRANSACTION?
A: Parent believes that, if you are a U.S. stockholder, as defined in the
section titled "MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS" as set
forth on page 114, you may have taxable income as a result of the
distribution to you of the Atlantic Securities. The amount of the
distribution should equal the fair market value of the Atlantic
Securities distributed. The distribution should be taxable as a
dividend to the extent of Parent's current or accumulated earnings and
profits, then as a non-taxable return of capital to the extent of your
tax basis in the common stock of Parent, and then as capital gain from
the sale or exchange of the common stock of Parent. Parent currently
has no current or accumulated earnings and profits. Although Parent
anticipates that the Transaction will not result in any taxable income
or gain to its consolidated group that would be included in Parent's
current earnings and profits, Parent may have current earnings and
profits at the end of the tax year in which the Transaction is
consummated. If so, the distribution should be taxable as a dividend,
but only to the extent of such current earnings and profits, if any.
Parent's belief that its consolidated group will not recognize any
income or gain from the Transaction assumes, in part, that none of the
Existing Notes, the Existing Notes, as amended, or the New Notes are
"Publicly Traded," as defined in the section entitled "MATERIAL U.S.
FEDERAL INCOME TAX CONSIDERATIONS" as set forth on page 114. However,
there is a risk that the Transaction will result in the Parent
consolidated group recognizing either taxable income or gain, in part
because the Existing Notes, the Existing Notes, as amended, or the New
Notes may be Publicly Traded. Such taxable income or gain would be
included in Parent's current earnings and profits and would increase
the amount of the distribution of Atlantic Securities taxable as a
dividend because such taxable income would increase Parent's current
earnings and profits, if any, for the year in which the distribution is
made. After the distribution of Atlantic Securities, your tax basis in
the Atlantic Securities should equal the fair market value of the
distribution of Atlantic Securities from Parent. If you are a non-U.S.
stockholder, you should be subject to 30% U.S. withholding tax to the
extent that the distribution of Atlantic Securities is taxable as a
dividend, subject to reduction by applicable treaty. You should not be
subject to U.S. federal income or withholding taxes on any portion of
the distribution of Atlantic Securities not taxable as a dividend.
However, as Parent may not be able to determine, at the time of the
distribution of Atlantic Securities, the amount of the distribution
taxable as a dividend, Parent may collect the 30% U.S. withholding tax
on the entire amount of the distribution of Atlantic Securities,
subject to reduction by applicable treaty. You should be able to
receive a refund if and to the extent of any excess withholding. Parent
suggests that you consult your own tax advisor as to the consequences
to you of the distribution to you
6
of the Atlantic Securities. For more information, see "MATERIAL U.S.
FEDERAL INCOME TAX CONSIDERATIONS" as set forth on page 114.
Q: IF I WOULD LIKE TO VOTE ON THE PROPOSAL, WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in
this document, please complete and sign your proxy card and return it
in the enclosed postage-paid envelope as soon as possible so that your
shares may be represented at the special meeting.
If you sign, date and send your proxy and do not indicate how you want
to vote, your proxy will be voted for the approval of the proposal.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: Send a later-dated, signed proxy card to the Secretary of Parent prior
to the date of the special meeting or attend the special meeting in
person and vote. You also may revoke your proxy by sending a notice of
revocation to the Secretary of Parent at the address under "SUMMARY
-Changing Your Vote" as set forth on page 18.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY
SHARES?
A: If you do not provide your broker with instructions on how to vote your
street name shares, your broker will not be permitted to vote them on
the Transaction proposal. You should, therefore, be sure to provide
your broker with instructions on how to vote your shares. Stockholders
should check the voting form provided by their brokers to see if they
offer telephone or Internet voting.
If you do not give voting instructions to your broker, your votes will
not be counted as voting for the Transaction unless you appear and vote
in person at your special meeting. If your broker holds your shares and
you attend the special meeting, please bring a letter from your broker
identifying you as the beneficial owner of the shares and authorizing
you to vote.
Q: HOW DOES THE BOARD OF DIRECTORS OF PARENT RECOMMEND THAT I VOTE?
A: The Board of Directors of Parent recommends that you vote in favor of
the Transaction.
Q: WHAT WILL HAPPEN IF I ABSTAIN FROM VOTING OR FAIL TO VOTE?
A: An abstention or failure to vote will have the same effect as a vote
against the Transaction.
Q: WHO ELSE MUST APPROVE THE TRANSACTION?
A: The holders of a majority of the outstanding principal amount of the
Existing Notes must consent to the amendments to the Existing Indenture
and agree to exchange their Existing Notes for the New Notes in the
Exchange Offer before the Transaction described herein can take place.
Affiliates of Carl C. Icahn own approximately 58% of the aggregate
principal amount outstanding of the Existing Notes and approximately
77% of the outstanding common stock of Parent and have indicated that
they intend to vote in favor of the Transaction and tender for exchange
all of their Existing Notes in the Exchange Offer, thereby consenting
to the proposed amendments to the Existing Indenture.
The Transaction is subject to Parent's receipt of all required
third-party and governmental consents including approval of the New
Jersey Casino Control Commission (including the issuance of a casino
license to Ace Gaming, LLC on the same terms and conditions as the
casino license held by Operating).
7
Q: WHAT HAPPENS IF THE STOCKHOLDERS OF PARENT APPROVE THE TRANSACTION, BUT
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING PRINCIPAL AMOUNT OF THE
EXISTING NOTES DO NOT EXCHANGE THEIR EXISTING NOTES AND DO NOT CONSENT
TO THE INDENTURE AMENDMENTS?
A: In that event, the Transaction will not be consummated.
Q: WHAT ARE THE RISKS TO ME IF THE TRANSACTION IS APPROVED?
A: There are a number of risks, including the risk that there can be no
assurance that Atlantic will be able to pay the principal and interest
due on the New Notes at maturity if holders of a majority of the
aggregate principal amount outstanding do not elect to accept Atlantic
Common Stock in exchange for the outstanding principal and accrued
interest under the New Notes or the New Notes are not converted into
Atlantic Common Stock. For more information, see "RISK FACTORS" as set
forth on page 33 below.
Q: WHEN DO YOU EXPECT TO COMPLETE THE TRANSACTION?
A: Parent expects to complete the Transaction in the first quarter of
2004.
Q: CAN I STILL SELL MY SHARES OF THE COMMON STOCK OF PARENT?
A: Yes. The common stock of Parent is currently traded on the American
Stock Exchange. However, Parent currently anticipates that upon the
consummation of the Transaction, the common stock of Parent will be
delisted from the American Stock Exchange. If and when that happens,
trading may thereafter occur only on the over-the-counter market in the
so-called "pink sheets" or on the "electronic bulletin board" of the
National Association of Securities Dealers, Inc. In this event, the
ability to buy and sell shares of the common stock of Parent may be
materially impaired, which may have an adverse effect on the price and
liquidity of the common stock of Parent. See "RISK FACTORS -- It is
anticipated that the common stock of Parent will be voluntarily
delisted from the AMEX which will make it more difficult for you to
sell your shares of common stock of Parent" as set forth on page __
below. After the Transaction is completed, upon the payment of the
Existing Notes and the exercise of the Warrants, Parent may be
dissolved and there may be no further trading in the common stock of
Parent.
Q: IS PAYMENT OF THE PRINCIPAL AND THE ACCRUED INTEREST ON THE NEW NOTES
AUTOMATICALLY DUE AND PAYABLE IN CASH UPON MATURITY IN 2008?
A: No. The holders of a majority of the aggregate principal amount
outstanding of the New Notes can elect, at any time following
consummation of the Transaction, to determine whether the New Notes
will be paid in the form of Atlantic Common Stock instead of a cash
payment of the principal and accrued interest. If such holders choose
to receive Atlantic Common Stock, the holders of all of the New Notes
will receive Atlantic Common Stock expressed as a percentage equal to
72.5% (on a fully diluted basis) of the total outstanding Atlantic
Common Stock, multiplied by a fraction, the numerator of which is the
aggregate principal amount outstanding of the Existing Notes exchanged
for the New Notes and the denominator of which is the aggregate
principal amount of the Existing Notes outstanding immediately prior to
the consummation of the Exchange Offer. Holders of the New Notes will
receive payment for such notes in the form of Atlantic Common Stock in
full satisfaction and full payment of the New Notes and immediately
thereafter the New Notes will be cancelled.
Q: DO I NEED TO SEND IN MY SHARE CERTIFICATES?
A: No. After the Transaction is approved, Parent will send the
stockholders of Parent written information describing the Warrants
and/or Atlantic Common Stock to be issued. You do not need to send in
your certificates for common stock of Parent in order to receive
Atlantic Securities upon completion of the Transaction.
8
Q: DO I HAVE APPRAISAL RIGHTS?
A: No, you will not have appraisal rights under Delaware law as a result
of the Transaction.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the Transaction or if you need
additional copies of this document or the enclosed proxy card, you
should contact:
stockholders:
[Information Agent]
Q: WHERE CAN I FIND MORE INFORMATION ABOUT PARENT?
A: You can find more information about Parent from various sources
described under "WHERE YOU CAN FIND MORE INFORMATION" as set forth on
page [125.]
9
SUMMARY
This summary highlights selected information from this document and may not
contain all the information that is important to you. To understand the
transaction fully and for a more complete description of the legal terms of the
transaction, you should carefully read this entire document, including the
annexes, and the other documents to which we have referred you. For information
on how to obtain the documents that we have filed with the Securities and
Exchange Commission, see "WHERE YOU CAN FIND MORE INFORMATION" as set forth on
page 120. For a discussion of the risk factors that you should consider in
evaluating the transaction, see "RISK FACTORS" beginning on page 33.
In this proxy statement/ prospectus, unless the context otherwise requires and
except with respect to any description of the New Notes, the words "we," "us,"
"our", "Atlantic", and the "Company" refer to Atlantic Coast Entertainment
Holdings, Inc. The word "Licensee" refers to Ace Gaming, LLC, a wholly-owned
subsidiary of Atlantic, the word "Parent" refers to GB Holdings, Inc., the word
"Funding" refers to GB Property Funding Corp. and the word "Operating" refers to
Greate Bay Hotel and Casino, Inc. The following summary contains basic
information about Parent and Atlantic and the series of events comprising the
Transaction (as defined below). In addition, in this proxy statement/prospectus,
outstanding 11% Notes due 2005 of Funding are referred to as the "Existing
Notes"; newly registered 3% Notes due 2008 of Atlantic are referred to as the
"New Notes"; and the Existing Notes and the New Notes are collectively referred
to as the "Notes." Furthermore, in this proxy statement/prospectus, the Amended
and Restated Indenture, dated as of October 12, 2001, among Funding, as issuer,
Parent and Operating, as guarantors, and the trustee, relating to the Existing
Notes, shall be referred to as the "Existing Indenture"; the form of the
Amendment to the Amended and Restated Indenture among Funding, as issuer, Parent
and Operating, as guarantors, and Wells Fargo Bank Minnesota, National
Association, as trustee shall be referred to as " the Amendment to the
Indenture"; the form of the Second Amended and Restated Indenture, among Parent,
as issuer and Wells Fargo Bank Minnesota, National Association, as trustee,
governing the Existing Notes, as amended, shall be referred to as the "Second
Amended and Restated Indenture"; and the form of the Indenture among Atlantic as
issuer, Licensee as guarantor, and the trustee governing the New Notes shall be
referred to as the "New Indenture." All percentages expressed in this proxy
statement/ prospectus, unless otherwise stated, are measured immediately
following consummation of the Transaction (as defined below) and do not reflect
or account for any issuance of Atlantic Common Stock that may occur following
consummation of the Transaction (as defined below). Any such issuances may
result in the percentage ownership being lowered at any given point. This
summary does not contain all the information that is important to you. For a
more complete understanding of this offering, you are encouraged to read this
entire document and the documents referred to herein.
The Certificate of Incorporation, By-Laws of Atlantic, the Contribution
Agreement between Parent, Operating, Atlantic and Licensee, the form of Warrant
Agreement, Amended and Restated Indenture, the form of the Amendment to the
Amended and Restated Indenture and the form of the Second Amended and Restated
Indenture (which is attached as Exhibit A thereto) and the New Indenture and the
fairness opinion issued by Libra Securities, LLC (collectively, the "Transaction
Documents") are attached as Annexes A, B, C, D, E, F, G and H to this document.
Parent encourages you to read the Transaction Documents carefully and in their
entirety. They are the principal documents governing the Transaction (as defined
below).
BACKGROUND OF ATLANTIC
Atlantic was incorporated in the State of Delaware on October 31, 2003, and is
currently a wholly-owned subsidiary of Operating. Following the consummation of
the proposed transaction, Atlantic's sole asset will be 100% of the membership
interests in Licensee. As a result of the Transaction, Licensee will own
substantially all of the assets and cash currently owned by Operating and
Parent, respectively (less the cash Atlantic will pay to the holders of the
Existing Notes that elect to exchange for New Notes), which consist principally
of The Sands Hotel and Casino in Atlantic City, New Jersey ("The Sands").
Atlantic's principal executive offices are located at c/o Sands Hotel & Casino,
Indiana Avenue & Brighton Park, Atlantic City, New Jersey 08401 and its
telephone number is (609) 441-4517.
BACKGROUND OF OPERATING
Operating was incorporated in the State of New Jersey on October 30, 1978 and
became a wholly-owned subsidiary of Parent in February 1994. Operating's
principal business activity is its ownership of The Sands. Operating's principal
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executive offices are located at c/o Sands Hotel & Casino, Indiana Avenue &
Brighton Park, Atlantic City, New Jersey 08401 and its telephone number is (609)
441-4517. For more detailed information regarding Atlantic, please see
"DESCRIPTION OF THE BUSINESS OF PARENT AND ITS SUBSIDIARIES" as set forth on
page 82.
BACKGROUND OF PARENT
Parent is a Delaware corporation. In February 1994, Parent acquired
Operating through a capital contribution by its then parent. Operating's
principal business activity is its ownership of The Sands. Funding, a
wholly-owned subsidiary of Parent, was incorporated in September 1993 as a
special purpose subsidiary of Parent for the purpose of borrowing funds for the
benefit of Operating. Parent has no operating activities and its only source of
income, other than income derived from the business of Operating, is interest on
cash equivalent investments. Parent's only significant assets are its investment
in Operating and its cash balance at June 30, 2003 of $28.9 million.
For additional information about Parent and its business, see
"DESCRIPTION OF THE BUSINESS OF PARENT AND ITS SUBSIDIARIES" as set forth on
page 82 and "WHERE YOU CAN FIND MORE INFORMATION" as set forth on page 120.
BACKGROUND OF THE TRANSACTION
The transaction set forth herein is comprised of a series of events
(collectively, the "Transaction") which will allow Parent to refinance its
existing debt, on terms more favorable than Parent believes is available to it
in the capital markets. The effect of the Transaction will be the transfer and
disposition of substantially all of the assets of Parent and its subsidiaries to
Atlantic, a Delaware corporation and a newly formed, wholly-owned subsidiary of
Operating, a New Jersey corporation and a wholly-owned subsidiary of Parent.
Upon consummation of the Transaction, up to an aggregate of 72.5% (on a fully
diluted basis) of the issued and outstanding common stock, par value $.01 per
share, of Atlantic ("Atlantic Common Stock") may be owned by holders of debt
securities issued by Atlantic, thereby resulting in such noteholders
beneficially owning a significant majority of the outstanding Atlantic Common
Stock (on a fully diluted basis) which through its wholly-owned subsidiary will
own substantially all of the assets initially owned by Parent and its
subsidiaries. The Transaction will include the following series of events:
(a) Upon receipt of the necessary approval from the holders of a
majority of the Existing Notes issued by Funding and their
exchange of the Existing Notes for New Notes:
(i) Parent will transfer all of its assets (other than the
stock of Funding and Operating) to Operating;
(ii) Operating will transfer all of the assets which it
received from Parent and substantially all of its assets
(other than the stock of Atlantic) to Atlantic in
exchange for either:
(A) 27.5% of the outstanding common stock of Atlantic
(the "Holders Equity") (on a fully diluted basis)
(if 100% of the Existing Notes are exchanged for
New Notes); or
(B) warrants ("Warrants" and collectively with the
Holders Equity the "Atlantic Securities") to
purchase 27.5% of the outstanding common stock of
Atlantic (on a fully diluted basis) at a purchase
price of $.01 per share (if less than 100% of the
Existing Notes are exchanged for New Notes) and
Atlantic will transfer to Operating an additional
number of shares of common stock of Atlantic
so that Operating has a pro rata share of 72.5%
of the Atlantic Common Stock which shall be
proportional to the principal amount of the
Existing Notes that are not exchanged; and
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(iii) immediately thereafter Atlantic will transfer to Licensee
(A) the cash it received, except for an amount of cash
that Atlantic will pay to the holders of the Existing
Notes that exchange for New Notes and (B) all of its
assets (except for the membership interests in Licensee)
including the assets it received from Operating
(collectively, the "Asset Transfer");
(b) Atlantic will offer the holders of the Existing Notes the
opportunity (the "Exchange Offer") to tender for exchange such
Existing Notes for (i) $100 in cash for every $1,000 in principal
amount of the Existing Notes exchanged in such Transaction, (ii)
on a dollar for dollar basis, the New Notes, which under certain
circumstances will be payable or convertible in the form of 72.5%
of the issued and outstanding shares of Atlantic Common Stock (on
a fully diluted basis, assuming 100% of the Existing Notes are
exchanged for the New Notes) as full consideration for the
principal and accrued interest owed thereunder, and (iii) a cash
payment of accrued, but unpaid interest on the Existing Notes.
Such exchange by a holder of Existing Notes will also indicate
such holder's desire to consent to (i) eliminate certain covenants
of the Existing Indenture, (ii) the release of the liens on the
collateral securing the Existing Notes, and (iii) the terms of the
New Indenture. The New Notes provide that, among other things, the
holders of a majority of the aggregate principal amount
outstanding of the New Notes may determine (i) when and whether to
require all other holders of the New Notes to accept Atlantic
Common Stock as payment in lieu of a cash payment of the principal
and accrued interest on the New Notes at or prior to maturity, or
(ii) to allow the holders of the New Notes the right to elect to
convert all, or a portion, of their New Notes into Atlantic Common
Stock;
(c) Through a series of mergers, Parent, Operating and Funding will
merge and Parent will be the surviving entity (the "Merger") so
that:
(i) The Existing Notes exchanged for New Notes will be
canceled;
(ii) Parent will be the sole obligor of the Existing Notes
(which shall no longer be secured by liens on the
collateral);
(iii) Parent will own the Atlantic Securities transferred by
Atlantic; and
(iv) Atlantic will be a wholly-owned subsidiary of Parent
(immediately prior to the completion of the Transaction);
and
(d) Parent will distribute (the "Distribution of Securities"), to you
as its stockholders, pro rata, either:
(i) 0.275 shares of Atlantic Common Stock for every one share
of common stock of Parent that you currently own, so that
in the aggregate the stockholders of Parent will own an
aggregate of 27.5% (on a fully diluted basis) of the
issued and outstanding Atlantic Common Stock (if 100% of
the Existing Notes exchange for the New Notes,); or
(ii) Warrants to purchase 0.275 shares of Atlantic Common
Stock, at a purchase price of $.01 per share for every
one share of common stock of Parent that you currently
own, so that in the aggregate the stockholders of Parent
will own, upon exercise of the Warrants, 27.5% (on a
fully diluted basis) of the outstanding Atlantic Common
Stock (if less than 100% of the aggregate principal
amount outstanding of the Existing Notes for New Notes).
If less than 100% of the holders of the $110 million aggregate
principal amount outstanding of the Existing Notes exchange such Existing Notes
for the New Notes, holders of common stock of Parent will receive Warrants to
purchase shares of Atlantic Common Stock with the following terms. The Warrants
will not be immediately
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exercisable. The Warrants will only become exercisable for shares of Atlantic
Common Stock, following the earliest of: (a) a decision by the holders of a
majority of the aggregate principal amount outstanding of the New Notes to cause
the New Notes to be payable in or convertible into Atlantic Common Stock, (b)
full payment of the interest and principal due under the Existing Notes, or (c)
a decision by the board of directors of Atlantic to allow the holders of the
Warrants to exercise such Warrants into Atlantic Common Stock. An accurate
prediction cannot be made as to exactly when the first of these conditions will
be satisfied. While the Existing Notes are scheduled to mature on September 28,
2005, neither Atlantic nor Parent can provide any assurance that Parent will
have sufficient funds to pay the principal upon maturity. The Warrants will not
be listed for trading on any securities exchange. The Warrants will have certain
anti-dilution terms and will expire upon the earlier of seven years from
issuance or in the alternative, the Board of Directors of Atlantic may elect at
any time following the date on which the Warrants become exercisable to provide
notice to the holders of the Warrants that the Warrants will automatically
cancel at least 90 days following the date of such notice, unless exercised
prior to such date. Consequently, if the Board of Directors of Atlantic elects,
you may have only a 90-day period beginning on the date the Warrants become
exercisable to exercise the Warrants. For more detailed information regarding
the Warrants, please see the section of this proxy statement/prospectus entitled
"DESCRIPTION OF SECURITIES -- Warrants".
Following consummation of the Transaction, holders of the Existing
Notes that do not elect to exchange such Existing Notes for New Notes will
continue to own their Existing Notes, but the terms of the Existing Notes will
have been amended. The interest on the Existing Notes, as amended, will be
payable on September 29 and March 29 of each year until the maturity date of
September 29, 2005. As amended, the Existing Notes (i) will neither be secured
nor guaranteed by Parent or its subsidiaries; and (ii) will be redeemable at
Parent's option, in whole or in part, on not less than 30 days or more than 60
days' notice, at a price equal to 100% of the principal amount of the Existing
Notes, as amended, plus accrued and unpaid interest up to, but not including,
the date of redemption, payable in cash.
Following consummation of the Transaction, holders of the Existing
Notes that exchanged such Existing Notes for New Notes will receive New Notes
issued by Atlantic that pay 3% interest per annum, which shall accrue and be
payable at maturity, and at the election of the holders of a majority of the
aggregate principal amount outstanding, will be (i) payable at or prior to
maturity in the form of, or (ii) convertible, in whole or in part, at the
election of the holder of the New Notes into, 72.5% (on a fully diluted basis)
of the outstanding Atlantic Common Stock, based upon a conversion formula set
forth in the New Indenture. If less than 100% of the holders of the aggregate
principal amount outstanding of the Existing Notes elect to exchange such notes
for the New Notes, the New Notes will be, at the election of the holders of a
majority of the aggregate principal amount outstanding of the New Notes, payable
in or convertible into, at or prior to maturity, an amount of outstanding
Atlantic Common Stock (on a fully diluted basis) equal to 72.5% multiplied by a
fraction, the numerator of which is the aggregate principal amount outstanding
of the Existing Notes exchanged in the Exchange Offer and the denominator of
which shall be the aggregate principal amount outstanding of the Existing Notes,
on the day immediately prior to the consummation of the Exchange Offer.
Additionally, the New Notes will have certain anti-dilution protection. The New
Notes will be governed by the New Indenture. For more information about the New
Notes, please see "THE TRANSACTION--Terms of the New Notes".
For more detailed information regarding the background of the Transaction,
please see the section of this proxy statement/prospectus entitled "THE
TRANSACTION - Potential Benefits Associated with the Transaction" as set forth
on page 48.
REASONS FOR THE TRANSACTION
Parent determined that it is reasonably likely that at maturity in
September 2005 the Existing Notes may not be able to be refinanced on favorable
terms or at all and that there may not be sufficient cash accumulated to pay off
the Existing Notes, thereby resulting in a default on the Existing Notes. In
order to avoid refinancing on unfavorable terms or not at all or defaulting on
the Existing Notes and the possibility of being forced to seek the protection of
the bankruptcy court, Parent determined to refinance the Existing Notes by means
of the proposed transaction. The Transaction is being undertaken to allow Parent
to refinance its existing long-term debt, represented by the Existing Notes, on
more favorable terms which include interest at a rate of 3% (which is
substantially below the prevailing rate currently being paid in the capital
markets) which accrues and is not payable until maturity in 2008. Also, holders
of a majority of the aggregate principal amount outstanding of the New Notes may
elect to have the New Notes paid in
13
Atlantic Common Stock at any time up to and including the date of maturity. If
such election is made, the holders of the New Notes will receive equity in
Atlantic in full payment of the principal and accrued interest due under the New
Notes.
For more detailed information regarding the reasons for the
Transaction, see "THE TRANSACTION -- Potential Benefits Associated with the
Transaction" as set forth on page 48.
PARENT'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
TRANSACTION.
After consultation with its financial advisor and after reviewing the
recommendation of the Special Committee of the Board of Directors of Parent (the
"Special Committee"), the Board of Directors of Parent (the "Board") has
determined that the Transaction is fair to and in the best interest of the
stockholders of Parent.
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DESCRIPTION OF THE TRANSACTION
What You Will Receive in the Transaction
You will receive either Atlantic Common Stock or Warrants in either
case representing 27.5% of the Atlantic Common Stock. The Atlantic Common Stock,
Warrants and the shares of Atlantic Common Stock issuable upon exercise of the
Warrants will be registered under the Securities Act of 1933, as amended (the
"Securities Act"), upon the effectiveness of the registration statement of which
this proxy statement/prospectus forms a part. In accordance with rules and
regulations set forth in applicable law (including (1) that Atlantic Securities
held by affiliates of Atlantic may be subject to transfer restrictions and (2)
that no restriction on transfer is imposed by the New Jersey Casino Control
Commission ("CCC")), the Atlantic Common Stock , the Warrants and the shares of
Atlantic Common Stock underlying the Warrants will be freely transferable, at
least initially (see "DESCRIPTION OF SECURITIES" as set forth below on page 65
and "RISK FACTORS" as set forth below on page 33). No application will be made
to list the Warrants, the shares of Atlantic Common Stock underlying the
Warrants (the "Warrant Shares"), the Atlantic Common Stock, or any shares of
Atlantic Common Stock issued to Parent (the "Parent Shares"), on any securities
exchange. In addition, Parent currently anticipates that upon the consummation
of the Transaction, the common stock of Parent will be delisted from the
American Stock Exchange ("AMEX"), and although a trading market presently exists
for Parent's securities, there can be no assurances of any trading market once
the stock is delisted. (See "COMPARISON OF RIGHTS AND MATERIAL DIFFERENCES OF
PARENT AND COMPANY STOCKHOLDERS" as set forth below). The voting rights of the
Atlantic Common Stock, on a per share basis, are identical to those of the
common stock of Parent.
If the Transaction is approved, holders of the common stock of Parent will
receive securities of a holding company of which the sole asset is its
membership interests in a wholly-owned subsidiary that owns all of the assets of
Parent (except the stock of Funding and Operating), except an amount of cash
that Atlantic pays to the holders of the Existing Notes that elect to exchange
for New Notes, and substantially all of the assets of Operating (except the
stock of Atlantic), consisting of The Sands. However, due to the existence of
the New Notes, such assets will also be collateral securing the obligations
under the New Notes and Atlantic may be obligated to pay the principal and
accrued interest, when the same become due and payable in 2008. Additionally,
due to the potential payment or conversion of the New Notes in the form of
Atlantic Common Stock as full satisfaction of the principal and accrued interest
owed thereunder, it is possible that the percentage of total equity represented
by your holdings in Atlantic (upon distribution of the Atlantic Common Stock or
the exercise of the Warrants) will be lower than the percentage of Parent equity
represented by your common stock of Parent, although in the event of such full
payment of all of the New Notes, Atlantic will have no outstanding debt (other
than additional debt which may be incurred directly or indirectly by Atlantic or
the Licensee after the completion of the Transaction). See "RISK FACTORS -- Risk
Factors Related to the Transaction" beginning on page 33. Please also see
"DESCRIPTION OF SECURITIES" as set forth below on page 65.
Recommendations of the Board of Directors
At its meeting on November 12, 2003, after due consideration, the
Board:
- Determined that the Transaction and the Transaction Documents are
advisable, fair to and in the best interests of the stockholders of
Parent;
- Approved the Transaction Documents, in form and substance; and
- Recommended that the stockholders of Parent vote in favor of the
Transaction.
TO REVIEW THE BACKGROUND AND REASONS FOR THE TRANSACTION IN GREATER DETAIL, SEE
PAGES 47 THROUGH 64.
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Opinion of Libra Securities
In connection with the Transaction, the Special Committee considered
the opinion of Libra Securities, LLC ("Libra Securities") as to the fairness
from a financial point of view of the consideration to be received by the
holders of common stock of Parent. On July 14, 2003, Libra Securities delivered
a written opinion to the Special Committee to the effect that as of that date
and based upon the assumptions made, matters considered and the review described
in the written opinion, the consideration to be received by the holders of
common stock of Parent in the Transaction is fair, from a financial point of
view, to the common stockholders of Parent. Libra Securities expressed no
opinion as to (1) the fairness of the consideration to be received in connection
with the Transaction by any person other than the common stockholders of Parent
and (2) the possible tax consequences of the Transaction (including the tax
consequences to Parent and whether stockholders of Parent will recognize taxable
income as a result of the Transaction). Libra Securities' opinion was provided
for the information of the Special Committee and does not constitute a
recommendation to any common stockholder of Parent with respect to any matter
relating to the Transaction. See "THE TRANSACTION -- Opinion of Libra
Securities."
The full text of Libra Securities' written opinion is attached as Annex
I to this proxy statement/prospectus. You are encouraged to read Libra
Securities' opinion in its entirety for a description of the assumptions made,
matters considered and limitations on the review undertaken.
PARENT ENCOURAGES THE STOCKHOLDERS OF PARENT TO READ THE OPINION CAREFULLY AND
IN ITS ENTIRETY.
INTERESTS OF DIRECTORS AND MANAGEMENT IN THE TRANSACTION
Carl C. Icahn is the Chairman of the Board of Funding, Operating and
Parent, and will be the Chairman of the Board of Atlantic and Licensee.
Affiliates of Mr. Icahn own approximately 77% of the outstanding common stock of
Parent, which owns 100% of Funding and Operating, and approximately 58% of the
aggregate principal amount outstanding of the Existing Notes. Mr. Icahn's
affiliates have indicated their support of the Transaction, their intent to
tender for exchange their Existing Notes thereby satisfying the minimum tender
condition of the Exchange Offer, and their intent to vote in favor of the
Transaction. After the Transaction is completed, affiliates of Mr. Icahn may
beneficially own (i) approximately 63.4% (on a fully diluted basis) of the
outstanding Atlantic Common Stock, if more than 58%, but less than 100% of the
Existing Notes exchange for the New Notes such affiliates may beneficially own
up to an additional 23.5% of the outstanding Atlantic Common Stock because of
such affiliates ownership of 77% of the outstanding common stock of Parent and
(ii) at least 58% of the aggregate principal amount outstanding of the New
Notes. In addition, affiliates of Mr. Icahn will effectively control Atlantic,
since, immediately following the consummation of the Transaction, they will
continue to have control over any stock which Parent owns because they own 77%
of the outstanding common stock of Parent, and Atlantic initially will be a
wholly owned subsidiary of Parent. As a result, affiliates of Mr. Icahn will
have a substantial influence and control over matters voted upon by stockholders
(such as the election of the directors to the Board of Directors of each of
Parent and Atlantic, mergers and sale of assets involving Parent and Atlantic
and other matters upon which stockholders, of either Parent or Atlantic, vote),
as well as matters to be consented to by the holders of the New Notes, such as
the determination of whether and when the payment in the form of Atlantic Common
Stock shall be made in satisfaction of the principal and accrued interest of the
New Notes shall occur, or whether to amend the New Indenture (i.e. release of
the collateral securing the New Notes or waiver of events of default).
CONDITIONS TO THE COMPLETION OF THE TRANSACTION
Parent's ability to complete the Transaction is subject to the satisfaction of a
number of conditions, including the following:
o requisite third party consents and governmental approvals shall
have been obtained, including the approval of the CCC;
16
o the Amendment to the Existing Indenture, the Second Amended and
Restated Indenture, and the New Indenture shall be declared
effective;
o the Transaction shall have been approved by the holders of a
majority of the outstanding shares of the common stock of Parent;
o no legal prohibition on consummation of the Transaction shall have
been in effect; and
o holders of a majority of the outstanding principal amount of
Existing Notes shall have agreed to exchange their Existing Notes
for New Notes in the Exchange Offer, thereby approving of the
amendments to the Existing Indenture.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of the common stock of Parent at the close of business on
_____, the record date, are entitled to notice of and to vote at the special
meeting. On the record date approximately ___ shares of the common stock of
Parent were issued and outstanding and held by approximately __ holders of
record. A quorum will be present at the special meeting if the holders of a
majority of the shares of the common stock of Parent outstanding on the record
date are present, in person or by proxy. If a quorum is not present at the
special meeting, Parent expects that the special meeting will be adjourned to
solicit additional proxies. Holders of record of the common stock of Parent on
the record date are entitled to one vote per share at the special meeting on the
proposal to adopt the Transaction.
VOTE REQUIRED
The adoption of the Transaction by the stockholders of Parent requires the
affirmative vote of the holders of a majority of the shares of Parent's common
stock outstanding as of the record date, either in person or by proxy, voting as
a single class.
PARENT GRANT OF AUTHORITY TO ADJOURN OR POSTPONE THE SPECIAL MEETING
If there are not sufficient votes at the originally scheduled time of
the special meeting to approve the Transaction, the stockholders will be asked
to vote on whether to grant to the board the discretionary authority to adjourn
or postpone the special meeting in order to permit Parent to solicit additional
proxies.
VOTING BY PARENT DIRECTORS AND EXECUTIVE OFFICERS
Affiliates of Carl C. Icahn own approximately 77% of the outstanding common
stock of Parent and have indicated their intent to vote in favor of the
Transaction.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for the
special meeting will be voted at the special meeting in the manner specified by
the stockholders giving those proxies. Properly executed proxies that do not
contain voting instructions will be voted for the adoption of the Transaction.
Shares of the common stock of Parent represented at the special meeting but not
voting, including shares of the common stock of Parent for which proxies have
been received but for which holders of shares have abstained, will be treated as
present at the special meeting for purposes of determining the presence or
absence of a quorum for the transaction of all business.
Only shares affirmatively voted for the adoption of the Transaction, including
properly executed proxies that do not contain voting instructions, will be
counted as favorable votes for the proposal. AN ABSTENTION OR FAILURE TO VOTE
WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE ADOPTION OF THE TRANSACTION.
17
Also, under AMEX rules, brokers that hold shares of the common stock of Parent
in street name for customers that are the beneficial owners of those shares may
not give a proxy to vote those shares without specific instructions from those
customers. If a stockholder of Parent owns shares through a broker and attends
the special meeting, the stockholder should bring a letter from that
stockholder's broker identifying that stockholder as the beneficial owner of the
shares and authorizing the stockholder to vote.
The persons named as proxies by a stockholder of Parent may vote for one or more
adjournments of the special meeting, including adjournments to permit further
solicitations of proxies. No proxy voted against the proposal to adopt the
Transaction will be voted in favor of any adjournment.
Parent does not expect that any matter other than the proposal to adopt the
Transaction will be brought before the special meeting. If, however, other
matters are properly presented at the special meeting, the persons named as
proxies will vote in accordance with the recommendation of the Board.
REVOCABILITY OF PROXIES
Submitting a proxy on the enclosed form does not preclude a stockholder of
Parent from voting in person at the special meeting. A stockholder of Parent may
revoke a proxy at any time before it is voted by filing with Parent a duly
executed revocation of proxy, by submitting a duly executed proxy to Parent with
a later date or by appearing at the special meeting and voting in person. The
stockholders of Parent may revoke a proxy by any of these methods, regardless of
the method used to deliver a stockholder's previous proxy. Attendance at the
special meeting without voting will not itself revoke a proxy.
CHANGING YOUR VOTE
If you want to change your vote, you may send a later-dated, signed
proxy card to the Secretary of Parent at GB Holdings Inc. c/o Sands Hotel &
Casino, Indiana Avenue & Brighton Park, Atlantic City, NJ 08401, prior to the
date of the special meeting, or attend the special meeting in person and vote.
SOLICITATION OF PROXIES
Parent will incur the expenses in connection with the printing and mailing of
this proxy statement/prospectus. In addition to solicitation by mail, the
directors, officers and employees of Parent and its subsidiaries, who will not
be specially compensated, may solicit proxies from the stockholders of Parent by
telephone, facsimile, telegram or other electronic means or in person.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation materials to the
beneficial owners of shares held of record by these persons, and Parent will
reimburse them for their reasonable out-of-pocket expenses.
Parent will mail a copy of this proxy statement/prospectus to each holder of
record of the common stock of Parent on the record date.
You will continue to own your shares of common stock of Parent after the
completion of the Transaction. You should not send in any share certificates of
the common stock of Parent with your proxy card. If the Transaction is
completed, information will be mailed by the [Transfer Agent/Warrant Agent] to
the stockholders of Parent concerning the distribution of Atlantic Common Stock
and Warrants at a later date.
Parent has retained ___ to assist in the solicitation of proxies from banks,
brokerage firms, nominees, institutional holders and individual investors for a
fee of ___ plus reimbursement for expenses.
Parent has retained [________] to act as the [Transfer Agent/Warrant Agent] in
connection with the Atlantic Common Stock and Warrants.
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ATTENDING THE SPECIAL MEETING
If you are a holder of record and plan to attend the special meeting, please
indicate this when you vote. The lower portion of the proxy card will be your
admission ticket. IF YOU ARE A BENEFICIAL OWNER OF COMMON STOCK OF PARENT HELD
BY A BROKER, BANK, OR OTHER NOMINEE, YOU WILL NEED PROOF OF OWNERSHIP TO BE
ADMITTED TO THE SPECIAL MEETING. A recent brokerage or benefit plan statement or
a letter from a bank or broker are examples of proof of ownership. If you want
to vote your common stock of Parent held in nominee name in person, you must get
a written proxy in your name from the broker, bank, or other nominee that holds
your shares.
USE OF PROCEEDS
Neither Atlantic nor Parent will receive any proceeds from the issuance
of the Atlantic Common Stock, the Warrants or the issuance of the New Notes in
the Exchange Offer. Any proceeds from the exercise of Warrants will be added to
the working capital of Atlantic.
REGULATORY MATTERS
Certain regulatory requirements imposed by New Jersey regulatory authorities
must be complied with before the Transaction is completed. Parent is not aware
of any material governmental consents or approvals that are required prior to
the completion of the Transaction other than those described below. Parent and
Atlantic have agreed that, if any additional governmental consents and approvals
are required, Parent and Atlantic shall each use its commercially reasonable
efforts to obtain these consents and approvals.
The Transaction is subject to the approval of the CCC. The CCC must, among other
things, approve the issuance of the New Notes and the issuance of a casino
license to Licensee on the same terms and conditions as the license held by
Operating. A Petition will be timely filed with the CCC seeking the required
approvals.
APPRAISAL RIGHTS
Under the Delaware General Corporation Law, the stockholders of Parent will not
have any appraisal rights as a result of the Transaction.
RESALE OF ATLANTIC COMMON STOCK AND WARRANTS
Atlantic Common Stock and/or Warrants (and Atlantic Common Stock issuable upon
exercise of the Warrants) issued in the Transaction will not be subject to any
restrictions on transfer arising under the Securities Act, except for shares of
Atlantic Common Stock and/or Warrants (and Atlantic Common Stock issuable upon
exercise of the Warrants) issued to any stockholder of Parent that is, or is
expected to be, an "affiliate" of Atlantic or Parent, as applicable, for
purposes of Rule 144 under the Securities Act. Persons that may be deemed to be
"affiliates" for such purposes generally include individuals or entities that
control, are controlled by, or are under common control with, Atlantic or Parent
and include the directors of Atlantic and Parent. This proxy statement/
prospectus does not cover resales of Atlantic Common Stock and/or Warrants (and
Atlantic Common Stock issuable upon exercise of the Warrants) received by any
person upon completion of the Transaction, and no person is authorized to make
any use of this proxy statement/prospectus in connection with any resale.
Affiliates of Carl C. Icahn will receive registration rights in connection with
the Transaction which may result in the filing of future registration statements
by Atlantic covering resales of Atlantic Common Stock (including Atlantic Common
Stock issuable upon exercise of the Warrants) by affiliates of Carl C. Icahn.
SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION
Parent anticipates that the Transaction will not result in the Parent
consolidated group recognizing any taxable income for U.S. federal income tax
purposes in part because Parent believes that none of the Existing Notes, the
Existing Notes, as amended, or the New Notes will be "Publicly Traded," as
defined in the section entitled "MATERIAL U.S. FEDERAL INCOME TAX
19
CONSIDERATIONS" as set forth on page 114 (which we refer to as "Publicly
Traded"). However, this conclusion is not free from doubt and it is possible
that the Transaction will result in Parent recognizing cancellation of
indebtedness income ("COD Income") for U.S. federal income tax purposes. It
should also be noted that under accounting principles generally accepted in the
United States of America ("US GAAP"), the Selected Unaudited Pro Forma Condensed
Consolidated Financial Statements and the Unaudited Pro Forma Condensed
Consolidated Financial Statements contained in this proxy statement/prospectus
assume that the Transaction will result in Parent recognizing COD Income for
federal income tax purposes. There would not be any such taxes if there is no
recognition of COD Income. Such assumption and estimate is required under US
GAAP because Parent's determination that there should be no COD Income incurred
is based upon events which will occur after the Transaction is completed and
under US GAAP, such a determination cannot be made where post-transaction events
will affect the results. Although no assurances can be given, Parent does not
believe that COD Income will result because Parent does not believe an active
trading market in the Existing Notes existed 30 days prior to the Transaction or
an active trading market in the New Notes or the Existing Notes will develop
after the Transaction is completed, and unless such an active trading market
develops, a tax liability related to COD income will not be incurred.
The uncertainty as to whether the Parent consolidated group will
recognize COD Income results from the fact that the "Issue Price," as defined in
the section titled "MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS" as set
forth on page 114, (which we refer to as the "Issue Price") of the New Notes or
the Existing Notes, as amended, may be based on either the face value of the New
Notes or the Existing Notes, as amended, or the fair market value of the
Existing Notes, the Existing Notes, as amended, or the New Notes depending on
whether the Existing Notes, the Existing Notes, as amended, or the New Notes are
Publicly Traded. The Parent consolidated group's COD Income should be equal to
the sum of (a) the difference of (i) the face value of the Existing Notes
exchanged minus both (ii) the Issue Price of the New Notes and the Cash Payment
and (b) the difference of (i) the face value of the Existing Notes deemed
exchanged minus (ii) the Issue Price of the Existing Notes, as amended.
Therefore, if the Issue Price of both the New Notes and the Existing Notes, as
amended, is based on their respective face values, the Parent consolidated group
should not recognize any COD Income. The Issue Price of the New Notes and the
Existing Notes, as amended, would be based on their respective face values only
if the Existing Notes, the Existing Notes, as amended, and the New Notes are not
Publicly Traded. The Existing Notes, the Existing Notes, as amended, and the New
Notes should not be considered Publicly Traded, provided that the Existing Notes
are de-listed at least thirty (30) days prior to the Transaction and that none
of the Existing Notes, the Existing Notes, as amended, or the New Notes are
either listed on a national securities exchange or appear on a "quotation
medium," defined as a system of general circulation that provides a reasonable
basis to determine their fair market value. Parent does not anticipate that
either the Existing Notes, the Existing Notes, as amended, or the New Notes
will appear on such a quotation medium. If so, the Issue Price of both the New
Notes and the Existing Notes, as amended, should equal their respective face
values so that no COD Income should be recognized by the Parent consolidated
group. However, if either the Existing Notes, the Existing Notes, as amended,
or the New Notes appears on such a quotation medium, the Issue Price of either
or both the New Notes and the Existing Notes, as amended, would be based on
either their respective fair market value or the fair market value of the
Existing Notes. In such a situation, the Parent consolidated group could
recognize COD Income.
Such COD Income, if any, could be offset with the Parent consolidated
group's net operating losses ("NOLs"). If such an application of the NOLs is
necessary, the NOLs so utilized would be unavailable as an offset against the
Parent consolidated group's future income. Furthermore, in the event that COD
Income is recognized, to the extent that such COD Income exceeds the NOLs, or to
the extent that the NOLs cannot be used to offset the COD Income, such COD
Income would produce a current tax liability for Parent.
Parent does not anticipate recognizing any gain on the Distribution of
Securities to you because Parent believes that its tax basis in the Atlantic
Securities will exceed the fair market value of the Atlantic Securities.
Although not anticipated, it is possible that the Distribution of Securities
will result in Parent recognizing gain for U.S. federal income tax purposes. In
the event that Parent does recognize gain on the Distribution of Securities,
Parent's gain should equal the difference between the fair market value of the
Atlantic Securities distributed and Parent's tax basis in such Atlantic
Securities, measured as of the date of the Distribution of Securities. Parent
believes that its tax basis in the Atlantic Securities will, for U.S. federal
income tax purposes, exceed the fair market value of such Atlantic Securities
so that Parent should not recognize any gain on the distribution (under the
Internal Revenue Code of 1986, as amended (the "Code"), loss cannot be
recognized).
20
If you are a U.S. stockholder, as defined in the section titled
"MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS" as set forth on page 114, the
Distribution of Securities should be (i) a taxable dividend to the extent of
Parent's current or accumulated earnings and profits, and then (ii) a
non-taxable return of basis to the extent of your tax basis in your Parent
common stock, and then (iii) taxable gain from the sale or exchange of your
Parent common stock, which should result in capital gain taxed at long-term
capital gains rates assuming that you held your Parent common stock for more
than 12 months. Parent currently has no current or accumulated earnings and
profits. Although Parent anticipates that the Transaction will not result in any
taxable income or gain that would be included in Parent's current earnings and
profits, Parent may have current earnings and profits at the end of the tax year
that the Distribution of Securities is made. If so, the distribution should be
taxable as a dividend, but only to the extent of such current earnings and
profits, if any. However, there is a risk, as described above, that the
Transaction will result in Parent recognizing either taxable COD Income or gain.
Such COD Income or gain would be included in Parent's current earnings and
profits and increase the amount of the Distribution of Securities taxable as a
dividend because such COD Income or gain would increase Parent's current
earnings and profits, if any, for the year in which the Distribution of
Securities is made. Your tax basis in the Atlantic Securities received in the
Distribution of Securities should equal the fair market value of such Atlantic
Common Stock or Warrants, measured as of the date of the Distribution of
Securities.
If you are a non-U.S. stockholder you should be subject to 30% U.S.
withholding tax to the extent that the Distribution of Securities is taxable as
a dividend, subject to reduction by applicable treaty. You should be exempt from
U.S. income or withholding tax on any portion of the Distribution of Securities
not taxable as a dividend, provided that: (i) the Distribution of Securities is
not effectively connected with your conduct of a trade or business in the U.S.
and (ii) Parent is not, and has not been, a U.S. real property holding
corporation ("USRPHC"), as that term is defined in the Code. Although Parent
believes that it is a USRPHC, because it is regularly traded on an established
securities market, such status should only affect foreign shareholders who own
more than 5% of Parent. Therefore, if you own 5% or less of Parent's common
stock and the Distribution of Securities is not effectively connected with your
conduct of a trade or business in the U.S., you should not be subject to U.S.
income or withholding tax on the amount of the Distribution of Securities not
taxable as a dividend. However, as Parent may not be able to determine, at the
time of the distribution, the amount of the Distribution of Securities taxable
as a dividend, Parent may collect the 30% U.S. withholding tax on the entire
amount of the distribution, subject to reduction by applicable treaty. You
should be able to receive a refund if and to the extent of any excess
withholding.
If you are a non-U.S. stockholder and you own more than 5% of Parent's
common stock and the Distribution of Securities is not effectively connected
with your conduct of a trade or business in the U.S., you should be subject to
30% U.S. withholding tax to the extent that the Distribution of Securities is
taxable as a dividend, subject to reduction by applicable treaty, and U.S. net
income tax to the extent that the Distribution of Securities is not taxable as a
dividend. However, as Parent may not be able to determine, at the time of the
distribution, the amount of the Distribution of Securities taxable as a
dividend, Parent may collect the 30% U.S. withholding tax on the entire amount
of the distribution, subject to reduction by applicable treaty. You should be
able to receive a refund if and to the extent of any excess withholding.
If you are a non-U.S. stockholder and the Distribution of Securities is
effectively connected with your conduct of a trade or business in the U.S. and
you provide the proper withholding certificate to Parent, you should be subject
to U.S. net income tax on the Distribution of Securities (but not the 30% U.S.
withholding tax).
In the event that the Distribution of Securities consists of the
Warrants, you, regardless of whether you are a U.S. or a non-U.S. stockholder,
should not recognize gain or loss on the subsequent exercise of the Warrants for
Atlantic Common Stock. Your tax basis in such Atlantic Common Stock should equal
your adjusted tax basis in the Warrants exercised, increased by the price you
pay to exercise the Warrants to acquire Atlantic Common Stock, and your holding
period for such Atlantic Common Stock should commence on the date of the
exercise of the Warrants for Atlantic Common Stock.
You should consult your own tax advisor as to the consequences of the
Transaction. This section is only a brief summary of some of the U.S. federal
tax implications of the Transaction, for more information, see "MATERIAL U.S.
FEDERAL INCOME TAX CONSIDERATIONS" as set forth on page 114.
21
ANTICIPATED ACCOUNTING TREATMENT
Based on the current third party valuation, the exchange will be
accounted for as a modification of debt. The fees paid in connection with the
exchange (i.e., consent fee), are amortized over the term of the New Notes using
the effective yield method. All external costs (i.e., legal, accountants, etc.)
associated with the issuance of the New Notes will be expensed.
COMPARATIVE MARKET PRICE INFORMATION
The common stock of Parent is currently listed on the AMEX under the symbol
"GBH." Public trading of the common stock of Parent and the Existing Notes
commenced on March 27, 2001. This table sets forth, for the periods indicated,
the high and low closing sales prices for the common stock of Parent as reported
on the AMEX. Parent's fiscal year ends on December 31 of each year.
High Low
------ -----
Fiscal year ended December 31, 2001
First quarter..................................... $12.500 12.250
Second quarter.................................... $12.250 3.000
Third quarter..................................... $ 3.500 1.660
Fourth quarter.................................... $ 2.940 1.500
Fiscal year ended December 31, 2002
First quarter..................................... $ 3.110 2.450
Second quarter.................................... $ 3.150 2.220
Third quarter..................................... $ 3.160 2.250
Fourth quarter.................................... $ 3.190 2.620
Quarter ended March 31, 2003...................... $ 3.09 2.25
Quarter ended June 30, 2003....................... $ 6.75 2.50
Parent has never paid any dividends. The payment of future dividends, other than
the distribution of Atlantic Securities to the stockholders of Parent, will be
made, if at all, at the discretion of the Board, in a manner competitive with
other companies in the gaming industry.
As of October 10, 2003, Parent had nine stockholders of record.
The following table presents the last reported sale price per share of the
common stock of Parent as reported on AMEX on July 11, 2003, the last full
trading day prior to the public announcement of the Transaction, and on
November 12, 2003, the last trading day for which this information could be
obtained prior to the date of this document.
July 14, 2003................................................... $3.64
November 12, 2003, 2003......................................... $2.85
There is currently no established trading market for the
Atlantic Common Stock. At this time, (i) there is no Atlantic Common Stock
subject to outstanding warrants or options; (ii) there are no shares of Atlantic
Common Stock eligible for resale pursuant to Rule 144; and (iii) Atlantic
proposes to publicly offer (a) up to 2,750,000 shares of Atlantic Common Stock
or up to 10,000,000 Warrants (exercisable for 2,750,000 shares of Atlantic
Common Stock);
22
and (b) up to 7,250,000 shares of Atlantic Common Stock issuable upon payment of
the New Notes in the form of Atlantic Common Stock or conversion, in whole or in
part, of the New Notes into Atlantic Common Stock.
After the Transaction is completed, affiliates of Mr. Icahn may
beneficially own (i) approximately 63.4% (on a fully diluted basis) of the
outstanding Atlantic Common Stock, if more than 58%, but less than 100% of
the Existing Notes exchange for the New Notes such affiliates may beneficially
own up to an additional 23.5% of the outstanding Atlantic Common Stock because
of such affiliates ownership of 77% of the outstanding common stock of Parent
and (ii) at least 58% of the aggregate principal amount outstanding of the New
Notes.
After the Transaction is completed, affiliates of HMC Investors L.L.C.
may beneficially own approximately 3.2% (on a fully diluted basis) of the
outstanding Atlantic Common Stock, if more than 58%, but less than 100% of the
Existing Notes exchange for the New Notes such affiliates may beneficially own
up to an additional 3.6% of the outstanding Atlantic Common Stock because of
such affiliates ownership of 11.65% of the common stock of Parent. Information
concerning HMC Investors, L.L.C. and its affiliates is derived from a Statement
of Changes in Beneficial Ownership on Form 4 filed with the SEC on October 23,
2003.
23
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents Parent and its subsidiaries' (the "Parent
Company") selected historical consolidated financial and operating data. The
selected historical financial and operating data should be read in conjunction
with, and is qualified in its entirety by reference to, "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PARENT AND ITS
SUBSIDIARIES" as set forth on page 89, and the historical consolidated
financial statements and notes to the Parent Company's historical consolidated
financial statements, each of which is included elsewhere in this proxy
statement prospectus. The unaudited consolidated financial statements of
operations data for the six months ended June 30, 2002 and 2003, and the
unaudited consolidated balance sheet data as of the last day of each of these
periods are derived from the Parent Company's unaudited consolidated interim
financial statements for those periods and have been prepared on a basis
consistent with the audited consolidated financial statements and, in the
opinion of management, include all adjustments consisting only of normal
recurring adjustments, necessary for a fair presentation of such data. The
results for the six months ended June 30, 2002 and 2003, are not necessarily
indicative of the results to be expected for the full year. The consolidated
statements of operations data for 1998, 1999, 2000, 2001 and 2002 and the
consolidated balance sheet data as of the last day of each of these years are
derived from the Parent Company's historical audited consolidated financial
statements. The financial statements for 1998, 1999, 2000, and 2001 have been
audited by Arthur Andersen LLP, independent public accountants, whose report is
included elsewhere in this proxy statement/prospectus. The financial statements
for 2002 have been audited by KPMG LLP, independent accountants, whose report is
included elsewhere in this proxy statement/prospectus.
The historical financial information is not indicative of Parent's or
Atlantic's future performance. For additional information, see "COMPARATIVE
UNAUDITED HISTORICAL AND PRO FORMA PER SHARE DATA" as set forth on page 26.
Parent implemented SOP 90-7 and, therefore, adopted "fresh start
reporting" as of September 30, 2000. Parent's emergence from its Chapter 11
proceedings resulted in a new reporting entity with no retained earnings or
accumulated deficit as of September 30, 2000. Accordingly, Parent's consolidated
financial statements for periods prior to September 30, 2000 are not comparable
to consolidated financial statements presented on or subsequent to September 30,
2000. Column headings have been included on the accompanying Consolidated
Statement of Operations Data and Consolidated Balance Sheet Data to distinguish
between the pre-reorganization and post-reorganization entities. A black line
has been drawn on the accompanying consolidated financial statements data to
distinguish between the pre-reorganization and post-reorganization entities.
24
GB HOLDINGS, INC. AND SUBSIDIARIES
(dollars in thousands except income per share data)
STATEMENT OF OPERATIONS DATA: POST-ORGANIZATION
----------------------------------------------------------------------
Six Months Six Months 10/01/00
Ended Ended Year Ended Year Ended through
6/30/03 6/30/02 12/31/02 12/31/01 12/31/00(1)
--------- --------- ---------- ---------- -----------
Net revenues $ 85,831 $102,826 $ 193,473 $ 215,749 $ 46,711
--------- -------- --------- --------- ----------
Expenses
Departmental.............................. 71,857 80,963 159,714 185,255 45,427
General and administrative................ 5,261 6,944 12,799 11,512 2,175
Depreciation and amortization including
provision for obligatory investments.... 7,678 6,865 15,457 12,133 3,834
Loss on impairment of fixed assets........ - 1,282 1,282 - -
Loss (gain) on disposal of fixed assets... 3 (52) 185 20 11
--------- -------- --------- --------- ----------
Total Expenses...................... 84,799 96,002 189,437 208,920 51,447
--------- -------- --------- --------- ----------
Income (loss) from operations............. 1,032 6,824 4,036 6,829 (4,736)
--------- -------- --------- --------- ----------
Non-operating income (expense):
Interest income........................... 361 530 1,067 2,671 1,338
Interest expense.......................... (5,958) (5,682) (11,640) (11,279) (3,133)
Reorganization and other related costs.... - - - - 34
Gain on prepetition debt discharge........ - - - - -
--------- -------- --------- --------- ----------
Total non-operating income (expense),
net................................. (5,597) (5,152) (10,573) (8,608) (1,761)
--------- -------- --------- --------- ----------
Income (loss) before income taxes............ (4,565) 1,672 (6,537) (1,779) (6,497)
Income tax provision......................... (343) (632) (784) (55) -
--------- -------- --------- --------- ----------
Net income (loss)............................ $(4,908) $ 1,040 $ (7,321) $ (1,834) $ (6,497)
========= ======== ========= ========= ==========
Basic/diluted income (loss) per common share. $ (0.49) $ 0.10 $ (0.73) $ (0.18) $ (0.65)
========= ======== ========= ========= ==========
Weighted average common shares
outstanding............................. 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
========== ========== ========== ========== ===========
Ratio of earnings to fixed charges (3) - 1.2 - - -
--------- -------- --------- --------- ----------
STATEMENT OF OPERATIONS DATA: PRE-ORGANIZATION
-------------------------------------------
1/1/00
through Year Ended Year Ended
9/30/00(1) 12/31/99 (1) 12/31/98 (1)
---------- ------------ ------------
Net revenues $162,463 $209,811 $199,918
-------- -------- --------
Expenses
Departmental.............................. 131,985 178,188 165,106
General and administrative................ 7,663 10,586 12,497
Depreciation and amortization including
provision for obligatory investments.... 9,414 16,215 12,795
Loss on impairment of fixed assets........ - - -
Loss (gain) on disposal of fixed assets... 10 (259) (252)
-------- -------- --------
Total Expenses...................... 149,072 204,730 190,146
-------- -------- --------
Income (loss) from operations............. 13,391 5,081 9,772
-------- -------- --------
Non-operating income (expense):
Interest income........................... 518 649 961
Interest expense.......................... (366) (295) (313)
Reorganization and other related costs.... (2,807) (2,154) (4,069)
Gain on prepetition debt discharge........ 14,795 - -
-------- -------- --------
Total non-operating income (expense),
net................................. 12,140 (1,800) (3,421)
-------- -------- --------
Income (loss) before income taxes............ 25,531 3,281 6,351
Income tax provision......................... - (133) -
-------- -------- --------
Net income (loss)............................ $25,531 $ 3,148 $ 6,351
======== ======== ========
Basic/diluted income (loss) per common share. $ 2.55(2) $ 0.32(2) $ 0.64 (2)
======== ======== ========
Weighted average common shares
outstanding............................. 10,000,000 10,000,000 10,000,000
========== ========== ==========
Ratio of earnings to fixed charges (3) 20.2 6.2 9.3
--------- ---------- ----------
BALANCE SHEET DATA: POST-REORGANIZATION
------------------------------------------------------------------------------------
6/30/03 6/30/02 12/31/02 12/31/01 12/31/00 9/30/00
-------- --------- ---------- ---------- ----------- ----------
Total assets.............................. $240,060 $254,094 $ 244,712 $ 255,922 $ 264,247 272,676
Total long-term debt...................... 110,000 110,342 110,000 110,371 110,838 110,858
Shareholder's equity (deficit)............ 104,440 117,709 109,348 116,669 118,503 125,000
BALANCE SHEET DATA: PRE-REORGANIZATION
----------------------------
12/31/99 12/31/98
------------ ------------
Total assets.............................. $208,416 $199,148
Total long-term debt...................... 197,898 198,234
Shareholder's equity (deficit)............ (39,593) (42,741)
- -----------------
(1) On January 5, 1998, Holdings, GB Property Funding and GBHC filed petitions
for relief under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the District of New Jersey. The accrual
of interest expense on the First Mortgage Notes, the Subordinated Notes (as
hereafter defined) and other affiliate advances for periods subsequent to
the filing was suspended.
(2) Income (loss) per share information is presented on a pro forma basis for
periods presented prior to the effective date of the plan of
reorganization.
(3) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes plus fixed charges. Fixed
charges consist of interest and amortization of debt expense plus one-third
of operating lease expense that we believe is representative of the
interest factor. There was a deficiency of earnings to fixed charges for
the three months ended December 31, 2000, for the years ended December 31,
2001 and 2002 and the six months ended June 30, 2003 of $6.5 million, $3.0
million, $7.3 million and $4.8 million, respectively.
25
COMPARATIVE UNAUDITED HISTORICAL AND PRO FORMA PER SHARE DATA
The following table sets forth the historical net loss and the book
value per share of the common stock of Parent, and the combined per share data
for Atlantic on an unaudited pro forma basis after giving effect to the proposed
Transaction, assuming alternatively that (i) holders of 58% of the outstanding
aggregate principal amount of the Existing Notes elect to exchange their
Existing Notes for New Notes (but have not received Atlantic Common Stock, upon
conversion or payment for such New Notes); (ii) holders of 80% of the
outstanding aggregate principal amount of the Existing Notes elect to exchange
their Existing Notes for New Notes (but have not received Atlantic Common Stock,
upon conversion or payment for such New Notes); and (iii) holders of 100% of the
outstanding aggregate principal amount of the Existing Notes elect to exchange
their Existing Notes for New Notes (but have not received Atlantic Common Stock,
upon conversion or payment for such New Notes). The following data should be
read in connection with the separate historical consolidated financial
statements of Parent and pro forma combined financial statements which are
included in this proxy statement/prospectus.
The unaudited pro forma combined per share data is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the Transaction had
been consummated at the beginning of the earliest period presented, nor is it
necessarily indicative of future operating results or financial position. The
pro forma adjustments are estimates based on information and assumptions
available at the time of the filing of this proxy statement/prospectus.
Additional information regarding the pro forma information of Parent
and Atlantic is set forth in the "FINANCIAL STATEMENTS -- Notes to the Financial
Statements" on pages F-8 to F-35
26
GB HOLDINGS, INC. AND SUBSIDIARIES
(dollars in thousands except income per share data)
PRO FORMA STATEMENT OF OPERATIONS DATA:
YEAR ENDED DECEMBER 31, 2002
---------------------------------------------------------------
PRO FORMA AT
-----------------------------------------------
100% 80% 58%
HISTORICAL EXCHANGED EXCHANGED EXCHANGED
------------ ---------------- ------------ ------------
Net revenues ........................................... $ 193,473 $ -- $ 193,473 $ 193,473
------------ ---------------- ------------ ------------
Expenses:
Departmental ..................................... 159,714 -- 159,714 159,714
General and administrative ....................... 12,799 -- 14,299 14,299
Depreciation and amortization including
provision for obligatory investments ........ 15,457 -- 15,210 15,210
Loss on impairment of assets ..................... 1,282 -- 1,282 1,282
Loss (gain) on disposal of fixed assets .......... 185 -- 185 185
------------ ---------------- ------------ ------------
Total Expenses ............................... 189,437 -- 190,690 190,690
------------ ---------------- ------------ ------------
Income from operations ........................... 4,036 -- 2,783 2,783
------------ ---------------- ------------ ------------
Non-operating income (expense):
Interest income .................................. 1,067 -- 931 961
Interest expense ................................. (11,640) -- (6,044) (7,498)
------------ ---------------- ------------ ------------
Total non-operating expense, net ............. (10,573) -- (5,113) (6,537)
------------ ---------------- ------------ ------------
Loss before income taxes ............................... (6,537) -- (2,330) (3,754)
Income tax provision ................................... (784) (1,900) (784) (784)
------------ ---------------- ------------ ------------
Net loss ............................................... $ (7,321) $ (1,900) $ (3,114) $ (4,538)
============ ================ ============ ============
Basic/diluted income (loss) per common share ........... $ (0.73) $ (0.19) $ (0.31) $ (0.45)
============ ================ ============ ============
Weighted average common shares
outstanding .................................. 10,000,000 10,000,000 10,000,000 10,000,000
============ ================ ============ ============
Ratio of earnings to fixed charges (1) ........... -- N/A -- --
------------ ---------------- ------------ ------------
Book value per share ............................. $ 10.93 N/A N/A N/A
------------ ---------------- ------------ ------------
Income (loss) per share from continuing operations $ (0.65) $ 0.00 $ (0.23) $ (0.38)
------------ ---------------- ------------ ------------
BALANCE SHEET DATA:
Total assets ........................................... $ 244,712
Total long-term debt ................................... 110,000
Shareholder's equity ................................... 109,348
(1) For purposes of computing the ratio of earnings to fixed charges,
earnings consist of loss before income taxes plus fixed charges. Fixed
charges consist of interest and amortization of debt expense plus
one-third of operating lease expense that we believe is representative
of the interest factor. There was a deficiency of earnings to fixed
charges for the year ended December 31, 2002 as historically reported
and assuming an 80% and 58% exchange of $7.3 million, $2.7 million and
$4.3 million, respectively.
27
GB HOLDINGS, INC. AND SUBSIDIARIES
(dollars in thousands except income per share data)
PRO FORMA STATEMENT OF OPERATIONS DATA:
SIX MONTHS ENDED JUNE 30, 2003
---------------------------------------------------------------
PRO FORMA AT
-----------------------------------------------
100% 80% 58%
HISTORICAL EXCHANGED EXCHANGED EXCHANGED
------------ ---------------- ------------ ------------
Net revenues ........................................... $ 85,831 $ -- $ 85,831 $ 85,831
------------ ---------------- ------------ ------------
Expenses:
Departmental ..................................... 71,857 -- 71,857 71,857
General and administrative ....................... 5,261 -- 5,261 5,261
Depreciation and amortization including
provision for obligatory investments ......... 7,678 -- 7,555 7,555
Loss (gain) on disposal of assets ................ 3 -- 3 3
------------ ---------------- ------------ ------------
Total Expenses ............................... 84,799 -- 84,676 84,676
------------ ---------------- ------------ ------------
Income from operations ........................... 1,032 -- 1,155 1,155
------------ ---------------- ------------ ------------
Non-operating income (expense):
Interest income .................................. 361 -- 355 354
Interest expense ................................. (5,958) -- (3,094) (3,849)
------------ ---------------- ------------ ------------
Total non-operating expense, net ............. (5,597) -- (2,739) (3,495)
------------ ---------------- ------------ ------------
Loss before income taxes ............................... (4,565) -- (1,583) (2,340)
Income tax provision ................................... (343) -- (344) (343)
------------ ---------------- ------------ ------------
Net loss ............................................... $ (4,908) $ -- $ (1,927) $ (2,683)
============ ================ ============ ============
Basic/diluted income (loss) per common share ........... $ (0.49) $ -- $ (0.19) $ (0.27)
============ ================ ============ ============
Weighted average common shares
outstanding .................................. 10,000,000 10,000,000 10,000,000 10,000,000
============ ================ ============ ============
Ratio of earnings to fixed charges (1) ........... -- N/A -- --
------------ ---------------- ------------ ------------
Book value per share ............................. $ 10.44 N/A $ 10.29 $ 10.29
------------ ---------------- ------------ ------------
Income (loss) per share from continuing operations $ (0.46) N/A $ (0.16) $ (0.23)
------------ ---------------- ------------ ------------
BALANCE SHEET DATA:
Total assets ........................................... $ 240,060 $ -- $ 236,140 $ 236,805
Total long-term debt ................................... 110,000 -- 110,000 110,000
Shareholder's equity ................................... 104,440 -- 102,904 102,940
(1) For purposes of computing the ratio of earnings to fixed charges,
earnings consist of loss before income taxes plus fixed charges. Fixed
charges consist of interest and amortization of debt expense plus
one-third of operating lease expense that we believe is representative
of the interest factor. There was a deficiency of earnings to fixed
charges for the six months ended June 30, 2003 as historically
reported and assuming an 80% exchange and a 58% exchange of $4.8
million, $1.7 million and $2.5 million, respectively.
28
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. & SUBSIDIARY
(dollars in thousands except income per share data)
PRO FORMA STATEMENT OF OPERATIONS DATA:
YEAR ENDED DECEMBER 31, 2002
------------------------------------------------------------
PRO FORMA AT
--------------------------------------------
100% 80% 58%
HISTORICAL EXCHANGED EXCHANGED EXCHANGED
------------- ------------- -------------- -------------
Net revenues $ $ 193,473 $ 193,473 $ 193,473
------------- ------------- -------------- -------------
Expenses:
Departmental ....................................... 159,714 159,714 159,714
General and administrative ......................... 14,299 14,299 14,299
Depreciation and amortization including
provision for obligatory investments .......... 14,902 14,902 14,902
Loss on impairment of fixed assets ................. 1,282 1,282 1,282
Loss on disposal of assets ......................... 185 185 185
------------- ------------- -------------- -------------
Total Expenses ................................. -- 190,382 190,382 190,382
------------- ------------- -------------- -------------
Income from operations ............................. -- 3,091 3,091 3,091
------------- ------------- -------------- -------------
Non-operating income (expense):
Interest income .................................... 905 931 961
Interest expense ................................... (4,721) (3,735) (2,650)
------------- ------------- -------------- -------------
Total non-operating expense, net ............... -- (3,816) (2,804) (1,689)
------------- ------------- -------------- -------------
Income (loss) before income taxes ........................ (725) 287 1,402
Income tax provision ..................................... (784) (784) (784)
------------- ------------- -------------- -------------
Net income (loss) ........................................ $ -- $ (1,509) $ (497) $ 618
============= ============= ============== =============
Basic income (loss) per common share ..................... $ $ (0.55) $ (0.34) $ 0.20
============= ============= ============== =============
Weighted average common shares
outstanding .................................... 0 2,750,000 1,450,000 3,045,000
============= ============= ============== =============
Fully diluted income per common share .................... $ N/A $ N/A $ N/A $ 0.10
============= ============= ============== =============
Weighted average fully diluted common shares
outstanding .................................... 0 2,750,000 1,450,000 7,250,000
============= ============= ============== =============
Ratio of earnings to fixed charges (1) ............. N/A - 1.02 1.41
------------- ------------- -------------- -------------
Book value per share ............................... N/A N/A N/A N/A
------------- ------------- -------------- -------------
Income (loss) per share from continuing operations.. N/A (0.26) 0.20 0.46
------------- ------------- -------------- -------------
(1) For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income (loss) before income taxes plus fixed
charges. Fixed charges consist of interest and amortization of debt
expense plus one-third of operating lease expense that we believe is
representative of the interest factor. There was a deficiency of
earnings to fixed charges for the year ended December 31, 2002
assuming a 100% exchange of $934,000.
29
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. & SUBSIDIARY
(dollars in thousands except income per share data)
PRO FORMA STATEMENT OF OPERATIONS DATA:
SIX MONTHS ENDED JUNE 30, 2003
---------------------------------------------------------------
PRO FORMA AT
-----------------------------------------------
100% 80% 58%
HISTORICAL EXCHANGED EXCHANGED EXCHANGED
------------ ------------- ------------- -------------
Net revenues $ $ 85,831 $ 85,831 $ 85,831
------------ ------------- ------------- -------------
Expenses:
Departmental ....................................... 71,857 71,857 71,857
General and administrative ......................... 5,261 5,261 5,261
Depreciation and amortization including
provision for obligatory investments .......... 7,401 7,401 7,401
Loss on disposal of assets ......................... 3 3 3
------------ ------------- ------------- -------------
Total Expenses ................................. -- 84,522 84,522 84,522
------------ ------------- ------------- -------------
Income from operations ............................. -- 1,309 1,309 1,309
------------ ------------- ------------- -------------
Non-operating income (expense):
Interest income .................................... 357 355 354
Interest expense ................................... (2,407) (1,914) (1,372)
------------ ------------- ------------- -------------
Total non-operating expense, net ............... -- (2,050) (1,559) (1,018)
------------ ------------- ------------- -------------
Loss before income taxes ................................. (741) (250) 291
Income tax provision ..................................... (343) (343) (343)
------------ ------------- ------------- -------------
Net income (loss) ........................................ $ -- $ (1,084) $ (593) $ (52)
============ ============= ============= =============
Basic/diluted loss per common share ...................... $ $ (0.39) $ (0.41) $ (0.02)
============ ============= ============= =============
Weighted average common shares
outstanding .................................... 0 2,750,000 1,450,000 3,045,000
============ ============= ============= =============
Ratio of earnings to fixed charges (1) ............. N/A - - 1.16
------------ ------------- ------------- -------------
Book value per share ............................... N/A $ 37.46 $ 71.46 $ 34.25
------------ ------------- ------------- -------------
Income (loss) per share from continuing operations . N/A $ (0.27) $ (0.17) $ 0.10
------------ ------------- ------------- -------------
BALANCE SHEET DATA:
Total assets ............................................. $ N/A $ 235,535 $ 236,140 $ 236,806
Total long-term debt ..................................... N/A 110,000 110,000 110,000
Shareholder's equity ..................................... N/A 103,007 103,612 104,277
(1) For purposes of computing the ratio of earnings to fixed charges,
earnings consist of loss before income taxes plus fixed charges. Fixed
charges consist of interest and amortization of debt expense plus
one-third of operating lease expense that we believe is representative
of the interest factor. There was a deficiency of earnings to fixed
charges for the six months ended June 30, 2003 assuming a 100%
exchange and an 80% exchange of $799,000 and $307,000, respectively.
30
CAPITALIZATION
ATLANTIC
The following table sets forth the consolidated capitalization of
Atlantic and its subsidiary as of June 30, 2003 on an actual basis, as adjusted
to give effect to the exchange offer assuming 58% exchange, as adjusted to give
effect to the exchange offer assuming 80% exchange, and as adjusted to give
effect to the exchange offer assuming 100% exchange:
As of June 30, 2003
----------------------------------------------------------------------------
As adjusted As adjusted As adjusted
Actual (58% exchange) (80% exchange) 100% exchange)
------------ -------------- -------------- -------------
($ in thousands)
Cash and cash equivalents .......... $ - $ 36,868 $ 33,782 $ 30,977
------------ ------------ ------------ ------------
Long-term debt, net of current
maturities ...................... $ - $ 110,000 $ 110,000 $ 110,000
------------ ------------ ------------ ------------
Shareholders' Equity:
Preferred stock, par value $.01
per share; 5,000,000 shares
authorized, 0 shares outstanding - - - -
Common stock, par value $0.01 per
share; 20,000,000 shares
authorized, 3,045,000, 1,450,000
and 2,750,000 shares outstanding
on an as adjusted basis ........ - 30 15 28
Additional paid in capital ...... - 70,248 70,597 102,979
Warrants outstanding ............ - 34,000 33,000 -
Accumulated deficit ............. - - - -
------------ ------------ ------------ ------------
Total shareholders' equity ...... - 104,278 103,612 103,007
------------ ------------ ------------ ------------
Total capitalization ............... $ - $ 251,146 $ 247,394 $ 243,984
============ ============ ============ ============
31
PARENT
The following table sets forth the consolidated capitalization of
Parent and its subsidiaries as of June 30, 2003 on an actual basis, as adjusted
to give effect to the exchange offer assuming 58% exchange, as adjusted to give
effect to the exchange offer assuming 80% exchange, and as adjusted to give
effect to the exchange offer assuming 100% exchange:
As of June 30, 2003
---------------------------------------------------------------------
As adjusted As adjusted As adjusted
Actual (58% exchange) (80% exchange) (100% exchange)
---------- -------------- -------------- ---------------
($ in thousands)
Cash and cash equivalents .......... $ 46,502 $ 36,867 $ 33,782 $ -
--------- --------- --------- ----------
Long-term debt, net of current .....
maturities ...................... $ 110,000 $ 110,000 $ 110,000 $ -
--------- --------- --------- ----------
Shareholders' Equity:
Preferred stock, par value $.01
per share; 5,000,000 shares
authorized, 0 shares outstanding - - - -
Common stock, par value $0.01 per
share; 20,000,000 shares
authorized; 10,000,000 shares
issued and outstanding ......... 100 100 100 -
Additional paid in capital ...... 124,900 90,900 91,900 -
Warrants outstanding ............ - 34,000 33,000 -
Accumulated deficit ............. (20,560) (22,060) (22,096) -
--------- --------- --------- ----------
Total shareholders' equity ...... 104,440 102,940 102,904 -
--------- --------- --------- ----------
Total capitalization ............... $ 260,942 $ 249,807 $ 246,686 $ -
========= ========= ========= ==========
32
RISK FACTORS
IN DECIDING WHETHER TO APPROVE THE TRANSACTION, PARENT AND ATLANTIC
URGE YOU TO READ THIS PROXY STATEMENT AND PROSPECTUS AND THE DOCUMENTS ANNEXED
TO THIS PROXY STATEMENT AND PROSPECTUS CAREFULLY. YOU SHOULD ALSO CONSIDER THE
RISK FACTORS DESCRIBED BELOW.
RISK FACTORS RELATED TO THE TRANSACTION
IF THE TRANSACTION IS NOT APPROVED BY THE STOCKHOLDERS OF PARENT OR NOT
COMPLETED, FUNDING AND THE GUARANTORS OF THE EXISTING NOTES, WHICH INCLUDES
PARENT AND OPERATING, MAY BE UNABLE TO PAY THE PRINCIPAL DUE ON THE EXISTING
NOTES AT MATURITY.
The Board believes that the completion of the Transaction is critical
to the continuing viability of The Sands. The Existing Notes mature on September
29, 2005, and are guaranteed by Parent and Operating. Funding and the guarantors
of the Existing Notes do not currently anticipate having sufficient cash to
repay the outstanding principal amount of the Existing Notes at maturity, absent
a refinancing of the Existing Notes. The purpose of the Transaction is to
exchange the Existing Notes for New Notes which will have the effect of
extending the maturity date of the Existing Notes, reducing the rate of interest
and delaying the payment of interest until maturity of the New Notes in 2008 in
order for Parent and its affiliates to have more available cash to improve
Parent's financial performance. If the Transaction is not approved, Parent will
need to pursue alternative methods to refinance the Existing Notes, or seek
other forms of financing. Parent currently has no arrangement for an alternative
method to refinance the Existing Notes and is not seeking new financing, and
there can be no assurance that such alternatives can be arranged on favorable
terms, if at all. Even if the stockholders of Parent holding a majority of the
outstanding shares of common stock of Parent vote to approve the proposal,
Parent cannot guarantee that the Transaction will be completed. If the
Transaction is not completed, and Parent is unable to refinance the Existing
Notes or obtain additional financing, Parent may not be able to pay the Existing
Notes at their maturity in 2005, which would mean that Parent could be required
to file for or be forced to resort to bankruptcy protection. In addition, if
Parent is unable to consummate the Transaction the Licensee may be unable to
obtain renewal of its casino license when renewal is required in 2004.
AS THE HOLDERS OF A SIGNIFICANT AMOUNT OF NEW NOTES AND PARENT COMMON STOCK,
AFFILIATES OF CARL C. ICAHN WILL HAVE SUBSTANTIAL INFLUENCE OVER PARENT AND
ATLANTIC, AND SUCH AFFILIATES MAY HAVE INTERESTS WHICH DIFFER FROM OTHER
HOLDERS.
Affiliates of Carl C. Icahn (a) beneficially own approximately 77% of
the total voting power of Parent, (b) own approximately 58% aggregate principal
amount outstanding of the Existing Notes and (c) following the consummation of
the Transaction may own at least 58% of the aggregate principal amount
outstanding of the New Notes. Affiliates of Mr. Icahn have indicated their
support of the Transaction, their intent to vote in favor of the Transaction,
and their intent to tender for exchange their Existing Notes. As such, Mr.
Icahn's affiliates will have substantial influence and control over matters
voted upon by stockholders (such as the election of the directors to the Board
of Directors of Parent, mergers and sale of assets involving Parent and other
matters upon which stockholders, of either Parent or Atlantic, vote). This
power, in turn, gives them substantial control over the business of both Parent
and Atlantic. As a result, upon completion of the Transaction, affiliates of Mr.
Icahn may (a) beneficially own 77% of the Common Stock of Parent, (b)
beneficially approcimately 63.4% (on fully dliuted basis) the Atlantic Common
Stock approximately 63.4% (on a fully diluted basis) of the outstanding Atlantic
Common Stock, if more than 58%, but less than 100% of the Existing Notes
exchange for the New Notes such affiliates may beneficially own up to an
additional 23.5% of the outstanding Atlantic Common Stock because of such
affiliates ownership of 77% of the outstanding common stock of Parent, (c) own
at least 58% of the outstanding amount of the New Notes, and (d) control the
Atlantic Common Stock held by Parent through its beneficial ownership of 77% of
the outstanding common stock of Parent. Therefore, Mr. Icahn's affiliates may
have the ability to:
o elect the Board; and
o approve transactions of Parent that may have a significant impact
including mergers or a sale of all, or substantially all, of the
assets of Parent.
33
o determine when and whether the New Notes will be paid in cash at
maturity or paid in or converted into Atlantic Common Stock, at or
prior to, maturity;
o waive events of default under the New Indenture;
o approve certain amendments to the New Indenture;
o approve the release of collateral securing the New Notes;
o direct the actions of the trustee under the New Indenture
governing the New Notes;
Additionally, affiliates of Mr. Icahn are actively involved in the
gaming industry and casinos owned or managed by him or his affiliates may
directly or indirectly compete with Parent and Atlantic. Furthermore, the
potential for conflicts of interest exists among Parent or Atlantic, and Mr.
Icahn for future business opportunities. Mr. Icahn may pursue other business
opportunities and there is no agreement requiring that such additional business
opportunities be presented to Parent or Atlantic.
UPON CONSUMMATION OF THE TRANSACTION, PARENT'S SOLE ASSET WILL BE ATLANTIC
COMMON STOCK WHICH WILL HAVE LIMITED LIQUIDITY.
Immediately upon consummation of the Transaction, assuming less than
100% of the Existing Notes are exchanged, Parent will be the sole owner of
Atlantic Common Stock and such stock will be its sole asset. If less than 100%
of the Existing Notes are exchanged, there will be no "public float" of Atlantic
Common Stock (i.e., shares owned by persons and entities unaffiliated with
Atlantic) immediately upon consummation of the Transaction. Upon completion of
the Transaction, it is anticipated that affiliates of Mr. Icahn may beneficially
own an amount of the Atlantic Common Stock that is approximately 63.4% (on a
fully diluted basis) of the outstanding Atlantic Common Stock, if more than 58%,
but less than 100% of the Existing Notes exchange for the New Notes such
affiliates may beneficially own up to an additional 23.5% of the outstanding
Atlantic Common Stock because of such affiliates ownership of 77% of the
outstanding common stock of Parent. See "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF ATLANTIC AND PARENT" as set forth on page
[___]. The market price of Atlantic Common Stock, accordingly, may not be
indicative of the market price of Atlantic Common Stock in a more liquid market
or of Atlantic's financial performance or business prospects.
THE SUBSTANTIAL DEBT OF ATLANTIC AND PARENT COULD ADVERSELY AFFECT ATLANTIC.
After the completion of the Transaction, it is anticipated that Atlantic and
Parent will have a significant amount of debt outstanding. Pursuant to the terms
of the Contribution Agreement among Parent, Operating, and Atlantic, Atlantic
will undertake to provide to Parent the funds necessary to continue to pay
scheduled interest on the Existing Notes that remain outstanding after the
completion of the Transaction, through their maturity date on September 29,
2005, subject to sufficient funds being available to make such payments. You
should be aware that this level of debt could have important consequences to
you, as a stockholder of Parent and either stockholder or holder of Warrants of
Atlantic, if the Transaction is consummated. Below Parent and Atlantic have
identified some of the material potential consequences resulting from this
significant amount of debt.
- significant payments may be required to be paid to Parent for
interest payments on the unexchanged Existing Notes and operating
expenses of Parent pursuant to the terms of the Contribution
Agreement between Parent, Operating and Atlantic, thereby reducing
the amount of cash available for other purposes, including
reinvestment in Atlantic;
- Atlantic may be unable to obtain additional financing for working
capital, capital expenditures, acquisitions and general corporate
purposes; and
- Atlantic's ability to adjust to changing market conditions may be
hampered.
34
Atlantic cannot assure you that it will continue to generate sufficient cash
flow to enable it to meet its working capital and capital expenditure
requirements or pay Atlantic's principal and interest obligations under the New
Notes when the same become due and payable in 2008. If Atlantic is not able to
generate sufficient cash flow from operations or to borrow sufficient funds to
service its debt, it may be required to sell assets or allow Parent to default
on the Existing Notes, reduce capital expenditures, refinance all or a portion
of Atlantic or Parent's existing debt including the Existing Notes, or obtain
additional financing.
Atlantic and its affiliates may be able to incur substantial additional
indebtedness in the future. Although Atlantic's ability to incur additional debt
will be restricted under the covenants contained in the New Indenture, these
restrictions are subject to a number of qualifications and exceptions, and the
indebtedness incurred in compliance with these restrictions could be
substantial. To the extent new debt is added to Atlantic's currently anticipated
debt levels, the substantial leverage risks described above would increase.
Also, these restrictions do not prevent Atlantic from incurring obligations that
do not constitute indebtedness.
IF THE TRANSACTION IS NOT COMPLETED OPERATING MAY BE UNABLE TO OBTAIN RENEWAL
FROM THE CCC OF THE CASINO LICENSE THAT IS NECESSARY TO OPERATE THE SANDS DUE TO
THE OUTSTANDING DEBT OF PARENT.
Pursuant to New Jersey law, Operating is required to maintain a casino license
in order to operate The Sands. See "-- Risk Factors Related to the Gaming
Industry -- Gaming is a regulated industry and changes in the law could have a
material adverse effect on our ability to conduct gaming" as set forth on page
[___]. The gaming licenses required to own and operate The Sands must be renewed
in 2004 and if Parent is unable to make the required payments pursuant to the
Existing Notes or if it is likely that Parent will not be able to pay the
principal when it becomes due in 2005, Operating, a wholly owned subsidiary of
Parent, may be unable to obtain renewal of its casino license required to own
and operate The Sands due to the outstanding debt of Parent. Operating's
inability to renew the casino license will have a material adverse effect on
Parent and prevent the continued operation of The Sands.
YOU CANNOT CONTROL WHAT KIND OF ATLANTIC SECURITY YOU WOULD RECEIVE AS PART OF
THE TRANSACTION.
Whether you receive Atlantic Common Stock or Warrants is determined by
the percentage of the aggregate principal amount outstanding of the Existing
Notes that holders of such Existing Notes agree to exchange for the New Notes as
part of the Exchange Offer. If the holders of 100% of the $110 million aggregate
principal amount outstanding of Existing Notes agree to exchange such Existing
Notes for New Notes, Parent will distribute 0.275 shares of Atlantic Common
Stock to you for every one share of the common stock of Parent that you
currently own. If the holders of less than 100% of the $110 million aggregate
principal amount outstanding of Existing Notes agree to exchange such notes for
New Notes, Parent will distribute Warrants to purchase 0.275 shares of Atlantic
Common Stock to you for every share of the common stock of Parent that you
currently own. You will not have an opportunity to select whether you receive
Atlantic Common Stock or Warrants; you can only vote to approve or reject the
Transaction in its entirety.
THE WARRANTS WILL NOT BE EXERCISABLE UNTIL SPECIFIED CONDITIONS ARE MET, MAY
ONLY BE EXERCISABLE FOR A LIMITED PERIOD OF TIME, AND MAY NOT BE EXERCISABLE
IMMEDIATELY.
The Warrants are not immediately exercisable. The Warrants will only
become exercisable at the election of the holders at any time following the
earlier of (i) the conversion of one or more of the New Notes or the payment in
the form of shares of Atlantic Common Stock as full satisfaction of the
principal and accrued interest due pursuant to the New Notes; (ii) a
determination of the Board of Directors of Atlantic that the Warrants may be
exercised; and (iii) payment in full of the outstanding principal amount of the
Existing Notes which have not been exchanged for the New Notes. Neither Atlantic
nor Parent can make an accurate prediction as to exactly when the first of these
conditions will be satisfied. While the Existing Notes are scheduled to mature
on September 28, 2005, neither Atlantic nor Parent will provide any assurance
that Parent can have sufficient funds to pay the principal upon maturity.
The Warrants will expire on the seven year anniversary of the date of
issuance. In the alternative, the Board of Directors of Atlantic may elect at
any time following the date on which the Warrants become exercisable to provide
notice to the holders of the Warrants that the Warrants will automatically
cancel at least 90 days following the date of
35
such notice, unless exercised prior to such date. Consequently, if the Board of
Directors of Atlantic elects, you may have only a 90-day period beginning on the
date the Warrants become exercisable to exercise the Warrants.
For a holder to exercise the Warrants, once they are exercisable, there
must be a current registration statement in effect with the SEC and
qualification with or approval from various state securities agencies with
respect to the shares of Atlantic Common Stock underlying the Warrants, or an
opinion of counsel for Atlantic that there is an effective exemption from
registration. As long as the Warrants remain exercisable, Atlantic may be
required to file a registration statement with the SEC and have such
registration statement declared effective. There can be no assurance, however,
that such registration statement can be kept current. If a registration
statement covering such shares of Atlantic Common Stock is not kept current for
any reason, or if the shares of Atlantic Common Stock underlying the Warrants
are not registered in the state in which a holder resides, the Warrants will not
be exercisable and will be deprived of any value.
IT IS ANTICIPATED THAT THE COMMON STOCK OF PARENT WILL BE VOLUNTARILY DELISTED
FROM THE AMEX, WHICH WILL MAKE IT MORE DIFFICULT FOR YOU TO SELL YOUR SHARES OF
COMMON STOCK OF PARENT.
AMEX rules provide that an issuer may voluntarily withdraw a security
from listing on the AMEX upon written notice to the AMEX, provided the issuer
complies with all applicable state laws in effect in the state in which it is
incorporated. Parent intends to voluntarily withdraw the common stock of Parent
from listing on the AMEX.
Once the common stock of Parent is delisted from trading on the AMEX,
trading, if any, in the common stock of Parent may continue to be conducted on
the OTC Bulletin Board or in privately negotiated transactions. The price of the
common stock of Parent may also be quoted in the "pink sheets". Delisting of the
common stock of Parent may result in, among other things, limited release of the
market price of the common stock of Parent and limited company news coverage and
could restrict investors' interest in the common stock as well as materially
adversely affect the trading market and prices for the common stock of Parent
and its ability to issue additional securities or to secure additional
financing.
After the common stock of Parent is delisted, Parent may de-register
its common stock. If Parent de-registers its common stock, there will be no
trading market for you to sell your securities and the value of common stock of
Parent would decrease greatly.
AN ACTIVE TRADING MARKET FOR THE SHARES OF ATLANTIC COMMON STOCK AND/OR WARRANTS
IS NOT LIKELY TO DEVELOP, AND EVEN IF SUCH A MARKET DOES DEVELOP, THE MARKET
PRICE OF THE SHARES OF ATLANTIC COMMON STOCK MAY BE LESS THAN THE MARKET PRICE
OF A SHARE OF COMMON STOCK OF PARENT.
Prior to this Transaction, you could not buy or sell shares of Atlantic Common
Stock or Warrants. An active public trading market for Atlantic Common Stock or
Warrants is not likely to develop or continue after the consummation of the
Transaction. Even if such a market does develop, the market price of shares of
Atlantic Common Stock or Warrants after this offering may be volatile and could
be less than the market price of shares of common stock of Parent or the
historical per share book value of the assets of Parent as a result of any of
the following factors, some which are beyond Atlantic' s control:
o the complexity of the terms of the Transaction, the corporate
structure or Atlantic's capitalization upon completion of the
Transaction;
o liabilities that Atlantic has or may have;
o the interest level of investors in purchasing the shares of
Atlantic Common Stock and Warrants after the Transaction;
o the trading market of common stock of Parent, if any, could reduce
the market price of the shares of Atlantic Common Stock and
Warrants; and
36
o affiliates of Carl C. Icahn may sell their shares of common stock
of Parent in private transactions or otherwise at any time, which
could have a similar effect on the market price for the
outstanding shares of common stock of Parent and, indirectly, the
shares of Atlantic Common Stock and Warrants.
Atlantic does not currently intend to list the Atlantic Common Stock and
Warrants on any securities exchange, which will further inhibit the development
of an active trading market for such securities. If any active market develops
in the future, it may not be sustained or provide you a means to sell your
shares. In addition, the market price of Atlantic Common Stock and Warrants
could decline below the price you paid for your shares of common stock of
Parent. Prices for the Atlantic Common Stock and Warrants will be determined in
the marketplace and may be influenced by many factors, including variations in
Atlantic's financial results, changes in earnings estimates by industry research
analysts, investors' perceptions of Atlantic and general economic, industry and
market conditions.
AFFILIATES OF CARL C. ICAHN WILL RECEIVE REGISTRATION RIGHTS RELATING TO
ATLANTIC COMMON STOCK IN CONNECTION WITH THE TRANSACTION.
Affiliates of Carl C. Icahn will receive registration rights in
connection with the Transaction which will give them the right, subject to
certain conditions, to, at their election, require Atlantic to register, at
Atlantic's expense, their Atlantic Common Stock for resale by such affiliates.
This will increase their ability to sell their shares of Atlantic Common Stock,
which could have a substantial effect on the trading market for Atlantic Common
Stock. The other holders of the common stock of Parent will receive no
registration rights or comparable benefit, with respect to any shares of
Atlantic Common Stock or Warrants which they receive, as part of the
Transaction. See "RISK FACTORS -- An active trading market for the shares of
Atlantic Common Stock and/or Warrants is not likely to develop, and even if such
a market does develop, the market price of the shares of Atlantic Common Stock
may be less than the market price of a share of common stock of Parent" and "As
the holders of a significant amount of New Notes and Parent Common Stock,
affiliates of Carl C. Icahn will have substantial influence over Parent and
Atlantic, and such affiliates may have interests which differ from other
holders" as set forth above on pages 36 and 33, respectively
ATLANTIC MAY STILL NEED ADDITIONAL FINANCING FOLLOWING THE TRANSACTION, WHICH
MAY NOT BE AVAILABLE.
The Transaction will eliminate a significant portion of the required semi-annual
interest payments on the Existing Notes and provide Atlantic with sufficient
cash to cover Atlantic's estimated funding needs. After giving effect to the
Transaction Atlantic may need further additional funding to address Atlantic's
business needs and concerns. Atlantic's actual funding requirements could vary
materially. Atlantic may have to raise more funds than expected to remain
competitive. Currently there is no commitment or agreement for any additional
financing and there are no assurances that Atlantic will be able to obtain such
financing, if and when needed, on acceptable terms, if at all. See "-- Risk
Factors Related to the Business Of Atlantic," as set forth below.
PARENT'S ABILITY TO FULFILL ITS OBLIGATIONS WILL BE DEPENDENT ON ATLANTIC'S
OPERATING INCOME AND CASH FLOW.
Following consummation of the Transaction, Parent will be the obligor
of the Existing Notes. Parent expects to derive its operating income and cash
flow from Atlantic, pursuant to the Contribution Agreement. Accordingly, Parent
will be dependent on the earnings and cash flow of, and semi-annual payments
from, Atlantic to pay interest on the Existing Notes as well as normal operating
costs and taxes that will continue to be incurred after the completion of the
Transaction.
Atlantic is a holding company and will have no operating income of its
own. Atlantic's ability to make payments on the Notes is dependent on receiving
distributions and other payments from Licensee.
THE ASSETS OF OPERATING AND PARENT MAY BE SUBJECT TO A CLAIM OF A FRAUDULENT
CONVEYANCE.
Under relevant federal and state fraudulent conveyance statutes,
generally stated and subject to certain exceptions, if a court found that at the
time the Transaction was completed, (i) Parent, Operating and Atlantic effected
the Transaction with the actual intent of hindering, delaying, or defrauding
creditors, which are the holders who did not exchange their Existing Notes or
(ii) Funding or the guarantors of the Existing Notes remaining property
constituted
37
unreasonably small capital to pay its debt, including the Existing Notes (i.e.
the value of the Atlantic Common Stock is insufficient), or (iii) Atlantic,
Funding or the guarantors of the Existing Notes were insolvent at the time the
Transaction was consummated or became insolvent as a result of the Transaction,
such court could take action and apply remedies detrimental to the holders of
the New Notes, including voiding the transfer of the assets to Atlantic and the
liens securing the New Notes. While Atlantic believes that the Transaction does
not constitute a fraudulent conveyance, there is no assurance that a court would
agree with such belief.
THE CASH PAYMENT MADE TO HOLDERS OF EXISTING NOTES WILL RESULT IN A TRANSFER OF
LIQUID ASSETS OF PARENT TO HOLDERS OF THE EXISTING NOTES AS PART OF THE EXCHANGE
OFFER.
As part of the Exchange Offer, holders of the Existing Notes who tender
such Existing Notes in exchange for New Notes will receive $100 in cash (the
"Cash Payment") for every $1,000 in principal amount of Existing Notes
exchanged.
YOU SHOULD CONSIDER THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION.
Please see the section titled "MATERIAL U.S. FEDERAL INCOME TAX
CONSIDERATIONS" beginning on page 114 of this proxy statement/prospectus. You
should consult your tax advisor as to the U.S. federal, state, local and any
foreign tax consequences of the Transaction.
RISK FACTORS RELATED TO THE BUSINESS OF ATLANTIC
ATLANTIC IS A NEWLY FORMED COMPANY AND HAS NO OPERATING HISTORY.
Atlantic is a newly formed wholly-owned subsidiary of Operating.
Following the approval of the stockholders of Parent, Parent will transfer all
of its assets to Operating (except the stock of Funding and Operating) and
Operating will transfer all of the assets received from Parent and substantially
all of its assets (except for the stock of Atlantic) to Atlantic in exchange for
the Atlantic Securities. Atlantic will subsequently assign substantially all of
its assets (except for an amount of cash that Atlantic will pay to holders of
Existing Notes that elect to exchange for New Notes), not including the
membership interest in Licensee, to Licensee. Following this transfer,
Atlantic's sole asset will be 100% of the membership interest in Licensee.
Atlantic has no operating history nor historical financial results for investors
to evaluate except for Parent's historical consolidated financial results. After
consummation of the Transaction, Parent's historical financial results may not
be indicative of Atlantic's future operating results. As a result, no assurances
can be given that Atlantic will be successful or profitable. As a result of the
Transaction, the management, the assets, and the business of Atlantic will be
substantially similar to the current management, assets, and business of Parent
and because Atlantic will be substantially similar to Parent, Atlantic does not
believe that the business or operations of The Sands will be substantially
affected.
ATLANTIC'S QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS AND
SEASONALITY, AND IF ATLANTIC FAILS TO MEET THE EXPECTATIONS OF SECURITIES
ANALYSTS OR INVESTORS, ATLANTIC'S SHARE PRICE MAY DECREASE SIGNIFICANTLY.
Atlantic's quarterly operating results are expected to be highly
volatile and subject to unpredictable fluctuations due to unexpectedly high or
low losses, changing customer tastes and trends, unpredictable patron gaming
volume, the proportion of table game revenues to slot game revenues, weather and
discretionary decisions by The Sands' patrons regarding frequency of visits and
spending amounts. Atlantic's operating results for any given quarter may not
meet analyst expectations or conform to the operating results of Atlantic's
local, regional or national competitors. If Atlantic's operating results do not
conform to such expectations our share price and the marketability of the New
Notes and their prices will be adversely affected. Conversely, favorable
operating results in any given quarter may be followed by an unexpected downturn
in subsequent quarters.
ATLANTIC WILL NEED TO INCREASE CAPITAL EXPENDITURES TO COMPETE EFFECTIVELY.
Capital expenditures, such as room refurbishments, amenity upgrades and
new gaming equipment, are necessary from time to time to preserve the
competitiveness of The Sands. The gaming industry market is very
38
competitive and is expected to become more competitive in the future. If cash
from operations is insufficient to provide for needed levels of capital
expenditures, The Sands' competitive position could deteriorate if Atlantic or
Licensee is unable to borrow funds for such purposes. In addition, the
indentures governing the New Notes limit Atlantic's ability to make capital
expenditures.
IF ATLANTIC FAILS TO OFFER COMPETITIVE PRODUCTS AND SERVICES OR MAINTAIN THE
LOYALTY OF THE SANDS' PATRONS, ITS BUSINESS WILL BE ADVERSELY AFFECTED.
In addition to capital expenditures, Parent is, and Atlantic will be,
required to anticipate the changing tastes of The Sands patrons and offer both
competitive and innovative products and services to ensure that repeat patrons
return and new patrons visit The Sands. The demands of meeting Atlantic's debt
service payments and the need to make capital expenditures limits the available
cash to finance such products and services. In addition, the consequences of
incorrect strategic decisions may be difficult or impossible to anticipate or
correct in a timely manner.
INCREASED STATE TAXATION OF GAMING AND HOSPITALITY REVENUES COULD ADVERSELY
AFFECT ATLANTIC'S RESULTS OF OPERATIONS.
The casino industry represents a significant source of tax revenues to
the various jurisdictions in which casinos operate. Gaming companies are
currently subject to significant state and local taxes and fees in addition to
normal federal and state corporate income taxes. For example, casinos in
Atlantic City pay for licenses as well as special taxes to the city and state.
New Jersey taxes annual gaming revenues at the rate of 8.0%. New Jersey also
levies an annual investment alternative tax of 2.5% on annual gaming revenues in
addition to normal federal and state income taxes. This 2.5% obligation,
however, can be satisfied by purchasing certain bonds or making certain
investments in the amount of 1.25% of annual gaming revenues. On July 3, 2002,
the State of New Jersey passed the New Jersey Business Tax Reform Act, which,
among other things, suspended the use of the New Jersey net operating loss
carryforwards for two years and introduced a new alternative minimum assessment
under the New Jersey corporate business tax based on gross receipts or gross
profits. For the year ended December 31, 2002 and the six month period ended
June 30, 2003, there was a charge to operations of $774,000 and $343,000,
respectively, related to the impact of the New Jersey Business Tax Reform Act.
On July 1, 2003, the State of New Jersey amended the New Jersey Casino
Control Act (the "NJCCA") to impose various tax increases on Atlantic City
casinos, including The Sands. Among other things, the amendments to the NJCCA
include the following new tax provisions: (i) a new 4.25% tax on casino
complementaries, with proceeds deposited to the Casino Revenue Fund; (ii) an 8%
tax on casino service industry multi-casino progressive slot machine revenue,
with the proceeds deposited to the Casino Revenue Fund; (iii) a 7.5% tax on
adjusted net income of licensed casinos in State fiscal years 2004 through 2006,
with the proceeds deposited to the Casino Revenue Fund; (iv) a fee of $3.00 per
day on each hotel room in a casino hotel facility that is occupied by a guest,
for consideration or as a complimentary item, with the proceeds deposited into
the Casino Revenue Fund in State fiscal years 2004 through 2006, and beginning
in State fiscal year 2007 $2.00 of the fee deposited into the Casino Revenue
Fund and $1.00 transferred to the Casino Reinvestment Development Authority
("CRDA"); (v) an increase of the minimum casino hotel parking charge from $2 to
$3, with $1.50 of the fee to be deposited into the Casino Revenue Fund in State
fiscal years 2004 through 2006, and beginning in State fiscal year 2007, $0.50
to be deposited into the Casino Revenue Fund and $1.00 to be transferred to the
CRDA for its purposes pursuant to law, and for use by the CRDA to post a bond
for $30 million for deposit into the Casino Capital Construction Fund, which was
also created by the July 1, 2003 Act; and (vi) the elimination of the deduction
from casino licensee calculation of gross revenue for uncollectible gaming debt.
These changes to the NJCCA, and the new taxes imposed on The Sands and other
Atlantic City casinos, will reduce Atlantic's profitability and cash flow from
operations.
Future changes in state taxation of casino gaming companies in New
Jersey, where Parent and Atlantic operate cannot be predicted and any such
changes could adversely affect Atlantic's profitability.
PARENT MAY RECOGNIZE CANCELLATION OF INDEBTEDNESS INCOME.
If the Issue Price of either the New Notes or the Existing Notes, as
amended, is determined to be below the face value of the Existing Notes, the
Parent consolidated group could recognize COD Income as a result of the
Transaction. The Issue Price of
39
the New Notes and the Existing Notes, as amended, are based on either their
respective face values or the fair market value of the Existing Notes, the
Existing Notes, as amended, or the New Notes depending on whether the Existing
Notes, the Existing Notes, as amended, or the New Notes are Publicly Traded. The
Parent's consolidated group COD Income should be equal to the sum of (a) the
difference of (i) the face value of the Existing Notes exchanged minus both (ii)
the Issue Price of the New Notes and the Cash Payment and (b) the difference of
(i) the face value of the Existing Notes deemed exchanged minus (ii) the Issue
Price of the Existing Notes, as amended. Therefore, if the Issue Price of both
the New Notes and the Existing Notes, as amended, is based on their respective
face values, the Parent consolidated group should not recognize any COD Income.
The Issue Price of the New Notes and the Existing Notes, as amended, would be
based on their respective face values only if the Existing Notes, the Existing
Notes, as amended, and the New Notes are not Publicly Traded. If the Existing
Notes are delisted at least 30 days prior to the Transaction and none of the
Existing Notes, the Existing Notes, as amended, and the New Notes are
subsequently listed or on a "quotation medium", defined as a system of general
circulation that provides a reasonable basis to determine their fair market
value, they will not be considered Publicly Traded. Parent does not anticipate
that either the Existing Notes, the Existing Notes, as amended, or the New Notes
will appear on such a quotation medium. If so, the Issue Price of both the New
Notes and the Existing Notes, as amended, should equal their respective face
values so that no COD Income should be recognized by the Parent consolidated
group. However, if either the Existing Notes, the Existing Notes, as amended, or
the New Notes appears on such a quotation medium, the Issue Price of either or
both the New Notes and the Existing Notes, as amended, would be based on either
their respective fair market value or the fair market value of the Existing
Notes. In such a situation, the Parent consolidated group could recognize COD
Income. In the event that the Parent consolidated group recognizes COD Income,
such COD Income (1) may be offset by (and therefore reduce) the Parent
consolidated group's NOLs and (2) to the extent that such COD Income exceeds the
NOLs, would create a current year tax liability that Parent would not have had
but for the Transaction. The COD Income could exceed the Parent consolidated
group's NOLs, in which case Parent would have a current year tax liability and
will no longer have any NOLs available to offset other income. There can be no
assurance that COD Income would not be recognized and that such COD Income will
not have a material adverse effect on either Parent or Atlantic's results of
operations. It should also be noted that US GAAP requires that the Selected
Unaudited Pro Forma Condensed Consolidated Financial Statements and the
Unaudited Pro Forma Condensed Consolidated Financial Statements contained in
this proxy statement/prospectus assume that the Transaction will result in the
Parent consolidated group recognizing COD Income for federal income tax
purposes. There would not be any such taxes if there is no recognition of COD
Income. Such assumption and estimate is required under US GAAP because Parent's
determination that there should be no COD Income incurred is based upon events
which will occur after the Transaction is completed and under US GAAP, such a
determination cannot be made where post transaction events will affect the
results. Although no assurances can be given, Parent does not believe that COD
Income will result because Parent does not believe an active trading market in
the Existing Notes existed 30 days prior to the Transaction or an active trading
market in the New Notes or the Existing Notes will develop after the Transaction
is completed, and unless such an active trading market develops, a tax liability
related to COD income will not be incurred.
PARENT'S FORMER USE OF ARTHUR ANDERSEN LLP AS ITS INDEPENDENT PUBLIC ACCOUNTANTS
MAY POSE RISKS TO PARENT AND ATLANTIC AND WILL LIMIT YOUR ABILITY TO SEEK
POTENTIAL RECOVERIES FROM ARTHUR ANDERSEN LLP RELATED TO THEIR WORK.
Arthur Andersen LLP, independent certified public accountants, were
engaged as the principal accountants to audit Parent and its subsidiaries' (the
"Parent Company") consolidated financial statements until the Parent Company
dismissed them on May 16, 2002 and engaged KPMG LLP. In May 2002, Arthur
Andersen was convicted on a federal obstruction of justice charge. Some
investors, including institutional investors, may choose not to invest in or
hold securities of a company whose prior financial statements (or those of its
predecessor entity) were audited by Arthur Andersen, which may serve to, among
other things, suppress the price of Atlantic's and Parent's securities. In
addition, rules promulgated by the Securities and Exchange Commission ("SEC")
require the Parent Company to present its audited financial statements in
various SEC filings, along with Arthur Andersen's consent to inclusion of its
audit report in those filings. The SEC has provided temporary regulatory relief
designed to allow companies that file reports with them to dispense with the
requirement to file a consent of Arthur Andersen in certain circumstances.
Notwithstanding the SEC's temporary regulatory relief, the inability of Arthur
Andersen to provide its consent or to provide assurance services to Atlantic and
Parent with regard to future SEC filings could negatively affect Atlantic's and
Parent's ability to, among other things, access capital markets. Any delay or
inability to access capital markets as a result of this situation could have a
material adverse impact on the business of Atlantic or Parent.
40
Atlantic and Parent cannot assure you that they will be able to
continue to rely on the temporary relief granted by the SEC. If the SEC no
longer accepts financial statements audited by Arthur Andersen, requires audits
of other financial statements or financial information or requires changes to
financial statements previously audited by Arthur Andersen, this may affect
ability to access the public capital markets in the future, unless Parent's
current independent auditors or another independent accounting firm is able to
audit the consolidated financial statements originally audited by Arthur
Andersen in a timely manner. Any delay or inability to access the capital
markets may have an adverse impact on the business of Atlantic or Parent.
After reasonable efforts, Parent has not been able to obtain Arthur
Andersen's consent to the inclusion in this solicitation statement and
prospectus of its audit reports dated March 8, 2002 for fiscal years ended
December 31, 2000 and 2001. Accordingly, investors will not be able to sue
Arthur Andersen under Section 11(a) of the Securities Act for material
misstatements or omissions, if any, in this solicitation statement and
prospectus or the registration statement of which it is a part, including the
financial statements covered by Arthur Andersen's previously issued reports.
Moreover, because Arthur Andersen ceased conducting business it is unlikely you
would be able to recover damages from Arthur Andersen for any claim against
them. In addition, any recovery you may have from Arthur Andersen related to any
claims that you may assert related to the financial statements audited by Arthur
Andersen may be limited as a result of the lack of Arthur Andersen's consent as
well as by the financial circumstances of Arthur Andersen.
The consolidated financial statements of the Parent Company as of and
for the year ended December 31, 2002 have been audited by KPMG LLP, independent
public accountants.
ENERGY PRICE INCREASES MAY ADVERSELY AFFECT ATLANTIC'S COSTS OF OPERATIONS AND
REVENUES OF THE SANDS.
The Sands uses significant amounts of electricity, natural gas and
other forms of energy. While no shortages of energy have been experienced,
substantial increases in the cost of forms of energy in the U.S. will negatively
affect Atlantic's 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, higher energy and gasoline prices which affect The Sands'
customers may result in reduced visitation to The Sands' properties and a
reduction in revenues.
A DOWNTURN IN GENERAL ECONOMIC CONDITIONS MAY ADVERSELY AFFECT ATLANTIC'S
RESULTS OF OPERATIONS.
Atlantic's business operations are affected by international, national
and local economic conditions. A recession or downturn in the general economy,
or in a region constituting a significant source of customers for The Sands'
properties, could result in fewer customers visiting Atlantic's property and a
reduction in spending by customers who do visit Atlantic's property, which would
adversely affect Atlantic's revenues while some of its costs remain fixed,
resulting in decreased earnings.
A majority of The Sands' patrons are from automobile travel and bus
tours. Higher gasoline prices could reduce automobile travel to The Sands'
location and could increase bus fares to The Sands. In addition, adverse winter
weather conditions could reduce automobile travel to The Sands' location and
could reduce bus travel. Accordingly, Atlantic's business, assets, financial
condition and results of operations could be adversely affected by a weakening
of regional economic conditions and higher gasoline prices or adverse winter
weather conditions.
ACTS OF TERRORISM AND THE UNCERTAINTY OF THE OUTCOME AND DURATION OF THE
ACTIVITY IN IRAQ AND ELSEWHERE, AS WELL AS OTHER FACTORS AFFECTING DISCRETIONARY
CONSUMER SPENDING, HAVE IMPACTED THE GAMING INDUSTRY AND MAY HARM ATLANTIC'S
OPERATING RESULTS AND ATLANTIC'S ABILITY TO INSURE AGAINST CERTAIN RISKS.
The terrorist attacks of September 11, 2001 had an immediate impact on
hotel and casino volume. The Sands hotel occupancy was down approximately ten
percentage points during the week that followed the attacks. Bus passenger
volume for The Sands was lower than normal, especially from those bus tours
originating from the New York metropolitan area. There were approximately 22.5%
less bus passengers at The Sands during September 2001 than during the same
month in the prior year. These events, the potential for future terrorist
attacks, the national and international responses to terrorist attacks and other
acts of war or hostility have created many economic and political uncertainties
which could adversely affect Atlantic's business and results of operations.
Future acts of terror in the U.S.
41
or an outbreak of hostilities involving the United States, may again reduce The
Sands' guests' willingness to travel with the result that Atlantic's operations
will suffer.
ATLANTIC MAY INCUR LOSSES THAT WOULD NOT BE COVERED BY INSURANCE AND THE COST OF
INSURANCE WILL INCREASE.
Although Atlantic has agreed in the New Indenture governing the New
Notes to maintain insurance customary and appropriate for its business, Atlantic
cannot assure you that insurance will be available or adequate to cover all loss
and damage to which Atlantic's business or Atlantic's assets might be subjected.
In connection with insurance renewals subsequent to September 11, 2001, the
insurance coverage for certain types of damages or occurrences has been
diminished substantially and is unavailable at commercial rates. Consequently,
Atlantic is self-insured for certain risks. The lack of insurance for certain
types or levels of risk could expose Atlantic to significant losses in the event
that an uninsured catastrophe occurred. Any losses Atlantic incurs that are not
covered by insurance may decrease its future operating income, require it to
find replacements or repairs for destroyed property and reduce the funds
available for payments of its obligations on the New Notes.
THERE ARE RISKS RELATED TO THE CREDITWORTHINESS OF PATRONS OF THE CASINOS.
The Sands is exposed to certain risks related to the creditworthiness
of their patrons. Historically, The Sands has extended credit on a discretionary
basis to certain qualified patrons. For the year ended December 31, 2002 and the
six month period ended June 30, 2003, The Sands' credit play as a percentage of
overall table game wagering was approximately 18.6% and 18.7%, respectively, and
table game wagering accounted for approximately 9.8% and 12.3%, respectively, of
overall casino wagering during the period. There can be no assurance that
defaults in the repayment of credit by patrons of The Sands would not have a
material adverse effect on the results of operations of The Sands and,
consequently of Parent and Atlantic.
ATLANTIC'S SUCCESS DEPENDS IN PART ON THE AVAILABILITY OF QUALIFIED MANAGEMENT
AND PERSONNEL AND ON ATLANTIC'S ABILITY TO RETAIN SUCH EMPLOYEES.
The quality of individuals hired for positions in the hotel and gaming
operations will be critical to the success of Atlantic's business. It may be
difficult to attract, retain and train qualified employees due to the
competition for employees with other gaming companies and their facilities in
Atlantic's jurisdictions and nationwide. The Borgata, a recently opened casino
located in the marina district of Atlantic City has aggravated this problem in
Atlantic City. Atlantic cannot assure you that it will be successful in
retaining current personnel or in hiring or retaining qualified personnel in the
future. A failure to attract or retain qualified management and personnel at all
levels or the loss of any of Atlantic, Operating or Parent key executives could
have a material adverse effect on Atlantic's financial condition and results of
operations.
RISK FACTORS RELATED TO THE GAMING INDUSTRY
THE GAMING INDUSTRY IS HIGHLY COMPETITIVE.
The gaming industry is highly competitive and Atlantic or Parent's
competitors may have greater resources than Atlantic or Parent. 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
location in which Parent or Atlantic conduct business, Parent or Atlantic may
lose market share. In particular, expansion of gaming in or near the geographic
area from which Parent or Atlantic attracts or expects to attract a significant
number of customers could have a significant adverse effect on Parent or
Atlantic's business, financial condition and results of operations. The Sands
competes, 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, Parent and Atlantic face competition from all other types of
entertainment.
On July 3, 2003, The Borgata, owned by Boyd Gaming Corporation and MGM
Mirage, opened in the marina district of Atlantic City. The Borgata features a
40-story tower with 2,010 rooms and suites, as well as a 135,000 square-foot
casino, restaurants, retail shops, a spa and pool, and entertainment venues.
This project represents a significant increase in capacity in that market. In
addition, other of Parent and Atlantic's competitors in Atlantic City
42
have recently completed expansions of their hotels or have announced expansion
projects. For example, Tropicana Atlantic City has started plans to construct a
502-room hotel tower, a 25-room conference center, a 2,400 space parking garage,
an expanded casino floor and a 200,000 square foot themed shopping, dining and
entertainment complex called The Quarter. Tropicana intends to complete the
project in the second quarter of 2004. Resorts is currently constructing a hotel
room addition of approximately 400 - 500 rooms and is set to open in 2004. In
addition, during 2003 Showboat Atlantic City opened a new 544-room hotel tower
and expanded its gaming space to 101,000 square feet and increased its slot
machines to 3,976. The business of Parent and Atlantic may be adversely impacted
(i) by the additional gaming and room capacity generated by this increased
competition in Atlantic City and/or (ii) by other projects not yet announced in
New Jersey or in other markets (e.g., Pennsylvania, New York and Connecticut).
GAMING IS A REGULATED INDUSTRY AND CHANGES IN THE LAW COULD HAVE A MATERIAL
ADVERSE EFFECT ON ATLANTIC'S ABILITY TO CONDUCT GAMING.
Gaming in New Jersey is regulated extensively by federal and state
regulatory bodies, including the CCC and state and federal taxing, law
enforcement and liquor control agencies. The ownership and operation of The
Sands is subject to strict state regulation under the NJCCA. Parent, Atlantic
and their affiliates have received the licenses, permits and authorizations
required to operate The Sands. Failure to maintain or obtain the requisite
casino licenses would have a material adverse effect on Parent and Atlantic.
PENDING AND ENACTED GAMING LEGISLATION FROM NEW YORK AND NEW JERSEY MAY HARM THE
SANDS.
In the summer of 2003, the State of New Jersey considered approving video
lottery terminals ("VLTs") at the racetracks in the state and on July 1, 2003,
the NJCCA was amended to impose various new and increased taxes on casino
license revenues. There is no guarantee that New Jersey will not consider
approving VLTs in the future, and if VLTs are approved, it could adversely
affect Parent and Atlantic's operations, and an increase in the gross gaming tax
without a significant simultaneous increase in revenue would adversely affect
Parent and Atlantic's results of operations. See "GOVERNMENT REGULATION"
beginning on page 82 below.
The Sands also competes with legalized gaming from casinos located on Native
American tribal lands. In October 2001, the New York State Legislature enacted a
bill, which the governor signed, authorizing a total of six Indian casinos in
the State of New York--three in Western New York and three in the Catskill
Region--and approved the use of video lottery terminals at racetracks and
authorized the participation of New York State in a multi-state lottery. On
January 29, 2002, a lawsuit was commenced contesting the above legislation
package on the grounds that certain of its provisions were adopted in violation
of the State's constitution. The likely outcome of this lawsuit cannot be
ascertained at this time. The implementation of VLT'S and the outcome of this
lawsuit could adversely affect visitation of The Sands from New York.
Pennsylvania and Maryland are among the other states currently contemplating
some form of gaming legislation. Legislative proposals introduced in
Pennsylvania would potentially allow for a wide range of gaming activities,
including riverboat gaming, slot machines at racetracks, video lottery terminals
at liquor stores and the formation of a gaming commission. Maryland's proposed
legislation would authorize video lottery terminals at some of Maryland's racing
facilities. The results of the gubernatorial elections in Pennsylvania and
Maryland in 2002 have also increased the likelihood of gaming legislation in
such states. Since The Sands' market is primarily a drive-to-market, legalized
gambling in Pennsylvania or one or more states neighboring or within close
proximity to New Jersey could have a material adverse effect on the Atlantic
City gaming industry overall, including The Sands.
HOLDERS OF ATLANTIC COMMON STOCK AND WARRANTS ARE SUBJECT TO THE CCC AND THE
NJCCA.
The holders of Atlantic Common Stock, the holders of Warrants, and the
holders of the common stock of Parent, will be subject to certain regulatory
restrictions on ownership. While holders of publicly traded obligations such as
the New Notes are generally not required to be investigated and found suitable
to hold such securities, the CCC has the discretionary authority to (i) require
holders of securities of corporations governed by New Jersey gaming law to file
applications; (ii) investigate such holders; and (iii) require such holders to
be found suitable or qualified to be an owner or operator of a gaming
establishment. Pursuant to the regulations of the CCC such gaming corporations
may be sanctioned, including the loss of its approvals, if, without prior
approval of the CCC, it (i) pays to the unsuitable or
43
unqualified person any dividend, interest or any distribution whatsoever; (ii)
recognizes any voting right by such unsuitable or unqualified person in
connection with the securities; (iii) pays the unsuitable or unqualified person
remuneration in any form; or (iv) makes any payments to the unsuitable or
unqualified person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction. If Atlantic is served with notice of
disqualification of any holder, such holder will be prohibited by the NJCCA from
receiving any payments on, or exercising any rights connected to, the Atlantic
Common Stock or the Warrant, as applicable.
In addition to the other information included or incorporated by reference in
this document (including the matters addressed in "Forward-Looking Statements"
on page 44), the stockholders of Parent should consider carefully the matters
described below in determining whether to vote in favor of the adoption of the
Transaction.
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains statements that are
forward-looking. The statements are based on management's belief as well as
assumptions made by and information currently available to management. When used
in this document, the words "anticipate", "estimate", "estimated", "project",
"intend", "expect", "will likely result", "will continue", "intends", "plans",
and "projection", and similar expressions are intended to identify
forward-looking statements. Such statements involve certain risks, uncertainties
and assumptions that could significantly affect anticipated results in the
future and, accordingly such results may differ from those expressed in any
forward-looking statement contained in this prospectus and proxy statement. Any
forward-looking statements are qualified in their entirety by the reference to
the factors discussed throughout this prospectus and solicitation statement.
