Filed pursuant to Rule 424(b)(3)
Registration Statement No. 333-110484
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. has called a special meeting of its stockholders on June 30,
2004, at 11:00 a.m., local time at the offices of Katten Muchin Zavis Rosenman
at 575 Madison Avenue, 11th Floor, New York, NY 10022, to seek your approval of
a proposed transaction, resulting in the transfer of substantially all of the
assets of GB Holdings and its subsidiaries to Atlantic Coast Entertainment
Holdings, Inc., a Delaware corporation and a newly formed indirect wholly-owned
subsidiary of GB Holdings. Upon consummation of the proposed transaction (i) up
to an aggregate of 72.5% (on a fully diluted basis) of the issued and
outstanding common stock of Atlantic Holdings (a wholly-owned subsidiary which
will own substantially all of the assets of GB Holdings and its subsidiaries)
will be beneficially owned by holders of 3% Notes due 2008 issued by Atlantic
Holdings and (ii) each stockholder of GB Holdings will receive, as a
distribution, either (a) 0.275 shares of common stock of Atlantic or (b)
warrants to purchase 0.275 shares of common stock of Atlantic, for each share of
common stock of GB Holdings owned.
This proxy statement/prospectus explains the proposed transaction and the
procedures for voting and these materials should be read carefully. The Board of
Directors of GB Holdings is soliciting proxies for the special meeting and GB
Holdings will bear the costs associated with the solicitation. GB Holdings 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.
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 is traded on the American Stock Exchange under
the ticker symbol GBH. On May 26, 2004, the last reported sale price of the
common stock was $2.22 per share. As soon as reasonably practicable following
consummation of the proposed transaction, the Board of Directors of GB Holdings
will apply to delist the common stock of GB Holdings from trading on the
American Stock Exchange. The common stock of Atlantic Holdings is not listed for
trading on any exchange and following consummation of the proposed transaction
neither GB Holdings nor Atlantic Holdings believe that there will be a trading
market for the common stock or warrants of Atlantic Holdings and accordingly
stockholders of GB Holdings will not know the market value of the stock or
warrants they are receiving in the transaction.
The Board of Directors of GB Holdings may, under certain circumstances terminate
the proposed transaction at any time prior to consummation.
Affiliates of Carl C. Icahn own approximately 77% of the outstanding common
stock of GB Holdings and have indicated their intent to vote in favor of the
proposed transaction. Because of their significant ownership of the outstanding
common stock of GB Holdings, as long as they vote in favor of the proposed
transaction, the proposed transaction will be approved.
See "Risk Factors" beginning on page 28 for a discussion of issues that you
should consider with respect to 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 common stock of Atlantic
Holdings, the warrants of Atlantic Holdings, or the common stock of Atlantic
Holdings 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 June 1, 2004, and is first being mailed
to stockholders on or about June 4, 2004.
The Solicitation Agent for the exchange offer and consent solicitation and this
proxy statement/prospectus is: Innisfree M&A Incorporated
i
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 30, 2004
To the Stockholders of GB Holdings, Inc.:
GB Holdings Inc. will hold a special meeting of its stockholders on June 30,
2004, at 11:00 AM, local time, at the offices of Katten Muchin Zavis Rosenman at
575 Madison Avenue, 11th Floor, New York, NY 10022, 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 GB Holdings and its
subsidiaries to Atlantic Coast Entertainment Holdings, Inc., a
Delaware corporation and a newly formed, wholly-owned subsidiary
of GB Holdings' wholly-owned subsidiary Greate Bay Hotel and
Casino, Inc., 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 Holdings may be beneficially owned by holders of debt
securities issued by Atlantic Holdings, thereby resulting in such
noteholders beneficially owning up to 72.5% of Atlantic Holdings
that through its wholly-owned subsidiary will own substantially
all of the assets owned by GB Holdings and its subsidiaries. The
proposed transaction will include the following events:
(a) Following the 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., a
Delaware corporation and a wholly-owned subsidiary
of GB Holdings and their exchange of the Existing
Notes for 3% Notes due 2008 (which we refer to as
the "New Notes"), issued by Atlantic Holdings,
guaranteed by ACE Gaming, LLC, a New Jersey
limited liability company and a wholly-owned
subsidiary of Atlantic Holdings, and secured by
the assets of Atlantic Holdings and ACE Gaming:
(i) GB Holdings will transfer all of its
assets (other than the stock of GB
Property and Greate Bay Hotel) and
liabilities (other than its obligations
under the Existing Notes) to Greate Bay
Hotel;
(ii) Greate Bay Hotel will transfer all of the
assets and liabilities which it received
from GB Holdings and substantially all of
its assets (other than the stock of
Atlantic Holdings) and certain of its
liabilities to Atlantic Holdings (which
will agree to issue New Notes in exchange
for Existing Notes that are tendered for
exchange and cancel such Notes) in
exchange for either:
(A) 27.5% of the outstanding common
stock of Atlantic Holdings (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 Holdings (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 Holdings will transfer to
Greate Bay Hotel additional common
stock of Atlantic Holdings so that
Greate Bay Hotel has a pro rata
share of 72.5% of the common stock
of Atlantic Holdings which is equal
to the percentage of the principal
amount of the Existing Notes that
are not exchanged; and
(iii) Atlantic Holdings will transfer to ACE
Gaming (A) the cash it received, except
for the cash that Atlantic Holdings will
pay to the holders of the Existing Notes
that exchange for New Notes and (B) all of
the assets and liabilities it received
from Greate Bay Hotel;
(b) Atlantic Holdings will offer the holders of the
outstanding Existing Notes the opportunity to
exchange their Existing Notes for (i) $100 in
cash for every $1,000 in principal amount of the
Existing Notes exchanged; (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 Holdings (on a fully
diluted basis, assuming 100% of the $110 million
Existing Notes are exchanged for the New Notes),
or 65.909 shares of common
ii
stock of Atlantic Holdings for each $1,000 of
principal amount of 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, GB Property, Greate
Bay Hotel, and GB Holdings will merge and GB
Holdings will be the surviving entity and:
(i) The Existing Notes tendered for exchange
for the New Notes will be cancelled;
(ii) GB Holdings will be the obligor of the
Existing Notes (which will no longer be
secured by liens on the collateral);
(iii) GB Holdings will own the shares of common
stock of Atlantic Holdings or warrants
to purchase common stock of Atlantic
Holdings;
(iv) Atlantic Holdings will be a wholly-owned
subsidiary of GB Holdings (immediately
prior to the completion of the
transaction);
(d) GB Holdings will distribute, to you as its
stockholders, pro rata, either:
(i) 0.275 shares of common stock of Atlantic
Holdings for each share of common stock of
GB Holdings that you currently own, so
that the stockholders of GB Holdings will
own an aggregate of 27.5% (or 2,750,000
shares) of the issued and outstanding
common stock of Atlantic Holdings (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
common stock of Atlantic Holdings, at a
purchase price of $.01 per share, for each
share of common stock of GB Holdings that
you currently own, so that the
stockholders of GB Holdings will own, upon
exercise of the warrants, an aggregate of
27.5% (or 2,750,000 shares) of the issued
and outstanding common stock of Atlantic
Holdings (on a fully diluted basis, if
less than 100% of the Existing Notes are
exchanged for New Notes); and
(e) As soon as reasonably practicable following the
consummation of the transaction, GB Holdings will
apply to delist the common stock of GB Holdings
from trading on the American Stock Exchange. Also,
if 100% of the Existing Notes are exchanged, the
Board of Directors of GB Holdings will take the
steps necessary to dissolve GB Holdings, satisfy
any obligations or liabilities with its assets,
and distribute any remaining assets to its
stockholders.
2) To vote to adjourn the meeting to solicit additional proxies.
3) To act on any other matters that may properly be brought before
the special meeting or any adjournment of the special meeting.
Only record holders of shares of common stock at the close of
business on June 1, 2004, are entitled to notice of and to vote at the special
meeting or any adjournment or postponement of the special meeting. As of
May 6, 2004 there were 10 stockholders of record, and GB Holdings believes this
number will not change prior to the mailing of this proxy statement/prospectus.
On such date, there were 10 million shares of common stock outstanding. A
complete list of the stockholders of record of GB Holdings entitled to vote at
the special meeting will be available 10 days before the special meeting at GB
Holdings' executive offices for inspection by GB Holdings' stockholders during
ordinary business hours for proper purposes.
The Board of Directors of GB Holdings is soliciting proxies for
the special meeting. GB Holdings 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 GB Holdings' stockholders in connection with this
solicitation. GB Holdings 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. Innisfree M&A Incorporated has been
retained as Information Agent in connection with the solicitation of proxies.
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 GB
Holdings, 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
iii
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.
In the exercise of its business judgment and fiduciary duties
pursuant to Delaware law, the Board of Directors of GB Holdings, based on the
recommendation of the Special Committee of the Board of Directors of GB
Holdings, has the ability, in its sole discretion, to terminate the transactions
described herein at any time prior to consummation based on (i) (a) the
availability of financing on terms more favorable to GB Holdings than the
proposed transaction and (b) the availability of an alternative transaction that
is more favorable to GB Holdings or (ii) a material adverse change in (a) the
business, assets, liabilities or prospects of GB Holdings, or its subsidiaries;
(b) the gaming industry; (c) tourism in Atlantic City; or (d) general economic
conditions.
FOR MORE INFORMATION ABOUT THE TRANSACTION DESCRIBED ABOVE,
PLEASE REVIEW THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS, THE CERTIFICATE OF
INCORPORATION OF ATLANTIC HOLDINGS, ATTACHED HERETO AS ANNEX A, THE BY-LAWS OF
ATLANTIC HOLDINGS, ATTACHED HERETO AS ANNEX B, THE FORM OF CONTRIBUTION
AGREEMENT ATTACHED HERETO AS ANNEX C, THE FORM OF WARRANT AGREEMENT, ATTACHED
HERETO AS ANNEX D, THE AMENDED AND RESTATED INDENTURE, ATTACHED HERETO AS ANNEX
E, THE FORM OF AMENDMENT TO THE AMENDED AND RESTATED INDENTURE AND THE FORM OF
SECOND AMENDED AND RESTATED INDENTURE, ATTACHED HERETO AS ANNEX F, THE FORM OF
INDENTURE, ATTACHED HERETO AS ANNEX G, THE FAIRNESS OPINION ISSUED BY LIBRA
SECURITIES, LLC, ATTACHED HERETO AS ANNEX H, THE NAMES AND POSITIONS OF
EXECUTIVE OFFICERS, DIRECTORS AND SIGNIFICANT EMPLOYEES OF THE AFFILIATES,
ATTACHED HERETO AS ANNEX I AND PROJECTIONS FOR GB HOLDINGS, INC. AND ITS
SUBSIDIARIES FOR JULY - DECEMBER 2003 DELIVERED TO LIBRA SECURITIES LLC ATTACHED
HERETO AS ANNEX J.
THE GB HOLDINGS BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN
FAVOR OF THE TRANSFER OF SUBSTANTIALLY ALL OF THE ASSETS OF GB HOLDINGS AND
GREATE BAY HOTEL AND THE TRANSACTION DESCRIBED ABOVE AND IN THE ACCOMPANYING
PROXY STATEMENT/PROSPECTUS.
By Order of the Board of Directors of GB Holdings, Inc.
Interim President
/s/ George Toth
June 1, 2004
GB HOLDINGS, INC.
C/O SANDS HOTEL & CASINO
INDIANA AVENUE & BRIGHTON PARK
ATLANTIC CITY, NEW JERSEY 08401
iv
TABLE OF CONTENTS
PAGE
-------
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION.................................................................................. 1
SUMMARY...................................................................................................................... 7
BACKGROUND OF ATLANTIC HOLDINGS........................................................................................... 7
BACKGROUND OF GREATE BAY HOTEL............................................................................................ 7
BACKGROUND OF GB HOLDINGS................................................................................................. 7
BACKGROUND OF THE TRANSACTION............................................................................................. 8
DIFFERENCES IN RIGHTS OF HOLDERS OF COMMON STOCK OF GB HOLDINGS, ATLANTIC HOLDINGS COMMON STOCK, AND WARRANTS............. 11
REASONS FOR THE TRANSACTION............................................................................................... 11
DESCRIPTION OF THE TRANSACTION............................................................................................ 14
INTERESTS OF DIRECTORS AND MANAGEMENT IN THE TRANSACTION.................................................................. 15
CONDITIONS TO THE COMPLETION OF THE TRANSACTION........................................................................... 17
SPECIAL FACTORS........................................................................................................... 17
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM.............................................................................. 17
VOTE REQUIRED............................................................................................................. 17
GB HOLDINGS GRANT OF AUTHORITY TO ADJOURN OR POSTPONE THE SPECIAL MEETING................................................. 18
VOTING BY GB HOLDINGS DIRECTORS AND EXECUTIVE OFFICERS.................................................................... 18
USE OF PROCEEDS........................................................................................................... 18
REGULATORY MATTERS........................................................................................................ 18
APPRAISAL RIGHTS.......................................................................................................... 18
RESALE OF ATLANTIC HOLDINGS COMMON STOCK AND WARRANTS..................................................................... 18
SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION............................................... 18
ANTICIPATED ACCOUNTING TREATMENT............................................................................................. 21
COMPARATIVE MARKET PRICE INFORMATION......................................................................................... 22
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA................................................................ 23
SELECTED PRO FORMA FINANCIAL DATA GB HOLDINGS AND ATLANTIC HOLDINGS GIVING EFFECT TO THE TRANSACTION......................... 25
CAPITALIZATION............................................................................................................... 30
ATLANTIC HOLDINGS......................................................................................................... 30
GB HOLDINGS............................................................................................................... 31
RISK FACTORS................................................................................................................. 32
RISK FACTORS RELATED TO THE TRANSACTION..................................................................................... 32
RISK FACTORS RELATED TO THE BUSINESS OF ATLANTIC HOLDINGS................................................................... 39
RISK FACTORS RELATED TO THE GAMING INDUSTRY................................................................................. 43
FORWARD-LOOKING STATEMENTS................................................................................................... 45
SPECIAL FACTORS.............................................................................................................. 46
BACKGROUND OF THE TRANSACTION............................................................................................. 46
REASONS FOR THE TRANSACTION............................................................................................... 51
POTENTIAL BENEFITS ASSOCIATED WITH THE TRANSACTION........................................................................ 52
i
POTENTIAL DETRIMENTS ASSOCIATED WITH THE TRANSACTION...................................................................... 54
RECOMMENDATION OF THE SPECIAL COMMITTEE................................................................................... 54
RECOMMENDATION OF THE BOARD OF DIRECTORS OF GB HOLDINGS, GREATE BAY HOTEL, GB PROPERTY, AND ATLANTIC HOLDINGS............. 57
RECOMMENDATION OF THE MANAGER OF ACE GAMING .............................................................................. 58
POSITION OF ENTITIES CONTROLLED BY CARL C. ICAHN AS TO THE FAIRNESS OF THE TRANSACTION.................................... 58
OPINION OF LIBRA SECURITIES............................................................................................... 59
ADDITIONAL REPORT OF LIBRA SECURITIES..................................................................................... 64
INTERESTS OF THE DIRECTORS AND MANAGEMENT OF GB HOLDINGS IN THE TRANSACTION............................................... 68
POSSIBLE CONFLICTS OF INTERESTS........................................................................................... 69
THE TRANSACTION.............................................................................................................. 70
CONDITIONS TO THE COMPLETION OF THE TRANSACTION........................................................................... 70
MANNER OF EFFECTING THE ASSET TRANSFER AND DISTRIBUTION OF SECURITIES..................................................... 71
MANNER OF EFFECTING THE EXCHANGE OFFER.................................................................................... 71
TERMS OF THE CONSENT SOLICITATION AND EXCHANGE OFFER...................................................................... 72
TERMS OF THE NEW NOTES.................................................................................................... 74
RESULTS OF THE ASSET TRANSFER AND DISTRIBUTION OF SECURITIES.............................................................. 76
NO ISSUANCE OF FRACTIONAL SHARES OF ATLANTIC HOLDINGS COMMON STOCK........................................................ 78
U.S. FEDERAL TAX CONSEQUENCES OF THE ASSET TRANSFER AND DISTRIBUTIONS OF ATLANTIC HOLDINGS SECURITIES..................... 78
LISTING AND TRADING OF THE SECURITIES..................................................................................... 81
THE SPECIAL MEETING.......................................................................................................... 81
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM.............................................................................. 81
VOTE REQUIRED............................................................................................................. 82
GB HOLDINGS GRANT OF AUTHORITY TO ADJOURN OR POSTPONE THE SPECIAL MEETING................................................. 82
VOTING OF PROXIES......................................................................................................... 82
REVOCABILITY OF PROXIES................................................................................................... 82
CHANGING YOUR VOTE........................................................................................................ 83
SOLICITATION OF PROXIES................................................................................................... 83
ATTENDING THE SPECIAL MEETING............................................................................................. 83
APPRAISAL RIGHTS............................................................................................................. 83
ACCOUNTING TREATMENT......................................................................................................... 83
DESCRIPTION OF SECURITIES.................................................................................................... 83
DESCRIPTION OF ATLANTIC HOLDINGS' CAPITAL STOCK........................................................................... 84
AUTHORIZED CAPITAL STOCK.................................................................................................. 84
COMMON STOCK.............................................................................................................. 84
PREFERRED STOCK........................................................................................................... 85
WARRANTS.................................................................................................................. 85
COMPARISON OF RIGHTS AND MATERIAL DIFFERENCES OF GB HOLDINGS AND ATLANTIC HOLDINGS STOCKHOLDERS.............................. 87
GOVERNMENT REGULATION........................................................................................................ 94
ii
NEW JERSEY GAMING REGULATIONS............................................................................................. 94
TREASURY REGULATIONS...................................................................................................... 98
DESCRIPTION OF THE BUSINESS OF ATLANTIC HOLDINGS AND ITS SUBSIDIARIES........................................................ 98
GENERAL................................................................................................................... 98
DESCRIPTION OF THE BUSINESS OF GB HOLDINGS AND ITS SUBSIDIARIES.............................................................. 99
GENERAL................................................................................................................... 99
THE SANDS................................................................................................................. 99
DESCRIPTION OF PROPERTIES................................................................................................. 106
LEGAL PROCEEDINGS............................................................................................................ 107
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GB HOLDINGS AND ITS SUBSIDIARIES.... 108
GENERAL................................................................................................................... 108
LIQUIDITY AND CAPITAL RESOURCES........................................................................................... 108
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2004........................................................... 111
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003................................................................ 115
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................................................... 121
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE......................................... 121
MANAGEMENT OF GB HOLDINGS AND ATLANTIC HOLDINGS.............................................................................. 122
DIRECTORS AND EXECUTIVE OFFICERS.......................................................................................... 122
EXECUTIVE COMPENSATION OF ATLANTIC HOLDINGS, GB HOLDINGS AND ITS SUBSIDIARIES................................................ 125
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION............................................................................ 125
OPTION GRANTS IN LAST FISCAL YEAR......................................................................................... 126
EMPLOYMENT CONTRACTS...................................................................................................... 126
EMPLOYEE RETIREMENT SAVINGS PLAN.......................................................................................... 126
COMPENSATION OF DIRECTORS................................................................................................. 126
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION............................................................... 127
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ATLANTIC HOLDINGS AND GB HOLDINGS.......................... 127
ATLANTIC HOLDINGS......................................................................................................... 127
GB HOLDINGS............................................................................................................... 129
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................................................... 130
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES................................................................................ 131
GENERAL................................................................................................................... 131
GB HOLDINGS............................................................................................................... 132
U.S. SHAREHOLDERS......................................................................................................... 133
EXERCISE OF THE WARRANTS TO ACQUIRE ATLANTIC HOLDINGS COMMON STOCK........................................................ 135
NON-U.S. SHAREHOLDERS..................................................................................................... 135
TAXATION OF THE DISTRIBUTION OF ATLANTIC HOLDINGS SECURITIES AND A SALE,
EXCHANGE OR REDEMPTION OF ATLANTIC HOLDINGS SECURITIES................................................................. 135
BACKUP WITHHOLDING AND INFORMATION REPORTING.............................................................................. 136
LEGAL MATTERS................................................................................................................ 136
EXPERTS...................................................................................................................... 136
iii
STOCKHOLDER PROPOSALS........................................................................................................ 137
WHERE YOU CAN FIND MORE INFORMATION.......................................................................................... 137
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS............................................................................. 138
INDEX TO FINANCIAL STATEMENTS................................................................................................ F
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM...................................................................... F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS..................................................................................... F-2
GB HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED DECEMBER 31, 2003 AND 2002... F-3
INDEPENDENT AUDITOR'S REPORT................................................................................................. F-21
UNAUDITED CONSOIDATED FINANCIAL STATEMENT OF GB HOLDINGS, INC. AND SUBSIDIARY ............................................... F-23
GB HOLDINGS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS........................... P-1
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY UNAUDITED PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.... P-15
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS.............................................................................. II-1
Annex A Certificate of Incorporation of Atlantic Coast Entertainment Holdings, Inc.
Annex B By-Laws of Atlantic Coast Entertainment Holdings, Inc.
Annex C Form of Contribution Agreement by and among GB Holdings, Inc., Greate Bay Hotel and Casino, Inc., Atlantic Coast
Entertainment Holdings, Inc. and ACE Gaming LLC
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, and Wells Fargo Bank Minnesota, National
Association, as trustee
Annex F Form of Amendment to the Amended and Restated Indenture among GB Property Funding Corp., as issuer, GB Holdings,
Inc. and Greate Bay Hotel and Casino, Inc., as Shareholders, and Wells Fargo Bank, National Association, as trustee,
and Form of Second Amended and Restated Indenture, among GB Holdings, Inc., as obligor, and Wells Fargo Bank
National Association, as trustee, which is attached as Exhibit A thereto
Annex G Form of Indenture among Atlantic Coast Entertainment Holdings, Inc., as issuer, ACE Gaming LLC, as guarantor, and
Wells Fargo Bank, National Association, as trustee
Annex H Opinion of Libra Securities, LLC
Annex I Executive Officers, Directors and Significant Employees of the Affiliates
Annex J Projections for GB Holdings, Inc. and its Subsidiaries for July-December 2003 delivered to Libra Securities, LLC
iv
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION
The following are some questions that you may have as a
stockholder of GB Holdings, Inc. regarding the transaction which will result in
the transfer and disposition of substantially all of the assets of GB Holdings
and its wholly-owned subsidiaries, and the answers to those questions. GB
Holdings 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 GB Holdings will take place
on June 30, 2004, at 11:00 AM, local time, at the offices of Katten
Muchin Zavis Rosenman, 575 Madison Avenue, 11th Floor, New York,
NY 10022.
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 GB Holdings' Board of Directors, own approximately 77% of the
issued and outstanding shares of common stock of GB Holdings and have
indicated that they intend to vote in favor of the Transaction (as
defined below), although such holders have not entered into any
agreements or other arrangements requiring such holders to vote in favor
of the Transaction and such holders are free to decide not to vote in
favor of the Transaction. If affiliates of Mr. Icahn do not vote in
favor of the Transaction, the Transaction will not be approved;
conversely, if they vote in favor of the Transaction, approval of the
Transaction is assured.
If GB Holdings is unable to obtain the approval of a majority of its
stockholders, Atlantic Holdings will be forced to terminate the exchange
offer and GB Holdings will have to pursue other alternatives, including
attempting to refinance the Existing Notes in the capital markets, or
seeking additional financing or other methods of restructuring the
Existing Notes. If GB Holdings is unable to refinance the Existing Notes
on favorable terms, or at all, or accumulate enough cash to pay the
principal amount and accrued interest of the Existing Notes when the
Existing Notes are due, GB Holdings may file for, or be forced to resort
to, bankruptcy protection. See "RISK FACTORS -- RISK FACTORS RELATED TO
THE TRANSACTION -- If the Transaction is not approved by the
stockholders of GB Holdings or not completed, GB Property and the
guarantors of the Existing Notes, which include GB Holdings and Greate
Bay Hotel, may be unable to pay the principal due on the Existing Notes
at maturity" as set forth on page 32.
Q: Why is GB Holdings proposing to enter into the Transaction?
A: The proposed transaction is comprised of a series of events (which we
refer to collectively as the "Transaction") initiated by GB Holdings to
enable it to refinance its 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., a Delaware corporation and a
wholly-owned subsidiary of GB Holdings, which are due and payable,
together with accrued, but unpaid interest, on September 29, 2005, on
terms more favorable than GB Holdings believes is available to it in the
capital markets. If GB Holdings is unable to refinance the Existing
Notes on favorable terms, or at all, or accumulate enough cash to pay
the Existing Notes when the Existing Notes become due in 2005, GB
Property 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 GB Holdings does not consummate the
Transaction, Greate Bay Hotel may be unable to obtain renewal of its
casino license when renewal is required in 2004 due to the outstanding
debt of GB Holdings.
Q. What will happen if the Transaction is approved and what will I receive?
A. If the Transaction is approved, Atlantic Coast Entertainment Holdings,
Inc., a Delaware corporation and an indirect wholly-owned subsidiary of
GB Holdings, will, through its wholly-owned subsidiary ACE Gaming, LLC,
a New Jersey limited liability company, own substantially all of the
assets of GB Holdings and Greate Bay Hotel and Casino, Inc., a New
Jersey corporation and a wholly-owned subsidiary of GB Holdings.
Following consummation of the Transaction, the stockholders of GB
Holdings will receive either (i) an aggregate of 27.5% (or 2,750,000
shares) of the outstanding common stock, par value $.01 per share (the
"Atlantic Holdings Common Stock") of Atlantic Holdings (which we refer
to as the "Holders Equity") (on a
1
fully diluted basis) or (ii) warrants (which we refer to as "Warrants"
and, collectively, with the Holders Equity, as "Atlantic Holdings
Securities") to purchase an aggregate of 27.5% (or 2,750,000 shares) of
the outstanding Atlantic Holdings Common Stock (on a fully diluted
basis) at a purchase price of $.01 per share. Also, the Transaction will
provide the holders of the Existing Notes the opportunity to exchange,
on a dollar for dollar basis, their Existing Notes for 3% Notes due 2008
(which we refer to as the "New Notes"), issued by Atlantic Holdings and
guaranteed by ACE Gaming. As soon as reasonably practicable following
the Transaction, GB Holdings will apply to delist the common stock of GB
Holdings from trading on the American Stock Exchange. Also if 100% of
the Existing Notes are exchanged, the Board of Directors (the "Board")
of GB Holdings will take the steps necessary to dissolve GB Holdings and
satisfy any obligations or liabilities with its assets and distribute
any remaining assets to its stockholders.
For example, for every one share of common stock of GB Holdings that you
currently own, you will receive either:
(1) 0.275 shares of Atlantic Holdings Common Stock (if 100%
of the Existing Notes are exchanged for New Notes); or
(2) Warrants to purchase 0.275 shares of Atlantic Holdings
Common Stock (if less than 100% of the Existing Notes
are exchanged for New Notes).
If 100% of the Existing Notes are exchanged, you will receive a pro rata
share of the Holders Equity, but if less than 100% of the Existing Notes
are exchanged, you will receive a pro rata share of Warrants. The
Holders Equity, Warrants, and the shares of Atlantic Holdings Common
Stock issuable upon the exercise of the Warrants will 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 Holdings 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 83 and "RISK FACTORS -- RISK FACTORS RELATED TO THE GAMING
INDUSTRY -- Holders of Atlantic Holdings Common Stock and Warrants are
Subject to the CCC and the NJCCA" as set forth on page 45 below). 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 83
below).
The Warrants, the Atlantic Holdings Common Stock underlying the
Warrants, the Atlantic Holdings Common Stock and the shares of Atlantic
Holdings Common Stock that may be issued to GB Holdings will not be
listed for trading on any securities exchange.
Q: Will the Warrants or the Atlantic Holdings Common Stock be listed for
Trading on any stock exchange or on Nasdaq?
A: No. Atlantic Holdings does not currently anticipate listing the Warrants
or the Atlantic Holdings Common Stock.
Q: Can this Transaction be terminated?
A: Yes. GB Holdings can choose to terminate the Transaction at any point
prior to the consummation of the Transaction, including by the Board in
the exercise of its business judgment and fiduciary duty pursuant to
Delaware law, based on the recommendation of the Special Committee (the
"Special Committee") of the Board, the Board has the ability, in its
sole discretion, to terminate the Transaction at any time prior to
consummation based on (i) (a) the availability of financing on terms
more favorable to GB Holdings than the Transaction and (b) the
availability of an alternative transaction that is more favorable to GB
Holdings or (ii) a material adverse change in (a) the business, assets,
liabilities, or prospects of GB Holdings, or its subsidiaries; (b) the
gaming industry; (c) tourism in Atlantic City; or (d) general economic
conditions. Currently, GB Holdings has not received nor is it soliciting
alternative financing or transaction proposals. GB Holdings has not
reviewed and has not solicited any alternative financing or transaction
proposal.
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) a determination by a majority of the Board
of Directors of Atlantic Holdings (including at least one independent
director) that the Warrants may be exercised; (ii)
2
payment in full of the Existing Notes which have not been exchanged for
the New Notes; or (iii) the payment or conversion of any of the New
Notes in cash or Atlantic Holdings Common Stock. The New Notes provide
that among other things, the holders of a majority of the aggregate
principal amount of the New Notes may determine (i) when and whether to
require all holders of New Notes to accept Atlantic Holdings Common
Stock as 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 Holdings Common Stock as payment of the principal and accrued
interest at or prior to maturity. An accurate prediction cannot be made
as to exactly when and if any of these conditions will be satisfied.
While the Existing Notes are scheduled to mature on September 28, 2005,
neither Atlantic Holdings nor GB Holdings can provide any assurance that
GB Holdings 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, a majority of the Board of Directors of
Atlantic Holdings (including at least one independent director) 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 terminate at least 90 days following the
date of such notice, unless exercised prior to such date. Consequently,
if the Board of Directors of Atlantic Holdings elects, you may have only
a 90-day period beginning on the date the Warrants become exercisable to
exercise the Warrants. The Board of Directors of Atlantic Holdings has
not determined the circumstances under which it will make the Warrants
exercisable, however such Board will consider a variety of factors
including, but not limited to, general market factors, Atlantic
Holdings' need for additional financing, business opportunities of
Atlantic Holdings, Atlantic Holdings' ability to enter into
transactions, whether the Board of Directors of Atlantic Holdings wants
the holders of the Warrants to obtain ownership of Atlantic Holdings
Common Stock in order to be in a position to exercise their respective
rights as stockholders, the business and financial prospects of The
Sands, Atlantic Holdings and ACE Gaming, and other economic factors
effecting the nation in general, the Atlantic City Market or the gaming
industry.
Affiliates of Mr. Icahn own approximately 58% of the Existing Notes,
have indicated their intent to tender for exchange their Existing Notes
(but have not entered into any agreements or other arrangements
requiring that they tender for exchange their Existing Notes and such
holders are free to change their intention and decide not to tender),
and following such exchange, they will own a majority of the New Notes.
Such affiliates, as holders of a majority of the principal amount of the
New Notes outstanding, may have the power to cause the New Notes to be
paid in Atlantic Holdings Common Stock at any time, in their sole
discretion (thereby allowing the Warrants to be exercised). Although
they reserve such right to exercise such power at any time, such
affiliates have advised Atlantic Holdings that they have not determined
the form and timing of the payment of the New Notes. In determining
whether or when to cause the New Notes to be paid in Atlantic Holdings
Common Stock, they may consider a variety of factors, including, but not
limited to, the results of operations and the financial condition of
Atlantic Holdings and ACE Gaming, the general market conditions
affecting Atlantic Holdings and ACE Gaming, the business and financial
prospects of The Sands, Atlantic Holdings and ACE Gaming, whether such
affiliates want to obtain ownership of such shares in order to be in a
position to exercise their respective rights as stockholders, whether
such affiliates find it advantageous to themselves to eliminate the debt
created by the New Notes, and other economic factors generally affecting
the country and the gaming industry in particular. However, such
affiliates have advised Atlantic Holdings that they have not determined
benchmarks or standards in this regard and reserve the right to cause
the New Notes to be paid in or convertible into Atlantic Holdings Common
Stock at any time, in their sole discretion.
Q: When will any distributions be made to the stockholders of GB Holdings?
A: Assuming the Transaction is approved, the distribution of either
Atlantic Holdings 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 Holdings Common Stock to the stockholders of GB
Holdings will occur, as soon as practicable, after the consummation of
the Transaction.
3
Q: What are the conditions of the Transaction?
A: This Transaction is conditioned upon:
o GB Holdings receiving the approval of a majority of its
stockholders for the Transaction;
o GB Holdings receiving the consent of the holders of a
majority of the aggregate principal amount of the
Existing Notes outstanding, and a majority of such
holders exchanging their Existing Notes for New Notes;
o Greate Bay Hotel receiving the required governmental
consent from the New Jersey Casino Control Commission
(relating to the Asset Transfer and the issuance of a
casino license to Ace Gaming on substantially the same
terms and conditions as the casino license issued to
Greate Bay Hotel) and receiving consents from the city
of Atlantic City and certain third parties;
o no legal prohibition to consummation of the Transaction
shall have been in effect; and
o the effectiveness of the Amendment to the Existing
Indenture among GB Property, as issuer, GB Holdings and
Greate Bay Hotel, as guarantors, and Wells Fargo Bank
Minnesota, National Association, as trustee, the Second
Amended and Restated Indenture, among GB Holdings, as
issuer, and Wells Fargo Bank Minnesota, National
Association, as trustee, and the Indenture among
Atlantic Holdings, as issuer, ACE Gaming, as guarantor,
and the trustee. See "THE TRANSACTION -- Conditions to
the Completion of the Transaction" as set forth on page
70.
Q: What happens if the Transaction is not completed?
A: If the Transaction is not completed, GB Holdings will have to pursue
other alternatives, including attempting to refinance the Existing Notes
in the capital markets, seeking additional financing, downsizing GB
Holdings' 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 on acceptable terms
or at all. If such other alternatives are unavailable or unsuccessful
prior to the maturity of the Existing Notes, GB Holdings does not
believe it will be able to pay the Existing Notes at maturity in
September 2005. If GB Holdings is unable to refinance the Existing Notes
on favorable terms, or at all, or accumulate enough cash to pay the
Existing Notes when the Existing Notes are due, the Existing Notes will
be in default and it is reasonably likely that GB Holdings 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 GB Holdings.
Q: Will I receive dividends in the future?
A: Other than distributions contemplated by the Transaction, GB Holdings
does not anticipate GB Holdings or Atlantic Holdings issuing any
dividends.
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 GB Holdings
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 GB Holdings at the address under
"SPECIAL MEETING -- Changing Your Vote" as set forth on page 83.
4
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 GB Holdings recommend that I vote?
A: The Board of Directors of GB Holdings 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: What happens if the stockholders of GB Holdings 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 Holdings 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 Holdings Common Stock in payment of the outstanding principal
and accrued interest under the New Notes or the New Notes are not
convertible into Atlantic Holdings Common Stock. For more information,
see "RISK FACTORS" as set forth on page 32 below.
Q: When do you expect to complete the Transaction?
A: GB Holdings expects to complete the Transaction in the third quarter of
2004.
Q: Can I still sell my shares of the common stock of GB Holdings?
A: Yes. The common stock of GB Holdings is currently traded on the American
Stock Exchange. As soon as reasonably practicable following the
consummation of the Transaction, GB Holdings will apply to delist the
common stock of GB Holdings from trading on the American Stock Exchange.
Also, if 100% of the Existing Notes are exchanged, the Board will take
the steps necessary to dissolve GB Holdings, satisfy any obligations or
liability with its assets, and distribute any remaining assets to its
stockholders. If and when the stock is delisted, 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 GB Holdings may be materially impaired,
which may have an adverse effect on the price and liquidity of the
common stock of GB Holdings. See "RISK FACTORS--RISK FACTORS RELATED TO
THE TRANSACTION--As soon as reasonably practicable following
consummation of the Transaction, GB Holdings will apply to delist the
common stock of GB Holdings from trading on the AMEX and the delisting
of the common stock of GB Holdings from trading on the AMEX will make it
more difficult for you to sell your shares of common stock of GB
Holdings" as set forth on page 36 below. After the Transaction is
completed, upon the payment of the Existing Notes and the exercise of
the Warrants, GB Holdings may be dissolved and there may be no further
trading in the common stock of GB Holdings.
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
(including principal and accrued interest) will be paid in the form of
Atlantic Holdings Common Stock. If such holders choose to receive
Atlantic Holdings Common Stock, the holders of all of the New Notes will
receive Atlantic
5
Holdings Common Stock expressed as a percentage equal to 72.5% (on a
fully diluted basis) of the total outstanding Atlantic Holdings 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. Following such election, holders of the New Notes
will receive payment for such notes in the form of Atlantic Holdings
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, GB Holdings will send the
stockholders of GB Holdings written information describing the Warrants
and/or Atlantic Holdings Common Stock to be issued. You do not need to
send in your certificates for common stock of GB Holdings in order to
receive Atlantic Holdings Securities upon completion of the Transaction.
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:
Innisfree M&A Incorporated
-------------------------------------------------------------
Banks and Brokers Call Collect: 212-750-5833
All others Call Toll-Free: 1-888-750-5834
Q: Where can I find more information about GB Holdings?
A: You can find more information about GB Holdings from various sources
described under "WHERE YOU CAN FIND MORE INFORMATION" as set forth on
page 131.
6
SUMMARY
This summary highlights material information from this document.
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 137. For a discussion of the risk factors that you should
consider in evaluating the transaction, see "RISK FACTORS" beginning on page 32.
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," and "our" refer to Atlantic Coast Entertainment Holdings, Inc. 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
Holdings Common Stock that may occur following consummation of the Transaction
(as defined below). Any such issuances may result in the percentage ownership
being reduced 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 Holdings,
the Contribution Agreement between GB Holdings, Greate Bay Hotel, Atlantic
Holdings and ACE Gaming, the form of Warrant Agreement, the Amended and Restated
Indenture, dated as of October 12, 2001, among GB Property as issuer, GB
Holdings and Greate Bay Hotel, as guarantors, Wells Fargo Bank Minnesota,
National Association, as trustee, the form of the Amendment to the Amended and
Restated Indenture among GB Property as issuer, GB Holdings and Greate Bay
Hotel, as guarantors, Wells Fargo Bank Minnesota, National Association, as
trustee, the form of the Second Amended and Restated Indenture (which is
attached as Exhibit A thereto), among GB Holdings, as obligor, and Wells Fargo
Bank Minnesota, National Association, as trustee, the New Indenture, the
fairness opinion issued by Libra Securities, LLC (collectively, the "Transaction
Documents") the names and positions of Executive Officers, Directors and
Significant Employees of the Affiliates, and the Projections for GB Holdings
and its Subsidiaries for July-December 2003 delivered to Libra Securities, LLC
are attached as Annexes A, B, C, D, E, F, G, H, I, and J to this document. GB
Holdings 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 HOLDINGS
Atlantic Holdings was incorporated in the State of Delaware on
October 31, 2003, and is currently a wholly-owned subsidiary of Greate Bay
Hotel. Following the consummation of the proposed transaction, Atlantic
Holdings' sole asset will be 100% of the membership interests in ACE Gaming. As
a result of the Transaction, ACE Gaming will own substantially all of the assets
and cash currently owned by Greate Bay Hotel and GB Holdings, which includes The
Sands Hotel and Casino in Atlantic City, New Jersey ("The Sands") (except for
the cash Atlantic Holdings will pay to the holders of outstanding 11% Notes due
2005 of GB Property (the "Existing Notes") exchanged for newly-registered 3%
Notes due 2008 of Atlantic Holdings (the "New Notes" and, collectively with the
Existing Notes, the "Notes"). Atlantic Holdings' 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 GREATE BAY HOTEL
Greate Bay Hotel was incorporated in the State of New Jersey on
October 30, 1978 and became a wholly-owned subsidiary of GB Holdings in February
1994. Greate Bay Hotel's principal business activity is its ownership of The
Sands. Greate Bay Hotel'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. For more detailed information
regarding Atlantic Holdings, please see "DESCRIPTION OF THE BUSINESS OF GB
HOLDINGS AND ITS SUBSIDIARIES" as set forth on page 99.
BACKGROUND OF GB HOLDINGS
GB Holdings is a Delaware corporation. In February 1994, GB
Holdings acquired Greate Bay Hotel through a capital contribution by its then
parent. Greate Bay Hotel's principal business activity is its ownership of The
Sands. GB Property, a wholly-owned subsidiary of GB Holdings, was incorporated
in September 1993 as a
7
special purpose subsidiary of GB Holdings for the purpose of borrowing funds for
the benefit of Greate Bay Hotel. GB Holdings has no Greate Bay Hotel activities
and its only source of income, other than income derived from the business of
Greate Bay Hotel, is interest on cash equivalent investments. GB Holdings' only
significant assets are its investment in Greate Bay Hotel and its cash balance
at March 31, 2004 of $12.5 million.
GB Holdings has two wholly-owned subsidiaries: GB Property and
Greate Bay Hotel. Its 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. For more detailed information regarding
GB Holdings, please see "DESCRIPTION OF THE BUSINESS OF GB HOLDINGS AND ITS
SUBSIDIARIES" as set forth on page 89 and "WHERE YOU CAN FIND MORE INFORMATION"
as set forth on page 137.
BACKGROUND OF THE TRANSACTION
The transaction set forth herein is comprised of a series of
events (collectively, the "Transaction") which will allow GB Holdings to
refinance its existing debt, on terms more favorable than GB Holdings 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 GB Holdings
and its subsidiaries to Atlantic Holdings, a Delaware corporation and a newly
formed, wholly-owned subsidiary of Greate Bay Hotel, a New Jersey corporation
and a wholly-owned subsidiary of GB Holdings. 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
Holdings ("Atlantic Holdings Common Stock") may be owned by holders of debt
securities issued by Atlantic Holdings, thereby resulting in such noteholders
beneficially owning a significant majority of the outstanding Atlantic Holdings
Common Stock (on a fully diluted basis) which through its wholly-owned
subsidiary will own substantially all of the assets initially owned by GB
Holdings and its subsidiaries. The Transaction will include the following
events:
(a) Following receipt of the necessary approval from the
holders of a majority of the Existing Notes issued by GB
Property and their exchange of the Existing Notes for New
Notes:
(i) GB Holdings will transfer all of its
assets (other than the stock of GB
Property and Greate Bay Hotel) and
liabilities (other than its obligations
under the Existing Notes) to Greate Bay
Hotel;
(ii) Greate Bay Hotel will transfer all of the
assets and liabilities which it received
from GB Holdings and substantially all of
its assets (other than the stock of
Atlantic Holdings) and certain of its
liabilities to Atlantic Holdings (which
will agree to issue New Notes in exchange
for Existing Notes that are tendered for
exchange and cancel such Notes) in
exchange for either:
(A) 27.5% of the outstanding
common stock of Atlantic
Holdings (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 Holdings
Securities") to purchase
27.5% of the outstanding
common stock of Atlantic
Holdings (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 Holdings
will transfer to Greate Bay
Hotel an additional number
of shares of common stock of
Atlantic Holdings so that
Greate Bay Hotel has a pro
rata share of 72.5% of the
Atlantic Holdings Common
Stock which is equal to the
percentage of the principal
amount of the Existing Notes
that are not exchanged; and
(iii) Atlantic Holdings will transfer to ACE
Gaming (A) the cash it received, except
for the cash that Atlantic Holdings will
pay to the holders of the Existing Notes
that exchange for New Notes and (B) all of
the assets (except for the membership
interests in ACE Gaming) and liabilities
it received from Greate Bay Hotel
(collectively, the "Asset Transfer");
8
(b) Atlantic Holdings will offer the holders of the
Existing Notes the opportunity (the "Exchange Offer") to
tender for exchange their Existing Notes for (i) $100 in
cash for every $1,000 in principal amount of the
Existing Notes exchanged; (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 Holdings
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)
amendments to the Amended and Restated Indenture, dated
as of October 12, 2001, among GB Property, as issuer, GB
Holdings and Greate Bay Hotel, as guarantors, and Wells
Fargo Bank of Minnesota, National Association, as
trustee, relating to the Existing Notes (the "Existing
Indenture"); (ii) the release of the liens on the
collateral securing the Existing Notes; and (iii) the
terms of the Indenture among Atlantic Holdings as
issuer, ACE Gaming as guarantor, and Wells Fargo Bank
Minnesota, National Association, as trustee, governing
the New Note (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 Holdings Common Stock as 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 Holdings
Common Stock as payment of the principal and accrued
interest at or prior to maturity. As per the terms of
the New Notes, upon the election of the holders of a
majority of the aggregate principal amount of the New
Notes outstanding, the holders of the New Notes will
receive 65.909 shares of Atlantic Holdings Common Stock
for each $1,000 of principal amount of New Notes, as
full payment of the principal and accrued interest on
such Notes. Prior to the election of the holders of a
majority of the aggregate principal amount of the New
Notes outstanding to be paid in the form of Atlantic
Holdings Common Stock (i) if less than 100% of the
Existing Notes are exchanged, GB Holdings will own 100%
of the Atlantic Holdings Common Stock or (ii) if 100% of
the Existing Notes are exchanged, the stockholders of GB
Holdings will own 100% of the Atlantic Holdings Common
Stock;
(c) Through a series of mergers GB Property, Greate Bay Hotel
and GB Holdings will merge and GB Holdings will be the
surviving entity (the "Merger") and:
(i) The Existing Notes tendered for exchange
for New Notes will be canceled;
(ii) GB Holdings will be the sole obligor of
the Existing Notes (which will no longer
be secured by liens on the collateral);
(iii) GB Holdings will own the Atlantic Holdings
Securities transferred by Atlantic
Holdings; and
(iv) Atlantic Holdings will be a wholly-owned
subsidiary of GB Holdings (immediately
prior to the completion of the
Transaction); and
(d) GB Holdings will distribute (the "Distribution of
Atlantic Holdings Securities"), to you as its
stockholders, pro rata, either:
(i) 0.275 shares of Atlantic Holdings Common
Stock for each share of common stock of GB
Holdings that you currently own, so that
the stockholders of GB Holdings will own
an aggregate of 27.5% (or 2,750,000
shares) of the issued and outstanding
of Atlantic Holdings Common Stock (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 Holdings Common Stock, at a
purchase price of $.01 per share, for each
share of common stock of GB Holdings that
you currently own, so that the
stockholders of GB Holdings will own, upon
exercise of the warrants, an aggregate of
27.5% (or 2,750,000 shares) of the issued
and outstanding Atlantic Holdings Common
Stock (on a fully diluted basis, if
less than 100% of the Existing Notes are
exchanged for New Notes); and
9
(e) As soon as reasonably practicable following the
consummation of the Transaction, GB Holdings will apply
to delist the common stock of GB Holdings from trading on
the American Stock Exchange by filing an application with
the American Stock Exchange and Securities and Exchange
Commission. Also, if 100% of the Existing Notes are
exchanged, the Board will take the steps necessary to
dissolve GB Holdings, satisfy any obligations or
liabilities with its assets, and distribute any remaining
assets to its stockholders.
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 GB Holdings will receive Warrants
to purchase shares of Atlantic Holdings Common Stock with the following terms.
The Warrants will not be immediately exercisable. The Warrants will only become
exercisable for shares of Atlantic Holdings 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 Holdings Common Stock; (b) full payment of the
interest and principal due under the Existing Notes; or (c) a decision by a
majority of the Board of Directors of Atlantic Holdings (including at least one
independent director) to allow the holders of the Warrants to exercise such
Warrants into Atlantic Holdings 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 Holdings nor GB Holdings can provide any assurance that GB Holdings
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 Holdings 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 Holdings 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 GB Holdings or its subsidiaries and (ii) will be redeemable at
GB Holdings' 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.
Immediately following consummation of the Transaction, if (a)
100% of the Existing Notes are exchanged, no Warrants will be issued to the
stockholders of GB Holdings, an aggregate of 2,750,000 shares of Atlantic
Holdings Common Stock will be issued to the stockholders of GB Holdings (of
which approximately 2,117,500 shares of Atlantic Holdings Common Stock will be
issued to the Affiliates (as defined herein)), and a Cash Payment equal to $11
million, in the aggregate, will be made to the holders of the Existing Notes who
exchange their Existing Notes (of which approximately $6,380,000 will be paid to
the Affiliates); (b) 80% of the Existing Notes are exchanged, an aggregate of
1,450,000 shares of Atlantic Holdings Common Stock will be issued to GB
Holdings, an aggregate of 10 million Warrants exercisable for 2,750,000 shares
of Atlantic Holdings Common Stock will be issued pro rata to the stockholders of
GB Holdings (of which the Affiliates will receive approximately 7,700,000
Warrants exercisable for approximately 2,117,500 shares of Atlantic Holdings
Common Stock), and a Cash Payment equal to $8,800,000, in the aggregate, will be
made to the holders of the Existing Notes who exchange their Existing Notes (of
which approximately $6,380,000 will be paid to the Affiliates); and (c) 58% of
the Existing Notes are exchanged, an aggregate of 3,045,000 shares of Atlantic
Holdings Common Stock will be issued to GB Holdings, an aggregate of 10 million
Warrants exercisable for 2,750,000 shares of Atlantic Holdings Common Stock will
be issued pro rata to the stockholders of GB Holdings (of which the Affiliates
will receive approximately 7,700,000 Warrants exercisable for approximately
2,117,500 shares of Atlantic Holdings Common Stock), and a Cash Payment equal to
$6,380,000, in the aggregate, will be made to the holders of the Existing Notes
who exchange their Existing Notes (of which approximately $6,380,000 will be
paid to the Affiliates). Assuming consummation of the Transaction on July 1,
2004, an aggregate of approximately $1,740,000, $2,400,000, and $3
10
million in interest payments will be paid to holders who exchange Existing Notes
assuming 58%, 80%, and 100%, respectively, of the Existing Notes are exchanged
for New Notes.
Prior to an election of the holders of a majority of the
aggregate principal amount of the New Notes outstanding to be paid in the form
of Atlantic Holdings Common Stock, holders of the New Notes will have no equity
interest in Atlantic Holdings with respect to their New Notes and (a) if less
than 100% of the Existing Notes are exchanged, GB Holdings will own 100% of the
outstanding Atlantic Holdings Common Stock or (b) if 100% of the Existing Notes
are exchanged, the stockholders of GB Holdings will own 100% of the outstanding
Atlantic Holdings Common Stock.
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 Holdings 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 Holdings 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 Holdings 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
"SPECIAL FACTORS -- Potential Benefits Associated with the Transaction" as set
forth on page 52 and "THE TRANSACTION" as set forth on page 70.
DIFFERENCES IN RIGHTS OF HOLDERS OF COMMON STOCK OF GB HOLDINGS, ATLANTIC
HOLDINGS COMMON STOCK, AND WARRANTS
The rights and preferences of holders of Atlantic Holdings Common
Stock are identical to those of holders of common stock of GB Holdings. The
holders of Atlantic Holdings Common Stock will be entitled to elect the members
of the Board of Directors of Atlantic Holdings, approve Atlantic Holdings'
corporate actions, and receive dividends when, and if, declared by the Board of
Directors of Atlantic Holdings. Holders of the Warrants will have no rights as
stockholders prior to the exercise of the Warrants and consequently will have no
voting rights, will not be entitled to elect directors of Atlantic Holdings,
will not be entitled to approve corporate actions, and will not be eligible to
receive dividends if any.
For more detailed information regarding the rights of holders of
Atlantic Holdings Common Stock and Warrants, please see the section of this
proxy statement/prospectus entitled "COMPARISON OF RIGHTS AND MATERIAL
DIFFERENCES OF GB HOLDINGS AND ATLANTIC HOLDINGS STOCKHOLDERS."
REASONS FOR THE TRANSACTION
As a result of its review of the business, financial condition,
and prospects of GB Holdings and its subsidiaries, the Special Committee
determined that it is reasonably likely that GB Holdings would not have
sufficient funds to pay the $110 million principal, plus accrued interest, due
on the Existing Notes at maturity in 2005 and that refinancing the Existing
Notes now was in the best interests of GB Holdings and its subsidiaries. The
Special Committee also determined that it was reasonably likely that prior to
maturity in September 2005, GB Holdings would not be able to refinance the
Existing Notes on favorable terms or at all and that such inability could result
in a default on the Existing Notes and the possibility of being forced to seek
the bankruptcy protection. For this reason, the Special Committee believed that
it was necessary to refinance the Existing Notes by means of the Transaction.
The Transaction is being undertaken to allow GB Holdings to refinance its
existing long-term debt, represented by the Existing Notes, on favorable terms
which include interest at a rate of 3% (which is substantially below the
Existing Notes and the rates currently available in the capital markets), which
accrues and is not payable
11
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
Atlantic Holdings 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 Holdings in full payment of the principal and accrued
interest due under the New Notes. Also, as interest on the New Notes is not
payable semi-annually, but rather accrues and is payable only at maturity and if
such notes are paid in Atlantic Holdings Common Stock, the accrued interest will
also not be paid in cash.
In determining the structure of the Transaction, the Special
Committee determined that to refinance the Existing Notes on terms favorable to
GB Holdings (including lowering the interest rate, extending the maturity date,
and having the interest accrue and be payable only at maturity), GB Holdings
needed to obtain the consent of the holders of a majority of the aggregate
principal amount of the Existing Notes outstanding, pursuant to the Indenture
governing the Existing Notes, to transfer the assets of GB Holdings and its
subsidiaries to Atlantic Holdings. In order to obtain such consent, the
Transaction provides for a cash payment of $100 per $1,000 principal amount of
Existing Notes tendered for exchange and allows the holders the ability to
convert the notes which they received in the exchange into up to an aggregate of
72.5% (on a fully diluted basis) of the equity of Atlantic Holdings. The Special
Committee determined that it was necessary to transfer the assets to Atlantic
Holdings (and subsequently to ACE Gaming) in order to provide collateral that
will secure the New Notes because the Special Committee did not believe that
holders of the Existing Notes would tender their Existing Notes for exchange if
the New Notes were not secured and believed that by transferring the assets to a
new entity which would guarantee the New Notes, the holders of the Existing
Notes (which after consummation of the Transaction would be unsecured) would be
encouraged to exchange. The Special Committee also determined that the approval
of the stockholders of GB Holdings is required under Delaware law because the
Transaction may be deemed a transfer of substantially all of the assets of GB
Holdings to a company in which the current stockholders of GB Holdings would
only own 27.5% of the outstanding common stock (on a fully diluted basis). The
Special Committee determined that upon consummation of the Transaction, the
transfer of the Atlantic Holdings Securities to the stockholders of GB Holdings
is necessary to allow the stockholders of GB Holdings to own 27.5% of the
Atlantic Holdings Common Stock, on a fully diluted basis, and receive adequate
consideration or value for such transfer of assets.
As soon as reasonably practicable following the consummation of
the Transaction, GB Holdings will apply to delist the common stock of GB
Holdings, from trading on the American Stock Exchange. GB Holdings will apply to
delist the common stock of GB Holdings because GB Holdings has concluded that
the existing listing has not resulted in an active trading market and GB
Holdings does not want to incur the continued cost of listing on the American
Stock Exchange. There are only 10 holders of record of the common stock of GB
Holdings, affiliates of GB Holdings own approximately 77.5% of the outstanding
common stock of GB Holdings, in the past 30 days on average 4,727 shares of
common stock of GB Holdings were traded per day on the American Stock Exchange,
and approximately 85% of the common stock of GB Holdings is held by two
different groups of stockholders (including the affiliates of Carl C. Icahn).
Also, if 100% of the Existing Notes are exchanged, the Board will take the steps
necessary to dissolve GB Holdings, satisfy any obligations or liabilities with
its assets and distribute any remaining assets to its stockholders.
The exchange ratio was determined following discussions between
the Special Committee and Cyprus, LLC, an entity affiliated with Carl C. Icahn
that owns common stock of GB Holdings and Existing Notes. Initially a memorandum
was submitted by Cyprus to the Board. Such memorandum set forth a refinancing
transaction with respect to the Existing Notes that Cyprus believed would be
beneficial to GB Holdings, in which the holders of the New Notes would receive
approximately 75% of the outstanding equity of Atlantic Holdings at the election
of the holders of a majority of the aggregate principal amount of the New Notes.
Cyprus believed that after payment of the Existing Notes the value of the
remaining equity would approximate 25% of the enterprise value of GB Holdings
and its subsidiaries and the holders of the New Notes, upon payment or
conversion into common stock, should be entitled to equity interest representing
the remaining 75% of the enterprise value. Following receipt of this memorandum,
as a result of discussions between the Special Committee and Cyprus, it was
agreed that the holders of the New Notes would be eligible to receive up to
72.5%, on a fully diluted basis, of the outstanding equity of Atlantic Holdings
as full payment for the New Notes, and the stockholders of GB Holdings would
receive 27.5% of the outstanding common stock, on a fully diluted basis. The
Transaction was also designed to extend the maturity date of the indebtedness
represented by the Existing Notes which are exchanged from 2005 to 2008, and to
reduce the existing interest payment obligation by providing that the New Notes
bear interest at a rate of 3% per annum which accrues and is not payable until
maturity. The terms of the New Notes were initially included in the memorandum
submitted by Cyprus and after review by the Special Committee, the Special
Committee determined
12
that for the Transaction to be successful, the non-financial and non-payment
related terms of the New Notes must be substantially similar to the terms of the
Existing Notes.
The Special Committee determined if less than 100% of the
Existing Notes are exchanged, Atlantic Holdings will issue Warrants to Greate
Bay Hotel, which will subsequently be issued by GB Holdings to its stockholders
and 100% of the outstanding Atlantic Holdings Common Stock would be distributed
to and held by GB Holdings. The Special Committee determined that Warrants
should initially be issued to the stockholders of GB Holdings, rather than
Atlantic Holdings Common Stock, after consultation with its legal advisor in
light of the fact that upon consummation of the Transaction, such stockholders
would continue to own their common stock of GB Holdings, and GB Holdings would
own all of the outstanding Atlantic Holdings Common Stock. The Warrants would
provide such stockholders the opportunity for direct ownership in Atlantic
Holdings if, among other things, the holders of the New Notes obtained direct
equity interests in Atlantic Holdings and thereby changed the equity position of
the stockholders of GB Holdings in Atlantic Holdings.
The stockholders of GB Holdings will receive an aggregate of
27.5% or 2,750,000 of the outstanding Atlantic Holdings Common Stock, on a fully
diluted basis. Each of GB Holdings and Atlantic Holdings will have 10,000,000
shares of common stock outstanding, on a fully diluted basis, following
consummation of the Transaction. For each share of common stock of GB Holdings,
stockholders of GB Holdings will receive 0.275 shares of Atlantic Holdings
Common Stock either immediately following consummation of the Transaction (if
100% of the Existing Notes are exchanged) or upon exercise of the Warrants. Such
an amount is determined by dividing (a) 2,750,000, which is the aggregate number
of shares of Atlantic Holdings Common Stock to be distributed to the
stockholders of GB Holdings by (b) 10,000,000 which is the number of shares of
common stock GB Holdings outstanding, on a fully diluted basis. Under the New
Notes, upon the election of the holders of a majority of the aggregate principal
amount of the New Notes outstanding, the holders of the New Notes will receive
65.909 shares of Atlantic Holdings Common Stock for each $1,000 of principal
amount of New Notes, as full payment of the principal and accrued interest on
such Notes. The number of shares of Atlantic Holdings Common Stock that $1,000
of principal amount of New Notes will be payable in or convertible into is
determined by dividing (a) 7,250,000, the aggregate number of shares of Atlantic
Holdings Common Stock into which the New Notes will be paid or converted
(assuming 100% of the Existing Notes are converted) by (b) $110,000,000, the
principal amount of the New Notes (assuming 100% of the Existing Notes are
converted) and multiplying the quotient by $1,000. At this time, it is
impossible to estimate the value of Atlantic Holdings Common Stock that the
holders of New Notes would receive or that the holders of common stock of GB
Holdings would receive.
For more detailed information regarding the reasons for the
Transaction, see "SPECIAL FACTORS -- Potential Benefits Associated with the
Transaction" as set forth on page 52.
GB Holdings' Board of Directors recommends that you vote for the Transaction.
After discussion with the financial advisor of the Special
Committee and after reviewing the recommendation of the Special Committee, the
Board has determined that the Transaction is fair to and in the best interest of
the stockholders of GB Holdings.
The following are flowcharts depicting the corporate structure of
GB Holdings and its subsidiaries before the commencement of the Transaction,
during the events which make up the Transaction, and immediately following
consummation of the Transaction (both if less than 100%, and 100%, of the
Existing Notes are exchanged). Such flowcharts highlight the material events
which form a part of the Transaction, including, the Exchange Offer, the Asset
Transfer, the Distribution of Atlantic Holdings Securities, and the Merger.
13
DESCRIPTION OF THE TRANSACTION
What You Will Receive in the Transaction
You will receive either your pro rata share of Atlantic Holdings
Common Stock or Warrants in either case representing 27.5%, in the aggregate, of
the outstanding Atlantic Holdings Common Stock (on a fully diluted basis). The
Atlantic Holdings Common Stock, Warrants and the shares of Atlantic Holdings
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 Holdings Securities held by
affiliates of Atlantic Holdings 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 Holdings Common Stock, the Warrants and the
shares of Atlantic Holdings Common Stock underlying the Warrants will be freely
transferable, at least initially (see "DESCRIPTION OF SECURITIES" as set forth
below on page 83 and "RISK FACTORS" as set forth below on page 32). No
application will be made to list the Warrants, the shares of Atlantic Holdings
Common Stock underlying the Warrants (the "Warrant Shares"), the Atlantic
Holdings Common Stock, or any shares of Atlantic Holdings Common Stock issued to
GB Holdings (the "GB Holdings Shares"), on any securities exchange. As soon as
reasonably practicable following the consummation of the Transaction, GB
Holdings will apply to delist the common stock of GB Holdings from trading on
the American Stock Exchange by filing an application with the American Stock
Exchange and Securities and Exchange Commission. Also, if 100% of the Existing
Notes are exchanged, the Board will take the steps necessary to dissolve GB
Holdings, satisfy any obligations or liabilities with its assets and distribute
any remaining assets to its stockholders. Following the delisting, there can be
no assurances of any trading market. (See "COMPARISON OF RIGHTS AND MATERIAL
DIFFERENCES OF GB HOLDINGS AND COMPANY STOCKHOLDERS" as set forth below). The
voting rights of the Atlantic Holdings Common Stock, on a per share basis, are
identical to those of the common stock of GB Holdings.
If the Transaction is approved, holders of the common stock of GB
Holdings will receive securities of Atlantic Holdings whose sole asset will be
membership interests in a wholly-owned subsidiary that owns all of the assets of
GB Holdings (except the stock of GB Property and Greate Bay Hotel), except for
the cash that Atlantic Holdings pays to the holders of the Existing Notes that
exchange for New Notes, and substantially all of the assets of Greate Bay Hotel
(except the stock of Atlantic Holdings), consisting of The Sands. Such assets
will also be collateral securing the obligations under the New Notes and
Atlantic Holdings may be obligated to pay the principal and accrued interest,
when it becomes due and payable in 2008. Also, due to the potential payment on
or conversion of the New Notes into Atlantic Holdings Common Stock in full
satisfaction of the principal and accrued interest owed, the percentage of total
equity represented by your holdings in Atlantic Holdings (upon distribution of
the Atlantic Holdings Common Stock or the exercise of the Warrants) will be
lower than the percentage of GB Holdings equity represented by your common stock
of GB Holdings. Following payment of all of the New Notes, Atlantic Holdings
will be relieved of the debt obligations under the New Notes and will have no
outstanding debt (other than additional debt which may be incurred directly or
indirectly by Atlantic Holdings or the ACE Gaming after the completion of the
Transaction). See "RISK FACTORS -- Risk Factors Related to the Transaction"
beginning on page 32. Please also see "DESCRIPTION OF SECURITIES" as set forth
below on page 83.
Recommendations of the Board of Directors
At its meeting on November 12, 2003, after due consideration, the
Board:
- determined that the Transaction, including whether the
stockholders of GB Holdings receive either Atlantic Holdings
Common Stock or Warrants, and the Transaction Documents are
advisable, fair to and in the best interests of the stockholders
of GB Holdings;
- approved the Transaction Documents, in form and substance; and
- recommended that the stockholders of GB Holdings vote in favor of
the Transaction.
On May 26, 2004, after due consideration, the Board confirmed its
conclusions and recommendations of November 12, 2003.
To review the background and reasons for the Transaction in
greater detail, see pages 44 through 77.
14
Opinion of Libra Securities
In connection with the Transaction, the Special Committee
considered the opinion of Libra Securities, LLC as to the fairness from a
financial point of view of the consideration to be received by the holders of
common stock of GB Holdings. 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 common stockholders
of common stock of GB Holdings in the Transaction is fair, from a financial
point of view, to the common stockholders of GB Holdings. 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 stockholders of
GB Holdings and (2) the possible tax consequences of the Transaction (including
the tax consequences to GB Holdings and whether common stockholders of GB
Holdings 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 stockholder of GB Holdings with
respect to any matter relating to the Transaction. See "SPECIAL FACTORS --
Opinion of Libra Securities."
The full text of Libra Securities' written opinion is attached as
Annex H 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.
GB Holdings encourages the stockholders of GB Holdings to read the opinion
carefully and in its entirety.
Additional Report of Libra Securities
In connection with the preparation of pro forma financial
statements to be included in this proxy statement/prospectus, the Special
Committee amended its engagement agreement with Libra Securities on September
30, 2003 to engage Libra Securities to prepare an estimate of the value of the
New Notes and Warrants to be issued in the Transaction. On November 7, 2003,
Libra Securities delivered a report to GB Holdings to the effect that as of that
date and based upon the assumptions made, matters considered and the review
described in the written valuation estimate, Libra Securities estimated the
aggregate value of (i) the issued New Notes to be approximately (a) $51.5
million, assuming holders of 58% of the Existing Notes (or $63.8 million
principal amount), exchange their Existing Notes into an equal principal amount
of New Notes; (b) $69.6 million, assuming holders of 80% of the Existing Notes
(or $88.0 million principal amount), exchange their Existing Notes into an equal
principal amount of New Notes; and (c) $85.4 million assuming holders of 100% of
the Existing Notes (or $110.0 million principal amount), exchange their Existing
Notes into an equal principal amount of New Notes, and (ii) the Warrants to be
approximately (a) $33.7 million, assuming holders of 58% of the Existing Notes
(or $63.8 million principal amount), exchange their Existing Notes into an equal
principal amount of New Notes; (b) $33.0 million, assuming holders of 80% of the
Existing Notes (or $88.0 million principal amount), exchange their Existing
Notes into an equal principal amount of New Notes; and (c) $32.4 million
assuming holders of 100% of the Existing Notes (or $110.0 million principal
amount), exchange their Existing Notes into an equal principal amount of New
Notes. Libra Securities' valuation estimate was provided for the information of
GB Holdings and does not constitute a recommendation to any stockholder of GB
Holdings with respect to any matter relating to the Transaction and no assurance
was given and no reliance should be made that the actual trading price of any
security or instrument will be the same as any estimate in the written valuation
estimate. See "SPECIAL FACTORS -- Additional Report of Libra Securities."
INTERESTS OF DIRECTORS AND MANAGEMENT IN THE TRANSACTION
Carl C. Icahn is the Chairman of the Board of GB Property, Greate
Bay Hotel, GB Holdings, and Atlantic Holdings. Affiliates of Mr. Icahn own
approximately 77% of the outstanding common stock of GB Holdings, which owns
100% of GB Property and Greate Bay Hotel, 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. Upon
consummation of the Transaction, affiliates of Mr. Icahn will beneficially own
approximately 63.4% of the outstanding Atlantic Holdings Common Stock, on a
fully diluted basis, and because of their ownership of approximately 77% of the
common stock of GB Holdings, they will beneficially own up to an additional
23.5% of the Atlantic Holdings Common Stock if
15
between 58% and 100% of the Existing Notes are exchanged (i.e., the lower the
aggregate principal amount of Existing Notes that are exchanged, the greater the
number of additional shares of Atlantic Holdings Common Stock that GB Holdings
will own and the affiliates will beneficially own). In addition, affiliates of
Mr. Icahn will effectively control Atlantic Holdings, since, immediately
following the consummation of the Transaction, they will continue to have
control over any stock which GB Holdings owns because they own approximately 77%
of the outstanding common stock of GB Holdings, and Atlantic Holdings initially
will be a wholly-owned subsidiary of GB Holdings. 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 GB Holdings and Atlantic Holdings, mergers and sale of assets involving
GB Holdings and Atlantic Holdings and other matters upon which stockholders, of
either GB Holdings or Atlantic Holdings, 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 Holdings 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). Such
affiliates may cause the New Notes to be paid in Atlantic Holdings Common Stock
at any time, in their sole discretion (thereby allowing the Warrants to be
exercised). In determining whether or when to cause the New Notes to be paid in
Atlantic Holdings Common Stock, they may consider a variety of factors,
including, but not limited to, the results of operations and the financial
condition of Atlantic Holdings and ACE Gaming, the general market conditions
affecting Atlantic Holdings and ACE Gaming, whether such affiliates want to
obtain ownership of Atlantic Holdings Common Stock in order to be in a position
to exercise their respective rights as stockholders, whether such affiliates
find it advantageous to eliminate the debt created by the New Notes, the
business and financial prospects of The Sands, Atlantic Holdings and ACE Gaming,
and other general economic factors generally affecting the country and the
gaming industry in particular. However, such affiliates have advised Atlantic
Holdings that they have not determined benchmarks or standards in this regard
and reserve the right to cause the New Notes to be paid in or convertible into
Atlantic Holdings Common Stock at any time in their sole discretion.
Also, such affiliates are actively involved in the gaming
industry and casinos owned or managed by the affiliates may directly or
indirectly compete with GB Holdings and Atlantic Holdings. The potential for
conflicts of interest exists among GB Holdings or Atlantic Holdings, and such
affiliates for future business opportunities. Such affiliates may pursue other
business opportunities and there is no agreement requiring that such additional
business opportunities be presented to GB Holdings or Atlantic Holdings. In his
capacity as Chairman of the Board of Directors of GB Holdings, Greate Bay Hotel,
GB Property, and Atlantic Holdings, Mr. Icahn is required to act in a manner
consistent with his fiduciary duties under applicable law. Mr. Icahn is not
subject to any fiduciary duty by reason of his ownership of the Notes. In his
capacity as an affiliate of stockholders of GB Holdings, Mr. Icahn is bound to
act in accordance with applicable law. Additionally, although no specific
measures to resolve such potential conflict of interests have been formulated,
the directors of GB Holdings, GB Property, Greate Bay Hotel, and Atlantic
Holdings have a fiduciary obligation to deal fairly and in good faith with the
entities. The directors intend to exercise reasonable judgement and take such
steps as they deem necessary under all of the circumstances in resolving any
specific conflict of interest which may occur.
At the request of GB Holdings, Ealing Corp., a Nevada corporation
and an affiliate of Mr. Icahn, provided a commitment letter to GB Holdings,
dated January 30, 2004, in which Ealing agreed to provide a revolving credit
facility under which GB Holdings and its subsidiaries may borrow up to an
aggregate amount of $10 million to be used for general working capital purposes.
Under the terms of the commitment letter, the revolving credit facility will
expire on June 30, 2005, borrowings will bear interest at a rate of 10% per
annum, and obligations under the revolving credit facility will be secured by a
first lien on all of the assets of GB Holdings and its subsidiaries (including
Atlantic Holdings) which will be senior to the liens securing the Existing
Notes. Upon consummation of the Transaction the obligation will be assumed by
Atlantic Holdings, and the lien will be senior to the New Notes. Ealing's
obligations to provide the financing pursuant to the commitment letter is
subject to the negotiation and execution of definitive loan and security
agreements and related documents as well as certain customary conditions.
However, there can be no assurance that the loan agreement with Ealing will be
consummated, that if the loan agreement with Ealing is not consummated, GB
Holdings will be able to obtain financing from another lender on terms as or
more favorable than the terms of the commitment letter, or whether GB Holdings
will need to borrow for working capital. Ealing and GB Holdings have agreed to
extend the commitment until July 1, 2004.
16
CONDITIONS TO THE COMPLETION OF THE TRANSACTION
GB Holdings' ability to complete the Transaction is subject to
the satisfaction of a number of conditions, including the following:
o The receipt of the requisite governmental approval from the
CCC and the receipt of consents from the city of Atlantic
City and certain third parties;
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 GB
Holdings;
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.
SPECIAL FACTORS
Pursuant to the proxy statement/prospectus, GB Holdings is
seeking the consent of the stockholders of GB Holdings to the Transaction. The
Transaction is composed of the Asset Transfer, the Exchange Offer, the Merger,
and the Distribution of Atlantic Holdings Securities. Upon consummation of the
Transaction, up to 72.5% of the issued and outstanding Atlantic Holdings 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 GB Holdings.
In deciding whether or not to vote in favor of the Transaction,
you should pay special attention to the information contained below in the
sections entitled "Background for the Transaction," "Potential Benefits of the
Transaction," "Recommendation of the Special Committee," "Recommendation of the
Board of Directors of GB Holdings, GB Property, Greate Bay Hotel and Atlantic
Holdings," "Recommendation of the Management of ACE Gaming," "Position of
Entities Controlled by Carl C. Icahn as to the Fairness of the Transaction,"
"Opinion of Libra Securities", "Interests of the Directors and Management of GB
Holdings in the Transaction", and "Possible Conflicts of Interests." These
sections include information regarding the background and reasons for the
Transaction, the fairness of the Transaction, and the opinion of Libra
Securities obtained in connection with the Transaction.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of the common stock of GB Holdings at
the close of business on June 1, 2004, the record date, are entitled to notice
of and to vote at the special meeting. As of May 6, 2004, 10,000,000 shares of
the common stock of GB Holdings were issued and outstanding and held by
approximately 10 holders of record and we do not believe that such information
has changed as of the record date. A quorum will be present at the special
meeting if the holders of a majority of the shares of the common stock of GB
Holdings outstanding on the record date are present, in person or by proxy. If a
quorum is not present at the special meeting, GB Holdings expects that the
special meeting will be adjourned to solicit additional proxies. Holders of
record of the common stock of GB Holdings 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 GB
Holdings requires the affirmative vote of the holders of a majority of the
shares of GB Holdings' common stock outstanding as of the record date, either in
person or by proxy, voting as a single class.
17
GB HOLDINGS 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 GB Holdings to
solicit additional proxies.
VOTING BY GB HOLDINGS DIRECTORS AND EXECUTIVE OFFICERS
Affiliates of Carl C. Icahn own approximately 77% of the
outstanding common stock of GB Holdings and have indicated their intent to vote
in favor of the Transaction, but such affiliates have not entered into any
agreements or other arrangements requiring such holders to vote in favor of the
Transaction and such holders may decide not to vote in favor of the Transaction.
USE OF PROCEEDS
Neither Atlantic Holdings nor GB Holdings will receive any
proceeds from the issuance of the Atlantic Holdings 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 Holdings.
REGULATORY MATTERS
Certain regulatory requirements imposed by New Jersey regulatory
authorities must be complied with before the Transaction is completed. GB
Holdings 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. GB Holdings and Atlantic Holdings have agreed that, if any
additional governmental consents and approvals are required, GB Holdings and
Atlantic Holdings 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 ACE Gaming on the same terms and conditions as the
license held by Greate Bay Hotel. A Petition has been filed with the CCC seeking
the required approvals.
APPRAISAL RIGHTS
Under the Delaware General Corporation Law, the stockholders of
GB Holdings will not have any appraisal rights as a result of the Transaction.
RESALE OF ATLANTIC HOLDINGS COMMON STOCK AND WARRANTS
Atlantic Holdings Common Stock and/or Warrants (and Atlantic
Holdings 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 Holdings Common Stock and/or
Warrants (and Atlantic Holdings Common Stock issuable upon exercise of the
Warrants) issued to any stockholder of GB Holdings that is, or is expected to
be, an "affiliate" of Atlantic Holdings or GB Holdings, 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 Holdings
or GB Holdings and include the directors of Atlantic Holdings and GB Holdings.
This proxy statement/ prospectus does not cover resales of Atlantic Holdings
Common Stock and/or Warrants (and Atlantic Holdings 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 Holdings
covering resales of Atlantic Holdings Common Stock (including Atlantic Holdings
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
GB Holdings anticipates that neither the Exchange Offer nor the
Distribution of the Atlantic Holdings Securities will result in the GB Holdings
consolidated group recognizing any taxable income for U.S. federal
18
income tax purposes. GB Holdings anticipates that the Distribution of the
Atlantic Holdings Securities will not result in the GB Holdings consolidated
group recognizing any taxable income because GB Holdings believes that its
adjusted tax basis in the Atlantic Securities to be distributed will exceed the
fair market value of such Atlantic Holdings Securities. GB Holdings anticipates
that the Exchange Offer will not result in the GB Holdings consolidated group
recognizing any taxable income for U.S. federal income tax purposes because GB
Holdings 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 CONSIDERATIONS" as set forth on page
114 (which we refer to as "Publicly Traded"). However, the conclusion that none
of the Notes will be Publicly Traded is not free from doubt and it is possible
that the Exchange Offer will result in the GB Holdings consolidated group
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 Exchange Offer will result in
the GB Holdings consolidated group recognizing COD Income for federal income tax
purposes producing a tax liability. There would not be any such liability if
there is no recognition of COD Income. Such assumption and estimate is required
under US GAAP because GB Holdings' belief that there should be no COD Income
incurred is based upon events which will occur after the Exchange Offer 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, GB Holdings does not believe that COD Income will result because GB
Holdings does not believe that an active trading market in the Existing Notes
will exist either during any of the thirty (30) days prior to the Exchange Offer
or after the Exchange Offer 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 GB Holdings 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 CONSEQUENCES"
as set forth on page 131, (which we refer to as the "Issue Price") of the New
Notes or the Existing Notes, as amended, may be based on the fair market value
of the Existing Notes, the Existing Notes, as amended, or the New Notes if the
Existing Notes, the Existing Notes, as amended, or the New Notes are Publicly
Traded. The GB Holdings consolidated group's COD Income should be equal to the
sum of (a) the excess of (i) the face value of the Existing Notes exchanged over
both (ii) the Issue Price of the New Notes and the Cash Payment and (b) the
excess of (i) the face value of the Existing Notes deemed exchanged over (ii)
the Issue Price of the Existing Notes, as amended. Therefore, provided that the
Issue Price of both the New Notes and the Existing Notes, as amended, is not
based on their respective fair market values, or the fair market value of the
Existing Notes, the GB Holdings 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 fair market values, or the fair market value
of the Existing Notes, only if the Existing Notes, the Existing Notes, as
amended, or the New Notes are 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 more than thirty (30) days prior
to the Exchange Offer 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. The AMEX
de-listed the Existing Notes effective April 19, 2004, which is more than thirty
(30) days prior to the Exchange Offer and GB Holdings does not anticipate that
either the Existing Notes, the Existing Notes, as amended, or the New Notes will
appear on a quotation medium or otherwise be Publicly Traded. If so, the Issue
Price of the New Notes should equal their "Imputed Principal Amount," as defined
in the section titled "MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES" as set
forth on page 131, (which we refer to as the "Imputed Principal Amount" ). In
addition, the Issue Price of the Existing Notes, as amended, should equal their
face value. As such, no COD Income should be recognized by the GB Holdings
consolidated group. However, if either the Existing Notes, the Existing Notes,
as amended, or the New Notes appears on a quotation medium or are otherwise
Publicly Traded, 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 values or the fair market value of the Existing Notes. In such a
situation, the GB Holdings consolidated group could recognize COD Income. As the
determination of whether the Existing Notes, the Existing Notes, as amended, or
the New Notes are Publicly Traded will depend on facts, not within our control,
in existence during the thirty (30) day period before the Exchange Offer, as
well as after the consummation of the Exchange Offer, our counsel, Katten Muchin
Zavis Rosenman, cannot opine as to the Issue Price of either the New Notes or
the Existing Notes, as amended, or as to whether the GB Holdings consolidated
group will recognize COD Income as a result of the Exchange Offer.
19
Such COD Income, if any, could be offset with the GB Holdings
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 GB Holdings 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 GB Holdings.
The distribution of the Atlantic Holdings Securities should be a
taxable event to GB Holdings. GB Holdings does not anticipate recognizing any
gain on the distribution of the Atlantic Holdings Securities to you because GB
Holdings believes that its tax basis in the Atlantic Holdings Securities will
exceed the fair market value of the Atlantic Holdings Securities. Although not
anticipated, it is possible that the distribution of the Atlantic Holdings
Securities will result in GB Holdings recognizing gain for U.S. federal income
tax purposes. In the event that GB Holdings does recognize gain on the
distribution of the Atlantic Holdings Securities, GB Holdings' gain should equal
the excess of the fair market value of the Atlantic Holdings Securities
distributed over GB Holdings' tax basis in such Atlantic Holdings Securities,
measured as of the date of the distribution of the Atlantic Holdings Securities.
GB Holdings believes that its tax basis in the Atlantic Holdings Securities
will, for U.S. federal income tax purposes, exceed the fair market value of such
Atlantic Holdings Securities so that GB Holdings should not recognize any gain
on the distribution (under the Internal Revenue Code of 1986, as amended (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 CONSEQUENCES" as set forth on page 131, and
the distribution is of the Warrants, such distribution should be (i) a taxable
dividend to the extent of GB Holdings' current or accumulated earnings and
profits, then (ii) a non-taxable return of basis to the extent of your tax basis
in your GB Holdings common stock, and then (iii) taxable gain from the sale or
exchange of your GB Holdings common stock, which should result in capital gain
taxed at long-term capital gains rates assuming that you held your GB Holdings
common stock for more than 12 months. GB Holdings currently has no current or
accumulated earnings and profits. Although GB Holdings anticipates that neither
the Exchange Offer nor the Distribution of the Atlantic Holdings Securities will
result in any taxable income or gain that would be included in GB Holdings'
current earnings and profits, GB Holdings may have current earnings and profits
at the end of the 2004 tax year. 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 either or both the Exchange
Offer and the Distribution of the Atlantic Holdings Securities will result in
the GB Holdings consolidated group recognizing either taxable COD Income or
gain. Such COD Income or gain would be included in GB Holdings' current earnings
and profits and increase the amount of the distribution of Warrants taxable as a
dividend because such COD Income or gain would increase GB Holdings' current
earnings and profits, if any, for the year in which the distribution of the
Warrant is made. Your tax basis in the Warrants received in the distribution
should equal the fair market value of such Warrants, measured as of the date of
the distribution of the Warrants.
In the event that 100% of the Existing Notes are exchanged for
the New Notes, pursuant to the Exchange Offer, the distribution will be of
Atlantic Holdings Common Stock and would likely be effected in connection with
the liquidation of GB Holdings. If so, then none of the distribution of the
Atlantic Holdings Common Stock should be taxable to you as a dividend. Instead,
you may recognize capital gain or loss equal to the difference between the fair
market value of the Atlantic Holdings Common Stock distributed and your adjusted
tax basis in your common stock of GB Holdings. The deductibility of net capital
losses is subject to limitations. If gain or loss is recognized, your tax basis
in the Atlantic Holdings Common Stock received in the distribution should equal
the fair market value of such Atlantic Holdings Common Stock, measured as of the
date of the distribution of the Atlantic Holdings Common Stock. However, the IRS
may take the position that no gain or loss may be recognized. In such case, your
tax basis in the Atlantic Holdings Common Stock distributed should be equal to
your adjusted tax basis in the common stock of GB Holdings at the time of the
distribution.
If you are a non-U.S. stockholder, you should be exempt from U.S.
income or withholding tax on any portion of the distribution of the Atlantic
Holdings Securities not taxable as a dividend, provided that: (i) the
distribution of the Atlantic Holdings Securities is not effectively connected
with your conduct of a trade or business in the U.S. and (ii) GB Holdings is
not, and has not been, a U.S. real property holding corporation ("USRPHC"), as
that term is defined in the Code. Although GB Holdings 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 GB
Holdings.
20
If you are a non-U.S. stockholder who owns 5% or less of GB
Holdings' common stock and the distribution of the Atlantic Holdings Securities
is not effectively connected with your conduct of a trade or business in the
U.S., then, if the distribution is of the Warrants, you should be subject to 30%
U.S. withholding tax to the extent that the distribution of the Warrants is
taxable as a dividend, subject to reduction by applicable treaty, and you should
not be subject to U.S. income or withholding tax on the amount of the
distribution of the Warrants not taxable as a dividend. However, as GB Holdings
may not be able to determine, at the time of the distribution, the amount of the
distribution of the Warrants taxable as a dividend, GB Holdings 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. In the event that 100% of the Existing
Notes are exchanged for the New Notes, pursuant to the Exchange Offer, the
distribution will be of Atlantic Holdings Common Stock and would likely be
effected in connection with the liquidation of GB Holdings. If so, then none of
the distribution of the Atlantic Holdings Common Stock should be taxable to you
as a dividend and subject to 30% U.S. withholding tax. Instead, you should not
be subject U.S. income or withholding tax on any of the distribution of the
Atlantic Holdings Common Stock.
If you are a non-U.S. stockholder who owns more than 5% of the
common stock of GB Holdings and the distribution of the Atlantic Holdings
Securities is not effectively connected with your conduct of a trade or business
in the U.S., then, if the distribution is of the Warrants, you should be subject
to 30% U.S. withholding tax to the extent that the distribution of the Warrants
is taxable as a dividend, subject to reduction by applicable treaty, and U.S.
net income tax to the extent that the distribution of the Warrants is not
taxable as a dividend. However, as GB Holdings may not be able to determine, at
the time of the distribution, the amount of the distribution of the Warrants
taxable as a dividend, GB Holdings 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. In the event that 100% of the Existing Notes are exchanged
for the New Notes, pursuant to the Exchange Offer, the distribution will be of
Atlantic Holdings Common Stock and would likely be effected in connection with
the liquidation of GB Holdings. If so, then none of the distribution of the
Atlantic Holdings Common Stock should be taxable to you as a dividend and
subject to 30% U.S. withholding tax. Instead, you may be subject to U.S. net
income tax upon your receipt of the Atlantic Holdings Common Stock.
If you are a non-U.S. stockholder and the distribution of the
Atlantic Holdings Securities is effectively connected with your conduct of a
trade or business in the U.S. and you provide the proper withholding certificate
to GB Holdings, then if the distribution is of the Warrants, you should be
subject to U.S. net income tax on the distribution of the Warrants (but not the
30% U.S. withholding tax). In the event that 100% of the Existing Notes are
exchanged for the New Notes, pursuant to the Exchange Offer, the distribution
will be of Atlantic Holdings Common Stock and would likely be effected in
connection with the liquidation of GB Holdings. If so, you should still be
subject to U.S. net income tax on the distribution of the Atlantic Holdings
Common Stock. However, none of the distribution of the Atlantic Holdings Common
Stock should be taxable to you as a dividend. Instead, you may recognize capital
gain or loss equal to the difference between the fair market value of the
Atlantic Holdings Common Stock distributed and your adjusted tax basis in your
common stock of GB Holdings. The deductibility of net capital losses is subject
to limitations. However, the IRS may take the position that no gain or loss may
be recognized.
In the event that the distribution of the Atlantic Holdings
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 Holdings Common Stock. Your tax basis in
such Atlantic Holdings 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 Holdings Common Stock, and your holding period for such
Atlantic Holdings Common Stock should commence on the date of the exercise of
the Warrants for Atlantic Holdings Common Stock.
You should consult your own tax advisors as to the consequences
of the Transaction. This section is a summary of some of the U.S. federal tax
implications of the Transaction, for more information, see "MATERIAL U.S.
FEDERAL INCOME TAX CONSEQUENCES" as set forth on page 131.
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
21
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 GB Holdings is currently listed on the AMEX
under the symbol "GBH." Public trading of the common stock of GB Holdings 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
GB Holdings as reported on the AMEX. GB Holdings' 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
Fiscal Year ended December 31, 2003
First Quarter.............................................. $ 3.09 2.25
Second Quarter............................................. $ 6.75 2.50
Third Quarter.............................................. $ 5.15 2.56
Fourth Quarter............................................. $ 3.70 2.41
Fiscal Year ending December 31, 2004
Quarter ended March 31, 2004............................... $ 3.10 2.30
Quarter ending June 30, 2004 (through May 26, 2004)........ $ 2.23 2.06
GB Holdings has never paid any dividends. The payment of future
dividends, other than the distribution of Atlantic Holdings Securities to the
stockholders of GB Holdings, 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 May 6, 2004, GB Holdings had ten stockholders of record.
The following table presents the last reported sale price per
share of the common stock of GB Holdings as reported on AMEX on July 11, 2003,
the last full trading day prior to the public announcement of the Transaction,
and on May 26, 2004, the last trading day for which this information could be
obtained prior to the date of this document.
July 14, 2003.....................................................$ 3.64
May 26, 2004......................................................$ 2.22
There is currently no established trading market for the Atlantic
Holdings Common Stock. At this time, (i) there is no Atlantic Holdings Common
Stock subject to outstanding warrants or options; (ii) there are no shares of
Atlantic Holdings Common Stock eligible for resale pursuant to Rule 144; and
(iii) Atlantic Holdings proposes to publicly offer (a) up to 2,750,000 shares of
Atlantic Holdings Common Stock or up to 10,000,000 Warrants
22
(exercisable for 2,750,000 shares of Atlantic Holdings Common Stock) and (b) up
to 7,250,000 shares of Atlantic Holdings Common Stock issuable upon payment of
the New Notes in the form of Atlantic Holdings Common Stock or conversion, in
whole or in part, of the New Notes into Atlantic Holdings Common Stock.
Upon consummation of the Transaction, affiliates of Mr. Icahn
will beneficially own approximately 63.4% of the outstanding Atlantic Holdings
Common Stock, on a fully diluted basis. Also if between 58% and 100% of the
aggregate principal amount of the Existing Notes are exchanged, they will
beneficially own up to an additional 23.5% of the Atlantic Holdings Common Stock
because of their ownership of approximately 77% of the common stock of GB
Holdings (i.e., the lower the principal amount of the Existing Notes that are
exchanged, the greater the number of additional shares of Atlantic Holdings
Common Stock that GB Holdings will own and the affiliates will beneficially
own).
Based upon information concerning HMC Investors, L.L.C. and its
affiliates derived from a Schedule 13G filed with the SEC on February 4, 2004,
after the Transaction is completed, affiliates of HMC Investors L.L.C. may
beneficially own approximately 2.2% (on a fully diluted basis) of the
outstanding Atlantic Holdings 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 0.24% of the outstanding Atlantic Holdings
Common Stock because of such affiliates ownership of 8.0% of the common stock
of GB Holdings.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents GB Holdings and its subsidiaries'
(the "GB Holdings 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 GB HOLDINGS AND ITS SUBSIDIARIES" as set forth on page 104, and
the historical consolidated financial statements and notes to the GB Holdings
Company's historical consolidated financial statements, each of which is
included elsewhere in this proxy statement prospectus. The consolidated
statements of operations data for 1999, 2000, 2001, 2002, and 2003 and the
consolidated balance sheet data as of the last day of each of these years are
derived from the GB Holdings Company's historical audited consolidated financial
statements. The financial statements for 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
and 2003 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 GB
Holdings' or Atlantic Holdings' future performance. For additional information,
see "SELECTED PRO FORMA FINANCIAL DATA FOR GB HOLDINGS AND ATLANTIC HOLDINGS
GIVING EFFECT TO THE TRANSACTION" as set forth on page 25.
GB Holdings implemented SOP 90-7 and, therefore, adopted "fresh
start reporting" as of September 30, 2000. GB Holdings' 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, GB
Holdings' 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.
23
GB HOLDINGS, INC. AND SUBSIDIARIES
(dollars in thousands except income per share data)
STATEMENT OF OPERATIONS DATA:
Post-Reorganization
-----------------------------------------------------------------------------------
Three Three
Months Months Year Year Year
Ended Ended Ended Ended Ended
3/31/04 3/31/03 12/31/03 12/31/02 12/31/01
---------------- --------------- --------------- ------------ ----------------
Total revenues................................... $52,703 $51,645 $219,890 $244,601 $278,030
Promotional allowances........................... (11,254) (11,844) (49,632) (51,128) (62,281)
---------------- --------------- --------------- ------------ ----------------
Net revenues..................................... 41,449 39,801 170,258 193,473 215,749
---------------- --------------- --------------- ------------ ----------------
Expenses
Departmental.................................. 33,726 34,980 146,049 159,714 185,255
General and administrative.................... 2,873 2,522 11,582 12,799 11,512
Depreciation and amortization including
provision for obligatory investments....... 4,073 3,731 16,244 15,457 12,133
Loss on impairment of fixed assets........... -- -- -- 1,282 --
Loss (gain) on disposal of fixed assets...... -- 4 (105) 185 20
---------------- --------------- --------------- ------------ ----------------
Total Expenses.............................. 40,672 41,237 173,770 189,437 208,920
---------------- --------------- --------------- ------------ ----------------
Income (loss) from operations................. 777 (1,436) (3,512) 4,036 6,829
---------------- --------------- --------------- ------------ ----------------
Non-operating income (expense):
Interest income............................... 111 189 627 1,067 2,671
Interest expense.............................. (3,051) (2,995) (12,027) (11,640) (11,279)
Debt restructuring costs...................... (710) -- (1,843) -- --
Reorganization and other related costs........ -- -- -- -- --
Gain on prepetition debt discharge............ -- -- -- -- --
---------------- --------------- --------------- ------------ ----------------
Total non-operating income (expense), net... (3,650) (2,806) (13,243) (10,573) (8,608)
---------------- --------------- --------------- ------------ ----------------
Income (loss) before income taxes................ (2,873) (4,242) (16,755) (6,537) (1,779)
Income tax provision............................. (267) (159) (958) (784) (55)
---------------- --------------- --------------- ------------ ----------------
Net income (loss)................................ $(3,140) $(4,401) $(17,713) $(7,321) $(1,834)
================ =============== =============== ============ ================
Basic/diluted income (loss) per common share(2) $(0.31) $(0.44) $(1.77) $(0.73) $(0.18)
================ =============== =============== ============ ================
10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
================ =============== =============== ============ ================
Ratio of earnings to fixed charges (3)........ -- -- -- -- --
---------------- --------------- --------------- ------------ ----------------
|
| Pre-Reorganization
---------------------------------------------------
10/1/00 1/1/00 Year
through through Ended
12/31/00 9/30/00 12/31/99(1)
--------------- --------------- ---------------
Total revenues.................................... $62,485 $209,575 $270,578
Promotional allowances............................ (15,774) (47,112) (60,767)
--------------- --------------- ---------------
Net revenues...................................... 46,711 162,463 209,811
--------------- --------------- ---------------
Expenses
Departmental................................... 45,427 131,985 178,188
General and administrative..................... 2,175 7,663 10,586
Depreciation and amortization including
provision for obligatory investments........ 3,834 9,414 16,215
Loss on impairment of fixed assets............ -- -- --
Loss (gain) on disposal of fixed assets....... 11 10 (259)
--------------- --------------- ---------------
Total Expenses............................... 51,447 149,072 204,730
---------------- ---------------- ----------------
Income (loss) from operations.................. (4,736) 13,391 5,081
--------------- --------------- ---------------
Non-operating income (expense):
Interest income................................ 1,338 518 649
Interest expense............................... (3,133) (366) (295)
Debt restructuring costs....................... -- -- --
Reorganization and other related costs......... 34 (2,807) (2,154)
Gain on prepetition debt discharge............. -- 14,795 --
--------------- --------------- ---------------
Total non-operating income (expense), net.... (1,761) 12,140 (1,800)
--------------- --------------- ---------------
Income (loss) before income taxes................. (6,497) 25,531 3,281
Income tax provision.............................. -- -- (133)
--------------- --------------- ---------------
Net income (loss)................................. $(6,497) $25,531 $3,148
================ ================ ================
Basic/diluted income (loss) per common share(2) $(0.65) $2.55 $0.32
================ ================ ================
10,000,000 10,000,000 10,000,000
=============== =============== ================
Ratio of earnings to fixed charges (3)......... -- 20.2 6.2
--------------- --------------- ---------------
24
Balance Sheet Data:
Post-Reorganization | Pre-Reorganization
|
--------------------------------------------------------------------------------------------------------
3/31/04 3/31/03 12/31/03 12/31/02 12/31/01 12/31/00 9/30/00 12/31/99
------------------------------------ ------------ ------------- ------------ ------------ ------------
Total assets.............. $219,865 $237,832 $227,563 $244,712 $255,922 $264,247 $272,676 $208,416
Total long-term debt...... 110,000 110,000 110,000 110,000 110,371 110,838 110,858 197,898
Shareholder's equity
(deficit) ............. 88,495 104,947 91,635 109,348 116,669 118,503 125,000 (39,593)
- --------------
(1) On January 5, 1998, GB Holdings, GB Property and Greate Bay Hotel 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 10 7/8% First Mortgage Notes due January
15, 2004, the promissory note due February 17, 2005 made by Greate Bay
Hotel to PRT Funding Corp., the $5.0 million loan made by Pratt Casino
Corporation to Greate Bay Hotel in January 1997 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.
(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, 2002 and 2003 of $6.5 million, $3.0 million, $7.3 million and $17.1
million, respectively. For the three months ended March 31, 2004 and 2003,
there was a deficiency of earnings to fixed charges of $2.9 million and
$4.3 million, respectively.
SELECTED PRO FORMA FINANCIAL DATA GB HOLDINGS AND ATLANTIC HOLDINGS GIVING
EFFECT TO THE TRANSACTION
The following table sets forth the historical net loss and the
book value per share of the common stock of GB Holdings, and the combined per
share data for Atlantic Holdings on an unaudited pro forma basis after giving
effect to the Transaction, assuming alternatively that (i) holders of 58% of the
aggregate principal amount of the Existing Notes outstanding elect to exchange
their Existing Notes for New Notes (but the holders of a majority of the
aggregate principal amount of the New Notes outstanding have not elected to be
paid in or allow conversion, in whole or in part, into Atlantic Holdings Common
Stock); (ii) holders of 80% of the aggregate principal amount of the Existing
Notes elect to exchange their Existing Notes for New Notes (but the holders of a
majority of the aggregate principal amount outstanding have not elected to
either be paid in or allow conversion, in whole or in part, into Atlantic
Holdings Common Stock); and (iii) holders of 100% of the aggregate principal
amount of the Existing Notes outstanding elect to exchange their Existing Notes
for New Notes (but the holders of a majority of the aggregate principal amount
of the New Notes outstanding have not elected to be paid in or allow conversion,
in whole or in part, into Atlantic Holdings Common Stock). The following data
should be read in connection with the separate historical consolidated financial
statements of GB Holdings and pro forma combined financial statements which are
included in this solicitation statement and 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 solicitation statement and
prospectus.
Additional information regarding the pro forma information of GB
Holdings and Atlantic Holdings is set forth in the "Notes to the Financial
Statements" beginning on page P-1.
25
GB HOLDING, INC. AND SUBSIDIARIES
(dollars in thousands except income per share data)
PRO FORMA STATEMENT OF OPERATIONS DATA:
YEAR ENDED DECEMBER 31, 2003
-----------------------------------------------------------------------
PRO FORMA AT
-----------------------------------------------------
100% 80% 58%
HISTORICAL EXCHANGED EXCHANGED EXCHANGED
---------------- ----------------- ---------------- ----------------
Net revenues.............................................. $ 170,258 $ -- $ 170,258 $ 170,258
---------------- ----------------- ---------------- ----------------
Expenses:
Departmental........................................... 146,049 -- 146,049 146,049
General and administrative............................. 11,582 -- 11,582 11,582
Depreciation and amortization including provision for
obligatory investments............................... 16,244 -- 16,012 16,076
Gain on disposal of assets............................. (105) -- (105) (105)
---------------- ----------------- ---------------- ----------------
Total Expenses....................................... 173,770 -- 173,538 173,602
---------------- ----------------- ---------------- ----------------
Loss from operations.................................. (3,512) -- (3,280) (3,344)
---------------- ----------------- ---------------- ----------------
Non-operating income (expense):
Interest income ....................................... 627 -- 505 533
Interest expense....................................... (12,027) -- (6,465) (7,933)
Debt restructuring costs............................... (1,843) -- (3,080) (3,080)
---------------- ----------------- ---------------- ----------------
Total non-operating expense, net..................... (13,243) -- (9,040) (10,480)
---------------- ----------------- ---------------- ----------------
Loss before income taxes ................................. (16,755) -- (12,320) (13,824)
Income tax provision ..................................... (958) (1,342) (958) (958)
---------------- ----------------- ---------------- ----------------
Net loss.................................................. $ (17,713) $ (1,342) $ (13,278) $ (14,782)
================ ================= ================ ================
Basic/diluted loss per common share ...................... $ (1.77) $ (0.13) $ (1.33) $ (1.48)
================ ================= ================ ================
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 .................................. $ 9.16 N/A N/A N/A
-------------- --------------- --------------- --------------
BALANCE SHEET DATA:
Total assets.............................................. $ 227,563
Total long-term debt ..................................... 110,000
Shareholder's equity ..................................... 91,635
(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, 2003 as historically reported
and assuming an 80% and 58% exchange of $17.1 million, $12.5 million and
$14.0 million, respectively.
26
GB HOLDING, INC. AND SUBSIDIARIES
(dollars in thousands except income per share data)
PRO FORMA STATEMENT OF OPERATIONS DATA:
THREE MONTHS ENDED MARCH 31, 2004
-----------------------------------------------------------------------
PRO FORMA AT
-----------------------------------------------------
100% 80% 58%
HISTORICAL EXCHANGED EXCHANGED EXCHANGED
---------------- ----------------- ---------------- ----------------
Net revenues............................................... $ 41,449 $ -- $ 41,449 $ 41,449
---------------- ----------------- ---------------- ----------------
Expenses:
Departmental............................................ 33,726 -- 33,726 33,726
General and administrative.............................. 2,873 -- 2,873 2,873
Depreciation and amortization including provision for
obligatory investments................................ 4,073 -- 4,015 4,031
---------------- ----------------- ---------------- ----------------
Total Expenses........................................ 40,672 -- 40,614 40,630
---------------- ----------------- ---------------- ----------------
Income from operations.................................. 777 835 819
---------------- ----------------- ---------------- ----------------
Non-operating income (expense):
Interest income ........................................ 111 -- 113 112
Interest expense........................................ (3,051) -- (1,636) (2,011)
Debt restructuring costs................................ (710) -- -- --
---------------- ----------------- ---------------- ----------------
Total non-operating expense, net...................... (3,650) (1,523) (1,899)
---------------- ----------------- ---------------- ----------------
Loss before income taxes .................................. (2,873) -- (688) (1,080)
Income tax provision ...................................... (267) -- (267) (267)
---------------- ----------------- ---------------- ----------------
Net loss................................................... $ (3,140) $ -- $ (955) $ (1,347)
================ ================= ================ ================
Basic/diluted loss per common share ....................... $ (0.31) $ -- $ (0.10) $ (0.13)
================ ================= ================ ================
Weighted average common shares outstanding.............. 10,000,000 _____ 10,000,000 10,000,000
================ ================= ================ ================
Ratio of earnings to fixed charges (1).................. -- N/A -- --
---------------- ----------------- ---------------- ----------------
Book value per share ................................... $ 8.85 N/A $ 5.50 $ 5.43
---------------- ----------------- ---------------- ----------------
BALANCE SHEET DATA:
Total assets............................................... $ 219,865 -- $ 219,284 $ 219,299
Total long-term debt ...................................... 110,000 -- 110,000 110,000
Shareholder's equity ...................................... 88,495 -- 54,968 54,268
(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 three
months ended March 31, 2004 as historically reported and assuming an 80%
and 58% exchange of $2.9 million, $700,000 and $1.1 million, respectively.
27
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. & SUBSIDIARY
(dollars in thousands except income per share data)
PRO FORMA STATEMENT OF OPERATIONS DATA:
YEAR ENDED DECEMBER 31, 2003
-------------------------------------------------------------------
PRO FORMA AT
---------------------------------------------------
100% 80% 58%
Historical Exchanged Exchanged Exchanged
--------------- ----------------- --------------- ---------------
Net revenues................................................. $ -- $ 170,258 $ 170,258 $ 170,258
--------------- ----------------- --------------- ---------------
Expenses:
Departmental.............................................. -- 146,049 146,049 146,049
General and administrative................................ -- 11,582 11,582 11,582
Depreciation and amortization including provision for
obligatory investments.................................. -- 15,955 15,902 15,843
Gain on disposal of assets................................ -- (105) (105) (105)
--------------- ----------------- --------------- ---------------
Total Expenses.......................................... -- 173,481 173,428 173,369
--------------- ----------------- --------------- ---------------
Loss from operations...................................... -- (3,223) (3,170) (3,111)
--------------- ----------------- --------------- ---------------
Non-operating income (expense):
Interest income........................................... 488 505 533
Interest expense.......................................... (5,131) (4,088) (2,942)
Debt restructuring costs.................................. -- (3,080) (3,080) (3,080)
--------------- ----------------- --------------- ---------------
Total non-operating expense, net........................ -- (7,723) (6,663) (5,489)
--------------- ----------------- --------------- ---------------
Loss before income taxes..................................... -- (10,946) (9,833) (8,600)
Income tax provision......................................... -- (958) (958) (958)
--------------- ----------------- --------------- ---------------
Net loss..................................................... $ -- $ (11,904) $ (10,791) $ (9,558)
=============== ================= =============== ===============
Basic/diluted loss per common share.......................... $ $ (4.33) $ (7.44) $ (3.14)
=============== ================= =============== ===============
Weighted average common shares outstanding................ -- 2,750,000 1,450,000 3,045,000
=============== ================= =============== ===============
Ratio of earnings to fixed charges (1).................... N/A -- -- --
--------------- ----------------- --------------- ---------------
Book value per share...................................... N/A N/A N/A N/A
--------------- ----------------- --------------- ---------------
BALANCE SHEET DATA:
Total assets................................................. $ 1
Total long-term debt......................................... --
Shareholder's equity......................................... 1
(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, 2003 assuming a 100% exchange, an 80% exchange and a 58%
exchange of $11.0 million, $9.9 million and $8.7 million, respectively.
28
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. & SUBSIDIARY
(dollars in thousands except income per share data)
PRO FORMA STATEMENT OF OPERATIONS DATA:
THREE MONTHS ENDED MARCH 31, 2004
-------------------------------------------------------------------
PRO FORMA AT
--------------------------------------------------
100% 80% 58%
Historical Exchanged Exchanged Exchanged
--------------- ---------------- --------------- ---------------
Net revenues.................................................. $ -- $ 41,449 $ 41,449 $ 41,449
--------------- ---------------- --------------- ---------------
Expenses:
Departmental............................................... -- 33,726 33,726 33,726
General and administrative................................. -- 2,873 2,873 2,873
Depreciation and amortization including provision for
obligatory investments................................... -- 4,001 3,987 3,973
--------------- ---------------- --------------- ---------------
Total Expenses........................................... -- 40,600 40,586 40,572
--------------- ---------------- --------------- ---------------
Income from operations..................................... -- 849 863 877
--------------- ---------------- --------------- ---------------
Non-operating income (expense):
Interest income............................................ 115 113 112
Interest expense........................................... (1,295) (1,035) (748)
Debt restructuring costs................................... -- -- -- --
--------------- ---------------- --------------- ---------------
Total non-operating expense, net......................... -- (1,180) (922) (636)
--------------- ---------------- --------------- ---------------
Income (loss) before income taxes............................. -- (331) (59) 241
Income tax provision.......................................... -- (267) (267) (267)
--------------- ---------------- --------------- ---------------
Net loss...................................................... $ -- $ (598) $ (326) $ (26)
=============== ================ =============== ===============
Basic/diluted loss per common share........................... $ -- $ (0.22) $ (0.22) $ (0.01)
=============== ================ =============== ===============
Weighted average common shares outstanding................. -- 2,750,000 1,450,000 3,045,000
=============== ================ =============== ===============
Ratio of earnings to fixed charges (1)..................... N/A -- -- 1.24
--------------- ---------------- --------------- ---------------
Book value per share....................................... N/A $ 31.99 $ 75.71 $ 43.93
--------------- ---------------- --------------- ---------------
BALANCE SHEET DATA:
Total assets.................................................. $ 1 $ 219,272 $ 219,091 $ 218,892
Total long-term debt.......................................... -- 110,000 88,000 63,800
Shareholder's equity.......................................... 1 87,969 109,775 133,761
(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 three
months ended March 31, 2004 assuming a 100% exchange and an 80% exchange of
$340,000 and $270,000, respectively.
29
CAPITALIZATION
ATLANTIC HOLDINGS
The following table sets forth the consolidated capitalization of
Atlantic Holdings and its subsidiary as of March 31, 2004 on an actual basis, as
adjusted to give effect to the Transaction assuming 58% exchange, as adjusted to
give effect to the exchange offer assuming 80% exchange, and as adjusted to give
effect to the exchange offer assuming 100% exchange:
As of March 31, 2004
------------------------------------------------------------------
Pro Forma
------------------------------------------------------------------
As adjusted As adjusted As adjusted
Actual (58% exchange) (80% exchange) (100% exchange)
---------- ----------------- ----------------- -----------------
($ in thousands)
Cash and cash equivalents........................................ $ 1 $ 21,116 $ 18,681 $ 16,468
---------- ----------------- ----------------- -----------------
Long-term debt, net of current maturities........................ $ -- $ 63,800 $ 88,000 $ 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; shares issued and outstanding listed by
scenario below -- 30 15 28
Additional paid in capital.................................... 1 100,031 76,760 87,941
Warrants outstanding.......................................... -- 33,700 33,000 --
Accumulated deficit........................................... -- -- -- --
---------- ----------------- ----------------- -----------------
Total shareholders' equity.................................. 1 133,761 109,775 87,969
---------- ----------------- ----------------- -----------------
Total capitalization............................................. $ 2 $ 218,677 $ 216,456 $ 214,437
========== ================= ================= =================
30
GB HOLDINGS
The following table sets forth the consolidated capitalization of
GB Holdings and its subsidiaries as of March 31, 2004 on an actual basis, as
adjusted to give effect to the Transaction 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 March 31, 2004
-----------------------------------------------------------------------
Pro Forma
-----------------------------------------------------------------------
As adjusted As adjusted As adjusted
Actual (58% exchange) (80% exchange) (100% exchange)
------------- ------------------ ----------------- -------------------
($ in thousands)
Cash and cash equivalents................................. $ 28,061 $ 21,115 $ 18,680 $ --
------------- ------------------ ----------------- -------------------
Long-term debt:
Existing Notes......................................... $ 110,000 $ 46,200 $ 22,000 $ --
New Notes.............................................. -- 63,800 88,000 --
------------- ------------------ ----------------- -------------------
Long-term debt, net of current maturities................. 110,000 110,000 110,000 --
------------- ------------------ ----------------- -------------------
Warrants in Atlantic Holdings............................. -- 33,700 33,000 --
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 91,200 91,900 --
Accumulated deficit.................................... (36,505) (37,032) (37,032) --
------------- ------------------ ----------------- -------------------
Total shareholders' equity........................... 88,495 54,268 54,968 --
------------- ------------------ ----------------- -------------------
Total capitalization...................................... $ 226,556 $ 219,083 $ 216,648 $ --
============= ================== ================= ===================
31
RISK FACTORS
In deciding whether to approve the Transaction, GB Holdings and
Atlantic Holdings 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 GB Holdings or not
completed, GB Property and the guarantors of the Existing Notes, which include
GB Holdings and Greate Bay Hotel, 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 GB Holdings and Greate Bay Hotel. GB
Property 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 GB Holdings and its affiliates to have more available
cash to improve GB Holdings' financial performance. If the Transaction is not
approved, GB Holdings will need to pursue alternative methods to refinance the
Existing Notes, or seek other forms of financing. GB Holdings 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 GB
Holdings holding a majority of the outstanding shares of common stock of GB
Holdings vote to approve the proposal, GB Holdings cannot guarantee that the
Transaction will be completed. If the Transaction is not completed, and GB
Holdings is unable to refinance the Existing Notes or obtain additional
financing, GB Holdings may not be able to pay the Existing Notes at their
maturity in 2005, which would mean that GB Holdings could be required to file
for or be forced to resort to bankruptcy protection. In addition, if GB Holdings
is unable to consummate the Transaction then Greate Bay Hotel 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 common stock of GB
Holdings, affiliates of Carl C. Icahn will have substantial influence over GB
Holdings and Atlantic Holdings, and such affiliates may have interests which
differ from other holders.
Affiliates of Carl C. Icahn (i) beneficially own approximately
77% of the total voting power of GB Holdings; (ii) own approximately 58%
aggregate principal amount outstanding of the Existing Notes; and (iii)
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, although such affiliates have not entered into any agreements or other
arrangements requiring such holders to vote in favor of the Transaction and such
affiliates are free to decide not to vote in favor of the Transaction. 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 GB Holdings, mergers and sale of assets involving GB Holdings
and other matters upon which stockholders, of either GB Holdings or Atlantic
Holdings, vote). This power, in turn, gives them substantial control over the
business of both GB Holdings and Atlantic Holdings. As a result, upon completion
of the Transaction, affiliates of Mr. Icahn may (i) beneficially own
approximately 77% of the common stock of GB Holdings; (ii) beneficially own
approximately 63.4% (on a fully diluted basis) of the outstanding Atlantic
Holdings Common Stock, and if more than 58%, but less than 100% of the Existing
Notes exchange for the New Notes these 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 GB Holdings;
(iii) own at least 58% of the
32
outstanding amount of the New Notes; and (iv) control the Atlantic Holdings
Common Stock held by GB Holdings through its beneficial ownership of
approximately 77% of the outstanding common stock of GB Holdings. Therefore, Mr.
Icahn's affiliates may have the ability to:
o elect the Board;
o approve transactions of GB Holdings that may have a
significant impact including mergers or a sale of all, or
substantially all, of the assets of GB Holdings;
o determine when and whether the New Notes will be paid in
cash at maturity or paid in or convertible into Atlantic
Holdings 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 subordination of the liens securing the New
Notes to liens securing newly incurred debt that, as a
result, will rank senior to such liens;
o approve the release of collateral securing the New Notes;
and
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 GB Holdings and Atlantic Holdings. The
potential for conflicts of interest exists among GB Holdings or Atlantic
Holdings, 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 GB Holdings or Atlantic
Holdings.
At the request of GB Holdings, Ealing Corp., a Nevada corporation
and an affiliate of Mr. Icahn, has provided a commitment letter, dated January
30, 2004, in which Ealing has agreed to provide a revolving credit facility
under which GB Holdings and its subsidiaries may borrow up to an aggregate
amount of $10 million to be used for general working capital purposes. Under the
terms of the commitment letter, the revolving credit facility will expire on
June 30, 2005, and borrowings will bear interest at a rate of 10% per annum, and
obligations under the revolving credit facility will be secured by a first lien
on all of the assets of GB Holdings and its subsidiaries (including Atlantic
Holdings) which will be senior to the liens securing the Existing Notes. Upon
the consummation of the Transaction the obligation will be assumed by Atlantic
Holdings and the lien will be senior to the New Notes. Ealing's obligations to
provide the financing pursuant to the commitment letter is subject to the
negotiation and execution of definitive loan and security agreements and related
documents as well as certain customary conditions. Ealing and GB Holdings have
agreed to extend the commitment until July 1, 2004.
Upon consummation of the Transaction, GB Holdings' sole asset will be Atlantic
Holdings Common Stock which will have limited liquidity.
Immediately upon consummation of the Transaction, assuming less
than 100% of the Existing Notes are exchanged, GB Holding will be the sole owner
of Atlantic Holdings 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 Holdings Common Stock (i.e., shares owned by persons and entities
unaffiliated with Atlantic Holdings) 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 Holdings
Common Stock that is approximately 63.4% (on a fully diluted basis) of the
outstanding Atlantic Holdings Common Stock, and 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 Holdings
Common Stock because of such affiliates ownership of 77% of the outstanding
common stock of GB Holdings. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF ATLANTIC HOLDINGS AND GB HOLDINGS" as set forth on page
115. The market price of Atlantic Holdings Common Stock, accordingly, may not be
indicative of the market price of Atlantic Holdings Common Stock in a more
liquid market or of Atlantic Holdings' financial performance or business
prospects.
33
The substantial debt of Atlantic Holdings and GB Holdings could adversely affect
Atlantic Holdings.
After the completion of the Transaction, it is anticipated that
Atlantic Holdings and GB Holdings will have a significant amount of debt
outstanding. Pursuant to the terms of the Contribution Agreement among GB
Holdings, Greate Bay Hotel, and Atlantic Holdings, Atlantic Holdings will
undertake to provide to GB Holdings 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 GB Holding and as a stockholder or holder of Warrants
of Atlantic Holdings, if the Transaction is consummated. Below, GB Holdings and
Atlantic Holdings have identified some of the material potential consequences
resulting from this significant amount of debt.
o Significant payments may be required to be paid to GB
Holdings for interest payments on the unexchanged Existing
Notes and operating expenses of GB Holdings pursuant to the
terms of the Contribution Agreement between GB Holdings,
Greate Bay Hotel and Atlantic Holdings, thereby reducing the
amount of cash available for other purposes, including
reinvestment in Atlantic Holdings;
o Atlantic Holdings may be unable to obtain additional
financing for working capital, capital expenditures,
acquisitions and general corporate purposes; and
o Atlantic Holdings' ability to adjust to changing market
conditions may be hampered.
Atlantic Holdings 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 Holdings' principal and
interest obligations under the New Notes when the same become due and payable in
2008. If Atlantic Holding 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 GB Holdings to default on the Existing Notes, reduce
capital expenditures, refinance all or a portion of Atlantic Holding or GB
Holdings' existing debt including the Existing Notes, or obtain additional
financing.
Atlantic Holding and its affiliates may be able to incur
substantial additional indebtedness in the future. Although Atlantic Holdings'
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 Holdings' currently anticipated debt levels, the substantial leverage
risks described above would increase. Also, these restrictions do not prevent
Atlantic Holdings from incurring obligations that do not constitute
indebtedness.
If the Transaction is not completed Greate Bay Hotel 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 GB Holdings.
Pursuant to New Jersey law, Greate Bay Hotel 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 44. The gaming licenses required to own and operate The
Sands must be renewed in 2004, which requires that the CCC determine that Greate
Bay Hotel and GB Holdings are financially stable. In order to be found
"financially stable" under NJCCA, Greate Bay Hotel and GB Holdings must
demonstrate among other things, their ability to pay, exchange, or refinance
debts that mature or otherwise become due and payable during the license term,
or to otherwise manage such debts. If the CCC determines that GB Holdings is
unable to make the required payments pursuant to the Existing Notes or pay the
principal when it becomes due in 2005, Greate Bay Hotel may be unable to obtain
renewal of the casino license required to own and operate The Sands. Greate Bay
Hotel's inability to obtain renewal of its casino license will have a material
adverse effect on GB Holdings.
You cannot control what kind of Atlantic Holdings Security you would receive as
part of the Transaction.
Whether you receive Atlantic Holdings 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, GB Holdings will distribute 0.275
shares of Atlantic Holdings Common Stock to you for every one share of the
common stock of GB Holdings that you currently own. If the holders of less than
100% of the $110 million aggregate
34
principal amount outstanding of Existing Notes agree to exchange such notes for
New Notes, GB Holdings will distribute Warrants to purchase 0.275 shares of
Atlantic Common Stock to you for every share of the common stock of GB Holdings
that you currently own. You will not have an opportunity to select whether you
receive Atlantic Holdings Common Stock or Warrants; you can only vote to approve
or reject the Transaction in its entirety.
The Warrants, are not exercisable until the occurrence of specified conditions,
may only be exercisable for a limited period of time, may not be exercisable
immediately, and are significantly different from an equity security.
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 Holdings Common Stock as full satisfaction of the
principal and accrued interest due pursuant to the New Notes; (ii) a
determination by a majority of the Board of Directors of Atlantic Holdings
(including at least one independent director) 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
Holdings nor GB Holdings can make an accurate prediction as to exactly when or
if any of these conditions will be satisfied. While the Existing Notes are
scheduled to mature on September 28, 2005, neither Atlantic Holdings nor GB
Holdings will provide any assurance that GB Holdings 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
Holdings 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 Holdings elects, you may have only a 90-day period beginning on the
date the Warrants become exercisable to exercise the Warrants.
The Board of Directors of Atlantic Holdings has not determined
the circumstances in which it will declare the Warrants exercisable, however
such board has indicated that in determining whether or when to allow the
stockholders to exercise the Warrants, it would consider a variety of factors
including, but not limited to, general market factors, Atlantic Holdings' need
for additional financing, business opportunities of Atlantic Holdings, Atlantic
Holdings' ability to enter into transactions, the business and financial
prospects of The Sands, Atlantic Holdings and ACE Gaming, and other economic
factors affecting the nation in general, the Atlantic City Market or the gaming
industry.
Affiliates of Mr. Icahn own approximately 58% of the Existing
Notes, have indicated their intent to tender for exchange their Existing Notes,
and following such exchange, they will own a majority of the New Notes. Such
affiliates may cause the New Notes to be paid in Atlantic Holdings Common Stock
at any time, in their sole discretion (thereby allowing the Warrants to be
exercised). In determining whether or when to cause the New Notes to be paid in
Atlantic Holdings Common Stock, they may consider a variety of factors,
including, but not limited to, the results of operations and the financial
condition of Atlantic Holdings and ACE Gaming, the general market conditions
affecting Atlantic Holdings and ACE Gaming, whether such affiliates want to
obtain ownership rights of the Atlantic Holdings Common Stock which they are
entitled to in connection with the Warrants or their New Notes in order to be in
a position to exercise their respective rights as stockholders, whether such
affiliates find it advantageous to themselves to eliminate the debt created by
the New Notes, the business and financial prospects of The Sands, Atlantic
Holdings and ACE Gaming, and other general economic factors generally affecting
the country and the gaming industry in particular. However, such affiliates have
advised Atlantic Holdings that they have not determined benchmarks or standards
in this regard and reserve the right to cause the New Notes to be paid in or
convertible into Atlantic Holdings Common Stock at any time in their sole
discretion.
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 Holdings Common Stock underlying the Warrants,
or an opinion of counsel for Atlantic Holdings that there is an effective
exemption from registration. As long as the Warrants remain exercisable,
Atlantic Holdings may be required to file a registration statement with the SEC
and have such registration statement
35
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 Holdings Common Stock is not kept current for any reason, or if the
shares of Atlantic Holdings 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.
Prior to the exercise of the Warrants, the holders will not have
any rights as stockholders of Atlantic Holdings. In this regard, the holders of
the Warrants will not be entitled to elect directors of Atlantic Holdings, will
have no voting rights, will not be entitled to approve corporate actions and
will not be eligible to receive dividends, if any.
As soon as reasonably practicable following consummation of the Transaction, GB
Holdings will apply to delist the common stock of GB Holdings from trading on
the AMEX and the delisting of the common stock of GB Holdings from trading on
the AMEX will make it more difficult for you to sell your shares of common stock
of GB Holdings.
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. GB Holdings intends to voluntarily withdraw the common stock
of GB Holdings from listing on the AMEX.
Once the common stock of GB Holdings is delisted from trading on
the AMEX, trading, if any, in the common stock of GB Holdings may continue to be
conducted on the OTC Bulletin Board or in privately negotiated transactions. The
price of the common stock of GB Holdings may also be quoted in the "pink
sheets." Delisting of the common stock of GB Holdings may result in, among other
things, limited release of the market price of the common stock of GB Holdings
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 GB Holdings and its ability to issue additional
securities or to secure additional financing.
After the common stock of GB Holdings is delisted, GB Holdings
may de-register its common stock. If GB Holdings de-registers its common stock,
there will be no trading market for you to sell your securities and the value of
common stock of GB Holdings could decrease significantly.
Libra Securities, LLC was previously retained by an affiliate of GB Holdings.
On December 11, 2002, prior to its retention by the Special
Committee, Libra Securities, LLC entered into an engagement agreement with
American Real Estate Partners, L.P., a limited partnership affiliated with Mr.
Icahn and which as of October 10, 2003 directly beneficially owned 3,627,711
shares of common stock of GB Holdings (36.28% of the common stock of GB
Holdings). In such engagement, the Audit Committee of American Property
Investors, Inc., the general partner of American Real Estate Partners, retained
Libra Securities to provide a fairness opinion to American Real Estate Partners
in connection with American Real Estate Partners' possible acquisition of
certain Existing Notes and common stock of GB Holdings owned by other affiliates
of Mr. Icahn. Libra Securities was paid an engagement fee of $50,000 pursuant to
this agreement. Libra Securities engaged in a preliminary discussion with the
Audit Committee of the Board of Directors of American Property Investors, Inc.
with respect to various possible methods to value GB Holdings. In such
discussion, Libra Securities indicated that it expected to use the Comparable
Transaction Approach, the Market Multiple Approach and the Discounted Cash Flow
Approach as part of the analyses to be conducted by it in connection with its
proposed fairness opinion. However, the transaction did not proceed, Libra
Securities did not make any determination of the value of GB Holdings, and Libra
Securities did not provide a report or opinion to the Audit Committee of
American Property Investors, Inc.
The Special Committee was aware of the terminated relationship
between Libra Securities and American Real Estate Partners.
An active trading market for the shares of Atlantic Holding 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 Holding Common Stock may be less than the
market price of a share of common stock of GB Holdings.
Prior to this Transaction, you could not buy or sell shares of
Atlantic Holdings Common Stock or Warrants. An active public trading market for
Atlantic Holdings Common Stock or Warrants is not likely to develop
36
or continue after the consummation of the Transaction. Even if such a market
does develop, the market price of shares of Atlantic Holdings Common Stock or
Warrants after this offering may be volatile and could be less than the market
price of shares of common stock of GB Holdings or the historical per share book
value of the assets of GB Holdings as a result of any of the following factors,
some which are beyond Atlantic Holdings' control:
o The complexity of the terms of the Transaction, the
corporate structure or Atlantic Holdings' capitalization
upon completion of the Transaction;
o Liabilities that Atlantic Holdings has or may have;
o The interest level of investors in purchasing the shares of
Atlantic Holdings Common Stock and Warrants after the
Transaction;
o The trading market of common stock of GB Holdings, if any,
could reduce the market price of the shares of Atlantic
Holdings Common Stock and Warrants; and
o Affiliates of Carl C. Icahn may sell their shares of common
stock of GB Holdings 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 GB
Holdings and, indirectly, the shares of Atlantic Holdings
Common Stock and Warrants.
Atlantic Holdings does not currently intend to list the Atlantic
Holdings 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
Holdings Common Stock and Warrants could decline below the price you paid for
your shares of common stock of GB Holdings. Prices for the Atlantic Holdings
Common Stock and Warrants will be determined in the marketplace and may be
influenced by many factors, including variations in Atlantic Holdings' financial
results, changes in earnings estimates by industry research analysts, investors'
perceptions of Atlantic Holdings and general economic, industry and market
conditions.
Affiliates of Carl C. Icahn will receive registration rights relating to
Atlantic Holdings Common Stock in connection with the Transaction.
Affiliates of Carl C. Icahn will receive registration rights in
connection with the Transaction because they are "affiliates" of Atlantic
Holding (as such term is defined under federal securities laws) and their
ability to sell such shares would be significantly limited without such
registration rights. The registration rights will give them the right, subject
to certain conditions, to, at their election, require Atlantic Holdings to
register, at Atlantic Holdings' expense, their Atlantic Holdings Common Stock
for resale by such affiliates. This will increase their ability to sell their
shares of Atlantic Holdings Common Stock, which could have a substantial effect
on the trading market for Atlantic Holdings Common Stock. The other holders of
the common stock of GB Holdings will receive no registration rights or
comparable benefit, with respect to any shares of Atlantic Holdings Common Stock
or warrants which they receive, as part of the Transaction. See "RISK FACTORS --
An active trading market for the shares of Atlantic Holdings 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 Holdings Common Stock may be less than
the market price of a share of common stock of GB Holdings" and -- "As the
holders of a significant amount of New Notes and common stock of GB Holdings,
affiliates of Carl C. Icahn will have substantial influence over GB Holdings and
Atlantic Holdings, and such affiliates may have interests which differ from
other holders" as set forth above on pages 36 and 32, respectively.
GB Holdings or its subsidiaries may incur additional indebtedness secured by
liens ranking senior to the liens securing the New Notes.
At the request of GB Holdings, Ealing has provided a commitment
letter, dated January 30, 2004, in which Ealing has agreed to provide a
revolving credit facility under which GB Holdings and its subsidiaries may
borrow up to an aggregate amount of $10 million to be used for general working
capital purposes. Under the terms of the commitment letter, the revolving credit
facility will expire on June 30, 2005, borrowings will bear interest at a rate
of 10% per annum, and obligations under the revolving credit facility will be
secured by a first lien on all of the assets of GB Holdings and its subsidiaries
(including Atlantic Holdings) which will be senior to the liens securing the
Existing Notes. Upon the consummation of the Transaction the obligation will be
assumed by Atlantic Holdings and the lien will be senior to the New Notes.
Ealing's obligations to provide the financing pursuant to the
37
commitment letter is subject to the negotiation and execution of definitive loan
and security agreements and related documents as well as certain customary
conditions. However, there can be no assurance that the loan agreement with
Ealing will be consummated, that if the loan agreement with Ealing is not
consummated, GB Holdings will be able to obtain financing from another lender on
terms as or more favorable than the terms of the commitment letter, or whether
GB Holdings will need to borrow funds for working capital. If GB Holdings
executes such definitive agreements, Ealing will have a first priority lien on
the assets of GB Holdings and its subsidiaries and any lien arising out of the
New Indenture will be subordinate to Ealing's lien until the later of the
expiration of the revolving credit facility and such time as all borrowings and
interest accrued have been repaid to Ealing. Ealing and GB Holdings have agreed
to extend the commitment until July 1, 2004.
Atlantic Holdings 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
Holdings with sufficient cash to cover Atlantic Holdings' estimated funding
needs. After giving effect to the Transaction Atlantic Holdings may need further
additional funding to address Atlantic Holdings' business needs and concerns.
Atlantic Holdings' actual funding requirements could vary materially. Atlantic
Holdings 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 Holdings 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 HOLDINGS" as set forth below.
GB Holdings' ability to fulfill its obligations will be dependent on Atlantic
Holdings' operating income and cash flow.
Following consummation of the Transaction, GB Holdings will be
the obligor of the Existing Notes. GB Holdings expects to derive its operating
income and cash flow from Atlantic Holdings, pursuant to the Contribution
Agreement. Accordingly, GB Holdings will be dependent on the earnings and cash
flow of, and semi-annual payments from, Atlantic Holdings 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 Holdings is a holding company and will have no operating
income of its own. Atlantic Holdings' ability to make payments on the Notes is
dependent on receiving distributions and other payments from ACE Gaming.
The assets of Greate Bay Hotel and GB Holdings 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) GB Holdings, Greate Bay
Hotel and Atlantic Holdings effected the Transaction with the actual intent of
hindering, delaying, or defrauding creditors, such as the holders who did not
exchange their Existing Notes; or (ii) GB Property or the guarantors of the
Existing Notes remaining property constituted unreasonably small capital to pay
its or their debts, including the Existing Notes (i.e., the value of the
Atlantic Holdings Common Stock is insufficient); or (iii) Atlantic Holdings, GB
Property 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 Holdings
and the liens securing the New Notes.
The measure of insolvency for purposes of a fraudulent conveyance
claim will vary depending upon the law of the applicable jurisdiction.
Generally, however, a company will be considered insolvent at a particular time
if the sum of its debts at that time is greater than the then fair value of its
assets or if the fair saleable value of its assets at that time is less than the
amount that would be required to pay its probable liability on its existing
debts as they mature. There can be no assurance that a court would not determine
that the Transaction constituted a fraudulent conveyance. The cash payment made
to holders of Existing Notes will result in a transfer of liquid assets of GB
Holdings 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
tendered for exchange.
38
You should consider the U.S. federal income tax consequences of the Transaction.
In the event that the distribution consists of Warrants, such
distribution should be (i) a taxable dividend to the extent of GB Holdings'
current or accumulated earnings and profits, then (ii) a non-taxable return of
basis to the extent of your tax basis in your GB Holdings common stock, and then
(iii) taxable gain from the sale or exchange of your GB Holdings common stock,
which should result in capital gain taxed at long-term capital gains rates
assuming that you held your GB Holdings common stock for more than 12 months. In
the event that the distribution consists of Atlantic Holdings Common Stock, such
distribution would likely be effected in connection with the liquidation of GB
Holdings. If so, then none of the distribution of the Atlantic Holdings Common
Stock should be taxable to you as a dividend. Instead, you may recognize capital
gain or loss equal to the difference between the fair market value of the
Atlantic Holdings Common Stock distributed and your adjusted tax basis in your
common stock of GB Holdings. The deductibility of net capital losses is subject
to limitations. For more information, please see the section titled "MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES" beginning on page 131 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 HOLDINGS
Atlantic Holdings is a newly formed company and has no operating history.
Atlantic Holdings is a newly formed wholly-owned subsidiary of
Greate Bay Hotel. Following the approval of the stockholders of GB Holdings, GB
Holdings will transfer all of its assets to Greate Bay Hotel (except the stock
of Greate Bay Hotel) and Greate Bay Hotel will transfer all of the assets
received from GB Holdings and substantially all of its assets (except for the
stock of Atlantic Holdings) to Atlantic Holdings in exchange for the Atlantic
Holdings Securities. Atlantic Holdings will subsequently assign substantially
all of its assets (except for an amount of cash that Atlantic Holdings will pay
to holders of Existing Notes that elect to exchange for New Notes), not
including the membership interest in ACE Gaming, to ACE Gaming. Following this
transfer, Atlantic Holdings' sole asset will be 100% of the membership interest
in ACE Gaming. Atlantic Holdings has no operating history nor historical
financial results for investors to evaluate except for GB Holdings' historical
consolidated financial results. After consummation of the Transaction, GB
Holdings' historical financial results may not be indicative of GB Holdings'
future operating results. As a result, no assurances can be given that Atlantic
Holdings will be successful or profitable.
Atlantic Holdings' quarterly operating results are subject to fluctuations and
seasonality, and if Atlantic Holdings fails to meet the expectations of
securities analysts or investors, Atlantic Holdings' share price may decrease
significantly.
Atlantic Holdings' 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 Holdings' 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 Holdings'
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 Holdings 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 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 Holdings or Ace
Gaming is unable to borrow funds for such purposes. In addition, the indentures
governing the New Notes limit Atlantic Holdings' ability to make capital
expenditures.
39
If Atlantic Holdings 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, GB Holdings is, and Atlantic
Holdings 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 Holdings' 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 Holdings' 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 three months ended March 31, 2004 and 2003, there was a charge
to income tax provision of $179,000 and $159,000, 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 to be transferred to the Casino Reinvestment Development
Authority ("CRDA"); (v) an increase 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
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
Holdings' profitability.
Future changes in state taxation of casino gaming companies in
New Jersey, where GB Holdings and Atlantic Holdings operate cannot be predicted
and any such changes could adversely affect Atlantic Holdings' profitability.
The GB Holdings consolidated group may recognize cancellation of indebtedness
income.
If the Issue Price of either the New Notes or the Existing Notes,
as amended, is based on the fair market value of the Existing Notes, the
Existing Notes, as amended, or the New Notes, the GB Holdings consolidated group
could recognize COD Income as a result of the Transaction. The Issue Price of
the New Notes and the Existing Notes, as amended, could be based on the fair
market value of the Existing Notes, the Existing Notes, as amended, or the New
Notes if the Existing Notes, the Existing Notes, as amended, or the New Notes
are Publicly Traded. 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 GB Holdings or Atlantic Holdings' results of operations. For more
information,
40
please see the section titled "MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES"
beginning on page 125 of this proxy statement/prospectus.
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
GB Holdings consolidated group recognizing COD Income for federal income tax
purposes, producing a tax liability. There would not be any such liability if
there is no recognition of COD Income. Such assumption and estimate is required
under US GAAP because GB Holdings' belief 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, GB Holdings does not believe that COD Income will result because GB
Holdings does not believe that an active trading market in the Existing Notes
will exist either during any of the thirty (30) days prior to the Transaction or
after the Transaction is completed, and unless such an active trading market
develops, a tax liability related to COD income will not be incurred.
GB Holdings' former use of Arthur Andersen LLP as its independent public
accountants may pose risks to GB Holdings and Atlantic Holdings 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 GB Holdings and its
subsidiaries' (the "Parent Company") consolidated financial statements until the
GB Holdings 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 Holdings' and GB Holdings'
securities. In addition, rules promulgated by the Securities and Exchange
Commission ("SEC") require the GB Holdings 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 Holdings and GB Holdings with regard to future SEC filings
could negatively affect Atlantic Holdings' and GB Holdings' 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 Holdings or GB Holdings.
Atlantic Holdings and GB Holdings 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 GB Holdings' 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 Holdings or GB Holdings.
After reasonable efforts, GB Holdings 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.
41
Energy price increases may adversely affect Atlantic Holdings' 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 Holdings' 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
Holdings' results of operations.
Atlantic Holdings' 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 Holdings' property and a reduction in spending by customers who do
visit Atlantic Holdings' property, which would adversely affect Atlantic
Holdings' 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 and bus 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 Holdings' 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
Holdings' operating results and Atlantic Holdings' 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 Holdings' business and
results of operations. Future acts of terror in the U.S. or an outbreak of
hostilities involving the United States, may again reduce The Sands' guests'
willingness to travel with the result that Atlantic Holdings' operations will
suffer.
Atlantic Holdings may incur losses that would not be covered by insurance and
the cost of insurance will increase.
Although Atlantic Holdings has agreed in the New Indenture
governing the New Notes to maintain insurance customary and appropriate for its
business, Atlantic Holdings cannot assure you that insurance will be available
or adequate to cover all loss and damage to which Atlantic Holdings' business or
Atlantic Holdings' 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 Holdings is self-insured
for certain risks. The lack of insurance for certain types or levels of risk
could expose Atlantic Holdings to significant losses in the event that an
uninsured catastrophe occurred. Any losses Atlantic Holdings 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 its patrons. Historically The Sands has extended credit on a
discretionary basis to certain qualified patrons. For the three months ended
March 31, 2004, gaming credit extended to The Sands' table game patrons
accounted for approximately 25.6% of overall table
42
game wagering, and table game wagering accounted for approximately 12.2% of
overall casino wagering during the period. At March 31, 2004, gaming receivables
amounted to $8.5 million before an allowance for uncollectible gaming
receivables of $4.9 million. 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 GB
Holdings, Atlantic Holdings and ACE Gaming.