All of these forward-looking statements are based on estimates and
assumptions made by the management of Parent and Atlantic which, although
believed to be reasonable, are inherently uncertain. They are subject to
uncertainties and factors relating to Parent's and Atlantic's operations and
business environment, all of which are difficult to predict and many of which
are beyond Parent's and Atlantic's control. Many factors mentioned in this
prospectus and proxy statement, including the risks outlined under "RISK
FACTORS", will be important in determining future results.
Therefore, undue reliance should not be placed upon such estimates and
statements. No assurance can be given that any of such estimates will be
realized and it is likely that actual results will differ materially from those
contemplated by such forward-looking statements.
THE SPECIAL MEETING
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of the common stock of Parent at the close of business on
_____, the record date, are entitled to notice of and to vote at the special
meeting. On the record date approximately ___ shares of the common stock of
Parent were issued and outstanding and held by approximately __ holders of
record. A quorum will be present at the special meeting if the holders of a
majority of the shares of the common stock of Parent outstanding and entitled to
vote on the record date are present, in person or by proxy. If a quorum is not
present at the special meeting, Parent expects that the special meeting will be
adjourned to solicit additional proxies. Holders of record of the common stock
of Parent on the record date are entitled to one vote per share at the special
meeting on the proposal to adopt the Transaction.
VOTE REQUIRED
The adoption of the Transaction by the stockholders of Parent requires the
affirmative vote of the holders of a majority of the shares outstanding and
entitled to vote at the special meeting as of the record date, either in person
or by proxy, voting as a single class.
44
PARENT GRANT OF AUTHORITY TO ADJOURN OR POSTPONE THE SPECIAL MEETING
If there are not sufficient votes at the originally scheduled time of
the special meeting to approve the Transaction, the stockholders of Parent will
be asked to vote on whether to grant to the board the discretionary authority to
adjourn or postpone the special meeting in order to permit Parent to solicit
additional proxies.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for the
special meeting will be voted at the special meeting in the manner specified by
the stockholders giving those Proxies. Properly executed proxies that do not
contain voting instructions will be voted for the adoption of the Transaction.
Shares of the common stock of Parent represented at the special meeting but not
voting, including the common stock of Parent for which proxies have been
received but for which holders of shares have abstained, will be treated as
present at the special meeting for purposes of determining the presence or
absence of a quorum for the transaction of all business.
Only shares affirmatively voted for the adoption of the Transaction, including
properly executed proxies that do not contain voting instructions, will be
counted as favorable votes for the proposal. AN ABSTENTION OR FAILURE TO VOTE
WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE ADOPTION OF THE TRANSACTION.
Also, under AMEX rules, brokers that hold shares of the common stock of Parent
in street name for customers that are the beneficial owners of those shares may
not give a proxy to vote those shares without specific instructions from those
customers. If a stockholder of Parent owns shares through a broker and attends
the special meeting, the stockholder should bring a letter from that
stockholder's broker identifying that stockholder as the beneficial owner of the
shares and authorizing the stockholder to vote.
The persons named as proxies by a stockholder of Parent may vote for one or more
adjournments of the special meeting, including adjournments to permit further
solicitations of proxies. No proxy voted against the proposal to adopt the
Transaction will be voted in favor of any adjournment.
Parent does not expect that any matter other than the proposal to adopt the
Transaction will be brought before the special meeting. If, however, other
matters are properly presented at the special meeting, the persons named as
proxies will vote in accordance with the recommendation of the Board.
REVOCABILITY OF PROXIES
Submitting a proxy on the enclosed form does not preclude a stockholder of
Parent from voting in person at the special meeting. A stockholder of Parent may
revoke a proxy at any time before it is voted by filing with Parent a duly
executed revocation of proxy, by submitting a duly executed proxy to Parent with
a later date or by appearing at the special meeting and voting in person. the
stockholders of Parent may revoke a proxy by any of these methods, regardless of
the method used to deliver a stockholder's previous proxy. Attendance at the
special meeting without voting will not itself revoke a proxy.
CHANGING YOUR VOTE
If you want to change your vote, you may send a later-dated, signed
proxy card to the Secretary of Parent prior to the date of the special meeting,
or attend the special meeting in person and vote.
SOLICITATION OF PROXIES
Parent will incur the expenses in connection with the printing and mailing of
this proxy statement/prospectus. In addition to solicitation by mail, the
directors, officers and employees of Parent and its subsidiaries, who will not
be specially compensated, may solicit proxies from the stockholders of Parent by
telephone, facsimile, telegram or other electronic means or in person.
Arrangements will also be made with brokerage houses and other custodians,
nominees
45
and fiduciaries for the forwarding of solicitation materials to the beneficial
owners of shares held of record by these persons, and Parent will reimburse them
for their reasonable out-of-pocket expenses.
Parent will mail a copy of this proxy statement/prospectus to each holder of
record of the common stock of Parent on the record date.
You should not send in any share certificates of the common stock of Parent with
your proxy card.
Parent has retained ___ to assist in the solicitation of proxies from banks,
brokerage firms, nominees, institutional holders and individual investors for a
fee of ___ plus reimbursement for expenses.
ATTENDING THE SPECIAL MEETING
If you are a holder of record and plan to attend the special meeting, please
indicate this when you vote. The lower portion of the proxy card will be your
admission ticket. IF YOU ARE A BENEFICIAL OWNER OF THE COMMON STOCK OF PARENT
HELD BY A BROKER, BANK, OR OTHER NOMINEE, YOU WILL NEED PROOF OF OWNERSHIP TO BE
ADMITTED TO THE SPECIAL MEETING. A recent brokerage or benefit plan statement or
a letter from a bank or broker are examples of proof of ownership. If you want
to vote your common stock of Parent held in nominee name in person, you must get
a written proxy in your name from the broker, bank, or other nominee that holds
your shares.
46
THE TRANSACTION
Pursuant to the proxy statement/prospectus, Parent is seeking the
consent of the stockholders of Parent to the Transaction. The Transaction is
composed of the Asset Transfer, the Exchange Offer, the Merger, and the
Distribution of Securities. Upon consummation of the Transaction, up to 72.5% of
the issued and outstanding Atlantic Common Stock (on a fully diluted basis) may
be owned by former holders of the Existing Notes, thereby resulting in such
former holders controlling substantially all of the assets of Parent.
BACKGROUND OF THE TRANSACTION
On or about March 11, 2003, Cyprus, LLC ("Cyprus"), an entity
controlled by Carl C. Icahn, submitted a proposal to Parent detailing a proposal
(the "Cyprus Proposal") for refinancing the Existing Notes in which a newly
formed subsidiary of Parent would offer the holders of the Existing Notes an
opportunity to exchange the Existing Notes for notes that were convertible into
75% of the outstanding common stock of such new entity and accrued interest.
Additionally, under this proposal, the holders of the Existing Notes would be
asked to consent to amendments to the Existing Indenture which would result in
the release of the collateral securing the Existing Notes and the removal of
most of the covenants.
Pursuant to a Unanimous Written Consent in lieu of a Meeting of the
Board, dated as of March 12, 2003, the Board formed the Special Committee
which includes the independent directors of the Board. The Special Committee,
which consists of Michael L. Ashner, Harold First, and Auguste E. Rimpel, Jr.,
was delegated the authority to approve or reject a possible restructuring
transaction pursuant to which Parent would restructure its existing
indebtedness, negotiate the terms of such a transaction, and consider,
authorize, and implement such a transaction.
On March 12, 2003, Mr. Ashner, on behalf of the Special Committee,
retained Katten Muchin Zavis Rosenman ("KMZR"), subject to the approval and
formal ratification by the Special Committee, as the legal counsel to the
Special Committee. At Mr. Ashner's request, KMZR contacted representatives of
several investment banking firms regarding their possible retention as the
financial advisor to the Special Committee.
On April 10, 2003, the Special Committee held its inaugural meeting at
which the retention of KMZR as legal counsel to the Special Committee was
ratified and approved. Representatives of KMZR explained to the Special
Committee the role of the Special Committee in this matter, the Cyprus Proposal
submitted to Parent, and the legal documents necessary to consummate the
transaction contemplated by the Cyprus Proposal. Additionally, representatives
of KMZR presented to the Special Committee information concerning the various
investment banking firms contacted by KMZR on behalf of the Special Committee.
The Special Committee decided to retain Libra Securities, subject to the
execution of a definitive engagement letter. The Special Committee authorized
Mr. Ashner to negotiate the terms of and enter into such an engagement letter.
On April 14, 2003, a definitive engagement letter was executed and
Libra Securities was retained as the financial advisor to the Special Committee.
On April 25, 2003, the Special Committee met and elected Mr. Ashner as
the Chairman of the Special Committee and approved resolutions empowering Mr.
Ashner and KMZR to negotiate the terms of the Cyprus Proposal on behalf of the
Parent.
Between April 25, 2003 and July 10, 2003, Mr. Ashner and
representatives of KMZR discussed the terms of the Cyprus Proposal with
management of Parent and with the representatives of Cyprus and negotiated
various terms of the proposal, including the percentage of ownership which the
stockholders of Parent would retain in Atlantic, the structure of the proposed
transaction, the terms of the convertible notes to be exchanged for the Existing
Notes, the securities issued to Parent stockholders, the amendments to be made
to the Existing Indenture and the mechanics of implementing the Cyprus Proposal
as revised and approved by the Special Committee.
On July 10, 2003, the Special Committee met and Mr. Ashner and KMZR
explained the details of the Transaction to the members of the Special
Committee. Counsel for the Special Committee explained to the Special
47
Committee their role, duties, and obligations in determining whether the
Transaction would be fair to and in the best interest of the common stockholders
of Parent. Additionally, counsel explained the Transaction and the key changes
between the Transaction and the Cyprus Proposal, including that (a) the
stockholders of Parent would receive 27.5% (i.e. an additional 2.5%) of the
outstanding common stock of Atlantic (on a fully diluted basis), (b) the
stockholders would receive either shares of Atlantic Common Stock or Warrants to
purchase shares of Atlantic Common Stock depending on whether all of the
Existing Notes were tendered for exchange, and (c) certain covenants in the
Existing Indenture would be amended or removed. Following such presentation,
representatives of Libra Securities reviewed with the Special Committee its
fairness analysis of the Transaction, as documented in a written summary of its
analysis dated July 14, 2003, and orally expressed (and subsequently confirmed
in a written opinion dated as of July 14, 2003) that as of the date of its
written opinion and based upon the assumptions made, matters considered and
review described in its written opinion, the consideration to be received by the
common stockholders of Parent in the Transaction was fair, from a financial
point of view, to the common stockholders of Parent.
On July 14, 2003, Libra Securities presented to the Special Committee
its fairness opinion and the Special Committee unanimously determined, among
other things, that:
o The Transaction is fair to and in the best interests of the common
stockholders of Parent to consummate the Transaction;
o The Transaction be submitted to the common stockholders of Parent
for their review and, if necessary, approval; and
o The Special Committee recommends to the Board that the Board
recommend to the common stockholders of Parent that they vote in
favor of the Transaction if approval of the stockholders of Parent
is required.
On November 12, 2003, the Special Committee met and representatives of
KMZR explained the content of the Transaction Documents to be filed with the SEC
and executed in connection with the Transaction. The Special Committee
recommended to the Board that it authorize the filing of the Transaction
Documents and any amendments thereto in form and substance as the officers of
Parent determine to be appropriate and necessary.
On November 12, 2003, the Board met and representatives of KMZR
explained the Transaction and Libra Securities reviewed its fairness opinion
with the Board. Additionally, the Board reviewed the recommendation of the
Special Committee. Mr. Icahn did not attend the meeting, Martin L. Hirsch and
John P. Saldarelli abstained, and unanimously determined, among other things,
that:
o The officers of Parent are authorized to file the Transaction
Documents, and any amendments thereto, underlying the Transaction
with the SEC in form and substance as they reasonably determine;
o It is fair to and in the best interests of the stockholders of
Parent to consummate the Transaction;
o The Transaction should be submitted to the stockholders of Parent
for their vote and approval; and
o The Board recommends to the stockholders of Parent that they vote
in favor of the Transaction.
POTENTIAL BENEFITS ASSOCIATED WITH THE TRANSACTION
The Special Committee determined that the Transaction will be
beneficial to Parent's business and the stockholders of Parent for, among other
things, the following reasons:
o As a result of the Transaction, Atlantic will have a significantly
reduced interest obligation because the New Notes will accrue
interest at 3% per annum, rather than the 11% per annum which is
currently paid semi-annually;
48
o Payment in Atlantic Common Stock as full satisfaction for the
principal and interest may be made at the election of the holders
of a majority of the aggregate principal amount outstanding of
such New Notes and upon such election, Atlantic will not be
obligated to repay the principal or accrued but unpaid interest on
the New Notes;
o If Parent does not undertake the Transaction, it may not be able
to refinance the Existing Notes on favorable terms or at all or
accumulate enough cash to pay the principal amount and accrued,
but unpaid interest, on the Existing Notes when such amounts
become due and payable in September 2005 and it is reasonably
likely that Funding and the guarantors of the Existing Notes will
not be able to pay off the Existing Notes in September 2005 when
they become due and payable. If Funding and the guarantors of the
Existing Notes do not refinance or pay off the Existing Notes,
Parent may be forced to file for bankruptcy protection;
o If Parent does not consummate the Transaction Operating may be
unable to obtain renewal of its casino license when renewal is
required in 2004 due to the outstanding debt of Parent.
o If Parent does not undertake the Transaction and chooses to pursue
an alternative method of refinancing the Existing Notes, Parent
may not be able to refinance on terms as favorable or comparable
to the terms of the Transaction and the differences may be adverse
to the interests of the stockholders of Parent;
o As a result of the Transaction, the management, the assets, and
the business of Atlantic will be substantially similar to the
current management, assets, and business of Parent and because
Atlantic will be substantially similar to Parent, Atlantic does
not believe that the business or operations of The Sands will be
substantially affected; and
o Management of Atlantic will be better able to grow and develop
Atlantic's business because it will no longer have to pay the
interest ($12,100,000 per annum) on the Existing Notes and instead
can use that money for business needs.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF PARENT
On November 12, 2003 the Board reviewed the recommendation by the
Special Committee (set forth below) and discussed with the Special Committee
their reasons for recommending that the Board (i) approve the Transaction and
(ii) recommend to the stockholders of Parent that they vote in favor of the
Transaction. Mr. Icahn did not attend the meeting. Following the conversation
between the Board and Special Committee, Messrs. Hirsch and Saldarelli
abstained, and the Board, after due consideration, unanimously determined, among
other things, that:
o The Transaction is fair to and in the best interests of the common
stockholders of Parent to consummate the Transaction;
o The Transaction be submitted to the common stockholders of Parent
for their review and approval; and
o The Board recommends to the common stockholders of Parent that
they vote in favor of the Transaction.
In reaching this conclusion, the Board consulted with the members of
the Special Committee, the members of management, and outside legal counsel and
financial advisors, and considered the Special Committee's view of the factors
which it reviewed as set forth in "-- Recommendation of the Special Committee"
on page 50 as well as the Fairness Opinion issued by Libra Securities, which
states that as of the date of its written opinion and based upon the assumptions
made, matters considered and review described in its written opinion, the
consideration to be received by the common stockholders of Parent in the
Transaction is fair, from a financial point of view, to the common stockholders
of Parent, as described under "THE TRANSACTION--Opinion of Libra Securities".
49
THE BOARD OF DIRECTORS OF PARENT RECOMMENDS THAT THE COMMON
STOCKHOLDERS OF PARENT VOTE "FOR" THE APPROVAL OF THE TRANSACTION.
RECOMMENDATION OF THE SPECIAL COMMITTEE
At its meeting on July 14, 2003, the Special Committee reviewed the
revised proposal reflecting the discussion relating to the Transaction and after
due consideration, unanimously:
o Determined that it is fair to and in the best interests of the
common stockholders of Parent to consummate the Transaction;
o Determined that, if necessary, the Transaction be submitted to the
common stockholders of Parent for their review and approval; and
o Determined that the Special Committee recommends to the Board that
the Board recommend to the stockholders of Parent that they vote
in favor of the Transaction if approval of the stockholders of
Parent is required.
The Special Committee considered the following positive factors
relating to the Transaction:
o Atlantic will have a significantly reduced interest obligation
because the New Notes will accrue interest at 3% per annum, rather
than the 11% per annum which is currently paid semi-annually;
o Payment in Atlantic Common Stock, as full satisfaction for the
principal and accrued interest, may be made at the election of the
holders of a majority of the aggregate principal amount
outstanding of such New Notes and upon such election, Atlantic
will not be obligated to repay the principal or accrued but unpaid
interest on the New Notes;
o If Parent does not consummate the Transaction, it may be unable to
renew the casino license when renewal is required in 2004.
o If Parent does not undertake the Transaction, it may not be able
to refinance the Existing Notes on favorable terms or at all or
accumulate enough cash to pay the principal amount and accrued,
but unpaid interest, on the Existing Notes when such amounts
become due and payable in September 2005 and it is reasonably
likely that Funding and the guarantors of the Existing Notes will
not be able to pay off the Existing Notes in September 2005 when
they become due and payable. If Funding and the guarantors of the
Existing Notes do not refinance or pay off the Existing Notes,
Parent may be forced to file for bankruptcy protection;
o The expectation that Parent would realize an immediate benefit
from the Transaction because it would not be obligated to pay up
to twenty four million two hundred thousand ($24,200,000) for
interest payments in 2004 and 2005;
o The expectation that the strengthened financial condition of the
business will allow the management team of The Sands to focus its
attention and additional resources and funds on providing an
enhanced gaming entertainment experience for its players; and
o The additional benefits of the Transaction described above under
"SUMMARY--Reasons for the Transaction" on page 13.
The Special Committee considered the following negative factors
relating to the Transaction:
50
o Ownership by Parent of the entity which, upon consummation of the
Transaction, will control substantially all of the assets of the
business, including The Sands, will be diluted from 100% of the
outstanding common stock of Parent to as little as 27.5% of the
outstanding Atlantic Common Stock on a fully diluted basis;
o If the holders of a majority of the aggregate principal amount
outstanding of the New Notes do not elect to receive Atlantic
Common Stock as full payment for the principal and accrued
interest, in lieu of cash payment, there is no guarantee that
Atlantic will be able to pay the aggregate sum of the accrued
interest and the principal on the New Notes when each becomes due
in 2008;
o While Parent would not be obligated to pay up to $24.2 million for
interest payments in 2004 and 2005, Atlantic will be obligated to
pay up to $11 million in connection with the Transaction to
holders of Existing Notes that elect to exchange for New Notes;
o The COD Income which the Parent consolidated group may incur as a
result of the exchange of the Existing Notes for the New Notes may
significantly reduce its NOLs or eliminate its NOLs and produce a
current tax liability. It is not anticipated that the exchange of
the Existing Notes for the New Notes will result in any COD
Income. However, this conclusion assumes that none of the of the
Existing Notes, the Existing Notes, as amended, or the New Notes
are Publicly Traded, which may not be correct; and
o The distribution of Atlantic Securities to the stockholders of
Parent may be a taxable event and Parent will not be providing the
stockholders with cash to pay the taxes which they are incurring.
The Special Committee believed that overall, the potential benefits of
the Transaction to the common stockholders of Parent outweighed the risks.
In reviewing the Transaction and determining whether the Transaction is
fair to and in the best interest of the stockholders of Parent, the Special
Committee analyzed the factors set forth above, consulted with certain members
of management of Parent, consulted with the legal counsel, consulted with the
financial advisors, and considered the Fairness Opinion issued by Libra
Securities which is more fully described in "THE TRANSACTION--Opinion of Libra
Securities" as set forth on page 51.
The discussion of the information and factors considered by the Special
Committee in making its decision is not intended to be exhaustive, but includes
all material factors considered by the Board and the Special Committee. In view
of the wide variety of factors considered in connection with its evaluation of
the Transaction and the complexity of the Transaction, the Special Committee did
not find it useful to, and did not attempt to, quantify, rank, or otherwise
assign relative weights to these factors. In addition, individual members of the
Special Committee may have given different weight to different factors.
OPINION OF LIBRA SECURITIES
In connection with the Transaction, the Special Committee retained
Libra Securities as financial advisor on April 14, 2003 to render an opinion as
to the fairness from a financial point of view of the consideration to be
received by the common stockholders of Parent in the Transaction. The Special
Committee retained Libra Securities based upon Libra Securities' experience,
particularly with respect to the gaming industry, in rendering fairness opinions
and their experience in, among other things, the valuation of businesses and
their securities in connection with mergers and acquisitions, recapitalizations
and similar transactions. Libra Securities is an investment banking firm that as
part of its business is regularly engaged to render financial advice and
opinions in connection with mergers and acquisitions, corporate reorganizations,
and other corporate transactions. Based upon a review of the credentials of, and
interviews with, several candidates, the Special Committee selected Libra
Securities primarily because of its experience and expertise in performing
valuation and fairness analyses. Libra Securities does not beneficially own nor
has it ever beneficially owned any interest in Parent.
51
As compensation to Libra Securities for its services in connection with
the Transaction, including its rendering of the fairness opinion, the
performance of other financial analysis requested by the Special Committee and
the rendering of an opinion as required under the existing indenture pursuant to
Section 314(d)(1) of the Trust Indenture Act, Parent agreed to pay Libra
Securities an aggregate fee of $200,000 in addition to Libra Securities'
expenses in connection with the provision of its services. In addition to its
out-of-pocket expenses, Libra Securities will be reimbursed for reasonable fees
and expenses of its legal counsel. No portion of Libra Securities' fee is
contingent upon the successful completion of the Transaction, any related
transaction, or the conclusions reached in the Libra Securities opinions. No
limitations were imposed by the Special Committee or the Board on Libra
Securities with respect to the investigations made or procedures followed by it
in rendering its opinion. Parent also agreed to indemnify Libra Securities and
related persons against certain liabilities that may arise out of the engagement
of Libra Securities, including certain liabilities arising under the federal
securities laws.
The summary set forth below describes the material points of more
detailed analyses performed by Libra Securities in arriving at its fairness
opinion. The preparation of a fairness opinion is a complex analytical process
involving various determinations as to the most appropriate and relevant methods
of financial analysis and application of those methods to the particular
circumstances and is therefore not readily susceptible to summary description.
In arriving at its opinion, Libra Securities made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly, Libra
Securities believes that its analyses and summary set forth herein must be
considered as a whole and that selecting portions of its analyses, without
considering all analyses and factors, or portions of this summary, could create
an incomplete view of the processes underlying the analyses set forth in Libra
Securities' fairness opinion. Libra Securities made numerous assumptions with
respect to Parent, the Transaction, industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of Parent. The estimates contained in such analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be more or less favorable than suggested by such analyses.
Additionally, analyses relating to the value of businesses or securities are not
..appraisals. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty.
Libra Securities was not asked to opine and did not express any opinion
as to the tax consequences of the Transaction, including tax consequences to
Parent and whether holders of common stock of Parent will recognize taxable
income as a result of the Transaction. The tax consequences of the Transaction
could be material and could affect the analysis underlying the conclusions
reached in the fairness opinion. In addition, Libra Securities did not express
any opinion as to: (a) the value of common stock of Parent or Atlantic Common
Stock or the Warrants or the prices at which common stock of Parent or Atlantic
Common Stock may trade in the future following the Transaction; or (b) the
fairness of any aspect of the Transaction not expressly addressed in its
fairness opinion. Libra Securities did not perform an independent appraisal of
the tangible assets of Parent.
In addition, at the Special Committee's direction, Libra Securities
assumed for the purposes of the fairness opinion and the analyses described
below that the holders of at least 58% of the Existing Notes, or at least $63.8
million principal amount, will exchange their Existing Notes into an equal
principal amount of New Notes in the Transaction.
For purposes of formulating the fairness opinion, Libra Securities:
1. met with representatives and attorneys for the Special Committee
and certain members of the senior management of Parent to discuss
the operations, financial condition, future prospects, projected
operations and performance of Parent and the Transaction;
2. reviewed Parent's Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 and Parent's Quarterly Report on Form
10-Q for the period ended March 31, 2003, which Parent's
management had identified as the most current financial
statements available;
3. reviewed and discussed with Parent's management the projections
of Parent's financial performance for the fiscal year ended
December 31, 2003 prepared by Parent's management;
4. discussed with Parent's management the New Jersey tax
environment, the likely impact of the Borgata casino, and various
other potential new competitive threats in other states;
52
5. visited certain facilities and business offices of Parent;
6. reviewed the historical market prices and trading volume for
Parent's publicly traded securities and other publicly available
information regarding Parent;
7. reviewed certain publicly available financial data for certain
companies that Libra Securities deemed comparable to Parent;
8. reviewed the Existing Indenture and related security documents;
9. reviewed a memorandum describing the Transaction from Parent
dated July 11, 2003; and
10. conducted such other studies, analyses and inquiries as Libra
Securities deemed appropriate.
Analysis
Libra Securities used several analyses to assess the fairness of the
consideration to be received by the common stockholders, from a financial point
of view, relative to an estimate as to the common share equity value of Parent.
The following is a summary of the material financial analyses performed by Libra
Securities in connection with providing its opinion. This summary is qualified
in its entirety by reference to the full text of Libra Securities' fairness
opinion, which is attached as Annex I to this proxy statement/prospectus. You
are urged to read the full text of the fairness opinion carefully in its
entirety. The following summary speaks as of July 14, 2003, the date of the
fairness opinion.
In assessing the fairness of the consideration to be received by the
holders of common stock, from a financial point of view, Libra Securities first
independently estimated the total enterprise value of Parent's operations using
analyses appropriate and reflective of generally accepted valuation
methodologies given Parent's trading volume relative to total shares
outstanding, the accessibility of comparable publicly traded companies, the
availability of forecasts from management of Parent, and available information
regarding similar transactions in the industries in which Parent is engaged.
Libra Securities then estimated the portion of this value allocable to the
holders of common stock of Parent on both a pre- and post-Transaction basis,
taking into account, among other things, the reduction in interest expense
resulting from the exchange of Existing Notes for New Notes and the payment of
the consent fee to exchanging holders of Existing Notes.
Valuation Analyses
Libra Securities used the following valuation methodologies to estimate
the aggregate enterprise value of Parent: (1) the Comparable Transaction
Approach, (2) the Market Multiple Approach, and (3) the Discounted Cash Flow
Approach. Libra Securities also reviewed the historical prices and trading
volume for Parent's publicly traded stock. Libra Securities noted that the
common stock of Parent has a relatively low trading volume, a small public float
and, to Libra Securities' knowledge, a lack of analysts providing research on
Parent's stock. Accordingly, Libra Securities concluded that the public market
may not reflect the value of Parent's stock.
Comparable Transaction and Market Multiple Approaches
Libra Securities reviewed consideration paid in certain acquisitions of
controlling interests in companies with operations that Libra Securities deemed
to be reasonably comparable to Parent's principal business operations. For
purposes of this analysis, Libra Securities analyzed two announced transactions
of Atlantic City casinos where financial information was publicly disclosed: (1)
The acquisition by an affiliate of Colony Capital of Resorts International and
(2) Park Place Entertainment Corporation's acquisition of The Claridge Hotel and
Casino. Libra Securities calculated the multiple of total enterprise value
("TEV") to latest twelve months ("LTM") earnings before interest, taxes,
53
depreciation and amortization ("EBITDA"). The analysis showed that the multiple
of TEV to LTM EBITDA exhibited by the comparable transactions ranged from 5.3
times to 6.5 times. Libra Securities calculated "TEV" by adding an entity's
equity market value to its net debt and Libra Securities calculated net debt by
subtracting an entity's excess cash, defined as total cash on the balance sheet
less cash used in the business (assumed to be 4% of LTM net revenue) and
excluding Casino Reinvestment Development Authority investments, from the book
value of its existing debt.
Libra Securities reviewed certain financial information of publicly
traded companies that derive a majority of their cash flow from Atlantic City
casinos to provide indications of value based upon comparisons of Parent to
market values and arm's-length pricing evidence of those comparable companies.
The comparable companies were Aztar Corporation and Trump Hotels & Casino
Resorts, Inc. Libra Securities calculated certain financial ratios, including
the multiples of (1) TEV to LTM revenues, (2) TEV to LTM EBITDA, (3) total debt
to LTM EBITDA and (4) total net debt to LTM EBITDA. The analysis showed that the
multiples exhibited by the comparable companies were as follows: (1) TEV to LTM
revenues for both comparable companies was 1.2 times, (2) TEV to LTM EBITDA
ranged from 5.2 times to 5.4 times, (3) total debt to LTM EBITDA ranged from 2.4
times to 5.5 times and (4) total net debt to LTM EBITDA ranged from 2.4 times to
5.0 times.
Libra Securities derived indications of the enterprise value of Parent
by applying selected multiples to revenue and EBITDA results for the latest
twelve months ended March 31, 2003 and the last four fiscal years. In
determining the TEV of the operations of Parent, Libra Securities made certain
adjustments to reflect Parent's current holdings of cash and cash equivalents
and certain debt obligations of Parent.
After consideration of such adjustments, Libra Securities estimated the
TEV of Parent using the comparable transaction approach and the market multiple
approach to be in the range of $145 million to $167 million and $140 million to
$149 million, respectively.
Discounted Cash Flow Approach
The discounted cash flow approach measures the present worth of
anticipated future economic benefits of a company (i.e., free cash flow). The
free cash flow of a company is forecasted into future years and converted to a
present value equivalent using an appropriate discount rate. The chosen discount
rate considers the time value of money, inflation, and the risk inherent in
ownership of the company.
Libra Securities' discounted cash flow analysis of Parent was based on
historical operating results for Parent for the last four fiscal years. Libra
Securities made certain adjustments to the historical operating results to
reflect revenue and expense margin stabilization and anticipated growth and
inflation and projected Parent's operating results for ten years. For purposes
of this analysis, Libra Securities determined free cash flows of Parent by using
the tax-affected operating income from the projections, subtracting necessary
capital expenditures and adding interest expense and depreciation and
amortization as provided by Parent.
Libra Securities applied risk-adjusted discount rates ranging from 12.0
percent to 14.0 percent. Libra Securities believes that a company-specific risk
premium is appropriate due to (1) Parent's lack of geographic diversity and (2)
Parent's small size relative to other comparable companies. To determine the
value of Parent at the end of the ten-year projection period, Libra Securities
applied an exit multiple range of 5.0 times to 6.0 times EBITDA based upon the
multiples exhibited in the comparable transaction approach and market multiple
approach.
The discounted cash flow approach resulted in an indicated valuation
range for Parent of approximately $155 million to $163 million.
Determination of Fairness
As described above, the valuation analyses performed by Libra
Securities indicated a total enterprise value for Parent's operations of from
$140 million to $167 million. Using these amounts, Libra Securities then
assessed the value of Parent's common stock on a pre-Transaction basis and the
value of the interest in Atlantic, through the Warrants, of the existing holders
of common stock of Parent on a post-Transaction basis, taking into account,
among other things, the
54
interest savings that would result from the exchange of the Existing Notes for
the New Notes, the payment of a consent fee to the exchanging holders of
Existing Notes, and the amount of equity value that stockholders would lose from
the conversion feature on the New Notes. Libra Securities considered this
analysis in light of both upside and downside cases. Libra Securities also took
into account the possibility that Parent would be unable to refinance the
existing debt and/or would experience negative cash flow after debt service.
Based on this analysis, Libra Securities determined that the consideration to be
received by the holders of common stock of Parent on the Transaction was fair
from a financial point of view.
Conclusion
Libra Securities rendered a verbal opinion to the Special Committee on
July 14, 2003 and confirmed its opinion by providing a written opinion dated
July 14, 2003 stating that, as of that date and based upon the assumptions made,
matters considered and review described in the written opinion, the
consideration to be received by the stockholders of Parent in the Transaction is
fair, from a financial point of view, to the common stockholders of Parent.
The fairness opinion does not address Parent's underlying business
decision to effect the Transaction. The Special Committee did not request Libra
Securities to, and accordingly, Libra Securities did not undertake to, solicit
third party indications of interest in acquiring all or any part of Parent,
assist in the structuring of the Transaction or advise the Special Committee or
Parent with respect to alternatives to it. The fairness opinion does not
constitute, and should not be construed, as a recommendation to any common
stockholder of Parent as to how such common stockholder of Parent should vote on
the Transaction.
Libra Securities relied upon the accuracy and completeness of all of
the financial, accounting, legal, tax, operating and other information provided
to it by Parent and assumed that all such information was complete and accurate
in all material respects and that no material changes occurred in the
information reviewed between the date the information was provided and the date
of the fairness opinion. In particular, Libra Securities relied upon and
assumed, without independent verification, that (a) the historic operating
results and the financial forecasts and projections provided by Parent, and the
related discussions with the management of Parent, were prepared in good faith
and reflect the best currently available estimates of the future financial
results and condition of Parent (as of the dates of such forecasts and
projections), and (b) that there has been no material change in the assets,
financial condition, business or prospects of Parent since the date of the most
recent financial statements made available to Libra Securities. Libra Securities
also assumed that there are no facts or information regarding Parent that would
cause the information supplied by Parent to be incomplete or misleading or fail
to fairly represent the financial condition and results of operations of Parent
in any material respect.
Libra Securities did not independently verify the accuracy and
completeness of the information supplied to it with respect to Parent and did
not assume any responsibility with respect to it. Libra Securities' fairness
opinion was necessarily based on business, economic, market and other conditions
as they existed and could be evaluated by Libra Securities at the date of the
fairness opinion.
INTERESTS OF THE DIRECTORS AND MANAGEMENT OF PARENT IN THE TRANSACTION
Prior to and immediately after the Transaction, it is anticipated that
the Board of Directors at Atlantic will have the same members as the Board.
Carl C. Icahn is the Chairman of the Board of Funding, Operating and
Parent, and will be the Chairman of the Board of Atlantic and Licensee.
Affiliates of Mr. Icahn own approximately 77% of the outstanding common stock of
Parent, which owns 100% of Funding and Operating, and approximately 58% of the
aggregate principal amount outstanding of the Existing Notes. Mr. Icahn's
affiliates have indicated their support of the Transaction, their intent to
tender for exchange their Existing Notes thereby satisfying the minimum tender
condition of the Exchange Offer, and their intent to vote in favor of the
Transaction. After the Transaction is completed, affiliates of Mr. Icahn may
beneficially own (i) approximately 63.4% (on a fully diluted basis) of the
outstanding Atlantic Common Stock, if more than 58%, but less than 100% of the
Existing Notes exchange for the New Notes such affiliates may beneficially own
up to an additional 23.5% of the outstanding Atlantic Common Stock because of
such affiliates ownership of 77% of the outstanding common stock of Parent and
(ii) at least 58% of the aggregate principal amount outstanding of the New
Notes. In addition, affiliates of Mr. Icahn will effectively control Atlantic,
since, immediately following the consummation of the Transaction, they will
continue to have control over any stock which Parent owns because they own 77%
of the outstanding common stock of Parent, and Atlantic initially will be a
wholly owned subsidiary of Parent. As a result, affiliates of Mr. Icahn will
have a substantial influence and control over matters voted upon by stockholders
(such as the election of the directors to the Board of Directors of each of
Parent
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and Atlantic, mergers and sale of assets involving Parent and Atlantic and other
matters upon which stockholders, of either Parent or Atlantic, vote), as well as
matters to be consented to by the holders of the New Notes, such as the
determination of whether and when the payment in the form of Atlantic Common
Stock shall be made in satisfaction of the principal and accrued interest of the
New Notes shall occur, or whether to amend the New Indenture (i.e. release of
the collateral securing the New Notes or waiver of events of default).
CONDITIONS TO THE COMPLETION OF THE TRANSACTION
Parent's ability to complete the Transaction is subject to the satisfaction of a
number of conditions, including the following:
o requisite third party and governmental consents shall have been
obtained, including the approval of the CCC;
o the Amendment to the Indenture, the Second Amended and Restated
Indenture, and the Form of the Indenture shall be declared
effective;
o the Transaction shall have been approved by the holders of a
majority of the outstanding shares of the common stock of Parent;
o no legal prohibition on consummation of the Transaction shall
have been in effect; and
o holders of a majority of the outstanding principal amount of
Existing Notes shall have agreed to exchange their Existing Notes
for New Notes in the Exchange Offer, thereby approving of the
amendments to the Existing Indenture.
MANNER OF EFFECTING THE ASSET TRANSFER AND DISTRIBUTION OF SECURITIES
In order to consummate the Transaction, the consent of the stockholders
of Parent and of the holders of a majority of the aggregate principal amount of
the Existing Notes outstanding is necessary prior to the following actions: (i)
Parent's transfer of all of its assets (except the stock of Operating and
Funding) to Operating and (ii) Operating's transfer of the assets it received
from Parent and all of its assets (except the stock of Atlantic) to Atlantic
which will then transfer such assets to Licensee (except an amount of cash to be
used for the Cash Payment). In exchange for the transfer by Operating, Atlantic
will distribute to Operating (i) the Atlantic Securities (i.e. either Holders
Equity or Warrants representing 27.5% of the outstanding Atlantic Common Stock,
in each case, on a fully diluted basis) to Operating and (ii) Atlantic Common
Stock, expressed as a percentage, equal to the product of 72.5% multiplied by a
fraction in which the principal of the unexchanged Existing Notes is divided by
the total aggregate principal amount of the Existing Notes outstanding
immediately prior to the consummation of the exchange offer, representing the
unexchanged Existing Notes. Simultaneously with such transfer Atlantic will
cancel all Existing Notes which it receives in the exchange offer. Once
Operating receives the Atlantic Securities through a series of transactions,
Funding, Operating, and Parent will merge, with Parent as the surviving
corporation, resulting in Parent owning the Atlantic Securities, Parent being
the obligor of the Existing Notes and Atlantic being a wholly-owned subsidiary
of Parent. After the completion of the Merger, Parent will distribute the
Atlantic Securities pro rata to the stockholders of Parent as of the effective
date of the Merger. It is expected that certificates representing the Atlantic
Securities will be mailed to the stockholders of Parent as soon as practicable
after the consummation of the Transaction.
MANNER OF EFFECTING THE EXCHANGE OFFER
In order to consummate the Transaction, holders of a majority of the
aggregate principal amount outstanding of the Existing Notes are required to
elect to tender for exchange the Existing Notes (whether directly by the note
holders, their broker or their depository) for the New Notes on a dollar for
dollar basis thereby consenting to (a) the elimination of certain covenants
under the Existing Indenture, (b) the release of the liens on the collateral
securing the Existing Notes and (c) the terms of the New Notes. Atlantic will
pay each holder of the Existing Notes that elects to exchange, the Cash Payment
and all interest accrued on such Existing Notes through the date of such
exchange. If holders of
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100% of the Existing Notes elect to exchange the Existing Notes for the New
Notes, the common stockholders of Parent will receive 27.5% (on a fully diluted
basis) of the outstanding Atlantic Common Stock, pro rata, from Parent in
connection with the Asset Transfer. If holders of less than 100% of the Existing
Notes elect to exchange the Existing Notes for the New Notes, the common
stockholders of Parent will receive Warrants for 27.5% (on a fully diluted
basis) of Atlantic Common Stock (on a fully diluted basis), pro rata, from
Parent in connection with the Transaction. Additionally, if holders of less than
100% of the Existing Notes elect to exchange the Existing Notes for the New
Notes, Parent shall receive a percent of Atlantic Common Stock, equal to the
product of 72.5% multiplied by a fraction, the numerator of which is the
principal amount of the Existing Notes which were not exchanged and the
denominator of which is the total outstanding principal amount of the Existing
Notes on the day immediately prior to the consummation of the Exchange Offer.
TERMS OF THE CONSENT SOLICITATION AND EXCHANGE OFFER
The consummation of the Transaction and the Asset Transfer is
conditioned upon and subject to Atlantic, on behalf of Parent, obtaining the
consent of the holders of a majority of the aggregate principal amount
outstanding of the Existing Notes to amend the Existing Indenture. Pursuant to
the Exchange Offer, the holders of a majority of the aggregate principal amount
of the Existing Notes will have the opportunity to consent to amending the
Existing Indenture by electing to exchange their Existing Notes for New Notes.
As a result of the amendments to the Existing Indenture, the Second Amended and
Restated Indenture will not apply to Atlantic or Licensee. If the holders of the
Existing Notes consent to the amendments to the Existing Indenture by tendering
their Existing Notes, the following provisions of the Existing Indenture will be
amended as described. The following description is qualified in its entirety by
reference to the full text of the Form of the Amendment to the Amended and
Restated Indenture each attached to this proxy statement/prospectus as Annex E.
Collateral. Currently, the Existing Notes are secured by certain of the assets
owned by Operating and Parent constituting The Sands Hotel and Casino. After the
Transaction is completed, all of the collateral will be released and transferred
to Atlantic (and subsequently transferred to Licensee) subject to a mortgage in
favor of the New Notes and, under the Second Amended and Restated Indenture, all
references to collateral would be eliminated and the Existing Notes will be
unsecured.
Events of Default. Section 501 of the Existing Indenture specifies the types of
events that could constitute an event of default under the Existing Indenture,
including, without limitation, cross default to other indebtedness, certain
litigations resulting in significant judgments, bankruptcy proceedings and
cessation of gaming operations. Under the Second Amended and Restated Indenture,
all events of default would be eliminated, other than the failure to pay
interest on the Existing Notes when due and such default continues for 30 days,
failure to pay the principal at maturity, default or breach of any covenants or
warranty by Parent (which remain uncured for more than 60 days after notice of
such default or breach), the entry of a bankruptcy or insolvency decree against
Parent, and the initiation of bankruptcy or insolvency proceedings by Parent.
Successors. Section 801(a) and (b) of the Existing Indenture contemplate that
transferees of all or substantially all of the properties of Parent or its
subsidiaries will assume the obligations of Parent under the Existing Indenture.
Under the Second Amended and Restated Indenture, this section would be modified
to eliminate that requirement with respect to the Asset Transfer and any
subsequent transfers.
Corporate Existence. Section 1004 of the Existing Indenture requires that Parent
and its subsidiaries maintain corporate existence and franchises and protect the
security interest granted under the Existing Indenture. Under the Second Amended
and Restated Indenture, this section would be modified to remove all references
to Security Interest and Security Documents.
Payment of Taxes. Section 1005 of the Existing Indenture requires Parent and its
subsidiaries to pay all of their taxes and all lawful claims for labor,
materials and supplies. Under the Second Amended and Restated Indenture, this
section would be modified to remove all references to Security Documents.
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Maintenance of Properties. Section 1006 of the Existing Indenture requires
Parent to cause all properties owned by it and its subsidiaries used in the
business to be maintained and kept in good condition, repair and working order.
Under the Second Amended and Restated Indenture, this section would be modified
to remove all references to Security Documents.
Insurance. Section 1007 of the Existing Indenture requires Parent and its
subsidiaries to maintain insurance with responsible and reputable insurance
companies covering risk usually covered by companies engaged in similar
businesses. Under the Second and Amended and Restated Indenture, this section
would be deleted.
Change of Control. Section 1010 of the Existing Indenture requires Parent to
offer to purchase all of the Existing Notes at an amount equal to 100% of the
principal amount plus accrued interest in the event of the occurrence of a
change of control. Under the Second Amended and Restated Indenture, this section
would be deleted.
Limitation on Restricted Payments. Section 1013 of the Existing Indenture
prohibits Parent and its subsidiaries from making any restricted payment
including any declaration or payment of dividends or purchase or redemption of
any common stock. Under the Second Amended and Restated Indenture, this section
would be modified to prohibit dividends on the common stock of Parent only if an
event of default has occurred and is continuing under section 501.
Limitation on Asset Sales. Section 1017 of the Existing Indenture requires
Parent to sell assets at fair market value for consideration of which at least
85% is in the form of cash and further requires that the proceeds thereof be
applied to purchase the Existing Notes from the holders thereof at a price equal
to 100% of the principal amount of the Existing Notes plus accrued interest.
Parent is not required to make an offer to acquire the Existing Notes, unless
the aggregate cash net proceeds from the asset sale exceed $5 million. Excess
cash must be maintained in a collateral account. Under the Second Amended and
Restated Indenture, this section would be modified to eliminate the collateral
account requirement.
Application Net Cash Proceeds in Event of Loss. Section 1018 of the Existing
Indenture requires proceeds received by Funding with respect to an event of loss
(which includes destruction, condemnation or seizure of property) to be used to
provide an opportunity to holders of the Existing Notes to sell the same to
Funding for a purchase price equal to 100% of the principal plus accrued
interest. Certain retained amounts not utilized for that purpose would be held
in a cash collateral account. Under the Second Amended and Restated Indenture,
this section would be deleted.
Ownership of Stock of Subsidiaries. Section 1019 of the Existing Indenture
requires Parent to maintain at all times ownership of each class of voting stock
of and all other equity securities in each entity that as of September 29, 2000
was a subsidiary of Parent and further requires that such stock be subject to a
first priority security interest in favor of the trustee. Under the Second
Amended and Restated Indenture, this section would be deleted.
Limitation on Transactions with Affiliates. Section 1020 of the Existing
Indenture prohibits Parent and its subsidiaries from engaging in transactions
with affiliates without satisfying the criteria specified therein unless the
same are approved in writing by the Board (including the majority of the
independent members thereof) and that the terms of the transaction shall be on
terms no less favorable than Parent would obtain in an arm's length transaction
with an independent third party. Under the Second Amended and Restated
Indenture, this section would be deleted.
Change In Nature of Business. Section 1021 of the Existing Indenture prohibits
Funding from owning, managing or conducting any operations other than in a
permitted line of business (which includes the casino gaming business or any
business related to such business). Under the Second Amended and Restated
Indenture, this section would be deleted.
Additional Collateral. Section 1022 of the Existing Indenture requires Funding
to grant a valid and effective first priority security interest in any
collateral which it owns in favor of the Existing Notes and to execute all
related documents necessary to perfect such security interest. Under the Second
Amended and Restated Indenture, this section would be deleted.
Casino Reinvestment Development Authority. Section 1023 of the Existing
Indenture prohibits Parent from granting any security interest in any CRDA
Investments except to the Casino Reinvestment Development Authority of the State
58
of New Jersey or other entities as required by applicable law, or to convey such
assets other than for fair value. Under the Second Amended and Restated
Indenture, this section would be deleted.
Subsidiaries. Section 1024 of the Existing Indenture requires Funding and Parent
to pledge the stock of its subsidiaries as of September 29, 2000. This section
also prohibits any person becoming a subsidiary if the event of default would
result therefrom. Under the Second Amended and Restated Indenture, this section
would be deleted.
Security Documents. Section 1025 of the Existing Indenture requires Funding and
Parent to execute security documents creating liens on their respective assets
which secure their respective obligations under the Existing Indenture. Under
the Second Amended and Restated Indenture, this section would be deleted.
Validity of Security Interests. Section 1026 of the Existing Indenture provides
that Parent and its subsidiaries represent and warrant that they shall continue
to have full power and lawful authority to grant the security interests and will
preserve the same. Under the Second Amended and Restated Indenture, this section
would be deleted.
Security Interests. Sections 1401, 1402, 1403, 1404, 1405, 1406, 1407 and 1408
of the Existing Indenture provide the security interests in favor of the trustee
under the Existing Indenture with respect to the collateral contemplated
therein. Under the Second Amended and Restated Indenture, these sections would
be deleted.
TERMS OF THE NEW NOTES
Pursuant to the Exchange Offer, the holders of the Existing Notes will
be offered the choice of retaining the Existing Notes as modified pursuant to
the terms of the Second Amended and Restated Indenture as described above (see
"-- Terms of the Consent Solicitation and Exchange Offer") or exchanging the
Existing Notes on a dollar for dollar basis for the New Notes having the
following terms which will be set forth in the New Indenture, plus a cash
payment of $100 for every $1,000 of principal amount of Existing Notes
exchanged. The following section is qualified in its entirety by referring to
the full text of the Form of the Indenture attached hereto as Annex H:
o The New Notes will be secured by all existing and future assets
of Atlantic and Licensee;
o The New Notes will bear an interest rate of 3% per annum through
maturity;
o Interest on the New Notes will accrue annually, but will not be
payable until maturity;
o Upon payment in the form of the Atlantic Common Stock, in all
situations, the holders of the New Notes will not receive any
cash payment in respect of interest which has accrued, but has
not been paid;
o The New Notes will be due on September 29, 2008, or upon demand
(a "Demand Payment") of the holders of a majority of the
aggregate principal amount outstanding of the New Notes (the
"Requisite Lenders"). In the event of a Demand Payment, all
principal and accrued interest under all of the New Notes will be
satisfied through the payment in the form of the shares of
Atlantic Common Stock, in lieu of a cash payment, and all of the
New Notes will thereby be extinguished;
o The New Notes will be fully secured by a first lien on the assets
of Atlantic and Licensee, including after acquired property. Such
liens will not be released or subordinated without the consent of
the acquiring Requisite Lenders;
o The New Notes and the shares of Atlantic Common Stock issuable
following an election of the holders of a majority of the
aggregate principal outstanding as full satisfaction of the
principal and accrued interest owed under the New Notes, will be
registered under the Securities Act;
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o Following a change of control of Atlantic, the New Notes will be
assumable by the buyer and will neither be callable (by the
buyer) nor putable (by the holders of the New Notes) as a result
of such sale or change of control;
o At the election of the Requisite Lenders (i) the entire class of
New Notes will be paid in shares of Atlantic Common Stock and all
of the New Notes will thereby be extinguished, resulting in
holders not being entitled to receive any cash payments for the
principal or accrued interest or (ii) each of the holders of the
New Notes will be allowed to determine if and when to convert all
or a portion of such holder's New Notes into Atlantic Common
Stock;
o If holders of 100% of the aggregate principal amount outstanding
of the Existing Notes elect to exchange such notes for New Notes,
the number of shares of Atlantic Common Stock issuable upon
payment of the New Notes in the form of Atlantic Common Stock
will represent 72.5% of the outstanding Atlantic Common Stock, on
a fully diluted basis, or 7,250,000 shares of Atlantic Common
Stock, subject to adjustment pursuant to antidilution provisions
set forth herein;
o If holders of less than 100% of the aggregate principal amount
outstanding of the Existing Notes elect to exchange, the number
of shares of Atlantic Common Stock issuable upon conversion or
payment of the New Notes will represent a percentage of
outstanding Atlantic Common Stock equal to the product of 72.5%
multiplied by a fraction, the numerator of which shall be the
principal amount of the Existing Notes exchanged, and the
denominator of which shall be the total principal amount of the
Existing Notes on the day immediately prior to the consummation
of the Exchange Offer;
o The conversion price/number of shares of Atlantic Common Stock
issuable upon payment of the New Notes in the form of Common
Stock will be subject to adjustments for certain capital
structure changing events (such as stock dividends, stock splits,
recapitalizations, and the like).
o The New Notes will allow the holders information rights similar to
the rights provided under the Existing Indenture, including the
right to receive such information;
o The events of default for the New Notes will be similar to the
Existing Notes, including if Atlantic or its subsidiaries: (i)
fails to make payment of any principal or interest on the New
Notes; (ii) default in performance or breach of any warranty or
covenant of the New Indenture which remains uncured for more than
60 days following notice of such breach or default; (iii)
defaults on the payment of principal or premium for any
indebtedness aggregating $5 million or more; (iv) notification to
the trustee of an action to collect indebtedness in excess of $5
million due to an event of default of an agreement evidencing
such default; (v) has a judgment entered into against it for more
than $10 million under certain conditions; (vi) has a decree of
bankruptcy or insolvency entered into against it; (vii) files for
bankruptcy; (viii) adversely, to the creditors, alters security
documents underlying this transaction; (ix) ceases substantially
all gaming activity at The Sands for more than 60 consecutive
days; or (x) its affiliates lose the legal right to own or
operate The Sands for more than 60 consecutive days.
o Atlantic will make various affirmative covenants, consistent with
the Existing Indenture, including, among others, that Atlantic
will: (i) make payment as required pursuant to the New Indenture;
(ii) maintain offices in New York City; (iii) transfer funds to
designated agent; (iv) maintain its corporate existence; (v) pay
taxes and similar assessments prior to delinquency; (vi) maintain
properties used by the business; (vii) maintain adequate
insurance in the ordinary course of business; (viii) deliver to
the trustee an annual officer's statement indicating compliance
with terms of the New Indenture; (ix) deliver to the trustee a
notice regarding a default; (x) maintain ownership of Licensee;
(xi) execute the necessary documents to secure its obligations
under the New Indenture; (xii) grant a valid security interest;
and (xiii) cooperate with the CCC.
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o Atlantic will agree to certain restrictions, consistent with the
Existing Indenture, including, without limitation, restrictions
on: (i) making restricted payments, including payments to Parent
by Atlantic for the payment of principal on the Existing Notes;
(ii) selling assets; (iii) paying of net cash proceeds in event
of loss; (iv) changing or altering the business of Atlantic and
its subsidiaries; (v) granting a security interest in CRDA
Investments; (vi) paying of dividends on the Atlantic Common
Stock other than (a) as required to provide funds to Parent to
pay current scheduled interest due on the unexchanged Existing
Notes and operating expenses (such as accounting costs and fees
for SEC filings), provided that, such dividends will be permitted
only through the maturity of the Existing Notes and only so long
as the New Notes are not in default and no event that could
result in such a default has occurred or is incipient and (b) as
required in order to implement the Transaction; (vii) incurring
or having Atlantic's subsidiaries incur additional indebtedness;
(viii) incurring or having Atlantic's subsidiaries incur liens;
and (ix) entering into or having Atlantic's subsidiaries enter
into sale-leaseback transactions.
RESULTS OF THE ASSET TRANSFER AND DISTRIBUTION OF SECURITIES
As a condition to the closing of the Contribution Agreement, pursuant
to the Asset Transfer (which is necessary prior to the Distribution of the
Securities), the remaining aspects of the Transaction will need to be completed
as well. If the Transaction is completed, Atlantic will be a wholly-owned
subsidiary of Parent and the operating assets and cash, less the Cash Payment,
of Parent and Operating will be owned by Licensee. Atlantic's capitalization
will include the Atlantic Securities and the New Notes. Pursuant to the terms of
the Warrants, under certain conditions, the Warrants will be exercisable for an
amount of shares of Atlantic Common Stock equal to 27.5% of the outstanding
Atlantic Common Stock (on a fully diluted basis). After the conversion of the
New Notes and the exercise of the Warrants, Atlantic expects to have
approximately ten million shares of Atlantic Common Stock outstanding, but
because the date of conversion and exercise cannot be determined at this point,
Atlantic is not able to anticipate the number of holders of record of Atlantic
Common Stock.
If the holders of 100% of the Existing Notes elect to exchange the
Existing Notes for the New Notes thereby consenting to (i) the elimination of
certain covenants under the Existing Notes, (ii) the release of the liens on the
collateral and (iii) the terms of the New Indenture, the number and identity of
the stockholders of Atlantic immediately after the consummation of the
Transaction (but prior to conversion of the New Notes) will be the same as the
number and identity of the stockholders of Parent on the date of the
consummation. Immediately after the consummation of the Transaction, Atlantic
expects to have approximately ten million shares of Atlantic Common Stock
outstanding (including those reserved for conversion of the New Notes), based on
the anticipated number of record stockholders and issued and outstanding shares
common stock of Parent as of the close of business on the [Asset Transfer Record
Date] and the distribution ratio of 0.275 shares of Atlantic Common Stock for
each outstanding share of common stock of Parent.
NO ISSUANCE OF FRACTIONAL SHARES OF ATLANTIC COMMON STOCK
No certificates or scrip representing fractional interests in shares of
Atlantic Common Stock (the "Fractional Shares") will be issued to the holders of
the common stock of Parent upon either the exercise of the Warrants or the
distribution to the stockholders of Parent of Atlantic Common Stock. The
Distribution Agent, acting as agent for the stockholders otherwise entitled to
receive certificates representing Fractional Shares, will aggregate all
Fractional Shares and subsequently all Fractional Shares will be cancelled by
Atlantic.
U.S. FEDERAL TAX CONSEQUENCES OF THE ASSET TRANSFER AND DISTRIBUTIONS OF
ATLANTIC SECURITIES
It is anticipated that the transfer of substantially all of the assets
of Operating to Atlantic, followed by the merger of Operating into Parent
should, for U.S. federal income tax purposes, qualify as a tax-free
reorganization. If so, Operating should recognize no gain or loss on the
transfer of its assets and Parent should recognize no gain or loss from the
merger of Operating into Parent. Atlantic should have a tax basis in the
transferred assets equal to Operating's adjusted tax basis in the assets.
Finally, Parent's total tax basis in the Atlantic Common Stock or the Warrants
(if the Warrants are issued) it receives pursuant to the merger of Operating
into Parent should equal its adjusted tax basis in its
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Operating shares. In the event that the Warrants are issued, such tax basis will
be apportioned between the Atlantic Common Stock and the Warrants in accordance
with their relative fair market values.
Although not anticipated, it is possible that the Distribution of
Atlantic Securities will result in Parent recognizing gain for U.S. federal
income tax purposes. In the event that Parent does recognize gain on the
Distribution of Atlantic Securities, Parent's gain should equal the difference
between the fair market value of the Atlantic Securities distributed and
Parent's tax basis in such Atlantic Securities, measured as of the date of the
Distribution of Atlantic Securities. Parent believes that its tax basis in the
Atlantic Securities distributed will, for U.S. federal income tax purposes,
exceed its fair market value so that Parent should not recognize any gain on the
distribution (under the Code), loss cannot be recognized).
If you are a U.S. stockholder, as defined in the section titled
"MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS" as set forth on page [__], the
Distribution of Atlantic Securities should be (i) a taxable dividend to the
extent of Parent's current or accumulated earning and profits, and then (ii) a
non-taxable return of basis to the extent of your tax basis in your common stock
of Parent, and then (iii) taxable gain from the sale or exchange of your Parent
common stock, which should result in capital gain taxed at long-term capital
gains rates assuming that you held your common stock of Parent for more than 12
months.
Although Parent currently has no current or accumulated earnings and
profits, Parent may have current earnings or profits at the end of the tax year
that the Transaction is consummated. Parent anticipates that the Transaction
will not result in Parent recognizing any taxable income for U.S. federal income
tax purposes because Parent believes it will not have gain from the Distribution
of Atlantic Securities or COD Income. Parent anticipates that the Transaction
will not result in it realizing COD Income because Parent believes that none of
the Existing Notes, the Existing Notes, as amended, or the New Notes will be
Publicly Traded. However, this conclusion is not free from doubt and it is
possible that the Transaction will result in Parent recognizing COD Income or
gain. Such COD Income or gain would be included in Parent's current earnings and
profits and increase the amount of the Distribution of Atlantic Securities
taxable as a dividend because such COD Income or gain would increase Parent's
current earnings and profits, if any, for the year in which the Distribution of
Atlantic Securities is made. It should also be noted that US GAAP requires that
the Selected Unaudited Pro Forma Condensed Consolidated Financial Statements and
the Unaudited Pro Forma Condensed Consolidated Financial Statements contained in
this proxy statement/prospectus assume that the Transaction will result in
Parent recognizing COD Income for federal income tax purposes. There would not
be any such taxes if there is no recognition of COD Income. Such assumption and
estimate is required under US GAAP because Parent's determination that there
should be no COD Income incurred is based upon events which will occur after the
Transaction is completed and under US GAAP, such a determination cannot be made
where post transaction events will affect the results. Although no assurances
can be given, Parent does not believe that COD Income will result because Parent
does not believe an active trading market in the Existing Notes existed 30 days
prior to the Transaction or an active trading market in the New Notes or the
Existing Notes will develop after the Transaction is completed, and unless such
an active trading market develops, a tax liability related to COD income will
not be incurred.
The amount of the Distribution of Atlantic Securities should equal the
fair market value of the Distribution of Atlantic Securities as of the date of
the distribution. Your tax basis in the Atlantic Securities received in the
Distribution of Atlantic Securities, should equal the fair market value of such
Atlantic Securities, measured as of the date of the Distribution of Atlantic
Securities.
If you are a non-U.S. stockholder you should be subject to 30% U.S.
withholding tax to the extent that the Distribution of Atlantic Securities is
taxable as a dividend, subject to reduction by applicable treaty. You should be
exempt from U.S. income or withholding tax on any portion of the Distribution of
Atlantic Securities not taxable as a dividend, provided that: (i) the
Distribution of Atlantic Securities is not effectively connected with your
conduct of a trade or business in the U.S. and (ii) Parent is not, and has not
been, a U.S. real property holding corporation ("USRPHC"), as that term is
defined in the Code. Although Parent believes that it is a USRPHC, because it is
regularly traded on an established securities market, such status should only
affect foreign shareholders who own more than 5% of Parent. Therefore, if you
own 5% or less of Parent's common stock and the Distribution of Atlantic
Securities is not effectively connected with your conduct of a trade or business
in the U.S., you should not be subject U.S. income or
62
withholding tax on the amount of the Distribution of Atlantic Securities not
taxable as a dividend. However, as Parent may not be able to determine, at the
time of the distribution, the amount of the Distribution of Atlantic Securities
taxable as a dividend, Parent may collect the 30% U.S. withholding tax on the
entire amount of the distribution, subject to reduction by applicable treaty.
You should be able to receive a refund if and to the extent of any excess
withholding.
If you are a non-U.S. stockholder and you own more than 5% of Parent's
common stock and the Distribution of Atlantic Securities is not effectively
connected with your conduct of a trade or business in the U.S., you should be
subject to 30% U.S. withholding tax to the extent that the Distribution of
Atlantic Securities is taxable as a dividend, subject to reduction by applicable
treaty, and U.S. net income tax to the extent that the Distribution of Atlantic
Securities is not taxable as a dividend. However, as Parent may not be able to
determine, at the time of the distribution, the amount of the Distribution of
Atlantic Securities taxable as a dividend, Parent may collect the 30% U.S.
withholding tax on the entire amount of the distribution, subject to reduction
by applicable treaty. You should be able to receive a refund if and to the
extent of any excess withholding.
If you are a non-U.S. stockholder and the Distribution of Atlantic
Securities is effectively connected with your conduct of a trade or business in
the U.S. and you provide the proper withholding certificate to Parent, you
should be subject to U.S. net income tax on the Distribution of Atlantic
Securities (but not the 30% U.S. withholding tax).
In the event that the Distribution of Atlantic Securities consists of
the Warrants, you, regardless of whether you are a U.S. or a non-U.S.
stockholder, should not recognize gain or loss on the subsequent exercise of the
Warrants for Atlantic Common Stock. Your tax basis in such Atlantic Common Stock
should equal your adjusted tax basis in the Warrants exercised, increased by the
price you pay to exercise the Warrants to acquire Atlantic Common Stock, and
your holding period for such Atlantic Common Stock should commence on the date
of the exercise of the Warrants for Atlantic Common Stock.
You should consult your own tax advisor as to the consequences of the
Exchange Offer and the Distribution of Atlantic Securities. This section is only
a brief summary of some of the U.S. federal tax implications of the Exchange
Offer and the Distribution of Atlantic Securities, for more information, see
"MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS" as set forth on page 114.
LISTING AND TRADING OF THE SECURITIES
Currently, there is no public market for the Warrants. Atlantic does
not intend to list the Warrants on the AMEX or any securities exchange. The
prices at which the Warrants may trade on a regular way basis after the
Transaction or after such time certificates are actually available or issued
cannot be predicted. Until the Warrants are fully distributed and, if and when
an orderly market develops, trading prices for the Warrants may fluctuate
significantly. The prices at which the Warrants trade will be determined by the
marketplace and may be influenced by many factors including, among others, the
depth and liquidity of the market for the Warrants, investor perception of
Atlantic and its business and Atlantic's results and general economic and market
conditions.
Currently, there is no public market for the Atlantic Common Stock.
Atlantic does not intend to list the Atlantic Common Stock on the AMEX or any
securities exchange. The prices at the which the Atlantic Common Stock may trade
on a regular way basis after the Transaction or after such time certificates are
actually available or issued cannot be predicted. Until the shares of Atlantic
Common Stock are fully distributed and, if and when an orderly market develops,
trading prices for the Atlantic Common Stock may fluctuate significantly. The
prices at which the Atlantic Common Stock trade will be determined by the
marketplace and may be influenced by many factors including, among others, the
depth and liquidity of the market for the Atlantic Common Stock, investor
perception of Atlantic and its business, market conditions for interest rates
and fixed incomes and Atlantic's results and general economic and market
conditions.
In addition, Parent currently anticipates that upon the consummation of
the Transaction, the common stock of Parent will be delisted from the AMEX, and
although a trading market presently exists for Parent's securities, there can be
no assurances of any market once the stock is delisted.
63
The Warrants and Atlantic Common Stock distributed to the stockholders
of Parent following the consummation of the Transaction will be freely
transferable under the Securities Act, except for Warrants and Atlantic Common
Stock received by persons who may be deemed to be affiliates of Atlantic
pursuant to Rule 405 under the Securities Act. Persons who may be deemed to be
affiliates of Atlantic after the Transaction generally include individuals or
entities that control, are controlled by, or are under common control with
Atlantic or Parent, and such persons include directors of Atlantic. Persons who
are affiliates of Atlantic will be permitted to sell their Warrants and Atlantic
Common Stock received in the Transaction pursuant to Rule 144 of the Securities
Act. As a result, Warrants and Atlantic Common Stock received by affiliates of
Atlantic in the Transaction may be sold if certain provisions of Rule 144 under
the Securities Act are complied with (e.g., the amount sold within a three
month period does not exceed the greater of one percent of the outstanding
Warrants and Atlantic Common Stock or the average weekly trading volume for the
Warrants and Atlantic Common Stock during the preceding four week period and the
securities are sold in "brokers' transactions" and in compliance with certain
notice provisions of Rule 144). Atlantic will use reasonable efforts to have the
shares of Atlantic Common Stock issuable upon exercise of the Warrants
registered under the Securities Act, however Atlantic cannot provide any
assurance that such a registration statement will be kept current. If for any
reason a registration statement cannot be kept current with respect to the
shares of Atlantic Common Stock issuable upon exercise of the Warrants, such
shares will not be transferable absent an exception from the registration
requirements of the Securities Act of 1933, such as Rule 144 promulgated under
the Securities Act or if they are registered pursuant to state securities laws.
APPRAISAL RIGHTS
Under the Delaware General Corporation Law, the stockholders of Parent will not
have any appraisal rights as a result of the Transaction.
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ACCOUNTING TREATMENT
Based on the current third party valuation, the exchange will be
accounted for as a modification of debt. The fees paid in connection with the
exchange (i.e., consent fee) are amortized over the term of the New Notes using
the effective yield method. All external costs (i.e., legal, accountants, etc.)
associated with the issuance of New Notes will be expensed.
DESCRIPTION OF SECURITIES
Atlantic is issuing Atlantic Securities consisting of one or more of the
following:
(1) In the event that less than 100% of the Existing Notes are
exchanged for New Notes, Atlantic will issue to Operating Warrants to purchase
2,750,000 shares of the Atlantic Common Stock representing, in the aggregate,
27.5% of the outstanding Atlantic Common Stock, on a fully diluted basis, at an
exercise price of $.01 per share. The Warrants will be distributed by Parent to
its stockholders, pro rata to their ownership of the common stock of Parent. The
Warrants will be exercisable, at the election of the holders, following the
earlier of (i) the payment, in cash or Atlantic Common Stock, for the New Notes
or conversion, in whole or in part, into Atlantic Common Stock, of any of the
New Notes; (ii) a determination of the board of directors of Atlantic that the
Warrants may be exercised; and (iii) payment in full of the outstanding
principal of the Existing Notes which have not been exchanged for the New Notes.
This proxy statement/prospectus also covers the exercise of the Warrants for up
to 2,750,000 shares of Atlantic Common Stock upon the exchange of the Warrants.
The Warrants are subject to cancellation 90 days after Atlantic gives notice of
certain events as described below, but may be exercised between the occurrence
of one of the events set forth above and 90 days following notice from the Board
of cancellation of the Warrants.
(2) In the event that 100% of the aggregate principal amount
outstanding of the Existing Notes are exchanged for New Notes, Atlantic will
issue to Operating 2,750,000 shares of Atlantic Common Stock representing, in
the aggregate, 27.5% of the outstanding Atlantic Common Stock on a fully diluted
basis. Subsequent to the Merger, Parent will distribute Atlantic Common Stock to
its stockholders pro rata to their ownership of the common stock of Parent and
no Warrants will be issued.
(3) In the event that less than 100% of the aggregate principal amount
outstanding of the Existing Notes are exchanged for New Notes, Atlantic will
issue to Operating Atlantic Common Stock, which would represent on a fully
diluted basis a percentage of the Atlantic Common Stock equal to the product of
(a) 72.5% and (b) a fraction, the numerator of which is the principal amount of
the Existing Notes that are not exchanged for the New Notes and the denominator
of which is the total principal amount of the Existing Notes immediately prior
to the consummation of the Exchange Offer.
Atlantic does not currently intend to list the Atlantic Common Stock or Warrants
on the AMEX or any national securities exchange.
Neither Parent nor Atlantic will receive any proceeds from the distribution of
the Warrants or the Atlantic Common Stock to the stockholders of Parent. Any
proceeds from the exercise of the Warrants will be added to the working capital
of Atlantic.
DESCRIPTION OF ATLANTIC'S CAPITAL STOCK
The following description of the proposed terms of the capital stock of Atlantic
includes a summary of specified provisions of Atlantic's Certificate of
Incorporation and By-Laws, copies of which are attached as Annex A and B,
respectively, to the proxy statement/prospectus and are incorporated in the
proxy statement/prospectus.
65
AUTHORIZED CAPITAL STOCK
Atlantic is authorized to issue 25 million shares of common stock, par value
$.01 per share and 5 million shares of preferred stock, par value $.01 per share
(the "Preferred Stock").
COMMON STOCK
Holders of the Atlantic Common Stock are entitled to one vote on each matter
submitted to a vote at a meeting of the stockholders of Atlantic. The Atlantic
Common Stock does not have cumulative voting rights, which means that the
holders of a majority (or a plurality in the event of individual candidates) of
voting shares voting for the election of directors can elect all of the members
of the Board of Directors. The Atlantic Common Stock has no preemptive rights
and no redemption or conversion privileges. Subject to the preferences of any
outstanding Preferred Stock (see "-- Preferred Stock" as set forth below), the
holders of the outstanding shares of Atlantic Common Stock are entitled to (1)
receive dividends out of funds legally available for that purpose, payable in
cash, stock or otherwise, at such times and in such amounts as the Board of
Directors of Atlantic may, from time to time, determine, and (2) receive, upon
liquidation and dissolution, all assets available for distribution to the
stockholders. A majority vote of shares represented at a meeting at which a
quorum is present is sufficient for all actions that require the vote of
stockholders. All of the outstanding shares of Atlantic Common Stock are, and
the shares to be issued by Atlantic as part of the issuance of the Securities
described above will be, when issued and paid for pursuant to the terms of the
Warrants or distributed to the stockholders of Parent, fully paid and
nonassessable.
Except as discussed under "Preferred Stock" below, Atlantic is not authorized to
create, designate, authorize or cause to be issued any nonvoting classes or
series of stock.
The NJCCA also imposes certain restrictions upon the ownership of securities
issued by a corporation that holds a casino license or is a holding company of a
corporate licensee. Among other restrictions, the sale, assignment, transfer,
pledge or other disposition of any security issued by a corporate licensee or
holding company is subject to the regulation of the CCC. The CCC may require
divestiture of any security held by a disqualified holder such as an officer,
director or controlling stockholder who is required to be qualified under the
NJCCA.
[_____________] shall be the Transfer Agent for Atlantic Common Stock and
Warrants.
PREFERRED STOCK
Pursuant to the Certificate of Incorporation, Atlantic is authorized to issue
one or more series of Preferred Stock, which may be issued from time to time in
one or more series upon authorization by Atlantic's Board of Directors. The
Board of Directors, without further approval of the stockholders, will be
authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and any other
rights, preferences, privileges and restrictions to each series of the Preferred
Stock. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes could, among
other things, adversely affect the voting power of the holders of Atlantic
Common Stock and, in certain circumstances, make it more difficult for a third
party to gain control of Atlantic, discourage bids for the Atlantic Common Stock
at a premium or otherwise adversely affect the market price of the Atlantic
Common Stock.
WARRANTS
The Warrants will be issued pursuant to an agreement (the "Warrant Agreement")
between Atlantic and __________, as warrant agent (the "Warrant Agent"). The
following discussion of the material terms and provisions of the Warrants is
qualified in its entirety by referring to the detailed provision of the Warrant
Agreement, the form of which is attached to this proxy statement/prospectus as
Annex G.
The Warrants will have the following terms:
66
o The Warrants will initially be exercisable for an aggregate of
2,750,000 shares of Atlantic Common Stock or 27.5% of the
outstanding shares of Atlantic Common Stock, at an exercise price
of $.01 per share (the "Exercise Price"), subject to adjustments.
o The Warrants will expire seven years from the date of issuance,
but will be subject to cancellation as set forth below.
o The Warrants will become exercisable, at the election of the
holders, following the earlier of (i) the payment in cash or
Atlantic Common Stock for the New Notes or conversion, in whole
or in part, of any of the New Notes into Atlantic Common Stock as
full satisfaction of the principal and accrued interest due
pursuant to the New Notes; (ii) a determination of the board of
directors of Atlantic that the Warrants may be exercised; and
(iii) payment in full of the outstanding principal of the
Existing Notes which have not been exchanged for the New Notes.
Atlantic cannot make an accurate prediction as to exactly when
the first of these conditions will be satisfied. While the
Existing Notes are scheduled to mature on September 28, 2005,
neither Atlantic nor Parent can provide any assurances that
Parent can have sufficient funds to pay the principal upon
maturity.
o In addition, the Board of Directors of Atlantic may elect at any
time following the date on which the Warrants become exercisable
to provide notice to the holders of the Warrants that the
Warrants will automatically cancel at least 90 days following the
date of such notice, unless exercised prior to such date.
Consequently, if the Board of Directors of Atlantic elects, you
may have only a 90-day period beginning on the date the Warrants
become exercisable to exercise the Warrants.
o The holders may exercise the Warrants by providing notice to the
Warrant Agent and paying the Exercise Price.
o The Exercise Price and the number of shares of Atlantic Common
Stock issuable upon exercise of the Warrants will be subject to
adjustments for certain capital structure changing events (such
as stock dividends, stock splits, recapitalizations, and the
like).
o Prior to and including the time of exercise of the Warrants,
Atlantic will use its reasonable efforts to keep a current
registration statement in effect with the SEC and qualification
with or approval from various state securities agencies with
respect to the shares or other securities underlying the
Warrants, or obtain an opinion of counsel for Atlantic that there
is an effective exemption from registration. There can be no
assurance, however, that such registration statement will be kept
current. If a registration statement covering such shares of
Atlantic Common Stock is not kept current for any reason, or if
the shares underlying the Warrants are not registered in the
state in which a holder resides, Atlantic will use its reasonable
efforts to cause such a registration statement to become
effective.
o The Warrants will be transferable.
Prior to exercise, the Warrants have no voting rights.
67
COMPARISON OF RIGHTS AND MATERIAL DIFFERENCES OF PARENT AND COMPANY
STOCKHOLDERS
The following summary compares certain differences among the rights of
holders of the common stock of Parent, Atlantic Common Stock, and Warrants. The
statements set forth below do not purport to be complete and are qualified in
their entirety by reference to Delaware law, the Certificates of Incorporation
and By-Laws of Parent and Atlantic, the Warrants, and the information contained
elsewhere in this proxy statement/prospectus, including the information under
"RISK FACTORS," and as set forth on page 33. In addition to the rights
described below, Parent is, and Atlantic, upon the effectiveness of the
registration statement of which this proxy statement/prospectus forms a part
will be, subject to additional corporate governance requirements under the
federal securities laws.
The forms of Atlantic's Certificate of Incorporation and By-Laws, and a
form of the Warrant Agreement, are included in this proxy statement/prospectus
as Annex A, B and G, respectively, and these summaries are qualified in their
entirety by reference to such documents. Copies of the Restated Certificate of
Incorporation and Amended and Restated By-Laws of Parent were previously filed
with the SEC.
Parent Common Stock Atlantic Common Stock Warrants
------------------------------- ----------------------------- -----------------------------------
Issuer GB Holdings, Inc. Atlantic Coast Entertainment Atlantic Coast Entertainment
Holdings, Inc. Holdings, Inc.
Authorized Capital 25 million shares, of which (1) 25 million shares, of which Not Applicable.
Stock 20 million are shares of common (1) 20 million are shares of
stock, par value $0.01 per common stock, par value $0.01
share, and (2) five million are per share, and (2) five
shares of preferred stock, par million are shares of
value $0.01 per share. preferred stock, par value
$0.01 per share.
Voting Rights Holders of common stock of Holders of Atlantic Common None prior to exercise. Holders of
Parent are entitled to one vote Stock are entitled to one Warrants have no rights as
per share. vote per share. stockholders of Atlantic prior to
the exercise of the Warrants.
Comparison of Parent has 10 million shares After the Transaction, In addition to the characteristics
Investment of common stock currently substantially all of the described under "Atlantic Common
issued and outstanding. The assets of Operating will be Stock", which will apply to the
primary asset of Parent is transferred to Licensee, a Warrant Shares issuable upon
Operating, a wholly-owned newly formed wholly-owned exercise of the Warrants, the
subsidiary of Parent. Parent subsidiary of Atlantic. Warrants will themselves be
has no operating activities and Atlantic will have no transferable. There can be no
its only source of income is operating activities, its assurance that a substantial
interest on cash equivalent only asset will be membership trading market will develop for the
investments. interests of Licensee and its Warrants.
only source of income will be
interest on cash equivalent
investments.
68
Dividend Rights Subject to the preferences of Subject to the preferences of No right to receive dividends prior
any outstanding preferred any outstanding preferred to exercise; however, if Atlantic
stock, holders of the common stock, and any payment due shall, at any time after issuance
stock of Parent are entitled to under the New Notes, holders of the Warrants declare a dividend
receive dividends in cash, of Atlantic Common Stock are or make a distribution on the
stock or otherwise, at such entitled to receive dividends outstanding shares of Atlantic
times and in such amounts as in cash, stock or otherwise, Common Stock in shares of Atlantic
the Board may, from time to at such times and in such Common Stock (other than as part of
time, determine. amounts as the Board of the Transaction) upon exercise, the
Directors of Atlantic may, holder is entitled to receive the
from time to time, determine. aggregate number and kind of shares
which, if such Warrant had been
exercised immediately prior to such
time, such holder would have been
entitled to receive by virtue of
such dividend.
Board of Directors The Board is initially set at The Board of Directors of Not Applicable.
six directors. Atlantic is initially set at
six directors.
Size of Board The exact number of directors The exact number of directors Not Applicable.
is determined from time to time is determined from time to
by resolution adopted by a time by resolution adopted by
majority of the entire Board. a majority of the entire
Parent currently has 6 Board of Directors. Atlantic
directors. currently has six directors.
Qualification of Directors need not be Directors need not be Not Applicable.
Directors stockholders. stockholders.
Removal of Directors Any director or the entire Any director or the entire Not Applicable.
Board may be removed, with or Board of Directors of
without cause, by the holders Atlantic may be removed,
of a majority of the shares with or without cause, by
then entitled to vote at an the holders of a majority
election of directors, unless of the shares then entitled
the Certificate of to vote at an election of
Incorporation allows for directors, unless the
classification of directors Certificate of
(which it currently does not). Incorporation allows for
classification of directors
(which it currently does
not).
69
Effectiveness, The New Jersey Casino Control The NJCCA imposes certain The Warrants are not immediately
Cancellation, Act (the "NJCCA") imposes restrictions upon the exercisable. The Warrants will
Expiration or certain restrictions upon the ownership of securities only become exercisable at the
Divestiture. ownership of securities issued by a corporation election of the holders at any
issued by a corporation that that holds a casino license time following the earlier of (i)
holds a casino license or is or is a holding company of the payment in cash or Atlantic
a holding company of a a corporate licensee. The Common Stock for the New Notes or
corporate licensee. The CCC may require divestiture the conversion, in whole or in
Casino Control Commission of any security held by a part, of any of the New Notes
("CCC") may require disqualified holder such as into shares of Atlantic Common
divestiture of any security an officer, director or Stock as full satisfaction of the
held by a disqualified holder stockholder who is required principal and accrued interest
such as an officer, director to be qualified under the due pursuant to the New Notes;
or stockholder who is NJCCA. (ii) a determination of the Board
required to be qualified of Directors of Atlantic that the
under the NJCCA. Warrants may be exercised; and
(iii) payment in full of the
outstanding principal amount of
the Existing Notes which have not
been exchanged for the New Notes.
Atlantic cannot make an accurate
prediction as to exactly when the
first of these conditions will be
satisfied.
The Warrants will expire seven years
from the date of issuance, but will be
subject to cancellation as set forth
below.
The notice of exercise or, at the
discretion of the Board of Directors of
Atlantic, a later notice from Atlantic,
may state that the Warrants will be
cancelled by Atlantic, ninety (90) days
after the date of the giving of the
applicable notice (or such later date as
shall be specified by the Board of
Directors of Atlantic (the "Expiration
Date")) and shall thereafter be of no
force or effect and no longer
exercisable for the Atlantic Common
Stock unless prior to the Expiration
Date, the Warrant is properly exercised.
Vacancies on the Vacancies and newly-created Vacancies and newly-created Not Applicable.
Board directorships are filled by directorships are filled by
an individual elected by a an individual elected by a
majority vote of the majority vote of the
remaining directors, such remaining directors, such
vote to occur even if quorum vote to occur even if
is not present. quorum is not present.
70
Board Quorum and A majority of the total A majority of the total Not Applicable.
vote requirements number of directors then in number of directors then in
office constitutes a quorum. office constitutes a quorum.
The affirmative vote of a The affirmative vote of a Not Applicable.
majority of the total majority of the total
directors then in office directors then in office
constitutes action by the constitutes action by the
Board. Board of Directors of
Atlantic.
Stockholder Meetings
Annual Meetings Date, time and place of the Date, time and place of the Not Applicable.
annual meeting is determined annual meeting is
by the Board. Notice must be determined by the Board of
mailed to stockholders no Directors. Notice must be
less than 10 and no more than mailed to stockholders no
60 days prior to the meeting. less than 10 and no more
than 60 days prior to the
meeting.
Special Meetings Special meetings may be Special meetings may be Not Applicable.
called by the Chairman of the called by the Chairman of
Board or the President of the Board of Atlantic or
Parent and shall be called by the President of Atlantic
the President or the and shall be called by the
Secretary at the request in president or the secretary
writing of a majority of the at the request in writing
Board, or by the holders of of a majority of the Board
ten percent or more of the of Directors of Atlantic,
outstanding shares of or by the holders of ten
Parent. Such request shall percent or more of the
state the purpose or purposes outstanding shares of
of the proposed meeting. Atlantic. Such request
shall state the purpose or
purposes of the proposed
meeting.
Quorum Requirements The holders of a majority of The holders of a majority Not Applicable.
the stock issued and of the stock issued and
outstanding and entitled to outstanding and entitled to
vote at a meeting present in vote at a meeting present
person or by proxy in person or by proxy
constitutes a quorum. constitutes a quorum.
71
Action By Written Any action required or Any action required or Not Applicable.
Consent permitted to be taken by permitted to be taken by
stockholders for or in stockholders for or in
connection with any corporate connection with any
action may be taken without a corporate action may be
meeting, without prior notice taken without a meeting,
and without a vote, if without prior notice and
consents setting forth the without a vote, if consents
action so taken shall be (i) setting forth the action so
signed by the holders of taken shall be (i) signed
outstanding stock having not by the holders of
less than the minimum number outstanding stock having
of votes that would be not less than the minimum
necessary to authorize such number of votes that would
action at a meeting at which be necessary to authorize
all shares entitled to vote such action at a meeting at
were present and voted, and which all shares entitled
(ii) delivered to Parent to to vote were present and
its registered agent, its voted, and (ii) delivered
principal place of business to Atlantic to its
or to an officer or agent of registered agent, its
Parent with custody of principal place of business
records of stockholder or to an officer or agent
proceedings. of Atlantic with custody of
records of stockholder
If action is taken by less proceedings.
than unanimous consent,
prompt notice must be given If action is taken by less
to those who have not than unanimous consent,
consented. prompt notice must be given
to those who have not
The Board shall fix a record consented.
date for the taking of action
by written consent. Such The Board of Directors of
date shall not precede the Atlantic shall fix a record
date on which the resolution date for the taking of
fixing the record date is action by written consent.
adopted by the Board and not Such date shall not precede
be more than ten days after the date on which the
such date. resolution fixing the
record date is adopted
by the Board of
Directors of Atlantic
and not be more than
ten days after such
date.
Amendments to Amendments must generally be Amendments must generally Not Applicable.
Certificate of approved by the Board and by be approved by the Board of
Incorporation a majority of the outstanding Directors and by a majority
stock entitled to vote on the of the outstanding stock
amendment and, if applicable, entitled to vote on the
by a majority of the amendment and, if
outstanding stock of each applicable, by a majority
class or series entitled to of the outstanding stock of
vote on the amendment as a each class or series
class or series. entitled to vote on the
amendment as a class or
series.
72
Amendments to By-Laws The By-Laws may be altered, The By-Laws may be altered, Not Applicable.
amended or repealed by a amended or repealed by a
majority of the entire Board, majority of the entire
at any meeting of the board Board of Directors, at any
of directors. Under Delaware meeting of the Board of
Law, a majority of the Directors. Under Delaware
shareholders may repeal, Law, a majority of the
amend or adopt the By-Laws. shareholders may repeal,
amend or adopt the By-Laws.
Indemnification In general, the By-Laws In general, the By-Laws Not Applicable.
provide for the provide for the
indemnification of any person indemnification of any
to the fullest extent person to the fullest
authorized by Delaware law, extent authorized by
for each individual who is or Delaware law, for each
was a party or is otherwise individual who is or was a
involved in any proceeding party or is otherwise
because of his or her status involved in any proceeding
as a director or officer of because of his or her
Parent. status as a director or
officer of Atlantic.
Exculpation A director shall not be A director shall not be Not Applicable.
personally liable to Parent personally liable to
for monetary damages for Atlantic for monetary
breach of fiduciary duty as a damages for breach of
director except for liability: fiduciary duty as a
director except for
o for any breach of liability:
the director's duty of
loyalty to Parent or its o for any breach of
stockholders; the director's duty of
loyalty to Atlantic or
o for acts or its stockholders;
omissions not in good
faith or which involve o for acts or
intentional misconduct omissions not in good
or a knowing violation faith or which involve
of law; intentional misconduct
or a knowing violation
o pursuant to Section of law;
174 of the Delaware
General Corporation Law o pursuant to
or Section 174 of the
Delaware General
o for any transaction Corporation Law or
from which the director
derived an improper o for any
personal benefit. transaction from which
the director derived
Each of the above provisions an improper personal
protects Parent's directors benefit.
against personal liability
for monetary damages related Each of the above
to breaches of their provisions protects
fiduciary duty of care. None Atlantic's directors
of the above provisions against personal liability
eliminates the director's for monetary damages
duty of care nor has any related to breaches of
effect on the availability of their fiduciary duty of
equitable remedies, such as care. None of the above
an injunction or rescission, provisions eliminates the
based upon a director's director's duty of care nor
breach of his or her duty of has any effect on the
care. availability of equitable
remedies, such as an
injunction or
rescission, based upon
a director's breach of
his or her duty of
care.
73
Information on State Parent's Certificate Atlantic's Not Applicable.
Anti-takeover Statute of Incorporation provides Certificate of
that it has elected not to be Incorporation provides that
governed by the Takeover it has elected not to be
Statute (Section 203 of the governed by the Takeover
General Corporation Law of Statute (Section 203 of the
Delaware). General Corporation Law of
Delaware).
Exercise Price Not Applicable. Not Applicable. No Adjustment.
Underlying Securities Not Applicable. Not Applicable. The shares of Atlantic Common Stock
issuable upon exercise will be
registered under the Securities Act
upon the effectiveness of the
registration statement of which
this proxy statement/prospectus
forms a part. Prior to and
including the time of exercise of
the Warrants, Parent shall use its
reasonable efforts to cause a
current registration statement to
be in effect with the SEC and
qualification with or approval from
various state securities agencies
with respect to the shares or other
securities underlying the
Warrants. There can be no
assurance, however, that such a
registration statement will be kept
current.
74
Transfer Restrictions The common stock of Parent is At the closing of the Prior to and including the time of
registered under the Securities Transaction and the exercise of the Warrants, Parent
Act and is currently listed on effectiveness of the shall use its reasonable efforts to
AMEX, and, so long as not held registration statement of cause a current registration
by affiliates, is freely which this proxy statement to be in effect with the
tradeable. Following statement/prospectus forms a SEC and qualification with or
consummation of the part, the Atlantic Common approval from various state
Transaction, we anticipate that Stock will be registered securities agencies with respect to
the Common Stock of Parent will under the Securities Act and, the shares or other securities
be delisted from AMEX. so long as not held by underlying the Warrants, or an
affiliates, will be freely opinion of counsel for Atlantic
The NJCCA imposes certain tradeable. that there is an effective
restrictions upon the ownership exemption from registration. There
of securities issued by a The NJCCA imposes certain can be no assurance, however, that
corporation that holds a casino restrictions upon the such a registration statement will
license or is a holding company ownership of securities be kept current. If a registration
of a corporate licensee. Among issued by a corporation that statement covering such shares of
other restrictions, the sale, holds a casino license or is Atlantic Common Stock is not kept
assignment, transfer, pledge or a holding company of a current for any reason, or if the
other disposition of any corporate licensee. Among shares underlying the Warrants are
security issued by a corporate other restrictions, the sale, not registered in the state in
licensee or holding company is assignment, transfer, pledge which a holder resides, Atlantic
subject to the regulation of or other disposition of any will use its reasonable efforts to
the CCC. security issued by a register the shares of Atlantic
corporate licensee or holding Common Stock underlying the
company is subject to the Warrants.
regulation of the CCC.
75
GOVERNMENT REGULATION
Casino gaming is strictly regulated in Atlantic City under the NJCCA and
the regulations of the CCC, which affect virtually all aspects of the operations
of The Sands. The NJCCA and regulations affecting Atlantic City casino licensees
concern primarily the financial stability, integrity and character of casino
operators, their employees, their debt and equity security holders and others
financially interested in casino operations; the nature of casino/hotel
facilities; the operation methods (including rules of games and credit granting
procedures); and financial and accounting practices used in connection with
casino operations. A number of these regulations require practices that are
different from those in casinos in Nevada and elsewhere, and some of these
regulations result in casino operating costs greater than those in comparable
facilities in Nevada and elsewhere. The following is only a summary of the
applicable provisions of the NJCCA. It does not purport to be a full description
and is qualified in its entirety by reference to the NJCCA and such other
applicable laws and regulations.
NEW JERSEY GAMING REGULATIONS
In general, the NJCCA and the regulations promulgated thereunder
contain detailed provisions concerning, among other things:
o the granting and renewal of casino licenses;
o the suitability of the approved hotel facility, and the amount of
authorized casino space and gaming units permitted therein;
o the qualification of natural persons and entities related to the
casino licensee;
o the licensing of certain employees and vendors of casino
licensees;
o the rules of the games;
o the selling and redeeming of gaming chips;
o the granting and duration of credit and the enforceability of
gaming debts;
o management control procedures, accounting and cash control
methods and reports to gaming agencies;
o the security standards;
o the manufacture and distribution of gaming equipment;
o the simulcasting of horse races by casino licensees, advertising,
entertainment and alcoholic beverages.
Casino Control Commission
The ownership and operation of casino/hotel facilities in Atlantic City
are the subject of strict state regulation under the NJCCA. The CCC is empowered
to regulate a wide spectrum of gaming and non-gaming related activities and to
approve the form of ownership and financial structure of not only a casino
licensee, but also its entity qualifiers and intermediary and holding companies
and any other related entity required to be qualified.
Casino License
No casino hotel facility may operate unless the appropriate license and
approvals are obtained from the CCC, which has broad discretion with regard to
the issuance, renewal, revocation and suspension of such licenses and approvals,
which are non-transferable. The qualification criteria with respect to the
holder of a casino license include its
76
financial stability, integrity and responsibility; the integrity and adequacy of
its financial resources which bear any relation to the casino project; its good
character, honesty and integrity; and the sufficiency of its business ability
and casino experience to establish the likelihood of a successful, efficient
casino operation. A plenary license authorizes the operation of a casino with
the games authorized in an operation certificate issued by the Commission, and
the operation certificate may be issued only on a finding that the casino
conforms to the requirements of the NJCCA and applicable regulations and that
the casino is prepared to entertain the public. Under such determination,
Operating has been issued a plenary casino license. The plenary license issued
to The Sands was renewed by the CCC in September 2000 for a period of four
years. The CCC may reopen licensing hearings at any time, and must reopen a
licensing hearing at the request of the Division of Gaming Enforcement.
To be considered financially stable, a licensee must demonstrate the
following abilities: to pay winning wagers when due; to achieve an annual gross
operating profit; to pay all local, state and federal taxes when due; to make
necessary capital and maintenance expenditures to insure that it has a superior
first-class facility; and to pay, exchange, refinance or extend debts which will
mature or become due and payable during the license term.
In the event a licensee fails to demonstrate financial stability, the
CCC may take such action as it deems necessary to fulfill the purposes of the
NJCCA and protect the public interest, including: issuing conditional licenses,
approvals or determinations; establishing an appropriate cure period; imposing
reporting requirements; placing restrictions on the transfer of cash or the
assumption of liabilities; requiring reasonable reserves or trust accounts;
denying licensure; or appointing a conservator. See "-- Conservatorship."
Pursuant to the NJCCA and the regulations and precedent of the CCC, no
entity may hold a casino license unless each officer, director, principal
employee, person who directly or indirectly holds any beneficial interest or
ownership in the licensee, each person who in the opinion of the CCC has the
ability to control or elect a majority of the board of directors of the licensee
(other than a banking or other licensed lending institution which makes a loan
or holds a mortgage or other lien acquired in the ordinary course of business)
and any lender, underwriter, agent or employee of the licensee or other person
whom the CCC may consider appropriate, obtains and maintains qualification
approval from the CCC. Qualification approval means that such person must, but
for residence, individually meet the qualification requirements as a casino key
employee.
Control Persons
An entity qualifier or intermediary or holding company, such as
Operating, Parent, Atlantic or Licensee is required to register with the CCC and
meet the same basic standards for approval as a casino licensee; provided,
however, that the CCC, with the concurrence of the Director of the Division of
Gaming Enforcement, may waive compliance by a publicly-traded corporate holding
company with the requirement that an officer, director, lender, underwriter,
agent or employee thereof, or person directly or indirectly holding a beneficial
interest or ownership of the securities thereof, individually qualify for
approval under casino key employee standards so long as the CCC and the Director
of the Division of Gaming Enforcement are, and remain, satisfied that such
officer, director, lender, underwriter, agent or employee is not significantly
involved in the activities of the casino licensee, or that such security holder
does not have the ability to control the publicly-traded corporate holding
company or elect one or more of its directors. Persons holding 5.0% or more of
the equity securities of such holding company are presumed to have the ability
to control the company or elect one or more of its directors and will, unless
this presumption is rebutted, be required to individually qualify. Equity
securities are defined as any voting stock or any security similar to or
convertible into or carrying a right to acquire any security having a direct or
indirect participation in the profits of the issuer.
Financial Sources
The CCC may require all financial backers, investors, mortgagees, bond
holders and holders of notes or other evidence of indebtedness, either in effect
or proposed, which bear any relation to any casino project, including holders of
publicly-traded securities of an entity which holds a casino license or is an
entity qualifier, subsidiary or holding company of a casino licensee, to qualify
as financial sources. In the past, the CCC has waived the qualification
requirement for holders of less than 15.0% of a series of publicly-traded
mortgage bonds so long as the bonds remained
77
widely distributed and freely traded in the public market and the holder had no
ability to control the casino licensee. The CCC may require holders of less than
15.0% of a series of debt to qualify as financial sources even if not active in
the management of the issuer or casino licensee.
Institutional Investors
An institutional investor is defined by the NJCCA as any retirement
fund administered by a public agency for the exclusive benefit of federal, state
or local public employees; any investment company registered under the
Investment Company Act of 1940, as amended; any collective investment trust
organized by banks under Part Nine of the Rules of the Comptroller of the
Currency; any closed end investment trust; any chartered or licensed life
insurance company or property and casualty insurance company; any banking and
other chartered or licensed lending institution; any investment advisor
registered under the Investment Advisers Act of 1940, as amended; and such other
persons as the CCC may determine for reasons consistent with the policies of the
NJCCA.
An institutional investor may be granted a waiver by the CCC from
financial source or other qualification requirements applicable to a holder of
publicly-traded securities, in the absence of a prima facie showing by the
Division of Gaming Enforcement that there is any cause to believe that the
holder may be found unqualified, on the basis of CCC findings that: (i) its
holdings were purchased for investment purposes only and, upon request by the
CCC, it files a certified statement to the effect that it has no intention of
influencing or affecting the affairs of the issuer, the casino licensee or its
holding or intermediary companies; provided, however, that the institutional
investor will be permitted to vote on matters put to the vote of the outstanding
security holders; and (ii) if (x) the securities are debt securities of a casino
licensee's holding or intermediary companies or another subsidiary company of
the casino licensee's holding or intermediary companies which is related in any
way to the financing of the casino licensee and represent either (A) 20.0% or
less of the total outstanding debt of the company or (B) 50.0% or less of any
issue of outstanding debt of the company, (y) the securities are equity
securities and represent less than 10.0% of the equity securities of a casino
licensee's holding or intermediary companies or (z) the securities so held
exceed such percentages, upon a showing of good cause. There can be no
assurance, however, that the CCC will make such findings or grant such waiver
and, in any event, an institutional investor may be required to produce for the
CCC or the Antitrust Division of the Department of Justice upon request, any
document or information which bears any relation to such debt or equity
securities.
Ownership and Transfer of Securities
The NJCCA imposes certain restrictions upon the issuance, ownership and
transfer of securities of a regulated company and defines the term "security" to
include instruments which evidence a direct or indirect beneficial ownership or
creditor interest in a regulated company including, but not limited to,
mortgages, debentures, security agreements, notes and warrants. Each of The
Sands, Parent, Atlantic and Licensee will be deemed to be a regulated company,
and instruments evidencing a beneficial ownership or creditor interest therein,
including a partnership interest, are deemed to be the securities of a regulated
company.
If the CCC finds that a holder of such securities is not qualified
under the NJCCA, it has the right to take any remedial action it may deem
appropriate, including the right to force divestiture by such disqualified
holder of such securities. In the event that certain disqualified holders fail
to divest themselves of such securities, the CCC has the power to revoke or
suspend the casino license affiliated with the regulated company which issued
the securities. If a holder is found unqualified, it is unlawful for the holder
(i) to exercise, directly or through any trustee or nominee, any right conferred
by such securities or (ii) to receive any dividends or interest upon such
securities or any remuneration, in any form, from its affiliated casino licensee
for services rendered or otherwise.
With respect to non-publicly-traded securities, the NJCCA and
regulations of the CCC require that the corporate charter or partnership
agreement of a regulated company establish a right in the CCC of prior approval
with regard to transfers of securities, shares and other interests and an
absolute right in the regulated company to repurchase at the market price or the
purchase price, whichever is the lesser, any such security, share or other
interest in the event that the CCC disapproves a transfer. With respect to
publicly-traded securities, such corporate charter or partnership
78
agreement is required to establish that any such securities of the entity are
held subject to the condition that if a holder thereof is found to be
disqualified by the CCC, such holder shall dispose of such securities.
Under the terms of the indentures governing the Notes, if a holder of
the Notes does not qualify under the NJCCA when required to do so, such holder
must dispose of its interest in such securities, and the respective Issuer or
Issuers of such securities may redeem the securities at the lesser of the
outstanding amount or fair market value.
License Fees
The CCC is authorized to establish annual fees for the renewal of
casino licenses. The renewal fee is based upon the cost of maintaining control
and regulatory activities prescribed by the NJCCA, and may not be less than
$200,000 for a four-year casino license. Additionally, casino licensees are
subject to potential assessments to fund any annual operating deficits incurred
by the CCC or the Division of Gaming Enforcement. There is also an annual
license fee of $500 for each slot machine maintained for use or in use in any
casino.
Gross Revenue Tax
Each casino licensee is also required to pay an annual tax of 8.0% on
its gross casino revenues. On July 3, 2002, the State of New Jersey passed the
New Jersey Business Tax Reform Act which, among other things, suspended the use
of the New Jersey net operating loss carryforwards for two years and introduced
a new alternative minimum assessment under the New Jersey corporate business tax
based on gross receipts or gross profits.
On July 1, 2003, the State of New Jersey amended the NJCCA to impose
new and increased taxes on casino revenues, complementaries and hotel
occupancies, among other things. See "DESCRIPTION OF THE BUSINESS OF PARENT AND
ITS SUBSIDIARIES" as set forth on page 82 below.
Investment Alternative Tax Obligations
The Sands conducts gaming operations in Atlantic City, New Jersey and
operates a hotel and several restaurants, as well as related support facilities.
The operation of an Atlantic City casino/hotel is subject to significant
regulatory control. Under the NJCCA, Operating was required to obtain and is
required to periodically renew its operating license. A casino license is not
transferable and, after the initial licensing and two one-year renewal periods,
is issued for a term of up to four years. The plenary license issued to The
Sands was renewed by the CCC in September 2000 and extended through September
2004. The CCC may reopen licensing hearings at any time. If it were determined
that gaming laws were violated by a licensee, the gaming license could be
conditioned, suspended or revoked. In addition, the licensee and other persons
involved could be subject to substantial fines.
The NJCCA requires casino licensees to pay an investment alternative
tax of 2.5% of gross revenue (the "2.5% Tax") or, in lieu thereof, to make
quarterly deposits of 1.25% of quarterly gross revenue with the CRDA (the
"Deposits"). The Deposits are then used to purchase bonds at below-market
interest rates from the CRDA or to make qualified investments approved by the
CRDA. The CRDA administers the statutorily mandated investments made by casino
licensees and is required to expend the monies received by it for eligible
projects as defined in the NJCCA. The Sands has elected to make the Deposits
with the CRDA rather than pay the 2.5% Tax.
As of December 31, 2002 and 2001, The Sands had purchased bonds
totaling $6,946,000 and $6,980,000, respectively. In addition, The Sands had
remaining funds on deposit and held in escrow by the CRDA at December 31, 2002
and 2001, of $13,151,000 and $11,612,000, respectively. The bonds purchased and
the amounts on deposit and held in escrow are collectively referred to as
"obligatory investments" on the accompanying consolidated financial statements.
Obligatory investments at December 31, 2002 and 2001, are net of
accumulated valuation allowances of $10,028,000 and $9,290,000, respectively,
based upon the estimated realizable values of the investments. Provisions for
valuation allowances for the years ended December 31, 2002 and 2001 amounted to
$1,521,000 and $1,341,000, respectively. Provisions for valuation allowances for
the three months ended December 31, 2000 and the nine months
79
ended September 30, 2000 amounted to $243,000 and $1,044,000, respectively.
The Sands has, from time to time, contributed certain amounts held in
escrow by the CRDA to fund CRDA sponsored projects. During 2002, The Sands
contributed $925,000 of its escrowed funds to CRDA sponsored projects and
received $116,000 in a cash refund. In 2001, The Sands contributed $322,000 of
its escrowed funds to CRDA sponsored projects and received $80,000 in a cash
refund and $84,000 in waivers of certain future Deposit obligations. During the
three months ended December 31, 2000, The Sands contributed $3,310,000 of its
escrowed funds to a CRDA sponsored project and received a cash refund of
$828,000 in consideration for the contribution. Prior to this, the CRDA had
granted The Sands waivers of certain of its future Deposit obligations in
consideration of similar contributions. The Sands had made such contributions of
Deposits during the nine months ended September 30, 2000, totaling $142,000,
resulting in waivers granted by the CRDA totaling $72,000. Other assets
aggregating $811,000 and $1,010,000, respectively, have been recognized on the
accompanying consolidated balance sheets at December 31, 2002 and 2001, and are
being amortized over a period of ten years commencing with the completion of the
projects. Amortization of other assets totaled $199,000, $202,000, $51,000 and
$151,000 for the years ended December 31, 2002 and 2001, the three months ended
December 31, 2000 and the nine months ended September 30, 2000, respectively.
Atlantic City Fund
On each October 31st during the years 1996 through 2003, each casino
licensee shall pay into an account established in the CRDA and known as the
Atlantic City Fund, its proportional share of an amount related to the amount by
which annual operating expenses of the CCC and the Division of Gaming
Enforcement are less than a certain fixed sum. Additionally, a portion of the
investment alternative tax obligation of each casino licensee for the years 1994
through 1998 allocated for projects in northern New Jersey shall be paid into
and credited to the Atlantic City Fund. Amounts in the Atlantic City Fund will
be expended by the CRDA for economic development projects of a revenue-producing
nature that foster the redevelopment of Atlantic City other than the
construction and renovation of casino hotels.
Conservatorship
If, at any time, it is determined that The Sands, Parent, Atlantic or
Licensee or any other entity qualifier has violated the NJCCA or that any of
such entities cannot meet the qualification requirements of the NJCCA, such
entity could be subject to fines or the suspension or revocation of its license
or qualification. If a casino license is suspended for a period in excess of 120
days or is revoked, or if the CCC fails or refuses to renew such casino license,
the CCC could appoint a conservator to operate and dispose of such licensee's
casino hotel facilities. A conservator would be vested with title to all
property of such licensee relating to the casino and the approved hotel subject
to valid liens and/or encumbrances. The conservator would be required to act
under the direct supervision of the CCC and would be charged with the duty of
conserving, preserving and, if permitted, continuing the operation of the casino
hotel. During the period of the conservatorship, a former or suspended casino
licensee is entitled to a fair rate of return out of net earnings, if any, on
the property retained by the conservator. The CCC may also discontinue any
conservatorship action and direct the conservator to take such steps as are
necessary to effect an orderly transfer of the property of a former or suspended
casino licensee. Such events could result in an event of default under the terms
of the indentures governing the Notes.
TREASURY REGULATIONS
The United States Department of the Treasury has adopted regulations
pursuant to which a casino is required to file a report of each deposit,
withdrawal, exchange of currency, gambling tokens or chips, or other payments or
transfers by, through or to such casino which involves a transaction in currency
of more than $10,000 per patron, per gaming day. Such reports are required to be
made on forms prescribed by the Secretary of the Treasury and are filed with the
Commissioner of the Internal Revenue Service. In addition, Licensee is required
to maintain detailed records (including the names, addresses, social security
numbers and other information with respect to its gaming customers) dealing
with, among other items, the deposit and withdrawal of funds and the maintenance
of a line of credit.
In the past, the Internal Revenue Service had taken the position that
winnings from table games by nonresident aliens were subject to a 30.0%
withholding tax. The Internal Revenue Service, however, subsequently adopted a
practice of
80
not collecting such tax. Recently enacted legislation exempts from withholding
tax table game winnings by nonresident aliens, unless the Secretary of the
Treasury determines by regulation that such collections have become
administratively feasible.
81
DESCRIPTION OF THE BUSINESS OF PARENT AND ITS SUBSIDIARIES
GENERAL
Parent is a Delaware corporation and was a wholly-owned subsidiary of
Pratt Casino Corporation, a Delaware corporation ("PCC"), through December 31,
1998. PCC was incorporated in September 1993 and was wholly-owned by PPI
Corporation, a New Jersey corporation ("PPI") and a wholly-owned subsidiary of
Greate Bay Casino Corporation ("GBCC"). Effective after December 31, 1998, PCC
transferred 21% of the stock ownership in Parent to PBV, Inc., a newly formed
entity controlled by certain stockholders of GBCC ("PBV"). As a result of a
certain confirmed plan of reorganization of PCC and others in October 1999, the
remaining 79% stock interest of PCC in Parent was transferred to Greate Bay
Holdings, LLC ("GBLLC"), whose sole member as a result of the same
reorganization was PPI. In February 1994, Parent acquired Operating through a
capital contribution by its then parent. Operating's principal business activity
is its ownership of The Sands Hotel and Casino located in Atlantic City, New
Jersey. Funding, a Delaware corporation and a wholly-owned subsidiary of Parent,
was incorporated in September 1993 as a special purpose subsidiary of Parent for
the purpose of borrowing funds for the benefit of Operating. Atlantic, a
Delaware corporation and a wholly-owned subsidiary of Operating, was
incorporated on October 31, 2003. Licensee, a New Jersey limited liability
company and a wholly-owned subsidiary of Atlantic, was formed on November 5,
2003. Parent has no operating activities and its only source of income is
interest on cash equivalent investments. Parent's only significant assets are
its investment in Operating and its cash balance at June 30, 2003 of $28.9
million.
On January 5, 1998, Parent and its subsidiaries filed petitions for
relief under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy
Code") in the United States Bankruptcy Court for the District of New Jersey (the
"Bankruptcy Court"). On August 14, 2000, the Bankruptcy Court entered an order
(the "Confirmation Order") confirming the Modified Fifth Amended Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code Proposed by the Official
Committee of Unsecured Creditors and High River Limited Partnership and its
affiliates (the "Plan") for the Parent Company. High River Limited Partnership
("High River") is an entity controlled by Carl C. Icahn. On September 13, 2000,
the CCC approved the Plan. On September 29, 2000, the Plan became effective (the
"Effective Date"). All material conditions precedent to the Plan becoming
effective were satisfied on or before September 29, 2000. Accordingly, the
accompanying consolidated financial statements have been prepared in accordance
with Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code" ("SOP 90-7"). In addition, as a result
of the Confirmation Order and the occurrence of the Effective Date, and in
accordance with SOP 90-7, Parent and its subsidiaries adopted "fresh start
reporting" in the preparation of the accompanying consolidated financial
statements. Parent and its subsidiaries' emergence from Chapter 11 resulted in a
new reporting entity with no retained earnings or accumulated deficit as of
September 30, 2000. As a result, the consolidated financial statements for the
periods subsequent to September 30, 2000, reflect the new basis of accounting
and are not comparable to consolidated financial statements presented prior to
September 30, 2000. A black line has been drawn on the accompanying consolidated
financial statements to distinguish between the pre-reorganization and
post-reorganization entities.
On the Effective Date, Funding's existing debt securities, consisting
of its 10 7/8% First Mortgage Notes due January 15, 2004 (the "10 7/8% Old
Notes") and all of Parent's issued and outstanding shares of common stock owned
by PBV and GBLLC were cancelled. As of the Effective Date, an aggregate of
10,000,000 shares of new common stock of Parent (the "New Parent Common Stock")
were issued and outstanding, and the Existing Notes were issued by Funding.
Holders of the 10 7/8% Old Notes received a distribution of their pro rata
shares of (i) the Existing Notes and (ii) 5,375,000 shares of the New Parent
Common Stock.
Parent and Funding listed the New Parent Common Stock and the
Existing Notes, respectively, on AMEX on March 27, 2001.
THE SANDS
The Sands has segregated its gaming customers into three broad
categories:
82
o The Premium Categories - Those customers who have a high potential
loss per trip. This category has the lowest profit margin percentage
per customer.
o The Middle Categories - Those customers who have a high repeat trip
frequency along with a potential loss per trip that equates to a high
annual potential loss per customer.
o The Mass Categories - Those customers who have a low casino loyalty
and a low potential loss per trip. This category has the highest
profit margin percentage per customer.
Business Strategy
Traditionally, The Sands' marketing strategy in the highly competitive
Atlantic City market has consisted of seeking premium category patrons. In the
past, The Sands has been successful in its marketing efforts towards these
premium patrons through its offering of private, limited-access facilities,
related amenities and use of sophisticated information technology to monitor
patron play, control certain casino operating costs and target marketing efforts
toward frequent visitors with above average gaming budgets. While The Sands
strived to maintain market share within this category, competition within the
industry for the premium category (both table and slot) reduced The Sands
ability to attract this type of player on a profitable basis.
In 2001, The Sands focused on the "Value Gaming" concept. The general
concept in "Value Gaming" is to provide the customer with the best possible
gaming experience for the amount of time that the customer is on property.
Whether that experience is enhanced by competitive odds on games, the ability to
find a food outlet that provides an affordable quality food product, or superior
service, the intent is to provide all categories with an expanded and improved
entertainment experience that would lead to an increase in subsequent trips.
As part of its commitment to make the "Value Gaming" concept a reality
for its customers, The Sands continued to provide the "loosest" slots in the
Atlantic City market during 2001 and through the first quarter of 2002. That is,
The Sands provided the best overall odds for winning at slots of any casino in
Atlantic City, according to monthly data filed with the CCC.
Additionally in 2001, The Sands invested approximately $4.6 million in
new slot machines, gaming equipment and casino renovations. The Boardwalk Buffet
reopened after renovations in the summer of 2001, providing guests with an
expanded buffet outlet featuring a wide variety of culinary choices at an
affordable price in a nostalgic Atlantic City atmosphere.
In the second quarter of 2002, The Sands changed its marketing strategy
to reduce its focus on the lower profit margin table games business and focus
almost exclusively on the slot machine business. In the process, The Sands
reduced the number of table games from 69 to 26 and increased its number of slot
machines by approximately 400 units. The Sands began to market its product
predominantly to the mass slot player categories. As part of this strategy, The
Sands, in keeping with its "Value Gaming" concept, increased the number of lower
denomination slot machines, thus making the product more available to this mass
category. However the increase in the number of lower denomination slot machines
created a more competitive slot machine hold percentage and, as a result, caused
The Sands to move away from its "loosest" slots in Atlantic City. The "Value
Gaming" concept continued to be reinforced through the availability of slot
machines, discounted food product and availability of hotel rooms to the mass
category.
At the end of the third quarter of 2002, it had become apparent that
the gain in slot machine revenue could not offset the loss of table game
revenue. In addition, the volume required from the mass slot player categories,
to make up the loss of the middle to premium slot player categories, could not
be accommodated in a property with the physical constraints of The Sands.
Subsequent review of marketing data revealed that the loss in table game play
had a direct effect on the loss in some slot machine play, as many slot patrons
who frequented The Sands with family and friends were forced to patronize
competitors to find the variety of gaming experience they desired. As a result,
by the end of the fourth quarter of 2002, The Sands had added fourteen table
games to bring the total number of table games to forty, and changed its
marketing strategy to focus more on the middle to premium categories of slot
players.
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During 2002 and 2003, The Sands continued to invest in improvements and
upgrades to the casino hotel complex. These improvements included new slot
machines, renovations to the first floor casino, bus depot, porte-cochere, bus
patron lobby and hotel room renovations to both The Sands and the Madison House
Hotel, see "DESCRIPTION OF THE BUSINESS OF PARENT AND ITS SUBSIDIARIES --
Description of Properties" as set forth on page 82. With the ongoing upgrades
to the property, The Sands will be able to broaden its appeal to both the
premium category as well as increase its marketing effort towards the middle and
mass categories of the gaming market.
In 2002, the Sands had also introduced a new comprehensive customer
service program that includes customer service training for new employees,
customer service monitoring for operations and customer service recovery
programs. During the six months ended June 30, 2003, 21 more table games were
added and 151 slot machines were removed. This brought the total number of table
games to 61 and the total number of slot machines to 2,171 as of June 30, 2003.
As part of The Sands capital expenditure program, certain improvements,
additions and enhancements have been made, or are planned to be made, to the
facility, including slot machines, other gaming equipment and physical plant
renovations. These additions and enhancements will primarily benefit guests in a
variety of services and will compliment the "Value Gaming" marketing strategy.
The Sands uses sophisticated information technology that enables it to
track and rate patrons' play through the use of identification cards, which it
issues to patrons ("casino players' cards"). All of the slot machines at The
Sands are connected with, and information with respect to table games activity
can be input into, a computer network. When patrons insert their casino players'
card into slot machines or present them to supervisors at table games,
meaningful information, including amounts wagered and duration of play, is
transmitted in real-time to a casino management database. The information
contained in the database facilitates the implementation of targeted and cost
effective marketing programs, which appropriately recognize and reward patrons
during current and future visits to The Sands, certain of these marketing
programs allow patrons to automatically obtain complimentaries based on levels
of play. Such complimentaries include free meals, hotel accommodations,
entertainment, retail merchandise, parking, and sweepstakes giveaways.
Management believes that its ability to reward its customers on a "same-visit"
basis is valuable in encouraging the loyalty of repeat visits. Management of The
Sands believes this is a unique benefit and strategy in the Atlantic City market
providing a marketing edge over its competitors. The computer systems also allow
The Sands to monitor, analyze and control the granting of gaming credit,
promotional expenses and other marketing costs.
Management primarily focuses its marketing efforts on patrons who have
been identified by its casino management computer system as profitable patrons.
Management believes that its philosophy of encouraging participation in its
casino players' card program, using the information obtained thereby to identify
the relative playing patterns of patrons and tailoring specific marketing
programs and property amenities to this market category enhances profitability
of The Sands.
The Sands also markets to the mass casino patron market through various
forms of direct and indirect advertising, and group and bus tour programs. Once
new patrons are introduced to The Sands' "Value Gaming" concept and the casino
players' card program, management uses its information technology capabilities
to directly market to these patrons to encourage repeat patronage.
Competition
The Sands faces intense competition from the eleven other existing
Atlantic City casinos, including the newly opened Borgata. According to reports
of the CCC, the twelve Atlantic City casinos currently offer approximately [1.2]
million square feet of gaming space. After completion of the acquisition of
Caesars by Park Place Entertainment Corp. in December 1999, Park Place
Entertainment connected Caesars to Bally's Park Place and added slot machines in
the connecting space. In January 2001, over the objections of The Sands, the CCC
determined that the proposed acquisition of the Claridge Hotel and Casino by
Park Place Entertainment which is located adjacent to The Sands and with whom
The Sands jointly operates the "People Mover" walkway from the Boardwalk would
not violate the NJCCA's prohibition against undue economic concentration. As a
result of the confirmation of the Claridge Chapter 11 Plan by the Bankruptcy
Court, Park Place Entertainment acquired the Claridge, and Park Place
Entertainment constructed a
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connection between the Claridge and Bally's Park Place Casino, which was already
interconnected to the Park Place Entertainment controlled Caesars Hotel and
Casino. In 2003, Bally's Park Place Casino merged the Claridge operations into
its corporate structure and under its casino license similar to its operation of
the Wild, Wild West Casino. Currently, Park Place Entertainment controls three
casinos, the Trump Organization controls three and the Harrah's Organization
controls two of the twelve Atlantic City casinos. Park Place Entertainment also
controls the so-called Traymore site located between the boardwalk and The Sands
and has acquired a lot contiguous to The Sands parking garage that formerly
contained the Continental Motel property. Park Place Entertainment announced
that it may develop another hotel-casino complex on this site but has not
announced specific plans at this time. In addition, several companies have
announced plans to build and operate additional casino/hotels over the next few
years. On July 3, 2003, Boyd Gaming Corporation, in partnership with MGM Mirage,
opened a 40 story 2,010-room hotel and 120,000 square foot casino, the Borgata,
in the Marina District of Atlantic City. The Borgata is situated on
approximately 30 acres and includes specialty restaurants, distinct boutiques, a
European style spa and several entertainment venues. In connection with that
project, construction was completed on a tunnel connecting the Atlantic City
Expressway with the Marina District. Other casino companies and individuals have
submitted applications and have been qualified in New Jersey to hold casino
licenses. Tropicana Atlantic City is nearing completion of an expansion of its
existing facility. The expansion will include a 502-room hotel tower, a 25-room
conference center, a 2,400 space-parking garage and an expanded casino floor.
The plans will also include a 200,000 square foot themed shopping, dining and
entertainment complex called The Quarter. Tropicana intends to complete the
project in 2004. Resorts is currently constructing a hotel room addition of
approximately 400 to 500 rooms and is set to open in the second quarter of 2004.
Showboat Atlantic City has opened a new 544-room hotel tower in 2003 and
expanded its gaming space to 101,000 square feet and increased its slot machines
to 3,972. Accordingly, the existing and future competing forces could have a
materially adverse impact on the operations of The Sands.
The CRDA is a governmental agency that administers the statutorily
mandated investments required to be funded by casino licensees. Legislation
enacted during 1993 and 1996 allocated an aggregate of $175 million of CRDA
funds and credits to subsidize and encourage the construction of additional
hotel rooms by Atlantic City casino licensees. Competitors of The Sands that
have the financial resources to construct hotel rooms can take advantage of such
credits more readily than The Sands. The Sands has an approved hotel expansion
program with the CRDA and a retail entertainment development project. Plans have
been announced by other casino operators to complete expansions within the
required subsidy period. The expansion of existing gaming facilities and the
addition of new casinos will continue to increase competition within the
Atlantic City market.
In this highly competitive environment, each property's relative
success is affected by a great many factors that relate to its location and
facilities. These include the number of parking spaces and hotel rooms it
possesses, close proximity to Pacific Avenue, the Boardwalk and to other
casino/hotels and access to the main expressway entering Atlantic City. Parent
and its subsidiaries believe that, in prior years, its operating strategy
enabled The Sands to compete against most other Atlantic City casino/hotels. In
the past, many of their competitors had greater financial resources for capital
improvements and marketing and promotional activities than Parent and its
subsidiaries and, as a result, The Sands' facilities and amenities fell behind
many of the other casinos. In order to improve Parent's and its subsidiaries'
competitive position, they sought the approval of the Bankruptcy Court for a
capital expenditure program to renovate the majority of its hotel rooms and
suites and to purchase approximately 700 slot machines. The Bankruptcy Court
approved the capital expenditure program in the amount of approximately $13.6
million in March 1998. In addition, the lack of access to Pacific Avenue
hampered The Sands' efforts to expand its "drive-in" patron base. However, in
1999, The Sands acquired land parcels on Pacific Avenue, demolished the existing
structures and constructed a new front entrance to The Sands' facility on
Pacific Avenue, which opened in June 2000. During 2003, the new front entrance
was redesigned and refurbished as an exclusive entrance for its bus patrons,
complete with a new and expanded bus waiting lounge. Also during 2003, the
porte-cochere was renovated and expanded in order to make the Sands more easily
accessible to the drive-in customer.