Either GB Holdings or Atlantic Holdings may need to obtain financing for working
capital purposes.
A capital expenditure plan was recently approved by the Board,
and management believes that cash generated from operations and cash reserves
will be sufficient to meet the requirements of the capital expenditure plan.
Based upon expected cash flow generated from operations management determined
that it would be prudent for GB Holdings to obtain a line of credit to provide
additional cash availability to meet GB Holdings' working capital needs, in the
event that anticipated cash flow is less than expected or expenses exceed those
anticipated. At the request of GB Holdings, Ealing agreed to provide a revolving
credit facility, secured by a first lien on all of the assets of GB Holdings and
its subsidiaries (including Atlantic Holdings) which will be senior to the liens
securing the Existing Notes. Upon consummation of the Transaction the obligation
will be assumed by Atlantic Holdings and the lien will be senior to the New
Notes. Under the credit facility GB Holdings may borrow up to an aggregate
amount of $10 million for general working capital purposes. Ealing's obligation
to provide the financing pursuant to the commitment letter is subject to the
negotiation and execution of definitive loan and security agreements and related
documents as well as certain customary conditions. However, there can be no
assurance that the loan arrangement with Ealing will be consummated, that if the
loan agreement with Ealing is not consummated, GB Holdings will be able to
obtain financing from another lender on terms as or more favorable than the
terms of the commitment letter, or whether GB Holdings will need to borrow funds
for working capital. Ealing and GB Holdings have agreed to extend the commitment
until July 1, 2004.
Atlantic Holdings' success depends in part on the availability of qualified
management and personnel and on Atlantic Holdings' 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 Holdings'
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 Holdings' jurisdictions and nationwide. The Borgata,
recently opened in the marina district of Atlantic City in the summer of 2003,
has aggravated this problem in Atlantic City. Atlantic Holdings 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
Holdings, Greate Bay Hotel or GB Holdings key executives could have a material
adverse effect on Atlantic Holdings' 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 Holdings
or GB Holdings' competitors may have greater resources than Atlantic Holdings or
GB Holdings. 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 GB Holdings or Atlantic Holdings
conduct business, GB Holdings or Atlantic Holdings may lose market share. In
particular, expansion of gaming in or near the geographic area from which GB
Holdings or Atlantic Holdings attracts or expects to attract a significant
number of customers could have a significant adverse effect on GB Holdings or
Atlantic Holdings' 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, GB Holdings and Atlantic Holdings 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 The Sands' competitors in Atlantic City have
recently completed expansions of their hotels or have announced expansion
projects. For example,
43
Tropicana Atlantic City began constructing 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 third quarter of 2004.
Resorts is currently constructing a hotel room addition of approximately 400
rooms and is set to open in the third quarter of 2004. Our business 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 Holdings' 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. GB Holdings,
Atlantic Holdings 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 GB Holdings
and Atlantic Holdings.
Pending and enacted gaming legislation from neighboring States 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 the Company's operations, and an increase in the gross gaming tax without
a significant simultaneous increase in revenue would adversely affect the
Company's results of operations.
Recently, the casino industry, the CRDA and the New Jersey Sports
and Exposition Authority have agreed to a plan regarding New Jersey video
lottery terminals. Although not final, under the plan, casinos will pay a total
of $96 million over a period of four years, of which $10 million will fund,
through project grants, North Jersey CRDA projects and $86 million will be paid
to the New Jersey Sports and Exposition Authority who will then subsidize
certain New Jersey horse tracks to increase purses and attract higher-quality
races that would allow them to compete with horse tracks in neighboring states.
In return, the race tracks and New Jersey have committed to postpone any
attempts to install VLTs for at least four years. $52 million of the $86 million
would be donated by the CRDA from the casinos' North Jersey obligations and $34
million would be paid by the casinos directly. It is currently estimated that
The Sands' current CRDA deposits for North Jersey projects are sufficient to
fund The Sands' proportionate obligations with respect to the $10 million and
$52 million commitments. The Sands' proportionate obligation with respect to the
$34 million commitment is estimated to be approximately $1.4 million payable
over a four year period. The Sands' proportionate obligation with respect to the
combined $10 million and $52 million commitment is estimated to be approximately
$2.6 million payable over a four year period.
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 VLTs 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. Neither Pennsylvania nor Maryland enacted any legalized gaming
legislation in their respective legislative sessions during the three months
ended March 31, 2004. Since The Sands' market is primarily a drive-to-market,
legalized gambling in Pennsylvania or one
44
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 Holdings Common Stock and Warrants are subject to the CCC
and the NJCCA.
The holders of Atlantic Holdings Common Stock, the holders of
Warrants, and the holders of the common stock of GB Holdings, 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 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 Holdings 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 Holdings Common
Stock or the Warrants, 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 42), the stockholders of GB Holdings 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 GB Holdings and Atlantic Holdings
which, although believed to be reasonable, are inherently uncertain. They are
subject to uncertainties and factors relating to GB Holdings' and Atlantic
Holdings' operations and business environment, all of which are difficult to
predict and many of which are beyond GB Holdings' and Atlantic Holdings'
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.
45
SPECIAL FACTORS
Pursuant to the proxy statement/prospectus, GB Holdings is
seeking the consent of the stockholders of GB Holdings to the Transaction. The
Transaction is composed of the Asset Transfer, the Exchange Offer, the Merger,
and the Distribution of Atlantic Holdings Securities. Upon consummation of the
Transaction, up to 72.5% of the issued and outstanding Atlantic Holdings 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 GB Holdings.
BACKGROUND OF THE TRANSACTION
On or about March 11, 2003, Cyprus, LLC, an entity affiliated
with Carl C. Icahn, submitted a memorandum to GB Holdings outlining a possible
refinancing transaction with respect to the Existing Notes (the "Cyprus
Memorandum"), in which a newly formed subsidiary of GB Holdings 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, 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. In preparing the Cyprus Memorandum, Cyprus
believed that GB Holdings would not have sufficient cash to pay the principal of
the Existing Notes at maturity, that it was appropriate to develop a transaction
that would have the effect of extending the maturity of the indebtedness
represented by the Existing Notes that are exchanged from 2005 to 2008 and
eliminate the current semi-annual interest payments and that current
implementation of the Transaction would be beneficial to GB Holdings. Having
developed the Cyprus Memorandum, Cyprus did not seek or consider alternative
transactions. Other affiliates of Mr. Icahn, that are also affiliates of GB
Holdings, did not participate in the preparation of the Cyprus Memorandum nor
did they consider alternative transactions.
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 GB Holdings 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 to advise the
Special Committee as to the fairness, from a financial point of view, of the
consideration to be received by the stockholders of GB Holdings in the
Transaction.
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
Memorandum submitted to GB Holdings, and the legal documents necessary to
consummate the transaction contemplated by the Cyprus Memorandum. 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 was aware of the prior retention of
Libra Securities by the Audit Committee of American Property Investors, Inc., an
affiliate of GB Holdings, which was terminated prior to completion and did not
involve a transaction with GB Holdings. 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 to render an opinion as to the fairness from a financial point of view
of the consideration to be received by the stockholders of GB Holdings in the
Transaction.
46
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 discuss with Cyprus the terms of the Cyprus
Memorandum on behalf of GB Holdings.
On May 12, 2003, the representatives of the Special Committee and
its counsel discussed the terms of the Cyprus Memorandum with management of GB
Holdings and with the representatives of Cyprus and requested that the equity
portion that the stockholders of GB Holdings would receive, on a fully diluted
basis, be increased.
On May 15, 2003, the representatives of the Special Committee and
its counsel discussed the terms of the Cyprus Memorandum with management of GB
Holdings and with the representatives of Cyprus. At such meeting, the
representatives of Cyprus stated that they were willing to increase the equity
portion that the stockholders of GB Holdings would receive, on a fully diluted
basis, from 25% to 27.5%. The representatives also explained that they were not
interested in proceeding with the proposed transaction if the stockholders of GB
Holdings would receive, on a fully diluted basis, more than 27.5% of the equity
portion. At that meeting, it was also discussed that if less than 100% of the
Existing Notes are exchanged the stockholders of GB Holdings would receive
warrants. Such warrants would be exercisable following the first to occur of (i)
the election of the holders of a majority of the aggregate principal amount of
the New Notes outstanding to be paid in common stock; (ii) the payment of the
principal of the unexchanged Existing Notes; or (iii) the election of the board
of directors of GB Holdings.
On May 19, 2003, the representatives of the Special Committee and
its counsel discussed the terms of the Cyprus Memorandum with management of GB
Holdings and with the representatives of Cyprus and discussed the mechanics of
the Transaction. Also the representatives of the Special Committee and its
counsel requested that (i) the maturity of the New Notes be extended past 2008
and (ii) the Cash Payment be lower than $100 per $1,000 of principal exchanged.
The representatives of the Special Committee did not request an interest rate
lower than 3%, because they believed that based on their knowledge of the
capital markets, such interest rate was more favorable than rates otherwise
available.
On May 28, 2003, the representatives of the Special Committee and
its counsel discussed the terms of the Cyprus Memorandum with management of GB
Holdings and with the representatives of Cyprus and further discussed the
mechanics of the Transaction. Also, the representatives of Cyprus explained that
they were unwilling to extend the term of the New Notes past 2008 and that they
were unwilling to accept a cash payment lower than $100 per $1,000 of principal
exchanged because the 3% interest which accrues and is not payable on a current
basis was, in their view, favorable to Atlantic Holdings.
On June 2, 2003 and June 5, 2003, the representatives of the
Special Committee and its counsel discussed the terms of the Cyprus Memorandum
with management of GB Holdings and with the representatives of Cyprus and
further discussed means of implementing the Transaction.
On June 10, 2003, the representatives of the Special Committee
and its counsel discussed the terms of the Cyprus Memorandum with management of
GB Holdings and with the representatives of Cyprus. At that meeting it was
agreed that the stockholders of GB Holdings would receive 27.5% of the equity of
Atlantic Holdings, on a fully diluted basis, subject to the receipt of an
opinion from Libra Securities as to fairness from a financial point of view of
the consideration to be received by the stockholders of GB Holdings in the
Transaction. It was also agreed that warrants would be issued to the
stockholders of GB Holdings, if less than 100% of the Existing Notes are
exchanged.
On June 30, 2003, July 3, 2003, July 8, 2003, and July 9, 2003
counsel to the Special Committee and representatives of Cyprus discussed the
mechanics of implementing the Transaction and various provisions of the
indenture under which the New Notes will be issued including (i) the payment
terms; (ii) the events of default; (iii) the restrictive covenants of the
indenture governing the New Notes; (iv) the conversion provisions of the New
Notes; and (v) the form of payment, prior to maturity, of the New Notes.
On July 10, 2003, the Special Committee met with counsel who
explained the details of the Transaction to the members of the Special
Committee. Counsel for the Special Committee explained to the Special Committee
their role, duties, and obligations in determining whether the Transaction would
be fair to and in the best interest of the stockholders of GB Holdings.
Additionally, counsel explained the Transaction, the proposed terms of the
indenture for the New Notes and changes to the indenture for the Existing Notes
as discussed between the Special
47
Committee, counsel to the Special Committee, and Cyprus, and certain changes
proposed between the terms of the Transaction and the terms of the Cyprus
Memorandum including that (i) the stockholders of GB Holdings would receive
27.5% (i.e., an additional 2.5%) of the outstanding Atlantic Holdings Common
Stock (on a fully diluted basis); (ii) the stockholders would receive either
shares of Atlantic Holdings Common Stock or Warrants to purchase shares of
Atlantic Holdings Common Stock depending on whether all of the Existing Notes
were tendered for exchange; (iii) the New Notes would not be callable as a
result of a sale or change of control of Atlantic Holdings; (iv) the New Notes
would not be accelerated, and therefore payable, as a result of a default under
the Existing Indenture, including a default in the payment of the unexchanged
Existing Notes; (v) the holders of a majority of the aggregate principal amount
of the New Notes outstanding were provided with the right to allow all holders
of the New Notes to convert such notes into Atlantic Holdings Common Stock at
such majority holders election; and (vi) the New Indenture would include
restrictive covenants on additional indebtedness, liens, and sale-leaseback
transactions. 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 at that meeting (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 stockholders of GB
Holdings in the Transaction was fair, from a financial point of view, to the
stockholders of GB Holdings. Specifically, the Special Committee considered
whether GB Holdings should wait until September 2005 and attempt to pay the
principal and interest due on the Existing Notes at maturity or whether GB
Holdings should try to refinance the Existing Notes at or prior to maturity
through the commercial debt market. The Special Committee determined that based
on current expectations, it did not believe that GB Holdings would have
sufficient cash resources to pay the principal owed on the Existing Notes at
maturity in September 2005 and would be forced to either sell the assets of GB
Holdings or default on the Existing Notes. The Special Committee determined that
a sale of the assets of GB Holdings would not be in the best interest of the
stockholders of GB Holdings since approximately 75% of the proceeds of such sale
would be required to pay the principal and accrued interest on the Existing
Notes, while only approximately 25% or less of the proceeds of such sale would
be distributed to the stockholders of GB Holdings. In reaching its conclusion as
to the advisability of the Transaction, the Special Committee took into account
its discussions with Libra Securities during which Libra Securities expressed
its belief that, based on its experience in gaming industry finance and capital
markets, it was unlikely that GB Holdings would be able to obtain third party
financing on terms as favorable as the financing available with the New Notes.
Libra Securities' view was expressed in response to a direct question of the
Special Committee as to alternative financings and without Libra Securities
performing any independent investigation as to available financing alternatives.
Libra Securities did not, and the Special Committee did not request that Libra
Securities, seek alternative financing.
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 consummation of the Transaction is fair to and in the
best interest of the stockholders of GB Holdings, including
whether the stockholders of GB Holdings receive Atlantic
Holdings Common Stock or Warrants;
o the Transaction be submitted to the stockholders of GB
Holdings for their review and, if necessary, approval; and
o the Special Committee recommends to the Board that the Board
recommend to the stockholders of GB Holdings that they vote
in favor of the Transaction if approval of the stockholders
of GB Holdings is required.
On September 30, 2003, Libra Securities and the Special Committee
amended the engagement letter to retain Libra Securities to provide certain
financial information to be used in the preparation of the pro forma financial
statements to be included in the Proxy Statement/Prospectus.
On November 7, 2003, Libra Securities delivered its valuation
estimate to GB Holdings.
On November 12, 2003, the Special Committee met and
representatives of KMZR explained the content of the Transaction Documents to be
executed and filed with the SEC in connection with the Transaction. The Special
Committee recommended to the Board that it authorize the filing of the
Transaction Documents and any
48
amendments thereto in form and substance as the officers of GB Holdings
determine to be appropriate and necessary.
On November 12, 2003, the Board of Directors of GB Holdings,
Greate Bay Hotel, GB Property, and Atlantic Holdings and Atlantic Holdings, as
the manager of ACE Gaming (collectively the "Boards") met and representatives of
KMZR explained the Transaction and Libra Securities reviewed its fairness
opinion with the Boards. Additionally, the Boards reviewed the recommendation of
the Special Committee. It was also explained to the Boards that while the
Special Committee initially recommended the Transaction on July 14, 2003, the
Boards were not given the opportunity to approve it until November 12, 2003,
because of the complexity of the Transaction, the time required to prepare the
financial information, and the time required to prepare the other information
required in the Registration Statement. Mr. Icahn did not attend the meeting.
Following discussions between the Boards and the Special Committee, the Boards,
after due consideration, unanimously determined (Messrs. Hirsch and Saldarelli
abstaining), among other things, that:
o the officers of GB Holdings 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 the consummation of the Transaction is fair to and in the
best interest of the stockholders of GB Holdings, including
whether the stockholders of GB Holdings receive Atlantic
Holdings Common Stock or Warrants;
o the Transaction should be submitted to the stockholders of
GB Holdings for their vote and approval; and
o the Boards recommend to the stockholders of GB Holdings that
they vote in favor of the Transaction.
Messrs. Hirsch and Saldarelli abstained because each of them is employed by
American Real Estate Partners, L.P., a company affiliated with Mr. Icahn and in
light of such relationship determined that it was appropriate to abstain.
On May 26, 2004, the Special Committee met with its counsel to
review the Transaction and the Transaction Documents which had been filed with
the SEC in connection with the Transaction, discussed the changes that had been
made to the Transaction Documents in the various amendments that were filed with
the SEC, discussed the fairness of the proposed Transaction and the business,
operations, and financial condition of GB Holdings and the impact of the
Transaction on GB Holdings and its stockholders. Also, the Special Committee
discussed the fairness opinion of Libra Securities. After such discussion, the
Special Committee unanimously determined, among other things, that:
o the consummation of the Transaction is fair to and in the
best interest of the stockholders of GB Holdings, including
whether the stockholders of GB Holdings receive Atlantic
Holdings Common Stock or Warrants;
o the contributions and mergers required in connection with
the Transaction are in the best interest of GB Holdings and
its stockholders and the agreements and documents required
to effect such transactions are approved and the officers of
GB Holdings are authorized to execute and deliver such
agreements and documents and effectuate the transactions set
forth therein;
o the Special Committee recommends to the Boards that the
Boards approve the Transaction and recommend to the
stockholders of GB Holdings that they vote in favor of the
Transaction; and
o the Transaction be submitted to the stockholders of GB
Holdings for their review and approval.
On May 26, 2004, the Boards met with its counsel to review the
Transaction and the Transaction Documents which had been filed with the SEC in
connection with the Transaction, discussed the changes that had been made to the
Transaction Documents in the various amendments that were filed with the SEC,
discussed the fairness of the proposed Transaction and the business, operations,
and financial condition of GB Holdings and the impact of the Transaction on GB
Holdings and its stockholders. Also, the Boards discussed the fairness opinion
of Libra Securities. Mr. Icahn did not attend the meeting. Following discussions
between the Boards and the Special Committee, the Boards, after due
consideration, unanimously determined (Messrs. Hirsch and Saldarelli
abstaining), among other things, that:
49
o the officers of GB Holdings are authorized to file the
Transaction Documents, and any amendments thereto,
underlying the Transaction with the SEC;
o the consummation of the Transaction is fair to and in the
best interest of the stockholders of GB Holdings, including
whether the stockholders of GB Holdings receive Atlantic
Holdings Common Stock or Warrants;
o the officers of GB Holdings are authorized to schedule the
Special Meeting of the stockholders of GB Holdings and that
the record date for holders of common stock of GB Holdings
entitled to vote at the Special Meeting is June 1, 2004;
o the officers of GB Holdings and Atlantic Holdings are
authorized to execute and deliver agreements with third
parties as may be necessary to effectuate the Transaction;
o the officers of Atlantic Holdings are authorized to file all
documents necessary for registration of the Atlantic
Holdings Common Stock and the New Notes in any state where
it is required;
o the consent solicitation and exchange offer to the holders
of the Existing Notes be implemented and the officers of
Atlantic Holdings are authorized to commence the Exchange
Offer after the SEC declares the Consent Solicitation and
Exchange Offer effective;
o the contributions and mergers required in connection with
the Transaction are approved and that the officers of GB
Holdings and subsidiaries are authorized to execute and
deliver them;
o the Transaction should be submitted to the stockholders of
GB Holdings for their vote and approval; and
o the Boards recommend to the stockholders of GB Holdings that
they vote in favor of the Transaction.
Messrs. Hirsch and Saldarelli abstained because each of them is employed by
American Real Estate Partners, L.P., a company affiliated with Mr. Icahn and in
light of such relationship determined that it was appropriate to abstain.
In structuring and approving the Transaction, the Special
Committee, the Boards and the Affiliates believed that to refinance the Existing
Notes on terms favorable to GB Holdings (including lowering the interest rate,
extending the maturity date, and having the interest accrue and be payable only
at maturity), GB Holdings needed to obtain the consent of the holders of a
majority of the aggregate principal amount of the Existing Notes outstanding.
Pursuant to the terms of the Existing Indenture, such consent is necessary in
order to transfer the assets of GB Holdings and its subsidiaries to the newly
formed subsidiary. The Boards and the Special Committee concluded, as
contemplated by the Cyprus Memorandum, that it was necessary to provide such
holders additional benefits, including providing a cash payment of $100 per
$1,000 principal amount of Existing Notes tendered for exchange and providing
holders of the new debt security the possibility of obtaining up to an aggregate
of 72.5% (on a fully diluted basis) of the equity of the newly formed
subsidiary. Also, the Boards and Special Committee concluded, as contemplated by
the Cyprus Memorandum, that the assets of GB Holdings and its subsidiaries
should be transferred to the newly formed subsidiary to secure the new debt
security with a lien on such assets. Furthermore, by transferring the assets,
the Existing Notes outstanding after consummation of the Transaction would be
unsecured.
In connection with the transfer of the assets, the Special
Committee determined that under Delaware law the approval of the stockholders of
GB Holdings is required because the Transaction may be deemed to constitute a
transfer of substantially all of the assets of GB Holdings to a company in which
the current stockholders of GB Holdings would only own 27.5% of the outstanding
equity. In determining the consideration to be distributed to the stockholders
of GB Holdings following such transfer, the Special Committee determined that
Warrants should initially be issued to the stockholders of GB Holdings, rather
than Atlantic Holdings Common Stock, after consultation with its legal advisor,
in light of the fact that upon consummation of the Transaction, such
stockholders would continue to own their common stock of GB Holdings and GB
Holdings would own all of the outstanding Atlantic Holdings Common Stock. The
Warrants would provide such stockholders the opportunity for direct ownership in
Atlantic Holdings if, among other things, the holders of the New Notes obtained
direct equity interests in Atlantic Holdings and thereby changed the equity
position of the stockholders of GB Holdings in Atlantic Holdings.
50
Prior to the submission of the Cyprus Memorandum, no discussions
were held among or between the management of GB Holdings, the Boards, or Cyprus
with respect to the refinancing of the Existing Notes. In preparing the Cyprus
Memorandum, Cyprus did not retain an independent financial advisor, but rather
determined the terms on its own behalf. Upon its receipt of the Cyprus
Memorandum, the Board determined that based on its composition, it was necessary
to appoint the Special Committee to approve or reject the proposed transaction
and to negotiate, authorize, and implement the Transaction. In creating the
Special Committee, the Board did not place any limitations on it and empowered
it to retain an independent legal and financial advisor. Based on its
instructions, the Special Committee had sole responsibility for, and
unilaterally discussed on behalf of GB Holdings, the terms of the Transaction,
with the advice of its legal advisor and after discussions with its financial
advisor as to the fairness, from a financial point of view, of the consideration
to be received by the stockholders of GB Holdings in the Transaction.
REASONS FOR THE TRANSACTION
The terms of the New Notes were initially included in the Cyprus
Memorandum and after review by the Special Committee were modified to increase
the equity ownership of the stockholders of GB Holdings in Atlantic Holdings
from 25% to 27.5%. In determining the structure of the Transaction, the Special
Committee determined to refinance the indebtedness represented by the Existing
Notes on terms favorable to GB Holdings (including lowering the interest rate,
extending the maturity date, and having the interest accrue and be payable only
at maturity), GB Holdings needed to obtain the consent of the holders of a
majority of the aggregate principal amount of the Existing Notes outstanding,
pursuant to the Indenture governing the Existing Notes, to transfer the assets
of GB Holdings and its subsidiaries to Atlantic Holdings. In order to obtain
such consent, the Transaction provides for a cash payment of $100 per $1,000
principal amount of Existing Notes tendered for exchange and allows the holders
the ability to convert the notes which they received in the exchange into up to
an aggregate of 72.5% (on a fully diluted basis) of the equity of Atlantic
Holdings. The Special Committee determined that it was necessary to transfer the
assets to Atlantic Holdings (and subsequently to ACE Gaming) in order to provide
collateral that will secure the New Notes because the Special Committee did not
believe that holders of the Existing Notes would tender their Existing Notes for
exchange if the New Notes were not secured and believed that by transferring the
assets to a new entity, which would guarantee the New Notes, the holders of the
Existing Notes (which after consummation of the Transaction would be unsecured)
would be encouraged to exchange. The Special Committee also determined that the
approval of the stockholders of GB Holdings is required under Delaware law
because the Transaction may be deemed a transfer of substantially all of the
assets of GB Holdings to a company in which the current stockholders of GB
Holdings would own only 27.5% of the outstanding equity (on a fully diluted
basis). The Special Committee determined that upon consummation of the
Transaction, the issuance of the Atlantic Holdings Securities to the
stockholders of GB Holdings is necessary to allow the stockholders of GB
Holdings to own 27.5% of the Atlantic Holdings Common Stock, on a fully diluted
basis, and receive adequate consideration or value for such transfer of assets.
In determining to support the Transaction, the Boards and
Affiliates adopted the reasons for the structure of the Transaction set forth
above.
As soon as reasonably practicable following the consummation of
the Transaction, GB Holdings will apply to delist the common stock of GB
Holdings from trading on the American Stock Exchange. GB Holdings will apply to
delist the common stock of GB Holdings because GB Holdings has concluded that
the existing listing has not resulted in an active trading market and GB
Holdings does not want to incur the continued cost of listing on the American
Stock Exchange. There are only 10 holders of record of the common stock of GB
Holdings, affiliates of GB Holdings own approximately 77.5% of the outstanding
common stock of GB Holdings, in the past 30 days on average 4,727 shares of
common stock of GB Holdings were traded per day on the American Stock Exchange,
and approximately 85% of the common stock of GB Holdings is held by two
different groups of stockholders (including the affiliates of Carl C. Icahn).
Also, if 100% of the Existing Notes are exchanged, the Board will take the steps
necessary to dissolve GB Holdings, satisfy any obligations or liabilities with
its assets and distribute any remaining assets to its stockholders.
The exchange ratio was determined following discussions between
the Special Committee and Cyprus. Initially the Cyprus Memorandum set forth a
refinancing transaction with respect to the Existing Notes that Cyprus believed
would be beneficial to GB Holdings, in which the holders of the New Notes would
receive approximately 75% of the outstanding equity of Atlantic Holdings at the
election of the holders of a majority of the aggregate principal amount of the
New Notes. Cyprus believed that after payment of the Existing Notes the value of
the
51
remaining equity would approximate 25% of the enterprise value of GB Holdings
and its subsidiaries and holders of the New Notes, upon payment or conversion
into common stock, should be entitled an equity interest representing the
remaining 75% of the enterprise value. Following receipt of this memorandum, as
a result of discussions between the Special Committee and Cyprus, it was agreed
that the holders of the New Notes would be eligible to receive up to 72.5%, on a
fully diluted basis, of the outstanding equity of Atlantic Holdings as full
payment for the New Notes, and the stockholders of GB Holdings would receive
27.5% of the outstanding equity, on a fully diluted basis. The Transaction was
designed to extend the maturity date of the indebtedness represented by the
Existing Notes that was exchanged from 2005 to 2008, and to reduce the current
interest payment obligation of Atlantic Holdings by providing that the New Notes
bear interest at a rate of 3% per annum which accrues and is not payable until
maturity. The terms of the New Notes were initially included in the memorandum
submitted by Cyprus and after review by the Special Committee, the Special
Committee determined that for the Transaction to be successful, the
non-financial and non-payment related terms of the New Notes must be
substantially similar to the terms of the Existing Notes. The terms of the New
Notes provided for under the New Indenture are essentially the same as the
proposed terms of the New Notes included in the Cyprus Memorandum except that
(i) the stockholders of GB Holdings would receive 27.5% (i.e., an additional
2.5%) of the outstanding Atlantic Holdings Common Stock (on a fully diluted
basis); (ii) the stockholders would receive either shares of Atlantic Holdings
Common Stock or Warrants to purchase shares of Atlantic Holdings Common Stock
depending on whether all of the Existing Notes were tendered for exchange; (iii)
the New Notes would not be callable as a result of a sale or change of control
of Atlantic Holdings; (iv) the New Notes would not be accelerated, and therefore
payable, as a result of a default under the Existing Indenture, including a
default of the payment of the unexchanged Existing Notes; (v) the holders of a
majority of the aggregate principal amount of the New Notes outstanding were
provided with the right to allow all holders of the New Notes to convert such
notes into Atlantic Holdings Common Stock at such holders election; and (vi) the
New Indenture would include restrictive covenants on additional indebtedness,
liens, and sale-leaseback transactions.
The Special Committee determined if less than 100% of the
Existing Notes are exchanged, Atlantic Holdings will issue Warrants to Greate
Bay Hotel, which will subsequently be issued by GB Holdings to its stockholders
and 100% of the outstanding Atlantic Holdings Common Stock would be distributed
to and held by GB Holdings. The Special Committee determined that Warrants
should initially be issued to the stockholders of GB Holdings, rather than
Atlantic Holdings, after consultation with its legal advisor, in light of the
fact that upon consummation of the Transaction, such stockholder would continue
to own their common stock of GB Holdings and GB Holdings would own all of the
outstanding Atlantic Holdings Common Stock. The Warrants would provide such
stockholders the opportunity for direct ownership in Atlantic Holdings, if,
among other things, the holders of the New Notes obtained direct equity
interests in Atlantic Holdings, and thereby changed the equity position of the
stockholders of GB Holdings in Atlantic Holdings.
POTENTIAL BENEFITS ASSOCIATED WITH THE TRANSACTION
The Transaction may be beneficial to the stockholders of GB
Holdings for, among other things, the following reasons:
o As a result of the Transaction, Atlantic Holdings 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 Holdings 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 Holdings will not be obligated to repay
the principal or accrued but unpaid interest on the New
Notes;
o If GB Holdings 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 GB Property
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 GB Property and the guarantors of
the Existing Notes do not refinance or pay off the Existing
Notes, GB Holdings may be forced to file for bankruptcy
protection;
52
o If GB Holdings does not consummate the Transaction, Greate
Bay Hotel may be unable to obtain renewal of its casino
license when renewal is required in 2004 due to the
outstanding debt of GB Holdings;
o If GB Holdings does not undertake the Transaction and
chooses to pursue an alternative method of refinancing the
Existing Notes, GB Holdings 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 GB Holdings;
o As a result of the Transaction, the management, the assets,
and the business of Atlantic Holdings will be substantially
similar to the current management, assets, and business of
GB Holdings and because Atlantic Holdings be substantially
similar to GB Holdings, Atlantic Holdings does not believe
that the business or operations of The Sands will be
substantially affected;
o Management of Atlantic Holdings will be better able to grow
and develop Atlantic Holdings' business because it will no
longer have to pay the interest ($12.1 million per annum) on
the Existing Notes and instead can use that money for
business needs;
o Upon the consummation of the Transaction, the stockholders
will own stock in a company that is not obligated to pay
interest semi-annually on the New Notes;
o The Board, in the exercise of its business judgment and
fiduciary duties pursuant to Delaware law, based on the
recommendation of the Special Committee, has the ability, in
its sole discretion, to terminate the transaction at any
time prior to consummation based on (i) (a) the availability
of financing on terms more favorable to GB Holdings than the
Transaction and (b) the availability of an alternative
transaction that is more favorable to GB Holdings or (ii) a
material adverse change in (a) the business, assets,
liabilities, or prospects of GB Holdings, or its
subsidiaries; (b) the gaming industry; (c) tourism in
Atlantic City; or (d) general economic conditions;
o If the holders of a majority of the aggregate principal
amount of the New Notes outstanding elect to have the New
Notes payable in Atlantic Holdings Common Stock, although
the current stockholders of GB Holdings will no longer own a
majority of the outstanding stock, they will own 27.5% of
the outstanding stock (on a fully diluted basis) of a debt
free company; and
o As a result of the Transaction, if 100% of the Existing
Notes are exchanged, the equity ownership of the affiliates
of Mr. Icahn will be reduced from 77% of the outstanding
stock of GB Holdings to 63% of the Atlantic Holdings Common
Stock (on a fully diluted basis).
The Transaction will treat the affiliated and unaffiliated stockholders the
same. However, because the affiliated stockholders own Existing Notes, the
affiliated stockholders will receive an aggregate of approximately $6,380,000
representing a pro rata portion of the Cash Payment paid on the same terms to
all holders of the Existing Notes who tender for exchange. Also, the Affiliates
that are stockholders of GB Holdings will recognize the following additional
benefits:
o The Affiliates, which currently own approximately 77% of the
common stock of GB Holdings, will own approximately 77% of
the outstanding Atlantic Holdings Common Stock, on a
non-diluted basis, if 100% of the Existing Notes are
exchanged;
o The Affiliates, which currently own approximately 77% of the
common stock of GB Holdings, will own approximately 63.4%
(on a fully diluted basis) of the outstanding Atlantic
Holdings Common Stock and until such time as the New Notes
are paid or converted, at least 58% of the New Notes;
o The Affiliates will control when and if the New Notes are
paid in or convertible into Atlantic Holdings Common Stock
if they exchange all of their Existing Notes, because they
will own a majority of the aggregate principal amount of the
New Notes outstanding;
o By reason of their ability to determine when and if the New
Notes will be paid in or convertible into Atlantic Holdings
Common Stock, the Affiliates may cause the Warrants to
become exercisable; and
53
o The Affiliates who currently hold management positions in GB
Holdings and its subsidiaries (including Atlantic Holdings
and its subsidiaries), will continue to hold management
positions in Atlantic Holdings and its subsidiaries.
POTENTIAL DETRIMENTS ASSOCIATED WITH THE TRANSACTION
The following matters may be detrimental to the stockholders:
o Ownership by the stockholders of GB Holdings 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 GB Holdings to as little as 27.5% of the
outstanding Atlantic Holdings 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 Holdings Common Stock as full payment for the
principal and accrued interest, in lieu of cash payment,
there is no guarantee that Atlantic Holdings 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 GB Holdings would not be obligated to pay up to $22
million for interest payments in 2004 and 2005, Atlantic
Holdings will be obligated to pay up to $11 million as the
Cash Payments in connection with the Transaction to holders
of Existing Notes that elect to exchange for New Notes;
o The GB Holdings consolidated group may incur COD Income as a
result of the exchange of the Existing Notes for the New
Notes, which could produce a current tax liability that
would not have existed absent the Transaction; and
o The distribution of Atlantic Holdings Securities to the
stockholders of GB Holdings may be a taxable event and GB
Holdings will not be providing the stockholders with cash to
pay the taxes which they are incurring.
Except for a payment to the affiliated stockholders in connection with the
tender of Existing Notes (which payment is also available to other holders who
own and tender their Existing Notes), the affiliated and unaffiliated
stockholders will be treated the same way and each will be subject to the same
detriments.
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 the consummation of the Transaction is fair
to and in the best interest of the stockholders of GB
Holdings, including whether the stockholders of GB Holdings
receive Atlantic Holdings Common Stock or Warrants;
o Determined that, if necessary, the Transaction be submitted
to the stockholders of GB Holdings for their review and
approval; and
o Determined that the Special Committee recommends to the
Board that the Board recommend to the stockholders of GB
Holdings that they vote in favor of the Transaction if
approval of the stockholders of GB Holdings is required.
The Special Committee considered the following positive factors
relating to the Transaction:
o Atlantic Holdings 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 Holdings 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 Holdings will not be obligated
to repay the principal or accrued but unpaid interest on the
New Notes;
54
o If GB Holdings does not consummate the Transaction, it may
be unable to renew the casino license when renewal is
required in 2004;
o If GB Holdings 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 GB Property
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 GB Property and the guarantors of
the Existing Notes do not refinance or pay off the Existing
Notes, GB Holdings may be forced to file for bankruptcy
protection;
o The expectation that GB Holdings would realize an immediate
benefit from the Transaction because it would not be
obligated to pay up to approximately $22 million 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 11.
The Special Committee considered the following negative factors
relating to the Transaction:
o Ownership by GB Holdings 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 GB
Holdings to as little as 27.5% of the outstanding Atlantic
Holdings 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 Holdings Common Stock as full payment for the
principal and accrued interest, in lieu of cash payment,
there is no guarantee that Atlantic Holdings 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 GB Holdings would not be obligated to pay up to $22
million for interest payments in 2004 and 2005, Atlantic
Holdings 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 GB Holdings 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 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 Holdings Securities to the
stockholders of GB Holdings may be a taxable event and GB
Holdings 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 unaffiliated stockholders of GB Holdings
outweighed the detriments.
On May 26, 2004, the Special Committee met and confirmed the
decisions made on July 14, 2003.
Prior to recommending the Transaction, the Special Committee
determined that it was procedurally and substantively fair to the unaffiliated
stockholders of GB Holdings. In its review of the Transaction, the Special
Committee based its recommendations in part on discussions with, and relied upon
and adopted the analysis and conclusions of, Libra Securities for certain
factors including the current market price, the historical market price and the
going concern value of GB Holdings, and its subsidiaries and its views on the
appropriate valuation methodology to apply in determining the fairness of the
Transaction. In the preparation of its fairness opinion, Libra
55
Securities did not perform a liquidation value analysis because based upon the
nature of GB Holdings' business, liquidation value was not indicative of actual
market value, so for purposes of the fairness opinion it was not considered. (A
buyer of GB Holdings' assets would be expected to pay more for such assets when
sold as a going concern because the assets should be able to generate greater
cash flow when operated as a going concern, as opposed to the cash flow that
would be generated if the assets were broken up and sold on an asset-by-asset
basis in a liquidation sale.) In connection with the preparation of its fairness
opinion, Libra Securities determined that the enterprise value of GB Holdings
would be appropriately analyzed on a going concern basis and Libra Securities
did not take account of net book value which is an accounting concept designed
to reflect historical cost, depreciation, and other factors not necessarily
indicative of market value. The Special Committee did not consider the price
paid for common stock of GB Holdings by the Affiliates in the past two years,
because the Affiliates did not purchase any common stock of GB Holdings during
such period from unaffiliated parties. The Special Committee did not consider
any firm offers made by unaffiliated parties for GB Holdings during the past two
years because no such offers were made.
The Special Committee determined that the Transaction was
substantively fair because the unaffiliated stockholders of GB Holdings will
receive the same consideration, whether in the form of Atlantic Holdings Common
Stock or Warrants as the Affiliates (in their capacity as stockholders) if the
Transaction is consummated. The Special Committee considered the nature of the
Warrants and recognized that until such time as the Warrants become exercisable
both the affiliated and unaffiliated stockholders will retain their rights as
stockholders (including their voting rights) in GB Holdings, which upon
consummation will be the owner of all of the outstanding Atlantic Holdings
Common Stock. The Special Committee also recognized that the affiliated
stockholders would be subject to restrictions on resale of securities under
applicable federal securities laws and non-affiliates would not be subject to
such restrictions. Therefore, the Special Committee believed it was not unfair
to the unaffiliated stockholders to provide the Affiliates with registration
rights in respect of their Atlantic Holdings Common Stock or Warrants.
The Special Committee believed that sufficient procedural
safeguards to ensure fairness of the Transaction were present, and there was no
need to either require the approval of a majority of the unaffiliated
stockholders or retain an unaffiliated representative to represent solely the
unaffiliated stockholders of GB Holdings. In reaching this conclusion, the
Special Committee determined that sufficient procedural safeguards were in
place, including, the creation of the Special Committee, comprised of
independent directors, which was delegated the responsibility to negotiate,
recommend, and implement the Transaction on behalf of the stockholders of GB
Holdings; the retention by the Special Committee of an independent legal
advisor; the retention by the Special Committee of an independent financial
advisor to provide an opinion as to the fairness from a financial point of view
of the consideration to be received by the stockholders of GB Holdings in the
Transaction; the Special Committee's receipt of a fairness opinion from such
independent financial advisor; and the approval of the Transaction by a majority
of the directors of GB Holdings who are not employees of GB Holdings. The
Special Committee also believed that the Transaction was procedurally fair
despite each member's receipt of $35,000 because such payment was paid to each
member as compensation for the work that they were to perform on behalf of the
Special Committee, was paid in advance of their consideration of the
Transaction, and was paid without regard to whether they approved the
Transaction.
In reviewing the Transaction and determining whether the
Transaction is fair to and in the best interest of the stockholders of GB
Holdings, the Special Committee analyzed the factors set forth above, consulted
with certain members of management of GB Holdings, consulted with the legal
counsel, consulted with Libra Securities, and considered the Fairness Opinion
issued by Libra Securities which is more fully described in "SPECIAL FACTORS --
Opinion of Libra Securities" as set forth on page 56. The Special Committee
notes that the Fairness Opinion is as of July 14, 2003, and that the opinion has
not been updated. However, the Special Committee keeps itself apprised of GB
Holdings' business, operation, and financial conditions and does not believe
there has been changes of a nature warranting an updated opinion.
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 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.
56
RECOMMENDATION OF THE BOARD OF DIRECTORS OF GB HOLDINGS, GREATE BAY HOTEL, GB
PROPERTY, AND ATLANTIC HOLDINGS
On November 12, 2003 the Boards reviewed the recommendation by
the Special Committee (set forth below) and discussed with the Special Committee
their reasons for recommending that the Boards (i) approve the Transaction and
(ii) recommend to the stockholders of GB Holdings that they vote in favor of the
Transaction. Mr. Icahn did not attend the meeting. Following discussions between
the Boards and the Special Committee, the Boards after due consideration,
unanimously determined (Messrs. Hirsch and Saldarelli abstaining) among other
things, that;
o the consummation of the Transaction is fair to and in the
best interest of the stockholders of GB Holdings, including
whether the stockholders of GB Holdings receive Atlantic
Holdings Common Stock or Warrants;
o the Transaction be submitted to the stockholders of GB
Holdings for their review and approval; and
o the Boards recommend to the stockholders of GB Holdings that
they vote in favor of the Transaction.
Messrs. Hirsch and Saldarelli abstained because each of them is employed by
American Real Estate Partners, L.P., a company affiliated with Mr. Icahn, and in
light of such relationships determined that it was appropriate to abstain.
On May 26, 2004 the Boards met and confirmed their previous
analysis.
Prior to approving and recommending the Transaction, the Boards
determined that it was procedurally and substantively fair to the unaffiliated
stockholders of GB Holdings. The Boards determined that the Transaction was
substantively fair to the unaffiliated stockholders because prior to making its
recommendation, it reviewed and adopted the analysis and recommendation of the
Special Committee, consulted with the members of the Special Committee, the
members of management, and outside legal counsel and discussed the fairness
opinion with the Special Committee's financial advisor, and considered the
Special Committee's view of the factors which it reviewed as set forth in "--
Recommendation of the Special Committee" on page 54 and adopted 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
stockholders of GB Holdings in the Transaction is fair, from a financial point
of view, to the stockholders of GB Holdings, as described under "SPECIAL FACTORS
- -- Opinion of Libra Securities." The Boards note that the Fairness Opinion is as
of July 14, 2003, and that the opinion has not been updated. However, the Boards
keep themselves apprised of GB Holdings' business, operation, and financial
conditions and does not believe there has been changes of a nature warranting an
updated opinion.
The Boards determined that the Transaction was substantively fair
because the unaffiliated stockholders of GB Holdings will receive the same
consideration in the form of Atlantic Holdings Common Stock or Warrants, as the
Affiliates (in their capacity as stockholders), if the Transaction is
consummated. The Boards considered the nature of the Warrants and recognized
that until such time as the Warrants become exercisable both the affiliated and
unaffiliated stockholders will retain their rights as stockholders (including
their voting rights) in GB Holdings, which upon consummation will be the owner
of all of the outstanding Atlantic Holdings Common Stock. The Boards also
recognized that the affiliated stockholders would be subject to restrictions on
resale of securities under applicable federal securities laws and non-affiliates
would not be subject to such restrictions. Therefore, the Boards believed it was
not unfair to the unaffiliated stockholders to provide the Affiliates with
registration rights in respect of their Atlantic Holdings Common Stock or
Warrants.
Based on the reasons set forth below, the Boards believe that
sufficient procedural safeguards to ensure fairness of the Transaction were
present, and there was no need to require the approval of a majority of the
unaffiliated stockholders or to retain an unaffiliated representative to
represent solely the unaffiliated stockholders of GB Holdings. In reaching this
conclusion, the Boards determined that sufficient procedural safeguards were in
place, including, the creation of the Special Committee, comprised of
independent directors, which was delegated the responsibility to negotiate,
recommend, and implement the Transaction; the retention by the Special Committee
of an independent legal advisor; the retention by the Special Committee of an
independent financial advisor to
57
provide an opinion as to the fairness from a financial point of view of the
consideration to be received by the stockholders of GB Holdings in the
Transaction; the Special Committee's receipt of a fairness opinion from such
independent financial advisor and the unanimous approval of the Transaction by
the independent directors of the Boards representing a majority of the directors
in attendance at the meeting. The Boards also believed that the Transaction was
procedurally fair despite each member of the Special Committee's receipt of
$35,000 because such payment was paid to each member as compensation for the
work that they were to perform on behalf of the Special Committee, was paid in
advance of their consideration of the Transaction, and was paid without regard
to whether they approved the Transaction.
In connection with the timing of the Transaction, the Boards
considered the September 2005 maturity of the Existing Notes and wanted to
complete the Transaction on a prompt basis.
The discussion of the information and factors considered by the
Boards in making its decision is not intended to be exhaustive, but includes all
material factors considered by the Boards 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 Boards 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 Boards may have
given different weight to different factors.
THE BOARD OF DIRECTORS OF GB HOLDINGS, GREATE BAY HOTEL, GB
PROPERTY, AND ATLANTIC HOLDINGS RECOMMEND THAT THE STOCKHOLDERS OF GB HOLDINGS
VOTE "FOR" THE APPROVAL OF THE TRANSACTION.
RECOMMENDATION OF THE MANAGER OF ACE GAMING
Atlantic Holdings owns 100% of the membership interests and is
the sole manager (the "Manager") of ACE Gaming. ACE Gaming has the same
management as Greate Bay Hotel and upon consummation of the Transaction will own
substantially all of the assets currently owned by Greate Bay Hotel. The Manager
has not performed an independent review of the Transaction and relies upon and
adopts the recommendation and conclusion of the Board of Directors of Atlantic
Holdings which is described above. In adopting the recommendation and
conclusions of the Board of Directors of Atlantic Holdings, the Manager believes
that the Transaction is substantively and procedurally fair to the unaffiliated
stockholders of GB Holdings for the same reasons that the Boards believe the
Transactions is substantively and procedurally fair to the unaffiliated
stockholders of GB Holdings.
POSITION OF ENTITIES AFFILIATED WITH CARL C. ICAHN AS TO THE FAIRNESS OF THE
TRANSACTION
Carl C. Icahn, together with his affiliates, Cyprus, Barberry
Corp., Starfire Holding Corporation, American Real Estate Holdings Limited
Partnership, American Real Estate Partners, L.P., American Property Investors,
Inc. and Beckton Corp. (collectively with Mr. Icahn, the "Affiliates"),
currently beneficially own a majority of the shares of GB Holdings and are
deemed to be "affiliates" within the meaning of Rule 13E-3 of the Securities
Exchange Act of 1934, as amended. Accordingly, the Affiliates are required to
express their belief as to the fairness of the Transaction to GB Holdings'
unaffiliated stockholders.
The Affiliates determined that the Transaction is both
substantively and procedurally fair to the unaffiliated stockholders of GB
Holdings. This belief is based upon the conclusions of, and approval of the
Board and the recommendation of the Special Committee, as well as the bases
therefore, which conclusions and bases, as set forth in "-- Recommendation of
the Board of Directors of GB Holdings" and "-- Recommendation of the Special
Committee" which are incorporated by reference herein.
In addition, the Affiliates determined that the Transaction was
substantively fair to the unaffiliated stockholders because prior to reaching
this conclusion, it reviewed the description of the meetings of the Special
Committee and the Board on November 12, 2003 each as described under the heading
"-- Background of the Transaction" and adopted the analysis and recommendation
of the Special Committee and the analysis and approval of the Board. Also, the
Affiliates reviewed the description of the meeting of the Special Committee on
July 14, 2003 at which Libra Securities made a presentation described under the
heading "-- Background of the Transaction" and the Affiliates reviewed and
adopted the analysis and conclusion of Libra Securities. The Affiliates did not
retain Libra Securities nor did they engage in discussions with Libra Securities
concerning Libra Securities Fairness Opinion or its analysis or conclusion with
respect to the Transaction. Such analysis and conclusion includes a review
58
of the Transaction through a review of the current market price of the common
stock of GB Holdings, the historical market price of the common stock of GB
Holdings and the going concern value of GB Holdings, and its subsidiaries which
is summarized below under the caption "-- Opinion of Libra Securities." Also,
the Affiliates recognized that Libra Securities, in its preparation of its
fairness opinion, did not perform a liquidation value analysis because Libra
Securities believed that it was not considered based upon the nature of GB
Holdings' business, liquidation value was not indicative of actual market value,
so it was not considered. (A buyer of GB Holdings' assets would be expected to
pay more for such assets when sold as a going concern because the assets should
be able to generate greater cash flow when operated as a going concern, as
opposed to the cash flow that would be generated if the assets were broken up
and sold on an asset-by-asset basis in a liquidation sale.) In connection with
the preparation of its fairness opinion, Libra Securities determined that the
enterprise value of GB Holdings would be appropriately analyzed on a going
concern basis. Libra Securities did not take account of net book value which is
an accounting concept designed to reflect historical cost, depreciation, and
other factors not necessarily indicative of market value. The Affiliates did not
consider the price paid for common stock of GB Holdings by the Affiliates in the
past two years, because the Affiliates did not purchase any common stock of GB
Holdings during such period from unaffiliated parties. Also, the Affiliates did
not consider any firm offers made by unaffiliated parties for GB Holdings during
the past two years because no such offers were made. The Affiliates note that
the opinion of the financial advisor is as of July 14, 2003, and that the
opinion has not been updated. However, the Affiliates have generally kept
apprised of GB Holdings' business, operations, and financial condition and do
not believe there has been any changes of a nature warranting a change in their
prior determination. The Affiliates believe it is appropriate to concur with
Libra Securities' analysis set forth above because the analysis of Libra
Securities, which has significant experience in the valuation of companies,
appears to the Affiliates to be reasonable.
In connection with the timing of the Transaction, the Affiliates
considered the September 2005 maturity of the Existing Notes and wanted to
complete the Transaction on a prompt basis.
The discussion of the information and factors considered by the
Affiliates in making its decision is not intended to be exhaustive, but includes
all material factors considered by the Affiliates, 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
Affiliates 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 Affiliates 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 stockholders of GB Holdings in the Transaction. Prior to
its retention by the Special Committee, Libra Securities had no previous
relationship with either GB Holdings or Atlantic Holdings. The Special Committee
retained Libra Securities based upon Libra Securities' experience, particularly
with respect to the gaming industry, in rendering fairness opinions, their
familiarity with the business and financial condition of GB Holdings 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 GB Holdings. On December 11,
2002, Libra Securities entered into an engagement agreement with American Real
Estate Partners, L.P., a limited partnership affiliated with Mr. Icahn and which
as of October 10, 2003 directly beneficially owned 3,627,711 shares of common
stock of GB Holdings, pursuant to which the Audit Committee of American Property
Investors, Inc., the general partner of American Real Estate Partners, retained
Libra Securities to provide a fairness opinion to the Audit Committee in
connection with a possible acquisition by American Real Estate Partners of
certain debt and equity interests of GB Holdings owned by an entity or entities
affiliated with Mr. Icahn. Libra Securities was paid an engagement fee of
$50,000 pursuant to this agreement. Libra Securities engaged in a preliminary
discussion with the Audit Committee of the Board of Directors of American
Property Investors, Inc. with respect to various possible methods to value GB
Holdings. In such discussion, Libra Securities indicated that it expected to use
the Comparable Transaction Approach, the Market Multiple Approach and the
Discounted Cash Flow Approach as part of the analyses to be conducted by it in
59
connection with its proposed fairness opinion. However, the transaction did not
proceed, Libra Securities did not make any determination of the value of GB
Holdings, and Libra Securities did not provide a report or opinion to American
Property Investors, Inc.
As compensation to Libra Securities for its services in
connection with the Transaction, including its rendering of the fairness
opinion, the preparation of an estimate of the value of the New Notes and
Warrants for use in the preparation of the pro forma financial statements
included in this proxy statement/prospectus and the rendering of an opinion as
required under the existing indenture pursuant to Section 314(d)(1) of the Trust
Indenture Act, GB Holdings agreed to pay Libra Securities an aggregate fee of
$225,000 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 or valuation estimate. 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. GB Holdings 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 GB Holdings, the Transaction, industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of GB Holdings. 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 GB Holdings and whether holders of common stock of GB Holdings
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
GB Holdings or Atlantic Holdings Common Stock or the Warrants or the prices at
which common stock of GB Holdings or Atlantic Holdings 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 GB Holdings.
Libra Securities did not, and was not requested by the Special
Committee, GB Holdings, Atlantic Holdings or any other person to make any
recommendations as to the form or amount of consideration in connection with the
Transaction. Furthermore, Libra Securities has not negotiated any portion of the
Transaction or Transaction Documents, and other than as set forth above, has not
advised the Special Committee or the Board with respect to alternatives to the
Transaction. For more information, please see "SPECIAL FACTORS--Background of
the Transaction" on page 46.
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.
60
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
GB Holdings to discuss the operations, financial
condition, future prospects, projected operations and
performance of GB Holdings and the Transaction;
2. reviewed GB Holdings' Annual Report on Form 10-K for the
fiscal year ended December 31, 2002 and GB Holdings'
Quarterly Report on Form 10-Q for the period ended March
31, 2003, which GB Holdings' management had identified as
the most current financial statements available;
3. reviewed and discussed with GB Holdings' management the
projections of GB Holdings' financial performance for the
fiscal year ended December 31, 2003 prepared by GB
Holdings' management;
4. discussed with GB Holdings' 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 GB
Holdings;
6. reviewed the historical market prices and trading volume
for GB Holdings' publicly-traded securities and other
publicly available information regarding GB Holdings;
7. reviewed certain publicly available financial data for
certain companies that Libra Securities deemed comparable
to GB Holdings;
8. reviewed the Existing Indenture and related security
documents;
9. reviewed a memorandum describing the Transaction from GB
Holdings, 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 stockholders, from a financial point of
view, relative to an estimate as to the common share equity value of GB
Holdings. 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 H to this proxy
statement/prospectus and which will be made available for inspection and copying
at the principal executive offices of Atlantic Holdings during regular business
hours by any interested common stockholders of GB Holdings or representative who
has been so designated in writing. 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 GB Holdings'
operations using analyses appropriate and reflective of generally accepted
valuation methodologies given GB Holdings' trading volume relative to total
shares outstanding, the accessibility of comparable publicly-traded companies,
the availability of forecasts from management of GB Holdings, and available
information regarding similar transactions in the industries in which GB
Holdings is engaged. Libra Securities then estimated the portion of this value
allocable to the holders of common stock of GB Holdings 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 GB Holdings on a going concern basis:
(i) the Comparable Transaction Approach; (ii) the Market Multiple Approach; and
(iii) the Discounted Cash Flow Approach. Libra Securities also reviewed the
historical prices and trading volume for GB Holdings' publicly-traded stock.
Libra Securities noted that the common stock of GB
61
Holdings has a relatively low trading volume, a small public float and, to Libra
Securities' knowledge, a lack of analysts providing research on GB Holdings'
stock. For example, during the 136 trading days between January 2, 2003 and July
11, 2003 (the last trading day prior to the day Libra Securities delivered its
opinion), trades of GB Holdings common stock were reported on only 38 of such
days, with daily reported trading volumes on such days being as low as 100
shares. Accordingly, Libra Securities concluded that the public market may not
reflect the value of GB Holdings' stock and therefore did not rely on such
information in its analyses of the fairness of the consideration to be received
by the holders of GB Holdings common stock in the Transaction.
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 GB Holdings' principal business
operations. For purposes of this analysis, Libra Securities analyzed two
announced transactions of Atlantic City casinos where financial information was
publicly disclosed: (i) the acquisition by an affiliate of Colony Capital of
Resorts International and (ii) 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, 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
GB Holdings 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 (i) TEV to LTM revenues; (ii) TEV to LTM
EBITDA; (iii) total debt to LTM EBITDA; and (iv) total net debt to LTM EBITDA.
The analysis showed that the multiples exhibited by the comparable companies
were as follows: (i) TEV to LTM revenues for both comparable companies was 1.2
times; (ii) TEV to LTM EBITDA ranged from 5.2 times to 5.4 times; (iii) total
debt to LTM EBITDA ranged from 2.4 times to 5.5 times; and (iv) total net debt
to LTM EBITDA ranged from 2.4 times to 5.0 times.
Libra Securities derived indications of the enterprise value of
GB Holdings 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 GB Holdings, Libra Securities made
certain adjustments to reflect GB Holdings' current holdings of cash and cash
equivalents and certain debt obligations of GB Holdings.
After consideration of such adjustments, Libra Securities
estimated the TEV of GB Holdings 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 GB Holdings
was based on historical operating results for GB Holdings 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 GB Holdings' operating results
for ten years. For purposes of this analysis, Libra Securities determined free
cash flows of GB Holdings 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 GB Holdings.
62
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 (i) GB Holdings' lack of
geographic diversity and (ii) GB Holdings' small size relative to other
comparable companies. To determine the value of GB Holdings 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 GB Holdings of approximately $155 million to $163 million.
Determination of Fairness
As described above, the various valuation analyses performed by
Libra Securities indicated a total enterprise value for GB Holdings' operations
of from $140 million to $167 million. However, focusing on the valuation metrics
that are most commonly used for the gaming industry as well as various
subjective factors (such as impending competition from the Borgata property that
was under construction in Atlantic City and potential expanded gaming in other
states), Libra Securities estimated that the enterprise value was more likely in
the range of $140 to $150 million.
Using these amounts, Libra Securities then assessed the value of
the common stock of GB Holdings on a pre-Transaction basis by deducting the
amount of GB Holdings' long term debt from total enterprise value, resulting in
an estimated value of $30 to $40 million for GB Holdings' common stock. Libra
Securities then estimated the value of the interest in Atlantic Holdings,
through the Warrants, of the existing holders of common stock of GB Holdings on
a post-Transaction basis, taking into account, among other things, the interest
savings that would result from the exchange of the Existing Notes for the New
Notes and the payment of a consent fee to the exchanging holders of Existing
Notes.
For example, Libra Securities estimated that the present value of
the interest savings (assuming that all existing noteholders exchange but do not
convert) would be approximately $32.5 million. When netted against the $11
million dollar consent fee that would be payable to exchanging holders of
Existing Notes, this would result in an increase in total value of approximately
$21.5 million and would cause the value of GB Holdings stockholders' interest in
Atlantic Holdings to increase above the pre-Transaction values of their common
stock in GB Holdings.
Based upon these estimates of value, (i) at a $140 million
estimated pre-Transaction enterprise value, the pre-Transaction value of the
interests of the common stockholders of GB Holdings would be approximately $30
million and the post-Transaction value of the interests of the common
stockholders of GB Holdings would range from $44 million (assuming all of the
New Notes are converted into Atlantic Holdings Common Stock) to $51.5 million
(assuming none of the New Notes are converted into Atlantic Holdings Common
Stock) and (ii) at a $150 million estimated pre-Transaction enterprise value,
the pre-Transaction value of the interests of the common stockholders of GB
Holdings would be approximately $40 million and the post-Transaction value of
the interests of the common stockholders of GB Holdings would range from $47.2
million (assuming all of the New Notes are converted into Atlantic Holdings
Common Stock) to $61.5 million (assuming none of the New Notes are converted
into Atlantic Holdings Common Stock).
In each example, the estimated value of GB Holdings stockholders'
share of Atlantic Holdings equity post-Transaction was larger than the estimated
pre-Transaction value of interests of the common stockholders of GB Holdings,
reflecting the increased value resulting from the interest savings.
In addition to its analysis of pre- and post-Transaction values,
Libra Securities also took into account the risk that GB Holdings would be
unable to refinance the Existing Notes and/or would experience negative cash
flow after debt service if the Transaction were not consummated. Based on this
analysis, Libra Securities determined that the consideration to be received by
the common stockholders of GB Holdings on the Transaction was fair from a
financial point of view.
63
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 common stockholders of GB
Holdings in the Transaction is fair, from a financial point of view, to the
common stockholders of GB Holdings.
The fairness opinion does not address GB Holdings' 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
GB Holdings, assist in the structuring of the Transaction or advise the Special
Committee or GB Holdings with respect to alternatives to it. The fairness
opinion does not constitute, and should not be construed, as a recommendation to
any stockholder of GB Holdings as to how such stockholder of GB Holdings 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 GB Holdings 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 (i) the historic operating
results and the financial forecasts and projections provided by GB Holdings, and
the related discussions with the management of GB Holdings, were prepared in
good faith and reflect the best currently available estimates of the future
financial results and condition of GB Holdings (as of the dates of such
forecasts and projections) and (ii) there has been no material change in the
assets, financial condition, business or prospects of GB Holdings 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
GB Holdings that would cause the information supplied by GB Holdings to be
incomplete or misleading or fail to fairly represent the financial condition and
results of operations of GB Holdings in any material respect.
Libra Securities did not independently verify the accuracy and
completeness of the information supplied to it with respect to GB Holdings 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.
ADDITIONAL REPORT OF LIBRA SECURITIES
In connection with the preparation of pro forma financial
statements to be included in this proxy statement/prospectus, the Special
Committee amended its engagement agreement with Libra Securities on September
30, 2003 to engage Libra Securities to prepare an estimate of the value of the
New Notes and Warrants to be issued in the Transaction (the "Valuation
Estimate"). The qualifications of Libra Securities are described under "--
OPINION OF LIBRA SECURITIES" above. The Special Committee selected Libra
Securities to perform the Valuation Estimate primarily because of its previous
role in rendering its fairness opinion in the Transaction and its experience and
expertise in performing valuation and fairness analyses. Libra Securities has
had prior relationships with American Real Estate Partners, L.P., a limited
partnership affiliated with Mr. Icahn and which as of October 10, 2003 directly
beneficially owned 3,627,711 shares of common stock of GB Holdings, and American
Property Investors, Inc., the general partner of American Real Estate Partners,
as described above under "-- OPINION OF LIBRA SECURITIES."
Libra Securities completed its Valuation Estimate on November 7,
2003 and was paid a fee of $50,000 (which amount is included in the aggregate
fee paid to Libra Securities of $225,000 described above under "Opinion of Libra
Securities").
Libra Securities delivered its Valuation Estimate to GB Holdings
solely for the purpose of assisting GB Holdings in its preparation of the pro
forma financial statements of GB Holdings, and it was not prepared for the
benefit of the Special Committee or the Board of Directors of GB Holdings in
their consideration of the Transaction.
The summary set forth below describes the material points of more
detailed analyses performed by Libra Securities in arriving at its Valuation
Estimate. As with the preparation of the fairness opinion, the preparation of a
64
valuation estimate 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
Valuation Estimate, 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 the
Valuation Estimate. Libra Securities made numerous assumptions with respect to
GB Holdings, the Transaction, industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of GB Holdings. 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.
The Valuation Estimate represents Libra Securities' estimate of value of
the New Notes and Warrants as of the date thereof (assuming consummation of the
Transaction). Libra Securities did not analyze and expressed no view as to what
the value of the New Notes or Warrants (or any other security) actually will be
when the Transaction is in fact consummated or the price at which the New Notes,
Warrants or any other security may trade subsequent thereto. Specifically, no
assurance was given and no reliance should be made that the actual trading price
of any security or instrument will be the same as any estimate in the Valuation
Estimate. Further, the Valuation Estimate does not constitute, and should not be
construed, as a recommendation to any stockholder of GB Holdings as to how such
stockholder of GB Holdings should vote on the Transaction.
In preparing its Valuation Estimate, Libra Securities was not asked to
consider and did not consider the tax consequences of the Transaction, including
tax consequences to GB Holdings and whether holders of common stock of GB
Holdings 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 estimates set forth in the Valuation Estimate.
Libra Securities did not, and was not requested by the Special
Committee, GB Holdings, Atlantic Holdings or any other person to make any
recommendations as to the form or amount of consideration in connection with the
Transaction, including the terms of the New Notes and Warrants.
For purposes of formulating its Valuation Estimate, Libra Securities:
1. met with representatives and attorneys for the Special
Committee and certain members of the senior management of
GB Holdings to discuss the operations, financial
condition, future prospects, projected operations and
performance of GB Holdings and the Transaction;
2. reviewed GB Holdings' Annual Report on Form 10-K for the
fiscal year ended December 31, 2002 and GB Holdings'
Quarterly Report on Form 10-Q for the period ended March
31, 2003 and June 30, 2003, which GB Holdings' management
had identified as the most current financial statements
available;
3. reviewed and discussed with GB Holdings' management the
projections of GB Holdings' financial performance for the
fiscal year ended December 31, 2003 prepared by GB
Holdings' management and discussed with GB Holdings'
management the preliminary operating results for the
quarter ended September 30, 2003;
4. discussed with GB Holdings' 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 GB
Holdings;
6. reviewed the historical market prices and trading volume
for GB Holdings' publicly-traded securities and other
publicly available information regarding GB Holdings;
7. reviewed certain publicly available financial data for
certain companies that Libra Securities deemed comparable
to GB Holdings;
65
8. reviewed the Existing Indenture and related security
documents;
9. reviewed a memorandum describing the Transaction from GB
Holdings, dated July 11, 2003; and
10. conducted such other studies, analyses and inquiries as
Libra Securities deemed appropriate.
The Valuation Estimate does not address GB Holdings' 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
GB Holdings, assist in the structuring of the Transaction (including the terms
of the New Notes and the Warrants) or advise the Special Committee or GB
Holdings with respect to alternatives to it.
In preparing the Valuation Estimate, Libra Securities relied upon
the accuracy and completeness of all of the financial, accounting, legal, tax,
operating and other information provided to it by GB Holdings 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 Valuation Estimate. In particular,
Libra Securities relied upon and assumed, without independent verification, that
(i) the historic operating results and the financial forecasts and projections
provided by GB Holdings, and the related discussions with the management of GB
Holdings, were prepared in good faith and reflect the best currently available
estimates of the future financial results and condition of GB Holdings (as of
the dates of such forecasts and projections) and (ii) that there has been no
material change in the assets, financial condition, business or prospects of GB
Holdings 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 GB Holdings that would cause the information supplied by
GB Holdings to be incomplete or misleading or fail to fairly represent the
financial condition and results of operations of GB Holdings in any material
respect. Libra Securities did not independently verify the accuracy and
completeness of the information supplied to it with respect to GB Holdings and
did not assume any responsibility with respect to it. The Valuation Estimate 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 Valuation
Estimate.
Analysis Methodology
At GB Holding's direction, Libra Securities prepared its
Valuation Estimate assuming the following three scenarios:
o The holders of 58% of the Existing Notes, or $63.8 million
principal amount, exchange their Existing Notes into an
equal principal amount of New Notes (the "58% Exchange
Scenario").
o The holders of 80% of the Existing Notes, or $88.0 million
principal amount, exchange their Existing Notes into an
equal principal amount of New Notes (the "80% Exchange
Scenario").
o The holders of 100% of the Existing Notes, or $110.0 million
principal amount, exchange their Existing Notes into an
equal principal amount of New Notes (the "100% Exchange
Scenario").
As described in more detail below, Libra Securities used two
different methodologies to estimate the value of the New Notes under these three
scenarios.
First, Libra Securities determined an estimated "straight rate"
value of the New Notes by adding (i) its estimate of the present value of the
principal and interest payments to be made under the New Notes assuming no
conversion of any New Notes into equity and (ii) its estimate of the discounted
present value of the conversion feature of the New Notes.
Second, Libra Securities determined an estimated "intrinsic"
value of the New Notes by estimating the value of the equity interest in
Atlantic Holdings to be owned by the holders of New Notes assuming conversion of
all of the New Notes into Atlantic Holdings Common Stock occurs at the time of
consummation of the Transaction. Libra Securities determined the intrinsic value
by estimating the total enterprise value of Atlantic Holdings and then
determining the portion of this total value that would be held by the holders of
New Notes after conversion of all of the New Notes, into Atlantic Holdings
Common Stock.
66
Under the first methodology, Libra Securities estimated the value
of the New Notes assuming the New Notes are held as New Notes through maturity
of the New Notes. Under the second methodology, Libra Securities estimated the
value of the New Notes assuming all of the New Notes are immediately converted
into common stock upon closing of the Transaction. Libra Securities then
selected the higher of these two amounts as its estimate of the value of the New
Notes based upon its assumption for purposes of its Valuation Estimate that all
of the New Notes would be converted if the intrinsic value of the New Notes was
greater than the straight-rate value of the New Notes.
After completing its estimate of the value of the New Notes,
Libra Securities then estimated the value of the Warrants by estimating the
total enterprise value of Atlantic Holdings and determining the portion of such
value that would be held by the owners of the Warrants. In determining its
estimate of the value of the Warrants, it was necessary for Libra Securities to
make an assumption as to whether and the amount of the New Notes converted into
Atlantic Holdings Common Stock, as the value of the Warrants varies depending on
whether and the amount of New Notes actually converted into Atlantic Holdings
Common Stock. Accordingly, and based upon its assumption for purposes of its
Valuation Estimate that all of the New Notes would be converted if the intrinsic
value of the New Notes was greater than the straight-rate value of the New
Notes, Libra Securities assumed for the purposes of its estimate of the value of
the Warrants that all of the New Notes were converted into Atlantic Holdings
Common Stock.
Valuation Estimate for the New Notes
Estimate of "Straight Rate" Value of the New Notes
Libra Securities estimated the "straight rate" value of the New
Notes by computing the discounted present value of the New Notes assuming
payment of the principal amount and all accrued interest upon the five year
maturity thereof. Using a discount rate of 12.10% (representing Libra
Securities' estimate of an appropriate discount rate based on the equivalent
yield of a comparable gaming company's outstanding bonds), Libra Securities
calculated a net present value of the New Notes of $71.5 million in the 100%
Exchange Scenario, $57.2 million in the 80% Exchange Scenario and $41.5 million
in the 58% Exchange Scenario.
Libra Securities then estimated the discounted maximum present
value of the conversion feature of the New Notes assuming the 100% Exchange
Scenario based upon the portion of the estimated total enterprise value of
Atlantic Holdings represented by the Atlantic Holdings Common Stock into which
the New Notes are convertible. Based on its discussions with management of GB
Holdings, Libra Securities assumed for purposes of its estimate of the straight
rate value of the New Notes a total enterprise value of $188.6 million for
Atlantic Holdings, calculated by applying a valuation multiple of 5.25 to
assumed 2008 earnings before interest, taxes, depreciation and amortization
("EBITDA") of $28.5 million, and then adding assumed net excess cash (after
payment to the holders of Existing Notes of the maximum possible consent fee of
$11.0 million). Under the 100% Exchange Scenario, the holders of New Notes would
own 72.5% of Atlantic Holdings Common Stock, on a fully diluted basis, after all
of the New Notes have been paid or converted into Atlantic Holdings Common
Stock, and their interest in the estimated total enterprise value of Atlantic
Holdings of $188.6 million would therefore be $136.8 million in 2008, resulting
in an estimated potential value of the conversion feature of the New Notes of
$10.3 million (which represents the excess of the portion of the estimated total
enterprise value of Atlantic Holdings in 2008 attributable to the Atlantic
Holdings Common Stock issuable upon conversion of all of the New Notes, or
$136.8 million, over the aggregate amount of principal of and interest on the
New Notes that would be paid to the holders of the New Notes if such holders did
not convert the New Notes, or $126.5 million).
Libra Securities then adjusted the estimated potential value of
the conversion feature of the New Notes as follows to estimate the discounted
present value of the conversion feature of the New Notes to reflect the impact
of two factors. Because Libra Securities believed that there is a significant
risk that Atlantic Holdings will not achieve the assumed EBITDA amount in 2008
or otherwise fail to achieve the assumed total enterprise value of Atlantic
Holdings used by Libra Securities in its valuation of the estimated potential
value of the conversion feature of the New Notes, Libra Securities assigned a
probability weighting of 14.0% to the $10.3 million estimated potential value of
the conversion feature of the New Notes. In addition, Libra Securities applied a
discount rate in order to calculate an estimated net present value of the
probability-weighted estimated potential value of the conversion feature of the
New Notes, as the excess value would not be realized until the maturity date of
the New Notes. After applying these factors, the discounted maximum present
value of the conversion feature of the Notes was calculated to be $0.8 million
in the 100% Exchange Scenario. Adding the discounted present value of the New
Notes of $71.5
67
million to the $0.8 million discounted maximum present value of the conversion
feature resulted in a $72.3 million estimated total value for the New Notes in
the 100% Exchange Scenario.
Estimate of "Intrinsic" Value of the New Notes
Libra Securities next estimated the value of the New Notes using
the "intrinsic value" methodology described above for each of the three
scenarios, assuming conversion of all of the New Notes into Atlantic Holdings
Common Stock upon consummation of the Transaction. In making these estimates,
Libra Securities first estimated the total enterprise value of Atlantic Holdings
by applying a 5.25 multiple to estimated normalized EBITDA of Atlantic Holdings
for the following twelve months of $15.0 million assumed at the time of closing
of the Transaction and then adding estimated excess cash and deducting the
consent fee that would be payable to holders of Existing Notes that exchange
into New Notes. Libra Securities then calculated the portion of this value that
would be held by converting holders of New Notes based on their percentage
ownership of the total common stock of Atlantic Holdings (e.g., in the 100%
Exchange Scenario, converting holders of New Notes would own 72.5% of Atlantic
Holdings Common Stock and therefore are deemed to hold 72.5% of the aggregate
enterprise value of Atlantic Holdings). Applying this methodology in the 100%
Exchange Scenario, 80% Exchange Scenario and 58% Exchange Scenarios resulted in
estimated intrinsic values for the New Notes of $85.4 million, $69.6 million and
$51.5 million, respectively. Each of these estimated intrinsic values exceeds
the values determined using the "straight rate" methodology above, and therefore
were used by Libra Securities as the estimated valuation amounts for the New
Notes in the Valuation Estimate.
The estimated valuation amounts of the New Notes contained in the
Valuation Estimate were made as of the date of the Valuation Estimate and based
upon the assumptions made, matters considered and the review described in the
Valuation Estimate.
Valuation Estimate for the Warrants
When calculating its valuation estimate for the Warrants, Libra
Securities assumed that conversion of the New Notes occurred upon consummation
of the Transaction.
To estimate the value of the Warrants, Libra Securities used the
same total enterprise value estimates for Atlantic Holdings that were used in
determining the "intrinsic" value of the New Notes as described above. Libra
Securities then determined the portion of the estimated total enterprise value
that would be held by the owners of the Warrants in each scenario (i.e., 27.5%
of such amount, representing the percentage of Atlantic Holdings Common Stock to
which such Warrant holders would be entitled under all three scenarios).
Applying this methodology to the 100% Exchange Scenario, 80% Exchange Scenario
and 58% Exchange Scenario resulted in estimated values for the Warrants of $32.4
million, $33.0 million and $33.7 million, respectively, which were the estimated
values for the Warrants used by Libra Securities in its Valuation Estimate.
The estimated values of the Warrants contained in the Valuation
Estimate were made as of the date of the Valuation Estimate and based upon the
assumptions made, matters considered and the review described in the Valuation
Estimate.
INTERESTS OF THE DIRECTORS AND MANAGEMENT OF GB HOLDINGS IN THE TRANSACTION
Prior to and immediately after the Transaction, it is anticipated
that the Board of Directors at Atlantic Holdings will have the same members as
the Board.
Carl C. Icahn is the Chairman of the Board of GB Property, Greate
Bay Hotel, GB Holdings, and Atlantic Holdings. The Affiliates own approximately
77% of the outstanding common stock of GB Holdings, which owns 100% of GB
Property and Greate Bay Hotel, and approximately 58% of the aggregate principal
amount outstanding of the Existing Notes. The 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, the Affiliates may beneficially own (i) approximately 63.4% (on a
fully diluted basis) of the outstanding Atlantic Holdings 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 Holdings Common Stock because of such affiliates ownership
of approximately 77% of the outstanding common stock of GB Holdings and (ii) at
least 58% of the aggregate principal amount outstanding of the New Notes. In
addition, the Affiliates will effectively control
68
Atlantic Holdings, since, immediately following the consummation of the
Transaction, they will continue to have control over any stock which GB Holdings
owns because they own approximately 77% of the outstanding common stock of GB
Holdings, and Atlantic Holdings initially will be a wholly owned subsidiary of
GB Holdings. As a result, the Affiliates 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 GB Holdings and Atlantic
Holdings, mergers and sale of assets involving GB Holdings and Atlantic Holdings
and other matters upon which stockholders, of either GB Holdings or Atlantic
Holdings, 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 Holdings 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).
POSSIBLE CONFLICTS OF INTERESTS
The Affiliates (i) beneficially own approximately 77% of the
outstanding common stock of GB Holdings; (ii) own approximately 58% of the
aggregate principal amount outstanding of the Existing Notes; and (iii)
following the consummation of the Transaction may own at least 58% of the
aggregate principal amount outstanding of the New Notes. The Affiliates 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, the 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 GB Holdings, mergers and sale of assets involving GB Holdings
and other matters upon which stockholders, of either GB Holdings or Atlantic
Holdings, vote). This power, in turn, gives them substantial control over the
business of both GB Holdings and Atlantic Holdings. As a result, upon completion
of the Transaction, the Affiliates may (i) beneficially own approximately 77% of
the common stock of GB Holdings; (ii) beneficially own approximately 63.4% (on a
fully diluted basis) of the outstanding Atlantic Holdings Common Stock and if
more than 58%, but less than 100% of the Existing Notes are exchanged the
Affiliates may beneficially own up to an additional 23.5% of the outstanding
Atlantic Common Stock because of the Affiliates ownership of approximately 77%
of the outstanding common stock of GB Holdings; (iii) own at least 58% of the
outstanding amount of the New Notes; and (iv) control the Atlantic Holdings
Common Stock held by GB Holdings through its beneficial ownership of
approximately 77% of the outstanding common stock of GB Holdings. Therefore, the
Affiliates may have the ability to:
o elect the Board;
o approve transactions of GB Holdings that may have a
significant impact including mergers or a sale of all, or
substantially all, of the assets of GB Holdings;
o determine when and whether the New Notes will be paid in
cash at maturity or paid in or convertible into Atlantic
Holdings 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 subordination of the liens securing the New
Notes to liens securing newly incurred debt that, as a
result, will rank senior to such liens;
o approve the release of collateral securing the New Notes;
and
o direct the actions of the trustee under the New Indenture
governing the New Notes.
Additionally, the Affiliates are actively involved in the gaming industry and
casinos owned or managed by the Affiliates may directly or indirectly compete
with GB Holdings and Atlantic Holdings. The potential for conflicts of interest
exists among GB Holdings or Atlantic Holdings, and the Affiliates for future
business opportunities. The Affiliates may pursue other business opportunities
and there is no agreement requiring that such additional business opportunities
be presented to GB Holdings or Atlantic Holdings.
In his capacity as Chairman of the Board of Directors of GB
Holdings, Greate Bay Hotel, GB Property, and Atlantic Holdings, Mr. Icahn is
required to act in a manner consistent with his fiduciary duties under
applicable law. Mr. Icahn is not subject to any fiduciary duty by reason of his
ownership of the Notes. In his capacity as an affiliate of GB Holdings, Mr.
Icahn is only required to act in accordance with applicable law. Additionally,
although
69
no specific measures to resolve such potential conflict of interests have been
formulated, the directors of GB Holdings, GB Property, Greate Bay Hotel, and
Atlantic Holdings, have a fiduciary obligation to deal fairly and in good faith
with the entities. The directors intend to exercise reasonable judgement and
take such steps as they deem necessary under all of the circumstances in
resolving any specific conflict of interest which may occur.
At the request of GB Holdings, Ealing Corp., a Nevada corporation
and an affiliate of Mr. Icahn, provided a commitment letter to GB Holdings,
dated January 30, 2004, in which Ealing agreed to provide a revolving credit
facility under which GB Holdings and its subsidiaries may borrow up to an
aggregate amount of $10 million to be used for general working capital purposes.
Under the terms of the commitment letter, the revolving credit facility will
expire on June 30, 2005, borrowings will bear interest at a rate of 10% per
annum, and obligations under the revolving credit facility will be secured by a
first lien on all of the assets of GB Holdings and its subsidiaries (including
Atlantic Holdings) which will be senior to the liens securing the Existing
Notes. Upon the consummation of the Transaction the obligation will be assumed
by Atlantic Holdings and the lien will be senior to the New Notes. Ealing's
obligations to provide the financing pursuant to the commitment letter is
subject to the negotiation and execution of definitive loan and security
agreements and related documents as well as certain customary conditions.
However, there can be no assurance that the loan agreement with Ealing will be
consummated, that if the loan agreement with Ealing is not consummated, GB
Holdings will be able to obtain financing from another lender on terms as or
more favorable than the terms of the commitment letter, or whether GB Holdings
will need to borrow funds for working capital. Ealing and GB Holdings have
agreed to extend the commitment until July 1, 2004.
THE TRANSACTION
Immediately prior to the consummation of the Transaction, GB
Holdings, Greate Bay Hotel, Atlantic Holdings, and ACE Gaming will enter into a
Contribution Agreement whereby GB Holdings will contribute its assets and
liabilities (other than the stock of Greate Bay Hotel and its obligation to
guarantee the Existing Notes) to Greate Bay Hotel which will then transfer such
assets and liabilities and all of its assets (other than the stock of Atlantic
Holdings) and certain of its liabilities to Atlantic Holdings (which will agree
to issue New Notes in exchange for Existing Notes and cancel such Notes) which
will transfer such assets and liabilities to ACE Gaming. In turn Atlantic
Holdings will transfer the Atlantic Holdings Securities to Greate Bay Hotel.
Additionally, Atlantic Holdings will agree to provide GB Holdings 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.
Additionally, GB Holdings, Greate Bay Hotel and GB Property will
enter into Merger Agreements, through which Greate Bay Hotel, GB Property, and
GB Holdings will merge and GB Holdings will be the surviving entity and the sole
stockholder of Atlantic Holdings.
CONDITIONS TO THE COMPLETION OF THE TRANSACTION
GB Holdings' ability to complete the Transaction is subject to
the satisfaction of a number of conditions, including the following:
o The receipt of the necessary governmental consent from the
CCC and consents from the city of Atlantic City and certain
third parties;
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 GB
Holdings;
o No legal prohibition to 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.
70
MANNER OF EFFECTING THE ASSET TRANSFER AND DISTRIBUTION OF SECURITIES
In order to consummate the Transaction, the consent of the
stockholders of GB Holdings 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) GB Holdings' transfer of all of its assets and
liabilities (except the stock of GB Property and Greate Bay Hotel and its
obligation as a guarantor of the Existing Notes) to Greate Bay Hotel and (ii)
Greate Bay Hotel's transfer of the assets and liabilities it received from GB
Holdings and all of its assets (except the stock of Atlantic Holdings) and
certain of its liabilities to Atlantic Holdings (which will agree to issue New
Notes in exchange for Existing Notes and cancel such Notes) which will then
transfer such assets (except an amount of cash to be used for the Cash Payment)
and liabilities to ACE Gaming. In exchange for the transfer by Greate Bay Hotel,
Atlantic Holdings will distribute to Greate Bay Hotel (i) the Atlantic Holdings
Securities (i.e., either Holders Equity or Warrants representing 27.5% of the
outstanding Atlantic Holdings Common Stock, in each case, on a fully diluted
basis) to Greate Bay Hotel and (ii) Atlantic Holdings 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. As part of the Transaction Atlantic Holdings will cancel all Existing
Notes which it receives in the exchange offer. Also, through a series of
transactions, GB Property, Greate Bay Hotel and GB Holdings will merge with GB
Holdings as the surviving corporation, resulting in GB Holdings owning the
Atlantic Holdings Securities, GB Holdings being the obligor of the Existing
Notes and Atlantic Holdings being a wholly-owned subsidiary of GB Holdings.
After the completion of the Merger, GB Holdings will distribute the Atlantic
Holdings Securities pro rata to the stockholders of GB Holdings as of the
effective date of the Merger. It is expected that certificates representing the
Atlantic Holdings Securities will be mailed to the stockholders of GB Holdings
as soon as practicable after the consummation of the Transaction.
As soon as reasonably practicable following the consummation of
the Transaction, GB Holdings will apply to delist the common stock of GB
Holdings from trading on the American Stock Exchange by filing an application
with the American Stock Exchange and the Securities and Exchange Commission.
Also, if 100% of the Existing Notes are exchanged, the Board will take the steps
necessary to dissolve GB Holdings, satisfy any obligations or liabilities with
its assets and distribute any remaining assets to its stockholders.
Immediately following consummation of the Transaction, if (i)
100% of the Existing Notes are exchanged, no Warrants will be issued to the
stockholders of GB Holdings, an aggregate of 2,750,000 shares of Atlantic
Holdings Common Stock will be issued to the stockholders of GB Holdings (of
which approximately 2,117,500 shares of Atlantic Holdings Common Stock will be
issued to the Affiliates), and a Cash Payment equal to $11 million, in the
aggregate, will be made to the holders of the Existing Notes who exchange their
Existing Notes (of which approximately $6,380,000 will be paid to the
Affiliates); (ii) 80% of the Existing Notes are exchanged, an aggregate of
1,450,000 shares of Atlantic Holdings Common Stock will be issued to GB
Holdings, an aggregate of 10 million Warrants exercisable for 2,750,000 shares
of Atlantic Holdings Common Stock will be issued pro rata to the stockholders of
GB Holdings (of which the Affiliates will receive approximately 7,700,000
Warrants exercisable for approximately 2,117,500 shares of Atlantic Holdings
Common Stock), and a Cash Payment equal to $8,800,000, in the aggregate, will be
made to the holders of the Existing Notes who exchange their Existing Notes (of
which approximately $6,380,000 will be paid to the Affiliates); and (iii) 58% of
the Existing Notes are exchanged, an aggregate of 3,045,000 shares of Atlantic
Holdings Common Stock will be issued to GB Holdings, an aggregate of 10 million
Warrants exercisable for 2,750,000 shares of Atlantic Holdings Common Stock will
be issued pro rata to the stockholders of GB Holdings (of which the Affiliates
will receive approximately 7,700,000 Warrants exercisable for approximately
2,117,500 shares of Atlantic Holdings Common Stock), and a Cash Payment equal to
$6,380,000, in the aggregate, will be made to the holders of the Existing Notes
who exchange their Existing Notes (of which approximately $6,380,000 will be
paid to the Affiliates). Assuming consummation of the Transaction on July 1,
2004, an aggregate of approximately $1,740,000, $2,400,000, and $3 million in
interest payments will be paid to holders who exchange Existing Notes assuming
58%, 80%, and 100%, respectively, of the Existing Notes are exchanged for New
Notes.
MANNER OF EFFECTING THE EXCHANGE OFFER
In order to consummate the Transaction, holders of a majority of
the aggregate principal amount of the Existing Notes outstanding 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 (i)
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amendments to the Existing Indenture; (ii) the release of the liens on the
collateral securing the Existing Notes; and (iii) the terms of the New
Indenture. Atlantic Holdings 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 100% of the Existing
Notes elect to exchange the Existing Notes for the New Notes, the stockholders
of GB Holdings will receive 27.5% (on a fully diluted basis) of the outstanding
Atlantic Holdings Common Stock, pro rata, from GB Holdings in connection with
the Asset Transfer. Also, prior to the election of the holders of a majority of
the aggregate principal amount of New Notes outstanding to be paid in Atlantic
Holdings Common Stock, such stockholders will own 100% of the Atlantic Holdings
Common Stock. If holders of less than 100% of the Existing Notes elect to
exchange the Existing Notes for the New Notes, the stockholders of GB Holdings
will receive Warrants for 27.5% (on a fully diluted basis) of the outstanding
Atlantic Holdings Common Stock pro rata, from GB Holdings in connection with the
Transaction. Also prior to the election of the holders of a majority of the
aggregate principal amount of the New Notes outstanding to be paid on Atlantic
Holdings Common Stock, GB Holdings will own 100% of the Atlantic Holdings Common
Stock. Additionally, if holders of less than 100% of the Existing Notes elect to
exchange the Existing Notes for the New Notes, GB Holdings will receive a
percent of Atlantic Holdings 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 Holdings, on behalf of GB Holdings,
obtaining the consent of the holders of a majority of the aggregate principal
amount outstanding of the Existing Notes to amendments to the Existing
Indenture. Pursuant to the Exchange Offer, the holders of the Existing Notes
will have the opportunity to consent to amendments to the Existing Indenture, to
release the liens on the collateral securing the Existing Notes and the terms of
the New 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 Holdings or ACE Gaming. 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 Existing Indenture and Form of Second Amended and Restated
Indenture, each attached to this proxy statement/prospectus as Annex F.
Collateral. Currently, the Existing Notes are secured by certain
of the assets owned by Greate Bay Hotel and GB Holdings constituting The Sands
Hotel and Casino. After the Transaction is completed, all of the collateral will
be released and transferred to Atlantic Holdings (and subsequently transferred
to ACE Gaming) 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 GB Holdings (which remain uncured for
more than 60 days after notice of such default or breach), the entry of a
bankruptcy or insolvency decree against GB Holdings, and the initiation of
bankruptcy or insolvency proceedings by GB Holdings.
Successors. Section 801(a) and (b) of the Existing Indenture
contemplate that transferees of all or substantially all of the properties of GB
Holdings or its subsidiaries will assume the obligations of GB Holdings 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 GB Holdings 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.
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Payment of Taxes. Section 1005 of the Existing Indenture requires
GB Holdings 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.
Maintenance of Properties. Section 1006 of the Existing Indenture
requires GB Holdings 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 GB
Holdings 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 GB Holdings 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 GB Holdings 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 GB
Holdings 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 GB Holdings 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. GB Holdings 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 GB Property 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 GB Property 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 GB Holdings 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 GB Holdings 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 GB Holdings 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 GB Holdings 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 GB Property 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 GB Property 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
73
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 GB Holdings from granting any security interest in
any CRDA Investments except to the Casino Reinvestment Development Authority of
the State 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 GB
Property and GB Holdings 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 GB Property and GB Holdings 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 GB Holdings 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 tendered
for exchange. The following section is qualified in its entirety by referring to
the full text of the Form of the Indenture attached hereto as Annex G:
o The New Notes will be secured by all existing and future
assets of Atlantic Holdings and ACE Gaming;
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 Holdings 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"). Following a Demand Payment, the
holders of the New Notes will be paid 65.909 shares of
Atlantic Holdings Common Stock for each $1,000 of principal
amount of New Notes, in lieu of a cash payment, as full
payment of the principal and accrued interest on such Notes;
thereby extinguishing the New Notes. At this time, it is
impossible to estimate the value of Atlantic Holdings Common
Stock. However, it is possible that the value of such stock,
following payment, would be less than the cash payment to
which the holders of the New Notes would otherwise be
entitled to at the maturity of the New Notes;
74
o The New Notes will be fully secured by a lien on the assets
of Atlantic Holdings and ACE Gaming, 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 Holdings 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;
o Following a change of control of Atlantic Holdings, 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
Holdings Common Stock and all of the New Notes (including
the principal and the accrued interest) will thereby be
extinguished 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 Holdings
Common Stock as full substitution of the principal and
interest owed thereunder;
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
Holdings Common Stock issuable upon payment of the New Notes
in the form of Atlantic Holdings Common Stock will represent
72.5% of the outstanding Atlantic Holdings Common Stock, on
a fully diluted basis, or 7,250,000 shares of Atlantic
Holdings 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 Holdings Common Stock
issuable upon conversion or payment of the New Notes will
represent a percentage of outstanding Atlantic Holdings
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 Holdings
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 Holdings 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) default on an agreement which results
in the trustee being notified of an action to collect
indebtedness in excess of $5 million due to 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) lose or their
affiliates lose the legal right to own or operate The Sands
for more than 60 consecutive days;
o Atlantic Holdings will make various affirmative covenants,
consistent with the Existing Indenture, including, among
others, that Atlantic Holdings 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
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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 ACE
Gaming; (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; and
o Atlantic Holdings will agree to certain restrictions,
consistent with the Existing Indenture, including, without
limitation, restrictions on: (i) making restricted payments,
including payments to GB Holdings by Atlantic Holdings 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 Holdings
and its subsidiaries; (v) granting a security interest in
CRDA Investments; (vi) paying of dividends on the Atlantic
Holdings Common Stock other than (a) as required to provide
funds to GB Holdings to pay current scheduled interest due
on the unexchanged Existing Notes and Greate Bay Hotel
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 Holdings' subsidiaries
incur additional indebtedness; (viii) incurring or having
Atlantic Holdings' subsidiaries incur liens; and (ix)
entering into or having Atlantic Holdings' 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 Holdings will be a
wholly-owned subsidiary of GB Holdings and the operating assets and cash, less
the Cash Payment, of GB Holdings and Greate Bay Hotel will be owned by ACE
Gaming. Atlantic Holdings' capitalization will include (i) the New Notes having
a principal amount equal to the principal amount of the Existing Notes that are
exchanged; (ii) the Atlantic Holdings Securities representing 27.5% (on a fully
diluted basis) of the outstanding Atlantic Holdings Common Stock (assuming
conversion of the Warrants and the New Notes); and (iii) Atlantic Holdings
Common Stock equal to the pro rata portion of the 72.5% (on a fully diluted
basis) of the outstanding Atlantic Holdings Common Stock representing the
unexchanged Existing Notes. Pursuant to the terms of the Warrants, under certain
conditions, the Warrants will be exercisable for 27.5% (on a fully diluted
basis) of the outstanding Atlantic Holdings Common Stock. Assuming exercise of
the Warrants and payment or conversion of all of the New Notes, Atlantic
Holdings expects to have approximately 10 million shares of Atlantic Holdings
Common Stock outstanding, but because the date of exercise and date of payment
or conversion cannot be determined at this point, Atlantic Holdings is not able
to anticipate the number of holders of record of Atlantic Holdings 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) amendments to 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 Holdings immediately after the consummation of the Transaction (but
prior to the payment in or conversion into Atlantic Holdings Common Stock) will
be the same as the number and identity of the stockholders of GB Holdings on the
date of the consummation. Immediately after the consummation of the Transaction,
Atlantic Holdings expects to have approximately ten million shares of Atlantic
Holdings 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 of common stock of GB Holdings as of the close of
business on July 1, 2004 and the distribution ratio of 0.275 shares of Atlantic
Holdings Common Stock for each outstanding share of common stock of GB Holdings.
Following the consummation of the Transaction, if less than 100%
of the Existing Notes are exchanged, GB Holdings will own 100% of the Atlantic
Holdings Common Stock outstanding, on a non-diluted basis; the sole asset of GB
Holdings will be the Atlantic Holdings Common Stock and GB Holdings will be
obligated to fulfill the terms of the Existing Notes that are not exchanged.
Following the earliest of (i) the payment in full of the outstanding principal
and accrued interest on the Existing Notes which have not been exchanged for the
New Notes; (ii) a decision by a majority of the Board of Directors of Atlantic
Holdings (including at least one
76
independent director) to allow the holder of the Warrants to exercise such
Warrants into Atlantic Holdings Common Stock; or (iii) the payment in cash or
Atlantic Holdings Common Stock for the New Notes or conversion, in whole or in
part, of any of the New Notes into Atlantic Holdings Common Stock as full
satisfaction of the principal and accrued interest due pursuant to such New
Notes, the Warrants will become exercisable for Atlantic Holdings Common Stock.
Upon such exercise, the holders of the Warrants will own an aggregate of 27.5%
of the outstanding Atlantic Holdings Common Stock, the holders of the New Notes
will own up to an aggregate 72.5% of the outstanding Atlantic Holdings Common
Stock, GB Holdings' sole asset will be Atlantic Holdings Common Stock (or the
cash proceeds if such stock was sold) representing the portion of the Existing
Notes that were not exchanged, and GB Holdings will be obligated to fulfill the
terms of the Existing Notes.
In the alternative, if 100% of the Existing Notes are exchanged,
following the consummation of the Transaction, the stockholders of GB Holdings
will own 100% of the outstanding Atlantic Holdings Common Stock, on a
non-diluted basis, and GB Holdings will have no assets or liabilities. Following
the election of the holders of a majority of the aggregate principal amount of
the New Notes outstanding, such former holders of the New Notes will own an
aggregate of 72.5% of the outstanding Atlantic Holdings Common Stock and the
stockholders of GB Holdings will own an aggregate of 27.5% of the outstanding
Atlantic Holdings Common Stock.
Immediately following consummation of the Transaction, if (i)
100% of the Existing Notes are exchanged, no Warrants will be issued to the
stockholders of GB Holdings, an aggregate of 2,750,000 shares of Atlantic
Holdings Common Stock will be issued to the stockholders of GB Holdings (of
which approximately 2,117,500 shares of Atlantic Holdings Common Stock will be
issued to the Affiliates (as defined herein)), and a Cash Payment equal to $11
million, in the aggregate, will be made to the holders of the Existing Notes who
exchange their Existing Notes (of which approximately $6,380,000 will be paid to
the Affiliates); (ii) 80% of the Existing Notes are exchanged, an aggregate of
1,450,000 shares of Atlantic Holdings Common Stock will be issued to GB
Holdings, an aggregate of 10 million Warrants exercisable for 2,750,000 shares
of Atlantic Holdings Common Stock will be issued pro rata to the stockholders of
GB Holdings (of which the Affiliates will receive approximately 7,700,000
Warrants exercisable for approximately 2,117,500 shares of Atlantic Holdings
Common Stock), and a Cash Payment equal to $8,800,000, in the aggregate, will be
made to the holders of the Existing Notes who exchange their Existing Notes (of
which approximately $6,380,000 will be paid to the Affiliates); and (iii) 58% of
the Existing Notes are exchanged, an aggregate of 3,045,000 shares of Atlantic
Holdings Common Stock will be issued to GB Holdings, an aggregate of 10 million
Warrants exercisable for 2,750,000 shares of Atlantic Holdings Common Stock will
be issued pro rata to the stockholders of GB Holdings (of which the Affiliates
will receive approximately 7,700,000 Warrants exercisable for approximately
2,117,500 shares of Atlantic Holdings Common Stock), and a Cash Payment equal to
$6,380,000, in the aggregate, will be made to the holders of the Existing Notes
who exchange their Existing Notes (of which approximately $6,380,000 will be
paid to the Affiliates). Assuming consummation of the Transaction on July 1,
2004, an aggregate of approximately $1,740,000, $2,400,000, and $3 million in
interest payments will be paid to holders who exchange Existing Notes assuming
58%, 80%, and 100%, respectively, of the Existing Notes are exchanged for New
Notes.
If the common stock of GB Holdings is delisted from trading on
the American Stock Exchange, there may be no readily available market for
holders of the common stock of GB Holdings to sell their securities; however,
the common stock of GB Holdings may be quoted or traded on the OTC Bulletin
Board or traded in privately negotiated transactions. The price of the common
stock of GB Holdings may also be quoted in the "pink sheets." Delisting of the
common stock of GB Holdings may result in, among other things, limited release
of the market price of the common stock of GB Holdings 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 GB Holdings and its ability to issue additional securities or to secure
additional financing. Both the Affiliates and unaffiliated stockholders may, in
the event of delisting, be unable to buy or sell common stock of GB Holdings
easily because a trading market may not exist.
If the common stock of GB Holdings is delisted, GB Holdings may
de-register its common stock. If GB Holdings de-registers its common stock,
there will be no trading market for you to sell your securities and the value of
common stock of GB Holdings could decrease significantly.
The delisting of the common stock of GB Holdings will have no
discernible impact on Atlantic Holdings.
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As a result of the consummation of the Transaction (i) if 100% of
the Existing Notes are exchanged, the Affiliates will then have zero interest in
terms of percentage and dollar amounts, in the net income of GB Holdings, on a
pro forma basis; (ii) if 80% of the Existing Notes are exchanged, the Affiliates
loss per share of GB Holdings will continue to be 77.5% in terms of percentage
and will decrease from $1.30 to $1.01, on a pro forma basis; and (iii) if 58% of
the Existing Notes are exchanged, the Affiliates loss per share of GB Holdings
will continue to be 77.5% in terms of percentage and will decrease, from $1.43
to $1.11, on a pro forma basis. Also as a result of the Transaction (i) if 100%
of the Existing Notes are exchanged, the Affiliates will then have zero interest
in terms of percentage and dollar amounts, in the net book value of GB Holdings
on a pro forma basis; (ii) if 80% of the Existing Notes are exchanged, the
Affiliates' beneficial interest, on a non-diluted basis, in the net book value
of GB Holdings will continue to be 77.5% in terms of percentage and will
decrease from $5.79 to $4.49, on a pro forma basis; and (iii) if 58% of the
Existing Notes are exchanged, the Affiliates' beneficial interest, on a
non-diluted basis, in the net book value of GB Holdings will continue to be
77.5% in terms of percentage and will decrease from $5.69 to $4.41, on a pro
forma basis.
NO ISSUANCE OF FRACTIONAL SHARES OF ATLANTIC HOLDINGS COMMON STOCK
No certificates or scrip representing fractional interests in
shares of Atlantic Holdings Common Stock (the "Fractional Shares") will be
issued to the holders of the common stock of GB Holdings upon either the
exercise of the Warrants or the distribution to the stockholders of GB Holdings
of Atlantic Holdings 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 Holdings.
U.S. FEDERAL TAX CONSEQUENCES OF THE ASSET TRANSFER AND DISTRIBUTIONS OF
ATLANTIC HOLDINGS SECURITIES
Our counsel, Katten Muchin Zavis Rosenman, has advised us that
that the transfer of substantially all of Greate Bay Hotel's assets to Atlantic
Holdings and the merger of Greate Bay Hotel into GB Holdings should, for U.S.
federal income tax purposes, qualify as a tax-free reorganization. If so, Greate
Bay Hotel should recognize no gain or loss on the transfer of substantially all
of its assets to Atlantic Holdings and GB Holdings should recognize no gain or
loss from the merger of Greate Bay Hotel into GB Holdings. Atlantic Holdings
should have a tax basis in the transferred assets equal to Greate Bay Hotel's
adjusted tax basis in those assets. However, the opinion of our counsel is not
free from doubt because (1) Greate Bay Hotel will retain its liability on the
Existing Notes not exchanged so that Greate Bay Hotel may not transfer
substantially all of its liabilities to Atlantic Holdings; (2) a minimum of a
majority of the Existing Notes are being refinanced as part of the Transaction;
and (3) the Distribution of the Atlantic Holding Securities, if considered part
of the transfer of substantially all of Greate Bay Hotel's assets to Atlantic
Holdings and the merger of Greate Bay Hotel into GB Holdings, could disqualify
such transaction from tax-free reorganization treatment.
The distribution of the Atlantic Holdings Securities should be a
taxable event to GB Holdings. GB Holdings does not anticipate recognizing any
gain on the distribution of the Atlantic Holdings Securities to you because GB
Holdings believes that its tax basis in the Atlantic Holdings Securities will
exceed the fair market value of the Atlantic Holdings Securities. Although not
anticipated, it is possible that the distribution of the Atlantic Holdings
Securities will result in GB Holdings recognizing gain for U.S. federal income
tax purposes. In the event that GB Holdings does recognize gain on the
distribution of the Atlantic Holdings Securities, GB Holdings' gain should equal
the excess of the fair market value of the Atlantic Holdings Securities
distributed over GB Holdings' tax basis in such Atlantic Holdings Securities,
measured as of the date of the distribution of the Atlantic Holdings Securities.
GB Holdings believes that its tax basis in the Atlantic Holdings Securities
distributed will, for U.S. federal income tax purposes, exceed its fair market
value so that GB Holdings 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 CONSEQUENCES" as set forth on page 110, and
the distribution is of the Warrants, such distribution should be (i) a taxable
dividend to the extent of GB Holdings' current or accumulated earnings and
profits, then (ii) a non-taxable return of basis to the extent of your tax basis
in your GB Holdings common stock, and then (iii) taxable gain
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from the sale or exchange of your GB Holdings common stock, which should result
in capital gain taxed at long-term capital gains rates assuming that you held
your GB Holdings common stock for more than 12 months.
Although GB Holdings currently has no current or accumulated
earnings and profits, GB Holdings may have current earnings or profits at the
end of the 2004 tax year. GB Holdings anticipates that the Transaction should
not result in the GB Holdings consolidated group recognizing any taxable income
for U.S. federal income tax purposes because GB Holdings believes it should not
have gain from the distribution of the Warrants and the GB Holdings consolidated
group will have no COD Income. GB Holdings anticipates that the Transaction
should not result in its consolidated group realizing COD Income because GB
Holdings 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
GB Holdings consolidated group recognizing COD Income or gain. Such COD Income
or gain would be included in GB Holdings' current earnings and profits and
increase the amount of the distribution of the Warrants taxable as a dividend
because such COD Income or gain would increase GB Holdings' current earnings and
profits, if any, for the year in which the distribution of the Warrants 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 GB Holdings
consolidated group recognizing COD Income for federal income tax purposes,
producing a tax liability. There would not be any such liability if there is no
recognition of COD Income. Such assumption and estimate is required under US
GAAP because GB Holdings' belief 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, GB Holdings does not
believe that COD Income will result because GB Holdings does not believe that an
active trading market in the Existing Notes will exist either during any of the
thirty (30) days prior to the Transaction or 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 the Warrants should equal the
fair market value of the distribution of the Warrants as of the date of the
distribution. Your tax basis in the Warrants received should equal the fair
market value of such Warrants, measured as of the date of the distribution of
the Warrants.
In the event that 100% of the Existing Notes are exchanged for
the New Notes, pursuant to the Exchange Offer, the distribution will be of
Atlantic Holdings Common Stock and would likely be effected in connection with
the liquidation of GB Holdings. If so, then none of the distribution of the
Atlantic Holdings Common Stock should be taxable to you as a dividend. Instead,
you may recognize capital gain or loss equal to the difference between the fair
market value of the Atlantic Holdings Common Stock distributed and your adjusted
tax basis in your common stock of GB Holdings. The deductibility of net capital
losses is subject to limitations. If gain or loss is recognized, your tax basis
in the Atlantic Holdings Common Stock received in the distribution should equal
the fair market value of such Atlantic Holdings Common Stock, measured as of the
date of the distribution of the Atlantic Holdings Common Stock. However, the IRS
may take the position that no gain or loss may be recognized. In such case, your
tax basis in the Atlantic Holdings Common Stock distributed should be equal to
your adjusted tax basis in the common stock of GB Holdings at the time of the
distribution.
If you are a non-U.S. stockholder, you should be exempt from U.S.
income or withholding tax on any portion of the distribution of the Atlantic
Holdings Securities not taxable as a dividend, provided that: (i) the
distribution of the Atlantic Holdings Securities is not effectively connected
with your conduct of a trade or business in the U.S. and (ii) GB Holdings is
not, and has not been, a U.S. real property holding corporation ("USRPHC"), as
that term is defined in the Code. Although GB Holdings 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 GB
Holdings.
If you are a non-U.S. stockholder who owns 5% or less of GB
Holdings' common stock and the distribution of the Atlantic Holdings Securities
is not effectively connected with your conduct of a trade or business in the
U.S., then, if the distribution is of the Warrants, you should be subject to 30%
U.S. withholding tax to the extent that the distribution of the Warrants is
taxable as a dividend, subject to reduction by applicable treaty, and you should
not be subject to U.S. income or withholding tax on the amount of the
distribution of the Warrants not taxable as a dividend. However, as GB Holdings
may not be able to determine, at the time of the distribution, the amount of the
distribution of the Warrants taxable as a dividend, GB Holdings may collect the
30% U.S. withholding tax on the entire amount of the distribution, subject to
reduction by applicable treaty. You should be
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able to receive a refund if and to the extent of any excess withholding. In the
event that 100% of the Existing Notes are exchanged for the New Notes, pursuant
to the Exchange Offer, the distribution will be of Atlantic Holdings Common
Stock and would likely be effected in connection with the liquidation of GB
Holdings. If so, then none of the distribution of the Atlantic Holdings Common
Stock should be taxable to you as a dividend and subject to 30% U.S. withholding
tax. Instead, you should not be subject U.S. income or withholding tax on any of
the distribution of the Atlantic Holdings Common Stock.
If you are a non-U.S. stockholder who owns more than 5% of the
common stock of GB Holdings and the distribution of the Atlantic Holdings
Securities is not effectively connected with your conduct of a trade or business
in the U.S., then, if the distribution is of the Warrants, you should be subject
to 30% U.S. withholding tax to the extent that the distribution of the Warrants
is taxable as a dividend, subject to reduction by applicable treaty, and U.S.
net income tax to the extent that the distribution of the Warrants is not
taxable as a dividend. However, as GB Holdings may not be able to determine, at
the time of the distribution, the amount of the distribution of the Warrants
taxable as a dividend, GB Holdings 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. In the event that 100% of the Existing Notes are exchanged
for the New Notes, pursuant to the Exchange Offer, the distribution will be of
Atlantic Holdings Common Stock and would likely be effected in connection with
the liquidation of GB Holdings. If so, then none of the distribution of the
Atlantic Holdings Common Stock should be taxable to you as a dividend and
subject to 30% U.S. withholding tax. Instead, you may be subject to U.S. net
income tax upon your receipt of the Atlantic Holdings Common Stock.
If you are a non-U.S. stockholder and the distribution of the
Atlantic Holdings Securities is effectively connected with your conduct of a
trade or business in the U.S. and you provide the proper withholding certificate
to GB Holdings, then if the distribution is of the Warrants, you should be
subject to U.S. net income tax on the distribution of the Warrants (but not the
30% U.S. withholding tax). In the event that 100% of the Existing Notes are
exchanged for the New Notes, pursuant to the Exchange Offer, the distribution
will be of Atlantic Holdings Common Stock and would likely be effected in
connection with the liquidation of GB Holdings. If so, you should still be
subject to U.S. net income tax on the distribution of the Atlantic Holdings
Common Stock. However, none of the distribution of the Atlantic Holdings Common
Stock should be taxable to you as a dividend. Instead, you may recognize capital
gain or loss equal to the difference between the fair market value of the
Atlantic Holdings Common Stock distributed and your adjusted tax basis in your
common stock of GB Holdings. The deductibility of net capital losses is subject
to limitations. However, the IRS may take the position that no gain or loss may
be recognized.
In the event that the distribution of the Atlantic Holdings
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 Holdings Common Stock. Your tax basis in
such Atlantic Holdings 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 Holdings Common Stock, and your holding period for such
Atlantic Holdings Common Stock should commence on the date of the exercise of
the Warrants for Atlantic Holdings Common Stock.
Although the consummation of the Transaction may result in the
delisting of the GB Holdings common stock from the AMEX, such a delisting should
not be a taxable event to any affiliated security holder, regardless of whether
such affiliated security holder is a U.S. or non-U.S. person. It is further
possible, if the distribution of the Atlantic Holdings Securities consists of
the Warrants, that at some point in time, after the distribution of the
Warrants, GB Holdings may no longer hold a material amount of assets. In the
event that at some point in time, after the distribution of the Warrants, GB
Holdings no longer holds a material amount of assets, GB Holdings my be
dissolved. If you are a U.S. stockholder of GB Holdings at the time of its
dissolution and you do not receive anything in exchange for our stock, you
should recognize a capital loss equal to your adjusted tax basis in your GB
Holdings stock at the time of such dissolution. The deductability of net capital
losses is subject to limitations. If you are a non-U.S. stockholder of GB
Holdings, the possible dissolution of GB Holdings without the receipt of any
assets for your GB Holdings Common Stock should not be a taxable event.
You should consult your own tax advisors as to the consequences
of the Exchange Offer and the distribution of the Atlantic Holdings Securities.
This section is a summary of some of the U.S. federal tax implications of the
Exchange Offer and the distribution of the Atlantic Holdings Securities, for
more information, see "MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES" as set
forth on page 131.
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LISTING AND TRADING OF THE SECURITIES
Currently, there is no public market for the Warrants. Atlantic
Holdings 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 Holdings and its business and Atlantic Holdings' results and general
economic and market conditions.
Currently, there is no public market for the Atlantic Holdings
Common Stock. Atlantic Holdings does not intend to list the Atlantic Holdings
Common Stock on the AMEX or any securities exchange. The prices at the which the
Atlantic Holdings 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 Holdings Common Stock are
fully distributed and, if and when an orderly market develops, trading prices
for the Atlantic Holdings Common Stock may fluctuate significantly. The prices
at which the Atlantic Holdings 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 Holdings Common Stock,
investor perception of Atlantic Holdings and its business, market conditions for
interest rates and fixed incomes and Atlantic Holdings' results and general
economic and market conditions.
As soon as reasonably practicable following the consummation of
the Transaction, GB Holdings will apply to the American Stock Exchange and the
Securities and Exchange Commission to delist the common stock of GB Holdings
from trading on the American Stock Exchange. Also, if 100% of the Existing Notes
are exchanged, the Board will take the steps necessary to dissolve GB Holdings,
satisfy any obligations or liabilities with its assets, and distribute any
remaining assets to its stockholders.
The Warrants and Atlantic Holdings Common Stock distributed to
the stockholders of GB Holdings following the consummation of the Transaction
will be freely transferable under the Securities Act, except for Warrants and
Atlantic Holdings Common Stock received by persons who may be deemed to be
affiliates of Atlantic Holdings pursuant to Rule 405 under the Securities Act.
Persons who may be deemed to be affiliates of Atlantic Holdings after the
Transaction generally include individuals or entities that control, are
controlled by, or are under common control with Atlantic Holdings or GB
Holdings, and such persons include directors of Atlantic Holdings. Persons who
are affiliates of Atlantic Holdings will be permitted to sell their Warrants and
Atlantic Holdings Common Stock received in the Transaction pursuant to Rule 144
of the Securities Act. As a result, Warrants and Atlantic Holdings Common Stock
received by affiliates of Atlantic Holdings 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 Holdings Common Stock or the
average weekly trading volume for the Warrants and Atlantic Holdings 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 Holdings will use reasonable efforts to have the shares of
Atlantic Holdings Common Stock issuable upon exercise of the Warrants registered
under the Securities Act, however Atlantic Holdings 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 Holdings 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.
THE SPECIAL MEETING
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of the common stock of GB Holdings at the
close of business on June 1, 2004, the record date, are entitled to notice of
and to vote at the special meeting. As of May 6, 2004, 10,000,000 shares of the
common stock of GB Holdings were issued and outstanding and held by
approximately 10 holders of record and we do not believe that such information
has changed as of the record date. A quorum will be present at the special
meeting if the holders of a majority of the shares of the common stock of GB
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Holdings 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, GB
Holdings expects that the special meeting will be adjourned to solicit
additional proxies. Holders of record of the common stock of GB Holdings 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 GB
Holdings 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.
GB HOLDINGS 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 GB
Holdings 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 GB Holdings 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 GB Holdings represented at the
special meeting but not voting, including the common stock of GB Holdings 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. Shares that
are not voted because brokers did not receive instructions are referred to as
"broker non-votes." Holders of a majority of the common stock of GB Holdings
outstanding on the record date must be present in person or by proxy at the
special meeting to constitute a quorum. Abstentions and broker non-votes are
counted as present or represented for purposes of determining a quorum for the
special meeting. Because the affirmative vote of the holders of a majority of
the stock of GB Holdings is required for approval of the Transaction, AN
ABSTENTION, UNRETURNED PROXY OR BROKER NON-VOTE WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST APPROVAL OF THE TRANSACTION. 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 GB Holdings 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 GB Holdings 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 GB Holdings 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.
GB Holdings 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 GB Holdings from voting in person at the special meeting. A
stockholder of GB Holdings may revoke a proxy at any time before it is voted by
filing with GB Holdings a duly executed revocation of proxy, by submitting a
duly executed proxy to GB Holdings with a later date or by appearing at the
special meeting and voting in person. The stockholders of GB Holdings 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.
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CHANGING YOUR VOTE
If you want to change your vote, you may send a later-dated,
signed proxy card to the Secretary of GB Holdings prior to the date of the
special meeting, or attend the special meeting in person and vote.
SOLICITATION OF PROXIES
GB Holdings 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 GB Holdings and
its subsidiaries, who will not be specially compensated, may solicit proxies
from the stockholders of GB Holdings by telephone, facsimile, telegram,
electronic mail 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 GB Holdings will reimburse them for their reasonable
out-of-pocket expenses.
GB Holdings will mail a copy of this proxy statement/prospectus
to each holder of record of the common stock of GB Holdings on the record date.
You should not send in any share certificates of the common stock
of GB Holdings with your proxy card.
GB Holdings has retained Innisfree M&A Incorporated to assist in
the solicitation of proxies from banks, brokerage firms, nominees, institutional
holders and individual investors for a fee of $7,500 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 GB HOLDINGS 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 GB Holdings 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.
APPRAISAL RIGHTS
Under the Delaware General Corporation Law, the stockholders of
GB Holdings will not have any dissenters' appraisal rights which would have
given you the right to obtain a cash payment as a result of the Transaction if
such appraisal rights were asserted in accordance with Delaware law.
Stockholders of GB Holdings that object to the Transaction have the ability to
vote against the Transaction or sell their shares of GB Holdings.
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 Holdings is issuing Atlantic Holdings 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 Holdings will issue to Greate Bay Hotel
Warrants to purchase 2,750,000 shares of the Atlantic Holdings Common Stock
representing, in the aggregate, 27.5% of the outstanding Atlantic Holdings
Common Stock, on a fully diluted basis, at an exercise price of $.01 per share.
The Warrants will be distributed by GB Holdings to its stockholders, pro rata to
their ownership of the common stock of GB Holdings. The Warrants will be
exercisable, at the election of the holders, following the earlier of (i) the
payment, in cash or Atlantic Holdings Common Stock, for the New
83
Notes or conversion, in whole or in part, into Atlantic Holdings Common Stock,
of any of the New Notes; (ii) a determination by a majority of the Board of
Directors of Atlantic Holdings (including at least one independent director)
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 Holdings Common Stock upon the exchange of the
Warrants. The Warrants are subject to cancellation 90 days after Atlantic
Holdings 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 Holdings
will issue to Greate Bay Hotel 2,750,000 shares of Atlantic Holdings Common
Stock representing, in the aggregate, 27.5% of the outstanding Atlantic Holdings
Common Stock, on a fully diluted basis. Subsequent to the Merger, GB Holdings
will distribute Atlantic Holdings Common Stock to its stockholders pro rata to
their ownership of the common stock of GB Holdings 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
Holdings will issue to Greate Bay Hotel, Atlantic Holdings Common Stock, which
would represent, on a fully diluted basis, a percentage of the Atlantic Holdings
Common Stock equal to the product of (i) 72.5% and (ii) 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 Holdings does not currently intend to list the Atlantic
Holdings Common Stock or Warrants on the AMEX or any national securities
exchange.
Neither GB Holdings nor Atlantic Holdings will receive any
proceeds from the distribution of the Warrants or the Atlantic Holdings Common
Stock to the stockholders of GB Holdings. Any proceeds from the exercise of the
Warrants will be added to the working capital of Atlantic Holdings.
DESCRIPTION OF ATLANTIC HOLDINGS' CAPITAL STOCK
The following description of the proposed terms of the capital
stock of Atlantic Holdings includes a summary of specified provisions of
Atlantic Holdings' 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.
AUTHORIZED CAPITAL STOCK
Atlantic Holdings 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 Holdings Common Stock are entitled to one
vote on each matter submitted to a vote at a meeting of the stockholders of
Atlantic Holdings. The Atlantic Holdings 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
Holdings 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 Holdings Common Stock are entitled to (i) 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 Holdings
may, from time to time, determine and (ii) 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 Holdings Common Stock are, and the shares to be
issued by Atlantic Holdings 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 GB Holdings, fully paid and nonassessable.
84
Except as discussed under "Preferred Stock" below, Atlantic
Holdings 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 ACE
Gaming 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.
American Stock Transfer & Trust Company shall be the Transfer
Agent for Atlantic Holdings Common Stock and Warrants.
Prior to the consummation of the Transaction, there is one share
of Atlantic Holdings Common Stock outstanding and it is held by Greate Bay
Hotel.
PREFERRED STOCK
Pursuant to the Certificate of Incorporation, Atlantic Holdings
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
Holdings' 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 Holdings Common Stock and, in certain circumstances,
make it more difficult for a third party to gain control of Atlantic Holdings,
discourage bids for the Atlantic Holdings Common Stock at a premium or otherwise
adversely affect the market price of the Atlantic Holdings Common Stock.
WARRANTS
The Warrants will be issued pursuant to an agreement (the
"Warrant Agreement") between Atlantic Holdings and Wells Fargo Bank, National
Association, 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 D.
The Warrants will have the following terms:
o The Warrants will initially be exercisable for an aggregate
of 2,750,000 shares of Atlantic Holdings Common Stock or
27.5% of the outstanding shares of Atlantic Holdings 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 Holdings Common Stock for the New Notes or
conversion, in whole or in part, of any of the New Notes
into Atlantic Holdings Common Stock as full satisfaction of
the principal and accrued interest due pursuant to such New
Notes; (ii) a determination by a majority of the Board of
Directors of Atlantic Holdings (including at least one
independent director) 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 Holdings 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 Holdings nor GB
Holdings can provide any assurances that GB Holdings can
have sufficient funds to pay the principal upon maturity.
o In addition, the Board of Directors of Atlantic Holdings 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 Holdings elects,
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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 number of shares of Atlantic Holdings 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 Holdings 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 Holdings 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
Holdings 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 Holdings 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.
86
COMPARISON OF RIGHTS AND MATERIAL DIFFERENCES OF GB HOLDINGS AND ATLANTIC
HOLDINGS STOCKHOLDERS
The following summary compares certain differences among the
rights of holders of the common stock of GB Holdings, Atlantic Holdings 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 GB Holdings 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 32. In addition to the rights described below, GB Holdings 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 Holdings' 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 D, 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 GB
Holdings were previously filed with the SEC.
GB Holdings Common Stock Atlantic Holdings Common Stock Warrants
--------------------------------- -------------------------------------- ----------------------------------
Issuer GB Holdings, Inc. Atlantic Coast Entertainment Atlantic Coast Entertainment
Holdings, Inc. Holdings, Inc.
Authorized Capital 25 million shares, of which (i) 25 million shares, of which (i) 20 Not Applicable.
Stock 20 million are shares of common million are shares of common stock,
stock, par value $0.01per share par value $0.01 per share and (ii)
and (ii) five million are five million are shares of preferred
shares of preferred stock, par stock, par value $0.01 per share.
value $0.01 per share.
Voting Rights Holders of common stock of GB Holders of Atlantic Holdings Common None prior to exercise. Holders of
Holdings are entitled to one Stock are entitled to one vote per Warrants have no rights as
vote per share. share. stockholders of Atlantic Holdings
prior to the exercise of the
Warrants.
Comparison of GB Holdings has 10 million After the Transaction, substantially In addition to the characteristics
Investment shares of common stock all of the assets of Greate Bay described under "Atlantic Holdings
currently issued and Holdings will be transferred to ACE Common Stock," which will apply to
outstanding. The primary asset Gaming, a newly formed wholly-owned the Warrant Shares issuable upon
of GB Holdings is Greate Bay subsidiary of Atlantic Holdings. exercise of the Warrants, the
Holdings, a wholly-owned Atlantic Holdings will have no Warrants will themselves be
subsidiary of GB Holdings. GB Greate Bay Holdings activities, its transferable. There can be no
Holdings has no Greate Bay only asset will be membership assurance that a substantial
Holdings activities and its interests of ACE Gaming and its only trading market will develop for the
only source of income is source of income will be interest on Warrants.
interest on cash equivalent cash equivalent investments.
investments
Dividend Rights Subject to the preferences of Subject to the preferences of any No right to receive dividends prior
any outstanding preferred outstanding preferred stock, and any to exercise; however, if Atlantic
stock, holders of the common payment due under the New Notes, Holdings shall, at any time after
stock of GB Holdings are holders of Atlantic Holdings Common issuance of the Warrants declare a
entitled to receive dividends Stock are entitled to receive dividend or make a distribution on
in cash, stock or otherwise, at dividends in cash, stock or the outstanding shares of Atlantic
such times and in such amounts otherwise, at such times and in such Holdings Common Stock in
87
as the Board may, from time to amounts as the Board of Directors of shares of Atlantic Holdings Common
time, determine. Atlantic Holdings may, from time to Stock (other than as part of the
time, determine. Transaction) upon exercise, the
holder is 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.
Board of Directors The Board is initially set at The Board of Directors of Atlantic Not Applicable.
six directors. Holdings is initially set at six
directors.
Size of Board The exact number of directors The exact number of directors is Not Applicable.
is determined from time to time determined from time to time by
by resolution adopted by a resolution adopted by a majority of
majority of the entire Board. the entire Board of Directors of
GB Holdings currently has 6 Atlantic Holdings. Atlantic Holdings
directors. currently has six directors.
Qualification of Directors need not be Directors need not be stockholders. Not Applicable.
Directors stockholders.
Removal of Directors Any director or the entire Any director or the entire Board of Not Applicable.
Board may be removed, with or Directors of Atlantic Holdings may
without cause, by the holders be removed, with or without cause,
of a majority of the shares by the holders of a majority of the
then entitled to vote at an shares then entitled to vote at an
election of directors, unless election of directors, unless the
the Certificate of Certificate of Incorporation allows
Incorporation allows for for classification of directors
classification of directors (which it currently does not).
(which it currently does not).
Effectiveness, The New Jersey Casino Control The NJCCA imposes certain The Warrants are not immediately
Cancellation, Act (the "NJCCA") imposes restrictions upon the ownership of exercisable. The Warrants will only
Expiration or certain restrictions upon the securities issued by a corporation become exercisable at the election
Divestiture ownership of securities issued that holds a casino license or is a of the holders at any time
by a corporation that holds a holding company of a corporate ACE following the earlier of (i) the
casino license or is a holding Gaming. The CCC may require payment in cash or Atlantic
company of a corporate ACE divestiture of any security held by Holdings Common Stock for the New
Gaming. The Casino Control a disqualified holder such as an Notes or the conversion, in whole
Commission ("CCC") may require officer, director or stockholder who or in part, of any of the New Notes
divestiture of any security is required to be qualified under into shares of Atlantic Holdings
held by a disqualified holder the NJCCA. Common Stock as full satisfaction
such as an officer, director or of the principal and accrued
stockholder who is required to interest due pursuant to such New
be qualified under the NJCCA. Notes; (ii) a determination by
a majority of the Board of
88
Directors of Atlantic Holdings
(including at least one
independent director) 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. Atlantic Holdings 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 Holdings,
a later notice from Atlantic
Holdings, may state that the
Warrants will be cancelled by
Atlantic Holdings, 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 Holdings
(the "Expiration Date")) and
shall thereafter be of no force
or effect and no longer
exercisable for the Atlantic
Holdings Common Stock unless
prior to the Expiration Date,
the Warrant is properly
exercised.
Vacancies on the Board Vacancies and newly created Vacancies and newly created Not Applicable.
directorships are filled by an directorships are filled by an
individual elected by a individual elected by a majority
majority vote of the remaining vote of the remaining directors,
directors, such vote to occur such vote to occur even if quorum is
even if quorum is not present. not present.
Board Quorum and vote A majority of the total number A majority of the total number of Not Applicable.
requirements of directors then in office directors then in office constitutes
constitutes a quorum. a quorum.
The affirmative vote of a The affirmative vote of a majority Not Applicable.
majority of the total of the total directors
89
directors then in office then in office constitutes action e
constitutes action by the by the Board of Directors of Atlantic
Board. Holdings.
Stockholder Meetings
Annual Meetings Date, time and place of the Date, time and place of the annual Not Applicable.
annual meeting is determined by meeting is determined by the Board
the Board. Notice must be of Directors. Notice must be mailed
mailed to stockholders no less to stockholders no less than 10 and
than 10 and no more than 60 no more than 60 days prior to the
days prior to the meeting. meeting.
Special Meetings Special meetings may be called Special meetings may be called by Not Applicable.
by the Chairman of the Board or the Chairman of the Board of
the President of GB Holdings Atlantic Holdings or the President
and shall be called by the of Atlantic Holdings and shall be
President or the Secretary at called by the president or the
the request in writing of a secretary at the request in writing
majority of the Board, or by of a majority of the Board of
the holders of ten percent or Directors of Atlantic Holdings, or
more of the outstanding shares by the holders of ten percent or
of GB Holdings. Such request more of the outstanding shares of
shall state the purpose or Atlantic Holdings. Such request
purposes of the proposed shall state the purpose or purposes
meeting. of the proposed meeting.
Quorum Requirements The holders of a majority of The holders of a majority of the Not Applicable.
the stock issued and stock issued and outstanding and
outstanding and entitled to entitled to vote at a meeting
vote at a meeting present in present in person or by proxy
person or by proxy constitutes constitutes a quorum.
a quorum.
Action By Written Any action required or Any action required or permitted to Not Applicable.
Consent permitted to be taken by be taken by stockholders for or in
stockholders for or in connection with any corporate action
connection with any corporate may be taken without a meeting,
action may be taken without a without prior notice and without a
meeting, without prior notice vote, if consents setting forth the
and without a vote, if consents action so taken shall be (i) signed
setting forth the action so by the holders of outstanding stock
taken shall be (i) signed by having not less than the minimum
the holders of outstanding number of votes that would be
stock having not less than the necessary to authorize such action
minimum number of votes that at a meeting at which all shares
would be necessary to authorize entitled to vote were present and
such action at a meeting at voted and (ii) delivered to Atlantic
which all shares entitled to Holdings to its registered agent,
vote were present and voted and its principal place of business or
(ii) delivered to GB Holdings to an officer or agent of Atlantic
to its Holdings
90
registered agent, its principal with custody of records of
place of business or to an stockholder proceedings.
officer or agent of GB Holdings
with custody of records of
stockholder proceedings.
If action is taken by less than If action is taken by less than
unanimous consent, prompt unanimous consent, prompt notice
notice must be given to those must be given to those who have not
who have not consented. consented.
The Board shall fix a record The Board of Directors of Atlantic
date for the taking of action Holdings shall fix a record date for
by written consent. Such date the taking of action by written
shall not precede the date on consent. Such date shall not precede
which the resolution fixing the the date on which the resolution
record date is adopted by the fixing the record date is adopted by
Board and not be more than ten the Board of Directors of Atlantic
days after such date. Holdings and not be more than ten
days after such date.
Amendments to Amendments must generally be Amendments must generally be Not Applicable.
Certificate of approved by the Board and by a approved by the Board of Directors
Incorporation majority of the outstanding and by a majority of the outstanding
stock entitled to vote on the stock entitled to vote on the
amendment and, if applicable, amendment and, if applicable, by a
by a majority of the majority of the outstanding stock of
outstanding stock of each class each class or series entitled to
or series entitled to vote on vote on the amendment as a class or
the amendment as a class or series.
series.
Amendments to The By-Laws may be altered, The By-Laws may be altered, amended Not Applicable.
By-Laws amended or repealed by a or repealed by a majority of the
majority of the entire Board, entire Board of Directors, at any
at any meeting of the board of meeting of the Board of Directors.
directors. Under Delaware Law, Under Delaware Law, a majority of
a majority of the shareholders the shareholders may repeal, amend
may repeal, amend or adopt the or adopt the By-Laws.
By-Laws.
Indemnification In general, the By-Laws provide In general, the By-Laws provide for Not Applicable.
for the indemnification of any the indemnification of any person to
person to the fullest extent the fullest extent authorized by
authorized by Delaware law, for Delaware law, for each individual
each individual who is or as a who is or was a party or is
party or is otherwise involved otherwise involved in any proceeding
in any proceeding because of because of his or her status as a
his or her status as a director director or officer of Atlantic
or officer of GB Holdings. Holdings.
91
Exculpation A director shall not be A director shall not be personally Not Applicable.
personally liable to GB liable to Atlantic Holdings for
Holdings for monetary damages monetary damages for breach of
for breach of fiduciary duty as fiduciary duty as a director except
a director except for liability: for liability:
o for any breach of the o for any breach of the
of director's duty to director's duty of loyalty
GB Holdings or its to Atlantic Holdings or its
stockholders; stockholders;
o for acts or omissions o for acts or omissions not in
not in good faith or good faith or which involve
which involve intentional misconduct or a
intentional misconduct knowing violation of law;
or a knowing violation
of law;
o pursuant to Section 174 o pursuant to Section 174 of
of the Delaware General the Delaware General
Corporation Law; or Corporation Law; or
o for any transaction o for any transaction from
from which the director which the director derived
derived an improper an improper personal benefit.
personal benefit.
Each of the above provisions Each of the above provisions
protects GB Holdings' directors protects Atlantic Holdings'
against personal liability for directors against personal liability
monetary damages related to for monetary damages related to
breaches of their fiduciary breaches of their fiduciary duty of
duty of care. None of the above care. None of the above provisions
provisions eliminates the eliminates the director's duty of
director's duty of care nor has care nor has any effect on the
any effect on the availability availability of equitable remedies,
of equitable remedies, such as such as an injunction or rescission,
an injunction or rescission, based upon a director's breach of
based upon a director's breach his or her duty of care.
of his or her duty of care.
Information on State GB Holdings' Certificate of Atlantic Holdings' Certificate of Not Applicable.
Anti-takeover Statute Incorporation provides that it Incorporation provides that it has
has elected not to be governed elected not to be governed by the
by the Takeover Statute Takeover Statute (Section 203 of the
(Section 203 of the General General Corporation Law of Delaware).
Corporation Law of Delaware).
92
Exercise Price Not Applicable. Not Applicable. No Adjustment.
Underlying Securities Not Applicable. Not Applicable. The shares of Atlantic Holdings
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, GB
Holdings 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.
Transfer Restrictions The common stock of GB Holdings At the closing of the Transaction Prior to and including the time of
is registered under the and the effectiveness of the exercise of the Warrants, GB
Securities Act and is currently registration statement of which this Holdings shall use its reasonable
listed on AMEX, and, so long as proxy statement/prospectus forms a efforts to cause a current
not held by affiliates, is part, the Atlantic Holdings Common registration statement to be in
freely tradeable. Following Stock will be registered under the effect with the SEC and
consummation of the Securities Act and, so long as not qualification with or approval from
Transaction, we anticipate that held by affiliates, will be freely various state securities agencies
the common stock of GB Holdings tradeable. with respect to the shares or other
will be delisted from AMEX. securities underlying the Warrants,
The NJCCA imposes certain or an opinion of counsel for
The NJCCA imposes certain restrictions upon the ownership of Atlantic Holdings that there is an
restrictions upon the ownership securities issued by a corporation effective exemption from
of securities issued by a that holds a casino license or is a registration. There can be no
corporation that holds a casino holding company of a corporate assurance, however, that such a
license or is a holding company licensee. Among other restrictions, registration statement will be kept
of a corporate licensee. Among the sale, assignment, transfer, current. If a registration
other restrictions, the sale, pledge or other disposition of any statement covering such shares of
assignment, transfer, pledge or security issued by a corporate Atlantic Holdings Common Stock is
other disposition of any licensee or holding company is not kept current for any reason, or
security issued by a corporate subject to the regulation of the CCC. if the shares underlying the
licensee or holding company is Warrants are not registered in the
subject to the regulation of state in which a holder resides,
the CCC. Atlantic Holdings will use its
reasonable efforts to register
the shares of Atlantic Holdings
Common Stock underlying the
Warrants.
93
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 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,
94
Greate Bay Hotel 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
Greate Bay Hotel, GB Holdings, Atlantic Holdings or ACE Gaming 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 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
95
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, GB Holdings, Atlantic Holdings and ACE Gaming 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 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.
96
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 GB HOLDINGS
AND ITS SUBSIDIARIES" as set forth on page 99 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, Greate Bay Hotel 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, 2003 and 2002, The Sands had purchased bonds
totaling $6,875,000 and $6,946,000, respectively. In addition, The Sands had
remaining funds on deposit and held in escrow by the CRDA at December 31, 2003
and 2002, of $15,798,000 and $13,151,000, 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
of GB Holdings and its subsidiary.
Obligatory investments at December 31, 2003 and 2002, are net of
accumulated valuation allowances of $11,340,000 and $10,028,000, respectively,
based upon the estimated realizable values of the investments. Provisions for
valuation allowances for the years ended December 31, 2003, 2002 and 2001
amounted to $1,434,000, $1,521,000 and $1,341,000, respectively.
The Sands has, from time to time, contributed certain amounts
held in escrow by the CRDA to fund CRDA sponsored projects. During 2003, The
Sands contributed $695,000 of its escrowed funds to 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. Prior to this, the CRDA had granted The Sands both cash
refunds and waivers of certain of its future Deposit obligations in
consideration of similar contributions. Other assets aggregating $621,000 and
$811,000, respectively, have been recognized on the accompanying consolidated
balance sheets at December 31, 2003 and 2002, and are being amortized over a
period of ten years commencing with the completion of the projects. Amortization
of other assets totaled $205,000, $199,000, and $202,000, for the years ended
December 31, 2003, 2002 and 2001, respectively, and are included in depreciation
and amortization, including provisions for obligatory investments or
accompanying statements of operations.
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
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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, GB Holdings,
Atlantic Holdings or ACE Gaming 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, ACE
Gaming 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 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.
DESCRIPTION OF THE BUSINESS OF ATLANTIC HOLDINGS AND ITS SUBSIDIARIES
GENERAL
Atlantic Holdings is a Delaware corporation and a newly formed,
wholly-owned subsidiary of Greate Bay Hotel which is a wholly-owned subsidiary
of GB Holdings. Atlantic Holdings was formed in November 2003 for the purpose of
the contemplated exchange of the Existing Notes for the New Notes. The
contemplated exchange includes the transfer of substantially all of the assets
and liabilities of GB Holdings to Atlantic Holdings and of Greate Bay Hotel to
ACE Gaming.
Upon consummation of the Transaction, Atlantic Holdings will own
a subsidiary with substantially the same assets as Greate Bay Hotel and have the
same directors and management as GB Holdings. Also, Atlantic Holdings will
manage the business of ACE Gaming in a manner identical to GB Holdings'
management of Greate Bay Hotel. For more information, please see "DESCRIPTION OF
THE BUSINESS OF GB HOLDINGS AND ITS SUBSIDIARIES" as set forth below.