In order to enhance its competitive position in the marketplace, The
Sands may determine to incur substantial additional costs and expenses to
maintain, improve and expand its facilities and operations. Those activities may
require the Parent to consider seeking additional financing.
A significant amount of The Sands' revenues is derived from patrons
living within a 120-mile radius of Atlantic
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City, New Jersey, particularly northern New Jersey, southeastern Pennsylvania
and metropolitan New York City. Proposals to allow casino gaming in certain
areas of Pennsylvania have been defeated within the past three years. If casino
gaming were to be legalized in those areas or in other venues that are more
convenient to those areas, it could have a material adverse effect on The Sands.
Gaming is currently conducted on Indian lands in nearby states, including the
Foxwoods and Mohegan Sun Casinos in Connecticut and the Turning Stone Casino in
Oneida, New York near Syracuse. Casino Niagara, which has operated a temporary
casino facility in Niagara Falls, Ontario, since 1996, intends to open an
expanded permanent facility in the spring of 2004. In addition, New York State
passed legislation that was signed by the Governor in October 2001 to allow slot
machines at racetracks and six Indian owned casinos within the State of New
York. The legislation also allowed the State to join the multi-state Powerball
lottery. The gaming portion of the legislation may face legal challenges
including a challenge based on the New York State Constitution. Therefore, it is
not possible to determine the timing or financial impact of this legislation on
Atlantic City at this time.
Industry Developments
On July 1, 2003, the State of New Jersey amended the NJCCA to impose
various tax increases on Atlantic City casinos, including The Sands. Among other
things, the amendments to the NJCCA include the following new tax provisions:
(i) a new 4.25% tax on casino complimentaries, with proceeds deposited to the
Casino Revenue Fund; (ii) an 8% tax on casino service industry multi-casino
progressive slot machine revenue, with the proceeds deposited to the Casino
Revenue Fund; (iii) a 7.5% tax on adjusted net income of licensed casinos in
State fiscal years 2004 through 2006 based on 2003 Net Income with a minimum
payment of $350,000, with the proceeds deposited to the Casino Revenue Fund;
(iv) a fee of $3.00 per day on each hotel room in a casino hotel facility that
is occupied by a guest, for consideration or as a complimentary item, with the
proceeds deposited into the Casino Revenue Fund in State fiscal years 2004
through 2006 and, beginning in State fiscal year 2007, $2.00 of the fee
deposited into the Casino Revenue Fund and $1.00 transferred to the CRDA; (v) an
increase in the amount paid by the casino hotel for patron cars parked from
$1.50 to $3.00, of the minimum casino hotel parking charge from $2.00 to $3.00,
with $1.50 of the fee to be deposited into the Casino Revenue Fund in State
fiscal years 2004 through 2006 and, beginning in State fiscal year 2007, $0.50
to be deposited into the Casino Revenue Fund and $1.00 transferred to the CRDA
for its purposes pursuant to law, and for use by the CRDA to bond for $30
million for deposit into the Casino Capital Construction Fund, which was also
created by the July 1, 2003 Act that amended the NJCCA; and (vi) the elimination
of the deduction from casino licensee calculation of gross revenue for
uncollectible gaming debt. These changes to the NJCCA, and the new taxes imposed
on The Sands and other Atlantic City casinos, will reduce our profitability. It
is anticipated that these new and increased taxes will cost The Sands
approximately $1.5-2.0 million annually in additional expenses.
New Jersey regulators have approved a number of significant changes to
the regulations governing the casino industry in recent years. Significant
deregulation of the industry began in 1995 with the enactment of legislation
amending the NJCCA and has continued with additional rule modifications to
stimulate industry growth. Partly as a result of such regulatory changes,
industry-wide revenues in New Jersey have remained steady at $4.3 billion in
2002, 2001 and 2000, despite the adverse market conditions. However, the general
economic uncertainties and additional tax burdens specific to the casino
industry may continue to have an adverse impact on the results of The Sands.
Casino/hotel operators have also benefited in recent years from a trend
toward increased slot play as slot machines have become increasingly more
popular than table games particularly with frequent patrons and with
recreational and other casual visitors. Casino operators have been catering
increasingly to slot patrons through new forms of promotions and incentives such
as slot machines that are linked among the various casinos enabling the pay out
of large pooled jackpots, and through more attractive and entertaining gaming
machines. Slot machines generally produce higher margins and profitability than
table games because they require less labor and have lower operating costs. As a
result, slot machine revenue growth has outpaced table game revenue growth in
recent years. In 2002, according to CCC filings, slot win accounted for
approximately 75% of total Atlantic City gaming win. However, table games remain
important to a select category of gaming patrons. Management believes the
availability of table games provides a varied gaming experience that benefits
both slot and table game revenues.
Casino Credit
Casino operations are conducted on both a credit and a cash basis.
Patron gaming debts incurred in accordance
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with the NJCCA are enforceable under New Jersey law. For the six months ended
June 30, 2002 and the year ended December 31, 2002, gaming credit extended to
The Sands' table game patrons accounted for approximately 20.0% and 18.6%,
respectively, of overall table game wagering. Table game wagering accounted for
approximately 9.0% and 9.8%, respectively, of overall casino wagering during the
six months ended June 30, 2003, and the year ended December 31, 2002. Gaming
receivables amounted to $12.2 million before an allowance for uncollectible
gaming receivables of $8.5 million as of June 30, 2003. At December 31, 2002,
gaming receivables amounted to $15.3 million before an allowance for
uncollectible gaming receivables of $11.0 million. Management believes that such
allowances are adequate.
License Agreement
Operating's rights to the trade name "The Sands" (the "Trade Name")
were derived from a license agreement between GBCC and an unaffiliated third
party. Amounts payable by The Sands for these rights were equal to the amounts
paid to the unaffiliated third party. As a result of the Confirmation Order and
the occurrence of the Effective Date and under the terms of the Plan, Operating
was assigned by High River the rights under a certain agreement with the owner
of the Trade Name to use the Trade Name as of the Effective Date. High River
received no payments for its assignment of these rights. Payment is made
directly to the owner of the Trade Name. The calculation of the license fee is
the same as under the previous agreement. For the six months ended June 30, 2003
and the year ended December 31, 2002, the license fee amounted to $130,000
$272,000, respectively. For the year ended December 31, 2001, such charges
amounted to $268,000.
Employees and Labor Relations
In Atlantic City, all employees, except certain hotel employees, must
be licensed under the NJCCA. Due to the seasonality of the operations of The
Sands, the number of employees varies during the course of the year. At June 30,
2003, The Sands had approximately 2,400 employees. The Sands has collective
bargaining agreements with three unions that represent approximately 1,000
employees, most of whom are represented by the Hotel, Restaurant Employees and
Bartenders International Union, AFL-CIO, Local 54. The collective bargaining
agreement with Local 54 expires in September 2004. The collective bargaining
agreements with the Carpenters, Local 623 and Entertainment Workers, Local 68
expire in April and July 2005, respectively. Management considers its labor
relations to be good.
Casino Licenses
The NJCCA provides for a casino license fee of not less than $200,000
based upon the cost of the investigation and consideration of the license
application, and a renewal fee of not less than $100,000 or $200,000 for a one
year or four year renewal, respectively, based upon the cost of maintaining
control and regulatory activities. In addition, a licensee must pay annual taxes
of 8% of casino win (as defined in the NJCCA), net of a provision for
uncollectible gaming debts of up to 4% of casino win up to June 30, 2003, and
then not allowed as a deduction ("Gross Revenue"). During the six months ended
June 30, 2003 and the years ended December 31, 2002, 2001 and 2000, the taxes
and the license and other fees incurred by The Sands amounted to $9.8 million,
$21.3 million, $23.0 million and $22.7 million, respectively.
The NJCCA also requires casino licensees to pay an investment
alternative tax of 2.5% of Gross Revenue (the "2.5% Tax") or, in lieu thereof,
to make Deposits. The Deposits are then used to purchase bonds at below-market
interest rates from the CRDA or to make qualified investments approved by the
CRDA. The CRDA administers the statutorily mandated investments required to be
funded by casino licensees and is required to expend the monies received by it
for eligible projects as defined in the NJCCA. The Sands has elected to make the
Deposits with the CRDA rather than pay the 2.5% Tax.
The Sands has, from time to time, contributed certain amounts held in
escrow by the CRDA to fund CRDA sponsored projects. During 2002, The Sands
contributed $925,000 of its escrowed funds to CRDA sponsored projects and
received $116,000 in a cash refund. In 2001, The Sands contributed $322,000 of
its escrowed funds to CRDA sponsored projects and received $80,000 in a cash
refund and $84,000 in waivers of certain future Deposit obligations. During the
three months ended December 31, 2000, The Sands contributed $3,310,000 of its
escrowed funds to a CRDA sponsored project and received a cash refund of
$828,000 in consideration for the contribution. Prior to this, the CRDA had
granted The Sands waivers of certain of its future Deposit obligations in
consideration of similar
87
contributions. The Sands had made such contributions of Deposits during the nine
months ended September 30, 2000, totaling $142,000, resulting in waivers granted
by the CRDA totaling $72,000. Intangible assets aggregating $811,000 and
$1,010,000, respectively, have been recognized on the accompanying consolidated
balance sheets in other assets at December 31, 2002 and 2001, and are being
amortized over a period of ten years commencing with the completion of the
projects. Amortization of other assets totaled $199,000, $202,000, $51,000 and
$151,000 for the years ended December 31, 2002 and 2001, the three months ended
December 31, 2000 and the nine months ended September 30, 2000, respectively.
DESCRIPTION OF PROPERTIES
The Sands is located in Atlantic City, New Jersey, on approximately 6.1
acres of land one-half block from the Boardwalk at Brighton Park between Indiana
Avenue and Dr. Martin Luther King, Jr. Boulevard. The Sands facility currently
consists of a casino and simulcasting facility with approximately 79,000 square
feet of gaming space containing approximately 2,322 slot machines and
approximately 61 table games; a hotel with 637 rooms (including 57 suites); six
restaurants; one cocktail lounge; two private lounges for invited guests; an
800-seat cabaret theater; retail space; an adjacent nine-story office building
with approximately 77,000 square feet of office space for its executive,
financial and administrative personnel; the "People Mover", an elevated,
enclosed, one-way moving sidewalk connecting The Sands to the Boardwalk using
air rights granted by an easement from the City of Atlantic City and a garage
and surface parking for approximately 1,750 vehicles.
In April 2000, Operating entered into an agreement with the entities
controlling the Claridge to acquire the Claridge Administration Building. The
purchase price was $3.5 million, consisting of $1.5 million in cash at closing
and $2.0 million consideration tendered through the elimination for 40 months of
a $50,000 monthly license fee paid by the Claridge to Operating, under an
agreement between the Claridge and Operating governing the development and
operation of the "People Mover" leading from the Boardwalk to The Sands and the
Claridge. The present value of the $2.0 million consideration has been recorded
in other current and other noncurrent liabilities sections of the balance sheet
of Parent and its subsidiaries.
The Sands entered into a long-term lease of the Madison House Hotel.
The initial lease period is from December 2000 to December 2012 with lease
payments ranging from $1.8 million per year to $2.2 million per year. The
Madison House is physically connected at two floors to the existing Sands
casino-hotel complex. The Sands recently completed renovations to upgrade and
combine the rooms of the Madison House into a total of 113 suites and 13 single
rooms. It is the intention of The Sands to maintain and operate the Madison
House at the same quality level as The Sands.
LEGAL PROCEEDINGS
Tax appeals on behalf of Parent and its subsidiaries and the City of
Atlantic City challenging the amount of Parent's real property assessments for
tax years 1996 through 2003 are pending before the NJ Tax Court. Parent
discovered certain failures relating to currency transaction reporting and
self-reported the situation to the applicable regulatory agencies. Parent
conducted an internal examination of the matter and the New Jersey Division of
Gaming Enforcement conducted a separate review. Parent has revised internal
control processes and taken other measures to address the situation. Parent was
advised by the Department of the Treasury that it will not pursue a civil
penalty.
Parent is a party in various legal proceedings with respect to the
conduct of casino and hotel operations and has received employment related
claims. Although a possible range of losses cannot be estimated, in the opinion
of management, based upon the advice of counsel, Parent does not expect
settlement or resolution of these proceedings or claims to have a material
adverse impact upon their consolidated financial position or results of
operations, but the outcome of litigation and the resolution of claims is
subject to uncertainties and no assurances can be given. The consolidated
financial statements do not include any adjustments that might result from these
uncertainties.
From time to time, Parent and certain of its officers, directors,
agents and employees, are subject to various legal and administrative
proceedings incidental to the business of Parent. Parent does not believe any
proceedings currently pending are material to the conduct of the business of
Parent.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF PARENT AND ITS SUBSIDIARIES
GENERAL
This management's discussion and analysis of Parent and its
subsidiaries' financial condition and results of operations and other portions
of this solicitation statement and prospectus contain forward-looking statements
about the business, financial condition and prospects of the Parent Company. The
actual results could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties. Such
risks and uncertainties are beyond management's ability to control and, in many
cases, cannot be predicted by management. When used in this solicitation
statement and prospectus, the words "believes", "estimates", "anticipates",
"expects", "intends" and similar expressions as they relate to the Parent
Company or its management are intended to identify forward-looking statements
(see "-- Private Securities Litigation Reform Act" below).
LIQUIDITY AND CAPITAL RESOURCES FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2003
Operating Activities
At June 30, 2003, the Parent Company had cash and cash equivalents of
$46.5 million. The Parent Company provided $3.5 million of net cash from
operations during the six months ended June 30, 2003 compared to generating $8.9
million during the same prior year period.
On July 1, 2003, the State of New Jersey enacted certain legislation
that established a 7.5% tax on a casino's calendar year 2002 adjusted net
income, as defined in the legislation (the "Casino Income Tax"). The Casino
Income Tax is payable annually at a minimum of $350,000 per casino through June
2006. Since Operating operated at an adjusted net loss in 2002, it is subject to
the minimum annual Casino Income Tax. This tax is payable in equal quarterly
installments of $87,500. Casinos can receive a portion of this amount in the
form of a distribution from the CRDA for approved capital construction projects.
Eligible projects include expansions that "increase the square footage of retail
space, parking spaces, or hotel rooms or to create a significant physical
amenity or improvement."
Also enacted on July 1, 2003, was legislation to tax complimentaries at
a rate of 4.25%. The minimum complimentary tax each casino will have to pay is
equivalent to the tax it would have paid in calendar year 2002 if this tax were
already in existence. In addition, parking fees payable to the State of New
Jersey increased from $1.50 per vehicle to $3.00 per vehicle. The legislation
also disallows deduction of uncollectible gaming receivables in calculating the
gross revenue tax on gambling winnings. Management estimates the impact of these
new taxes, fees and calculations to be approximately $725,000 over the next four
quarters. The incremental cost of the new taxes, fees and calculations includes
$350,000 for the Casino Income Tax, approximately $260,000 for taxes on
complimentaries and increased parking fees and approximately $115,000
attributable to the disallowance of deducting uncollectible gaming receivables
for gross revenue tax purposes.
Investing Activities
Capital expenditures at The Sands for the six months ended June 30,
2003 amounted to approximately $6.6 million. These expenditures included but
were not limited to renovations to the new `Swingers' Lounge, Pacific Avenue bus
center, the Platinum Club players lounge and the new bus patron lobby. In order
to enhance its competitive position in the market place, The Sands may determine
to incur additional substantial costs and expenses to maintain, improve and
expand its facilities and operations. The Parent Company may require additional
financing in connection with those activities.
The Sands is required by the NJCCA to make certain quarterly deposits
based on gross revenue with the CRDA in lieu of a certain investment alternative
tax. Deposits for the six months ended June 30, 2003 amounted to $1.1 million.
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Financing Activities
There were no financing activities during the six months ended June 30,
2003. As of June 30, 2003, the only scheduled payment of long-term debt is the
Existing Notes.
On July 14, 2003, a Form 8-K was filed with the SEC reporting that a
committee of the independent directors of Parent approved a proposed
restructuring of the Existing Notes together with various other corporate
changes to be accomplished in connection with the proposed restructuring and
issued a press release describing the restructuring and other aspects of the
proposed transaction. The proposed transaction would involve the following:
o An amendment of the Existing Indenture to remove certain
provisions and covenants and the release of the lien on the
assets of Parent, Operating and Funding which is the collateral
for the Existing Notes, thereby allowing the transfer of such
assets to Licensee free and clear of all liens and all
obligations under the Existing Indenture. Licensee will guarantee
the obligations of Atlantic under the New Indenture.
o An offer to the holders of the Existing Notes to exchange their
Existing Notes, on a dollar for dollar basis, for up to $110
million of New Notes. The New Notes will be secured by a first
lien on the assets of Atlantic and Licensee. Atlantic will
undertake to provide the funds to Parent to meet scheduled
interest payments on the Existing Notes through their scheduled
maturity.
o The payment of $100 by the Parent Company to the holders of the
Existing Notes for each $1,000 in principal amount exchanged
together with all interest accrued on such Existing Notes through
the date of such exchange.
o The distribution to Parent's common stockholders of either
Atlantic Common Stock or Warrants representing 27.5% of Atlantic
Common Stock (on a fully diluted basis).
o The holders of a majority of the aggregate principal amount
outstanding of the New Notes have the option at any time prior to
maturity to cause the New Notes to be paid in the form of
Atlantic Common Stock equal to either (a) 72.5% of the Atlantic
Common Stock outstanding (on a fully diluted basis) if all of the
holders of the Existing Notes tender in the exchange offer, or
(b) if less than all of the holders of the Existing Notes tender
in the exchange offer, the number of shares of Atlantic Common
Stock equal to the product of (i) 72.5% and (ii) a fraction, the
numerator of which is the principal amount of the New Notes and
the denominator of which is the total principal amount of the
Existing Notes immediately following the exchange offer.
o At the election of the holders of a majority of the aggregate
principal amount outstanding of the New Notes, each of the
holders of the New Notes may be given the ability to decide if
they want to be paid in the form of Atlantic Common Stock.
o If all the holders of the Existing Notes do not participate in
the exchange offer, the Transaction will result in Parent owning
shares of Atlantic Common Stock which would represent on a fully
diluted basis a percentage of the Atlantic Common Stock equal to
the product of (a) 72.5% and (b) a fraction, the numerator of
which is the aggregate principal amount of the Existing Notes
that are not exchanged for New Notes and the denominator of which
is the aggregate principal amount outstanding of the Existing
Notes immediately following the exchange offer.
The Transaction is subject to the consent of the holders of a majority
of the Existing Notes, the exchange of a majority in aggregate principal amount
outstanding of the Existing Notes, the approval of stockholders owning a
majority of the common stock of Parent, the effectiveness of all required filing
under applicable securities law, and the receipt of all required governmental
and third party approvals.
90
Summary
Management believes that cash flows to be generated from operations
during 2003, as well as available cash reserves, will be sufficient to meet its
operating plan and provide for scheduled capital expenditures of approximately
$7.5 million for the remaining six months of 2003. However, any significant
other capital expenditures may require additional financing.
Critical Accounting Policies and Estimates
The Parent Company's discussion and analysis of its results of
operations and financial condition are based upon its consolidated financial
statements that have been prepared in accordance with accounting principles
generally accepted in the United States of America ("US GAAP"). The preparation
of financial statements in conformity with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities. Estimates and assumptions are evaluated on an ongoing basis and are
based on historical and other factors believed to be reasonable under the
circumstances. The results of these estimates may form the basis of the carrying
value of certain assets and liabilities and may not be readily apparent from
other sources. Actual results, under conditions and circumstances different from
those assumed, may differ from estimates. The impact and any associated risks
related to estimates, assumptions, and accounting policies are discussed within
this management's discussion and analysis of financial condition and results of
operations, as well as in the Notes to the Condensed Consolidated Financial
Statements, if applicable, where such estimates, assumptions, and accounting
policies affect the Parent Company's reported and expected financial results.
The Parent Company believes the following accounting policies are
critical to its business operations and the understanding of results of
operations and affect the more significant judgments and estimates used in the
preparation of its condensed consolidated financial statements:
Allowance for Doubtful Accounts - The Parent Company maintains accounts
receivable allowances for estimated losses resulting from the inability of its
customers to make required payments. Additional allowances may be required if
the financial condition of the Parent Company's customers deteriorates.
Commitments and Contingencies - Litigation - On an on going basis, the
Parent Company assesses the potential liabilities related to any lawsuits or
claims brought against the Parent Company. While it is typically very difficult
to determine the timing and ultimate outcome of such actions, the Parent Company
uses its best judgment to determine if it is probable that it will incur an
expense related to the settlement or final adjudication of such matters and
whether a reasonable estimation of such probable loss, if any, can be made. In
assessing probable losses, the Parent Company makes estimates of the amount of
insurance recoveries, if any. The Parent Company accrues a liability when it
believes a loss is probable and the amount of loss can be reasonably estimated.
Due to the inherent uncertainties related to the eventual outcome of litigation
and potential insurance recovery, it is possible that certain matters may be
resolved for amounts materially different from any provisions or disclosures
that the Parent Company has previously made.
Impairment of Long-Lived Assets - The Parent Company periodically
reviews long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Assumptions and estimates used in the determination of impairment
losses, such as future cash flows and disposition costs, may affect the carrying
value of long-lived assets and possible impairment expense in the Parent
Company's condensed consolidated financial statements.
Self-Insurance - The Parent Company retains the obligation for certain
losses related to customer's claims of personal injuries incurred while on
Parent Company property as well as major-medical and dental claims for non-union
employees in 2003 and Workers Compensation claims beginning in 2002. The Parent
Company accrues for outstanding reported claims, claims that have been incurred
but not reported and projected claims based upon management's estimates of the
aggregate liability for uninsured claims using historical experience, an
adjusting company's estimates and the estimated trends in claim values. Although
management believes it has the ability to adequately project and record
estimated claim payments, it is possible that actual results could differ
significantly from the recorded liabilities.
91
Allowance for Obligatory Investments - The Parent Company maintains
obligatory investment allowances for its investments made in satisfaction of its
CRDA obligation. The obligatory investments may ultimately take the form of CRDA
issued bonds, which bear interest at below market rates, direct investments or
donations. Management bases its reserves on the type of investments the
obligation has taken or is expected to take. CRDA bonds bear interest at
approximately one-third below market rates. Donations of The Sands' quarterly
deposits to the CRDA have historically yielded a 51% future credit or refund of
obligations. Therefore, management has reserved the predominant balance of its
obligatory investments at between 33% and 49%.
RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2003
Gaming Operations
Information contained herein, regarding Atlantic City casinos other
than The Sands, was obtained from reports filed with the CCC.
The following table sets forth certain unaudited financial and
operating data relating to The Sands' and all other Atlantic City casinos'
capacities, volumes of play, hold percentages and revenues:
SIX MONTHS ENDED
JUNE 30,
---------------------------
2003 2002
------------ --------------
(Dollars in Thousands)
UNITS: (AT END OF PERIOD)
Table Games - Sands $ 61 $ 38
- Atlantic City (ex. Sands) 1,154 1,181
Slot Machines- Sands 2,171 2,438
- Atlantic City (ex. Sands) 36,034 35,441
GROSS WAGERING (1)
Table Games - Sands $ 98,315 $ 159,349
- Atlantic City (ex. Sands) 3,130,602 3,223,664
Slot Machines- Sands 993,880 1,140,582
- Atlantic City (ex. Sands) 18,502,770 18,694,900
HOLD PERCENTAGES (2)
Table Games - Sands 14.7% 15.0%
- Atlantic City (ex. Sands) 16.5% 16.1%
Slot Machines- Sands 7.9% 7.2%
- Atlantic City (ex. Sands) 8.1% 8.1%
REVENUES (2)
Table Games - Sands $ 14,404 $ S23,925
- Atlantic City (ex. Sands) 517,194 517,416
Slot Machines- Sands 78,421 82,586
- Atlantic City (ex. Sands) 1,496,331 1,516,526
Other (3) - Sands 461 1,013
- Atlantic City (ex. Sands) N/A N/A
- -------------------------------
(1) Gross wagering consists of the total value of chips purchased for table
games (excluding poker) and keno wagering (the "drop") and coins wagered in
slot machines (the "handle").
92
(2) Casino revenues consist of the portion of gross wagering that a casino
retains and, as a percentage of gross wagering, is referred to as the "hold
percentage." The Sands' hold percentages and revenues are reflected on an
accrual basis. Comparable accrual basis data for the remainder of the
Atlantic City gaming industry as a whole is not available; consequently,
industry hold percentages and revenues are based on information available
from the Commission.
(3) Consists of revenues from poker and simulcast horse racing wagering.
Comparable information for the remainder of the Atlantic City gaming
industry is not available.
Patron Gaming Volume
Information contained herein, regarding Atlantic City casinos other
than The Sands, was obtained from reports filed with the CCC.
For the six months ended June 30, 2003 the table game drop decreased
$61.0 million (38.3%) compared to the comparable period in 2002. These results
are compared to the Atlantic City Industry table drop results of a decrease of
$93 million (2.9%) for the six months ended June 30, 2003 compared to the same
period in 2002. During this 2003 period, the Parent Company reestablished its
table games to 61 units compared to 38 units in the prior year. It was during
May of 2002 that the Parent Company reduced its table games and related business
for the purpose of focusing entirely on the mass slot customer business. The
Parent Company changed its business strategy in late 2002 to refocus on the mid
to high-end slot customer along with a balanced table game business. It should
be noted that marketing adjustments regarding target audience refocus take time
to come to fruition. The number of slot machine units as of the end of June 2003
was 2,171 compared to 2,438 at the same time in 2002. Table game hold percentage
for the Parent Company declined 0.3 percentage points to 14.7% for the six month
period ended June 30, 2003 compared to the same period in 2002.
Slot machine handle for the Parent Company decreased $146.7 (12.9%)
million for the six month period ended June 30, 2003 compared to the same period
in 2002. By comparison, the percentage change in slot machine handle for all
other Atlantic City casinos during this period in 2003 compared to the same
period in 2002 was a 1.0% decrease for the six month period. The Parent
Company's 2003 decrease in handle is attributed to (i) reduced hotel room
occupancy from the tour and travel groups during mid-week, a carryover effect
from the focus on mass slot play during the first three months of 2003; and (ii)
the heavy weighting of lower denomination slot machines remaining from the 2002
mass customer strategy, and (iii) the change in strategy from early 2002 of a
"Lowest Slot Hold Percentage" to a more competitive hold percentage in 2003.
During June 2003, the Parent Company shifted its weighting of denomination of
slot machine units back toward the mid to high end levels. This decrease in slot
machine handle was offset by an increase in the hold percentage of 0.7
percentage points to 7.9% for the six month period ended June 30, 2003 compared
to the same period in 2002. This positive variance in hold percentage was not
enough to offset the decrease in slot machine handle and resulted in a decrease
in slot revenue of $4.2 million (5%) for the six-month period ended June 30,
2003 compared to the period in 2002. The number of slot machine units as of the
end of June 2003 was 2,171 compared to 2,438 at the same time in 2002. On an
industry-wide basis, the number of slot machines increased 1.6% at June 30, 2003
compared to the same time period in 2002.
93
The following table sets forth the changes in operating revenues and
expenses (unaudited) for the six month period ended June 30, 2003 and 2002:
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------
INCREASE (DECREASE)
2003 2002 $ %
----------- ---------- ----------- -------------
(DOLLARS IN THOUSANDS)
REVENUES:
Casino $93,286 $107,524 $(14,238) (13.24)
Rooms 5,415 5,795 (380) (6.56)
Food and Beverage 10,175 12,217 (2,042) (16.71)
Other 1,963 1,978 (15) (0.76)
Promotional Allowances 25,008 24,688 (320) (1.30)
EXPENSES:
Casino 64,958 72,123 (7,165) (9.93)
Rooms 1,030 2,120 (1,090) (51.42)
Food and Beverage 4,481 5,312 (831) (15.64)
Other 1,388 1,408 (20) (1.42)
General and Administrative 5,261 6,944 (1,683) (24.24)
Depreciation and Amortization 7,678 6,865 813 11.84
Loss on impairment of fixed assets - 1,282 (1,282) (100.00)
Loss (gain) on disposal of assets 3 (52) 55 (105.77)
INCOME FROM OPERATIONS 1,032 6,824 (5,792) (84.88)
Non-operating expense, net (5,597) (5,152) (445) (8.64)
Income Tax (Provision) Benefit (343) (632) 289 45.73
Net income (loss) (4,908) 1,040 (5,948) (571.94)
Revenues
Overall casino revenues decreased $14.2 million (13.2%) for the
six-month period ended June 30, 2003 compared to the same period in 2002. The
decrease in casino revenues are attributable to the decreases in table game
drop and slot machine handle as described above, along with the related changes
in hold percentage.
Room revenue decreased $380,000 (6.6%) for the six-month period ended
June 30, 2003 compared to the same period in 2002. The decrease in room revenue
is attributable to a decrease in occupancy percentage along with a decrease in
average room rate for the six months ended June 30, 2003 compared to the same
period in 2002.
Food and Beverage revenues decreased $2.0 million (16.7%) for the
six-month period ended June 30, 2003 compared to the same period in 2002. This
decrease is directly attributable to the decrease in gaming volume and hotel
occupancy primarily in the first three months of 2003.
Other revenues decreased $15,000 (0.8%) for the six-month period ended
June 30, 2003 compared to the same period in 2002. The decrease for the
six-month period is due to a reduction in commissions ($207,000), offset by
increases in entertainment ($101,000) and parking revenues ($97,000).
94
Promotional Allowances
Promotional allowances are comprised of (i) the estimated retail value
of goods and services provided free of charge to casino customers under various
marketing programs, (ii) the cash value of redeemable points earned under a
customer loyalty program based on the amount of slot play and (iii) coin and
cash coupons and discounts. The dollar amount of promotional allowances
increased $320,000 (1.3%) for the six-month period ended June 30, 2003 compared
to the same period in 2002. As a percentage of casino revenues, promotional
allowances increased to 26.8 % from 23% for the six-month period ended June 30,
2003 compared to the same period in 2002. The increase in this ratio is directly
attributable to the Parent Company's focus on recapture of lost market share
related to its table game enhancement and refocus on the mid to high end slots.
Departmental Expenses
Casino expenses at The Sands decreased by $7.2 million for the six
months ended June 30, 2003 compared to the same prior year period. The decrease
in casino expenses is primarily due to the reduction of payroll expenses ($2.6
million) due to the reduction in table games. Also, the lower complimentary
costs associated with amenities provided free of charge contributed to the
favorable variance ($1.8 million). Expenses allocated to the casino department
were lower by $1.1 million for the six months ended June 30, 2003 as a result of
overall cost reductions in other operating departments. Gaming revenue tax was
reduced by $1.1 million for the six months ended June 30, 2003 as a result of
lower casino revenues. Direct mail and radio advertising increased by $966,000
for the six months ended June 30, 2003 due to a marketing campaign aimed at
spreading the new Sands "All The Way" image to key markets.
Rooms expenses decreased $1.1 million for the six months ended June 30,
2003 compared to the same prior year period. Rooms payroll and benefits
decreased $547,000 for the six months ended June 30, 2003 due to a
reorganization of management. Also contributing to the favorable variance were
reduced costs for linen usage ($64,000) and outside laundry expense ($37,000).
The decreases were also due to a larger share of costs allocated to casino
expenses ($206,000) as a result of increased room complimentaries generated by
casino operations. Total complimentary room nights increased by 15,584 or 24.4%
for the six months ended June 30, 2003 over the same prior year period.
Food and beverage expenses decreased $831,000 for the six months ended
June 30, 2003 compared to the same prior year period. The decrease was due to
reductions in payroll and benefits ($2.5 million) and food and beverage cost of
sales ( $1.2 million), which were a result of a reorganization of management, a
reduction in unproductive operating hours in certain outlets and closing the
employee cafeteria production kitchen. Food and beverage costs allocated to
casino expenses declined $1.8 million for the six months ended June 30, 2003
compared to the same prior year period as a result of a combination of lower
complimentary food and beverage activity and lower food and beverage production
costs.
General and Administrative Expenses
General and administrative expenses decreased $1.7 million for the six
months ended June 30, 2003, compared to the same prior year period. The decrease
was due to lower payroll and benefits as a result of a reduction in workforce at
the beginning of 2003 ($1.3 million) and the cost of a 2002 severance package
($1.0 million) that had no comparable cost in 2003. These were offset by
increases in insurance ($628,000), property taxes ($446,000) and trash removal
($240,000), compared to the same prior year period.
Depreciation and Amortization, including Provision for Obligatory
Investments
Depreciation and amortization expense increased $813,000 for the six
month period ended June 30, 2003, compared to the same prior year period due to
an increase in depreciation expense ($794,000) as a result of the continued
investment in infrastructure and equipment during the current and preceding
year. These were offset by lower amortization of CRDA losses ($27,000) as a
result of reduced casino revenues.
95
Interest Income and Expense
Interest income decreased by $169,000 during the six month period ended
June 30, 2003, compared to the same prior year period. The decrease was due to
smaller earnings on decreased cash reserves and lower interest rates.
Interest expense increased $276,000 during the six month period ended
June 30, 2003, compared to the same period in 2002. The increase is due to a
larger accrual of capitalized interest in 2002 ($532,000) compared to 2003
($211,000). It is the Parent Company's policy to capitalize interest on
construction projects in excess of $250,000.
Income Tax (Provision) Benefit
Federal and State income tax benefits or provisions are based upon the
results of operations for the current period and the estimated adjustments for
income tax purposes of certain nondeductible expenses.
Due to recurring losses, the Parent Company has not recorded Federal
income tax for the six months ended June 30, 2003.
The State income tax provision of $343,000 for the six months ended
June 30, 2003 is a result of applying the statutory Alternative Minimum
Assessment rate of 0.4% to gross receipts, as defined in the Business Tax Reform
Act.
Inflation
Management believes that, in the near term, modest inflation and
increased competition within the gaming industry for qualified and experienced
personnel will continue to cause increases in operating expenses, particularly
labor and employee benefits costs.
Seasonality
Historically, The Sands' operations have been highly seasonal in
nature, with the peak activity occurring from May to September. Consequently,
the results of operations for the first and fourth quarters are traditionally
less profitable than the other quarters of the fiscal year. In addition, The
Sands' operations may fluctuate significantly due to a number of factors,
including chance. Such seasonality and fluctuations may materially affect casino
revenues and profitability.
Private Securities Litigation Reform Act
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
solicitation statement and prospectus and other materials filed or to be filed
by the Parent Company with the SEC (as well as information included in oral
statements or other written statements made by such companies) contains
statements that are forward-looking, such as statements relating to future
expansion plans, future construction costs and other business development
activities including other capital spending, economic conditions, financing
sources, competition and the effects of tax regulation and state regulations
applicable to the gaming industry in general or the Parent Company in
particular. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Parent Company. These
risks and uncertainties include, but are not limited to, those relating to
development and construction activities, dependence on existing management,
leverage and debt service (including sensitivity to fluctuations in interest
rates), domestic or global economic conditions, activities of competitors and
the presence of new or additional competition, fluctuations and changes in
customer preference and attitudes, changes in federal or state tax laws or the
administration of such laws and changes in gaming laws or regulations (including
the legalization of gaming in certain jurisdictions).
96
LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ENDED DECEMBER 31, 2002
Operating Activities
At December 31, 2002, the Parent Company had cash and cash equivalents
of $50.6 million. The Parent Company generated $9.7 million of net cash from
operations during the year ended December 31, 2002 compared to $5.7 million
during the same prior year period. Despite a net loss in 2002, depreciation and
amortization expense of $15.5 million and a decrease in accounts receivables of
$2.4 million contributed to the positive cash flow from operations. During 2002,
based upon a periodic review of long-lived assets for impairment in conjunction
with a review of the Parent Company's marketing programs and product mix,
certain expenditures incurred for property expansion plans, that were included
in construction in progress, were determined to be unusable and resulted in a
loss on asset impairment in the amount of $1.3 million.
Investing Activities
Capital expenditures at The Sands for the year ended December 31, 2002
amounted to approximately $14.1 million. In order to enhance its competitive
position in the market place, The Sands may determine to incur additional
substantial costs and expenses to maintain, improve and expand its facilities
and operations. Management anticipates that capital expenditures for 2003 will
be approximately $14.9 million. The Parent Company may require additional
financing in connection with those activities.
The Sands is required by the NJCCA to make certain quarterly deposits
based on gross revenue with the CRDA in lieu of a certain investment alternative
tax. Deposits for the year ended December 31, 2002 amounted to $2.5 million. The
Sands has agreed to contribute certain of its future investment obligations to
the CRDA in connection with the renovation related to the Atlantic City
Boardwalk Convention Center. The projected total contribution will amount to
$6.9 million, which will be paid through 2011 based on an estimate of certain of
The Sands' future CRDA deposit obligations. As of December 31, 2002, The Sands
had satisfied $2.0 million of this obligation.
Financing Activities
During 2002, the Parent Company repaid $371,000 in long-term debt.
There were no other financing activities during the year ended December 31,
2002.
As of December 31, 2002 the only scheduled payment of long-term debt is
the $110 million for New Notes, due September 29, 2005.
Summary
Management believes that cash flows generated from operations during
2002, as well as available cash reserves, will be sufficient to meet its
operating plan and provide for scheduled capital expenditures. However, any
significant other capital expenditures may require additional financing.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2002
Gaming Operations
Information contained herein, regarding Atlantic City casinos other
than The Sands, was obtained from reports filed with the CCC.
The following table sets forth certain unaudited financial and
operating data relating to The Sands' and all other Atlantic City casinos'
capacities, volumes of play, hold percentages and revenues:
97
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
2002 2001 2000
---- ---- ----
(DOLLARS IN THOUSANDS)
UNITS: (AT YEAR END)
- --------------------
TABLE GAMES
- SANDS $ 40 $ 69 $ 92
- ATLANTIC CITY (EX. SANDS) 1,167 1,061 1,238
SLOT MACHINES
- SANDS 2,322 2,060 1,987
- ATLANTIC CITY (EX. SANDS) 35,795 35,423 34,291
GROSS WAGERING (1)
- ------------------
TABLE GAMES
- SANDS 242,731 457,992 471,769
- ATLANTIC CITY (EX. SANDS) 6,684,168 6,773,640 7,157,418
SLOT MACHINES
- SANDS 2,227,830 2,348,180 2,114,444
- ATLANTIC CITY (EX. SANDS) 38,237,932 36,772,969 35,714,927
HOLD PERCENTAGES (2)
- --------------------
TABLE GAMES
- SANDS 15.00% 14.92% 14.09%
- ATLANTIC CITY (EX. SANDS) 15.73% 15.65% 15.52%
SLOT MACHINES
- SANDS 7.57% 6.87% 7.58%
- ATLANTIC CITY (EX. SANDS) 8.08% 8.09% 8.18%
REVENUES (2)
- ------------
TABLE GAMES
- SANDS $ 36,401 $ 68,351 $ 66,456
- ATLANTIC CITY (EX. SANDS) 1,051,103 1,059,881 1,110,512
SLOT MACHINES
- SANDS 168,697 161,503 160,224
- ATLANTIC CITY (EX. SANDS) 3,089,067 2,974,610 2,923,224
OTHER (3)
- SANDS 1,319 2,515 3,077
- ATLANTIC CITY (EX. SANDS) N/A N/A N/A
- ----------------------------------------
(1) Gross wagering consists of the total value of chips purchased for table
games (excluding poker and keno wagering (the "Drop") drop and coins
wagered in slot machines (the "Handle").
98
(2) Casino revenues consist of the portion of gross wagering that a casino
retains and, as a percentage of gross wagering, is referred to as the "hold
percentage." The Sands' hold percentages and revenues are reflected on an
accrual basis. Comparable accrual basis data for the remainder of the
Atlantic City gaming industry as a whole is not available; consequently,
industry hold percentages and revenues are based on information available
from the CCC.
(3) Consists of revenues from poker and simulcast horse racing wagering.
Comparable information for the remainder of the Atlantic City gaming
industry is not available.
Patron Gaming Volume
Information contained herein, regarding Atlantic City casinos other
than The Sands, was obtained from reports filed with the CCC.
Table game drop decreased by $215.3 million (47.0%) during 2002
compared with 2001 and by $13.8 million (2.9%) in 2001 compared to 2000. By
comparison, according to CCC reports, table game drop at all other Atlantic City
casinos during the same periods decreased 1.3% and 5.4%, respectively. The
decrease in table game drop is attributable to the reduction of the number of
table games from 69 in 2001 to 40 by the end of 2002. The decrease in the number
of table games was the result of a change in business strategy, begun in the
second quarter of 2002 by newly appointed President, Herbert Wolfe, to reduce
the table game business and increase the slot machine business. Historically the
table game business has a lower profit margin percentage than the slot machine
business. The strategy was to focus specifically on the higher profit margin
mass slot player business. The original strategy reduced the number of table
games from 69 to 26. By late in the third quarter of 2002, it became apparent
that this strategy, among other things, could not generate an increase in slot
revenue sufficient to overcome the loss in table revenue. Mr. Wolfe resigned on
September 30, 2002, and Richard Brown was appointed Chief Executive Officer on
October 9, 2002. The Parent Company strategy shifted to, among other things,
increase the number of table games to 40 by the end of 2002. During the second
quarter of 2002, there was considerable disruption of the casino floor related
to the removal of table games and their replacement with slot machines. For the
year ended December 31, 2002, the table game hold percentage decreased 0.08
percentage points to 15.0% compared to the same prior year period. The 2001
decrease in table game drop was due to a 25.0% decrease in the number of table
games compared to 2000.
Slot machine handle decreased $120.4 million (5.1%) during 2002,
compared with 2001 and increased by $234 million (11.1%) in 2001 compared to
2000. By comparison, according to CCC reports, the percentage increase in slot
machine handle for all other Atlantic City casinos for the same periods was 4.0%
and 3.0%, respectively. The decrease in slot handle during 2002 can be
attributed to the strategic change in the denominational mix of slot machines
from higher denomination, lower hold percentage machines, toward lower
denomination, higher hold percentage machines, which caused the hold percentage
to increase to 7.6% in 2002 from 6.9% in 2001. The number of slot machines
increased 12.7% at The Sands to 2,322 at December 31, 2002 compared to December
31, 2001. On an industry-wide basis, the number of slot machines increased 1.1%
in 2002 compared to 2001.
Aggregate gaming space at all other Atlantic City casinos increased by
approximately 35,000 square feet (3.0%) at December 31, 2002 compared to
December 31, 2001. The amount of gaming space at The Sands decreased
approximately 209 square feet (0.3%) between periods.
Revenues
Casino revenues at The Sands decreased by $26.0 million (11.2%) in 2002
compared to 2001 and increased by $2.6 million (1.1%) in 2001 compared to 2000.
The 2002 decrease was due to the $32.1 million decline in table game revenues,
which was a result of the $215.3 million (47.0%) decrease in table game drop.
The decrease in table game drop was primarily due to fewer table games available
during the peak third quarter. Slot revenues increased during 2002 as result of
increased hold percentage despite a decrease in handle of $120.4 million. The
increase in slot machine revenue was not enough to offset the decrease in table
game revenue. As a result, the Parent Company, by the end of 2002, had replaced
14 of the table games removed in the second quarter of 2002 and shifted its
marketing strategy to focus on the middle to premium slot player business. The
increase in 2001 was attributed to increased revenue in both table games and
slots. Slot win increased due to higher handle, despite a lower hold percentage.
Table game win increased due to a higher hold percentage, despite lower drop.
The 2001 slot results were due to a 5.8% increase in the
99
number of slot machines and the "loosest" slots strategy in effect at that time.
The 2001 table game results were due to a marketing focus that attracted
profitable customer categories and offset the impact of fewer table games.
Room revenues decreased by $430,000 (3.7%) in 2002 compared to 2001 and
increased by $2.1 million (22.0%) in 2001 compared to 2000. The 2002 decrease is
due to a decrease in occupied room nights and a slightly lower average daily
room rate. The decrease in 2002, occupied room nights is due to a decrease in
complimentary rooms. The increase in 2001 was a result of increased occupied
room nights and a higher average daily room rate. The increase in 2001 occupied
room nights was due to the increase in rooms inventory related to the Madison
House Addition.
Food and beverage revenues decreased $6.1 million (20.8%) in 2002
compared to 2001 and increased by $1.1 million (3.8%) in 2001 compared to 2000.
The 2002 decrease was due to a decrease in the average check of $6.89 (25.6%) as
a result of fewer complimentaries to premium outlets. The increase in 2001 was a
result of an increase in the number of patrons by 42,000 (3.2%).
Other revenues decreased $944,000 (20.2%) in 2002 compared to 2001 and
increased by $183,000 (4.1%) in 2001 compared to 2000. The 2002 decrease is
predominantly due to the decline in entertainment revenues, $470,000 (47.9%)
which was primarily a result of discontinuation of review shows in 2002. The
increase in 2001 was due to more entertainment revenue offset by a reduction in
parking revenue.
Promotional Allowances
Promotional allowances are comprised of (i) the estimated retail value
of goods and services provided free of charge to casino customers under various
marketing programs, (ii) the cash value of redeemable points earned under a
customer loyalty program based on the amount of slot play and (iii) coin and
cash coupons and discounts. As a percentage of casino revenues, promotional
allowances decreased to 24.8% during 2002 compared to 26.8% during 2001 and
27.4% in 2000. The decrease is primarily attributable to the elimination of
marketing programs and other promotional activities that were deemed less
profitable and a continued focus on, and development of, the segments of play
that created more volume with less expense.
Departmental Expenses
Casino expenses at The Sands decreased by $25.5 million (15.1%) in 2002
compared to 2001 and increased by $6.3 million in 2001 compared to 2000. The
decrease in casino expenses is primarily due to the reduction of complimentary
costs associated with food and beverage provided free of charge. Casino payroll
expenses decreased due to the reduction in table games. The decrease in the
provision for doubtful accounts expense was caused by a reduction in credit
issuance due to lower table game activity. Lower costs for customer
transportation were a result of reduced volume in air travel and ground
transportation. Reductions in advertising expense and gaming revenue tax also
contributed significantly to the decreases in casino expenses in 2002. The
increase in 2001 was due to increased television advertising and complimentary
expenses.
Rooms expenses decreased by $406,000 (12.0%) in 2002 compared to 2001
and increased $1.6 million in 2001 compared to 2000. The 2002 decreases were due
to a decrease in housekeeping supplies expense, amenity package costs, linen and
uniform usage, which resulted from fewer occupied room nights and also outside
maintenance contracts. The 2001 increase was due to costs associated with
operating the Madison House, which had no similar costs in 2000.
Food and beverage expenses increased by $1.1 million (11.2%) in 2002
compared to 2001 and by $837,000 in 2001compared to 2000. The increases were due
to a smaller share of costs allocated to casino expense as a result of a
decrease in food and beverage complimentaries generated by casino operations.
These were offset slightly by decreases in payroll, benefits and food and
beverage cost of sales as a result of the lower volume. The 2001 increase was
due to higher volume of business offset by a greater allocation of costs to
casino expense.
Other expenses decreased by $749,000 (22.2%) in 2002 compared to 2001
and by $367,000 in 2001 compared to 2000. The decrease in 2002 is primarily due
to savings resulting from discontinuation of review shows in the theatre.
100
The 2001 decrease was due to promoter fees for special events in 2000 that had
no similar costs in 2001.
General and Administrative Expenses
General and administrative expenses increased by $1.3 million (11.2%)
in 2002 compared to 2001 and by $1.7 million in 2001 compared to 2000. The 2002
increase was due to costs arising from severance packages and higher costs for
insurance, property taxes and utilities. The increase in 2001 was due to costs
associated with the attempted acquisition of the Claridge Hotel Casino and
severance packages.
Depreciation and Amortization
Depreciation and amortization expense increased by $3.3 million (27.4%)
in 2002 compared to 2001 and decreased by $1.1 million in 2001 compared to 2000.
The 2002 increase is a result of the continued investment in and renovation of
the casino, hotel and administrative complex at The Sands. The 2001 decrease was
a result of depreciation expense being impacted by the asset valuation reduction
associated with "fresh start reporting" implemented in September 2000.
Interest Income and Expense
Interest income decreased by $1.6 million (60.1%) in 2002 compared to
2001 and increased by $815,000 (43.9%) in 2001 compared to 2002. The decrease in
2002 was due to earnings on decreased cash reserves and lower interest rates.
Interest expense increased by $361,000 (3.2%) in 2002 compared to 2001
and $7.8 million (222.3%) in 2001 compared to 2000. The 2002 increase is due to
a lower amount of capitalized interest partially offset by the elimination of
debt. The increase in 2001 is due to a full year of interest expense associated
with the New Notes.
Income Tax Provision
On July 2, 2002, the Business Tax Reform Act ("BTR") was signed into
law. The BTR revises and updates the New Jersey corporation business tax and
establishes filing fees for certain returns. Included in the BTR is a deferral
on the use of State NOLs until tax year 2005. Those State NOLs that would have
been utilized in tax years 2002 and 2003 will be granted a two year extension of
their expiration period. Additionally, the BTR imposes an alternative minimum
assessment ("AMA") based on gross receipts or gross profits. The taxpayer pays
the greater of the AMA or the regular corporate business tax ("CBT") and to the
extent AMA exceeds CBT, an AMA tax credit is generated. The AMA provision is
discontinued for tax years beginning after June 30, 2006 and any remaining AMA
tax credit is allowed as a non-expiring future tax credit carryforward. Due to
various uncertainties, management is unable to determine that realization of the
future tax credit carryforward is more likely than not and, thus, has provided a
valuation allowance for the entire amount at December 31, 2002 and 2001.
The State income tax provision of $784,000 for the year ended December
31, 2002 includes $774,000 of AMA for Operating and $10,000 of CBT for Parent.
101
Contractual Obligations
PAYMENTS DUE BY PERIOD
-------------------------------------------------------------------------------
LESS MORE
THAN 1-3 3-5 THAN
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR YEARS YEARS 5 YEARS
- ----------------------- ------------ ------------ ------------ ----------- ------------
Long-Term Debt $110,000,000 $ - $110,000,000 $ - $ -
Operating Leases:
Madison House 19,826,000 1,800,000 5,598,000 3,996,000 8,432,000
Equipment 688,000 336,000 352,000 - -
------------ ------------ ------------ ----------- ------------
Total Contractual Obligations $130,514,000 2,136,000 115,950,000 $ 3,996,000 $ 8,432,000
============ ============ ============ =========== ============
Inflation
Management believes that, in the near term, modest inflation and
increased competition within the gaming industry for qualified and experienced
personnel will continue to cause increases in operating expenses, particularly
labor and employee benefits costs.
Seasonality
Historically, The Sands' operations have been highly seasonal in
nature, with the peak activity occurring from May to September. Consequently,
the results of operations for the first and fourth quarters are traditionally
less profitable than the other quarters of the fiscal year. Any excess cash flow
achieved from operations during peak periods is used to subsidized non-peak
periods. Performance in non-peak periods is usually dependent on favorable
weather and a long-weekend holiday calendar. In the event that we are unable to
generate excess cash flow in one or more peak periods, it may not be able to
subsidize non-peak periods, if necessary.
New Accounting Pronouncements
In November 2002, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others" ("FIN 45"). FIN 45 requires the disclosure of certain guarantees
existing at December 31, 2002. The Parent Company had no guarantees meeting the
requirements of FIN 45 at December 31, 2002. In addition, FIN 45 requires the
recognition of a liability for the fair value of the obligation of qualifying
guarantee activities that are initiated or modified after December 31, 2002.
Accordingly, the Parent Company will apply the recognition provisions of FIN 45
prospectively to applicable guarantee activities initiated after December 31,
2002.
On January 1, 2003, the Parent Company will adopt Statement of
Financial Accounting Standards ("SFAS") No. 143, "Asset Retirement Obligations"
("SFAS 143"), which provides the accounting requirements for retirement
obligations associated with tangible long-lived assets. This statement requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. The adoption of SFAS 143 is
not expected to have a material impact on the Parent Company's consolidated
financial statements.
In June 2002, FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 nullifies
EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination
102
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring)" ("EITF 94-3") and requires that a liability for a cost
associated with an exit or disposal activity be recognized and measured
initially at fair value in the period in which the liability is incurred. Under
EITF 94-3, a liability for an exit cost was recognized at the date of an
entity's commitment to an exit plan. The adoption of SFAS 146 is expected to
result in delayed recognition for certain types of costs as compared to the
provisions of EITF 94-3. SFAS 146 is effective for new exit or disposal
activities that are initiated after December 31, 2002. SFAS 146 will affect the
types and timing of costs included in future restructuring programs, if any, but
is not expected to have a material impact on the Parent Company's financial
position or results of operations.
On January 1, 2003, the Parent Company adopted SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure" ("SFAS
148"), which provides alternative methods of transition for companies that
choose to switch to the fair value method of accounting for stock options. SFAS
148 also makes changes in the disclosure requirements for stock-based
compensation, regardless of which method of accounting is chosen. The adoption
of SFAS 148 did not have any impact on the Parent Company's consolidated
financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from changes in market rates
and prices, such as interest rates and foreign currency exchange rates. The
Parent Company does not have securities subject to interest rate fluctuations
and has not invested in derivative-based financial instruments.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On March 27, 2002, the CCC entered an order prohibiting the Parent
Company, as well as all other New Jersey casino licensees, from conducting
business with Arthur Andersen LLP after May 15, 2002. On May 16, 2002, the
Parent Company's Board of Directors' dismissed Arthur Andersen LLP as
independent auditors and appointed KPMG LLP to serve as the Parent Company's
independent auditors for the fiscal year ended December 31, 2002. The decision
to appoint KPMG was made after an extensive evaluation process by the Parent
Company's Board of Directors, its Audit Committee and management.
Arthur Andersen LLP's reports on the Parent Company's consolidated
financial statements for the years ended 2000 and 2001, included elsewhere in
this solicitation statement and prospectus, did not contain an adverse opinion
or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles.
During the years ended December 31, 2000 and 2001 and through the date
of this solicitation statement and prospectus, there were no disagreements with
Arthur Andersen LLP on any matter of accounting principle or practice, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
Arthur Andersen LLP's satisfaction, would have caused them to make reference to
the subject matter in connection with their report on the Parent Company's
consolidated financial statements for such years; and there were no reportable
events as set forth in applicable SEC regulations.
During the years ended December 31, 2000 and 2001 and through the date
of their engagement, the Parent Company did not consult KPMG LLP with respect to
the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Parent Company's consolidated financial statements, or any other matters or
reportable events as set forth in applicable SEC regulations.
On June 15, 2002, Arthur Andersen LLP was convicted of federal
obstruction of justice charges arising from the government's investigation of
its role as auditors for Enron Corp. None of the Arthur Andersen LLP personnel
who were involved with the Enron account were involved with the audit of the
Parent Company's financial statements for the years ended December 31, 2000 and
2001.
Arthur Andersen LLP did not participate in the preparation of this
registration statement or reissue its report, dated March 8, 2002, on the Parent
Company's 2001 financial statements included in this solicitation statement and
prospectus. You are unlikely to have any effective remedies against Arthur
Andersen LLP in connection with a material
103
misstatement or omission in these financial statements. See "RISK FACTORS --
Risk Factors Related to the Business of Atlantic" as set forth on page 38.
Although the Parent Company does not believe that the conviction of
Arthur Andersen LLP will materially adversely affect it, should the Parent
Company seek to access the public capital markets after the Transaction is
completed, SEC rules will require it to include or incorporate by reference in
any prospectus three years of audited financial statements. Until our audited
financial statements for the year ending December 31, 2004 become available in
the first quarter of 2005, the SEC's current rules would require the Parent
Company to present audited financial statements audited by Arthur Andersen LLP.
On August 31, 2002, Arthur Andersen LLP ceased practicing before the SEC, but
the SEC has continued to accept financial statements audited by Arthur Andersen
LLP. However, if the SEC ceases to accept financial statements audited by Arthur
Andersen LLP, the Parent Company would be unable to access the public capital
markets unless KPMG LLP, the Parent Company's current independent accounting
firm, or another independent accounting firm, is able to audit the 2000 and 2001
financial statements, which Arthur Andersen LLP originally audited.
Additionally, Arthur Andersen LLP cannot consent to the inclusion or
incorporation by reference in any prospectus of their report on the Parent
Company's audited financial statements for the years ended December 31, 2000 and
2001 and investors in any future offerings for which we use their audit report
will not be entitled to recovery against them under Section 11 of the Securities
Act for any material misstatements or omissions in those financial statements.
The Parent Company may not be able to bring to the market successfully an
offering of its securities in the absence of Arthur Andersen LLP's participation
in the transaction, including its consent. Consequently, the Parent Company's
financing costs may increase or the Parent Company may miss attractive market
opportunities if either the Parent Company's annual financial statements for
2000 and 2001 audited by Arthur Andersen LLP should cease to satisfy the SEC's
requirements or those statements are used in a prospectus but investors are not
entitled to recovery against auditors for material misstatements or omissions in
them. See "RISK FACTORS -- Risk Factors Related to the Business of Atlantic" as
set forth on page 38.
104
MANAGEMENT OF PARENT AND ATLANTIC
DIRECTORS AND EXECUTIVE OFFICERS
Prior to and immediately following the consummation of the Transaction,
the Board of Directors and executive officers of Atlantic shall be identical to
the Board and executive officers of Parent and, consequently, the following
information is applicable to both Parent and Atlantic.
The Board consists of: Carl C. Icahn, Michael L. Ashner, Martin Hirsch,
Harold First, Auguste E. Rimpel, Jr. and John P. Saldarelli. Messrs. Ashner,
First and Rimpel, Jr. are independent members of the Board and members of
Parent's Audit Committee and for purposes of the Transactions were Members of
the Special Committee.
Set forth below is information concerning each of Parent's directors
and executive officers, including information furnished by them as to principal
occupations, certain other directorships held by them, any arrangements pursuant
to which they were elected as directors and their ages.
Name Age Position
- -------------------------- ---- -------------------------------------------
Carl C. Icahn (1) 67 Chairman of the Board of Directors
Martin Hirsch (2) 48 Director
John P. Saldarelli (3) 61 Director
Michael L. Ashner (4) 50 Director
Harold First (5) 67 Director
Auguste E. Rimpel, Jr. (6) 63 Director
Richard P. Brown (7) 56 Chief Executive Officer
Timothy A. Ebling (8) 45 Executive Vice President, Chief Financial
Officer and Principal Accounting Officer
Thomas Davis (9) 53 President
- -----------------
(1) Carl C. Icahn has served as Chairman of the Board of Directors and a
director of Starfire Holding Corporation (formerly Icahn Holding
Corporation), a privately-held holding company, and Chairman of the Board
of Directors and a director of various subsidiaries of Starfire, including
ACF Industries, Incorporated, a privately-held railcar leasing and
manufacturing company, since 1984. He has also been Chairman of the Board
of Directors and President of Icahn & Co., Inc., a registered broker-dealer
and a member of the NASD Inc., since 1968. Since November 1990, Mr. Icahn
has been Chairman of the Board of Directors of American Property Investors,
Inc., the general partner of American Real Estate Partners, L.P., a public
limited partnership that invests in real estate. Mr. Icahn has been a
director of Cadus Pharmaceutical Corporation, a firm which holds various
biotechnology patents, since 1993. Since August 1998 he has also served as
Chairman of the Board of Directors of Lowestfare.com, LLC, an internet
travel reservations company. From October 1998, Mr. Icahn has been the
President and a director of Stratosphere Corporation which operates the
Stratosphere Hotel and Casino. Mr. Icahn received his B.A. from Princeton
University. Since September 29, 2000, Mr. Icahn has served as the Chairman
of the Board of Directors of Parent, Funding and Operating. Since October
31, 2003, Mr. Icahn has served as the Chairman of the Board of Atlantic's
Board of Directors.
105
(2) Martin Hirsch has served as a Vice President of American Property
Investors, Inc. since March 18, 1991, where he is involved in investing,
managing and disposing of real estate properties and securities. Mr. Hirsch
was elected as Executive Vice President and Director of Acquisitions of
American Property Investors, Inc. in 2000. From January 1986 to January
1991, he was at Integrated Resources, Inc. as a Vice President where he was
involved in the acquisition of commercial real estate properties and asset
management. From 1985-1986, he was a Vice President of Hall Financial Group
where he acquired and financed commercial and residential properties. Mr.
Hirsch currently serves on the Board of Directors of Stratosphere Corp. He
received his M.B.A. from The Emory University Graduate School of Business.
Mr. Hirsch has served as a director of Parent and Funding since September
29, 2000 and as a director of Operating since February 28, 2001. Since
October 31, 2003, Mr. Hirsch has served as a member of Atlantic's Board of
Directors.
(3) John P. Saldarelli has served as Vice President, Secretary and Treasurer of
American Property Investors, Inc. (general partner of American Real Estate
Partners) since March 18, 1991. Mr. Saldarelli was also President of
Bayswater Realty Brokerage Corp. from June 1987 until November 19, 1993,
and Vice President of Bayswater Realty & Capital Corp. from September 1979
until April 15, 1993. In October 1998, Mr. Saldarelli was appointed to the
Board of Directors of Stratosphere and in June 2000, Mr. Saldarelli was
given the additional title of Chief Financial Officer. Mr. Saldarelli has
served as a director of Parent, Funding and Operating since February 28,
2001. Since October 31, 2003, Mr. Saldarelli has served as a member of
Atlantic's Board of Directors.
(4) Michael L. Ashner has served as Chairman, President and CEO of Winthrop
Associates, a real estate consulting firm, since 1995. Mr. Ashner has also
served as General Partner of Cecil Associates, a limited liability company
which owns twenty Comfort Inns, since 1996. Mr. Ashner has been CEO of
Newkirk Associates, a limited liability company which owns and manages more
than 40 million square feet of office and retail space, since 1997. Mr.
Ashner has also been Managing Director of AP-USX, LLC, a limited liability
company which owns a 28 million square foot office tower, since 1998. Since
1999, Mr. Ashner has served as President and CEO of Presidio Capital
Corporation, an investment banking firm, Mr. Ashner has been President and
CEO since 2000 of GFB-AP Fort, LLC, a limited liability company involved in
independent and assisted living communities. Mr. Ashner has been President
and sole shareholder since 1981 of Exeter Capital Corporation, which
provides real estate consulting to real estate investors. Mr. Ashner
currently serves as a director of NBTY, Inc. and Burnham Pacific
Properties, which are publicly-traded companies. Mr. Ashner has served as a
director of Parent and Funding since September 29, 2000, as a member of the
Audit Committee of Parent since October 3, 2000, and as a member of the
Board of Directors of Operating since June 6, 2001. Since March 12, 2003,
Mr. Ashner has been a member of the Special Committee. Since October 31,
2003, Mr. Ashner has served as a member of Atlantic's Board of Directors.
(5) Harold First has been a financial consultant since 1993. From December 1990
through January 1993, Mr. First served as Chief Financial Officer of Icahn
Holding Corp., a privately held holding company. He has served as a
director of Taj Mahal Holding Corporation, a public casino and gaming
corporation, Trump Taj Mahal Realty Corporation, a privately held real
estate company, Memorex Telex N.V., a public technology company, Trans
World Airlines, Inc., a public airline company, ACF Industries, Inc., a
privately-held railcar leasing and manufacturing company, Cadus
Pharmaceutical Corporation, a biotech research company, Talk.com, a public
long distance telephone service company, Marvel Entertainment Group, Inc.,
a public entertainment company, Toy Biz, Inc., a public toy company and
Vice Chairman of the Board of Directors of American Property Investors,
Inc., the general partner of American Real Estate Partners, L.P., a public
limited partnership that invests in real estate. Mr. First currently serves
on the Boards of Directors of Panaco Inc., an oil and gas drilling company,
and Philip Services Corporation, a leading integrated provider of
industrial and metals services. He is a Certified Public Accountant and
holds a B.S. from Brooklyn College. He has served as a member of the Audit
Committee and the Board since April 25, 2001, and as a director of Funding
and Operating since June 6, 2001. Since March 12, 2003, Mr. First has been
a member of the Special Committee. Since October 31, 2003, Mr. First has
served as a member of Atlantic's Board of Directors.
106
(6) Auguste E. Rimpel, Jr. has been a retired partner of PricewaterhouseCoopers
LLP ("PwC") since 2000. He was with PwC and its predecessor firm, Price
Waterhouse, since 1983, most recently as Managing Partner of International
Consulting services for the Washington Consulting Practice of the firm.
Prior to his tenure at PwC, he served as a Partner with Booz Allen &
Hamilton, Inc. and as a Vice President of Arthur D. Little International,
Inc. Dr. Rimpel currently serves as Chairman of the Board of Trustees of
the University of the Virgin Islands. Dr. Rimpel received a Ph.D. in
chemical engineering from Carnegie Institute of Technology and was an
International Fellow at Columbia University Graduate School of Business. He
has served as a member of the Audit Committee and Board of Directors of
Parent since April 25, 2001, and as a director of Funding and Operating
since June 6, 2001. Since March 12, 2003, Mr. Rimpel has been a member of
the Special Committee. Since October 31, 2003, Mr. Rimpel has served as a
member of Atlantic's Board of Directors.
(7) Richard P. Brown, serves as President and Chief Executive Officer for Carl
C. Icahn's Nevada gaming properties, the Stratosphere Casino Hotel and
Tower, Arizona Charlie's Decatur and Arizona Charlie's Boulder. All three
properties are located in Las Vegas. In addition, Mr. Brown serves as Chief
Executive Officer of Operating, Parent and Funding. Mr. Brown reports
directly to Mr. Icahn and oversees strategic planning, operating, financial
and capital investment direction for the Icahn gaming properties. His role
also encompasses development of new business opportunities and company
policies. Mr. Brown joined Mr. Icahn's gaming properties in March 2000 as
Executive Vice President of Marketing for the Stratosphere and both Arizona
Charlie's properties while also serving as one of three key executives
responsible for overall operations of the Stratosphere. In January 2001, he
was promoted to Chief Operating Officer, responsible for the operations of
all three properties. Mr. Brown was promoted to the position of President
and Chief Executive Officer of Mr. Icahn's gaming properties in Nevada in
June 2002. In addition, he was promoted to the role of Chief Executive
Officer of Operating, Parent and Funding in September 2002. Prior to
joining the Stratosphere, Mr. Brown held executive positions with Harrah's
Entertainment (1994-2000) and the Hilton Corporation (1992-1994). In
addition, he has held vice president positions with the New York Racing
Association, the Travelers Companies of Hartford, Connecticut and the J.
Walter Thompson Company in New York, New York. Mr. Brown earned a
bachelor's degree in business economics from Southern Connecticut State
College. Since November 13, 2002, Mr. Brown has served as Parent's
President and Chief Executive Officer.
(8) Timothy A. Ebling was formerly Executive Vice President, Chief Financial
Officer and Principal Accounting Officer of Operating and appointed Interim
Chief Operating Officer beginning January 2002 and ending March 18, 2002
and as President from October 1, until January 10, 2003. Since January 10,
2003, Mr. Ebling has served as Parent's Executive Vice President, Chief
Financial Officer and Principal Accounting Officer. Since October 31,
Mr. Ebling has served as Atlantic's Chief Financial Officer and Principal
Accounting Officer.
(9) Thomas Davis, served as President of Operating since February 2003.
Previously, Mr. Davis served as Vice President of Business Development at
Stratosphere Corporation from November 2002 until February 2003, General
Manager of Little River Casino Resort, General Manager at Chinook Winds
Resort-Casino and General Manager of Pioneer Gambling Hall & Hotel.
There are no arrangements or understandings pursuant to which any
person has been elected as a director of Parent. Directors are elected annually
by the stockholders and hold office until the next annual meeting of
stockholders or until their respective successors are elected and qualified.
Executive officers are elected by the Board of Directors and hold office until
their respective successors are elected and qualified. No family relationships
exist between any of Parent's directors or executive officers.
107
EXECUTIVE COMPENSATION OF ATLANTIC, PARENT AND ITS SUBSIDIARIES
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
Neither Parent nor Funding pays any compensation to any employee,
executive officer or director. Operating pays the compensation of the
independent directors (see "EXECUTIVE COMPENSATION OF ATLANTIC, PARENT AND ITS
SUBSIDIARIES--Compensation Of Directors" as set forth below). The following
table provides certain summary information concerning compensation paid or
accrued by Operating, to or on behalf of (i) Operating's Chief Executive
Officer; (ii) each of the other executive officers of Operating determined as of
the end of the last fiscal year; and (iii) additional individuals who would have
qualified as among the executive officers of Operating but for the fact that the
individual was not serving as an executive officer at the end of the last year
(hereafter referred to as the named executive officers), for the years ended
December 31, 2002, 2001 and 2000. It is anticipated that Licensee will pay
comparable compensation to such officers and directors such that the overall
compensation paid to such officers and directors remains constant.
Annual Compensation
--------------------------- Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation(1)
- --------------------------- ---- ------ ----- ------------ ---------------
Richard P. Brown (2) 2002 $ - $ - $ - $ -
Chief Executive Officer 2001 - - - -
2000 - - - -
Herbert R. Wolfe (3) 2002 184,167 $ - $ - $ -
Chief Executive Officer, 2001 - - - -
and President 2000 - - - -
Timothy A. Ebling 2002 250,000 - 8,400 4,500
Executive Vice President, 2001 250,000 - 8,400 4,250
Chief Financial Officer, 2000 207,610 149,349 (4) 8,400 4,000
Principal Accounting Officer
Frederick H. Kraus (5) 2002 235,815 - 10,800 4,500
Executive Vice President, 2001 235,815 - 10,800 4,250
General Counsel, Secretary 2000 235,815 176,861 (4) 10,800 4,000
Signe C. Huff (6) 2002 140,900 - 200,816 (7) 2,352
Senior Vice President Hotel 2001 188,166 - 8,400 4,250
Operations and Human 2000 186,522 41,147 (4) 8,400 4,000
Resources
Thomas Biglan (8) 2002 83,468 - 171,504 (7) 1,054
Vice President Food and 2001 168,703 - 8,400 4,218
Beverage 2000 166,243 41,147 (4) 8,400 4,000
- ----------------------------
(1) Includes matching contributions by Operating to The Sands Retirement
Savings Plan on behalf of the named executive officer.
(2) Richard P. Brown has served as Chief Executive Officer of Parent since
November 13, 2002. Commencing in 2003, Operating will fund a percentage of
Mr. Brown's salary on an annual basis.
(3) Herbert R. Wolfe has served as President and Chief Executive Officer of
Parent, Funding and Operating from March 18, 2002 until he resigned
September 30, 2002. Prior to that, Mr. Wolfe served as President of
Showboat Casino-Hotel
108
in Atlantic City (Showboat) from July 1994 until October 2000. During 2001,
Mr. Wolfe completed his B.A. degree in Liberal Studies at Rider University.
Mr. Wolfe also served as Senior Vice President of Marketing of Showboat
from January 1989 until July 1994.
(4) Represents payment of a Bankruptcy Court approved bonus for certain
management employees as an incentive for them to stay through the
bankruptcy proceedings (Stay Bonus).
(5) Frederick H. Kraus served as Executive Vice President, General Counsel &
Secretary until his resignation February 26, 2003.
(6) Signe C. Huff served as Senior Vice President Hotel Operations and Human
Resources from January 2002 until her resignation on August 9, 2002. During
2001, Ms. Huff served as Senior Vice President Marketing Operations and
Human Resources. Ms. Huff served as Senior Vice President of Hotel
Operations from 1995 to 2000. From 1989 to 1995, Ms. Huff served as Vice
President of Hotel Operations. Prior to 1989, Ms. Huff held various senior
hotel operating positions with Operating.
(7) Includes severance compensation.
(8) Thomas Biglan served as Vice President Food and Beverage from April 1996
until his resignation April 24, 2002.
OPTION GRANTS IN LAST FISCAL YEAR
The Company does not have a stock option plan.
EMPLOYMENT CONTRACTS
Timothy A. Ebling, presently and formerly Executive Vice President, Chief
Financial Officer and Principal Accounting Officer of Operating, and appointed
Interim Chief Operating Officer beginning January 2002 and ending March 18, 2002
and as President from October 2002 until January 10, 2003, is under an
employment agreement, amended as of March 11, 1998, in his present capacity
continuing through November 30, 2003. The terms of the agreement provide for an
annual base salary of $190,000, subject to annual increases on each anniversary
date of the agreement equal to no less than the change in the Consumer Price
Index, as defined, and no more than five percent. In October 2000, Mr. Ebling's
base salary was increased to $250,000.
The agreement provides for automatic renewal for additional one year
periods in accordance with the terms thereof. In addition, the Bankruptcy Court
approved a Stay Bonus and Severance Plan for certain management employees,
including Mr. Ebling. Under the Stay Bonus Plan, Mr. Ebling received a bonus
equal to 75% of his base salary. To the extent provided in the Severance Plan,
if the Reorganized Entity, as defined in the Severance Plan, terminated the
employment of Mr. Ebling without cause, as defined in the employment agreement,
Mr. Ebling would be entitled to a lump sum payment equal to the greater of two
years of his base salary or the remaining terms of his employment agreement.
EMPLOYEE RETIREMENT SAVINGS PLAN
Effective January 1, 1999, Operating created The Sands Retirement Savings
Plan, a qualified defined contribution plan, as a spinoff from the Hollywood
Casino Corporation Retirement Savings Plan, as the same existed as of December
31, 1998 ("the Predecessor Plan"). The Predecessor Plan was established by
Operating effective as of November 1, 1984 and subsequently became the basic
section 401(k) retirement plan sponsored by a controlled group of corporations,
of which Operating had been a component.
The Sands Retirement Savings Plan is qualified under the requirements
of Section 401(k) of the Code allowing participating employees to benefit from
the tax deferral opportunities provided therein. The Sands Retirement Savings
Plan is for the benefit of Operating's employees, excluding employees covered by
a Collective Bargaining Agreement ("CBA") unless the CBA specifically provides
for coverage, who satisfy certain eligibility requirements being the completion
of one year of service, as defined, and having attained the age of 21.
109
The Sands Retirement Plan provides for a matching contribution by
Operating based upon certain criteria, including levels of participation by
Operating's employees. Operating incurred matching contributions totaling
$575,000, $700,000, $192,000 and $561,000, for the years ended December 31, 2002
and 2001, the three months ended December 31, 2000, the nine months ended
September 30, 2000, respectively.
COMPENSATION OF DIRECTORS
Prior to September 29, 2000, independent directors of Parent, Funding
and Operating received an annual fee of $10,000 for service on the Boards of
Directors and a fee of $500 for each meeting attended. Independent directors of
the Board of Directors of Parent are entitled to receive an annual fee of
$22,500. The Board held 11 meetings either in person or by unanimous consent
during the year ended December 31, 2002. All directors attended at least 75% of
all meetings of the Board and committees thereof for which they were eligible to
serve.
The Board also has an Audit Committee. Prior to September 29, 2000, the
external members of the Audit Committee received an annual fee of $5,000 for
service on the committee and a fee of $500 for each meeting attended. As of
September 29, 2000, compensation for members of the Audit Committee is included
in the compensation described above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On October 3, 2000, Parent established a Compensation Committee
consisting of Messrs. Hirsch and Ashner.
Mr. Icahn (including certain related entities) is actively involved in
the gaming industry and currently owns 77.49% of the outstanding common stock of
Parent. Casinos owned or managed by Mr. Icahn may directly or indirectly compete
with the Company. In addition, the potential for conflicts of interest exists
among Atlantic and Mr. Icahn for future business opportunities. Mr. Icahn may
pursue other business opportunities and there is no agreement requiring that
such additional business opportunities be presented to Atlantic.
110
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OF ATLANTIC AND PARENT
ATLANTIC
The following table sets forth as of October 31, 2003, certain
information regarding the beneficial ownership of shares of Atlantic Common
Stock by each director and executive officer of Atlantic, each person known to
Atlantic to be the beneficial owner of more than 5% of the outstanding shares
and all directors and executive officers as a group. Except as otherwise
indicated, each such stockholder has sole voting and investment power with
respect to the shares beneficially owned by such stockholder. A person is deemed
to beneficially own a security if such person has or shares the power to vote or
dispose of the security or has the right to acquire it within 60 days.
Number
Name of Shares Percent
---- --------- -------
Carl C. Icahn (1) - -
Martin Hirsch - -
John P. Saldarelli - -
Michael L. Ashner - -
Harold First - -
Auguste E. Rimpel, Jr. - -
Timothy A. Ebling - -
Richard P. Brown - -
Thomas Davis - -
All Directors and Officers - -
- ---------------------------
(1) It is anticipated that Carl C. Icahn and his affiliates will beneficially
own a majority of the Atlantic Common Stock outstanding after consummation
of the Transaction.
PARENT
The following table sets forth as of October 10, 2003, certain
information regarding the beneficial ownership of shares of common stock of
Parent by each director and executive officer of Parent, each person known to
Parent to be the beneficial owner of more than 5% of the outstanding shares and
all directors and executive officers as a group. Except as otherwise indicated,
each such stockholder has sole voting and investment power with respect to the
shares beneficially owned by such stockholder. A person is deemed to
beneficially own a security if such person has or shares the power to vote or
dispose of the security or has the right to acquire it within 60 days.
111
Number
Name of Shares Percent
- ---- --------- -------
HMC Investors, L.L.C. (1) 1,165,471 11.65%
c/o International Fund Services
3rd Floor, Bishops Square
Redmonds Hill
Dublin, Ireland
Carl C. Icahn (2) 7,748,744 77.49%
Martin Hirsch - -
John P. Saldarelli - -
Michael L. Ashner - -
Harold First - -
Auguste E. Rimpel, Jr. - -
Timothy A. Ebling - -
Richard P. Brown - -
Thomas Davis - -
All Directors and Officers 7,748,744 77.49%
- ---------------------------
(1) Includes 1,118,851 shares held by Harbert Distressed Investment Master Fund
Ltd. (the "Fund"). HMC Investors, L.L.C. is the managing member of the
investment manager of the Fund. Phillip Falcone, portfolio manager of the
Fund, and Raymond Harbert and Michael D. Luce, members of HMC Investors,
L.L.C., may be deemed to share beneficial ownership of the shares of common
stock of Parent held by HMC Investors, L.L.C. Information concerning HMC
Investors, L.L.C. and its affiliates is derived from a Statement of Changes
in Beneficial Ownership on Form 4 filed with the SEC on October 23, 2003.
(2) As of October 10, 2003, Cyprus LLC, an entity controlled by Mr. Icahn,
directly beneficially owned 4,121,033 shares of common stock of Parent and
American Real Estate Holdings L.P., a limited partnership controlled by Mr.
Icahn, directly beneficially owned 3,627,711 shares of common stock of
Parent.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Plan, entities controlled by Mr. Icahn purchased
5,375,000 shares of common stock of Parent for an aggregate purchase price of
$65,000,000 and received 1,850,561 shares of common stock of Parent in
connection with the exchange of $62,833,000 principal amount of 10 7/8 Old Notes
for $37,870,000 principal amount of Existing Notes. See "DESCRIPTION OF THE
BUSINESS OF PARENT AND ITS SUBSIDIARIES -- General" as set forth on page 82.
Operating's rights to the Trade Name "Sands" were derived from a
license agreement between GBCC and an unaffiliated third party. Amounts payable
by The Sands for these rights were equal to the amounts paid to the unaffiliated
third party. As a result of the entry of an order confirming the Plan by the
Bankruptcy Court and the occurrence of the Effective Date and under the terms of
the Plan, Operating was assigned by High River the rights under a certain
agreement with the owner of the Trade Name to use the Trade Name as of the
Effective Date. High River received no payments for its assignment of these
rights. Payment is made directly to the owner of the Trade Name. The calculation
of the license fee is the same as under the previous agreement.
On October 12, 2001, the entities controlled by Mr. Icahn, as holders
of the Existing Notes, received a payment in the aggregate amount of $1,118,670
in connection with Funding's solicitation of consents of holders to certain
amendments to the Indenture dated as of September 29, 2000.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a discussion of certain material U.S. federal income
tax consequences to holders of outstanding common stock of Parent resulting from
the Transaction. Under the Transaction, holders of outstanding common stock of
Parent will receive the Distribution of Atlantic Securities consisting of either
Atlantic Common Stock or Warrants. The discussion assumes that any holder of
outstanding common stock of Parent or Atlantic Common Stock or any holder of the
Warrants holds such stock or warrants as capital assets for U.S. federal income
tax purposes. The discussion is based on the Code, Treasury Regulations
promulgated under the Code, and administrative and judicial decisions
interpreting the Code and the Treasury Regulations. This section does not apply
to a shareholder or holder of warrants who is a member of a class of
shareholders subject to special rules, such as:
- a dealer in securities or currencies;
- a trader in securities that elects to use a mark-to-market method
of accounting for its securities holdings;
- a bank, an insurance company or other financial institution;
- a tax-exempt organization;
- a person that acquired its outstanding common stock of Parent
through the exercise of options or otherwise as compensation;
- a person that has entered into a constructive sale of its
outstanding common stock of Parent under the Code;
- a person that owns Parent common stock, Atlantic Common Stock or
the Warrants as part of a straddle, conversion or other risk
reduction transaction for U.S. federal income tax purposes; or
- a U.S. shareholder (as defined below) whose functional currency
for U.S. income tax purposes is not the U.S. dollar.
The discussion below does not address all of the tax consequences that
may be relevant to you. In particular, it does not address:
- the U.S. federal estate, gift or alternative minimum tax
consequences of the Transaction and the receiving, owning and
disposing of the Atlantic Common Stock or the receiving, owning,
disposing and exchanging for the Atlantic Common Stock of the
Warrants; or
- state, local or foreign tax consequences of the Transaction and
the receiving, owning and disposing of the Atlantic Common Stock
or the receiving, owning, disposing and exchanging for the
Atlantic Common Stock of the Warrants.
Atlantic has not sought, and will not seek, a ruling from the Internal
Revenue Service ("IRS") with respect to any of the U.S. federal income tax
consequences discussed below. No assurance can be given that the IRS will not
take positions contrary to the U.S. federal income tax consequences discussed
below. As a result, no assurance can be given that the IRS will agree with the
tax characterizations and tax consequences described below.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY VARY, EACH SHAREHOLDER SHOULD
CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE PARTICULAR U.S. FEDERAL
INCOME TAX CONSEQUENCES AND OTHER TAX CONSEQUENCES OF THE OFFER, INCLUDING THE
APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, ANY STATE, LOCAL AND
FOREIGN TAX LAWS AND THE EFFECT OF ANY CHANGES IN SUCH LAWS.
114
PARENT
Possible Cancellation of Indebtedness Income ("COD Income")
Parent anticipates that the Transaction will not result in the Parent
consolidated group recognizing any taxable income for U.S. federal income tax
purposes because Parent believes that none of the Existing Notes, the Existing
Notes, as amended, or the New Notes will be Publicly Traded. However, this
conclusion is not free from doubt and it is possible that the Transaction will
result in the Parent consolidated group recognizing COD Income. Such COD Income,
if any, could be offset with the Parent consolidated group's NOLs. If such an
application of the NOLs is necessary, the NOLs so utilized would be unavailable
as an offset against the Parent consolidated group's future income. Furthermore,
in the event that COD Income is recognized, to the extent that such COD Income
exceeds the NOLs, or to the extent that the NOLs are unable to be used to offset
COD Income, such COD Income would produce a current tax liability for Parent. It
should also be noted that US GAAP requires that the Selected Unaudited Pro Forma
Condensed Consolidated Financial Statements and the Unaudited Pro Forma
Condensed Consolidated Financial Statements contained in this proxy
statement/prospectus assume that the Transaction will result in the Parent
consolidated group recognizing COD Income for federal income tax purposes. There
would not be any such taxes if there is no recognition of COD Income. Such
assumption and estimate is required under US GAAP because Parent's determination
that there should be no COD Income incurred is based upon events which will
occur after the Transaction is completed and under US GAAP, such a determination
cannot be made where post transaction events will affect the results. Although
no assurances can be given, Parent does not believe that COD Income will result
because Parent does not believe an active trading market in the Existing Notes
existed 30 days prior to the Transaction or an active trading market in the New
Notes or the Existing Notes will develop after the Transaction is completed, and
unless such an active trading market develops, a tax liability related to COD
Income will not be incurred.
COD Income should equal to the sum of (a) the difference of (i) the
face value of the Existing Notes exchanged minus both (ii) the Issue Price (as
defined below) of the New Notes and the Cash Payment and (b) the difference of
(i) the face value of the Existing Notes deemed exchanged minus (ii) the Issue
Price of the Existing Notes, as amended.
The determination of the Issue Price of the New Notes depends on
whether either the Existing Notes or the New Notes are Publicly Traded (as
defined below). The determination of the Issue Price of the Existing Notes, as
amended, depends on whether either the Existing Notes or the Existing Notes, as
amended, are Publicly Traded. A debt instrument is considered to be Publicly
Traded if it (1) is listed on a national or international securities exchange;
(2) appears on a "quotation medium," defined as a system of general circulation
that provides a reasonable basis to determine the fair market value; (3) is of a
kind of property either traded in the futures market or an interbank market; or
(4) the price of the debt instrument readily available from dealers, brokers or
traders, unless, among other things, no other debt instrument of the issuer is
described in items (1) through (3) above. None of the Existing Notes, the
Existing Notes, as amended, or the New Notes should be the kind of property
traded on a futures or interbank market and Parent and its subsidiaries have not
issued any other debt instrument that is described in items (1) through (3)
above. Therefore, the Existing Notes, the Existing Notes, as amended, and the
New Notes should not be considered Publicly Traded, provided that the Existing
Notes are de-listed at least thirty (30) days prior to the Transaction and that
none of the Existing Notes, the Existing Notes, as amended, or the New Notes are
either listed on a national securities exchange or appear on a quotation medium.
The Issue Price of a new non-Publicly Traded debt instrument exchanged, or
deemed to be exchanged, for an existing non-Publicly Traded debt instrument
equals the face value of the new debt instrument. Parent does not anticipate
that either the Existing Notes, the Existing Notes, as amended, or the New Notes
will appear on such a quotation medium or otherwise be Publicly Traded. If so,
the Issue Price of the New Notes should equal their face value and the Issue
Price of the Existing Notes, as amended, should equal their face value.
However, either the New Notes or the Existing Notes, as amended, may
appear on such a quotation medium or otherwise be Publicly Traded. The Issue
Price of a new Publicly Traded debt instrument exchanged, or deemed to be
exchanged, for an existing debt instrument equals the fair market value of the
new debt instrument, measured at the time of the exchange. Therefore, if the New
Notes are Publicly Traded, their Issue Price should be their fair market value
at
115
the time of the exchange and if the Existing Notes, as amended, are Publicly
Traded, their Issue Price should be their fair market value at the time of the
deemed exchange.
It is also possible that, although neither the New Notes nor the
Existing Notes, as amended, will be Publicly Traded, the Existing Notes will
appear on such a quotation medium or otherwise be Publicly Traded. The Issue
Price of a new non-Publicly Traded debt instrument exchanged, or deemed to be
exchanged, for an existing Publicly Traded debt instrument equals the fair
market value of the existing Publicly Traded debt instrument, measured at the
time of the exchange. In such a situation, the Issue Price of both the New Notes
and the Existing Notes, as amended, should be the fair market value of the
Existing Notes at the time of the exchange.
Possible Gain from the Distribution of Atlantic Securities
Although not anticipated, it is possible that the Distribution of
Atlantic Securities will result in Parent recognizing gain for U.S. federal
income tax purposes. In the event that Parent does recognize gain on the
Distribution of Atlantic Securities, Parent's gain should equal the difference
between the fair market value of the Distribution of Atlantic Securities and
Parent's tax basis in the Atlantic Securities distributed, measured as of the
date of the distribution. Parent believes that its tax basis in the Distribution
of Atlantic Securities will, for U.S. federal income tax purposes, exceed its
fair market value so that Parent should not recognize any gain on the
distribution (under the Code, loss cannot be recognized). Should Parent
recognize any gain, such gain would be taxable income to Parent for U.S. federal
income tax purposes. Parent may be able to offset some or all of such taxable
income with the Parent consolidated group's NOLs. Such an application of the
NOLs would make the NOLs so utilized unavailable as an offset against the Parent
consolidated group's future income. Furthermore, to the extent that the gain
exceeds the NOLs, or to the extent that the NOLs are unable to be used to offset
Parent's gain, or if the Parent consolidated group's NOLs have been fully
applied to any COD Income, the gain would produce a current tax liability for
Parent.
Alternative Minimum Tax
Parent may be subject to the alternative minimum tax ("AMT") for the
year of the Transaction. In the event that Parent is subject to the AMT,
Parent's ability to offset any of its possible COD Income or gain from the
Distribution of Atlantic Securities will be limited as Parent may only use its
alternative tax net operating losses ("AMT NOLs") to offset 90% of its
alternative minimum taxable income ("AMTI"). As such, even if for purposes of
regular U.S. federal income taxation the Parent consolidated group's NOLs are
sufficient to offset more than 90% of the Parent consolidated group's taxable
income, if Parent is subject to the AMT, Parent would only be able to apply
Parent's AMT NOLs to 90% of Parent's AMTI and would be potentially liable for
the AMT on all of Parent's AMTI not offset by the AMT NOLs.
U.S. SHAREHOLDERS
You are a "U.S. shareholder" if you are a beneficial owner of Parent
common stock and you are, for U.S. federal income tax purposes:
- a citizen or resident of the United States;
- a domestic corporation;
- an estate whose income is subject to U.S. federal income tax
regardless of its sources;
- a trust over whose administration a U.S. court can exercise
primary supervision and all substantial decisions of which one or
more U.S. persons are authorized to control; or
- a trust that was in existence on August 20, 1996 and treated as a
domestic trust on August 19, 1996 and made an election to
continue to be treated as a domestic trust.
116
This Section does not apply you if you are a "non-U.S. shareholder."
You are a non-U.S. shareholder if you are a beneficial owner of Parent common
stock and you are, for U.S. federal income tax purposes, not a U.S. shareholder.
If you are a non-U.S. shareholder, please see the section titled
"Non-U.S. Shareholders" as set forth below.
Taxation of the Distribution of Atlantic Securities
The Distribution of Atlantic Securities should be (i) a taxable
dividend to the extent of Parent's current or accumulated earning and profits,
and then (ii) a non-taxable return of basis to the extent of your tax basis in
your Parent common stock, and then (iii) taxable gain from the sale or exchange
of your Parent common stock, which should result in capital gain taxed at
long-term capital gains rates assuming that you held your Parent common stock
for more than 12 months. Parent currently believes that it has no current or
accumulated earnings and profits. Although Parent anticipates that the
Transaction will not result in any income or gain that would be included in
Parent's current earnings and profits, Parent may have current or accumulated
earnings and profits at the end of the tax year that the Distribution of
Atlantic Securities is made. If so, the distribution should be taxable as a
dividend, but only to the extent of such current or accumulated earnings and
profits, if any. The amount of the Distribution of Atlantic Securities should
equal the fair market value of the Atlantic Securities distributed to you as of
the date of the distribution.
In the event that the Transaction results in the Parent consolidated
group recognizing COD Income or Parent recognizing gain from the Distribution of
Atlantic Securities, such COD Income or gain would be included in Parent's
current earnings and profits and increase the amount of the Distribution of
Atlantic Securities potentially taxable as a dividend because such COD Income or
gain would increase Parent's current earnings and profits, if any, for the year
in which the Distribution of Atlantic Securities is made.
If you receive the Distribution of Atlantic Securities, you should also
receive an IRS Form 1099-DIV on which Parent will list the amount, if any, of
the distribution taxable to you as a dividend and the amount, if any, of the
distribution treated as a "nontaxable distribution." The amount listed on the
IRS Form 1099-DIV as a "nontaxable distribution," if any, will, for U.S. federal
income tax purposes, first be treated as a non-taxable return of basis to the
extent of your tax basis in your Parent common stock, and then as taxable gain
from the sale or exchange of your Parent common stock, as described above. If
you are a corporate shareholder of Parent you may be able to use the dividends
received deduction, as defined in the Code, to reduce the amount of your taxable
dividend income from the Distribution of Atlantic Securities.
Sale, Exchange, or Redemption
Generally, the sale or exchange of the Atlantic Securities (other than
the exercise of the Warrants for Atlantic Common Stock), or the redemption of
the Atlantic Securities for cash should result in taxable gain or loss to you.
For the tax treatment of the exercise of the Warrants for shares of Atlantic
Common Stock, see "MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS -- Exercise
of the Warrants to acquire Atlantic Common Stock" as set forth below. The amount
of gain or loss on a taxable sale, exchange or redemption will equal the
difference between (i) the amount of cash plus the fair market value of any
other property received by you, and (ii) your adjusted tax basis in the Atlantic
Securities. Your adjusted tax basis in the Atlantic Securities should equal the
fair market value of the Atlantic Securities received, determined as of the date
of the distribution of the Atlantic Securities by Parent to you. Gain or loss
recognized upon a sale, exchange or redemption of the Atlantic Securities
generally should be treated as capital gain or loss, which will be long-term
capital gain or loss if the Atlantic Securities is held for more than one year.
The deductibility of net capital losses is subject to limitations.
EXERCISE OF THE WARRANTS TO ACQUIRE ATLANTIC COMMON STOCK
In the event that you receive the Warrants, the exercise of the
Warrants to acquire Atlantic Common Stock should be a transaction in which no
gain or loss is recognized by you. Your tax basis in the Atlantic Common Stock
received upon an exchange of the Warrants for Atlantic Common Stock should equal
your tax basis in the Warrants plus
117
the price paid to exchange the Warrants for Atlantic Common Stock. The holding
period for such Atlantic Common Stock received should commence on the date of
the exchange.
NON-U.S. SHAREHOLDERS
The following section discusses the U.S. federal income tax
consequences of the Transaction and the receiving, owning and disposing of the
Atlantic Common Stock or the receiving, owning, disposing and exchanging for
Atlantic Common Stock of the Warrants if you are a non-U.S. shareholder (as
defined above). This section does not apply to you if you are not a non-U.S.
shareholder and such a person is referred to the section titled "U.S.
Shareholders" above.
TAXATION OF THE DISTRIBUTION OF ATLANTIC SECURITIES AND A SALE, EXCHANGE OR
REDEMPTION
You should be subject to 30% U.S. withholding tax to the extent that
the Distribution of Atlantic Securities is taxable as a dividend, subject to
reduction by applicable treaty. You should be exempt from U.S. income or
withholding tax on any portion of the Distribution of Atlantic Securities not
taxable as a dividend, provided that: (i) the Distribution of Atlantic
Securities is not effectively connected with your conduct of a trade or business
in the U.S. and (ii) Parent is not, and has not been, a U.S. real property
holding corporation ("USRPHC"), as that term is defined in the Code. Although
Parent believes that it is a USRPHC, because it is regularly traded on an
established securities market, such status should only affect foreign
shareholders who own more than 5% of Parent. Therefore, if you own 5% or less of
Parent's common stock and the Distribution of Atlantic Securities is not
effectively connected with your conduct of a trade or business in the U.S., you
should not be subject U.S. income or withholding tax on the amount of the
Distribution of Atlantic Securities not taxable as a dividend. However, as
Parent may not be able to determine, at the time of the distribution, the amount
of the Distribution of Atlantic Securities taxable as a dividend, Parent may
collect the 30% U.S. withholding tax on the entire amount of the distribution,
subject to reduction by applicable treaty. You should be able to receive a
refund if and to the extent of any excess withholding.
If you own more than 5% of Parent's common stock and the Distribution
of Atlantic Securities is not effectively connected with your conduct of a trade
or business in the U.S., you should be subject to 30% U.S. withholding tax to
the extent that the Distribution of Atlantic Securities is taxable as a
dividend, subject to reduction by applicable treaty, and U.S. net income tax to
the extent that the Distribution of Atlantic Securities is not taxable as a
dividend. However, as Parent may not be able to determine, at the time of the
distribution, the amount of the Distribution of Atlantic Securities taxable as a
dividend, Parent may collect the 30% U.S. withholding tax on the entire amount
of the distribution, subject to reduction by applicable treaty. You should be
able to receive a refund if and to the extent of any excess withholding.
If the Distribution of Atlantic Securities is effectively connected
with your conduct of a trade or business in the U.S. and you provide the proper
withholding certificate to Parent, you should be subject to U.S. net income tax
on the Distribution of Atlantic Securities (but not the 30% U.S. withholding
tax).
Your exercise of the Warrants for Atlantic Common Stock will have the
same tax consequences as described above under "--Exercise of the Warrants to
acquire Atlantic Common Stock" above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Proceeds from the Transaction and the receiving, owning and disposing
of the Atlantic Common Stock or the receiving, owning, disposing and exercise of
the Warrants for the Atlantic Common Stock may be subject to information
reporting and U.S. federal backup withholding tax if the U.S. holder thereof
fails to supply an accurate taxpayer identification number or otherwise fails to
comply with applicable U.S. information or reporting certification requirements.
Any amounts so withheld will be allowed as a credit against the shareholder's
U.S. federal income tax liability and may entitle a holder to a refund, provided
the required information is timely furnished to the IRS.
THE PROPER TAX TREATMENT OF THE PARENT SHAREHOLDERS IS UNCERTAIN.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE U.S.
118
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE OFFER AND AN
INVESTMENT IN THE ATLANTIC COMMON STOCK OR WARRANTS.
LEGAL MATTERS
Katten Muchin Zavis Rosenman, counsel to Atlantic, Parent and their
subsidiaries, will pass on the validity of the New Notes and the Atlantic Common
Stock to be issued upon the election of the holders of a majority of the
aggregate principal amount outstanding of the New Notes to be paid in Atlantic
Common Stock offered by this solicitation statement and prospectus.
EXPERTS
The consolidated financial statements and the related financial
statement schedule of GB Holdings, Inc. as of December 31, 2002 and for the year
then ended, have been included herein in reliance upon the report of KPMG LLP,
independent accountants, included herein, and upon the authority of said firm as
experts in accounting and auditing. The audit report covering the December 31,
2002, consolidated financial statements refers to the Company's adoption of
Emerging Issues Task force 01-09, "Accounting for consideration given by a
Vendor to a Customer (Including a Reseller of the Vendor's Products)" as of
January 1, 2002.
119
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in a company's proxy statement and for
consideration at the next annual meeting of its stockholders by submitting their
proposals to Parent or Atlantic in a timely manner.
Parent. Parent has already held its 2003 annual meeting of
stockholders. Parent will hold an annual meeting in the year 2004 and
stockholder proposals must be received by Parent no later than [_____], 2004,
and must otherwise comply with the requirements of Rule 14a-8, to be included in
Parent's proxy statement. In addition, Parent's By-Laws establish an advance
notice procedure with regard to stockholder proposals to be brought before an
annual meeting of Parent's stockholders. To be presented at Parent's next annual
meeting, a stockholder proposal must be received by Parent after [____ , 200]
but no later than [____ __, 200_]. If a stockholder who has notified Parent of
his, her or its intention to present a proposal at an annual meeting does not
appear or send a qualified representative to present the proposal at the
meeting, Parent need not present the proposal for a vote at the meeting. All
notices of proposals by stockholders, whether or not to be included in Parent's
proxy materials, should be sent to the attention of the Secretary, GB Holdings,
Inc. c/o Sands Hotel & Casino, Indiana Avenue & Brighton Avenue Atlantic City,
New Jersey 08401.
Atlantic. If the Transaction is completed, Atlantic will hold its first
annual meeting of stockholders in [May ___] 2004. Stockholders' proposals must
be received by Atlantic no later than [____ _], 2004, and must otherwise comply
with the requirements of Rule 14a-8. In addition, Atlantic's By-Laws establish
an advance notice procedure with regard to stockholder proposals to be brought
before an annual meeting of Atlantic's stockholders. To be presented at
Atlantic's first annual meeting, a stockholder proposal must be received by
Atlantic after [____ __. 200_] but no later [____ __. 200_]. If a stockholder
who has notified Atlantic of his, her or its intention to present a proposal at
an annual meeting does not appear or send a qualified representative to present
the proposal at the meeting, Atlantic need not present the proposal for a vote
at the meeting. All notices of proposals by stockholders, whether or not to be
included in Atlantic's proxy materials, should be sent to the attention of
Atlantic's Secretary, Atlantic Coast Entertainment Holdings, Inc. c/o Sands
Hotel & Casino, Indiana Avenue & Brighton Avenue Atlantic City, New Jersey
08401.
WHERE YOU CAN FIND MORE INFORMATION
Requests for documents relating to GB Holdings, Inc. c/o Sands Hotel &
Casino, Indiana Avenue & Brighton Avenue Atlantic City, New Jersey 08401.
Attention: Public Relations, telephone: 609-441-4000.
Parent files, and after the Transaction Atlantic will file, reports,
proxy statements and other information with the SEC. Copies of Parent's reports,
proxy statements and other information may be inspected and copied at the public
reference facilities maintained by the SEC at:
Judiciary Plaza
Room 1024
450 Fifth Street, N.W.
Washington, D.C. 20549
Reports, proxy statements and other information concerning Parent may
be inspected at: The American Stock Exchange, 86 Trinity Place, New York, NY
10006, 212-306-1000.
Copies of these materials can also be obtained by mail at prescribed
rates from the Public Reference Room of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at l-800-SEC-0330. The SEC
maintains a Web site that contains reports, proxy statements and other
information regarding Parent and, after completion of the Transaction, Atlantic.
The address of the SEC's Web site is http://www.sec.gov.
Atlantic filed a registration statement on Form S-4 under the
Securities Act with the SEC with respect to the offer and issuance of shares of
Atlantic Common Stock, Warrants, and Atlantic Common Stock issuable upon
exercise of the Warrants in connection with the Transaction. This document
constitutes our proxy statement/prospectus filed as part of that registration
statement. This document does not contain all of the information set forth in
the registration
120
statement because parts of the registration statement are omitted in accordance
with the rules and regulations of the SEC. The registration statement and its
exhibits are available for inspection and copying as described above.
If you have any questions about the Transaction, please call Susan
O'Connell Parent Public Relations at (609) 441-4000.
This document does not constitute an offer to sell, or a solicitation
of an offer to purchase, the securities offered by this document, or the
solicitation of a proxy, in any jurisdiction to or from any person to whom or
from whom it is unlawful to make such offer, solicitation of an offer or proxy
solicitation in such jurisdiction. Neither the delivery of this document nor any
distribution of securities pursuant to this document shall, under any
circumstances, create any implication that there has been no change in the
information set forth in this document or in Parent or Atlantic's affairs since
the date of this document. The information contained in this document with
respect to Parent was provided by Parent.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
The SEC encourages companies to disclose forward-looking information so
that investors can better understand a company's future prospects and make
informed investment decisions. This document contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements may be made directly in this document referring to
Parent or Atlantic. These statements may include statements regarding the period
following completion of the Transaction.
This document contains forward-looking statements based on current
projections about operations, industry, financial condition and liquidity. Words
such as "anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe" and words and terms of similar substance used in connection with any
discussion of future operating or financial performance, the Transaction or the
business of Parent or Atlantic, identify forward-looking statements. You should
note that the discussion of Parent's board of directors' reasons for the
Transaction and the description of its financial advisors opinions contains many
forward looking statements that describe beliefs, assumptions and estimates as
of the indicated dates and those forward looking expectations may have changed
as of the date of this document. In addition, any statements that refer to
expectations, projections or other characterizations or future events or
circumstances, including any underlying assumptions, are forward-looking
statements. Those statements are not guarantees and are subject to risks,
uncertainties and assumptions that are difficult to predict. Therefore, actual
results could differ materially and adversely from these forward-looking
statements.
All forward-looking statements reflect management's present
expectations of future events and are subject to a number of factors and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements. In addition to the risks related to
the businesses of Parent, the uncertainty concerning the completion of the
Transaction and the matters discussed under "RISK FACTORS," among others, could
cause actual results to differ materially from those described in the
forward-looking statements. These factors include: relative value of Atlantic
Common Stock, the Warrants, the New Notes, the Existing Notes, and common stock
of Parent, the market's difficulty in valuing the business of Parent or
Atlantic, the failure to realize the anticipated benefits of the Transaction and
conflicts of interest of directors recommending the Transaction. You are
cautioned not to place undue reliance on the forward-looking statements, which
speak only of the date of this document. Neither Atlantic nor Parent is under
any obligation, except as required by law, to update or alter any
forward-looking statements, whether as a result of new information, future
events or otherwise. Atlantic and Parent each expressly disclaim, to the maximum
extent permitted by law, any obligation to update or alter any forward-looking
statement.
All subsequent forward-looking statements attributable to Atlantic or
Parent or any person acting on their behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
121
INDEX TO FINANCIAL STATEMENTS
PAGE
----
GB HOLDINGS, INC. AND SUBSIDIARIES
Reports of Independent Public Accountants............................................................ F-1
Consolidated Balance Sheets of GB Holdings, Inc.
and Subsidiaries as of December 31, 2002 and 2001 ................................................. F-3
Consolidated Statements of Operations of GB Holdings, Inc.
and Subsidiaries for the Years Ended December 31, 2002 and 2001 (Post-reorganization),
the Period October 1, 2000 through December 31, 2000 (Post-reorganization),
the Period January 1, 2000 through September 30, 2000 (Pre-reorganization)......................... F-5
Consolidated Statement of Changes in Shareholder's Equity (Deficit) of GB
Holdings, Inc. and Subsidiaries for the Years Ended December 31, 2002 and
2001 (Post-reorganization), Period October 1, 2000 through December 31,
2000 (Post-reorganization), the Period January 1, 2000
through September 30, 2000 (Pre-reorganization) ................................................... F-6
Consolidated Statements of Cash Flows of GB Holdings, Inc.
and Subsidiaries for the Years Ended December 31, 2002 and 2001, the Period October 1,
2000 through December 31, 2000 (Post-reorganization), the Period January 1,
2000 through September 30, 2000 (Pre-reorganization)............................................... F-7
Notes to Consolidated Financial Statements of GB Holdings, Inc.
and Subsidiaries .................................................................................. F-8
Schedule II, Valuation and Qualifying Accounts of GB Holdings, Inc.
and Subsidiaries for the Years Ended December 31, 2002 and 2001
(Post-reorganization), Period October 1, 2000 through December 31, 2000
(Post-reorganization), the Period
January 1, 2000 through September 30, 2000 (Pre-reorganization) ................................... F-24
Unaudited Consolidated Balance Sheets of GB Holdings, Inc. and Subsidiaries as of
June 30, 2003 and December 31, 2002.............................................................. F-26
Unaudited Consolidated Statements of Operations of GB Holdings, Inc. and Subsidiaries
as of the six months ended June 30, 2003 and June 30, 2002....................................... F-28
Unaudited Consolidated Statements of Cash Flows of GB Holdings, Inc. and Subsidiaries
as of the six months ended June 30, 2003 and June 30, 2002....................................... F-29
Notes to Unaudited Consolidated Financial Statements of GB Holdings, Inc. and
Subsidiaries..................................................................................... F-30
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
Atlantic Coast Entertainment Holdings, Inc. Consolidated Financial Statements........................ F-35
GB HOLDINGS, INC. AND SUBSIDIARIES
GB Holdings, Inc. and Subsidiaries Unaudited Pro Forma Condensed Consolidated
Financial Statements ............................................................................ P-1
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
Atlantic Coast Entertainment Holding, Inc. Pro Forma Condensed Consolidated
Financial Statements .............................................................................P-16
F-i
INDEPENDENT AUDITORS' REPORT
To the Shareholders of GB Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of GB Holdings, Inc.
and subsidiaries as of December 31, 2002 and the related consolidated statements
of operation, shareholders' equity, and cash flows for the year then ended, as
listed in the accompanying index. In connection with our audit of the 2002
consolidated financial statements, we also have audited the 2002 consolidated
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the company's management. Our responsibility is to express an
opinion on these consolidated financial statements and consolidated financial
statement schedule based on our audit. The 2001 and 2000 consolidated financial
statements of GB Holdings, Inc. and subsidiaries as listed in the accompanying
index were audited by other auditors who have ceased operations. Those auditors
expressed an unqualified opinion on those consolidated financial statements,
before the revision related to the adoption of Emerging Issues Task Force 01-09
"Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendor's Products)" ("EITF 01-09"), described in Note 3 to the
consolidated financial statements, in their report dated March 8, 2002.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the 2002 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
GB Holdings, Inc. and subsidiaries as of December 31, 2002, and the results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America. Also
in our opinion, the related 2002 consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
As discussed in Note 3 to the consolidated financial statements, the company
adopted EITF 01-09, as of January 1, 2002.
As discussed above, the 2001 and 2000 consolidated financial statements of GB
Holdings, Inc. and subsidiaries as listed in the accompanying index were audited
by other auditors who have ceased operations. As described in Note 3, these
consolidated financial statements have been revised to include application of
EITF 01-09, which was adopted by the company as of January 1, 2002. In our
opinion, the disclosures required by EITF 01-09 for 2001 and 2000 as discussed
in Note 3 are appropriate. However, we were not engaged to audit, review, or
apply any procedures to the 2001 and 2000 consolidated financial statements of
GB Holdings, Inc. and subsidiaries other than with respect to such disclosures
and, accordingly, we do not express an opinion or any other form of assurance on
the 2001 and 2000 consolidated financial statements taken as a whole.
/s/ KPMG LLP
Short Hills, New Jersey
February 20, 2003
F-1
INFORMATION REGARDING PREDECESSOR INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
THE FOLLOWING REPORT IS A COPY OF A PREVIOUSLY ISSUED REPORT BY ARTHUR ANDERSEN
LLP ("ANDERSEN"). THE REPORT HAS NOT BEEN REISSUED BY ANDERSEN NOR HAS ANDERSEN
CONSENTED TO ITS INCLUSION IN THIS ANNUAL REPORT ON FORM 10-K. THE ANDERSEN
REPORT REFERS TO THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2000 AND THE
CONSOLIDATED STATEMENTS OF INCOME, SHAREHOLDERS' EQUITY/DEFICIT AND CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 (PRE-REORGANIZATION) WHICH ARE NO LONGER
INCLUDED IN THE ACCOMPANYING FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of GB Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of GB Holdings,
Inc. and subsidiaries (the Company, a Delaware corporation) as of December 31,
2001 and 2000, and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for the period ended December 31,
2001 (post-reorganization), the periods from October 1, 2000 through December
31, 2000 (post-reorganization), January 1, 2000 through September 30, 2000
(pre-reorganization) and the period ended December 31, 1999
(pre-reorganization). 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. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of GB Holdings, Inc.
and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for the period ended December 31, 2001
(post-reorganization), the periods from October 1, 2000 through December 31,
2000 (post-reorganization), January 1, 2000 through September 30, 2000
(pre-reorganization), and the period ended December 31, 1999
(pre-reorganization) in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 8, 2002
F-2
GB HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(POST-REORGANIZATION)
ASSETS
DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------
Current Assets:
Cash and cash equivalents ......................................... $ 50,645,000 $ 57,369,000
Accounts receivable, net of allowances
of $11,301,000 and $14,406,000, respectively .................... 4,976,000 8,911,000
Inventories ....................................................... 1,857,000 2,431,000
Income tax deposits ............................................... 1,359,000 759,000
Prepaid expenses and other current assets ......................... 3,067,000 2,266,000
------------ ------------
Total current assets .......................................... 61,904,000 71,736,000
------------ ------------
Property and Equipment:
Land .............................................................. 54,344,000 54,814,000
Buildings and improvements ........................................ 91,657,000 84,890,000
Equipment ......................................................... 46,119,000 27,321,000
Construction in progress .......................................... 3,597,000 17,003,000
------------ ------------
195,717,000 184,028,000
Less - accumulated depreciation and amortization .................. (26,095,000) (13,016,000)
------------ ------------
Property and equipment, net ....................................... 169,622,000 171,012,000
------------ ------------
Other Assets:
Obligatory investments, net of allowances of $10,028,000 and
$9,290,000, respectively ........................................ 10,069,000 9,302,000
Other assets ...................................................... 3,117,000 3,872,000
------------ ------------
Total other assets ............................................ 13,186,000 13,174,000
------------ ------------
$ 244,712,000 $ 255,922,000
============ ============
The accompanying notes to consolidated financial
statements are an integral part of these consolidated financial statements.
F-3
GB HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(POST-REORGANIZATION)
LIABILITIES AND SHAREHOLDER'S EQUITY
DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------
Current Liabilities:
Current maturities of long-term debt .............................. $ - $ 19,000
Accounts payable .................................................. 5,598,000 6,843,000
Accrued liabilities -
Salaries and wages ............................................ 3,717,000 4,144,000
Interest ...................................................... 3,092,000 3,092,000
Gaming obligations ............................................ 3,752,000 4,692,000
Insurance ..................................................... 1,805,000 1,670,000
Other ......................................................... 3,955,000 4,602,000
------------ ------------
Total current liabilities ..................................... 21,919,000 25,062,000
------------ ------------
Long-Term Debt, net of current maturities .............................. 110,000,000 110,352,000
------------ ------------
Other Noncurrent Liabilities ........................................... 3,445,000 3,839,000
------------ ------------
Commitments and Contingencies
Shareholder's Equity:
Preferred stock, $.01 par value per share;
5,000,000 shares authorized; 0 shares outstanding ............... - -
Common Stock, $.01 par value per share;
20,000,000 shares authorized;
10,000,000 shares issued and outstanding ........................ 100,000 100,000
Additional paid-in capital ........................................ 124,900,000 124,900,000
Accumulated deficit ............................................... (15,652,000) (8,331,000)
------------ ------------
Total shareholder's equity .................................... 109,348,000 116,669,000
------------ ------------
$ 244,712,000 $ 255,922,000
============ ============
The accompanying notes to consolidated financial
statements are an integral part of these consolidated financial statements.
F-4
GB HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
POST-REORGANIZATION PRE-REORGANIZATION
-------------------------------------------------- ------------------
YEAR ENDED YEAR ENDED OCTOBER 1, 2000 JANUARY 1, 2000
DECEMBER 31, DECEMBER 31, THROUGH THROUGH
2002 2001 DECEMBER 31, 2000 SEPTEMBER 30, 2000
-------------- ------------ ----------------- ------------------
Revenues:
Casino ....................................... $ 206,417,000 $ 232,369,000 $ 52,026,000 $ 177,731,000
Rooms ........................................ 11,140,000 11,570,000 2,307,000 7,173,000
Food and beverage ............................ 23,305,000 29,408,000 7,201,000 21,122,000
Other ........................................ 3,739,000 4,683,000 951,000 3,549,000
-------------- ------------- ---------------- -----------------
244,601,000 278,030,000 62,485,000 209,575,000
Less - promotional allowances ................ (51,128,000) (62,281,000) (15,774,000) (47,112,000)
-------------- ------------- ---------------- ----------------
Net revenues ............................. 193,473,000 215,749,000 46,711,000 162,463,000
-------------- ------------- ---------------- ----------------
Expenses:
Casino ....................................... 143,189,000 168,676,000 41,581,000 120,343,000
Rooms ........................................ 2,985,000 3,391,000 664,000 2,106,000
Food and beverage ............................ 10,915,000 9,814,000 2,292,000 6,685,000
Other ........................................ 2,625,000 3,374,000 890,000 2,851,000
General and administrative ................... 12,799,000 11,512,000 2,175,000 7,663,000
Depreciation and amortization ................ 15,457,000 12,133,000 3,834,000 9,414,000
Loss on impairment of fixed assets ........... 1,282,000 - - -
Loss on disposal of assets ................... 185,000 20,000 11,000 10,000
-------------- ------------- ---------------- ----------------
Total expenses ........................... 189,437,000 208,920,000 51,447,000 149,072,000
-------------- ------------- ---------------- ----------------
Income (loss) from operations ................... 4,036,000 6,829,000 (4,736,000) 13,391,000
-------------- ------------- ---------------- ----------------
Non-operating income (expense):
Interest income .............................. 1,067,000 2,671,000 1,338,000 518,000
Interest expense (contractual interest of
$16,545,000 for the nine months
ended September 30, 2000) ................ (11,640,000) (11,279,000) (3,133,000) (366,000)
Reorganization and other related costs - - 34,000 (2,807,000)
-------------- ------------- ---------------- -----------------
Total non-operating expense, net ............. (10,573,000) (8,608,000) (1,761,000) (2,655,000)
-------------- ------------- ---------------- -----------------
Income (loss) before income taxes,
and extraordinary items ...................... (6,537,000) (1,779,000) (6,497,000) 10,736,000
Income tax provision ......................... (784,000) (55,000) - -
-------------- ------------- ---------------- ----------------
Income (loss) before extraordinary items ..... (7,321,000) (1,834,000) (6,497,000) 10,736,000
Extraordinary gain on prepetition debt
discharge - - - 14,795,000
-------------- ------------- ---------------- ----------------
Net income (loss) ............................... $ (7,321,000) $ (1,834,000) $ (6,497,000) $ 25,531,000
============== ============= ================ ================
Basic/diluted loss per common share ............. $ (0.73) $ (0.18) $ (0.65)
============== ============= ================
Weighted average common shares outstanding ...... 10,000,000 10,000,000 10,000,000
============== ============= ================
The accompanying notes to consolidated financial
statements are an integral part of these consolidated financial statements.
F-5
GB HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDER'S EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 2002 AND 2001
(POST-REORGANIZATION),
FOR THE PERIOD OCTOBER 1, 2000 THROUGH DECEMBER 31, 2000
(POST-REORGANIZATION),
JANUARY 1, 2000 THROUGH SEPTEMBER 30, 2000 (PRE-REORGANIZATION)
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT
------ ------ ---------- -----------
BALANCE, JANUARY 1, 2000 ........................ 1,000 1,000 27,946,000 (67,540,000)
Net Income Pre-reorganization ................ - - - 25,531,000
Cancellation of old common stock
pursuant to the plan for reorganization .... (1,000) (1,000) 1,000 -
Issuance of new common stock pursuant
to the plan for reorganization ............. 10,000,000 100,000 64,954,000 -
Elimination of accumulated deficit
pursuant to the plan of reorganization ..... - - (42,009,000) 42,009,000
Additional paid in capital pursuant to the
plan of reorganization ..................... - - 74,008,000 -
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2000 ..................... 10,000,000 100,000 124,900,000 -
Net Loss Post-reorganization - - - (6,497,000)
---------- -------- ----------- ----------
BALANCE, DECEMBER 31, 2000 ...................... 10,000,000 100,000 124,900,000 (6,497,000)
Net Loss Post-reorganization - - - (1,834,000)
---------- -------- ----------- ----------
BALANCE, DECEMBER 31, 2001 ...................... 10,000,000 $ 100,000 124,900,000 $ (8,331,000)
Net Loss Post-reorganization - - - (7,321,000)
---------- -------- ----------- ----------
BALANCE, DECEMBER 31, 2002 ...................... 10,000,000 $ 100,000 124,900,000 $ (15,652,000)
---------- -------- ----------- ----------
The accompanying notes to consolidated financial
statements are an integral part of these consolidated financial statements.
F-6
GB HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
POST-REORGANIZATION PRE-REORGANIZATION
--------------------------------------------------- ------------------
YEAR ENDED YEAR ENDED OCTOBER 1, 2000 JANUARY 1, 2000
DECEMBER 31, DECEMBER 31, THROUGH THROUGH
2002 2001 DECEMBER 31, 2000 SEPTEMBER 30, 2000
------------- ------------ ----------------- ------------------
OPERATING ACTIVITIES:
Net income (loss) ................................ $ (7,321,000) $ (1,834,000) $ (6,497,000) $ 25,531,000
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization ................ 15,457,000 12,133,000 3,834,000 9,414,000
Loss on impairment of fixed assets ........... 1,282,000 - - -
Loss on disposal of assets ................... 185,000 20,000 11,000 10,000
Provision for doubtful accounts, net ......... 1,586,000 4,991,000 1,423,000 1,637,000
Deferred income tax benefit .................. - 292,000 - -
Decrease (increase) in accounts receivable ... 2,349,000 (2,930,000) (3,157,000) (184,000)
(Decrease) increase in accounts payable and
accrued liabilities ........................ (3,124,000) (5,605,000) 5,370,000 1,956,000
Net change in other current assets ............... (1,026,000) 1,261,000 (405,000) 3,452,000
Net change in other noncurrent assets and
liabilities ...................................... 285,000 (2,580,000) (4,708,000) (11,083,000)
Extraordinary gain on prepetition debt discharge - - - (14,795,000)
----------- ----------- ----------- ------------
Net cash (used in) provided by operating
activities ................................... 9,673,000 5,748,000 (4,129,000) 15,938,000
=========== =========== =========== ============
INVESTING ACTIVITIES:
Purchase of property and equipment ............... (14,058,000) (23,095,000) (2,934,000) (14,422,000)
Proceeds from disposition of assets .............. 320,000 4,000 - 13,000
Proceeds from sale of obligatory investments ..... 208,000 114,000 111,000 330,000
Purchase of obligatory investments ............... (2,496,000) (2,838,000) (803,000) (2,014,000)
----------- ----------- ----------- ------------
Net cash used in investing activities .......... (16,026,000) (25,815,000) (3,626,000) (16,093,000)
----------- ----------- ----------- ------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock ........... - - - 65,000,000
Repayments of long-term debt ..................... (371,000) (467,000) (20,000) (64,000)
----------- ----------- ----------- ------------
Net cash (used in) provided by financing
activities ................................... (371,000) (467,000) (20,000) 64,936,000
----------- ----------- ----------- ------------
Net (decrease) increase in cash and cash
equivalents .................................. (6,724,000) (20,534,000) (7,775,000) 64,781,000
Cash and cash equivalents at beginning of
period ...................................... 57,369,000 77,903,000 85,678,000 20,897,000
=========== =========== =========== ============
Cash and cash equivalents at end of period .. $ 50,645,000 $ 57,369,000 $ 77,903,000 $ 85,678,000
=========== =========== =========== ============
The accompanying notes to consolidated financial
statements are an integral part of these consolidated statements.