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DESCRIPTION OF THE BUSINESS OF GB HOLDINGS AND ITS SUBSIDIARIES
GENERAL
GB Holdings 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 GB Holdings 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 GB Holdings was
transferred to Greate Bay Holdings, LLC ("GBLLC"), whose sole member as a result
of the same reorganization was PPI. In February 1994, GB Holdings acquired
Greate Bay Hotel through a capital contribution by its then parent. Greate Bay
Hotel principal business activity is its ownership of The Sands Hotel and Casino
located in Atlantic City, New Jersey. GB Property, a Delaware corporation and a
wholly-owned subsidiary of GB Holdings, was incorporated in September 1993 as a
special purpose subsidiary of GB Holdings for the purpose of borrowing funds for
the benefit of Greate Bay Hotel. Atlantic Holdings, a Delaware corporation and a
wholly-owned subsidiary of Greate Bay Hotel, was incorporated on October 31,
2003. ACE Gaming, a New Jersey limited liability company and a wholly-owned
subsidiary of Atlantic Holdings, was formed on November 5, 2003. GB Holdings has
no operating activities and its only source of income is interest on cash
equivalent investments. GB Holdings only significant assets are its investment
in Greate Bay Hotel and its cash balance at March 31, 2004 of $12.5 million.
On January 5, 1998, GB Holdings 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 GB Holdings 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, GB Holdings and its
subsidiaries adopted "fresh start reporting" in the preparation of the
accompanying consolidated financial statements. GB Holdings 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, GB Property'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 GB Holdings' 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 GB Holdings (the "New GB
Holdings Common Stock") were issued and outstanding, and the Existing Notes were
issued by GB Property. 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 GB Holdings Common Stock.
GB Holdings and GB Property listed the New GB Holdings 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:
o The Premium Categories - Those customers who have a high
potential loss per trip. This category has the lowest profit
margin percentage per customer.
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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.
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, the showroom,
two private lounges for casino guests and hotel room renovations to both The
Sands and the Madison House Hotel, see "--Description of Properties" as set
forth on page 106. The Sands also introduced a new
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comprehensive customer service program that included customer service training
for new employees, customer service monitoring for operations and customer
service recovery programs.
GB Holdings recognized that "The Sands" name had a strong brand
recognition and a rich heritage in gaming that went back to the original
property in Las Vegas of the 1950's. Beginning in 2003, the Atlantic City Sands
stylized a new Sands logo, which reflected this rich heritage and began to
transform the property theme into the "Players' Place." The Players' Place
identity was woven into the value gaming strategy to provide the customer with
ample access to a variety of gaming and entertainment experiences that harkened
back to the glamorous era of the Las Vegas strip. The Property will offer
outstanding gaming odds, highest table limits, more liberal player rewards to
the avid customer and unparalleled, personal boutique service that exceeds guest
expectations; all in an environment that makes the better player feel like he
has a "home court advantage."
In 2003, further renovations to the casino floor occurred that
supported this theme. Swingers lounge was constructed in the center of the
casino to provide a multi-faceted state-of-the-art entertainment experience. The
Swingers lounge includes bartop slot machines and is staffed by "Flair
Bartenders" (part mixologist, part performance artist). In addition, further
renovations to the bus lobby entrance, the promotions center and the Platinum
and Plaza Clubs improved the customer experience by providing easier access to
facilities, shorter lines and a more relaxing and personal environment. More
table games including poker were added during 2003 and some slot machines were
displaced. However, the slot product was upgraded during 2003 including the
initial phase of converting the slots to coinless system technology. These slots
accept paper cash, coin or coupons and allow the player an option to return
winnings or cash-outs in the form of redeemable tickets.
This technology has gained customer acceptance at competitors and
management believes it will enhance profitability by reducing labor intensive
slot transactions while providing greater customer service and more
uninterrupted player time on machines.
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 upgrades and amenities to the casino floor,
slot machines, other gaming equipment and physical plant renovations. In 2004,
an entire floor of 37 rooms in The Sands will be converted into suites to
improve the inventory of accommodations for the premium category players. 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. 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
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. The computer systems also allow The Sands to monitor, analyze and
control the granting of gaming credit, promotional expenses and other marketing
costs. The Sands Management believes this is a valuable tool and strategy that
allows The Sands to compete effectively in the Atlantic City market.
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.
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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 1.4 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
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 has changed its name to
Caesars Entertainment. Of the twelve Atlantic City casinos Caesars Entertainment
controls three casinos, the Trump Organization controls three and the Harrah's
Organization controls two. Caesars Entertainment also controls the so-called
Traymore site located between the boardwalk and The Sands and has acquired a
property contiguous to The Sands parking garage that formerly contained the
Continental Motel property. Caesars Entertainment announced that it may develop
another hotel-casino complex on this site but has not announced specific plans
at this time.
On July 3, 2003, The Borgata, a joint venture of 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 to capacity
in the market. In addition, other of the Company's competitors in Atlantic City
have recently completed expansions of their hotels or have announced expansion
projects. For example, Tropicana Atlantic City is constructing 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
third quarter of 2004. Resorts is currently constructing a hotel room addition
of approximately 400 rooms and is scheduled to open in the third quarter of
2004. The business of the Company 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, Maryland, New York and Connecticut).
The Casino Reinvestment Development Authority ("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. GB
Holdings 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, marketing and promotional activities than GB
Holdings and its subsidiaries and, as a result, The Sands' facilities and
amenities fell behind many of the other casinos. In order to improve GB
Holdings' 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
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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. During, in 1999, in an effort to increase and utilize available
Pacific Avenue frontage, The Sands acquired land parcels on Pacific Avenue and
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,
a capital expenditure plan was recently approved by the Board and management
believes that cash generated from operations and cash reserves will be
sufficient to meet the requirements of the capital expenditure plan. Based upon
expected cash flow generated from operations, management determined that it
would be prudent for GB Holdings to obtain a line of credit to provide
additional cash availability, to meet working capital needs, in the event that
anticipated cash flow is less than expected or expenses exceed those
anticipated. At the request of GB Holdings, Ealing agreed to provide a revolving
credit facility, secured by a first lien on all of the assets of GB Holdings and
its subsidiaries (including Atlantic Holdings), under which GB Holdings may
borrow up to an aggregate amount of $10 million for general working capital
purposes. Ealing's obligation to provide the financing pursuant to the
commitment letter is subject to the negotiation and execution of definitive loan
and security agreements and related documents as well as certain customary
conditions. However, there can be no assurance that the loan agreement with
Ealing will be consummated, that if the loan agreement with Ealing is not
consummated, the Company will be able to obtain financing from another lender on
terms as or more favorable than the terms of the commitment letter, or whether
the Company will need to borrow funds for working capital. Ealing and GB
Holdings have agreed to extend the commitment until July 1, 2004.
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 VLTs 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. Neither Pennsylvania nor Maryland enacted any legalized gaming
legislation in their respective legislative sessions during the three months
ended March 31, 2004. 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.
A significant amount of The Sands' revenues is derived from
patrons living within a 120-mile radius of Atlantic 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.
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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 upon 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 to be 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 to be 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.
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 with secondary
jackpots. Various competitors have committed efforts to provide coinless
technology in their slot product, which appears to be an industry trend for the
future. 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 2003, according to Commission filings, slot win accounted for
approximately 74.8% 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 with the NJCCA are enforceable
under New Jersey law. For the year ended December 31, 2003, gaming credit
extended to The Sands' table game patrons accounted for approximately 22.0% of
overall table game wagering, and table game wagering accounted for approximately
10.2% of overall casino wagering during the period. At December 31, 2003, gaming
receivables amounted to $9.5 million before an allowance for uncollectible
gaming receivables of $5.6 million. For the three months ended March 31, 2004,
gaming credit extended to Sands' table game patrons accounted for approximately
25.6% of overall table game wagering, and table game wagering accounted for
approximately 12.2% of overall casino wagering during the period. At March 31,
2004, gaming receivables amounted to $8.5 million before an allowance for
uncollectible gaming receivables of $4.9 million. Management believes that such
allowance is adequate.
License Agreement
Greate Bay Hotel's rights to the trade name "The Sands" (the
"Trade Name") were derived from a license agreement between Greate Bay Casino
Corporation and an unaffiliated third party. Amounts payable by Greate Bay Hotel
for these rights were equal to the amounts paid to the unaffiliated third party.
On September 29, 2000, High River Limited Partnership assigned to Greate Bay
Hotel 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 for its
assignment of these rights. Payment is made directly to the owner of the Trade
Name. The license fee amounted to $263,000, $272,000 and $265,000, respectively,
for the years ended December
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31, 2003, 2002 and 2001. Such charges amounted to $53,000 and $59,000,
respectively, for the three months ended March 31, 2004 and 2003.
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
December 31, 2003, The Sands had approximately 2,211 employees. The Sands has
collective bargaining agreements with three unions that represent approximately
818 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 requires that all casino owners and management
contractors be licensed by the Commission and that all employees (except for
certain non-casino related job positions), major shareholders and other persons
or entities financially interested in the casino operation be either licensed or
approved by the Commission. A license is not transferable and may be revoked or
suspended under certain circumstances by the Commission. 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
Casino Act and applicable regulations and that the casino is prepared to
entertain the public. Under such determination, Greate Bay Hotel has been issued
a plenary casino license. The plenary license issued to The Sands was renewed by
the Commission in September 2000 for a period of four years.
In order to renew Greate Bay Hotel's casino license, the
Commission must determine that Greate Bay Hotel and GB Holdings are financially
stable. In order to be found "financially stable" under the NJCCA, Greate Bay
Hotel and GB Holdings must demonstrate, among other things, their ability to
pay, exchange, or refinance debts that mature or otherwise become due and
payable during the license term, or to otherwise manage such debts. Because the
Existing Notes will become due during the period following the renewal of the
license in 2004, the Commission will require Greate Bay Hotel and GB Holdings to
indicate the efforts they will pursue or are pursuing to refinance the Existing
Notes prior to maturity and during the new license term. Currently, the
Commission is and will continue to monitor the efforts of Greate Bay Hotel and
GB Holdings to manage and refinance the Existing Notes. There has been no
precedent of non-renewal of a casino license in this situation.
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 three months
ended March 31, 2004 and the years ended December 31, 2003, 2002 and 2001, the
taxes and the license and other fees incurred by The Sands amounted to $4.5
million, $19.0 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 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 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 2003, The
Sands contributed $694,000 of its escrowed funds to CRDA sponsored projects. No
specific refund or future credit has been associated with the 2003
contributions. 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
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$80,000 in a cash refund and $84,000 in waivers of certain future Deposit
obligations. Prior to this, the CRDA had granted The Sands both cash refunds and
waivers of certain of its future Deposit obligations in consideration of similar
contributions. Other assets aggregating $621,000 and $811,000, respectively,
have been recognized on the accompanying consolidated balance sheets at December
31, 2003 and 2002, and are being amortized over a period of ten years commencing
with the completion of the projects. Amortization of other assets totaled
$205,000, $199,000 and $202,000 for the years ended December 31, 2003, 2002 and
2001, respectively.
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 Commission. The
Commission 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.
Note holders are also subject to the qualification provisions of
the NJCCA and may, in the sole discretion of the Commission, be required to make
filings, submit to regulatory proceedings and qualify under the Casino Act. If
an investor is an "Institutional Investor" such as a retirement fund for
governmental employees, a registered investment company or adviser, a collective
investment trust, or an insurance company, then, in the absence of a prima facie
showing by the New Jersey Division of Gaming Enforcement that the "Institutional
Investor" may be found unqualified, the Commission shall grant a waiver of this
qualification requirement with respect to publicly-traded debt or equity
securities of parent companies or affiliates if the investor will own (i) less
than 10% of the common stock of the company in question, on a fully diluted
basis or (ii) less than 20% of such company's overall indebtedness, provided the
investor owns less than 50% of an outstanding issue of indebtedness of such
company, the Commission, upon a showing of good cause, may, in its sole
discretion, grant a waiver of qualification to an "Institutional Investor" not
satisfying the above percentage criteria. An "Institutional Investor" must also
purchase securities for investment and have no intent to influence the
management or operations of such company. The Commission may, in its sole
discretion, grant a waiver of the qualification requirement to investors not
qualifying as "Institutional Investors" under the Casino Act if such investors
will own less than 5% of the publicly-traded common stock of such company, on a
fully diluted basis, or less than 15% of the publicly-traded outstanding
indebtedness of such company.
DESCRIPTION OF PROPERTIES
The Sands is located in Atlantic City, New Jersey, on
approrximately 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 78,000 square feet of gaming space containing approximately 2,202
slot machines and approximately 73 table games; 2 hotels (see discussion on the
Madison House Hotel immediately below) with an overall total of 637 rooms
(including 170 suites); five restaurants; two cocktail lounges; 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.
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.
With the exception of the land over which the People Mover is
constructed, The Sands owns the land and improvements comprising The Sands
facility. The Sands owns and operates the casino, the hotel, all of the
restaurants, the cocktail lounge, the private lounges, the theatre and a retail
gift shop. In addition, The Sands has licensed certain space within the hotel
building to unrelated third parties who operate a beauty shop, a peanut shop, a
game room and a coffee stand.
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In April 2000, Greate Bay Hotel 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 Greate
Bay Hotel, under an agreement between the Claridge and Greate Bay Hotel
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 GB Holdings and its subsidiaries.
LEGAL PROCEEDINGS
Tax appeals on behalf of GB Holdings and its subsidiaries and the
City of Atlantic City challenging the amount of GB Holdings' real property
assessments for tax years 1996 through 2003 are pending before the NJ Tax Court.
In 2001, GB Holdings discovered certain failures relating to
currency transaction reporting which resulted in the failure of GB Holdings to
file legally required currency transaction reports. Following this discovery, GB
Holdings self-reported the situation to the applicable regulatory agencies. GB
Holdings conducted an internal examination of the matter and the New Jersey
Division of Gaming Enforcement conducted a separate review. There has not been
an impact on GB Holdings' financial reporting because of these failures. GB
Holdings has revised internal control processes and taken other measures to
address the situation. GB Holdings may be subjected to regulatory sanctions
which may include cash penalties. However, the potential cash penalties cannot
be estimated at this time. In May 2003, GB Holdings was advised by the
Department of the Treasury that it will not pursue a civil penalty.
By letter dated January 23, 2004, Sheffield Enterprises, Inc.
asserted potential claims against The Sands under the Lanham Act for permitting
a show entitled The Main Event, to run at The Sands during 2001. Sheffield also
asserts certain copyright infringement claims growing out of The Main Event
performances. It has not yet been determined whether or not the claims made by
Sheffield would, if adversely determined, materially impact the financial
position or results of operations of GB Holdings.
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 amicably resolved.
GB Holdings 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, GB Holdings 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, GB Holdings and certain of its officers,
directors, agents and employees, are subject to various legal and administrative
proceedings incidental to the business of GB Holdings. GB Holdings does not
believe any proceedings currently pending are material to the conduct of the
business of GB Holdings.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF GB HOLDINGS AND ITS SUBSIDIARIES
GENERAL
This management's discussion and analysis of financial condition
and results of operations of GB Holdings and its subsidiaries and other portions
of this solicitation statement and prospectus contain forward-looking statements
about the business, financial condition and prospects of GB Holdings and its
subsidiaries (hereinafter collectively referred to as 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.
The Parent Company faced a number of competitive challenges
during fiscal 2003, including increased competition from the newly opened
Borgata, increased competition from existing casinos that invested in capital
improvements, and a corresponding increase in competition for slot machine
players. Severe winter weather and a loss of customers resulting in part from
The Sands' decreased table gaming capacity also had a negative effect on
revenues for the first half of fiscal 2003. These factors resulted in a decline
of $23.2 million (12%) in net revenues as compared to the prior fiscal year, and
a net loss of $17.7 million compared to a net loss of $7.3 million in the prior
fiscal year.
Management is currently focused on restructuring its debt to
significantly reduce the cash requirements for debt service and defer the
payment of principal which is presently due in September 2005, for three years.
These funds would then be available for operational and capital investment,
including opportunities that arise to expand The Sands' casino, rooms, parking,
entertainment and retail facilities.
Pursuant to New Jersey law, Greate Bay Hotel is required to
maintain a casino license in order to operate The Sands. The gaming licenses
required to own and operate The Sands must be renewed in 2004, which requires
that the CCC determine that Greate Bay Hotel and GB Holdings are financially
stable. In order to be found "financially stable" under NJCCA, Greate Bay Hotel
and GB Holdings must demonstrate among other things, their ability to pay,
exchange, or refinance debts that mature or otherwise become due and payable
during the license term, or to otherwise manage such debts. If the CCC
determines that GB Holdings may be unable to make the required payments pursuant
to the Existing Notes or pay the principal when it becomes due in 2005, Greate
Bay Hotel may be unable to obtain renewal of the casino license required to own
and operate The Sands. Currently, the CCC is and will continue to monitor the
effect of Greate Bay Hotel and GB Holdings to manage and refinance the Existing
Notes. There has been no precedent of non-renewal of a casino license in this
situation.
The Sands primarily generates revenues from gaming operations in
its Atlantic City facility (see Properties). Although The Sands' other business
segments including rooms, entertainment, retail store, food and beverage
operations also generate some cash sales, these revenues are nominal in
comparison to the casino operations. The non-casino segments primarily support
the casino operation by providing complimentary goods and services to deserving
casino customers (see Promotional Allowances). The Company competes in a capital
intensive industry (see Competition) that requires continual reinvestment in its
facility and technology.
Below is Management's discussion and analysis of the financial
condition and results of operations of GB Holdings and its subsidiaries. Upon
consummation of the Transaction, Atlantic Holdings will own a subsidiary with
substantially the same assets as Greate Bay Hotel and have the same directors
and management as GB Holdings. Also, Atlantic Holdings will manage the business
of ACE Gaming in a manner identical to GB Holdings' management of Greate Bay
Hotel.
LIQUIDITY AND CAPITAL RESOURCES
Summary
During 2004, management anticipates making tax payments of
approximately $1.1 million to the State of New Jersey. Management believes that
cash flows generated from operations during 2004, as well as available
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cash reserves, will be sufficient to meet its operating plan. In the first
quarter of 2004, the Board approved a capital expenditures program for 2004
under which GB Holdings and its subsidiaries anticipate making capital
expenditures of up to $23.6 million to invest in and upgrade The Sands.
Management believes that cash generated from operations and cash reserves will
be sufficient to meet the requirements of the plan. Based upon expected cash
flow generated from operations, management determined that it would be prudent
for the Company to obtain a line of credit to provide additional cash
availability, to meet the Company's working capital needs, in the event that
anticipated cash flow is less than expected or expenses exceed those
anticipated. At the request of the Company, Ealing Corp., a Nevada corporation
and an affiliate of Mr. Icahn, agreed to provide a revolving credit facility,
secured by a first lien on all of the assets of the Company, under which the
Company may borrow up to an aggregate amount of $10 million for general working
capital purposes. Ealing's obligation to provide the financing pursuant to the
commitment letter is subject to the negotiation and execution of definitive loan
and security agreements and related documents as well as certain customary
conditions. However, there can be no assurance that the loan agreement with
Ealing will be consummated, that if the loan agreement with Ealing is not
consummated, the Company will be able to obtain financing from another lender on
terms as or more favorable than the terms of the commitment letter, or whether
the Company will need to borrow funds for working capital. Ealing and GB
Holdings have agreed to extend the commitment until July 1, 2004.
Costs Associated with the Transaction
If less than 100% of the Existing Notes are tendered for exchange
in the Transaction, the ability of GB Holdings to pay the principal due on the
Existing Notes at maturity is dependent upon its ability to sell all or a
portion of the Atlantic Holdings Common Stock, held by GB Holdings to engage in
a financing transaction or through the payment of dividends from Atlantic
Holdings, although any such dividends require the consent of the holders of the
New Notes. There can be no assurances that GB Holdings will be able to pay the
principal amount of the Existing Notes when due at maturity in September 2005.
Operating Activities
At December 31, 2003, the Parent Company had cash and cash
equivalents of $33.5 million. The Parent Company used $2.3 million of net cash
from operations during the year ended December 31, 2003 compared to generating
$9.7 million during the same prior year period. The 2003 decrease in net cash
from operations was primarily due to the decline in net revenues as a result of
the increased competition and capacity in the Atlantic City market. The 2002
increase in net cash from operations is a result of a combination of a decrease
in accounts receivable and an increase in depreciation expense that offset a
decrease in income 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,
2003 amounted to approximately $12.8 million compared to $14.1 million in 2002
and $23.1 million in 2001. 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 has approval from the Board for a 2004 capital expenditure plan of up
to $23.6 million which includes new slot machines, casino and hotel renovations
as well as replacement and upgrades to infrastructure and technology. However,
in order to avoid disruption of its operations during the peak summer season and
based upon operating results and available cash, Management may defer some slot
machine replacements and casino renovations to the latter half of 2004 or
beyond, thereby reducing capital expenditures for 2004. Accordingly, additional
financing requirements could be reduced significantly.
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 years ended December 31, 2003, 2002 and 2001
amounted to $2.3 million, $2.5 million and $2.8 million, respectively.
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Financing Activities
There were no financing activities during the year ended December
31, 2003. As of December 31, 2003, the only scheduled payment of long-term debt
is the Existing Notes, which mature on September 29, 2005. On July 14, 2003, a
Form 8-K was filed with the SEC reporting that a committee of the independent
directors of the Parent Company approved a proposed restructuring of the
Existing Notes, together with various other corporate changes to be accomplished
in connection with the proposed restructuring. In connection with the foregoing,
on November 13, 2003, Atlantic Holdings filed with the SEC, a Registration
Statement on Form S-4 (which contains a preliminary prospectus), under the
Securities Act of 1933, as amended (the "Securities Act"), to transfer
substantially all of the assets and liabilities of GB Holdings, Greate Bay
Hotel, and GB Property, to Atlantic Holdings, in exchange for Atlantic Holdings
issuance of 3% Notes due 2008 in exchange for the Existing Notes and the
cancellation of such Notes), and the registration of certain securities to be
issued to the stockholders of GB Holdings; and, also on such date, Atlantic
Holdings and ACE Gaming filed with the SEC, a Registration Statement on Form S-4
under the Securities Act, with respect to a consent solicitation and exchange
offer with respect to the Existing Notes. Neither of such Registration
Statements have been declared effective and each was amended by filing
Amendments No. 1, 2 and 3 to Form S-4/A on February 13, 2004, March 22, 2004 and
April 22, 2004, respectively. The Company and Atlantic Holdings also filed with
the SEC a Schedule 13E-3, under the Securities and Exchange Act of 1934, with
respect to such transactions, which was also amended by the filings of a
Schedule 13E-3/A on November 17, 2003 and February 13, 2004.
During 2004, Management anticipates making its next scheduled
interest payment on the Existing Notes of $6.1 million on September 29, 2004;
interest on such notes accrue at a rate of up to $1.0 million per month, and if
the anticipated exchange is consummated prior to September 29, 2004, holders
that exchange will be entitled to payments for the accrued interest at the time
of the exchange. The Board adopted the Special Committee's belief that, based on
a review of the business, financial condition, and prospects of GB Holdings and
its subsidiaries, it is reasonably likely that GB Holdings would not have
sufficient funds to pay the $110 million principal, plus accrued interest, on
the Existing Notes at maturity in 2005 and that refinancing the Existing Notes
now was in the best interest of GB Holdings and its subsidiaries. Also, the
Board adopted the Special Committees' determination that it is reasonably likely
that prior to maturity in 2005, GB Holdings would not be able to refinance the
Existing Notes on favorable terms or at all and that such inability could result
in a default on the Existing Notes and the possibility of GB Holdings being
forced to seek bankruptcy protection.
Management estimates that consent fees associated with the
exchange of Existing Notes will be between $6.4 million and $11.0 million.
Additional financing fees are estimated to be between $700,000 and $800,000.
Pursuant to New Jersey law, Greate Bay Hotel is required to
maintain a casino license in order to operate The Sands. The gaming licenses
required to own and operate The Sands must be renewed in September 2004, and for
each renewal the CCC must determine that Greate Bay Hotel and GB Holdings are
financially stable. In order to be found "financially stable" under NJCCA,
Greate Bay Hotel and GB Holdings must demonstrate among other things, their
ability to pay, exchange, or refinance debts that mature or otherwise become due
and payable during the license term, or to otherwise manage such debts. If the
CCC determines that GB Holdings may be unable to make the required payments
pursuant to the Existing Notes or pay the principal when it becomes due in 2005,
Greate Bay Hotel may be unable to obtain renewal of the casino license required
to own and operate The Sands. Greate Bay Hotel's inability to obtain renewal of
is casino license will have a material adverse effect on GB Holdings.
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
110
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 Management's Discussion and Analysis of
Financial Condition and Results of Operations, as well as in the Notes to the
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 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. The adequacy of the allowance is
determined by management based on a periodic review of the receivable portfolio.
Additional allowances may be required if the financial condition of the Parent
Company's customers deteriorates.
Commitments and Contingencies - Litigation - On an ongoing 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 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 the Parent Company property as well as workers compensation claims beginning
in 2002 and major medical claims for non-union employees in 2003. 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, and
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.
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. CRDA bonds bear interest at approximately
one-third below market rates. Management bases its reserves on the type of
investments the obligation has taken or is expected to take. 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 THREE MONTHS ENDED MARCH 31, 2004
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:
111
Three Months Ended
March 31,
--------------------------------------
2004 2003
------------------ -----------------
(Dollars in Thousands)
Units: (at end of period)
Table Games - Sands 61 40
- Atlantic City (ex. Sands) 1,128 1,039
Slot Machines - Sands 2,201 2,295
- Atlantic City (ex. Sands) 39,720 36,131
Gross Wagering (1)
Table Games - Sands $ 59,897 $ 45,171
- Atlantic City (ex. Sands) 1,782,104 1,519,996
Slot Machines - Sands 431,548 479,250
- Atlantic City (ex. Sands) 9,813,809 8,715,722
Hold Percentages (2)
Table Games - Sands 15.41% 13.99%
- Atlantic City (ex. Sands) 16.34% 16.65%
Slot Machines - Sands (accrual basis) 8.09% 7.75%
- Sands (cash basis) 8.34% 7.96%
- Atlantic City (ex. Sands) (accrual basis) N/A N/A
- Atlantic City (ex. Sands) (cash basis) 8.09% 8.02%
Revenues (2)
Table Games - Sands $ 9,233 $ 6,319
- Atlantic City (ex. Sands) 291,216 253,145
Slot Machines - Sands (accrual basis) 34,926 37,162
- Sands (cash basis) 36,010 38,132
- Atlantic City (ex. Sands) (accrual basis) N/A N/A
- Atlantic City (ex. Sands) (cash basis) 793,840 699,039
Other (3) - Sands 341 158
- Atlantic City (ex. Sands) 13,721 9,831
- --------------------
(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").
(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 increased by $14.7 million (32.6%) during the
three months ended March 31, 2004 compared with the same prior year period. By
comparison, according to CCC reports, table game drop at all other
112
Atlantic City casinos during the same period increased 17.2%. The Sands'
increase in table game drop is a direct result of an increase in the number of
table games from 40 during the 2003 period to 61 during the 2004 period. The
increase in the number of table games was the result of a change in business
strategy, to balance the gaming experience between table games and slot
machines. Table game hold percentage increased 1.4 percentage points to 15.4%
for the three months ended March 31, 2004 compared to the same period last year.
The 2004 table game hold percentage is slightly higher than expected. However,
the increase over the prior year is primarily attributable to one high end
patron winning approximately $1 million in March 2003. Aggregate gaming space at
all other Atlantic City casinos increased by approximately 135,000 square feet
(10.7%) at March 31, 2004 compared to March 31, 2003 primarily due to the
Borgata opening in July 2003. The amount of gaming space at The Sands remained
the same at approximately 78,000 square feet.
Slot machine handle decreased $47.7 million (10.0%) during the
three months ended March 31, 2004, compared with the same period of 2003. By
comparison, the percentage increase in slot machine handle for all other
Atlantic City casinos in the first three months of 2004 versus the same period
in 2003 was 12.6%. The Sands' 2004 decrease in handle is primarily attributed to
the effect of a new competitor that entered the Atlantic City marketplace in
July 2003. This decrease in slot machine handle is offset slightly by an
increase in hold percentage to 8.1% from 7.8% in the 2004 period compared to the
2003 period. The number of slot machines decreased 4.1% at The Sands to 2,201 at
March 31, 2004 compared to March 31, 2003. On an industry-wide basis, excluding
The Sands, the number of slot machines increased 9.9% in the first quarter of
2004 compared to the first quarter of 2003.
The following table sets forth the changes in operating revenues
and expenses (unaudited) for the three month period ended March 31, 2004 and
2003:
Three Months Ended March 31,
---------------------------------------------------------------------------
Increase (Decrease)
2004 2003 $ %
-------------- --------------- ------------- -------------
(Dollars In Thousands)
Revenues:
Casino $ 44,500 $ 43,639 $ 861 1.97
Rooms 2,285 2,459 (174) (7.08)
Food and Beverage 4,988 4,664 324 6.95
Other 930 883 47 5.32
Promotional Allowances 11,254 11,844 (590) (4.98)
Expenses:
Casino 30,331 31,886 (1,555) (4.88)
Rooms 608 434 174 40.09
Food and Beverage 2,090 2,056 34 1.65
Other 697 604 93 15.40
General and Administrative 2,873 2,522 351 13.92
Depreciation and Amortization 4,073 3,731 342 9.17
Loss on disposal of assets - 4 (4) (100.00)
Income/(loss) from Operations 777 (1,436) 2,213 154.00
Non-operating expense, net 3,650 2,806 844 30.08
Income Tax Provision 267 159 108 67.92
Revenues
Overall casino revenues increased $861,000 for the three months
ended March 31, 2004 compared to the same prior year period. The increase in
casino revenue is a result of increased table game win of $3,100,000 offset by
reduced slot win of $2,239,000.
113
Rooms revenue decreased $174,000 for the three months ended March
31, 2004 compared to the same prior year period as a result of decreased
occupancy. The decrease in occupancy was primarily attributable to a reduction
in promotional room nights.
Food and beverage revenues increased $324,000 for the three
months ended March 31, 2004 compared to the same prior year period. This
increase is a direct result of a new casino bar ("Swingers") ($309,000), which
opened in July 2003.
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 25.3% during the three months ended March
31, 2004 from 27.1% during the same period of 2003. The decrease in this ratio
is directly attributable to The Sands' strategy to continue to monitor the
reinvestment in the casino customer based upon the competitiveness within the
Atlantic City market.
Departmental Expenses
Casino expenses at The Sands decreased by $1.6 million for the
three months ended March 1, 2004 compared to the same prior year period. The
decrease in casino expenses is primarily due to the reduction of allocable
expenses ($865,000) from other departments due to the reduction in
complimentaries and other cost reductions. Inspection and licensing fees
decreased $292,000 for the three months ended March 31, 2004 compared to the
same prior year period. The decrease is due to a credit received from surplus
NJCCC funds, caused by initial licensing and registration fees related to a
newly opened Atlantic City Casino. Gaming revenue tax increased $119,000 as a
result of increased casino revenues.
Rooms expenses increased $174,000 for the three months ended
March 31, 2004 compared to the same prior year period. The increases were due to
a larger share of costs allocated to casino expenses ($292,000) as a result of
decreased room complimentaries generated by casino promotions. Total
complimentary room nights decreased by 5,906 or 15.3% over the same prior year
period. Rooms payroll and benefits decreased $91,000 year to year due to a
decrease in the number of rooms sold.
Food and beverage expenses increased $34,000 for the three months
ended March 31, 2004 compared to the same prior year period. The increases were
due to increases in food and beverage cost of sales ($136,000) as a result of
increased revenue.
Other expenses increased $93,000 for the three months ended March
31, 2004, compared to the same prior year period as a result of an increase to
entertainment expenses ($158,000) and a decrease in the allocation of
entertainment complimentaries by casino operations ($106,000).
General and Administrative Expenses
General and administrative expenses increased $351,000 for the
three months ended March 31, 2004, compared to the same period last year. The
increases were due to lower allocable costs from general and administrative
expenses to operating departments ($563,000). These were offset by decreases in
payroll and benefits ($251,000) and property taxes ($95,000).
Depreciation and Amortization, Including Provision for Obligatory
Investments
Depreciation and amortization expense increased $342,000 for the
three month period ended March 31, 2004, compared to the same prior year period
due to an increase in depreciation expense ($259,000) as a result of the
continued investment in infrastructure and equipment during the current and
preceding year. Also increased amortization of CRDA losses ($82,000) as a result
of increased casino revenues contributed to the overall increase.
114
Interest Income and Expense
Interest income decreased by $77,000 during the three month
period ended March 31, 2004, compared to the same prior year period. The
decrease was due to smaller earnings on decreased cash reserves.
Interest expense increased $56,000 during the three month period
ended March 31, 2004, compared to the same period in 2003. The increase is due
to a lower accrual of capitalized interest in 2004 ($28,000) compared to 2003
($91,000). It is The Sands' policy to capitalize interest on construction
projects in excess of $250,000.
Income Tax Provision
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 Sands has not recorded Federal
income tax benefit or provision for the three months ended March 31, 2004.
The State income tax provision increased $108,000 (67.9%) during
the three months ended March 31, 2004 compared to the same prior year period.
The increase is primarily due to the newly enacted Casino Net Income tax
($88,000) which did not effect the 2003 period. Increased revenues resulted in a
$20,000 increase in the Alternative Minimum Assessment for 2004 compared to
2003.
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.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003
Gaming Operations
Information contained herein, regarding Atlantic City casinos
other than The Sands, was obtained from reports filed with the CCC.
115
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:
YEAR ENDED DECEMBER 31,
----------------------------------------------------
2003 2002 2001
---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
UNITS: (AT YEAR END)
TABLE GAMES
- SANDS................................................................ 73 40 69
- ATLANTIC CITY (EX. SANDS)............................................ 1,311 1,167 1,061
SLOT MACHINES
- SANDS................................................................ 2,202 2,322 2,060
- ATLANTIC CITY (EX. SANDS)............................................ 40,176 35,795 35,423
GROSS WAGERING (1)
TABLE GAMES
- SANDS................................................................ $ 217,984 $ 242,731 $ 457,992
- ATLANTIC CITY (EX. SANDS)............................................ 6,858,441 6,684,168 6,773,640
SLOT MACHINES
- SANDS................................................................ 1,920,379 2,227,830 2,348,180
- ATLANTIC CITY (EX. SANDS)............................................ 39,025,945 38,237,932 36,772,969
HOLD PERCENTAGES (2)
TABLE GAMES
- SANDS................................................................ 14.89% 15.00% 14.92%
- ATLANTIC CITY (EX. SANDS)............................................ 15.91% 15.73% 15.65%
SLOT MACHINES
- SANDS (ACCRUAL BASIS)................................................ 7.78% 7.57% 6.88%
- SANDS (CASH BASIS)................................................... 7.94% 7.76% 7.10%
- ATLANTIC CITY (EX. SANDS) (ACCRUAL BASIS)............................ N/A N/A N/A
- ATLANTIC CITY (EX. SANDS) (CASH BASIS)............................... 8.14% 8.08% 8.09%
REVENUES (2)
TABLE GAMES
- SANDS................................................................ $ 32,451 $ 36,401 $ 68,351
- ATLANTIC CITY (EX. SANDS)............................................ 1,091,479 1,051,103 1,059,881
SLOT MACHINES
- SANDS (ACCRUAL BASIS)................................................ 149,394 168,697 161,503
- SANDS (CASH BASIS)................................................... 152,527 172,833 166,657
- ATLANTIC CITY (EX. SANDS) (ACCRUAL BASIS)............................ N/A N/A N/A
- ATLANTIC CITY (EX. SANDS) (CASH BASIS)............................... 3,174,834 3,089,067 2,974,610
OTHER (3)
-- SANDS............................................................... 1,191 1,319 2,515
-- ATLANTIC CITY (EX. SANDS)........................................... 45,510 41,735 42,554
- --------------
(1) Gross wagering consists of the total value of chips purchased for table
games (excluding poker) and keno wagering (the "Drop") and coins, cash
and/or equivalent value tickets wagered in slot machines (the "Handle").
(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
116
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. Cash basis slot machine revenue does not include
an accrual for industry-wide progressive slot jackpots, whereas accrual
basis slot machine revenue does include such accrual.
(3) Consists of revenues from poker and simulcast horse racing wagering. The
Sands provides its customers both poker and simulcast horse wagering,
however, not all Atlantic City Casinos provide these same gaming
options.
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 $24.7 million (10.2%) during 2003
compared with 2002 and by $215.3 million (47.0%) in 2002 compared to 2001. By
comparison, according to CCC reports, table game drop at all other Atlantic City
casinos increased 2.6% in 2003 compared to 2002 and decreased 1.3% in 2002
compared to 2001. During 2003, The Sands increased the number of table games
from 40 to 73 units in an effort to recapture market share by providing the
customer ample access to a variety of table games. The increase in table game
capacity was supported by marketing, player development and customer service
programs that focused on attracting premium and middle category table game
players.
During the second half of 2003, table game drop increased $36.3
million (43.5%) compared to the same prior year period. This occurred despite a
significant increase in table games in the Atlantic City market as a result of
the opening of a new casino in July 2003. However, these positive results were
not enough to offset the decline in table game drop in the first half of 2003
compared to the same prior year period, which was negatively impacted by severe
winter weather.
Slot machine handle decreased $307.5 million (13.8%) during 2003,
compared with 2002 and $120.4 million (5.1%) in 2002 compared to 2001. By
comparison, according to CCC reports, the percentage increase in slot machine
handle for all other Atlantic City casinos for the same periods was 2.1% and
4.0%, respectively. The decreased Sands slot handle during 2003 can be
attributed to a combination of a decrease in the number of units and an increase
in competitive capacity in the Atlantic City Market. The number of slot machines
decreased 5.2% at The Sands to 2,202 at December 31, 2003 compared to December
31, 2002. For all other Atlantic City casinos, the number of slot machines
increased 12.2% in 2003 compared to 2002, primarily due to the opening of a new
casino in July 2003.
The majority (52.3%) of the 2003 decrease in Sands slot machine
handle occurred during the second half of 2003 compared to the same prior year
period. This was primarily due to increased market capacity as a result of the
Borgata opening on July 3, 2003.
Aggregate gaming space at all other Atlantic City casinos
increased by approximately 144,000 square feet (12.1%) at December 31, 2003
compared to December 31, 2002, primarily due to the opening of a new casino in
July 2003. The amount of gaming space at The Sands decreased approximately 781
square feet (1.0%) between periods.
Revenues
Casino revenues at The Sands decreased by $23.4 million (11.3%)
in 2003 compared to 2002 and decreased by $26.0 million (11.2%) in 2002 compared
to 2001. The 2003 decrease was due to the $19.3 million decline in slot
revenues, which was a result of the $307.5 million (13.8%) decrease in slot
handle. An increase in slot hold percentage from 7.57% in 2002 to 7.78% in 2003
slightly offset the impact of the decrease in slot handle. 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 third
quarter 2002. Slot revenues increased during 2002 as a 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 and premium category slot player business.
117
Room revenues decreased by $157,000 (1.4%) in 2003 compared to
2002 and decreased by $430,000 (3.7%) in 2002 compared to 2001. The 2003
decrease is due to a decrease in occupied room nights while average room rates
remained flat. This was a result of a decrease in occupied room nights for cash
sales, offset slightly by an increase in occupied room nights for complimentary
rooms. The decline in occupied room nights for cash sales is primarily due to
the increased rooms inventory in the Atlantic City market as a result of the
Borgata, which opened in July 2003, as well as room additions at existing
competitors. Management believes competition in this market will increase as
further expansion of the rooms inventory in Atlantic City is expected in 2004.
The 2002 decrease is due to a decrease in occupied room nights and a slightly
lower average daily room rate. The 2002 decrease in occupied room nights is due
to a decrease in complimentary rooms.
Food and beverage revenues decreased $1.4 million (5.8%) in 2003
compared to 2002 and decreased by $6.1 million (20.8%) in 2002 compared to 2001.
The 2003 decrease is due to a decrease in food revenue ($2.2 million) partially
offset by an increase in beverage revenues ($841,000). The decrease in food
revenue occurred predominantly in the high volume outlets (Boardwalk Buffet and
Food Factory). The Food Factory has been closed since December 2002. In 2002,
these outlets were the preferred choice of the mass category slot player. The
2003 increase in beverage revenue is primarily due to the new Swingers lounge,
which opened in July 2003, as well as increases in room service and casino
service bars. 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.
Other revenues increased $186,000 (5.0%) in 2003 compared to 2002
and decreased by $944,000 (20.2%) in 2002 compared to 2001. The 2003 increase is
due to increased revenue in entertainment ($338,000), lobby store sales
($142,000) and parking ($53,000). These increases were primarily from
complimentaries provided to customers in the middle and premium categories. 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.
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 increased to 27.1% during 2003 compared to 24.8% during
2002 and 26.8% in 2001. The 2003 increase is primarily attributable to
marketing, player development and customer service programs implemented to
recapture lost market share in the middle and premium player categories due to
the reduction in table games and the marketing program during the summer of 2002
that focused on the mass slot player category.
Departmental Expenses
Casino expenses at The Sands decreased by $12.1 million (8.4%) in
2003 compared to 2002 and by $25.5 million (15.1%) in 2002 compared to 2001. The
2003 decrease is primarily due to reduction in casino payroll and employee
benefits ($2.9 million) as a result of a full year of lower employment levels
related to a series of layoffs and job eliminations beginning in 2001. Other
favorable casino expense variances in 2003 were directly related to the lower
casino revenues, which in turn, lowers general, marketing and promotional
allocations ($6.6 million) and gaming taxes ($1.8 million). The 2002 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.
Room expenses decreased by $631,000 (21.1%) in 2003 compared to
2002 and $406,000 (12.0%) in 2002 compared to 2001. The 2003 decrease is
primarily due to reductions in staffing, which reduced payroll and employee
benefits. Linen usage and laundry expense decreased as a result of fewer
occupied rooms in 2003 compared to 2002. 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.
118
Food and beverage expenses decreased by $1.5 million (13.3%) in
2003 compared to 2002 and by $1.1 million in 2002 compared to 2001. The 2003
decrease is due to a decrease in payroll and employee benefits as a result of
staffing reductions. Food cost of sales decreased as a result of lower food
costs in the Boardwalk Buffet and the closing of the Food Factory in 2002. These
favorable variances were offset slightly by lower allocable food and beverage
costs transferred to other departments. The 2002 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.
Other expenses increased by $492,000 (18.7%) in 2003 compared to
2002 and decreased by $749,000 (22.2%) in 2002 compared to 2001. The 2003
increase was due to increased entertainment costs as the theatre was open more
often with headliner entertainers than it was in 2002. The decrease in 2002 is
primarily due to savings resulting from discontinuation of review shows in the
theatre.
General and Administrative Expenses
General and administrative expenses decreased by $1.2 million
(9.5%) in 2003 compared to 2002 and increased by $1.3 million (11.2%) in 2002
compared to 2001. The 2003 decrease was primarily due to lower payroll and
benefits costs ($2.1 million) as a result of continued staff reductions. Also
contributing to the decrease in 2003, was lower severance payouts ($1.6 million)
than in 2002 as a result of smaller adjustments in staffing levels than in the
prior year. These favorable variances were offset somewhat by increases in
insurance premiums and reserves due to market conditions and higher payouts and
more significant claims in 2003. The 2002 increase was due to costs arising from
severance packages and higher costs for insurance, property taxes and utilities.
Depreciation and Amortization, including Provision for Obligatory
Investments
Depreciation and amortization, including provision for obligatory
investments, increased by $787,000 (5.1%) in 2003 compared to 2002 and by $3.3
million (27.4%) in 2002 compared to 2001. The 2003 increase is due to increased
depreciation expense ($826,000) resulting from further renovations and upgrades
to infrastructure and public areas such as Swingers lounge, Platinum Club and
the new bus entrance and waiting area. The provision for obligatory investments
decreased in 2003 ($441,000) primarily due to a decrease in casino revenues, on
which the obligation is based. The 2002 increase is a result of the continued
investment in and renovation of the casino, hotel and administrative complex at
The Sands.
Interest Income and Expense
Interest income decreased by $440,000 (41.2%) in 2003 compared to
2002 and decreased by $1.6 million (60.1%) in 2002 compared to 2001. The 2003
decrease was due to lower invested cash reserves. The decrease in 2002 was due
to earnings on decreased cash reserves and lower interest rates.
Interest expense increased by $387,000 (3.3%) in 2003 compared to
2002 and $361,000 (3.2%) in 2002 compared to 2001. The increase in 2003 is due
to lower levels of capitalized interest than in 2002. The 2002 increase is due
to a lower amount of capitalized interest partially offset by the elimination of
debt.
Income Tax Provision
Income tax provision increased $174,000 (22.2%) in 2003 compared
to 2002 and $729,000 (1,325.5%) in 2002 compared to 2001. The 2003 increase is
predominantly due to the newly enacted New Jersey Casino Net Income Tax
($175,000), which became effective in July 2003. The increase in 2002 was
directly related to the enactment of New Jersey alternative minimum assessment
in July 2002, which is based on gross receipts or gross profits.
Cash flow
GB Holdings used $2.3 million of net cash from operations during
the year ended December 31, 2003 compared to generating $9.7 million during the
same prior year period. The 2003 decrease in net cash from operations was
primarily due to the decline in net revenues as a result of the increased
competition and capacity in the Atlantic City market. The 2002 increase in net
cash from operations is a result of a combination of a decrease in
119
accounts receivable and an increase in depreciation expense that offset a
decrease in income from operations. During 2002, based upon a periodic review of
long-lived assets for impairment in conjunction with a review of the GB
Holdings' 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.
Capital expenditures at The Sands for the year ended December 31,
2003 amounted to approximately $12.8 million compared to $14.1 million in 2002
and $23.1 million in 2001. The Sands is required by the Casino Act to make
certain quarterly deposits based on gross revenue with the CRDA in lieu of a
certain investment alternative tax. Deposits for the years ended December 31,
2003, 2002 and 2001 amounted to $2.3 million, $2.5 million and $2.8 million,
respectively.
There were no financing activities during the year ended December
31, 2004.
Contractual Obligations
The following table sets forth the contractual obligations of the
Parent Company at December 31, 2003:
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 $ -- $ --
Capital Lease Obligations................. -- -- -- -- --
Obligatory Contributions.................. 4,808,000 72,000 228,000 2,244,000 2,264,000
Operating Leases:
Madison House.......................... 18,026,000 1,800,000 5,797,000 3,996,000 6,433,000
Equipment.............................. 352,000 186,000 166,000 -- --
Purchase Obligations...................... -- -- -- -- --
Other Long-term liabilities on balance
sheet under GAAP....................... -- -- -- -- --
---------------------------------------------------------------------------------------
Total Contractual Obligations............. $ 133,186,000 $ 2,058,000 $ 116,191,000 $ 6,240,000 $ 8,697,000
================== ============== ================== ============== ===============
New Accounting Pronouncements
In June 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 nullifies
Emerging Issues Task Force 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 146 is expected to result in delayed recognition for some 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, and does
not affect amounts currently reported in the Parent Company's consolidated
financial statements. SFAS 146 will affect the types and timing of costs
included in future restructuring programs, if any.
On January 1, 2003, the Parent Company adopted 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 did not have any impact on the Parent Company's consolidated financial
statements.
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
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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.
At March 31, 2004, the fair value of the Parent Company's fixed rate
debt was $88.1 million compared with its carrying amount of $110 million.
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 misstatement or
omission in these financial statements. See "RISK FACTORS--Risk Factors Related
to the Business of Atlantic Holdings" as set forth on page 39.
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
121
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
Holdings" as set forth on page 39.
MANAGEMENT OF GB HOLDINGS AND ATLANTIC HOLDINGS
DIRECTORS AND EXECUTIVE OFFICERS
Prior to and immediately following the consummation of the
Transaction, the Board of Directors and executive officers of Atlantic Holdings
shall be identical to the Board and executive officers of GB Holdings and,
consequently, the following information is applicable to both GB Holdings and
Atlantic Holdings.
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 GB Holding's Audit Committee and for purposes of the Transactions were
Members of the Special Committee.
Set forth below is information concerning each of GB Holding'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.......................... 68 Chairman of the Board of Directors
Martin Hirsch.......................... 49 Director
John P. Saldarelli..................... 62 Director
Michael L. Ashner...................... 51 Director
Harold First........................... 67 Director
Auguste E. Rimpel, Jr.................. 64 Director
Richard P. Brown....................... 56 Chief Executive Officer
George Toth............................ 57 Interim President
Douglas S. Niethold.................... 48 Interim Vice President, Finance, Chief Financial Officer and Principal
Accounting Officer
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
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received his B.A. from Princeton University. Since September 29, 2000, Mr. Icahn
has served as the Chairman of the Board of Directors of GB Holdings, GB Property
and Greate Bay Hotel. Since October 31, 2003, Mr. Icahn has served as the
Chairman of the Board of Directors of Atlantic Holdings.
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
to 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 GB Holdings and GB Property since September 29, 2000 and as a
director of Greate Bay Hotel since February 28, 2001. Since October 31, 2003,
Mr. Hirsch has served as a member of Atlantic Holdings' Board of Directors.
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 GB Holdings, GB Property and Greate Bay Hotel since February 28,
2001. Since October 31, 2003, Mr. Saldarelli has served as a member of Atlantic
Holdings' Board of Directors.
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
25 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. a
publicly-traded company that is a manufacturer, marketer, and retailer of
nutritional supplement. Mr. Ashner is the President and CEO and a director of
Shelbourne Properties I, Shelbourne Properties II, and Shelbourne Properties
III, three separate publicly-traded real estate investment trusts that are
listed on the American Stock Exchange and are currently liquidating. Since
December 31, 2003, Mr. Ashner has been the President and CEO of First Union Real
Estate Equity and Mortgage Investment, an unincorporated business trust engaged
in the business of owning and managing, and lending to, real estate and related
investments which is publicly-traded and listed on the New York Stock Exchange.
Mr. Ashner has served as a director of GB Holdings and GB Property since
September 29, 2000, as a member of the Audit Committee of GB Holdings since
October 3, 2000, and as a member of the Board of Directors of Greate Bay Hotel
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 Holdings' Board of Directors.
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, Talkamerica, Inc., 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 Board of Director of Panaco Inc., an oil and gas
drilling company, and was a director of Philip Services Corporation, a
privately-held company that is 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
123
served as a member of the Audit Committee and the Board since April 25, 2001,
and as a director of GB Property and Greate Bay Hotel 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 Holdings' Board
of Directors.
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 GB Holdings
since April 25, 2001, and as a director of GB Property and Greate Bay Hotel
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 Holdings' Board of Directors.
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 Greate Bay Hotel, GB Holdings and GB Property. 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 Greate Bay
Hotel, GB Holdings and GB Property 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 GB Holdings' President and Chief Executive Officer.
George Toth was appointed Interim President of Greate Bay Hotel
in February 2004. Prior to that, Mr. Toth was Vice President of Hotel Operations
and Security for Greate Bay Hotel and has held various positions in the company
since 1994, including Vice President of Construction and Operations and
Executive Director of Support Services. Mr. Toth received his MBA from Monmouth
University in 1996.
Douglas S. Niethold was appointed Interim Vice President,
Finance, Chief Financial Officer and Principal Accounting Officer of GB
Holdings, GB Property and Atlantic Holdings in January 2004. Mr. Niethold has
also served as Treasurer of Brighton Park Maintenance Corporation since 1996.
Previously, Mr. Niethold served as Executive Director, Finance from 2000 to 2003
and Director, Financial Planning from 1994 to 2000, for Greate Bay Hotel. Mr.
Niethold received his Bachelors degree from Northeastern University and his MBA
from Temple University.
The Board of Directors has determined that Harold First qualifies
as an "audit committee financial expert" as defined in ITEM 401(h) of Regulation
S-K of the Exchange Act, and that Mr. First is independent of management as that
term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.
There are no arrangements or understandings pursuant to which any
person has been elected as a director of GB Holdings. 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 GB Holdings' directors or executive officers.
124
EXECUTIVE COMPENSATION OF ATLANTIC HOLDINGS, GB HOLDINGS AND ITS SUBSIDIARIES
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
Neither GB Holdings nor GB Property pays any compensation to any
employee, executive officer or director. Greate Bay Hotel pays the compensation
of the independent directors (see "EXECUTIVE COMPENSATION OF ATLANTIC HOLDINGS,
GB HOLDINGS AND ITS SUBSIDIARIES--Compensation Of Directors" as set forth on
page 105). The following table provides certain summary information concerning
compensation paid or accrued by Greate Bay Hotel's, to or on behalf of (i)
Greate Bay Hotel's Chief Executive Officer; (ii) each of the other executive
officers of Greate Bay Hotel determined as of the end of the last fiscal year;
and (iii) additional individuals who would have qualified as among the executive
officers of Greate Bay Hotel 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, 2003, 2002
and 2001. It is anticipated that ACE Gaming 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 ...................................... 2003 $ 106,252 $ -- $ -- $ --
Chief Executive Officer 2002 -- -- -- --
2001 -- -- -- --
Timothy A. Ebling...................................... 2003 278,106 -- 7,700 4,534
Executive Vice President, 2002 250,000 -- 8,400 4,500
Chief Financial Officer, 2001 250,000 -- 8,400 4,250
Principal Accounting Officer
Thomas Davis........................................... 2003 247,067 -- -- --
President 2002 -- -- -- --
2001 -- -- -- --
William Cooney (2)..................................... 2003 159,374 2,000 -- 2,721
Senior Vice President 2002 180,654(4) -- -- --
Customer Development 2001 210,000 -- -- 4,463
Carmen Hirst (3)....................................... 2003 143,402 6,000 -- --
Vice President Information 2002 74,996 -- -- --
Technology, CIO 2001 -- -- -- --
- --------------
(1) Includes matching contributions by Greate Bay Hotel to The Sands
Retirement Savings Plan on behalf of the named executive officer.
(2) William Cooney has served Greate Bay Hotel as Senior Vice President,
Customer Development since February 2003. Prior to that, Mr. Cooney was
Vice President, Player Development at Tropicana Casino from May 2002
until February 2003. Mr. Cooney had previously served Greate Bay Hotel as
Executive Vice President, Marketing Operations from February 2001 until
May 2002 and Vice President, Marketing from March 2000 until February
2001 and Vice President, Player Development from September 1999 until
March 2000. Prior to that, Mr. Cooney served as Executive Director of
Player Development.
125
(3) Carmen Hirst has served Greate Bay Hotel as Vice President/CIO since
April 2003 and served as Executive Assistant to the President/CIO from
August 2002 until April 2003 and Executive Assistant to the President
beginning in June 2002. Prior to that, Ms. Hirst served as Executive
Director of Information Technology at Resorts Casino from December 2001
until May 2002 and Director of Information Services at Showboat Casino
from May 1991 until December 2001.
(4) Includes severance compensation.
OPTION GRANTS IN LAST FISCAL YEAR
GB Holdings does not have a stock option plan.
EMPLOYMENT CONTRACTS
Timothy A. Ebling, formerly Executive Vice President, Chief
Financial Officer and Principal Accounting Officer of Greate Bay Hotel, and
appointed Interim Chief Operating Officer beginning January 2002 and ending
March 18, 2002 and as President from October 2002 until January 10, 2003, was
under an employment agreement, amended as of March 11, 1998, through November
30, 2003. The terms of the agreement provided 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. Mr. Ebling's contract was not renewed and he left the Parent
Company as of November 30, 2003. Mr. Ebling received a payment of $265,338 and
provided GB Holdings a general release.
Frederick H. Kraus, Executive Vice President, General Counsel and
Secretary of Greate Bay Hotel, was under an employment agreement, amended as of
March 11, 1998, in such capacities continuing through December 31, 2003. Mr.
Kraus left the employ of the Parent Company as of March 26, 2003.
The Parent Company currently has no individual employees under
employment contracts.
EMPLOYEE RETIREMENT SAVINGS PLAN
Greate Bay Hotel administers and participates in The Sands
Retirement Plan, a qualified defined contribution plan for the benefit of all of
Greate Bay Hotel's employees, who satisfy certain eligibility requirements.
The Sands Retirement 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. All employees of Greate Bay Hotel,
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
Greate Bay Hotel based upon certain criteria, including levels of participation
by Greate Bay Hotel's employees. Greate Bay Hotel incurred matching
contributions totaling $406,000, $575,000, and $700,000 for the years ended
December 31, 2003, 2002 and 2001, respectively.
COMPENSATION OF DIRECTORS
Prior to September 29, 2000, independent directors of GB
Holdings, GB Property and Greate Bay Hotel 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 GB Holdings 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.
126
Members of the Special Committee received a one time cash payment
of $35,000, on or about April 5, 2003, shortly after the formation of the
Special Committee, as payment for their services as members of the Special
Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On October 3, 2000, GB Holdings 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 GB Holdings. Casinos owned or managed by Mr. Icahn may directly
or indirectly compete with GB Holdings. In addition, the potential for conflicts
of interest exists among Atlantic Holdings 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 Holdings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ATLANTIC
HOLDINGS AND GB HOLDINGS
ATLANTIC HOLDINGS
The following table sets forth as of March 15, 2004, certain
information regarding the beneficial ownership of shares of Atlantic Holdings
Common Stock by each director and executive officer of Atlantic Holdings, each
person known to Atlantic Holdings 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.
Prior to Transaction Subsequent to Transaction (1)
----------------------- -------------------------------
Name Number of Number of
Shares Percent Shares Percent
- -------- ------------ --------- ---------------- --------------
Carl C. Icahn (2).......... -- -- 2,130,975 77.49%
Martin Hirsch.............. -- -- -- --
John P. Saldarelli......... -- -- -- --
Michael L. Ashner.......... -- -- -- --
Harold First............... -- -- -- --
Auguste E. Rimpel, Jr...... -- -- -- --
Douglas S. Niethold........ -- -- -- --
Richard P. Brown........... -- -- -- --
Thomas Davis............... -- -- -- --
All Directors and Officers. -- -- 2,130,975 77.49%
- --------------
(1) Assuming that 100% of the Existing Notes are exchanged for New Notes.
(2) It is anticipated that Carl C. Icahn, Cyprus, Barberry Corp.
("Barberry"), Starfire Holding Corporation ("Starfire"), American Real
Estate Holdings Limited Partnership ("AREH"), American Real Estate
Partners, L.P. ("AREP"), American Property Investors, Inc. ("API") and
Beckton Corp. ("Beckton") will acquire beneficial ownership of a
majority of the Atlantic Holdings Common Stock outstanding after
consummation of the Transaction. Mr. Icahn owns 100% of Barberry,
Starfire and Beckton. Barberry is the managing member of Cyprus. Mr.
Icahn is (i) the sole director and the Chairman of the Board, President
and Secretary of Barberry; (ii) the sole director, Chairman of the Board
and President of Starfire; and (iii) the sole director, Chairman of the
Board, President and Secretary of Beckton. API is the general partner of
both AREH and AREP, and AREP is a limited partner of AREH owning a 99%
limited partnership interest therein. API is 100% owned by Beckton. As a
result of Mr. Icahn's ownership of and position(s) with Barberry,
Starfire and
127
Beckton, Mr. Icahn is in a position to directly and indirectly determine
the investment and voting decisions made by the entities named above.
128
GB HOLDINGS
The following table sets forth as of March 15, 2004, certain
information regarding the beneficial ownership of shares of common stock of GB
Holdings by each director and executive officer of GB Holdings, each person
known to GB Holdings 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.
Prior to and
Subsequent to the
Transaction
-------------------------
Number of
Shares Percent
-------------- ---------
HMC Investors, L.L.C. (1)..................... 795,771 8.0%
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......................... -- --
Carmen Hirst.................................. -- --
Richard P. Brown.............................. -- --
Thomas Davis.................................. -- --
All Directors and Officers.................... 7,748,744 77.49%
- --------------
(1) Includes 772,696 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 GB Holdings held by HMC Investors, L.L.C.
Information concerning HMC Investors, L.L.C. and its affiliates is based
upon a Schedule 13G filed with the SEC on February 4, 2004.
(2) As of July 14, 2003, Cyprus directly beneficially owned 4,121,033 shares
of common stock of GB Holdings and American Real Estate Holdings Limited
Partnership, a limited partnership affiliated with Mr. Icahn, directly
beneficially owned 3,627,711 shares of common stock of GB Holdings. Mr.
Icahn owns 100% of Barberry Corp. ("Barberry"), Starfire Holding
Corporation ("Starfire") and Beckton Corp. ("Beckton"). Barberry is the
managing member of Cyprus. Mr. Icahn is (i) the sole director and the
Chairman of the Board, President and Secretary of Barberry; (ii) the
sole director, Chairman of the Board and President of Starfire; and
(iii) the sole director, Chairman of the Board, President and Secretary
of Beckton. American Property Investors, Inc. ("API") is the general
partner of both American Real Estate Holdings Limited Partnership
("AREH") and American Real Estate Partners, L.P. ("AREP"), and AREP is a
limited partner of AREH owning a 99% limited partnership interest
therein. API is 100% owned by Beckton. As a result of Mr. Icahn's
ownership of and position(s) with Barberry, Starfire and Beckton, Mr.
Icahn is in a position to directly and indirectly determine the
investment and voting decisions made by the entities named above.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the effectiveness of 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"), neither Mr. Icahn nor any of his affiliates owned
equity securities of GB Holdings or its predecessors. At the time of the
effectiveness of the Plan, Cyprus LLC and Larch LLC were entities indirectly
owned and affiliated with Mr. Icahn. Each of Cyprus and Larch held $31,416,500
principal amount of the Old Notes which, under the Plan, were canceled, and on
or about November 1, 2000, each of Cyprus and Larch received in respect thereof
$18,935,337 principal amount of Existing Notes and 925,280.50 shares of common
stock of GB Holdings. In addition, and pursuant to the Plan (effective September
29, 2000), Cyprus purchased 4,625,000 shares of common stock of GB Holdings for
$65 million. The consideration for the purchase of the shares was described in a
bankruptcy court approved joint plan of reorganization of GB Holdings, which was
filed with the SEC on November 29, 2000 as Exhibit 99.2 to GB Holding's Current
Report on Form 8-K. See "DESCRIPTION OF THE BUSINESS OF GB HOLDINGS AND ITS
SUBSIDIARIES--General" as set forth on page 99.
Greate Bay Hotel's rights to the trade name "The Sands" (the
"Trade Name") were derived from a license agreement between Greate Bay Casino
Corporation and an unaffiliated third party. Amounts payable by Greate Bay Hotel
for these rights, being 3% of the Gross Room Charges, as defined, at the hotel
were equal to the amounts paid to the unaffiliated third party. On September 29,
2000, High River Limited Partnership assigned to Greate Bay Hotel 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 paying sums equal to
3% of the Gross Room Charges, as defined, at the hotel to the owner of the Trade
Name and also 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 for its assignment of these rights. Payment is made directly to the
owner of the Trade Name. For the three months ended March 31, 2004 and the years
ended December 31, 2003, 2002 and 2001 such charges amounted to $53,000,
$263,000, $272,000 and $268,000, respectively.
On October 12, 2001, as a result of, and pursuant to the terms
of, a consent solicitation, dated September 20, 2001 to holders of the Existing
Notes, holders that consented were paid $17.50 for each $1,000 of principal
amount of notes held, thus affiliates of Mr. Icahn were paid $1,118,670 because
they consented to certain amendments to the Indenture, dated as of September 29,
2000, among GB Property, as issuer, GB Holdings and Greate Bay Hotel, as
guarantors, and Wells Fargo Bank Minnesota, National Association, as Trustee.
The Stratosphere Casino Hotel & Tower (the "Stratosphere"), an
entity affiliated with Carl C. Icahn, allocates a portion of certain executive
salaries, including the salary of Richard P. Brown, as well as other charges for
tax preparation, legal fees, travel and entertainment to Greate Bay Hotel.
Payments for such charges incurred from the Stratosphere for the year ended
December 31, 2003 amounted to $191,000, including $106,000 for Mr. Brown's
salary. There were no similar charges for the year ended December 31, 2002.
On February 28, 2003, Greate Bay Hotel entered into a two year
agreement with XO New Jersey, Inc., an entity affiliated with Carl C. Icahn. The
agreement, pursuant to which XO provides long-distance telephone service to GB
Holdings and its subsidiaries, can be extended beyond the minimum two year term
on a month-to-month basis. Payments for such charges incurred for the three
months ended March 31, 2004 and the year ended December 31, 2003 amounted to
$41,000 and $127,000, respectively.
At the request of GB Holdings, Ealing Corp., a Nevada corporation
and an affiliate of Mr. Icahn, provided a commitment letter to GB Holdings,
dated January 30, 2004, under which Ealing has agreed to provide a revolving
credit facility under which GB Holdings and its subsidiaries may borrow up to an
aggregate amount of $10 million to be used for general working capital purposes.
Under the terms of the commitment letter the revolving credit will expire on
June 30, 2005, and borrowings will bear interest at a rate of 10% per annum, and
obligations under the revolving credit facility will be secured by a first lien
on all of the assets of GB Holdings and its subsidiaries (including Atlantic
Holdings) which will be senior to the liens securing the Existing Notes. Upon
the consummation of the Transaction the obligation will be assumed by Atlantic
Holdings and the lien will be senior to the New Notes. Ealing's obligations to
provide the financing pursuant to the commitment letter is subject to the
negotiation and execution of definitive loan and security agreements and related
documents and certain customary conditions. However, there can be no assurance
that the loan agreement with Ealing will be consummated, that if the loan
agreement with Ealing is not consummated, GB Holdings will be able to obtain
financing from another lender
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on terms as or more favorable than the terms of the commitment letter, or
whether GB Holdings will need to borrow funds for working capital. Ealing and GB
Holdings have agreed to extend the commitment until July 1, 2004.
During the years ended December 31, 2003 and 2002, Greate Bay
Hotel borrowed $15.4 million and $6.5 million, respectively, from GB Holdings.
This borrowing is eliminated in the consolidation of, and has no impact on, the
accompanying consolidated financial statements.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a discussion of the material U.S. federal income
tax consequences to holders of outstanding common stock of GB Holdings resulting
from the Transaction. Under the Transaction, holders of outstanding common stock
of GB Holdings will receive the distribution of the Atlantic Holdings Securities
consisting of either Atlantic Holdings Common Stock or Warrants. The discussion
assumes that any holder of outstanding common stock of GB Holdings or Atlantic
Holdings 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 person related, for U.S. federal income tax purposes,
to GB Holdings or its subsidiaries;
- a controlling shareholder(s);
- 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
GB Holdings through the exercise of options or otherwise
as compensation;
- a person that has entered into a constructive sale of
its outstanding common stock of GB Holdings under the
Code;
- a person that owns GB Holdings common stock, Atlantic
Holdings 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 Holdings Common
Stock or the receiving, owning, disposing and exchanging
for the Atlantic Holdings Common Stock of the Warrants;
or
- state, local or foreign tax consequences of the
Transaction and the receiving, owning and disposing of
the Atlantic Holdings Common Stock or the receiving,
owning, disposing and exchanging for the Atlantic
Holdings Common Stock of the Warrants.
Atlantic Holdings 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.
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BECAUSE INDIVIDUAL CIRCUMSTANCES MAY VARY, EACH SHAREHOLDER
SHOULD CONSULT HIS OR HER OWN TAX ADVISORS 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.
GB HOLDINGS
Possible Cancellation of Indebtedness Income ("COD Income")
GB Holdings anticipates that the Exchange Offer will not result
in the GB Holdings consolidated group recognizing any taxable income for U.S.
federal income tax purposes because GB Holdings 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 Exchange Offer will result in the Parent consolidated group
recognizing COD Income. Such COD Income could be offset with the GB Holdings
consolidated group's NOLs. However, the NOLs so utilized would be unavailable as
an offset against the GB Holdings consolidated group's future income.
Furthermore, to the extent that such COD Income, if any, 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 GB Holdings. 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 Exchange Offer will result in the GB Holdings consolidated group
recognizing COD Income for federal income tax purposes, producing a tax
liability. There would not be any such liability if there is no recognition of
COD Income. Such assumption and estimate is required under US GAAP because GB
Holding's belief that there should be no COD Income incurred is based upon
events which will occur after the Exchange Offer 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, GB Holdings does not believe
that COD Income will result because GB Holdings does not believe that an active
trading market in the Existing Notes will exist either during any of the thirty
(30) days prior to the Exchange Offer or after the Exchange Offer is completed,
and unless such an active trading market develops, a tax liability related to
COD income will not be incurred.
Any COD Income would be equal to the sum of (a) the excess of (i)
the face value of the Existing Notes exchanged over both (ii) the Issue Price
(as defined below) of the New Notes and the Cash Payment and (b) the excess of
(i) the face value of the Existing Notes deemed exchanged over (ii) the Issue
Price of the Existing Notes, as amended.
The determination of the Issue Price of the New Notes or the
Existing Notes, as amended, depends on whether any of the Notes are Publicly
Traded (as defined below). 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; or (3) has
certain attributes not relevant here. 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 more than thirty (30)
days prior to the Exchange Offer 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 either the face value of the
new debt instrument or the Imputed Principal Amount of the new debt instrument,
depending on whether the new debt instrument provides for "adequate stated
interest," as defined in the Code. The Imputed Principal Amount of a debt
instrument with a term of three to nine years equals the present value of all
payments under the debt instrument using a discount rate equal to the lowest
mid-term applicable federal rate for the three-month period ending on calendar
month in which the exchange, or deemed exchange, occurs.