F-7
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
GB Holdings, Inc. ("Holdings") is a Delaware corporation and was a
wholly owned subsidiary of Pratt Casino Corporation ("PCC") through December 31,
1998. PCC, a Delaware corporation, was incorporated in September 1993 and was
wholly owned by PPI Corporation ("PPI"), a New Jersey corporation and a
wholly-owned subsidiary of Greate Bay Casino Corporation ("GBCC"). Effective
after December 31, 1998, PCC transferred 21% of the stock ownership in Holdings
to PBV, Inc. ("PBV"), a newly formed entity controlled by certain stockholders
of GBCC. As a result of a certain confirmed plan of reorganization of PCC and
others in October 1999, the remaining 79% stock interest of PCC in Holdings was
transferred to Greate Bay Holdings, LLC ("GBLLC"), whose sole member as a result
of the same reorganization was PPI. In February 1994, Holdings acquired Greate
Bay Hotel and Casino, Inc. ("GBHC"), a New Jersey corporation, through a capital
contribution by its then parent. GBHC's principal business activity is its
ownership of The Sands Hotel and Casino located in Atlantic City, New Jersey
("The Sands"). GB Property Funding Corp. ("GB Property Funding"), a Delaware
corporation and a wholly-owned subsidiary of Holdings, was incorporated in
September 1993 as a special purpose subsidiary of Holdings for the purpose of
borrowing funds for the benefit of GBHC. Holdings has no operating activities
and its only source of income is interest on cash equivalent investments.
Holding's only significant assets are its investment in GBHC and its cash and
cash equivalents of $31.8 million and $37.9 million as of December 31, 2002 and
2001, respectively.
The accompanying consolidated financial statements include the accounts
and operations of Holdings and its subsidiaries (Holdings, GBHC and GB Property
Funding, collectively, the "Company"). All significant intercompany balances and
transactions have been eliminated. Throughout this document, references to Notes
are referring to the Notes to Consolidated Financial Statements contained
herein.
The Sands is located in Atlantic City, New Jersey on approximately 6.1
acres of land one-half block from the Boardwalk at Brighton Park between Indiana
Avenue and Dr. Martin Luther King, Jr. Boulevard. The Sands facility currently
consists of a casino and simulcasting facility with approximately 79,000 square
feet of gaming space containing approximately 2,322 slot machines and
approximately 40 table games; a hotel with 637 rooms (including 57 suites); six
restaurants; one cocktail lounge; two private lounges for invited guests; an
800-seat cabaret theater; retail space; an adjacent nine-story office building
with approximately 77,000 square feet of office space for its executive,
financial and administrative personnel; the "People Mover", an elevated,
enclosed, one-way moving sidewalk connecting The Sands to the Boardwalk using
air rights granted by an easement from the City of Atlantic City and a garage
and surface parking for approximately 1,750 vehicles.
On January 5, 1998, the Company filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the
United States Bankruptcy Court for the District of New Jersey (the "Bankruptcy
Court"). On August 14, 2000, the Bankruptcy Court entered an order (the
"Confirmation Order") confirming the Modified Fifth Amended Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code Proposed by the Official
Committee of Unsecured Creditors and High River Limited Partnership and its
affiliates (the "Plan") for the Company. High River Limited Partnership ("High
River") is an entity controlled by Carl C. Icahn. On September 13, 2000, the New
Jersey Casino Control Commission (the "Commission") approved the Plan. On
September 29, 2000, the Plan became effective (the "Effective Date") (see Note
2). All material conditions precedent to the Plan becoming effective were
satisfied on or before September 29, 2000. Accordingly, the accompanying
consolidated financial statements have been prepared in accordance with
Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code" ("SOP 90-7"). In addition, as a result
of the Confirmation Order and the occurrence of the Effective Date, and in
accordance with SOP 90-7, the Company has adopted "fresh start reporting" in the
preparation of the accompanying consolidated financial statements. The Company's
emergence from Chapter 11 resulted in a new reporting entity with no retained
earnings or accumulated deficit as of September 30, 2000. As a result, the
consolidated financial statements for the periods subsequent to September 30,
2000 reflect the new basis of accounting and are not comparable to consolidated
financial statements presented prior to September 30, 2000. A black line has
been drawn on the accompanying consolidated financial statements to distinguish
between the pre-reorganization and post-reorganization entities.
A significant amount of The Sands' revenues are derived from patrons
living in northern New Jersey, southeastern Pennsylvania and metropolitan New
York City. Competition in the Atlantic City gaming market is intense and
management believes that this competition will continue or intensify in the
future, especially with the expected opening of a new gaming property in
Atlantic City in 2003.
F-8
(2) FINANCIAL REORGANIZATION
On the Effective Date, GB Property Funding's existing debt securities,
consisting of its 10 7/8% First Mortgage Notes due January 15, 2004 (the "Old
Notes") and all of Holdings' issued and outstanding shares of common stock owned
by PBV and GBLLC (the "Old Common Stock"), were cancelled. As of the Effective
Date, an aggregate of 10,000,000 shares of new common stock of Holdings (the
"New Common Stock") were issued and outstanding, and $110,000,000 of 11% First
Mortgage Notes due 2005 were issued by GB Property Funding (the "New Notes").
Holders of the Old Notes received a distribution of their pro rata shares of (i)
the New Notes and (ii) 5,375,000 shares of the New Common Stock (the "Stock
Distribution"). In addition, $65,000,000 in cash was obtained from affiliates of
the majority shareholder.
Pursuant to SOP 90-7, "fresh start reporting" has been reflected as of
September 30, 2000 in the accompanying consolidated financial statements
because: (i) the sum of the allowed claims, plus postpetition liabilities,
exceeded the reorganization value of the preconfirmation assets of the emerging
entity and (ii) Holdings experienced a change of control (as defined in SOP
90-7). SOP 90-7 requires under these circumstances the creation of a new
reporting entity and the recording of assets and liabilities at their fair
values. In support of the restructuring process, the Company retained an
independent third party to determine, among other things, the value of the
equity of Holdings. This independent third party set the value of the equity
between a range of $11 and $14 per share. The Bankruptcy Court, considering the
testimony of that third party and others offered at the confirmation hearing on
the Plan, accepted this range and used the mid-point of $12.50 per share for the
purpose of determining the value of the unsecured portion of the claim of the
holders of the Old Notes. For these reasons, Holdings has set the value of the
post confirmation assets of the reorganized entity based upon that value of the
equity and the New Notes and by the post petition liabilities assumed. The
resulting difference between the equity, New Notes and post petition liability
assumed and the liabilities subject to compromise and equity eliminated has been
allocated to long term assets based upon a pro rata determination of their fair
values, as required by SOP 90-7.
The discharge of debt and "fresh start reporting" have been reflected
in the accompanying September 30, 2000 consolidated financial statements. The
gain from discharge of debt has been regarded as an extraordinary item.
Assuming the reorganization had been effective January 1, 2000,
depreciation and amortization expense would have decreased an estimated
$1,100,000 and interest expense would have increased an estimated $9,008,000 for
the year ended December 31, 2000. On a pro forma basis, reorganization costs of
$2,773,000 and the extraordinary gain on pre-petition debt discharge of
$14,795,000 would not have been reported in 2000.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed in the preparation of the
accompanying consolidated financial statements are discussed below. The
consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America. 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 balance sheets, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The accompanying consolidated financial statements include the accounts
and operations of Holdings and its subsidiaries (Holdings, GBHC and GB Property
Funding, collectively, the "Company"). All significant intercompany balances and
transactions have been eliminated. Throughout this document, references to Notes
are referring to the Notes to Consolidated Financial Statements contained
herein.
F-9
CASINO REVENUES, PROMOTIONAL ALLOWANCES AND DEPARTMENTAL EXPENSES -
The Sands recognizes the net win from gaming activities (the difference
between gaming wins and losses) as casino revenues. Casino revenues are net of
accruals for anticipated payouts of progressive and certain other slot machine
jackpots. Such anticipated jackpots and payouts are included in gaming
liabilities on the accompanying consolidated balance sheets.
In 2001, the Emerging Issues Task Force (the "EITF") reached a
consensus on Issue No. 01-09: "Accounting for Consideration Given by a Vendor to
a Customer (Including a Reseller of the Vendor's Products)" ("EITF 01-09"). For
a sales incentive offered voluntarily by a vendor to its patrons, EITF 01-09
requires the vendor to recognize the cost of the sales incentive at the later of
the date at which the related revenue is recorded by the vendor, or the date at
which the sales incentive is offered. Application of EITF 01-09 is required in
annual or interim financial statements for periods beginning after December 15,
2001. EITF 01-09 requires, among other things, that cash or other consideration
provided to customers as part of a transaction is presumed to be a reduction in
revenue unless the vendor is able to establish both that it received or will
receive a separate identifiable benefit and the fair value of the benefit can be
reasonably estimated. The Company offers cash inducements to encourage
visitation and play at the casino and, as the Company was unable to meet the
criteria as discussed in EITF 01-09, these costs have been classified as
promotional allowances on the accompanying consolidated statements of
operations.
With the adoption of the new standards, the prior year periods
presented have been reclassified to conform to the new presentation. This
resulted in a $20.1 million, $5.1 million and $16.5 million increase in
promotional allowances (and a corresponding reduction in casino expenses) for
the year ended December 31, 2001, the three months ended December 31, 2000 and
the nine months ended September 30, 2000, respectively. Application of the
requirements of EITF 01-09 do not have an impact on previously reported
operating income or net income and have no impact on the previously reported
consolidated financial statements other than the reclassifications noted above.
The estimated value of rooms, food and beverage and other items that
were provided to customers without charge has been included in revenues and a
corresponding amount has been deducted as promotional allowances. The costs of
such complimentaries have been included in casino expenses on the accompanying
consolidated statements of operations. Costs of complimentaries allocated from
the rooms, food and beverage and other operating departments to the casino
department were as follows:
Post-reorganization Pre-reorganization
------------------------------------------------------------------ ----------------------
October 1, 2000 January 1, 2000
Year Ended Year Ended through December through September
December 31, 2002 December 31, 2001 31, 2000 30, 2000
------------------- ------------------- -------------------- ----------------------
Rooms .................. $ 8,194,000 $ 8,139,000 $ 1,630,000 $ 4,299,000
Food and Beverage ...... 19,846,000 26,409,000 6,867,000 18,745,000
Other .................. 2,223,000 4,614,000 602,000 3,172,000
------------------- ------------------- -------------------- ----------------------
$ 30,263,000 $ 39,162,000 $ 9,099,000 $ 26,216,000
=================== =================== ==================== ======================
CASH AND CASH EQUIVALENTS -
Cash and cash equivalents are generally comprised of cash and
investments with original maturities of three months or less, such as commercial
paper, certificates of deposit and fixed repurchase agreements.
ALLOWANCE FOR DOUBTFUL ACCOUNTS -
In its normal course of business The Sands incurs receivables arising
from credit provided to casino customers, hotel customers and accrued interest
receivable. The allowance for doubtful accounts adjusts these gross receivables
to management's estimate of their net realizable value. The provision for
doubtful accounts charged to
F-10
expense is determined by Management based on a periodic review of the receivable
portfolio. This provision is based on estimates, and actual losses may vary from
these estimates. The allowance for doubtful accounts is maintained at a level
that Management considers adequate to provide for possible future losses.
Provisions for doubtful accounts amounting to $1,586,000 and $4,991,000 for the
years ended December 31, 2002 and 2001, respectively, $1,423,000 for the period
October 1, 2000 through December 31, 2000 and $1,637,000 for the period January
1, 2000 through September 30, 2000 were recorded in Casino Expenses on the
accompanying consolidated statements of operations.
INVENTORIES -
Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market.
PROPERTY AND EQUIPMENT -
As of the Effective Date, property and equipment were restated pursuant
to SOP 90-7 (see Note 2) and are being depreciated utilizing the straight line
method over their remaining estimated useful lives.
Property and equipment purchased after the Effective Date have been
recorded at cost and are being depreciated utilizing the straight-line method
over their estimated useful lives as follows:
Buildings and improvements ............. 25-40 years
Operating equipment .................... 3-7 years
Interest costs related to property and equipment acquisitions are
capitalized during the acquisition period and are being amortized over the
useful lives of the related assets (see Note 11).
DEFERRED FINANCING COSTS -
The costs of issuing long-term debt, including all related
underwriting, legal, directors and accounting fees, were capitalized and are
being amortized over the term of the related debt issue. Deferred financing
costs of $180,000 were incurred in connection with GB Property Funding's
offering of $110,000,000 11% New Notes. During 2001, additional costs
associated with a Consent Solicitation by GB Property Funding to modify the
original indenture for the $110,000,000 New Notes were capitalized and are also
being amortized over the remaining term of the New Notes. Total Consent
Solicitation costs, including expenses, amounted to $2,083,000 in 2001 (see Note
4). For the years ended December 31, 2002 and 2001 and the three months ended
December 31, 2000, amortization of deferred financing costs were $555,000,
$174,000 and $10,000 respectively. There was no amortization of deferred
financing costs for the nine months ended September 30, 2000.
LONG-LIVED ASSETS -
In 2002, the Company adopted FASB Statement No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("FAS No. 144"), which
excludes from the definition of long-lived assets goodwill and other intangibles
that are not amortized in accordance with FAS No. 142. FAS No. 144 requires that
long-lived assets to be disposed of by sale be measured at the lower of carrying
amount or fair value less cost to sell, whether reported in continuing
operations or in discontinued operations. FAS No. 144 also expands the reporting
of discontinued operations to include components of an entity that have been or
will be disposed of rather than limiting such discontinuance to a segment of a
business. The adoption of FAS No. 144 did not have an impact on the Company's
consolidated financial statements.
The Company periodically reviews long-lived assets, for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Impairments are recognized when the expected
future undiscounted cash flows derived from such assets are less than their
carrying value. For such cases, losses are recognized for the difference between
the fair value and the carrying amount. Assets to be disposed of by sale or
abandonment, and where management has the current ability to remove such assets
from operations, are recorded at the lower of carrying amount or fair value less
cost of disposition. Depreciation for these
F-11
assets is suspended during the disposal period, which is generally less than one
year. Assumptions and estimates used in the determination of impairment losses,
such as future cash flows and disposition costs, may affect the carrying value
of long-lived assets and possible impairment expense in the Company's
consolidated financial statements.
As of September 30, 2000, assets were valued in accordance with SOP
90-7 (see Note 2). As a result of this and subsequent reviews and adjustment,
Management does not believe that any material impairment currently exists
related to its long-lived assets.
ACCRUED INSURANCE -
GBHC is self insured for a portion of its general liability,
certain health care and other liability exposures. A third party insures losses
over prescribed levels. Accrued insurance includes estimates of such accrued
liabilities based on an evaluation of the merits of individual claims and
historical claims experience. Accordingly, GBHC's ultimate liability may differ
from the amounts accrued.
INCOME TAXES -
Prior to 1997, Holdings was included in the consolidated federal income
tax return of Hollywood Casino Corporation ("HCC"). Holdings' operations were
included in GBCC's consolidated federal income tax returns for the years ended
December 31, 1998 and 1997, but GBCC agreed to allow Holdings to become
deconsolidated from the GBCC group effective after December 31, 1998. In
accordance therewith, HCC transferred 21% of the stock ownership in Holdings to
PBV, effecting the deconsolidation of Holdings from the GBCC group for federal
income tax purposes (the "Deconsolidation"). Accordingly, beginning in 1999,
Holdings' provision for federal income taxes is calculated and paid on a
consolidated basis with GB Property Funding and GBHC (see Note 5).
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted rates
expected to apply to taxable income in the years in which temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in the tax rates is recognized in income in the period
of the enactment date.
INCOME (LOSS) PER SHARE -
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS
128"), requires, among other things, the disclosure of basic and diluted
earnings per share for public companies. Since the capital structure of Holdings
is simple, in that no potentially dilutive securities were outstanding during
the periods presented, basic income (loss) per share is equal to diluted income
(loss) per share. Basic income (loss) per share is computed by dividing net
income (loss) by the weighted average number of common shares outstanding.
Additionally, FAS 128 requires among other things, the income (loss)
per share effect of extraordinary items and is computed by dividing the
extraordinary item by the weighted average number of common shares outstanding.
F-12
On a pro forma basis, for the period presented prior to the Effective
Date, the income per share would have been as follows:
Pre-reorganization
-------------------------
January 1, 2000 through
September 30, 2000
-------------------------
Basic/diluted income per common share:
Before extraordinary item .................... $ 1.07
Extraordinary item ........................... 1.48
Net income per share .............................. 2.55
=========================
Weighted average common shares outstanding ........ $ 10,000,000
=========================
NEW ACCOUNTING PRONOUNCEMENTS -
On January 1, 2003, the Company adopted FAS No. 143, "Asset Retirement
Obligations" ("SFAS No. 143"), which provides the accounting requirements for
retirement obligations associated with tangible long-lived assets. This
statement requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. The adoption of FAS
No. 143 is not expected to have a material impact on the Company's consolidated
financial statements.
In June 2002, FASB issued FAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("FAS 146"). FAS No. 146 nullifies Emerging
Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)" ("EITF 94-3"), and requires that a
liability for a cost associated with an exit or disposal activity be recognized
and measured initially at fair value in the period in which the liability is
incurred. Under EITF 94-3, a liability for an exit cost was required to be
recognized at the date of an entity's commitment to an exit plan. The adoption
of SFAS No. 146 is expected to result in delayed recognition for certain types
of costs as compared to the provisions of EITF 94-3. FAS No. 146 is effective
for new exit or disposal activities that are initiated after December 31, 2002,
and does not affect amounts currently reported in the Company's consolidated
financial statements. FAS No. 146 will affect the types and timing of costs
included in future restructuring programs, if any.
On January 1, 2003, the Company adopted FAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" ("FAS 148"), which
provides alternative methods of transition for companies that choose to switch
to the fair value method of accounting for stock options. SFAS No. 148 also
makes changes in the disclosure requirements for stock-based compensation,
regardless of which method of accounting is chosen. The adoption of SFAS No. 148
is not expected to have any impact on the Company's consolidated financial
statements.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("Interpretation No. 45"). Interpretation
No. 45 requires the disclosure of certain guarantees existing at December 31,
2002. The Company had no guarantees meeting the requirements of Interpretation
No. 45 at December 31, 2002. In addition, Interpretation No. 45 requires the
recognition of a liability for the fair value of the obligation of qualifying
guarantee activities that are initiated or modified after December 31, 2002.
Accordingly, the Company will apply the recognition provisions of Interpretation
No. 45 prospectively to applicable guarantee activities initiated after December
31, 2002.
F-13
RECLASSIFICATIONS -
Certain reclassifications have been made to prior years' consolidated
financial statements to conform to the current year consolidated financial
statement presentations.
(4) LONG-TERM DEBT
LONG-TERM DEBT IS COMPRISED OF THE FOLLOWING:
December 31, 2002 December 31, 2001
------------------------- -------------------------
11% Notes, due September 29, 2005 (a) ... $ 110,000,000 $ 110,000,000
Other ................................... - 371,000
------------------------- -------------------------
Total indebtedness ................. 110,000,000 110,371,000
Less - current maturities ............... - (19,000)
------------------------- -------------------------
Total long-term debt ............... $ 110,000,000 $ 110,352,000
========================= =========================
(a) As a result of the Confirmation Order and the occurrence of the Effective
Date and under the terms of the Plan, the Old Notes were cancelled and
replaced with $110,000,000 of 11% notes due 2005 ("New Notes"). Interest
on the New Notes is payable on March 29 and September 29, beginning March
29, 2001. The outstanding principal is due on September 29, 2005. The New
Notes are unconditionally guaranteed, on a joint and several basis, by
both Holdings and GBHC, and are secured by substantially all of the
assets, as of the Effective Date, other than cash and gaming receivables
of Holdings and GBHC.
The original indenture for the New Notes contained various provisions,
which, among other things, restricted the ability of Holdings and GBHC
to incur certain senior secured indebtedness beyond certain limitations,
and contained certain other limitations on the ability to merge,
consolidate, or sell substantially all of their assets, to make certain
restricted payments, to incur certain additional senior liens, and to
enter into certain sale-leaseback transactions.
In a Consent Solicitation Statement and Consent Form dated September 14,
2001, GB Property Funding sought the consent of holders of the New Notes
to make certain changes to the original indenture (the "Modifications").
The Modifications included, but were not limited to, a deletion of, or
changes to, certain provisions the result of which would be (i) to permit
Holdings and its subsidiaries to incur any additional indebtedness
without restriction, to issue preferred stock without restriction, to
make distributions in respect of preferred stock and to prepay
indebtedness without restriction, to incur liens without restriction and
to enter into sale-leaseback transactions without restriction, (ii) to
add additional exclusions to the definition of "asset sales" to exclude
from the restrictions on "asset sales" sale-leaseback transactions,
conveyances or contributions to any entity in which Holdings or its
subsidiaries has or obtains equity or debt interests, and transactions
(including the granting of liens) made in accordance with another
provision of the Modifications relating to collateral release and
subordination or any documents entered into in connection with an
"approved project" (a new definition included as part of the
Modifications which includes, if approved by the Board of Directors of
Holdings, incurrence of indebtedness or the transfer of assets to any
person if Holdings or any of its subsidiaries has or obtain debt or
equity interests in the transferee or any similar, related or associated
event, transaction or activity) in which a release or subordination of
collateral has occurred including, without limitation, any sale or other
disposition resulting from any default or foreclosure, (iii) to exclude
from the operation of covenants related to certain losses to collateral,
any assets and any proceeds thereof, which have been subject to the
release or subordination provisions of the Modifications, (iv) to permit
the sale or other conveyances of Casino Reinvestment Development
Authority investments in accordance with the terms of a permitted
security interest whether or not such sale was made at fair value, (v) to
exclude from the operation of covenants related to the deposit into a
collateral account of certain proceeds of "asset sales" or losses to
collateral any assets and any proceeds thereof, which have been subject
to the release or subordination provisions of the Modifications, (vi) to
add new provisions authorizing the release or subordination of the
collateral securing the New Notes in connection with, in anticipation of,
as a result of, or in relation to, an
F-14
"approved project", and (vii) various provisions conforming the text of
the original indenture to the intent of the preceding summary of the
Modifications.
Holders representing approximately 98% in principal amount of the New
Notes provided consents to the Modifications. Under the terms of the
original indenture, the consent of holders representing a majority in
principal amount of New Notes was a necessary condition to the
Modifications. Accordingly, GB Property Funding, as issuer, and Holdings
and GBHC, as guarantors, and Wells Fargo Bank Minnesota, National
Association, as trustee, entered into an Amended and Restated Indenture
dated as of October 12, 2001, containing the Modifications to the
original indenture described in the Consent Solicitation Statement (the
"Amended and Restated Indenture"). In accordance with the terms of the
Consent Solicitation Statement, holders of New Notes, who consented to
the Modifications and who did not revoke their consents ("Consenting
Noteholders"), were entitled to $17.50 per $1,000 in principal amount of
New Notes, subject to certain conditions including entry into the Amended
and Restated Indenture. Upon entry into the Amended and Restated
Indenture on October 12, 2001, the Company transferred approximately $1.9
million to the Trustee for distribution to Consenting Noteholders.
As of December 31, 2002 the only scheduled payment of long-term debt is
the $110 million for New Notes, due September 29, 2005.
Interest paid amounted to $12,128,000 and $12,156,000 for the years
ended December 31, 2002 and 2001, respectively. Interest paid amounted to
$18,000 for the three months ended December 31, 2000 and $57,000 for the nine
months ended September 30, 2000. At December 31, 2002 and 2001, accrued interest
on the New Notes was $3,092,000 and $3,092,000, respectively.
(5) INCOME TAXES
The components of the (provision) benefit for income taxes are as
follows:
Post-reorganization Pre-reorganization
---------------------------------------------------------------- --------------------
October 1, 2000 January 1, 2000
Year Ended Year Ended through December through September
December 31, 2002 December 31, 2001 31, 2000 30, 2000
------------------- ------------------ ------------------- --------------------
Federal income tax
(provision) benefit ........ $ $ $ $
Current ............... - (292,000) - -
Deferred .............. - 292,000 - -
State income tax
(provision) benefit
Current ............... (784,000) (55,000) - -
Deferred .............. - - - -
------------------- ------------------ ------------------- --------------------
$ (784,000) $ (55,000) $ - $ -
=================== ================== =================== ====================
F-15
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes, and the amounts used for income tax purposes. The major
components of deferred tax liabilities and assets as of December 31, 2002 were
as follows:
2002
-------------------
Deferred tax assets:
Bad debt reserve ................................ $ 5,137,000
Deferred financing costs ........................ 1,053,000
Group insurance ................................. 936,000
Accrued vacation ................................ 732,000
Action cash awards accrual ...................... 499,000
Jackpot accrual ................................. 337,000
Medical reserve ................................. 109,000
Other ........................................... 101,000
CRDA ............................................ 5,512,000
Federal and state net operating loss carryforward 8,163,000
Grantors trust income ........................... 3,570,000
Credit carryforwards ............................ 2,421,000
Other ........................................... 229,000
-------------------
Total deferred tax assets ................... 28,799,000
Deferred tax liabilities:
Noncurrent:
Depreciation of plant and equipment ............. (18,466,000)
Chips and tokens ................................ (76,000)
-------------------
Total deferred tax liabilities .............. (18,542,000)
-------------------
Less valuation allowance .................... (10,257,000)
-------------------
Net deferred tax assets (liabilities) ....... $ -
===================
Federal net operating loss carryforwards were generated in 2002 and
will expire in the year 2022. The enactment of the Business Tax Reform Act
("BTR") on July 2, 2002 deferred New Jersey net operating losses ("State NOL's")
set to expire in 2003, for a two year period. The general business credit
carryforwards expire in 2003 through 2022.
Financial Accounting Standards No. 109 ("FAS 109") requires that the
tax benefit of NOL's and deferred tax assets resulting from temporary
differences be recorded as an asset and, to the extent that management can not
assess that the utilization of all or a portion of such NOL's and deferred tax
assets is more likely than not, requires the recording of a valuation allowance.
Due to various uncertainties, management is unable to determine that realization
of the Company's deferred tax asset is more likely than not and, thus, has
provided a valuation allowance for the entire amount at December 31, 2002 and
2001.
F-16
The provision for income taxes differs from the amount computed at the
federal statutory rate as a result of the following:
Year Ended
December 31, 2002
-------------------------
Federal statutory rate .................. 35.0%
State taxes net of federal benefit ...... 1.6%
Permanent differences ................... (0.9)%
Tax credits ............................. 13.2%
Deferred tax valuation allowance ........ (57.8)%
Other (3.1)%
-------------------------
(12.0)%
=========================
The Internal Revenue Service has completed the examination of the
consolidated federal income tax returns of HCC for the years 1995 and 1996 and
the consolidated federal income tax returns for GBCC for the years 1997 and 1998
in which the Company was included (the "Audit"). The Company has fulfilled all
obligations pertaining to its share of adjustments stemming from the audit and
accounted for all impacts on its Federal NOL's and credit carryforwards.
The State of New Jersey is examining the state corporate business tax
return of GBHC for the years 1996, 1997 and 1998. It is management's position
that any claims by the State of New Jersey against GBHC attributable to anytime
prior to January 5, 1998 is barred by applicable provisions of the Bankruptcy
Code. Management is presently unable to estimate the impact of New Jersey's tax
audit on the financial position or results of operations of GBHC.
As a result of the Confirmation Order and the occurrence of the
Effective Date and under the terms of the Plan, the Company's outstanding debt
was discharged (see Note 2). Pursuant to the Internal Revenue Code, debt that is
cancelled or discharged under the Bankruptcy Code does not generate taxable
income in the current period to the debtor. Instead, certain tax attributes
otherwise available to the debtor are reduced. This attribute reduction is
effective for tax purposes beginning January 1, 2001. Approximately $14.9
million of the Company's tax attributes relating to the tax bases of noncurrent
assets were reduced as of January 1, 2001. Holdings also had a change of
ownership as defined under Internal Revenue Code Section 382 upon the effective
date of the plan. Management currently estimates there will be no significant
limitations on the ability of the Company to use its tax credit carryforwards on
a post confirmation basis as a result of this change of ownership.
The State income tax provision of $784,000 for the year ended December
31, 2002 includes $774,000 of alternative minimum assessment for GBHC and
$10,000 of corporate business tax for GBH.
(6) TRANSACTIONS WITH RELATED PARTIES
GBHC's rights to the trade name "Sands" (the "Trade Name") were derived
from a license agreement between GBCC and an unaffiliated third party. Amounts
payable by the Sands for these rights were equal to the amounts paid to the
unaffiliated third party. As a result of the Confirmation Order and the
occurrence of the Effective Date and under the terms of the Plan, GBHC was
assigned by High River the rights under a certain agreement with the owner of
the Trade Name to use the Trade Name as of the Effective Date. High River
received no payments for its assignment of these rights. Payment is made
directly to the owner of the Trade Name. The calculation of the license fee is
the same as under the previous agreement. For the years ended December 31, 2002
and 2001, the license fee amounted to $272,000 and $268,000, respectively. Such
charges amounted to $66,000 for the three months ended December 31, 2000 and
$215,000 during the nine months ended September 30, 2000.
During the year ended December 31, 2002, GBHC borrowed $6.5 million
from Holdings. This borrowing is eliminated in the consolidation of, and has no
impact on, the accompanying consolidated financial statements.
F-17
(7) NEW JERSEY REGULATIONS AND OBLIGATORY INVESTMENTS
The Sands conducts gaming operations in Atlantic City, New Jersey and
operates a hotel and several restaurants, as well as related support facilities.
The operation of an Atlantic City casino/hotel is subject to significant
regulatory control. Under the New Jersey Casino Control Act (the "Casino Act"),
GBHC was required to obtain and is required to periodically renew its operating
license. A casino license is not transferable and, after the initial licensing
and two one-year renewal periods, is issued for a term of up to four years. The
plenary license issued to the Sands was renewed by the Commission in September
2000 and extended through September 2004. The Commission may reopen licensing
hearings at any time. If it were determined that gaming laws were violated by a
licensee, the gaming license could be conditioned, suspended or revoked. In
addition, the licensee and other persons involved could be subject to
substantial fines.
The Casino Act requires casino licensees to pay an investment
alternative tax of 2.5% of Gross Revenue (the "2.5% Tax") or, in lieu thereof,
to make quarterly deposits of 1.25% of quarterly Gross Revenue with the CRDA
(the "Deposits"). The Deposits are then used to purchase bonds at below-market
interest rates from the CRDA or to make qualified investments approved by the
CRDA. The CRDA administers the statutorily mandated investments made by casino
licensees and is required to expend the monies received by it for eligible
projects as defined in the Casino Act. The Sands has elected to make the
Deposits with the CRDA rather than pay the 2.5% Tax.
As of December 31, 2002 and 2001, the Sands had purchased bonds
totaling $6,946,000 and $6,980,000, respectively. In addition, the Sands had
remaining funds on deposit and held in escrow by the CRDA at December 31, 2002
and 2001, of $13,151,000 and $11,612,000, respectively. The bonds purchased and
the amounts on deposit and held in escrow are collectively referred to as
"obligatory investments" on the accompanying consolidated financial statements.
Obligatory investments at December 31, 2002 and 2001, are net of
accumulated valuation allowances of $10,028,000 and $9,290,000, respectively,
based upon the estimated realizable values of the investments. Provisions for
valuation allowances for the years ended December 31, 2002 and 2001 amounted to
$1,521,000 and $1,341,000, respectively. Provisions for valuation allowances for
the three months ended December 31, 2000 and the nine months ended September 30,
2000 amounted to $243,000 and $1,044,000, respectively.
The Sands has, from time to time, contributed certain amounts held in
escrow by the CRDA to fund CRDA sponsored projects. During 2002, the Sands
contributed $925,000 of its escrowed funds to CRDA sponsored projects and
received $116,000 in a cash refund. In 2001, the Sands contributed $322,000 of
its escrowed funds to CRDA sponsored projects and received $80,000 in a cash
refund and $84,000 in waivers of certain future Deposit obligations. During the
three months ended December 31, 2000, the Sands contributed $3,310,000 of its
escrowed funds to a CRDA sponsored project and received a cash refund of
$828,000 in consideration for the contribution. Prior to this, the CRDA had
granted the Sands waivers of certain of its future Deposit obligations in
consideration of similar contributions. The Sands had made such contributions of
Deposits during the nine months ended September 30, 2000, totaling $142,000,
resulting in waivers granted by the CRDA totaling $72,000. Other assets
aggregating $811,000 and $1,010,000, respectively, have been recognized on the
accompanying consolidated balance sheets at December 31, 2002 and 2001, and are
being amortized over a period of ten years commencing with the completion of the
projects. Amortization of other assets totaled $199,000, $202,000, $51,000 and
$151,000 for the years ended December 31, 2002 and 2001, the three months ended
December 31, 2000 and the nine months ended September 30, 2000, respectively.
(8) LEGAL PROCEEDINGS
The Company filed tax appeals with the New Jersey Tax Court (the "NJ
Tax Court") challenging the amount of its real property assessment for calendar
years 1996 through 2001, inclusive, and filed an appeal for calendar year 2002
with the Atlantic County Tax Board ("AC Tax Board"). The City of Atlantic City
also appealed the amount of assessments for the years 1996 through 2001,
inclusive, and filed a cross-petition with the Atlantic County Tax Board for
calendar year 2002. The AC Tax Board declined to hear the appeal and therefore
the appeal and cross-petition for calendar year 2002 is now pending before the
NJ Tax Court. The Sands has also filed a tax appeal for calendar year 2003 with
the New Jersey Tax Court and it is expected that the City of Atlantic City will
file a counterclaim.
F-18
The Company discovered certain failures relating to currency
transaction reporting and self-reported the situation to the applicable
regulatory agencies. The Company conducted an internal examination of the matter
and the New Jersey Division of Gaming Enforcement conducted a separate review.
The Company has revised internal control processes and taken other measures to
address the situation. The Company may be subjected to regulatory sanctions,
which may include cash penalties. However, the potential cash penalties cannot
be estimated at this time.
The Company is a party in various legal proceedings with respect to the
conduct of casino and hotel operations and has received employment related
claims. Although a possible range of losses cannot be estimated, in the opinion
of management, based upon the advice of counsel, the Company does not expect
settlement or resolution of these proceedings or claims to have a material
adverse impact upon the consolidated financial position or results of operations
of the Company, but the outcome of litigation and the resolution of claims is
subject to uncertainties and no assurances can be given. The accompanying
consolidated financial statements do not include any adjustments that might
result from these uncertainties.
On February 26, 2003, the Sands received a letter from counsel for Mr.
Frederick H. Kraus, Executive Vice President, General Counsel and Secretary,
indicating that he had been retained to represent Mr. Kraus "in regards to a
constructive discharge, breach of contract, severance pay" and other claims.
This matter has been referred to legal counsel for evaluation. Management does
not believe this matter will have a material impact, if any, on the financial
position or results of operations of the Company.
(9) ACQUISITION OF CLARIDGE ADMINISTRATION BUILDING
In April 2000, GBHC entered into an agreement with the entities
controlling the Claridge Hotel and Casino (the "Claridge") to acquire the
Claridge Administration Building. The purchase price was $3.5 million,
consisting of $1.5 million in cash at closing and $2.0 million consideration
tendered through the elimination for 40 months of a $50,000 monthly license fee
paid by the Claridge to GBHC, under an agreement between the Claridge and GBHC
governing the development and operation of the "People Mover" leading from the
boardwalk to the Sands and the Claridge. The present value of the $2.0 million
consideration has been recorded in other accrued and other noncurrent
liabilities sections of the balance sheet. GBHC reduces and adjusts the
respective liabilities as it records the People Mover license fee in other
income and interest expense at an imputed rate of 10%. At December 31, 2002,
$339,000 remained in other accrued liabilities related to the Claridge
Administration Building acquisition.
(10) EMPLOYEE RETIREMENT SAVINGS PLAN
Effective January 1, 1999, GBHC administers and participates in
the Sands Retirement Plan, a qualified defined contribution plan for the benefit
of all of GBHC's employees, who satisfy certain eligibility requirements.
The Sands Retirement Plan is qualified under the requirements of
Section 401(k) of the Internal Revenue Code allowing participating employees to
benefit from the tax deferral opportunities provided therein. All employees of
GBHC, who have completed one year of service, as defined, and who have attained
the age of 21, are eligible to participate in the Savings Plan.
The Sands Retirement Plan provides for a matching contribution by GBHC
based upon certain criteria, including levels of participation by GBHC's
employees. GBHC incurred matching contributions totaling $575,000, $700,000,
$192,000 and $561,000, for the years ended December 31, 2002 and 2001, the three
months ended December 31, 2000 and the nine months ended September 30, 2000,
respectively.
F-19
(11) SUPPLEMENTAL CASH FLOW INFORMATION
Interest Paid, Interest Capitalized and Income Taxes paid during the
periods presented are set forth below:
POST-REORGANIZATION PRE-REORGANIZATION
-------------------------------------------------- ------------------
YEAR ENDED YEAR ENDED OCTOBER 1, 2000 JANUARY 1, 2000
DECEMBER 31, DECEMBER 31, THROUGH THROUGH
2002 2001 DECEMBER 31, 2000 SEPTEMBER 30, 2000
------------- ------------ ----------------- ------------------
Interest paid .................. $ 12,128,000 $ 12,156,000 $ 18,000 $ 57,000
============== ============== ============== =================
Interest Capitalized ........... $ 766,000 $ 1,207,000 $ - $ -
============== ============== ============== =================
Interest Taxes paid ............ $ 1,764,000 $ 205,000 $ - $ 932,000
============== ============== ============== =================
(12) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Disclosure of the estimated fair value of financial instruments is
required under FAS No 107, "Disclosure About Fair Value of Financial
Instruments." The fair value estimates are made at discrete points in time based
on relevant market information and information about the financial instruments.
These estimates may be subjective in nature and involve uncertainties and
significant judgment and therefore cannot be determined with precision.
Cash and cash equivalents are valued at the carrying amount. Such
amount approximates the fair value of cash equivalents because of the short
maturity of these instruments.
Obligatory investments are valued at a carrying amount which includes
an allowance reflecting the below market interest rate associated with such
investments.
Other debt obligations with a short remaining maturity are valued at
the carrying amount.
New Notes are valued at the market closing price on December 31, 2002
and 2001, respectively.
F-20
The estimated carrying amounts and fair values of Holdings' financial
instruments at December 31, 2002 and 2001 are as follows:
DECEMBER 31, 2002 DECEMBER 31, 2001
-------------------------- -------------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- --------- --------------
Financial Assets
Cash and cash equivalents ................ $ 50,645,000 $ 50,645,000 $ 57,369,000 $ 57,369,000
Obligatory investments, net .............. 10,069,000 10,069,000 9,302,000 9,302,000
Financial Liabilities:
Interest payable ......................... 3,092,000 3,092,000 3,092,000 3,092,000
New Notes ................................ 110,000,000 88,000,000 110,000,000 90,750,000
Other Notes Payable ...................... - - 371,000 371,000
(13) OPERATING LEASES
The Company leases certain equipment and property. Total lease
expense was $2.5 million for the year ended December 31, 2002. The following
table sets forth the future minimum rental commitments for operating leases:
2003 ........ $ 2,136,000
2004 ........ 1,986,000
2005 ........ 1,966,000
2006 ........ 1,998,000
2007 ........ 1,998,000
Thereafter .. $10,430,000
-----------
Total ...... $ 20,514,000
============
(14) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTER
----------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
-------------- ---------- --------- ----------
YEAR ENDED DECEMBER 31, 2002
Net revenues ............................ $ 53,244,000 $ 49,582,000 $ 49,797,000 $ 40,850,000
================ ================ ================ ================
Income (loss) from operations ........... $ 5,958,000 $ 867,000 $ 1,938,000 $ 4,727,000
================ ================ ================ ================
Net Income/(loss) ....................... $ 2,258,000 $ (1,218,000) $ (906,000) $ (7,455,000)
================ ================ ================ ================
Net income (loss) per share ............. $ 0.23 $ (0.12) $ (0.09) $ (0.75)
================ ================ ================ ================
YEAR ENDED DECEMBER 31, 2001
Net revenue (A) ......................... $ 48,601,000 $ 56,888,000 $ 60,985,000 $ 49,275,000
================ ================ ================ ================
Income (loss) from operations ........... $ (2,509,000) $ 3,913,000 $ 7,187,000 $ (1,762,000)
================ ================ ================ ================
Net income/(loss) ....................... $ (3,056,000) $ 837,000 $ 3,086,000 $ (2,701,000)
================ ================ ================ ================
Net income (loss) per share ............. $ (0.31) $ 0.08 $ 0.31 $ (0.27)
================ ================ ================ ================
(A) Restated for EIIF 01-09 to conform to 2002 presentation.
F-21
INDEX TO FINANCIAL STATEMENT SCHEDULE
GB HOLDINGS, INC. AND SUBSIDIARIES
- Report of Independent Public Accountants
- Schedule II; Valuation and Qualifying Accounts
F-22
INFORMATION REGARDING PREDECESSOR INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
THE FOLLOWING REPORT IS A COPY OF A PREVIOUSLY ISSUED REPORT BY ARTHUR ANDERSEN
LLP ("ANDERSEN"). THE REPORT HAS NOT BEEN REISSUED BY ANDERSEN NOR HAS ANDERSEN
CONSENTED TO ITS INCLUSION IN THIS ANNUAL REPORT ON FORM 10-K.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of GB Holdings, Inc.:
We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements of GB Holdings, Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon dated
March 8, 2002. Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed in the index to
financial statement schedule is the responsibility of Atlantic's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 8, 2002
F-23
SCHEDULE II
GB HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
ADDITIONS
--------------------------------------------------------------------
AMOUNTS
BALANCE OF CHARGED TO BALANCE
BEGINNING COSTS AND AT END
OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
------------ ------------ -------------- -------------
POST-REORGANIZATION
YEAR ENDED DECEMBER 31, 2002:
Allowance for doubtful
accounts receivable .................. $ 14,406,000 $ 1,586,000 $ (4,691,000) (1) $ 11,301,000
Allowance for obligatory
investments .......................... 9,290,000 1,521,000 (783,000) (2) 10,028,000
------------ ------------ ------------ ------------
$ 23,696,000 $ 3,107,000 $ (5,474,000) $ 21,329,000
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 2001:
Allowance for doubtful
accounts receivable .................. $ 11,408,000 $ 4,991,000 $ (1,993,000) (1) $ 14,406,000
Allowance for obligatory
investments .......................... 8,418,000 1,341,000 (469,000) (2) 9,290,000
------------ ------------ ------------ ------------
$ 19,826,000 $ 6,332,000 $ (2,462,000) $ 23,696,000
============ ============ ============ ============
October 1, 2000 through December 31, 2000:
Allowance for doubtful
accounts receivable .................. $ 10,366,000 $ 1,423,000 $ (381,000) (1) $ 11,408,000
Allowance for obligatory
investments .......................... 9,806,000 243,000 (1,609,000) (2) 8,418,000
------------ ------------ ------------ ------------
$ 20,172,000 $ 1,666,000 $ (1,990,000) $ 19,826,000
============ ============ ============ ============
POST-REORGANIZATION
January 1, 2000 through September 30, 2000:
Allowance for doubtful
accounts receivable .................. $ 11,413,000 $ 1,636,000 $ (2,683,000) (1) $ 10,366,000
Allowance on
affiliate receivables ................ 11,522,000 624,000 (12,146,000) (3) -
Allowance for obligatory
Investments .......................... 9,122,000 1,044,000 (360,000) (2) 9,806,000
------------ ------------ ------------ ------------
$ 32,057,000 $ 3,304,000 $ (15,189,000) $ 20,172,000
============ ============ ============ ============
- -----------------------------
(1) Represents net write-offs of uncollectible accounts.
(2) Represents write-offs of obligatory investments in connection with the
contribution of certain obligatory investments to CRDA approved
projects.
(3) Represents write-off of affiliated receivables.
F-24
GB HOLDINGS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS FOR THE FISCAL QUARTER ENDED JUNE 30, 2003
F-25
GB HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
JUNE 30, DECEMBER 31,
2003 2002
------------ --------------
Current Assets:
Cash and cash equivalents .......................................... $ 46,502,000 $ 50,645,000
Accounts receivable, net of allowances
of $8,833,000 and $11,301,000, respectively ...................... 4,637,000 4,976,000
Inventories ........................................................ 2,031,000 1,857,000
Income tax deposits ................................................ 1,363,000 1,359,000
Prepaid expenses and other current assets .......................... 2,705,000 3,067,000
------------ ------------
Total current assets ........................................... 57,238,000 61,904,000
------------ ------------
Property and Equipment:
Land ............................................................... 54,344,000 54,344,000
Buildings and improvements ......................................... 92,132,000 91,657,000
Equipment .......................................................... 49,925,000 46,119,000
Construction in progress ........................................... 5,760,000 3,597,000
------------ ------------
202,161,000 195,717,000
Less - accumulated depreciation and amortization ................... (32,687,000) (26,095,000)
------------ ------------
Property and equipment, net ........................................ 169,474,000 169,622,000
------------ ------------
Other Assets:
Obligatory investments, net of allowances of $10,511,000 and
$10,028,000, respectively ........................................ 10,601,000 10,069,000
Other assets ....................................................... 2,747,000 3,117,000
------------ ------------
Total other assets ............................................. 13,348,000 13,186,000
------------ ------------
$ 240,060,000 $ 244,712,000
============ ============
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated financial statements.
F-26
GB HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
JUNE 30, DECEMBER 31,
2003 2002
------------ ----------------
Current Liabilities:
Accounts payable ................................................ $ 5,685,000 $ 5,598,000
Accrued liabilities -
Salaries and wages .......................................... 3,847,000 3,717,000
Interest .................................................... 3,092,000 3,092,000
Gaming obligations .......................................... 2,618,000 3,752,000
Self-insurance .............................................. 2,193,000 1,805,000
Other ....................................................... 4,599,000 3,955,000
------------ ------------
Total current liabilities ................................... 22,034,000 21,919,000
------------ ------------
Long-Term Debt, net of current maturities ............................ 110,000,000 110,000,000
------------ ------------
Other Noncurrent Liabilities ......................................... 3,586,000 3,445,000
------------ ------------
Commitments and Contingencies
Shareholder's Equity:
Preferred stock, $.01 par value per share;
20,000,000 shares authorized; 0 shares outstanding ............ - -
Common Stock, $.01 par value per share;
20,000,000 shares authorized;
10,000,000 shares issued and outstanding ...................... 100,000 100,000
Additional paid-in capital ...................................... 124,900,000 124,900,000
Accumulated deficit ............................................. (20,560,000) (15,652,000)
------------ ------------
Total shareholder's equity .................................. 104,440,000 109,348,000
------------ ------------
..................................................................... $ 240,060,000 $ 244,712,000
============ ============
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated financial statements.
F-27
GB HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
SIX MONTHS
ENDED JUNE 30,
--------------------------------------
2003 2002
------------ -------------
Revenues:
Casino ............................................................ $ 93,286,000 $ 107,524,000
Rooms ............................................................. 5,415,000 5,795,000
Food and beverage ................................................. 10,175,000 12,217,000
Other ............................................................. 1,963,000 1,978,000
------------ ------------
110,839,000 127,514,000
Less - promotional allowances ..................................... (25,008,000) (24,688,000)
------------ ------------
Net revenues .................................................. 85,831,000 102,826,000
------------ ------------
Expenses:
Casino ............................................................ 64,958,000 72,123,000
Rooms ............................................................. 1,030,000 2,120,000
Food and beverage ................................................. 4,481,000 5,312,000
Other ............................................................. 1,388,000 1,408,000
General and administrative ........................................ 5,261,000 6,944,000
Depreciation and amortization, including provision for
obligatory investments ........................................ 7,678,000 6,865,000
Loss on impairment of fixed assets - 1,282,000
Loss (gain) on disposal of assets ................................. 3,000 (52,000)
------------ ------------
Total expenses ................................................ 84,799,000 96,002,000
------------ ------------
Income from operations ................................................. 1,032,000 6,824,000
Non-operating income (expense):
Interest income ................................................... 361,000 530,000
Interest expense .................................................. (5,958,000) (5,682,000)
------------ ------------
Total non-operating expense, net .................................. (5,597,000) (5,152,000)
------------ ------------
Income (loss) before income taxes ...................................... (4,565,000) 1,672,000
Income tax provision .............................................. (343,000) (632,000)
------------ ------------
Net income ............................................................. $ (4,908,000) $ 1,040,000
============ ============
Basic/diluted income (loss) per common share ........................... $ (0.49) $ 0.10
============ ============
Weighted average common shares outstanding ............................. 10,000,000 10,000,000
============ ============
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated financial statements.
F-28
GB HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS
ENDED JUNE 30,
--------------------------------------
2003 2002
----------- -----------
OPERATING ACTIVITIES
Net income (loss) .................................................. $ (4,908,000) $ 1,040,000
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization, including provision for
obligatory investments ......................................... 7,678,000 6,865,000
Loss on impairment of fixed assets ............................... - 1,282,000
Loss (gain) on disposal of assets ................................ 3,000 (52,000)
Provision for doubtful accounts .................................. 688,000 912,000
(Increase) decrease in income tax deposits ....................... (4,000) 318,000
(Decrease) increase in accounts receivable ....................... (349,000) 1,470,000
Increase (decrease) in accounts payable and accrued
liabilities .................................................... 63,000 (1,634,000)
Decrease (increase) in other current assets ...................... 182,000 (1,481,000)
Decrease in other noncurrent assets and liabilities .............. 176,000 131,000
------------ ------------
Net cash provided by operating activities ........................ 3,529,000 8,851,000
------------ ------------
INVESTING ACTIVITIES:
Purchase of property and equipment ................................. (6,576,000) (9,696,000)
Proceeds from disposition of assets ................................ 2,000 52,000
Purchase of obligatory investments ................................. (1,098,000) (1,281,000)
------------ ------------
Net cash used in investing activities ............................ (7,672,000) (10,925,000)
------------ ------------
FINANCING ACTIVITIES:
Repayments of long-term debt ....................................... - (10,000)
------------ ------------
Net cash used in financing activities ............................ - (10,000)
------------ ------------
Net decrease in cash and cash equivalents ........................ (4,143,000) (2,084,000)
Cash and cash equivalents at beginning of period ............... 50,645,000 57,369,000
------------ ------------
Cash and cash equivalents at end of period ..................... $ 46,502,000 $ 55,285,000
============ ============
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated financial statements.
F-29
(1) ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
GB Holdings, Inc. and subsidiaries ("Holdings" or the "Company"). All
significant intercompany transactions and balances have been eliminated in
consolidation. In management's opinion, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the condensed
consolidated financial position as of June 30, 2003 and the condensed
consolidated results of operations for the six months ended June 30, 2003 and
2002 have been made. The results set forth in the condensed consolidated
statement of operations for the six months ended June 30, 2003 are not
necessarily indicative of the results to be expected for the full year.
The condensed consolidated financial statements were prepared following
the requirements of the Securities and Exchange Commission (SEC) for interim
reporting. As permitted under those rules, certain footnotes or other financial
information that are normally required by GAAP (accounting principles generally
accepted in the United States of America) can be condensed or omitted.
The Company is responsible for the unaudited financial statements
included in this document. As these are condensed financial statements, they
should be read in conjunction with the audited consolidated financial statements
and notes included in the Company's Form 10-K.
(2) INCOME TAXES
The components of the provision for income taxes are as follows:
Six Months Ending June 30,
-------------------------------------------------------
2003 2002
------------------------- -------------------------
Federal income tax provision:
Current ......................... $ - $ (632,000)
Deferred ........................ - -
State income tax provision:
Current ......................... (343,000) -
Deferred ........................ - -
------------------------- -------------------------
$ (343,000) $ (632,000)
========================= =========================
Federal and State income tax benefits or provisions are based upon the
results of operations for the current period and the estimated adjustments for
income tax purposes of certain nondeductible expenses.
Due to recurring losses, the Company has not recorded a Federal income
tax benefit for the six months ended June 30, 2003. Management is unable to
determine that realization of the Parent Company's deferred tax assets are
more likely than not, and, thus has provided a valuation allowance for the
entire amount.
The State income tax provision of $343,000 for the six months ended
June 30, 2003 is a result of applying the statutory Alternative Minimum
Assessment rate of 0.4% to gross receipts, as defined in the Business Tax Reform
Act.
(3) TRANSACTIONS WITH RELATED PARTIES
Greate Bay Hotel and Casino, Inc.'s ("GBHC") rights to the trade
name "Sands" (the "Trade Name") were derived from a license agreement between
Greate Bay Casino Corporation and an unaffiliated third party. Amounts payable
by GBHC for these rights were equal to the amounts paid to the unaffiliated
third party. GBHC was assigned by High River Limited Partnership ("High
River") the rights under a certain agreement with the owner of the Trade Name to
use the Trade Name as of September 29, 2000 through May 19, 2086 subject to
termination rights for a fee after a certain minimum term. High River is an
entity controlled by Carl C. Icahn. High River received no payments
F-30
for its assignment of these rights. Payment is made directly to the owner of the
Trade Name. Such charges amounted to $130,000 and $144,000, respectively, for
the six months ended June 30, 2003 and 2002.
The Stratosphere Casino Hotel & Tower (the "Stratosphere"), an entity
controlled by Carl C. Icahn, allocates a portion of certain executive salaries,
including Richard P. Brown, as well as other charges for tax preparation, legal
fees, travel and entertainment to GBHC. Charges incurred from the Stratosphere
for the six months ended June 30, 2003 were $108,000. There were no similar
charges for the six months ended June 30, 2002.
On February 28, 2003, GBHC entered into a two year agreement with
XO New Jersey, Inc. a long-distance phone carrier controlled by Carl C. Icahn.
The agreement can be extended beyond the minimum two year term on a
month-to-month basis. Charges incurred for the six months ended June 30, 2003
were $26,000.
(4) LEGAL PROCEEDINGS
Tax appeals on behalf of the Company and the City of Atlantic
City challenging the amount of the Company's real property assessments
for tax years 1996 through 2003 are pending before the New Jersey Tax Court.
The Company discovered certain failures relating to currency
transaction reporting and self-reported the situation to the applicable
regulatory agencies. The Company conducted an internal examination of the matter
and the New Jersey Division of Gaming Enforcement conducted a separate review.
The Company has revised internal control processes and taken other measures to
address the situation. The Company was advised by the Department of the Treasury
that it will not pursue a civil penalty.
The Company is a party in various legal proceedings with respect
to the conduct of casino and hotel operations and has received employment
related claims. Although a possible range of losses cannot be estimated, in the
opinion of management, based upon the advice of counsel, the Company does not
expect settlement or resolution of these proceedings or claims to have a
material adverse impact upon the consolidated financial position or results of
operations of the Company, but the outcome of litigation and the resolution of
claims is subject to uncertainties and no assurances can be given. The
accompanying condensed consolidated financial statements do not include any
adjustments that might result from these uncertainties.
On February 26, 2003, the Company received a letter from counsel
for Mr. Frederick H. Kraus, Executive Vice President, General Counsel and
Secretary, indicating that he had been retained to represent Mr. Kraus "in
regards to a constructive discharge, breach of contract, severance pay" and
other claims. This matter has been amicably resolved.
(5) INCOME (LOSS) PER SHARE
Statement of Financial Accounting Standards No. 128, "Earnings
Per Share", requires, among other things, the disclosure of basic and diluted
earnings per share for public companies. Since the capital structure of the
Company is simple, in that no potentially dilutive securities were outstanding
during the periods presented, basic and diluted income (loss) per share are the
same. Basic and diluted income (loss) per share is computed by dividing net
income (loss) by the weighted average number of common shares outstanding.
F-31
(6) SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes during the six months ended
June 30, 2003 and 2002 are set forth below:
Six Months Ended June 30,
-----------------------------------------
2003 2002
----------------- -------------------
Interest paid .............. $ 6,050,000 $ 6,068,000
================= ===================
Interest capitalized ....... $ 211,000 $ 532,000
================= ===================
Income taxes paid .......... $ 376,000 $ 1,006,000
================= ===================
(7) NEW ACCOUNTING PRONOUNCEMENT
On January 1, 2003, the Company adopted FAS No. 143, "Asset
Retirement Obligations" ("SFAS No. 143"), which provides the accounting
requirements for retirement obligations associated with tangible long-lived
assets. This statement requires entities to record the fair value of a liability
for an asset retirement obligation in the period in which it is incurred. The
adoption of SFAS No. 143 did not have a material impact on the Company's
condensed consolidated financial statements.
F-32
Independent Auditors' Report
The Board of Directors and Stockholders
Atlantic Coast Entertainment Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of Atlantic Coast
Entertainment Holdings, Inc. and subsidiary as of November 13, 2003. This
consolidated balance sheet is the responsibility of the Company's management.
Our responsibility is to express an opinion on this consolidated balance sheet
based on our audit.
We conducted our audit 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
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of Atlantic Coast
Entertainment Holdings, Inc. and subsidiary as of November 13, 2003, in
conformity with accounting principles generally accepted in the United States of
America.
KPMG LLP
/S/ KPMG LLP
Short Hills, New Jersey
November 13, 2003
F-33
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
ASSETS
November 13,
-------------
2003
-------------
Current asset:
Cash ............................................... $ 1,000
-------------
$ 1,000
=============
LIABILITIES AND SHAREHOLDER'S EQUITY
Shareholder's equity (Note 1)
Preferred stock, $.01 par value per share
5,000,000 shares authorized, 0 outstanding ....... -
Common stock, $.01 par value per share,
20,000,000 shares authorized, 1 share outstanding. -
Additional paid-in capital ......................... 1,000
-------------
$ 1,000
=============
The accompanying note to the consolidated balance sheet is
an integral part of the consolidated financial statement.
F-34
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
NOTE TO CONSOLIDATED BALANCE SHEET
NOTE 1: Description of Business and Basis of Presentation
Atlantic Coast Entertainment Holdings, Inc. ("Atlantic" or the
"Company") is a Delaware corporation and a newly formed, wholly-owned subsidiary
of Greate Bay Hotel and Casino, Inc. which is a wholly-owned subsidiary of GB
Holdings, Inc. Atlantic was formed for the purpose of the contemplated exchange
of $110 million 11% Notes due 2005 (of GB Property Funding Corp., a wholly owned
subsidiary of GB Holdings Inc.) for $110 million 3% Notes due 2008 to be issued
by Atlantic. The contemplated exchange includes the transfer of substantially
all of the assets of GB Holdings, Inc. to Atlantic.
The exchange is to be accounted for as a debt modification and the New
Notes will be recorded at face value.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the balance sheet.
All intercompany accounts have been eliminated.
F-35
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Capitalized terms used herein shall have the meaning set forth in the body of
the registration statement to which these statements are attached.
The following unaudited pro forma condensed consolidated balance sheet
and related notes of GB Holdings, Inc. and Subsidiaries have been prepared to
give effect to the Transaction as if it occurred on June 30, 2003.
The following unaudited pro forma condensed consolidated statement of
operations and related notes reflect adjustments to GB Holdings, Inc. and
Subsidiaries' for the year ended December 31, 2002 and the six months ended June
30, 2003 to give effect to:
o The proposed Transaction, including, without limitation, the
exchange of the Existing Notes for the New Notes as if it
occurred on January 1, 2002 assuming alternatively that:
o 100% of the outstanding aggregate principal amount of
the Existing Notes are exchanged for New Notes;
o 80% of the outstanding aggregate principal amount of
the Existing Notes are exchanged for New Notes; and
o 58% of the outstanding aggregate principal amount of
the Existing Notes are exchanged for New Notes.
o The assumption that all Existing Notes held by affiliates of
Carl C. Icahn (58% of the Existing Notes) will be exchanged in
their entirety for the New Notes in each of the three
alternatives referred to above.
o Adjustments required to reflect the impact of modification
of debt, changes to interest income and expense (including
amortization of the consent fee) and income tax provisions.
P-1
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002
ASSUMING 100% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
Revenues:
Casino ...................................... $ 206,417 $ (206,417) (A) $ -
Rooms ....................................... 11,140 (11,140) (A) -
Food and beverage ........................... 23,305 (23,305) (A) -
Other ....................................... 3,739 (3,739) (A) -
-------------------------------------- -----------------
244,601 (244,601) -
Less - promotional allowances ............... (51,128) 51,128 (A) -
-------------------------------------- -----------------
Net revenues ...................... 193,473 (193,473) -
Expenses:
Casino ...................................... 143,189 (143,189) (A) -
Rooms ....................................... 2,985 (2,985) (A) -
Food and beverage ........................... 10,915 (10,915) (A) -
Other ....................................... 2,625 (2,625) (A) -
General and administrative .................. 12,799 (12,799) (A) -
Depreciation and amortization, including
provision for obligatory investments 15,457 (15,457) (A) -
Loss on impairment of fixed assets .......... 1,282 (1,282) (A) -
Loss on disposal of assets .................. 185 (185) (A) -
-------------------------------------- -----------------
Total expenses .................... 189,437 (189,437) -
-------------------------------------- -----------------
Income from operations ............................... 4,036 (4,036) -
Non-operating income (expense):
Interest income ............................. 1,067 (1,067) (A) -
Interest expense ............................ (11,640) 11,640 (A) -
-------------------------------------- -----------------
Total non-operating expense, net ............ (10,573) 10,573 -
-------------------------------------- -----------------
Income (loss) before income taxes .................... (6,537) 6,537 -
Income tax provision (784) (1,116) (H) -
-------------------------------------- -----------------
Net income (loss)..................................... $ (7,321) $ 5,421 $ (1,900)
====================================== =================
Basic/diluted income (loss) per common share ......... $ (0.73) $ 0.54 $ (0.19)
====================================== =================
Weighted average common shares outstanding ........... 10,000,000 10,000,000 10,000,000
====================================== =================
Ratio of earnings to fixed charges -
-----------------
P-2
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002
ASSUMING 80% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
Revenues:
Casino ................................................ $ 206,417 $ - $ 206,417
Rooms ................................................. 11,140 - 11,140
Food and beverage ..................................... 23,305 - 23,305
Other ................................................. 3,739 - 3,739
----------------------------------- ------------------
244,601 - 244,601
Less - promotional allowances ......................... (51,128) - (51,128)
----------------------------------- ------------------
Net revenues ................................... 193,473 - 193,473
Expenses:
Casino ................................................ 143,189 - 143,189
Rooms ................................................. 2,985 - 2,985
Food and beverage ..................................... 10,915 - 10,915
Other ................................................. 2,625 - 2,625
General and administrative ............................ 12,799 - 14,299
Transaction fees - New Notes.................... 1,500 (B)
Depreciation and amortization, including provision
for obligatory investments ..................... 15,457 - 15,210
Adjust deferred financing fees - Existing Notes (247) (C)
Loss on impairment of fixed assets .................... 1,282 - 1,282
Loss on disposal of assets ............................ 185 - 185
----------------------------------- ------------------
Total expenses ................................. 189,437 1,253 190,690
----------------------------------- ------------------
Income from operations ......................................... 4,036 (1,253) 2,783
Non-operating income (expense):
Interest income ....................................... 1,067 - 931
Adjust for lower invested balances ............. (136) (D)
Interest expense ...................................... (11,640) 6,580 (E) (6,044)
Amortize Consent fee - New Notes ............... (1,304) (F)
Adjust capitalized interest .................... 320 (G)
----------------------------------- ------------------
Total non-operating expense, net ...................... (10,573) 5,460 (5,113)
----------------------------------- ------------------
Income (loss) before income taxes .............................. (6,537) 4,207 (2,330)
Income tax provision .................................. (784) - (784)
----------------------------------- ------------------
Net income (loss)............................................... $ (7,321) $ 4,207 $ (3,114)
=================================== ==================
Basic/diluted income (loss) per common share ................... $ (0.73) $ 0.42 $ (0.31)
=================================== ==================
Weighted average common shares outstanding ..................... 10,000,000 10,000,000 10,000,000
=================================== ==================
Ratio of Earnings to Fixed Charges -
------------------
P-3
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002
ASSUMING 58% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
Revenues:
Casino .............................................. $ 206,417 $ - $ 206,417
Rooms ............................................... 11,140 - 11,140
Food and beverage ................................... 23,305 - 23,305
Other ............................................... 3,739 - 3,739
----------------------------------- ------------------
244,601 - 244,601
Less - promotional allowances ....................... (51,128) - (51,128)
----------------------------------- ------------------
Net revenues ................................. 193,473 - 193,473
Expenses:
Casino .............................................. 143,189 - 143,189
Rooms ............................................... 2,985 - 2,985
Food and beverage ................................... 10,915 - 10,915
Other ............................................... 2,625 - 2,625
General and administrative .......................... 12,799 - 14,299
Transaction fees - New Notes.................. 1,500 (B)
Depreciation and amortization, including
provision for obligatory investments ......... 15,457 - 15,210
Adjust transaction fees - Existing Notes ..... (247) (C)
Loss on impairment of fixed assets .................. 1,282 - 1,282
Loss on disposal of assets .......................... 185 - 185
----------------------------------- ------------------
Total expenses ............................... 189,437 1,253 190,690
----------------------------------- ------------------
Income from operations ....................................... 4,036 (1,253) 2,783
Non-operating income (expense):
Interest income ..................................... 1,067 - 961
Adjust for lower invested balances (106) (D)
Interest expense .................................... (11,640) 4,644 (E) (7,498)
Amortize consent fee - New Notes (945) (F)
Adjust capitalized interest 443 (G)
----------------------------------- ------------------
Total non-operating expense, net .................... (10,573) 4,036 (6,537)
----------------------------------- ------------------
Income (loss) before income taxes ............................ (6,537) 2,783 (3,754)
Income tax provision ................................ (784) - (784)
----------------------------------- ------------------
Net income (loss)............................................. $ (7,321) $ 2,783 $ (4,538)
=================================== ==================
Basic/diluted income (loss) per common share ................. $ (0.73) $ 0.28 $ (0.45)
=================================== ==================
Weighted average common shares outstanding ................... 10,000,000 10,000,000 10,000,000
=================================== ==================
Ratio of earnings to fixed charges ........................... -
------------------
P-4
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2002
ASSUMING 100%, 80% AND 58% NOTE EXCHANGE
PRO FORMA ADJUSTMENTS
Statement of Operations Adjustments:
(A) Represents the removal of the amounts presented in the statement of
operations of GB Holdings, Inc. and Subsidiaries for the year ended
December 31, 2002 as the result of the operations are to be recorded by
Atlantic Coast Entertainment Holdings, Inc. and Subsidiary.
(B) Represents the estimated transaction fees associated with the issuance of
the New Notes.
(C) Represents reduction in amortization expense of deferred financing fees of
Existing Notes due to the extension of the amortization period associated
with the term of the New Notes, which mature in 2008.
(D) Represents a decrease in interest income as a result of lower cash balances
due to payments of consent fee, estimated transaction fees and accelerated
interest payments.
(E) Represents a decrease in interest expense due to the modification in the
interest rate from 11% on the Existing Notes to 3% on the New Notes.
(F) Represents amortization expense using the interest method of the consent
fee paid (10% of the face value of the Existing Notes exchanged) upon
exchange of the Existing Notes for New Notes.
(G) Represents the capitalized interest using the lower effective interest rate
as a result of the issuance of the New Notes.
(H) Represents the impact on the income tax provision as a result of
Transaction and the aforementioned Pro Forma adjustments based on a Federal
tax rate of 35% and a state tax rate of 9%.
P-5
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2003
ASSUMING 100% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
Revenues:
Casino ......................................... $ 93,286 $ (93,286) (A) $
-
Rooms .......................................... 5,415 (5,415)(A) -
Food and beverage .............................. 10,175 (10,175)(A) -
Other .......................................... 1,963 (1,963)(A) -
---------------------------------- -----------------
110,839 (110,839) -
Less - promotional allowances .................. (25,008) 25,008 (A) -
---------------------------------- -----------------
Net revenues ............................ 85,831 (85,831)
Expenses:
Casino ......................................... 64,958 (64,958)(A) -
Rooms .......................................... 1,030 (1,030)(A) -
Food and beverage .............................. 4,481 (4,481)(A) -
Other .......................................... 1,388 (1,388)(A) -
General and administrative ..................... 5,261 (5,261)(A) -
Depreciation and amortization, including
provision for obligatory investments .... 7,678 (7,678)(A) -
Loss on disposal of assets ..................... 3 (3)(A) -
---------------------------------- -----------------
Total expenses .......................... 84,799 (84,799) -
---------------------------------- -----------------
Income from operations .................................. 1,032 (1,032) -
---------------------------------- -----------------
Non-operating income (expense):
Interest income ................................ 361 (361)(A) -
Interest expense ............................... (5,958) 5,958 (A) -
---------------------------------- -----------------
Total non-operating expense, net ............... (5,597) 5,597 -
---------------------------------- -----------------
Income (loss) before income taxes ....................... (4,565) 4,565 -
Income tax provision ........................... (343) 343 (A) -
---------------------------------- -----------------
Net income (loss)........................................ (4,908) 4,908 -
================================== =================
Basic/diluted income (loss) per common share ............ $ (0.49) $ 0.49 $ -
================================== =================
Weighted average common shares outstanding .............. 10,000,000 10,000,000 10,000,000
================================== =================
Ratio of earnings to fixed charges ...................... -
-----------------
P-6
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2003
($ IN THOUSANDS)
ASSUMING 100% EXCHANGE
PRO FORMA PRO FORMA
ASSETS: HISTORICAL ADJUSTMENTS AS ADJUSTED
- ------- ---------- ----------- -----------
Current Assets:
Cash and cash equivalents ........................ $ 46,502 $ (46,502) (B) $ -
Accounts receivable, net of allowance of $8,833 .. 4,637 (4,637) (B) -
Inventories ...................................... 2,031 (2,031) (B) -
Income tax deposits .............................. 1,363 (1,363) (B) -
Prepaid expenses and other current assets ........ 2,705 (2,705) (B) -
--------------------------------- ------------------
Total current assets .......................... 57,238 (57,238) -
--------------------------------- ------------------
Property and Equipment:
Land ............................................. 54,344 (54,344) (B) -
Buildings and improvements ....................... 92,132 (92,132) (B) -
Equipment ........................................ 49,925 (49,925) (B) -
Construction in progress ......................... 5,760 (5,760) (B) -
--------------------------------- ------------------
202,161 (202,161) -
Less - accumulated depreciation and amortization ..... (32,687) 32,687 (B) -
--------------------------------- ------------------
Property and equipment, net .......................... 169,474 (169,474) -
--------------------------------- ------------------
Other Assets:
Obligatory investments, net of allowances of
$10,511 .......................................... 10,601 (10,601) (B) -
Other assets...................................... 2,747 (2,747) (B) -
--------------------------------- ------------------
Total other assets ............................ 13,348 (13,348) -
--------------------------------- ------------------
$ 240,060 $ (240,060) $ -
================================= ==================
LIABILITIES:
Current Liabilities
Accounts payable ................................. $ 5,685 $ (5,685) (B) $ -
Accrued liabilities -
Salaries and wages ............................ 3,847 (3,847) (B) -
Interest ...................................... 3,092 (3,092) (B) -
Gaming obligations ............................ 2,618 (2,618) (B) -
Self-insurance ................................ 2,193 (2,193) (B) -
Other ......................................... 4,599 (4,599) (B) -
--------------------------------- ------------------
Total current liabilities ..................... 22,034 (22,034) -
--------------------------------- ------------------
Long-Term Debt, net of current maturities ............ 110,000 (110,000) (B) -
--------------------------------- ------------------
Other Noncurrent Liabilities ......................... 3,586 (3,586) (B) -
--------------------------------- ------------------
Commitments and Contingencies ........................ - - -
Shareholders' Equity:
Preferred stock, $.01 par value per share;
5,000,000 shares authorized; 0 shares
outstanding...................................... - - -
Common Stock, $.01 par value per share;
20,000,000 shares authorized;
10,000,000 shares issued and outstanding ........ 100 (100) (B) -
Additional paid-in capital ....................... 124,900 (124,900) (B) -
Dividends ........................................ - - -
Accumulated deficit .............................. (20,560) 20,560 (B) -
--------------------------------- ------------------
Total shareholders' equity .................... 104,440 (104,440) -
--------------------------------- ------------------
$ 240,060 $ (240,060) $ -
================================= ==================
P-7
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2003
ASSUMING 100% NOTE EXCHANGE
PRO FORMA ADJUSTMENTS
Statement of Operations Adjustments:
(A) Represents the removal of the amounts presented in the
statement of operations of GB Holdings, Inc. and
Subsidiaries for the six months ended June 30, 2003 as the
result of operations is to be recorded by Atlantic Coast
Entertainment Holdings, Inc. and Subsidiary.
Balance Sheet Adjustments
(B) Represents the removal of the net assets presented in the
balance sheet of GB Holdings, Inc. and Subsidiaries as of
June 30, 2003 as the result of the transfer of all assets of
Atlantic Coast Entertainment Holdings, Inc. and Subsidiary.
P-8
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2003
ASSUMING 80% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
Revenues:
Casino ...................................... $ 93,286 $ - $ 93,286
Rooms ....................................... 5,415 - 5,415
Food and beverage ........................... 10,175 - 10,175
Other ....................................... 1,963 - 1,963
---------------------------------- ------------------
110,839 - 110,839
Less - promotional allowances ............... (25,008) - (25,008)
---------------------------------- ------------------
Net revenues ......................... 85,831 - 85,831
Expenses:
Casino ...................................... 64,958 - 64,958
Rooms ....................................... 1,030 - 1,030
Food and beverage ........................... 4,481 - 4,481
Other ....................................... 1,388 - 1,388
General and administrative .................. 5,261 - 5,261
Depreciation and amortization, including
provision for obligatory investments ........ 7,678 - 7,555
Adjust deferred financing fees -
Existing Notes ....................... - (123) (A)
Loss on disposal of assets .................. 3 - 3
---------------------------------- ------------------
Total expenses ....................... 84,799 (123) 84,676
---------------------------------- ------------------
Income from operations ............................... 1,032 (123) 1,155
Non-operating income (expense):
Interest income ............................. 361 - 355
Adjust for lower invested balances (6) (B)
Interest expense ............................ (5,958) 3,428 (C) (3,094)
Amortize consent fee - New Notes (652) (D)
Adjust capitalized interest .......... 88 (E)
---------------------------------- ------------------
Total non-operating expense, net ............ (5,597) 2,858 (2,739)
---------------------------------- ------------------
Income (loss) before income taxes .................... (4,565) 2,981 (1,583)
Income tax provision ........................ (343) - (344)
---------------------------------- ------------------
Net income (loss)..................................... (4,908) 2,981 (1,927)
================================== ==================
Basic/diluted income (loss) per common share ......... $ (0.49) $ 0.30 $ (0.19)
================================== ==================
Weighted average common shares outstanding ........... 10,000,000 10,000,000 10,000,000
================================== ==================
Ratio of earnings to fixed charges ................... -
------------------
P-9
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2003
($ IN THOUSANDS)
ASSUMING 80% EXCHANGE
PRO FORMA PRO FORMA
ASSETS: HISTORICAL ADJUSTMENTS AS ADJUSTED
- ------- ---------- ----------- -----------
Current Assets:
Cash and cash equivalents ........................ $ 46,502 $ - $ 33,782
Adjust for decreased cash balances (12,720) (F)
Accounts receivable, net of allowance of $8,833 .. 4,637 - 4,637
Inventories ...................................... 2,031 - 2,031
Income tax deposits .............................. 1,363 - 1,363
Prepaid expenses and other current assets ........ 2,705 1,304 (G) 4,009
------------------------------------ -------------------
Total current assets .......................... 57,238 (11,416) 45,822
------------------------------------ -------------------
Property and Equipment:
Land ............................................. 54,344 - 54,344
Buildings and improvements ....................... 92,132 - 92,132
Equipment ........................................ 49,925 - 49,925
Construction in progress ......................... 5,760 - 5,760
------------------------------------ -------------------
202,161 - 202,161
Less - accumulated depreciation and amortization . (32,687) - (32,687)
------------------------------------ -------------------
Property and equipment, net ...................... 169,474 - 169,474
------------------------------------ -------------------
Other assets:
Obligatory investments, net of allowances
of $10,511 ................................... 10,601 - 10,601
Other assets ..................................... 2,747 - 10,243
Add Consent Fee - New Notes .................. 7,496 (G)
------------------------------------ -------------------
Total other assets .................................... 13,348 7,496 20,844
------------------------------------ -------------------
$ 240,060 (3,920) $ 236,140
==================================== ===================
LIABILITIES:
Current Liabilities
Accounts payable ................................. $ 5,685 $ - $ 5,685
Accrued liabilities - -
Salaries and wages ............................ 3,847 - 3,847
Interest ...................................... 3,092 (2,420) (H) 672
Gaming obligations ............................ 2,618 - 2,618
Self-insurance ................................ 2,193 - 2,193
Other ......................................... 4,599 36 (I) 4,635
Adjust tax liability...........................
------------------------------------ -------------------
Total current liabilities ............................. 22,034 (2,384) 19,650
------------------------------------ -------------------
Total Long-Term Debt .................................. 110,000 - 110,000
------------------------------------ -------------------
Other Noncurrent Liabilities .......................... 3,586 - 3,586
------------------------------------ -------------------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $.01 par value per share;
5,000,000 shares authorized; 0 shares
outstanding....................................... - - -
Common Stock, $.01 par value per share;
20,000,000 shares authorized;
10,000,000 shares issued and outstanding ........ 100 - 100
Additional paid-in capital ....................... 124,900 (33,000) (J) 91,900
Warrants outstanding ............................. - 33,000 (J) 33,000
Accumulated deficit .............................. (20,560) (1,536) (K) (22,096)
------------------------------------ -------------------
Total shareholders' equity .................... 104,440 (1,536) 102,904
------------------------------------ -------------------
$ 240,060 $ (3,920) $ 236,140
==================================== =====================
P-10
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2003
ASSUMING 58% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------------- ----------------- -----------------
Revenues:
Casino ................................................. $ 93,286 $ - $ 93,286
Rooms .................................................. 5,415 - 5,415
Food and beverage ...................................... 10,175 - 10,175
Other .................................................. 1,963 - 1,963
------------------------------------ -----------------
110,839 - 110,839
Less - promotional allowances .......................... (25,008) - (25,008)
------------------------------------ -----------------
Net revenues .................................. 85,831 - 85,831
Expenses:
Casino ................................................. 64,958 - 64,958
Rooms .................................................. 1,030 - 1,030
Food and beverage ...................................... 4,481 - 4,481
Other .................................................. 1,388 - 1,388
General and administrative ............................. 5,261 - 5,261
Depreciation and amortization, including provision
for obligatory investments .................... 7,678 - 7,555
Adjust deferred financing fees - Existing Notes - (123)(A)
Loss on disposal of assets ............................. 3 - 3
------------------------------------ -----------------
Total expenses ................................ 84,799 (123) 84,676
------------------------------------ -----------------
Income from operations ........................................... 1,032 (123) 1,155
Non-operating income (expense):
Interest income ........................................ 361 - 354
Adjust for lower invested balances (7)(B)
Interest expense ....................................... (5,958) 2,460 (C) (3,849)
Amortize consent fee - New Notes .............. (473)(D)
Adjust capitalized interest ................... 122 (E)
------------------------------------ -----------------
Total non-operating expense, net ....................... (5,597) 2,102 (3,495)
------------------------------------ -----------------
Income (loss) before income taxes ................................ (4,565) 2,225 (2,340)
Income tax provision ................................... (343) - (343)
------------------------------------ -----------------
Net income (loss)................................................. $ (4,908) $ 2,225 $ (2,683)
==================================== =================
Basic/diluted income (loss) per common share ..................... $ (0.49) $ 0.22 $ (0.27)
==================================== =================
Weighted average common shares outstanding ....................... 10,000,000 10,000,000 10,000,000
==================================== =================
Ratio of earnings to fixed charges ............................... -
-----------------
P-11
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2003
($ IN THOUSANDS)
ASSUMING 58% EXCHANGE
PRO FORMA PRO FORMA
ASSETS: HISTORICAL ADJUSTMENTS AS ADJUSTED
- ------- ---------- ----------- -----------
Current Assets:
Cash and cash equivalents ............................. $ 46,502 $ 36,867
Adjust for decreased cash balances .................. $ (9,635) (F)
Accounts receivable, net of allowance of $8,833 ....... 4,637 - 4,637
Inventories ........................................... 2,031 - 2,031
Income tax deposits ................................... 1,363 - 1,363
Prepaid expenses and other current assets ............. 2,705 945 (G) 3,650
------------------------------ ----------------
Total current assets ................................ 57,238 (8,690) 48,548
------------------------------ ----------------
Property and Equipment:
Land .................................................. 54,344 - 54,344
Buildings and improvements ............................ 92,132 - 92,132
Equipment ............................................. 49,925 - 49,925
Construction in progress .............................. 5,760 - 5,760
------------------------------ ----------------
202,161 - 202,161
Less - accumulated depreciation and amortization ...... (32,687) - (32,687)
------------------------------ ----------------
Property and equipment, net ........................... 169,474 - 169,474
------------------------------ ----------------
Other Assets:
Obligatory investments, net of allowances
of $10,511 ............................................ 10,601 - 10,601
Other assets .......................................... 2,747 - 8,182
Add Consent Fees - New Notes 5,435 (G)
------------------------------ ----------------
Total other assets .................................. 13,348 5,435 18,783
------------------------------ ----------------
240,060 $ (3,255) $ 236,805
============================== ================
LIABILITIES:
Current Liabilities
Accounts payable ...................................... $ 5,685 - $ 5,685
Accrued liabilities -
Salaries and wages .................................. 3,847 - 3,847
Interest ............................................ 3,092 (1,755) (H) 1,337
Gaming obligations .................................. 2,618 - 2,618
Self-insurance ...................................... 2,193 - 2,193
Other ............................................... 4,599 - 4,599
------------------------------ ----------------
Total current liabilities ........................... 22,034 (1,755) 20,279
------------------------------ ----------------
Total Long-Term Debt ...................................... 110,000 - 110,000
------------------------------ ----------------
Other Noncurrent Liabilities .............................. 3,586 - 3,586
------------------------------ ----------------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $.01 par value per share;
5,000,000 shares authorized; 0 shares outstanding .... - - -
Common Stock, $.01 par value per share;
20,000,000 shares authorized;
10,000,000 shares issued and outstanding ............. 100 - 100
Additional paid-in capital ............................ 124,900 (34,000) (J) 90,900
Warrants outstanding................................... - 34,000 (J) 34,000
Accumulated deficit.................................... (20,560) (1,500) (K) (22,060)
------------------------------ ----------------
Total shareholders' equity .......................... 104,440 (1,500) 102,940
------------------------------ ----------------
$ 240,060 $ (3,255) $ 236,805
============================== ================
P-12
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2003
ASSUMING 80% AND 58% EXCHANGE
PRO FORMA ADJUSTMENTS
Statement of Operations Adjustments:
(A) Represents reduction in amortization expense of deferred financing fees of
Existing Notes due to the extension of the amortization period associated
with the term of the New Notes, which mature in 2008.
(B) Represents a decrease in interest income as a result of lower cash balances
due to payments of consent fee, estimated transaction fees and accelerated
interest payments, net of the benefit of discontinued interest payments on
Existing Notes.
(C) Represents a decrease in interest expense due to the modification in the
interest rate from 11% on the Existing Notes to 3% on the New Notes.
(D) Represents amortization expense uisng the interest method of the consent
fee paid (10% of the face value of Existing Notes exchanged) upon exchange
of the Existing Notes for New Notes.
(E) Represents the capitalized interest using the lower effective interest rate
as a result of the issuance of the New Notes.
Balance Sheet Adjustments:
(F) Represents the net decrease in Cash and Cash Equivalents as of June 30,
2003. Amount is equal to the cumulative amount of cash payments for the
following items by exchange scenario:
80% 58%
exchanged exchanged
--------- ---------
Consent fees .................. $ 8,800,000 $ 6,380,000
Estimated financing fees ...... 1,500,000 1,500,000
Accrued interest
Existing Notes ........... 2,420,000 1,755,000
----------- -----------
$12,720,000 $ 9,635,000
=========== ===========
(G) Represents consent fee (10% of the face value of Existing Notes exchanged)
paid upon exchange of Existing Notes for New Notes.
(H) Represents the payment of interest associated with the Existing Notes upon
exchange.
(I) Represents the income tax liability as a result of the Transaction and the
aforementioned Pro Forma adjustments based on a Federal tax rate of 35% and
a state tax rate of 9%.
(J) Represents the value of the warrants to purchase Atlantic Coast
Entertainment Holdings, Inc. common stock (as determined by third party
valuation), ultimately dividended to the shareholders of GB Holdings, Inc.,
in a less than 100% exchange scenario.
(K) Represents the net pro forma adjustment to retained earnings.
P-13
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
INTRODUCTION TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet
and related notes of Atlantic Coast Entertainment Holdings, Inc. and Subsidiary
give effect to the Transaction as if it occurred on June 30, 2003.
The following unaudited pro forma condensed consolidated statement of
operations and related notes reflect adjustments to Atlantic Coast
Entertainment Holdings, Inc. and Subsidiary for the year ended December 31, 2002
and the six months ended June 30, 2003 to give effect to:
o The proposed Transaction, including, without limitation, the
exchange of the Existing Notes for the New Notes as if it
occurred on January 1, 2002 assuming alternatively that:
o 100% of the outstanding aggregate principal amount of
the Existing Notes are exchanged for New Notes;
o 80% of the outstanding aggregate principal amount of
the Existing Notes are exchanged for New Notes; and
o 58% of the outstanding aggregate principal amount of
the Existing Notes are exchanged for New Notes.
o The assumption that all Existing Notes held by affiliates of
Carl C. Icahn (58% of the Existing Notes) will be exchanged in
their entirety for the New Notes in each of the three
alternatives referred to above.
o Adjustments required to reflect the changes to interest income
and expense including (amortization of the consent fee) and
income tax provisions.
P-14
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002
ASSUMING 100% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
Revenues:
Casino .................................. $ - $ 206,417 (A) $ 206,417
Rooms ................................... - 11,140 (A) 11,140
Food and beverage ....................... - 23,305 (A) 23,305
Other ................................... - 3,739 (A) 3,739
--------------- ------------------- ------------------
- 244,601 244,601
Less - promotional allowances ........... - (51,128) (A) (51,128)
--------------- ------------------- ------------------
Net revenues ..................... - 193,473 193,473
Expenses:
Casino .................................. - 143,189 (A) 143,189
Rooms ................................... - 2,985 (A) 2,985
Food and beverage ....................... - 10,915 (A) 10,915
Other ................................... - 2,625 (A) 2,625
General and administrative .............. - 12,799 (A) 14,299
Transaction fees - New Notes 1,500 (B)
Depreciation and amortization, including
provision for obligatory investments . - 15,457 (A) 14,902
Adjust deferred financing fees -
Existing Notes ................ (555) (C)
Loss on impairment of fixed assets ...... - 1,282 (A) 1,282
Loss on disposal of assets .............. - 185 (A) 185
--------------- ------------------- ------------------
Total expenses ................... - 190,382 190,382
--------------- ------------------- ------------------
Income from operations .......................... - 3,091 3,091
Non-operating income (expense):
Interest income ......................... - 1,067 (A) 905
Adjust for lower invested balances (162) (D)
Interest expense ........................ - (3,300) (E) (4,721)
Amortize valuation allowance - New
Notes .......................... (1,630) (F)
Adjust capitalized interest ...... 209 (G)
--------------- ------------------- ------------------
Total non-operating expense, net ........ - (3,816) (3,816)
--------------- ------------------- ------------------
Loss before income taxes ........................ - (725) (725)
Income tax provision .................... - (784) (H) (784)
--------------- ------------------- ------------------
Net loss......................................... $ - $ (1,509) $ (1,509)
=============== =================== ==================
Basic/diluted loss per common share ............. $ - $ (0.55) $ (0.55)
=============== =================== ==================
Weighted average common shares outstanding ...... - 2,750,000 2,750,000
=============== =================== ==================
Ratio of Earnings to Fixed Charges .............. -
------------------
P-15
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002
ASSUMING 80% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
Revenues:
Casino ................................................ $ - $ 206,417 (A) $ 206,417
Rooms ................................................. - 11,140 (A) 11,140
Food and beverage ..................................... - 23,305 (A) 23,305
Other ................................................. - 3,739 (A) 3,739
--------------- -------------------- ------------------
- 244,601 244,601
Less - promotional allowances ......................... - (51,128) (A) (51,128)
--------------- -------------------- ------------------
Net revenues .................................... - 193,473 193,473
Expenses:
Casino ................................................ - 143,189 (A) 143,189
Rooms ................................................. - 2,985 (A) 2,985
Food and beverage ..................................... - 10,915 (A) 10,915
Other ................................................. - 2,625 (A) 2,625
General and administrative ............................ - 12,799 (A) 14,299
Transaction fees - New Notes........................... 1,500 (B)
Depreciation and amortization, including provision
for obligatory investments ...................... - 15,457 (A) 14,902
Adjust deferred financing fees - Existing Notes . (555) (C)
Loss on impairment of fixed assets .................... - 1,282 (A) 1,282
Loss on disposal of assets ............................ - 185 (A) 185
--------------- -------------------- ------------------
Total expenses .................................. - 190,382 190,382
--------------- -------------------- ------------------
Income from operations ........................................ - 3,091 3,091
Non-operating income (expense):
Interest income ....................................... - 1,067 (A) 931
Adjust for lower invested balances .............. (136) (D)
Interest expense ...................................... - (2,640) (E) (3,735)
Amortize consent fees - New Notes ............... (1,304) (F)
Adjust capitalized interest ..................... 209 (G)
--------------- -------------------- ------------------
Total non-operating expense, net ...................... - (2,804) (2,804)
--------------- -------------------- ------------------
Income before income taxes .................................... - 287 287
Income tax provision .................................. - (784) (H) (784)
--------------- -------------------- ------------------
Net income .................................................... $ - $ (497) $ (497)
=============== ==================== ==================
Basic/diluted income per common share ........................ $ - $ (0.34) $ (0.34)
=============== ==================== ==================
Weighted average common shares outstanding .................... - 1,450,000 1,450,000
=============== ==================== ==================
Ratio of earnings to fixed charges ............................ 1.02
------------------
P-16
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002
ASSUMING 58% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
Revenues:
Casino ................................................... $ - $ 206,417 (A) $ 206,417
Rooms .................................................... - 11,140 (A) 11,140
Food and beverage ........................................ - 23,305 (A) 23,305
Other .................................................... - 3,739 (A) 3,739
--------------- -------------------- -----------------
................................................................. - 244,601 244,601
Less - promotional allowances ............................ - (51,128) (A) (51,128)
--------------- -------------------- -----------------
Net revenues ....................................... - 193,473 193,473
Expenses:
Casino ................................................... - 143,189 (A) 143,189
Rooms .................................................... - 2,985 (A) 2,985
Food and beverage ........................................ - 10,915 (A) 10,915
Other .................................................... - 2,625 (A) 2,625
General and administrative ............................... - 12,799 (A) 14,299
Transaction fees - New Notes.............................. 1,500 (B)
Depreciation and amortization, including provision
for obligatory investments ......................... - 15,457 (A) 14,902
Adjust deferred financing fees - Existing Notes .... (555) (C)
Loss on impairment of fixed assets ....................... - 1,282 (A) 1,282
Loss on disposal of assets ............................... - 185 (A) 185
--------------- -------------------- -----------------
Total expenses ..................................... - 190,382 190,382
--------------- -------------------- -----------------
Income from operations ........................................... - 3,091 3,091
Non-operating income (expense):
Interest income .......................................... - 1,067 (A) 961
Adjust for lower invested balances ................. (106) (D)
Interest expense ......................................... - (1,914) (E) (2,650)
Amortize consent fee - New Notes ................... (945) (F)
Adjust capitalized interest ........................ 209 (G)
--------------- -------------------- -----------------
Total non-operating expense, net ......................... - (1,689) (1,689)
--------------- -------------------- -----------------
Income before income taxes ....................................... - 1,402 1,402
Income tax provision ..................................... - (784) (H) (784)
--------------- -------------------- -----------------
Net income ....................................................... $ - $ 618 $ 618
=============== ==================== =================
Basic income per common share..................................... $ - $ 0.20 $ 0.20
=============== ==================== =================
Weighted average basic common shares outstanding.................. $ - $ 3,045,000 $ 3,045,000
=============== ==================== =================
Fully diluted income per common share ............................ $ - $ 0.10 $ 0.10
=============== ==================== =================
Weighted average fully diluted common shares outstanding ......... - 7,250,000 7,250,000
=============== ==================== =================
Ratio of earnings to fixed charges ............................... 1.41
-----------------
P-17
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2003
ASSUMING 100% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
Revenues:
Casino .................................................. $ - $ 93,286 (A) $ 93,286
Rooms ................................................... - 5,415 (A) 5,415
Food and beverage ....................................... - 10,175 (A) 10,175
Other ................................................... - 1,963 (A) 1,963
--------------- ------------------- ------------------
- 110,839 110,839
Less - promotional allowances ........................... - (25,008) (A) (25,008)
--------------- ------------------- ------------------
Net revenues ...................................... - 85,831 85,831
Expenses:
Casino .................................................. - 64,958 (A) 64,958
Rooms ................................................... - 1,030 (A) 1,030
Food and beverage ....................................... - 4,481 (A) 4,481
Other ................................................... - 1,388 (A) 1,388
General and administrative .............................. - 5,261 (A) 5,261
Depreciation and amortization, including provision
for obligatory investments ........................ - 7,678 (A) 7,401
Adjust deferred financing fees - Existing Notes ... (277) (C)
Loss on disposal of assets .............................. - 3 (A) 3
--------------- ------------------- ------------------
Total expenses .................................... - 84,522 84,522
--------------- ------------------- ------------------
Income from operations .......................................... - 1,309 1,309
Non-operating income (expense):
Interest income ......................................... - 361 (A) 357
Adjust for lower invested balances ................ (4) (D)
Interest expense ........................................ - (1,650) (E) (2,407)
Amortize consent fee - New Notes .................. (815) (F)
Adjust capitalized interest ....................... 58 (G)
--------------- ------------------- ------------------
Total non-operating expense, net ........................ - (2,050) (2,050)
--------------- ------------------- ------------------
Loss before income taxes ........................................ - (741) (741)
Income tax provision .................................... - (343) (H) (343)
--------------- ------------------- ------------------
Net loss......................................................... $ - $ (1,084) $ (1,084)
=============== =================== ==================
Basic/diluted loss per common share ............................. $ - $ (0.39) $ (0.39)
=============== =================== ==================
Weighted average common shares outstanding ...................... - 2,750,000 2,750,000
=============== =================== ==================
Ratio of earnings to fixed charges .............................. -
------------------
P-18
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2003
($ IN THOUSANDS)
ASSUMING 100% EXCHANGE
PRO FORMA PRO FORMA
ASSETS: HISTORICAL ADJUSTMENTS AS ADJUSTED
- ------- ---------- ----------- -----------
Current Assets:
Cash and cash equivalents................................ $ - $ 46,502 (I) $ 30,977
Adjust for decreased cash balances .................... (15,525) (J)
Accounts receivable, net of allowance of $8,833 ......... 4,637 (I) 4,637
Inventories ............................................. - 2,031 (I) 2,031
Income tax deposits...................................... - 1,363 (I) 1,363
Prepaid expenses and other current assets ............... - 2,705 (I) 4,335
Add Consent Fees - New Notes........................... - 1,630 (K)
-------------- --------------- ----------------
Total current assets .................................. - 43,343 43,343
-------------- --------------- ----------------
Property and Equipment:
Land .................................................... - 54,344 (I) 54,344
Buildings and improvements .............................. - 92,132 (I) 92,132
Equipment ............................................... 49,925 (I) 49,925
Construction in progress ................................ 5,760 (I) 5,760
-------------- --------------- ----------------
- 202,161 202,161
Less - accumulated depreciation and amortization......... - (32,687)(I) (32,687)
-------------- --------------- ----------------
Property and equipment, net ............................. - 169,474 169,474
-------------- --------------- ----------------
Other Assets:
Obligatory investments, net of allowances ...............
of $10,511 .............................................. - 10,601 (I) 10,601
Other assets ............................................ - 2,747 (I) 12,117
Add Consent Fees - New Notes .......................... 9,370 (K)
-------------- --------------- ----------------
Total other assets .................................... - 22,718 22,718
-------------- --------------- ----------------
$ - $ 235,535 $ 235,535
============== =============== ================
LIABILITIES:
Current Liabilities
Accounts payable ........................................ $ - $ 5,685 (I) $ 5,685
Accrued liabilities
Salaries and wages .................................... - 3,847 (I) 3,847
Interest .............................................. - - -
Gaming obligations .................................... - 2,618 (I) 2,618
Self-insurance ........................................ - 2,193 (I) 2,193
Other ................................................. - 4,599 (I) 4,599
-------------- --------------- ----------------
Total current liabilities ............................. - 18,942 18,942
-------------- --------------- ----------------
Long-Term Debt, net of current maturities ................... - 110,000 (I) 110,000
-------------- --------------- ----------------
Other Noncurrent Liabilities ................................ 3,586 (I) 3,586
-------------- --------------- ----------------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $.01 par value per share; -
5,000,000 shares authorized; 0 shares .................. - - -
outstanding
Common Stock, $.01 par value per share;
20,000,000 shares authorized;
2,750,000 shares issued and outstanding ................ - 28 (L) 28
Additional paid-in capital............................... 102,979 (M) 102,979
Dividends ............................................... - - -
Accumulated deficit ..................................... - - -
-------------- --------------- ----------------
Total shareholders' equity ................... - 103,007 103,007
-------------- --------------- ----------------
$ - $ 235,535 $ 235,535
============== =============== ================
P-19
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2003
ASSUMING 80% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
Revenues:
Casino $ - $ 93,286 (A) $ 93,286
Rooms - 5,415 (A) 5,415
Food and beverage - 10,175 (A) 10,175
Other - 1,963 (A) 1,963
---------------- ------------------- -------------------
- 110,839 110,839
Less - promotional allowances - (25,008)(A) (25,008)
---------------- ------------------- -------------------
Net revenues - 85,831 85,831
Expenses:
Casino - 64,958 (A) 64,958
Rooms - 1,030 (A) 1,030
Food and beverage - 4,481 (A) 4,481
Other - 1,388 (A) 1,388
General and administrative - 5,261 (A) 5,261
Depreciation and amortization, including provision
for obligatory investments - 7,678 (A) 7,401
Adjust deferred financing fees -
Existing Notes - (277)(C)
Loss on disposal of assets - 3 (A) 3
---------------- ------------------- -------------------
Total expenses - 84,522 84,522
---------------- ------------------- -------------------
Income from operations - 1,309 1,309
Non-operating income (expense):
Interest income - 361 (A) 355
Adjust for lower invested balances (6)(D)
Interest expense - (1,320)(E) (1,914)
Amortize valuation allowance - New Notes (652)(F)
Adjust capitalized interest 58 (G)
---------------- ------------------- -------------------
Total non-operating expense, net - (1,559) (1,559)
---------------- ------------------- -------------------
Loss before income taxes - (250) (250)
Income tax provision - (343)(H) (343)
---------------- ------------------- -------------------
Net loss $ - $ (593) $ (593)
================ =================== ===================
Basic/diluted income (loss) per common share $ - $ (0.41) $ (0.41)
================ =================== ===================
Weighted average common shares outstanding - 1,450,000 1,450,000
================ =================== ===================
Ratio of earnings to fixed charges -
-------------------
P-20
ATLANTIC COAST ENTERTAINMENT HONDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2003
($ IN THOUSANDS)
ASSUMING 80% EXCHANGE
PRO FORMA PRO FORMA
ASSETS: HISTORICAL ADJUSTMENTS AS ADJUSTED
- ------- ---------- ----------- -----------
Current Assets:
Cash and cash equivalents $ - $ 46,502 (I) $ 33,782
Adjust for decreased cash balances (12,720)(J)
Accounts receivable, net of allowance - 4,637 (I) 4,637
of $8,833
Inventories - 2,031 (I) 2,031
Income tax deposit - 1,363 (I) 1,363
Prepaid expenses and other current assets - 2,705 (I) 4,009
Add consent fee - New Notes - 1,304 (K) -
------------------- ------------------- -------------------
Total current assets - 45,822 45,822
------------------- ------------------- -------------------
Property and Equipment:
Land - 54,344 (I) 54,344
Buildings and improvements - 92,132 (I) 92,132
Equipment - 49,925 (I) 49,925
Construction in progress - 5,760 (I) 5,760
------------------- ------------------- -------------------
- 202,161 202,161
Less - accumulated depreciation and amortization - (32,687)(I) (32,687)
------------------- ------------------- -------------------
Property and equipment, net - 169,474 169,474
------------------- ------------------- -------------------
Other Assets:
Obligatory investments, net of allowances of $10,511 - 10,601 (I) 10,601
Other assets - 2,747 (I) 10,243
Add Consent Fee - New Notes - 7,496 (K)
------------------- -------------------- -------------------
Total other assets - 20,844 20,844
------------------- ------------------- -------------------
$ - $ 236,140 $ 236,140
=================== =================== ===================
LIABILITIES:
Current Liabilities:
Accounts payable $ - $ 5,685 (I) $ 5,685
Accrued liabilities -
Salaries and wages - 3,847 (I) 3,847
Interest - - -
Gaming obligations - 2,618 (I) 2,618
Self-insurance - 2,193 (I) 2,193
Other - 4,599 (I) 4,599
------------------- ------------------- -------------------
Total current liabilities - 18,942 18,942
------------------- ------------------- -------------------
Long-Term Debt, New Notes, Net - 110,000 (I) 110,000
------------------- ------------------- -------------------
Other Noncurrent Liabilities - 3,586 (I) 3,586
------------------- ------------------- -------------------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $.01 par value per
share; 5,000,000 shares authorized; 0 shares - - -
outstanding
Common stock, $.01 par value per share;
20,000,000 shares authorized;
1,450,000 shares issued and outstanding - 15 (L) 15
Additional paid-in capital 70,597 (M) 70,597
Warrants outstanding - 33,000 (N) 33,000
Accumulated deficit - - -
------------------- ------------------- -------------------
Total shareholders' equity - 103,612 103,612
------------------- ------------------- -------------------
$ - $ 236,140 $ 236,140
=================== =================== ===================
P-21
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2003
ASSUMING 58% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
Revenues:
Casino $ - $ 93,286 (A) $ 93,286
Rooms - 5,415 (A) 5,415
Food and beverage - 10,175 (A) 10,175
Other - 1,963 (A) 1,963
------------- ----------------- ------------------
- 110,839 110,839
Less - promotional allowances - (25,008)(A) (25,008)
------------- ----------------- ------------------
Net revenues - 85,831 85,831
Expenses:
Casino - 64,958 (A) 64,958
Rooms - 1,030 (A) 1,030
Food and beverage - 4,481 (A) 4,481
Other - 1,388 (A) 1,388
General and administrative - 5,261 (A) 5,261
Depreciation and amortization, including provision
for obligatory investments - 7,678 (A) 7,401
Adjust deferred financing fees - Existing Notes (277)(C)
Loss on disposal of assets - 3 (A) 3
------------- ----------------- ------------------
Total expenses - 84,633 84,522
------------- ----------------- ------------------
Income from operations - 1,309 1,309
Non-operating income (expense):
Interest income - 361 (A) 354
Adjust for lower invested balances (7)(D)
Interest expense - (957)(E) (1,372)
Amortize consent fee - New Notes (473)(F)
Adjust capitalized interest 58 (G)
------------- ----------------- ------------------
Total non-operating expense, net - (1,018) (1,018)
------------- ----------------- ------------------
Income (loss) before income taxes - 291 291
Income tax provision - (343)(H) (343)
------------- ----------------- ------------------
Net loss $ - $ (52) $ (52)
============= ================= ==================
Basic/diluted loss per common share $ - $ (0.02) $ (0.02)
============= ================= ==================
Weighted average common shares outstanding - 3,045,000 3,045,000
============= ================= ==================
Ratio of earnings to fixed charges 1.16
------------------
P-22
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2003
($ IN THOUSANDS)
ASSUMING 58% EXCHANGE
PRO FORMA PRO FORMA
ASSETS: HISTORICAL ADJUSTMENTS AS ADJUSTED
- ------- ---------- ----------- -----------
Current Assets:
Cash and cash equivalents $ - $ 46,502 (I) $ 36,868
Adjust for decreased cash balances (9,635)(J)
Accounts receivable, net of allowance of $8,833 - 4,637 (I) 4,637
Inventories - 2,031 (I) 2,031
Income tax - 1,363 (I) 1,363
deposits
Prepaid expenses and other current assets - 2,705 (I) 3,650
Add consent fee - New Notes - 945 (K) -
--------------- ----------------- ----------------
Total current assets - 48,549 48,549
--------------- ----------------- ----------------
Property and Equipment:
Land - 54,344 (I) 54,344
Buildings and improvements - 92,132 (I) 92,132
Equipment - 49,925 (I) 49,925
Construction in progress - 5,760 (I) 5,760
--------------- ----------------- ----------------
- 202,161 202,161
Less - accumulated depreciation and amortization - (32,687)(I) 32,687)
--------------- ----------------- ----------------
Property and equipment, net - 169,474 169,474
--------------- ----------------- ----------------
Other Assets:
Obligatory investments, net of allowances of
of $10,511 - 10,601 (I) 10,601
Other assets - 2,747 (I) 8,182
Add Consent Fee - New Notes 5,435 (K)
--------------- ----------------- ----------------
Total other assets - 18,783 18,783
--------------- ----------------- ----------------
$ - $ 236,806 $ 236,806
=============== ================= ================
LIABILITIES:
Current Liabilities:
Accounts payable $ - $ 5,685 (I) $ 5,685
Accrued liabilities -
Salaries and wages - 3,847 (I) 3,847
Interest - - -
Gaming obligations - 2,618 (I) 2,618
Self-insurance - 2,193 (I) 2,193
Other - 4,599 (I) 4,599
--------------- ----------------- ----------------
Total current liabilities - 18,942 18,942
--------------- ----------------- ----------------
Long-Term Debt, New Notes, Net - 110,000 (I) 110,000
--------------- ----------------- ----------------
Other Noncurrent Liabilities - 3,586 (I) 3,586
--------------- ----------------- ----------------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $.01 par value per share;
5,000,000 shares authorized; 0 shares
outstanding - - -
Common stock, $.01 par value per share;
20,000,000 shares authorized;
3,045,000 shares issued and outstanding - 30 (L) 30
Additional paid-in capital - 70,248 (M) 70,248
Warrants outstanding - 34,000 (N) 34,000
Dividends - - -
Accumulated deficit - - -
--------------- ----------------- ----------------
Total shareholders' equity - 104,278 104,278
--------------- ----------------- ----------------
$ - $ 236,806 $ 236,806
=============== ================= ================
P-23
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2002
AND AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2003
PRO FORMA ADJUSTMENTS
Statements of Operations Adjustments:
(A) Represents the inclusion of the amounts presented in the respective
statement of operations of GB Holdings, Inc. and Subsidiaries for the
year ended December 31, 2002 and the six months ended June 30, 2003 as
the result of operations are to be recorded by Atlantic Coast
Entertainment Holdings, Inc. and Subsidiary.
(B) Represents the estimated transaction fees associated with the issuance
of the New Notes.
(C) Represents the removal of deferred financing costs related to the
Existing Notes contained in the amount of the "Depreciation and
Amortization, including Provision for obligatory investments" of GB
Holdings, Inc. and Subsidiaries.
(D) Represents a decrease in interest income as a result of lower cash
balances due to a payments of consent fee, estimated transaction fees
and accelerated interest payments, net of the benefit of discontinued
interest payments on Existing Notes.
(E) Represent interest on the New Notes issued in exchange for Existing
Notes which is accrued at 3% annually with the resulting expense as
follows by period for each exchange scenario:
100% 80% 58%
exchanged exchanged exchanged
---------------- ----------------- -------------------
Year ended 12/31/02 $3,300,000 $2,640,000 $1,914,000
Six months ended 6/30/03 $1,650,000 $1,320,000 $957,000
(F) Represents amortization expense using the interest method of the
consent fee paid (10% of the face value of Existing Notes exchanged)
upon exchange of the Existing Notes for New Notes, which mature in
2008.
(G) Represent the capitalized interest using the lower effective interest
rate as a result of the issuance of the New Notes.
(H) Represents the impact on the income tax provision as a result of the
Transaction and the aforementioned Pro Forma adjustments based on a
Federal tax rate of 35% and a state tax rate of 9%.
Balance Sheet Adjustments :
(I) Represents the inclusion of the net assets presented in the balance
sheet of GB Holdings, Inc. and Subsidiaries as of June 30, 2003 as the
result of the transfer of all assets to Atlantic Coast Entertainment
Holdings, Inc. and Subsidiary.
(J) Represents the net decrease in cash as of June 30, 2003. Amount is
equal to the cumulative amount of estimated cash payments for the
following items by each exchange scenario:
(K) Represents Consent fee paid upon exchange of Existing Notes for New
Notes
P-24
100% 80% 58%
exchanged exchanged exchanged
--------------------- ----------------- --------------------
Consent fees $11,000,000 $8,800,000 $6,380,000
Estimated financing fees 1,500,000 1,500,000 1,500,000
Accrued interest 3,025,000 2,420,000 1,755,000
--------------------- ----------------- --------------------
Existing Notes $15,525,000 $12,720,000 $9,635,000
===================== ================= ====================
(L) Represents: In a 100% exchange of the Existing Notes, the former
shareholders of GB Holdings, Inc. and Subsidiaries receive their
ownership in Atlantic Coast Entertainment Holdings, Inc. and
Subsidiary. In a less than 100% exchange, GB Holdings, Inc. and
Subsidiaries will own 100% of the outstanding shares of Common Stock
of Atlantic Coast Entertainment Holdings, Inc. and Subsidiary.
(M) Represents the paid in capital as a result of the transaction.
(N) Represents the value of the outstanding warrants to purchase Atlantic
Coast Entertainment Holdings, Inc. common stock (as determined by
third party valuation) ultimately dividended to the shareholders of GB
Holdings Inc., in a less than 100% exchange scenario.
P-25
ANNEX A
CERTIFICATE OF INCORPORATION
OF
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
The undersigned, being over the age of eighteen years, in order to form
a corporation pursuant to the provisions of the Delaware General Corporation
Law, does hereby certify as follows:
FIRST: The name of this corporation shall be: ATLANTIC COAST
ENTERTAINMENT HOLDINGS, INC. (the "Corporation").
SECOND: The address, including street, number, city, and county, of the
registered office of the Corporation in the State of Delaware is 2711
Centerville Road, Suite 400, City of Wilmington 19808, County of New Castle; and
the name of the registered agent of the Corporation in the State of Delaware at
such address is Corporation Service Company.
THIRD: The purpose or purposes of the Corporation shall be to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware
FOURTH: The total number of shares which the Corporation shall have
authority to issue is 25,000,000, consisting of 20,000,000 shares of common
stock, all of a par value of one cent ($.01) each ("Common Stock"), and
5,000,000 shares of preferred stock, all of a par value of one cent ($.01) each
("Preferred Stock"). The voting powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, in respect of the classes of stock of the
Corporation are as follows:
(a) Preferred Stock,
(i) The Preferred Stock of the Corporation may be issued from
time to time in one or more series of any number of shares, provided
that the aggregate number of shares issued and not canceled in any and
all such series shall not exceed the total number of shares of
Preferred Stock hereinabove authorized.
(ii) Authority is hereby vested in the Board of Directors from
time to time to authorize the issuance of one or more series of
Preferred Stock and, in connection with the creation of such series, to
fix by resolution or resolutions providing for the issuance of shares
thereof the characteristics of each such series including, without
limitation, the following:
A-1
(1) the maximum number of shares to constitute such
series, which may subsequently be increased or decreased (but
not below the number of shares of that series then
outstanding) by resolution of the Board of Directors, the
distinctive designation thereof and the stated value thereof
if different than the par value thereof;
(2) whether the shares of such series shall have
voting powers, full or limited, or no voting powers, and if
any, the terms of such voting powers;
(3)the dividend rate, if any, on the shares of such
series, the conditions and dates upon which such dividends
shall be payable, the preference or relation which such
dividends shall bear to the dividends payable on any other
class or classes or on any other series of capital stock and
whether such dividend shall be cumulative or noncumulative;
(4)whether the shares of such series shall be subject
to redemption by the Corporation, and, if made subject to
redemption, the times, prices and other terms, limitations,
restrictions or conditions of such redemption;
(5) the relative amounts, and the relative rights or
preference, if any, of payment in respect of shares of such
series, which the holders of shares of such series shall be
entitled to receive upon the liquidation, dissolution or
winding-up of the Corporation;
(6) whether or not the shares of such series shall be
subject to the operation of a retirement or sinking fund and,
if so, the extent to and manner in which any such retirement
or sinking fund shall be applied to the purchase or redemption
of the shares of such series for retirement or to other
corporate purposes and the terms and provisions relative to
the operation thereof;
(7) whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of any other
class, classes or series, or other securities, whether or nor
issued by the Corporation, and if so convertible or
exchangeable, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting
same;
(8) the limitations and restrictions, if any, to be
effective while any shares of such series are outstanding upon
the payment of dividends or the making of other distributions
on, and upon the purchase, redemption or other acquisition by
the Corporation of, the Common Stock (as defined below) or any
other class or classes of stock of the Corporation ranking
junior to the shares of such series either as to dividends or
upon liquidation, dissolution or winding-up;
A-2
(9) the conditions or restrictions, if any, upon the
creation of indebtedness of the Corporation or upon the
issuance of any additional stock (including additional shares
of such series or of any other series or of any other class)
ranking on a parity with or prior to the shares of such series
as to dividends or distributions of assets upon liquidation,
dissolution or winding-up; and
(10) any other preference and relative.
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, as shall
not be inconsistent with law, this ARTICLE FOURTH or any
resolution of the Board of Directors pursuant hereto.
(b) Common Stock
(i) The Common Stock of the Corporation may be issued from time to
time in any number of shares, provided that the aggregate
number of shares issued and not canceled shall not exceed the
total number of shares of Common Stock hereinabove authorized.
(ii) Unless expressly provided by the Board of Directors of the
Corporation in fixing the voting rights of any series of
Preferred Stock, the holders of the outstanding shares of
Common Stock shall exclusively possess all voting power for
the election of directors and for all other purposes, each
holder of record of shares of Common Stock being entitled to
one vote for each share of such stock standing in his name on
the books of the Corporation.
(iii) Subject to the prior rights of the holders of Preferred Stock
now or hereafter granted pursuant to this ARTICLE FOURTH, the
holders of Common Stock shall be entitled to receive, when and
as declared by the Board of Directors, out of funds legally
available for that purpose, dividends payable either in cash,
stock or otherwise.
(iv) In the event of any liquidation, dissolution or winding-up of
the Corporation, either voluntary or involuntary, after
payment shall have been made in full to the holders of
Preferred Stock of any amounts to which they may be entitled
and subject to the rights of the holders of Preferred Stock
now or hereafter granted pursuant to this ARTICLE FOURTH, the
holders of Common Stock shall be entitled, to the exclusion of
the holders of Preferred Stock of any and all series, to
share, ratably accordingly to the number of shares of Common
Stock held by them, in all remaining assets of the Corporation
available for distribution to its stockholders.
FIFTH: The Board of Directors shall have the power to adopt, amend or
repeal the by-laws of the Corporation.
A-3
SIXTH: No director shall be personally liable to the Corporation or its
stockholders for monetary damages or any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this ARTICLE SIXTH shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
SEVENTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law, as the same may be amended
and supplemented from time to time, indemnify any and all persons whom it shall
have power to indemnify under said Section from and against any and all of the
expenses, liabilities or other matters referred to or covered by said Section,
and the indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any By-Law,
agreement, vote of stockholders or disinterested directors, or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person
EIGHTH: All securities (as defined by the New Jersey Casino Control
Act, N.J.S.A. 5:12-1 et seq. (the "Act")) of the Corporation are held subject to
the condition that, if a holder thereof is found to be disqualified by the New
Jersey Casino Control Commission pursuant to the provisions of the Act, such
holder shall (a) dispose of his or her interest in the Corporation; (b) not
receive any dividends or interest upon any such securities; (c) not exercise,
directly or through any trustee or nominee, any voting right conferred by such
securities; and (d) not receive any remuneration in any form from the casino
licensee for services rendered or otherwise. If any unsuitable or disqualified
holder fails to dispose of his securities within 180 days following such
disqualification, (i) such securities shall be subject to redemption by the
Corporation, by action of the Board of Directors, if in the judgment of the
Board of Directors such action should be taken, pursuant to Section 151 (b) of
the General Corporation Law of Delaware, to the extent necessary to prevent the
loss or secure the reinstatement of any government-issued license or franchise
held by the Corporation, which license or franchise is conditioned upon some or
all of the holders of the Corporation's securities possessing prescribed
qualifications and (ii) such unsuitable or disqualified holder shall indemnify
the Corporation for any and all direct or indirect costs, including attorneys'
fees, incurred by the Corporation as a result of such holder's continuing
ownership or failure to divest promptly. The redemption price for all securities
to be redeemed by the Corporation pursuant to this ARTICLE EIGHTH shall be the
par value per share thereof.
A-4
NINTH: The Corporation shall not create, designate, authorize or cause
to be issued any class or
series of nonvoting stock.
TENTH: The corporation elects not to be governed by the "Takeover
Statute" (Section 203 of the General Corporation Law of the State of Delaware).
NINTH: The name and address of the incorporator is Bernadette Fallows
Davidson, Esq. 50 West State Street, Suite 1400, P.O. Box 1298, Trenton, New
Jersey 08607-1298.
IN WITNESS WHEREOF, the undersigned has set her hand this 30th day of
October, 2003.
---------------------------
Bernadette Fallows Davidson
A-5
ANNEX B
BY-LAWS OF
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
-------------------------------------------
ARTICLE 1
OFFICES
Section 1.1. Principal Office. The principal office of the Corporation
shall bec c/o Sands Hotel & Casino, Indiana Avenue & Brighton Park, Atlantic
City, New Jersey 08401.
Section 1.2. Other Offices. The corporation may also have offices, and
keep the books and records of the corporation, at such other places, either
within or without the State of Delaware, as the board of directors may from time
to time determine or as the business of the corporation may require, except as
may otherwise be required by law.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of the stockholders shall
be held at the office of the corporation or at such other places as may be fixed
from time to time by the board of directors, either within or without the State
of Delaware, and stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2.2. Annual Meetings. Annual meetings of stockholders shall be
held at the time and place to be selected by the board of directors. If the day
is a legal holiday, then the meeting shall be held on the next following
business day. At the meeting, the stockholders shall elect a board of directors
by written ballot and transact such other business as may properly be brought
before the meeting.
Section 2.3. Notice of Annual Meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 2.4. Voting List. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
B-1
Section 2.5. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the chairman of the board or the
president of the corporation and shall be called by the president or the
secretary at the request in writing of a majority of the board of directors, or
by the holders of ten percent (10%) or more of the outstanding shares of stock
of the corporation. Such request shall state the purpose or purposes of the
proposed meeting.
Section 2.6. Notice of Special Meetings. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting. Business transacted at any special
meeting of the stockholders shall be limited to the purposes stated in the
notice.
Section 2.7. Quorum. The, holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except, as may otherwise be provided by statute or by
the certificate of incorporation.
If a quorum is present at a meeting of stockholders, the stockholders
represented in person or by proxy at the meeting may conduct such business as
may be properly brought before the meeting until it is finally adjourned, and
the subsequent withdrawal from the meeting of any stockholder or the refusal of
any stockholder represented in person or by proxy to vote shall not affect the
presence of a quorum at the meeting, except as may otherwise be provided by law
or the certificate of incorporation.
If, however, such quorum shall not be present or represented at any
meeting of the stockholders, the chairman of the meeting or the holders of a
majority of the capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, or if these
Bylaws otherwise require, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2.8. Order of Business. At each meeting of the stockholders,
one of the following persons, in the order in which they are listed (and in the
absence of the first, the next, and so on), shall serve as chairman of the
meeting: chairman of the board, president, vice presidents (in the order of
their seniority if more than one) and secretary. The order of business at each
such meeting shall be as determined by the chairman of the meeting. Except as
may otherwise be provided by statute, the certificate of
B-2
incorporation or these Bylaws, the chairman of the meeting shall have, in his
sole discretion, the right and authority to prescribe such rules, regulations
and procedures and to do all such acts and things as are necessary or desirable
for the proper conduct of the meeting, including, without limitation, the
establishment of procedures for the maintenance of order and safety, limitations
on the time allotted to questions or comments on the affairs of the corporation,
restrictions on entry to such meeting after the time prescribed for the
commencement thereof, and the opening and closing of the voting polls. Only
stockholders of record will be permitted to present motions from the floor at
any meeting of stockholders.
Section 2.9. Majority Vote. When a quorum is present at any meeting,
the vote of the holders of a majority of the stock having voting power present
in person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of the
statutes, the certificate of incorporation or these Bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 2.10. Method of Voting. Unless otherwise provided in the
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder (i) at the time fixed
pursuant to Section & 5 of these By Laws as the record date for the
determination of stockholders entitled to vote at such meeting, or (ii) if no
such record date shall have been fixed, then at the close of business on the
date next preceding the day on which notice thereof shall be given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held, but no proxy shall be voted on or after three (3)
years from its date, unless the proxy provides for a longer period.
Section 2.11. Action of Stockholders by Written Consent Without
Meetings. Unless otherwise provided in the certificate of incorporation, any
action required or permitted to be taken by stockholders for or in connection
with any corporate action may be taken without a meeting, without prior notice
and without a vote, if a consent or consents in writing setting forth the action
so taken shall be (a) signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted and (ii) delivered to the corporation by delivery to its
registered office in Delaware, its principal place of business or an officer or
agent of the corporation having custody of the book in which proceedings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder who
signs the consent.
If action is taken by less than unanimous consent of stockholders and
in accordance with the foregoing, there shall be filed with the records of the
meetings of stockholders the writing or writings comprising such less than
B-3
unanimous consent. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous consent shall be given to those who have not
consented in writing, and a certificate signed and attested to by the secretary
that such notice was given shall be filed with the records of the-meetings of
the stockholders.
If action is taken by unanimous consent of stockholders, the writing or
writings comprising such unanimous consent shall be filed with the records of
the meetings of stockholders.
In the event that the action which is consented to is such as would
have required the filing of a certificate under any of the provisions of the
General Corporation Law of the State of Delaware (the "DGCL") as amended, if
such action had been voted upon by the stockholders at a meeting thereof, the
certificate filed under such provisions shall state (i) that written consent has
been given under Section 228 of the DGCL, as amended, in lieu of stating that
the stockholders have voted upon the corporate action in question, if such last
mentioned statement is so required, and (ii) that written notice has been given
as provided in such Section 228.