The AMEX de-listed the Existing Notes effective April 19, 2004,
which is more than thirty (30) days prior to the Exchange Offer and GB Holdings
does not anticipate that either the Existing Notes, the Existing Notes, as
amended, or the New Notes will appear on a quotation medium or otherwise be
Publicly Traded. As GB Holdings anticipates that the New Notes will not provide
for adequate stated interest, the Issue Price of the New Notes should equal
their Imputed Principal Amount. As GB Holdings anticipates that the Existing
Notes, as amended, will provide for adequate stated interest, the Issue Price of
the Existing Notes, as amended, should equal their face value. If so, no COD
Income should be recognized by the GB Holdings consolidated group. However, as
the determination
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of whether the Existing Notes, the Existing Notes, as amended, or the New Notes
are Publicly Traded will depend on facts, not within our control, in existence
during a minimum of thirty (30) days before the Exchange Offer and a minimum of
thirty (30) days after the Exchange Offer, our counsel, Katten Muchin Zavis
Rosenman, cannot opine as to the Issue Price of either the New Notes or the
Existing Notes, as amended, or as to whether the GB Holdings consolidated group
will recognize COD Income as a result of the Exchange Offer.
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 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 Holdings
Securities
The distribution of the Atlantic Holdings Securities should be a
taxable event to GB Holdings. Although not anticipated, it is possible that the
distribution of the Atlantic Holdings Securities will result in GB Holdings
recognizing gain for U.S. federal income tax purposes. In the event that GB
Holdings does recognize gain on the distribution of the Atlantic Holdings
Securities, GB Holding's gain should equal the excess of the fair market value
of the distribution of the Atlantic Holdings Securities over GB Holding's tax
basis in the Atlantic Holdings Securities distributed, measured as of the date
of the distribution. GB Holdings believes that its tax basis in the distribution
of the Atlantic Holdings Securities will, for U.S. federal income tax purposes,
exceed its fair market value so that GB Holdings should not recognize any gain
on the distribution (under the Code, loss cannot be recognized). Should GB
Holdings recognize any gain, such gain would be taxable income to GB Holdings
for U.S. federal income tax purposes. GB Holdings may be able to offset some or
all of such taxable income with the GB Holdings consolidated group's NOLs. Such
an application of the NOLs would make the NOLs so utilized unavailable as an
offset against the GB Holdings 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 GB Holding's gain, or if the GB Holdings
consolidated group's NOLs have been fully applied to any COD Income, the gain
would produce a current tax liability for GB Holdings.
Alternative Minimum Tax
GB Holdings may be subject to the alternative minimum tax ("AMT")
for the year of the Transaction. In the event that GB Holdings is subject to the
AMT, GB Holdings' ability to offset any of its possible COD Income or gain from
the distribution of the Atlantic Holdings Securities will be limited as GB
Holdings 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 GB Holdings
consolidated group's NOLs are sufficient to offset more than 90% of the GB
Holdings consolidated group's taxable income, if GB Holdings is subject to the
AMT, GB Holdings would only be able to apply GB Holdings' AMT NOLs to 90% of GB
Holdings' AMTI and would be potentially liable for the AMT on all of GB
Holdings' AMTI not offset by the AMT NOLs.
U.S. SHAREHOLDERS
You are a "U.S. shareholder" if you are a beneficial owner of GB
Holdings common stock and you are, for U.S. federal income tax purposes:
- a citizen or resident of the United States;
- a domestic corporation;
133
- 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.
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 GB
Holdings 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 Holdings Securities
If the distribution of the Atlantic Holdings Securities consists
of the Warrants, such distribution should be (i) a taxable dividend to the
extent of GB Holdings' current or accumulated earnings and profits, then (ii) a
non-taxable return of basis to the extent of your tax basis in your GB Holdings
common stock, and then (iii) taxable gain from the sale or exchange of your GB
Holdings common stock, which should result in capital gain taxed at long-term
capital gains rates assuming that you held your GB Holdings common stock for
more than 12 months. GB Holdings currently has no current or accumulated
earnings and profits. Although GB Holdings anticipates that the Transaction will
not result in any taxable income or gain that would be included in GB Holdings'
current earnings and profits, GB Holdings may have current earnings and profits
at the end of the 2004 tax year. 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 the GB Holdings consolidated group recognizing either taxable COD Income or
gain. Such COD Income or gain would be included in GB Holdings' current earnings
and profits and increase the amount of the distribution of the Warrants taxable
as a dividend because such COD Income or gain would increase GB Holdings'
current earnings and profits, if any, for the year in which the distribution of
the Warrant is made. Your tax basis in the Warrants received in the distribution
should equal the fair market value of such Warrants, measured as of the date of
the distribution of the Warrants.
In the event that 100% of the Existing Notes are exchanged for
the New Notes, pursuant to the Exchange Offer, the distribution will be of
Atlantic Holdings Common Stock and would likely be effected in connection with
the liquidation of GB Holdings. If so, then none of the distribution of the
Atlantic Holdings Common Stock should be taxable to you as a dividend. Instead,
you may recognize capital gain or loss equal to the difference between the fair
market value of the Atlantic Holdings Common Stock distributed and your adjusted
tax basis in your common stock of GB Holdings. The deductibility of net capital
losses is subject to limitations. In such case, your tax basis in the Atlantic
Holdings Common Stock received in the distribution should equal the fair market
value of such Atlantic Holdings Common Stock, measured as of the date of the
distribution of the Atlantic Holdings Common Stock. However, the IRS may take
the position that no gain or loss may be recognized. If gain or loss is
recognized, your tax basis in the Atlantic Holdings Common Stock distributed
should be equal to your adjusted tax basis in the common stock of GB Holdings at
the time of the distribution.
If you receive the distribution of the Atlantic Holdings
Securities, you should also receive an IRS Form 1099-DIV on which GB Holdings
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
GB Holdings common stock, and then as taxable gain from the sale or exchange of
your GB Holdings common stock, as described above. If you are a corporate
shareholder of GB Holdings 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 the Warrants.
Sale, Exchange, or Redemption
Generally, the sale or exchange of the Atlantic Holdings
Securities (other than the exercise of the Warrants for Atlantic Holdings Common
Stock), or the redemption of the Atlantic Holdings 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
134
Atlantic Holdings Common Stock, see "MATERIAL U.S. FEDERAL INCOME TAX
CONSEQUENCES--Exercise of the Warrants to acquire Atlantic Holdings 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 Holdings Securities. Your adjusted tax basis
in the Atlantic Holdings Securities should equal the fair market value of the
Atlantic Holdings Securities received, determined as of the date of the
distribution of the Atlantic Holdings Securities by GB Holdings to you. Gain or
loss recognized upon a sale, exchange or redemption of the Atlantic Holdings
Securities generally should be treated as capital gain or loss, which will be
long-term capital gain or loss if the Atlantic Holdings Securities are held for
more than one year. The deductibility of net capital losses is subject to
limitations.
EXERCISE OF THE WARRANTS TO ACQUIRE ATLANTIC HOLDINGS COMMON STOCK
In the event that you receive the Warrants, the exercise of the
Warrants to acquire Atlantic Holdings Common Stock should be a transaction in
which no gain or loss is recognized by you. Your tax basis in the Atlantic
Holdings Common Stock received upon an exchange of the Warrants for Atlantic
Holdings Common Stock should equal your tax basis in the Warrants plus the price
paid to exchange the Warrants for Atlantic Holdings Common Stock. The holding
period for such Atlantic Holdings 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 Holdings Common Stock or the receiving, owning, disposing and
exchanging for Atlantic Holdings 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 HOLDINGS SECURITIES AND A SALE,
EXCHANGE OR REDEMPTION OF ATLANTIC HOLDINGS SECURITIES
You should be exempt from U.S. income or withholding tax on any
portion of the distribution of the Atlantic Holdings Securities not taxable as a
dividend, provided that: (i) the distribution of the Atlantic Holdings
Securities is not effectively connected with your conduct of a trade or business
in the U.S. and (ii) GB Holdings is not, and has not been, a U.S. real property
holding corporation ("USRPHC"), as that term is defined in the Code. Although GB
Holdings 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 GB Holdings.
If you own 5% or less of GB Holdings' common stock and the
distribution of the Atlantic Holdings Securities is not effectively connected
with your conduct of a trade or business in the U.S., then, if the distribution
is of the Warrants, you should be subject to 30% U.S. withholding tax to the
extent that the distribution of the Warrants is taxable as a dividend, subject
to reduction by applicable treaty, and you should not be subject to U.S. income
or withholding tax on the amount of the distribution of the Warrants not taxable
as a dividend. However, as GB Holdings may not be able to determine, at the time
of the distribution, the amount of the distribution of the Warrants taxable as a
dividend, GB Holdings 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. In the event that 100% of the Existing Notes are exchanged for the
New Notes, pursuant to the Exchange Offer, the distribution will be of Atlantic
Holdings Common Stock and would likely be effected in connection with the
liquidation of GB Holdings. If so, then none of the distribution of the Atlantic
Holdings Common Stock should be taxable to you as a dividend and subject to 30%
U.S. withholding tax. Instead, you should not be subject U.S. income or
withholding tax on any of the distribution of the Atlantic Holdings Common
Stock.
If you own more than 5% of the common stock of GB Holdings and
the distribution of the Atlantic Holdings Securities is not effectively
connected with your conduct of a trade or business in the U.S., then, if the
distribution is of the Warrants, you should be subject to 30% U.S. withholding
tax to the extent that the distribution of the Warrants is taxable as a
dividend, subject to reduction by applicable treaty, and U.S. net income tax to
the
135
extent that the distribution of the Warrants is not taxable as a dividend.
However, as GB Holdings may not be able to determine, at the time of the
distribution, the amount of the distribution of the Warrants taxable as a
dividend, GB Holdings 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. In the event that 100% of the Existing Notes are exchanged for the
New Notes, pursuant to the Exchange Offer, the distribution will be of Atlantic
Holdings Common Stock and would likely be effected in connection with the
liquidation of GB Holdings. If so, then none of the distribution of the Atlantic
Holdings Common Stock should be taxable to you as a dividend and subject to 30%
U.S. withholding tax. Instead, you may be subject to U.S. net income tax upon
your receipt of the Atlantic Holdings Common Stock.
If the distribution of the Atlantic Holdings Securities is
effectively connected with your conduct of a trade or business in the U.S. and
you provide the proper withholding certificate to GB Holdings, then if the
distribution is of the Warrants, you should be subject to U.S. net income tax on
the distribution of the Warrants (but not the 30% U.S. withholding tax). In the
event that 100% of the Existing Notes are exchanged for the New Notes, pursuant
to the Exchange Offer, the distribution will be of Atlantic Holdings Common
Stock and would likely be effected in connection with the liquidation of GB
Holdings. If so, you should still be subject to U.S. net income tax on the
distribution of the Atlantic Holdings Common Stock. However, none of the
distribution of the Atlantic Holdings Common Stock should be taxable to you as a
dividend. Instead, you may recognize capital gain or loss equal to the
difference between the fair market value of the Atlantic Holdings Common Stock
distributed and your adjusted tax basis in your common stock of GB Holdings. The
deductibility of net capital losses is subject to limitations. However, the IRS
may take the position that no gain or loss may be recognized.
Your exercise of the Warrants for Atlantic Holdings Common Stock
will have the same tax consequences as described above under "--Exercise of the
Warrants to acquire Atlantic Holdings Common Stock" above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Proceeds from the Transaction and the receiving, owning and
disposing of the Atlantic Holdings Common Stock or the receiving, owning,
disposing and exercise of the Warrants for the Atlantic Holdings 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 GB Holdings shareholders is
uncertain. Shareholders are urged to consult their own tax advisors regarding
the U.S. federal, state, local and foreign tax consequences of the offer and an
investment in the Atlantic Holdings common stock or warrants.
LEGAL MATTERS
Katten Muchin Zavis Rosenman, counsel to the Special Committee,
Atlantic Holdings, GB Holdings and their subsidiaries in connection with the
Transaction, will pass on the validity of the New Notes and the Atlantic
Holdings Common Stock to be issued in connection with the Transaction, upon the
payment or conversion of the New Notes, and the exercise of the Warrants.
EXPERTS
The consolidated financial statements and the related financial
statement schedule of GB Holdings, Inc. as of December 31, 2003 and 2002 and for
the years then ended, have been included herein in reliance upon the report of
KPMG LLP, an independent registered public accounting firm, 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 GB Holding'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.
136
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 GB Holdings or Atlantic Holdings in a timely manner.
GB Holdings. GB Holdings has already held its 2003 annual meeting
of stockholders. GB Holdings will hold an annual meeting in the year 2004 and
stockholder proposals must be received by GB Holdings no later than July 15,
2004, and must otherwise comply with the requirements of Rule 14a-8, to be
included in GB Holdings' proxy statement. If a stockholder who has notified GB
Holdings 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, GB Holdings need not present the proposal for a vote at the
meeting. All notices of proposals by stockholders, whether or not to be included
in GB Holdings' proxy materials, should be sent to the attention of the
Secretary, GB Holdings, Inc. c/o Sands Hotel & Casino, Indiana Avenue & Brighton
Park, Atlantic City, New Jersey 08401.
Atlantic Holdings. If the Transaction is completed, Atlantic
Holdings will hold its first annual meeting of stockholders on November 17,
2004. Stockholders' proposals must be received by Atlantic Holdings no later
than July 15, 2004, and must otherwise comply with the requirements of Rule
14a-8. If a stockholder who has notified Atlantic Holdings 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
Holdings 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 Holdings'
proxy materials, should be sent to the attention of Atlantic Holdings'
Secretary, Atlantic Coast Entertainment Holdings, Inc., c/o Sands Hotel &
Casino, Indiana Avenue & Brighton Park, 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 Park, Atlantic City, New Jersey 08401.
Attention: Public Relations, telephone: 609-441-4000.
GB Holdings files, and after the Transaction Atlantic Holdings
will file, reports, proxy statements and other information with the SEC. Copies
of GB Holdings' 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 GB
Holdings 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 GB Holdings and, after completion of the Transaction,
Atlantic Holdings. The address of the SEC's Web site is http://www.sec.gov.
Atlantic Holdings 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 Holdings Common Stock, Warrants, and Atlantic Holdings 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
137
contain all of the information set forth in the registration 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, GB Holdings 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 GB Holdings' or Atlantic Holdings'
affairs since the date of this document. The information contained in this
document with respect to GB Holdings was provided by GB Holdings.
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 information may be made directly in
this document referring to GB Holdings or Atlantic Holdings. This information
may include statements regarding the period following completion of the
Transaction.
This document contains forward-looking information 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 GB Holdings or Atlantic Holdings, identify
forward-looking information. You should note that the discussion of GB Holdings'
board of directors' reasons for the Transaction and the description of its
financial advisor's fairness opinion contains forward-looking information 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 information that refer to expectations, projections or other
characterizations or future events or circumstances, including any underlying
assumptions, is forward-looking information. That information is not a guarantee
and is subject to risks, uncertainties and assumptions that are difficult to
predict. Therefore, actual results could differ materially and adversely from
this forward-looking information.
All forward-looking information reflect management's present
expectations of future events and is subject to a number of factors and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking information. In addition to the risks related
to the businesses of GB Holdings, 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 information. These factors include: relative value of Atlantic
Holdings Common Stock, the Warrants, the New Notes, the Existing Notes, and
common stock of GB Holdings, the market's difficulty in valuing the business of
GB Holdings or Atlantic Holdings, 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 information, which speak only of the date of this document.
Neither Atlantic Holdings nor GB Holdings is under any obligation, except as
required by law, to update or alter any forward-looking information, whether as
a result of new information, future events or otherwise. Atlantic Holdings and
GB Holdings each expressly disclaim, to the maximum extent permitted by law, any
obligation to update or alter any forward-looking information.
All subsequent forward-looking information attributable to
Atlantic Holdings or GB Holdings or any person acting on their behalf are
expressly qualified in their entirety by the cautionary statements contained or
referred to in this section.
138
INDEX TO FINANCIAL STATEMENTS
PAGE
GB HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm................................................................. F-1
Report of Independent Public Accountants................................................................................ F-2
Consolidated Balance Sheets of GB Holdings, Inc. and Subsidiaries as of December 31, 2003 and 2002....................... F-3
Consolidated Statements of Operations of GB Holdings, Inc. and Subsidiaries for the Years Ended December 31, 2003, 2002
and 2001............................................................................................................... F-5
Consolidated Statement of Changes in Shareholder's Equity (Deficit) of GB Holdings, Inc. and Subsidiaries for the Years
Ended December 31, 2003, 2002 and 2001................................................................................. F-6
Consolidated Statements of Cash Flows of GB Holdings, Inc. and Subsidiaries for the Years Ended December 31, 2003, 2002
and 2001............................................................................................................... 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,
2003, 2002 and 2001.................................................................................................... F-22
Unaudited Consolidated Balance Sheets of GB Holdings, Inc. and Subsidiaries as of March 31, 2004 and December 31, 2003... F-23
Unaudited Consolidated Statements of Operations of GB Holdings, Inc. and Subsidiaries as of the three months ended March
31, 2004 and March 31, 2003.............................................................................................. F-25
Unaudited Consolidated Statements of Cash Flows of GB Holdings, Inc. and Subsidiaries as of the three months ended March
31, 2004 and March 31, 2003.............................................................................................. F-26
Notes to Unaudited Consolidated Financial Statements of GB Holdings, Inc. and Subsidiaries............................... F-27
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
Report of Independent Registered Public Accounting Firm.................................................................. F-29
Consolidated Balance Sheet of Atlantic Coast Entertainment Holdings, Inc. as of December 31, 2003........................ F-30
Unaudited Consolidated Balance Sheets of Atlantic Coast Entertainment Holdings, Inc. as of March 31, 2004................ F-32
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 Holdings, Inc. Pro Forma Condensed Consolidated Financial Statements........................ P-15
F-i
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of GB Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of GB Holdings,
Inc. and subsidiaries as of December 31, 2003 and 2002 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the two-year period ended December 31, 2003. In connection
with our audits of the 2003 and 2002 consolidated financial statements, we also
have audited the 2003 and 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 audits.
The 2001 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 2 to the consolidated financial statements, in their
report dated March 8, 2002.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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 provides a
reasonable basis for our opinion.
In our opinion, the 2003 and 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, 2003 and 2002,
and the results of their operations and their cash flows for each of the years
in the two-year period ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related 2003 and 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 2 to the consolidated financial statements, the company
adopted EITF 01-09, as of January 1, 2002.
As discussed above, the 2001 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 2, 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. We audited the
reclassifications described in Note 2 that were applied to revise the 2001
consolidated statement of operations. In our opinion, such reclassifications and
disclosures required by EITF 01-09 for 2001 as discussed in Note 2 are
appropriate and have been properly applied. However, we were not engaged to
audit, review, or apply any procedures to the 2001 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 consolidated financial statements taken as a whole.
/s/ KPMG LLP
Short Hills, New Jersey
February 27, 2004
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, 2001 and 2000
AND THE CONSOLIDATED STATEMENTS OF INCOME, SHAREHOLDERS' EQUITY/DEFICIT AND CASH
FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 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
DECEMBER 31, DECEMBER 31,
2003 2002
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents ............................................................ $ 33,454,000 $ 50,645,000
Accounts receivable, net of allowances of $5,918,000 and $11,301,000, respectively ... 5,247,000 4,976,000
Inventories .......................................................................... 2,222,000 1,857,000
Income tax deposits .................................................................. 1,365,000 1,359,000
Prepaid expenses and other current assets ............................................ 3,343,000 3,622,000
------------- -------------
Total current assets ............................................................... 45,631,000 62,459,000
------------- -------------
Property and Equipment:
Land ................................................................................. 54,344,000 54,344,000
Buildings and improvements ........................................................... 88,249,000 87,102,000
Equipment ............................................................................ 64,722,000 50,659,000
Construction in progress ............................................................. 2,111,000 3,612,000
------------- -------------
209,426,000 195,717,000
Less - accumulated depreciation and amortization ..................................... (40,013,000) (26,095,000)
------------- -------------
Property and equipment, net .......................................................... 169,413,000 169,622,000
------------- -------------
Other Assets:
Obligatory investments, net of allowances of $11,340,000 and $10,028,000, respectively 10,705,000 10,069,000
Other assets ......................................................................... 1,814,000 2,562,000
------------- -------------
Total other assets ................................................................. 12,519,000 12,631,000
------------- -------------
$ 227,563,000 $ 244,712,000
============= =============
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
DECEMBER 31, DECEMBER 31,
2003 2002
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................................................... $ 6,815,000 $ 5,598,000
Accrued liabilities -
Salaries and wages ........................................................... 3,570,000 3,717,000
Interest ..................................................................... 3,092,000 3,092,000
Gaming obligations ........................................................... 2,744,000 3,752,000
Insurance .................................................................... 2,505,000 1,805,000
Other ........................................................................ 3,473,000 3,955,000
------------- -------------
Total current liabilities .................................................... 22,199,000 21,919,000
------------- -------------
Long-Term Debt, net of current maturities ......................................... 110,000,000 110,000,000
------------- -------------
Other Noncurrent Liabilities ...................................................... 3,729,000 3,445,000
------------- -------------
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 ............................................................ (33,365,000) (15,652,000)
------------- -------------
Total shareholder's equity ................................................... 91,635,000 109,348,000
------------- -------------
$ 227,563,000 $ 244,712,000
============= =============
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
-----------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001
------------- ------------- -------------
Revenues:
Casino .......................................................... $ 183,036,000 $ 206,417,000 $ 232,369,000
Rooms ........................................................... 10,983,000 11,140,000 11,570,000
Food and beverage ............................................... 21,946,000 23,305,000 29,408,000
Other ........................................................... 3,925,000 3,739,000 4,683,000
------------- ------------- -------------
219,890,000 244,601,000 278,030,000
Less - promotional allowances ...................................... (49,632,000) (51,128,000) (62,281,000)
------------- ------------- -------------
Net revenues .................................................... 170,258,000 193,473,000 215,749,000
------------- ------------- -------------
Expenses:
Casino .......................................................... 131,117,000 143,189,000 168,676,000
Rooms ........................................................... 2,354,000 2,985,000 3,391,000
Food and beverage ............................................... 9,461,000 10,915,000 9,814,000
Other ........................................................... 3,117,000 2,625,000 3,374,000
General and administrative ...................................... 11,582,000 12,799,000 11,512,000
Depreciation and amortization, including provision for obligatory
investments ................................................... 16,244,000 15,457,000 12,133,000
Loss on impairment of fixed assets .............................. -- 1,282,000 --
(Gain) loss on disposal of assets ............................... (105,000) 185,000 20,000
------------- ------------- -------------
Total expenses ..................................................... 173,770,000 189,437,000 208,920,000
------------- ------------- -------------
Income (loss) from operations ...................................... (3,512,200) 4,036,000 6,829,000
------------- ------------- -------------
Non-operating income (expense):
Interest income ................................................. 627,000 1,067,000 2,671,000
Interest expense ................................................ (12,027,000) (11,640,000) (11,279,000)
Debt restructuring costs ........................................ (1,843,000) -- --
------------- ------------- -------------
Total non-operating expense, net ................................ (13,243,000) (10,573,000) (8,608,000)
------------- ------------- -------------
Loss before income taxes ........................................... (16,755,000) (6,537,000) (1,779,000)
Income tax provision ............................................ (958,000) (784,000) (55,000)
------------- ------------- -------------
Net loss ........................................................... $ (17,713,000) $ (7,321,000) $ (1,834,000)
============= ============= =============
Basic/diluted loss per common share ................................ $ (1.77) $ (0.73) $ (0.18)
============= ============= =============
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 YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
COMMON STOCK ADDITIONAL
PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- --------- -------------- ------------- -------------
BALANCE, JANUARY 1, 2001...................... 10,000,000 $100,000 $ 124,900,000 $ (6,497,000) $118,503,000
Net Loss................................... -- -- -- (1,834,000) (1,834,000)
=========== ========= ============== ============= =============
BALANCE, SEPTEMBER 31, 2001................... 10,000,000 $100,000 $ 124,900,000 $ (8,331,000) $116,669,000
Net Loss................................... -- -- -- (7,321,000) (7,321,000)
=========== ========= ============== ============= =============
BALANCE, DECEMBER 31, 2002.................... 10,000,000 $100,000 $ 124,900,000 $(15,652,000) $109,348,000
Net Loss................................... -- -- -- (17,713,000) (17,713,000)
=========== ========= ============== ============= =============
BALANCE, DECEMBER 31, 2003.................... 10,000,000 $100,000 $ 124,900,000 $(33,365,000) $ 91,635,000
=========== ========= ============== ============= =============
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
-------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001
------------ ------------ ------------
OPERATING ACTIVITIES:
Net loss ......................................................... $(17,713,000) $ (7,321,000) $ (1,834,000)
Adjustments to reconcile net loss to net cash (used in) provided
by operating activities:
Depreciation and amortization including provision for obligatory
investments ................................................. 16,244,000 15,457,000 12,133,000
Loss on impairment of fixed assets ............................. -- 1,282,000 --
(Gain) Loss on disposal of assets .............................. (105,000) 185,000 20,000
Provision for doubtful accounts, net ........................... 1,040,000 1,586,000 4,991,000
Deferred Income Tax benefit .................................... -- -- 292,000
(Increase) decrease in income tax deposits ..................... (6,000) (600,000) 400,000
Decrease (increase) in accounts receivable ..................... (1,312,000) 2,349,000 (2,930,000)
Decrease in accounts payable and accrued liabilities ........... (684,000) (3,124,000) (5,605,000)
Increase in other current assets ............................... (92,000) (426,000) 861,000
Net change in other noncurrent assets and liabilities .......... 358,000 285,000 (2,580,000)
------------ ------------ ------------
Net cash (used in) provided by operating activities ......... $ (2,270,000) $ 9,673,000 $ 5,748,000
============ ============ ============
INVESTING ACTIVITIES:
Purchase of property and equipment ............................... (12,825,000) (14,058,000) (23,095,000)
Proceeds from disposition of assets .............................. 110,000 320,000 4,000
Proceeds from sale of obligatory investments ..................... 130,000 208,000 114,000
Purchase of obligatory investments ............................... (2,336,000) (2,496,000) (2,838,000)
------------ ------------ ------------
Net cash used in investing activities ............................ (14,921,000) (16,026,000) (25,815,000)
------------ ------------ ------------
FINANCING ACTIVITIES:
Repayments of long-term debt ..................................... -- (371,000) (467,000)
------------ ------------ ------------
Net cash (used in) provided by financing activities .............. -- (371,000) (467,000)
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents ............. (17,191,000) (6,724,000) (20,534,000)
Cash and cash equivalents at beginning of period ................. 50,645,000 57,369,000 77,903,000
------------ ------------ ------------
Cash and cash equivalents at end of period ....................... $ 33,454,000 $ 50,645,000 $ 57,369,000
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid .................................................... $ 12,100,000 $ 12,128,000 $ 12,156,000
============ ============ ============
Interest capitalized ............................................. $ 300,000 $ 766,000 $ 1,207,000
============ ============ ============
Income taxes paid ................................................ $ 899,000 $ 1,764,000 $ 205,000
============ ============ ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated financial 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"), 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. Atlantic Coast Entertainment Holdings, Inc. ("Atlantic
Holdings") is a Delaware corporation and a wholly-owned subsidiary of GBHC.
Atlantic Holdings was formed in November 2003 for the purpose of the
contemplated exchange of $110 million 11% Notes due 2005 for $110 million 3%
Notes due 2008 to be issued by Atlantic Holdings. ACE Gaming LLC, ("ACE
Gaming"), a New Jersey limited liability company and a wholly-owned subsidiary
of Atlantic Holdings was formed in November 2003. Atlantic Holdings and its
subsidiary, ACE Gaming, had no operating activities in 2003. Holdings has no
operating activities and its only source of income is interest on cash
equivalent investments. Holdings only significant assets are its investment in
GBHC and its cash and cash equivalents of $16.6 million and $31.8 million as of
December 31, 2003 and 2002, respectively.
On July 14, 2003, a Form 8-K was filed with the SEC reporting that a
committee of the independent directors of the Company approved a proposed
restructuring of the Existing Notes, together with various other corporate
changes to be accomplished in connection with the proposed restructuring. In
connection with the foregoing, on November 13, 2003, Atlantic Holdings filed
with the SEC, a Registration Statement on Form S-4 (which contains a preliminary
prospectus), under the Securities Act of 1933, as amended (the "Securities
Act"), to transfer substantially all of the assets and liabilities of Holdings,
GBHC, and GB Property, to Atlantic Holdings, in exchange for Atlantic Holdings
issuance of 3% Notes due 2008 in exchange for the Existing Notes and the
cancellation of such Notes) and the registration of certain securities to be
issued to the stockholders of the Company; and, also on such date, Atlantic
Holdings and ACE Gaming filed with the SEC, a Registration Statement on Form S-4
under the Securities Act, with respect to a consent solicitation and exchange
offer with respect to the Existing Notes. Neither of such Registration
Statements have been declared effective and each was amended by filing Amendment
No. 1 to Form S-4/A on February 13, 2004. The Company and Atlantic Holdings also
filed with the SEC a schedule 13e-3, under the Securities and Exchange Act of
1934, with respect to such transactions, which was also amended by the filing of
a Schedule 13e-3/A on February 13, 2004.
The accompanying consolidated financial statements include the accounts and
operations of Holdings and its subsidiaries (Holdings, GBHC (and its
subsidiaries, Atlantic Holdings and ACE Gaming), and GB Property, 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 78,000 square
feet of gaming space containing approximately 2,202 slot machines and
approximately 73 table games; a hotel with 637 rooms (including 57 suites); five
restaurants; two cocktail lounges; 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.
F-8
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.
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 opening of a new casino during 2003 and the expected
expansion of the market's rooms inventory at pre-existing competitors in 2004.
On the Effective Date, GB Property'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 (the "Existing Notes"). Holders of the
Old Notes received a distribution of their pro rata shares of (i) the Existing
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.
Despite annual net losses and the 2003 negative net cash from operations,
Management believes that cash reserves, expected net cash flow from 2004
operations and additional financing will be adequate to meet the 2004 funding
requirements for operations, capital expenditures and refinancing debt. Based
upon expected cash flow generated from operations management determined that it
would be prudent for the Company to obtain a line of credit to provide
additional cash availability, to meet the Company working capital needs, in the
event that anticipated cash flow is less than expected or expenses exceed those
anticipated. At the request of the Company, Ealing Corp., a Nevada Corporation
and an affiliate of Mr. Icahn, agreed to provide a revolving credit facility,
secured by a first lien on all of the assets of the Company, under which the
Company may borrow up to an aggregate amount of $10 million for general working
capital purposes. Ealing's obligation to provide the financing pursuant to the
commitment letter is subject to the negotiation and execution of a definitive
loan and security agreements and related documents as well as certain customary
conditions. However, there can be no assurance that the loan agreement with
Ealing will be consummated, that if the loan agreement is not consummated, the
Company will be able to obtain financing from another lender on terms as or more
favorable than the terms of the commitment letter, or whether the Company will
need to borrow for working capital.
(2) 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.
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, 2002. 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 EITF 01-09, the 2001 statement of operations has been
reclassified to conform to the new presentation. This resulted in a $20.1
million increase in promotional allowance and a corresponding reduction in
casino expense for the year-end December 31, 2001. Application of the
requirements of EITF 01-09 did not have an impact on previously reported
operating income or net loss and had no impact on the previously reported
consolidated financial statements, which were adjusted to these standards at
December 31, 2002 for the prior period ended December 31, 2001.
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:
Year Ended Year Ended Year Ended
December 31, 2003 December 31, 2002 December 31, 2001
-------------------- -------------------- --------------------
Rooms............................................................ $ 7,253,000 $ 8,194,000 $ 8,139,000
Food and Beverage................................................ 18,270,000 19,846,000 26,409,000
Other............................................................ 2,611,000 2,223,000 4,614,000
------------- ------------- -------------
$28,134,000 $30,263,000 $39,162,000
============= ============= =============
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 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 $1,040,000, $1,586,000 and $4,991,000 for the years ended December 31, 2003,
2002 and 2001, respectively, were recorded in Casino Expenses on the
accompanying consolidated statements of operations.
F-10
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.
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's offering of $110,000,000 11%
Notes due 2005 (the "Existing Notes"). During 2002, additional costs associated
with a Consent Solicitation by GB Property to modify the original indenture for
the Existing Notes were capitalized and are also being amortized over the
remaining term of the Existing Notes. Total Consent Solicitation costs,
including expenses, amounted to $2,083,000 in 2001 (see Note 4). For the years
ended December 31, 2003, 2002 and 2001 amortization of deferred financing costs
were $555,000, $555,000 and $174,000, respectively.
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 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.
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, workers
compensation, 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.
F-11
INCOME TAXES -
Since 1999, Holdings' provision for federal income taxes is calculated and
paid on a consolidated basis with GB Property and GBHC.
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.
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 loss per share is equal to diluted loss per share. Basic loss
per share is computed by dividing net loss by the weighted average number of
common shares outstanding.
NEW ACCOUNTING PRONOUNCEMENTS -
On January 1, 2003, the Company adopted FAS No. 143, "Asset Retirement
obligations" ("FAS 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 did not have any impact on the Company's consolidated financial
statements.
On January 1, 2003, the Company adopted FAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure" ("FAS No. 148"), which
provides alternative methods of transition for companies that choose to switch
to the fair value method of accounting for stock options. FAS No. 148 also makes
changes in the disclosure requirements for stock-based compensation, regardless
of which method of accounting is chosen. The adoption of FAS No. 148 did not
have any impact on the Company's consolidated financial statements.
RECLASSIFICATIONS -
Certain reclassifications have been made to prior years' consolidated
financial statements to conform to the current year consolidated financial
statement presentations.
(3) LONG-TERM DEBT
Long-term debt is comprised of the following:
December 31, 2003 December 31, 2002
-------------------- --------------------
11% Notes, due September 29, 2005 (a)....................... $110,000,000 $10,000,000
(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 Existing Notes. Interest on the Existing Notes is payable on
March 29 and September 29, beginning March 29, 2002. The outstanding
principal is due on September 29, 2005. The Existing 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 Existing 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.
F-12
In a Consent Solicitation Statement and Consent Form dated September 14,
2001, GB Property sought the consent of holders of the Existing 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
Existing Notes in connection with, in anticipation of, as a result of, or
in relation to, an "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 Existing
Notes provided consents to the Modifications. Under the terms of the
original indenture, the consent of holders representing a majority in
principal amount of Existing Notes was a necessary condition to the
Modifications. Accordingly, GB Property, 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 Existing 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 Existing 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, 2003 the only scheduled payment of long-term debt is the
$110 million for Existing Notes, due September 29, 2005.
At December 31, 2003 and 2002, accrued interest on the Existing Notes was
$3,092,000 and $3,092,000, respectively.
F-13
(4) INCOME TAXES
The components of the (provision) benefit for income taxes as follows:
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001
------------ ------------ -----------
Federal income tax (provision) benefit
Current ........................... $ -- $ -- $(292,000)
Deferred .......................... -- -- 292,000
State income tax (provision) benefit
Current ........................... (958,000) (784,000) (55,000)
Deferred .......................... -- -- --
--------- --------- ---------
$(958,000) $(784,000) $ (55,000)
========= ========= =========
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, 2003 and 2002 were as
follows:
2003 2002
------------ ------------
Deferred tax assets:
Bad debt reserve .................................... $ 2,418,000 $ 5,137,000
Deferred financing costs ............................ 234,000 1,053,000
Group insurance ..................................... 747,000 936,000
Accrued vacation .................................... 613,000 732,000
Action cash awards accrual .......................... 123,000 499,000
Jackpot accrual ..................................... 298,000 337,000
Medical reserve ..................................... 408,000 109,000
Debt restructuring costs ............................ 754,000 --
CRDA ................................................ 5,724,000 5,512,000
Federal and state net operating loss carryforward ... 17,004,000 8,163,000
Grantors trust income ............................... 3,616,000 3,570,000
Credit and capital loss carryforwards ............... 3,385,000 2,421,000
Other ............................................... 297,000 330,000
------------ ------------
Total deferred tax assets ......................... 35,621,000 28,799,000
Less valuation allowance .......................... (17,685,000) (10,257,000)
------------ ------------
Total deferred tax assets after valuation allowance 17,936,000 18,542,000
------------ ------------
Deferred tax liabilities:
Noncurrent
Depreciation of plant and equipment ............... (17,812,000) (18,466,000)
Chips and tokens .................................. (124,000) (76,000)
------------ ------------
Total deferred tax liabilities ................. (17,936,000) (18,542,000)
------------ ------------
Net deferred tax assets (liabilities) ........ $ -- $ --
============ ============
Federal net operating loss carryforwards totaled approximately $39 million
as of December 31, 2003 and will begin expiring in the year 2022 and forward.
New Jersey net operating loss carryforwards totaled approximately $58 million as
of December 31, 2003. 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 2002 and 2003, for a two year period. As a result, about $6 million of
state net operating loss carryforwards set to expire in 2003 are extended to
2005. The Company also has general business credit carryforwards of
approximately $1.4 million which expire in
F-14
2004 through 2022. Additionally, as of December 2003, the Company has a federal
alternative minimum tax (AMT) credit carryforward of about $72,000 and a New
Jersey alternative minimum assessment (AMA) credit carryforward of approximately
$1.5 million, both of which can be carried forward indefinitely.
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. Management
believes that it is more likely than not that the tax benefits of certain of the
deductible temporary differences will be realized based on the future reversal
of existing temporary differences. As such, a valuation allowance has not been
provided for these deferred tax benefits Management has determined that the
realization of certain of the Company's deferred tax benefits is not more likely
than not and, as such, has provided a valuation allowance in the amount of $17.7
million and $10.3 million for 2003 and 2002, respectively.
The provision for income taxes differs from the amount computed at the
federal statutory rate as a result of the following:
Years Ended December 31,
----------------------------------
2003 2002
---------------- ---------------
Federal statutory rate (35.0)% (35.0)%
State taxes net of federal benefit (2.2)% (1.6)%
Permanent differences 0.2 % 0.9 %
Tax credits (5.2)% (13.2)%
Deferred tax valuation allowance 47.9 % 57.8 %
Other 0.0 % 3.1 %
---------------- ---------------
5.7 % 12.0 %
================ ===============
Holdings also had a change of ownership as defined under Internal Revenue
Code Section 382 upon the Effective Date. 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. 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 years ended December 31, 2003 and
2002, there was a charge to income tax provision of $778,000 and $774,000,
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 provision: the greater of a $350,000 minimum tax or a 7.5% tax
on adjusted net income of licensed casinos (the "Casino Net Income Tax) in State
fiscal years 2004 through 2006, with the proceeds deposited to the Casino
Revenue Fund. For the year ended December 31, 2003, $175,000 was charged to the
income tax provision related to the minimum Casino Net Income Tax, which is
payable in quarterly installments of $87,500 each.
(5) Transactions with related parties
GBHC's rights to the trade name "The 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. On September 29, 2000, High
River Limited Partnership assigned GBHC 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 for its assignment of these rights. Payment is made
directly to the owner of the Trade Name. For the years ended December 31, 2003,
2002 and 2001, the license fee amounted to $263,000, $272,000 and $268,000,
respectively.
The Stratosphere Casino Hotel & Tower (the "Stratosphere"), an entity
controlled by Carl C. Icahn, allocates a portion of certain executive salaries,
including the salary of Richard P. Brown, CEO of Holdings, as well as other
charges for tax preparation and travel to GBHC. Payments for such charges
incurred from the Stratosphere
F-15
for the year ended December 31, 2003 amounted to $191,000, including $106,000
for Mr. Brown's salary. There were no similar charges for the year ended
December 31, 2002.
On February 28, 2003, Operating 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. Payments for such charges incurred for the year ended December 31, 2003
amounted to $127,000.
During the years ended December 31, 2003 and 2002, GBHC borrowed $15.4
million and $6.5 million, respectively, from Holdings. This borrowing is
eliminated in the consolidation of, and has no impact on, the accompanying
consolidated financial statements.
On October 12, 2001, as a result of, and pursuant to the terms of, a
consent solicitation dated September 20, 2001 to holders of Existing Notes,
holders that consented were paid $17.50 for each $1,000 of principal amount of
notes held, the affiliates of Mr. Icahn were paid $1,118,677 because they
consented to certain amendments to the Indenture, dated as of September 29,
2000, among GB Property, as issuer. Holdings and Greate Bay Hotel, as
guarantors, and Wells Fargo Bank Minnesota, National Association, as Trustee.
(6) 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 NJCCA, 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.
In order to renew GBHC's casino license, the Commission must determine that
GBHC and Holdings are financially stable. In order to be found "financially
stable" under the NJCCA, GBHC and Holdings must demonstrate, among other things,
their ability to pay, exchange, or refinance debts that mature or otherwise
become due and payable during the license term, or to otherwise manage such
debts. Because the Existing Notes will become due during the period following
the renewal of the license in 2004, the Commission will require GBHC and
Holdings to indicate the efforts they will pursue or are pursuing to refinance
the Existing Notes prior to maturity and during the new license term. Currently,
the Commission is and will continue to monitor the efforts of GBHC and Holdings
to manage and refinance the Existing Notes. There has been no precedent of
non-renewal of a casino license in this situation.
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, 2003 and 2002, The Sands had purchased bonds totaling
$6,875,000 and $6,946,000, respectively. In addition, The Sands had remaining
funds on deposit and held in escrow by the CRDA at December 31, 2003 and 2002,
of $15,198,000 and $13,151,000, 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, 2003 and 2002, are net of
accumulated valuation allowances of $11,340,000 and $10,028,000, respectively,
based upon the estimated realizable values of the investments. Provisions for
valuation allowances for the years ended December 31, 2003, 2002 and 2001
amounted to $1,434,000, $1,521,000 and $1,341,000, respectively.
F-16
The Sands has, from time to time, contributed certain amounts held in
escrow by the CRDA to fund CRDA sponsored projects. During 2003, The Sands
donated $695,000 of its escrowed funds to CRDA sponsored projects. No specific
refund or future credit has been associated with the 2003 contributions. 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.
Prior to this, the CRDA had granted The Sands both cash refunds and waivers of
certain of its future Deposit obligations in consideration of similar
contributions. Other assets aggregating $621,000 and $811,000, respectively,
have been recognized on the accompanying consolidated balance sheets at December
31, 2003 and 2002, and are being amortized over a period of ten years commencing
with the completion of the projects. Amortization of other assets totaled
$205,000, $199,000 and $202,000 for the years ended December 31, 2003, 2002 and
2001, respectively, and are included in depreciation and amortization, including
provision for obligatory investments on the accompanying statements of
operations.
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, 2003,
The Sands had satisfied $2.1 million of this obligation.
(7) Commitments and Contingencies
LEGAL PROCEEDINGS -
Tax appeals on behalf of GBHC and the City of Atlantic City challenging the
amount of GBHC's real property assessments for tax years 1996 through 2003 are
pending before the NJ Tax Court.
In 2001, GBHC discovered certain failures relating to currency transaction
reporting which resulted in the failure of GBHC to file legally required
currency transaction reports. Following this discovery, GBHC self-reported the
situation to the applicable regulatory agencies. GBHC conducted an internal
examination of the matter and the New Jersey Division of Gaming Enforcement
conducted a separate review. There has not been an impact on GBHC's financial
reporting because of these failures, GBHC has revised internal control processes
and taken other measures to address the situation. In May 2003, GBHC was advised
by the Department of the Treasury that it will not pursue a civil penalty.
By letter dated January 23, 2004, Sheffield Enterprises, Inc. asserted
potential claims against The Sands under the Lanham Act for permitting a show
entitled The Main Event, to run at the Sands during 2001. Sheffield also asserts
certain copyright infringement claims growing out of the Main Event
performances. It has not yet been determined whether or not the claims made by
Sheffield would, if adversely determined, materially impact the financial
position or results of operations of the Company.
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 amicably resolved.
GBHC 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, GBHC 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, GBHC and certain of its officers, directors, agents and
employees, are subject to various legal and administrative proceedings
incidental to the business of GBHC, GBHC does not believe any proceedings
currently pending are material to the conduct of the business of GBHC.
F-17
LABOR RELATIONS -
The Sands has collective bargaining agreements with three unions that
represent approximately 818 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.
(8) 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 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%. In July 2003, the remaining obligation related to the Claridge
Administration Building acquisition was satisfied in full. The following month
the Claridge resumed payment of the monthly fee at the reduced amount of $20,000
per month.
(9) Employee Retirement Savings Plan
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 $406,000, $575,000, and
$700,000, for the years ended December 31, 2003, 2002 and 2001, respectively.
GBHC also contributes to multi-employer pension, health and welfare plans
for its union employees. For the years ended December 31, 2003 and 2002, GBHC
contributed $5,411,000 and $5,750,000, respectively.
(10) 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.
Existing Notes are valued at the market closing price on December 31, 2003
and 2002, respectively.
The estimated carrying amounts and fair values of Holdings' financial
instruments at December 31, 2003 and 2002 are as follows:
F-18
December 31, 2003 December 31, 2002
------------------------- ----------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ------------ ------------ ------------
Financial Assets:
Cash and cash equivalents $ 33,454,000 $ 33,454,000 $ 50,645,000 $ 50,645,000
Obligatory investments, net 10,705,000 10,705,000 10,069,000 10,069,000
Financial Liabilities:
Interest payable 3,092,000 3,092,000 3,092,000 3,092,000
Existing Notes 110,000,000 91,300,000 110,000,000 96,400,000
(11) Operating Leases
The Company leases certain equipment and property. Total lease expense was
$2.1 million and $2.5 million for the years ended December 31, 2003 and 2002,
respectively. The following table sets forth the future minimum rental
commitments for operating leases:
2004 $ 1,986,000
2005 1,967,000
2006 1,998,000
2007 1,998,000
2008 1,998,000
Thereafter 8,431,000
----------------
Total $ 18,378,000
================
(12) Debt Restructuring Costs
Management anticipates that the exchange of Existing Notes for $110 million
in 3% notes due 2008 will be accounted for as a modification of debt, as opposed
to an extinguishment of debt, in accordance with Emerging Issues Task Force
Issue No. 96-19, "Debtors Accounting for a Modification or Exchange of Debt
Instruments" ("EITF 96-19"). EITF 96-19 provides the quantitative method of
evaluating the exchange of debt as either a modification or an extinguishment of
debt, as well as the accounting treatment of related costs based on the results
of that evaluation. Guidance contained in EITF 96-19 indicates that costs
incurred with third-parties directly related to the modification of debt should
be expensed as incurred. Costs associated with the debt restructuring amounted
to $1.8 million during the year ended December 31, 2003. Further costs are
anticipated in 2004 related to the modification of debt.
(13) Subsequent Events
On January 13, 2004, the Securities and Exchange Commission granted GB
Holdings application to delist the Existing Notes from trading on the American
Stock Exchange. On January 14, 2004, the American Stock Exchange halted trading
on the Existing Notes and on February 2, 2004 trading resumed.
In January 2004, at the request of GB Holdings, Ealing Corp., a Nevada
corporation and an affiliate of Mr. Icahn, provided a commitment letter to GB
Holdings, dated January 30, 2004, in which Ealing agreed to provide a revolving
credit facility under which GB Holdings and its subsidiaries may borrow up to an
aggregate amount of $10 million to be used for general working capital purposes.
Under the terms of the commitment letter, the revolving credit facility will
expire on June 30, 2005, borrowings will bear interest at a rate of 10% per
annum, and obligations under the revolving credit facility will be secured by a
first lien on all of the assets of GB Holdings and its subsidiaries which will
be senior to either the liens securing the Existing Notes or the New Notes,
depending on when the loan is funded. Ealing's obligations to provide the
financing pursuant to the commitment letter is subject to the execution of a
definitive loan agreement and related documents and certain customary
conditions. However, there can be no assurance that the loan agreement with
Ealing will be consummated, that if the loan agreement with Ealing is not
consummated, the Company will be able to obtain financing from another lender on
terms as or more favorable than the terms of the commitment letter, or whether
the Company will need to borrow funds for working capital.
F-19
(14) Selected Quarterly Financial Data (Unaudited)
Quarter
------------------------------------------------------------------------
First Second Third Fourth
----------------- ---------------- ----------------- ----------------
Year Ended December 31, 2003
Net revenues $ 39,801,000 $ 46,030,000 $ 46,041,000 $ 38,386,000
================= ================ ================= ================
Income (loss) from operations $ (1,436,000) $ 2,468,000 $ (317,000) $ (4,227,000)
================= ================ ================= ================
Net loss $ (4,401,000) $ (507,000) $ (3,456,000) $ (9,349,000)
================= ================ ================= ================
Net loss per share $ (0.44) $ (0.05) $ (0.35) $ (0.93)
================= ================ ================= ================
Year Ended December 31, 2002
Net revenues $ 53,244,000 $ 49,582,000 $ 49,797,000 $ 40,850,000
================= ================ ================= ================
Income 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)
================= ================ ================= ================
INDEX TO FINANCIAL STATEMENT SCHEDULE
GB HOLDINGS, INC. AND SUBSIDIARIES
-- Report of Independent Public Accountants
-- Schedule II; Valuation and Qualifying Accounts
F-20
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 GB Holdings' 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-21
SCHEDULE II
GB HOLDINGS, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Additions
-----------------------------------------------------------------------
Amounts
Balance of Charged to Balance At
Beginning of Costs and End of
Period Expenses Deductions Period
---------------- --------------- ---------------- ----------------
Year Ended December 31, 2003:
Allowance for doubtful accounts receivable $ 11,301,000 $ 1,040,000 $ (6,423,000)(1) $ 5,918,000
Allowance for obligatory investments 10,028,000 1,434,000 (122,000)(2) 11,340,000
---------------- --------------- ---------------- ----------------
$ 21,329,000 $ 2,474,000 $ (6,545,000) $ 17,258,000
================ =============== ================ ================
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
================ =============== ================ ================
- --------------
(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.
F-22
GB HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
March 31, December 31,
2004 2003
------------- ------------
Current Assets:
Cash and cash equivalents $ 28,061,000 $ 33,454,000
Accounts receivable, net of allowances
of $5,220,000 and $5,918,000, respectively 5,172,000 5,247,000
Inventories 2,114,000 2,222,000
Income tax deposits 1,364,000 1,365,000
Prepaid expenses and other current assets 2,639,000 3,343,000
------------ ------------
Total current assets 39,350,000 45,631,000
------------ ------------
Property and Equipment:
Land 54,344,000 54,344,000
Buildings and improvements 88,262,000 88,249,000
Equipment 65,798,000 64,722,000
Construction in progress 3,141,000 2,111,000
------------ ------------
211,545,000 209,426,000
Less - accumulated depreciation and
amortization (43,528,000) (40,013,000)
------------ ------------
Property and equipment, net 168,017,000 169,413,000
------------ ------------
Other Assets:
Obligatory investments, net of allowances of
$11,702,000 and $11,340,000, respectively 10,875,000 10,705,000
Other assets 1,623,000 1,814,000
------------ ------------
Total other assets 12,498,000 12,519,000
------------ ------------
$219,865,000 $227,563,000
============ ============
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated financial statements.
F-23
GB HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(Unaudited)
March 31, December 31,
2004 2003
------------ ------------
Current Liabilities
Accounts payable $ 4,300,000 $ 6,815,000
Accrued liabilities -
Salaries and wages 4,027,000 3,570,000
Interest 67,000 3,092,000
Gaming obligations 2,885,000 2,744,000
Insurance 3,136,000 2,505,000
Other 3,156,000 3,473,000
------------ ------------
Total current liabilities 17,571,000 22,199,000
------------ ------------
Long-Term Debt, net of current maturities 110,000,000 110,000,000
------------ ------------
Other Noncurrent Liabilities 3,799,000 3,729,000
------------ ------------
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 100,000 100,000
Additional paid-in capital 124,900,000 124,900,000
Accumulated deficit (36,505,000) (33,365,000)
-------------- ------------
Total shareholders' equity 88,495,000 91,635,000
-------------- ------------
$ 219,865,000 $227,563,000
============== ============
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated financial statements.
F-24
GB HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
--------------------------------
2004 2003
------------- --------------
Revenues:
Casino $ 44,500,000 $ 43,639,000
Rooms 2,285,000 2,459,000
Food and beverage 4,988,000 4,664,000
Other 930,000 883,000
------------ -------------
52,703,000 51,645,000
Less - promotional allowances (11,254,000) (11,844,000)
------------- -------------
Net revenues 41,449,000 39,801,000
------------- -------------
Expenses:
Casino 30,331,000 31,886,000
Rooms 608,000 434,000
Food and beverage 2,090,000 2,056,000
Other 697,000 604,000
General and administrative 2,873,000 2,522,000
Depreciation and amortization,
including provision for obligatory investments 4,073,000 3,731,000
Loss on disposal of assets - 4,000
------------ -------------
Total expenses 40,672,000 41,237,000
------------ -------------
Income (loss) from operations 777,000 (1,436,000)
------------ -------------
Non-operating income (expense):
Interest income 111,000 189,000
Interest expense (3,051,000) (2,995,000)
Debt restructuring costs (710,000) -
------------ -------------
Total non-operating expense, net (3,650,000) (2,806,000)
------------ -------------
Loss before income taxes (2,873,000) (4,242,000)
Income tax provision (267,000) (159,000)
------------ -------------
Net loss $ (3,140,000) $ (4,401,000)
============ =============
Basic/diluted loss per common share $ (0.31) $ (0.44)
============ =============
Basic/diluted 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-25
GB HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
-------------------------------
2004 2003
------------- -------------
OPERATING ACTIVITIES:
Net loss $ (3,140,000) $ (4,401,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 4,073,000 3,731,000
Loss on disposal of assets -- 4,000
Provision for doubtful accounts 146,000 331,000
Increase in accounts receivable (71,000) (70,000)
Decrease in accounts payable
and accrued liabilities (4,679,000) (2,534,000)
Decrease in other current assets 813,000 1,282,000
Net change in other noncurrent assets and liabilities 91,000 92,000
------------ -------------
Net cash used in operating activities (2,767,000) (1,565,000)
------------ -------------
INVESTING ACTIVITIES:
Purchase of property and equipment (2,118,000) (1,903,000)
Proceeds from disposition of assets 9,000 2,000
Purchase of obligatory investments (517,000) (568,000)
------------ -------------
Net cash used in investing activities (2,626,000) (2,469,000)
------------ -------------
FINANCING ACTIVITIES:
Repayments of long-term debt -- --
------------ -------------
Net cash used in financing activities -- --
------------ -------------
Net decrease in cash and cash equivalents (5,393,000) (4,034,000)
Cash and cash equivalents at beginning of period 33,454,000 50,645,000
------------ -------------
Cash and cash equivalents at end of period $ 28,061,000 $ 46,611,000
============ =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 6,050,000 $ 6,050,000
============ =============
Interest capitalized $ 28,000 $ 91,000
============ =============
Income taxes paid $ 88,000 $ 31,000
============ =============
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
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT
(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 March 31, 2004 and the condensed consolidated results
of operations for the three months ended March 31, 2004 and 2003 have been made.
The results set forth in the condensed consolidated statement of operations for
the three months ended March 31, 2004 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 consolidated financial statements and notes
included in the Company's latest Form 10-K/A.
(2) INCOME TAXES
The components of the provision for income taxes are as follows:
Three Months Ending March 31,
-------------------------------
2004 2003
-------------- ------------
Federal income tax provision:
Current $ -- $ --
Deferred -- --
State income tax provision:
Current (267,000) (159,000)
Deferred -- --
-------------- ------------
$ (267,000) $ (159,000)
============== ============
Federal and State income tax 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 Federal income tax
benefits or provisions for the three months ended March 31, 2004.
For the three months ended March 31, 2004 and 2003, there was a charge to
income tax provision of $179,000 and $159,000, 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 provision: the
greater of a $350,000 minimum tax or a 7.5% tax on adjusted net income of
licensed casinos (the "Casino Net Income Tax) in State fiscal years 2004 through
2006 with the proceeds deposited to the Casino Revenue Fund. For the three
months ended March 31, 2004, $87,500 was charged to the income tax provision
related to the minimum Casino Net Income Tax, which is payable in quarterly
installments of $87,500 each.
(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 with 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
F-27
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 for its assignment of these rights.
Payment is made directly to the owner of the Trade Name. Such charges amounted
to $53,000 and $59,000, respectively, for the three months ended March 31, 2004
and 2003.
The Stratosphere Casino Hotel & Tower (the "Stratosphere"), an entity
controlled by Carl C. Icahn, allocates a portion of certain executive salaries,
including the salary of Richard P. Brown, CEO of Holdings, as well as other
charges for tax preparation and travel to GBHC. Payments for such charges
incurred from the Stratosphere for the three months ended March 31, 2004 and
2003 amounted to $106,000 and $42,000, respectively.
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. Payments for such charges incurred for the three months ended March 31,
2004 amounted to $41,000. No payments were made during the three months ended
March 31, 2003 related to this agreement.
(4) LEGAL PROCEEDINGS
Tax appeals on behalf of GBHC and the City of Atlantic City challenging the
amount of GBHC's real property assessments for tax years 1996 through 2003 are
pending before the NJ Tax Court.
By letter dated January 23, 2004, Sheffield Enterprises, Inc. asserted
potential claims against The Sands under the Lanham Act for permitting a show
entitled The Main Event, to run at The Sands during 2001. Sheffield also asserts
certain copyright infringement claims growing out of the Main Event
performances. It has not yet been determined whether or not the claims made by
Sheffield would, if adversely determined, materially impact the financial
position or results of operations of the Company.
GBHC is a party in various legal proceedings with respect to the conduct of
casino and hotel operations and has receiving employed related claims. Although
a possible range of losses cannot be estimated, in the opinion or management,
based upon the advice of counsel, GBHC 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.
(5) 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 loss per share are the same. Basic loss per
share is computed by dividing net loss by the weighted average number of common
shares outstanding.
(6) SUBSEQUENT EVENTS
On April 12, 2004, the Securities and Exchange Commission granted GB
Holdings application to delist the Existing Notes from trading on the American
Stock Exchange. On April 19, 2004, the American Stock Exchange delisted the
Existing Notes.
Recently, the casino industry, the CRDA and the New Jersey Sports and
Exposition Authority have agreed to a plan regarding New Jersey video lottery
terminals ("VLTs"). Although not final, under the plan, casinos will pay a total
of $96 million over a period of four years, of which $10 million will fund,
through project grants, North Jersey CRDA projects and $86 million will be paid
to the New Jersey Sports and Exposition Authority who will then subsidize
certain New Jersey horse tracks to increase purses and attract higher-quality
races that would allow them to compete with horse tracks in neighboring states.
In return, the race tracks and New Jersey have committed to postpone any
attempts to install VLTs for at least four years. $52 million of the $86 million
would be donated by the CRDA from the casinos' North Jersey obligations and $34
million would be paid by the casinos directly. It is currently estimated that
The Sands current CRDA deposits for North Jersey projects are sufficient to fund
The Sands proportionate obligations with respect to the $10 million and $52
million commitments. The Sands proportionate obligation with respect to the $34
million commitment is estimated to be approximately $1.4 million payable over a
four year period. The Sands proportionate obligation with respect to the
combined $10 million and $52 million commitment is estimated to be approximately
$2.6 million payable over a four year period.
F-28
Report of Independent Registered Public Accounting Firm
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 December 31, 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 the standards of the Public Company
Accounting Oversight Board (United States). 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 December 31, 2003, in
conformity with accounting principles generally accepted in the United States of
America.
KPMG LLP
/S/ KPMG LLP
- --------------------------------------
Short Hills, New Jersey
February 27, 2004
F-29
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31,
2003
------------
ASSETS
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-30
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 Holdings" 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. ACE Gaming LLC, a New Jersey limited liability
company and a wholly owned subsidiary of Atlantic Holdings was formed in
November, 2003. Atlantic Holdings and ACE Gaming LLC were 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 Holdings. The
contemplated exchange includes the transfer of substantially all of the assets
of GB Holdings, Inc. to Atlantic Holdings. The 3% Notes due 2008 to be issued
by Atlantic Holdings will be wholly and unconditionally guaranteed on a joint
and several basis by ACE Gaming LLC, Atlantic Holdings and its subsidiary.
ACE Gaming LLC had no operating activities in 2003.
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-31
AT ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, December 31,
2004 2003
-------------- ---------------
ASSETS
Current asset:
Cash...................................................................... $ 1,000 $ 1,000
-------------- ------------------
$ 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
-------------- ------------------
$ 1,000 $ 1,000
============== ==================
The accompanying note to the unaudited consolidated balance sheet is an
integral part of the consolidated financial statement.
F-32
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
NOTE TO UNAUDITED CONSOLIDATED BALANCE SHEET
(Unaudited)
NOTE 1: Description of Business and Basis of Presentation
Atlantic Coast Entertainment Holdings, Inc. ("Atlantic Holdings" 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. ACE Gaming LLC, a New Jersey limited liability company and a
wholly owned subsidiary of Atlantic Holdings was formed in November 2003.
Atlantic Holdings and ACE Gaming LLC were 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 Holdings. The contemplated exchange includes
the transfer of substantially all of the assets of GB Holdings, Inc. to Atlantic
Holdings. The 3% Notes due 2008 to be issued by Atlantic Holdings will be wholly
and unconditionally guaranteed on a joint and several basis by ACE Gaming LLC.
Atlantic Holdings and its subsidiary, ACE Gaming LLC had no operating activities
in 2004.
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-33
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
sheets and related notes of GB Holdings, Inc. and Subsidiaries have been
prepared as if the Transaction occurred on March 31, 2004 and the following
unaudited pro forma condensed consolidated statements of operations and related
notes reflect adjustments to GB Holdings, Inc. and Subsidiaries for the year
ended December 31, 2003 as if the Transaction occurred on January 1, 2003 and
give effect to the following:
(i) GB Holdings will transfer all of its assets (other than the stock of
GB Property and Greate Bay Hotel) and liabilities (other than its
obligations under the Existing Notes) to Greate Bay Hotel;
(ii) Greate Bay Hotel will transfer all of the assets which it received
from GB Holdings and substantially all of its assets (other than the
stock of Atlantic Holdings) and certain of its liabilities to
Atlantic Holdings (which will agree to issue New Notes in exchange
for Existing Notes and cancel such Notes); Atlantic Holdings will
subsequently transfer to ACE Gaming all of the assets and liabilities
(excluding the cash Atlantic Holdings pays to the holders of Existing
Notes that exchange) that it received from Greate Bay Hotel;
(iii) Effect of Atlantic Holdings offer to the holders of the outstanding
Existing Notes the opportunity to tender for exchange such Existing
Notes for (a) $100 in cash for every $1,000 in principal amount of
the Existing Notes exchanged in such Transaction assuming a 100%, 80%
and 58% exchange, (b) on a dollar for dollar basis, the New Notes,
and (c) a cash payment of accrued, but unpaid interest on the
Existing Notes;
(iv) Through a series of mergers, GB Property, Greate Bay Hotel, and GB
Holdings will merge and GB Holdings will be the surviving entity so
that the Existing Notes exchanged for the New Notes will be
cancelled; GB Holdings will own the Atlantic Holdings Securities
transferred by Atlantic Holdings; and Atlantic Holdings will be a
wholly-owned subsidiary of GB Holdings (immediately prior to the
completion of the Transaction);
(v) Assuming a 100% exchange, Atlantic Holdings will distribute 2,750,000
shares of its common stock to GB Holdings and GB Holdings will
distribute such stock to its stockholders, or assuming an 80% or 58%
exchange, Atlantic Holdings will distribute warrants to purchase
2,750,000 shares of Atlantic Holdings common stock, at an exercise
price of $.01 per share to GB Holdings and GB Holdings will
distribute such warrants to its stockholders. It is also assumed that
in a 100% exchange that GB Holdings will be dissolved.
The following unaudited pro forma condensed financial statements
assume that all Existing Notes held by affiliates of Carl C. Icahn (58% of the
Existing Notes) will be exchanged in their entirety and do not assume the impact
of converting the New Notes to common stock of Atlantic Coast Entertainment
Holdings, Inc. The transfer of net assets has been accounted for as an exchange
of net assets between entities under common control, whereby the entity
receiving the net assets shall initially recognize the assets and liabilities
transferred at their historical carrying amount in the accounts of the
transferring entity at the date of transfer (March 31, 2004 in the following
unaudited pro forma balance sheets). No gain or loss is recorded relating to the
transfer. The distribution of Atlantic Holdings common stock, assuming a 100%
exchange, to the shareholders of GB Holdings has also been accounted for as a
transfer of entities under common control as the stockholders of GB Holdings are
not receiving additional ownership rights.
P-1
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
ASSUMING 100% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
------------ -------------- -------------
Revenues:
Casino............................................................ $ 183,036 $ (183,036)(A) $ --
Rooms............................................................. 10,983 (10,983)(A) --
Food and beverage................................................. 21,946 (21,946)(A) --
Other............................................................. 3,925 (3,925)(A) --
------------ -------------- -------------
219,890 (219,890) --
Less - promotional allowances..................................... (49,632) 49,632 (A) --
------------ -------------- -------------
Net revenues.................................................... 170,258 (170,258) --
------------ -------------- -------------
Expenses:
Casino............................................................ 131,117 (131,117)(A) --
Rooms............................................................. 2,354 (2,354)(A) --
Food and beverage................................................. 9,461 (9,461)(A) --
Other............................................................. 3,117 (3,117)(A) --
General and administrative........................................ 11,582 (11,582)(A) --
Depreciation and amortization, including provision for obligatory
investments..................................................... 16,244 (16,244)(A) --
Gain on disposal of assets........................................ (105) 105 (A) --
------------ -------------- -------------
Total expenses.................................................. 173,770 (173,770) --
------------ -------------- -------------
Income (loss) from operations........................................ (3,512) 3,512 --
------------ -------------- -------------
Non-operating income (expense):
Interest income................................................... 627 (627)(A) --
Interest expense.................................................. (12,027) 12,027 (A) --
Debt restructuring costs.......................................... (1,843) 1,843 --
------------ -------------- -------------
Total non-operating expense, net.................................. (13,243) 13,243 --
------------ -------------- -------------
Income (loss) before income taxes.................................... (16,755) 16,755 --
Income tax provision.............................................. (958) (384)(J) (1,342)
------------ -------------- -------------
Net income (loss).................................................... $ (17,713) $ 16,371 $ (1,342)
============ ============== =============
Basic/diluted income (loss) per common share......................... $ (1.77) $ (0.13)
============ =============
Weighted average common shares outstanding........................... 10,000,000 10,000,000 (K)
============ =============
Ratio of earnings to fixed charges N/A
-------------
P-2
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
ASSUMING 80% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
------------- --------------- --------------
Revenues:
Casino.......................................................... $ 183,036 $ -- $ 183,036
Rooms........................................................... 10,983 -- 10,983
Food and beverage............................................... 21,946 -- 21,946
Other........................................................... 3,925 -- 3,925
------------- --------------- --------------
219,890 -- 219,890
Less - promotional allowances................................... (49,632) -- (49,632)
------------- --------------- --------------
Net revenues.................................................... 170,258 -- 170,258
------------- --------------- --------------
Expenses:
Casino.......................................................... 131,117 -- 131,117
Rooms........................................................... 2,354 -- 2,354
Food and beverage............................................... 9,461 -- 9,461
Other........................................................... 3,117 -- 3,117
General and administrative...................................... 11,582 -- 11,582
Depreciation and amortization, including provision for
obligatory investments........................................ 16,244 -- 16,012
Adjust deferred financing fees - Existing Notes................. (232)(C)
Gain on disposal of assets...................................... (105) -- (105)
------------- --------------- --------------
Total expenses................................................ 173,770 (232) 173,538
------------- --------------- --------------
Income (loss) from operations...................................... (3,512) 232 (3,280)
------------- --------------- --------------
Non-operating income (expense):
Interest income................................................. 627 -- 505
Adjust for lower invested balances............................ (122)(D)
Interest expense................................................ (12,027) 12,027 (E) (6,465)
Interest expense - Existing Notes............................. (2,420)(F)
Interest expense - New Notes.................................. (2,640)(G)
Amortize consent fee - New Notes.............................. (1,530)(H)
Adjust capitalized interest .................................. 125 (I)
Debt restructuring costs........................................ (1,843) (1,237)(B) (3,080)
------------- --------------- --------------
Total non-operating income (expense), net....................... (13,243) 4,203 (9,040)
------------- --------------- --------------
Income (loss) before income taxes.................................. (16,755) 4,435 (12,320)
Income tax provision............................................ (958) -- (J) (958)
------------- --------------- --------------
Net income (loss).................................................. $ (17,713) $ 4,435 $ (13,278)
============= =============== ==============
Basic/diluted loss per common share................................ $ (1.77) $ (1.33)
============= ==============
Weighted average common shares outstanding......................... 10,000,000 10,000,000(K)
============= ==============
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, 2003
ASSUMING 58% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
------------ -------------- ---------------
Revenues:
Casino.......................................................... $ 183,036 $ -- $ 183,036
Rooms........................................................... 10,983 -- 10,983
Food and beverage............................................... 21,946 -- 21,946
Other........................................................... 3,925 -- 3,925
------------ -------------- ---------------
219,890 -- 219,890
Less - promotional allowances................................... (49,632) -- (49,632)
------------ -------------- ---------------
Net revenues.................................................. 170,258 -- 170,258
------------ -------------- ---------------
Expenses:
Casino.......................................................... 131,117 -- 131,117
Rooms........................................................... 2,354 -- 2,354
Food and beverage............................................... 9,461 -- 9,461
Other........................................................... 3,117 -- 3,117
General and administrative...................................... 11,582 -- 11,582
Depreciation and amortization, including provision for
obligatory investments........................................ 16,244 -- 16,076
Adjust deferred financing fees - Existing Notes............... (168)(C)
Gain on disposal of assets...................................... (105) -- (105)
------------ -------------- ---------------
Total expenses................................................ 173,770 (168) 173,602
------------ -------------- ---------------
Income (loss) from operations...................................... (3,512) 168 (3,344)
------------ -------------- ---------------
Non-operating income (expense):
Interest income................................................. 627 -- 533
Adjust for lower invested balances............................ (94)(D)
Interest expense................................................ (12,027) 12,027 (E) (7,933)
Interest expense - Existing Notes............................. (5,082)(F)
Interest expense - New Notes.................................. (1,914)(G)
Amortize consent fee - New Notes.............................. (1,110)(H)
Adjust capitalized interest................................... 173 (I)
Debt restructuring costs........................................ (1,843) (1,237)(B) (3,080)
------------ -------------- ---------------
Total non-operating income (expense), net ...................... (13,243) 2,758 (10,480)
------------ -------------- ---------------
Income (loss) before income taxes.................................. (16,755) 2,926 (13,824)
Income tax provision............................................ (958) -- (J) (958)
------------ -------------- ---------------
Net income (loss).................................................. $ (17,713) $ 2,926 $ (14,782)
============ ============== ===============
Basic/ diluted loss per common share............................... $ (1.77) $ (1.48)
============ ===============
Weighted average common shares outstanding......................... 10,000,000 10,000,000(K)
===============
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, 2003
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 three months ended
December 31, 2003 as the result of the operations 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 the payments of consent fee, estimated transaction fees and
accelerated interest payments, exceeding the net of the benefit of
discontinued interest payments on Existing Notes. It is assumed that the
benefit of discontinued interest payments would not reduce interest bearing
cash equivalents and payments of consent fee, estimated transaction fees
and accelerated interest payments would reduce interest bearing cash
equivalents.