ARTICLE 3
DIRECTORS
Section 3.1. General Powers. The business and affairs of the
corporation shall be managed by or under the direction of the board of
directors, which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by law or by the certificate of incorporation
of the corporation or by these Bylaws directed or required to be exercised or
done by the stockholders.
Section 3.2. Number of Directors. The number of directors constituting
the board shall be such number as shall be from time to time specified by
resolution of the board of directors; provided, however, that no director's term
shall be shortened by reason of a resolution reducing the number of directors;
and further provided that the number of directors constituting the initial board
of directors shall be 6 and shall remain such number unless and until changed by
resolution of the board of directors on or after the date hereof.
Section 3.3. Election Qualification and Term of Office of Directors.
Directors shall be elected at each annual meeting of stockholders at which a
quorum is present to hold office until the next annual meeting. The persons
receiving a plurality of the votes of the shares represented in person or by
proxy and entitled to vote on the election of directors shall be, elected
directors. Except as may otherwise be provided by law, the certificate of
incorporation or these Bylaws, directors need not be stockholders nor residents
of the State of Delaware. Except as may otherwise be provided by law, the
certificate of incorporation or these Bylaws, each director, including a
director elected to fill a vacancy, shall hold office until the next annual
meeting and until his successor is elected and qualified or until his earlier
death, disqualification, resignation or removal.
B-4
Section 3.4. First Meetings. The first meeting of each newly elected
board of directors shall be held at such time and place as shall be fixed by the
vote of the stockholders at the annual meeting and no notice of such meeting
shall be necessary to the newly elected directors in order legally to constitute
the meeting provided a quorum shall be present. In the event of the failure of
the stockholders to fix the time or place of such first meeting of the newly
elected board of directors, or in the event such meeting is not held at the time
and place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 3.5. Regular Meetings. Regular meetings of the board of
directors may be held without notice (except as may otherwise be required by law
or these Bylaws) at such times and at such places as shall from time to time be
determined by the board.
Section 3.6. Special Meetings. Special meetings of the board of
directors may be called by the chairman of the board or the president, and shall
be called by the president or secretary on the written request of two (2)
directors unless the board consists of only one director, in which case special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of the sole director.
Section 3.7. Quorum; Majority Vote. At all meetings of the board, a
majority of the entire board of directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting of
the board of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 3.8. Action Without Meeting. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the board of directors may be taken without a
meeting, if all members of the board consent in writing to the adoption of a
resolution authorizing the action, and the writing or writings are filed with
the minutes of the proceedings of the board.
Section 3.9. Telephone and Similar Meetings. Unless otherwise
restricted by the certificate of incorporation or these Bylaws, members of the
board of directors may participate in any meeting of the board of directors by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting of
the board.
Section 3.10. Notice of Meetings. Unless otherwise required by law or
specified herein, notice of regular meetings of the board of directors or of any
adjourned meeting
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thereof need not be given. Notice of each special meeting of the board (and of
each regular meeting for which notice shall be required) shall be sailed to each
director, addressed to such director at such director's residence or usual place
of business, at least two (2) days before the day on which the meeting is to be
held or shall be sent to such director at such place by telex, cable, facsimile
or telegram or be given personally or by telephone, not later than the day
before the meeting is to be held, but notice need not be given to any director
who shall, either before or after the meeting, submit a signed written waiver of
such notice or who shall attend such meeting without protesting, prior to or at
its commencement, the lack of notice to such director. Every such notice shall
state the time and place but need not state the purpose of the meeting.
Section 3.11. Rules and Regulations. The board of directors may adopt
such rules and regulations not inconsistent with the provisions of law, the
certificate of incorporation of the corporation or these Bylaws for the conduct
of its meetings and management of the affairs of the corporation, as the board
may deem proper.
Section 3.12. Resignations. Any director of the corporation may at any
time resign by' giving written notice to the board of directors, the chairman of
the board, the president or the secretary of the corporation. Such resignation
shall take effect at the time specified therein or, if the time be not
specified, upon receipt thereof; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 3.13. Removal of Directors. Unless otherwise restricted by
statute, by the certificate of incorporation or by these Bylaws, any director or
the entire board of directors may be removed, with or without cause, by the
holders of a majority of the shares then entitled to vote at an election of
directors; provided, however, that when the holders of any class or series of
stock are entitled by the certificate of incorporation to elect one (1) or more
directors, then, in respect to the removal without cause of a director or
directors so elected, the required majority vote shall be of the holders of the
outstanding shares of such class or series and not of the Outstanding shares as
a whole.
Section 3.14. Vacancies. Except as may otherwise be provided by, law,
the certificate of incorporation or these By Laws, any vacancies on the board of
directors resulting from death, disqualification, resignation, removal or other
cause, and newly created directorships resulting from any increase in the number
of directors shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the board
of directors, or by a sole remaining director. Any director elected or chosen in
accordance with the preceding sentence of this Section 3.15 shall hold office
for the remainder of the term of the directorship to which he was appointed or
until his successor shall have been elected and qualified or until his earlier
death, disqualification, resignation or removal. Unless the certificate of
incorporation or these Bylaws provide otherwise, when one or more directors
shall resign from the board of directors, effective at future date, the majority
of directors then in office, including
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those who have so resigned, shall have the power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective.
Section 3.15. Compensation of Directors. Unless otherwise restricted by
the certificate of incorporation of these Bylaws, the board of directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the board of
directors and may be paid a fixed sum for attendance at each meeting of the
board of directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
ARTICLE 4
EXECUTIVE AND OTHER COMMITTEES
Section 4.1. Executive and Other Committees. The board of directors
may, by resolution adopted by a majority of the entire board, designate from
time to time one (1) or more of its members to constitute members or alternate
members of an executive committee or one or more other committees, which
committees shall have and may exercise, between meetings of -the board, all the
powers and authority of the board in the management of the business and affairs
of the corporation, including, if any such committee is so empowered and
authorized ay resolution adopted by a majority of the entire board, the power
and authority to declare a dividend, to authorize the issuance of stock and to
adopt a certificate of ownership and merger pursuant to Section 253 of the DGCL,
as amended, and may authorize the seal of the corporation to be affixed to all
papers which may require it, except that no such committee shall have such power
or authority with reference to:
(a) amending the certificate of incorporation of the corporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors pursuant to authority, if any, expressly vested in the board by the
provisions of the certificate of incorporation, (i) fix the designations and any
of the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation, or (ii) fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series);
(b) adopting an agreement of merger or consolidation involving the
corporation;
(c) recommending to the stockholders the sale, lease or exchange of all
or substantially all of the property and assets of the corporation;
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(d) recommending to the stockholders a dissolution of the corporation
or a revocation of a dissolution;
(e) adopting, amending or repealing any Bylaw;
(f) filling vacancies on the board;
(g) fixing the compensation of directors for serving on the board or on
any committee of the board, including the executive committee; or
(h) amending or repealing any resolution of the board which by its
terms may be amended or repealed only by the board.
Section 4.2. Procedure; Meetings; Quorum. Regular meetings of the
executive committee or any other committee of the board of directors, of which
no notice shall be necessary, may be held at such times and places as shall be
fixed by resolution adopted by a majority of the members thereof. Special
meetings of the executive committee or any other committee of the board shall be
called at the request of any member thereof. Notice of each special meeting of
the executive committee or any other committee of the board shall be sent by
mail, telex, cable, facsimile, telegram or telephone, or be delivered personally
to each member thereof not later than the day before the day on which the
meeting is to be held, but notice need not be given to any member who shall,
either before or after the meeting, submit a signed written waiver of such
notice or who shall attend such meeting without protesting, prior to or at its
commencement, the lack of such notice to such member. Any special meeting of the
executive committee or any other committee of the board shall be a legal meeting
without any notice thereof having been given, if all the members thereof shall
be present thereat. Notice of any adjourned meeting of any committee of the
board need not be given. The executive committee or any other committee of the
board may adopt such rules and regulations not inconsistent with the provisions
of law, the certificate of incorporation of the corporation or these Bylaws for
the conduct of its meetings as the executive committee or any other committee of
the board may deem proper. A majority of the executive committee or any Other
committee of the board shall constitute a quorum for the transaction of business
at any meeting, and the vote of a majority of the members thereof present at any
meeting at which a quorum is present shall be the act of such committee. In the
absence or disqualification of a member, the remaining members, whether or not a
quorum may fill a vacancy. The executive committee or any other committee of the
board of directors shall keep written minutes of its proceedings, a copy of
which is to be filed with the secretary of the corporation, and shall report on
such proceedings to the board.
Section 4.3. Compensation. Members of special or standing committees
may be allowed compensation if the board of directors shall so determine
pursuant to Section 3.16 of these Bylaws.
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Section 4.4 Action by Consent; Participation by Telephone or Similar
Equipment. Unless the board of directors, the certificate of incorporation or
these Bylaws shall otherwise provide, any action required or permitted to be
taken by any committee may be taken without a meeting if all members of the
committee consent in writing to the adoption of a resolution authorizing the
action, and the writing or writings are filed with the minutes of the
proceedings of the committee. Unless the board of directors, the certificate of
incorporation or these Bylaws shall otherwise provide, any one or more members
of any such committee may participate in any meeting of the committee by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation by
such means shall constitute presence in person at a meeting of the committee.
Section 4.5. Changes in Committees; Resignations; Removals. The board
shall have powers, by the affirmative vote of a majority of the authorized
number of directors, at any time to change the members of, to fill vacancies in,
and to discharge any committee of the board. Any member of any such committee
may resign at any time by giving notice to the corporation, provided, however,
that notice to the board, the chairman of the board, the president, the chairman
of such committee or the secretary shall be deemed to constitute notice to the
corporation. Such resignation shall take effect upon receipt of such notice or
at any later time specified therein; and, unless otherwise specified therein,
acceptance of such resignation shall not be necessary to make it effective. Any
member of any such committee may be removed at any time, with or without cause,
by the affirmative vote of a majority of 'the authorized number of directors at
any meeting of the board called for that purpose.
ARTICLE 5
NOTICES
Section 5.1. Method. Whenever, under the provisions of the statutes or
of the certificate of incorporation or of these Bylaws, notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telex, cable, facsimile or telegram.
Section 5.2. Waiver. Whenever any notice is required to be given under
the provisions of the statutes or of the certificate of incorporation or of
these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened, Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
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Committee of directors need be specified in any written waiver of notice unless
so required by the certificate of incorporation or these Bylaws.
ARTICLE 6
OFFICERS
Section 6.1. Election; Qualification. The officers of the corporation
shall be chosen annually by the board of directors at its first regular meeting
held after the annual meeting of stockholders or as soon thereafter as
conveniently practicable and shall be a president, one or more vice presidents
and a secretary. The board of directors may also choose as officers a chairman
of the board, one or more vice chairmen of the board, a treasurer, one or more
assistant secretaries and assistant treasurers and such other officers and
agents as it shall deem necessary. Any number of offices may-be held by the same
person, unless the certificate of incorporation or these Bylaws otherwise
provide. The chairman of the board and any vice chairman of the board shall be
elected from among the directors. With the foregoing exception, none of the
other officers need be a director, and none of the officers need be a
stockholder of the corporation unless otherwise required by the certificate of
incorporation.
Section 6.2. Salary. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 6.3. Term; Removal. The officers of the corporation shall hold
office until their successors are chosen and qualify or until their death or the
effective date of their removal or resignation (or until he shall cease to be a
director in the case of the chairman of the board or any vice chairman of the
board). Any officer elected or appointed by the board of directors may be
removed, with or without cause, at any time by the affirmative vote of a
majority of the board of directors.
Section 6.4. Resignation. Subject at all times to the right of removal
as provided in Section 6.3 of this Article 6, any officer may resign at any time
by giving notice to the board of directors, the chairman of the board, the
president or the secretary of the corporation. Any such resignation shall take
effect at the date of receipt of such notice or at any later date specified
therein; provided that the president or, in the event of the resignation of the
president, the board of directors may designate an effective date for such
resignation which is earlier than the date specified in such notice but which is
not earlier than the date of receipt of such notice; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 6.5. Vacancies. A vacancy in any office because of death,
resignation, removal or any other cause may be filled for the unexpired portion
of the term by the board of directors and, in the case of any vacancy in an
office other than the office of chairman of the board or vice chairman of the
board (if any) or president, by the president.
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Section 6.6. Chairman of the Board. The chairman of the board shall, if
there be such an officer, preside at meetings of the board of directors and
preside at meetings of the stockholders. The chairman of the board shall counsel
with and advise the president and perform such other duties as the president or
the board or the executive committee may from time to time determine. Except as
otherwise provided by resolution of the board, the chairman of the board shall
be ex-officio a member of all committees of the board. The chairman of the board
may sign and execute in the name of the corporation any and all deeds,
mortgages, bonds, contracts, agreements, certificates or other instruments or
documents authorized by the board or any committee thereof "powered to authorize
the same.
Section 6.7. Vice Chairman of the Board. In the absence of the chairman
of the board or, in the event of his inability or refusal to act, the vice
chairman (or in the event there be more than one vice chairman, the vice
chairmen in the order designated by the directors, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the chairman of the board, and when so acting shall have all the powers of and
be subject to all the restrictions upon the chairman of the board. The vice
chairman shall perform such other duties and have such other powers as the board
of directors may from time to time prescribe. Any vice chairman may sign and
execute in the name of the corporation any and all deeds, mortgages, bonds,
contracts, agreements, certificates or other instruments or documents authorized
by the board or any committee thereof empowered to authorize the same.
Section 6.8. President. The president shall be the chief executive
officer of the corporation, shall preside at all meetings of the stockholders
and the board of directors if there shall be no chairman or vice chairman of the
board or if the chairman or vice chairman of the board shall not be present or
shall be unable or unwilling to act at any such meeting, shall have general and
active management of the business of the corporation and shall see that all
orders and resolutions of the board of directors are carried into effect. He
shall execute deeds, mortgages, bonds, contracts, agreements, certificates or
other instruments or documents requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation.
Section 6.9. Vice Presidents. In the absence of the president, the
chairman of the board and the vice chairmen of the board or, in the event of
their inability or refusal to act, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated by the
directors or, in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
Section 6.10. Secretary. Secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record-all the
proceedings of the
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meetings of the corporation and of the board of directors in a book to be kept
for that purpose and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the board of directors, and shall perform
such other duties as may be prescribed by the board of directors or president,
under whose supervision he shall be. He shall have custody of the corporate seal
of the corporation and he, or an assistant secretary, shall have authority to
affix the same to any instrument requiring it and when so affixed, it may be
attested by his signature or by the signature of such assistant secretary. The
board of directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 6. 11. Assistant Secretary. The assistant secretary, or if
there shall be more than one, the assistant secretaries in the order determined
by the board of directors (or if there be no such determination, then in the
order of their election) shall, in the absence of the secretary or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall perform such other duties and have such other powers
as the board of directors may from time to time prescribe.
Section 6.12. Treasurer. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the, name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and shall
render to the president and the board of directors, at its regular meetings, or
when the board of directors so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation. If required by the
board of directors, he shall give the corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 6.13. Assistant Treasurer. The assistant treasurer, or if there
shall be more than one, the assistant treasurers in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may-from time to time prescribe.
ARTICLE 7
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 7.1. Third-Party Actions. The corporation shall indemnify to
the fullest extent authorized or permitted by Section 145 of the DGCL any person
(his heirs,
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executors and administrators) who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that such person is
or was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director or officer or in any other capacity for
another corporation, partnership, joint venture, trust or other enterprise,
against all expenses (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in connection
with such action, suit -)r proceeding if such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith and in
a manner which such person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, that such person had reasonable cause to believe that his or her
conduct was unlawful.
The corporation may indemnify any employee or agent of the corporation,
or any employee or agent serving at the request of the corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, in the manner and to the extent that it shall indemnify any
director or officer under this Section 7.1.
Section 7.2. Derivative Actions. The corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against all expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made with respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of such person's duty to
the corporation unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the Court of Chancery of Delaware or such other
court shall deem proper.
Section 7.3. Determination of Indemnification. Any indemnification
under Section 7.1 or 7.2 of this Article 7 (unless ordered by a court) shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the
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director, officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct set forth in Section 7.1 or
7.2 of this Article 7. Such determination shall be made (i) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in, a written opinion, or (iii) by the
stockholders.
Section 7.4. Right to Indemnification. Notwithstanding the other
provisions of this Article 7, to the extent that a director, officer, employee
or agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 7.1 or 7.2 of
this Article 7, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
Section 7.5. Advance of Expenses. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the corporation on
behalf of a director, officer, employee or agent in advance of the final
disposition of such action, suit or proceeding as authorized by the board of
directors in the specific case upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that such person is entitled to be indemnified by the
corporation as authorized in this Article 7.
Section 7.6. Indemnification Not Exclusive. The indemnification
provided by this Article 7 shall not be deemed exclusive of any other rights to
which any person seeking indemnification may be entitled under any law, any
agreement, the certificate of incorporation, any vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 7.7. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the corporation would have the,
power to indemnify such person against liability under the provisions of this
Article 7.
Section 7.8. Definitions of Certain Terms. For purposes of this Article
7, references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that
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any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article 7 with respect to the resulting or
surviving corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
For purposes of this Article 7, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; references
to "serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this Article 7.
Section 7.9. Continuity. The indemnification and advancement of
expenses provided for in this Article 7 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent of the corporation and shall inure to the benefit of
the heirs, executors and administrators of such a person.
ARTICLE 8
CERTIFICATES OF STOCK
Section 8. 1. Certificates. Every holder of stock in the corporation
shall be entitled to have a certificate, signed by, or in the name of the
corporation by, the chairman or vice chairman of the board of directors, or the
president or a vice president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof, and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock; provided that, except as
otherwise stated in Section 202 of the DGCL, as amended, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional and other special rights of
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each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 8.2. Facsimile Signatures. When any such certificate is
countersigned by a transfer agent or registered by a registrar other than the
corporation or an employee of the corporation, any or all of the signatures on
the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 8.3. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sun as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 8.4. Transfers of Stock. Upon surrender to the corporation or
the transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 8.5. Fixing Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the board of
directors may fix a record date, which record date shall (i) not precede the
date upon which the resolution fixing the record date is adopted by the board
and (ii) not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the board.
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Section 8.6. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE 9
GENERAL PROVISIONS
Section 9.1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, 'in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Section 9.2. Reserves. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the directors may from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 9.3. Annual Statement. The board of directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
Section 9.4. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 9.5. Contracts. The board may authorize any officer or
officers, agent or agents, in the name and on behalf of the corporation, to
enter into any contract or to execute and deliver any instrument, which
authorization may be general or confined to specific instances; and, unless so
authorized by the board, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable pecuniarily for any purpose or for any amount.
Section 9.6. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
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Section 9.7. Seal. The corporate seal shall have inscribed thereon the
name of the corporation and the words "Seal" or "Corporate Seal." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 9.8. Conflicts with Certificate of Incorporation. In the event
of a conflict between the provisions of these Bylaws and the certificate of
incorporation, the provisions of the certificate of incorporation shall control.
ARTICLE 10
AMENDMENTS
Section 10.1. Amendments. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by a majority of the entire board of
directors, at any meeting of the board of directors if notice of such
alteration, amendment, repeal or adoption of new Bylaws be contained in the
notice of such meeting.
B-18
ANNEX C
CONTRIBUTION AGREEMENT
----------------------
THIS CONTRIBUTION AGREEMENT (this "Agreement"), dated as of
____________, 2003, is made by and among GB Holdings, Inc., a Delaware
corporation ("Parent") and Greate Bay Hotel and Casino, Inc., a New Jersey
corporation ("Operating"; and together with Parent, sometimes referred to as
"Transferors") and Atlantic Coast Entertainment Holding, Inc., a Delaware
corporation ("Newco") and ACE LLC, a New Jersey limited liability company
("Licensee"; and together with Newco, sometimes referred to as "Transferees").
BACKGROUND
----------
A. Parent is the sole beneficial owner of Operating. Operating owns and
operates the Sands Hotel and Casino in Atlantic City, New Jersey ("The Sands").
Newco is a newly formed, wholly-owned subsidiary of Operating. Operating owns
one (1) share of the common stock of Newco, which (1) share represents all of
the outstanding stock of Newco (the "Existing Newco Stock"). Licensee is a newly
formed, wholly-owned subsidiary of Newco.
B. Newco and Licensee engaged in that certain Consent Solicitation and
Offer to Exchange detailed in that certain Form S-4 Registration Statement, No.
333-[__________], filed on [_________], 2003 by Newco and Licensee with the
United States Securities and Exchange Commission (the "Note Registration
Statement"). Pursuant to the terms of the exchange offer detailed in the Note
Registration Statement (the "Exchange Offer"), Newco is offering the holders of
those certain 11% Notes due 2005 (the "Existing Notes") of GB Property Funding
Corp., a Delaware corporation and a wholly-owned subsidiary of Parent
("Funding"), the opportunity to exchange such notes for (1) $100 in cash for
each $1,000 principal amount of Existing Notes exchanged (the "Cash Payment");
(2) on a dollar for dollar basis, 3% Notes due 2008 (the "New Notes") issued by
Newco; and (3) the accrued but unpaid interest on the Existing Notes. The New
Notes shall be governed by the terms of that certain Indenture dated [____],
2003 by and among Newco, Licensee and [_____________], as Trustee (the "New Note
Indenture").
C. Parent is also conducting a proxy solicitation under a Proxy
Statement and Prospectus on Form S-4, No. 333-[__________], filed on
[_________], 2003 by Newco as registrant with the United States Securities and
Exchange Commission (the "Common Stock Registration Statement"). Pursuant to the
terms of the Transaction (as defined in the Common Stock Registration
Statement), prior to the consummation of the Transaction, the holders of a
majority of the outstanding stock of Parent are required to vote in favor of the
Transaction at a meeting of the stockholders of Parent on [______].
D. As a predicate to the Exchange Offer, in connection with the
capitalization of Newco and Licensee, and subject to receipt of the consent of
(1) the majority of the holders of the outstanding stock of Parent, and (2) the
holders of a majority of the aggregate principal amount of the Existing Notes,
(a) (i) Parent desires to contribute to
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Operating all of Parent's assets, other than the stock of Operating and Funding,
and (ii) Operating desires to contribute to Newco all of Operating's assets
including the assets obtained from Parent all as more fully set forth herein
(the "Tier 1 Contribution"), and (b) Newco desires to contribute to Licensee all
of the assets obtained in the Tier 1 Contribution, less cash in an amount
necessary to fund the obligations relating to the Transaction all as more fully
set forth herein (the "Tier 2 Contribution"; and together with the Tier 1
Contribution, the "Asset Contributions").
E. In consideration of the Tier 1 Contribution, Newco, among other
things, (1) shall issue to Operating certain securities of Newco and Newco shall
assume all liabilities, other than the Excluded Liabilities (as defined herein),
relating to the assets contributed to it by Transferors and (2) Newco shall
distribute to Operating all Existing Notes received by Newco in conjunction with
the Exchange Offer, all of which shall be cancelled. The securities to be issued
by Newco shall be determined by reference to the outcome of the Exchange Offer.
If 100% of the Existing Notes are exchanged for New Notes, then Newco will issue
to Operating 27.5% (on a fully diluted basis immediately after consummation of
the Transactions and without giving effect to any further issuance not related
to such Transaction) of the outstanding common stock, par value $0.01 per share,
of Newco (the "Newco Common Stock"), less the Existing Newco Stock. If less than
100% of the Existing Notes are exchanged for New Notes, then Newco will issue to
Operating (1) warrants to purchase shares of Newco Common Stock at a purchase
price of $0.01 per share (the "Warrants") representing 27.5% (on a fully diluted
basis immediately after consummation of the Transaction and without giving
effect to any further issuance not related to such Transaction) of the
outstanding Newco Common Stock, and (2) a portion of the Newco Common Stock
equal to the product of (y) 72.5% and (z) a fraction, the numerator of which is
the total principal amount of the Existing Notes that are not exchanged for New
Notes and the denominator of which is the total principal amount of the Existing
Notes outstanding immediately prior to the completion of the Exchange Offer,
less the Existing Newco Stock. The Newco Common Stock and the Warrants, if any,
issued by Newco in connection with the Exchange Offer, as described above, are
sometimes collectively referred to as the "Newco Securities".
F. In consideration of the Tier 2 Contribution, Licensee, among other
things, shall issue to Newco all of the outstanding limited liability company
membership interests in Licensee (the "Licensee Membership Interests"), Licensee
shall assume all liabilities relating to the assets contributed to it by Newco
and Licensee shall guarantee the New Notes and grant liens upon substantially
all of the assets of Licensee for the benefit of the holders of the New Notes,
all as more fully set forth herein.
G. Through a series of mergers, Operating, Funding and Parent shall
merge, with Parent as the surviving entity, such that all of the assets and
liabilities of Operating and Funding shall become the
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assets and liabilities of Parent (the "Merger"). Newco will thereby become a
wholly-owned subsidiary of Parent.
H. For Federal income tax purposes, it is intended that the asset
contribution described in clause (ii) of the Tier 1 Contribution and the Merger
qualify as a "Reorganization" under the provisions of Section 368(a)(i)(F) of
the Internal Revenue Code of 1986, as amended (the "Code") and the Parent,
Operating, and Newco hereby adopt this Agreement as a plan of reorganization.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and the other agreements being entered in connection with the
Exchange Offer and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Tier 1 Contribution.
-------------------
1.1 Capital Contribution. Effective as of the date hereof, (i)
Parent hereby contributes, transfers, assigns and conveys to Operating all
right, title and interest in and to all of the assets of Parent, both tangible
and intangible, of every nature and type whatsoever, other than its stock in
Operating and Funding, and (ii) Operating hereby contributes, transfers, assigns
and conveys to Newco all right, title and interest in and to all of the assets
both tangible and intangible of every nature and type whatsoever of Operating
(including those obtained pursuant to clause (i) of this Section 1.1) less only
those "Excluded Assets" listed on Schedule 1.1 hereto (the assets so transferred
being referred to collectively as the "Tier 1 Assets").
1.2 Conveyance of the Tier 1 Assets. As of the date hereof,
or as soon after the date hereof as practicable, Transferors shall:
(i) place Newco in effective possession, control and
operation of the Tier 1 Assets and deliver to Newco all Tier 1 Assets, title to
which is capable of passing by delivery; and
(ii) deliver to Newco duly executed assignments or other
instruments and documentation reasonably required to transfer to Newco all
right, title and interest in and to the Tier 1 Assets.
1.3. Consideration. In consideration of the Tier 1
Contribution, Newco, on behalf of itself and its subsidiaries now existing and
hereafter acquired, hereby:
(i) accepts all right, title and interest in and to the
Tier 1 Assets and does hereby assume and agree to promptly and fully pay,
perform and discharge when due all obligations and liabilities associated with
the Tier 1 Assets, less only those
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"Excluded Liabilities" listed on Schedule 1.3(i) hereto (the obligations and
liabilities so assumed collectively referred to as the "Newco Assumed
Liabilities"); and
(ii) agrees to indemnify Transferors against all actions,
proceedings, costs, liabilities, damages, claims and demands arising in
connection with the Newco Assumed Liabilities or the operation of The Sands by
Newco or its transferee subsequent to the date hereof except insofar as such
actions, proceedings, costs, damages, claims and demands arise out of the gross
negligence or willful misconduct of Transferors or a breach of any of the
representations and warranties of Transferors contained in Section 1.4; and
(iii) agrees to issue to Operating or its designee the
Newco Securities in such form and amounts as is required under the terms of the
Exchange Offer and distribute to Operating for cancellation all Existing Notes
received by Newco in conjunction with the Exchange Offer; and
(iv) undertakes to provide to Parent the Permitted Payment,
as that term is defined in the New Note Indenture.
1.4. Transferors' Representations and Warranties. Transferors
hereby represent and warrant to Newco that, as of the date hereof:
1.4.1 Organization and Existence. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Operating is a corporation duly organized, validly existing
and in good standing under the laws of the State of New Jersey. Transferors have
all requisite corporate power and authority to own and operate their properties,
to carry on their business as now conducted and as proposed to be conducted, to
enter into the Exchange Offer and to carry out the transactions contemplated by
the Registration Statement.
1.4.2 Due Authorization. The execution, delivery and
performance of all documents contemplated by the Registration Statement have
been duly authorized by all necessary corporate action on the part of
Transferors.
1.4.3 Due Execution and Delivery; Enforceability. This
Agreement has been duly executed and delivered by Transferors in accordance with
its terms and represents the legal, valid and binding agreement of Transferors
enforceable against Transferors in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws affecting creditors' rights and remedies generally and
to general principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity).
1.4.4 No Conflicts. Except as set forth on Schedule 1.4.4,
the execution, delivery and performance of this Agreement by Transferors, and
the
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consummation of the transactions contemplated hereby, do not and will not
conflict with or result in a breach or violation of (i) any of the terms or
provisions of, or constitute a default or cause an acceleration or any
obligation under, or result in the imposition or creation of (or the obligation
to create or impose), any security interest, mortgage, pledge, claim, lien,
encumbrance or adverse interest of any nature (each, a "Lien") with respect to
any obligation, bond agreement, note, debenture or other evidence of
indebtedness or any indenture, mortgage, deed of trust or other agreement, lease
or instrument to which Transferors or any of their affiliates is a party or by
which Transferors or any of their affiliates is bound or to which any of the
properties or assets of Transferors or any of their affiliates (including,
without limitation, the Tier 1 Assets) may be subject or (ii) any Federal, state
or local law, rule, administrative regulation or ordinance or order of any court
or governmental agency, body or official having jurisdiction over Transferors or
any of the Tier 1 Assets, except, in the case of clause (i), for such conflicts,
breaches, violations, defaults or Liens that would not have a material adverse
effect on the Tier 1 Assets or the condition or results of operations (financial
or otherwise) of The Sands taken as a whole.
1.4.5 No Consents or Approvals. Except as set forth on
Schedule 1.4.5, no authorization, approval, consent or order of, or filing with,
(i) any court or governmental body, agency or official, including the New Jersey
Casino Control Commission, the New Jersey Division of Gaming Enforcement and the
New Jersey Department of Environmental Protection, or (ii) and other third party
is necessary in connection with the transactions contemplated by this Agreement,
except those that have been obtained or made, and are in full force and effect.
1.4.6 Title to Tier 1 Assets. Except as set forth on
Schedule 1.4.6, Transferors have good title to the Tier 1 Assets, free and clear
of any Liens.
2. Tier 2 Contribution.
2.1 Capital Contribution. Immediately following the Tier 1
Contribution and the issuance of the Securities by Newco, Newco hereby
contributes, transfers, assigns and conveys to Licensee all right, title and
interest in and to all of the Tier 1 Assets, less only cash in an amount
necessary to fund the Cash Payment and the accrued and unpaid interest paid on
those Existing Notes being exchanged in the Exchange Offer (the assets so
transferred being referred to collectively as the "Tier 2 Assets" and
collectively with the Tier 1 Assets, the "Assets").
2.2 Conveyance of the Tier 2 Assets. As of the date hereof, or as
soon after the date hereof as practicable, Newco shall:
(i) place Licensee in effective possession, control and
operation of the Tier 2 Assets and deliver to Licensee all Tier 2 Assets, title
to which is capable of passing by delivery; and
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(ii) deliver to Licensee duly executed assignments or other
instruments and documentation reasonably required to transfer to Licensee all
right, title and interest in and to the Tier 2 Assets.
2.3. Consideration. In consideration of the Tier 2 Contribution,
Licensee, on behalf of itself and its subsidiaries now existing and hereafter
acquired, hereby:
(i) accepts all right, title and interest in and to the Tier 2
Assets and does hereby assume and agree to promptly and fully pay, perform and
discharge when due all obligations and liabilities associated with the Tier 2
Assets, exclusive of the "Excluded Liabilities" listed on Schedule 2.3(i) hereto
(the obligations and liabilities so assumed collectively referred to as the
"Licensee Assumed Liabilities"); and
(ii) agrees to indemnify Newco against all actions,
proceedings, costs, liabilities, damages, claims and demands arising in
connection with the Licensee Assumed Liabilities or the operation of The Sands
by Licensee or its transferee subsequent to the date hereof except insofar as
such actions, proceedings, costs, damages, claims and demands arise out of the
gross negligence or willful misconduct of Newco or a breach of any of the
representations and warranties of Newco contained in Section 2.4; and
(iii) agrees to issue to Newco or its designee the Licensee
Membership Interests; and
(iv) undertakes to provide to Newco the funds necessary to
make the Permitted Payment.
(v) agrees to take such actions and execute such documents as
may be necessary to effectively (a) guaranty each and every obligation of Newco
described in the New Notes and the New Note Indenture, and (b) pledge as
security for such guaranty all or substantially all of the assets of Licensee.
2.4. Newco's Representations and Warranties. Newco hereby
represents and warrants to Licensee that, as of the date hereof:
2.4.1 Organization and Existence. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Licensee is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of New Jersey. Newco
and Licensee have all requisite corporate power and authority to own and operate
their properties, to carry on their business as now conducted and as proposed to
be conducted, to enter into the Exchange Offer and to carry out the transactions
contemplated by the Registration Statement.
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2.4.2 Due Authorization. The execution, delivery and
performance of all documents contemplated by the Registration Statement have
been duly authorized by all necessary corporate action on the part of
Transferors.
2.4.3 Due Execution and Delivery; Enforceability. This
Agreement has been duly executed and delivered by Newco in accordance with its
terms and represents the legal, valid and binding agreement of Newco enforceable
against Newco in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
2.4.4 No Conflicts. Except as set forth on Schedule 2.4.4, the
execution, delivery and performance of this Agreement by Newco, and the
consummation of the transactions contemplated hereby, do not and will not
conflict with or result in a breach or violation of (i) any of the terms or
provisions of, or constitute a default or cause an acceleration or any
obligation under, or result in the imposition or creation of (or the obligation
to create or impose), Lien with respect to any obligation, bond agreement, note,
debenture or other evidence of indebtedness or any indenture, mortgage, deed of
trust or other agreement, lease or instrument to which Newco or any of its
affiliates is a party or by which Newco or any of its affiliates is bound or to
which any of the properties or Tier 2 Assets of Newco or any of its affiliates
(including, without limitation, the Tier 2 Assets) may be subject or (ii) any
Federal, state or local law, rule, administrative regulation or ordinance or
order of any court or governmental agency, body or official having jurisdiction
over Newco or any of the Tier 2 Assets, except, in the case of clause (i), for
such conflicts, breaches, violations, defaults or Liens that would not have a
material adverse effect on the Tier 2 Assets or the condition or results of
operations (financial or otherwise) of The Sands taken as a whole.
2.4.5 No Consents or Approvals. Except as set forth on
Schedule 2.4.5, no authorization, approval, consent or order of, or filing with,
any court or governmental body, agency or official, including the New Jersey
Casino Control Commission, the New Jersey Division of Gaming Enforcement and the
New Jersey Department of Environmental Protection, is necessary in connection
with the transactions contemplated by this Agreement, except those that have
been obtained or made, and are in full force and effect.
2.4.6 Title to Tier 2 Assets. Except as set forth on Schedule
2.4.6, Newco has good title to the Tier 2 Assets, free and clear of any Liens.
3. Miscellaneous
3.1 Transfer of Assets. This Agreement shall not constitute an
agreement to assign or transfer the Assets or any claim, right or benefit
arising thereunder or resulting therefrom, if an assignment or transfer or an
attempt to make
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such an assignment or transfer without the consent of a third party would
constitute a breach or violation thereof or affect adversely the rights of the
Transferees thereunder; and any transfer or assignment to the Transferees of any
interest under any Asset that requires the consent, waiver or approval of a
third party shall be made subject to such consent, waiver or approval being
obtained. The Transferors shall use commercially reasonable efforts to obtain
any such approval, waiver or consent until such time as such consent, waiver or
approval has been obtained, and the Transferors will reasonably cooperate with
the Transferees in any lawful and economically feasible arrangement to provide
that the Transferees shall receive the Transferors' interest in the benefits
under any Asset; provided that the Transferees shall undertake to pay or satisfy
the corresponding liabilities for the enjoyment of such benefit to the extent
the Transferees would have been responsible therefor hereunder if such consent,
waiver or approval had been obtained.
3.2 Further Assurances. The Transferors shall at any time and
from time to time after the date hereof, upon the request of the Transferees,
execute and deliver such further instruments of conveyance and transfer, in form
and substance reasonably satisfactory to Transferee's counsel, and take such
other action as Transferee may reasonably request in order to more effectively
convey, transfer and vest in Transferee full and complete ownership of the
Assets and to enable Transferee to collect and reduce the Assets to its
possession as contemplated hereby.
3.3 Waiver; Amendment. Neither this Agreement nor any
provision hereof shall be waived, amended, modified, changed, discharged or
terminated except by an instrument in writing executed by Transferors and
Transferees.
3.4 Entire Agreement. This Agreement, together with the
schedules hereto, sets forth the entire agreement and understanding of the
parties hereof with respect to the transactions contemplated hereby and
supersedes any and all prior agreements and understandings relating to the
subject matter thereof. No representation, promise or statement of intention has
been made by any party hereto which is not embodied in this Agreement or the
written schedules or other documents delivered pursuant hereto or in connection
with the transactions contemplated hereby, and no party hereto shall be bound by
or liable for any alleged representation, promise or statement of intention not
set forth herein or therein. All of the documents referred to in the immediately
preceding sentence are hereby incorporated by reference and shall be deemed a
part of this Agreement with the same effect as if set forth in full herein.
3.5 Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, this Agreement shall continue in full force and effect without
said provision; provided that no such severance of provision shall be effective
if it materially changes the economic benefit of this Agreement to any party.
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3.6 Section and Other Headings. The section headings contained
in this Agreement and the schedules thereto are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
3.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPALS THEREOF. TRANSFERORS AND
TRANSFEREES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW JERSEY
STATE COURT SITTING IN ATLANTIC CITY, NEW JERSEY OR ANY FEDERAL COURT SITTING IN
CAMDEN, NEW JERSEY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPT FOR THEMSELVES AND IN
RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS. TRANSFERORS AND TRANSFEREES IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT THEY MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH THEY
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN ANY INCONVENIENT FORUM.
3.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which together shall be deemed to be one and the same
agreement.
3.9 Notice. Each notice, demand, request, request for
approval, consent, approval, disapproval, designation or other communication
(each of the foregoing being referred to herein as "notice") required or desired
to be given or made under this Agreement shall be in writing (except as
otherwise provided in this Agreement), and shall be effective and deemed to have
been received (i) when delivered in person, (ii) when sent by facsimile
transmission with receipt acknowledged, (iii) three (3) days after having been
mailed by certified or registered United States mail, postage prepaid, return
receipt requested, or (iv) the next business day after having been sent by a
nationally recognized overnight mail or courier service, receipt requested (a)
if to Transferors, at [_____________________]; or (b) if to Transferees, at
[_____________________].
3.10 Compliance with State Gaming Regulations. Each of the
provisions of this Agreement is subject to and shall be enforced in compliance
with the provisions, regulations or approvals required by any statement gaming
authority, including, without limitation, the New Jersey Casino Control
Commission and the New Jersey Division of Gaming Enforcement.
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3.11 Third Party Rights. Nothing in this Agreement is intended
or shall be construed to confer upon or give any person, other than the parties
hereto and their respective successors, any rights or remedies under or by
reason of this Agreement or any transaction contemplated hereby.
3.12 Limitation on Damages. Except as otherwise provided in
Section 1.3(ii) and Section 2.3(ii), neither party shall be liable to the other
party for any consequential damages resulting from a breach of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
ATTEST: GB HOLDINGS, INC., a Delaware corporation
_____________________________ By:___________________________________
ATTEST: GREATE BAY HOTEL AND CASINO, INC., a
New Jersey corporation
_____________________________ By:___________________________________
ATTEST: ATLANTIC COAST ENTERTAINMENT
HOLDINGS, INC., a Delaware corporation
_____________________________ By:___________________________________
ATTEST: ACE LLC, a New Jersey limited liability
company
_____________________________ By:___________________________________
C-10
SCHEDULE 1.1
------------
EXCLUDED ASSETS
1. Policies of Directors and Officers Insurance.
C-11
SCHEDULE 1.3(i)
---------------
EXCLUDED LIABILITIES
1. THAT CERTAIN GREATE BAY HOTEL AND CASINO, INC. 11% INTERCOMPANY NOTE IN THE
PRINCIPAL AMOUNT OF $110,000,000.00 DUE 2005 MADE BY OPERATING TO FUNDING.
2. All obligations, duties, liabilities, indemnities, debts, guarantees,
covenants, agreements and other obligations of any kind or description under, in
respect of, associated with, arising under or otherwise relating to the Existing
Notes, including any indenture, security agreements, guaranties or other
instruments related thereto.
C-12
SCHEDULE 1.4.4
--------------
CONFLICTS
C-13
SCHEDULE 1.4.5
--------------
CONSENTS AND APPROVALS
C-14
SCHEDULE 1.4.6
--------------
TITLE EXCEPTIONS
C-15
SCHEDULE 2.3(i)
---------------
EXCLUDED LIABILITIES
1. All obligations under the New Notes, except Licensee's obligations as
guarantor of Newco's obligations under the New Note Indenture and the New Notes
arising under the guaranty of Licensee delivered in connection with the issuance
of the New Notes.
C-16
SCHEDULE 2.4.4
--------------
CONFLICTS
C-17
SCHEDULE 2.4.5
--------------
CONSENTS AND APPROVALS
C-18
SCHEDULE 2.4.6
--------------
TITLE EXCEPTIONS
C-19
ANNEX D
WARRANT AGREEMENT
BETWEEN
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
AND
[name of warrant agent]
Dated as of _______, 2003
TABLE OF CONTENTS
Page
----
ARTICLE I DISTRIBUTION OF WARRANT CERTIFICATES.................................1
Section 1.1 Appointment of Warrant Agent..........................1
Section 1.2 Form of Warrant Certificates..........................1
Section 1.3 Execution of Warrant Certificates.....................2
Section 1.4 Issuance and Distribution of Warrant
Certificates..........................................2
Section 1.5 Conditions to Distribution of Warrant
Certificates..........................................2
ARTICLE II WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS.....................2
Section 2.1 Exercise Price........................................2
Section 2.2 Registration of Common Stock and Exercisability
of Warrants...........................................3
Section 2.3 Procedure for Exercise of Warrants....................4
Section 2.4 Issuance of Common Stock..............................4
Section 2.5 Certificates for Unexercised Warrants.................4
Section 2.6 Reservation of Shares.................................4
Section 2.7 Disposition of Proceeds...............................4
Section 2.8 Cancellation of Warrants..............................4
ARTICLE III ADDITIONAL SECURITIES AND NOTICE PROVISIONS........................5
Section 3.1 Additional Securities.................................5
Section 3.2 Deferral of Adjustments to Warrant Shares.............5
Section 3.3 Adjustment to Number of Warrant Shares................6
Section 3.4 Reorganizations.......................................6
Section 3.5 Verification of Computations..........................6
Section 3.6 Exercise Price Not Less Than Par Value................7
Section 3.7 Notice of Certain Actions.............................7
Section 3.8 Notice of Certain Actions.............................7
Section 3.9 Warrant Certificate Amendments........................7
Section 3.10 Fractional Shares.....................................8
Section 3.11 Current Market Price..................................8
Section 3.12 Right to Adjust Exercise Price and Exercise
Deadline..............................................8
ARTICLE IV OTHER PROVISIONS RELATING TO RIGHTS OF REGISTERED HOLDERS OF
WARRANT CERTIFICATES..................................................8
Section 4.1 Rights of Warrant Holders.............................8
Section 4.2 Lost, Stolen, Mutilated, or Destroyed Warrant
Certificates..........................................8
ARTICLE V SPLIT UP, COMBINATION, EXCHANGE, TRANSFER, AND CANCELLATION OF
WARRANT CERTIFICATES..................................................9
Section 5.1 Split Up, Combination, Exchange, and Transfer
of Warrant Certificates...............................9
Section 5.2 Cancellation upon Surrender of Warrant
Certificates..........................................9
Section 5.3 Agreement of Warrant Certificate Holders.............10
ARTICLE VI PROVISIONS CONCERNING THE WARRANT AGENT AND OTHER MATTERS.........10
Section 6.1 Payment of Taxes and Charges.........................10
Section 6.2 Resignation or Removal of Warrant Agent..............10
Section 6.3 Notice of Appointment................................11
Section 6.4 Merger of Warrant Agent..............................11
Section 6.5 Company Responsibilities.............................11
i
Section 6.6 Certification for the Benefit of Warrant Agent.......11
Section 6.7 Books and Records....................................12
Section 6.8 Liability of Warrant Agent...........................12
Section 6.9 Use of Attorneys, Agents, and Employees..............12
Section 6.10 Indemnification......................................12
Section 6.11 Acceptance of Agency.................................12
Section 6.12 Changes to Agreement.................................12
Section 6.13 Assignment...........................................13
Section 6.14 Successor to Company.................................13
Section 6.15 Notices..............................................13
Section 6.16 Defects in Notice....................................13
Section 6.17 Governing Law........................................14
Section 6.18 Standing.............................................14
Section 6.19 Headings.............................................14
Section 6.20 Counterparts.........................................14
Section 6.21 Conflict of Interest.................................14
Section 6.22 Availability of the Agreement........................14
EXHIBIT A FORM OF WARRANT CERTIFICATE
ii
WARRANT AGREEMENT
-----------------
WARRANT AGREEMENT, dated as of ______, 2003, between ATLANTIC COAST
ENTERTAINMENT HOLDINGS, INC., a Delaware corporation (the "Company") and [name
of Warrant Agent] (the "Warrant Agent").
W I T N E S S E T H :
---------------------
WHEREAS, the Company is a wholly owned subsidiary of GB Holdings, Inc., a
Delaware corporation (the "Parent");
WHEREAS, the Company proposes to enter into the transaction (the
"Transaction") described in that certain Proxy Statement and Registration
Statement on Form S-4 (the "Form S-4") pursuant to which the Company shall
distribute to the stockholders of Parent (the "Distribution") ______ warrants
(the "Warrants") to purchase common stock, par value $.01 per share the ("Common
Stock") of the Company, each Warrant entitling the holder thereof to purchase
..275 shares of Common Stock;
WHEREAS, the Company proposes to issue certificates evidencing the Warrants
(such Warrant certificates issued pursuant to this Agreement being hereinafter
called the "Warrant Certificates");
WHEREAS, the Company desires the Warrant Agent, and the Warrant Agent
agrees, to act on behalf of the Company in connection with the issuance,
transfer, exchange, replacement, redemption, and surrender of the Warrant
Certificates; and
WHEREAS, the Company and the Warrant Agent desire to set forth in this
Warrant Agreement, among other things, the form and provisions of the Warrant
Certificates and the terms and conditions under which they may be issued,
transferred, exchanged, replaced, redeemed, and surrendered in connection with
the exercise and redemption of the Warrants;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DISTRIBUTION OF WARRANT CERTIFICATES
Section 1.1 Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act on behalf of the Company in accordance with the
instructions hereinafter set forth, and the Warrant Agent hereby accepts such
appointment.
Section 1.2 Form of Warrant Certificates. The Warrant Certificates shall be
issued in registered form only and, together with the purchase and assignment
forms to be printed on the reverse thereof, shall be substantially in the form
of Exhibit A attached hereto and, in addition, may have such letters, numbers,
or other marks of identification or designation and such legends,
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summaries, or endorsements stamped, printed, lithographed, or engraved thereon
as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement or as, in any particular case, may be required, in
the opinion of counsel for the Company, to comply with any law or with any rule
or regulation of any regulatory authority or agency, or to conform to customary
usage.
Section 1.3 Execution of Warrant Certificates. The Warrant Certificates
shall be executed on behalf of the Company by its Chairman, Vice Chairman,
President, or any Vice President and by its Chief Financial Officer, Treasurer,
Assistant Treasurer, Secretary, or Assistant Secretary, either manually or by
facsimile signature printed thereon. The Warrant Certificates shall be manually
countersigned and dated the date of countersignature by the Warrant Agent and
shall not be valid for any purpose unless so countersigned and dated. If any
authorized officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer of the Company either before or
after delivery thereof by the Company to the Warrant Agent, the signature of
such person on such Warrant Certificates nevertheless shall be valid and such
Warrant Certificates may be countersigned by the Warrant Agent and issued and
delivered to those persons entitled to receive the Warrants represented thereby
with the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be such officer of the Company.
Section 1.4 Issuance and Distribution of Warrant Certificates. Upon
completion of the Distribution, the Company shall deliver to the Warrant Agent
an adequate supply of Warrant Certificates executed on behalf of the Company as
described in Section 1.3 hereof. Upon receipt of an order from the Company, the
Warrant Agent shall within three business days complete and countersign Warrant
Certificates representing the total number of Warrants to be issued hereunder
and shall deliver such Warrant Certificates pursuant to written instructions of
the Company.
Section 1.5 Conditions to Distribution of Warrant Certificates. If the
Distribution or the Transaction is not consummated for any reason, no Warrant
Certificates shall be distributed and this Agreement shall terminate and be of
no further force or effect.
ARTICLE II
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 Exercise Price. Each Warrant Certificate shall, when signed by
the Chairman, Vice Chairman, President, or any Vice President and by the Chief
Financial Officer, Treasurer, Assistant Treasurer, Secretary, or Assistant
Secretary of the Company and countersigned by the Warrant Agent, entitle the
registered holder thereof to purchase from the Company .275 shares (each a
"Warrant Share") of Common Stock for each Warrant evidenced thereby, at the
purchase price of $.01 per share, or such adjusted number of shares at such
adjusted purchase price as may be established from time to time pursuant to the
provisions of Article III hereof, payable in full at the time of exercise of the
Warrant. Except as the context otherwise requires, the term "Exercise Price" as
used in this Agreement shall mean the purchase
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price of .275 shares of Common Stock upon exercise of a Warrant, reflecting all
appropriate adjustments made in accordance with the provisions of Article III
hereof.
Section 2.2 Registration of Common Stock and Exercisability of Warrants.
Each Warrant may be exercised at any time after the earliest to occur of the
following events (the first date on which any such event occurs being referred
to as the "Vesting Date"):
(a) the payment in full of the entire principal amount and accrued
interest on the Company's outstanding 3% Notes due 2008 issued by the
Company (the "New Notes"), pursuant to and in accordance with the
terms thereof whether such payment is in the form of cash or by
issuance of shares of Common Stock to the holder thereof in lieu of
cash payment;
(b) a determination of the board of directors of the Company (the "Board")
that the Warrants may be exercised; and
(c) payment in full by the Parent of both the aggregate principal amount
outstanding of and the accrued, but unpaid interest owed under the 11%
Notes due 2005 issued by the Parent which have not been exchanged for
the New Notes in the Transaction.
Promptly after the Vesting Date, the Company shall send written notice to
the Warrant Agent that such Vesting Date has occurred (the "Vesting Notice").
The Warrant Agent shall within ten days after receipt of the Vesting Notice
cause a similar notice to be mailed to each registered holder of a Warrant
Certificate.
The latest time and date at which the Warrants may be exercised (the
"Exercise Deadline") shall be 5:00 P.M. New York City time on the earlier of (i)
the date that is the seventh anniversary of the completion of the Distribution;
or (ii) the Cancellation Date (as defined in Section 2.8 below).
The Company shall use its reasonable efforts to secure the effective
registration of the Warrant Shares under the Securities Act of 1933, as amended
(the "Securities Act"), and register or qualify such shares under applicable
state laws; provided, however, that the Company shall have no obligation to
register the Warrant Shares in the event that, by amendment to the Securities
Act or otherwise, such registration or qualification or the delivery of such
prospectus is not required at the time said Warrant Shares are to be issued; and
further that, if by amendment to the Securities Act or otherwise, some other or
different requirement shall be imposed by act of the Congress of the United
States which shall relate to the issuance of the Warrant Shares upon exercise of
the Warrants, the Company shall use its reasonable efforts to comply with such
requirements so long as the same shall not be more burdensome to the Company
than the registration statement under the Securities Act. Promptly after a
registration statement under the Securities Act covering the aforementioned
Warrant Shares has become effective, or such other action as contemplated hereby
and as may be required has been taken, as the case may be, the Company shall
cause notice thereof or a copy of the prospectus covering the Warrant Shares to
be mailed to each registered holder of a Warrant Certificate.
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Section 2.3 Procedure for Exercise of Warrants. During the period specified
in and subject to the provisions of Section 2.2 hereof, Warrants may be
exercised by surrendering the Warrant Certificates representing such Warrants to
the Warrant Agent at the principal office of its corporate trust department (the
"Principal Office"), which is presently at _________________, with the election
to purchase form set forth on the Warrant Certificate duly completed and
executed, with medallion signatures guaranteed by a member of a medallion
guarantee program ("Signatures Guaranteed"), accompanied by payment in full of
the Exercise Price as provided for in Section 2.1 hereof in effect at the time
of such exercise, together with such taxes as are specified in Section 6.1
hereof, for each Warrant Share with respect to which such Warrant is being
exercised. Such Exercise Price and taxes shall be paid in full by certified
check or money order, payable in United States currency to the order of the
Company. The date on which Warrants are exercised in accordance with this
Section 2.3 is sometimes referred to herein as the "Date of Exercise" of such
Warrants.
Section 2.4 Issuance of Common Stock. As soon as practicable after the Date
of Exercise of any Warrants, the Company shall issue, or cause the transfer
agent for the Common Stock, if any, to issue a certificate or certificates for
the number of full shares of Common Stock to which such holder is entitled,
registered in accordance with the instructions set forth in the election to
purchase. All Warrant Shares shall be validly authorized and issued, fully paid,
and nonassessable, and free from all taxes, liens, and charges created by the
Company in respect of the issue thereof. Each person in whose name any such
certificate for shares of Common Stock is issued shall for all purposes be
deemed to have become the holder of record of the Common Stock represented
thereby on the Date of Exercise of the Warrants resulting in the issuance of
such shares, irrespective of the date of issuance or delivery of such
certificate for shares of Common Stock.
Section 2.5 Certificates for Unexercised Warrants. If less than all of the
Warrants represented by a Warrant Certificate are exercised, the Warrant Agent
shall execute and mail, by first-class mail, within 30 days of the Date of
Exercise, to the registered holder of such Warrant Certificate, or such other
person as shall be designated in the election to purchase, a new Warrant
Certificate representing the number of full Warrants not exercised. In no event
shall a fraction of a Warrant be exercised, and the Warrant Agent shall
distribute no Warrant Certificates representing fractions of Warrants under this
or any other section of this Agreement. Final fractions of shares shall be
treated as provided in Section 3.11 hereof.
Section 2.6 Reservation of Shares. The Company shall at all times reserve
and keep available for issuance upon the exercise of Warrants a number of its
authorized but unissued shares of Common Stock that will be sufficient to permit
the exercise in full of all outstanding Warrants.
Section 2.7 Disposition of Proceeds. The Warrant Agent shall account
promptly to the Company with respect to Warrants exercised and concurrently
deliver to the Company all proceeds from such exercise.
Section 2.8 Cancellation of Warrants. At any time after the Vesting Date,
the Company by action of the Board, may at its option, cancel all, but not less
than all of the Warrants provided that the Company is in compliance with its
obligations under Section 2.2
D-4
hereof to register the Warrant Shares under the Securities Act. Notice of such
cancellation shall be promptly given to the Warrant Agent by the Company and
such notice (the "Cancellation Notice") shall be mailed to all registered
holders of Warrant Certificates, not less than 90 days prior to the date
established by the Board (the "Cancellation Date"). The Cancellation Notice will
specify the Cancellation Date and will also state that the right to exercise the
Warrants will terminate at 5:00 p.m., New York City time on the Cancellation
Date. The Company will also make a prompt public announcement by news release
and by notice to any national securities exchange on which the Warrants are
listed for trading.
ARTICLE III
ADDITIONAL SECURITIES AND NOTICE PROVISIONS
Section 3.1 Additional Securities. In addition to the Warrant Shares
issuable upon the exercise of this Warrant as contemplated in Section 2.1 above:
(a) In case the Company shall, at any time after the date hereof and on or
prior to the Date of Exercise (i) declare a dividend or make a
distribution on the Common Stock in shares of the Common Stock, (ii)
subdivide the outstanding shares of the Common Stock into a greater
number of shares, (iii) combine the outstanding shares of its Common
Stock into a smaller number of shares, or (iv) issue any shares of its
capital stock by reclassification of the Common Stock (including any
such reclassification in connection with a consolidation or merger in
which the Company is the continuing corporation), then upon the
exercise of a Warrant the holder of such Warrant shall be entitled to
receive the aggregate number and kind of shares which, if such Warrant
had been exercised immediately prior to such time, such holder would
have been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification
(b) In case the Company shall, at any time after the date hereof and on or
prior to the Date of Exercise, issue to all holders of the Common
Stock rights, options, or warrants to subscribe for or purchase the
Common Stock (or securities convertible into or exchangeable for the
Common Stock), and if the same are not issued or otherwise provided to
the holders of Warrants at such time pro rata on a fully-diluted basis
as if all warrants, other rights, options or convertible securities in
respect of Common Stock, and as if all such securities were exercised
or paid, then upon the exercise of the Warrant, the holder of such
Warrant exercised shall be entitled to receive the aggregate number
and kind of rights, options, or warrants to subscribe for or purchase
the Common Stock (or securities convertible into or exchangeable for
the Common Stock) which if, such holder would have received by virtue
of such issuance of rights, options, or warrants to subscribe for or
purchase the Common Stock (or securities convertible into or
exchangeable for the Common Stock), if such Warrant had been exercised
immediately prior to such time.
Section 3.2 Deferral of Adjustments to Warrant Shares. In any case in which
this Article III shall require that an adjustment in the Warrant Shares be made
effective as of a record
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date for a specified event, the Company may elect to defer, until the occurrence
of such event, issuing to the holders of the Warrants, if any holder has
exercised a Warrant after such record date, the shares of Common Stock, if any,
issuable upon such exercise over and above the Warrant Shares; provided,
however, that the Company shall deliver to such exercising holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
All calculations under this Article III shall be made to the nearest cent or
one-hundredth of a share, as the case may be.
Section 3.3 Adjustment to Number of Warrant Shares. Upon each action set
forth in Section 3.1 that requires an adjustment in the number of Warrant
Shares, each Warrant shall thereupon evidence the right to purchase that number
of Warrant Shares (calculated to the nearest hundredth of a share) obtained by
multiplying the number of shares of Common Stock purchasable immediately prior,
after giving effect to Section 3.1, to such adjustment upon exercise of the
Warrant by the Exercise Price in effect immediately prior to such adjustment.
Section 3.4 Reorganizations. In case of any consolidation or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the continuing corporation and which does not result in
any reclassification of the outstanding shares of Common Stock or the conversion
of such outstanding shares of Common Stock into shares of other stock or other
securities or property) (such actions being hereinafter collectively referred to
as "Mergers"), there shall thereafter be deliverable upon exercise of any
Warrant (in lieu of the number of shares of Common Stock theretofore
deliverable) the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock which would otherwise
have been deliverable upon the exercise of such Warrant would have been entitled
upon such Merger if such Warrant had been exercised in full immediately prior to
such Merger. In case of any Merger, appropriate adjustment, as determined in
good faith by the Board shall be made in the application of the provisions
herein set forth with respect to the rights and interests of Warrant holders so
that the provisions set forth herein shall thereafter be applicable, as nearly
as possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants. Any such adjustment shall be made by and set forth in
a supplemental agreement between the Company, or any successor thereto, and the
Warrant Agent and shall for all purposes hereof conclusively be deemed to be an
appropriate adjustment. The Company shall not effect any such Merger unless upon
or prior to the consummation thereof the successor corporation, or if the
Company shall be the surviving corporation in any such Merger and is not the
issuer of the shares of stock or other securities or property to be delivered to
holders of shares of the Common Stock outstanding at the effective time thereof,
then such issuer, shall assume by written instrument the obligation to deliver
to the registered holder of any Warrant Certificate such shares of stock,
securities, cash, or other property as such holder shall be entitled to purchase
in accordance with the foregoing provisions.
Section 3.5 Verification of Computations. Whenever the Warrant Shares are
adjusted as provided pursuant to Section 3.1 hereof, the Company will promptly
obtain a certificate of a firm of independent public accountants of recognized
standing selected by the Board (who may be the regular auditors of the Company)
setting forth the Warrant Shares as so adjusted and a brief statement of the
facts accounting for such adjustment, and will make available a brief summary
thereof to the holders of the Warrant Certificates, at their addresses listed on
the register maintained for that purpose by the Warrant Agent.
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Section 3.6 Exercise Price Not Less Than Par Value. In no event shall the
Exercise Price be adjusted below the par value per share of the Common Stock.
Section 3.7 Notice of Certain Actions. In the event the Company shall
publicly announce its intention to:
(a) pay any dividend or make any distribution on shares of Common Stock in
shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in an amount per
share greater than the most recent such cash dividend) to all holders
of Common Stock;
(b) issue any rights, warrants, or other securities to all holders of
Common Stock entitling them to purchase any additional shares of
Common Stock or any other rights, warrants, or other securities;
(c) effect any reclassification of its Common Stock (other than a
reclassification involving merely the subdivision or combination of
outstanding shares of Common Stock) or Merger (other than a merger in
which no distribution of securities or other property is made to
holders of Common Stock); or
(d) take any other action which would result in the issuance of additional
consideration to the holders of Warrants;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to the Warrant Agent. Such notice shall specify the date on which
the books of the Company shall close, or a record be taken, for determining
holders of Common Stock entitled to receive such stock dividend or other
distribution or such rights or options, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer, other
disposition, liquidation, dissolution, winding up, or exchange or other action
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed. The Company shall cause copies of such notice to be mailed to each
registered holder of a Warrant Certificate not later than 30 days after such
action.
Section 3.8 Notice of Certain Actions. Whenever any additional
consideration is required to is be made pursuant to this Article III, the
Company shall cause notice of same to be mailed to the Warrant Agent within 15
days thereafter, such notice to include in reasonable detail (a) the events
precipitating the adjustment, (b) the computation of any such actions, and (c)
the Exercise Price and the number of shares or the securities or other property
purchasable upon exercise of each Warrant, after giving effect thereto. The
Warrant Agent shall within 15 days after receipt of such notice from the Company
cause a similar notice to be mailed to each registered holder of a Warrant
Certificate.
Section 3.9 Warrant Certificate Amendments. Irrespective of any adjustments
pursuant to this Article III, Warrant Certificates theretofore or thereafter
issued need not be amended or replaced, but certificates thereafter issued shall
bear an appropriate legend or other notice of any adjustments.
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Section 3.10 Fractional Shares. The Company shall not be required upon the
exercise of any Warrant to issue fractional shares of Common Stock which may
result from adjustments in accordance with this Article III to the Exercise
Price or number of shares of Common Stock purchasable under each Warrant. If
more than one Warrant is exercised at one time by the same registered holder,
the number of full shares of Common Stock which shall be deliverable shall be
computed based on the number of shares deliverable in exchange for the aggregate
number of Warrants exercised. With respect to any final fraction of a share
called for upon the exercise of any Warrant or Warrants, the Company shall pay a
cash adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price (as defined below) of a share of Common
Stock calculated in accordance with Section 3.12 hereof.
Section 3.11 Current Market Price. The "Current Market Price" per share at
any date shall be the average of the "closing prices" for the 30 consecutive
trading days ending on the trading day immediately preceding the date in
question, where the "closing price" on any day is (a) the last reported sales
price regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (including, for
purposes hereof, the Nasdaq National Market), if on such date the Common Stock
is not listed or admitted to trading on any national securities exchange, the
highest reported bid price for the Common Stock as furnished by the National
Association of Securities Dealers, Inc. through Nasdaq or a similar organization
if Nasdaq is no longer reporting such information, or (c) if on such date the
Common Stock is not listed or admitted to trading on any national securities
exchange and is not quoted by Nasdaq or any similar organization, as determined
by reference to the "pink sheets" published by National Quotation Bureau or, if
not so published, by such other method of determining market value as the Board
shall in good faith from time to time deem to be fair and such other method
shall be conclusive.
Section 3.12 Right to Adjust Exercise Price and Exercise Deadline The
Company may at any time, by notice to the Warrant Agent, reduce the Exercise
Price to such price, or extend the Exercise Deadline to such date, as the
Company may set forth in such notice. Any such reduction shall remain in effect
for such period as may be set forth in such notice. The Warrant Agent shall
promptly after receipt of any such notice from the Company cause a similar
notice to be mailed to each registered holder of a Warrant Certificate.
ARTICLE IV
OTHER PROVISIONS RELATING TO
RIGHTS OF REGISTERED HOLDERS OF WARRANT CERTIFICATES
Section 4.1 Rights of Warrant Holders. No Warrant Certificate shall entitle
the registered holder thereof to any of the rights of a stockholder of the
Company, including without limitation the right to vote, to receive dividends
and other distributions, or to receive any notice of, or to attend, meetings of
stockholders or any other proceedings of the Company.
Section 4.2 Lost, Stolen, Mutilated, or Destroyed Warrant Certificates. If
any Warrant Certificate shall be mutilated, lost, stolen, or destroyed, the
Company in its discretion may direct the Warrant Agent to execute and deliver,
in exchange and substitution for and upon cancellation of a mutilated Warrant
Certificate, or in lieu of or in substitution for a lost, stolen, or destroyed
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Warrant Certificate, a new Warrant Certificate for the number of Warrants
represented by the Warrant Certificate so mutilated, lost, stolen, or destroyed
but only upon receipt of evidence of such loss, theft, or destruction of such
Warrant Certificate, and of the ownership thereof, and indemnity, if requested,
all satisfactory to the Company and the Warrant Agent. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges incidental thereto as the
Company or the Warrant Agent may prescribe. Any such new Warrant Certificate
shall constitute an original contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated, or destroyed Warrant Certificate
shall be at any time enforceable by anyone.
ARTICLE V
SPLIT UP, COMBINATION, EXCHANGE, TRANSFER,
AND CANCELLATION OF WARRANT CERTIFICATES
Section 5.1 Split Up, Combination, Exchange, and Transfer of Warrant
Certificates. Prior to the Exercise Deadline, Warrant Certificates, subject to
the provisions of Section 5.2, may be split up, combined, or exchanged for other
Warrant Certificates representing a like aggregate number of Warrants or may be
transferred in whole or in part. Any holder desiring to split up, combine, or
exchange a Warrant Certificate or Warrant Certificates shall make such request
in writing delivered to the Warrant Agent at its Principal Office and shall
surrender the Warrant Certificate or Warrant Certificates so to be split up,
combined, or exchanged at said office. Subject to any applicable laws, rules, or
regulations restricting transferability, any restriction on transferability that
may appear on a Warrant Certificate in accordance with the terms hereof, or any
"stop-transfer" instructions the Company may give to the Warrant Agent to
implement any such restrictions (which instructions the Company is expressly
authorized to give), transfer of outstanding Warrant Certificates may be
effected by the Warrant Agent from time to time upon the books of the Company to
be maintained by the Warrant Agent for that purpose, upon a surrender of the
Warrant Certificate to the Warrant Agent at its Principal Office, with the
assignment form set forth in the Warrant Certificate duly executed and with
Signatures Guaranteed. Upon any such surrender for split up, combination,
exchange, or transfer, the Warrant Agent shall execute and deliver to the person
entitled thereto a Warrant Certificate or Warrant Certificates, as the case may
be, as so requested. The Warrant Agent shall not be required to effect any split
up, combination, exchange, or transfer which will result in the issuance of a
Warrant Certificate evidencing a fraction of a Warrant. The Warrant Agent may
require the holder to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any split up, combination,
exchange, or transfer of Warrant Certificates prior to the issuance of any new
Warrant Certificate.
Section 5.2 Cancellation upon Surrender of Warrant Certificates. Any
Warrant Certificate surrendered upon the exercise of Warrants or for split up,
combination, exchange, or transfer, or purchased or otherwise acquired by the
Company, shall be cancelled and shall not be reissued by the Company; and,
except as provided in Section 2.5 hereof in case of the exercise of less than
all of the Warrants evidenced by a Warrant Certificate or in Section 5.1 hereof
in case of a split up, combination, exchange, or transfer, no Warrant
Certificate shall be issued hereunder in lieu of such cancelled Warrant
Certificate. Any Warrant Certificate so cancelled shall be destroyed by the
Warrant Agent unless otherwise directed by the Company.
D-9
Section 5.3 Agreement of Warrant Certificate Holders. Every holder of a
Warrant Certificate by accepting the same consents and agrees with the Company
and the Warrant Agent and with every other holder of a Warrant Certificate that:
(a) transfer of the Warrant Certificates shall be registered on the books
of the Company maintained for that purpose by the Warrant Agent only
if surrendered at the Principal Office of the Warrant Agent, duly
endorsed or accompanied by a proper instrument of transfer, with
Signatures Guaranteed; and
(b) prior to due presentment for registration of transfer, the Company and
the Warrant Agent may deem and treat the person in whose name the
Warrant Certificate is registered as the absolute owner thereof and of
the Warrants evidenced thereby (notwithstanding any notations of
ownership or writing on the Warrant Certificates made by anyone other
than the Company or the Warrant Agent) for all purposes whatsoever,
and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary.
ARTICLE VI
PROVISIONS CONCERNING THE WARRANT
AGENT AND OTHER MATTERS
Section 6.1 Payment of Taxes and Charges. The Company will from time to
time promptly pay to the Warrant Agent, or make provisions satisfactory to the
Warrant Agent for the payment of, all taxes and charges that may be imposed by
the United States or any state upon the Company or the Warrant Agent in
connection with the issuance or delivery of shares of Common Stock upon the
exercise of any Warrants, but any transfer taxes in connection with the issuance
of Warrant Certificates or certificates for shares of Common Stock in any name
other than that of the registered holder of the Warrant Certificate surrendered
shall be paid by such registered holder; and, in such case, the Company shall
not be required to issue or deliver any Warrant Certificate or certificate for
shares of Common Stock until such taxes shall have been paid or it has been
established to the Company's satisfaction that no tax is due.
Section 6.2 Resignation or Removal of Warrant Agent. The Warrant Agent may
resign its duties and be discharged from all further duties and liabilities
hereunder after giving 30 days notice in writing to the Company, except that
such shorter notice may be given as the Company shall, in writing, accept as
sufficient. Upon comparable notice to the Warrant Agent, the Company may remove
the Warrant Agent; provided, however, that in such event the Company shall
appoint a new Warrant Agent, as hereinafter provided, and the removal of the
Warrant Agent shall not be effective until a new Warrant Agent has been
appointed and has accepted such appointment. If the office of Warrant Agent
becomes vacant by resignation or incapacity to act or otherwise, the Company
shall appoint in writing a new Warrant Agent. If the Company shall fail to make
such appointment within a period of 30 days after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Warrant Agent or by the registered holder of any Warrant Certificate, then the
registered holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new Warrant Agent. Any new Warrant Agent
appointed hereunder shall execute, acknowledge,
D-10
and deliver to the former Warrant Agent last in office, and to the Company, an
instrument accepting such appointment under substantially the same terms and
conditions as are contained herein, and thereupon such new Warrant Agent without
any further act or deed shall become vested with the rights, powers, duties, and
responsibilities of the Warrant Agent and the former Warrant Agent shall cease
to be the Warrant Agent; but if for any reason it becomes necessary or expedient
to have the former Warrant Agent execute and deliver any further assurance,
conveyance, act, or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the former Warrant
Agent.
Section 6.3 Notice of Appointment. Not later than the effective date of the
appointment of a new Warrant Agent the Company shall cause notice thereof to be
mailed to the former Warrant Agent and the transfer agent for the Common Stock,
and shall forthwith cause a copy of such notice to be mailed to each registered
holder of a Warrant Certificate. Failure to mail such notice, or any defect
contained therein, shall not affect the legality or validity of the appointment
of the successor Warrant Agent.
Section 6.4 Merger of Warrant Agent. Any company into which the Warrant
Agent may be merged or with which it may be consolidated, or any company
resulting from any merger or consolidation to which the Warrant Agent shall be a
party, shall be the successor Warrant Agent under this Agreement without further
act, provided that such company would be eligible for appointment as a successor
Warrant Agent under the provisions of Section 6.2 hereof. Any such successor
Warrant Agent may adopt the prior countersignature of any predecessor Warrant
Agent and distribute Warrant Certificates countersigned but not distributed by
such predecessor Warrant Agent, or may countersign the Warrant Certificates in
its own name.
Section 6.5 Company Responsibilities. The Company agrees that it shall (a)
pay the Warrant Agent reasonable remuneration for its services as Warrant Agent
hereunder and will reimburse the Warrant Agent upon demand for all expenses,
advances, and expenditures that the Warrant Agent may reasonably incur in the
execution of its duties hereunder (including fees and expenses of its counsel);
and (b) perform, execute, acknowledge, and deliver or cause to be performed,
executed, acknowledged, and delivered all further and other acts, instruments,
and assurances as may reasonably be required by the Warrant Agent for the
carrying out or performing by the Warrant Agent of the provisions of this
Agreement.
Section 6.6 Certification for the Benefit of Warrant Agent. Whenever in the
performance of its duties under this Agreement the Warrant Agent shall deem it
necessary or desirable that any matter be proved or established or that any
instructions with respect to the performance of its duties hereunder be given by
the Company prior to taking or suffering any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established, or such instructions may be
given, by a certificate or instrument signed by the Chairman, any Vice Chairman,
the President, any Vice President, the Secretary, any Assistant Secretary, the
Chief Financial Officer, Treasurer, or any Assistant Treasurer of the Company
and delivered to the Warrant Agent. Such certificate or instrument may be relied
upon by the Warrant Agent for any action taken or suffered in good faith by it
under the provisions of this Agreement; but in its discretion the Warrant Agent
may in lieu thereof accept other evidence of such matter or may require such
further or additional evidence as it may deem reasonable.
D-11
Section 6.7 Books and Records. The Warrant Agent shall maintain the
Company's books and records for registration and registration of transfer of the
Warrant Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Warrant Certificates, the number of
Warrants evidenced on its face by each Warrant Certificate, and the date of each
Warrant Certificate.
Section 6.8 Liability of Warrant Agent. The Warrant Agent shall be liable
hereunder for its own negligence or willful misconduct. The Warrant Agent shall
act hereunder solely as an agent for the Company and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not be
liable for or by reason of any of the statements of fact or recitals contained
in this Agreement or in the Warrant Certificates (except its countersignature
thereof) or be required to verify the same, but all such statements and recitals
are and shall be deemed to have been made by the Company only. The Warrant Agent
will not incur any liability or responsibility to the Company or to any holder
of any Warrant Certificate for any action taken, or any failure to take action,
in reliance on any notice, resolution, waiver, consent, order, certificate, or
other paper, document, or instrument reasonably believed by the Warrant Agent to
be genuine and to have been signed, sent, or presented by the proper party or
parties. The Warrant Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof by the
Company or in respect of the validity or execution of any Warrant Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Agreement
or in any Warrant Certificate; nor shall it be responsible for the making of any
adjustment required under the provisions of Article III hereof or responsible
for the manner, method, or amount of any such adjustment or the facts that would
require any such adjustment; nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
shares of Common Stock or other securities to be issued pursuant to this
Agreement or any Warrant Certificate or as to whether any shares of Common Stock
or other securities will when issued be validly authorized and issued and fully
paid and nonassessable.
Section 6.9 Use of Attorneys, Agents, and Employees. The Warrant Agent may
execute and exercise any of the rights or powers hereby vested in it or perform
any duty hereunder either itself or by or through its attorneys, agents, or
employees.
Section 6.10 Indemnification. The Company agrees to indemnify the Warrant
Agent and save it harmless against any and all losses, expenses, or liabilities,
including judgments, costs, and counsel fees arising out of or in connection
with its agency under this Agreement, except as a result of the negligence or
willful misconduct of the Warrant Agent.
Section 6.11 Acceptance of Agency. The Warrant Agent hereby accepts the
agency established by this Agreement and agrees to perform the same upon the
terms and conditions herein set forth.
Section 6.12 Changes to Agreement. The Warrant Agent may, without the
consent or concurrence of any registered holder of a Warrant Certificate, by
supplemental agreement or otherwise, join with the Company in making any changes
or corrections in this Agreement that they shall have been advised by counsel
(a) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
D-12
contained, (b) add to the covenants and agreements of the Company or the Warrant
Agent in this Agreement such further covenants and agreements thereafter to be
observed, or (c) result in the surrender of any right or power reserved to or
conferred upon the Company or the Warrant Agent in this Agreement, but which
changes or corrections do not or will not adversely affect, alter, or change the
rights, privileges, or immunities of the registered holders of Warrant
Certificates.
Section 6.13 Assignment. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns.
Section 6.14 Successor to Company. The Company will not merge or
consolidate with or into any other corporation or sell or otherwise transfer its
property, assets, and business substantially as an entirety to a successor
corporation unless the corporation resulting from such merger, consolidation,
sale, or transfer (if not the Company) shall expressly assume, by supplemental
agreement satisfactory in form and substance to the Warrant Agent and delivered
to the Warrant Agent, the due and punctual performance and observance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company.
Section 6.15 Notices. Any notice or demand required by this Agreement to be
given or made by the Warrant Agent or by the registered holder of any Warrant
Certificate to or on the Company shall be sufficiently given if made in writing
and shall be mailed by certified mail, return receipt requested or sent by
Federal Express, Express Mail, or similar overnight delivery or courier service
or delivered (in person or by telecopy, telex, or similar telecommunications
equipment) against receipt to the party to whom it is to be given as follows:
if to the Company:
Atlantic Coast Entertainment Holdings, Inc.
c/o Sands Hotel & Casino
Indiana Avenue & Brighton Park
Atlantic City, New Jersey 08401
Phone: (609) 441-4633
Attention: Phyllis LeTart, Esq.
If to the Warrant Agent:
[warrant agent address]
Any notice or demand required by this Agreement to be given or made by the
Company or the Warrant Agent to or on the registered holder of any Warrant
Certificate shall be sufficiently given or made, whether or not such holder
receives the notice, if sent by first-class or registered mail, postage prepaid,
addressed to such registered holder at his last address as shown on the books of
the Company maintained by the Warrant Agent. Otherwise such notice or demand
shall be deemed given when received by the party entitled thereto.
Section 6.16 Defects in Notice. Failure to file any certificate or notice
or to mail any notice, or any defect in any certificate or notice pursuant to
this Agreement, shall not affect in
D-13
any way the rights of any registered holder of a Warrant Certificate or the
legality or validity of any adjustment made pursuant to Section 3.1 hereof, or
any transaction giving rise to any such adjustment, or the legality or validity
of any action taken or to be taken by the Company.
Section 6.17 Governing Law. This Agreement and the Warrant Certificates
shall be governed by and construed in accordance with the laws of the State of
New York, without regard to principles of conflicts of law. Each of the parties
submits to the jurisdiction of the federal courts whose districts encompass any
part of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute arising under
this Agreement or any of the transactions contemplated hereby, and hereby
waives, to the maximum extent permitted by law, any objection, including an
objections based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions.
Section 6.18 Standing. Nothing in this Agreement expressed and nothing that
may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company, the Warrant Agent, and the registered holders of the Warrant
Certificates any right, remedy, or claim under or by reason of this Agreement or
of any covenant, condition, stipulation, promise, or agreement contained herein;
and all covenants, conditions, stipulations, promises, and agreements contained
in this Agreement shall be for the sole and exclusive benefit of the Company and
the Warrant Agent and their successors, and the registered holders of the
Warrant Certificates.
Section 6.19 Headings. The descriptive headings of the articles and
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 6.20 Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts shall together constitute but one and the same instrument.
Section 6.21 Conflict of Interest. The Warrant Agent and any stockholder,
director, officer, or employee of the Warrant Agent may buy, sell, or deal in
any of the Warrant Certificates or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be interested
or contract with or lend money to the Company or otherwise act as fully and
freely as though the Warrant Agent were not Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company, including, without limitation, as trustee under any
indenture or as transfer agent for any securities of the Company or for any
other entity.
Section 6.22 Availability of the Agreement. The Warrant Agent shall keep
copies of this Agreement available for inspection by holders of Warrants during
normal business hours at its Corporate Trust Department. Copies of this
Agreement may be obtained upon written request addressed to:
Phyllis LeTart, Esq.
c/o Sands Hotel & Casino
Indiana Avenue & Brighton Park
D-14
Atlantic City, New Jersey 08401
(609) 441-4633
D-15
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
By: _______________________
Name:
Title:
[Warrant Agent]
By: _______________________
Name:
Title:
D-16
Exhibit A
[FORM OF WARRANT CERTIFICATE]
No.
Certificate for _____ Warrants
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that ____________________________________ or registered
assigns is the registered holder (the "Registered Holder") of the number of
Warrants set forth above, each of which represents the right to purchase .275
fully paid and nonassessable share of Common Stock, par value $.01 per share
(the "Common Stock"), of Atlantic Coast Entertainment Holdings, Inc., (the
"Company"), a Delaware corporation, at the initial exercise price (the "Exercise
Price") of $.01, at any time after the shares of Common Stock issuable upon
exercise of the Warrants evidenced hereby have been registered under the
Securities Act of 1933, as amended, or such other action as may be required by
Federal or state law relating to the issuance or distribution of securities
shall have been taken, but not before the Vesting Date hereinafter referred to,
and not after the Exercise Deadline hereinafter referred to, by surrendering
this Warrant Certificate, with the form of election to purchase set forth hereon
duly executed with signatures guaranteed as provided below, at the office
maintained pursuant to the Warrant Agreement hereinafter referred to for that
purpose by _______, or its successor as warrant agent (any such warrant agent
being herein called the "Warrant Agent"), and by paying in full the Exercise
Price, plus transfer taxes, if any. Payment of the Exercise Price shall be made
in United States currency, by certified check or money order payable to the
order of the Company. Capitalized terms used herein, but not otherwise defined
shall have the meaning set forth in the Warrant Agreement, (the "Warrant
Agreement") dated as of [___ ___, 2003] by and between the Company and the
Warrant Agent.
Upon certain events provided for in the Warrant Agreement, the number of
shares of Common Stock issuable upon the exercise of each Warrant is required to
be adjusted.
Each Warrant may be exercised at any time after the earliest to occur of
the following events (the first date on which any such event occurs being
referred to as the "Vesting Date"):
(a) the payment in full of the entire principal amount and accrued
interest on the Company's outstanding 3% Notes due 2008 issued by the
Company (the "New Notes"), pursuant to and in accordance with the
terms thereof whether such payment is in the form of cash or by
issuance of shares of Common Stock to the holder thereof in lieu of
cash payment;
1
(b) a determination of the board of directors of the Company (the "Board")
that the Warrants may be exercised; and
(c) payment in full by the Parent of both the aggregate principal amount
outstanding of and the accrued, but unpaid interest owed under the 11%
Notes due 2005 issued by the Parent which have not been exchanged for
the New Notes in the Transaction.
Promptly after the Vesting Date, the Company shall send written notice to
the Warrant Agent that such Vesting Date has occurred (the "Vesting Notice").
The Warrant Agent shall within ten days after receipt of the Vesting Notice
cause a similar notice to be mailed to each registered holder of a Warrant
Certificate.
The latest time and date at which the Warrants may be exercised (the
"Exercise Deadline") shall be 5:00 P.M. New York City time on the earlier of (i)
the date that is the seventh anniversary of the completion of the Distribution;
or (ii) the Cancellation Date (as defined below).
At any time after the Vesting Date, the Company by action of the Board, may
at its option, cancel all, but not less than all of the Warrants provided that
the Company uses reasonable efforts to register the Warrant Shares under the
Securities Act. Notice of such cancellation shall be promptly given to the
Warrant Agent by the Company and such notice (the "Cancellation Notice") shall
be mailed to all registered holders of Warrant Certificates, not less than 90
days prior to the date established by the Board (the "Cancellation Date"). The
Cancellation Notice will specify the Cancellation Date and will also state that
the right to exercise the Warrants will terminate at 5:00 p.m., New York City
time on the Cancellation Date. The Company will also make a prompt public
announcement by news release and by notice to any national securities exchange
on which the Warrants are listed for trading.
After the Exercise Deadline, all Warrants evidenced hereby shall thereafter
become void.
Prior to the Exercise Deadline, subject to any applicable laws, rules, or
regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate in accordance with
the terms of the Warrant Agreement, the Registered Holder shall be entitled to
transfer this Warrant Certificate in whole or in part upon surrender of this
Warrant Certificate at the office of the Warrant Agent maintained for that
purpose with the form of assignment set forth hereon duly executed, with
signatures guaranteed by a member firm of a national securities exchange, a
commercial bank (not a savings bank or a savings and loan association) or a
trust company located in the United States, a member of the National Association
of Securities Dealers, Inc., or other eligible guarantor institution which is a
participant in a signature guarantee program (as such terms are defined in Reg.
240.17Ad-15 under the Securities Exchange Act of 1934, as amended) acceptable to
the Warrant Agent. Upon any such transfer, a new Warrant Certificate or Warrant
Certificates representing the same aggregate number of Warrants will be issued
in accordance with instructions in the form of assignment.
2
Upon the exercise of less than all of the Warrants evidenced by this
Warrant Certificate, there shall be issued to the Registered Holder a new
Warrant Certificate in respect of the Warrants not exercised.
Prior to the Exercise Deadline, the Registered Holder shall be entitled to
exchange this Warrant Certificate, with or without other Warrant Certificates,
for another Warrant Certificate or Warrant Certificates for the same aggregate
number of Warrants, upon surrender of this Warrant Certificate at the office
maintained for such purpose by the Warrant Agent.
No fractional shares will be issued upon the exercise of Warrants. As to
any final fraction of a share which the registered holder of one or more Warrant
Certificates, the rights under which are exercised in the same transaction,
would otherwise be entitled to purchase upon such exercise, the Company shall
pay the cash value thereof determined as provided in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with the Warrant
Agreement and is subject to the terms and provisions contained in said Warrant
Agreement, to all of which terms and provisions the Registered Holder consents
by acceptance hereof.
This Warrant Certificate shall not entitle the registered holder of such
Certificate to any of the rights of a stockholder of the Company, including,
without limitation, the right to vote, to receive dividends and other
distributions, or to attend or receive any notice of meetings of stockholders or
any other proceedings of the Company.
This Warrant Certificate shall not be valid for any purpose until it shall
have been countersigned by the Warrant Agent.
3
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its facsimile corporate seal.
Atlantic Coast Entertainment Holdings, Inc.
By:__________________________________
President
Seal Attest:
-------------------------------------
Secretary
Countersigned: [Warrant Agent]
--------------------------------------
as Warrant Agent
Dated
4
[FORM OF]
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise __________ of the
Warrants represented by this Warrant Certificate and to purchase the shares of
Common Stock issuable upon the exercise of said Warrants, and requests that
certificates for such shares be issued and delivered as follows:
ISSUE TO:
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
(SOCIAL SECURITY OR OTHER TAX IDENTIFICATION NUMBER)
DELIVER TO:
(NAME)
at
(ADDRESS, INCLUDING ZIP CODE)
If the number of Warrants hereby exercised is less than all the Warrants
represented by this Warrant Certificate, the undersigned requests that a new
Warrant Certificate representing the number of full Warrants not exercised be
issued and delivered as set forth below.
In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$_________ by certified check or money order payable in United States currency
to the order of the Company.
Dated ____________________, 20__
Name of Warrant Holder:
--------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature:
----------------------------------------------------------------------
5
[FORM OF] ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto the Assignee named below all of the rights of the undersigned represented
by the within Warrant Certificate, with respect to the number of Warrants set
forth below:
Name of Assignee Address No. of Warrants
- ---------------- ------- ---------------
and does hereby irrevocably constitute and appoint ___________ Attorney to make
such transfer on the books of Atlantic Coast Entertainment Holdings, Inc.
maintained for that purpose, with full power of substitution in the premises.
Dated: ___.
Signature
SIGNATURE(S) GUARANTEED Signature
NOTICE: The signature(s) on
By this assignment must
THE SIGNATURE(S) SHOULD BE correspond with the name(s) as
GUARANTEED BY AN ELIGIBLE written upon the face of the
GUARANTOR INSTITUTION (Banks, Certificate, in every
Stock Brokers, Savings and particular, without alteration
Loan Associations, and Credit or enlargement or any change
Unions) WITH MEMBERSHIP IN AN whatever.
APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM PURSUANT TO
S.E.C. RULE 17Ad-15.
6
ANNEX E
================================================================================
GB PROPERTY FUNDING CORP.,
as Issuer,
GB HOLDINGS INC. and GREATE BAY HOTEL
and CASINO, INC.,
as Guarantors,
and
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee
--------------------
Amended and Restated Indenture
Dated as of October 12, 2001
--------------------
$110 Million
11% Notes Due 2005
================================================================================
E-1
GB Property Funding Corp.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of ________
TIA INDENTURE
SECTION SECTION
- ------- -------
310(a)(1) ................................................. 607
(a)(2) ............................................... 607
(a)(3) ............................................... N.A.
(a)(4) ............................................... N.A.
(a)(5) ............................................... 607
(b) .................................................. 604, 608
(c) .................................................. N.A.
311 ....................................................... 604
312 ....................................................... 701
313 ....................................................... 601, 702
314(a) .................................................... 703, 1008
(b) .................................................. 1401(d)
(c)(1) ............................................... 102
(c)(2) ............................................... 102
(c)(3) ............................................... N.A.
(d) .................................................. 1405
(e) .................................................. 102
(f) .................................................. N.A.
315(a) .................................................... 602
(b) .................................................. 601
(c) .................................................. 602
(d) .................................................. 602
(e) .................................................. N.A.
316(a) (last sentence) .................................... 101("Outstanding")
(a)(1)(A) ............................................ 512
(a)(1)(B) ............................................ 513
(a)(2) ............................................... N.A.
(b) .................................................. 508
(c) .................................................. 104(d)
317(a)(1) ................................................. 503
(a)(2) ............................................... 504
(b) .................................................. 1003
318(a) .................................................... 111
- ----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
E-2
TABLE OF CONTENTS(1)
PARTIES .................................................................... 1
RECITALS ................................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions .................................................. 9
Section 102. Compliance Certificates and Opinions ......................... 26
Section 103. Form of Documents Delivered to Trustee ....................... 26
Section 104. Acts of Holders .............................................. 27
Section 105. Notices, etc., to Trustee, Company and Guarantors ............ 28
Section 106. Notice to Holders; Waiver .................................... 29
Section 107. Effect of Headings and Table of Contents ..................... 30
Section 108. Successors and Assigns ....................................... 30
Section 109. Separability Clause .......................................... 30
Section 110. Benefits of Indenture ........................................ 30
Section 111. Governing Law ................................................ 30
Section 112. Legal Holidays ............................................... 31
Section 113. Casino Control Act ........................................... 31
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally .............................................. 31
Section 202. Form of Face of Notes ........................................ 31
Section 203. Form of Reverse of Notes ..................................... 32
Section 204. Form of Trustee's Certificate of Authentication .............. 36
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms .............................................. 37
Section 302. Denominations ................................................ 38
Section 303. Execution, Authentication, Delivery and Dating ............... 38
Section 304. Temporary Securities ......................................... 39
Section 305. Registration, Registration of Transfer and Exchange .......... 39
Section 306. Mutilated, Destroyed, Lost and Stolen Securities ............. 40
Section 307. Payment of Interest; Interest Rights Preserved ............... 41
Section 308. Persons Deemed Owners ........................................ 42
Section 309. Cancellation ................................................. 42
Section 310. Computation of Interest ...................................... 43
Section 311. Maximum Interest Rate ........................................ 43
- ----------
(1) This table of contents shall not, for any purpose, be deemed to be a
part of this Indenture.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture ...................... 43
Section 402. Application of Trust Money ................................... 44
ARTICLE FIVE
REMEDIES
Section 501. Events of Default ............................................ 45
Section 502. Acceleration of Maturity; Rescission and Annulment ........... 47
Section 503. Collection of Indebtedness and Suits for Enforcement
by Trustee ................................................. 48
Section 504. Trustee May File Proofs of Claim ............................. 48
Section 505. Trustee May Enforce Claims Without Possession of Securities .. 49
Section 506. Application of Money Collected ............................... 49
Section 507. Limitation on Suits .......................................... 50
Section 508. Unconditional Right of Holders to Receive Principal Premium
and Interest ............................................... 50
Section 509. Restoration of Rights and Remedies ........................... 50
Section 510. Rights and Remedies Cumulative ............................... 51
Section 511. Delay or Omission Not Waiver ................................. 51
Section 512. Control by Holders ........................................... 51
Section 513. Waiver of Defaults and Compliance ............................ 51
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults ........................................... 52
Section 602. Certain Rights of Trustee .................................... 52
Section 603. Trustee Not Responsible for Recitals or Issuance of Securities 54
Section 604. May Hold Securities .......................................... 54
Section 605. Money Held in Trust .......................................... 54
Section 606. Compensation and Reimbursement ............................... 54
Section 607. Corporate Trustee Required: Eligibility ...................... 55
Section 608. Resignation and Removal; Appointment of Successor ............ 55
Section 609. Acceptance of Appointment by Successor ....................... 57
Section 610. Merger, Conversion, Consolidation or Succession to Business .. 57
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTORS
Section 701. Disclosure of Names and Addresses of Holders ................. 58
Section 702. Reports by Trustee ........................................... 58
Section 703. Reports by Company and Guarantors ............................ 59
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ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Holdings and Subsidiaries May Consolidate, etc.,
Only on Certain Terms ...................................... 60
Section 802. Successor Substituted ........................................ 61
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Amendments to Security
Documents Without Consent of Holders ....................... 62
Section 902. Supplemental Indentures and Amendments to Security
Documents with Consent of Holders .......................... 63
Section 903. Execution of Supplemental Indentures and Amendments
to Security Documents ...................................... 63
Section 904. Effect of Supplemental Indentures ............................ 64
Section 905. Conformity with Trust Indenture Act .......................... 64
Section 906. Reference in Securities to Supplemental Indentures ........... 64
Section 907. Notice of Supplemental Indentures and Amendments
to Security Documents ...................................... 64
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium, if any, and Interest ......... 64
Section 1002. Maintenance of Office or Agency ............................. 65
Section 1003. Money for Security Payments to Be Held in Trust ............. 65
Section 1004. Corporate Existence ......................................... 66
Section 1005. Payment of Taxes and Other Claims ........................... 67
Section 1006. Maintenance of Properties ................................... 67
Section 1007. Insurance ................................................... 67
Section 1008. Statement by Officers as to Compliance ...................... 67
Section 1009. Statement by Officers of Certain Defaults ................... 68
Section 1010. Purchase of Securities upon Change in Control ............... 68
Section 1011. [Intentionally Omitted.] .................................... 69
Section 1012. [Intentionally Omitted.] .................................... 69
Section 1013. Limitation on Restricted Payments ........................... 69
Section 1014. [Intentionally Omitted.] .................................... 69
Section 1015. [Intentionally Omitted.] .................................... 69
Section 1016. [Intentionally Omitted.] .................................... 70
Section 1017. Limitation on Asset Sales ................................... 70
Section 1018. Application of Net Cash Proceeds in Event of Loss ........... 71
Section 1019. Ownership of Stock of Subsidiaries .......................... 72
Section 1020. Limitation on Transactions with Affiliates .................. 72
Section 1021. Change in Nature of Business ................................ 72
Section 1022. Additional Collateral ....................................... 72
Section 1023. CRDA Investments ............................................ 72
Section 1024. Subsidiaries ................................................ 73
Section 1025. Security Documents .......................................... 73
Section 1026. Validity of Security Interest ............................... 73
Section 1027. Duty of Cooperation ......................................... 74
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Optional Redemption ......................................... 74
Section 1102. Applicability of Article .................................... 74
Section 1103. Election to Redeem; Notice to Trustee ....................... 74
Section 1104. Selection by Trustee of Securities to Be Redeemed ........... 74
Section 1105. Notice of Redemption ........................................ 75
Section 1106. Deposit of Redemption Price ................................. 76
Section 1107. Securities Payable on Redemption Date ....................... 76
Section 1108. Securities Redeemed in Part ................................. 76
Section 1109. Redemption Pursuant to Gaming Laws .......................... 76
ARTICLE TWELVE
GUARANTEE ARRANGEMENTS
Section 1201. Guarantee ................................................... 77
Section 1202. Execution and Deliver of Guarantee .......................... 79
Section 1203. Additional Guarantors ....................................... 79
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
Section 1301. Company's Option to Effect Defeasance or Covenant
Defeasance ............................................... 80
Section 1302. Defeasance and Discharge .................................... 80
Section 1303. Covenant Defeasance ......................................... 80
Section 1304. Conditions to Defeasance or Covenant Defeasance ............. 81
Section 1305. Deposited Money and U.S. Government Obligations To Be Held
in Trust; Other Miscellaneous Provisions ................. 82
Section 1306. Reinstatement ............................................... 83
ARTICLE FOURTEEN
SECURITY INTEREST
Section 1401. Assignment of Security Interest ............................. 83
Section 1402. Suits to Protect the Collateral ............................. 84
Section 1403. Further Assurances and Security ............................. 85
Section 1404. Collateral Account .......................................... 85
Section 1405. Release Notice; Subordination Request, Permitted Liens ...... 86
Section 1406. Reliance on Opinion of Counsel .............................. 88
Section 1407. Purchaser May Rely .......................................... 88
Section 1408. Payment of Expenses ......................................... 88
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ARTICLE FIFTEEN
MISCELLANEOUS
Section 1501. Counterparts ................................................ 89
Exhibit A
TESTIMONIUM................................................................
SIGNATURE AND SEALS........................................................
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SCHEDULES
1.01 Permitted Indebtedness
1.02 Permitted Affiliate Transactions
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AMENDED AND RESTATED INDENTURE, dated as of October 12, 2001 among GB
Property Funding Corp. (herein called the "Company"), GB Holdings, Inc. (herein
called "Holdings") and Greate Bay Hotel and Casino, Inc. (herein called "GBHC",
and, together with Holdings, herein called the "Guarantors"), each of which is a
corporation duly organized and existing, in the case of the Company and
Holdings, under the laws of the State of Delaware, and in the case of GBHC,
under the laws of the State of New Jersey, and each having its principal office
c/o Sands Hotel and Casino at Indiana Avenue & Brighton Park, Atlantic City, New
Jersey 08401, and Wells Fargo Bank Minnesota, National Association, Trustee
(herein called the "Trustee").
The Company has duly authorized and issued its 11% Notes Due 2005
(herein called "Notes" or the "Securities"), under an Indenture dated as of
September 29, 2000 (the "Original Indenture") of substantially the tenor and
amount set forth in the Original Indenture, and to provide therefore the Company
has duly authorized the execution and delivery of the Original Indenture, as
amended and restated by this Amended and Restated Indenture (this "Indenture").
The Company has duly authorized the creation of Liens to secure the Securities,
and to provide therefore the Company has duly authorized the execution and
delivery of the Security Documents to which it is a party.
Each of the Guarantors has duly authorized its guarantee of the
Securities, and to provide therefore each of the Guarantors has duly authorized
the execution and delivery of this Indenture. Each of the Guarantors has duly
authorized the creation of Liens to secure its guarantee of the Securities, and
to provide therefore each of the Guarantors has duly authorized the execution
and delivery of the Security Documents to which it is a party.
This Indenture is subject to the provisions of the Trust Indenture Act
of 1939, as amended, that are required to be part of this Indenture and shall,
to the extent applicable, be governed by such provisions.
All things necessary have been done to make the Securities, when
executed by the Company and authenticated by the Trustee and delivered hereunder
and duly issued by the Company, the valid obligations of the Company, to make
the Guarantees the valid obligation of each of the Guarantors and to make this
Indenture a valid agreement of each of the Company and the Guarantors, in
accordance with their and its terms.
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
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(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under
the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted at the date of
such computation;
(d) any reference herein to any "first priority lien", "first
priority security interest" or words of similar import or otherwise
regarding the priority of any Lien, shall apply and refer, and shall be
deemed to apply and refer, only to the Collateral and all such Liens
shall, and shall be deemed to be: (i) subject and inferior to any Lien
to secure Working Capital Indebtedness; and (ii) subject to any release
or subordination contemplated in Section 1405 hereof. Any reference
herein to the "terms of any release or subordination contemplated in
Section 1405 hereof" or "any release or subordination" or words of
similar import shall be deemed to refer to and include, without
limitation, any and all terms, provisions and conditions of any such
release or subordination and of all agreements, documents and
instruments related thereto, associated therewith or arising from or in
connection with any such release or subordination or any related or
associated transaction; and
(e) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Subsidiary of Holdings or is combined
or acquired through an asset acquisition, merger or otherwise, with Holdings or
a Subsidiary of Holdings, including, without limitation, Indebtedness incurred
by such Person in connection with, or in anticipation of, such Person becoming a
Subsidiary of Holdings or of such acquisition, in each case which, if secured,
is not secured by Collateral.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" of any Person means any other Person that,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such Person and with respect to any natural
Person, any other Person having a relationship by blood, marriage or adoption,
not more remote than first cousins with such natural Person. For the purposes of
this definition, "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of Voting Stock or other equity interests, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
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"Allowed Indebtedness" means any Indebtedness or Preferred
Stock, including, without limitation, Indebtedness or Preferred Stock that: (i)
is not secured by a Lien; (ii) is (or to the extent that it is) secured by a
Lien on assets other than the Collateral; (iii) is secured by a Lien on
Collateral which, except for and subject to any release or subordination
contemplated in Section 1405 hereof, is inferior to the Liens of the Trustee on
such Collateral; (iv) constitutes Acquired Indebtedness, or (v) is incurred
between or among Holdings and its Subsidiaries.
"Amortization Expense" means, for any Person for any period,
the amount of the amortization expense (including, without limitation, the
write-down of non-current assets, including CRDA Investments) that is reflected
on the financial statements of such Person and its Subsidiaries consolidated in
such financial statements for such period in accordance with GAAP.
"Approved Project" means any transaction that has been
approved by the Board of Directors of Holdings or any of its Subsidiaries
involving: (a) the incurrence of Indebtedness to be entered into or incurred by
Holdings or any of its Subsidiaries; (b) any Approved Transfer; or (c) any
similar, related or associated event, transaction or activity.
"Approved Transfer" means any sale, conveyance, transfer,
disposition or contribution by a Person, or any Subsidiary of such Person, to
any Person ("Transferee") if such Person or Subsidiary has or obtains debt or
equity interests in the Transferee.
"Asset Acquisition" means (a) any capital contribution
(including, without limitation, transfers of cash or other property to others or
payments for property or services for the account or use of others, or
otherwise), or purchase or acquisition of Capital Stock or other similar
ownership or profit interest, by Holdings or any of its Subsidiaries in any
other Person, in either case pursuant to which such Person shall become a
Subsidiary of Holdings or any of its Subsidiaries or shall be merged with or
into Holdings or any of its Subsidiaries or (b) any acquisition by Holdings or
any of its Subsidiaries of the assets of any Person which constitute
substantially all of an operating unit or business of such Person.
"Asset Sale" means, as applied to any Person, any direct or
indirect sale, conveyance, transfer, lease or other disposition (other than a
Sale-Leaseback Transaction) by such Person or any Subsidiary of such Person to
any Person other than such Person or a wholly owned Subsidiary of such Person,
in one transaction or a series of related transactions, of any Capital Stock of
any Subsidiary of such Person or other similar equity interest of such
Subsidiary or any other property or asset of such Person or any Subsidiary of
such Person (provided that the term "Asset Sale" shall not include (a) sales,
conveyances, transfers, leases or other dispositions in the ordinary course of
business, (b) all other dispositions pursuant to which such Person receives,
directly or indirectly, Net Cash Proceeds or fair market value of less than or
equal to $5,000,000 in the aggregate in any twelve month period, (c) sales,
conveyances, transfers, leases or other dispositions of CRDA Investments, (d)
any Approved Transfer, (e) sales, conveyances, transfers, leases or other
transactions or dispositions made in accordance with the provisions of Section
1405 of this Indenture or (f) sales, conveyances, transfers, leases or other
transactions or dispositions made pursuant to the terms of any agreement,
document or instrument entered into in connection with any Approved Project in
respect of which any release or subordination has occurred in accordance with
the provisions of Section 1405 of this Indenture, including, without limitation,
any sale or other disposition resulting from any default or foreclosure).
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"Assets" means, as applied to any Person, any tangible or
intangible assets, or rights or real or personal properties of such Person or
any of its Subsidiaries including capital stock of Subsidiaries.
"Board of Directors" means either the board of directors of a
Person or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of a Person to have been duly adopted by
the Board of Directors of such Person and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The City of New
York or the State of New Jersey are authorized or obligated by law or executive
order to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of, such Person's capital stock,
whether outstanding on the Issue Date or issued after such date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.
"Capitalized Lease Obligation" means any obligation to pay
rent or other amounts under a lease of (or other agreement conveying the right
to use) any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP, and, for
the purpose hereof, the amount of such obligation at any date of determination
shall be the capitalized amount thereof at such date, determined in accordance
with GAAP.
"Cash Equivalents" means any of the following, to the extent
owned by Holdings or any of its Subsidiaries free and clear of all Liens (other
than Liens in favor of the Trustee or the Holders) and having a maturity of not
greater than 270 days from the date of acquisition: (a) any evidence of
Indebtedness issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof): (b) insured certificates of deposit or acceptances of any commercial
bank that is a member of the Federal Reserve System, that issues (or the parent
of which issues) commercial paper rated as described in clause (c) below and
that has combined capital and surplus and undivided profits of not less than
$100,000,000; (c) commercial paper issued by a corporation (except an Affiliate
of Holdings) organized under the laws of any state of the United States or the
District of Columbia and rated at least A-1 (or the then equivalent grade) by
Standard & Poor's Corporation or at least Prime-1 (or the then equivalent grade)
by Moody's Investors Service, Inc.; and (d) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States government or issued by any
agency thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); provided that the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency.
E-12
"Casino Control Act" means the New Jersey Casino Control Act,
N.J. Stat. Ann. 5:12-1 et seq. (New Jersey Public Law 1977, C.110), and the
regulations promulgated thereunder, N.J.A.C. 19:40-1.1 et seq., as from time to
time amended, or any successor provision of law.
"Casino Control Commission" means the New Jersey Casino
Control Commission as established by Section 50 of the Casino Control Act or any
successor agency appointed pursuant to the Casino Control Act.
"Change of Control" means, after the Issue Date, an event or
series of events by which any "person" (as such term is used in Section 13(d)
and 14(d) of the Exchange Act), other than Carl C. Icahn and his Affiliates, or
Holdings and its Subsidiaries, is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 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), directly or indirectly (including through ownership of
Voting Stock of a Person owning, directly or indirectly, Voting Stock of the
Company, GBHC or Holdings) of securities representing 50% or more of the
combined voting power of the Voting Stock of the Company, GBHC or Holdings.
"Collateral" has the meaning attributed to it in the Security
Agreement and the Mortgage and includes and is limited to, to the extent
contemplated in such definition, assets (other than cash, cash equivalents, CRDA
Investments and gaming receivables and revenues) owned by Holdings or its
Subsidiaries as of the Issue Date and assets contemplated in Section 1404 of
this Indenture; provided that for purposes of this Indenture and the Security
Documents, the Collateral shall not include any asset to the extent that it has
ceased to be subject to the Security Interest pursuant to Section 1405 hereof.
"Collateral Account" shall have the meaning ascribed to such
term in the Security Agreement.
"Collateral Assignment of Leases" means the Assignment, dated
as of September 29, 2000, by GBHC in favor of the Trustee for its own benefit
and the benefit of the Holders, as the same may be amended from time to time.
"Collateral Proceeds" means, subject to and as permitted by
the terms of this Indenture and the terms of any release or subordination
contemplated in Section 1405 hereof, (a) any Net Cash Proceeds received or
receivable by Holdings or GBHC or any other Grantor as a result of an Asset Sale
or Event of Loss that involves all or a portion of the Collateral and (b) all
interest or other earnings on amounts in deposit in the Collateral Account.
E-13
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this Indenture such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations and other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the Issue Date, and includes, without limitation,
all series and classes of such common stock.
"Company" means GB Property Funding Corp., until a successor
Person shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman, its President, any
Vice President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated" or "consolidated" refers to the consolidation
of accounts in accordance with GAAP, and each reference to any such
consolidation in this Indenture including, without limitation, "Consolidated
Cash Flow", "Consolidated Coverage Ratio", "Consolidated Fixed Charges",
"Consolidated Income Tax Expense", and "Consolidated Net Income" shall include
and be deemed to include, if, prior to the calculation date, one or more
acquisitions have been engaged in by Holdings or any of its Subsidiaries
(including through mergers or consolidations or other asset or business
acquisitions or combination transactions), the accounts of such acquired person
or business for the entire applicable reference period, and such acquisition
shall be deemed to have occurred on the first day of the applicable reference
period and shall be given pro forma effect, in all events exclusive of all
obligations or charges: (x) of a non-recurring nature, (y) attributable to
discontinued operations, and (z) otherwise attributable to operations or
businesses disposed of prior to the Transaction Date.
"Consolidated Cash Flow" means, for any Person for any period,
the sum of:
(a) the Consolidated Net Income of such Person and its
Subsidiaries for such period, plus
(b) the sum of the following items (to the extent deducted in
determining Consolidated Net Income and without duplication): (i) all
Consolidated Fixed Charges; (ii) Amortization Expense; (iii)
Depreciation Expense; and (iv) Consolidated Income Tax Expense.
"Consolidated Coverage Ratio" means for any Person the ratio
of (a) Consolidated Cash Flow of such Person and its Subsidiaries for the four
full fiscal quarters for which financial statements are available that
immediately precede the date of the transaction or other circumstances giving
rise to the need to calculate the Consolidated Coverage Ratio (the "Transaction
Date") (or, for purposes of clause (b) of the definition of the term "Permitted
GBHC Indebtedness", projected as contemplated therein) to (b) the Consolidated
Fixed Charges for the fiscal quarter in which the Transaction Date occurs and to
be accrued during any balance of such quarter and during the three fiscal
quarters immediately following such fiscal quarter (based upon the pro forma
amount of Indebtedness of such Person and its Subsidiaries outstanding on the
Transaction Date and after giving effect to the transaction in question) (or,
for purposes of clause (b) of the definition of the term "Permitted GBHC
Indebtedness", projected as contemplated therein). For purposes of this
definition, if the Transaction Date occurs before the date on which such
Person's consolidated financial statements for the four full fiscal quarters
after the Issue Date are first available, "Consolidated Cash Flow" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis as if the Securities outstanding on the Transaction Date were issued
on the first day of such four full fiscal quarter period. In addition,
"Consolidated Cash Flow" and "Consolidated Fixed Charges" shall be calculated
after giving effect on a pro forma basis for the period of such calculation to
(i) the incurrence or retirement of any Indebtedness of such Person and its
Subsidiaries at any time during the period (the "Reference Period") (A)
commencing on the first day of the four full fiscal quarters ended before the
Transaction Date for which financial statements are available and (B) to, and
including, the Transaction Date, including, without limitation, the incurrence
of the Indebtedness giving rise to the need to make such calculation, as if such
Indebtedness were incurred or retired on the first day of the Reference Period;
provided that if such Person or any of its Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the above clause shall give effect to
the incurrence of such guaranteed Indebtedness as if such Person or such
Subsidiary had directly incurred such guaranteed Indebtedness and (ii) any Asset
Sale, Event of Loss or Asset Acquisition (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a result
of such Person or any of its Subsidiaries (including any Person who becomes a
Subsidiary as result of the Asset Acquisition) incurring Acquired Indebtedness)
occurring during the Reference Period and any retirement of Indebtedness in
connection with such Asset Acquisition, as if such Asset Sale, Event of Loss or
Asset Acquisition and/or retirement occurred on the first day of the Reference
Period. Furthermore, in calculating the denominator (but not the numerator) of
this "Consolidated Coverage Ratio," interest on Indebtedness determined on a
fluctuating basis that cannot be determined in advance shall be deemed to accrue
at the rate in effect on the Transaction Date for such entire period.
E-14
"Consolidated Fixed Charges" means as applied to any Person
for any period (a) the sum of the following items (without duplication): (i) the
aggregate amount of interest reflected in the financial statements by such
Person and its Subsidiaries in respect of their consolidated Indebtedness
(including, without limitation, all interest capitalized by such Person and its
Subsidiaries during such period, any amortization of debt discount and all
commissions, discounts and other similar fees and charges owed by such Person or
any of its Subsidiaries for letters of credit and bankers' acceptance financing
and the net costs associated with Interest and Currency Rate Protection
Obligations of such Person and its Subsidiaries); (ii) the aggregate amount of
the interest component of rentals in respect of Capitalized Lease Obligations
recognized by such Person and its Subsidiaries; (iii) to the extent any
Indebtedness of any other Person is guaranteed by such Person or any of its
Subsidiaries, the aggregate amount of interest paid or accrued by such other
Person during such period attributable to any such guaranteed Indebtedness; (iv)
dividends on Preferred Stock of any Subsidiary that is held by a Person other
than such Person or a wholly owned Subsidiary; (v) the interest portion of any
deferred payment obligation; and less (b) to the extent included in clause (a)
above, amortization or write-off of deferred financing costs of such Person and
its Subsidiaries and any charge related to any premium or penalty paid in
connection with redeeming or retiring any Indebtedness before its stated
maturity, with the foregoing amounts in the case of both clauses (a) and (b)
above, as determined in accordance with GAAP.
E-15
"Consolidated Income Tax Expense" means, as applied to any
Person for any period, federal, state, local and foreign income taxes of such
Person and its Subsidiaries for such period, determined in accordance with GAAP;
provided that, for purposes hereof, "income taxes" shall specifically exclude
any taxes paid to or imposed by a Gaming Authority.
"Consolidated Net Income" means, as applied to any Person for
any period, the aggregate of the consolidated Net Income (or net loss) of such
Person and its Subsidiaries (determined in accordance with GAAP) less (to the
extent included in such Consolidated Net Income): (a) the Net Income of any
other Person in which such Person and any of its Subsidiaries has a joint
interest with a third party (which interest does not cause the Net Income of
such other Person to be consolidated into the Net Income of such Person and its
Subsidiaries in accordance with GAAP) except to the extent of the amount of cash
dividends or other cash distributions in respect of Capital Stock actually paid
(out of funds legally available therefrom) to and received by such Person or a
Subsidiary, net of any taxes applicable thereto; (b) items (other than the tax
benefit of the utilization of net operating loss carry forwards or alternative
minimum tax credits) classified as extraordinary; (c) the net income of any
Subsidiary (other than a Guarantor) to the extent that the declaration of
dividends or similar distributions by such Subsidiary of that income is not at
the time permitted, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, law,
rule or governmental regulations applicable to that Subsidiary or its
stockholders; (d) any net gain or loss resulting from an Asset Sale or Event of
Loss or reserves relating thereto by such Person or any of its Subsidiaries; (e)
any gain (but not loss), net of taxes, realized upon the termination of any
employee pension benefit plan; and (f) all income taxes of such Person and its
Subsidiaries accrued according to GAAP for such period attributable to
extraordinary gains or losses.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee, at which at any particular time its corporate trust
business shall be administered, which office at the date of execution of this
Indenture is located at 6th and Marquette, MAC N9303-120, Minneapolis, MN 55479,
except that with respect to presentation of Securities for payment or for
registration of transfer or exchange, such term shall mean the office or agency
of the Trustee at which, at any particular time, its corporate agency business
shall be conducted.
"Corporation" includes corporations, associations, companies
and business trusts.
"CRDA Investments" means Investments in securities issued by,
and monies deposited with, the Casino Reinvestment Development Authority of the
State of New Jersey.
"Default" means any Event of Default, or an event that would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
"Defaulted Interest" has the meaning specified in Section 307.
"Depreciation Expense" means, as applied to any Person for any
period, the provision for depreciation that is reflected on the consolidated
financial statements of such Person and its Subsidiaries in accordance with
GAAP.
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"Disqualified Holders" shall have the meaning provided in
Section 1109.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock or other similar ownership or profit interest that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
exchangeable for Indebtedness, or is redeemable at the option of the holder
thereof, in whole or in part, on or before the Maturity Date of the Securities.
"Division of Gaming Enforcement" means the Division of Gaming
Enforcement of the New Jersey Department of Law and Public Safety as established
by Section 55 of the Casino Control Act or any successor division or agency.
"Event of Default" has the meaning specified in Section 501.
"Event of Loss" means, with respect to any property or asset
(tangible or intangible, real or personal), any of the following: (i) any loss,
destruction or damage of such property or asset; (ii) the condemnation or
seizure of such property or asset or the exercise of any right of eminent domain
or navigational servitude; or (iii) any actual condemnation, seizure or taking,
by exercise of the power of eminent domain or otherwise, of such property or
asset, or confiscation of such property or asset or the requisition of the use
of such property or asset; provided, that in any such case the Net Cash Proceeds
relating thereto are in excess of $5 million.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" or "fair value" means, with respect to any
asset or 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 shall be determined by the Board of Directors of
Holdings acting in good faith and shall be evidenced by a Board Resolution
delivered to the Trustee.
"Federal Bankruptcy Code" means the 1978 Bankruptcy Act of
Title 11 of the United States Code, as amended from time to time.
"FF&E Financing" means Indebtedness, the proceeds of which
will be used solely to finance the acquisition or lease of furniture, fixtures
or equipment ("FF&E") used by the Person incurring such Indebtedness in the
ordinary course in the operation of a Permitted Line of Business and secured by
a Lien on such FF&E.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
as of the Issue Date.
"Gaming Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States federal government or foreign government, any state, province
or any city or other political subdivision or otherwise and whether now or
hereafter in existence, or any officer or official thereof with authority to
regulate any gaming operation (or proposed gaming operation) owned, managed, or
operated by Holdings or any of its Subsidiaries.
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"Gaming Laws" means each gaming law of any applicable Gaming
Authority as amended from time to time, and the regulations promulgated and
rulings issued thereunder applicable to Holdings or any of its Subsidiaries or
shareholders.
"Grantor" means (i) any "Grantor" as defined in the Security
Agreement, (ii) any "Mortgagor" as defined in the Mortgage and (iii) any other
Person that grants a security interest in its assets in favor of the Trustee for
its benefit and the benefit of the Holders.
"Guarantee" means the guarantee of the Guarantors set forth in
Article Twelve.
"Guarantor" means each of GBHC and Holdings and any successor
thereto.
"Holder" means a Person in whose name a Security is registered
in the Security Register.
"incur" means to directly or indirectly create, assume, suffer
to exist, guarantee in any manner, or in any manner become liable for the
payment of.
"Indebtedness" of any Person means (a) any liability,
contingent or otherwise, of such Person (whether or not the recourse of the
lender is to the whole of the assets of such Person, or only to a portion
thereof), (i) for borrowed money (ii) evidenced by a note, bond, debenture or
similar instrument, letters of credit, acceptances or other similar facilities
(other than a trade payable or a current liability incurred in the ordinary
course of business) or (iii) for the payment of money relating to a Capitalized
Lease Obligation or other obligation relating to the deferred purchase price of
property or services (including a purchase money obligation); (b) any liability
of others of the kind described in the preceding clause (a) which such Person
has guaranteed including, without limitation, (x) to pay or purchase such
liability, (y) to supply funds to or in any other manner invest in the debtor
(including an agreement to pay for property or services irrespective of whether
such property is received or such services are rendered and (z) to purchase,
sell or lease (as lessee or lessor) property or to purchase or sell services,
primarily for the purpose of enabling a debtor to make a payment of such
Indebtedness or to assure the holder of such Indebtedness against loss; (c) any
obligation secured by a Lien to which the property or assets of such Person are
subject, whether or not the obligations secured thereby shall have been assumed
by or shall otherwise be such Person's legal liability; (d) all obligations of
such Person to purchase, redeem, retire, defease or otherwise make any payment
in respect of any Capital Stock of or other ownership or profit interest in such
Person or any of its Affiliates or any warrants, rights or options to acquire
such Capital Stock, valued, in the case of Disqualified Stock, at the greater of
its voluntary or involuntary liquidation preference plus accrued and unpaid
dividends; (e) all Interest and Currency Rate Protection Obligations; and (f)
any and all deferrals, renewals, extensions and refundings of any liability of
the kind described in any of the preceding clauses.
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"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented, changed, modified or amended (by
any addition to or elimination of, the provisions hereof, or otherwise) by one
or more indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
"Independent", when used with respect to any Person, means
such other Person who (a) does not have any material financial interest in
Holdings or in any Affiliate of Holdings and (b) is not an officer, employee,
promoter, underwriter, trustee, partner or person performing similar functions
for Holdings or a spouse, family member or other relative of any such Person;
provided, that with respect to any director of any corporation, such director
shall also be deemed to be "Independent" if such director meets the requirements
for independence established by any "national securities exchange" (as
contemplated in the Securities Exchange Act of 1934) for audit committee
membership. Whenever it is provided in this Indenture that any Independent
Person's opinion or certificate shall be furnished to the Trustee, such Person
shall be appointed by Holdings.
"Interest and Currency Rate Protection Obligations" means the
obligations of any Person pursuant to any interest rate swap, cap or collar
agreement, interest rate future or option contract, currency swap agreement,
currency future or option contract and other similar agreement designed to hedge
against fluctuations in interest rates or foreign exchange rates.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Investment" in any Person means any direct or indirect loan,
advance, guarantee or other extension of credit or capital contribution to
(including, without limitation, transfers of cash or other property to others or
payments for property or services for the account or use of others (excluding
unbilled or uncollected receivables), or otherwise), or purchase or acquisition
of Capital Stock, warrants, rights, options, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person or
Indebtedness of any other Person secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.
"Issue Date" means September 29, 2000.
"Lien" means any mortgage, lien (statutory or other), pledge,
security interest, encumbrance, hypothecation, assignment for security, or other
security agreement of any kind or nature whatsoever. For purposes of this
Indenture, a Person shall be deemed to own subject to a Lien any property which
it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, or other title retention agreement relating to such
Person.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, notice of redemption or otherwise.
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"Maturity Date", when used with respect to any Security, means
the date specified in such Security as the fixed date on which the final
installment of principal of such Security is due and payable.