(E) Represents the reversal of historical interest expense.
(F) Represents interest expense on Existing Notes at the interest rate of 11%,
alternatively at $22 million and $46.2 million in aggregate principal for
an 80% and 58% exchange scenario, respectively.
(G) Represents interest expense on New Notes at the interest rate of 3%,
alternatively at $88 million and $63.8 million in the aggregate principal
for an 80% and 58% exchange scenario, respectively.
(H) Represents amortization expense using the interest method of the consent
fee paid (10% of the face value of the Existing Notes exchanged) upon
exchange of the Existing Notes for New Notes.
(I) Represents the capitalized interest using the lower effective interest rate
as a result of the issuance of the New Notes. Assumes the same level of
capital investment and construction periods but a lower effective rate of
interest.
(J) Represents the impact on the income tax provision as a result of the
Transaction and the aforementioned Pro Forma adjustments based on a Federal
tax rate of 35% and a state tax rate of 9%. The income tax provision
includes applicable tax expense from the New Jersey alternative minimum
assessment (AMA) enacted as part of the Business Tax Reform Act on July 2,
2002. The 100% assumption includes a tax provision at the parent level as a
result of debt discharge income that would be recognized without the
otherwise benefit of federal consolidated group tax attributes. When
assuming less than 100% of the exchange takes place federal consolidated
rules apply to permit the utilization of tax attributes of consolidated
group members to offset some or all of the debt discharge income.
(K) Assumes 10 million shares are issued and outstanding as of this date.
P-5
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004
ASSUMING 100% EXCHANGE
($ in thousands except per share data)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
--------------- -------------- -------------
Revenues:
Casino ...................................................... $ 44,500 $ (44,500)(A) $ --
Rooms ....................................................... 2,285 (2,285)(A) --
Food and beverage ........................................... 4,988 (4,988)(A) --
Other ....................................................... 930 (930)(A) --
--------------- --------------- --------------
52,703 (52,703) --
Less - promotional allowances ............................... (11,254) 11,254(A) --
--------------- --------------- --------------
Net revenues .............................................. 41,449 (41,449) --
--------------- --------------- --------------
Expenses:
Casino ...................................................... 30,331 (30,331)(A) --
Rooms ....................................................... 608 (608)(A) --
Food and beverage............................................ 2,090 (2,090)(A) --
Other ....................................................... 697 (697)(A) --
General and administrative .................................. 2,873 (2,873)(A) --
Depreciation and amortization, including provision for
obligatory investments .................................... 4,073 (4,073)(A) --
--------------- --------------- --------------
Total expenses............................................. 40,672 (40,672) --
--------------- --------------- --------------
Income (loss) from operations .................................. 777 (777) --
--------------- --------------- --------------
Non-operating income (expense):
Interest income ............................................. 111 (111)(A) --
Interest expense ............................................ (3,051) 3,051 (A) --
Debt restructuring costs .................................... (710) 710(A) --
--------------- --------------- --------------
Total non-operating income (expense), net ................... (3,650) 3,650 --
--------------- --------------- --------------
Income (loss) before income taxes .............................. (2,873) 2,873 --
Income tax provision ........................................ (267) 267 (A) --
--------------- --------------- --------------
Net income (loss) .............................................. $ (3,140) $ 3,140 $ --
=============== =============== ==============
Basic/diluted loss per common share ............................ $ (0.31) $ --
=============== ==============
Weighted average common shares outstanding ..................... 10,000,000 10,000,000 (A)
=============== ==============
Ratio of earnings to fixed charges ............................. -- --
--------------- --------------
P-6
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2004
($ IN THOUSANDS)
ASSUMING 100% EXCHANGE
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
------------ -------------- --------------
ASSETS:
Current Assets:
Cash and cash equivalents.......................................... $ 28,061 $ (28,061)(B) $ --
Accounts receivable, net of allowance of $5,220 5,172 (5,172)(B) --
Inventories........................................................ 2,114 (2,114)(B) --
Income tax deposits................................................ 1,364 (1,364)(B) --
Prepaid expenses and other current assets.......................... 2,639 (2,639)(B) --
------------ -------------- --------------
Total current assets............................................. 39,350 (39,350) --
------------ -------------- --------------
Property and Equipment:
Land............................................................... 54,344 (54,344)(B) --
Buildings and improvements......................................... 88,262 (88,262)(B) --
Equipment.......................................................... 65,798 (65,798)(B) --
Construction in progress........................................... 3,141 (3,141)(B) --
------------ -------------- --------------
211,545 (211,545) --
Less - accumulated depreciation and amortization...................... (43,528) 43,528 (B) --
------------ -------------- --------------
Property and equipment, net........................................... 168,017 (168,017) --
------------ -------------- --------------
Other Assets:
Obligatory investments, net of allowances of $11,702............... 10,875 (10,875)(B) --
Other assets....................................................... 1,623 (1,623)(B) --
------------ -------------- --------------
Total other assets............................................... 12,498 (12,498) --
------------ -------------- --------------
$ 219,865 $ (219,865) $ --
============ ============== ==============
LIABILITIES:
Current Liabilities
Accounts payable................................................... $ 4,300 $ (4,300)(B) $ --
Accrued liabilities -
Salaries and wages............................................... 4,027 (4,027)(B) --
Interest-Existing Notes.......................................... 67 (67)(B) --
Gaming obligations............................................... 2,885 (2,885)(B) --
Self-insurance................................................... 3,136 (3,136)(B) --
Other............................................................ 3,156 (3,156)(B) --
------------ -------------- --------------
Total current liabilities........................................ 17,571 (17,571) --
------------ -------------- --------------
Long-Term Debt - Existing Notes....................................... 110,000 (110,000)(B) --
------------ -------------- --------------
Other Noncurrent Liabilities.......................................... 3,799 (3,799)(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) --
Accumulated deficit................................................ (36,505) 36,505 (B) --
------------ -------------- --------------
Total shareholders' equity....................................... 88,495 (88,495) --
------------ -------------- --------------
$ 219,865 $ (219,865) $ --
============ ============== ==============
P-7
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2004
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 three months ended
March 31, 2004 as the result of the operations to be recorded by Atlantic
Coast Entertainment Holdings, Inc. and Subsidiary. Subsequent to the
distribution of 2,750,000 shares of common stock of Atlantic Coast
Entertainment Holdings, Inc. to the shareholders of GB Holdings, Inc.
retains no ownership interest in Atlantic Coast Entertainment Holdings,
Inc. and therefore does not include the operations of Atlantic Coast
Entertainment Holdings, Inc. in its condensed consolidated pro forma
financial statements.
Balance Sheet Adjustments
(B) Represents the removal of the assets and liabilities presented in the
balance sheet of GB Holdings, Inc. and Subsidiaries as of March 31, 2004 as
the result of the transfer of all assets and liabilities of Atlantic Coast
Entertainment Holdings, Inc. and Subsidiary. Subsequent to the distribution
of 2,750,000 shares of common stock of Atlantic Coast Entertainment
Holdings, Inc. to the shareholders of GB Holdings, Inc., GB Holdings, Inc.
retains no ownership interest in Atlantic Coast Entertainment Holdings,
Inc. and therefore does not include the operations of Atlantic Coast
Entertainment Holdings, Inc. in its condensed consolidated pro forma
financial statements. It is also assumed that GB Holdings, Inc. will be
dissolved.
P-8
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004
ASSUMING 80% EXCHANGE
($ in thousands except per share data)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
-------------- ---------------- -------------
Revenues:
Casino ...................................................... $ 44,500 $ -- $ 44,500
Rooms ....................................................... 2,285 -- 2,285
Food and beverage ........................................... 4,988 -- 4,988
Other ....................................................... 930 -- 930
-------------- ---------------- -------------
52,703 -- 52,703
Less - promotional allowances ............................... (11,254) -- (11,254)
-------------- ---------------- -------------
Net revenues .............................................. 41,449 -- 41,449
-------------- ---------------- -------------
Expenses: --
Casino ...................................................... 30,331 -- 30,331
Rooms ....................................................... 608 -- 608
Food and beverage............................................ 2,090 -- 2,090
Other ....................................................... 697 -- 697
General and administrative .................................. 2,873 -- 2,873
Depreciation and amortization, including provision for
obligatory investments .................................... 4,073 -- 4,015
Adjust deferred financing fees - Existing Notes (58) (B)
-------------- ---------------- -------------
Total expenses............................................. 40,672 (58) 40,614
-------------- ---------------- -------------
Income from operations ......................................... 777 58 835
-------------- ---------------- -------------
Non-operating income (expense):
Interest income ............................................. 111 -- 113
Adjust for lower invested balances 2 (C)
Interest expense ............................................ (3,051) 3,051 (D) (1,636)
Interest expense - Existing Notes (605) (E)
Interest expense - New Notes (660) (F)
Amortize consent fee - New Notes (383) (G)
Adjust capitalized interest 12 (H)
Debt restructuring costs .................................... (710) 710 (A) --
-------------- ---------------- -------------
Total non-operating income (expense), net ................... (3,650) 2,127 (1,523)
-------------- ---------------- -------------
Income (loss) before income taxes .............................. (2,873) 2,185 (688)
Income tax provision ........................................ (267) -- (267)
-------------- ---------------- -------------
Net income (loss) .............................................. $ (3,140) $ 2,185 $ (955)
============== ================ =============
Basic/diluted loss per common share ............................ $ (0.31) $ (0.10)
============== =============
Weighted average common shares outstanding ..................... 10,000,000 10,000,000 (I)
============== =============
Ratio of earnings to fixed charges ............................. -- --
-------------- -------------
P-9
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2004
($ IN THOUSANDS)
ASSUMING 80% EXCHANGE
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
------------- -------------- --------------
ASSETS:
Current Assets:
Cash and cash equivalents.......................................... $ 28,061 $ $ 18,680
Adjust for decreased cash balances (9,381)(J)
Accounts receivable, net of allowance of $5,220.................... 5,172 5,172
Inventories........................................................ 2,114 2,114
Income tax deposits................................................ 1,364 1,364
Prepaid expenses and other current assets.......................... 2,639 4,595
Add consent fee - New Notes 1,956 (K)
------------- -------------- --------------
Total current assets............................................. 39,350 (7,425) 31,925
------------- -------------- --------------
Property and Equipment:
Land............................................................... 54,344 -- 54,344
Buildings and improvements......................................... 88,262 -- 88,262
Equipment.......................................................... 65,798 -- 65,798
Construction in progress........................................... 3,141 -- 3,141
------------- -------------- --------------
211,545 -- 211,545
Less - accumulated depreciation and amortization...................... (43,528) -- (43,528)
------------- -------------- --------------
Property and equipment, net........................................... 168,017 -- 168,017
------------- -------------- --------------
Other Assets:
Obligatory investments, net of allowances of $11,702............... 10,875 -- 10,875
Other assets....................................................... 1,623 -- 8,467
Add consent fee - New Notes 6,844 (K)
------------- -------------- --------------
Total other assets............................................... 12,498 6,844 19,342
------------- -------------- --------------
$ 219,865 $ (581) $ 219,284
============= ============== ==============
LIABILITIES:
Current Liabilities
Accounts payable................................................... $ 4,300 $ -- $ 4,300
Accrued liabilities -
Salaries and wages............................................... 4,027 -- 4,027
Interest-Existing Notes.......................................... 67 (54)(L) 13
Gaming obligations............................................... 2,885 -- 2,885
Self-insurance................................................... 3,136 -- 3,136
Other............................................................ 3,156 -- 3,156
------------- -------------- --------------
Total current liabilities........................................ 17,571 (54) 17,517
------------- -------------- --------------
Long-Term Debt:.......................................................
Existing Notes 110,000 (88,000)(M) 22,000
New Notes - 88,000(M) 88,000
------------- -------------- --------------
Total Long-Term Debt 110,000 -- 110,000
------------- -------------- --------------
Other Noncurrent Liabilities.......................................... 3,799 -- 3,799
------------- -------------- --------------
Warrants in Atlantic Holdings -- 33,000 (N) 33,000
------------- -------------- --------------
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) (N) 91,900
Accumulated deficit................................................ (36,505) (527) (O) (37,032)
------------- -------------- --------------
Total shareholders' equity....................................... 88,495 (33,527) 54,968
------------- -------------- --------------
$ 219,865 $ (581) $ 219,284
============= ============== ==============
P-10
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004
ASSUMING 58% EXCHANGE
($ in thousands except per share data)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
--------------- ---------------- --------------
Revenues:
Casino ...................................................... $ 44,500 $ -- $ 44,500
Rooms ....................................................... 2,285 -- 2,285
Food and beverage ........................................... 4,988 -- 4,988
Other ....................................................... 930 -- 930
--------------- ---------------- --------------
52,703 -- 52,703
Less - promotional allowances ............................... (11,254) -- (11,254)
--------------- ---------------- --------------
Net revenues .............................................. 41,449 -- 41,449
--------------- ---------------- --------------
Expenses: --
Casino ...................................................... 30,331 -- 30,331
Rooms ....................................................... 608 -- 608
Food and beverage............................................ 2,090 -- 2,090
Other ....................................................... 697 -- 697
General and administrative .................................. 2,873 -- 2,873
Depreciation and amortization, including provision for
obligatory investments .................................... 4,073 -- 4,031
Adjust deferred financing fees - Existing Notes -- (42) (B)
--------------- ---------------- --------------
Total expenses............................................. 40,672 (42) 40,630
--------------- ---------------- --------------
Income from operations ......................................... 777 42 819
--------------- ---------------- --------------
Non-operating income (expense):
Interest income ............................................. 111 -- 112
Adjust for lower invested balances 1 (C)
Interest expense ............................................ (3,051) 3,051 (D) (2,011)
Interest expense - Existing Notes (1,271) (E)
Interest expense - New Notes (479) (F)
Amortize consent fee - New Notes (277) (G)
Adjust capitalized interest 16 (H)
Debt restructuring costs .................................... (710) 710 (A) --
--------------- ---------------- --------------
Total non-operating income (expense), net ................... (3,650) 1,751 (1,899)
--------------- ---------------- --------------
Income (loss) before income taxes .............................. (2,873) 1,793 (1,080)
Income tax provision ........................................ (267) -- (267)
--------------- ---------------- --------------
Net income (loss) .............................................. $ (3,140) $ 1,793 $ (1,347)
=============== ================ ==============
Basic/diluted income (loss) per common share ................... $ (0.31) $ (0.13)
=============== ==============
Weighted average common shares outstanding ..................... 10,000,000 10,000,000 (I)
=============== ==============
Ratio of earnings to fixed charges ............................. -- --
--------------- --------------
P-11
GB HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2004
($ IN THOUSANDS)
ASSUMING 58% EXCHANGE
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
------------- ------------- --------------
ASSETS:
Current Assets:
Cash and cash equivalents.......................................... $ 28,061 $ $ 21,115
Adjust for decreased cash balances (6,946) (J)
Accounts receivable, net of allowance of $5,220.................... 5,172 5,172
Inventories........................................................ 2,114 2,114
Income tax deposits................................................ 1,364 1,364
Prepaid expenses and other current assets.......................... 2,639 4,057
Add consent fee - New Notes 1,418 (K)
------------- ------------- --------------
Total current assets............................................. 39,350 (5,528) 33,822
------------- ------------- --------------
Property and Equipment:
Land............................................................... 54,344 -- 54,344
Buildings and improvements......................................... 88,262 -- 88,262
Equipment.......................................................... 65,798 -- 65,798
Construction in progress........................................... 3,141 -- 3,141
------------- ------------- --------------
211,545 -- 211,545
Less - accumulated depreciation and amortization...................... (43,528) -- (43,528)
------------- ------------- --------------
Property and equipment, net........................................... 168,017 -- 168,017
------------- ------------- --------------
Other Assets:
Obligatory investments, net of allowances of $11,702............... 10,875 -- 10,875
Other assets....................................................... 1,623 -- 6,585
Add consent fee - New Notes 4,962 (K)
------------- ------------- --------------
Total other assets............................................... 12,498 4,962 17,460
------------- ------------- --------------
$ 219,865 $ (566) $ 219,299
============= ============= ==============
LIABILITIES:
Current Liabilities
Accounts payable................................................... $ 4,300 $ -- $ 4,300
Accrued liabilities -
Salaries and wages............................................... 4,027 -- 4,027
Interest-Existing Notes.......................................... 67 (39) (L) 28
Gaming obligations............................................... 2,885 -- 2,885
Self-insurance................................................... 3,136 -- 3,136
Other............................................................ 3,156 -- 3,156
------------- ------------- --------------
Total current liabilities........................................ 17,571 (39) 17,532
------------- ------------- --------------
Long-Term Debt:.......................................................
Existing Notes 110,000 (63,800)(M) 46,200
New Notes -- 63,800(M) 63,800
------------- ------------- --------------
Total Long-Term Debt 110,000 -- 110,000
------------- ------------- --------------
Other Noncurrent Liabilities.......................................... 3,799 -- 3,799
------------- ------------- --------------
Warrants in Atlantic Holdings -- 33,700 (N) 33,700
------------- ------------- --------------
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 (33,700) (N) 91,200
Accumulated deficit................................................ (36,505) (527) (O) (37,032)
------------- ------------- --------------
Total shareholders' equity....................................... 88,495 (34,227) 54,268
------------- ------------- --------------
$ 219,865 $ (566) $ 219,299
============= ============= ==============
P-12
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
ASSUMING 80% AND 58% NOTE EXCHANGE
PRO FORMA ADJUSTMENTS
Statement of Operations Adjustments:
(A) Represents the elimination of transaction fees associated with the issuance
of the New Notes as it is assumed the transaction occurred on January 1,
2003.
(B) 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.
(C) Represents an increase in interest income as a result of higher cash
balances due to the elimination of interest payments on the existing notes
offset by the impact of the consent fee and estimated transaction fees.
(D) Represents the reversal of historical interest expense.
(E) Represents interest expense on Existing Notes at the interest rate of 11%,
alternatively at $22 million and $46.2 million in aggregate principal for
an 80% and 58% exchange scenario, respectively.
(F) Represents interest expense on New Notes at the interest rate of 3%,
alternatively at $88 million and $63.8 million in the aggregate principal
for an 80% and 58% exchange scenario, respectively.
(G) 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.
(H) Represents the capitalized interest using the lower effective interest rate
as a result of the issuance of the New Notes. Assumes the same level of
capital investment and construction periods but a lower effective rate of
interest.
(I) Assumes 10 million shares are issued and outstanding as of this date.
P-13
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2004
ASSUMING 80% AND 58% EXCHANGE
PRO FORMA ADJUSTMENTS
Balance Sheet Adjustments:
(J) Represents the net decrease in Cash and Cash Equivalents as of March 31,
2004. 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........................ 527,000 527,000
Accrued interest - Existing Notes............... 54,000 39,000
---------------- ---------------
$ 9,381,000 $ 6,946,000
================ ===============
(K) Represents consent fee (10% of the face value of Existing Notes exchanged)
paid upon exchange of Existing Notes for New Notes.
(L) Represents the payment of interest associated with the Existing Notes upon
exchange.
(M) Represents impact of the exchange of Existing Notes for New Notes on
long-term debt in accordance with the assumption of an 80% exchange or 58%
exchange.
(N) 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.
(O) Represents the net pro forma adjustment to retained earnings.
P-14
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
INTRODUCTION TO 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 sheets and
related notes of Atlantic Coast Entertainment Holdings, Inc. and Subsidiary have
been prepared as if the Transaction occurred on December 31, 2003 and the
following unaudited pro forma condensed consolidated statements of operations
and related notes reflect adjustments to Atlantic Coast Entertainment Holdings,
Inc. and Subsidiary for the year ended December 31, 2003 as if the Transaction
occurred on January 1, 2003 and give effect to the following:
(i) GB Holdings will transfer all of its assets (other than the stock
of GB Property and Greate Bay Hotel) and liabilities (other than
its obligations under the Existing Notes) to Greate Bay Hotel;
(ii) Greate Bay Hotel will transfer all of the assets which it
received from GB Holdings and substantially all of its assets
(other than the stock of Atlantic Holdings) and certain of its
liabilities to Atlantic Holdings (which will agree to issue New
Notes in exchange for Existing Notes and cancel such Notes);
Atlantic Holdings will subsequently transfer to ACE Gaming all of
the assets and liabilities (excluding the cash Atlantic Holdings
pays to the holders of Existing Notes that exchange) that it
received from Greate Bay Hotel;
(iii) Effect of Atlantic Holdings offer to the holders of the
outstanding Existing Notes the opportunity to tender for exchange
such Existing Notes for (a) $100 in cash for every $1,000 in
principal amount of the Existing Notes exchanged in such
Transaction assuming a 100%, 80% and 58% exchange, (b) on a
dollar for dollar basis, the New Notes, and (c) a cash payment of
accrued, but unpaid interest on the Existing Notes;
(iv) Through a series of mergers, GB Property, Greate Bay Hotel, and
GB Holdings will merge and GB Holdings will be the surviving
entity so that the Existing Notes exchanged for the New Notes
will be cancelled; GB Holdings will own the Atlantic Holdings
Securities transferred by Atlantic Holdings; and Atlantic
Holdings will be a wholly-owned subsidiary of GB Holdings
(immediately prior to the completion of the Transaction);
(v) Assuming a 100% exchange, Atlantic Holdings will distribute
2,750,000 shares of its common stock to GB Holdings and GB
Holdings will distribute such stock to its stockholders, or
assuming an 80% or 58% exchange, Atlantic Holdings will
distribute warrants to purchase 2,750,000 shares of Atlantic
Holdings common stock, at an exercise price of $.01 per share to
GB Holdings and GB Holdings will distribute such warrants to its
stockholders. It is also assumed that in a 100% exchange that GB
Holdings will be dissolved.
The following unaudited pro forma condensed financial statements assume
that all Existing Notes held by affiliates of Carl C. Icahn (58% of the Existing
Notes) will be exchanged in their entirety and do not assume the impact of
converting the New Notes to common stock of Atlantic Coast Entertainment
Holdings, Inc. The transfer of net assets has been accounted for as an exchange
of net assets between entities under common control, whereby the entity
receiving the net assets shall initially recognize the assets and liabilities
transferred at their historical carrying amount in the accounts of the
transferring entity at the date of transfer (December 31, 2003 in the following
unaudited pro forma balance sheets). No gain or loss is recorded relating to the
transfer. The distribution of Atlantic Holdings common stock assuming, a 100%
exchange, to the shareholders of GB Holdings has also been accounted for as a
transfer of entities under common control as the stockholders of GB Holdings are
not receiving additional ownership rights.
P-15
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
ASSUMING 100% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
IMPACT OF PRO FORMA ADJUSTMENTS
--------------------------------------------------------------
TRANSFER OF EXCHANGE PRO FORMA
HISTORICAL OPERATIONS OF DEBT AS ADJUSTED
------------- -------------- ------------ -------------
Revenues:
Casino........................................... $ -- $ 183,036 (A) $ -- $ 183,036
Rooms............................................ -- 10,983 (A) -- 10,983
Food and beverage................................ -- 21,946 (A) -- 21,946
Other............................................ -- 3,925 (A) -- 3,925
------------- -------------- ------------ -------------
-- 219,890 -- 219,890
Less - promotional allowances.................... -- (49,632)(A) -- (49,632)
------------- -------------- ------------ -------------
Net revenues................................... -- 170,258 -- 170,258
------------- -------------- ------------ -------------
Expenses:
Casino........................................... -- 131,117 (A) -- 131,117
Rooms............................................ -- 2,354 (A) -- 2,354
Food and beverage................................ -- 9,461 (A) -- 9,461
Other............................................ -- 3,117 (A) -- 3,117
General and administrative....................... -- 11,582 (A) -- 11,582
Depreciation and amortization, including
provision for obligatory investments........... -- 16,244 (A) -- 15,955
Adjust deferred financing fees - Existing Notes (289)(C)
Gain on disposal of fixed assets................. -- (105)(A) -- (105)
------------- -------------- ------------ -------------
Total expenses................................. -- 173,770 (289) 173,481
------------- -------------- ------------ -------------
Income (loss) from operations ...................... -- (3,512) 289 (3,223)
------------- -------------- ------------ -------------
Non-operating income (expense):
Interest income.................................. -- 627 (A) -- 488
Adjust for lower invested balances............. (139)(D)
Interest expense - New Notes..................... -- -- (3,300)(E) (5,131)
Amortize valuation allowance - New Notes....... (1,913)(F)
Adjust capitalized interest.................... . 82 (G)
Debt restructuring costs......................... -- (1,843)(A) (1,237)(B) (3,080)
------------- -------------- ------------ -------------
Total non-operating expense, net................. -- (1,216) (6,507) (7,723)
------------- -------------- ------------ -------------
Loss before income taxes............................ -- (4,728) (6,218) (10,946)
Income tax provision............................. -- (958)(H) -- (958)
------------- -------------- ------------ -------------
Net loss............................................ $ -- $ (5,686) $ (6,218) $ (11,904)
============= ============== ============ =============
Basic loss per common share......................... $ -- $ (4.33)(I)
============= =============
Diluted loss per common share....................... $ -- $ (4.33)(I)
============= =============
Weighted average common shares outstanding.......... -- 2,750,000 (I)
============= =============
Weighted average fully diluted common shares
outstanding...................................... -- 2,750,000 (I)
============= =============
Ratio of Earnings to Fixed Charges.................. -- --
------------ -------------
P-16
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
ASSUMING 80% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
IMPACT OF PRO FORMA ADJUSTMENTS
-------------------------------------------------------------------
TRANSFER OF EXCHANGE PRO FORMA
HISTORICAL OPERATIONS OF DEBT AS ADJUSTED
-------------- --------------- ------------- ---------------
Revenues:
Casino....................................... $ -- $ 183,036 (A) $ -- $ 183,036
Rooms........................................ -- 10,983 (A) -- 10,983
Food and beverage............................ -- 21,946 (A) -- 21,946
Other........................................ -- 3,925 (A) -- 3,925
-------------- --------------- ------------- ---------------
-- 219,890 -- 219,890
Less - promotional allowances................ -- (49,632)(A) -- (49,632)
-------------- --------------- ------------- ---------------
Net revenues............................... -- 170,258 -- 170,258
-------------- --------------- ------------- ---------------
Expenses:
Casino....................................... -- 131,117 (A) -- 131,117
Rooms........................................ -- 2,354 (A) -- 2,354
Food and beverage............................ -- 9,461 (A) -- 9,461
Other........................................ -- 3,117 (A) -- 3,117
General and administrative................... -- 11,582 (A) -- 11,582
Depreciation and amortization, including
provision for obligatory investments....... -- 16,244 (A) -- 15,902
Adjust deferred financing fees - Existing
Notes................................... (342)(C)
Gain on disposal of assets................... -- (105)(A) -- (105)
-------------- --------------- ------------- ---------------
Total expenses (income).................... -- 173,770 (342) 173,428
-------------- --------------- ------------- ---------------
Income (loss) from operations................... -- (3,512) 342 (3,170)
-------------- --------------- ------------- ---------------
Non-operating income (expense):
Interest income.............................. -- 627 (A) 505
Adjust for lower invested balances......... (122)(D)
Interest expense - New Notes................. -- -- (2,640)(E) (4,088)
Amortize consent fees - New Notes.......... (1,530)(F)
Adjust capitalized interest................ 82 (G)
Debt restructuring costs..................... -- (1,843)(A) (1,237)(B) (3,080)
-------------- --------------- ------------- ---------------
Total non-operating expense, net............. -- (1,216) (5,447) (6,663)
-------------- --------------- ------------- ---------------
Loss before income taxes........................ -- (4,728) (5,105) (9,833)
Income tax provision......................... -- (958)(H) -- (958)
-------------- --------------- ------------- ---------------
Net loss........................................ $ -- $ (5,686) $ (5,105) $ (10,791)
============== =============== ============= ===============
Basic loss per common share..................... $ -- $ (7.44)(I)
============== ===============
Diluted loss per common share................... $ -- $ (7.44)(I)
============== ===============
Weighted average common shares outstanding...... -- 1,450,000 (I)
============== ===============
Weighted average fully diluted common shares
outstanding.................................. -- 1,450,000 (I)
============== ===============
Ratio of earnings to fixed charges.............. -- --
-------------- ---------------
P-17
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
ASSUMING 58% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
IMPACT OF PRO FORMA ADJUSTMENTS
---------------------------------------------------------------
TRANSFER OF EXCHANGE PRO FORMA
HISTORICAL OPERATIONS OF DEBT AS ADJUSTED
------------- -------------- ------------ --------------
Revenues:
Casino......................................... $ -- $ 183,036 (A) $ -- $ 183,036
Rooms.......................................... -- 10,983 (A) -- 10,983
Food and beverage.............................. -- 21,946 (A) -- 21,946
Other.......................................... -- 3,925 (A) -- 3,925
------------- -------------- ------------ --------------
-- 219,890 -- 219,890
Less - promotional allowances.................. -- (49,632)(A) -- (49,632)
------------- -------------- ------------ --------------
Net revenues................................. -- 170,258 -- 170,258
------------- -------------- ------------ --------------
Expenses:
Casino......................................... -- 131,117 (A) -- 131,117
Rooms.......................................... -- 2,354 (A) -- 2,354
Food and beverage.............................. -- 9,461 (A) -- 9,461
Other.......................................... -- 3,117 (A) -- 3,117
General and administrative..................... -- 11,582 (A) -- 11,582
Depreciation and amortization, including
provision for obligatory investments......... -- 16,244 (A) -- 15,843
Adjust deferred financing fees - Existing
Notes..................................... (401)(C)
Gain on disposal of assets..................... -- (105)(A) -- (105)
------------- -------------- ------------ --------------
Total expenses (income)...................... -- 173,770 (401) 173,369
------------- -------------- ------------ --------------
Income (loss) from operations..................... -- (3,512) 401 (3,111)
------------- -------------- ------------ --------------
Non-operating income(expense):
Interest income................................ -- 627 (A) 533
Adjust for lower invested balances........... (94)(D)
Interest expense - New Notes................... -- -- (1,914)(E) (2,942)
Amortize consent fee - New Notes............. (1,110)(F)
Adjust capitalized interest.................. 82 (G)
Debt restructuring costs....................... -- (1,843)(A) (1,237)(B) (3,080)
------------- -------------- ------------ --------------
Total non-operating expense, net............... -- (1,216) (4,273) (5,489)
------------- -------------- ------------ --------------
Loss before income taxes.......................... -- (4,728) (3,872) (8,600)
Income tax provision........................... -- (958)(H) -- (958)
------------- -------------- ------------ --------------
Net loss.......................................... $ -- $ (5,686) $ (3,872) $ (9,558)
============= ============== ============ ==============
Basic loss per common share....................... $ -- $ (3.14)(I)
============= ==============
Diluted loss per common share..................... $ -- $ (3.14)(I)
============= ==============
Weighted average common shares outstanding........ -- 3,045,000 (I)
============= ==============
Weighted average fully diluted common shares
outstanding.................................... -- 3,045,000 (I)
============= ==============
Ratio of earnings to fixed charges................ -- --
------------- --------------
P-18
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2003
AND AS OF DECEMBER 31, 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 and Subsidiaries for the year ended
December 31, 2003 (exclusive of any interest attributed to the Existing
Notes) as the result of operations are to be recorded by Atlantic Holdings
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 and
Subsidiaries.
(D) Represents a decrease in interest income as a result of lower cash balances
due to the 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 12/31/03.......... $ 3,300,000 $ 2,640,000 $ 1,914,000
(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 on September 29, 2008.
(G) Represent the capitalized interest using the lower effective interest rate
as a result of the issuance of the New Notes. Assumes the same level of
capital investment and construction periods but a lower effective rate of
interest.
(H) The income tax provision includes any applicable tax expense from the New
Jersey alternative minimum assessment (AMA) enacted as part of the Business
Tax Reform Act on July 2, 2002 and for periods ended after July 2003 a
minimum casino income tax provision.
(I) New Notes may be exchanged for shares of common stock of Atlantic Coast
Entertainment Holdings, Inc. under certain circumstances according to the
Stated Ratio, as defined. Atlantic Coast Entertainment Holdings, Inc. fully
diluted shares calculation by exchange scenario is as follows assuming a
Stated Ratio of 65.909 shares of common stock of Entertainment Holdings,
Inc. per $1,000 principal amount of New Notes:
In a less than 100% exchange scenario, warrants will be issued to the
shareholders of GB Holdings, Inc., allowing them to purchase up to
2,750,000 shares of common stock of Atlantic Coast Entertainment Holdings,
Inc.
P-19
100% 80% 58%
exchange exchange exchange
----------------- ----------------- ------------------
Convertible notes equivalent shares.......... 7,250,000 7,250,000 7,250,000
Exchange percentage.......................... 100% 80% 58%
----------------- ----------------- ------------------
Shares available to New Note holders......... 7,250,000 5,800,000 4,205,000
Shares available to Warrant holders.......... -- 2,750,000 2,750,000
Shares issued and outstanding................ 2,750,000 1,450,000 3,045,000
----------------- ----------------- ------------------
Total common stock equivalents............... 10,000,000 10,000,000 10,000,000
================= ================= ==================
In all pro forma statement of operations presented, Atlantic Coast
Entertainment Holdings, Inc. has a net loss. Therefore, the diluted
weighted average shares outstanding are the same as basic for all periods
presented. The effect of assuming the conversion of the New Notes would be
antidilutive. Since the Warrants are only exercisable under specific
conditions which are contingent upon future events, they will not be
included in determining the diluted weighted average shares outstanding
until the resolution of such contingencies.
The calculations of income loss per common share are presented below:
For the Year Ended December 31, 2003
100% 80% 58%
exchange exchange exchange
----------------- ------------------ ------------------
Numerator
Net loss.................................... $ (11,904,000) $ (10,791,000) $ (9,558,000)
Denominator
Weighted average number of common shares
outstanding - basic and dilutive.......... 2,750,000 1,450,000 3,045,000
----------------- ------------------ ------------------
Basic and dilutive loss per common share..... $ (4.33) $ (7.44) $ (3.14)
================= ================== ==================
P-20
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004
ASSUMING 100% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
IMPACT OF PRO FORMA ADJUSTMENTS
--------------------------------------------------------------
TRANSFER OF EXCHANGE PRO FORMA
HISTORICAL OPERATIONS OF DEBT AS ADJUSTED
------------ -------------- ------------ --------------
Revenues:
Casino........................................... $ -- $ 44,500 (A) $ -- $ 44,500
Rooms............................................ -- 2,285 (A) -- 2,285
Food and beverage................................ -- 4,988 (A) -- 4,988
Other............................................ -- 930 (A) -- 930
------------ -------------- ------------ --------------
-- 52,703 -- 52,703
Less - promotional allowances.................... -- (11,254)(A) -- (11,254)
------------ -------------- ------------ --------------
Net revenues................................... -- 41,449 -- 41,449
------------ -------------- ------------ --------------
Expenses:
Casino........................................... -- 30,331 (A) -- 30,331
Rooms............................................ -- 608 (A) -- 608
Food and beverage................................ -- 2,090 (A) -- 2,090
Other............................................ -- 697 (A) -- 697
General and administrative....................... -- 2,873 (A) -- 2,873
Depreciation and amortization, including
provision for obligatory investments........... -- 4,073 (A) -- 4,001
Adjust deferred financing fees - Existing Notes -- (72)(C) --
------------ -------------- ------------ --------------
Total expenses (income)................... -- 40,672 (72) 40,600
------------ -------------- ------------ --------------
Income from operations.............................. -- 777 72 849
------------ -------------- ------------ --------------
Non-operating income (expense):
Interest income.................................. -- 111 (A) -- 115
Adjust for higher invested balances............ 4 (D)
Interest expense - New Notes..................... -- -- (825)(E) (1,295)
Amortize valuation allowance - New Notes....... -- (478)(F)
Adjust capitalized interest.................... 8 (G)
Debt restructuring costs......................... -- (710)(A) 710(B) --
------------ -------------- ------------ --------------
Total non-operating expense, net................. -- (599) (581) (1,180)
------------ -------------- ------------ --------------
Income (loss) before income taxes................... -- 178 (509) (331)
Income tax provision............................. -- (267)(H) -- (267)
------------ -------------- ------------ --------------
Net loss............................................ $ -- $ (89) $ (509) $ (598)
============ ============== ============ ==============
Basic loss per common share......................... $ -- $ (0.22) (R)
============ ==============
Diluted loss per common share....................... $ -- $ (0.22) (R)
============ ==============
Weighted average common shares outstanding.......... -- 2,750,000 (R)
============ ==============
Weighted average fully diluted common shares
outstanding...................................... -- 2,750,000 (R)
============ ==============
Ratio of Earnings to Fixed Charges.................. -- --
------------ --------------
P-21
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2004
($ IN THOUSANDS)
ASSUMING 100% EXCHANGE
IMPACT OF PRO FORMA ADJUSTMENTS
---------------------------------------------------------------
TRANSFER OF EXCHANGE PRO FORMA
HISTORICAL OPERATIONS OF DEBT AS ADJUSTED
------------ -------------- ------------- --------------
ASSETS:
Current Assets:
Cash and cash equivalents............................ $ 1 $ 28,061 (I) $ -- $ 16,468
Adjust for decreased cash balances ................ (11,594)(J)
Accounts receivable, net of allowance of $5,220...... 5,172 (I) -- 5,172
Inventories ......................................... -- 2,114 (I) -- 2,114
Income tax deposits ................................. -- 1,364 (I) -- 1,364
Prepaid expenses and other current assets............ -- 2,639 (I) -- 5,083
Add consent Fees - New Notes....................... -- -- 2,444 (K) --
------------ -------------- ------------- --------------
Total current assets............................... 1 39,350 (9,150) 30,201
------------ -------------- ------------- --------------
Property and Equipment:
Land................................................. -- 54,344 (I) -- 54,344
Buildings and improvements........................... -- 88,262 (I) -- 88,262
Equipment............................................ 65,798 (I) -- 65,798
Construction in progress............................. -- 3,141 (I) -- 3,141
------------ -------------- ------------- --------------
-- 211,545 -- 211,545
Less - accumulated depreciation and amortization..... -- (43,528)(I) -- (43,528)
------------ -------------- ------------- --------------
Property and equipment, net.......................... -- 168,017 -- 168,017
------------ -------------- ------------- --------------
Other Assets:...........................................
Obligatory investments, net of allowances of $11,702. -- 10,875 (I) -- 10,875
Other assets......................................... -- 1,623 (I) -- 10,179
Add consent Fees - New Notes....................... -- -- 8,556 (K) --
------------ -------------- ------------- --------------
Total other assets................................. -- 12,498 8,556 21,054
------------ -------------- ------------- --------------
$ 1 $ 219,865 $ (594) $ 219,272
============ ============== ============= ==============
LIABILITIES:
Current Liabilities
Accounts payable..................................... $ -- $ 4,300 (I) $ -- $ 4,300
Accrued liabilities..................................
Salaries and wages................................. -- 4,027 (I) -- 4,027
Interest........................................... -- 67 (I) (67)(O) --
Gaming obligations................................. -- 2,885 (I) -- 2,885
Insurance.......................................... -- 3,136 (I) -- 3,136
Other.............................................. -- 3,156 (I) -- 3,156
------------ -------------- ------------- --------------
Total current liabilities.......................... -- 17,571 (67) 17,504
------------ -------------- ------------- --------------
Long-Term Debt, net of current maturities............... -- -- 110,000 (L) 110,000
------------ -------------- ------------- --------------
Other Noncurrent Liabilities............................ 3,799 (I) -- 3,799
------------ -------------- ------------- --------------
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 (M) -- 28
Additional paid-in capital........................... 1 198,467 (N) (110,527)(N) 87,941
Accumulated deficit.................................. -- -- -- --
------------ -------------- ------------- --------------
Total shareholders' equity......................... 1 198,495 (110,527) 87,969
------------ -------------- ------------- --------------
$ 1 $ 219,865 $ (594) $ 219,272
============ ============== ============= ==============
P-22
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004
ASSUMING 80% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
IMPACT OF PRO FORMA ADJUSTMENTS
-------------------------------------------------------------
TRANSFER OF EXCHANGE PRO FORMA
HISTORICAL OPERATIONS OF DEBT AS ADJUSTED
------------ ------------- ------------- -------------
Revenues:
Casino....................................... $ -- $ 44,500 (A) $ -- $ 44,500
Rooms........................................ -- 2,285 (A) -- 2,285
Food and beverage............................ -- 4,988 (A) -- 4,988
Other........................................ -- 930 (A) -- 930
------------ ------------- ------------- -------------
-- 52,703 -- 52,703
Less - promotional allowances................ -- (11,254)(A) -- (11,254)
------------ ------------- ------------- -------------
Net revenues............................... -- 41,449 -- 41,449
------------ ------------- ------------- -------------
Expenses:
Casino....................................... -- 30,331 (A) -- 30,331
Rooms........................................ -- 608 (A) -- 608
Food and beverage............................ -- 2,090 (A) -- 2,090
Other........................................ -- 697 (A) -- 697
General and administrative................... -- 2,873 (A) -- 2,873
Depreciation and amortization, including
provision for obligatory investments....... -- 4,073 (A) -- 3,987
Adjust deferred financing fees - Existing
Notes................................... (86)(C)
------------ ------------- ------------- -------------
Total expenses (income).................... -- 40,672 (86) 40,586
------------ ------------- ------------- -------------
Income from operations.......................... -- 777 86 863
------------ ------------- ------------- -------------
Non-operating income (expense):
Interest income.............................. -- 111 (A) -- 113
Adjust for higher invested balances........ 2 (D)
Interest expense - New Notes................. -- -- (660)(E) (1,035)
Amortize consent fees - New Notes.......... (383)(F)
Adjust capitalized interest................ 8 (G)
Debt restructuring -- (710)(A) 710 (B) --
------------ ------------- ------------- -------------
Total non-operating expense, net............. -- (599) (323) (922)
------------ ------------- ------------- -------------
Income (loss) before income taxes............... -- 178 (237) (59)
Income tax provision......................... -- (267)(H) -- (267)
------------ ------------- ------------- -------------
Net loss........................................ $ -- $ (89) $ (237) $ (326)
============ ============= ============= =============
Basic loss per common share..................... $ -- $ (.22) (R)
============ =============
Diluted loss per common share................... $ -- $ (.22) (R)
============ =============
Weighted average common shares outstanding...... -- 1,450,000 (R)
============ =============
Weighted average fully diluted common shares
outstanding.................................. -- 1,450,000 (R)
============ =============
Ratio of earnings to fixed charges.............. --
-------------
P-23
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2004
($IN THOUSANDS)
ASSUMING 80% EXCHANGE
IMPACT OF PRO FORMA ADJUSTMENTS
-------------------------------------------------------------
TRANSFER OF EXCHANGE PRO FORMA
HISTORICAL OPERATIONS OF DEBT AS ADJUSTED
------------ ------------- ------------ --------------
ASSETS:
Current Assets:
Cash and cash equivalents............................ $ 1 $ 28,061 (I) $ -- $ 18,681
Adjust for decreased cash balances ................ (9,381)(J)
Accounts receivable, net of allowance of $5,220...... 5,172 (I) -- 5,172
Inventories ......................................... -- 2,114 (I) -- 2,114
Income tax deposits ................................. -- 1,364 (I) -- 1,364
Prepaid expenses and other current assets............ -- 2,639 (I) -- 4,595
Add consent Fees - New Notes....................... -- -- 1,956 (K)
------------ ------------- ------------ --------------
Total current assets............................... 1 39,350 (7,425) 31,926
------------ ------------- ------------ --------------
Property and Equipment:
Land................................................. -- 54,344 (I) -- 54,344
Buildings and improvements........................... -- 88,262 (I) -- 88,262
Equipment............................................ 65,798 (I) -- 65,798
Construction in progress............................. -- 3,141 (I) -- 3,141
------------ ------------- ------------ --------------
-- 211,545 -- 211,545
Less - accumulated depreciation and amortization..... -- (43,528)(I) -- (43,528)
------------ ------------- ------------ --------------
Property and equipment, net.......................... -- 168,017 -- 168,017
------------ ------------- ------------ --------------
Other Assets:...........................................
Obligatory investments, net of allowances of $11,702. -- 10,875 (I) -- 10,875
Other assets......................................... -- 1,623 (I) -- 8,273
Deduct deferred financing fees - Existing Notes -- -- (194)(Q) --
Add consent Fees - New Notes....................... -- -- 6,844 (K) --
------------ ------------- ------------ --------------
Total other assets................................. -- 12,498 6,650 19,148
------------ ------------- ------------ --------------
$ 1 $ 219,865 $ (775) $ 219,091
============ ============= ============ ==============
LIABILITIES:
Current Liabilities
Accounts payable..................................... $ -- $ 4,300 (I) $ -- $ 4,300
Accrued liabilities..................................
Salaries and wages................................. -- 4,027 (I) -- 4,027
Interest........................................... -- 67 (I) (54)(O) 13
Gaming obligations................................. -- 2,885 (I) -- 2,885
Insurance.......................................... -- 3,136 (I) -- 3,136
Other.............................................. -- 3,156 (I) -- 3,156
------------ ------------- ------------ --------------
Total current liabilities.......................... -- 17,571 (54) 17,517
------------ ------------- ------------ --------------
Long-Term Debt, net of current maturities............... -- -- 88,000 (L) 88,000
------------ ------------- ------------ --------------
Other Noncurrent Liabilities............................ 3,799 (I) -- 3,799
------------ ------------- ------------ --------------
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 (M) -- 15
Additional paid-in capital........................... 1 165,480 (N) (88,721)(N) 76,760
Warrants outstanding 33,000 (P) -- 33,000
Accumulated deficit.................................. -- -- -- --
------------ ------------- ------------ --------------
Total shareholders' equity......................... 1 198,495 (88,721) 109,775
------------ ------------- ------------ --------------
$ 1 $ 219,865 $ (775) $ 219,091
============ ============= ============ ==============
P-24
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004
ASSUMING 58% EXCHANGE
($ IN THOUSANDS EXCEPT PER SHARE DATA)
IMPACT OF PRO FORMA ADJUSTMENTS
-----------------------------------------------------------------
TRANSFER OF EXCHANGE PRO FORMA
HISTORICAL OPERATIONS OF DEBT AS ADJUSTED
------------- --------------- ------------- --------------
Revenues:
Casino....................................... $ -- $ 44,500 (A) $ -- $ 44,500
Rooms........................................ -- 2,285 (A) -- 2,285
Food and beverage............................ -- 4,988 (A) -- 4,988
Other........................................ -- 930 (A) -- 930
------------- --------------- ------------- --------------
-- 52,703 -- 52,703
Less - promotional allowances................ -- (11,254)(A) -- (11,254)
------------- --------------- ------------- --------------
Net revenues............................... -- 41,449 -- 41,449
------------- --------------- ------------- --------------
Expenses:
Casino....................................... -- 30,331 (A) -- 30,331
Rooms........................................ -- 608 (A) -- 608
Food and beverage............................ -- 2,090 (A) -- 2,090
Other........................................ -- 697 (A) -- 697
General and administrative................... -- 2,873 (A) -- 2,873
Depreciation and amortization, including
provision for obligatory investments....... -- 4,073 (A) -- 3,973
Adjust deferred financing fees - Existing
Notes................................... (100)(C)
------------- --------------- ------------- --------------
Total expenses (income).................... -- 40,672 (100) 40,572
------------- --------------- ------------- --------------
Income from operations.......................... -- 777 100 877
------------- --------------- ------------- --------------
Non-operating income (expense):
Interest income.............................. -- 111 (A) 112
Adjust for higher invested balances........ 1 (D)
Interest expense - New Notes................. -- -- (479)(E) (748)
Amortize consent fees - New Notes.......... (277)(F)
Adjust capitalized interest................ 8 (G)
Debt restructuring -- (710)(A) 710 (B) --
------------- --------------- ------------- --------------
Total non-operating expense, net............. -- (599) (37) (636)
------------- --------------- ------------- --------------
Income before income taxes...................... -- 178 63 241
Income tax provision......................... -- (267)(H) -- (267)
------------- --------------- ------------- --------------
Net income (loss)............................... $ -- $ (89) $ 63 $ (26)
============= =============== ============= ==============
Basic loss per common share..................... $ -- $ (0.01) (R)
============= ==============
Diluted loss per common share................... $ -- $ (0.01) (R)
============= ==============
Weighted average common shares outstanding...... -- 3,045,000 (R)
============= ==============
Weighted average fully diluted common shares
outstanding.................................. -- 3,045,000 (R)
============= ==============
Ratio of earnings to fixed charges.............. 1.24
--------------
P-25
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2004
($IN THOUSANDS)
ASSUMING 58% EXCHANGE
IMPACT OF PRO FORMA ADJUSTMENTS
--------------------------------------------------------------
TRANSFER OF EXCHANGE PRO FORMA
HISTORICAL OPERATIONS OF DEBT AS ADJUSTED
------------ -------------- ------------ --------------
ASSETS:
Current Assets:
Cash and cash equivalents............................ $ 1 $ 28,061 (I) $ -- $ 21,116
Adjust for decreased cash balances ................ (6,946)(J)
Accounts receivable, net of allowance of $5,220...... 5,172 (I) -- 5,172
Inventories ......................................... -- 2,114 (I) -- 2,114
Income tax deposits ................................. -- 1,364 (I) -- 1,364
Prepaid expenses and other current assets............ -- 2,639 (I) -- 4,057
Add consent Fees - New Notes....................... -- -- 1,418 (K)
------------ -------------- ------------ --------------
Total current assets............................... 1 39,350 (5,528) 33,823
------------ -------------- ------------ --------------
Property and Equipment:
Land................................................. -- 54,344 (I) -- 54,344
Buildings and improvements........................... -- 88,262 (I) -- 88,262
Equipment............................................ 65,798 (I) -- 65,798
Construction in progress............................. -- 3,141 (I) -- 3,141
------------ -------------- ------------ --------------
-- 211,545 -- 211,545
Less - accumulated depreciation and amortization..... -- (43,528)(I) -- (43,528)
------------ -------------- ------------ --------------
Property and equipment, net.......................... -- 168,017 -- 168,017
------------ -------------- ------------ --------------
Other Assets:...........................................
Obligatory investments, net of allowances of $11,702. -- 10,875 (I) -- 10,875
Other assets......................................... -- 1,623 (I) -- 6,177
Deduct deferred financing fees - Existing Notes -- -- (408)(Q) --
Add consent Fees - New Notes....................... -- -- 4,962 (K) --
------------ -------------- ------------ --------------
Total other assets................................. -- 12,498 4,554 17,052
------------ -------------- ------------ --------------
$ 1 $ 219,865 $ (974) $ 218,892
============ ============== ============ ==============
LIABILITIES:
Current Liabilities
Accounts payable..................................... $ -- $ 4,300 (I) $ -- $ 4,300
Accrued liabilities..................................
Salaries and wages................................. -- 4,027 (I) -- 4,027
Interest........................................... -- 67 (I) (39)(O) 28
Gaming obligations................................. -- 2,885 (I) -- 2,885
Insurance.......................................... -- 3,136 (I) -- 3,136
Other.............................................. -- 3,156 (I) -- 3,156
------------ -------------- ------------ --------------
Total current liabilities.......................... -- 17,571 (39) 17,532
------------ -------------- ------------ --------------
Long-Term Debt, net of current maturities............... -- -- 63,800(L) 63,800
------------ -------------- ------------ --------------
Other Noncurrent Liabilities............................ 3,799 (I) -- 3,799
------------ -------------- ------------ --------------
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 ....................................... -- 30 (M) -- 30
Additional paid-in capital........................... 1 164,765 (N) (64,735)(N) 100,031
Warrants outstanding 33,700 (P) -- 33,700
Accumulated deficit.................................. -- -- -- --
------------ -------------- ------------ --------------
Total shareholders' equity......................... 1 198,495 (64,735) 133,761
------------ -------------- ------------ --------------
$ 1 $ 219,865 $ (974) $ 218,892
============ ============== ============ ==============
P-26
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2004
PRO FORMA ADJUSTMENTS
Statements of Operations Adjustments:
(A) Represents the inclusion of the amounts presented in the respective
statement of operations of GB Holdings and Subsidiaries for the three
months ended March 31, 2004 (exclusive of any interest attributed to
the Existing Notes) as the result of operations are to be recorded by
Atlantic Holdings and Subsidiary.
(B) Represents the elimination of transaction fees associated with the
issuance of the New Notes as it is assumed the transaction occurred on
January 1, 2003.
(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 and Subsidiaries.
(D) Represents an increase in interest income as a result of higher cash
balances due to the elimination of interest payments on the existing
notes offset by the impact of the consent fee and estimated
transaction fees.
(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
--------------- --------------- ---------------
Three months ended 3/31/04................ $ 825,000 $ 660,000 $ 479,000
(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 on
September 29, 2008.
(G) Represent the capitalized interest using the lower effective interest
rate as a result of the issuance of the New Notes. Assumes the same
level of capital investment and construction periods but a lower
effective rate of interest.
(H) The income tax provision includes any applicable tax expense from the
New Jersey alternative minimum assessment (AMA) enacted as part of the
Business Tax Reform Act on July 2, 2002 and for periods ended after
July 2003 a minimum casino income tax provision.
Balance Sheet Adjustments:
(I) Represents the inclusion of the assets and liabilities presented in
the balance sheet of GB Holdings, Inc. and Subsidiaries as of March
31, 2004 as the result of the transfer of all assets and liabilities
(excluding its obligations under the Existing Notes that are not
tendered for exchange) to Atlantic Coast Entertainment Holdings, Inc.
and Subsidiary.
(J) Represents the net decrease in cash as of March 31, 2004. Amount is
equal to the cumulative amount of estimated cash payments for the
following items by each exchange scenario:
100% 80% 58%
exchanged exchanged exchanged
---------------- ---------------- ---------------
Consent fees...................... $ 11,000,000 $ 8,800,000 6,380,000
Estimated financing fees.......... 527,000 527,000 527,000
Accrued interest.................. 67,000 54,000 39,000
---------------- ---------------- ---------------
$ 11,594,000 $ 9,381,000 $ 6,946,000
================ ================ ===============
(K) Represents consent fee paid upon exchange of Existing Notes for New
Notes.
P-27
(L) Represents the impact on long-term debt as a result of the issuance of
New Notes at a 100% exchange ($110 million), 80% exchange ($88
million) and 58% exchange ($63.8 million).
(M) 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.
(N) Represents the paid in capital as a result of the transaction.
(O) Represents the payment of accrued interest on the Existing Notes upon
exchange. The remaining accrued interest after the exchange represents
Atlantic Coast Entertainment Holdings, Inc. contractual obligation to
provide GB Holdings, Inc. the funds necessary to continue to pay the
scheduled interest on the remaining portion of the Existing Notes in a
80% and 58% Exchange.
(P) Represents the value of the outstanding warrants to purchase Atlantic
Holdings common stock (as determined by third party valuation)
ultimately dividended to the shareholders of GB Holdings in a less
than 100% exchange scenario.
(Q) Represents the reduction of deferred financing fees associated with
Existing Notes included in other assets.
(R) New Notes may be exchanged for shares of common stock of Atlantic
Coast Entertainment Holdings, Inc. under certain circumstances
according to the Stated Ratio, as defined. Atlantic Coast
Entertainment Holdings, Inc. fully diluted shares calculation by
exchange scenario is as follows assuming a Stated Ratio of 65.909
shares of common stock of Entertainment Holdings, Inc. per $1,000
principal amount of New Notes:
In a less than 100% exchange scenario, warrants will be issued to the
shareholders of GB Holdings, Inc., allowing them to purchase up to
2,750,000 shares of common stock of Atlantic Coast Entertainment
Holdings, Inc.
100% 80% 58%
exchange exchange exchange
-------------- -------------- --------------
Convertible notes equivalent shares............... 7,250,000 7,250,000 7,250,000
Exchange percentage............................... 100% 80% 58%
-------------- -------------- --------------
Shares available to New Note holders.............. 7,250,000 5,800,000 4,205,000
Shares available to Warrant holders............... -- 2,750,000 2,750,000
Shares issued and outstanding..................... 2,750,000 1,450,000 3,045,000
-------------- -------------- --------------
Total common stock equivalents.................... 10,000,000 10,000,000 10,000,000
============== ============== ==============
In all pro forma statement of operations presented, Atlantic Coast
Entertainment Holdings, Inc. has a net loss. Therefore, the diluted
weighted average shares outstanding are the same as basic for all
periods presented. The effect of assuming the conversion of the New
Notes would be antidilutive. Since the Warrants are only exercisable
under specific conditions which are contingent upon future events,
they will not be included in determining the diluted weighted average
shares outstanding until the resolution of such contingencies.
The calculations of income loss per common share are presented below:
For the Three Months Ended March 31, 2004
100% 80% 58%
exchange exchange exchange
------------------ ------------------- ----------------
Numerator
Net loss................................................. $ (598,000 ) $ (326,000 ) $ (26,000 )
Denominator
Weighted average number of common shares outstanding
- basic and dilutive.................................. 2,750,000 1,450,000 3,045,000
================== =================== ================
Basic and dilutive loss per common share................. $ (0.22 ) $ (0.22 ) $ (0.01 )
================== =================== ================
P-28
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:
(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
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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;
(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.
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
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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.
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.
/s/ Bernadette Fallows Davidson
-------------------------------
Bernadette Fallows Davidson
A-3
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 be 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.
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
B-1
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 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 8.5 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
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.
B-2
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.
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
B-3
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 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 mailed 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 Bylaws, 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 3.14 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 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.
B-4
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;
(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
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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 3.15 of these Bylaws.
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
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 maybe 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.
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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.
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 empowered 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
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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. The secretary shall attend all meetings of
the board of directors and all meetings of the stockholders and record all the
proceedings of the 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, 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 or 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.
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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 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
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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 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 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.
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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.
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.
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.
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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.
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ANNEX C
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement"), dated as of
____________, 2004, 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 Holdings, Inc., a Delaware
corporation ("Atlantic Holdings") and ACE Gaming LLC, a New Jersey limited
liability company ("ACE Gaming"; and together with Atlantic Holdings, sometimes
referred to as "Transferees").
BACKGROUND
A. Operating is a wholly-owned subsidiary of Parent. Operating owns and
operates the Sands Hotel and Casino in Atlantic City, New Jersey ("The Sands").
Atlantic Holdings is a newly formed, wholly-owned subsidiary of Operating.
Operating owns one (1) share of the common stock of Atlantic Holdings, which (1)
share represents all of the outstanding stock of Atlantic Holdings (the
"Existing Atlantic Holdings Stock"). ACE Gaming is a newly formed, wholly-owned
subsidiary of Atlantic Holdings. Immediately prior to the Tier 1 Contribution
(as defined herein), GB Property Funding Corp., a Delaware corporation
("Funding") and a wholly-owned subsidiary of Parent, will be merged with and
into Atlantic Coast Depository, LLC, a Delaware limited liability company ("AC
Depository") and a wholly-owned subsidiary of Operating, with AC Depository as
the surviving entity of such merger (the "Funding Merger"), such that all of the
assets and liabilities of Funding shall become the assets and liabilities of AC
Depository. In conjunction with the formation of AC Depository and pursuant to
the terms of that certain Assignment and Assumption Agreement dated as of
[____], 2004 by and between Operating and AC Depository, AC Depository assumed
the obligations of Operating under 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 and Funding (the "Mirror Note").
B. Atlantic Holdings and ACE Gaming engaged in that certain Consent
Solicitation and Offer to Exchange detailed in that certain Form S-4
Registration Statement, No. 333-110485, filed on November 14, 2003 by Atlantic
Holdings and ACE Gaming with the United States Securities and Exchange
Commission (the "SEC"), as amended by those certain Amendment Nos. 1, 2, 3, and
4 to Form S-4 Registration Statement, No. 333-110485, filed on February 13,
2004, March 22, 2004, April 21, 2004 and May ___, 2004, respectively, by
Atlantic Holdings and ACE Gaming with the SEC (the "Note Registration
Statement"). Pursuant to the terms of the exchange offer detailed in the Note
Registration Statement (the "Exchange Offer"), Atlantic Holdings is offering the
holders of those certain 11% Notes due 2005 (the "Existing Notes") issued by
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
Atlantic Holdings; 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 [____], 2004 by and among Atlantic Holdings, ACE Gaming and Wells Fargo
Bank, National Association, as Trustee (the "New Note Indenture"). Upon issuance
of the New Notes, and otherwise in accordance with the terms of the Exchange
Offer, Atlantic Holding shall cancel all Existing Notes tendered for exchange.
C. Parent is also conducting a proxy solicitation under a Proxy
Statement and Prospectus on Form S-4 Registration Statement, No. 333-110484,
filed on November 14, 2003 by Atlantic Holdings as registrant with the SEC, as
amended by those certain Amendment Nos. 1, 2, 3, and 4 to Form S-4 Registration
Statement, No. 333-110484, filed on February 13, 2004, March 22, 2004, April 21,
2004 and May ___, 2004, respectively, by Atlantic Holdings with the SEC (the
"Common Stock Registration Statement"). Pursuant to the terms of the
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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 Atlantic Holdings and ACE Gaming, and subject to receipt of
the consent of (1) the holders of a majority 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 Operating all of
Parent's assets, other than the stock of Operating, and (ii) Operating desires
to contribute to Atlantic Holdings all of Operating's assets, other than the
membership interests in AC Depository, the stock of Atlantic Holdings, and the
policies of directors and officer's insurance, but including the assets obtained
from Parent all as more fully set forth herein (the "Tier 1 Contribution"), and
(b) Atlantic Holdings desires to contribute to ACE Gaming all of the assets
obtained in the Tier 1 Contribution, but specifically excluding the membership
interests of ACE Gaming (the "ACE Gaming Membership Interests"), 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, Atlantic Holdings,
among other things, shall issue to Operating certain securities of Atlantic
Holdings and Atlantic Holdings shall assume all liabilities, other than the
Excluded Liabilities (as defined herein), relating to the assets contributed to
it by Transferors. The securities to be issued by Atlantic Holdings shall be
determined by reference to the outcome of the Exchange Offer. If 100% of the
Existing Notes are exchanged for New Notes, then Atlantic Holdings 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
Atlantic Holdings (the "Atlantic Holdings Common Stock"), less the Existing
Atlantic Holdings Stock. If less than 100% of the Existing Notes are exchanged
for New Notes, then Atlantic Holdings will issue to Operating (1) warrants to
purchase shares of Atlantic Holdings 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
Atlantic Holdings Common Stock, and (2) a portion of the Atlantic Holdings
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 Atlantic Holdings Stock. The Atlantic
Holdings Common Stock and the Warrants, if any, issued by Atlantic Holdings in
connection with the Exchange Offer, as described above, are sometimes
collectively referred to as the "Atlantic Holdings Securities".
F. In consideration of the Tier 2 Contribution, ACE Gaming, among other
things, shall issue to Atlantic Holdings all of the outstanding ACE Gaming
Membership Interests, ACE Gaming shall assume all liabilities relating to the
assets contributed to it by Atlantic Holdings and ACE Gaming shall guarantee the
New Notes and grant liens upon substantially all of the assets of ACE Gaming for
the benefit of the holders of the New Notes, all as more fully set forth herein.
G. Following the Asset Contributions and after the effectiveness of the
exchange transactions contemplated by the Exchange Offer and the cancellation of
the Existing Notes tendered in the Transaction, Operating and AC Depository will
each be merged with and into Parent, with Parent as the surviving entity, such
that all of the assets and liabilities
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of Operating and AC Depository shall become the assets and liabilities of Parent
(the merger of Operating and AC Depository into Parent, the "Operating Merger").
H. For Federal income tax purposes, it is intended that the asset
contribution described in clause (ii) of the Tier 1 Contribution and the
Operating Merger qualify as a "reorganization" under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and Parent,
Operating, and Atlantic Holdings 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 (ii) Operating hereby contributes, transfers, assigns and conveys
to Atlantic Holdings 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 Atlantic Holdings in effective possession, control and
operation of the Tier 1 Assets and deliver to Atlantic Holdings all Tier 1
Assets, title to which is capable of passing by delivery; and
(ii) deliver to Atlantic Holdings duly executed assignments or
other instruments and documentation reasonably required to transfer to Atlantic
Holdings all right, title and interest in and to the Tier 1 Assets.
1.3. Consideration. In consideration of the Tier 1 Contribution,
Atlantic Holdings, 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 "Excluded Liabilities" listed on Schedule 1.3(i) hereto
(the obligations and liabilities so assumed collectively referred to as the
"Atlantic Holdings Assumed Liabilities"); and
(ii) agrees to indemnify Transferors against all actions,
proceedings, costs, liabilities, damages, claims and demands arising out of the
Atlantic Holdings Assumed Liabilities or the operation of The Sands by Atlantic
Holdings or its transferee subsequent to the date hereof except insofar as such
actions, proceedings, costs, damages, claims and
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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 Atlantic
Holdings Securities in such form and amounts as is required under the terms of
the Exchange Offer;
(iv) agrees to (a) acquire those Existing Notes which are
tendered in connection with the Exchange Offer, (b) issue New Notes in
consideration of such tender as required by the terms of the Exchange Offer, and
(c) cancel those Existing Notes which are tendered in connection with the
Exchange Offer; and
(v) 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 Atlantic Holdings 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. AC Depository is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. AC Depository has all requisite limited liability company power and
authority to own and operate its properties, to carry on its business as now
conducted and as proposed to be conducted, to carry out the transactions
contemplated hereby.
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.
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
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 immaterial
breaches of contracts.
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 any material element of the transactions
contemplated by this Agreement, except those that have been obtained or made,
and are in full force and effect or which are immaterial in nature.
C-4
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.(1)
2.1 Capital Contribution. Immediately following the Tier 1
Contribution and the issuance of the Atlantic Holdings Securities, Atlantic
Holdings hereby contributes, transfers, assigns and conveys to ACE Gaming all
right, title and interest in and to all of the Tier 1 Assets, less only (a) 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 and
(b) those "Excluded Assets" listed on Schedule 2.1 hereto (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, Atlantic Holdings shall:
(i) place ACE Gaming in effective possession, control and
operation of the Tier 2 Assets and deliver to ACE Gaming all Tier 2 Assets,
title to which is capable of passing by delivery; and
(ii) deliver to ACE Gaming duly executed assignments or other
instruments and documentation reasonably required to transfer to ACE Gaming all
right, title and interest in and to the Tier 2 Assets.
2.3. Consideration. In consideration of the Tier 2 Contribution,
ACE Gaming, 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 of Atlantic Holdings,
exclusive of the "Excluded Liabilities" listed on Schedule 2.3(i) hereto (the
obligations and liabilities so assumed collectively referred to as the "ACE
Gaming Assumed Liabilities"); and
(ii) agrees to indemnify Atlantic Holdings against all actions,
proceedings, costs, liabilities, damages, claims and demands arising in
connection with the ACE Gaming Assumed Liabilities or the operation of The Sands
by ACE Gaming 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 Atlantic Holdings or a breach of any
of the representations and warranties of Atlantic Holdings contained in Section
2.4; and
(iii) undertakes to provide to Atlantic Holdings the funds
necessary to make the Permitted Payment.