"Mortgage" means the Mortgage and Fixture Security Agreement,
dated as of September 29, 2000, duly executed by GBHC in favor of the Trustee
for the benefit of the Holders, as the same may be amended from time to time.
"Net Cash Proceeds" means, with respect to any Asset Sale or
Event of Loss, as the case may be, the proceeds thereof in the form of cash or
Cash Equivalents received by Holdings or any of its Subsidiaries (whether as
initial consideration, through the payment or disposition of deferred
compensation or the release of reserves), after deducting therefrom (without
duplication): (a) reasonable and customary brokerage commissions, underwriting
fees and discounts, legal fees, finders fees and other similar fees and expenses
incurred in connection with such Asset Sale or Event of Loss; (b) provisions for
all taxes payable as a result of such Asset Sale or Event of Loss; (c) payments
made to retire Indebtedness (other than payments on the Securities) secured by
the assets subject to such Asset Sale or Event of Loss to the extent required
pursuant to the terms of such Indebtedness; and (d) appropriate amounts to be
provided by Holdings or any of its Subsidiaries, as the case may be, as a
reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale or Event of Loss and retained by Holdings or any of its Subsidiaries,
as the case may be, after such Asset Sale or Event of Loss, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale or Event of Loss, in each case to
the extent, but only to the extent, that the amounts so deducted are, at or
around the time of receipt of such cash or Cash Equivalents, actually paid to a
Person that is not an Affiliate of Holdings or, in the case of reserves, are
actually established and, in each case, are properly attributable to such Asset
Sale or Event of Loss.
"Net Income" means, with respect to any Person for any period,
the net income (or loss) of such Person determined in accordance with GAAP.
"Officers' Certificate" for any Person means a certificate
signed by the Chairman, the President, Executive Vice President or a Vice
President, and by the Chief Financial Officer or the Secretary of such Person,
and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel for
the Company or any of the Guarantors or any of their respective Affiliates,
including an employee of any such Person, or any other counsel reasonably
acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such Securities;
provided that, if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
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(iii) Securities, except to the extent provided in Sections
1302 and 1303, with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Article Thirteen;
and
(iv) Securities in respect of which, pursuant to Section 306,
other Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there
shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands the
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder or taken any other
action, Securities owned by Holdings or its Subsidiaries shall be disregarded
and deemed not to be Outstanding (but the Securities of any other Affiliates
shall be deemed for all such purposes to be Outstanding). In determining whether
the Trustee shall be protected in making such calculation or in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Securities owned by Holdings or its Subsidiaries which the Trustee knows to be
so owned shall be so disregarded. Securities owned by Holdings or its
Subsidiaries which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company, a Guarantor or a Subsidiary of Holdings.
"Paying Agent" means any Person (including the Company acting
as Paying Agent) authorized by the Company to pay the principal of (and premium,
if any, on) or interest on any Securities on behalf of the Company.
"Permitted GBHC Indebtedness" means any of the following
Indebtedness to the extent incurred by GBHC:
(a) Indebtedness under the Notes, the Indenture, the Guarantee
or any Security Document;
(b) Indebtedness if, immediately after giving pro forma effect
to the incurrence thereof, the projected Consolidated Coverage Ratio of
GBHC for the next full fiscal quarter, as determined by the Board of
Directors of GBHC based upon its projections, would be no less than
1.5:1;
(c) Indebtedness, including borrowing from Affiliates, having
a maturity at the time of its incurrence of one year or less incurred
solely to provide funds for working capital purposes; provided that
such Indebtedness (i) does not exceed $15 million outstanding in the
aggregate at any one time and (ii) for a period of 60 consecutive days
during any calendar year, does not exceed in the aggregate $5 million;
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(d) FF&E Financing and/or Capitalized Lease Obligations so
long as the sum of (x) the aggregate principal amount of such FF&E
Financing and (y) the aggregate amount of such Capitalized Lease
Obligations does not exceed $50 million in the aggregate at any time;
(e) Indebtedness of GBHC and Lieber Check Cashing LLC
("Lieber") that is outstanding on the Issue Date and the items listed
on Schedule 1.01 hereof on the Issue Date; and
(f) purchase money mortgage notes or other Indebtedness to
acquire Block 47, Lot 8 on the Tax Map of the City of Atlantic City,
and to acquire Block 156, Lots 28, 40 and 41 on the Tax Map of the City
of Atlantic City in fee simple or by long-term lease, which purchase
money mortgage note or similar indebtedness encumbers only such Block
and Lot numbers on the Tax Map of the City of Atlantic City, or any
other Indebtedness for the purpose of engaging in any transaction in
which the value of the assets acquired, for GAAP purposes (including
applicable goodwill) is equal to or greater than the financing
undertaken in connection with such transaction.
"Permitted Liens" means:
(i) Liens on property acquired after the Issue Date by way of
a merger or other business combination of a Person with or into
Holdings or any Subsidiary or the acquisition of a Person or its assets
by Holdings or any Subsidiary or otherwise and provided that except as
permitted in this Indenture such Liens do not extend to any Collateral;
(ii) statutory Liens to secure the performance of obligations,
surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business (exclusive of
obligations in respect of the payment of borrowed money), or for taxes,
assessments or governmental charges or claims, provided that in each
case the obligations are not yet delinquent or are being contested in
good faith by appropriate proceedings promptly instituted and
diligently concluded and any reserve or other adequate provision as
shall be required in conformity with GAAP shall have been made
therefor;
(iii) licenses, leases or subleases granted in the ordinary
course of business to others not interfering in any material respect
with the business of Holdings or any Subsidiary;
(iv) easement granted to the City of Atlantic City, New
Jersey, pursuant to municipal ordinance to extend Mt. Vernon Avenue
right-of-way upon part of Block 48, Lot 8 on the Tax Map of the City of
Atlantic City;
(v) with respect to the property involved, easements,
rights-of-way, navigational servitudes, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances which
do not interfere in any material respect with the ordinary conduct of
business of Holdings and its Subsidiaries as now conducted or as
contemplated herein;
E-22
(vi) Liens granting a security interest in CRDA Investments to
the Casino Redevelopment Authority of New Jersey or any other entity as
required by applicable law;
(vii) Liens permitted by the Security Documents, including,
without limitation, Liens granted under or to secure Permitted GBHC
Indebtedness;
(viii) Liens: (a) on Assets or property of any kind other than
Collateral and (b) on Collateral (including, without limitation, any
such Liens incurred to secure Allowed Indebtedness) which, except for
and subject to any release or subordination contemplated in Section
1405 hereof, shall be inferior to the Liens of the Trustee on such
Collateral; and
(ix) Liens (which shall be superior to the Liens of the
Trustee under the Security Documents) to secure Working Capital
Indebtedness.
"Permitted Line of Business" means the casino gaming business
and any business that is related to, ancillary or supportive of, connected with
or arising out of the gaming business (including, without limitation, developing
and operating lodging, dining, sports or entertainment facilities,
transportation services, software development or other related activities or
enterprises and any additions or improvements thereto).
"Permitted Related Investment" means the direct or indirect
acquisition, repair or restoration (including, without limitation, as permitted
in Article 9 of the Mortgage) of property or other Assets (including, without
limitation, Securities of any person possessing any such Asset or with rights
to, any Assets) to be used in connection with a Permitted Line of Business.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Security.
"Preferred Stock", as applied to the Capital Stock of any
Person, means Capital Stock of such Person of any class or classes (however
designated) that ranks prior, as to the payment of dividends on or to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
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"Redemption Date", when used with respect to any Security to
be redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means 100% of the principal amount of such Security, together with
accrued, unpaid interest.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the September 14 or March 14 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Release Notice" means a written notice of Holdings or any of
its Subsidiaries in the form of a Company Order delivered pursuant to Section
1405(a).
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above-designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Payment" means either of the following: (a) the
declaration or payment of any dividend or any other distribution on Common Stock
of Holdings or any Subsidiary or any payment made to the direct or indirect
holders (in their capacities as such) of Common Stock of Holdings or any
Subsidiary in respect of that stock (other than (i) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock) and (ii) in the
case of a Subsidiary, dividends or distributions payable to Holdings or to a
wholly owned Subsidiary) or (b) the purchase, defeasance, redemption or other
acquisition or retirement for value of any Common Stock of Holdings or any
Subsidiary (other than Common Stock of such Subsidiary held by Holdings or any
of its wholly owned Subsidiaries).
"Sale-Leaseback Transaction" means any arrangement with any
Person providing for the leasing by Holdings or any Subsidiary of any real or
tangible personal property, which property has been or is to be sold or
transferred by Holdings or any such Subsidiary to such Person or its Affiliates
in contemplation of such leasing.
"Sands" means the Sands Hotel and Casino located in Atlantic
City, New Jersey.
"Securities" has the meaning stated in the first recital of
this Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Security Agreement" means the Security Agreement dated as of
September 29, 2000 made by each of Holdings, GBHC and the Company to the Trustee
for its benefit and the benefit of the Holders, as the same may be amended from
time to time.
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"Security Documents" means this Indenture, the Security
Agreement, the Collateral Assignment of Leases, and the Mortgage and any other
mortgage, deed of trust, security agreement or similar instrument securing the
Company's, Holdings, or GBHC's obligations with respect to the Securities or
under this Indenture or any of the other Security Documents.
"Security Interest" has the meaning specified in Section
1401(a).
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or
any installment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal of such
Security or such installment of principal or interest 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).
"Subordination Determination" has the meaning specified in
Section 1405(b).
"Subordination Request" means a written request of Holdings or
any of its Subsidiaries in the form of a Company Order delivered pursuant to
Section 1405(b).
"Subsidiary" of any Person means any corporation, partnership,
joint venture, trust or estate of which (or in which) more than 50% of (a) the
issued and outstanding Capital Stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership or joint venture or
(c) the beneficial interest in such trust or estate, is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person's other Subsidiaries.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939, as amended from time to time.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"United States Government Obligations" means securities which
are (i) direct obligations of the United States of America for the payment of
which its full faith and credit is pledged or (ii) obligations of a Person, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America.
E-25
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only as long as no senior class of securities has such voting power by reason of
any contingency.
"Working Capital Indebtedness" means Indebtedness designated
as such by the Board of Directors of the borrower, the proceeds of which are to
be held or applied for working capital purposes, not to exceed, at any one time
outstanding, in the aggregate, principal of $25 million (plus interest accrued
for not more than 365 days) for all such Indebtedness of Holdings and its
Subsidiaries.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company or the
Guarantors to the Trustee to take any action under any provision of this
Indenture, the Company or the Guarantors shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenant compliance with which constitutes
a condition precedent) relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008) shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
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Any certificate or opinion of an officer of the Company or the
Guarantors may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company or the Guarantors stating that the information with respect to such
factual matters is in the possession of the Company or the Guarantors, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture or otherwise
to be given or taken by Holders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such
Holders in person or by agents duly appointed in writing; and, except
as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Company or
the Guarantors. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and
conclusive in favor of the Trustee and the Company or the Guarantors,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness
of such execution or by a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds, certifying
that the individual signing such instrument or writing acknowledged to
him the execution thereof. Where such execution is by a signer acting
in a capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of authority. The fact
and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held
by any Person, and the date of holding the same, shall be proved by the
Security Register.
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(d) If the Company or the Guarantors shall solicit from the
Holders of Securities any request, demand, authorization, direction,
notice, consent, waiver or other Act, the Company or the Guarantors
may, at its option, by or pursuant to Board Resolution, fix in advance
a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or
other Act, but the Company or the Guarantors shall have no obligation
to do so. Notwithstanding TIA Section 316(c), such record date shall be
the record date specified in or pursuant to such Board Resolution,
which shall be a date not earlier than the date 30 days prior to the
first solicitation of Holders generally in connection therewith and not
later than the date such solicitation is completed. If such a record
date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be given before or after such record
date, but only the Holders of record at the close of business on such
record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or
consent by the Holders on such record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this
Indenture not later than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind
every future Holder of the same Security and the Holder of every
Security issued upon the registration of transfer thereof or in
exchange therefore or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company or the
Guarantors in reliance thereon, whether or not notation of such action
is made upon such Security.
(f) For the purpose of the Company or the Guarantors complying
with any requirement of the Casino Control Commission, or the Division
of Gaming Enforcement or of the Casino Control Act, every holder,
intermediary holder, intermediary beneficial holder and beneficial
holder of a Security shall be deemed to authorize any Holder and any
other holder, intermediary holder, intermediary beneficial holder and
beneficial holder of a Security, upon written request of an Officer of
the Company, GBHC, Holdings, or the Trustee expressing reliance on this
Section and enclosing a copy of this Section, to release, and any such
holder, intermediary holder, intermediary beneficial holder and
beneficial holder shall be required to release, to the Company, GBHC,
Holdings, or the Trustee, as the case may be, the name, address,
telephone number, principal contact person, and amount of such
holdings, intermediary holdings, intermediary beneficial holdings and
beneficial holdings of Securities of each such holder, intermediary
holder, intermediary beneficial holder and beneficial holder of a
Security.
SECTION 105. Notices, etc., to Trustee, Company and
Guarantors.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
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(1) the Trustee by any Holder, the Company or the Guarantors
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate
Trust Office, Attention: Corporate Trust Administration, or
(2) the Company or the Guarantors by the Trustee or by any
Holder shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to the Company or the Guarantors, as the
case may be, addressed to it at the address of its principal office
specified in the first paragraph of this Indenture, with a copy to:
Sands Hotel and Casino, Indiana Avenue and Brighton Park, Atlantic
City, N.J. 08401, or at any other address previously furnished in
writing to the Trustee by the Company or the Guarantors, as the case
may be.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to
Holders, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice. Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
Any notices hereunder that are required to be given to the
Casino Control Commission shall be addressed to: Document Control Unit, Casino
Control Commission, Tennessee Avenue and the Boardwalk, Arcade Building,
Atlantic City, New Jersey 08401, Attention: Chief of Administrative Operations.
Any notices hereunder that are required to be given to the Division of Gaming
Enforcement shall be addressed to: Division of Gaming Enforcement, 140 East
Front Street, CN-047, Trenton, New Jersey 08625, Attention: Deputy Director for
the Division of Gaming Enforcement.
E-29
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and agreements in this Indenture and in the
Security Documents by each of the Company or the Guarantors shall bind its
successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto, any Paying
Agent, any Securities Registrar and their successors hereunder, and the Holders,
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
SECTION 111. Governing Law.
This Indenture and the Securities shall be governed by and
construed in accordance with the law of the State of New York. This Indenture is
subject to the provisions of the Trust Indenture Act of 1939, as amended, that
are required to be part of this Indenture and shall, to the extent applicable,
be governed by such provisions.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
sinking fund payment date or Stated Maturity or Maturity of any Security shall
not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Securities) payment of interest or principal (and premium,
if any) need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Redemption Date or sinking fund payment date, or at the Stated Maturity or
Maturity; provided that no interest shall accrue on such payment for the period
from and after such Interest Payment Date, Redemption Date, sinking fund payment
date, Stated Maturity or Maturity, as the case may be.
SECTION 113. Casino Control Act.
Notwithstanding the provisions of Section 111 hereof, each of
the provisions of this Indenture is subject to and shall be enforced in
compliance with the provisions of the Casino Control Act, to the extent
applicable, and the regulations promulgated thereunder, unless such provisions
are in conflict with the TIA, in which case the TIA shall control. The
Securities are to be held subject to the condition that if a holder thereof is
found to be disqualified by the Casino Control Commission pursuant to the
provisions of the Casino Control Act, such holder shall dispose of the
Securities in accordance with the provisions of Section 1109 hereof. The Company
shall have the right to repurchase the Securities at the lowest of (i) the
principal amount thereof, (ii) the amount which the Disqualified Holder or
beneficial owner paid for the Securities, together with accrued interest up to
the date of the determination of disqualification, or (iii) the market value of
such Securities.
E-30
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities and the Trustee's certificate of authentication
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any portion of the text of
any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
The definitive Securities shall be printed, lithographed or
engraved on steel-engraved borders or may be produced in any other manner, all
as determined by the officers of the Company executing such Securities, as
evidenced by their execution of such Securities.
SECTION 202. Form of Face of Notes.
GB PROPERTY FUNDING CORP.
11% Note Due 2005
No. _____________ $_________
GB Property Funding Corp., a Delaware corporation (herein
called the "Company", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to __________ or registered assigns, the principal sum of __________ U.S.
Dollars on September 29, 2005 at the office or agency of the Company referred to
below, and to pay interest thereon on March 29, 2001 and thereafter, on
September 29 and March 29 in each year, from September 29, 2000, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, at the rate of 11% per annum, until the principal hereof is paid
or duly provided for. Notwithstanding anything contained herein, the rate of
interest on the Securities shall not exceed the highest rate permitted by law.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the September 14 or March 14 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date, and such defaulted interest
may be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture. Payment of the
principal of (and premium, if any, on) and interest on this Security will be
made at the office or agency of the Company maintained for that purpose in The
City of New York, or at such other office or agency of the Company as may be
maintained for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Company (i) by check mailed to the address of the Person entitled
thereto as such address shall appear on the Security Register or (ii) by
transfer to an account maintained by the payee located in the United States.
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Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place. Unless the
certificate of authentication hereon has been duly executed by the Trustee
referred to on the reverse hereof by manual signature, this Security shall not
be entitled to any benefit under the Indenture, or be valid or obligatory for
any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
Dated: September 29, 2000 GB PROPERTY FUNDING
CORP.
By
--------------------------
Attest:
- ---------------------------------------
Authorized Signature
SECTION 203. Form of Reverse of Notes
This Security is one of a duly authorized issue of securities
of the Company designated as its 11% Notes Due 2005 (herein called the
"Securities"), limited (except as otherwise provided in the Indenture referred
to below) in aggregate principal amount to $110 million, which may be issued
under an indenture (herein called the "Indenture") dated as of September 29,
2000 between the Company, GB Holdings, Inc. and Greate Bay Hotel and Casino,
Inc. (the "Guarantors") and Wells Fargo Bank Minnesota, National Association,
trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties, obligations and immunities thereunder of the Company, the
Trustee and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered. Interest on the
Securities shall be computed on the basis of a 360-day year of twelve 30-day
months.
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The Securities are subject to redemption upon not less than 30
nor more than 60 days' notice, at any time after January 1, 2001, as a whole or
in part, at the election of the Company, at a Redemption Price equal to 100% of
the principal amount, together in the case of any such redemption with accrued,
unpaid interest, if any, to the Redemption Date, all as provided in the
Indenture.
Upon the occurrence of a Change of Control, the Holder of this
Security may require the Company, subject to certain limitations provided in the
Indenture, to repurchase this Security at a purchase price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest.
Each of the provisions of this Security is subject to and
shall be enforced in compliance with the provisions of the Casino Control Act
and the regulations promulgated thereunder, to the extent applicable.
Each Holder by accepting a Security agrees that all Holders,
whether initial holders or subsequent transferees, shall be subject to the
qualification provisions of the Casino Control Act. As set forth more fully in
the Indenture, in the event that the Casino Control Commission determines that a
Holder is not qualified under the Casino Control Act, the Company shall have the
absolute right and obligation to purchase from such Holder (the "Disqualified
Holder") the Securities the Disqualified Holder may then possess, no later than
forty-five days after the date that the Company serves notice on any
Disqualified Holder of such determination. Immediately upon such determination,
the Disqualified Holder shall have (i) no further right to exercise, directly or
through any trustee or nominee, any right conferred by its Securities or (ii) no
further right to receive any dividends, interest, or other distribution or
payment with respect to any such Securities. In the event a Disqualified Holder
fails to so sell its Securities within 30 days after the determination by the
Casino Control Commission, the Company shall purchase such Securities within 15
days after the end of such 30 day period at the lowest of (i) the principal
amount thereof, (ii) the amount which the Disqualified Holder paid for the
Securities, together with accrued interest up to the date of the determination
of disqualification or (iii) the market value of such Securities.
In the case of any redemption of Securities, interest
installments whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Date
referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the Redemption Date.
E-33
In the event of redemption of this Security in part only, a
new Security or Securities for the unredeemed portion hereof shall be issued in
the name of the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal of all the Securities may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of (a) the entire indebtedness of the Company on this Security and (b) certain
restrictive covenants and the related Defaults and Events of Default, upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Security. Any Lien that may from time to time secure
the Securities is subject to subordination or termination as provided in Section
1405 of the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Guarantors and the rights of the Holders
under the Indenture at any time by the Company, the Guarantors and the Trustee
with the consent of the Holders of a majority in aggregate principal amount of
the Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Securities at the time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such amendment, modification, consent or waiver by or on behalf of the
Holder of this Security, or otherwise in accordance with the terms of the
Indenture, shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
thereof is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the Company
or the Guarantors, which is absolute and unconditional, to pay the principal of
(and premium, if any, on) and interest on this Security at the times, place, and
rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registerable on
the Security Register of the Company, upon surrender of this Security for
registration of transfer at the office or agency of the Company maintained for
such purpose in The City of New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amounts will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the Holder
surrendering the same.
E-34
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Securities are entitled to the benefit of the Guarantees
by the Guarantors to the extent provided in the Guarantees.
Prior to the time of due presentment of this Security for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Security is registered as
the owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any agent shall be affected by notice to
the contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
Each Guarantor (which term includes any successor Person under
the Indenture) has unconditionally guaranteed, to the extent set forth in the
Indenture and subject to the provisions in the Indenture, (a) the due and
punctual payment of the principal of and interest on the Securities, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on overdue principal, and, to the extent permitted by law, interest, and the due
and punctual performance of all other obligations of the Company to the Holders
or the Trustee all in accordance with the terms set forth in the Indenture and
(b) in case of any extension of time of payment or renewal of any Securities or
any of such other obligations, that the same will be promptly paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at Stated Maturity, by acceleration or otherwise.
The obligations of the Guarantors to the Holders of Securities
and to the Trustee pursuant to the Guarantee and the Indenture are expressly set
forth in the Indenture and reference is hereby made to the Indenture for the
precise terms of the Guarantee.
Guarantors:
GB HOLDINGS INC.
By:
----------------------------
GREATE BAY HOTEL AND CASINO, INC.
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By:
----------------------------
SECTION 204 Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in
substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the
within-mentioned Indenture.
Wells Fargo Bank Minnesota, National Association
as Trustee
By:
---------------------------------------------
Authorized Officer
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ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
(a) The aggregate principal amount of securities which may be
authenticated and delivered under this Indenture is limited to $110
million, except for securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
securities.
(b) The Notes shall be known and designated as the "11% Notes
Due 2005" of the Company. Their Stated Maturity shall be September 29,
2005, and they shall bear interest at the rate of 11% per annum from
September 29, 2000, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, payable on March 29,
2001 and semiannually thereafter on September 29 and March 29 in each
year and at said Stated Maturity, until the principal thereof is paid
or duly provided for.
(c) The principal of (and premium, if any, on) and interest on
the Securities shall be payable at the office or agency of the Company
maintained for such purpose in The City of New York, or at such other
office or agency of the Company as may be maintained for such purpose;
provided, however, that, at the option of the Company, interest may be
paid by check mailed to addresses of the Persons entitled thereto as
such addresses shall appear on the Security Register.
(d) The Securities shall be redeemable as provided in Article
Eleven.
(e) If the Company is served with notice of the
disqualification of any Holder under Section 105(d) of the Casino
Control Act by the Casino Control Commission, such Holder will be
prohibited under Section 105(e) of the Casino Control Act from (a)
receiving interest on the Securities held by such Holder, (b)
exercising, directly or through any trustee or nominee, any right
conferred on such Securities, and (c) receiving any remuneration in any
form from any Person licensed or qualified by the Casino Control
Commission (including the Company, the Guarantors and the Trustee) for
services rendered or otherwise. Notwithstanding the foregoing, the
Trustee shall be entitled to exercise all rights with respect to the
Securities held by such Holder including, but not limited to,
accelerating the Securities (any monies or securities received by the
Trustee on behalf of such Holder to be held in trust for such Holder
pursuant to Section 605 hereof). If the Trustee exercises voting rights
with respect to such Securities, such votes shall be cast in the same
proportion as the votes of the other Outstanding Securities are cast on
such issue. A copy of any notice served upon the Company as described
above shall be promptly delivered by the Company to the Trustee. Any
such notice to the Trustee shall be effective against the Trustee on
the second Business Day after receipt thereof by a Responsible Officer
of the Trustee.
E-37
SECTION 302. Denominations.
The Securities shall be issuable only in registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
its Chairman, its President, a Vice President, or the Chief Financial Officer.
The signature of any officer on the Securities may be manual or facsimile
signatures of the present or any future such authorized officer and may be
imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities.
The initial Company Order shall be accompanied by the
documents contemplated in Section 1401 and an Officers Certificate or other
satisfactory confirmation indicating that: (i) the order of the United States
Bankruptcy Court for the District of New Jersey confirming the Joint Plan of
Reorganization (the "Plan") under Chapter 11 of the Bankruptcy Code Proposed by
the Official Committee of Unsecured Creditors and High River (Case No. 98-10001)
(JW) has been entered and is not stayed and together with the Plan, allows for
the execution and delivery of this Indenture, the Security Documents and the
Securities; and (ii) that after compliance by the Trustee with the Company
Order, the conditions specified in Section 7.02 of the Plan will have been
satisfied or waived.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein duly executed by the Trustee by manual signature of an authorized
officer, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Securities authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Securities executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of a
successor Person pursuant to this Section in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
E-38
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 1002, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and
Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Security Register
shall be in written form or any other form capable of being converted into
written form within a reasonable time. At all reasonable times, the Security
Register shall be open to inspection by the Trustee. The Trustee is hereby
initially appointed as security registrar (the "Security Registrar") for the
purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at
the office or agency of the Company designated pursuant to Section 1002, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denomination or denominations of a like aggregate principal
amount and like terms.
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At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomination and of a like aggregate
principal amount and like terms, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer, in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the selection of Securities to be redeemed under Section
1104 and ending at the close of business on the day of such mailing of the
relevant notice of redemption, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee,
or (ii) the Company and the Trustee receive evidence to their satisfaction of
the destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon Company Order the Trustee shall authenticate and
deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
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Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name such Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
at the office or agency of the Company maintained for such purpose pursuant to
Section 1002; provided, however, that each installment of interest may at the
Company's option be paid by (i) mailing a check for such interest, payable to or
upon the written order of the Person entitled thereto pursuant to Section 308,
to the address of such Person as it appears in the Security Register or (ii)
transfer to an account maintained by the payee located in the United States.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the Holder on the Regular Record Date by virtue
of having been such Holder, and such defaulted interest ("Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in clause
(1) or (2) below:
(1) the Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date, and in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
given in the manner provided for in Section 106, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having
been so given, such Defaulted Interest shall be paid to the Persons in
whose names the Securities (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2); or
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(2) the Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and premium,
if any, on) and (subject to Sections 305 and 307) interest on such Security and
for all other purposes whatsoever, whether or not such Security be overdue, and
none of the Company, the Trustee or any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee (or
to any other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. If
the Company shall so acquire any of the Securities, however, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company.
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SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 311. Maximum Interest Rate.
Regardless of any provision contained herein, in the
Securities or in any of the Security Documents, the Holders shall not be
entitled to receive, collect or apply as interest (whether termed interest in
the documents or deemed to be interest by judicial determination or operation of
law) on the Securities, any amount in excess of the maximum amount allowed by
applicable law, and, if any Holder ever receives, collects or applies as
interest any such excess, the amount that would be excessive interest shall be
deemed to be a partial prepayment of principal and treated hereunder as such;
and, if the principal amount of the Securities is paid in full, any remaining
excess shall forthwith be paid to the Company. In determining whether or not the
interest paid or payable under any specific contingency exceeds the maximum
amount of interest allowed by applicable law, the Company and the Holders shall,
to the maximum extent permitted under applicable law, (i) characterize any
nonprincipal payment as an expense fee, or premium rather than interest; (ii)
exclude voluntary prepayments and the effects thereof; and (iii) amortize,
prorate, allocate and spread, in equal parts, the total amount of interest
throughout the entire contemplated term of the Securities.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of Securities herein expressly provided for) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture and releasing all liens and
security interests in the Collateral when
(1) either
(a) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust with the
Trustee or any Paying Agent or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
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(b) all such Securities not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and interest
to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for in this Section 401 relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if money shall
have been deposited with the Trustee pursuant to subclause (b) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003, shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money and property deposited with the Trustee pursuant to Section 401
shall be held in trust and, at the direction of the Company, be invested prior
to Maturity in United States Government Obligations, and applied by it, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for whose
payment such money has been deposited with the Trustee; but such money need not
be segregated from other funds except to the extent required by law. Any funds
remaining following payment of all Securities and all other obligations of the
Company hereunder shall be the property of the Company.
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ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest on any Security
when it becomes due and payable, and continuance of such default for a
period of 30 days; or
(2) default in the payment of any principal of (or premium, if
any, on) any Security at its Maturity; or
(3) default in the performance, or breach, of any covenant or
warranty of Holdings or any of its Subsidiaries in this Indenture or of
Holdings or any other Grantor in the Security Documents (other than a
default in the performance, or breach, of a covenant or warranty which
is specifically dealt with elsewhere in this Section), and continuance
of such default or breach for a period of 60 days after there has been
given, by registered or certified mail, to the Company and the
Guarantors by the Trustee or to the Company and the Guarantors and the
Trustee by the Holders of a majority in principal amount of the
Outstanding Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is
a "Notice of Default" hereunder, unless Holdings, such Subsidiary, or
such Grantor, is proceeding, and continues to proceed, diligently to
cure any such default; or
(4) (A) there shall have occurred one or more defaults by
Holdings or any of its Subsidiaries in the payment of the principal of
or premium, if any, on Indebtedness aggregating $5 million or more,
when the same becomes due and payable at the stated maturity thereof,
and such default or defaults shall have continued after any applicable
grace period and shall not have been cured or waived or (B) in
accordance with the terms of an agreement or instrument binding upon
Holdings or any of its Subsidiaries, Indebtedness of Holdings or any of
its Subsidiaries aggregating $5 million or more shall have been
accelerated or otherwise declared due and payable, or required to be
prepaid or repurchased (other than by regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(5) any Person entitled to take the actions described in this
Section 501(5), after the occurrence of any event of default under any
agreement or instrument evidencing any Indebtedness in excess of $5
million in the aggregate of Holdings or any of its Subsidiaries, shall
notify the Trustee of the intended sale or disposition of any assets of
Holdings or any of its Subsidiaries that have been pledged to or for
the benefit of such Person to secure such Indebtedness or shall
commence proceedings, or take any action (including by way of set-off)
to retain in satisfaction of any Indebtedness, or to collect on, seize,
dispose of or apply, any such assets of Holdings or any of its
Subsidiaries (including funds on deposit or held pursuant to lock-box
and other similar arrangements), pursuant to the terms of any agreement
or instrument evidencing any such Indebtedness of Holdings or any of
its Subsidiaries or in accordance with applicable law; or
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(6) final judgments or orders rendered against Holdings or any
of its Subsidiaries which require the payment in money, either
individually or in an aggregate amount, that is more than $10 million
and (i) an enforcement proceeding shall have been commenced by any
creditor upon such judgment or order and (ii) there shall have been a
period of 60 consecutive days during which a stay of enforcement of
such judgment or order, by reason of pending appea1 or otherwise, was
not in effect; or
(7) the entry of a decree or order by a court having
jurisdiction in the premises adjudging Holdings or any of its
Subsidiaries a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition
or in respect of Holdings or any such Subsidiary under the Federal
Bankruptcy Code or any other applicable federal or state law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of Holdings or any such Subsidiary or of any
substantial part of their respective property, or ordering the winding
up or liquidation of their respective affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 90
consecutive days; or
(8) the institution by Holdings or any of its Subsidiaries of
proceedings to be adjudicated a bankrupt or insolvent, or the consent
by it to the institution of bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under the Federal Bankruptcy Code or
any other applicable federal or state law or the consent by it to the
filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official)
of Holdings or any such Subsidiary or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due; or
(9) any of the Security Documents ceases to be in full force
and effect in any material respect or any of the Security Documents
ceases to create in favor of the Trustee, with respect to any material
amount of Collateral, a valid and perfected first priority Lien on the
Collateral purported to be covered thereby, except for any cessation,
release or subordination contemplated or permitted (or resulting from
any act contemplated or permitted) by Section 1405 hereof or as may be
otherwise contemplated by this Indenture); or
(10) the cessation of substantially all gaming operations at
the Sands for more than 60 consecutive days, except as a result of an
Event of Loss; or
(11) the loss by GBHC or its successor or assigns of its legal
right to own or operate the Sands and such loss continues for more than
60 consecutive days.
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SECTION 502. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default (other than an Event of Default
specified in Section 501(7) or 501(8)) occurs and is continuing, then and in
every such case, the Trustee and the Holders of not less than a majority in
principal amount of the Securities Outstanding, may declare the principal amount
of all the Securities to be due and payable immediately, by a notice in writing
to the Company and the Guarantors, and upon any such declaration such principal
amount shall become immediately due and payable. If an Event of Default
specified in Section 501(7) or 501(8) occurs and is continuing, then the
principal amount of all the Securities shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee and any Holder.
At any time after a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter in this Article provided, the Holders of a
majority in principal amount of the Securities Outstanding, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay,
(A) all Defaulted Interest on all Outstanding
Securities,
(B) all unpaid principal of (and premium, if any, on)
any Outstanding Securities which has become due otherwise than
by such declaration of acceleration, and interest on such
unpaid principal at the rate borne by the Securities, and
(C) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(2) all Events of Default, other than the non-payment of
amounts of principal of (or premium, if any, on) or interest on
Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Securities because of an Event of
Default specified in Section 501(4) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness or the same has been waived or stayed, and written notice of such
discharge, rescission, waiver or stay, as the case may be, shall have been given
to the Trustee by the Company and countersigned by the holders of such
Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days
after such declaration of acceleration in respect of the Securities, and no
other Event of Default has occurred during such 30-day period which has not been
cured or waived during such period.
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SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(a) default is made in the payment of any installment of
interest on any Security when such interest becomes due and payable and
such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any), and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in any
Security Document or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company, the Guarantors or any other
obligor upon the Securities or the property of the Company, the Guarantors or of
such other obligor or their creditors, the Trustee (irrespective of whether the
principal of the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand on the Company for the payment of overdue principal,
premium, if any, or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise,
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(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money and property collected by the Trustee pursuant to
this Article or in connection with the exercise of remedies under any Security
Document shall be applied in the following order, at the date or dates fixed by
the Trustee and, in case of the distribution of such money on account of
principal (or premium, if any) or interest, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any, on,) and interest on the Securities
in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively; and
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THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(1) the Holders of a majority in principal amount of the
Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(2) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(3) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(4) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority or more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Section 507 to affect, disturb or prejudice the rights of any other
Holders, or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal Premium and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any of the Securities shall have the right, which is absolute and
unconditional, to receive payment, as provided herein (including, if applicable,
Article Thirteen) and in the terms of each note representing such Securities of
the principal of (and premium, if any, on) and (subject to Section 307) interest
on, such Securities on the respective Stated Maturities expressed in such
Securities (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture or any Security Document and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, the Trustee
and the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
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SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or any Security Document or by law to the Trustee or to the Holders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders.
Notwithstanding anything to the contrary set forth in Section
316(a) of the TIA (the provisions of which are hereby excluded), the Holders of
not less than a majority in principal amount of the Outstanding Securities shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee under this Indenture or the Security Documents,
provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve
it in personal liability unless it has obtained appropriate indemnity.
SECTION 513. Waiver of Defaults and Compliance.
Notwithstanding anything to the contrary set forth in Section
316(a) of the TIA (the provisions of which are hereby excluded) the Holders of
not less than a majority in principal amount of the Outstanding Securities may
on behalf of the Holders of all the Securities:
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(1) waive any past default hereunder and its
consequences, except a default in respect of the payment of the
principal of (or premium, if any, on) or interest on any Security, and
upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured and
released, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair
any right consequent thereon; and
(2) waive future compliance with any term, provision
or condition of this Indenture or the Security Documents or any related
instruments, agreements or documents (but no such waiver shall extend
to or affect such term, provision or condition except to the extent so
expressly waived), in which event the Company and the Guarantors may
omit to comply with any such term, provision or condition of this
Indenture, the Security Documents or any related instrument, agreement
or document.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
Within 90 days after the occurrence of any Default hereunder,
the Trustee shall transmit in the manner and to the extent provided in TIA
Section 313(c), notice of such Default hereunder known to the Trustee, unless
such Default shall have been cured or waived; provided, however, that, except in
the case of a Default in the payment of the principal of (or premium, if any,
on) or interest on any Security, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors and/or Responsible Officers of the Trustee in
good faith determines that the withholding of such notice is in the interest of
the Holders; and provided further that in the case of any Default of the
character specified in Section 501(4) no such notice to Holders shall be given
until at least 30 days after the occurrence thereof. The Trustee shall not be
deemed to have knowledge of any Default or Event of Default hereunder unless a
Responsible Officer in its Corporate Trust Department shall have actual
knowledge thereof.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through
315(d):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
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(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture; and
(9) the Trustee shall not be personally liable, in case of
entry by it upon any property subject to the liens of the Security
Documents, for debts contracted or liabilities or damages incurred in
the management or operation thereof.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
The Trustee and its directors, officers, employees and
Affiliates shall cooperate with the Casino Control Commission and the Division
of Gaming Enforcement and provide such information and documentation as may from
time to time be requested by such agencies.
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The Trustee may rely on, and shall be protected with respect
to any action taken or omitted to be taken in good faith in accordance with, the
direction of the Holders of not less than a majority in principal amount of
Outstanding Securities.
SECTION 603. Trustee Not Responsible for Recitals or Issuance
of Securities.
The recitals contained herein and in the Securities, except
for the Trustee's certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Securities and perform its obligations hereunder and that the
statements made by it in a Statement of Eligibility and Qualification of Form
T-1 supplied to the Company are true and accurate, subject to the qualifications
set forth therein. The Trustee shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
The Trustee makes no representations with respect to the
effectiveness or adequacy of any Security Document, or the validity, perfection
or priority, if any, of liens granted to it under this Indenture or the Security
Documents. The Trustee shall not be responsible for ascertaining or maintaining
such validity, perfection or priority, if any, and shall be fully protected in
relying upon certificates and opinions delivered to it in accordance with the
terms of this Indenture or the Security Documents.
SECTION 604. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any
other agent of the Company or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to TIA
Sections 310(b) and 311, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Paying Agent, Security Registrar or
such other agent.
SECTION 605. Money Held in Trust.
Except as otherwise provided herein, money held by the Trustee
in trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise provided herein or agreed
with the Company.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time such compensation
as the Company and the Trustee shall from time to time agree for all
services rendered by it hereunder and under the Security Documents
(which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust); and
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(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture and under the Security
Documents (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust and under the Security
Documents, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder or thereunder.
The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the payment of principal of (and premium, if any,
on) or interest on particular Securities.
SECTION 607. Corporate Trustee Required: Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
(b) Subject to the provisions of the Casino Control Act, the
Trustee may resign at any time by giving written notice thereof to the Company,
the Casino Control Commission and the Division of Gaming Enforcement. If the
instrument of acceptance by a successor Trustee required by Section 609 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
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(c) Subject to the provisions of the Casino Control Act, the
Trustee may be removed at any time by Act of the Holders of not less than a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Security for at least
six months, or
(2) the Trustee shall cease to be eligible under Section 607
and shall fail to resign after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Security for at
least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, subject to the provisions of the Casino Control Act, (i)
the Company, by a Board Resolution, may remove the Trustee, or (ii) subject to
TIA Section 315(e), any Holder who has been a bona fide Holder of a Security for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
Notwithstanding the foregoing, any successor Trustee may be appointed only with
the prior, express approval of the Casino Control Commission, in consultation
with the Division of Gaming Enforcement, provided that such successor Trustee
must first be qualified as a financial source by and cooperate with the Casino
Control Commission and the Division of Gaming Enforcement.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 106. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
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SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall take all
necessary steps to be approved by the Casino Control Commission and shall
execute, acknowledge and deliver to the Company, to the Guarantors and to the
retiring Trustee an instrument accepting such appointment, and the successor
Trustee, the Company and the Guarantors shall enter into a supplemental
indenture evidencing the appointment of the successor Trustee and, as required,
any amendment or modification to any Security Document or any additional
Security Document. Thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or
Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities; and in case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee;
and in all such cases such certificates shall have the full force which it is
anywhere in the Securities or in this Indenture provided that the certificate of
authentication of any predecessor Trustee or to authenticate Securities in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTORS
SECTION 701. Disclosure of Names and Addresses of
Holders.
Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with TIA Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under TIA Section
312(b).
SECTION 702. Reports by Trustee.
(a) Within 60 days after May 15 of each year commencing with
the first May 15 after the first issuance of Securities, the Trustee shall
transmit to the Holders, in the manner and to the extent provided in TIA Section
313(c), a brief report dated as of such May 15 if required by TIA Section
313(a).
The Trustee shall transmit to the Holders, within the times
hereinafter specified a brief report with respect to the following:
(1) the release, or release and substitution, of property
subject to any Lien of this Indenture (and the consideration therefor,
if any) unless the fair value of such property, as set forth in the
Officers' Certificate or Opinion of Counsel required by TIA Section
314(d), is less than 10 per centum of the aggregate principal amount of
the Securities Outstanding at the time of such release, or such release
and substitution, such report to be so transmitted within 90 days after
such time; and
(2) the character and amount of any advances made by it as
such since the date of the last report transmitted pursuant to the
provisions of TIA Section 313(a) (or if no such report has yet been so
transmitted, since the date of execution of the Indenture), for the
reimbursement of which it claims or may claim a Lien or charge, prior
to that of the Indenture Securities, on the trust estate or on property
or funds held or collected by it as such Trustee, and which it has not
previously reported pursuant to this clause (2), if such advances
remaining unpaid at any time aggregate more than 10 per centum of the
aggregate principal amount of the Securities Outstanding at such time,
such report to be so transmitted within 90 days after such time.
To the extent required by applicable laws, rules and
regulations, a copy of each such report shall, at the time of such transmission
to the Holders, be filed with each stock exchange, if any, upon which the
Securities are listed, and also with the Commission.
(b) The Trustee shall transmit by mail to the Casino Control
Commission and the Division of Gaming Enforcement (i) an initial list of the
beneficial Holders of the Securities promptly after the issuance of the
Securities, (ii) current lists of the Holders appearing in the Security Register
on a twice-per-year basis, no later than March 1 and September 1 of each year,
and (iii) upon request by the Casino Control Commission or the Division of
Gaming Enforcement, such additional information with respect to the beneficial
Holders of the Securities as the Trustee may obtain through its good faith
efforts.
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(c) The Trustee shall notify the Casino Control Commission and
the Division of Gaming Enforcement, simultaneously with any notice given to the
Holders, of any default or acceleration under the Securities, this Indenture,
the Security Documents, or any other documents, instrument, agreement, covenant,
or condition related to the issuance of the Securities, whether declared or
effectuated by the Trustee or the Holders. The Trustee shall notify the Casino
Control Commission and the Division of Gaming Enforcement on a continuing basis
and in writing, of any actions taken by the Trustee or the Holders with regard
to such default, acceleration or similar matters related thereto.
(d) The Trustee shall notify the Casino Control Commission and
the Division of Gaming Enforcement of the removal or resignation of the Trustee
promptly after such removal or resignation.
(e) The Trustee shall provide to the Casino Control
Commission and the Division of Gaming Enforcement, promptly after the execution
by the Trustee of the same, copies of any and all amendments or modifications to
this Indenture, the Securities, the Security Documents, or any other documents,
instrument, agreement, covenant or condition related to the issuance of the
Securities.
SECTION 703. Reports by Company and Guarantors.
The Company and the Guarantors shall, to the extent required
by the TIA:
(1) file with the Trustee, within 15 days after the Company or
any of the Guarantors, as the case may be, is required to file the same
with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules
and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company or any of the
Guarantors, as the case may be, is not required to file information,
documents or reports pursuant to either of said Sections, then it shall
file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may
be required pursuant to Section 13 of the Securities Exchange Act of
1934 in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such
rules and regulations;
(2) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by the Company or any of the Guarantors, as the
case may be, with the conditions and covenants of this Indenture as may
be required from time to time by such rules and regulations;
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(3) transmit by mail to all Holders, in the manner and to the
extent provided in TIA Section 313(c), within 30 days after the filing
thereof with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company or any of the
Guarantors, as the case may be, pursuant to paragraphs (1) and (2) of
this Section as may be required by rules and regulations prescribed
from time to time by the Commission; and
(4) comply in all material respects with all requirements and
provisions of the Casino Control Act and notify the Trustee by mail of
all formal hearings and formal proceedings materially relating to the
Company, the Guarantors or their respective successors, before the
Casino Control Commission relating to the plenary casino licenses for
the Casino, as the same are scheduled. Such notice shall be in writing
and given at least seven days prior to the hearing to which such notice
relates, unless a shorter notice is given to the Company in which event
the Company shall notify the Trustee promptly upon receiving such
definite information as shall be contained in such notice. The Company
hereby agrees that the Trustee may, but shall have no obligation to,
attend such hearings and other proceedings if permitted to do so by the
Casino Control Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Holdings and Subsidiaries May Consolidate, etc.,
Only on Certain Terms.
Neither Holdings nor any of its Subsidiaries shall consolidate
with or merge with or into or sell, assign, convey, lease or transfer all or
substantially all of its properties and assets to any Person or group of
affiliated Persons in a single transaction or through a series of transactions,
except that:
(a) Holdings or any of its Subsidiaries may consolidate with
or merge with or into or sell, assign, convey, lease or transfer all or
substantially all of its properties and assets if (i) Holdings or such
Subsidiary shall be the continuing Person, or the resulting, surviving
or transferee Person (the "surviving entity") shall be a Person
organized and existing under the laws of the United States or any State
thereof or the District of Columbia; (ii) the surviving entity (other
than an existing Guarantor) shall expressly assume, by a supplemental
indenture executed and delivered to the Trustee, in form and substance
reasonably satisfactory to the Trustee, all of the obligations of
Holdings or such Subsidiary, as applicable under the Securities, the
Guarantee, this Indenture and the Security Documents, and Holdings or
the surviving entity shall have taken all steps necessary or desirable
to perfect and protect the security interests granted or purported to
be granted by the Security Documents, including, without limitation,
the priority thereof, in the applicable Collateral, subject to and as
permitted by the terms of this Indenture and the terms of any release
or subordination contemplated in Section 1405 hereof, including,
without limitation, the execution, delivery, filing and recordation of
additional mortgages, pledges, assignments, security agreements,
releases of security and subordination agreements; (iii) immediately
before and immediately after giving effect to such transaction, or
series of transactions (including, without limitation, any Indebtedness
incurred or anticipated to be incurred in connection with or in respect
of, such transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing; (iv) such transaction
will not result in the loss, unless appropriately replaced, of any
gaming or other license necessary for the continued operation of
Holdings or any Subsidiary as conducted immediately prior to such
consolidation, merger, conveyance, transfer or lease; and (v) neither
Holdings nor any Subsidiary would thereupon become obligated with
respect to any Indebtedness, nor any of its property subject to any
Lien, unless Holdings or such Subsidiary could incur such Indebtedness
or create such Lien without violation of the terms of this Indenture;
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(b) a Subsidiary may consolidate with or merge into or sell,
assign, convey, lease or transfer all or substantially all of its
properties and assets to or with Holdings or any Subsidiary of Holdings
if (i) the surviving entity (other than an existing Guarantor) shall
expressly assume, by a supplemental indenture executed and delivered to
the Trustee, in form and substance reasonably satisfactory to the
Trustee, all of the obligations of such Subsidiary under the
Securities, the Guarantees, this Indenture and the Security Documents,
and such Subsidiary or surviving entity, as the case may be, shall have
taken all steps necessary or desirable to perfect and protect the
security interests granted or purported to be granted by the Security
Documents, including, without limitation, the priority thereof, subject
to and as permitted by the terms of this Indenture and the terms of any
release or subordination contemplated in Section 1405 hereof,
including, without limitation, the execution, delivery, filing and
recordation of additional mortgages, pledges, assignments, security
agreements, releases of security and subordination agreements, (ii)
such transaction will not impair the pledge of the stock of such
Subsidiary granted or purported to be granted pursuant to the Security
Documents, subject to and as permitted by the terms of this Indenture
and the terms of any release or subordination contemplated in Section
1405 hereof, and (iii) such transaction will not result in the loss
(unless appropriately replaced) of any gaming or other license
necessary for the continued operation of Holdings and its Subsidiaries
as conducted immediately prior to such sale, assignment, conveyance,
transfer or lease; and
(c) Holdings, the Company or such Person shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, sale, assignment conveyance,
transfer or lease and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, comply
with this covenant and that all conditions precedent herein provided
for relating to such transaction have been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company or any Guarantor with or
merger of the Company or any Guarantor with or into any other Person or any
conveyance, transfer or lease of the properties and assets of the Company or any
Guarantor substantially as an entirety to any Person in accordance with Section
801, the successor Person formed by such consolidation or into which the Company
or such Guarantor is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company or such Guarantor under this Indenture with the same
effect as if such successor Person had been named as the Company or such
Guarantor herein, and in the event of any such conveyance or transfer, the
Company or such Guarantor (which term shall for this purpose mean the Person
named as the "Company" or any "Guarantor," as the case may be, in the first
paragraph of this Indenture or any successor Person which shall theretofore
become such in the manner described in Section 801), except in the case of a
lease, shall be discharged of all obligations and covenants under this Indenture
and the Securities and may be dissolved and liquidated.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures and Amendments to
Security Documents Without Consent of Holders.
Without the consent of any Holders, the Company and the
Guarantors, when each is authorized by a Board Resolution, and the Trustee, at
any time and from time to time, may enter into one or more indentures
supplemental hereto or amendment to any Security Document, in form satisfactory
to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company or any Guarantor and the assumption by any such successor of
the covenants of the Company or such Guarantor, as the case may be,
contained herein, in the Securities and in the Security Documents; or
(2) to add to the covenants of the Company or the Guarantors
for the benefit of the Holders or to surrender any right or power
herein conferred upon the Company or the Guarantors; or
(3) to add any additional Events of Default; or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of
Section 609; or
(5) to cure any ambiguity, to correct or supplement any
provision herein or in the Security Documents which may be inconsistent
with any other provision herein or in the Security Documents, or to
make any other provisions with respect to matters or questions arising
under this Indenture or under the Security Documents; provided that
such action shall not adversely affect the interests of the Holders in
any material respect; or
(6) to establish or maintain the Lien of this Indenture and
the other Security Documents or to correct or amplify the description
of any Collateral subject to the Lien of this Indenture or the other
Security Documents, or to subject additional property to the Lien of
this Indenture or other Security Documents; or
(7) to add any additional Guarantor; or
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(8) to make any other change that does not adversely affect
the rights of any Holder; or
(9) to secure the Securities.
SECTION 902. Supplemental Indentures and Amendments to
Security Documents with Consent of Holders.
Upon the request of the Company and the Guarantors, by a Board
Resolution authorizing the execution thereof, together with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities, by Act of said Holders delivered to the Trustee, the Trustee shall
join the Company and the Guarantors in an indenture or indentures supplemental
hereto or amendments to the Security Documents, for any purpose, including,
without limitation, for the purpose of adding any provisions to or changing,
modifying or amending in any manner or eliminating any of the provisions of this
Indenture or the Security Documents or making additions to, changing, modifying,
amending or eliminating in any manner the rights of the Holders hereunder or
thereunder; provided, however, that no such supplemental indenture, or addition,
change, amendment or modification to, or elimination of any provision of, any
Security Document, shall, without the consent of the Holder of each Outstanding
Security affected thereby:
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the coin or currency in which
any Security or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture, or
(3) modify any of the provisions of this Section or Section
513, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected
thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture or
amendments to the Security Documents, but it shall be sufficient if such Act
shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures and
Amendments to Security Documents.
In executing, or accepting the additional trusts created by,
any supplemental indenture or amendment to the Security Documents permitted by
this Article or the modifications thereby of the trusts created by this
Indenture or the Security Documents, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture or amendment to the Security
Documents is authorized or permitted by this Indenture and all conditions
precedent herein provided for relating to such supplemental indenture have been
complied with. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture or amendment to the Security Documents which affects
the Trustee's own rights, duties, or immunities under this Indenture or under
the Security Documents or otherwise.
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SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental
Indentures.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 907 Notice of Supplemental Indentures and
Amendments to Security Documents.
Promptly after the execution by the Company, the Guarantors
and the Trustee of any supplemental indenture or amendment to the Security
Documents pursuant to the provisions of Section 902, the Company shall give
notice thereof to the Holders of each Outstanding Security affected, in the
manner provided for in Section 106, setting forth in general terms the substance
of such supplemental indenture or amendment to the Security Documents.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and
Interest.
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The Company covenants and agrees for the benefit of the
Holders that it will duly and punctually pay the principal of (and premium, if
any, on) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York an office or
agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Corporate Trust Office of the Trustee shall be such
office or agency of the Company, unless the Company shall designate and maintain
some other office or agency for one or more of such purposes. The Company will
give prompt written notice to the Trustee of any change in the location of any
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Securities may be presented or surrendered for any or all such purposes and may
from time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Security Payments to Be Held in
Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of (and premium, if any,
on) or interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due until such sums shall be paid
to such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
the Securities, it will, on or before each due date of the principal of (and
premium, if any, on), or interest on, any Securities, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of such action or
any failure so to act.
The Company will cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
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(1) hold all sums held by it for the payment of the principal
of (and premium, if any on) or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any, on) or interest on any Security and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, Holdings will do or cause to be done
all things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of Holdings and each of
its Subsidiaries; provided, however, that Holdings shall not be required to
preserve any such right or franchise if the Board of Directors of Holdings shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of Holdings and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders and
Holdings and its Subsidiaries shall have taken all steps necessary or desirable
to protect or perfect the security interests granted or purported to be granted
by the Security Documents, subject to and as permitted by the terms of this
Indenture and the terms of any release or subordination contemplated in Section
1405 hereof, including, without limitation, the execution, delivery, filing and
recordation of additional mortgages, pledges, assignments and security
agreements.
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SECTION 1005. Payment of Taxes and Other Claims.
Holdings will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent and in accordance with
applicable provisions of the Security Documents, (a) all taxes, assessments and
governmental charges levied or imposed upon Holdings or any of its Subsidiaries
or upon the income, profits or property of Holdings or any such Subsidiary and
(b) all lawful claims for labor, materials and supplies, which, if unpaid, might
by law become a lien upon Collateral; provided, however, that Holdings shall not
be required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
SECTION 1006. Maintenance of Properties.
Subject to and as permitted by the terms of this Indenture and
the terms of any release or subordination contemplated in Section 1405 hereof,
Holdings will cause all properties owned by Holdings or any of its Subsidiaries
or used or held for use in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as required by the Security Documents and as otherwise in the judgment of
Holdings may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent Holdings from discontinuing
the maintenance of any of such properties if such discontinuance is, in the
judgment of Holdings, desirable in the conduct of its business or the business
of any such Subsidiary and not disadvantageous in any material respect to the
Holders.
SECTION 1007. Insurance.
Holdings will, and will cause its Subsidiaries to, maintain
insurance with responsible and reputable insurance companies or associations in
such amounts and covering such risks as is usually carried by companies engaged
in similar businesses and owning similar properties in the same general areas in
which Holdings or such Subsidiary operates; provided that with respect to the
Collateral, Holdings will, and will cause its Subsidiaries to, maintain
insurance on the terms required by each of the Security Documents or, if the
Lien contemplated therein is released or subordinated as contemplated and
permitted in Section 1405, then in accordance with the requirements of the
holder of any other lien on the Collateral.
SECTION 1008. Statement by Officer as to Compliance.
The Company and each of the Guarantors will deliver to the
Trustee, within 120 days after the end of each fiscal year, a brief certificate,
which may be in the form attached as Exhibit A, from the principal executive
officer, principal financial officer or principal accounting officer as to his
or her knowledge of the Company's or such Guarantor's compliance with all
conditions and covenants under this Indenture or the Security Documents. For
purposes of this Section 1008, such compliance shall be determined without
regard to any period of grace or requirement of notice under this Indenture or
the Security Documents.
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SECTION 1009. Statement by Officers of Certain Defaults.
When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of Holdings or any of its Subsidiaries gives any notice or takes
any other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $5 million), Holdings shall
deliver to the Trustee by registered or certified mail or by telegram, telex or
facsimile transmission an Officers' Certificate specifying such event, notice or
other action within five Business Days of its occurrence.
SECTION 1010. Purchase of Securities upon Change in
Control.
(a) Upon the occurrence of a Change in Control and subject to
the compliance by the Company with the requirements of paragraph (b) of this
Section 1010, then each Holder shall have the right to require that the Company
repurchase such Holder's Securities in whole or in part in integral multiples of
$1,000, at a purchase price (the "Purchase Price") in cash in an amount equal to
100% of the outstanding principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (the "Change of Control Payment
Date"), in accordance with the procedures set forth in paragraphs (b) and (c) of
this Section.
(b) Not less than 15 days nor more than 45 days before the
Change of Control Payment Date, the Company shall make an offer to purchase the
Securities (the "Change of Control Offer") and shall give to the Trustee and to
each Holder of the Securities in the manner provided in Section 106 a notice
stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to repurchase such Holder's
Securities at the Purchase Price;
(2) the circumstances and relevant facts regarding such Change
of Control (including but not limited to information with respect to
pro forma historical income, cash flow and capitalization after giving
effect to such Change of Control);
(3) the Change of Control Payment Date, which shall be no
later than 60 days following the Change of Control; and
(4) the instructions a Holder must follow in order to have its
Securities repurchased in accordance with paragraph (c) of this
Section.
(c) The Change of Control Offer shall remain open for at least
20 Business Days and until the close of business on the Change of Control
Payment Date. Holders electing to have Securities purchased will be required to
surrender such Securities to the Company at the address specified in the notice
at least five Business Days prior to the Change of Control Payment Date. Holders
will be entitled to withdraw their election if the Company receives, not later
than three Business Days prior to the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Securities delivered for purchase by the
Holder as to which his election is to be withdrawn and a statement that such
Holder is withdrawing his election to have such Securities purchased. Holders
whose Securities are purchased only in part will be issued new Securities equal
in principal amount to the unpurchased portion of the Securities surrendered.
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(d) Neither the Trustee nor the Board of Directors of the
Company may amend or waive the Company's obligations to so offer to purchase all
outstanding Securities in the event of a Change of Control without the Holders
of not less than a majority of the aggregate principal amount of the Outstanding
Securities consenting to such waiver or amendment.
SECTION 1011. [Intentionally Omitted.].
SECTION 1012. [Intentionally Omitted.].
SECTION 1013. Limitation on Restricted Payments.
Holdings shall not make, directly or indirectly, and shall not
permit any Subsidiary to make, directly or indirectly, any Restricted Payment,
unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Restricted
Payment;
(b) with respect to a Restricted Payment, if any, to be made
to Carl C. Icahn and his Affiliates by Holdings, the Company or GBHC
(other than those to Holdings and its wholly owned Subsidiaries) at any
time prior to the expiration of 5 years from the Issue Date,
immediately after giving effect to such Restricted Payment, the
Consolidated Coverage Ratio of Holdings would be no less than 3.5:1.0;
and
(c) the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum of (i) 50% of Consolidated
Net Income of Holdings (or in the event such Consolidated Net Income
shall be a deficit, minus 100% of such deficit) accrued during the
period (treated as one accounting period) beginning on the last day of
the fiscal quarter of Holdings immediately following the Issue Date and
ending on the last day of Holdings' last fiscal quarter ending before
the date of such proposed Restricted Payment plus (ii) an amount equal
to the aggregate Net Cash Proceeds received by Holdings or any of its
Subsidiaries from the issuance or sale (other than to a Subsidiary) of,
and contribution to capital in respect of, any of its Capital Stock
(excluding Disqualified Stock, but including Capital Stock issued upon
conversion of convertible Indebtedness and from the exercise of
options, warrants or rights to purchase Capital Stock (other than
Disqualified Stock) of Holdings) after the Issue Date.
Notwithstanding the above, the Company shall not make any
Restricted Payments and agrees that all amounts received from GBHC by
the Company pursuant to the Guaranty shall be used solely to make
payments on the Securities.
SECTION 1014. [Intentionally Omitted.].
SECTION 1015. [Intentionally Omitted.].
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SECTION 1016. [Intentionally Omitted.].
SECTION 1017. Limitation on Asset Sales.
Subject to and as permitted by the terms of this Indenture and
the terms of any release or subordination contemplated in Section 1405 hereof,
Holdings shall not, directly or indirectly, and shall not permit any Subsidiary
to, directly or indirectly, make any Asset Sale of Collateral unless (a) at the
time of such Asset Sale, Holdings or such Subsidiary, as the case may be,
receives consideration at least equal to the Fair Market Value of the assets
sold or otherwise disposed of (or in the case of a lease or similar arrangement,
receives an agreement for the payment pursuant to the terms of such lease of
rents from time to time at fair value); (b) the proceeds therefrom (in the case
of a lease, when paid from time to time) consist of at least 85% cash and/or
Cash Equivalents; (c) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Asset Sale; and (d)
unless otherwise expressly provided herein, the Net Cash Proceeds of such Asset
Sale shall be applied in connection with the offer to purchase the Securities
described below.
On or before the 180th day after the date on which Holdings or
any Subsidiary consummates the relevant Asset Sale of Collateral and subject to
and as permitted by the terms of this Indenture and the terms of any release or
subordination contemplated in Section 1405 hereof, the Company shall use all of
the Net Cash Proceeds from such Asset Sale to make either (i) an offer to
purchase (the "Asset Sale Offer") from all holders of Securities up to a maximum
principal amount (expressed as a multiple of $1,000) of Securities equal to such
Net Cash Proceeds at a purchase price equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase; or (ii) a Permitted Related Investment, upon consummation of which the
Trustee shall have received a first priority fully perfected security interest
in the property on assets acquired by Holdings or any of its Subsidiaries in
connection therewith, subject to and as permitted by the terms of this Indenture
and the terms of any release or subordination contemplated in Section 1405
hereof; provided, that the Company shall not be required to make any Asset Sale
Offer if the Net Cash Proceeds of all Asset Sales and Events of Loss that are
not used to make a Permitted Related Investment within 180 days or 365 days,
respectively, do not exceed $5 million. Each Asset Sale Offer shall remain open
for a period of at least 20 business days. To the extent the Asset Sale Offer is
not fully subscribed to by the holders of the Securities, Holdings or the
relevant Subsidiary may retain such unutilized portion of the Net Cash Proceeds.
If the Asset Sale Offer is more than fully subscribed to by the Holders of the
Securities, the particular Securities to be accepted shall be selected by such
method as the Trustee shall deem fair and appropriate and which may provide for
the selection of portions of the principal of Securities; provided, however,
that no such partial acceptance shall reduce the portion of the principal amount
of a Security not redeemed to less than, $1,000; and provided further that so
long as the Securities are listed on any national securities exchange (as such
term is defined in the Exchange Act), such selection shall be made by the
Trustee in accordance with the provisions of such exchange.
Subject to and as permitted by the terms of this Indenture and
the terms of any release or subordination contemplated in Section 1405 hereof,
Holdings or such Subsidiary, as the case may be, shall cause such Net Cash
Proceeds derived from the sale of Collateral in an Asset Sale to be deposited in
the Collateral Account on the business day on which such Net Cash Proceeds are
received by Holdings or such Subsidiary. Collateral Proceeds (including any
earnings thereon) may be released from the Collateral Account only in accordance
with Section 1404.
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Notwithstanding the above, the Company shall not engage,
directly or indirectly, in any Asset Sale.
SECTION 1018. Application of Net Cash Proceeds in Event of
Loss.
Subject to and as permitted by the terms of this Indenture and
the terms of any release or subordination contemplated in Section 1405 hereof,
in the event that Holdings or any Subsidiary suffers any Event of Loss to any
Collateral, on or before the 365th day after the date that Holdings or such
Subsidiary receives any Net Cash Proceeds from such Event of Loss to Collateral,
the Company shall use all of the Net Cash Proceeds from such Event of Loss to
make either (i) an offer to purchase (the "Event of Loss Offer") from all
holders of Securities up to a maximum principal amount (expressed as a multiple
of $1,000) of Securities equal to the Net Cash Proceeds at a purchase price
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase; or (ii) a Permitted Related
Investment, upon consummation of which the Trustee shall have received a first
priority fully perfected security interest in the property on assets acquired by
Holdings or any of its Subsidiaries in connection therewith, subject to and as
permitted by the terms of this Indenture and the terms of any release or
subordination contemplated by Section 1405 hereof; provided, that the Company
shall not be required to make any Event of Loss Offer if the Net Cash Proceeds
of all Events of Loss to and Asset Sales of Collateral that are not used to make
a Permitted Related Investment within 365 days or 180 days, respectively, do not
exceed $5 million. Each Event of Loss Offer shall remain open for a period of at
least 20 Business Days. To the extent the Event of Loss Offer is not fully
subscribed to by the holders of the Securities, Holdings or the relevant
Subsidiary may retain such unutilized portion of the Net Cash Proceeds. If the
Event of Loss Offer is more than fully subscribed to by the Holders of the
Securities, the particular Securities to be accepted shall be selected by such
method as the Trustee shall deem fair and appropriate and which may provide for
the selection of portions of the principal of Securities; provided, however,
that no such partial acceptance shall reduce the portion of the principal amount
of a Security not redeemed to less than $1,000; and provided further that so
long as the Securities are listed on any national securities exchange (as such
term is defined in the Exchange Act), such selection shall be made by the
Trustee in accordance with the provisions of such exchange.
Subject to and as permitted by the terms of this Indenture and
the terms of any release or subordination contemplated in Section 1405 hereof,
Holdings or such Subsidiary, as the case may be, shall cause such Net Cash
Proceeds derived from the loss of Collateral to be deposited in the Collateral
Account on the Business Day on which such Net Cash Proceeds are received by
Holdings or such Subsidiary. Collateral Proceeds (including any earnings
thereon) may be released from the Collateral Account only in accordance with
Section 1404.
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SECTION 1019. Ownership of Stock of Subsidiaries.
Holdings shall at all times maintain, or cause each Subsidiary
to maintain, ownership of all of each class of Voting Stock of, and all other
equity securities in, each Person that, as of the Issue Date was a Subsidiary of
Holdings, to the extent the same is included in the Collateral, except any
Subsidiary that shall be disposed of in its entirety, or consolidated or merged
with or into Holdings or another Subsidiary, in each case in accordance with
Article Eight. Subject to and as permitted by the terms of this Indenture and
the terms of any release or subordination contemplated in Section 1405 hereof,
such stock will be subject to a first priority fully perfected security interest
in favor of the Trustee.
SECTION 1020. Limitation on Transactions with Affiliates.
Holdings shall not, and shall not permit, cause or suffer any
Subsidiary to, conduct any business or enter into any transaction or series of
transactions (including, without limitation, the sale, transfer, disposition,
purchase, exchange, lease or use of assets, property or services) or enter into
any contract, agreement, understanding, loan, advance or guarantees with or for
the benefit of any of their respective Affiliates, (each an "Affiliate
Transaction") other than (i) transactions among Holding and its Subsidiaries;
(ii) transactions involving aggregate payments or other Fair Market Value, of
less than $5 million in any consecutive 365-day period; (iii) transactions made
available to all Holders on a basis pro rata to their holdings of Securities;
(iv) transactions set forth on Schedule 1.02 hereto and (v) those that are
hereafter set forth in writing and are determined by the Board of Directors of
Holdings (including a majority of the Independent members of such Board), to be
on terms which are no less favorable to Holdings and its Subsidiaries than would
be obtained in an arm's length transaction with an unaffiliated third party.
Holdings shall deliver to the Trustee an Officers' Certificate certifying that
any such Affiliate Transaction contemplated in clause (v) above has received the
requisite approval of its Board of Directors.
SECTION 1021. Change in Nature of Business.
GBHC shall not, and shall not permit any of its Subsidiaries
to, own, manage or conduct any operation other than a Permitted Line of
Business.
SECTION 1022. Additional Collateral.
Subject to and as permitted by the terms of this Indenture and
the terms of any release or subordination contemplated in Section 1405 hereof,
Holdings will, and will cause each of its Subsidiaries that owns any Collateral
to, grant to the Trustee a valid and perfected first priority security interest
in such Collateral enforceable against all third parties, and to execute and
deliver all documents and to take all action reasonably necessary or desirable
to perfect and protect such a security interest in favor of the Trustee,
including the execution of the form of Security Agreement Supplement appended to
the Security Agreement.
SECTION 1023. CRDA Investments.
Holdings will not, and will not permit any of its Subsidiaries
to, directly or indirectly (i) grant a security interest in its CRDA Investments
to any Person other than any grant of a security interest or other Lien (a
"Permitted Grant:") to: (x) the Casino Reinvestment Development Authority of the
State of New Jersey ("CRDA"); (y) any other entity as required by applicable
law; or (z) any person so long as such action will not result in a violation of
applicable law; or (ii) sell, convey, transfer, lease or otherwise dispose of
its CRDA Investments otherwise than either (I) in accordance with the terms of a
Permitted Grant, or (II) for fair value (in either case, except to or on behalf
of the CRDA for a CRDA project), which shall be determined by, in their absolute
discretion, and evidenced by a resolution of, the Board of Directors of Holdings
or such Subsidiary, as the case may be.
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SECTION 1024. Subsidiaries.
The Trustee will receive a pledge of the stock of any Person
that is a Subsidiary of Holdings on the Issue Date in accordance with the
Security Agreement, subject to and as permitted by the terms of this Indenture
and the terms of any release or subordination contemplated in Section 1405
hereof. Except as otherwise provided in this Indenture, Holdings will not, and
will not permit any Subsidiary to, take any action or enter into any transaction
or series of transactions that would result in a Person becoming a Subsidiary
(whether through an acquisition or otherwise) unless, after giving effect to
such action, transaction or series of transactions before and immediately after
giving effect thereto no Default or Event of Default shall have occurred and be
continuing.
SECTION 1025. Security Documents.
Holdings shall execute, and shall cause its Subsidiaries to
execute, the respective Security Documents, as appropriate, securing its
obligations under this Indenture, the Security Documents and the Securities.
Each Holder, by accepting a Security, agrees to all terms and provisions of the
Security Documents as the same may be amended or supplemented from time to time
pursuant to the provisions hereof and thereof including, without limitation, the
terms of any release or subordination contemplated in Section 1405 hereof. The
terms of the release of the Collateral and the rights of the Holders with
respect thereto shall be governed by the Security Documents and this Indenture,
including, without limitation, the terms of any release or subordination
contemplated in Section 1405 hereof.
SECTION 1026. Validity of Security Interest.
Each of Holdings, GBHC and the Company represents and warrants
that it has, and covenants that it shall continue to have, full power and lawful
authority to grant, release, convey, assign, transfer, mortgage, pledge,
hypothecate and otherwise create the Security Interest referred to in Article
Fourteen; and subject to and as permitted by the terms of this Indenture and the
terms of any release or subordination contemplated in Section 1405 hereof, each
of Holdings, GBHC and the Company shall warrant, preserve and defend the
Security Interest of the Trustee in and to the Collateral or any asset that
should constitute Collateral (other than real property with respect to matters
covered by title insurance policies obtained by Holdings or its Subsidiaries)
but for the fact that Holdings and/or its Subsidiaries failed to comply with the
provisions of the Indenture or the Security Documents against the claims of all
persons, and will maintain and preserve the Security Interest contemplated by
Article Fourteen. Subject to and as permitted by the terms of this Indenture and
the terms of any release or subordination contemplated by Section 1405 hereof,
Holdings and its Subsidiaries shall be required to execute and deliver all
documents and take all action reasonably necessary or desirable to perfect and
protect a security interest in Collateral or any asset that would constitute
Collateral but for the fact that Holdings and/or its Subsidiaries failed to
comply with the provisions of the Indenture or the Security Documents, before
engaging in any sale, transfer, conveyance, or other disposition of such assets
to Holdings or any of its wholly owned Subsidiaries.
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SECTION 1027. Duty of Cooperation.
The Guarantors and their respective directors, officers and
Affiliates shall cooperate with the Casino Control Commission and the Division
of Gaming Enforcement and provide such information and documentation as may from
time to time be requested by such agencies unless being contested in good faith
by appropriate proceedings.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Optional Redemption.
The Securities may be redeemed, at the election of the
Company, as a whole or from time to time in part, at the times, subject to the
conditions and at the Redemption Price specified in the form of Security,
together with accrued interest to the Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article, other than repurchases
made from time to time in the open market.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant
to Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed.
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities not
previously called for redemption, by such method as the Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of
portions of the principal of Securities; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Security not
redeemed to less than $1,000 and, provided further that, so long as the
Securities are listed on any national securities exchange (as such term is
defined in the Exchange Act), any such redemption shall be made by the Trustee
in accordance with the provisions of such exchange.
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The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Securities shall
relate, in the case of any Security redeemed or to be redeemed only in part, to
the portion of the principal amount of such Security which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for
in Section 106 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed; provided, however, that in
the case of an optional redemption in which the Company has called for
redemption all outstanding Securities in connection with a refinancing of such
Securities, the Company shall be permitted to (i) specify a proposed redemption
date, (ii) change the proposed redemption date once to a final redemption date
by notice mailed to Holders not later than five business days prior to the final
redemption date, (iii) establish the final redemption date as a date not more
than 90 days after the first notice from the Company calling the Securities for
optional redemption was mailed to Holders and (iv) rescind the redemption offer
at any time prior to the final redemption date, which rescission shall not cause
the maturity of the Securities to have changed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of a partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price (together
with accrued interest, if any, to the Redemption Date payable as
provided in Section 1107) will become due and payable upon each such
Security, or the portion thereof, to be redeemed, and that interest
thereon will cease to accrue on and after said date, and
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
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SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) in
immediately available funds an amount of money sufficient to pay the Redemption
Price of, and accrued interest on, all the Securities which are to be redeemed
on that date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified (together with accrued
interest, if any, to the Redemption Date), and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest,
if any, to the Redemption Date; provided, however, that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate borne by
the Securities.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
SECTION 1109. Redemption Pursuant to Gaming Laws.
(a) If required to qualify by the Casino Control Commission,
all Holders, whether initial Holders or subsequent transferees, shall be subject
to the qualification provisions of the Casino Control Act relating to financial
sources and/or security holders. In the event that the Casino Control Commission
determines that a Holder is not qualified under the Casino Control Act and/or
such Holder fails to submit for qualification as required by the Casino Control
Commission in its sole discretion, the Company shall have the absolute right and
obligation to purchase from such Holder (the "Disqualified Holder") the
Securities the Disqualified Holder may then possess, either directly, indirectly
or beneficially, no later than forty-five days after the date the Company serves
notice on any Disqualified Holder of such determination. Immediately upon such
determination, the Disqualified Holder shall have no further right (i) to
exercise, directly or indirectly, through any trustee or nominee or any other
person or entity, any right conferred by any Securities and (ii) to receive any
dividends, interest, or any other distribution or payment with respect to any
such Securities or any remuneration in any form from the Company or the Trustee;
provided, however, that after such disqualification, interest on any such
Securities shall continue to accrue for the benefit of any subsequent Holder
thereof. The Company shall promptly provide to the Trustee a copy of each notice
served to a Disqualified Holder.
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(b) Upon receipt of the notice referred to in clause (a)
above, the Disqualified Holder may sell its Securities either directly to any
Person then qualified or previously qualified (and not subsequently
disqualified) or through a bona fide brokerage transaction, conducted at
arm's-length, to a Person not an Affiliate of the Disqualified Holder. In the
event the Disqualified Holder fails to so sell its Securities within thirty (30)
days after the determination by the Casino Control Commission, the Company shall
purchase such Securities within fifteen (15) days after the end of such thirty
(30) day time period, at a time and place as designated by the Company, at the
lowest of (i) the principal amount thereof, (ii) the amount which the
Disqualified Holder or beneficial owner paid for the Securities, together with
accrued interest up to the date of the determination of disqualification, or
(iii) the market value of such Securities. The right of the Company to purchase
such Security may be assigned by the Company to any Person approved by the
Casino Control Commission.
(c) The provisions of this Section shall be construed in
accordance with the applicable provisions of the Casino Control Act.
ARTICLE TWELVE
GUARANTEE ARRANGEMENTS
SECTION 1201. Guarantee.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees (such guarantees collectively referred to as the "Guarantee") to each
Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Securities, any of the Security Documents
or the obligations of the Company or any other Guarantor to the Holders or the
Trustee hereunder or thereunder, that: (a) the principal of, any interest on the
Securities (including, without limitation, any interest that accrues after the
filing of a proceeding of the type described in Sections 501(7) and (8) hereof),
premium, fees, expenses and all other amounts will be duly and punctually paid
in full when due, whether at maturity, by acceleration or otherwise, and
interest on the overdue principal and (to the extent permitted by law) interest,
if any, on the Securities and all other obligations of the Company or any
Guarantor to the Holders or the Trustee hereunder or thereunder including fees,
expenses or other whether now or hereafter existing will be promptly paid in
full or performed, all strictly in accordance with the terms hereof and thereof;
and (b) in case of any extension of time of payment or renewal of any Securities
or any of such other obligations, the same will be promptly paid in full when
due or performed in accordance with the terms of the extension or renewal,
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whether at stated maturity, by acceleration or otherwise. Failing payment when
due of any amount so guaranteed, or failing performance of any other obligations
of the Company to the Holders, for whatever reason, each Guarantor will be
obligated to pay, or to perform or cause the performance of, the same
immediately. An Event of Default under this Indenture, any Security Document or
the Securities shall constitute an event of default under this Guarantee, and
shall entitle the Holders of Securities to accelerate the obligations of the
Guarantors hereunder in the same manner and to the same extent as the
obligations of the Company. The obligations of a Guarantor are independent of
any obligation of the Company or any other Guarantor. Each of the Guarantors
hereby agrees that its obligations hereunder shall be absolute and
unconditional, irrespective of the validity, regularity or enforceability of the
Securities, any Security Document, this Indenture or any other document relating
thereto, the absence of any action to enforce the same, any waiver or consent by
any Holder with respect to any provisions hereof or thereof, any release or
non-perfection of Collateral, any release of any other Guarantor, any delays in
obtaining or realizing upon or failure to obtain or realize upon or application
of Collateral, the recovery of any judgment against the Company or any other
Person, any action to enforce the same or any other circumstance (including,
without limitation, any statute of limitations) which might otherwise constitute
a legal or equitable discharge or defense of a guarantor. Each of the Guarantors
hereby waives promptness, diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company or
any other Person, any right to require a proceeding first against the Company or
any other Person, protest, notice and all demands whatsoever and covenants that
its Guarantee will not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture, the Security Documents
and this Guarantee. If any Holder or the Trustee is required by any court or
otherwise to return to the Company or to any Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to the Company
or such Guarantor, any amount paid by the Company or such Guarantor to the
Trustee or such Holder, this Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Guarantor hereby irrevocably
waives any claim or other rights that it may now or hereafter acquire against
the Company or any other insider guarantor that arise from the existence,
payment, performance or enforcement of such Guarantor's obligations under this
Guarantee, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Holders or the Trustee against the
Company or any other insider guarantor or any Collateral, whether or not such
claim, remedy or right arises in equity or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Company or any other insider guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim, remedy or right. If any amount shall be paid to such Guarantor in
violation of the preceding sentence at any time prior to the later of the
payment in full of the Securities and all other amounts payable under this
Guarantee and the Maturity Date, such amount shall be held in trust for the
benefit of the Holders and the Trustee and shall forthwith be paid to the
Trustee to be credited and applied to the Securities and all other amounts
payable under this Guarantee, whether matured or unmatured, in accordance with
the terms of this Indenture, or to be held as Collateral for any obligations or
other amounts payable under this Guarantee thereafter arising. Each Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by this Indenture and that the waiver set
forth in this subsection is knowingly made in contemplation of such benefits.
Each Guarantor further agrees that, as between it, on the one hand, and the
Holders and the Trustee, on the other hand, (x) subject to this Article Twelve,
the maturity of the obligations guaranteed hereby may be accelerated as provided
in Article Five hereof for the purposes of this Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any acceleration of
such obligations as provided in Article Five hereof, such obligations (whether
or not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Guarantee.
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SECTION 1202. Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 1201,
each Guarantor hereby agrees that notation of such Guarantee shall be endorsed
on each security authenticated and delivered by the Trustee and executed by
either manual or facsimile signature of an authorized Officer of such Guarantor.
Each of the Guarantors hereby agrees that its Guarantee set
forth in Section 1201 shall remain in full force and effect notwithstanding any
failure to endorse on each Security a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on this
Indenture or a Security no longer holds that office at the time the Trustee
authenticates such Security or at any time thereafter, such Guarantor's
Guarantee of such Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any Guarantee
set forth in this Indenture on behalf of the Guarantor.
SECTION 1203. Additional Guarantors.
Any Person that was not a Guarantor on the Issue Date may
become a Guarantor by executing and delivering to the Trustee (a) a supplemental
indenture in form and substance satisfactory to the Trustee, which subjects such
Person to the provisions (including the representations and warranties) of the
Indenture as a Guarantor and (b) an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized and executed by such Person and
constitutes the legal, valid, binding and enforceable obligation of such Person
(subject to such customary exceptions concerning creditors' rights and equitable
principles as may be acceptable to the Trustee in its discretion).
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ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance.
The Company may, at its option by Board Resolution, at any
time, with respect to the Securities, elect to have either Section 1302 or
Section 1303 be applied to all Outstanding Securities upon compliance with the
conditions set forth below in this Article Thirteen.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1302, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Securities on
the date the conditions set forth in Section 1304 are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by the
Outstanding Securities, which shall thereafter be deemed to be "Outstanding"
only for the purposes of Section 1305 and the other Sections of this Indenture
referred to in (A) and (B) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same) and releasing the liens and security
interests created by the Security Documents, except for the following, which
shall survive until otherwise terminated or discharged hereunder: (A) the rights
of Holders of Outstanding Securities to receive, solely from the trust fund
described in Section 1304 and as more fully set forth in such Section, payments
in respect of the principal of (and premium, if any, on) and interest on such
Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (D)
this Article Thirteen. Subject to compliance with this Article Thirteen, the
Company may exercise its option under this Section 1302 notwithstanding the
prior exercise of its option under Section 1303 with respect to the Securities.
SECTION 1303. Covenant Defeasance.
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1303, the Company shall be released from its
obligations under any covenant contained in Section 801 and in Sections 1005
through 1026 with respect to the Outstanding Securities on and after the date
the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Securities shall thereafter be deemed not to be
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the Outstanding Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 501(3) or otherwise, but, except as specified above, the remainder of
this Indenture and such Securities shall be unaffected thereby.
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SECTION 1304. Conditions to Defeasance or Covenant
Defeasance.
The following shall be the conditions to application of either
Section 1302 or Section 1303 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds,
for a period of at least 123 days prior to the date of such defeasance,
in trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) money in an amount, or (B) U.S.
Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, (i) the
principal of (and premium, if any, on) and interest on the Outstanding
Securities on the Stated Maturity (or Redemption Date, if applicable)
of such principal (and premium, if any) or installment of interest and
(ii) any mandatory sinking fund payments or analogous payments
applicable to the Outstanding Securities on the day on which such
payments are due and payable in accordance with the terms of this
Indenture and of such Securities; provided that the Trustee shall have
been irrevocably instructed to apply such money or the proceeds of such
U.S. Government Obligations to said payments with respect to the
Securities. Before such a deposit the Company may give to the Trustee,
in accordance with Section 1103 hereof, a notice of its election to
redeem all of the Outstanding Securities at a future date in accordance
with Article Eleven hereof, which notice shall be irrevocable. Such
irrevocable redemption notice, if given, shall be given effect in
applying the foregoing. For this purpose, "U.S. Government Obligations"
means securities that are (x) direct obligations of the United States
of America for the timely payment of which its full faith and credit
is, pledged or (y) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America,
which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
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(2) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit or, insofar as paragraphs (7) and (8) of Section 501 hereof are
concerned, at any time during the period ending on the 123rd day after
the date of such deposit (it being understood that this condition shall
not be deemed satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, this Indenture
or any other material agreement or instrument to which the Company is a
party or by which it is bound.
(4) In the case of an election under Section 1302, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) there has been a change in
the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of
the Outstanding Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such 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 defeasance
had not occurred.
(5) In the case of an election under Section 1303, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred.
(6) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 1302 or the covenant defeasance under Section 1303 (as
the case may be) have been complied with.
SECTION 1305. Deposited Money and U.S. Government Obligations
To Be Held in Trust; Other Miscellaneous
Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1305, the "Trustee") pursuant to Section 1304 in
respect of the Outstanding Securities shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
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The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Securities.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it as
provided in Section 1304 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1306. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1305 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1302 or 1303, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1305; provided, however, that if the Company makes any payment of
principal of (or premium, if any, on) or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE FOURTEEN
SECURITY INTEREST
SECTION 1401. Assignment of Security Interest.
(a) In order to secure the performance of the Company's and
the Guarantors' obligations to pay the principal amount of, premium, if any, and
interest on the Securities (including, without limitation, any interest that
accrues after the filing of a petition initiating any proceeding referred to in
Section 501(7) or (8) of this Indenture) when and as the same shall be due and
payable, whether at maturity or on an Interest Payment Date, by acceleration,
call for redemption or otherwise, and interest on the overdue principal of and
interest on, if any, the Securities and performance of all other obligations of
the Company and the Guarantors to the Holders and the Trustee under this
Indenture and the Securities, according to the terms hereunder or thereunder,
any Grantor pursuant to the Security Documents has unconditionally and
absolutely assigned to the Trustee for the benefit of itself and all Holders, a
first priority security interest in the Collateral, subject to the limitations
set forth in this Indenture, including, without limitation, Section 1405 hereof
(the "Security Interest").
(b) The Security Interest as now or hereafter in effect shall
be held for the Trustee and for the equal and ratable benefit and security of
the Securities without preference, priority or distinction of any thereof over
any other by reason, or difference in time, of issuance, sale or otherwise, and
for the enforcement of the payment of principal of, premium, if any, and
interest on the Securities in accordance with their terms.
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(c) Each of the Company, Holdings and GBHC has executed and
delivered, filed and recorded and/or will execute and deliver, file and record,
all instruments and documents, and has done or will do or cause to be done all
such acts and other things as are necessary or desirable, subject to and as
permitted by the terms of this Indenture and the terms of any release or
subordination contemplated in Section 1405 hereof, to subject the Collateral to
the Lien of the Security Documents. Subject to and as permitted by the terms of
this Indenture and the terms of any release or subordination contemplated in
Section 1405 hereof, each of the Company, Holdings and GBHC will execute and
deliver, file and record all instruments and do all acts and other things as may
be reasonably necessary or advisable to perfect, maintain and protect the
Security Interest (including, without limitation, the first priority nature
thereof) and shall pay all filing, recording, mortgage or other taxes or fees
incidental thereto.
(d) Each of the Company, Holdings and GBHC shall furnish to
the Trustee (i) promptly after the recording or filing, or re-recording or
re-filing of the Security Documents and other security filings, an Opinion of
Counsel (who may be counsel for the Company or the Guarantors) stating that in
the opinion of such counsel the Security Documents and other security filings
have been properly recorded, filed, re-recorded or re-filed so as to make
effective and perfect the Security Interest intended to be created thereby and
reciting the details of such action; and (ii) except for Collateral released as
contemplated in Section 1405 hereof, at least annually on the anniversary date
of the Issue Date, an Opinion of Counsel (who may be counsel for the Company or
the Guarantors) either stating that in the opinion of such counsel such action
with respect to the recording, filing, re-recording or re-filing of the Security
Documents and other security filings has been taken as is necessary to maintain
the Lien and Security Interest of the Security Documents and other security
filings, subject to any subordination contemplated in Section 1405 hereof, and
reciting the details of such action, or stating that in the opinion of such
counsel no such action is necessary to maintain such Lien and Security Interest.
In giving the opinions required by this Section 1401(d) above, such counsel may
rely, to the extent recited in such opinions, on (i) certificates of relevant
public officials; (ii) certificates of an officer or officers of the Company,
the Guarantors or any other Grantor; (iii) photocopies of filed and recorded
documents certified by public officials as being accurate copies of such
documents; (iv) the opinions of other counsel acceptable to the Trustee with
respect to matters governed by law of any jurisdiction other than the state in
which such counsel is licensed to practice law; and (v) title insurance policies
and commitments. In addition, such opinions may contain such qualifications,
exceptions and limitations as are appropriate for similar opinions relating to
the nature of the Collateral.
SECTION 1402. Suits to Protect the Collateral.
To the extent permitted under the Security Documents and this
Indenture, the Trustee shall have power, but not be obliged, to institute and
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts which may be unlawful or in violation
of this Indenture or the Security Documents and such suits and proceedings as
the Trustee may deem expedient to preserve or protect its interests and the
interest of the Holders in the Collateral and in the profits, rents, revenues
and other income arising therefrom (including power to institute and maintain
suits or proceedings to restrain the enforcement of or compliance with any
legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the Security Interest thereunder or
be prejudicial to the interest of the Holders or of the Trustee).
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SECTION 1403. Further Assurances and Security.
Each of the Company, Holdings and GBHC represents and warrants
that at the time the Security Documents and this Indenture are executed,
Holdings and/or its Subsidiaries (i) will have full right, power and lawful
authority to grant, bargain, sell, release, convey, hypothecate, assign,
mortgage, pledge, transfer and confirm, absolutely, the Collateral, in the
manner and form done, or intended to be done, in the Security Documents, free
and clear of all Liens, except for the Liens created by the Security Documents
or otherwise permitted by the Indenture or the Security Documents, and will
forever warrant and defend the title to the same against the claims of all
Persons whatsoever; (ii) will execute, acknowledge and deliver to the Trustee,
at Holdings' and/or its Subsidiaries' expense, at any time and from time to time
such further assignments, transfer, assurances or other instruments as may be
required to effectuate the terms of this Indenture or the Security Documents;
and (iii) will at any time and from time to time do or cause to be done all such
acts and things as may be necessary or proper, or as may be required by the
Trustee, to assure and confirm to the Trustee the Security Interest in the
Collateral contemplated hereby and by the Security Documents, in each case,
subject to and as permitted by the terms of this Indenture and any release or
subordination contemplated in Section 1405 hereof.
SECTION 1404. Collateral Account.
(a) Subject to and as permitted by the terms of this Indenture
and any release or subordination contemplated in Section 1405 hereof, Holdings
or any Subsidiary, as the case may be, shall cause such Net Cash Proceeds of any
Asset Sale pursuant to Section 1017 that involves the sale of Collateral or any
Event of Loss pursuant to Section 1018 that involves a loss of Collateral to be
deposited in the Collateral Account on the business day on which such Net Cash
Proceeds are received by Holdings or such Subsidiary. Subject to and as
permitted by the terms of this Indenture and any release or subordination
contemplated in Section 1405 hereof, Collateral Proceeds (including any earnings
thereon) may be released from the Collateral Account in order to, and in only
such amount as is required to, (x) pay the principal amount of Securities
tendered pursuant to an Asset Sale Offer or Event of Loss Offer or (y) make a
Permitted Related Investment; provided that upon consummation of such Permitted
Related Investment the Trustee shall, subject to and as permitted by the terms
of this Indenture and any release or subordination contemplated in Section 1405
hereof, have received a first priority security interest in the property or
assets acquired by Holdings or any of its Subsidiaries in connection therewith
and Holdings delivers to the Trustee each of the following:
(1) an Officers' Certificate, dated the date on which
Collateral Proceeds shall be released from the Collateral Account (the
"Collateral Proceeds Release Date"), stating in substance as to the
following matters (which statements shall, on the Collateral Proceeds
Release Date, be true):
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(A) the reason Holdings is requesting a release of
the Collateral Proceeds and a description of the use to be
made of the Collateral Proceeds to be released;
(B) in the case of clause (x) above, the aggregate
principal amount of Securities purchased on the Collateral
Proceeds Release Date and, in the case of clause (y) above, a
description of the property or assets being acquired and the
Fair Market Value and the purchase price of each such property
or asset to be acquired by Holdings and/or its Subsidiaries
(if more than one);
(C) that the amount to be released from the
Collateral Account does not exceed the aggregate principal
amount of Securities to be purchased on the Collateral
Proceeds Release Date or the purchase price of the property or
assets to be acquired by Holdings or any of its Subsidiaries,
as the case may be;
(D) that, in the case of clause (y) above, Holdings
and/or its Subsidiaries, as the case may be, have taken all
steps necessary or desirable so that upon consummation of such
Permitted Related Investment the Trustee shall, subject to the
terms of any release or subordination contemplated in Section
1405 hereof, receive a first priority security interest in
such property or assets; and
(E) that no Default or Event of Default has occurred
and is continuing at the time of or after giving effect to
such release of Collateral Proceeds.
(2) An Opinion of Counsel stating that the certificate,
opinions, other instruments or cash which have been or are therewith
delivered to and deposited with the Trustee conform to the requirements
of this Indenture and that the property to be released may be lawfully
released from the Lien of the Security Documents and that all
conditions precedent in this Indenture and the Security Documents
relating to such release have been complied with.
(b) In connection with any release of any lien in favor of the
Trustee granted pursuant to the Security Documents on Collateral, the Company
and the Guarantors shall comply, to the extent required thereby, with the
applicable provisions of the TIA, including Section 314 thereof.
SECTION 1405. Release Notice; Subordination Request;
Permitted Liens.
(a) A Release Notice may only be delivered from time to time
in connection with, in anticipation of, as a result of or in relation to, an
Approved Project. A Release Notice shall be in the form of a Company Order and
shall request that the Trustee execute one or more specifically described
release instruments, documents and agreements (which release instruments,
documents and agreements shall accompany such Release Notice) and shall (i)
include a certified copy of the Board Resolution of Holdings or any of its
Subsidiaries in which such Board of Directors approved the Approved Project,
(ii) be accompanied by an Officers' Certificate, including a certification that
no Event of Default, or no default which with the passage of time or giving of
notice would become an Event of Default, has occurred or is continuing, in each
case unless waived in accordance with the terms of this Indenture, (iii) be
accompanied by an opinion of outside counsel to the Company and the Guarantors
(not by counsel which is an employee of the Company), which counsel shall be
reasonably satisfactory to the Trustee, stating that the action contemplated by
this Section 1405(a) is authorized and permitted by the Indenture and that all
conditions precedent herein relating to such action have been complied with and
(iv) if required by the TIA, certificates in accordance with Section 314 of the
TIA. Upon receipt of a Release Notice the Trustee, at Holdings' expense, shall
execute and deliver, within seven Business Days from the receipt of such Release
Notice, any instruments, documents and agreements specified by Holdings or any
of its Subsidiaries to release all or any part of the Collateral from the
Security Interests or any other Liens created by the Security Documents or the
Indenture including, without limitation, all instruments, documents and
agreements necessary to release any and all Liens of record and to terminate the
Security Documents.
E-86
(b) A Subordination Request may only be delivered from time to
time in connection with, in anticipation of, as a result of or in relation to,
any Approved Project. A Subordination Request shall be in the form of a Company
Order and shall request that the Trustee execute one or more specifically
described instruments, documents and agreements of subordination (which
instruments of subordination shall accompany such Subordination Request) and
shall (i) include a certified copy of the Board Resolution of Holdings or any of
its Subsidiaries in which the Subordination Determination was made, (ii) certify
that the subordination requested effects a subordination of the Security
Interests only to the extent, and only with respect to the Collateral as to
which such subordination is, contemplated by the Subordination Determination,
(iii) be accompanied by an Officers' Certificate, including a certification that
no Event of Default, and no default which with the passage of time or giving of
notice would become an Event of Default, has occurred or is continuing, in each
case unless waived in accordance with the terms of this Indenture, (iv) be
accompanied by an opinion of outside counsel to the Company and the Guarantors
(not by counsel which is an employee of the Company), which counsel shall be
reasonably satisfactory to the Trustee, stating that the action contemplated by
this Section 1405(b) is authorized and permitted by the Indenture and that all
conditions precedent herein relating to such action have been complied with and
(v) if required by the TIA, certificates in accordance with Section 314 of the
TIA. Upon receipt of a Subordination Request, the Trustee, at Holdings' expense,
will execute and deliver, within seven Business Days from the receipt of such
Subordination Request, any instruments, documents and agreements specified by
Holdings or any of its Subsidiaries to subordinate the Security Interests or any
other Liens created by the Security Documents or the Indenture to any Lien that
the Board of Directors of Holdings or any of its Subsidiaries determines (each
such determination, a "Subordination Determination") to accord priority over the
Security Interests in connection with an Approved Project.
(c) In connection with any release of any lien pursuant to a
Release Notice or the subordination of any lien pursuant to a Subordination
Request, the Company and the Guarantors shall comply, to the extent required
thereby, with the applicable provisions of the TIA, including Section 314
thereof.
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(d) Any release or subordination of Collateral made in
compliance with the provisions of this Section 1405 shall be deemed for all
purposes: (i) not to impair the Security Interests or impair the security under
the Indenture in contravention of the terms or provisions of this Indenture or
the Security Documents and (ii) not to constitute in any respect or for any
purpose a breach, default or violation of any term or provision of this
Indenture or the Security Documents and to the extent that any such breach,
default or violation would otherwise result the same are hereby waived in all
respects.
(e) In addition to, and not in limitation of, any other
rights, powers or privileges of Holdings and its Subsidiaries, and
notwithstanding any provision to the contrary set forth in this Indenture or the
Security Documents, Holdings and its Subsidiaries may incur Permitted Liens.
(f) To the extent set forth in any Release Notice or
Subordination Request or in the terms, provisions or conditions of any such
release or subordination or any agreements, documents or instruments related
thereto, associated therewith or arising from or in connection with any such
release or subordination or any related or associated transaction, the terms of
Section 1017, 1018 and 1404 hereof shall (i) cease to apply to the Assets that
are the subject of such Release Notice or Subordination Request, and to any
proceeds thereof or (ii) continue to apply to such Assets and proceeds only to
the extent set forth in the terms, provisions or conditions of any such release
or subordination or of any such agreements, documents or instruments.
SECTION 1406. Reliance on Opinion of Counsel.
The Trustee shall be fully protected in taking any action
under this Article Fourteen or omitting to take any action, in reliance upon an
Opinion of Counsel, or in the case of Section 1405, an opinion of outside
counsel to the Company and the Guarantors.
SECTION 1407. Purchaser May Rely.
A purchaser in good faith of the Collateral or any part
thereof or interest therein which is purported to be transferred, granted or
released by the Trustee as provided in this Article Fourteen shall not be bound
to ascertain, and may rely on the authority of the Trustee to execute, transfer,
grant or release, or to inquire as to the satisfaction of any conditions
precedent to the exercise of such authority, or to see to the application of the
purchase price therefor.
SECTION 1408. Payment of Expenses.
On demand of the Trustee, the Company forthwith shall pay or
satisfactorily provide for the payment of all reasonable expenditures incurred
by the Trustee under this Article Fourteen, including, without limitation, the
costs of title insurance, surveys, attorneys' fees and expenses, recording fees
and taxes, transfer taxes, taxes on indebtedness and other expenses incidental
thereto and all such sums shall be a Lien upon the Collateral prior to the
Securities and shall be secured thereby.
E-88
ARTICLE FIFTEEN
MISCELLANEOUS
SECTION 1501. Counterparts.
This Indenture may be signed in any number of counterparts
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
GB PROPERTY FUNDING CORP.
By /s/ Timothy A. Ebling
-------------------------------------------
Title: Executive Vice President
Chief Financial Officer
Attest: /s/ Frederick H. Kraus
------------------------
Title: Secretary
GB HOLDINGS, INC.
By /s/ Timothy A. Ebling
-------------------------------------------
Title: Executive Vice President
Chief Financial Officer
Attest: /s/ Frederick H. Kraus
------------------------
Title: Secretary
GREATE BAY HOTEL AND CASINO,
INC.
By /s/ Timothy A. Ebling
-------------------------------------------
Title: Executive Vice President
Chief Financial Officer
Attest: /s/ Frederick H. Kraus
------------------------
Title: Secretary
WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ Jane Schweiger
-------------------------------------------
Title: Assistant Vice President
Attest: /s/ Curtis D. Schwegman
--------------------------
Title: Assistant Secretary
E-90
Exhibit A
- --------------------------------------------------------------------------------
OFFICERS' CERTIFICATE
OF
GREATE BAY HOTEL AND CASINO, INC.
------------------------------------------------------------------------------
Reference is made to that certain Indenture dated as of
____________________ (the "Indenture") among GB Property Funding Corp. (the
"Company"), as Issuer, GB Holdings, Inc. ("Holdings") and Greate Bay Hotel and
Casino, Inc. ("GBHC"), as guarantors, and Wells Fargo Bank Minnesota, N.A., as
Trustee (the "Trustee"). Except as otherwise defined herein, capitalized terms
used herein shall have the meanings set forth in the Indenture.
Pursuant to Section 1008 of the Indenture, the undersigned officer of
GBHC hereby certifies to the Trustee as follows:
He is now, and at the times mentioned herein has been, the
duly elected, qualified and acting officer of GBHC as
specified below.
To his knowledge, and without regard to any period of grace or
requirements of notice under the Indenture or the Security
Documents, GBHC is in compliance with all conditions and
covenants under the Indenture or the Security Documents.
IN WITNESS WHEREOF, I have set my hand this ____ day of ______________.
GREATE BAY HOTEL AND CASINO, INC.
t/a "Sands Hotel & Casino"
By:______________________________
Schedule 1.01
Permitted Indebtedness
Mortgage in the amount of $700,000 and interest, made by Lieber Check Cashing
L.L.C., to Andermatt Corp., dated July 22, 1996.
Mortgage in the amount of $525,000 and interest made by GBHC to Ruth M. Lubin
dated January 1, 1983.
Amendment dated April 5, 2000, to Brighton Park Improvements Agreement dated
November 5, 1987, by and between Claridge at Park Place, Inc. and GBHC.
Lease Agreement dated April 17, 2000 between Claridge at Park Place, Inc. and
GBHC for Lot 11 on Block 47 Tax Map of the City of Atlantic City.
Such liens or interests as are set forth in that certain Commitment No.
102134032 for Title Insurance of Stewart Title Guaranty Company.
The lease, license or management agreement(s) with an energy management
company(s), supplier(s), or intermediary(s) related thereto now or hereafter
entered into concerning or with respect to the supply and/or management of
utility services and/or the operation of existing or newly supplied equipment at
the property, including, but not limited to heating, ventilation, and
air-conditioning and energy production related equipment.
2
Schedule 1.02
Permitted Affiliate Transactions
Purchase by affiliates of Carl C. Icahn of 4,625,000 shares of common stock for
a total purchase price of $65 million cash.
3
ANNEX F
================================================================================
GB PROPERTY FUNDING CORP.,
as Issuer,
GB HOLDINGS INC. and GREATE BAY HOTEL
and CASINO, INC.,
as Guarantors,
and
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee
--------------------
Amendment No. 1
dated ____________, 2003
to
Amended and Restated Indenture
Dated as of October 12, 2001
--------------------
$110 Million
11% Notes Due 2005
================================================================================
F-1
AMENDMENT NO. 1, dated __________, 2003 ("Amendment No. 1"), to the
Amended and Restated Indenture, dated as of October 12, 2001 (the "Indenture")
among GB Property Funding Corp. (herein called the "Company"), GB Holdings, Inc.
(herein called "Holdings") and Greate Bay Hotel and Casino, Inc. (herein called
"GBHC", and, together with Holdings, herein called the "Guarantors"), each of
which is a corporation duly organized and existing, in the case of the Company
and Holdings, under the laws of the State of Delaware, and in the case of GBHC,
under the laws of the State of New Jersey, and each having its principal office
c/o Sands Hotel and Casino at Indiana Avenue & Brighton Park, Atlantic City, New
Jersey 08401, and Wells Fargo Bank Minnesota, National Association, Trustee
(herein called the "Trustee").
The Company has duly authorized and issued its 11% Notes Due 2005
(herein called "Notes" or the "Securities"), under an Indenture dated as of
September 29, 2000 (the "Original Indenture") of substantially the tenor and
amount set forth in the Original Indenture, and to provide therefore the Company
has duly authorized the execution and delivery of the Original Indenture, as
amended and restated by the Indenture.
The Indenture is hereby modified, amended and supplemented by the
following:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
-----------
For all purposes of this Amendment No. 1, except as otherwise
expressly provided or unless the context otherwise requires:
(a) unless otherwise defined herein, all terms used herein
shall have the meaning attributed to them under the Indenture.
(b) the terms defined in this Amendment No. 1 have the
meanings assigned to them in this Article, and include the plural as
well as the singular.
(c) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Amendment No. 1 as a whole and
not to any particular Article, Section or other subdivision.
"Asset Transfer Transactions" means the transfer (a) by Holdings of all
of its assets (other than the stock of GBHC and the Company) to GBHC;
(b) by GBHC of substantially all of its assets, including the assets it
received from Holdings, to ___________; and (c) by _______ of all such
assets (less the cash paid to the holders of the Notes pursuant to the
Exchange and Consent) to ________, all as contemplated in the
Prospectuses.
F-2
"Exchange and Consent" means the exchange of the Notes for notes issued
by ____, and the solicitation of consents of holders of Notes, and all
related activities and payments, all as contemplated in the
Prospectuses.
"Merger" means the merger of GB Property Funding Corp. and Greate Bay
Hotel and Casino Inc., into GB Holdings, Inc.
"Prospectuses" means those two registration statements and
prospectuses, as amended, filed by ________ on Form S-4 with the
Securities and Exchange Commission, with respect to the Transactions.
"Section 1409 Release Notice" means a written notice of any or all of
Holdings, the Company or GBHC in the form of a Company Order, delivered
pursuant to Section 1409.
"Transactions" means the Asset Transfer Transactions, the Merger, the
Warrant Distribution, the Exchange and Consent and all of the other
acts, activities, actions and transactions contemplated in the
Prospectuses.
"Transfer" means each transfer, assignment, disposition or conveyance
occurring as part of or in connection with the Asset Transfer
Transactions.
"Transferee" means any Person that obtains or receives any Transfer of
assets in the Asset Transfer Transactions, including, without
limitation, _____ and _____.
"Warrant Distribution" means the distribution by Holdings of warrants
to acquire shares of the common stock of _______ as contemplated in the
Prospectuses.
ARTICLE II
ADDITION OF SECTION 803 TO ARTICLE EIGHTH
"CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE" OF THE
INDENTURE
Article Eight of the Indenture is hereby amended by the addition of the
following:
Section 803. Asset Transfer Transaction.
Notwithstanding any other provision of the Indenture, Holdings
and its Subsidiaries may engage without restriction in the Transactions
free and clear of: (i) any restrictions or obligations under or created
by; and (ii) any Security Interests or other liens or claims under or
created by, the Indenture or any Security Documents, and neither
Holdings and its Subsidiaries nor any other Person shall be required to
act in accordance with the provisions of Section 801 or 802 of the
Indenture in connection therewith or to comply with those or any other
provisions of the Indenture in connection with the Transactions. No
Transferee in any Asset Transfer Transaction, or party to the
F-3
Merger, shall be: (i) required to assume any of the obligations of any
person under the Indenture or to grant, perfect or protect any Security
Interests or other lien or claim in connection therewith or otherwise;
(ii) be or be deemed to be a successor to or to succeed or be
substituted for, the Company or any Guarantor in any respect; or (iii)
be required to provide any certificate or opinion to any person. Any
Transferee of assets in any Asset Transfer Transaction and any
recipient of securities in the Warrant Distribution shall obtain those
assets and securities free and clear of any obligation, guaranty, lien,
claim or encumbrance other than, with respect to any Asset Transfer
Transaction, any obligation expressly undertaken in writing in the
documents implementing such Asset Transfer Transaction.
ARTICLE III
ADDITION TO SECTION 1013 "LIMITATION ON RESTRICTED PAYMENTS"
OF THE INDENTURE
Section 1013 of the Indenture is hereby amended by the addition of the
following as the final paragraph thereof:
The provisions of this Section 1013 notwithstanding, neither the
Warrant Distribution nor any of the other Transactions, nor any portion thereof,
shall for any purpose be deemed to constitute or involve a "Restricted Payment"
or otherwise be restricted by or subject to the terms of this Section 1013, and
the provisions of this Section 1013 set forth in the preceding paragraphs shall
have no application to the Transactions in any respect.
ARTICLE IV
ADDITION OF SECTION 1017 "LIMITATION
ON ASSET SALES" OF THE INDENTURE
Section 1017 of the Indenture is hereby amended by the addition of the
following as the final paragraph thereof:
The provisions of Section 101 and this Section 1017
notwithstanding, neither the Asset Transfer Transactions, the Merger
nor any of the other Transactions, nor any portion thereof, shall for
any purpose be deemed to constitute or involve an "Asset Sale" or
otherwise be restricted by or subject to the terms of this Section
1017, and the provisions of this Section 1017 set forth in the
preceding paragraphs shall have no application to the Asset Transfer
Transactions, the Merger or any of the other Transaction
F-4
ARTICLE V
ADDITION OF SECTION 1019 "OWNERSHIP OF
STOCK OF SUBSIDIARY" OF THE INDENTURE
Section 1019 of the Indenture is hereby amended by the addition of the
following as the final paragraph thereof:
The provisions of this Section 1019 notwithstanding, neither
the Asset Transfer Transactions, the Merger nor any of the other
Transactions, nor any portion thereof, shall for any purpose be deemed
to constitute or involve an "Asset Sale" or otherwise be restricted by
or subject to the terms of this Section 1019, and the provisions of
this Section 1019 set forth in the preceding paragraphs shall have no
application to the Asset Transfer Transactions, the Merger or any of
the other Transaction
ARTICLE VI
ADDITION OF SECTION 1020 "LIMITATION
ON TRANSACTIONS WITH AFFILIATES" OF THE INDENTURE
Section 1020 of the Indenture is hereby amended by the addition of the
following as the final paragraph thereof:
The provisions of this Section 1020 notwithstanding, neither
the Asset Transfer Transactions, the Warrant Distribution, the Exchange
and Consent nor any of the other Transactions, nor any portion thereof,
shall for any purpose be deemed to constitute or involve an "Asset
Sale" or otherwise restricted by or subject to the terms of this
Section 1020, and the provisions of this Section 1020 set forth in the
preceding paragraphs shall have no application to the Asset Transfer
Transactions, the Merger or any of the other Transaction
ARTICLE VII
ADDITION OF SECTION 1409 TO ARTICLE FOURTEENTH,
"SECURITY INTEREST" OF THE INDENTURE
Article Fourteenth of the Indenture is hereby amended by the addition
of the following:
Section 1409. Release of Liens, Termination of Security Documents.
A Section 1409 Release Notice may be delivered in anticipation
of the Asset Transfer Transactions. A Section 1409 Release Notice (the
"Release Notice") shall be in the form of a Company Order, and shall
request that the Trustee execute one or more specifically described
release instruments, documents and agreements (which release
instruments, documents and agreements shall accompany such Section 1409
Release Notice). Additionally, the Release Notice shall (i) include a
certified copy of the Board
F-5
Resolution of Holdings or any of its Subsidiaries in which such Board
of Directors approved the delivery thereof, (ii) be accompanied by an
opinion of outside counsel to the Company and the Guarantors (not by
counsel which is an employee of the Company), which counsel shall be
reasonably satisfactory to the Trustee, stating that the action
contemplated by this Section 1409 is authorized and permitted by the
Indenture as modified by this Amendment No. 1 and that all conditions
precedent herein relating to such action have been complied with and
(iii) if required by the TIA, be accompanied by certificates in
accordance with Section 314 of the TIA. Upon receipt of the Release
Notice, all of the Security Interests and other Liens created by the
Security Documents or the Indenture shall, without any further act or
deed, be and be deemed to be released and terminated and all of the
Security Documents shall be terminated and shall be of no further force
or effect and in order to further evidence the foregoing, the Trustee,
at Holdings' expense, shall execute and deliver, within one Business
Day from the receipt of such Release Notice, any instruments, documents
and agreements specified by Holdings or any of its Subsidiaries to
release all or any part of the Collateral from the Security Interests
or any other Liens created by the Security Documents or the Indenture
including, without limitation, all instruments, documents and
agreements necessary to release any and all Liens of record and to
terminate the Security Documents.
The provisions of this Section 1409 are in addition to, and not in
limitation of, any other provision of this indenture.
ARTICLE VIII
WAIVER
It is intended that the Transactions be permitted to occur without
conflicting with or constituting any breach of or default under the terms of the
Indenture or the Security Documents and that any existing breach or default be
waived. Therefore, in furtherance thereof and not in limitation of any terms,
provisions or conditions set forth in this Amendment No. 1, any term, provision
or condition set forth in the Indenture, the Security Documents or any
instrument, document or agreement related thereto that conflicts with, prevents,
is inconsistent with, prohibits or otherwise would be violated by, or in
connection with, the Transactions, and any breach or default that has occurred,
or may occur, in respect of the Transaction and any other breach or default
under the Indenture, the Security Documents or any instrument, documents or
agreement related thereto occurring on or prior to the execution of this
Amendment No. 1, and all consequences of the foregoing, are hereby waived in all
respects and any Event of Default arising from or in respect of any of the
foregoing shall be deemed to have been cured and released, and compliance with
any such terms, provisions and conditions is not required and may be omitted.
ARTICLE IX
SECOND AMENDED AND RESTATED INDENTURE
The Indenture is hereby further amended and restated in its entirety,
as set forth in Exhibit A hereto, which shall be effective upon the completion
of the Transaction following the
F-6
delivery of a certificate, to the Trustee, from an officer of Holdings stating
that the Transaction has been completed.
ARTICLE X
MISCELLANEOUS
Section 10.1 Counterparts. This Amendment No. 1 may be signed in any
number of counterparts each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Indenture.
Section 10.2 Subsidiaries. Following the execution and delivery of this
Amendment No. 1, the Indenture shall cease to have any application to any
Subsidiary of Holdings, GBHC and the Issuer (other than GBHC and the Issuer).
Section 10.3 Effect on Indenture. Following the execution and delivery
of this Amendment No. 1, the Indenture shall be deemed to include the terms and
provisions of this Amendment No. 1.
F-7
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
GB PROPERTY FUNDING CORP.
By
-------------------------------
Title:
Attest:
---------------------------
Title:
GB HOLDINGS, INC.
By
-------------------------------
Title:
Attest:
---------------------------
Title:
GREATE BAY HOTEL AND CASINO, INC.
By
-------------------------------
Title:
Attest:
---------------------------
Title:
WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION
By
-------------------------------
Title:
F-8
EXHIBIT A
================================================================================
GB HOLDINGS INC
and
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee
--------------------
Second Amended and Restated Indenture
Dated as of __________, 200_
--------------------
$___ Million
11% Notes Due 2005
================================================================================
F-9
GB Property Funding Corp.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of ________
-------------------------------------------
TIA INDENTURE
SECTION SECTION
- ------- -------------
310(a)(1).......................................................................607
(a)(2).......................................................................607
(a)(3).......................................................................N.A.
(a)(4).......................................................................N.A.
(a)(5).......................................................................607
(b)..........................................................................604, 608
(c)..........................................................................N.A.
311 ............................................................................604
312 ............................................................................701
313 ............................................................................601, 702
314(a)..........................................................................703, 1008
(b)..........................................................................N.A.
(c)(1).......................................................................102
(c)(2).......................................................................102
(c)(3).......................................................................N.A.
(d)..........................................................................N.A.
(e)..........................................................................102
(f)..........................................................................N.A.
315(a)..........................................................................602
(b)..........................................................................601
(c)..........................................................................602
(d)..........................................................................602
(e)..........................................................................N.A.
316(a) (last sentence)..........................................................101("Outstanding")
(a)(1)(A)....................................................................512
(a)(1)(B)....................................................................513
(a)(2).......................................................................N.A.
(b)..........................................................................508
(c)..........................................................................104(d)
317(a)(1).......................................................................503
(a)(2).......................................................................504
(b)..........................................................................1003
318(a)..........................................................................111
- ---------------
F-10
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
TABLE OF CONTENTS(1)
PARTIES.......................................................................1
RECITALS......................................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.....................................................16
Section 102. Compliance Certificates and Opinions............................27
Section 103. Form of Documents Delivered to Trustee..........................27
Section 104. Acts of Holders.................................................28
Section 105. Notices, etc., to Trustee, Company and Guarantors...............29
Section 106. Notice to Holders; Waiver.......................................30
Section 107. Effect of Headings and Table of Contents........................30
Section 108. Successors and Assigns..........................................30
Section 109. Separability Clause.............................................31
Section 110. Benefits of Indenture...........................................31
Section 111. Governing Law...................................................31
Section 112. Legal Holidays..................................................31
Section 113. Casino Control Act..............................................31
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.................................................32
Section 202. Form of Face of Notes...........................................32
Section 203. Form of Reverse of Notes........................................33
Section 204. Form of Trustee's Certificate of Authentication.................36
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.................................................37
Section 302. Denominations...................................................38
Section 303. Execution, Authentication, Delivery and Dating..................38
Section 304. Temporary Securities............................................39
Section 305. Registration, Registration of Transfer and Exchange.............39
Section 306. Mutilated, Destroyed, Lost and Stolen Securities................40
- -----------------
(1) This table of contents shall not, for any purpose, be deemed to be a
part of this Indenture.
F-11
Section 307. Payment of Interest; Interest Rights Preserved..................41
Section 308. Persons Deemed Owners...........................................42
Section 309. Cancellation....................................................42
Section 310. Computation of Interest.........................................43
Section 311. Maximum Interest Rate...........................................43
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture.........................43
Section 402. Application of Trust Money......................................44
ARTICLE FIVE
REMEDIES
Section 501. Events of Default...............................................45
Section 502. Acceleration of Maturity; Rescission and Annulment..............46
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.47
Section 504. Trustee May File Proofs of Claim................................48
Section 505. Trustee May Enforce Claims Without Possession of Securities.....48
Section 506. Application of Money Collected..................................49
Section 507. Limitation on Suits.............................................49
Section 508. Unconditional Right of Holders to Receive Principal Premium
and Interest....................................................50
Section 509. Restoration of Rights and Remedies..............................50
Section 510. Rights and Remedies Cumulative..................................50
Section 511. Delay or Omission Not Waiver....................................50
Section 512. Control by Holders..............................................50
Section 513. Waiver of Defaults and Compliance...............................51
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults..............................................51
Section 602. Certain Rights of Trustee.......................................52
Section 603. Trustee Not Responsible for Recitals or Issuance of Securities..53
Section 604. May Hold Securities.............................................53
Section 605. Money Held in Trust.............................................54
Section 606. Compensation and Reimbursement..................................54
Section 607. Corporate Trustee Required: Eligibility.........................54
Section 608. Resignation and Removal; Appointment of Successor...............55
Section 609. Acceptance of Appointment by Successor..........................56
Section 610. Merger, Conversion, Consolidation or Succession to Business.....57
F-12
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTORS
Section 701. Disclosure of Names and Addresses of Holders....................57
Section 702. Reports by Trustee..............................................57
Section 703. Reports by Company..............................................58
ARTICLE EIGHT
CONSOLIDATION AND MERGER
Section 801. Company May Consolidate.........................................60
Section 802. Successor Substituted...........................................60
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Amendments Without Consent of
Holders.........................................................61
Section 902. Supplemental Indentures and Amendments with Consent of Holders..61
Section 903. Execution of Supplemental Indentures and Amendments.............62
Section 904. Effect of Supplemental Indentures...............................62
Section 905. Conformity with Trust Indenture Act.............................63
Section 906. Reference in Securities to Supplemental Indentures..............63
Section 907. Notice of Supplemental Indentures and Amendments................63
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium, if any, and Interest............63
Section 1002. Maintenance of Office or Agency................................63
Section 1003. Money for Security Payments to Be Held in Trust................64
Section 1004. Corporate Existence............................................65
Section 1005. Payment of Taxes and Other Claims..............................65
Section 1006. Maintenance of Properties......................................66
Section 1007. [Intentionally Omitted]........................................66
Section 1008. Statement by Officers as to Compliance.........................66
Section 1009. Statement by Officers of Certain Defaults......................66
Section 1010. Purchase of Securities upon Change in Control.
[Intentionally Omitted]........................................66
Section 1011. [Intentionally Omitted.].......................................66
Section 1012. [Intentionally Omitted.].......................................66
Section 1013. Limitation on Restricted Payments..............................66
Section 1014. [Intentionally Omitted.].......................................66
Section 1015. [Intentionally Omitted.].......................................67
Section 1016. [Intentionally Omitted.].......................................67
F-13
Section 1017. Limitation on Asset Sales......................................67
Section 1018. [Intentionally Omitted]........................................67
Section 1019. [Intentionally Omitted]........................................67
Section 1020. [Intentionally Omitted]........................................67
Section 1021. [Intentionally Omitted]........................................67
Section 1022. [Intentionally Omitted]........................................67
Section 1023. [Intentionally Omitted]........................................67
Section 1024. [Intentionally Omitted]........................................67
Section 1025. [Intentionally Omitted]........................................68
Section 1026. [Intentionally Omitted]........................................68
Section 1027. [Intentionally Omitted]........................................68
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Optional Redemption............................................68
Section 1102. Applicability of Article.......................................68
Section 1103. Election to Redeem; Notice to Trustee..........................68
Section 1104. Selection by Trustee of Securities to Be Redeemed..............68
Section 1105. Notice of Redemption...........................................69
Section 1106. Deposit of Redemption Price....................................70
Section 1107. Securities Payable on Redemption Date..........................70
Section 1108. Securities Redeemed in Part....................................70
Section 1109. Redemption Pursuant to Gaming Laws.............................70
ARTICLE TWELVE
INTENTIONALLY OMITTED
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
Section 1301. Company's Option to Effect Defeasance or Covenant Defeasance...71
Section 1302. Defeasance and Discharge.......................................72
Section 1303. Covenant Defeasance............................................72
Section 1304. Conditions to Defeasance or Covenant Defeasance................72
Section 1305. Deposited Money and U.S. Government Obligations To Be Held
in Trust; Other Miscellaneous Provisions.......................74
Section 1306. Reinstatement..................................................75
F-14
ARTICLE FOURTEEN
INTENTIONALLY OMITTED
ARTICLE FIFTEEN
MISCELLANEOUS
Section 1501. Counterparts...................................................75
ARTICLE XI Exhibit A
TESTIMONIUM..................................................................
SIGNATURE AND SEALS..........................................................
F-15
SECOND AMENDED AND RESTATED INDENTURE, dated as of _____, 200_
among GB Holdings, Inc. (herein called the "Company"), successor by merger (the
"Merger") to GB Property Funding Corp. (herein called "Funding"), and Greate Bay
Hotel and Casino, Inc. (herein called "GBHC", and, together with Funding, herein
called the "Merged Companies"), which is a corporation duly organized and
existing, under the laws of the State of Delaware, and having its principal
office c/o Sands Hotel and Casino at Indiana Avenue & Brighton Park, Atlantic
City, New Jersey 08401, and Wells Fargo Bank Minnesota, National Association,
Trustee (herein called the "Trustee").
Company, the Merged Companies and the Trustee were parties to
an Amended and Restated Indenture dated as of October 12, 2001 (the "First
Amended and Restated Indenture") which was further amended by Amendment No. 1
thereto ("Amendment No. 1"). Funding authorized and issued its 11% Notes Due
2005 (herein called "Notes" or the "Securities"), under an indenture dated as of
September 29, 2000 (the "Original Indenture") of substantially the tenor and
amount set forth in the Original Indenture in the original principal amount of
$110 million. As a result of an exchange transaction completed on or about the
date of this indenture, the remaining outstanding principal amount of the Notes
is $_____. To provide therefore, the Company has duly authorized the execution
and delivery of the Original Indenture, as amended and restated by the Amended
and Restated Indenture, Amendment No. 1 to the First Amended and Restated
Indenture and this Second Amended and Restated Indenture (this "Indenture").
Each of GBHC and the Company were guarantors of the
Securities. By virtue of the Merger of GBHC and Funding into the Company, the
Company has succeeded to all of the obligations of GBHC and Funding in respect
of the Securities and has become the obligor thereof. Any reference herein or in
any of the Securities to the Company, GBHC, Holdings "Guarantors" or any
guarantor or issuer of the Notes shall, for all purposes, be deemed to refer
only to the Company.
This Indenture is subject to the provisions of the Trust
Indenture Act of 1939, as amended, that are required to be part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
-----------
F-16
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under
the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted at the date of
such computation;
(d) [intentionally omitted]; and
(e) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" of any Person means any other Person that,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such Person and with respect to any natural
Person, any other Person having a relationship by blood, marriage or adoption,
not more remote than first cousins with such natural Person. For the purposes of
this definition, "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of Voting Stock or other equity interests, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Amortization Expense" means, for any Person for any period,
the amount of the amortization expense (including, without limitation, the
write-down of non-current assets, including CRDA Investments) that is reflected
on the financial statements of such Person and its Subsidiaries consolidated in
such financial statements for such period in accordance with GAAP.
"Asset Sale" means, as applied to any Person, any direct or
indirect sale, conveyance, transfer, lease or other disposition (other than a
Sale-Leaseback Transaction) by such Person or any Subsidiary of such Person to
any Person other than such Person or a wholly owned Subsidiary of such Person,
in one transaction or a series of related transactions, of any Capital Stock of
any Subsidiary of such Person or other similar equity interest of such
Subsidiary
F-17
or any other property or asset of such Person or any Subsidiary of such Person
(provided that the term "Asset Sale" shall not include (a) sales, conveyances,
transfers, leases or other dispositions in the ordinary course of business, (b)
all other dispositions pursuant to which such Person receives, directly or
indirectly, Net Cash Proceeds or fair market value of less than or equal to
$5,000,000 in the aggregate in any twelve month period and (c) sales,
conveyances, transfers, leases or other dispositions of CRDA Investments.
"Assets" means, as applied to any Person, any tangible or
intangible assets, or rights or real or personal properties of such Person or
any of its Subsidiaries including capital stock of Subsidiaries.
"Board of Directors" means either the board of directors of a
Person or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of a Person to have been duly adopted by
the Board of Directors of such Person and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The City of New
York or the State of New Jersey are authorized or obligated by law or executive
order to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of, such Person's capital stock,
whether outstanding on the Issue Date or issued after such date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.
"Capitalized Lease Obligation" means any obligation to pay
rent or other amounts under a lease of (or other agreement conveying the right
to use) any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP, and, for
the purpose hereof, the amount of such obligation at any date of determination
shall be the capitalized amount thereof at such date, determined in accordance
with GAAP.
"Cash Equivalents" means any of the following, to the extent
owned by Holdings or any of its Subsidiaries free and clear of all Liens (other
than Liens in favor of the Trustee or the Holders) and having a maturity of not
greater than 270 days from the date of acquisition: (a) any evidence of
Indebtedness issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof): (b) insured certificates of deposit or acceptances of any commercial
bank that is a member of the Federal Reserve System, that issues (or the parent
of which issues) commercial paper rated as described in clause (c) below and
that has combined capital and surplus and undivided profits of not less than
$100,000,000;
F-18
(c) commercial paper issued by a corporation (except an Affiliate of Holdings)
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 (or the then equivalent grade) by Standard &
Poor's Corporation or at least Prime-1 (or the then equivalent grade) by Moody's
Investors Service, Inc.; and (d) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the United States government or issued by any agency thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); provided that the terms of such agreements comply
with the guidelines set forth in the Federal Financial Agreements of Depository
Institutions with Securities Dealers and Others, as adopted by the Comptroller
of the Currency.
"Casino Control Act" means the New Jersey Casino Control Act,
N.J. Stat. Ann. 5:12-1 et seq. (New Jersey Public Law 1977, C.110), and the
regulations promulgated thereunder, N.J.A.C. 19:40-1.1 et seq., as from time to
time amended, or any successor provision of law.
"Casino Control Commission" means the New Jersey Casino
Control Commission as established by Section 50 of the Casino Control Act or any
successor agency appointed pursuant to the Casino Control Act.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this Indenture such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations and other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the Issue Date, and includes, without limitation,
all series and classes of such common stock.
"Company" means GB Holdings, Inc., until a successor Person
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman, its President, any
Vice President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee, at which at any particular time its corporate trust
business shall be administered, which office at the date of execution of this
Indenture is located at 6th and Marquette, MAC N9303-120, Minneapolis, MN 55479,
except that with respect to presentation of Securities for payment or for
registration of transfer or exchange, such term shall mean the office or agency
of the Trustee at which, at any particular time, its corporate agency business
shall be conducted.
F-19
"Corporation" includes corporations, associations, companies
and business trusts.
"CRDA Investments" means Investments in securities issued by,
and monies deposited with, the Casino Reinvestment Development Authority of the
State of New Jersey.
"Default" means any Event of Default, or an event that would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
"Defaulted Interest" has the meaning specified in Section 307.
"Disqualified Holders" shall have the meaning provided in
Section 1109.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock or other similar ownership or profit interest that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
exchangeable for Indebtedness, or is redeemable at the option of the holder
thereof, in whole or in part, on or before the Maturity Date of the Securities.
"Division of Gaming Enforcement" means the Division of Gaming
Enforcement of the New Jersey Department of Law and Public Safety as established
by Section 55 of the Casino Control Act or any successor division or agency.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchanged Amount" means the principal amount of Securities
exchanged in the Exchange Offer.
"Exchange Offer" means that certain offer for the exchange of
Notes set forth in a prospectus of Atlantic Coast Entertainment Holdings, Inc.
dated ___________, 200__.
"Fair Market Value" or "fair value" means either, (i) with
respect to any asset or 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 (the "Arm's Length Value") as determined by the Board of
Directors of the Company acting in good faith and evidenced by a Board
Resolution delivered to the Trustee or (ii) with respect to any asset or
property, any value within a range of values determined to reflect the Arm's
Length Value by an investment banking firm retained by the Company or the Board.
"Federal Bankruptcy Code" means the 1978 Bankruptcy Act of
Title 11 of the United States Code, as amended from time to time.
F-20
"FF&E Financing" means Indebtedness, the proceeds of which
will be used solely to finance the acquisition or lease of furniture, fixtures
or equipment ("FF&E") used by the Person incurring such Indebtedness in the
ordinary course in the operation of a Permitted Line of Business and secured by
a Lien on such FF&E.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
as of the Issue Date.
"Gaming Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States federal government or foreign government, any state, province
or any city or other political subdivision or otherwise and whether now or
hereafter in existence, or any officer or official thereof with authority to
regulate any gaming operation (or proposed gaming operation) owned, managed, or
operated by Holdings or any of its Subsidiaries.
"Gaming Laws" means each gaming law of any applicable Gaming
Authority as amended from time to time, and the regulations promulgated and
rulings issued thereunder applicable to Holdings or any of its Subsidiaries or
shareholders.
"Holder" means a Person in whose name a Security is registered
in the Security Register.
"incur" means to directly or indirectly create, assume, suffer
to exist, guarantee in any manner, or in any manner become liable for the
payment of.
"Indebtedness" of any Person means (a) any liability,
contingent or otherwise, of such Person (whether or not the recourse of the
lender is to the whole of the assets of such Person, or only to a portion
thereof), (i) for borrowed money (ii) evidenced by a note, bond, debenture or
similar instrument, letters of credit, acceptances or other similar facilities
(other than a trade payable or a current liability incurred in the ordinary
course of business) or (iii) for the payment of money relating to a Capitalized
Lease Obligation or other obligation relating to the deferred purchase price of
property or services (including a purchase money obligation); (b) any liability
of others of the kind described in the preceding clause (a) which such Person
has guaranteed including, without limitation, (x) to pay or purchase such
liability, (y) to supply funds to or in any other manner invest in the debtor
(including an agreement to pay for property or services irrespective of whether
such property is received or such services are rendered and (z) to purchase,
sell or lease (as lessee or lessor) property or to purchase or sell services,
primarily for the purpose of enabling a debtor to make a payment of such
Indebtedness or to assure the holder of such Indebtedness against loss; (c) any
obligation secured by a Lien to which the property or assets of such Person are
subject, whether or not the obligations secured thereby shall have been assumed
by or shall otherwise be such Person's legal liability; (d) all obligations of
such Person to purchase, redeem, retire, defease or otherwise make any payment
in respect of any Capital Stock of or other ownership or profit interest in such
Person or any of its Affiliates or any
F-21
warrants, rights or options to acquire such Capital Stock, valued, in the case
of Disqualified Stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends; (e) all Interest and
Currency Rate Protection Obligations; and (f) any and all deferrals, renewals,
extensions and refundings of any liability of the kind described in any of the
preceding clauses.
"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented, changed, modified or amended (by
any addition to or elimination of, the provisions hereof, or otherwise) by one
or more indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
"Independent", when used with respect to any Person, means
such other Person who (a) does not have any material financial interest in the
Company or in any Affiliate of the Company and (b) is not an officer, employee,
promoter, underwriter, trustee, partner or person performing similar functions
for the Company or a spouse, family member or other relative of any such Person;
provided, that with respect to any director of any corporation, such director
shall also be deemed to be "Independent" if such director meets the requirements
for independence established by any "national securities exchange" (as
contemplated in the Securities Exchange Act of 1934) for audit committee
membership. Whenever it is provided in this Indenture that any Independent
Person's opinion or certificate shall be furnished to the Trustee, such Person
shall be appointed by the Company.
"Interest and Currency Rate Protection Obligations" means the
obligations of any Person pursuant to any interest rate swap, cap or collar
agreement, interest rate future or option contract, currency swap agreement,
currency future or option contract and other similar agreement designed to hedge
against fluctuations in interest rates or foreign exchange rates.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Investment" in any Person means any direct or indirect loan,
advance, guarantee or other extension of credit or capital contribution to
(including, without limitation, transfers of cash or other property to others or
payments for property or services for the account or use of others (excluding
unbilled or uncollected receivables), or otherwise), or purchase or acquisition
of Capital Stock, warrants, rights, options, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person or
Indebtedness of any other Person secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.
"Issue Date" means September 29, 2000.
"Lien" means any mortgage, lien (statutory or other), pledge,
security interest, encumbrance, hypothecation, assignment for security, or other
security agreement of any kind or
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nature whatsoever. For purposes of this Indenture, a Person shall be deemed to
own subject to a Lien any property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, or other
title retention agreement relating to such Person.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, notice of redemption or otherwise.
"Maturity Date", when used with respect to any Security, means
the date specified in such Security as the fixed date on which the final
installment of principal of such Security is due and payable.
"Net Cash Proceeds" means, with respect to any Asset Sale the
proceeds thereof in the form of cash or Cash Equivalents received by the Company
(whether as initial consideration, through the payment or disposition of
deferred compensation or the release of reserves), after deducting therefrom
(without duplication): (a) reasonable and customary brokerage commissions,
underwriting fees and discounts, legal fees, finders fees and other similar fees
and expenses incurred in connection with such Asset Sale ; (b) provisions for
all taxes payable as a result of such Asset Sale ; (c) payments made to retire
Indebtedness (other than payments on the Securities) secured by the assets
subject to such Asset Sale to the extent required pursuant to the terms of such
Indebtedness; and (d) appropriate amounts to be provided by the Company as a
reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale and retained by the Company after such Asset Sale , including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale , in each case to
the extent, but only to the extent, that the amounts so deducted are, at or
around the time of receipt of such cash or Cash Equivalents, actually paid to a
Person that is not an Affiliate of the Company or, in the case of reserves, are
actually established and, in each case, are properly attributable to such Asset
Sale .
"Net Income" means, with respect to any Person for any period,
the net income (or loss) of such Person determined in accordance with GAAP.
"Officers' Certificate" for any Person means a certificate
signed by the Chairman, the President, Executive Vice President or a Vice
President, and by the Chief Financial Officer or the Secretary of such Person,
and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel for
the Company or any of the Guarantors or any of their respective Affiliates,
including an employee of any such Person, or any other counsel reasonably
acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
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(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such Securities;
provided that, if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(iii) Securities, except to the extent provided in Sections
1302 and 1303, with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Article Thirteen;
and
(iv) Securities in respect of which, pursuant to Section 306,
other Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there
shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands the
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder or taken any other
action, Securities owned by Holdings or its Subsidiaries shall be disregarded
and deemed not to be Outstanding (but the Securities of any other Affiliates
shall be deemed for all such purposes to be Outstanding). In determining whether
the Trustee shall be protected in making such calculation or in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Securities owned by Holdings or its Subsidiaries which the Trustee knows to be
so owned shall be so disregarded. Securities owned by Holdings or its
Subsidiaries which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company, a Guarantor or a Subsidiary of Holdings.
"Paying Agent" means any Person (including the Company acting
as Paying Agent) authorized by the Company to pay the principal of (and premium,
if any, on) or interest on any Securities on behalf of the Company.
"Permitted Investment" means the direct or indirect
acquisition, repair or restoration of property or other Assets (including,
without limitation, Securities of any person possessing any such Asset or with
rights to, any Assets).
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.
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"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Security.
"Preferred Stock", as applied to the Capital Stock of any
Person, means Capital Stock of such Person of any class or classes (however
designated) that ranks prior, as to the payment of dividends on or to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Redemption Date", when used with respect to any Security to
be redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means 100% of the principal amount of such Security, together with
accrued, unpaid interest.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the September 14 or March 14 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above-designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Payment" means either of the following: (a) the
declaration or payment of any dividend or any other distribution on Common Stock
of the Company or any payment made to the direct or indirect holders (in their
capacities as such) of Common Stock of the Company in respect of that stock
(other than dividends or distributions payable solely in Capital Stock (other
than Disqualified Stock) or (b) the purchase, defeasance, redemption or other
acquisition or retirement for value of any Common Stock of the Company.
"Sale-Leaseback Transaction" means any arrangement with any
Person providing for the leasing by Holdings or any Subsidiary of any real or
tangible personal property, which property has been or is to be sold or
transferred by the Company to such Person or its Affiliates in contemplation of
such leasing.
"Sands" means the Sands Hotel and Casino located in Atlantic
City, New Jersey.
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"Securities" has the meaning stated in the first recital of
this Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or
any installment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal of such
Security or such installment of principal or interest 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).
"Subsidiary" of any Person means any corporation, partnership,
joint venture, trust or estate of which (or in which) more than 50% of (a) the
issued and outstanding Capital Stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership or joint venture or
(c) the beneficial interest in such trust or estate, is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person's other Subsidiaries.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939, as amended from time to time.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"United States Government Obligations" means securities which
are (i) direct obligations of the United States of America for the payment of
which its full faith and credit is pledged or (ii) obligations of a Person, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only as long as no senior class of securities has such voting power by reason of
any contingency.
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SECTION 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance with which constitutes a condition precedent) relating to the
proposed action have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008) shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
---------------------------------------
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
F-27
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders.
----------------
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture or otherwise
to be given or taken by Holders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such
Holders in person or by agents duly appointed in writing; and, except
as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Company.
Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and conclusive in favor of
the Trustee and the Company, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness
of such execution or by a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds, certifying
that the individual signing such instrument or writing acknowledged to
him the execution thereof. Where such execution is by a signer acting
in a capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of authority. The fact
and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held
by any Person, and the date of holding the same, shall be proved by the
Security Register.
(d) If the Company shall solicit from the Holders of
Securities any request, demand, authorization, direction, notice,
consent, waiver or other Act, the Company may, at its option, by or
pursuant to Board Resolution, fix in advance a record date for the
determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not earlier
than the date 30 days prior to the first solicitation of Holders
generally in connection therewith and not later than the date such
solicitation is completed. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or
other Act may be
F-28
given before or after such record date, but only the Holders of record
at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the
requisite proportion of Outstanding Securities have authorized or
agreed or consented to such request, demand, authorization, direction,
notice, consent, waiver or other Act, and for that purpose the
Outstanding Securities shall be computed as of such record date;
provided that no such authorization, agreement or consent by the
Holders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later
than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind
every future Holder of the same Security and the Holder of every
Security issued upon the registration of transfer thereof or in
exchange therefore or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon
such Security.
(f) For the purpose of the Company complying with any
requirement of the Casino Control Commission, or the Division of Gaming
Enforcement or of the Casino Control Act, every holder, intermediary
holder, intermediary beneficial holder and beneficial holder of a
Security shall be deemed to authorize any Holder and any other holder,
intermediary holder, intermediary beneficial holder and beneficial
holder of a Security, upon written request of an Officer of the
Company, or the Trustee expressing reliance on this Section and
enclosing a copy of this Section, to release, and any such holder,
intermediary holder, intermediary beneficial holder and beneficial
holder shall be required to release, to the Company, or the Trustee, as
the case may be, the name, address, telephone number, principal contact
person, and amount of such holdings, intermediary holdings,
intermediary beneficial holdings and beneficial holdings of Securities
of each such holder, intermediary holder, intermediary beneficial
holder and beneficial holder of a Security.
SECTION 105. Notices, etc., to Trustee, Company and
--------------------------------------
Guarantors.
-----------
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this Indenture, with a copy
to: Sands Hotel and
F-29
Casino, Indiana Avenue and Brighton Park, Atlantic City, N.J. 08401, or
at any other address previously furnished in writing to the Trustee by
the Company.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice of any event to
Holders, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice. Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
Any notices hereunder that are required to be given to the
Casino Control Commission shall be addressed to: Document Control Unit, Casino
Control Commission, Tennessee Avenue and the Boardwalk, Arcade Building,
Atlantic City, New Jersey 08401, Attention: Chief of Administrative Operations.
Any notices hereunder that are required to be given to the Division of Gaming
Enforcement shall be addressed to: Division of Gaming Enforcement, 140 East
Front Street, CN-047, Trenton, New Jersey 08625, Attention: Deputy Director for
the Division of Gaming Enforcement.
SECTION 107. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture and in the
Security Documents by the Company shall bind its successors and assigns, whether
so expressed or not.
F-30
SECTION 109. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 110. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto, any Paying
Agent, any Securities Registrar and their successors hereunder, and the Holders,
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
SECTION 111. Governing Law.
-------------
This Indenture and the Securities shall be governed by and
construed in accordance with the law of the State of New York. This Indenture is
subject to the provisions of the Trust Indenture Act of 1939, as amended, that
are required to be part of this Indenture and shall, to the extent applicable,
be governed by such provisions.
SECTION 112. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date,
sinking fund payment date or Stated Maturity or Maturity of any Security shall
not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Securities) payment of interest or principal (and premium,
if any) need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Redemption Date or sinking fund payment date, or at the Stated Maturity or
Maturity; provided that no interest shall accrue on such payment for the period
from and after such Interest Payment Date, Redemption Date, sinking fund payment
date, Stated Maturity or Maturity, as the case may be.
SECTION 113. Casino Control Act.
------------------
Notwithstanding the provisions of Section 111 hereof, each of
the provisions of this Indenture is subject to and shall be enforced in
compliance with the provisions of the Casino Control Act, to the extent
applicable, and the regulations promulgated thereunder, unless such provisions
are in conflict with the TIA, in which case the TIA shall control. The
Securities are to be held subject to the condition that if a holder thereof is
found to be disqualified by the Casino Control Commission pursuant to the
provisions of the Casino Control Act, such holder shall dispose of the
Securities in accordance with the provisions of Section 1109 hereof. The Company
shall have the right to repurchase the Securities at the lowest of (i) the
principal amount thereof, (ii) the amount which the Disqualified Holder or
beneficial owner paid for the Securities, together with accrued interest up to
the date of the determination of disqualification, or (iii) the market value of
such Securities.
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ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
---------------
The Securities and the Trustee's certificate of authentication
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any portion of the text of
any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
The definitive Securities shall be printed, lithographed or
engraved on steel-engraved borders or may be produced in any other manner, all
as determined by the officers of the Company executing such Securities, as
evidenced by their execution of such Securities.
SECTION 202. Form of Face of Notes. From and after the
effective date of the merger, certificates to be issued to evidence the Security
shall be as follows:
GB HOLDINGS INC.
From and after the effective date of the Merger, certificates
to be issued to evidence the Security shall be as follows:
11% Note Due 2005
No. _____________ $_________
GB Holdings Inc., a Delaware corporation (herein called the
"Holdings", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
__________ or registered assigns, the principal sum of __________ U.S. Dollars
on September 29, 2005 at the office or agency of the Company referred to below,
and to pay interest thereon on March 29, 2001 and thereafter, on September 29
and March 29 in each year, from September 29, 2000, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, at
the rate of 11% per annum, until the principal hereof is paid or duly provided
for. Notwithstanding anything contained herein, the rate of interest on the
Securities shall not exceed the highest rate permitted by law. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the
September 14 or March 14 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on
such Regular
F-32
Record Date, and such defaulted interest may be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the close
of business on a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture. Payment of the principal of (and premium, if any,
on) and interest on this Security will be made at the office or agency of the
Company maintained for that purpose in The City of New York, or at such other
office or agency of the Company as may be maintained for such purpose, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company (i) by check mailed
to the address of the Person entitled thereto as such address shall appear on
the Security Register or (ii) by transfer to an account maintained by the payee
located in the United States.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place. Unless the
certificate of authentication hereon has been duly executed by the Trustee
referred to on the reverse hereof by manual signature, this Security shall not
be entitled to any benefit under the Indenture, or be valid or obligatory for
any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
Dated: _____________ GB HOLDINGS INC.
By
--------------------
Attest:
- -----------------------------
Authorized Signature
SECTION 203. Form of Reverse of Notes
------------------------
This Security is one of a duly authorized issue of securities
of the Company designated as its 11% Notes Due 2005 (herein called the
"Securities"), limited (except as otherwise provided in the Indenture referred
to below) in aggregate principal amount to $110 million, which may be issued
under an indenture (herein called the "Indenture") dated as of September 29,
2000 between the GB Property Funding Corp., GB Holdings, Inc. and Greate Bay
Hotel and Casino, Inc. and Wells Fargo Bank Minnesota, National Association,
trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the
F-33
respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
The Securities are subject to redemption upon not less than 30
nor more than 60 days' notice, at any time after January 1, 2001, as a whole or
in part, at the election of the Company, at a Redemption Price equal to 100% of
the principal amount, together in the case of any such redemption with accrued,
unpaid interest, if any, to the Redemption Date, all as provided in the
Indenture.
Each of the provisions of this Security is subject to and
shall be enforced in compliance with the provisions of the Casino Control Act
and the regulations promulgated thereunder, to the extent applicable.
Each Holder by accepting a Security agrees that all Holders,
whether initial holders or subsequent transferees, shall be subject to the
qualification provisions of the Casino Control Act. As set forth more fully in
the Indenture, in the event that the Casino Control Commission determines that a
Holder is not qualified under the Casino Control Act, the Company shall have the
absolute right and obligation to purchase from such Holder (the "Disqualified
Holder") the Securities the Disqualified Holder may then possess, no later than
forty-five days after the date that the Company serves notice on any
Disqualified Holder of such determination. Immediately upon such determination,
the Disqualified Holder shall have (i) no further right to exercise, directly or
through any trustee or nominee, any right conferred by its Securities or (ii) no
further right to receive any dividends, interest, or other distribution or
payment with respect to any such Securities. In the event a Disqualified Holder
fails to so sell its Securities within 30 days after the determination by the
Casino Control Commission, the Company shall purchase such Securities within 15
days after the end of such 30 day period at the lowest of (i) the principal
amount thereof, (ii) the amount which the Disqualified Holder paid for the
Securities, together with accrued interest up to the date of the determination
of disqualification or (iii) the market value of such Securities.
In the case of any redemption of Securities, interest
installments whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Date
referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the Redemption Date.
In the event of redemption of this Security in part only, a
new Security or Securities for the unredeemed portion hereof shall be issued in
the name of the Holder hereof upon the cancellation hereof.
F-34
If an Event of Default shall occur and be continuing, the
principal of all the Securities may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of (a) the entire indebtedness of the Company on this Security and (b) certain
restrictive covenants and the related Defaults and Events of Default, upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Security.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such amendment,
modification, consent or waiver by or on behalf of the Holder of this Security,
or otherwise in accordance with the terms of the Indenture, shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof whether or not notation thereof is made upon this
Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the Company
which is absolute and unconditional, to pay the principal of (and premium, if
any, on) and interest on this Security at the times, place, and rate, and in the
coin or currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registerable on
the Security Register of the Company, upon surrender of this Security for
registration of transfer at the office or agency of the Company maintained for
such purpose in The City of New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amounts will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the Holder
surrendering the same.
F-35
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to the time of due presentment of this Security for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Security is registered as
the owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any agent shall be affected by notice to
the contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
Each Guarantor (which term includes any successor Person under
the Indenture) has unconditionally guaranteed, to the extent set forth in the
Indenture and subject to the provisions in the Indenture, (a) the due and
punctual payment of the principal of and interest on the Securities, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on overdue principal, and, to the extent permitted by law, interest, and the due
and punctual performance of all other obligations of the Company to the Holders
or the Trustee all in accordance with the terms set forth in the Indenture and
(b) in case of any extension of time of payment or renewal of any Securities or
any of such other obligations, that the same will be promptly paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at Stated Maturity, by acceleration or otherwise.
SECTION 204. Form of Trustee's Certificate of
--------------------------------
Authentication.
---------------
The Trustee's certificate of authentication shall be in
substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the
within-mentioned Indenture.
Wells Fargo Bank Minnesota, National
Association as Trustee
By:
----------------------------------
Authorized Officer
F-36
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
---------------
(a) The aggregate principal amount of securities which may be
authenticated and delivered under this Indenture is limited to $110 million
(reduced by the Exchanged Amount), except for securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other securities.
(b) The Notes shall be known and designated as the "11% Notes Due 2005"
of the Company. Their Stated Maturity shall be September 29, 2005, and they
shall bear interest at the rate of 11% per annum from September 29, 2000, or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, payable on March 29, 2001 and semiannually thereafter on
September 29 and March 29 in each year and at said Stated Maturity, until the
principal thereof is paid or duly provided for.
(c) The principal of (and premium, if any, on) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose; provided, however, that, at
the option of the Company, interest may be paid by check mailed to addresses of
the Persons entitled thereto as such addresses shall appear on the Security
Register.
(d) The Securities shall be redeemable as provided in Article Eleven.
(e) If the Company is served with notice of the disqualification of any
Holder under Section 105(d) of the Casino Control Act by the Casino Control
Commission, such Holder will be prohibited under Section 105(e) of the Casino
Control Act from (a) receiving interest on the Securities held by such Holder,
(b) exercising, directly or through any trustee or nominee, any right conferred
on such Securities, and (c) receiving any remuneration in any form from any
Person licensed or qualified by the Casino Control Commission (including the
Company, the Guarantors and the Trustee) for services rendered or otherwise.
Notwithstanding the foregoing, the Trustee shall be entitled to exercise all
rights with respect to the Securities held by such Holder including, but not
limited to, accelerating the Securities (any monies or securities received by
the Trustee on behalf of such Holder to be held in trust for such Holder
pursuant to Section 605 hereof). If the Trustee exercises voting rights with
respect to such Securities, such votes shall be cast in the same proportion as
the votes of the other Outstanding Securities are cast on such issue. A copy of
any notice served upon the Company as described above shall be promptly
delivered by the Company to the Trustee. Any such notice to the Trustee shall be
effective against the Trustee on the second Business Day after receipt thereof
by a Responsible Officer of the Trustee.
F-37
SECTION 302. Denominations.
-------------
The Securities shall be issuable only in registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 303. Execution, Authentication, Delivery and
---------------------------------------
Dating.
------
The Securities shall be executed on behalf of the Company by
its Chairman, its President, a Vice President, or the Chief Financial Officer.
The signature of any officer on the Securities may be manual or facsimile
signatures of the present or any future such authorized officer and may be
imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein duly executed by the Trustee by manual signature of an authorized
officer, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Securities authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Securities executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange.
F-38
If Securities shall at any time be authenticated and delivered in any new name
of a successor Person pursuant to this Section in exchange or substitution for
or upon registration of transfer of any Securities, such successor Person, at
the option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
SECTION 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 1002, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and
------------------------------------------
Exchange.
--------
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Security Register
shall be in written form or any other form capable of being converted into
written form within a reasonable time. At all reasonable times, the Security
Register shall be open to inspection by the Trustee. The Trustee is hereby
initially appointed as security registrar (the "Security Registrar") for the
purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at
the office or agency of the Company designated pursuant to Section 1002, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denomination or denominations of a like aggregate principal
amount and like terms.
F-39
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomination and of a like aggregate
principal amount and like terms, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer, in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the selection of Securities to be redeemed under Section
1104 and ending at the close of business on the day of such mailing of the
relevant notice of redemption, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen
-------------------------------------
Securities.
-----------
If (i) any mutilated Security is surrendered to the Trustee,
or (ii) the Company and the Trustee receive evidence to their satisfaction of
the destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon Company Order the Trustee shall authenticate and
deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
F-40
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name such Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
at the office or agency of the Company maintained for such purpose pursuant to
Section 1002; provided, however, that each installment of interest may at the
Company's option be paid by (i) mailing a check for such interest, payable to or
upon the written order of the Person entitled thereto pursuant to Section 308,
to the address of such Person as it appears in the Security Register or (ii)
transfer to an account maintained by the payee located in the United States.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the Holder on the Regular Record Date by virtue
of having been such Holder, and such defaulted interest ("Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in clause
(1) or (2) below:
(1) the Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more
F-41
than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date, and in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be given in the manner provided for in Section 106, not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so given, such Defaulted Interest shall be paid to
the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (2); or
(2) the Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
----------------------
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and premium,
if any, on) and (subject to Sections 305 and 307) interest on such Security and
for all other purposes whatsoever, whether or not such Security be overdue, and
none of the Company, the Trustee or any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 309. Cancellation.
------------
All Securities surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee (or
to any other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. If
the Company shall so acquire any of the Securities, however, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
F-42
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company.
SECTION 310. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 311. Maximum Interest Rate.
---------------------
Regardless of any provision contained herein, in the
Securities or in any of the Security Documents, the Holders shall not be
entitled to receive, collect or apply as interest (whether termed interest in
the documents or deemed to be interest by judicial determination or operation of
law) on the Securities, any amount in excess of the maximum amount allowed by
applicable law, and, if any Holder ever receives, collects or applies as
interest any such excess, the amount that would be excessive interest shall be
deemed to be a partial prepayment of principal and treated hereunder as such;
and, if the principal amount of the Securities is paid in full, any remaining
excess shall forthwith be paid to the Company. In determining whether or not the
interest paid or payable under any specific contingency exceeds the maximum
amount of interest allowed by applicable law, the Company and the Holders shall,
to the maximum extent permitted under applicable law, (i) characterize any
nonprincipal payment as an expense fee, or premium rather than interest; (ii)
exclude voluntary prepayments and the effects thereof; and (iii) amortize,
prorate, allocate and spread, in equal parts, the total amount of interest
throughout the entire contemplated term of the Securities.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall upon Company Request cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of Securities herein expressly provided for) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture and releasing all liens and
security interests in the Collateral when
(1) either
(a) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust with the
Trustee or any Paying
F-43
Agent or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(b) all such Securities not theretofore delivered
to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and interest
to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other
sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for in this Section 401 relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if money shall
have been deposited with the Trustee pursuant to subclause (b) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003, shall survive.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section
1003, all money and property deposited with the Trustee pursuant to Section 401
shall be held in trust and, at the direction of the Company, be invested prior
to Maturity in United States Government Obligations, and applied by it, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for whose
payment such money has been
F-44
deposited with the Trustee; but such money need not be segregated from other
funds except to the extent required by law. Any funds remaining following
payment of all Securities and all other obligations of the Company hereunder
shall be the property of the Company.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest on any
Security when it becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of any principal of (or
premium, if any, on) any Security at its Maturity; or
(3) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture (other than a
default in the performance, or breach, of a covenant or warranty which
is specifically dealt with elsewhere in this Section), and continuance
of such default or breach for a period of 60 days after there has been
given, by registered or certified mail, to the Company by the Trustee
or to the Company and the Trustee by the Holders of a majority in
principal amount of the Outstanding Securities, a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder, unless the
Company, is proceeding, and continues to proceed, diligently to cure
any such default; or
(4) [intentionally omitted]; or
(5) [intentionally omitted]; or
(6) [intentionally omitted]; or
(7) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition or in respect of
the Company under the Federal Bankruptcy Code or any other applicable
federal or state law, or appointing a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company or of
any substantial part of its property, or ordering the winding up or
liquidation of their respective affairs, and the continuance of any
such decree or order unstayed and in effect for a period of 90
consecutive days; or
F-45
(8) the institution by the Company of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under the Federal Bankruptcy Code or any other applicable
federal or state law or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company or of
any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due;
or
(9) [intentionally omitted]; or
(10) [intentionally omitted]; or
(11) [intentionally omitted].
SECTION 502. Acceleration of Maturity; Rescission and
----------------------------------------
Annulment.
---------
If an Event of Default (other than an Event of Default
specified in Section 501(7) or 501(8)) occurs and is continuing, then and in
every such case, the Trustee and the Holders of not less than a majority in
principal amount of the Securities Outstanding, may declare the principal amount
of all the Securities to be due and payable immediately, by a notice in writing
to the Company, and upon any such declaration such principal amount shall become
immediately due and payable. If an Event of Default specified in Section 501(7)
or 501(8) occurs and is continuing, then the principal amount of all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee and any Holder.
At any time after a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter in this Article provided, the Holders of a
majority in principal amount of the Securities Outstanding, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay,
(A) all Defaulted Interest on all Outstanding
Securities,
(B) all unpaid principal of (and premium, if
any, on) any Outstanding Securities which has become due
otherwise than by such declaration of acceleration, and
interest on such unpaid principal at the rate borne by the
Securities, and
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(C) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(2) all Events of Default, other than the non-payment of
amounts of principal of (or premium, if any, on) or interest on
Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
----------------------------------------
Enforcement by Trustee.
----------------------
The Company covenants that if
(a) default is made in the payment of any installment of
interest on any Security when such interest becomes due and payable and
such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of
(or premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any), and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in any
Security Document or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
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SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company, or the property of the
Company, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without
----------------------------------
Possession of Securities.
-------------------------
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the holders of the Securities in respect of which such
judgment has been recovered.
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SECTION 506. Application of Money Collected.
------------------------------
Any money and property collected by the Trustee pursuant to
this Article or in connection with the exercise of remedies under any Security
Document shall be applied in the following order, at the date or dates fixed by
the Trustee and, in case of the distribution of such money on account of
principal (or premium, if any) or interest, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any, on,) and interest on the Securities
in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. Limitation on Suits.
-------------------
No Holder of any Securities shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(1) the Holders of a majority in principal amount of the
Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(2) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(3) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(4) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority or more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Section 507 to affect, disturb or prejudice the rights of any other
Holders, or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the Holders.
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SECTION 508. Unconditional Right of Holders to Receive
-----------------------------------------
Principal Premium and Interest.
-------------------------------
Notwithstanding any other provision in this Indenture, the
Holder of any of the Securities shall have the right, which is absolute and
unconditional, to receive payment, as provided herein (including, if applicable,
Article Thirteen) and in the terms of each note representing such Securities of
the principal of (and premium, if any, on) and (subject to Section 307) interest
on, such Securities on the respective Stated Maturities expressed in such
Securities (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture or any Security Document and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, the Trustee
and the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or any Security Document or by law to the Trustee or to the Holders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders.
-------------------
Notwithstanding anything to the contrary set forth in Section
316(a) of the TIA (the provisions of which are hereby excluded), the Holders of
not less than a majority in principal amount of the Outstanding Securities shall
have the right to direct the time, method and
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place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee under this Indenture or
the Security Documents, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve
it in personal liability unless it has obtained appropriate indemnity.
SECTION 513. Waiver of Defaults and Compliance.
---------------------------------
Notwithstanding anything to the contrary set forth in Section
316(a) of the TIA (the provisions of which are hereby excluded) the Holders of
not less than a majority in principal amount of the Outstanding Securities may
on behalf of the Holders of all the Securities:
(1) waive any past default hereunder and its
consequences, except a default in respect of the payment of the
principal of (or premium, if any, on) or interest on any Security, and
upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured and
released, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair
any right consequent thereon; and
(2) waive future compliance with any term, provision
or condition of this Indenture or the Security Documents or any related
instruments, agreements or documents (but no such waiver shall extend
to or affect such term, provision or condition except to the extent so
expressly waived), in which event the Company may omit to comply with
any such term, provision or condition of this Indenture or any related
instrument, agreement or document.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
------------------
Within 90 days after the occurrence of any Default hereunder,
the Trustee shall transmit in the manner and to the extent provided in TIA
Section 313(c), notice of such Default hereunder known to the Trustee, unless
such Default shall have been cured or waived; provided, however, that, except in
the case of a Default in the payment of the principal of (or premium, if any,
on) or interest on any Security, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors and/or Responsible Officers of the Trustee in
good faith determines that the withholding of such
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notice is in the interest of the Holders. The Trustee shall not be deemed to
have knowledge of any Default or Event of Default hereunder unless a Responsible
Officer in its Corporate Trust Department shall have actual knowledge thereof.
SECTION 602. Certain Rights of Trustee.
-------------------------
Subject to the provisions of TIA Sections 315(a) through
315(d):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee
F-52
shall not be responsible for any misconduct or negligence on the part
of any agent or attorney appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture; and
(9) the Trustee shall not be personally liable, in case of
entry by it upon any property subject to the liens of the Security
Documents, for debts contracted or liabilities or damages incurred in
the management or operation thereof.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
The Trustee and its directors, officers, employees and
Affiliates shall cooperate with the Casino Control Commission and the Division
of Gaming Enforcement and provide such information and documentation as may from
time to time be requested by such agencies.
The Trustee may rely on, and shall be protected with respect
to any action taken or omitted to be taken in good faith in accordance with, the
direction of the Holders of not less than a majority in principal amount of
Outstanding Securities.
SECTION 603. Trustee Not Responsible for Recitals or
---------------------------------------
Issuance of Securities.
-----------------------
The recitals contained herein and in the Securities, except
for the Trustee's certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Securities and perform its obligations hereunder and that the
statements made by it in a Statement of Eligibility and Qualification of Form
T-1 supplied to the Company are true and accurate, subject to the qualifications
set forth therein. The Trustee shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 604. May Hold Securities.
-------------------
The Trustee, any Paying Agent, any Security Registrar or any
other agent of the Company or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to TIA
Sections 310(b) and 311, may otherwise deal with the
F-53
Company with the same rights it would have if it were not Trustee, Paying Agent,
Security Registrar or such other agent.
SECTION 605. Money Held in Trust.
-------------------
Except as otherwise provided herein, money held by the Trustee
in trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise provided herein or agreed
with the Company.
SECTION 606. Compensation and Reimbursement.
------------------------------
The Company agrees:
(1) to pay to the Trustee from time to time such compensation
as the Company and the Trustee shall from time to time agree for all
services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust); and
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust and under the Security
Documents, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder or thereunder.
The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the payment of principal of (and premium, if any,
on) or interest on particular Securities.
SECTION 607. Corporate Trustee Required: Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law
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or to the requirements of federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of
---------------------------------------
Successor.
---------
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
(b) Subject to the provisions of the Casino Control Act, the
Trustee may resign at any time by giving written notice thereof to the Company,
the Casino Control Commission and the Division of Gaming Enforcement. If the
instrument of acceptance by a successor Trustee required by Section 609 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) Subject to the provisions of the Casino Control Act, the
Trustee may be removed at any time by Act of the Holders of not less than a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Security for at least
six months, or
(2) the Trustee shall cease to be eligible under Section 607
and shall fail to resign after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Security for at
least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, subject to the provisions of the Casino Control Act, (i)
the Company, by a Board Resolution, may remove the Trustee, or (ii) subject to
TIA Section 315(e), any Holder who has been a bona fide Holder of a Security for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
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(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
Notwithstanding the foregoing, any successor Trustee may be appointed only with
the prior, express approval of the Casino Control Commission, in consultation
with the Division of Gaming Enforcement, provided that such successor Trustee
must first be qualified as a financial source by and cooperate with the Casino
Control Commission and the Division of Gaming Enforcement.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 106. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall take all
necessary steps to be approved by the Casino Control Commission and shall
execute, acknowledge and deliver to the Company, and to the retiring Trustee an
instrument accepting such appointment, and the successor Trustee and the Company
shall enter into a supplemental indenture evidencing the appointment of the
successor Trustee. Thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
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SECTION 610. Merger, Conversion, Consolidation or
------------------------------------
Succession to Business.
----------------------
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities; and in case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee;
and in all such cases such certificates shall have the full force which it is
anywhere in the Securities or in this Indenture provided that the certificate of
authentication of any predecessor Trustee or to authenticate Securities in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTORS
SECTION 701. Disclosure of Names and Addresses of
------------------------------------
Holders.
-------
Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with TIA Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under TIA Section
312(b).
SECTION 702. Reports by Trustee.
------------------
(a) Within 60 days after May 15 of each year commencing with
the first May 15 after the first issuance of Securities, the Trustee shall
transmit to the Holders, in the manner and to the extent provided in TIA Section
313(c), a brief report dated as of such May 15 if required by TIA Section
313(a).
The Trustee shall transmit to the Holders, within the times
hereinafter specified a brief report with respect to the following:
(1) [intentionally omitted]; and
F-57
(2) the character and amount of any advances made by it as such
since the date of the last report transmitted pursuant to the provisions of TIA
Section 313(a) (or if no such report has yet been so transmitted, since the date
of execution of the Indenture), for the reimbursement of which it claims or may
claim a Lien or charge, prior to that of the Indenture Securities, on the trust
estate or on property or funds held or collected by it as such Trustee, and
which it has not previously reported pursuant to this clause (2), if such
advances remaining unpaid at any time aggregate more than 10 per centum of the
aggregate principal amount of the Securities Outstanding at such time, such
report to be so transmitted within 90 days after such time.
To the extent required by applicable laws, rules and
regulations, a copy of each such report shall, at the time of such transmission
to the Holders, be filed with each stock exchange, if any, upon which the
Securities are listed, and also with the Commission.
(b) The Trustee shall transmit by mail to the Casino Control
Commission and the Division of Gaming Enforcement (i) an initial list of the
beneficial Holders of the Securities promptly after the issuance of the
Securities, (ii) current lists of the Holders appearing in the Security Register
on a twice-per-year basis, no later than March 1 and September 1 of each year,
and (iii) upon request by the Casino Control Commission or the Division of
Gaming Enforcement, such additional information with respect to the beneficial
Holders of the Securities as the Trustee may obtain through its good faith
efforts.
(c) The Trustee shall notify the Casino Control Commission and
the Division of Gaming Enforcement, simultaneously with any notice given to the
Holders, of any default or acceleration under the Securities, this Indenture or
any other documents, instrument, agreement, covenant, or condition related to
the issuance of the Securities, whether declared or effectuated by the Trustee
or the Holders. The Trustee shall notify the Casino Control Commission and the
Division of Gaming Enforcement on a continuing basis and in writing, of any
actions taken by the Trustee or the Holders with regard to such default,
acceleration or similar matters related thereto.
(d) The Trustee shall notify the Casino Control Commission and
the Division of Gaming Enforcement of the removal or resignation of the Trustee
promptly after such removal or resignation.
(e) The Trustee shall provide to the Casino Control
Commission and the Division of Gaming Enforcement, promptly after the execution
by the Trustee of the same, copies of any and all amendments or modifications to
this Indenture, the Securities or any other documents, instrument, agreement,
covenant or condition related to the issuance of the Securities.
SECTION 703. Reports by Company.
------------------
The Company shall, to the extent required by the TIA:
F-58
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company may
be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934; or, if the
Company is not required to file information, documents or reports
pursuant to either of said Sections, then it may, if it determines to
do so, file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission,
such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a security listed and registered on
a national securities exchange as may be prescribed from time to time
in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations;
(3) transmit by mail to all Holders, in the manner and to the
extent provided in TIA Section 313(c), within 30 days after the filing
thereof with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company, as the case may be,
pursuant to paragraphs (1) and (2) of this Section as may be required
by rules and regulations prescribed from time to time by the
Commission; and
(4) comply in all material respects with all requirements and
provisions of the Casino Control Act and notify the Trustee by mail of
all formal hearings and formal proceedings materially relating to the
Company before the Casino Control Commission relating to the plenary
casino licenses for the Company, as the same are scheduled. Such notice
shall be in writing and given at least seven days prior to the hearing
to which such notice relates, unless a shorter notice is given to the
Company in which event the Company shall notify the Trustee promptly
upon receiving such definite information as shall be contained in such
notice. The Company hereby agrees that the Trustee may, but shall have
no obligation to, attend such hearings and other proceedings if
permitted to do so by the Casino Control Commission.
F-59
ARTICLE EIGHT
CONSOLIDATION AND MERGER
SECTION 801. Company May Merge and Consolidate.
---------------------------------
The Company shall not consolidate with or merge with or into
any Person or group of Persons in a single transaction or through a series of
transactions, except that:
(a) The Company may consolidate with or merge with or into any
Person or group of Persons in a single transaction or through a series
of transactions if (i) the Company shall be the continuing Person, or
the resulting or surviving Person (the "surviving entity") shall be a
Person organized and existing under the laws of the United States or
any State thereof or the District of Columbia; (ii) the surviving
entity (other the Company) shall expressly assume, by a supplemental
indenture executed and delivered to the Trustee, in form and substance
reasonably satisfactory to the Trustee, all of the obligations of the
Company under the Securities, and this Indenture; and (iii) immediately
before and immediately after giving effect to such transaction, or
series of transactions (including, without limitation, any Indebtedness
incurred or anticipated to be incurred in connection with or in respect
of, such transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing;
(b) [intentionally omitted]; and
(c) the Company or such Person shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation or merger and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture, comply with this covenant and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
SECTION 802. Successor Substituted.
---------------------
Upon any consolidation of the Company with or merger of the
Company with or into any other Person in accordance with Section 801, the
successor Person formed by such consolidation or merger shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein.
F-60
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures and Amendments
---------------------------------------
Without Consent of Holders.
---------------------------
Without the consent of any Holders, the Company, when it is so
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company, contained herein and in the Securities; or
(2) to add to the covenants of the Company for the
benefit of the Holders or to surrender any right or power herein
conferred upon the Company; or
(3) to add any additional Events of Default; or
(4) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee pursuant to the
requirements of Section 609; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein or in the Security Documents, or to make any other provisions
with respect to matters or questions arising under this Indenture;
provided that such action shall not adversely affect the interests of
the Holders in any material respect; or
(6) [intentionally omitted]; or
(7) to add any guarantor; or
(8) to make any other change that does not adversely
affect the rights of any Holder; or
(9) to secure the Securities.
SECTION 902. Supplemental Indentures and Amendments with
-------------------------------------------
Consent of Holders.
------------------
Upon the request of the Company, by a Board Resolution
authorizing the execution thereof, together with the consent of the Holders of
not less than a majority in principal amount of the Outstanding Securities, by
Act of said Holders delivered to the Trustee, the Trustee shall join the Company
in an indenture or indentures supplemental hereto or
F-61
amendments to the Security Documents, for any purpose, including, without
limitation, for the purpose of adding any provisions to or changing, modifying
or amending in any manner or eliminating any of the provisions of this Indenture
or making additions to, changing, modifying, amending or eliminating in any
manner the rights of the Holders hereunder; provided, however, that no such
supplemental indenture, or addition, change, amendment or modification to, or
elimination of any provision of, shall, without the consent of the Holder of
each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the coin or currency in which
any Security or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture, or
(3) modify any of the provisions of this Section or Section
513, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected
thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture or
amendments to the Security Documents, but it shall be sufficient if such Act
shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures and
----------------------------------------
Amendments.
----------
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture and all conditions precedent herein provided for
relating to such supplemental indenture have been complied with. The Trustee
may, but shall not be obligated to, enter into any such supplemental indenture
which affects the Trustee's own rights, duties, or immunities under this
Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form
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a part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 905. Conformity with Trust Indenture Act.
------------------------------------
Every supplemental indenture executed pursuant to the Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental
---------------------------------------
Indentures.
----------
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 907. Notice of Supplemental Indentures and
-------------------------------------
Amendments.
----------
Promptly after the execution by the Company and the Trustee of
any supplemental indenture or amendment pursuant to the provisions of Section
902, the Company shall give notice thereof to the Holders of each Outstanding
Security affected, in the manner provided for in Section 106, setting forth in
general terms the substance of such supplemental indenture or amendment.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and
------------------------------------------
Interest.
--------
The Company covenants and agrees for the benefit of the
Holders that it will duly and punctually pay the principal of (and premium, if
any, on) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in The City of New York an office or
agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Corporate Trust Office of the Trustee shall be such
office or agency of the Company, unless the Company shall designate and maintain
some other office or agency for one or more of such purposes. The Company will
give prompt written notice to the Trustee of any change in the location of any
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail
F-63
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Securities may be presented or surrendered for any or all such purposes and may
from time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Security Payments to Be Held in
-----------------------------------------
Trust.
-----
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of (and premium, if any,
on) or interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due until such sums shall be paid
to such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
the Securities, it will, on or before each due date of the principal of (and
premium, if any, on), or interest on, any Securities, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of such action or
any failure so to act.
The Company will cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any on) or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
F-64
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any, on) or interest on any Security and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 1004. Corporate Existence.
-------------------
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company; provided, however, that the Company shall not be required to preserve
any such right or franchise if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and that the loss thereof is not disadvantageous in
any material respect to the Company.
SECTION 1005. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or upon the income,
profits or property of the Company and (b) all lawful claims for labor,
materials and supplies, which, if unpaid, might by law become a lien upon the
property of the Company; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
F-65
SECTION 1006. Maintenance of Properties.
-------------------------
Subject to and as permitted by the terms of this Indenture the
Company will cause all properties owned by the Company or used or held for use
in the conduct of its business to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof as in the judgment of the Company may be necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section shall prevent the Company from discontinuing the maintenance of any of
such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business and not disadvantageous in any material
respect to the Holders.
SECTION 1007. [Intentionally Omitted.[.
----------------------
SECTION 1008. Statement by Officer as to Compliance.
-------------------------------------
The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year, a brief certificate, which may be in the form
attached as Exhibit A, from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this Indenture. For
purposes of this Section 1008, such compliance shall be determined without
regard to any period of grace or requirement of notice under this Indenture.
SECTION 1009. Statement by Officers of Certain Defaults.
-----------------------------------------
When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company gives any notice or takes any other action with
respect to a claimed default (other than with respect to Indebtedness in the
principal amount of less than $5 million), the Company shall deliver to the
Trustee by registered or certified mail or by telegram, telex or facsimile
transmission an Officers' Certificate specifying such event, notice or other
action within five Business Days of its occurrence.
SECTION 1010. [Intentionally Omitted]
SECTION 1011. [Intentionally Omitted.] .
SECTION 1012. [Intentionally Omitted.] .
SECTION 1013. Limitation on Restricted Payments .
The Company shall not make any Restricted Payment if an Event
of Default shall have occurred and be continuing at the time of such Restricted
Payment.
SECTION 1014. [Intentionally Omitted.] .
F-66
SECTION 1015. [Intentionally Omitted.] .
SECTION 1016. [Intentionally Omitted.] .
SECTION 1017. Limitation on Asset Sales.
--------------------------
Subject to and as permitted by the terms of this Indenture the
Company shall not make any Asset Sale of its properties unless (a) the
consideration received in the Asset Sale is equal to Fair Market Value; (b) the
proceeds therefrom consist of at least 85% cash and/or Cash Equivalents; and (c)
unless otherwise expressly provided herein, the Net Cash Proceeds of such Asset
Sale shall be: (i) applied in the manner described in the following paragraph;
or (ii) retained by the Company to apply to the payment on its Securities when
due.
On or before the 180th day after the date on which the Company
consummates the relevant Asset Sale and subject to and as permitted by the terms
of this Indenture, the Company shall use all of the Net Cash Proceeds from such
Asset Sale (other than amounts that the Company has determined to retain
pursuant to clause (ii) of the preceding paragraph) to make either (i) an offer
to purchase (the "Asset Sale Offer") from all holders of Securities up to a
maximum principal amount (expressed as a multiple of $1,000) of Securities equal
to such Net Cash Proceeds at a purchase price equal to 100% of the principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase; or (ii) a Permitted Investment; provided, that the Company shall not
be required to make any Asset Sale Offer if the Net Cash Proceeds of all Asset
Sales that are not used to make a Permitted Investment within 180 days, do not
exceed $5 million. Each Asset Sale Offer shall remain open for a period of at
least 20 business days. If the Asset Sale Offer is more than fully subscribed to
by the Holders of the Securities, the particular Securities to be accepted shall
be selected by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection of portions of the principal of Securities;
provided, however, that no such partial acceptance shall reduce the portion of
the principal amount of a Security not redeemed to less than, $1,000; and
provided further that so long as the Securities are listed on any national
securities exchange (as such term is defined in the Exchange Act), such
selection shall be made by the Trustee in accordance with the provisions of such
exchange.
SECTION 1018. [Intentionally Omitted]
SECTION 1019. [Intentionally Omitted]
SECTION 1020. [Intentionally Omitted]
SECTION 1021. [Intentionally Omitted]
SECTION 1022. [Intentionally Omitted]
SECTION 1023. [Intentionally Omitted]
SECTION 1024. [Intentionally Omitted]
F-67
SECTION 1025. [Intentionally Omitted]
SECTION 1026. [Intentionally Omitted]
SECTION 1027. [Intentionally Omitted]
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Optional Redemption.
-------------------
The Securities may be redeemed, at the election of
the Company, as a whole or from time to time in part, at the times, subject to
the conditions and at the Redemption Price specified in the form of Security,
together with accrued interest to the Redemption Date.
SECTION 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article, other than repurchases
made from time to time in the open market.
SECTION 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant
to Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Securities to Be
----------------------------------------
Redeemed.
--------
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities not
previously called for redemption, by such method as the Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of
portions of the principal of Securities; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Security not
redeemed to less than $1,000 and, provided further that, so long as the
Securities are listed on any national securities exchange (as such term is
defined in the Exchange Act), any such redemption shall be made by the Trustee
in accordance with the provisions of such exchange.
F-68
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Securities shall
relate, in the case of any Security redeemed or to be redeemed only in part, to
the portion of the principal amount of such Security which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given in the manner provided for
in Section 106 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed; provided, however, that in
the case of an optional redemption in which the Company has called for
redemption all outstanding Securities in connection with a refinancing of such
Securities, the Company shall be permitted to (i) specify a proposed redemption
date, (ii) change the proposed redemption date once to a final redemption date
by notice mailed to Holders not later than five business days prior to the final
redemption date, (iii) establish the final redemption date as a date not more
than 90 days after the first notice from the Company calling the Securities for
optional redemption was mailed to Holders and (iv) rescind the redemption offer
at any time prior to the final redemption date, which rescission shall not cause
the maturity of the Securities to have changed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of a partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price (together
with accrued interest, if any, to the Redemption Date payable as
provided in Section 1107) will become due and payable upon each such
Security, or the portion thereof, to be redeemed, and that interest
thereon will cease to accrue on and after said date, and
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
F-69
SECTION 1106. Deposit of Redemption Price.
---------------------------
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) in
immediately available funds an amount of money sufficient to pay the Redemption
Price of, and accrued interest on, all the Securities which are to be redeemed
on that date.
SECTION 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified (together with accrued
interest, if any, to the Redemption Date), and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest,
if any, to the Redemption Date; provided, however, that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate borne by
the Securities.
SECTION 1108. Securities Redeemed in Part.
--------------------------
Any Security which is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
SECTION 1109. Redemption Pursuant to Gaming Laws.
----------------------------------
(a) If required to qualify by the Casino Control Commission,
all Holders, whether initial Holders or subsequent transferees, shall be subject
to the qualification provisions of the Casino Control Act relating to financial
sources and/or security holders. In the event that the Casino Control Commission
determines that a Holder is not qualified under the Casino Control Act and/or
such Holder fails to submit for qualification as required by the Casino
F-70
Control Commission in its sole discretion, the Company shall have the absolute
right and obligation to purchase from such Holder (the "Disqualified Holder")
the Securities the Disqualified Holder may then possess, either directly,
indirectly or beneficially, no later than forty-five days after the date the
Company serves notice on any Disqualified Holder of such determination.
Immediately upon such determination, the Disqualified Holder shall have no
further right (i) to exercise, directly or indirectly, through any trustee or
nominee or any other person or entity, any right conferred by any Securities and
(ii) to receive any dividends, interest, or any other distribution or payment
with respect to any such Securities or any remuneration in any form from the
Company or the Trustee; provided, however, that after such disqualification,
interest on any such Securities shall continue to accrue for the benefit of any
subsequent Holder thereof. The Company shall promptly provide to the Trustee a
copy of each notice served to a Disqualified Holder.
(b) Upon receipt of the notice referred to in clause (a)
above, the Disqualified Holder may sell its Securities either directly to any
Person then qualified or previously qualified (and not subsequently
disqualified) or through a bona fide brokerage transaction, conducted at
arm's-length, to a Person not an Affiliate of the Disqualified Holder. In the
event the Disqualified Holder fails to so sell its Securities within thirty (30)
days after the determination by the Casino Control Commission, the Company shall
purchase such Securities within fifteen (15) days after the end of such thirty
(30) day time period, at a time and place as designated by the Company, at the
lowest of (i) the principal amount thereof, (ii) the amount which the
Disqualified Holder or beneficial owner paid for the Securities, together with
accrued interest up to the date of the determination of disqualification, or
(iii) the market value of such Securities. The right of the Company to purchase
such Security may be assigned by the Company to any Person approved by the
Casino Control Commission.
(c) The provisions of this Section shall be construed in
accordance with the applicable provisions of the Casino Control Act.
ARTICLE TWELVE
[INTENTIONALLY OMITTED]
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or
----------------------------------------
Covenant Defeasance.
-------------------
The Company may, at its option by Board Resolution, at any
time, with respect to the Securities, elect to have either Section 1302 or
Section 1303 be applied to all Outstanding Securities upon compliance with the
conditions set forth below in this Article Thirteen.
F-71
SECTION 1302. Defeasance and Discharge.
------------------------
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1302, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Securities on
the date the conditions set forth in Section 1304 are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by the
Outstanding Securities, which shall thereafter be deemed to be "Outstanding"
only for the purposes of Section 1305 and the other Sections of this Indenture
referred to in (A) and (B) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same) and releasing the liens and security
interests created by the Security Documents, except for the following, which
shall survive until otherwise terminated or discharged hereunder: (A) the rights
of Holders of Outstanding Securities to receive, solely from the trust fund
described in Section 1304 and as more fully set forth in such Section, payments
in respect of the principal of (and premium, if any, on) and interest on such
Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (D)
this Article Thirteen. Subject to compliance with this Article Thirteen, the
Company may exercise its option under this Section 1302 notwithstanding the
prior exercise of its option under Section 1303 with respect to the Securities.
SECTION 1303. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1303, the Company shall be released from its
obligations under any covenant contained in Section 801 and in Sections 1005
through 1026 with respect to the Outstanding Securities on and after the date
the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Securities shall thereafter be deemed not to be
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the Outstanding Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 501(3) or otherwise, but, except as specified above, the remainder of
this Indenture and such Securities shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant
------------------------------------
Defeasance.
----------
The following shall be the conditions to application of either
Section 1302 or Section 1303 to the Outstanding Securities:
F-72
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds,
for a period of at least 123 days prior to the date of such defeasance,
in trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) money in an amount, or (B) U.S.
Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, (i) the
principal of (and premium, if any, on) and interest on the Outstanding
Securities on the Stated Maturity (or Redemption Date, if applicable)
of such principal (and premium, if any) or installment of interest and
(ii) any mandatory sinking fund payments or analogous payments
applicable to the Outstanding Securities on the day on which such
payments are due and payable in accordance with the terms of this
Indenture and of such Securities; provided that the Trustee shall have
been irrevocably instructed to apply such money or the proceeds of such
U.S. Government Obligations to said payments with respect to the
Securities. Before such a deposit the Company may give to the Trustee,
in accordance with Section 1103 hereof, a notice of its election to
redeem all of the Outstanding Securities at a future date in accordance
with Article Eleven hereof, which notice shall be irrevocable. Such
irrevocable redemption notice, if given, shall be given effect in
applying the foregoing. For this purpose, "U.S. Government Obligations"
means securities that are (x) direct obligations of the United States
of America for the timely payment of which its full faith and credit
is, pledged or (y) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America,
which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
(2) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit or, insofar as paragraphs (7) and (8) of Section 501 hereof are
concerned, at any time during the period ending on the 123rd day after
the date of such deposit (it being understood that this condition shall
not be deemed satisfied until the expiration of such period).
F-73
(3) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, this Indenture
or any other material agreement or instrument to which the Company is a
party or by which it is bound.
(4) In the case of an election under Section 1302, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) there has been a change in
the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of
the Outstanding Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such 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 defeasance
had not occurred.
(5) In the case of an election under Section 1303, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred.
(6) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 1302 or the covenant defeasance under Section 1303 (as
the case may be) have been complied with.
SECTION 1305. Deposited Money and U.S. Government
-----------------------------------
Obligations To Be Held in Trust; Other
--------------------------------------
Miscellaneous Provisions.
-------------------------
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1305, the "Trustee") pursuant to Section 1304 in
respect of the Outstanding Securities shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Securities.
F-74
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it as
provided in Section 1304 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1306. Reinstatement.
-------------
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1305 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1302 or 1303, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1305; provided, however, that if the Company makes any payment of
principal of (or premium, if any, on) or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE FOURTEEN
[INTENTIONALLY OMITTED]
ARTICLE FIFTEEN
MISCELLANEOUS
SECTION 1501. Counterparts.
------------
This Indenture may be signed in any number of counterparts
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
F-75
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
GB PROPERTY FUNDING CORP.
By
-----------------------------
Title:
Attest:
----------------------------
Title:
GB HOLDINGS, INC.
By
-----------------------------
Title:
Attest:
----------------------------
Title:
GREATE BAY HOTEL AND CASINO, INC.
By
-----------------------------
Title:
Attest:
----------------------------
Title:
WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION
By
-----------------------------
Title:
F-76
Exhibit A
- -------------------------------------------------------------------------------
OFFICERS' CERTIFICATE
OF
GB HOLDINGS, INC.
- ------------------------------------------------------------------------------
Reference is made to that certain Indenture dated as of
____________________ (the "Indenture") among GB Holdings, Inc. (the "Company")
and Wells Fargo Bank Minnesota, N.A., as Trustee (the "Trustee"). Except as
otherwise defined herein, capitalized terms used herein shall have the meanings
set forth in the Indenture.
Pursuant to Section 1008 of the Indenture, the undersigned officer of
the Company hereby certifies to the Trustee as follows:
He is now, and at the times mentioned herein has been, the
duly elected, qualified and acting officer of the Company as
specified below.
To his knowledge, and without regard to any period of grace or
requirements of notice under the Indenture, the Company is in
compliance with all conditions and covenants under the
Indenture.
IN WITNESS WHEREOF, I have set my hand this ____ day of ______________.
GB HOLDINGS, INC.
By:______________________
ANNEX G
================================================================================
Atlantic Coast Entertainment Holdings, Inc.,
as Issuer
ACE Gaming, LLC,
as Guarantor
and
[ ]
-------------------------------
as Trustee
--------------------
Indenture
Dated as of [___________ __, 2003]
--------------------
$[110] Million
3% Notes Due September 29, 2008
================================================================================
Atlantic Coast Entertainment Holdings, Inc.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of ________
[TO BE UPDATED]
TIA INDENTURE
SECTION SECTION
- ------- -------------
310(a)(1).....................................................607
(a)(2).....................................................607
(a)(3).....................................................N.A.
(a)(4).....................................................N.A.
(a)(5).....................................................607
(b)........................................................604, 608
(c)........................................................N.A.
311 ..........................................................604
312 ..........................................................701
313 ..........................................................601, 702
314(a)........................................................703, 1008
(b)........................................................1401(d)
(c)(1).....................................................102
(c)(2).....................................................102
(c)(3).....................................................N.A.
(d)........................................................1404
(e)........................................................102
(f)........................................................N.A.
315(a)........................................................602
(b)........................................................601
(c)........................................................602
(d)........................................................602
(e)........................................................N.A.
316(a) (last sentence)........................................101("Outstanding")
(a)(1)(A)..................................................512
(a)(1)(B)..................................................513
(a)(2).....................................................N.A.
(b)........................................................508
(c)........................................................104(d)
317(a)(1).....................................................503
(a)(2).....................................................504
(b)........................................................1003
318(a)........................................................111
- ---------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
ii
TABLE OF CONTENTS(1)
------------------
PARTIES........................................................................1
RECITALS.......................................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions....................................................1
Section 102. Compliance Certificates and Opinions..........................19
Section 103. Form of Documents Delivered to Trustee........................19
Section 104. Acts of Holders...............................................20
Section 105. Notices, etc., to Trustee, Company and Guarantor..............21
Section 106. Notice to Holders; Waiver.....................................22
Section 107. Effect of Headings and Table of Contents......................22
Section 108. Successors and Assigns........................................23
Section 109. Separability Clause...........................................23
Section 110. Benefits of Indenture.........................................23
Section 111. Governing Law.................................................23
Section 112. Legal Holidays................................................23
Section 113. Casino Control Act............................................23
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally...............................................24
Section 202. Form of Face of Notes.........................................25
Section 203. Form of Reverse of Notes......................................26
Section 204. Form of Trustee's Certificate of Authentication...............29
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms...............................................30
Section 302. Denominations.................................................31
Section 303. Execution, Authentication, Delivery and Dating................31
Section 304. Temporary Securities..........................................32
Section 305. Registration, Registration of Transfer and Exchange...........32
Section 306. Mutilated, Destroyed, Lost and Stolen Securities..............33
Section 307. Payment of Interest; Interest Rights Preserved................34
Section 308. Persons Deemed Owners.........................................34
Section 309. Cancellation..................................................34
- --------
(1) This table of contents shall not, for any purpose, be deemed to be a part
of this Indenture.
iii
Section 310. Computation of Interest.......................................35
Section 311. Maximum Interest Rate.........................................35
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture.......................35
Section 402. Application of Trust Money....................................36
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.............................................37
Section 502. Acceleration of Maturity; Rescission and Annulment............39
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.......................................................39
Section 504. Trustee May File Proofs of Claim..............................40
Section 505. Trustee May Enforce Claims Without Possession of Securities...41
Section 506. Application of Money Collected................................41
Section 507. Limitation on Suits...........................................42
Section 508. Unconditional Right of Holders to Receive Principal Premium
and Interest..................................................42
Section 509. Restoration of Rights and Remedies............................42
Section 510. Rights and Remedies Cumulative................................43
Section 511. Delay or Omission Not Waiver..................................43
Section 512. Control by Holders............................................43
Section 513. Waiver of Defaults and Compliance.............................43
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults............................................44
Section 602. Certain Rights of Trustee.....................................44
Section 603. Trustee Not Responsible for Recitals or Issuance of
Securities....................................................46
Section 604. May Hold Securities...........................................46
Section 605. Money Held in Trust...........................................46
Section 606. Compensation and Reimbursement................................46
Section 607. Corporate Trustee Required; Eligibility.......................47
Section 608. Resignation and Removal; Appointment of Successor.............47
Section 609. Acceptance of Appointment by Successor........................49
Section 610. Merger, Conversion, Consolidation or Succession to
Business......................................................49
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTOR
Section 701. Disclosure of Names and Addresses of Holders..................50
Section 702. Reports by Trustee............................................50
Section 703. Reports by Company and Guarantor..............................51
iv
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company and Subsidiaries May Consolidate, etc., Only on
Certain Terms.................................................52
Section 802. Successor Substituted.........................................53
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Amendments to Security
Documents Without Consent of Holders..........................54
Section 902. Supplemental Indentures and Amendments to Security
Documents with Consent of Holders.............................55
Section 903. Execution of Supplemental Indentures and Amendments to
Security Documents............................................56
Section 904. Effect of Supplemental Indentures.............................56
Section 905. Conformity with Trust Indenture Act...........................56
Section 906. Reference in Securities to Supplemental Indentures............56
Section 907. Notice of Supplemental Indentures and Amendments to
Security Documents............................................56
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium, if any, and Interest...........57
Section 1002. Maintenance of Office or Agency...............................57
Section 1003. Money for Security Payments to Be Held in Trust...............57
Section 1004. Corporate Existence...........................................59
Section 1005. Payment of Taxes and Other Claims.............................59
Section 1006. Maintenance of Properties.....................................59
Section 1007. Insurance.....................................................59
Section 1008. Statement by Officers as to Compliance........................60
Section 1009. Statement by Officers of Certain Defaults.....................60
Section 1010. Assumption of Obligations upon Change in Control..............60
Section 1011. Limitation on Company Indebtedness............................60
Section 1012. Limitation on Subsidiary Indebtedness and Preferred Stock.....61
Section 1013. Limitation on Restricted Payments.............................62
Section 1014. Limitation on Liens...........................................62
Section 1015. [Intentionally Omitted.]......................................62
Section 1016. Limitation on Sale-Leaseback Transactions.....................62
Section 1017. Limitation on Asset Sales.....................................63
Section 1018. Application of Net Cash Proceeds in Event of Loss.............64
Section 1019. Ownership of Stock of Subsidiaries............................65
Section 1020. Limitation on Transactions with Affiliates....................65
Section 1021. Change in Nature of Business..................................65
Section 1022. Additional Collateral.........................................65
v
Section 1023. CRDA Investments..............................................66
Section 1024. Subsidiaries..................................................66
Section 1025. Security Documents............................................66
Section 1026. Validity of Security Interest.................................66
Section 1027. Duty of Cooperation...........................................67
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Redemption....................................................67
Section 1102. Applicability of Article......................................67
Section 1103. Election to Redeem; Notice to Trustee.........................67
Section 1104. Selection by Trustee of Securities to Be Redeemed.............68
Section 1105. Notice of Redemption..........................................68
Section 1106. Deposit of Redemption Price...................................69
Section 1107. Securities Payable on Redemption Date.........................69
Section 1108. Securities Redeemed in Part...................................69
Section 1109. Redemption Pursuant to Gaming Laws............................70
ARTICLE TWELVE
GUARANTEE ARRANGEMENTS
Section 1201. Guarantee.....................................................70
Section 1202. Execution and Delivery of Guarantee...........................72
Section 1203. Additional Guarantors.........................................72
Section 1204. Termination of Guarantee......................................73
Section 1203. Additional Guarantors.........................................73
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
Section 1301. Company's Option to Effect Defeasance or Covenant
Defeasance....................................................73
Section 1302. Defeasance and Discharge......................................73
Section 1303. Covenant Defeasance...........................................73
Section 1304. Conditions to Defeasance or Covenant Defeasance...............74
Section 1305. Deposited Money and U.S. Government Obligations To
Be Held in Trust; Other Miscellaneous Provisions..............75
Section 1306. Reinstatement.................................................76
ARTICLE FOURTEEN
SECURITY INTEREST
Section 1401. Assignment of Security Interest...............................76
Section 1402. Suits to Protect the Collateral...............................77
Section 1403. Further Assurances and Security...............................78
Section 1404. Release of Collateral.........................................78
Section 1405. Release Notice; Subordination Request, Permitted Liens........79
Section 1406. Reliance on Opinion of Counsel................................81
vi
Section 1407. Purchaser May Rely............................................81
Section 1408. Payment of Expenses...........................................81
ARTICLE FIFTEEN
PAYMENT OF NOTES IN FORM OF COMPANY COMMON STOCK
Section 1501. Conversion Following Election of Requisite Lenders............82
Section 1502. Exercise of Conversion Privilege and Required Payment;
Issuance of Common Stock; No Adjustment for Interest or
Dividends.....................................................82
Section 1503. Stated Ratio..................................................83
Section 1504. Additional Issuances In the Event of Occurrence of
Certain Events................................................84
Section 1505. Mergers.......................................................85
Section 1506. Verification of Computations..................................85
Section 1507. Notice of Additional Issuances or Other Property..............85
Section 1508. Fractional Shares.............................................86
Section 1509. Taxes on Shares Issued........................................86
Section 1510. Reservation of Shares; Shares to Be Fully Paid;
Compliance with Governmental Requirements; Listing
of Company Common Stock.......................................86
Section 1511. Responsibility of Trustee.....................................86
ARTICLE SIXTEEN
MISCELLANEOUS
Section 1601. Counterparts..................................................87
TESTIMONIUM.....................................................................
SIGNATURE AND SEALS.............................................................
vii
SCHEDULES
1.01 Permitted Indebtedness
ii
INDENTURE, dated as of [___________, 2003] between Atlantic Coast
Entertainment Holdings, Inc. (the "Company"), a corporation duly organized and
existing under the laws of the State of [Delaware], ACE Gaming, LLC (herein
called "Guarantor"), a limited liability company duly organized and existing
under the laws of the State of New Jersey and each having its principal office
c/o Sands Hotel and Casino at Indiana Avenue & Brighton Park, Atlantic City, New
Jersey 08401, and [___________________], as Trustee (herein called the
"Trustee").
The Company has duly authorized the creation of an issue of 3% Notes
Due 2008 (herein called "Notes" or the "Securities"), of substantially the tenor
and amount hereinafter set forth, and to provide therefore the Company has duly
authorized the execution and delivery of this Indenture. The Company has duly
authorized the creation of Liens to secure the Securities, and to provide
therefore the Company has duly authorized the execution and delivery of the
Security Documents to which it is a party.
The Guarantor has duly authorized its guarantee of the Securities, and
to provide therefore it has duly authorized the execution and delivery of this
Indenture. The Guarantor has duly authorized the creation of Liens to secure its
guarantee of the Securities, and to provide therefore it has duly authorized the
execution and delivery of the Security Documents to which it is a party.
This Indenture is subject to the provisions of the Trust Indenture Act
of 1939, as amended, that are required to be part of this Indenture and shall,
to the extent applicable, be governed by such provisions.
All things necessary have been done to make the Securities, when
executed by the Company and the Guarantor and authenticated by the Trustee and
delivered hereunder and duly issued by the Company, the valid obligations of the
Company, to make the Guarantee the valid obligation of Guarantor and to make
this Indenture a valid agreement of each of the Company and the Guarantor, in
accordance with their and its terms.
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the
singular;
G-1
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under
the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted at the date of
such computation;
(d) any reference herein to any "first priority lien", "first
priority security interest" or words of similar import or otherwise
regarding the priority of any Lien, shall apply and refer, and shall be
deemed to apply and refer, only to the Collateral and all such Liens
shall, and shall be deemed to be: (i) subject and inferior to any Lien
to secure Working Capital Indebtedness; and (ii) subject to any release
or subordination contemplated in Section 1405 hereof. Any reference
herein to the "terms of any release or subordination contemplated in
Section 1405 hereof" or "any release or subordination" or words of
similar import shall be deemed to refer to and include, without
limitation, any and all terms, provisions and conditions of any such
release or subordination and of all agreements, documents and
instruments related thereto, associated therewith or arising from or in
connection with any such release or subordination or any related or
associated transaction; and
(e) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Subsidiary of the Company or is combined or acquired
through an asset acquisition, merger or otherwise, with the Company or a
Subsidiary of the Company, including, without limitation, Indebtedness incurred
by such Person in connection with, or in anticipation of, such Person becoming a
Subsidiary of the Company or of such acquisition, in each case which, if
secured, is not secured by Collateral.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any Person means any other Person that, directly or
indirectly, controls, is controlled by or is under direct or indirect common
control with, such Person and with respect to any natural Person, any other
Person having a relationship by blood, marriage or adoption, not more remote
than first cousins with such natural Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of Voting Stock or other equity interests, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
G-2
"Allowed Indebtedness" means any Indebtedness or Preferred Stock the
incurrence or issuance of which is consented to by the Requisite Lenders and
that: (i) is not secured by a Lien; (ii) is (or to the extent that it is)
secured by a Lien on assets other than the Collateral; (iii) is secured by a
Lien on Collateral which, except for and subject to any release or subordination
contemplated by Section 1405 hereof, is inferior to the Liens of the Trustee on
such Collateral; (iv) constitutes Acquired Indebtedness, or (v) is incurred
between or among the Company and its Subsidiaries.
"Amortization Expense" means, for any Person for any period, the amount
of the amortization expense (including, without limitation, the write-down of
non-current assets, including CRDA Investments) that is reflected on the
financial statements of such Person and its Subsidiaries consolidated in such
financial statements for such period in accordance with GAAP.
"Applicable Common Stock" has the meaning set forth in Section 301(f)
of this Indenture.
"Asset Acquisition" means (a) any capital contribution (including,
without limitation, transfers of cash or other property to others or payments
for property or services for the account or use of others, or otherwise), or
purchase or acquisition of Capital Stock or other similar ownership or profit
interest, by the Company or any of its Subsidiaries in any other Person, in
either case pursuant to which such Person shall become a Subsidiary of the
Company or any of its Subsidiaries or shall be merged with or into the Company
or any of its Subsidiaries or (b) any acquisition by the Company or any of its
Subsidiaries of the assets of any Person which constitute substantially all of
an operating unit or business of such Person.
"Asset Sale" means, as applied to any Person, any direct or indirect
sale, conveyance, transfer, lease or other disposition (including, without
limitation, by means of a Sale-Leaseback Transaction) by such Person or any
Subsidiary of such Person to any Person other than such Person or a wholly owned
Subsidiary of such Person, in one transaction or a series of related
transactions, of any Capital Stock of any Subsidiary of such Person or other
similar equity interest of such Subsidiary or any other property or asset of
such Person or any Subsidiary of such Person (provided that the term "Asset
Sale" shall not include (a) sales, conveyances, transfers, leases or other
dispositions in the ordinary course of business, (b) all other dispositions
pursuant to which such Person receives, directly or indirectly, Net Cash
Proceeds or fair market value of less than or equal to $5,000,000 in the
aggregate in any twelve month period, (c) sales, conveyances, transfers, leases,
or other dispositions of CRDA Investments) , (d) sales, conveyances, transfers,
leases or other transactions or dispositions made in accordance with the
provisions of Section 1405 of this Indenture, (e) sales, conveyances, transfers,
leases or other transactions or dispositions made pursuant to the terms of any
agreement, document or instrument entered into in connection with any release or
subordination that has occurred in accordance with the provisions of Section
1405 of this Indenture, including, without limitation, any sale or other
disposition resulting from any default or foreclosure, or (f) any transaction
(whether or not such transaction has already occurred) that the Requisite
Lenders consent and agree shall not be deemed to constitute an "Asset Sale" ).
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"Assets" means, as applied to any Person, any tangible or intangible
assets, or rights or real or personal properties of such Person or any of its
Subsidiaries including capital stock of Subsidiaries.
"Board of Directors" means either the board of directors of a Person or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of a Person to have been duly adopted by the
Board of Directors of such Person and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
or the State of New Jersey are authorized or obligated by law or executive order
to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock, whether
outstanding on the Issue Date or issued after such date, and any and all rights,
warrants or options exchangeable for or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed) that is required to be classified
and accounted for as a capital lease obligation under GAAP, and, for the purpose
hereof, the amount of such obligation at any date of determination shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means any of the following, to the extent owned by
the Company or any of its Subsidiaries free and clear of all Liens (other than
Liens in favor of the Trustee or the Holders) and having a maturity of not
greater than 270 days from the date of acquisition: (a) any evidence of
Indebtedness issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof): (b) insured certificates of deposit or acceptances of any commercial
bank that is a member of the Federal Reserve System, that issues (or the parent
of which issues) commercial paper rated as described in clause (c) below and
that has combined capital and surplus and undivided profits of not less than
$100,000,000; (c) commercial paper issued by a corporation (except an Affiliate
of the Company) organized under the laws of any state of the United States or
the District of Columbia and rated at least A-1 (or the then equivalent grade)
by Standard & Poor's Corporation or at least Prime-1 (or the then equivalent
grade) by Moody's Investors Service, Inc.; and (d) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations issued
or unconditionally guaranteed by the United States government or issued by any
agency thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); provided that the terms of such
agreements comply with the guidelines set forth in the
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Federal Financial Agreements of Depository Institutions with Securities Dealers
and Others, as adopted by the Comptroller of the Currency.
"Casino Control Act" means the New Jersey Casino Control Act, N.J.
Stat. Ann. 5:12-1 et seq. (New Jersey Public Law 1977, C.110), and the
regulations promulgated thereunder, N.J.A.C. 19:40-1.1 et seq., as from time to
time amended, or any successor provision of law.
"Casino Control Commission" means the New Jersey Casino Control
Commission as established by Section 50 of the Casino Control Act or any
successor agency appointed pursuant to the Casino Control Act.
"Change of Control" means, after the Issue Date, an event or series of
events by which any "person" (as such term is used in Section 13(d) and 14(d) of
the Exchange Act), other than Carl C. Icahn and his Affiliates, or Parent and
its Subsidiaries, is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 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), directly or indirectly (including through ownership of Voting Stock of
a Person owning, directly or indirectly, Voting Stock of the Company or Parent)
of securities representing 50% or more of the combined voting power of the
Voting Stock of the Company.
"Collateral" has the meaning attributed to it in the Security Agreement
and the Mortgage and includes all of the assets of the Company and its
Subsidiaries (other than CRDA Investments and gaming receivables and revenues)
as of the Issue Date and assets contemplated in Section 1404 of this Indenture;
provided that for purposes of this Indenture and the Security Documents, the
Collateral shall not include any asset to the extent that it has ceased to be
subject to the Security Interest pursuant to Section 1405 hereof.
"Collateral Account" shall have the meaning ascribed to such term in
the Security Agreement.
"Collateral Assignment of Leases" means the Assignment, dated as of
[_____________ __], 2003, by Licensee in favor of the Trustee for its own
benefit and the benefit of the Holders as the same may be amended from time to
time.
"Collateral Proceeds" means, subject to and as permitted by the terms
of this Indenture and the terms of any release or subordination contemplated by
Section 1405 hereof, (a) any Net Cash Proceeds received or receivable by the
Company or the Guarantor as a result of an Asset Sale or Event of Loss that
involves all or a portion of the Collateral and (b) all interest or other
earnings on amounts in deposit in the Collateral Account.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or, if
at any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
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"Common Stock" means, with respect to any Person, any and all shares,
interests, participations and other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the Issue Date, and includes, without limitation, all series and
classes of such common stock.
"Company" means Atlantic Coast Entertainment Holdings, Inc., until a
successor Person shall have assumed the obligations of the Company pursuant to
the applicable provisions of Sections 801 and 802 of this Indenture, and
thereafter "Company" shall mean such successor Person.
"Company Common Stock" means the common stock, [$.01] par value per
share, of the Company.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President, any Vice
President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated" or "consolidated" refers to the consolidation of
accounts in accordance with GAAP, and each reference to any such consolidation
in this Indenture including, without limitation, "Consolidated Cash Flow",
"Consolidated Coverage Ratio", "Consolidated Fixed Charges", "Consolidated
Income Tax Expense", and "Consolidated Net Income" shall include and be deemed
to include, if, prior to the calculation date, one or more acquisitions have
been engaged in by the Company or any of its Subsidiaries (including through
mergers or consolidations or other asset or business acquisitions or combination
transactions), the accounts of such acquired person or business for the entire
applicable reference period, and such acquisition shall be deemed to have
occurred on the first day of the applicable reference period and shall be given
pro forma effect, in all events exclusive of all obligations or charges: (x) of
a non-recurring nature, (y) attributable to discontinued operations, and (z)
otherwise attributable to operations or businesses disposed of prior to the
Transaction Date.
"Consolidated Cash Flow" means, for any Person for any period, the sum
of:
(a) the Consolidated Net Income of such Person and its Subsidiaries for
such period, plus
(b) the sum of the following items (to the extent deducted in
determining Consolidated Net Income and without duplication): (i) all
Consolidated Fixed Charges; (ii) Amortization Expense; (iii) Depreciation
Expense; and (iv) Consolidated Income Tax Expense.
"Consolidated Coverage Ratio" means for any Person the ratio of (a)
Consolidated Cash Flow of such Person and its Subsidiaries for the four full
fiscal quarters for which financial statements are available that immediately
precede the date of the transaction or other circumstances giving rise to the
need to calculate the Consolidated Coverage Ratio (the "Transaction Date") (or,
for purposes of clause (b) of the definition of the term "Permitted
Indebtedness", projected as contemplated therein) to (b) the Consolidated Fixed
Charges for the fiscal quarter in which the Transaction Date occurs and to be
accrued during any balance of such quarter and during the three fiscal quarters
immediately following such fiscal quarter (based
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upon the pro forma amount of Indebtedness of such Person and its Subsidiaries
outstanding on the Transaction Date and after giving effect to the transaction
in question) (or, for purposes of clause (b) of the definition of the term
"Permitted Indebtedness", projected as contemplated therein). For purposes of
this definition, if the Transaction Date occurs before the date on which such
Person's consolidated financial statements for the four full fiscal quarters
after the Issue Date are first available, "Consolidated Cash Flow" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis as if the Securities outstanding on the Transaction Date were issued
on the first day of such four full fiscal quarter period. In addition,
"Consolidated Cash Flow" and "Consolidated Fixed Charges" shall be calculated
after giving effect on a pro forma basis for the period of such calculation to
(i) the incurrence or retirement of any Indebtedness of such Person and its
Subsidiaries at any time during the period (the "Reference Period") (A)
commencing on the first day of the four full fiscal quarters ended before the
Transaction Date for which financial statements are available and (B) to, and
including, the Transaction Date, including, without limitation, the incurrence
of the Indebtedness giving rise to the need to make such calculation, as if such
Indebtedness were incurred or retired on the first day of the Reference Period;
provided that if such Person or any of its Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the above clause shall give effect to
the incurrence of such guaranteed Indebtedness as if such Person or such
Subsidiary had directly incurred such guaranteed Indebtedness and (ii) any Asset
Sale, Event of Loss or Asset Acquisition (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a result
of such Person or any of its Subsidiaries (including any Person who becomes a
Subsidiary as result of the Asset Acquisition) incurring Acquired Indebtedness)
occurring during the Reference Period and any retirement of Indebtedness in
connection with such Asset Acquisition, as if such Asset Sale, Event of Loss or
Asset Acquisition and/or retirement occurred on the first day of the Reference
Period. Furthermore, in calculating the denominator (but not the numerator) of
this "Consolidated Coverage Ratio," interest on Indebtedness determined on a
fluctuating basis that cannot be determined in advance shall be deemed to accrue
at the rate in effect on the Transaction Date for such entire period.
"Consolidated Fixed Charges" means as applied to any Person for any
period (a) the sum of the following items (without duplication): (i) the
aggregate amount of interest reflected in the financial statements by such
Person and its Subsidiaries in respect of their consolidated Indebtedness
(including, without limitation, all interest capitalized by such Person and its
Subsidiaries during such period, any amortization of debt discount and all
commissions, discounts and other similar fees and charges owed by such Person or
any of its Subsidiaries for letters of credit and bankers' acceptance financing
and the net costs associated with Interest and Currency Rate Protection
Obligations of such Person and its Subsidiaries); (ii) the aggregate amount of
the interest component of rentals in respect of Capitalized Lease Obligations
recognized by such Person and its Subsidiaries; (iii) to the extent any
Indebtedness of any other Person is guaranteed by such Person or any of its
Subsidiaries, the aggregate amount of interest paid or accrued by such other
Person during such period attributable to any such guaranteed Indebtedness; (iv)
dividends on Preferred Stock of any Subsidiary that is held by a Person other
than such Person or a wholly owned Subsidiary; (v) the interest portion of any
deferred payment obligation; and less (b) to the extent included in clause (a)
above, amortization or write-off of deferred financing costs of such Person and
its Subsidiaries and any charge related to any premium or penalty paid in
connection with redeeming or retiring any Indebtedness before its
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stated maturity, with the foregoing amounts in the case of both clauses (a) and
(b) above, as determined in accordance with GAAP.
"Consolidated Income Tax Expense" means, as applied to any Person for
any period, federal, state, local and foreign income taxes of such Person and
its Subsidiaries for such period, determined in accordance with GAAP; provided
that, for purposes hereof, "income taxes" shall specifically exclude any taxes
paid to or imposed by a Gaming Authority.
"Consolidated Net Income" means, as applied to any Person for any
period, the aggregate of the consolidated Net Income (or net loss) of such
Person and its Subsidiaries (determined in accordance with GAAP) less (to the
extent included in such Consolidated Net Income): (a) the Net Income of any
other Person in which such Person and any of its Subsidiaries has a joint
interest with a third party (which interest does not cause the Net Income of
such other Person to be consolidated into the Net Income of such Person and its
Subsidiaries in accordance with GAAP) except to the extent of the amount of cash
dividends or other cash distributions in respect of Capital Stock actually paid
(out of funds legally available therefrom) to and received by such Person or a
Subsidiary, net of any taxes applicable thereto; (b) items (other than the tax
benefit of the utilization of net operating loss carry forwards or alternative
minimum tax credits) classified as extraordinary; (c) the net income of any
Subsidiary (other than a Guarantor) to the extent that the declaration of
dividends or similar distributions by such Subsidiary of that income is not at
the time permitted, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, law,
rule or governmental regulations applicable to that Subsidiary or its
stockholders; (d) any net gain or loss resulting from an Asset Sale or Event of
Loss or reserves relating thereto by such Person or any of its Subsidiaries; (e)
any gain (but not loss), net of taxes, realized upon the termination of any
employee pension benefit plan; and (f) all income taxes of such Person and its
Subsidiaries accrued according to GAAP for such period attributable to
extraordinary gains or losses.
"Convertibility Notice" has the meaning set forth in Section 1501(a)
hereof.
"Corporate Trust Office" means the principal corporate trust office of
the Trustee, at which at any particular time its corporate trust business shall
be administered, which office at the date of execution of this Indenture is
located at [_________________________], except that with respect to presentation
of Securities for payment or for registration of transfer or exchange, such term
shall mean the office or agency of the Trustee at which, at any particular time,
its corporate agency business shall be conducted.
"Corporation" includes corporations, associations, companies and
business trusts.
"CRDA Investments" means Investments in securities issued by, and
monies deposited with, the Casino Reinvestment Development Authority of the
State of New Jersey.
"Default" means any Event of Default, or an event that would constitute
an Event of Default but for the requirement that notice be given or time elapse
or both.
"Demand Payment" has the meaning set forth in Section 301 hereof.
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"Demand Payment Date" means the date specified by the Requisite Lenders
in the Demand Payment Notice.
"Demand Payment Notice" has the meaning set forth in Section 301
hereof.
"Depreciation Expense" means, as applied to any Person for any period,
the provision for depreciation that is reflected on the consolidated financial
statements of such Person and its Subsidiaries in accordance with GAAP.
"Disqualified Holders" shall have the meaning provided in Section 1109.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock or other similar ownership or profit interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
exchangeable for Indebtedness, or is redeemable at the option of the holder
thereof, in whole or in part, on or before the Maturity Date of the Securities.
"Division of Gaming Enforcement" means the Division of Gaming
Enforcement of the New Jersey Department of Law and Public Safety as established
by Section 55 of the Casino Control Act or any successor division or agency.
"Event of Default" has the meaning specified in Section 501.
"Event of Loss" means, with respect to any property or asset (tangible
or intangible, real or personal), any of the following: (i) any loss,
destruction or damage of such property or asset; (ii) the condemnation or
seizure of such property or asset or the exercise of any right of eminent domain
or navigational servitude; or (iii) any actual condemnation, seizure or taking,
by exercise of the power of eminent domain or otherwise, of such property or
asset, or confiscation of such property or asset or the requisition of the use
of such property or asset; provided, that in any such case the Net Cash Proceeds
relating thereto are in excess of $5 million; provided that an "Event of Loss"
shall not include any event or occurrence (whether or not such event or
occurrence has already occurred) that the Requisite Lenders consent and agree
shall not be deemed to constitute and "Event of Loss".
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Notes" means the 11% Notes due 2005 of Parent from time to
time outstanding.
"Fair Market Value" or "fair value" means, with respect to any asset or
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 shall be determined by the Board of Directors of the Company acting
in good faith and shall be evidenced by a Board Resolution delivered to the
Trustee.
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"Federal Bankruptcy Code" means the 1978 Bankruptcy Act of Title 11 of
the United States Code, as amended from time to time.
"FF&E Financing" means Indebtedness, the proceeds of which will be used
solely to finance the acquisition or lease of furniture, fixtures or equipment
("FF&E") used by the Person incurring such Indebtedness in the ordinary course
in the operation of a Permitted Line of Business and secured by a Lien on such
FF&E.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable as of the Issue
Date.
"Gaming Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States federal government or foreign government, any state, province
or any city or other political subdivision or otherwise and whether now or
hereafter in existence, or any officer or official thereof with authority to
regulate any gaming operation (or proposed gaming operation) owned, managed, or
operated by the Company or any of its Subsidiaries.
"Gaming Laws" means each gaming law of any applicable Gaming Authority
as amended from time to time, and the regulations promulgated and rulings issued
thereunder applicable to the Company or any of its Subsidiaries or shareholders.
"Grantor" means (i) any "Grantor" as defined in the Security Agreement,
(ii) any "Mortgagor" as defined in the Mortgage and (iii) any other Person that
grants a security interest in its assets in favor of the Trustee for its benefit
and the benefit of the Holders.
"Guarantee" means the guarantee of the Guarantor set forth in Article
Twelve.
"Guarantor" means Licensee, until a successor Person shall have assumed
the obligations of Licensee pursuant to the applicable provisions of Section 801
or 802 of this Indenture, and thereafter "Guarantor" shall mean such successor
Person.
"Holder" means a Person in whose name a Security is registered in the
Security Register. A person shall cease to be a Holder for all purposes upon
conversion of such Security into Company Common Stock pursuant to Article
Fifteen of this Indenture.
"incur" means to directly or indirectly create, assume, suffer to
exist, guarantee in any manner, or in any manner become liable for the payment
of.
"Indebtedness" of any Person means (a) any liability, contingent or
otherwise, of such Person (whether or not the recourse of the lender is to the
whole of the assets of such Person, or only to a portion thereof), (i) for
borrowed money (ii) evidenced by a note, bond, debenture or similar instrument,
letters of credit, acceptances or other similar facilities (other than a trade
payable or a current liability incurred in the ordinary course of business) or
(iii) for the payment of money relating to a Capitalized Lease Obligation or
other obligation relating to the deferred purchase price of property or services
(including a purchase money obligation); (b)
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any liability of others of the kind described in the preceding clause (a) which
such Person has guaranteed including, without limitation, (x) to pay or purchase
such liability, (y) to supply funds to or in any other manner invest in the
debtor (including an agreement to pay for property or services irrespective of
whether such property is received or such services are rendered and (z) to
purchase, sell or lease (as lessee or lessor) property or to purchase or sell
services, primarily for the purpose of enabling a debtor to make a payment of
such Indebtedness or to assure the holder of such Indebtedness against loss; (c)
any obligation secured by a Lien to which the property or assets of such Person
are subject, whether or not the obligations secured thereby shall have been
assumed by or shall otherwise be such Person's legal liability; (d) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any Capital Stock of or other ownership or profit
interest in such Person or any of its Affiliates or any warrants, rights or
options to acquire such Capital Stock, valued, in the case of Disqualified
Stock, at the greater of its voluntary or involuntary liquidation preference
plus accrued and unpaid dividends; (e) all Interest and Currency Rate Protection
Obligations; and (f) any and all deferrals, renewals, extensions and refundings
of any liability of the kind described in any of the preceding clauses.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented, changed, modified or amended (by any addition
to or elimination of, the provisions hereof, or otherwise) by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
"Independent", when used with respect to any Person, means such other
Person who (a) does not have any material financial interest in the Company or
in any Affiliate of the Company and (b) is not an officer, employee, promoter,
underwriter, trustee, partner or person performing similar functions for the
Company or a spouse, family member or other relative of any such Person;
provided, that with respect to any director of any corporation, such director
shall also be deemed to be "Independent" if such director meets the requirements
for independence established by any "national securities exchange" (as
contemplated in the Securities Exchange Act of 1934) for audit committee
membership. Whenever it is provided in this Indenture that any Independent
Person's opinion or certificate shall be furnished to the Trustee, such Person
shall be appointed by the Company.
"Interest and Currency Rate Protection Obligations" means the
obligations of any Person pursuant to any interest rate swap, cap or collar
agreement, interest rate future or option contract, currency swap agreement,
currency future or option contract and other similar agreement designed to hedge
against fluctuations in interest rates or foreign exchange rates.
"Investment" in any Person means any direct or indirect loan, advance,
guarantee or other extension of credit or capital contribution to (including,
without limitation, transfers of cash or other property to others or payments
for property or services for the account or use of others (excluding unbilled or
uncollected receivables), or otherwise), or purchase or acquisition of Capital
Stock, warrants, rights, options, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other Person or Indebtedness of any
other Person secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien (including,
without limitation, accounts and contract
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rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness.
"Issue Date" means the date of original issuance of the Securities.
"Licensee" means ACE Gaming, LLC, a New Jersey limited liability
company.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, hypothecation, assignment for security, or other security
agreement of any kind or nature whatsoever. For purposes of this Indenture, a
Person shall be deemed to own subject to a Lien any property which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, or other title retention agreement relating to such
Person.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption or otherwise.
"Maturity Date", when used with respect to any Security, means the date
specified in such Security as the fixed date on which the final installment of
principal of such Security is due and payable.
"Mortgage" means the [Mortgage and Fixture Security Agreement], dated
as of ______________, duly executed by Guarantor in favor of the Trustee for the
benefit of the Holders.
"Net Cash Proceeds" means, with respect to any Asset Sale or Event of
Loss, as the case may be, the proceeds thereof in the form of cash or Cash
Equivalents received by the Company or any of its Subsidiaries (whether as
initial consideration, through the payment or disposition of deferred
compensation or the release of reserves), after deducting therefrom (without
duplication): (a) reasonable and customary brokerage commissions, underwriting
fees and discounts, legal fees, finders fees and other similar fees and expenses
incurred in connection with such Asset Sale or Event of Loss; (b) provisions for
all taxes payable as a result of such Asset Sale or Event of Loss; (c) payments
made to retire Indebtedness (other than payments on the Securities) secured by
the assets subject to such Asset Sale or Event of Loss to the extent required
pursuant to the terms of such Indebtedness; and (d) appropriate amounts to be
provided by the Company or any of its Subsidiaries, as the case may be, as a
reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale or Event of Loss and retained by the Company or any of its
Subsidiaries, as the case may be, after such Asset Sale or Event of Loss,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale or Event of
Loss, in each case to the extent, but only to the extent, that the amounts so
deducted are, at or around the time of receipt of such cash or Cash Equivalents,
actually paid to a Person that is not an Affiliate of the Company or, in the
case of reserves, are actually established and, in each case, are properly
attributable to such Asset Sale or Event of Loss.
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"Net Income" means, with respect to any Person for any period, the net
income (or loss) of such Person determined in accordance with GAAP.
"Officers' Certificate" for any Person means a certificate signed by
the Chairman, the President, Executive Vice President or a Vice President, and
by the Chief Financial Officer or the Secretary of such Person, and delivered to
the Trustee.
"Opinion of Counsel" means a written opinion of counsel for the Company
or any of its Affiliates, including an employee of any such Person, or any other
counsel reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment, redemption or
conversion money or Company Common Stock in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the Company (if
the Company shall act as its own Paying Agent) for the Holders of such
Securities; provided that, if such Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(iii) Securities, except to the extent provided in Sections 1302 and
1303, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Thirteen; and
(iv) Securities in respect of which, pursuant to Section 306, other
Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there shall
have been presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands the Securities
are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder or taken any other
action, Securities owned by the Company or its Subsidiaries shall be disregarded
and deemed not to be Outstanding (but the Securities of any other Affiliates or
other Persons shall be deemed for all such purposes to be Outstanding). In
determining whether the Trustee shall be protected in making such calculation or
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities owned by the Company or its Subsidiaries
which the Trustee knows to be so owned shall be so disregarded. Securities owned
by the Company or its Subsidiaries which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company, the Guarantor, or a Subsidiary of the Company.
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"Parent" means [name of GBH successor entity].
"Parent Indenture" means the [Second Amended and Restated Indenture,
dated as of ______________, 2003], between Parent and _____________, as the same
may be amended from time to time.
"Paying Agent" means any Person (including the Company acting as Paying
Agent) authorized by the Company to pay the principal of (and premium, if any,
on) or interest on any Securities on behalf of the Company."Permitted
Indebtedness" means any of the following Indebtedness to the extent incurred by
the Company:
(a) Indebtedness under the Notes, the Indenture or any Security
Document;
(b) Indebtedness if, immediately after giving pro forma effect to the
incurrence thereof, the projected Consolidated Coverage Ratio of the
Company for the next full fiscal quarter, as determined by the Board of
Directors of the Company based upon its projections, would be no less than
1.5:1;
(c) Indebtedness having a maturity at the time of its incurrence of one
year or less incurred solely to provide funds for working capital purposes;
provided that such Indebtedness (i) does not exceed $15 million outstanding
in the aggregate at any one time and (ii) for a period of 60 consecutive
days during any calendar year, does not exceed in the aggregate $5 million;
(d) FF&E Financing and/or Capitalized Lease Obligations so long as the
sum of (x) the aggregate principal amount of such FF&E Financing and (y)
the aggregate amount of such Capitalized Lease Obligations does not exceed
$50 million in the aggregate at any time;
(e) Indebtedness of the Company that is outstanding on the Issue Date
and the items listed on Schedule 1.01 hereof on the Issue Date; and
[(f) purchase money mortgage notes or other Indebtedness to acquire
Block 47, Lot 8 on the Tax Map of the City of Atlantic City, and to acquire
Block 156, Lots 28, 40 and 41 on the Tax Map of the City of Atlantic City
in fee simple or by long-term lease, which purchase money mortgage note or
similar indebtedness encumbers only such Block and Lot numbers on the Tax
Map of the City of Atlantic City, or any other Indebtedness for the purpose
of engaging in any transaction in which the value of the assets acquired,
for GAAP purposes (including applicable goodwill) is equal to or greater
than the financing undertaken in connection with such transaction.]
"Permitted Liens" means:
(i) Liens on property acquired after the Issue Date by way of a merger
or other business combination of a Person with or into the Company or any
Subsidiary or the acquisition of a Person or its assets by the Company or
any Subsidiary or otherwise and provided that except as permitted in this
Indenture such Liens do not extend to any Collateral;
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(ii) statutory Liens to secure the performance of obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business (exclusive of obligations in
respect of the payment of borrowed money), or for taxes, assessments or
governmental charges or claims, provided that in each case the obligations
are not yet delinquent or are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded and any reserve or
other adequate provision as shall be required in conformity with GAAP shall
have been made therefor;
(iii) licenses, leases or subleases granted in the ordinary course of
business to others not interfering in any material respect with the
business of the Company or any Subsidiary;
(iv) easement granted to the City of Atlantic City, New Jersey,
pursuant to municipal ordinance to extend Mt. Vernon Avenue right-of-way
upon part of Block 48, Lot 8 on the Tax Map of the City of Atlantic City;
(v) with respect to the property involved, easements, rights-of-way,
navigational servitudes, restrictions, minor defects or irregularities in
title and other similar charges or encumbrances which do not interfere in
any material respect with the ordinary conduct of business of the Company
and its Subsidiaries as now conducted or as contemplated herein;
(vi) Liens granting a security interest in CRDA Investments to the
Casino Redevelopment Authority of New Jersey or any other entity as
required by applicable law;
(vii) Liens permitted by the Security Documents, including, without
limitation, Liens granted under or to secure Permitted Indebtedness;
(viii) Liens (a) on Assets or property of any kind other than
Collateral and (b) on Collateral (including, without limitation, any such
Liens incurred to secure Allowed Indebtedness) which, except for and
subject to any release or subordination contemplated in Section 1405
hereof, shall be inferior to the Liens of the Trustee on such Collateral;
(ix) Liens (which shall be superior to the Liens of the Trustee under
the Security Documents) to secure Working Capital Indebtedness; and
(x) Liens consented to by the Requisite Lenders.
"Permitted Line of Business" means the casino gaming business and any
business that is related to, ancillary or supportive of, connected with or
arising out of the gaming business (including, without limitation, developing
and operating lodging, dining, sports or entertainment facilities,
transportation services, software development or other related activities or
enterprises and any additions or improvements thereto) and any other business
that the Requisite Lenders consent and agree shall be deemed to constitute a
"Permitted Line of Business".
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"Permitted Payment" means the payment of (i) current scheduled interest
due on the Existing Notes, (ii) normal, ordinary course operating expenses
(including legal and accounting costs, directors' and officers' insurance
premiums and fees for Commission filings) not to exceed in the aggregate
$[250,000] in any twelve month period without the consent of the Requisite
Lenders and (iii) any amount required to be paid or reimbursed to the trustee
under the second amended and restated indenture, dated as of [___________,
2003], governing the Existing Notes; provided that with respect to clauses (i)
and (ii): (a) such payment is made prior to the maturity date of the Existing
Notes, (b) at the time of such payment and after giving effect thereto, no Event
of Default exists and no event that could result in an Event of Default has
occurred or is incipient.
"Permitted Related Investment" means the direct or indirect
acquisition, repair or restoration (including, without limitation, as permitted
in Article [9] of the Mortgage) of property or other Assets (including, without
limitation, Securities of any person possessing any such Asset or with rights
to, any Assets) to be used in connection with a Permitted Line of Business.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends on or to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Redemption Date", when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means 100% of the principal amount of such Security, together with
accrued, unpaid interest.
"Release Notice" means a written notice of the Company or any of its
Subsidiaries in the form of a Company Order delivered pursuant to Section
1405(a).
"Requisite Lenders" means the holders of at least a majority in
principal amount of the Outstanding Securities.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant
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treasurer, the cashier, any assistant cashier, any trust officer or assistant
trust officer, the controller or any assistant controller or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above-designated officers, and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Payment" means any of the following: (a) the declaration or
payment of any dividend or any other distribution on Capital Stock of the
Company or any Subsidiary or any payment made to the direct or indirect holders
(in their capacities as such) of Capital Stock of the Company or any Subsidiary
in respect of that stock (other than (i) dividends or distributions payable
solely in Capital Stock (other than Disqualified Stock) and (ii) in the case of
a Subsidiary, dividends or distributions (other than the Permitted Payment)
payable to the Company or to a wholly owned Subsidiary), (b) the purchase,
defeasance, redemption or other acquisition or retirement for value of any
Capital Stock of the Company or any Subsidiary (other than Capital Stock of such
Subsidiary held by the Company or any of its wholly owned Subsidiaries), and (c)
the making of any principal payment on, or the purchase, defeasance, repurchase,
redemption or other acquisition or retirement for value (in each case before any
scheduled payment date, scheduled maturity, scheduled repayment or scheduled
sinking fund payment) of, any Indebtedness (other than Securities) which is
subordinated in any manner in right of payment to the Securities (other than:
(x) Indebtedness acquired 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 or (y) Allowed Indebtedness); provided that the
term "Restricted Payment" shall not include any payment, transaction or
occurrence that the Requisite Lenders consent and agree shall not be deemed to
constitute a "Restricted Payment".
"Sale-Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of any real or
tangible personal property, which property has been or is to be sold or
transferred by the Company or any such Subsidiary to such Person or its
Affiliates in contemplation of such leasing.
"Sands" means the Sands Hotel and Casino located in Atlantic City, New
Jersey.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Security Agreement" means the Security Agreement contemporaneously
herewith made by each of Guarantor and the Company to the Trustee for its
benefit and the benefit of the Holders, as the same may be amended from time to
time.
"Security Documents" means this Indenture, the Security Agreement, the
[Collateral Assignment of Leases], and the Mortgage and any other mortgage, deed
of trust, security agreement or similar instrument securing the Company's or the
Guarantor's obligations with respect to the Securities or under this Indenture
or any of the other Security Documents.
"Security Interest" has the meaning specified in Section 1401(a).
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
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"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security, means the
earlier of (a) the date specified in such Security as the fixed date on which
the 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) and (b) the
Demand Payment Date.
"Stated Ratio" has the meaning specified in Section 1503.
"Subordination Determination" has the meaning specified in Section
1405(b).
"Subordination Request" means a written request of the Company or any
of its Subsidiaries in the form of a Company Order delivered pursuant to Section
1405(b).
"Subsidiary" of any Person means any corporation, partnership, joint
venture, trust or estate of which (or in which) more than 50% of (a) the issued
and outstanding Capital Stock having ordinary voting power to elect a majority
of the Board of Directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency), (b) the
interest in the capital or profits of such partnership or joint venture or (c)
the beneficial interest in such trust or estate, is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person's other Subsidiaries.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
as amended from time to time.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"United States Government Obligations" means securities which are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only as long as no
senior class of securities has such voting power by reason of any contingency.
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"Working Capital Indebtedness" means Indebtedness designated as such by
the Board of Directors of the Company, the proceeds of which are to be held or
applied for working capital purposes, not to exceed, at any one time
outstanding, in the aggregate, principal of $25 million (plus interest accrued
for not more than 365 days) for all such Indebtedness of the Company and its
Subsidiaries.
SECTION 102 Compliance Certificates and Opinions.
Upon any application or request by the Company or the Guarantor to the
Trustee to take any action under any provision of this Indenture, the Company or
the Guarantor shall furnish to the Trustee an Officers' Certificate stating that
all conditions precedent, if any, provided for in this Indenture (including any
covenant compliance with which constitutes a condition precedent) relating to
the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company or the
Guarantor may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by,
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counsel, unless such officer knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to the
matters upon which his certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer or
officers of the Company or the Guarantor stating that the information with
respect to such factual matters is in the possession of the Company or the
Guarantor, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104 Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture or otherwise to be given
or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person
or by agents duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument
or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company or the Guarantor. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the Holders signing such
instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and conclusive in favor of the Trustee and the Company or
the Guarantor, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a capacity
other than his individual capacity, such certificate or affidavit shall
also constitute sufficient proof of authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held by any
Person, and the date of holding the same, shall be proved by the Security
Register.
(d) If the Company or the Guarantor shall solicit from the Holders of
Securities any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company or the Guarantor may, at its option, by or
pursuant to Board Resolution, fix in advance a record date for the
determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the
Company or the Guarantor shall have no obligation to do so. Notwithstanding
TIA
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Section 316(c), such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not earlier than
the date 30 days prior to the first solicitation of Holders generally in
connection therewith and not later than the date such solicitation is
completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the
close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
Outstanding Securities have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as
of such record date; provided that no such authorization, agreement or
consent by the Holders on such record date shall be deemed effective unless
it shall become effective pursuant to the provisions of this Indenture not
later than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefore or in lieu
thereof including, without limitation, in respect of anything done, omitted
or suffered to be done by the Trustee or the Company or the Guarantor in
reliance thereon, whether or not notation of such action is made upon such
Security.
(f) For the purpose of the Company or the Guarantor complying with any
requirement of the Casino Control Commission, or the Division of Gaming
Enforcement or of the Casino Control Act, every holder, intermediary
holder, intermediary beneficial holder and beneficial holder of a Security
shall be deemed to authorize any Holder and any other holder, intermediary
holder, intermediary beneficial holder and beneficial holder of a Security,
upon written request of an Officer of the Company, the Guarantor, or the
Trustee expressing reliance on this Section and enclosing a copy of this
Section, to release, and any such holder, intermediary holder, intermediary
beneficial holder and beneficial holder shall be required to release, to
the Company, the Guarantor, or the Trustee, as the case may be, the name,
address, telephone number, principal contact person, and amount of such
holdings, intermediary holdings, intermediary beneficial holdings and
beneficial holdings of Securities of each such holder, intermediary holder,
intermediary beneficial holder and beneficial holder of a Security.
SECTION 105 Notices, etc., to Trustee, Company and Guarantor.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, the Company or the Guarantor shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Trustee at its Corporate Trust Office, Attention:
Corporate Trust Administration, or
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(2) the Company or the Guarantor by the Trustee or by any Holder shall
be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid,
to the Company or the Guarantor, as the case may be, addressed to it at the
address of its principal office specified in the first paragraph of this
Indenture, with a copy to: Sands Hotel and Casino, Indiana Avenue and
Brighton Park, Atlantic City, N.J. 08401, or at any other address
previously furnished in writing to the Trustee by the Company or the
Guarantor, as the case may be.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders, such
notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice mailed
to a Holder in the manner herein prescribed shall be conclusively deemed to
have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver
shall be the equivalent of such notice. Waivers of notice by Holders shall
be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to
mail notice of any event to Holders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of
giving such notice as shall be satisfactory to the Trustee shall be deemed
to be a sufficient giving of such notice for every purpose hereunder.
Any notices hereunder that are required to be given to the Casino
Control Commission shall be addressed to: Document Control Unit, Casino
Control Commission, Tennessee Avenue and the Boardwalk, Arcade Building,
Atlantic City, New Jersey 08401, Attention: Chief of Administrative
Operations. Any notices hereunder that are required to be given to the
Division of Gaming Enforcement shall be addressed to: Division of Gaming
Enforcement, 140 East Front Street, CN-047, Trenton, New Jersey 08625,
Attention: Deputy Director for the Division of Gaming Enforcement.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
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SECTION 108. Successors and Assigns.
All covenants and agreements in this Indenture and in the Security
Documents by each of the Company or the Guarantor shall bind its successors and
assigns, whether so expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto, any Paying Agent, any
Securities Registrar and their successors hereunder, and the Holders, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of New York. This Indenture is subject to
the provisions of the Trust Indenture Act of 1939, as amended, that are required
to be part of this Indenture and shall, to the extent applicable, be governed by
such provisions.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, sinking
fund payment date or Stated Maturity or Maturity of any Security shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or of
the Securities) payment of interest or principal (and premium, if any) need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date, Redemption
Date or sinking fund payment date, or at the Stated Maturity or Maturity;
provided that no interest shall accrue on such payment for the period from and
after such Interest Payment Date, Redemption Date, sinking fund payment date,
Stated Maturity or Maturity, as the case may be.
SECTION 113. Casino Control Act.
Notwithstanding the provisions of Section 111 hereof, each of the
provisions of this Indenture is subject to and shall be enforced in compliance
with the provisions of the Casino Control Act, to the extent applicable, and the
regulations promulgated thereunder, unless such provisions are in conflict with
the TIA, in which case the TIA shall control. The Securities are to be held
subject to the condition that if a holder thereof is found to be disqualified by
the Casino Control Commission pursuant to the provisions of the Casino Control
Act, such holder shall dispose of the Securities in accordance with the
provisions of Section 1109 hereof. The Company shall have the right to
repurchase the Securities at the lowest of (i) the principal
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amount thereof, (ii) the amount which the Disqualified Holder or beneficial
owner paid for the Securities, together with accrued interest up to the date of
the determination of disqualification, or (iii) the market value of such
Securities.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities and the Trustee's certificate of authentication shall be
in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any portion of the text of
any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
The definitive Securities shall be printed, lithographed or engraved on
steel-engraved borders or may be produced in any other manner, all as determined
by the officers of the Company executing such Securities, as evidenced by their
execution of such Securities.
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SECTION 202. Form of Face of Notes.
Atlantic Coast Entertainment Holdings, Inc.
3% Note Due 2008
No. $
---------------- -------------
Atlantic Coast Entertainment Holdings, Inc., a Delaware corporation
(herein called the "Company", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to __________ or registered assigns in full satisfaction of the principal sum of
__________ U.S. Dollars, together with interest which shall accrue thereon at a
rate of 3% per annum compounded annually on each [__________], (i) on the Demand
Payment Date, the Applicable Common Stock or (ii) if the Demand Payment Date
does not occur on or prior to September 29, 2008, then on September 29, 2008
cash in the amount of such principal plus accrued interest. The obligations
under this Security shall be deemed fully paid, satisfied, discharged and
extinguished as contemplated in the Indenture. Notwithstanding anything
contained herein, the rate of interest on the Securities shall not exceed the
highest rate permitted by law. Payment of this Security will be made at the
office or agency of the Company maintained for that purpose in The City of New
York, or at such other office or agency of the Company as may be maintained for
such purpose either (a) in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts in the case of payment pursuant to clause (i) above or (b) in Applicable
Common Stock in the case of payment pursuant to clause (ii) above.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place. Unless the certificate of
authentication hereon has been duly executed by the Trustee referred to on the
reverse hereof by manual signature, this Security shall not be entitled to any
benefit under the Indenture, or be valid or obligatory for any purpose.
G-25
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: [__________]Atlantic Coast Entertainment Holdings, Inc.
By
------------------------
Attest:
- --------------------------
Authorized Signature
SECTION 203. Form of Reverse of Notes
This Security is one of a duly authorized issue of securities of the
Company designated as its 3% Notes Due 2008 (herein called the "Securities"),
limited (except as otherwise provided in the Indenture referred to below) in
aggregate principal amount to $[110] million, which may be issued under an
indenture (herein called the "Indenture") dated as of [____________] between the
Company, [Name of Guarantor] (the "Guarantor") and [___________________],
trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties, obligations and immunities thereunder of the Company, the
Trustee and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered. Interest on the
Securities shall be computed on the basis of a 360-day year of twelve 30-day
months.
The Securities are subject to redemption upon not less than 30 nor more
than 60 days' notice, at any time prior to the Company's receipt of a Demand
Payment Notice (or, with respect to a particular Note, a notice of payment in
accordance with Section 1502 of the Indenture), as a whole or in part, at the
election of the Company but only if such election is consented to by the
Requisite Lenders, at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued, unpaid interest to the
Redemption Date, all as provided in the Indenture.
Each of the provisions of this Security is subject to and shall be
enforced in compliance with the provisions of the Casino Control Act and the
regulations promulgated thereunder, to the extent applicable.
Each Holder by accepting a Security or becoming the beneficial owner
thereof shall for all purposes be deemed to agree and consent (a) to all of the
terms and provisions of the Indenture and (b) that all Holders, whether initial
holders or subsequent transferees, shall be subject to the qualification
provisions of the Casino Control Act. As set forth more fully in the Indenture,
in the event that the Casino Control Commission determines that a Holder is not
qualified under the Casino Control Act, the Company shall have the absolute
right and obligation
G-26
to purchase from such Holder (the "Disqualified Holder") the Securities the
Disqualified Holder may then possess, no later than forty-five days after the
date that the Company serves notice on any Disqualified Holder of such
determination. Immediately upon such determination, the Disqualified Holder
shall have (i) no further right to exercise, directly or through any trustee or
nominee, any right conferred by its Securities or (ii) no further right to
receive any dividends, interest, or other distribution or payment with respect
to any such Securities. In the event a Disqualified Holder fails to so sell its
Securities within 30 days after the determination by the Casino Control
Commission, the Company shall purchase such Securities within 15 days after the
end of such 30 day period (I) at the lowest of (i) the principal amount thereof,
(ii) the amount which the Disqualified Holder paid for the Securities, together
with accrued interest up to the date of the determination of disqualification or
(iii) the market value of such Securities or (II) in lieu of a purchase pursuant
to clause (I), at the election of the Company if the same is consented to by the
Requisite Lenders, in exchange for the number of shares of Applicable Common
Stock that would apply to such Securities in the event of a Demand Payment.
In the case of any redemption of Securities in accordance with Article
Eleven of the Indenture, interest that has accrued on or prior to the Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Date referred to on the face hereof. Securities (or portions thereof) for
whose redemption and payment provision is made in accordance with the Indenture
shall cease to bear interest from and after the Redemption Date.
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof shall be issued in the
name of the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related Defaults and Events of Default, upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Security. Any Lien that may from time to time secure the Securities is
subject to subordination or termination.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the Guarantor and the rights of the Holders under the Indenture at
any time by the Company, the Guarantor and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Securities at the
time Outstanding. The Indenture also contains provisions permitting the Holders
of specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such amendment,
modification, consent or waiver by or on behalf of the Holder of this Security,
or otherwise in accordance with the terms of the Indenture, shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
G-27
any Security issued upon the registration of transfer hereof or in exchange here
for or in lieu hereof whether or not notation thereof is made upon this
Security.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable on the Security
Register of the Company, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained for such purpose in
The City of New York, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amounts will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
The Securities are entitled to the benefit of the Guarantee by the
Guarantor to the extent provided in the Guarantee.
Subject to the provisions of the Indenture, the Requisite Lenders may
elect, upon delivery of notice to the Trustee, at their sole discretion, at any
time after the original issuance of any Notes through the close of business on
the final maturity date of the Notes, to cause all (but not less than all)
outstanding Notes to be convertible at the option of the Holder, in whole or in
part, into that number of shares of Company Common Stock (as such shares shall
be constituted at the date of conversion) obtained by multiplying the principal
amount of this Note by the Stated Ratio in effect at such time, by surrender of
the Note so to be converted, together with any required funds as provided in
Section 1502 of the Indenture.
All fractions will be rounded down to the nearest whole number of
shares, and no fractional shares will be issued upon any conversion or Demand
Payment referred to above and no payment will be made in respect of any fraction
of a share which would otherwise be issuable upon the surrender of any Note or
Notes for conversion or payment in shares upon a Demand Payment.
Prior to the time of due presentment of this Security for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any agent shall be affected by notice to
the contrary.
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All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Guarantor (which term includes any successor Person under the
Indenture) has unconditionally guaranteed, to the extent set forth in the
Indenture and subject to the provisions in the Indenture, (a) the due and
punctual payment of the principal of and interest on the Securities, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on overdue principal, and, to the extent permitted by law, interest, and the due
and punctual performance of all other obligations of the Company to the Holders
or the Trustee all in accordance with the terms set forth in the Indenture and
(b) in case of any extension of time of payment or renewal of any Securities or
any of such other obligations, that the same will be promptly paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at Stated Maturity, by acceleration or otherwise.
The obligations of the Guarantor to the Holders of Securities and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth
in the Indenture and reference is hereby made to the Indenture for the precise
terms of the Guarantee.
Guarantor:
---------
[Name of Licensee]
By:
--------------------------------
SECTION 204. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially
the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned Indenture.
[ ]
-------------------
as Trustee
By:
---------------------------------
Authorized Officer
G-29
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
(a) The aggregate principal amount of securities which may be
authenticated and delivered under this Indenture is limited to $[110
million], except for securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
securities.
(b) The Notes shall be known and designated as the "3% Notes Due 2008"
of the Company. Their Stated Maturity shall be September 29, 2008, and they
shall accrue interest (which shall be payable only at the Stated Maturity
of the Notes) at the rate of 3% per annum from [Issue Date], accruing and
compounding on each [__________________] and annually thereafter and at
said Stated Maturity, until the principal thereof is paid or duly provided
for.
(c) The principal of (and premium, if any, on) and interest on the
Securities shall be payable at the office or agency of the Company
maintained for such purpose in The City of New York, or at such other
office or agency of the Company as may be maintained for such purpose;
provided, however, that, at the option of the Company, interest may be paid
by check mailed to addresses of the Persons entitled thereto as such
addresses shall appear on the Security Register.
(d) The Securities shall be redeemable as provided in Article Eleven.
(e) The Securities shall be payable or convertible into Company Common
Stock as provided in Article Fifteen.
(f) At any time after the Issue Date, the Requisite Lenders shall be
entitled (in their sole and absolute discretion) to demand payment (a "Demand
Payment") of all of the Notes by delivering a notice (a "Demand Payment Notice")
to the Company demanding payment pursuant to this Section 301(f). Upon receipt
of a Demand Payment Notice, the Notes shall thereafter be satisfied (and such
Notes thereby extinguished) through the delivery by the Company to the Holder
thereof of such number of shares of Company Common Stock (as such shares shall
be constituted at the date of such payment) obtained by multiplying the
principal amount of each Note by the Stated Ratio in effect at such time, plus
any other securities or property that would be required to be issued in respect
of such Note, as contemplated in Article Fifteen, in the case of Demand Payment
(collectively, the "Applicable Common Stock"). All fractions will be rounded
down to the nearest whole number of shares, and no fractional shares will be
issued upon any Demand Payment and no payment will be made in respect of any
fraction of a share which would otherwise be issuable upon the surrender of any
Note or Notes in connection therewith. On the Demand Payment Date the Notes
shall for all purposes cease to be (and shall be deemed to cease to be)
outstanding and shall be discharged and all principal and accrued interest
thereon extinguished and shall thereafter represent solely the right of the
Holder to receive the Applicable Common Stock contemplated herein by surrender
of such Notes in the manner provided in Article Fifteen hereof.
G-30
(g) If the Company is served with notice of the disqualification of any
Holder under Section 105(d) of the Casino Control Act by the Casino Control
Commission, such Holder will be prohibited under Section 105(e) of the Casino
Control Act from (a) receiving interest on the Securities held by such Holder,
(b) exercising, directly or through any trustee or nominee, any right conferred
on such Securities, and (c) receiving any remuneration in any form from any
Person licensed or qualified by the Casino Control Commission (including the
Company, the Guarantor and the Trustee) for services rendered or otherwise.
Notwithstanding the foregoing, the Trustee shall be entitled to exercise all
rights with respect to the Securities held by such Holder including, but not
limited to, accelerating the Securities (any monies or securities received by
the Trustee on behalf of such Holder to be held in trust for such Holder
pursuant to Section 605 hereof). If the Trustee exercises voting rights with
respect to such Securities, such votes shall be cast in the same proportion as
the votes of the other Outstanding Securities are cast on such issue. A copy of
any notice served upon the Company as described above shall be promptly
delivered by the Company to the Trustee. Any such notice to the Trustee shall be
effective against the Trustee on the second Business Day after receipt thereof
by a Responsible Officer of the Trustee.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman, its President, a Vice President, or the Chief Financial Officer. The
signature of any officer on the Securities may be manual or facsimile signatures
of the present or any future such authorized officer and may be imprinted or
otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized officer, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
G-31
In case the Company, pursuant to Article Eight, shall be consolidated
or merged with or into any other Person or shall convey, transfer, lease or
otherwise dispose of its properties and assets substantially as an entirety to
any Person, and the successor Person resulting from such consolidation, or
surviving such merger, or into which the Company shall have been merged, or the
Person which shall have received a conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture supplemental hereto
with the Trustee pursuant to Article Eight, any of the Securities authenticated
or delivered prior to such consolidation, merger, conveyance, transfer, lease or
other disposition may, from time to time, at the request of the successor
Person, be exchanged for other Securities executed in the name of the successor
Person with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Securities surrendered for such
exchange and of like principal amount; and the Trustee, upon Company Request of
the successor Person, shall authenticate and deliver Securities as specified in
such request for the purpose of such exchange. If Securities shall at any time
be authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer of
any Securities, such successor Person, at the option of the Holders but without
expense to them, shall provide for the exchange of all Securities at the time
Outstanding for Securities authenticated and delivered in such new name.
SECTION 304.Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 1002,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Security Register shall be in
written form or any other form capable of being converted into written form
within a reasonable
G-32
time. At all reasonable times, the Security Register shall be open to inspection
by the Trustee. The Trustee is hereby initially appointed as security registrar
(the "Security Registrar") for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of any
authorized denomination or denominations of a like aggregate principal amount
and like terms.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount and like terms, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Security Registrar) be
duly endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Security Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities, other
than exchanges not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the selection of Securities to be redeemed under Section 1104 and
ending at the close of business on the day of such mailing of the relevant
notice of redemption, (ii) to register the transfer of or exchange any Security
so selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part or (iii) to register a transfer of any
Security surrendered for conversion or in respect of any Demand Payment pursuant
to Article Fifteen.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee, or (ii)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon Company Order the Trustee shall authenticate and
deliver, in exchange for any
G-33
such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount, bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security shall be paid to the Person in whose name such
Security (or one or more Predecessor Securities) is registered at the close of
business on the Stated Maturity Date at the office or agency of the Company
maintained for such purpose pursuant to Section 1002.
SECTION 308. Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and premium,
if any, on) and (subject to Sections 305 and 307) interest on such Security and
for all other purposes whatsoever, whether or not such Security be overdue, and
none of the Company, the Trustee or any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, conversion,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee (or
to any other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so
G-34
delivered shall be promptly cancelled by the Trustee. If the Company shall so
acquire any of the Securities, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Securities
unless and until the same are surrendered to the Trustee for cancellation. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Securities held by the Trustee shall be disposed of by
the Trustee in accordance with its customary procedures and certification of
their disposal delivered to the Company.
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 311. Maximum Interest Rate. Regardless of any provision
contained herein, in the Securities or in any of the Security Documents, the
Holders shall not be entitled to receive, collect or apply as interest (whether
termed interest in the documents or deemed to be interest by judicial
determination or operation of law) on the Securities, any amount in excess of
the maximum amount allowed by applicable law, and, if any Holder ever receives,
collects or applies as interest any such excess, the amount that would be
excessive interest shall be deemed to be a partial prepayment of principal and
treated hereunder as such; and, if the principal amount of the Securities is
paid in full, any remaining excess shall forthwith be paid to the Company. In
determining whether or not the interest paid or payable under any specific
contingency exceeds the maximum amount of interest allowed by applicable law,
the Company and the Holders shall, to the maximum extent permitted under
applicable law, (i) characterize any nonprincipal payment as an expense fee, or
premium rather than interest; (ii) exclude voluntary prepayments and the effects
thereof; and (iii) amortize, prorate, allocate and spread, in equal parts, the
total amount of interest throughout the entire contemplated term of the
Securities.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of
Securities herein expressly provided for) and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture and releasing all liens and security interests in
the Collateral when
(1) either
(a) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306, (ii) Securities
for whose payment money has theretofore been deposited in trust with
the Trustee or any Paying Agent or segregated and held in trust by the
Company and thereafter repaid to the
G-35
Company or discharged from such trust, as provided in Section 1003 and
(iii) securities that have been duly delivered to the Trustee for
conversion or payment pursuant to Article Fifteen hereof) have been
delivered to the Trustee for cancellation; or
(b) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable as the result of a Demand
Payment, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for the purpose an amount (including any shares of
Company Common Stock) sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or Redemption
Date, or to satisfy the rights of holders of Securities under this
Indenture to obtain Applicable Common Stock in respect of any Demand
Payment;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
provided for in this Section 401 relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if money shall
have been deposited with the Trustee pursuant to subclause (b) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003, shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money and property deposited with the Trustee pursuant to Section 401 shall be
held in trust and, at the direction of the Company, be invested prior to
Maturity in United States Government Obligations, and applied by it, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
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acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for whose
payment such money has been deposited with the Trustee; but such money need not
be segregated from other funds except to the extent required by law. Any funds
remaining following payment of all Securities and all other obligations of the
Company hereunder shall be the property of the Company.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any principal of (or premium, if any, on)
any Security, or interest thereon, at its Maturity; or
(2) default in the performance, or breach, of any covenant or warranty
of the Company or any of its Subsidiaries in this Indenture or of the
Company or Guarantor in the Security Documents (other than a default in the
performance, or breach, of a covenant or warranty which is specifically
dealt with elsewhere in this Section), and continuance of such default or
breach for a period of 60 days after there has been given, by registered or
certified mail, to the Company and the Guarantor by the Trustee or to the
Company and the Guarantor and the Trustee by the Requisite Lenders a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder,
unless the Company or any of its Subsidiaries is proceeding, and continues
to proceed, diligently to cure any such default; or
(3) (A) there shall have occurred one or more defaults by the Company
or any of its Subsidiaries in the payment of the principal of or premium,
if any, on Indebtedness aggregating $5 million or more, when the same
becomes due and payable at the stated maturity thereof, and such default or
defaults shall have continued after any applicable grace period and shall
not have been cured or waived or (B) in accordance with the terms of an
agreement or instrument binding upon the Company or any of its
Subsidiaries, Indebtedness of the Company or any of its Subsidiaries
aggregating $5 million or more shall have been accelerated or otherwise
declared due and payable, or required to be prepaid or repurchased (other
than by regularly scheduled required prepayment), prior to the stated
maturity thereof; or
(4) any Person entitled to take the actions described in this Section
501(4), after the occurrence of any event of default under any agreement or
instrument evidencing any Indebtedness in excess of $5 million in the
aggregate of the Company or any of its Subsidiaries, shall notify the
Trustee of the intended sale or disposition of any assets of the Company or
any of its Subsidiaries that have been pledged to or for the benefit of
such Person to secure such Indebtedness or shall commence proceedings, or
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take any action (including by way of set-off) to retain in satisfaction of
any Indebtedness, or to collect on, seize, dispose of or apply, any such
assets of the Company or any of its Subsidiaries (including funds on
deposit or held pursuant to lock-box and other similar arrangements),
pursuant to the terms of any agreement or instrument evidencing any such
Indebtedness of the Company or any of its Subsidiaries or in accordance
with applicable law; or
(5) final judgments or orders rendered against the Company or any of
its Subsidiaries which require the payment in money, either individually or
in an aggregate amount, that is more than $10 million and (i) an
enforcement proceeding shall have been commenced by any creditor upon such
judgment or order and (ii) there shall have been a period of 60 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of pending appea1 or otherwise, was not in effect; or
(6) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company or any of its Subsidiaries a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition or in respect of the
Company or any such Subsidiary under the Federal Bankruptcy Code or any
other applicable federal or state law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
the Company or any such Subsidiary or of any substantial part of their
respective property, or ordering the winding up or liquidation of their
respective affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 90 consecutive days; or
(7) the institution by the Company or any of its Subsidiaries of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it
to the institution of bankruptcy or insolvency proceedings against it, or
the filing by it of a petition or answer or consent seeking reorganization
or relief under the Federal Bankruptcy Code or any other applicable federal
or state law or the consent by it to the filing of any such petition or to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or any such Subsidiary or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due; or
(8) any of the Security Documents ceases to be in full force and effect
in any material respect or any of the Security Documents ceases to create
in favor of the Trustee, with respect to any material amount of Collateral,
a valid and perfected first priority Lien on the Collateral purported to be
covered thereby, except for any cessation, release or subordination
contemplated or permitted (or resulting from any act contemplated or
permitted) by Section 1405 or as may be otherwise contemplated by this
Indenture; or
(9) the cessation of substantially all gaming operations at the Sands
for more than 60 consecutive days, except as a result of an Event of Loss;
or
(10) the loss by Guarantor or its successor or assigns of its legal
right to own or operate the Sands and such loss continues for more than 60
consecutive days.
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SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(6) or 501(7)) occurs and is continuing, then and in every such case,
the Trustee and the Requisite Lenders, may declare the principal amount of all
the Securities to be due and payable immediately, by a notice in writing to the
Company and the Guarantor, and upon any such declaration such principal amount
shall become immediately due and payable. If an Event of Default specified in
Section 501(6) or 501(7) occurs and is continuing, then the principal amount of
all the Securities shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee and any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Requisite Lenders, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum sufficient
to pay,
(A) all unpaid principal of (and premium, if any, on) any
Outstanding Securities which has become due otherwise than by such
declaration of acceleration, and interest on such unpaid principal at
the rate borne by the Securities, and
(B) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on Securities which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a declaration
of acceleration in respect of the Securities because of an Event of Default
specified in Section 501(3) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness or the same has been waived or stayed, and written notice of such
discharge, rescission, waiver or stay, as the case may be, shall have been given
to the Trustee by the Company and countersigned by the holders of such
Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days
after such declaration of acceleration in respect of the Securities, and no
other Event of Default has occurred during such 30-day period which has not been
cured or waived during such period.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
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The Company covenants that if
(a) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any), and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in any Security
Document or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company, the Guarantor or any other obligor
upon the Securities or the property of the Company, the Guarantor or of such
other obligor or their creditors, the Trustee (irrespective of whether the
principal of the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand on the Company for the payment of overdue principal,
premium, if any, or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
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(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
and as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money and property collected by the Trustee pursuant to this
Article or in connection with the exercise of remedies under any Security
Document shall be applied in the following order, at the date or dates fixed by
the Trustee and, in case of the distribution of such money on account of
principal (or premium, if any) or interest, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid for principal
of (and premium, if any, on,) and interest on the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Securities for principal (and premium, if any) and
interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
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SECTION 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(1) the Requisite Lenders shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(2) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(3) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(4) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority or
more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Section 507 to affect, disturb or prejudice the rights of any other
Holders, or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal
Premium and Interest.
The Holder of any of the Securities shall have the right, which is
absolute and unconditional, to receive payment, as provided herein (including,
if applicable, Article Thirteen) and in the terms of each note representing such
Securities of the principal of (and premium, if any, on) and interest on, such
Securities on the respective Stated Maturities expressed in such Securities (or,
in the case of redemption, on the Redemption Date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder; provided, however, that by a Holder's acquisition of
any of the Securities, such Holder or the beneficial owner thereof shall be
deemed to have consented to each and every provision of the Indenture including,
without limitation, the provisions of Sections 301, 1405 and Article Fifteen
hereof.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Security Document and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, the Trustee
and the Holders shall be restored severally and respectively to their former
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positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or any
Security Document or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
SECTION 512. Control by Holders.
Notwithstanding anything to the contrary set forth in Section 316(a) of
the TIA (the provisions of which are hereby excluded), the Requisite Lenders
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee under this Indenture or the Security Documents,
provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability unless it has obtained appropriate indemnity.
SECTION 513. Waiver of Defaults and Compliance.
Notwithstanding anything to the contrary set forth in Section 316(a) of
the TIA (the provisions of which are hereby excluded) the Requisite Lenders may
on behalf of the Holders of all the Securities:
(1) waive any past default hereunder and its consequences, except
a default in respect of the payment of the principal of (or premium, if
any, on) or interest
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on any Security, and upon any such waiver, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have
been cured and released, for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon; and
(2) waive future compliance with any term, provision or condition
of this Indenture or the Security Documents or any related instruments,
agreements or documents (but no such waiver shall extend to or affect such
term, provision or condition except to the extent so expressly waived), in
which event the Company and the Guarantor may omit to comply with any such
term, provision or condition of this Indenture, the Security Documents or
any related instrument, agreement or document.
The provisions of this Section 513 and Section 512 hereof apply to all
provisions of this Indenture and the Security Documents and the fact that
various provisions of this Indenture and the Security Documents may include
specific reference to the consent or other approval or agreement of or by the
Requisite Lenders shall not, for any purpose, be deemed to limit the application
of Section 512 or this Section 513.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
Within 90 days after the occurrence of any Default hereunder, the
Trustee shall transmit in the manner and to the extent provided in TIA Section
313(c), notice of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided, however, that, except in the
case of a Default in the payment of the principal of (or premium, if any, on) or
interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interest of the
Holders; and provided further that in the case of any Default of the character
specified in Section 501(4) no such notice to Holders shall be given until at
least 30 days after the occurrence thereof. The Trustee shall not be deemed to
have knowledge of any Default or Event of Default hereunder unless a Responsible
Officer in its Corporate Trust Department shall have actual knowledge thereof.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through 315(d):
(1) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
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(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(8) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture; and
(9) the Trustee shall not be personally liable, in case of entry by it
upon any property subject to the liens of the Security Documents, for debts
contracted or liabilities or damages incurred in the management or
operation thereof.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
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The Trustee and its directors, officers, employees and Affiliates shall
cooperate with the Casino Control Commission and the Division of Gaming
Enforcement and provide such information and documentation as may from time to
time be requested by such agencies.
The Trustee may rely on, and shall be protected with respect to any
action taken or omitted to be taken in good faith in accordance with, the
direction of the Requisite Lenders.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder and that the statements made by
it in a Statement of Eligibility and Qualification of Form T-1 supplied to the
Company are true and accurate, subject to the qualifications set forth therein.
The Trustee shall not be accountable for the use or application by the Company
of Securities or the proceeds thereof.
The Trustee makes no representations with respect to the effectiveness
or adequacy of any Security Document, or the validity, perfection or priority,
if any, of liens granted to it under this Indenture or the Security Documents.
The Trustee shall not be responsible for ascertaining or maintaining such
validity, perfection or priority, if any, and shall be fully protected in
relying upon certificates and opinions delivered to it in accordance with the
terms of this Indenture or the Security Documents.
SECTION 604. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company or of the Trustee, in its individual or any other capacity,
may become the owner or pledgee of Securities and, subject to TIA Sections
310(b) and 311, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Paying Agent, Security Registrar or such
other agent.
SECTION 605. Money Held in Trust.
Except as otherwise provided herein, money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise provided herein or agreed with the
Company.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
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(1) to pay to the Trustee from time to time such compensation as the
Company and the Trustee shall from time to time agree for all services
rendered by it hereunder and under the Security Documents (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust); and
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture and under the Security Documents (including the
reasonable compensation and the expenses and disbursements of its agents
and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust and under the Security Documents, including the costs and
expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder
or thereunder.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such obligations
of the Company, the Trustee shall have a claim prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (and premium, if any, on) or interest
on particular Securities.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be eligible
to act as Trustee under TIA Section 310(a) and shall have a combined capital and
surplus of at least $50,000,000. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of federal,
state, territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
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(b) Subject to the provisions of the Casino Control Act, the Trustee
may resign at any time by giving written notice thereof to the Company, the
Casino Control Commission and the Division of Gaming Enforcement. If the
instrument of acceptance by a successor Trustee required by Section 609 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) Subject to the provisions of the Casino Control Act, the Trustee
may be removed at any time by Act of the Requisite Lenders, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA Section
310(b) after written request therefor by the Company or by any Holder who
has been a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 607 and shall
fail to resign after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, subject to the provisions of the Casino Control Act, (i)
the Company, by a Board Resolution, may remove the Trustee, or (ii) subject to
TIA Section 315(e), any Holder who has been a bona fide Holder of a Security for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Requisite Lenders delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
Notwithstanding the foregoing, any successor Trustee may be appointed only with
the prior, express approval of the Casino Control Commission, in consultation
with the Division of Gaming Enforcement, provided that such successor Trustee
must first be qualified as a financial
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source by and cooperate with the Casino Control Commission and the Division of
Gaming Enforcement.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to the Holders of
Securities in the manner provided for in Section 106. Each notice shall include
the name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall take all necessary
steps to be approved by the Casino Control Commission and shall execute,
acknowledge and deliver to the Company, to the Guarantor and to the retiring
Trustee an instrument accepting such appointment, and the successor Trustee, the
Company and the Guarantor shall enter into a supplemental indenture evidencing
the appointment of the successor Trustee and, as required, any amendment or
modification to any Security Document or any additional Security Document.
Thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities;
and in case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee;
and in all such cases such certificates shall have the full force which it is
anywhere in the Securities or in this Indenture provided that the certificate of
authentication of
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any predecessor Trustee or to authenticate Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTOR
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that none of the Company or the Trustee or any
agent of either of them shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Holders in accordance
with TIA Section 312, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under TIA Section 312(b).
SECTION 702. Reports by Trustee.
(a) Within 60 days after May 15 of each year commencing with the first
May 15 after the first issuance of Securities, the Trustee shall transmit to the
Holders, in the manner and to the extent provided in TIA Section 313(c), a brief
report dated as of such May 15 if required by TIA Section 313(a).
The Trustee shall transmit to the Holders, within the times hereinafter
specified a brief report with respect to the following:
(1) the release, or release and substitution, of property subject to
any Lien of this Indenture (and the consideration therefor, if any) unless
the fair value of such property, as set forth in the Officers' Certificate
or Opinion of Counsel required by TIA Section 314(d), is less than 10 per
centum of the aggregate principal amount of the Securities Outstanding at
the time of such release, or such release and substitution, such report to
be so transmitted within 90 days after such time; and
(2) the character and amount of any advances made by it as such since
the date of the last report transmitted pursuant to the provisions of TIA
Section 313(a) (or if no such report has yet been so transmitted, since the
date of execution of the Indenture), for the reimbursement of which it
claims or may claim a Lien or charge, prior to that of the Indenture
Securities, on the trust estate or on property or funds held or collected
by it as such Trustee, and which it has not previously reported pursuant to
this clause (2), if such advances remaining unpaid at any time aggregate
more than 10 per centum of the aggregate principal amount of the Securities
Outstanding at such time, such report to be so transmitted within 90 days
after such time.
To the extent required by applicable laws, rules and regulations, a
copy of each such report shall, at the time of such transmission to the Holders,
be filed with each stock exchange, if any, upon which the Securities are listed,
and also with the Commission.
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(b) The Trustee shall transmit by mail to the Casino Control Commission
and the Division of Gaming Enforcement (i) an initial list of the beneficial
Holders of the Securities promptly after the issuance of the Securities, (ii)
current lists of the Holders appearing in the Security Register on a
twice-per-year basis, no later than March 1 and September 1 of each year, and
(iii) upon request by the Casino Control Commission or the Division of Gaming
Enforcement, such additional information with respect to the beneficial Holders
of the Securities as the Trustee may obtain through its good faith efforts.
(c) The Trustee shall notify the Casino Control Commission and the
Division of Gaming Enforcement, simultaneously with any notice given to the
Holders, of any default or acceleration under the Securities, this Indenture,
the Security Documents, or any other documents, instrument, agreement, covenant,
or condition related to the issuance of the Securities, whether declared or
effectuated by the Trustee or the Holders. The Trustee shall notify the Casino
Control Commission and the Division of Gaming Enforcement on a continuing basis
and in writing, of any actions taken by the Trustee or the Holders with regard
to such default, acceleration or similar matters related thereto.
(d) The Trustee shall notify the Casino Control Commission and the
Division of Gaming Enforcement of the removal or resignation of the Trustee
promptly after such removal or resignation.
(e) The Trustee shall provide to the Casino Control Commission and the
Division of Gaming Enforcement, promptly after the execution by the Trustee of
the same, copies of any and all amendments or modifications to this Indenture,
the Securities, the Security Documents, or any other documents, instrument,
agreement, covenant or condition related to the issuance of the Securities.
SECTION 703. Reports by Company and Guarantor.
The Company and the Guarantor shall, to the extent required by the TIA:
(1) file with the Trustee, within 15 days after the Company or the
Guarantor, as the case may be, is required to file the same with the
Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations prescribe)
which the Company may be required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if
the Company or the Guarantor, as the case may be, is not required to file
information, documents or reports pursuant to either of said Sections, then
it shall file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such
additional information,
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documents and reports with respect to compliance by the Company or the
Guarantor, as the case may be, with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations;
(3) transmit by mail to all Holders, in the manner and to the extent
provided in TIA Section 313(c), within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents and reports
required to be filed by the Company or the Guarantor, as the case may be,
pursuant to paragraphs (1) and (2) of this Section as may be required by
rules and regulations prescribed from time to time by the Commission; and
(4) comply in all material respects with all requirements and
provisions of the Casino Control Act and notify the Trustee by mail of all
formal hearings and formal proceedings materially relating to the Company,
the Guarantor or their respective successors, before the Casino Control
Commission relating to the plenary casino licenses for the Casino, as the
same are scheduled. Such notice shall be in writing and given at least
seven days prior to the hearing to which such notice relates, unless a
shorter notice is given to the Company in which event the Company shall
notify the Trustee promptly upon receiving such definite information as
shall be contained in such notice. The Company hereby agrees that the
Trustee may, but shall have no obligation to, attend such hearings and
other proceedings if permitted to do so by the Casino Control Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company and Subsidiaries May Consolidate, etc., Only
on Certain Terms.
Neither the Company nor any of its Subsidiaries shall consolidate with
or merge with or into or sell, assign, convey, lease or transfer all or
substantially all of its properties and assets to any Person or group of
affiliated Persons in a single transaction or through a series of transactions,
except that:
(a) The Company or any of its Subsidiaries may consolidate with or
merge with or into or sell, assign, convey, lease or transfer all or
substantially all of its properties and assets (x) if consented to by the
Requisite Lenders; and (y) the following requirements are complied with,
unless otherwise consented to by the Requisite Lenders: (i) the Company or
such Subsidiary shall be the continuing Person, or the resulting, surviving
or transferee Person (the "surviving entity") shall be a Person organized
and existing under the laws of the United States or any State thereof or
the District of Columbia; (ii) the surviving entity (other than an existing
Guarantor) shall expressly assume, by a supplemental indenture executed and
delivered to the Trustee, in form and substance reasonably satisfactory to
the Trustee, all of the obligations of the Company or such Subsidiary, as
applicable under the Securities, the Guarantee, this Indenture and the
Security Documents, and the Company or the surviving entity shall have
taken all steps necessary or desirable to perfect and protect the security
interests granted or purported to
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be granted by the Security Documents (including, without limitation, the
priority thereof) in the applicable Collateral, including, without
limitation, the execution, delivery, filing and recordation of additional
mortgages, pledges, assignments and security agreements; (iii) immediately
before and immediately after giving effect to such transaction, or series
of transactions (including, without limitation, any Indebtedness incurred
or anticipated to be incurred in connection with or in respect of, such
transaction or series of transactions), no Default or Event of Default
shall have occurred and be continuing; (iv) such transaction will not
result in the loss, unless appropriately replaced, of any gaming or other
license necessary for the continued operation of the Company or any
Subsidiary as conducted immediately prior to such consolidation, merger,
conveyance, transfer or lease; and (v) neither the Company nor any
Subsidiary would thereupon become obligated with respect to any
Indebtedness, nor any of its property subject to any Lien, unless the
Company or such Subsidiary could incur such Indebtedness or create such
Lien without violation of the terms of this Indenture;
(b) a Subsidiary may consolidate with or merge into or sell, assign,
convey, lease or transfer all or substantially all of its properties and
assets to or with the Company or any Subsidiary of the Company: (x) if
consented to by the Requisite Lenders; and (y) the following requirements
are complied with, unless otherwise consented to by the Requisite Lenders:
(i) the surviving entity (other than an existing Guarantor) shall expressly
assume, by a supplemental indenture executed and delivered to the Trustee,
in form and substance reasonably satisfactory to the Trustee, all of the
obligations of such Subsidiary under the Securities, the Guarantee, this
Indenture and the Security Documents, and such Subsidiary or surviving
entity, as the case may be, shall have taken all steps necessary or
desirable to perfect and protect the security interests granted or
purported to be granted by the Security Documents (including, without
limitation, the priority thereof), including, without limitation, the
execution, delivery, filing and recordation of additional mortgages,
pledges, assignments and security agreements, (ii) such transaction will
not impair the pledge of the stock of such Subsidiary granted or purported
to be granted pursuant to the Security Documents, and (iii) such
transaction will not result in the loss (unless appropriately replaced) of
any gaming or other license necessary for the continued operation of the
Company and its Subsidiaries as conducted immediately prior to such sale,
assignment, conveyance, transfer or lease; and
(c) the Company or such Person shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment conveyance, transfer or lease and,
if a supplemental indenture is required in connection with such
transaction, such supplemental indenture, comply with this Section 801.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company or the Guarantor with or merger
of the Company or any Guarantor with or into any other Person or any conveyance,
transfer or lease of the properties and assets of the Company or the Guarantor
substantially as an entirety to any Person in accordance with Section 801,
unless otherwise consented to by the Requisite Lenders, the successor Person
formed by such consolidation or into which the Company or the Guarantor
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is merged or to which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company or the Guarantor under this Indenture with the same effect as if such
successor Person had been named as the Company or the Guarantor herein, and in
the event of any such conveyance or transfer, the Company or the Guarantor
(which term shall for this purpose mean the Person named as the "Company" or the
"Guarantor," as the case may be, in the first paragraph of this Indenture or any
successor Person which shall theretofore become such in the manner described in
Section 801), except in the case of a lease, shall be discharged of all
obligations and covenants under this Indenture and the Securities and may be
dissolved and liquidated.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures and Amendments to Security
Documents Without Consent of Holders.
Without the consent of any Holders, the Company and the Guarantor, when
each is authorized by a Board Resolution, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto or
amendment to any Security Document, in form satisfactory to the Trustee, for any
of the following purposes:
(1) to evidence the succession of another Person to the Company or the
Guarantor and the assumption by any such successor of the covenants of the
Company or the Guarantor, as the case may be, contained herein, in the
Securities and in the Security Documents; or
(2) to add to the covenants of the Company or the Guarantor for the
benefit of the Holders or to surrender any right or power herein conferred
upon the Company or the Guarantor; or
(3) to add any additional Events of Default; or
(4) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee pursuant to the requirements of Section 609; or
(5) to cure any ambiguity, to correct or supplement any provision
herein or in the Security Documents which may be inconsistent with any
other provision herein or in the Security Documents, or to make any other
provisions with respect to matters or questions arising under this
Indenture or under the Security Documents; provided that such action shall
not adversely affect the interests of the Holders in any material respect;
or
(6) to establish or maintain the Lien of this Indenture and the other
Security Documents or to correct or amplify the description of any
Collateral subject to the Lien of this Indenture or the other Security
Documents, or to subject additional property to the Lien of this Indenture
or other Security Documents; or
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(7) to add any additional Guarantor; or
(8) to make any other change that does not adversely affect the rights
of any Holder; or
(9) to secure the Securities.
SECTION 902. Supplemental Indentures and Amendments to Security
Documents with Consent of Holders.
Upon the request of the Company and the Guarantor, by a Board
Resolution authorizing the execution thereof, together with the consent of the
Requisite Lenders, by Act of said Holders delivered to the Trustee, the Trustee
shall join the Company and the Guarantor in an indenture or indentures
supplemental hereto or amendments to the Security Documents, for any purpose,
including, without limitation, for the purpose of adding any provisions to or
changing, modifying or amending in any manner or eliminating any of the
provisions of this Indenture or the Security Documents or making additions to,
changing, modifying, amending or eliminating in any manner the rights of the
Holders hereunder or thereunder; provided, however, that no such supplemental
indenture, or addition, change, amendment or modification to, or elimination of
any provision of, any Security Document, shall, without the consent of the
Holder of each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the coin or currency in which any Security or any
premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture,
or
(3) modify any of the provisions of this Section or Section 513, except
to increase any such percentage or to provide that certain other provisions
of this Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture or amendments
to the Security Documents, but it shall be sufficient if such Act shall approve
the substance thereof.
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SECTION 903. Execution of Supplemental Indentures and Amendments
to Security Documents.
In executing, or accepting the additional trusts created by, any
supplemental indenture or amendment to the Security Documents permitted by this
Article or the modifications thereby of the trusts created by this Indenture or
the Security Documents, the Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture or amendment to the Security Documents
is authorized or permitted by this Indenture and all conditions precedent herein
provided for relating to such supplemental indenture have been complied with.
The Trustee may, but shall not be obligated to, enter into any such supplemental
indenture or amendment to the Security Documents which affects the Trustee's own
rights, duties, or immunities under this Indenture or under the Security
Documents or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 907. Notice of Supplemental Indentures and Amendments to
Security Documents
Promptly after the execution by the Company, the Guarantor and the
Trustee of any supplemental indenture or amendment to the Security Documents
pursuant to the provisions of Section 902, the Company shall give notice thereof
to the Holders of each Outstanding Security affected, in the manner provided for
in Section 106, setting forth in general terms the substance of such
supplemental indenture or amendment to the Security Documents.
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ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders that it
will duly and punctually pay the principal of (and premium, if any, on) and
interest on the Securities in accordance with, and subject to, the terms of the
Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer, exchange, conversion or in
respect of a Demand Payment and where notices and demands to or upon the Company
in respect of the Securities and this Indenture may be served. The Corporate
Trust Office of the Trustee shall be such office or agency of the Company,
unless the Company shall designate and maintain some other office or agency for
one or more of such purposes. The Company will give prompt written notice to the
Trustee of any change in the location of any such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Securities
may be presented or surrendered for any or all such purposes and may from time
to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any, on) or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, on or before each due date of the principal of (and
premium, if any, on), or interest on, any Securities, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due (or in the case of a Demand Payment, shall deposit the Applicable
Common Stock), such sum (or securities) to be held in trust for the benefit of
the
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Persons entitled to such principal, premium or interest, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of such
action or any failure so to act.
The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any on) or interest on Securities (or in the case of a Demand
Payment, the Applicable Common Stock) in trust for the benefit of the
Persons entitled thereto until such sums (or securities) shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal (and
premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums (or
securities) so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums (or
securities) held in trust by the Company or such Paying Agent, such sums (or
securities) to be held by the Trustee upon the same trusts as those upon which
such sums (or securities) were held by the Company or such Paying Agent; and,
upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any, on) or interest on any Security (or securities deposited as contemplated
above) and remaining unclaimed for two years after such principal (and premium,
if any) or interest has become due and payable (or in the case of a Demand
Payment, two years after the Demand Payment Date) shall be paid to the Company
on Company Request, or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money
(or securities), and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in the Borough of Manhattan, The City of New York, notice that such money (or
securities) remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
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SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of the Company and each
of its Subsidiaries; provided, however, that the Company shall not be required
to preserve any such right or franchise if (i) the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries as a whole and
that the loss thereof is not disadvantageous in any material respect to the
Holders and (ii) the Company and its Subsidiaries shall have taken all steps
necessary or desirable to protect or perfect the security interests granted or
purported to be granted by the Security Documents, subject to and as permitted
by the terms of this Indenture and the terms of any release or subordination
contemplated in Section 1405 hereof, including, without limitation, the
execution, delivery, filing and recordation of additional mortgages, pledges,
assignments and security agreements.
SECTION 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent and in accordance with applicable
provisions of the Security Documents, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any such
Subsidiary and (b) all lawful claims for labor, materials and supplies, which,
if unpaid, might by law become a lien upon the property of the Company or any
such Subsidiary; provided, however, that the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
SECTION 1006. Maintenance of Properties.
Subject to and as permitted by the terms of this Indenture and the
terms of any release or subordination contemplated by Section 1405 hereof, the
Company will cause all properties owned by the Company or any of its
Subsidiaries or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as required by the Security Documents and as otherwise in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the judgment of the Company, desirable in the conduct of its business or
the business of any such Subsidiary and not disadvantageous in any material
respect to the Holders.
SECTION 1007. Insurance.
The Company will, and will cause its Subsidiaries to, maintain
insurance with responsible and reputable insurance companies or associations in
such amounts and covering such risks as is usually carried by companies engaged
in similar businesses and owning similar
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properties in the same general areas in which the Company or such Subsidiary
operates; provided that with respect to the Collateral the Company will, and
will cause its Subsidiaries to, maintain insurance on the terms required by each
of the Security Documents or, if the Lien contemplated therein is released or
subordinated as contemplated and permitted in Section 1405, then in accordance
with the requirements of the holder of any other lien on the Collateral.
SECTION 1008. Statement by Officer as to Compliance.
The Company and the Guarantor will deliver to the Trustee, within 120
days after the end of each fiscal year, a brief certificate, which may be in the
form attached as Exhibit A, from the principal executive officer, principal
financial officer or principal accounting officer as to his or her knowledge of
the Company's or the Guarantor's compliance with all conditions and covenants
under this Indenture or the Security Documents. For purposes of this Section
1008, such compliance shall be determined without regard to any period of grace
or requirement of notice under this Indenture or the Security Documents.
SECTION 1009. Statement by Officers of Certain Defaults.
When any Default has occurred and is continuing under this Indenture,
or if the trustee for or the holder of any other evidence of Indebtedness of the
Company or any of its Subsidiaries gives any notice or takes any other action
with respect to a claimed default (other than with respect to Indebtedness in
the principal amount of less than $5 million), the Company shall deliver to the
Trustee by registered or certified mail or by telegram, telex or facsimile
transmission an Officers' Certificate specifying such event, notice or other
action within five Business Days of its occurrence.
SECTION 1010. Assumption of Obligations upon Change of Control.
Upon the occurrence of a Change of Control in accordance with the
provisions of Section 801 of this Indenture, the Securities shall be
assumable by the successor to the Company.
SECTION 1011. Limitation on Company Indebtedness.
Unless otherwise consented to by the Requisite Lenders, the Company
shall not, directly or indirectly, create, incur, assume, suffer to exist,
guarantee or in any manner become liable for the payment of ("incur"), any
Indebtedness other than any or all of the following:
(a) Indebtedness in connection with the Securities, this Indenture or
any Security Document;
(b) Indebtedness outstanding on the Issue Date and included on Schedule
1.01 hereto;
(c) Allowed Indebtedness;
(d) Working Capital Indebtedness; and
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(e) any Indebtedness issued in exchange for or to repay, prepay,
repurchase, redeem, defease, retire or refinance ("refinance") any
Indebtedness permitted by clauses (a) through (d) above; provided that (i)
if the principal amount of the Indebtedness so issued shall exceed the
principal amount of the Indebtedness so exchanged or refinanced, plus any
required premium, transaction costs and fees incurred in connection with
such exchange or refinancing, then such excess shall be permitted only to
the extent that such Indebtedness is otherwise permitted to be incurred
under this covenant and (ii) the Indebtedness so issued either: (x) (A) has
a stated maturity not earlier than the stated maturity of the Indebtedness
so exchanged or refinanced, (B) has an average life to stated maturity
equal to or greater than the remaining average life to stated maturity of
the Indebtedness so exchanged or refinanced, and (C) is subordinated to the
obligations of the Company under this Indenture to at least the same
extent, if any, as the Indebtedness so exchanged or refinanced; or (y) is
otherwise permitted to be incurred under this covenant.
SECTION 1012. Limitation on Subsidiary Indebtedness and Preferred
Stock.
The Company shall not cause or permit any Subsidiary to incur or issue,
directly or indirectly, any Indebtedness or Preferred Stock other than any or
all of the following:
(a) Indebtedness under the Guarantee or in connection with the
Securities, this Indenture and the Security Documents;
(b) Indebtedness or Preferred Stock issued to and held by the Company
or a wholly owned Subsidiary of the Company to the extent such Indebtedness
or Preferred Stock is subject to a first priority lien in favor of the
Trustee; provided that (i) any subsequent issuance or transfer of any
Capital Stock that results in any such wholly owned Subsidiary ceasing to
be a wholly owned Subsidiary or (ii) any transfer of such Indebtedness or
Preferred Stock to a Person other than the Company or a wholly owned
Subsidiary of the Company will be deemed to be the issuance of such
Indebtedness or Preferred Stock by the issuer thereof;
(c) Allowed Indebtedness;
(d) Working Capital Indebtedness; and
(e) any Indebtedness issued in exchange for or to refinance any
Indebtedness permitted by clause (a) through (d) above; provided that (i)
if the principal amount of the Indebtedness so issued does not exceed the
principal amount of the Indebtedness so exchanged or refinanced, plus any
required premium, transaction costs and fees incurred in connection with
such exchange or refinancing, then such excess shall be permitted only to
the extent that such Indebtedness is otherwise permitted to be incurred
under this covenant, and (ii) the Indebtedness so issued either (x) (A) has
a stated maturity date or an initial mandatory redemption date later than
the stated maturity date of the Indebtedness so exchanged or refinanced,
(B) has an average life to stated maturity equal to or greater than the
remaining average life to stated maturity of the Indebtedness so exchanged
or refinanced and (C) is subordinated to the Notes on the Guarantee of
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Guarantor or any other subsidiary guarantee to at least the same extent as
the Indebtedness so exchanged or refinanced; or (y) is otherwise permitted
to be incurred under this covenant.
SECTION 1013. Limitation on Restricted Payments.
The Company shall not make, directly or indirectly, and shall not
permit any Subsidiary to make, directly or indirectly, any Restricted Payment,
provided that the foregoing shall not limit the right or power of:
(a) the Company or any Subsidiary to make or provide for the Permitted
Payment; or
(b) the Guarantor to make any payments or distributions to the Company
to provide for (i) the payment or performance by the Company of its
obligations under this Indenture, the Security Documents and the Securities
and (ii) such other amounts as may be necessary to pay its normal, ordinary
course operating expenses (such as legal and accounting costs and fees for
Commission filings).
SECTION 1014. Limitation on Liens.
The Company shall not, and shall not permit, cause or suffer any
Subsidiary to create, incur, assume or suffer to exist any Lien of any kind upon
any of its property or assets (including, without limitation, any income or
profits) now owned or hereafter acquired by it, other than any or all of the
following:
(a) Liens existing on the Issue Date;
(b) Liens created by this Indenture and the Security Documents or that
otherwise secure the Guaranty or the Securities;
(c) Liens securing Permitted Indebtedness, FF&E Financing and/or
Capitalized Lease Obligations permitted pursuant to the Indenture;
(d) Permitted Liens; and
(e) The replacement, extension or renewal of any Lien permitted by
clauses (a), (b), (c) or (d) above upon or in the same property theretofore
subject thereto or the replacement, extension or renewal (without increase
in the principal amount, except as permitted hereunder) of the Indebtedness
secured thereby, or otherwise permitted by this Indenture.
SECTION 1015. [Intentionally Omitted.]
SECTION 1016. Limitation on Sale-Leaseback Transactions.
Unless otherwise consented to by the Requisite Lenders, the Company
shall not, directly or indirectly, and shall not permit any Subsidiary to,
directly or indirectly, enter into,
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guarantee or otherwise become liable with respect to any Sale-Leaseback
Transaction with respect to any Collateral unless (a) such Sale-Leaseback
Transaction is otherwise permitted pursuant to Section 1014, (b) the
consideration received by the Company and/or any of its Subsidiaries for such
Sale-Leaseback Transaction is at least equal to the Fair Market Value of such
property being transferred, and (c) the Net Cash Proceeds of the sale shall be
applied in accordance with Section 1017. Notwithstanding anything contained in
this covenant, the Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, enter into, guarantee or otherwise become liable with
respect to any other Sale-Leaseback Transaction involving the Collateral.
SECTION 1017. Limitation on Asset Sales.
Subject to and as permitted by the terms of this Indenture and the
terms of any release or subordination contemplated by Section 1405 hereof, the
Company shall not, directly or indirectly, and shall not permit any Subsidiary
to, directly or indirectly, make any Asset Sale of Collateral unless (a) at the
time of such Asset Sale, the Company or such Subsidiary, as the case may be,
receives consideration at least equal to the Fair Market Value of the assets
sold or otherwise disposed of (or in the case of a lease or similar arrangement,
receives an agreement for the payment pursuant to the terms of such lease of
rents from time to time at fair value); (b) the proceeds therefrom (in the case
of a lease, when paid from time to time) consist of at least 85% cash and/or
Cash Equivalents; (c) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Asset Sale; (d) unless
otherwise expressly provided herein, the Net Cash Proceeds of such Asset Sale
shall be applied in connection with the offer to purchase the Securities
described below; and (e) the Company and its Subsidiaries may engage in an Asset
Sale involving Collateral only in accordance with Article Fourteen.
On or before the 180th day after the date on which the Company or any
Subsidiary consummates the relevant Asset Sale of Collateral and subject to and
as permitted by the terms of this Indenture and the terms of any release or
subordination contemplated in Section 1405 hereof, the Company shall use all of
the Net Cash Proceeds from such Asset Sale to make either (i) an offer to
purchase (the "Asset Sale Offer") from all holders of Securities up to a maximum
principal amount (expressed as a multiple of $1,000) of Securities equal to such
Net Cash Proceeds at a purchase price equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase; or (ii) a Permitted Related Investment, upon consummation of which the
Trustee shall have received a first priority fully perfected security interest
in the property on assets acquired by the Company or any of its Subsidiaries in
connection therewith, subject to and as permitted by the terms of this Indenture
and the terms of any release or subordination contemplated in Section 1405
hereof; provided, that the Company shall not be required to make any Asset Sale
Offer if the Net Cash Proceeds of all Asset Sales and Events of Loss that are
not used to make a Permitted Related Investment within 180 days or 365 days,
respectively, do not exceed $5 million. Each Asset Sale Offer shall remain open
for a period of at least 20 business days. To the extent the Asset Sale Offer is
not fully subscribed to by the holders of the Securities, the Company or the
relevant Subsidiary may retain such unutilized portion of the Net Cash Proceeds.
If the Asset Sale Offer is more than fully subscribed to by the Holders of the
Securities, the particular Securities to be accepted shall be selected by such
method as the Trustee shall deem fair and appropriate and which may provide for
the selection of portions of the principal of Securities; provided, however,
that no
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such partial acceptance shall reduce the portion of the principal amount of a
Security not redeemed to less than, $1,000; and provided further that so long as
the Securities are listed on any national securities exchange (as such term is
defined in the Exchange Act), such selection shall be made by the Trustee in
accordance with the provisions of such exchange.
Subject to and as permitted by the terms of this Indenture and the
terms of any release or subordination contemplated by Section 1405 hereof, the
Company or such Subsidiary, as the case may be, shall cause such Net Cash
Proceeds derived from the sale of Collateral to be deposited in the Collateral
Account on the business day on which such Net Cash Proceeds are received by the
Company or such Subsidiary. Collateral Proceeds (including any earnings thereon)
may be released from the Collateral Account only in accordance with Section
1404.
SECTION 1018. Application of Net Cash Proceeds in Event of Loss.
Subject to and as permitted by the terms of this Indenture and the
terms of any release or subordination contemplated by Section 1405 hereof, in
the event that the Company or any Subsidiary suffers any Event of Loss to any
Collateral, on or before the 365th day after the date that the Company or such
Subsidiary receives any Net Cash Proceeds from such Event of Loss to Collateral,
the Company shall use all of the Net Cash Proceeds from such Event of Loss to
make either (i) an offer to purchase (the "Event of Loss Offer") from all
holders of Securities up to a maximum principal amount (expressed as a multiple
of $1,000) of Securities equal to the Net Cash Proceeds at a purchase price
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase; or (ii) a Permitted Related
Investment, upon consummation of which the Trustee shall have received a first
priority fully perfected security interest in the property on assets acquired by
the Company or any of its Subsidiaries in connection therewith, subject to and
as permitted by the terms of this Indenture and the terms of any release or
subordination contemplated by Section 1405 hereof; provided, that the Company
shall not be required to make any Event of Loss Offer if the Net Cash Proceeds
of all Events of Loss to and Asset Sales of Collateral that are not used to make
a Permitted Related Investment within 365 days or 180 days, respectively, do not
exceed $5 million. Each Event of Loss Offer shall remain open for a period of at
least 20 Business Days. To the extent the Event of Loss Offer is not fully
subscribed to by the holders of the Securities, the Company or the relevant
Subsidiary may retain such unutilized portion of the Net Cash Proceeds. If the
Event of Loss Offer is more than fully subscribed to by the Holders of the
Securities, the particular Securities to be accepted shall be selected by such
method as the Trustee shall deem fair and appropriate and which may provide for
the selection of portions of the principal of Securities; provided, however,
that no such partial acceptance shall reduce the portion of the principal amount
of a Security not redeemed to less than $1,000; and provided further that so
long as the Securities are listed on any national securities exchange (as such
term is defined in the Exchange Act), such selection shall be made by the
Trustee in accordance with the provisions of such exchange.
Subject to and as permitted by the terms of this Indenture and the
terms of any release or subordination contemplated by Section 1405 hereof, the
Company or such Subsidiary, as the case may be, shall cause such Net Cash
Proceeds derived from the loss of Collateral to be deposited in the Collateral
Account on the Business Day on which such Net Cash Proceeds are
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received by the Company or such Subsidiary. Collateral Proceeds (including any
earnings thereon) may be released from the Collateral Account only in accordance
with Section 1404.
SECTION 1019. Ownership of Stock of Subsidiaries.
The Company shall at all times maintain, or cause each Subsidiary to
maintain, ownership of all of each class of Voting Stock of, and all other
equity securities in, each Person that, as of the Issue Date was a Subsidiary of
the Company, to the extent the same is included in the Collateral, except any
Subsidiary that shall be disposed of in its entirety, or consolidated or merged
with or into the Company or another Subsidiary, in each case in accordance with
Article Eight. Subject to and as permitted by the terms of this Indenture and
the terms of any release or subordination contemplated by Section 1405 hereof,
such stock will be subject to a first priority fully perfected security interest
in favor of the Trustee.
SECTION 1020. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit, cause or suffer any
Subsidiary to, conduct any business or enter into any transaction or series of
transactions (including, without limitation, the sale, transfer, disposition,
purchase, exchange, lease or use of assets, property or services) or enter into
any contract, agreement, understanding, loan, advance or guarantees with any of
their respective Affiliates, (each an "Affiliate Transaction") other than (i)
transactions among the Company and its Subsidiaries; (ii) transactions involving
aggregate payments or other Fair Market Value, of less than $5 million in any
consecutive 365-day period; (iii) transactions made available to all Holders on
a basis pro rata to their holdings of Securities; (iv) the transactions
described in the Company's filings on Form S-4 filed with the Commission on
[__________] and [___________] and (v) those that are hereafter set forth in
writing and are determined by the Board of Directors of the Company (including a
majority of the Independent members of such Board), to be on terms which are no
less favorable to the Company and its Subsidiaries than would be obtained in an
arm's length transaction with an unaffiliated third party. the Company shall
deliver to the Trustee an Officers' Certificate certifying that any such
Affiliate Transaction contemplated in clause (v) above has received the
requisite approval of its Board of Directors.
SECTION 1021. Change in Nature of Business.
Guarantor shall not, and shall not permit any of its Subsidiaries to,
own, manage or conduct any operation other than a Permitted Line of Business.
SECTION 1022. Additional Collateral.
Subject to and as permitted by the terms of this Indenture and the
terms of any release or subordination contemplated by Section 1405 hereof, the
Company will, and will cause each of its Subsidiaries that owns any Collateral
to, grant to the Trustee a valid and perfected first priority security interest
in such Collateral enforceable against all third parties, and to execute and
deliver all documents and to take all action reasonably necessary or desirable
to perfect and protect such a security interest in favor of the Trustee,
including the execution of the form of Security Agreement Supplement appended to
the Security Agreement.
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SECTION 1023. CRDA Investments.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly (i) grant a security interest in its CRDA Investments to
any Person other than any grant of a security interest or other Lien (a
"Permitted Grant") to: (x) the Casino Reinvestment Development Authority of the
State of New Jersey ("CRDA"); (y) any other entity as required by applicable
law; or (z) any person so long as such action will not result in a violation of
applicable law; or (ii) sell, convey, transfer, lease or otherwise dispose of
its CRDA Investments otherwise than either (I) in accordance with the terms of a
Permitted Grant, or (II) for fair value (in either cases except to or on behalf
of the CRDA for a CRDA project), which shall be determined by, in their absolute
discretion, and evidenced by a resolution of, the Board of Directors of the
Company or such Subsidiary, as the case may be.
SECTION 1024. Subsidiaries.
The Trustee will receive a pledge of the stock of any Person that is a
Subsidiary of the Company on the Issue Date in accordance with the Security
Agreement, subject to and as permitted by the terms of this Indenture and the
terms of any release or subordination contemplated by Section 1405 hereof.
Except as otherwise provided in this Indenture, the Company will not, and will
not permit any Subsidiary to, take any action or enter into any transaction or
series of transactions that would result in a Person becoming a Subsidiary
(whether through an acquisition or otherwise) unless, after giving effect to
such action, transaction or series of transactions, before and immediately after
giving effect thereto no Default or Event of Default shall have occurred and be
continuing.
SECTION 1025. Security Documents.
Simultaneously herewith, the Company shall execute, and shall cause its
Subsidiaries to execute, the respective Security Documents, as appropriate,
securing its obligations under this Indenture, the Security Documents and the
Securities. Each Holder, by accepting a Security, agrees to all terms and
provisions of the Security Documents as the same may be amended or supplemented
from time to time pursuant to the provisions hereof and thereof, including,
without limitation, the terms of any release or subordination contemplated in
Section 145 hereof. The terms of the release of the Collateral and the rights of
the Holders with respect thereto shall be governed by the Security Documents and
this Indenture, including, without limitation, the terms of any release or
subordination contemplated in Section 1405 hereof.
SECTION 1026. Validity of Security Interest.
Each of the Company and the Guarantor represents and warrants that it
has, and covenants that it shall continue to have, full power and lawful
authority to grant, release, convey, assign, transfer, mortgage, pledge,
hypothecate and otherwise create the Security Interest referred to in Article
Fourteen; and, subject to and as permitted by the terms of this Indenture and
the terms of any release or subordination contemplated by Section 1405 hereof,
each of the Company and the Guarantor shall warrant, preserve and defend the
Security Interest of the Trustee in and to the Collateral or any asset that
should constitute Collateral (other than real
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property with respect to matters covered by title insurance policies obtained by
the Company or its Subsidiaries) but for the fact that the Company and/or its
Subsidiaries failed to comply with the provisions of the Indenture or the
Security Documents against the claims of all persons, and will maintain and
preserve the Security Interest contemplated by Article Fourteen. Subject to and
as permitted by the terms of this Indenture and the terms of any release or
subordination contemplated by Section 1405 hereof, the Company and its
Subsidiaries shall be required to execute and deliver all documents and take all
action reasonably necessary or desirable to perfect and protect a security
interest in Collateral or any asset that would constitute Collateral but for the
fact that the Company and/or its Subsidiaries failed to comply with the
provisions of the Indenture or the Security Documents, before engaging in any
sale, transfer, conveyance, or other disposition of such assets to the Company
or any of its wholly owned Subsidiaries.
SECTION 1027. Duty of Cooperation.
The Guarantors and their respective directors, officers and Affiliates
shall cooperate with the Casino Control Commission and the Division of Gaming
Enforcement and provide such information and documentation as may from time to
time be requested by such agencies unless being contested in good faith by
appropriate proceedings.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Redemption.
With the consent of the Requisite Lenders, the Securities may be
redeemed, at the election of the Company, as a whole or from time to time in
part, at the times, subject to the conditions and at the Redemption Price
specified in the form of Security, together with accrued interest to the
Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Securities pursuant to Section 1101 or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article, other than repurchases made
from time to time in the open market.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution and a consent executed by
the Requisite Lenders. In case of any redemption at the election of the Company,
the Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount of Securities to
be redeemed and shall deliver to the Trustee such documentation and records as
shall enable the Trustee to select the Securities to be redeemed pursuant to
Section 1104.
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SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal of Securities; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Security not
redeemed to less than $1,000 and, provided further that, so long as the
Securities are listed on any national securities exchange (as such term is
defined in the Exchange Act), any such redemption shall be made by the Trustee
in accordance with the provisions of such exchange.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for in
Section 106 not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Securities to be redeemed; provided, however, that in the case
of an optional redemption in which the Company has called for redemption all
outstanding Securities in connection with a refinancing of such Securities, the
Company shall be permitted to (i) specify a proposed redemption date, (ii)
change the proposed redemption date once to a final redemption date by notice
mailed to Holders not later than five business days prior to the final
redemption date, (iii) establish the final redemption date as a date not more
than 90 days after the first notice from the Company calling the Securities for
optional redemption was mailed to Holders and (iv) rescind the redemption offer
at any time prior to the final redemption date, which rescission shall not cause
the maturity of the Securities to have changed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price (together with
accrued interest, if any, to the Redemption Date payable as provided in
Section 1107) will
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become due and payable upon each such Security, or the portion thereof, to
be redeemed, and that interest thereon will cease to accrue on and after
said date, and
(5) the place or places where such Securities are to be surrendered for
payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) in immediately
available funds an amount of money sufficient to pay the Redemption Price of,
and accrued interest on, all the Securities which are to be redeemed on that
date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest, if any, to the
Redemption Date.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Securities.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at the office or agency of the Company maintained for such purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a new Security or Securities, of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
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SECTION 1109. Redemption Pursuant to Gaming Laws.
(a) If required to qualify by the Casino Control Commission, all
Holders, whether initial Holders or subsequent transferees, shall be subject to
the qualification provisions of the Casino Control Act relating to financial
sources and/or security holders. In the event that the Casino Control Commission
determines that a Holder is not qualified under the Casino Control Act and/or
such Holder fails to submit for qualification as required by the Casino Control
Commission in its sole discretion, the Company shall have the absolute right and
obligation to purchase from such Holder (the "Disqualified Holder") the
Securities the Disqualified Holder may then possess, either directly, indirectly
or beneficially, no later than forty-five days after the date the Company serves
notice on any Disqualified Holder of such determination. Immediately upon such
determination, the Disqualified Holder shall have no further right (i) to
exercise, directly or indirectly, through any trustee or nominee or any other
person or entity, any right conferred by any Securities and (ii) to receive any
dividends, interest, or any other distribution or payment with respect to any
such Securities or any remuneration in any form from the Company or the Trustee;
provided, however, that after such disqualification, interest on any such
Securities shall continue to accrue for the benefit of any subsequent Holder
thereof. The Company shall promptly provide to the Trustee a copy of each notice
served to a Disqualified Holder.
(b) Upon receipt of the notice referred to in clause (a) above, the
Disqualified Holder may sell its Securities either directly to any Person then
qualified or previously qualified (and not subsequently disqualified) or through
a bona fide brokerage transaction, conducted at arm's-length, to a Person not an
Affiliate of the Disqualified Holder. In the event the Disqualified Holder fails
to so sell its Securities within thirty (30) days after the determination by the
Casino Control Commission, the Company shall purchase such Securities within
fifteen (15) days after the end of such thirty (30) day time period, at a time
and place as designated by the Company: (I) at the lowest of (i) the principal
amount thereof, (ii) the amount which the Disqualified Holder or beneficial
owner paid for the Securities, together with accrued interest up to the date of
the determination of disqualification, or (iii) the market value of such
Securities. The right of the Company to purchase such Security may be assigned
by the Company to any Person approved by the Casino Control Commission or (II)
in lieu of a purchase pursuant to clause (I), at the election of the Company if
the same is consented to by the Requisite Lenders, in exchange for the number of
shares of Applicable Common Stock that would be payable in respect of such
Securities in the event of a Demand Payment.
(c) The provisions of this Section shall be construed in accordance
with the applicable provisions of the Casino Control Act.
ARTICLE TWELVE
GUARANTEE ARRANGEMENTS
SECTION 1201. Guarantee.
Guarantor hereby unconditionally guarantees (such guarantee referred to
as the "Guarantee") to each Holder of a Security authenticated and delivered by
the Trustee and to the
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Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Securities, any of the Security Documents
or the obligations of the Company to the Holders or the Trustee hereunder or
thereunder, that: (a) the principal of, any interest on the Securities
(including, without limitation, any interest that accrues after the filing of a
proceeding of the type described in Sections 501(7) and (8) hereof), premium,
fees, expenses and all other amounts will be duly and punctually paid in full
when due, whether at maturity, by acceleration or otherwise, and interest on the
overdue principal and (to the extent permitted by law) interest, if any, on the
Securities and all other obligations of the Company to the Holders or the
Trustee hereunder or thereunder including fees, expenses or other charges
whether now or hereafter existing will be promptly paid in full or performed,
all strictly in accordance with the terms hereof and thereof; and (b) in case of
any extension of time of payment or renewal of any Securities or any of such
other obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at Stated
Maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed, or failing performance of any other obligations of the Company to
the Holders, for whatever reason, Guarantor will be obligated to pay, or to
perform or cause the performance of, the same immediately. An Event of Default
under this Indenture, any Security Document or the Securities shall constitute
an event of default under this Guarantee, and shall entitle the Holders of
Securities to accelerate the obligations of the Guarantor hereunder in the same
manner and to the same extent as the obligations of the Company. The obligations
of the Guarantor are independent of any obligation of the Company. The Guarantor
hereby agrees that its obligations hereunder shall be absolute and
unconditional, irrespective of the validity, regularity or enforceability of the
Securities, any Security Document, this Indenture or any other document relating
thereto, the absence of any action to enforce the same, any waiver or consent by
any Holder with respect to any provisions hereof or thereof, any release or
non-perfection of Collateral, any delays in obtaining or realizing upon or
failure to obtain or realize upon or application of Collateral, the recovery of
any judgment against the Company or any other Person, any action to enforce the
same or any other circumstance (including, without limitation, any statute of
limitations) which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. The Guarantor hereby waives promptness, diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company or any other Person, any right to
require a proceeding first against the Company or any other Person, protest,
notice and all demands whatsoever and covenants that its Guarantee will not be
discharged except by complete performance of the obligations contained in the
Securities, this Indenture, the Security Documents and this Guarantee. If any
Holder or the Trustee is required by any court or otherwise to return to the
Company or to the Guarantor, or any custodian, trustee, liquidator or other
similar official acting in relation to the Company or the Guarantor, any amount
paid by the Company or the Guarantor to the Trustee or such Holder, this
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. The Guarantor hereby irrevocably waives any claim or other
rights that it may now or hereafter acquire against the Company or any other
insider guarantor that arise from the existence, payment, performance or
enforcement of Guarantor's obligations under this Guarantee, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of the
Holders or the Trustee against the Company or any other insider guarantor or any
Collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take
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or receive from the Company or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right. If any amount
shall be paid to the Guarantor in violation of the preceding sentence at any
time prior to the later of the payment in full of the Securities and all other
amounts payable under this Guarantee and the Maturity Date, such amount shall be
held in trust for the benefit of the Holders and the Trustee and shall forthwith
be paid to the Trustee to be credited and applied to the Securities and all
other amounts payable under this Guarantee, whether matured or unmatured, in
accordance with the terms of this Indenture, or to be held as Collateral for any
obligations or other amounts payable under this Guarantee thereafter arising.
The Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Indenture and that the
waiver set forth in this subsection is knowingly made in contemplation of such
benefits. The Guarantor further agrees that, as between it, on the one hand, and
the Holders and the Trustee, on the other hand, (x) subject to this Article
Twelve, the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article Five hereof for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article Five
hereof, such obligations (whether or not due and payable) shall forthwith become
due and payable by the Guarantor for the purpose of this Guarantee.
SECTION 1202. Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 1201, the
Guarantor hereby agrees that notation of such Guarantee shall be endorsed on
each security authenticated and delivered by the Trustee and executed by either
manual or facsimile signature of an authorized Officer of the Guarantor.
The Guarantor hereby agrees that its Guarantee set forth in Section
1201 shall remain in full force and effect notwithstanding any failure to
endorse on each Security a notation of such Guarantee.
If an Officer of Guarantor whose signature is on this Indenture or a
Security no longer holds that office at the time the Trustee authenticates such
Security or at any time thereafter, Guarantor's Guarantee of such Security shall
be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Guarantor.
SECTION 1203. Additional Guarantors.
Any Person that was not a Guarantor on the date of this Indenture may
become a Guarantor by executing and delivering to the Trustee (a) a supplemental
indenture in form and substance satisfactory to the Trustee, which subjects such
Person to the provisions (including the representations and warranties) of the
Indenture as a Guarantor and (b) an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized and executed by such Person and
constitutes the legal, valid, binding and enforceable obligation of such Person
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(subject to such customary exceptions concerning creditors' rights and equitable
principles as may be acceptable to the Trustee in its discretion).
SECTION 1204. Termination of Guarantee. This Guarantee and all of
the obligations of the Guarantor under this Indenture, the Security Documents,
and the Securities and any other related documents or agreements may be amended,
modified or terminated by the Company with the consent of the Requisite Lenders.
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either Section 1302 or Section 1303 be
applied to all Outstanding Securities upon compliance with the conditions set
forth below in this Article Thirteen.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise under Section 1301 of the option applicable
to this Section 1302, the Company shall be deemed to have been discharged from
its obligations with respect to all Outstanding Securities on the date the
conditions set forth in Section 1304 are satisfied (hereinafter, "defeasance").
For this purpose, such defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by the Outstanding
Securities, which shall thereafter be deemed to be "Outstanding" only for the
purposes of Section 1305 and the other Sections of this Indenture referred to in
(A) and (B) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same) and releasing the liens and security interests created
by the Security Documents, except for the following, which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of
Outstanding Securities to receive, solely from the trust fund described in
Section 1304 and as more fully set forth in such Section, payments in respect of
the principal of (and premium, if any, on) and interest on such Securities when
such payments are due, (B) the Company's obligations with respect to such
Securities under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (D) this Article
Thirteen. Subject to compliance with this Article Thirteen, the Company may
exercise its option under this Section 1302 notwithstanding the prior exercise
of its option under Section 1303 with respect to the Securities.
SECTION 1303. Covenant Defeasance.
Upon the Company's exercise under Section 1301 of the option applicable
to this Section 1303, the Company shall be released from its obligations under
any covenant contained in Section 801 and in Sections 1005 through 1026 with
respect to the Outstanding Securities on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant
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defeasance"), and the Securities shall thereafter be deemed not to be
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the Outstanding Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 501(3) or otherwise, but, except as specified above, the remainder of
this Indenture and such Securities shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
1302 or Section 1303 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 607 who shall agree to comply with the provisions of this
Article Thirteen applicable to it) as trust funds, for a period of at least
123 days prior to the date of such defeasance, in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
money in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, the principal
of (and premium, if any, on) and interest on the Outstanding Securities on
the Stated Maturity (or Redemption Date, if applicable) of such principal
(and premium, if any) or installment of interest; provided that the Trustee
shall have been irrevocably instructed to apply such money or the proceeds
of such U.S. Government Obligations to said payments with respect to the
Securities. Before such a deposit the Company may give to the Trustee, in
accordance with Section 1103 hereof, a notice of its election to redeem all
of the Outstanding Securities at a future date in accordance with Article
Eleven hereof, which notice shall be irrevocable. Such irrevocable
redemption notice, if given, shall be given effect in applying the
foregoing. For this purpose, "U.S. Government Obligations" means securities
that are (x) direct obligations of the United States of America for the
timely payment of which its full faith and credit is, pledged or (y)
obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation
by the United States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act of 1933, as amended), as custodian with respect to any such
U.S. Government Obligation or
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a specific payment of principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the holder of such
depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation
evidenced by such depository receipt.
(2) No Default or Event of Default with respect to the Securities shall
have occurred and be continuing on the date of such deposit or, insofar as
paragraphs (7) and (8) of Section 501 hereof are concerned, at any time
during the period ending on the 123rd day after the date of such deposit
(it being understood that this condition shall not be deemed satisfied
until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in a breach
or violation of, or constitute a default under, this Indenture or any other
material agreement or instrument to which the Company is a party or by
which it is bound.
(4) In the case of an election under Section 1302, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the Outstanding
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such 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 defeasance had not occurred.
(5) In the case of an election under Section 1303, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Securities will not recognize income, gain or
loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred.
(6) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 1302
or the covenant defeasance under Section 1303 (as the case may be) have
been complied with.
SECTION 1305. Deposited Money and U.S. Government Obligations To Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for purposes of this
Section 1305, the "Trustee") pursuant to Section 1304 in respect of the
Outstanding Securities shall be held in trust and applied by the
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Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Governmental Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article Thirteen to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1304 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1306. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 1305 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1302 or 1303, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1305; provided, however, that if the Company makes any payment of
principal of (or premium, if any, on) or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE FOURTEEN
SECURITY INTEREST
SECTION 1401. Assignment of Security Interest.
(a) In order to secure the performance of the Company's and the
Guarantor's obligations to the Holders and the Trustee under this Indenture and
the Securities, according to the terms hereunder or thereunder, any Grantor
pursuant to the Security Documents has unconditionally and absolutely assigned
to the Trustee for the benefit of itself and all Holders, a first priority
security interest in the Collateral, subject to the limitations set forth in
this Indenture, including, without limitation, Section 1405 hereof (the
"Security Interest").
(b) The Security Interest as now or hereafter in effect shall be held
for the Trustee and for the equal and ratable benefit and security of the
Securities without preference, priority or distinction of any thereof over any
other by reason, or difference in time, of issuance,
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sale or otherwise, and for the enforcement of the payment of principal of,
premium, if any, and interest on the Securities in accordance with their terms.
(c) Each of the Company and Guarantor has executed and delivered, filed
and recorded and/or will execute and deliver, file and record, all instruments
and documents, and has done or will do or cause to be done all such acts and
other things as are necessary or desirable, subject to and as permitted by the
terms of this Indenture and the terms of any release or subordination
contemplated in Section 1405 hereof, to subject the Collateral to the Lien of
the Security Documents. Each of the Company and Guarantor will execute and
deliver, file and record all instruments and do all acts and other things as may
be reasonably necessary or advisable to perfect, maintain and protect the
Security Interest (including, without limitation, the first priority nature
thereof) and shall pay all filing, recording, mortgage or other taxes or fees
incidental thereto.
(d) Each of the Company and Guarantor shall furnish to the Trustee (i)
promptly after the recording or filing, or re-recording or re-filing of the
Security Documents and other security filings, an Opinion of Counsel (who may be
counsel for the Company or the Guarantor) stating that in the opinion of such
counsel the Security Documents and other security filings have been properly
recorded, filed, re-recorded or re-filed so as to make effective and perfect the
Security Interest intended to be created thereby and reciting the details of
such action; and (ii) except for Collateral released as contemplated in Section
1405 hereof at least annually on the anniversary of the Issue Date, an Opinion
of Counsel (who may be counsel for the Company or the Guarantor) either stating
that in the opinion of such counsel such action with respect to the recording,
filing, re-recording or re-filing of the Security Documents and other security
filings has been taken as is necessary to maintain the Lien and Security
Interest of the Security Documents and other security filings, subject to any
subordination contemplated in Section 1405 hereof, and reciting the details of
such action, or stating that in the opinion of such counsel no such action is
necessary to maintain such Lien and Security Interest. In giving the opinions
required by this Section 1401(d) above, such counsel may rely, to the extent
recited in such opinions, on (i) certificates of relevant public officials; (ii)
certificates of an officer or officers of the Company, the Guarantors or any
other Grantor; (iii) photocopies of filed and recorded documents certified by
public officials as being accurate copies of such documents; (iv) the opinions
of other counsel acceptable to the Trustee with respect to matters governed by
law of any jurisdiction other than the state in which such counsel is licensed
to practice law; and (v) title insurance policies and commitments. In addition,
such opinions may contain such qualifications, exceptions and limitations as are
appropriate for similar opinions relating to the nature of the Collateral.
SECTION 1402. Suits to Protect the Collateral.
To the extent permitted under the Security Documents and this
Indenture, the Trustee shall have power, but not be obliged, to institute and
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts which may be unlawful or in violation
of this Indenture or the Security Documents and such suits and proceedings as
the Trustee may deem expedient to preserve or protect its interests and the
interest of the Holders in the Collateral and in the profits, rents, revenues
and other income arising therefrom (including power to institute and maintain
suits or proceedings to restrain the
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enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the Security Interest thereunder or be prejudicial to the interest of the
Holders or of the Trustee).
SECTION 1403. Further Assurances and Security.
Each of the Company and the Guarantor represents and warrants that at
the time the Security Documents and this Indenture are executed, the Company
and/or its Subsidiaries (i) will have full right, power and lawful authority to
grant, bargain, sell, release, convey, hypothecate, assign, mortgage, pledge,
transfer and confirm, absolutely, the Collateral, in the manner and form done,
or intended to be done, in the Security Documents, free and clear of all Liens,
except for the Liens created by the Security Documents or otherwise permitted by
the Indenture or the Security Documents, and will forever warrant and defend the
title to the same against the claims of all Persons whatsoever; (ii) will
execute, acknowledge and deliver to the Trustee, at the Company's and/or its
Subsidiaries' expense, at any time and from time to time such further
assignments, transfer, assurances or other instruments as may be required to
effectuate the terms of this Indenture or the Security Documents; and (iii) will
at any time and from time to time do or cause to be done all such acts and
things as may be necessary or proper, or as may be required by the Trustee, to
assure and confirm to the Trustee the Security Interest in the Collateral
contemplated hereby and by the Security Documents in each case, subject to and
as permitted by the terms of this Indenture and the terms of any release or
subordination contemplated by Section 1405 hereof.
SECTION 1404. Release of Collateral.
Subject to and as permitted by the terms of this Indenture and the
terms of any release or subordination contemplated by Section 1405 hereof and
unless otherwise consented to by the Requisite Lenders, the Company or any
Subsidiary, as the case may be, shall cause such Net Cash Proceeds of any Asset
Sale pursuant to Section 1017 that involves the sale of Collateral or any Event
of Loss pursuant to Section 1018 that involves a loss of Collateral to be
deposited in the Collateral Account on the business day on which such Net Cash
Proceeds are received by the Company or such Subsidiary. Subject to and as
permitted by the terms of this Indenture and the terms of any release or
subordination contemplated by Section 1405 hereof, Collateral Proceeds
(including any earnings thereon) may be released from the Collateral Account in
order to, and in only such amount as is required to, (x) pay the principal
amount of Securities tendered pursuant to an Asset Sale Offer or Event of Loss
Offer or (y) make a Permitted Related Investment; provided that upon
consummation of such Permitted Related Investment the Trustee shall subject to
and as permitted by the terms of this Indenture and the terms of any release or
subordination contemplated by Section 1405 hereof, have received a first
priority security interest in the property or assets acquired by the Company or
any of its Subsidiaries in connection therewith and the Company delivers to the
Trustee each of the following:
(1) an Officers' Certificate, dated the date on which Collateral
Proceeds shall be released from the Collateral Account (the "Collateral
Proceeds Release Date"), stating in substance as to the following matters
(which statements shall, on the Collateral Proceeds Release Date, be true):
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(A) the reason the Company is requesting a release of the
Collateral Proceeds and a description of the use to be made of the
Collateral Proceeds to be released;
(B) in the case of clause (x) above, the aggregate principal
amount of Securities purchased on the Collateral Proceeds Release Date
and, in the case of clause (y) above, a description of the property or
assets being acquired and the Fair Market Value and the purchase price
of each such property or asset to be acquired by the Company and/or its
Subsidiaries (if more than one);
(C) that the amount to be released from the Collateral Account
does not exceed the aggregate principal amount of Securities to be
purchased on the Collateral Proceeds Release Date or the purchase price
of the property or assets to be acquired by the Company or any of its
Subsidiaries, as the case may be;
(D) that, in the case of clause (y) above, the Company and/or its
Subsidiaries, as the case may be, have taken all steps necessary or
desirable so that upon consummation of such Permitted Related
Investment the Trustee shall, subject to the terms of any release or
subordination contemplated in Section 1405 hereof, receive a first
priority security interest in such property or assets; and
(E) that no Default or Event of Default has occurred and is
continuing at the time of or after giving effect to such release of
Collateral Proceeds.
(2) An Opinion of Counsel stating that the certificate, opinions, other
instruments or cash which have been or are therewith delivered to and
deposited with the Trustee conform to the requirements of this Indenture
and that the property to be released may be lawfully released from the Lien
of the Security Documents and that all conditions precedent in this
Indenture and the Security Documents relating to such release have been
complied with.
In connection with any release of any lien in favor of the Trustee
granted pursuant to the Security Documents on Collateral, the Company and the
Guarantor shall comply, to the extent required thereby, with the applicable
provisions of the TIA, including Section 314 thereof.
SECTION 1405. Release Notice; Subordination Request; Permitted Liens.
(a) At the request of the Requisite Lenders the Company shall deliver a
Release Notice to the Trustee. A Release Notice may only be delivered by the
Company from time to time with the consent of the Requisite Lenders. A Release
Notice shall request that the Trustee execute one or more specifically described
release instruments, documents and agreements (which release instruments,
documents and agreements shall accompany such Release Notice) and shall (i)
include a certified copy of the Board Resolution of the Company or any of its
Subsidiaries in which such Board of Directors approved the delivery of the
Release Notice, (ii) include a copy of the written consent of the Requisite
Lenders to the Release Notice, (iii) be accompanied by an Officers' Certificate,
including a certification that no Event of Default, or no default which with the
passage of time or giving of notice would become an Event of Default, has
occurred or is continuing, in each case unless waived in accordance with the
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terms of this Indenture, (iv) be accompanied by an Opinion of Counsel stating
that the action contemplated by this Section 1405(a) is authorized and permitted
by the Indenture and that all conditions precedent herein relating to such
action have been complied with and (v) if required by the TIA, certificates in
accordance with Section 314 of the TIA. Upon receipt of a Release Notice the
Trustee, at the Company's expense, shall execute and deliver, within seven
Business Days from the receipt of such Release Notice, any instruments,
documents and agreements specified by the Company or any of its Subsidiaries to
release all or any part of the Collateral from the Security Interests or any
other Liens created by the Security Documents or the Indenture including,
without limitation, all instruments, documents and agreements necessary to
release any and all Liens of record and to terminate the Security Documents.
(b) At the request of the Requisite Lenders the Company shall deliver a
Subordination Request to the Trustee. A Subordination Request may only be
delivered by the Company from time to time with the consent of the Requisite
Lenders. A Subordination Request shall request that the Trustee execute one or
more specifically described instruments, documents and agreements of
subordination (which instruments of subordination shall accompany such
Subordination Request) and shall (i) include a certified copy of the Board
Resolution of the Company or any of its Subsidiaries in which such Board of
Directors approved the delivery of the Subordination Request, (ii) include a
copy of the written consent of the Requisite Lenders to the Subordination
Request, (iii) certify that the subordination requested effects a subordination
of the Security Interests only to the extent, and only with respect to the
Collateral as to which such subordination is, contemplated by the Subordination
Determination, (iv) be accompanied by an Officers' Certificate, including a
certification that no Event of Default, and no default which with the passage of
time or giving of notice would become an Event of Default, has occurred or is
continuing, in each case unless waived in accordance with the terms of this
Indenture, (v) be accompanied by an Opinion of Counsel stating that the action
contemplated by this Section 1405(b) is authorized and permitted by the
Indenture and that all conditions precedent herein relating to such action have
been complied with and (vi) if required by the TIA, certificates in accordance
with Section 314 of the TIA. Upon receipt of a Subordination Request, the
Trustee, at the Company's expense, will execute and deliver, within seven
Business Days from the receipt of such Subordination Request, any instruments,
documents and agreements specified by the Company or any of its Subsidiaries to
subordinate the Security Interests or any other Liens created by the Security
Documents or the Indenture to any Lien that the Board of Directors of the
Company or any of its Subsidiaries determines (each such determination, a
"Subordination Determination") to accord priority over the Security Interests.
(c) In connection with any release of any lien pursuant to a Release
Notice or the subordination of any lien pursuant to a Subordination Request, the
Company and the Guarantor shall comply, to the extent required thereby, with the
applicable provisions of the TIA, including Section 314 thereof.
(d) Any release or subordination of Collateral made in compliance with
the provisions of this Section 1405 shall be deemed for all purposes: (i) not to
impair the Security Interests or impair the security under the Indenture in
contravention of the terms or provisions of this Indenture or the Security
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Documents and (ii) not to constitute in any respect or for any purpose a breach,
default or violation of any term or provision of this Indenture or the Security
Documents and to the extent that any such breach, default or violation would
otherwise result the same are hereby waived in all respects.
(e) In addition to, and not in limitation of, any other rights, powers
or privileges of the Company and its Subsidiaries, the Company and its
Subsidiaries may incur Permitted Liens as and to the extent such action is in
compliance with the terms of this Indenture and the Security Documents.
(f) To the extent set forth in any Release Notice or Subordination
Request or in the terms, provisions or conditions of any such release or
subordination or any agreements, documents or instruments related thereto,
associated therewith or arising from or in connection with any such release or
subordination or any related or associated transaction, the terms of Section
1017, 1018 and 1404 hereof shall (i) cease to apply to the Assets that are the
subject of such Release Notice or Subordination Request, and to any proceeds
thereof or (ii) continue to apply to such Assets and proceeds only to the extent
set forth in the terms, provisions or conditions of any such release or
subordination or of any such agreements, documents or instruments.
SECTION 1406. Reliance on Opinion of Counsel.
The Trustee shall be fully protected in taking any action under this
Article Fourteen or omitting to take any action, in reliance upon an Opinion of
Counsel.
SECTION 1407. Purchaser May Rely.
Any person that acquires, obtains a Lien on or otherwise obtains any
interest in good faith in the Collateral or any part thereof or interest therein
which is purported to be transferred, granted or released by the Trustee as
provided in this Article Fourteen shall not be bound to ascertain, and may rely
on the authority of the Trustee to execute, transfer, grant or release, or to
inquire as to the satisfaction of any conditions precedent to the exercise of
such authority, or to see to the application of the purchase price therefor or
any loan proceeds or other consideration relating thereto.
SECTION 1408. Payment of Expenses.
On demand of the Trustee, the Company forthwith shall pay or
satisfactorily provide for the payment of all reasonable expenditures incurred
by the Trustee under this Article Fourteen, including, without limitation, the
costs of title insurance, surveys, attorneys' fees and expenses, recording fees
and taxes, transfer taxes, taxes on indebtedness and other expenses incidental
thereto and all such sums shall be a Lien upon the Collateral prior to the
Securities and shall be secured thereby.
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ARTICLE FIFTEEN
CONVERSION AND DEMAND PAYMENT
SECTION 1501. Conversion Following Election of Requisite Lenders.
(a) Following delivery of written notice from the Requisite Lenders
(which notice shall be deliverable in their sole and absolute discretion) to the
Company and the Trustee stating that the Securities shall thereafter be
convertible under this Section 1501(a) (the "Convertibility Election"), the
Holder of any Note shall have the right, at its option, at any time following
the date the Convertibility Notice was received by the Trustee, through the
close of business on the final maturity date of the Notes (except that, with
respect to any Note or portion of a Note that shall be called for redemption,
such right shall terminate, except as provided in Section 1502, Section 1104 or
Section 1105, at the close of business on the Business Day next preceding the
date fixed for redemption of such Note or portion of a Note unless the Company
shall default in payment due upon redemption thereof) to convert any such Note
into that number of fully paid and non-assessable shares of Company Common Stock
(as such shares shall then be constituted) obtained by multiplying the principal
amount of the Note or portion thereof surrendered for conversion by the Stated
Ratio (and shall also be entitled to receive any other securities required to be
issued in respect of such Note as contemplated in Section 1504 below), by
surrender of the Note so to be converted in whole or in part in the manner
provided in Section 1502.
(b) A holder of Notes is not entitled to any rights of a holder of Company
Common Stock or other securities deliverable hereunder until such Notes are
surrendered as provided in Section 1502.
SECTION 1502. Exercise of Conversion Privilege; Demand Payment;
Issuance of Common Stock; No Adjustment for Interest or Dividends. In order to
exercise the conversion privilege or obtain Applicable Common Stock in
connection with a Demand Payment with respect to any Note in certificated form,
the Holder of any such Note to be converted or so paid shall surrender such
Note, duly endorsed, at an office or agency maintained by the Company pursuant
to Section 1002, accompanied by the funds, if any, required by the penultimate
paragraph of this Section 1502, and, with respect to a conversion under Section
1501(a) , shall give written notice of conversion (in the form of Exhibit B
hereto or another form acceptable to the Company) to the office or agency that
the Holder elects to convert such Note or the portion thereof specified in said
notice. In connection with such surrender, the Holder shall also state the name
or names (with address or addresses) in which certificates for securities which
shall be issuable on such conversion or payment shall be issued, and such
surrender shall be accompanied by transfer taxes, if required pursuant to
Section 1511. Each such Note surrendered for conversion or Demand Payment shall,
unless the shares issuable on conversion or such payment are to be issued in the
same name as the registration of such Note, be duly endorsed by, or be
accompanied by instruments of transfer in form satisfactory to the Company duly
executed by, the Holder or his duly authorized attorney.
As promptly as practicable after satisfaction of the requirements for
conversion or in respect of a Demand Payment in the form of the Applicable
Common Stock, subject to
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compliance with any restrictions on transfer if shares issuable on conversion
are to be issued in a name other than that of the Noteholder (as if such
transfer were a transfer of the Note or Notes (or portion thereof) so converted
or paid), the Company shall issue and shall deliver to such Noteholder a
certificate or certificates for the securities issuable upon the conversion or
payment in respect of a Demand Payment in the form of the Applicable Common
Stock, of such Note or (in the case of a conversion) portion thereof as
determined by the Company in accordance with the provisions of this Article
Fifteen, calculated by the Company as provided in Section 1503. In case any Note
of a denomination greater than $1,000 shall be surrendered for partial
conversion, and subject to Section 302, the Company shall execute and the
Trustee shall authenticate and deliver to the holder of the Note so surrendered,
without charge to him, a new Note or Notes in authorized denominations in an
aggregate principal amount equal to the unconverted portion of the surrendered
Note.
If a Note is surrendered for conversion in part, then a new Note will
be issued but any such issuance will only be made in multiples of $1,000.
Each conversion or payment in respect of a Demand Payment in the form
of the Applicable Common Stock shall be deemed to have been effected so as to
result in any Holder becoming a holder of Company Common Stock (or other
securities issuable in respect of such conversion or Demand Payment as
contemplated in Section 1504) on the date on which the requirements set forth
above in this Section 1502 have been satisfied as to such Note (or portion
thereof), and the Person in whose name any certificate or certificates for
shares of Company Common Stock (or other securities issuable in respect of such
conversion or payment as contemplated in Section 1504) shall be issuable upon
such conversion or payment shall be deemed to have become on said date the
holder of record of the shares represented thereby and such Holder shall be
entitled to all of the rights of a record holder of Company Common Stock or
other securities deliverable hereunder (all of which shall be and be deemed to
be issued to such person) and such person shall be deemed to be the owner of
such shares of Company Common Stock or other securities, whether or not
certificates representing the same have been issued to such person. In the case
of any conversion pursuant to Section 1501(a) any Note (or portion thereof) so
surrendered shall cease to be outstanding and shall be discharged and all
principal and accrued interest thereon extinguished in all respects as of the
date or such surrender. In the case of any Demand Payment, the Note so
surrendered shall be discharged and extinguished as contemplated in Section
301(f).
No adjustment in respect of accrued interest on any Note converted or
paid, or dividends on any shares issued upon conversion or payment of such Note
will be made upon any conversion or payment.
SECTION 1503. Stated Ratio. The "Stated Ratio" shall equal [______]
shares of Company Common Stock per $1,000 principal amount of Notes. In the
event of any transaction or occurrence not contemplated in Section 1504 in which
it is equitable that the Stated Ratio be adjusted, then, upon the request and
with the consent of the Requisite Lenders, and with the approval of the Board of
Directors of the Company acting in good faith, the Stated Ratio shall be
equitably adjusted. Any such adjustment shall be made by and set forth in a
supplemental
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indenture between the Company, or any successor thereto, and the Trustee and
shall for all purposes hereof conclusively be deemed to be an appropriate
adjustment.
SECTION 1504. Additional Issuances In the Event of Occurrence of
Certain Events. In addition to or instead of the shares of Company Common Stock
otherwise issuable upon conversion pursuant to this Article Fifteen or payment
in respect of a Demand Payment in the form of Applicable Common Stock:
(a) In case the Company shall, at any time after the date hereof
and on or prior to (x) the date of such conversion as contemplated in
Section 1501(a) in respect of any conversion or (y) the Demand Payment
Date in respect of any Demand Payment (i) declare a dividend or make a
distribution on the Company Common Stock in shares of Company Common
Stock, (ii) subdivide the outstanding shares of Company Common Stock
into a greater number of shares, (iii) combine the outstanding shares
of its Company Common Stock into a smaller number of shares, or (iv)
issue any shares of its capital stock by reclassification of the
Company Common Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing
corporation), then upon conversion or payment of a Note in respect of a
Demand Payment in the form of Applicable Common Stock the Holder of
such Note shall be entitled to receive the aggregate number and kind of
shares which, if such Note had been converted or so paid immediately
prior to such time, such Holder would have owned upon such conversion
or payment, as applicable, and by virtue of such dividend, subdivision,
combination, or reclassification.
(b) In case the Company shall, at any time after the date hereof
and on or prior to (x) the date of such conversion as contemplated in
Section 1501(a) in respect of any conversion or (y) the Demand Payment
Date in respect of any Demand Payment, issue to all holders of Company
Common Stock rights, options, or warrants to subscribe for or purchase
Company Common Stock (or securities convertible into or exchangeable
for Company Common Stock), and if the same are not issued or otherwise
provided to the Holders of Notes at such time pro rata on a
fully-diluted basis as if such Notes were then convertible or payable
as contemplated herein, together with all warrants, other rights,
options or convertible securities in respect of Company Common Stock,
and as if all such securities were exercised or converted, then upon
conversion or Demand Payment of a Note in the form of Applicable Common
Stock the Holder of such Note so converted or so paid shall be entitled
to receive the aggregate number and kind of rights, options, or
warrants to subscribe for or purchase Company Common Stock (or
securities convertible into or exchangeable for Company Common Stock
such holder would have received by virtue of such issuance of rights,
options, or warrants to subscribe for or purchase Company Common Stock
(or securities convertible into or exchangeable for Company Common
Stock)), if such Note had been converted or paid in the form of
Applicable Common Stock immediately prior to such time.
(c) For the avoidance of doubt, the exercise or conversion of any
option, warrant or other convertible or similar security shall not be deemed to
constitute a distribution, subdividion or issuance contemplated by Section
1504(a) and (b) or otherwise require the
G-84
issuance of any additional securities under Section 1504(a) or (b) or otherwise
in respect of, or upon, conversion of Notes or a Demand Payment.
SECTION 1505. Mergers. In case of any consolidation or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the continuing corporation and which does not result in
any reclassification of the outstanding shares of Company Common Stock or the
conversion of such outstanding shares of Company Common Stock into shares of
other stock or other securities or property) (such actions being hereinafter
collectively referred to as a "Merger"), there shall thereafter be deliverable
upon conversion or Demand Payment of any Note (in lieu of the securities
otherwise deliverable as contemplated in this Article Fifteen and Section
301(f)), the number of shares of stock or other securities or property to which
a holder of the number of shares of Company Common Stock which would otherwise
have been deliverable upon the conversion or such payment of such Note would
have been entitled upon such Merger if such Note had been converted or so paid
in full immediately prior to such Merger. In case of any Merger, appropriate
adjustment, as determined in good faith by the Board of Directors of the Company
and consented to by the Requisite Lenders, shall be made in the application of
the provisions herein set forth with respect to the rights and interests of Note
holders so that the provisions set forth herein shall thereafter be applicable,
as nearly as possible, in relation to any shares or other property thereafter
deliverable upon conversion or Demand Payment of Notes. Any such adjustment
shall be made by and set forth in a supplemental indenture between the Company,
or any successor thereto, and the Trustee and shall for all purposes hereof
conclusively be deemed to be an appropriate adjustment. The Company shall not
effect any such Merger unless upon or prior to the consummation thereof the
successor corporation, or if the Company shall be the surviving corporation in
any such Merger and is not the issuer of the shares of stock or other securities
or property to be delivered to holders of shares of the Company Common Stock
outstanding at the effective time thereof, then such issuer, shall assume by
written instrument the obligation to deliver to the registered holder of any
Note such shares of stock, securities, cash, or other property as such holder
shall be entitled to purchase in accordance with the foregoing provisions.
SECTION 1506. Verification of Computations. Whenever the Stated Ratio
is adjusted as provided pursuant to Section 1504 hereof, the Company will
promptly obtain a certificate of the chief financial officer of the Company
setting forth the Stated Ratio as so adjusted and a brief statement of the facts
accounting for such adjustment, and the Company will make available a brief
summary thereof to the holders of the Notes, at their addresses listed on the
register maintained for that purpose by the Trustee.
SECTION 1507. Notice of Additional Issuances or Other Property.
Whenever Holders of Notes become entitled to an additional issuance of
securities or other property pursuant to this Article Fifteen, the Company shall
cause notice of such matter to be mailed to the Trustee within 15 days
thereafter, such notice to include in reasonable detail (a) the events
precipitating such occurrence and (b) the computation of any such additional
consideration, which computation shall include the number of shares or the
securities or other property purchasable upon conversion or Demand Payment of
each Note after giving effect thereto. The Trustee shall within 15 days after
receipt of such notice from the Company cause a similar notice to be mailed to
each registered holder of a Note.
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SECTION 1508. Fractional Shares. Upon the conversion or Demand Payment
of any Note, all fractions will be rounded down to the nearest whole number of
shares, and the Company shall not be required to issue fractional shares of
Company Common Stock. If more than one Note is converted or paid in respect of
any Demand Payment at one time by the same registered holder, the number of full
shares of Company Common Stock which shall be deliverable shall be computed
based on the number of shares deliverable in exchange for the aggregate
principal amount of Notes converted or so paid. The Company shall not make any
cash payments to holders of Notes with respect to any final fraction of a share
called for upon the conversion or such payment of any Note.
SECTION 1509. Taxes on Shares Issued. The issue of stock certificates
on conversions or Demand Payment of Notes shall be made without charge to the
Holder for any tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the holder of any Note converted or so paid, and the Company shall not be
required to issue or deliver any such stock certificate unless and until the
Person or Persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
SECTION 1510. Reservation of Shares; Shares to Be Fully Paid;
Compliance with Governmental Requirements; Listing of Company Common Stock. The
Company shall provide, free from preemptive rights, out of its authorized but
unissued shares or shares held in treasury, sufficient shares of Company Common
Stock to provide for the conversion or Demand Payment of the Notes from time to
time as such Notes are presented for conversion or such payment.
The Company covenants that, if any shares of Company Common Stock to be
provided for the purpose of conversion or Demand Payment of Notes hereunder
require registration with or approval of any governmental authority under any
federal or state law before such shares may be validly issued upon conversion or
Demand Payment, the Company will in good faith and as expeditiously as possible,
to the extent then permitted by the rules and interpretations of the Securities
and Exchange Commission (or any successor thereto), endeavor to secure such
registration or approval, as the case may be.
The Company shall have no obligation to cause any securities to be
listed on any national securities exchange or automated quotation system.
SECTION 1511. Responsibility of Trustee. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine the Stated Ratio or whether any facts exist
which may require any adjustment of the Stated Ratio, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any other
conversion or payment agent shall not be accountable with respect to the
validity or value (or the kind or amount) of any shares of Company Common Stock,
or of any securities or property, which may at any time be issued or delivered
upon the conversion or Demand Payment of any Note; and the Trustee and any other
conversion or payment agent make no representations with respect thereto.
Neither the Trustee nor any conversion or payment agent shall be responsible for
any failure of the Company
G-86
to issue, transfer or deliver any shares of Company Common Stock or stock
certificates or other securities or property or cash upon the surrender of any
Note for the purpose of conversion or Demand Payment or to comply with any of
the duties, responsibilities or covenants of the Company contained in this
Article Fifteen.
Without limiting the generality of the foregoing, neither the Trustee
nor any conversion or payment agent shall be under any responsibility to
determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant hereto relating either to the kind or amount of
shares of stock or securities or property (including cash) receivable by
Noteholders upon the conversion or Demand Payment of their Notes, but, subject
to the provisions of Article Six, may accept as conclusive evidence of the
correctness of any such provisions, and shall be protected in relying upon, the
Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
ARTICLE SIXTEEN
MISCELLANEOUS
SECTION 1601. Counterparts.
This Indenture may be signed in any number of counterparts each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
ATLANTIC COAST ENTERTAINMENT
HOLDINGS, INC.
By
---------------------------------
Title:
Attest:
---------------------------------
Title:
ACE Gaming, LLC
By
---------------------------------
Title:
Attest:
---------------------------------
Title:
[ ]
--------------------------
By
---------------------------------
Title:
G-88
EXHIBIT A
---------
- --------------------------------------------------------------------------
OFFICER'S CERTIFICATE
OF
ACE GAMING, LLC
- ------------------------------------------------------------------------------
Reference is made to that certain Indenture dated as of
____________________ (the "Indenture") among Atlantic Coast Entertainment
Holdings, Inc. (the "Company"), as Issuer, ACE Gaming, LLC, as guarantor, and
[__________________________], as Trustee (the "Trustee"). Except as otherwise
defined herein, capitalized terms used herein shall have the meanings set forth
in the Indenture.
Pursuant to Section 1008 of the Indenture, the undersigned officer of
Licensee hereby certifies to the Trustee as follows:
He is now, and at the times mentioned herein has been, the
duly elected, qualified and acting officer of Licensee as
specified below.
To his knowledge, and without regard to any period of grace or
requirements of notice under the Indenture or the Security
Documents, Licensee is in compliance with all conditions and
covenants under the Indenture or the Security Documents.
IN WITNESS WHEREOF, I have set my hand this ____ day of ______________.
ACE GAMING, LLC
t/a "Sands Hotel & Casino"
By:___________________________________
SCHEDULE 1.01
-------------
PERMITTED INDEBTEDNESS
----------------------
[Mortgage in the amount of $700,000 and interest, made by Lieber Check Cashing
L.L.C., to Andermatt Corp., dated July 22, 1996.
Mortgage in the amount of $525,000 and interest made by GBHC to Ruth M. Lubin
dated January 1, 1983.
Amendment dated April 5, 2000, to Brighton Park Improvements Agreement dated
November 5, 1987, by and between Claridge at Park Place, Inc. and GBHC.
Lease Agreement dated April 17, 2000 between Claridge at Park Place, Inc. and
GBHC for Lot 11 on Block 47 Tax Map of the City of Atlantic City.
Such liens or interests as are set forth in that certain Commitment No.
102134032 for Title Insurance of Stewart Title Guaranty Company.
The lease, license or management agreement(s) with an energy management
company(s), supplier(s), or intermediary(s) related thereto now or hereafter
entered into concerning or with respect to the supply and/or management of
utility services and/or the operation of existing or newly supplied equipment at
the property, including, but not limited to heating, ventilation, and
air-conditioning and energy production related equipment.]
2
EXHIBIT B
---------
CONVERSION NOTICE
-----------------
TO: ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND [NAME OF AGENT]
The undersigned registered owner of this Note hereby irrevocably exercises the
option to convert this Note, or the portion thereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock of
Atlantic Coast Entertainment Holdings, Inc.in accordance with the terms of the
Indenture referred to in the Note below, and directs that the shares issuable
and deliverable upon such conversion, and any Notes representing any unconverted
principal amount hereof, be issued and delivered to the registered holder hereof
unless a different name has been indicated below. If shares or any portion of
this Note not converted are to be issued in the name of a person other than the
undersigned, the undersigned will provide the appropriate information below and
pay all transfer taxes payable with respect thereto. Any amount required to be
paid by the undersigned on account of interest accompanies this Note.
Dated: ___________________
Fill in the registration of shares of Common Stock if to be issued, and Notes if
to be delivered, other than to and in the name of the registered holder:
(Name)
(Street Address)
(City, State and Zip Code)
Please print name and address
Principal amount to be converted (if less than all):
$-------------------------------
Social Security or Other Taxpayer
Identification Number:
Name of Registered Owner of Note being Converted:
---------------------------
Principal Amount of Note being Converted: $
-------------------------------
Certificate Number of Note being Converted:
---------------------------------
3
ANNEX G
July 14, 2003
Independent Committee of the Board
of Directors of GB Holdings, Inc.
c/o Sands Hotel & Casino
Indiana Avenue & Brighton Park
Atlantic, City, NJ 08401
Dear Members of the Independent Committee:
We understand the following regarding the transactions contemplated by GB
Holdings Inc. ("Parent"), GB Property Funding Corp. ("Finance") and Greate Bay
Hotel and Casino, Inc. ("Operating" and, together with Parent and Finance, the
"Company"): Parent holds all of the outstanding capital stock of Operating and
Finance and Finance is the issuer of 11% Notes due 2005 (the "Existing Notes")
in principal amount of $110 million. The Existing Notes are guaranteed by each
of Operating and Parent and are secured by liens on certain of the assets of the
Company (the "Collateral"). The Company intends to solicit the consent of
holders of the Existing Notes to amend the Amended and Restated Indenture, dated
as of October 12, 2001, governing the Existing Notes (the "Existing Indenture")
and related security documents to eliminate substantially all of the covenants
set forth in the Existing Indenture, release all liens on the Collateral (the
"Release") and offer to exchange all of the Existing Notes for new notes (the
"New Notes") to be issued by a newly formed wholly-owned subsidiary of Operating
("Newco") in the same principal amount as its Existing Notes. The New Notes will
be secured by all existing and future assets of Newco, accrue interest at a rate
of 3% per annum payable at maturity, mature on September 29, 2008, be
convertible into 72.5% of the equity of Newco on a fully diluted basis (or such
lesser prorated amount if less than all of all holders of Existing Notes elect
to receive New Notes) and have other terms similar to those currently included
in the Existing Indenture (except that the New Notes will be assumable in
connection with an acquisition of the Sands and will not contain any "change of
control put" or other similar provisions). In connection with the offer to
exchange the Existing Notes for the New Notes, the Company intends to pay to the
holders of the Existing Notes who accept the exchange offer $100 per $1,000 in
principal amount of Existing Notes exchanged, plus any accrued but unpaid
interest then due on the Existing Notes being exchanged (we assume for the
purposes hereof that the Company has paid all interest that is currently due and
payable on the Existing Notes.) In connection with the issuance of the New
Notes, the Company will transfer substantially all of its assets and obligations
(other than any Existing Notes that remain outstanding, intercompany notes and
the stock of Operating and Finance) to Newco in exchange for (a) warrants to
acquire, for nominal consideration, 27.5% of the common stock of Newco on a
fully diluted basis and (b) if all of the holders of the Existing Notes do not
elect to exchange, the pro rata portion of the 72.5% of common stock of Newco
reserved for issuance upon the conversion of the New Notes that would have been
issued to such holders of the Existing Notes had they exchanged. Parent will
then dividend to its stockholders all of the warrants, which, upon conversion of
the New Notes would be convertible into 27.5% of the capital stock of Newco on a
fully diluted basis. Each of Operating
G-1
Independent Committee of the Board
of Directors of GB Holdings, Inc.
July 14, 2003
and Finance will also be merged into Parent with Parent as the surviving
corporation. The amendments to the Existing Indenture and related security
documents, the Release, the offer to exchange the Existing Notes for the New
Notes, the cash payment to the holders of the Existing Notes, the transfer of
substantially all of the operating assets of the Company to Newco and the
dividend by Parent of the warrants, issued by Newco, to Parent's stockholders
are referred to collectively herein as the "Transaction."
You have requested our opinion (this "Opinion") as to the matters set forth
below. This Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
Furthermore, at your request, we have not assisted in the structuring of the
Transaction or advised you with respect to alternatives to it.
We have made such reviews, analyses and inquiries as we have deemed necessary
and appropriate under the circumstances. Among other things, we have:
1. met with representatives and attorneys for the Independent
Committee and certain members of the senior management of the
Company to discuss the operations, financial condition, future
prospects, projected operations and performance of the Company
and the pending Transaction;
2. reviewed the Company's Form 10-K for the fiscal years ended
December 31, 2002 and the Company's Form 10-Q for the period
ended March 31, 2003, which the Company's management has
identified as the most current financial statements available;
3. reviewed and discussed with the Company's management the
projections of the Company's financial performance for the
fiscal year ended December 31, 2003 prepared by the Company's
management;
4. discussed with the Company's management the New Jersey tax
environment, the likely impact of the Borgata casino, and
various other potential new competitive threats in other
states;
5. visited certain facilities and business offices of the
Company;
6. reviewed the historical market prices and trading volume for
Parent's publicly traded securities and other publicly
available information regarding the Company;
7. reviewed certain publicly available financial data for certain
companies that we deemed comparable to the Company;
8. reviewed the Existing Indenture and related security
documents;
9. reviewed a memorandum describing the Transaction from the
Company dated July 11, 2003; and
10. conducted such other studies, analyses and inquiries as we
have deemed appropriate.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have relied upon and assumed, with your
permission, that all information reviewed by us with respect to the Company,
whether supplied by the Company or its advisors or obtained by us from publicly
available sources, is true, correct
G-2
Independent Committee of the Board
of Directors of GB Holdings, Inc.
July 14, 2003
and complete in all material respects and does not contain any untrue statement
of material fact or omit to state a material fact necessary to make the
information supplied to us not misleading. We have further relied upon and
assumed, without independent verification, that the financial forecasts and
projections provided to us have been reasonably prepared and reflect the best
currently available estimates of the future financial results and condition of
the Company, and that there has been no material change in the assets, financial
condition, business or prospects of the Company since the date of the most
recent financial statements made available to us.
We have assumed, without independent verification, that the Transaction will be
consummated in all material respects in accordance with applicable laws, the
Existing Indenture and related security documents and the Transaction Summary.
At your direction, we also have assumed for the purposes of this Opinion that
the holders of at least 58% of the Existing Notes, or $63.8 million principal
amount, will exchange their Notes into an equal principal amount of New Notes.
This Opinion is necessarily based on business, economic, market and other
conditions as they exist and can be evaluated by us at the date of this letter.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this Opinion. We have not analyzed and are expressing no view
on the value of what the common stock of Parent or Newco actually will be when
the Transaction is consummated or the price at which the common stock of Parent
or Newco will trade subsequent thereto.
For purposes of this Opinion, with your permission, we have not undertaken any
inquiry as to, or taken into consideration, the possible tax consequences of the
Transaction (including whether common stockholders of Parent will recognize
taxable income as a result of the Transaction). Such tax consequences could be
material and could affect the analysis underlying the conclusions reached in
this Opinion.
Based upon the foregoing, and in reliance thereon, it is our opinion that the
consideration to be received by the common stockholders of Parent in the
Transaction is fair, from a financial point of view, to the common stockholders
of Parent.
Our services to you and this Opinion are provided solely for the information of
the Independent Committee in its evaluation of the consideration to be received
by the common stockholders of Parent in the Transaction and this Opinion is
given to you solely for that purpose. This Opinion is not being given on behalf
of, and is not intended to confer rights or remedies upon or be relied upon by,
any securityholder of the Company or Newco or any other person or entity.
We will receive a fee for our services in connection with this Opinion, and we
will be indemnified by the Parent for certain liabilities arising from the
delivery of this Opinion.
LIBRA SECURITIES, LLC
G-3
[BACK COVER]
GB HOLDINGS, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
---------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard P. Brown, Timothy A. Ebling and
Phyllis LeTart, or any of them, attorneys and proxies, with power of
substitution and revocation, to vote, as designated below, all shares of stock
which the undersigned is entitled to vote, with all powers which the undersigned
would possess if personally present, at the Special Meeting of Stockholders
(including all adjournments thereof) of GB Holdings, Inc. to be held on _____,
___ at ___, at ______________________. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSALS 1 AND 2.
1) A proposed transaction, the effect of which will be the transfer of
substantially all of the assets of Parent and its subsidiaries to
Atlantic Coast Entertainment Holdings, Inc. (which we refer to as
"Atlantic"), a Delaware corporation and a newly formed, wholly-owned
subsidiary of Parent's wholly-owned subsidiary Greate Bay Hotel and
Casino, Inc. (which we refer to as "Operating"), a New Jersey
corporation. Upon consummation of the proposed transaction, up to an
aggregate of 72.5% (on a fully diluted basis) of the issued and
outstanding common stock of Atlantic may be beneficially owned by holders
of debt securities issued by Atlantic, thereby resulting in such
noteholders beneficially owning up to 72.5% of an entity that through its
wholly-owned subsidiary owns substantially all of the assets initially
owned by Parent and its subsidiaries. The proposed transaction will
include the following series of events:
(a) Upon receipt of the necessary approval from the holders of
a majority of the $110 million aggregate principal amount
outstanding of 11% Notes due 2005 (which we refer to as the
"Existing Notes") issued by GB Property Funding Corp.
(which we refer to as "Funding"), a Delaware corporation
and a wholly-owned subsidiary of Parent and their exchange
of the Existing Notes for 3% Notes due 2008 (which we refer
to as the "New Notes"), issued by Atlantic, guaranteed by
Ace Gaming, LLC (which we refer to as "Licensee"), a New
Jersey limited liability company and a wholly-owned
subsidiary of Atlantic, and secured by the assets of
Atlantic and Licensee:
(i) Parent will transfer all of its assets (other than
the stock of Funding and Operating) to Operating;
(ii) Operating will transfer all of the assets which it
received from Parent and substantially all of its
assets (other than the stock of Atlantic) to
Atlantic in exchange for either:
(A) 27.5% of the outstanding common stock of
Atlantic (on a fully diluted basis) (if 100%
of the Existing Notes are exchanged for New
Notes); or
(B) (1) warrants to purchase 27.5% of the
outstanding common stock of Atlantic (on a
fully diluted basis) at a purchase price of
$.01 per share (if less than 100% of the
Existing Notes are exchanged for New Notes);
and (2) Atlantic will transfer to Operating
additional common stock of Atlantic so as to
equal a pro rata share of 72.5% of the common
stock of Atlantic which shall be proportional
to the principal amount of the Existing Notes
that are not exchanged; and
(iii) immediately thereafter Atlantic will transfer to
Licensee (A) the cash it received, except for an
amount of cash that Atlantic will pay to the holders
of the Existing Notes that exchange for New Notes
and (B) all of the assets it received from
Operating;
(b) Atlantic will offer the holders of the outstanding Existing
Notes the opportunity to exchange such Existing Notes for
(i) $100 in cash for every $1,000 in principal amount of
the Existing Notes exchanged in such transaction, (ii) on a
dollar for dollar basis, the New Notes which, at the
election of the holders of a majority of the aggregate
principal amount of New Notes outstanding, will be payable
in the form of 72.5% of the issued and outstanding shares
of common stock of Atlantic (on a
fully diluted basis, assuming 100% of the $110 million
Existing Notes are exchanged for the New Notes) as full
consideration for the principal and accrued interest owed
thereunder, and (iii) a cash payment of accrued, but unpaid
interest on the Existing Notes;
(c) Through a series of mergers, Parent, Operating, and Funding
will merge and Parent will be the surviving entity so that:
(i) The Existing Notes exchanged for the New Notes will
be cancelled;
(ii) Parent will be the obligor of the Existing Notes
(which shall no longer be secured by liens on the
collateral);
(iii) Parent will own the shares of Atlantic common stock
or warrants to purchase Atlantic common stock; and
(iv) Atlantic will be a wholly-owned subsidiary of Parent
(immediately prior to the completion of the
transaction); and
(d) Parent will distribute, to you as its stockholders, pro
rata, either:
(i) 0.275 shares of Atlantic common stock for every one
share of common stock of Parent that you currently
own, so that the stockholders of Parent will own an
aggregate of 27.5% of the issued and outstanding
common stock of Atlantic (on a fully diluted basis,
if 100% of the Existing Notes are exchanged for New
Notes); or
(ii) warrants to purchase 0.275 shares of Atlantic common
stock, at a purchase price of $.01 per share, for
every one share of common stock of Parent that you
currently own, so that the stockholders of Parent
will own, upon exercise of the warrants, an
aggregate of 27.5%, on a fully diluted basis, of the
outstanding common stock of Atlantic (if less than
100% of the Existing Notes are exchanged for New
Notes).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2) To act on any other matters that may properly be brought before the
special meeting or any adjournment or postponement of the special
meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR ITEMS 1 AND 2 AND IN THE DISCRETION OF SAID PROXY ON ANY OTHER MATTER
WHICH MAY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
Dated: ___________________, _____
_________________________________
Print Name
_________________________________
Signature
NOTE: When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, custodian, guardian or corporate
officer, please give your full title as such. If a corporation, please sign full
corporate name by authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 102(b)(7) of the Delaware General Corporation Law, our
Certificate of Incorporation provides that directors shall not be personally
liable to us or our shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (I) for any breach of their duty of
loyalty to us or our shareholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, relating to
prohibited dividends or distributions or the repurchase or redemption of stock,
or (iv) for any transaction from which our director derives an improper personal
benefit. In addition, our By-Laws provide for indemnification of our officers
and directors to the fullest extent permitted under Delaware law. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons who control us, we have been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable.
We maintain directors' and officers' liability insurance against any actual or
alleged error, misstatement, misleading statement, act, omission, neglect or
breach of duty by any director or officer, excluding certain matters including
fraudulent, dishonest or criminal acts or self-dealing.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. Exhibits
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
3.1 Certificate of Incorporation of Atlantic Coast Entertainment Holdings,
Inc. ("Atlantic"), filed October 31, 2003. (Incorporated herein by
reference to Annex A to the solicitation statement and prospectus,
which is a part of this registration statement).
3.2 Certificate of Formation of ACE Gaming, LLC ("Licensee"), filed
November 5, 2003.
3.3 By-Laws of Atlantic (Incorporated herein by reference to Annex B to the
solicitation statement and prospectus, which is a part of this
registration statement).
4.1 Specimen form of Atlantic's Common Stock certificate.
4.2 Operating Agreement of Licensee, dated November 5, 2003, by Atlantic.
4.3 Amended and Restated Indenture, dated as of October 12, 2001, among GB
Property Funding Corp. ("Funding"), as issuer, GB Holdings, Inc.
("Parent") and Greate Bay Hotel and Casino, Inc. ("Operating"), as
guarantors, and Wells Fargo Bank Minnesota, National Association
("Wells Fargo"), as trustee (Incorporated herein by reference to Annex
E to the solicitation statement and prospectus, which is a part of this
registration statement).
4.4 Form of Amendment to the Amended and Restated Indenture among Funding,
as issuer, Parent and Operating, as guarantors, and Wells Fargo, as
trustee, and Form of Second Amended and Restated Indenture among
Parent, as issuer, and Wells Fargo, as trustee (Incorporated herein by
reference to Annex F to the solicitation statement and prospectus,
which is a part of this registration statement).
4.5 Form of Indenture among Atlantic, as issuer, Licensee, as guarantor,
and ___________, as trustee (Incorporated herein by reference to Annex
G to the solicitation statement and prospectus, which is a part of this
registration statement).
4.6 Form of Warrant Agreement (Incorporated herein by reference to Annex
D to the solicitation statement and prospectus, which is a part of this
registration statement).
4.7* Form of Registration Rights Agreement, between Atlantic and
Cyprus, LLC.
5.1 Opinion of Katten Muchin Zavis Rosenman.
10.1 Form of Contribution Agreement among Parent, Operating, Atlantic and
Licensee (Incorporated herein by reference to Annex C to the
solicitation statement and prospectus, which is a part of this
registration statement).
10.2* Form of Security Agreement, by and among Atlantic, Licensee and
Trustee.
10.3* Form of Collateral Assignment of Leases, between Licensee and Trustee.
10.4* Form of Mortgage and Fixture Security Agreement, between Licensee and
Trustee.
10.5* Solicitation Agent Agreement with ___________, dated ____________.
10.6* Information Agent Agreement with ___________, dated ____________.
10.7* Exchange Agent Agreement with ___________, dated ____________.
21.1 List of Subsidiaries of Atlantic.
II-1
23.1 Consents of KPMG LLP.
23.2 Opinion of Katten Muchin Zavis Rosenman (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).
99.1 Opinion of Libra Securities, LLC (Incorporated herein by reference to
Annex H to the proxy statement and prospectus, which is a part of this
registration statement)
- ---------------------
* To be filed by amendment.
b. Financial Statement Schedules
All financial statement schedules are omitted because the information
is not required, is not material or is otherwise included in the financial
statements or related notes thereto.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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.
(1) The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed pursuant
to paragraph (h)(1) immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-2
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 Atlantic City, New Jersey, on
November 13, 2003.
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
By: /s/ Timothy A. Ebling
--------------------------------------
Name: Timothy A. Ebling
Title: Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS, the undersigned hereby constitute and appoint
Richard P. Brown, Timothy A. Ebling, Phyllis LeTart and each of them, his or her
true and lawful attorney-in-fact and agent, each with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement, or any related registration
statement filed pursuant to Rule 462(b) under the Securities Act, and to file
the same, with exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Richard P. Brown Chief Executive Officer November 13, 2003
- -------------------------- (Principal Executive Officer)
RICHARD P. BROWN
/s/ Timothy A. Ebling Chief Financial Officer November 13, 2003
- -------------------------- (Principal Accounting Officer)
TIMOTHY A. EBLING
/s/ Martin Hirsch Director November 13, 2003
- --------------------------
MARTIN HIRSCH
/s/ John P. Saldarelli Director November 13, 2003
- --------------------------
JOHN P. SALDARELLI
/s/ Michael L. Ashner Director November 13, 2003
- --------------------------
MICHAEL L. ASHNER
/s/ Harold First Director November 13, 2003
- --------------------------
HAROLD FIRST
/s/ August E. Rimpel, Jr. Director November 13, 2003
- --------------------------
AUGUST E. RIMPEL, JR.
II-3
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
3.1 Certificate of Incorporation of Atlantic Coast Entertainment Holdings,
Inc. ("Atlantic"), filed October 31, 2003. (Incorporated herein by
reference to Annex A to the solicitation statement and prospectus,
which is a part of this registration statement).
3.2 Certificate of Formation of ACE Gaming, LLC ("Licensee"), filed
November 5, 2003.
3.3 By-Laws of Atlantic (Incorporated herein by reference to Annex B to the
solicitation statement and prospectus, which is a part of this
registration statement).
4.1 Specimen form of Atlantic's Common Stock certificate.
4.2 Operating Agreement of Licensee, dated _____________, by Atlantic.
4.3 Amended and Restated Indenture, dated as of October 12, 2001, among GB
Property Funding Corp. ("Funding"), as issuer, GB Holdings, Inc.
("Parent") and Greate Bay Hotel and Casino, Inc. ("Operating"), as
guarantors, and Wells Fargo Bank Minnesota, National Association
("Wells Fargo"), as trustee (Incorporated herein by reference to Annex
E to the solicitation statement and prospectus, which is a part of this
registration statement).
4.4 Form of Amendment to the Amended and Restated Indenture among Funding,
as issuer, Parent and Operating, as guarantors, and Wells Fargo, as
trustee and Form of Second Amended and Restated Indenture among Parent,
as issuer, and Wells Fargo, as trustee (Incorporated herein by
reference to Annex F to the solicitation statement and prospectus,
which is a part of this registration statement).
4.5 Form of Indenture among Atlantic, as issuer, Licensee, as guarantor,
and _________, as trustee (Incorporated herein by reference to Annex
G to the solicitation statement and prospectus, which is a part of this
registration statement).
4.6 Form of Warrant Agreement (Incorporated herein by reference to Annex
D to the solicitation statement and prospectus, which is a part of this
registration statement).
4.7* Form of Registration Rights Agreement, between Atlantic and
Cyprus, LLC.
5.1 Opinion of Katten Muchin Zavis Rosenman.
10.1 Form of Contribution Agreement among Parent, Operating, Atlantic and
Licensee (Incorporated herein by reference to Annex C to the
solicitation statement and prospectus, which is a part of this
registration statement).
10.2* Form of Security Agreement, by and among Atlantic, Licensee and
Trustee.
10.3* Form of Collateral Assignment of Leases, between Licensee and Trustee.
10.4* Form of Mortgage and Fixture Security Agreement, between Licensee and
Trustee.
10.5* Solicitation Agent Agreement with ___________, dated ____________.
10.6* Information Agent Agreement with ___________, dated ____________.
10.7* Exchange Agent Agreement with ___________, dated ____________.
21.1 List of Subsidiaries of Atlantic.
23.1 Consents of KPMG LLP.
23.2 Opinion of Katten Muchin Zavis Rosenman (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).
99.1 Opinion of Libra Securities, LLC (Incorporated herein by reference to
Annex H to the proxy statement and prospectus, which is a part of this
registration statement)
- ---------------------
* To be filed by amendment.
b. Financial Statement Schedules