(iv) agrees to take such actions and execute such documents as
may be necessary to effectively (a) guaranty each and every obligation of
Atlantic
C-5
Holdings 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
ACE Gaming.
2.4. Atlantic Holdings' Representations and Warranties. Atlantic
Holdings hereby represents and warrants to ACE Gaming that, as of the date
hereof:
2.4.1 Organization and Existence. Atlantic Holdings is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Atlantic Holdings has all requisite corporate power
and authority and limited liability company power and authority, respectively,
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.
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 Atlantic Holdings in accordance with its
terms and represents the legal, valid and binding agreement of Atlantic Holdings
enforceable against Atlantic Holdings in accordance with its terms.
2.4.4 No Conflicts. Except as set forth on Schedule 2.4.4, the
execution, delivery and performance of this Agreement by Atlantic Holdings, 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 Atlantic Holdings or any
of its affiliates is a party or by which Atlantic Holdings or any of its
affiliates is bound or to which any of the properties or Tier 2 Assets of
Atlantic Holdings 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 Atlantic Holdings or any of
the Tier 2 Assets, except, in the case of clause (i), for immaterial breaches of
contracts.
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, (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) any other third party is
necessary in connection with any material element of the transactions
contemplated by this Agreement, except those that have been obtained or made,
and are in full force and effect or which are immaterial in nature.
2.4.6 Title to Tier 2 Assets. Except as set forth on Schedule
2.4.6, Atlantic Holdings has good title to the Tier 2 Assets, free and clear of
any Liens.
3. Excluded Liabilities. Parent and Operating hereby expressly
acknowledge and agree that neither Atlantic Holdings or ACE Gaming has assumed
or shall have any responsibility for or obligations in respect of or relating to
the Excluded Liabilities listed on Schedule 1.3(i).
4. Miscellaneous.
4.1 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
C-6
complete ownership of the Assets and to enable Transferee to collect and reduce
the Assets to its possession as contemplated hereby.
4.2 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.
4.3 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.
4.4 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.
4.5 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.
4.6 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.
4.7 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.
4.8 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
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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 [_____________________].
4.9 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.
4.10 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.
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 GAMING LLC, a New Jersey limited liability
company
By:
- ----------------------------- --------------------------------------------
C-8
SCHEDULE 1.1
EXCLUDED ASSETS
1. Policies of Directors and Officers Insurance.
2. Membership Interests in AC Depository.
3. Common Stock of Atlantic Holdings.
C-9
SCHEDULE 1.3(i)
EXCLUDED LIABILITIES
1. 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 and the Mirror Note, including without limitation, that certain Indenture
among Funding, as Issuer, Holdings and Operating, as Guarantors and the Trustee
relating to the Existing Notes; Security Agreement by Funding, Operating and
Holdings in favor of Trustee; $110,000,000 principal amount 11% Intercompany
Note of GBHC due September 29, 2005, together with blank Irrevocable Bond Power;
Mortgage, Fixture Filing and Security Agreement by Operating in favor of
Trustee; Collateral Assignment of Leases by Operating in favor of Trustee;
Fractional Note Pool Trust Agreement between Funding and Trustee; and any other
indenture, security agreements, guaranties or other instruments related thereto.
C-10
SCHEDULE 1.4.4
CONFLICTS
C-11
SCHEDULE 1.4.5
CONSENTS AND APPROVALS
C-12
SCHEDULE 1.4.6
TITLE EXCEPTIONS
C-13
SCHEDULE 2.1
EXCLUDED ASSETS
1. Membership Interests in ACE Gaming.
C-14
SCHEDULE 2.3(i)
EXCLUDED LIABILITIES
1. All obligations under the New Notes, except ACE Gaming's obligations as
guarantor of Atlantic Holdings' obligations under the New Note Indenture and the
New Notes arising under the guaranty of ACE Gaming delivered in connection with
the issuance of the New Notes.
C-15
SCHEDULE 2.4.4
CONFLICTS
C-16
SCHEDULE 2.4.5
CONSENTS AND APPROVALS
C-17
SCHEDULE 2.4.6
TITLE EXCEPTIONS
C-18
ANNEX D
WARRANT AGREEMENT
BETWEEN
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
AND
WELLS FARGO BANK, NATIONAL ASSOCIATION
Dated as of _______, 2004
D-i
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.......................................................... 1
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................................ 2
Section 2.3 Procedure for Exercise of Warrants......................................................... 3
Section 2.4 Issuance of Common Stock................................................................... 3
Section 2.5 Certificates for Unexercised Warrants...................................................... 3
Section 2.6 Reservation of Shares...................................................................... 3
Section 2.7 Disposition of Proceeds.................................................................... 3
Section 2.8 Cancellation of Warrants................................................................... 3
ARTICLE III ADDITIONAL SECURITIES AND NOTICE PROVISIONS................................................................ 4
Section 3.1 Additional Securities...................................................................... 4
Section 3.2 Deferral of Adjustments to Warrant Shares.................................................. 4
Section 3.3 Adjustment to Number of Warrant Shares..................................................... 4
Section 3.4 Reorganizations............................................................................ 4
Section 3.5 Verification of Computations............................................................... 5
Section 3.6 Exercise Price Not Less Than Par Value..................................................... 5
Section 3.7 Notice of Certain Actions.................................................................. 5
Section 3.8 Notice of Certain Actions.................................................................. 5
Section 3.9 Warrant Certificate Amendments............................................................. 5
Section 3.10 Fractional Shares.......................................................................... 5
Section 3.11 Current Market Price....................................................................... 6
Section 3.12 Right to Adjust Exercise Price and Exercise Deadline....................................... 6
ARTICLE IV OTHER PROVISIONS RELATING TO RIGHTS OF REGISTERED HOLDERS OF WARRANT CERTIFICATES........................... 6
Section 4.1 Rights of Warrant Holders.................................................................. 6
Section 4.2 Lost, Stolen, Mutilated, or Destroyed Warrant Certificates................................. 6
ARTICLE V SPLIT UP, COMBINATION, EXCHANGE, TRANSFER, AND CANCELLATION OF WARRANT CERTIFICATES......................... 6
Section 5.1 Split Up, Combination, Exchange, and Transfer of Warrant Certificates...................... 6
Section 5.2 Cancellation upon Surrender of Warrant Certificates........................................ 7
Section 5.3 Agreement of Warrant Certificate Holders................................................... 7
ARTICLE VI PROVISIONS CONCERNING THE WARRANT AGENT AND OTHER MATTERS.................................................. 7
Section 6.1 Payment of Taxes and Charges............................................................... 7
D-ii
Section 6.2 Resignation or Removal of Warrant Agent.................................................... 7
Section 6.3 Notice of Appointment...................................................................... 8
Section 6.4 Merger of Warrant Agent.................................................................... 8
Section 6.5 Company Responsibilities................................................................... 8
Section 6.6 Certification for the Benefit of Warrant Agent............................................. 8
Section 6.7 Books and Records.......................................................................... 8
Section 6.8 Liability of Warrant Agent................................................................. 8
Section 6.9 Use of Attorneys, Agents, and Employees.................................................... 9
Section 6.10 Indemnification............................................................................ 9
Section 6.11 Acceptance of Agency....................................................................... 9
Section 6.12 Changes to Agreement....................................................................... 9
Section 6.13 Assignment................................................................................. 9
Section 6.14 Successor to Company....................................................................... 9
Section 6.15 Notices.................................................................................... 9
Section 6.16 Defects in Notice.......................................................................... 10
Section 6.17 Governing Law.............................................................................. 10
Section 6.18 Standing................................................................................... 10
Section 6.19 Headings................................................................................... 10
Section 6.20 Counterparts............................................................................... 10
Section 6.21 Conflict of Interest....................................................................... 10
Section 6.22 Availability of the Agreement.............................................................. 11
EXHIBIT A FORM OF WARRANT CERTIFICATE
D-iii
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of ______, 2004, between ATLANTIC COAST
ENTERTAINMENT HOLDINGS, INC., a Delaware corporation (the "Company") and Wells
Fargo Bank, National Association (the "Warrant Agent").
WITNESSETH:
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") 10 million
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. The Warrant Certificates may have such letters,
numbers, or other marks of identification or designation and such legends,
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
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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 price of $.01 per share 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 of the entire principal amount and accrued interest
on any of 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 or any conversion of any of such notes into
common stock pursuant to and in accordance with the terms
thereof;
(b) a determination by a majority of the board of directors of the
Company (the "Board") (including at least one independent
director) that the Warrants may be exercised; and
(c) payment in full by the Parent of principal and accrued, but
unpaid interest on all outstanding 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
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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.
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 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, specifying a date
(the "Cancellation Date") established by the Board which shall be at least 90
days after the date of such notice. 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 of the determination by the
Board of the Cancellation Date by news release and by notice to any national
securities exchange on which the Warrants are listed for trading.
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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 of the Company), 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 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
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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.
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 or adjustment is required to 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 adjustment, 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.
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
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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
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
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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.
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
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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, 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.
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
D-8
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
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:
D-9
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) 441-4432
Attention: Douglas S. Niethold
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 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.
D-10
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:
Douglas S. Niethold
c/o Sands Hotel & Casino
Indiana Avenue & Brighton Park
Atlantic City, New Jersey 08401
(609) 441-4432
D-11
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-12
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 Wells Fargo Bank, National Association, 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 [___ ___, 2004] 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 of the entire principal amount and accrued interest
on any of 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 or any conversion of any of such notes into
common stock pursuant to and in accordance with the terms
thereof;
(b) a determination by a majority of the board of directors of the
Company (the "Board") (including at least one independent
director) that the Warrants may be exercised; and
(c) payment in full by the Parent of principal and accrued, but
unpaid interest on all outstanding 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
D-13
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.
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.
D-14
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]
-------------------------------------------------
Dated as Warrant Agent
D-15
[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:
---------------------------------------------------------------------
D-16
[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 this
assignment must correspond with the
name(s) as written upon the face of the
Certificate, in every particular,
without alteration or enlargement or
By any change whatever.
-----------------------------------
THE SIGNATURE(S) SHOULD BE
GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION. (Banks, Stock Brokers,
Savings and Loan Associations, and
Credit Unions) WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM PURSUANT TO S.E.C.
RULE 17Ad-15.
D-17
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-i
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-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........................................ 13
Section 103. Form of Documents Delivered to Trustee...................................... 13
Section 104. Acts of Holders............................................................. 14
Section 105. Notices, etc., to Trustee, Company and Guarantors........................... 15
Section 106. Notice to Holders; Waiver................................................... 15
Section 107. Effect of Headings and Table of Contents.................................... 16
Section 108. Successors and Assigns...................................................... 16
Section 109. Separability Clause......................................................... 16
Section 110. Benefits of Indenture....................................................... 16
Section 111. Governing Law............................................................... 16
Section 112. Legal Holidays.............................................................. 16
Section 113. Casino Control Act.......................................................... 16
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally............................................................. 17
Section 202. Form of Face of Notes....................................................... 17
Section 203. Form of Reverse of Notes.................................................... 18
Section 204. Form of Trustee's Certificate of Authentication............................. 20
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms............................................................. 21
Section 302. Denominations............................................................... 21
Section 303. Execution, Authentication, Delivery and Dating.............................. 21
Section 304. Temporary Securities........................................................ 22
Section 305. Registration, Registration of Transfer and Exchange......................... 23
Section 306. Mutilated, Destroyed, Lost and Stolen Securities............................ 23
Section 307. Payment of Interest; Interest Rights Preserved.............................. 24
Section 308. Persons Deemed Owners....................................................... 25
Section 309. Cancellation................................................................ 25
Section 310. Computation of Interest..................................................... 25
Section 311. Maximum Interest Rate....................................................... 25
E-iii
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture..................................... 25
Section 402. Application of Trust Money.................................................. 26
ARTICLE FIVE
REMEDIES
Section 501. Events of Default........................................................... 26
Section 502. Acceleration of Maturity; Rescission and Annulment.......................... 28
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee............. 29
Section 504. Trustee May File Proofs of Claim............................................ 29
Section 505. Trustee May Enforce Claims Without Possession of Securities................. 30
Section 506. Application of Money Collected.............................................. 30
Section 507. Limitation on Suits......................................................... 30
Section 508. Unconditional Right of Holders to Receive Principal Premium and Interest.... 30
Section 509. Restoration of Rights and Remedies.......................................... 31
Section 510. Rights and Remedies Cumulative.............................................. 31
Section 511. Delay or Omission Not Waiver................................................ 31
Section 512. Control by Holders.......................................................... 31
Section 513. Waiver of Defaults and Compliance........................................... 31
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults.......................................................... 32
Section 602. Certain Rights of Trustee................................................... 32
Section 603. Trustee Not Responsible for Recitals or Issuance of Securities.............. 33
Section 604. May Hold Securities......................................................... 33
Section 605. Money Held in Trust......................................................... 33
Section 606. Compensation and Reimbursement.............................................. 33
Section 607. Corporate Trustee Required: Eligibility..................................... 34
Section 608. Resignation and Removal; Appointment of Successor........................... 34
Section 609. Acceptance of Appointment by Successor...................................... 35
Section 610. Merger, Conversion, Consolidation or Succession to Business................. 35
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTORS
Section 701. Disclosure of Names and Addresses of Holders................................ 36
Section 702. Reports by Trustee.......................................................... 36
Section 703. Reports by Company and Guarantors........................................... 37
E-iv
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Holdings and Subsidiaries May Consolidate, etc.,Only on Certain Terms....... 37
Section 802. Successor Substituted....................................................... 38
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Amendments to Security Documents Without Consent
of Holders............................................................... 39
Section 902. Supplemental Indentures and Amendments to Security Documents with Consent of
Holders.................................................................. 39
Section 903. Execution of Supplemental Indentures and Amendments to Security Documents... 40
Section 904. Effect of Supplemental Indentures........................................... 40
Section 905. Conformity with Trust Indenture Act......................................... 40
Section 906. Reference in Securities to Supplemental Indentures.......................... 40
Section 907. Notice of Supplemental Indentures and Amendments to Security Documents...... 40
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium, if any, and Interest......................... 41
Section 1002. Maintenance of Office or Agency............................................. 41
Section 1003. Money for Security Payments to Be Held in Trust............................. 41
Section 1004. Corporate Existence......................................................... 42
Section 1005. Payment of Taxes and Other Claims........................................... 42
Section 1006. Maintenance of Properties................................................... 42
Section 1007. Insurance................................................................... 43
Section 1008. Statement by Officers as to Compliance...................................... 43
Section 1009. Statement by Officers of Certain Defaults................................... 43
Section 1010. Purchase of Securities upon Change in Control............................... 43
Section 1011. [Intentionally Omitted.].................................................... 44
Section 1012. [Intentionally Omitted.].................................................... 44
Section 1013. Limitation on Restricted Payments........................................... 44
Section 1014. [Intentionally Omitted.].................................................... 44
Section 1015. [Intentionally Omitted.].................................................... 44
Section 1016. [Intentionally Omitted.].................................................... 44
Section 1017. Limitation on Asset Sales................................................... 44
Section 1018. Application of Net Cash Proceeds in Event of Loss........................... 45
Section 1019. Ownership of Stock of Subsidiaries.......................................... 46
Section 1020. Limitation on Transactions with Affiliates.................................. 46
Section 1021. Change in Nature of Business................................................ 46
Section 1022. Additional Collateral....................................................... 46
E-v
Section 1023. CRDA Investments............................................................ 46
Section 1024. Subsidiaries................................................................ 46
Section 1025. Security Documents.......................................................... 47
Section 1026. Validity of Security Interest............................................... 47
Section 1027. Duty of Cooperation......................................................... 47
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Optional Redemption......................................................... 47
Section 1102. Applicability of Article.................................................... 47
Section 1103. Election to Redeem; Notice to Trustee....................................... 48
Section 1104. Selection by Trustee of Securities to Be Redeemed........................... 48
Section 1105. Notice of Redemption........................................................ 48
Section 1106. Deposit of Redemption Price................................................. 49
Section 1107. Securities Payable on Redemption Date....................................... 49
Section 1108. Securities Redeemed in Part................................................. 49
Section 1109. Redemption Pursuant to Gaming Laws.......................................... 49
ARTICLE TWELVE
GUARANTEE ARRANGEMENTS
Section 1201. Guarantee................................................................... 50
Section 1202. Execution and Deliver of Guarantee.......................................... 51
Section 1203. Additional Guarantors....................................................... 51
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
Section 1301. Company's Option to Effect Defeasance or Covenant Defeasance................ 51
Section 1302. Defeasance and Discharge.................................................... 51
Section 1303. Covenant Defeasance......................................................... 52
Section 1304. Conditions to Defeasance or Covenant Defeasance............................. 52
Section 1305. Deposited Money and U.S. Government Obligations To Be Held in Trust; Other
Miscellaneous Provisions................................................. 53
Section 1306. Reinstatement............................................................... 54
E-vi
ARTICLE FOURTEEN
SECURITY INTEREST
Section 1401. Assignment of Security Interest............................................. 54
Section 1402. Suits to Protect the Collateral............................................. 55
Section 1403. Further Assurances and Security............................................. 55
Section 1404. Collateral Account.......................................................... 55
Section 1405. Release Notice; Subordination Request, Permitted Liens...................... 56
Section 1406. Reliance on Opinion of Counsel.............................................. 57
Section 1407. Purchaser May Rely.......................................................... 57
Section 1408. Payment of Expenses......................................................... 57
ARTICLE FIFTEEN
MISCELLANEOUS
Section 1501. Counterparts................................................................ 58
Exhibit A
TESTIMONIUM...............................................................................
SIGNATURE AND SEALS.......................................................................
(1) This table of contents shall not, for any purpose, be deemed to be a part of
this Indenture.
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:
(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;
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(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.
"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
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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).
"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
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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.
"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.
"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.
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"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.
"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
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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.
"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.
"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.
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"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.
"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
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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.
"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;
(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
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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;
(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;
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(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;
(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.
"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).
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"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.
"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
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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.
"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.
(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.
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(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,
(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
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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 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.
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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.
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.
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.
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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.
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.
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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.
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
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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.
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.
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
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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.
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.
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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.
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.
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.
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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
(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.
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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.
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
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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
(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.
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
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(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
(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
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(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.
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,
(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.
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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.
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.
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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 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 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.
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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;
(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
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(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.
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
(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
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(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.
(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
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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, 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.
(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
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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;
(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,
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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;
(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
(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
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(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.
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.
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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 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:
(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.
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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.
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.
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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.
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
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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.
(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.].
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.
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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.
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.
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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.
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.
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
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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.
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.
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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.
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.
(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)
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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, 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
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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.
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).
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,
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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:
(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
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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
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.
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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.
(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)
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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).
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):
(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)
E-55
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.
(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
E-56
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.
(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-57
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.
E-58
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-59
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:
-----------------------------
E-60
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.
E-61
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.
E-62
ANNEX F
================================================================================
GB PROPERTY FUNDING CORP.,
as Issuer,
GB HOLDINGS INC. and GREATE BAY HOTEL
and CASINO, INC.,
as Guarantors,
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
--------------
AMENDMENT NO. 1
Dated ____________, 2004
to
Amended and Restated Indenture
Dated as of October 12, 2001
--------------
$110 Million
11% Notes Due 2005
================================================================================
AMENDMENT NO. 1, dated __________, 2004 ("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, National Association, as successor by merger
to Wells Fargo Bank Minnesota, National Association, as successor by merger to
Wells Fargo Bank, 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 therefor 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:
(i) unless otherwise defined herein, all terms used herein shall
have the meaning attributed to them under the Indenture;
(ii) 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;
(iii) 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.
"ACE" means ACE Gaming LLC, a New Jersey limited liability company.
"ACE Holdings" means Atlantic Coast Entertainment Holdings, Inc., a
Delaware corporation.
"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 ACE Holdings; and (c) by ACE Holdings of all
such assets (less the cash paid to the holders of the Notes pursuant to
the Exchange and Consent) to ACE, all as contemplated in the
Prospectuses.
"Exchange and Consent" means the exchange of the Notes for notes issued
by ACE Holdings, and the solicitation of consents of holders of Notes,
and all related activities and payments, all as contemplated in the
Prospectuses.
"Merger" means (a) the merger of the Company into an entity owned by
GBHC; (b) the merger of the surviving entity and GBHC into Holdings;
and (c) any other merger transaction implemented to achieve any of the
foregoing.
"Prospectuses" means those two registration statements and
prospectuses, as amended, filed by ACE Holdings 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.
F-1
"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, ACE Holdings and ACE.
"Warrant Distribution" means the distribution by Holdings of shares of
common stock or warrants to acquire shares of the common stock of ACE
Holdings 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: (a) any restrictions or obligations under or created
by the Indenture or any Security Documents and (b) 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 or
party to any Asset Transfer Transaction, or party to the 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) 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 TO 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
F-2
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 Transactions or any portion thereof.
ARTICLE V
ADDITION TO 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 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 Transactions or any
portion thereof.
ARTICLE VI
ADDITION TO 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 be 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 or any portion thereof.
ARTICLE VII
ADDITION TO 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 (a) include a
certified copy of the Board Resolution of Holdings or any of its
Subsidiaries in which such Board of Directors approved the delivery
thereof; (b) 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 (c) 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,
F-3
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 and that the
same shall not be deemed to conflict with or constitute 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 or any portion thereof, and
any breach or default that has occurred, or may occur, in respect of the
Transactions or any portion thereof, 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 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 or the Company (other than to GBHC and the Company as Subsidiaries of
Holdings).
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.
Section 10.4. Third Party Beneficiaries.
Each Transferee shall be deemed to be a third party beneficiary of this
Amendment No. 1.
F-4
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-5
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-A-i
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
- --------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
F-A-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............................8
Section 103. Form of Documents Delivered to Trustee..........................9
Section 104. Acts of Holders.................................................9
Section 105. Notices, etc., to Trustee, Company and Guarantors...............10
Section 106. Notice to Holders; Waiver.......................................10
Section 107. Effect of Headings and Table of Contents........................11
Section 108. Successors and Assigns..........................................11
Section 109. Separability Clause.............................................11
Section 110. Benefits of Indenture...........................................11
Section 111. Governing Law...................................................11
Section 112. Legal Holidays..................................................11
Section 113. Casino Control Act..............................................11
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.................................................12
Section 202. Form of Face of Notes...........................................12
Section 203. Form of Reverse of Notes........................................13
Section 204. Form of Trustee's Certificate of Authentication.................15
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.................................................15
Section 302. Denominations...................................................15
Section 303. Execution, Authentication, Delivery and Dating..................16
Section 304. Temporary Securities............................................16
Section 305. Registration, Registration of Transfer and Exchange.............17
Section 306. Mutilated, Destroyed, Lost and Stolen Securities................17
Section 307. Payment of Interest; Interest Rights Preserved..................18
Section 308. Persons Deemed Owners...........................................19
Section 309. Cancellation....................................................19
Section 310. Computation of Interest.........................................19
Section 311. Maximum Interest Rate...........................................19
- --------------
(1) This table of contents shall not, for any purpose, be deemed to be a part
of this Indenture.
F-A-iii
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture.........................19
Section 402. Application of Trust Money......................................20
ARTICLE FIVE
REMEDIES
Section 501. Events of Default...............................................21
Section 502. Acceleration of Maturity; Rescission and Annulment..............21
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.......................................................22
Section 504. Trustee May File Proofs of Claim................................23
Section 505. Trustee May Enforce Claims Without Possession of Securities.....23
Section 506. Application of Money Collected..................................23
Section 507. Limitation on Suits.............................................24
Section 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest......................................................24
Section 509. Restoration of Rights and Remedies..............................24
Section 510. Rights and Remedies Cumulative..................................24
Section 511. Delay or Omission Not Waiver....................................24
Section 512. Control by Holders..............................................25
Section 513. Waiver of Defaults and Compliance...............................25
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults..............................................25
Section 602. Certain Rights of Trustee.......................................25
Section 603. Trustee Not Responsible for Recitals or Issuance of Securities..26
Section 604. May Hold Securities.............................................27
Section 605. Money Held in Trust.............................................27
Section 606. Compensation and Reimbursement..................................27
Section 607. Corporate Trustee Required: Eligibility.........................27
Section 608. Resignation and Removal; Appointment of Successor...............28
Section 609. Acceptance of Appointment by Successor..........................28
Section 610. Merger, Conversion, Consolidation or Succession to Business.....29
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTORS
Section 701. Disclosure of Names and Addresses of Holders....................29
Section 702. Reports by Trustee..............................................29
Section 703. Reports by Company..............................................30
F-A-iv
ARTICLE EIGHT
CONSOLIDATION AND MERGER
Section 801. Company May Merge and Consolidate...............................31
Section 802. Successor Substituted...........................................31
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Amendments Without Consent of
Holders.......................................................31
Section 902. Supplemental Indentures and Amendments with Consent of Holders..32
Section 903. Execution of Supplemental Indentures and Amendments.............32
Section 904. Effect of Supplemental Indentures...............................33
Section 905. Conformity with Trust Indenture Act.............................33
Section 906. Reference in Securities to Supplemental Indentures..............33
Section 907. Notice of Supplemental Indentures and Amendments................33
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium, if any, and Interest.............33
Section 1002. Maintenance of Office or Agency.................................33
Section 1003. Money for Security Payments to Be Held in Trust.................34
Section 1004. Corporate Existence.............................................34
Section 1005. Payment of Taxes and Other Claims...............................35
Section 1006. Maintenance of Properties.......................................35
Section 1007. [Intentionally Omitted].........................................35
Section 1008. Statement by Officers as to Compliance..........................35
Section 1009. Statement by Officers of Certain Defaults.......................35
Section 1010. [Intentionally Omitted].........................................35
Section 1011. [Intentionally Omitted].........................................35
Section 1012. [Intentionally Omitted].........................................35
Section 1013. Limitation on Restricted Payments...............................35
Section 1014. [Intentionally Omitted].........................................35
Section 1015. [Intentionally Omitted].........................................35
Section 1016. [Intentionally Omitted].........................................35
Section 1017. Limitation on Asset Sales.......................................36
Section 1018. [Intentionally Omitted].........................................36
Section 1019. [Intentionally Omitted].........................................36
Section 1020. [Intentionally Omitted].........................................36
Section 1021. [Intentionally Omitted].........................................36
Section 1022. [Intentionally Omitted].........................................36
Section 1023. [Intentionally Omitted].........................................36
Section 1024. [Intentionally Omitted].........................................36
Section 1025. [Intentionally Omitted].........................................36
Section 1026. [Intentionally Omitted].........................................36
Section 1027. [Intentionally Omitted].........................................36
F-A-v
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Optional Redemption............................................36
Section 1102. Applicability of Article.......................................36
Section 1103. Election to Redeem; Notice to Trustee..........................37
Section 1104. Selection by Trustee of Securities to Be Redeemed..............37
Section 1105. Notice of Redemption...........................................37
Section 1106. Deposit of Redemption Price....................................38
Section 1107. Securities Payable on Redemption Date..........................38
Section 1108. Securities Redeemed in Part....................................38
Section 1109. Redemption Pursuant to Gaming Laws.............................38
ARTICLE TWELVE
[INTENTIONALLY OMITTED]
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
Section 1301. Company's Option to Effect Defeasance or Covenant Defeasance...39
Section 1302. Defeasance and Discharge.......................................39
Section 1303. Covenant Defeasance............................................39
Section 1304. Conditions to Defeasance or Covenant Defeasance................40
Section 1305. Deposited Money and U.S. Government Obligations To Be Held in
Trust; Other Miscellaneous Provisions........................41
Section 1306. Reinstatement..................................................41
ARTICLE FOURTEEN
INTENTIONALLY OMITTED
ARTICLE FIFTEEN
MISCELLANEOUS
Section 1501. Counterparts...................................................42
Exhibit A
TESTIMONIUM...................................................................
SIGNATURE AND SEALS...........................................................
F-A-vi
SECOND AMENDED AND RESTATED INDENTURE, dated as of ____, 2004 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").
The 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 therefor, 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.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(i) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(ii) 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;
(iii) 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;
(iv) [intentionally omitted]; and
F-A-1
(v) 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 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
F-A-2
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.
"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.
"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.
F-A-3
"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
June 1, 2004.
"Fair Market Value" or "fair value" means either, (a) 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 (b) 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.
"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 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
(ii) 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, (i) to pay or purchase such liability; (ii) 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 (iii) to purchase, sell or lease
(as lessee or lessor) property or to purchase or sell services,
F-A-4
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.
"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.
"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
F-A-5
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:
(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.
F-A-6
"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.
"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.
"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.
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"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 (a)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (b) 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.
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:
(i) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) 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;
(iii) 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
(iv) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
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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 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 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.
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(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,
(i) 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
(ii) 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 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.
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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 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 (a) the principal amount thereof; (b)
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 (c) 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
F-A-11
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 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 (a) by check mailed to the address of the Person entitled thereto as
such address shall appear on the Security Register or (b) 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.
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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 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 (a) no further right to exercise, directly or
through any trustee or nominee, any right conferred by its Securities or (b) 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 (c) 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.
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.
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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.
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:
F-A-14
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned Indenture.
Wells Fargo Bank, National
Association, as Trustee
By:
----------------------------------
Authorized Officer
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 (i) receiving interest on the Securities held by such Holder;
(ii) exercising, directly or through any trustee or nominee, any right conferred
on such Securities; and (iii) 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.
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
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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. 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
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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.
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 (a) 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 (b) 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 (a) any mutilated Security is surrendered to the Trustee or (b) 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.
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.
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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 (a) 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 (b) 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 (i) or (ii)
below:
(i) 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 (ii); or
(ii) 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.
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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.
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 or in the Securities, 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, (a) characterize any nonprincipal payment as an expense fee, or
premium rather than interest; (b) exclude voluntary prepayments and the effects
thereof; and (c) 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 when:
(i) either
(A) all Securities theretofore authenticated and delivered (other
than (1) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (2)
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
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(1) have become due and payable, or
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(2) will become due and payable at their Stated Maturity within
one year, or
(3) 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 (1), (2) or (3) 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;
(ii) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(iii) 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.
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):
(i) 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
(ii) default in the payment of any principal of (or premium, if any,
on) any Security at its Maturity; or
(iii) 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
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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
(iv) [intentionally omitted]; or
(v) [intentionally omitted]; or
(vi) [intentionally omitted]; or
(vii) 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
(viii) 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
(ix) [intentionally omitted]; or
(x) [intentionally omitted]; or
(xi) [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(vii) or 501(viii)) 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(vii) or 501(viii) 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
(i) 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
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(ii) 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
(i) 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
(ii) 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, 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
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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.
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:
(i) 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;
(ii) 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;
(iii) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(iv) 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
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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 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, provided that
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction; and
(iii) 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:
(i) 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
(ii) waive future compliance with any term, provision or condition of
this Indenture or any related instruments, agreements or documents (but no such
waiver shall extend to or affect such term, provision or
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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 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):
(i) 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;
(ii) 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;
(iii) 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;
(iv) 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;
(v) 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;
(vi) 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;
(vii) 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; and
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(viii) 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.
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 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:
(i) 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
(ii) 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
(iii) 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, including the costs and expenses of defending
itself against
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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.
(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:
(i) 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
(ii) 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
(iii) 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, (A)
the Company, by a Board Resolution, may remove the Trustee or (B) 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
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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.
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
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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:
(i) [intentionally omitted]; and
(ii) 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:
(i) 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
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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;
(ii) 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;
(iii) 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 (i) and (ii) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission; and
(iv) 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.
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:
(i) 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 (A) 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; (B) 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 (C) 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;
(ii) [intentionally omitted]; and
(iii) 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
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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.
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:
(i) 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
(ii) 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
(iii) to add any additional Events of Default; or
(iv) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section
609; or
(v) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, 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
(vi) [intentionally omitted]; or
(vii) to add any guarantor; or
(viii) to make any other change that does not adversely affect the
rights of any Holder; or
(ix) 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, 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:
(i) 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
(ii) 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
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(iii) 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, 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 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
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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:
(i) 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;
(ii) 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
(iii) 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
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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.
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.
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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.]
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 (a) 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 (b) 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.]
SECTION 1025. [Intentionally Omitted.]
SECTION 1026. [Intentionally Omitted.]
SECTION 1027. [Intentionally Omitted.]
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Optional Redemption.
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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.
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 (a) specify a proposed redemption date; (b) 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;
(c) 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 (d) 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:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) 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;
(iv) 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
F-A-36
each such Security, or the portion thereof, to be redeemed, and that
interest thereon will cease to accrue on and after said date; and
(v) 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; 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
[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.
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), 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
F-A-38
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:
(i) 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 (1) direct obligations of
the United States of America for the timely payment of which its full faith
and credit is, pledged or (2) 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.
(ii) 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).
(iii) 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.
(iv) In the case of an election under Section 1302, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) 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
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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.
(v) 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.
(vi) 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.
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.
F-A-40
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-A-41
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,
NATIONAL ASSOCIATION
By
----------------------------------
Title:
F-A-42
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, National Association, 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:
--------------------------------
F-A-43
ANNEX G
================================================================================
ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.,
as Issuer,
ACE GAMING, LLC,
as Guarantor,
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
--------------
INDENTURE
Dated as of [___________ __, 2004]
--------------
$[110] Million
3% Notes Due September 29, 2008
================================================================================
G-i
Atlantic Coast Entertainment Holdings, Inc.
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)............................................... 702
(e)............................................... 102
(f)............................................... N.A.
315(a)............................................... 602
(b)............................................... 601
(c)............................................... 602
(d)............................................... N.A.
(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.
G-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...................... 13
Section 103. Form of Documents Delivered to Trustee.................... 14
Section 104. Acts of Holders........................................... 14
Section 105. Notices, etc., to Trustee, Company and Guarantor.......... 15
Section 106. Notice to Holders; Waiver................................. 15
Section 107. Effect of Headings and Table of Contents.................. 16
Section 108. Successors and Assigns.................................... 16
Section 109. Separability Clause....................................... 16
Section 110. Benefits of Indenture..................................... 16
Section 111. Governing Law............................................. 16
Section 112. Legal Holidays............................................ 16
Section 113. Casino Control Act........................................ 16
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally........................................... 17
Section 202. Form of Face of Notes..................................... 17
Section 203. Form of Reverse of Notes.................................. 18
Section 204. Form of Trustee's Certificate of Authentication........... 20
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms........................................... 21
Section 302. Denominations............................................. 22
Section 303. Execution, Authentication, Delivery and Dating............ 22
Section 304. Temporary Securities...................................... 22
Section 305. Registration, Registration of Transfer and Exchange....... 23
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.......... 23
Section 307. Payment of Interest; Interest Rights Preserved............ 24
Section 308. Persons Deemed Owners..................................... 24
Section 309. Cancellation.............................................. 24
Section 310. Computation of Interest................................... 24
Section 311. Maximum Interest Rate..................................... 24
- --------------
(1) This table of contents shall not, for any purpose, be deemed to be a part of
this Indenture.
G-iii
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture................... 25
Section 402. Application of Trust Money................................ 25
ARTICLE FIVE
REMEDIES
Section 501. Events of Default......................................... 26
Section 502. Acceleration of Maturity; Rescission and Annulment........ 27
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.................................... 28
Section 504. Trustee May File Proofs of Claim........................ 28
Section 505. Trustee May Enforce Claims Without
Possession of Securities................................ 29
Section 506. Application of Money Collected............................ 29
Section 507. Limitation on Suits....................................... 29
Section 508. Unconditional Right of Holders to Receive Principal
Premium and Interest.................................... 29
Section 509. Restoration of Rights and Remedies........................ 30
Section 510. Rights and Remedies Cumulative............................ 30
Section 511. Delay or Omission Not Waiver.............................. 30
Section 512. Control by Holders........................................ 30
Section 513. Waiver of Defaults and Compliance......................... 30
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults........................................ 31
Section 602. Certain Rights of Trustee................................. 31
Section 603. Trustee Not Responsible for Recitals or
Issuance of Securities.................................. 32
Section 604. May Hold Securities....................................... 32
Section 605. Money Held in Trust....................................... 32
Section 606. Compensation and Reimbursement............................ 32
Section 607. Corporate Trustee Required; Eligibility................... 33
Section 608. Resignation and Removal; Appointment of Successor......... 33
Section 609. Acceptance of Appointment by Successor.................... 34
Section 610. Merger, Conversion, Consolidation or
Succession to Business.................................. 34
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTOR
Section 701. Disclosure of Names and Addresses of Holders.............. 35
Section 702. Reports by Trustee........................................ 35
Section 703. Reports by Company and Guarantor.......................... 36
G-iv
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company and Subsidiaries May Consolidate, etc.,
Only on Certain Terms................................... 36
Section 802. Successor Substituted..................................... 37
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Amendments to Security
Documents Without Consent of Holders.................... 38
Section 902. Supplemental Indentures and Amendments to Security
Documents with Consent of Holders....................... 38
Section 903. Execution of Supplemental Indentures and Amendments
to Security Documents................................... 39
Section 904. Effect of Supplemental Indentures......................... 39
Section 905. Conformity with Trust Indenture Act....................... 39
Section 906. Reference in Securities to Supplemental Indentures........ 39
Section 907. Notice of Supplemental Indentures and Amendments to
Security Documents...................................... 39
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium, if any, and Interest....... 40
Section 1002. Maintenance of Office or Agency........................... 40
Section 1003. Money for Security Payments to Be Held in Trust........... 40
Section 1004. Corporate Existence....................................... 41
Section 1005. Payment of Taxes and Other Claims......................... 41
Section 1006. Maintenance of Properties................................. 41
Section 1007. Insurance................................................. 42
Section 1008. Statement by Officers as to Compliance.................... 42
Section 1009. Statement by Officer of Certain Defaults.................. 42
Section 1010. Assumption of Obligations upon Change of Control.......... 42
Section 1011. Limitation on Company Indebtedness........................ 42
Section 1012. Limitation on Subsidiary Indebtedness and
Preferred Stock......................................... 43
Section 1013. Limitation on Restricted Payments......................... 43
Section 1014. Limitation on Liens....................................... 43
Section 1015. [Intentionally Omitted.].................................. 44
Section 1016. Limitation on Sale-Leaseback Transactions................. 44
Section 1017. Limitation on Asset Sales................................. 44
Section 1018. Application of Net Cash Proceeds in Event of Loss......... 45
Section 1019. Ownership of Stock of Subsidiaries........................ 45
Section 1020. Limitation on Transactions with Affiliates................ 45
Section 1021. Change in Nature of Business.............................. 46
Section 1022. Additional Collateral..................................... 46
Section 1023. CRDA Investments.......................................... 46
Section 1024. Subsidiaries.............................................. 46
G-v
Section 1025. Security Documents........................................ 46
Section 1026. Validity of Security Interest............................. 47
Section 1027. Duty of Cooperation....................................... 47
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Redemption................................................ 47
Section 1102. Applicability of Article.................................. 47
Section 1103. Election to Redeem; Notice to Trustee..................... 47
Section 1104. Selection by Trustee of Securities to Be Redeemed......... 47
Section 1105. Notice of Redemption...................................... 48
Section 1106. Deposit of Redemption Price............................... 48
Section 1107. Securities Payable on Redemption Date..................... 48
Section 1108. Securities Redeemed in Part............................... 49
Section 1109. Redemption Pursuant to Gaming Laws........................ 49
ARTICLE TWELVE
GUARANTEE ARRANGEMENTS
Section 1201. Guarantee................................................. 49
Section 1202. Execution and Delivery of Guarantee....................... 51
Section 1203. Additional Guarantors..................................... 51
Section 1204. Termination of Guarantee.................................. 51
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
Section 1301. Company's Option to Effect Defeasance or
Covenant Defeasa........................................ 51
Section 1302. Defeasance and Discharge.................................. 51
Section 1303. Covenant Defeasance....................................... 52
Section 1304. Conditions to Defeasance or Covenant Defeasance........... 52
Section 1305. Deposited Money and U.S. Government Obligations
To Be Held in Trust; Other Miscellaneous Provisions..... 53
Section 1306. Reinstatement............................................. 53
ARTICLE FOURTEEN
SECURITY INTEREST
Section 1401. Assignment of Security Interest........................... 54
Section 1402. Suits to Protect the Collateral........................... 54
Section 1403. Further Assurances and Security........................... 55
Section 1404. Release of Collateral..................................... 55
Section 1405. Release Notice; Subordination Request, Permitted Liens.... 56
Section 1406. Reliance on Opinion of Counsel............................ 57
Section 1407. Purchaser May Rely........................................ 57
Section 1408. Payment of Expenses....................................... 57
G-vi
ARTICLE FIFTEEN
CONVERSION AND DEMAND PAYMENT
Section 1501. Conversion Following Election of Requisite Lenders........ 57
Section 1502. Exercise of Conversion Privilege; Demand Payment;
Issuance of Common Stock; No Adjustment for
Interest or Dividends.................................. 58
Section 1503. Stated Ratio.............................................. 59
Section 1504. Additional Issuances...................................... 59
Section 1505. Mergers................................................... 59
Section 1506. Verification of Computations.............................. 60
Section 1507. Notice of Additional Issuances or Other Property.......... 60
Section 1508. Fractional Shares......................................... 60
Section 1509. Taxes on Shares Issued.................................... 61
Section 1510. Reservation of Shares; Shares to Be Fully Paid;
Compliance with Governmental Requirements;
Listing of Company Common Stock........................ 61
Section 1511. Responsibility of Trustee................................. 61
ARTICLE SIXTEEN
MISCELLANEOUS
Section 1601. Counterparts.............................................. 61
TESTIMONIUM.................................................................
SIGNATURE AND SEALS.........................................................
SCHEDULES
1.01 Permitted Indebtedness
G-vii
INDENTURE, dated as of [___________, 2004] 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 Wells Fargo Bank, National Association, 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
therefor 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 therefor 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 therefor 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:
(i) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(ii) 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;
(iii) 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;
(iv) 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: (A) subject and inferior to any Lien
to secure Working Capital Indebtedness whether incurred prior to,
G-8
on or after the Issue Date and (B) 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
(v) 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.
"Allowed Indebtedness" means any Indebtedness or Preferred Stock the
incurrence or issuance of which either (x) is consented to by the Requisite
Lenders or (y) 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) is secured by a Permitted Lien; (v)
constitutes Acquired Indebtedness; or (vi) 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
G-9
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" ).
"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 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
G-10
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
[_____________ __], 2004, 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.
"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:
(i) the Consolidated Net Income of such Person and its Subsidiaries for
such period, plus
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(ii) the sum of the following items (to the extent deducted in
determining Consolidated Net Income and without duplication): (A) all
Consolidated Fixed Charges; (B) Amortization Expense; (C) Depreciation
Expense; and (D) 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 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 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.
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"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 carryforwards 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.
"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: (a) any loss,
destruction or damage of such property or asset; (b) the condemnation or seizure
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of such property or asset or the exercise of any right of eminent domain or
navigational servitude; or (c) 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.
"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 (a) any "Grantor" as defined in the Security Agreement;
(b) any "Mortgagor" as defined in the Mortgage; and (c) 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
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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, (i)
to pay or purchase such liability, (ii) 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 (iii) 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 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.
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"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.
"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 in accordance with the
applicable terms of this Indenture) 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 or other action, 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
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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.
"Parent" means [name of GBH successor entity].
"Parent Indenture" means the [Second Amended and Restated Indenture,
dated as of ______________, 2004], 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:
(i) Indebtedness under the Notes, the Indenture or any Security
Document;
(ii) 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;
(iii) 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 (A) does not exceed $15 million
outstanding in the aggregate at any one time and (B) for a period of 60
consecutive days during any calendar year, does not exceed in the aggregate
$5 million;
(iv) 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;
(v) 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
(vi) 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;
(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;
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(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 for all purposes be and be deemed to 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."
"Permitted Payment" means the payment of (a) current scheduled interest
due on the Existing Notes; (b) Parent's 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 (c) any amount required to be paid or reimbursed to the
trustee under the second amended and restated indenture, dated as of [
___________, 2004], governing the Existing Notes; provided however that with
respect to payments pursuant to clauses (a) and (b) the following conditions
should be satisfied unless consented to by the requisite Lenders: (i) such
payment is required to be made prior to the maturity date of the Existing Notes
and (ii) 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.
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"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 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 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 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: (i) 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
(ii) 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.
"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
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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.
"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:
(i) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) 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;
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(iii) 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
(iv) 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, 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 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
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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,
(i) 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
(ii) 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
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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 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 (a) the principal amount thereof; (b)
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 (c) 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.
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, and interest which shall accrue thereon at a rate of 3%
per annum compounded annually on each [__________], (a) on the Demand Payment
Date, the Applicable Common Stock or (b) 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 (i)
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 (b) above or (ii) in Applicable Common Stock in the
case of payment pursuant to clause (a) 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.
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
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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 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 (A) at the lowest of (1) the principal
amount thereof; (2) the amount which the Disqualified Holder paid for the
Securities, together with accrued interest up to the date of the determination
of disqualification; or (3) the market value of such Securities or (B) in lieu
of a purchase pursuant to clause (A), 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
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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
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.
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,
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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:
ACE GAMING, LLC
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, 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 "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) 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 (i) receiving interest on the Securities held by such Holder;
(ii) exercising, directly or through any trustee or nominee, any right conferred
on such Securities; and (iii) 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.
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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. 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
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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.
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 (a) 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; (b) 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 (c) 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 (a) any mutilated Security is surrendered to the Trustee or (b) 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 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 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, (a) characterize any nonprincipal payment
as an expense fee, or premium rather than interest; (b) exclude voluntary
prepayments and the effects thereof; and (c) amortize, prorate, allocate and
spread, in equal parts, the total amount of interest throughout the entire
contemplated term of the Securities.
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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
(i) either
(A) all Securities theretofore authenticated and delivered
(other than (1) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306, (2)
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 and (3) 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
(1) have become due and payable as the result of a
Demand Payment, or
(2) have become due and payable at their Stated
Maturity, or
(3) are to be called for redemption (with the consent
of the Requisite Lenders having been obtained) 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 (1), (2) or (3) 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;
(ii) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(iii) 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 (i) 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.
G-32
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):
(i) default in the payment of any principal of (or premium, if any, on)
any Security, or interest thereon, at its Maturity; or
(ii) 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
(iii) (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
(iv) 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
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
(v) 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 (A) an
enforcement proceeding shall have been commenced by any creditor upon such
judgment or order and (B) 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
(vi) 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
G-33
(vii) 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
(viii) 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
(ix) 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
(x) 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.
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
(i) 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
(ii) 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.
G-34
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(i) 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
(ii) 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
(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.
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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.
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:
(i) 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;
(ii) 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;
(iii) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(iv) 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 Articles Two,
Thirteen and 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
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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 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
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction; and
(iii) 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:
(i) 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
(ii) 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.
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ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
Within the earlier of 90 days after the occurrence of any Default
hereunder or as soon as practicable after any such Default becomes to known to
the Trustee, 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):
(i) 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;
(ii) 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;
(iii) 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;
(iv) 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;
(v) 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;
(vi) 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;
(vii) 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;
(viii) 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
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(ix) 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 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:
(i) 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
(ii) 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
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(iii) 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.
(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:
(i) 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
(ii) 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
(iii) 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, (A)
the Company, by a Board Resolution, may remove the Trustee or (B) 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
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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 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 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.
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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:
(i) 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
(ii) 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,
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:
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(i) 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;
(ii) 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 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;
(iii) 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 (A) and (B) of this Section as may be required by
rules and regulations prescribed from time to time by the Commission; and
(iv) 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:
(i) 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 (A) if consented to by the
Requisite Lenders; and (B) the following requirements are complied with,
unless otherwise consented to by the Requisite Lenders: (1) 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; (2) 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 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; (3) 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
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connection with or in respect of, such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing; (4) 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 (5) 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;
(ii) 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: (A) if
consented to by the Requisite Lenders and (B) the following requirements
are complied with, unless otherwise consented to by the Requisite Lenders:
(1) 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; (2) 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 (3) 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
(iii) 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 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:
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(i) 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
(ii) 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
(iii) to add any additional Events of Default; or
(iv) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section
609; or
(v) 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
(vi) 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
(vii) to add any additional Guarantor; or
(viii) to make any other change that does not adversely affect the
rights of any Holder; or
(ix) 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:
(i) 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
(ii) 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
(iii) 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.
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.
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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
thePersons 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:
(i) 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;
(ii) 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
(iii) 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 (a) 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 (b) 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 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.
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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 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:
(i) Indebtedness in connection with the Securities, this Indenture or
any Security Document;
(ii) Indebtedness outstanding on the Issue Date and included on
Schedule 1.01 hereto;
(iii) Allowed Indebtedness and Permitted Indebtedness;
(iv) Working Capital Indebtedness; and
(v) any Indebtedness issued in exchange for or to repay, prepay,
repurchase, redeem, defease, retire or refinance ("refinance") any
Indebtedness permitted by clauses (i) through (iv) above; provided that (A)
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 (B) the Indebtedness so issued either: (x) (1) has
a stated maturity not earlier than the stated maturity of the Indebtedness
so exchanged or refinanced; (2) 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 (3) 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:
(i) Indebtedness under the Guarantee or in connection with the
Securities, this Indenture and the Security Documents;
(ii) 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 (A) 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 (B) 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;
(iii) Allowed Indebtedness and Permitted Indebtedness;
(iv) Working Capital Indebtedness; and
(v) any Indebtedness issued in exchange for or to refinance any
Indebtedness permitted by clause (i) through (iv) above; provided that (A)
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
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only to the extent that such Indebtedness is otherwise permitted to be
incurred under this covenant and (B) the Indebtedness so issued either (x)
(1) has a stated maturity date or an initial mandatory redemption date
later than the stated maturity date of the Indebtedness so exchanged or
refinanced, (2) 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 (3) is subordinated to the Notes on the
Guarantee of 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:
(i) the Company or any Subsidiary to make or provide for the Permitted
Payment; or
(ii) the Guarantor to make any payments or distributions to the Company
to provide for (A) the payment or performance by the Company of its
obligations under this Indenture, the Security Documents and the Securities
and (B) 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:
(i) Liens existing on the Issue Date;
(ii) Liens created by this Indenture and the Security Documents or that
otherwise secure the Guaranty or the Securities;
(iii) Liens securing Permitted Indebtedness, FF&E Financing and/or
Capitalized Lease Obligations permitted pursuant to the Indenture;
(iv) Permitted Liens; and
(v) The replacement, extension or renewal of any Lien permitted by
clauses (i), (ii), (iii) or (iv) 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, 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
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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)
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 (a) 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 (b) 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 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 (a) 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 (b) 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
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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 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 (a)
transactions among the Company and its Subsidiaries; (b) transactions involving
aggregate payments or other Fair Market Value, of less than $5 million in any
consecutive 365-day period; (c) transactions made available to all Holders on a
basis pro rata to their holdings of Securities; (d) the transactions described
in the Company's filings on Form S-4 filed with the Commission on [__________]
and [___________]; and (e) 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 (e) 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.
SECTION 1023. CRDA Investments.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly (a) 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: (i) the Casino Reinvestment Development Authority of the
State of New Jersey ("CRDA"); (ii) any other entity as required by applicable
law; or (iii) any person so long as such action will not result in a violation
of applicable law or (b) sell, convey, transfer, lease or otherwise dispose of
its CRDA Investments otherwise than either (A) in accordance with the terms of a
Permitted Grant or (B) for fair value (in either cases
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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 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 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 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.
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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.
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 (a) specify a proposed redemption date; (b) 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;
(c) 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 (d) 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:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) 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;
(iv) 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
(v) the place or places where such Securities are to be surrendered for
payment of the Redemption Price.
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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.
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 (A) the principal
amount thereof; (B) 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 (C) the market value of such Securities.
The right of the Company to purchase such Security may be assigned by the
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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 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 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
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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
(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
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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:
(i) 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 (1) direct obligations of the United States of America for the
timely payment of which its full faith and credit is, pledged or (2)
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
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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.
(ii) 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).
(iii) 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.
(iv) In the case of an election under Section 1302, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (B) 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.
(v) 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.
(vi) 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.
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.
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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, 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.
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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).
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:
(i) 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):
(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
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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.
(ii) 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) With the consent or approval or 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 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 together with any intercreditor agreements specified in such
Release Notice.
(b) With the consent or approval or 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
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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 together with any
intercreditor agreements specified in such Subordination Request.
(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
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.
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
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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.
(c) For the avoidance of doubt, this Section 1501 shall not limit the
power of the Requisite Lenders to provide the Demand Payment Notice at any time,
either prior to or after the occurrence of the Convertibility Election and in
such event the Notes shall be discharged and shall thereafter represent solely
the right of the Holder to receive the Applicable Common Stock, all as more
fully set forth in this Indenture.
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, 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 1509. 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 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
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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 of such surrender. In the case of any Demand Payment, each Note 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 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:
(i) In case the Company shall, at any time after the date hereof and on
or prior to (A) the date of such conversion as contemplated in Section
1501(a) in respect of any conversion or (B) the Demand Payment Date in
respect of any Demand Payment (1) declare a dividend or make a distribution
on the Company Common Stock in shares of Company Common Stock; (2)
subdivide the outstanding shares of Company Common Stock into a greater
number of shares; (3) combine the outstanding shares of its Company Common
Stock into a smaller number of shares; or (4) 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.
(ii) In case the Company shall, at any time after the date hereof and
on or prior to (A) the date of such conversion as contemplated in Section
1501(a) in respect of any conversion or (B) 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.
G-65
(iii) 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(i) and (ii) or otherwise require the
issuance of any additional securities under Section 1504(i) or (ii) 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 Person (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.
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.
G-66
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 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.
G-67
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:
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By
-------------------------
Title:
G-68
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 Wells Fargo
Bank, National Association, 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:
-----------------------
G-69
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.]
G-70
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:
---------------------------------
G-71
ANNEX H
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 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;
H-1
Independent Committee of the Board
of Directors of GB Holdings, Inc.
July 14, 2003
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 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.
H-2
Independent Committee of the Board
of Directors of GB Holdings, Inc.
July 14, 2003
Our services to you and this Opinion are provided 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 for that purpose.
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
H-3
ANNEX I
EXECUTIVE OFFICERS, DIRECTORS
AND SIGNIFICANT EMPLOYEES OF THE AFFILIATES
The names and positions of the executive officers, directors and
significant employees of American Property Investors, Inc., Beckton Corp., and
Barberry Corp. are set forth below. Each executive officer, director and
significant employee is a citizen of the United States of America. As
partnerships, American Real Estate Holdings Limited Partnership and American
Real Estate Partners do not have any executive officers and directors. As a
limited liability company, Cyprus, LLC does not have any executive officers and
directors. The executive officers and directors of their general partner,
American Property Investors, Inc. ("API"), are listed below. The business
address of Cyprus, LLC, Barberry Corp., Starfire Holding Corporation, American
Real Estate Holdings Limited Partnership, American Real Estate Partners, L.P.,
American Property Investors, Inc., and Beckton Corp. is 100 South Bedford Road,
Mount Kisco, NY 10549.
AMERICAN PROPERTY INVESTORS, INC.
Directors Officers
Carl C. Icahn Carl C. Icahn - Chairman of the Board
William A. Leidesdorf Keith A. Meister - President and Chief Executive Officer
Jack G. Wasserman John P. Saldarelli - Vice President, Secretary and Treasurer
James L. Nelson Martin Hirsch - Executive Vice President and Director of Acquisitions
and Development
STARFIRE HOLDING CORPORATION
Directors Officers
Carl C. Icahn Carl C. Icahn - Chairman of the Board and President
BECKTON CORP.
Directors Officers
Carl C. Icahn Carl C. Icahn - Chairman of the Board, President, Secretary
BARBERRY CORP.
Directors Officers
Carl C. Icahn Carl C. Icahn - Chairman of the Board, President and Secretary
The following sets forth with respect to each executive officer and
director such person's (a) name, (b) present principal occupation or employment
and the name, principal business and address of the corporation or other
organization in which such employment or occupation is conducted and (c)
material occupations, positions, offices or employment during at least the last
five years, giving the starting and ending dates of each and the name, principal
business and address of any business corporation or other organization in which
such occupation, position, office or employment was carried on.
MARTIN HIRSCH, age 48, has served as a Vice President of API since March
18, 1991, where he is involved in investing, managing and disposing of real
estate properties and securities. On March 23, 2000, Mr. Hirsch was elected to
serve as Executive Vice President and Director of Acquisitions and Development
of API. From January 1986 to January 1991, he was at Integrated Resources, Inc.
as a Vice President where he was involved
I-1
in the acquisition of commercial real estate properties and asset management.
Mr. Hirsch has served as a Director of Stratosphere since October 14, 1998. In
1998, Mr. Hirsch was appointed to the Board of Directors of National Energy
Group, Inc., an independent public energy company primarily engaged in the
acquisition, exploitation, development, exploration and production of oil and
natural gas. Mr. Hirsch has served as Director of GB Holdings, Inc. and GB
Property Funding, Inc. since September 29, 2000 and Director of Greate Bay Hotel
& Casino, Inc., which owns and operates the Sands Hotel in Atlantic City, NJ,
since February 28, 2001. Mr. Hirsch's principal business address is American
Real Estate Holdings Limited Partnership, 767 Fifth Avenue, Suite 4700, New
York, New York 10153.
CARL C. ICAHN, age 68, has served as Chairman of the Board and a
Director of Starfire Holding Corporation (formerly Icahn Holding Corporation), a
privately-held holding company, and Chairman of the Board 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 and President of Icahn & Co., Inc., a registered
broker-dealer and a member of the National Association of Securities Dealers,
since 1968. Since November 15,1990, Mr. Icahn has been Chairman of the Board of
API. Mr. Icahn has been a Director of Cadus Pharmaceutical Corporation, a firm
that holds various biotechnology patents, since 1993. Since August 1998 he has
also served as Chairman of the Board of Maupintour Holding, LLC f/k/a
Lowestfare.com, LLC, an internet travel reservations company. From October 1998,
Mr. Icahn has been the President and a Director of Stratosphere. Since September
29, 2000, Mr. Icahn has served as the Chairman of the Board of GB Holdings,
Inc., GB Property Funding, Inc. and Greate Bay Hotel & Casino, Inc., which owns
and operates the Sands Hotel in Atlantic City, NJ. Mr. Icahn's principal
business address is Icahn Associates, Corp., 767 Fifth Avenue, Suite 4700, New
York, New York 10153.
WILLIAM A. LEIDESDORF, age 58, has served as Director of API since March
26, 1991. Since June 1997, Mr. Leidesdorf has been an owner and a managing
director of Renaissance Housing, LLC, a company primarily engaged in acquiring
multifamily residential properties. From April 1995 through December 1997, Mr.
Leidesdorf acted as an independent real estate investment banker. From January
1, 1994 through April 1995, Mr. Leidesdorf was Managing Director of RFG
Financial, Inc., a commercial mortgage company. From September 30, 1991 to
December 31, 1993, Mr. Leidesdorf was Senior Vice President of Palmieri Asset
Management Group. From May 1, 1990 to September 30, 1991, Mr. Leidesdorf was
Senior Vice President of Lowe Associates, Inc., a real estate development
company, where he was involved in the acquisition of real estate and the asset
management workout and disposition of business areas. He also acted as the
Northeast Regional Director for Lowe Associates, Inc. From June 1985 to January
30, 1990, Mr. Leidesdorf was Senior Vice President and stockholder of Eastdil
Realty, Inc., a real estate company, where he was involved in the asset
management workout, disposition of business and financing areas. During the
interim period from January 30, 1990 through May 1, 1990, Mr. Leidesdorf was an
independent contractor for Eastdil Realty, Inc. on real estate matters. Mr.
Leidesdorf's principal business address is 489 Fifth Avenue, 34th floor, New
York, New York 10017.
KEITH A. MEISTER, age 30, has served as President and Chief Executive
Officer of API since August 2003. He also continues to serve as a senior
investment analyst of High River Limited Partnership, a company affiliated with
Mr. Icahn, a position he has held since June 2002. From March 2000 through 2001,
Mr. Meister co-founded and served as co-president of J Net Ventures, a venture
capital fund focused on investments in information technology and enterprise
software businesses. From 1997 through 1999, Mr. Meister served as an investment
professional at Northstar Capital Partners, an opportunistic real estate
investment partnership. Prior to Northstar, Mr. Meister served as an investment
analyst in the investment banking group at Lazard Freres. He also serves on the
following Boards of Directors: XO Communications, Inc., a company that is
majority-owned by various Icahn entities; TransTexas Gas Corporation, a company
that is 85%-owned by various Icahn entities and managed by National Energy
Group, Inc., a subsidiary of AREH; Scientia Corporation, a private health care
venture company in which AREH holds less than a 10% equity interest; American
Entertainment Properties Corp.; and American Casino & Entertainment Properties
Finance Corp. Mr. Meister's principal business address is 100 South Bedford
Road, Mount Kisco, NY 10549.
JAMES L. NELSON, age 54, has served as a Director of API since June 12,
2001. Since March 1998, Mr. Nelson has been Chairman and Chief Executive Officer
of Orbit Aviation, Inc., a company engaged in the acquisition and completion of
Boeing 737 Business Jets for private and corporate clients. From 1986 until the
present, Mr. Nelson has been Chairman and Chief Executive Officer of Eaglescliff
Corporation, a specialty investment banking, consulting and wealth management
company. From August 1995 until July 1999 he was Chief
I-2
Executive Officer and Co-Chairman of Orbitex Management, Inc. and until March
2001 he was on the Board of Orbitex Financial Services Group, a financial
services company in the mutual fund sector. From January 1994 until August 1995
Mr. Nelson and Eaglescliff Corporation were affiliated with Rosecliff Inc., a
leveraged buyout firm. From January 1992 until August 1994 Mr. Nelson was
President of AVIC, Inc., a company involved in financing and building telecom
systems in China and creating network connectivity devices. Mr. Nelson's
principal business address is Orbit Aviation Inc., 79 Panorama Crest Avenue, Las
Vegas, Nevada 89135.
JOHN P. SALDARELLI, age 62, has served as Vice President, Secretary and
Treasurer of API since March 18, 1991 and in June 2000, Mr. Saldarelli was given
the additional title of Chief Financial Officer. 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. Mr. Saldarelli has served as a Director of Stratosphere
since October 14, 1998. Since February 28, 2001, Mr. Saldarelli has served as a
Director of GB Holdings, Inc., GB Property Funding, Inc. and Greate Bay Hotel &
Casino, Inc., which owns and operates the Sands Hotel in Atlantic City, NJ. Mr.
Saldarelli's principal business address is American Real Estate Holdings Limited
Partnership, 100 South Bedford Road, Mt. Kisco, New York 10549.
JACK G. WASSERMAN, age 67, has served as a Director of API since
December 3, 1993. Mr. Wasserman is an attorney and a member of the New York
State Bar and has been with the New York based law firm of Wasserman, Schneider
& Babb since 1966, where he is currently a senior partner. Mr. Wasserman also
serves as a director of Cadus Pharmaceutical Corporation, a public biotechnology
company. In addition, in 1998 Mr. Wasserman was appointed to the Board of
Directors of National Energy Group, Inc., an independent public energy company
primarily engaged in the acquisition, exploitation, development, exploration and
production of oil and natural gas. In addition, at the direction of the Nevada
State Gaming Control Board, Mr. Wasserman sits as a member of the Compliance
Committee of Stratosphere. In the fourth quarter of 1999, Mr. Wasserman acquired
approximately 18.5 million common shares of Philip Services Corp. from an
affiliate of Mr. Icahn for approximately $1.5 million consisting of cash and a
non-recourse promissory note secured by the acquired shares, which shares,
immediately after the reorganization of Philip Services Corp., represented less
than 0.5% of the outstanding common shares of the reorganized company. In March,
2000, Mr. Wasserman was nominated by Mr. Icahn as one of the eight directors
proposed by Mr. Icahn for the board of Nabisco Group Holdings. Mr. Wasserman's
principal business address is 510 East 86th Street, New York, New York 10028.
Except as set forth below, during the last five years, none of
Stratosphere, AREH, Nybor, Strat Merger Corp., AREP, API, Beckton, and Barberry,
nor to the best of their knowledge, any of their respective directors, executive
officers or controlling persons, (a) have been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (b) were a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining further violations of, or prohibiting
activities, subject to, federal or state securities laws or finding any
violation of such laws.
On January 5, 2001, Reliance Group Holdings, Inc. ("Reliance") commenced
an action in the United States District Court for the Southern District of New
York against "Carl C. Icahn, Icahn Associates Corp. and High River Limited
Partnership" alleging that High River's tender offer for Reliance 9% senior
notes violated Section 14(e) of the Exchange Act. Reliance sought a temporary
restraining order and preliminary and permanent injunctive relief to prevent
defendants from purchasing the notes. The Court initially imposed a temporary
restraining order. Defendants then supplemented the tender offer disclosures.
The Court conducted a hearing on the disclosures and other matters raised by
Reliance. It then denied plaintiffs' motion for a preliminary injunction and
ordered dissolution of its temporary restraining order following dissemination
of the supplement.
Reliance took an immediate appeal to the United States Court of Appeals
for the Second Circuit and sought a stay to restrain defendants from purchasing
notes during the pendency of the appeal. On January 30, 2001, the Court of
Appeals denied plaintiff's stay application. On January 30, Reliance also sought
a further temporary restraining order from the District Court. The Court
considered the matter and reimposed its original restraint until noon the next
day, at which time the restraint was dissolved. The appeal was argued on March 9
and denied on March 22.
I-3
ANNEX J
IN CONNECTION WITH THE FAIRNESS OPINION ISSUED BY LIBRA SECURITIES, LLC FOR THE
TRANSACTION, GB HOLDINGS PROVIDED LIBRA SECURITIES THE PROJECTIONS SET FORTH
BELOW FOR THE PERIOD JUNE-DECEMBER 2003. PLEASE NOTE THAT BECAUSE THE PERIOD
COVERED BY SUCH PROJECTIONS HAS ENDED, YOU ARE RESPECTFULLY REFERRED TO THE
AUDITED FINANCIALS ON PAGES F-3-F-20 FOR THE AUDITED FINANCIAL STATEMENTS
COVERING SUCH PERIOD.
SANDS CASINO HOTEL
OPERATING INCOME ESTIMATE
Twelve Months Ending December 31,
2003
(amounts in thousands)
Jan Feb Mar Apr May Jun est Jul Aug bud Sep bud Oct bud Nov bud Dec bud
bud
2003 2003 2003 2003 2003 2003 2003 2003 2003 2003 2003 2003
--------------------------------------------------------------------------------------------------
Table Drop 14,838 13,424 16,909 16,517 18,881 17,425 15,311 16,138 13,821 13,656 13,573 12,663
Table Hold % 18.49% 14.15% 9.91% 18.22% 15.76% 12.03% 16.10% 16.10% 16.10% 16.10% 16.10% 16.10%
Slot Handle 145,120 146,159 187,972 166,379 183,623 162,278 214,779 221,967 195,771 188,607 175,227 149,987
Slot Hold % (Cash Basis) 7.84% 8.07% 7.97% 8.26% 8.29% 8.30% 8.15% 8.15% 8.15% 8.15% 8.15% 8.15%
Revenues
Tables 2,744 1,900 1,676 3,009 2,976 2,097 2,465 2,598 2,225 2,199 2,185 2,039
Slots 11,379 11,788 14,972 13,741 15,225 13,462 17,503 18,089 15,954 15,370 14,280 12,223
Progressive Jackpot (165) (404) (409) (104) (445) (439) (360) (360) (329) (293) (264) (277)
Poker - - 40 66 66 44 - - - - - -
Simulcast 37 35 46 45 44 40 60 55 48 45 43 40
--------------------------------------------------------------------------------------------------
Total Casino Revenue 13,995 13,319 16,325 16,756 17,865 15,204 19,668 20,382 17,899 17,320 16,244 14,024
Rooms 756 790 913 910 1,013 1,055 1,249 1,249 1,061 1,061 931 808
Food & Beverage 1,361 1,469 1,834 1,697 1,988 1,724 2,272 2,277 1,946 1,890 1,559 1,414
Other 275 260 347 336 433 350 410 411 310 328 295 281
--------------------------------------------------------------------------------------------------
Gross Revenues 16,387 15,838 19,419 19,699 21,300 18,333 23,598 24,320 21,216 20,598 19,029 16,527
Less: Promotional 1,469 1,581 1,878 1,835 1,931 1,572 1,932 1,936 1,711 1,728 1,498 1,388
Allowances
Less: Cash Incentive 2,054 2,061 2,800 2,537 2,712 2,537 3,126 3,168 2,927 2,825 2,637 2,124
Programs --------------------------------------------------------------------------------------------------
Net Revenues 12,864 12,196 14,741 15,327 16,657 14,224 18,540 19,215 16,578 16,045 14,894 13,015
--------------------------------------------------------------------------------------------------
Operating Expenses
Table Marketing 110 97 99 111 92 88 58 60 55 51 48 47
Slot Marketing 574 684 899 748 900 840 969 963 907 798 886 915
Advertising 152 144 344 371 377 556 473 519 286 225 187 128
Other Promotion Costs 30 8 33 33 65 66 45 31 30 45 29 29
Coin Incentive Programs 0 0 0 0 0 0 0 0 0 0 0 0
Entertainment Costs 50 67 77 89 121 8 149 150 64 98 77 78
--------------------------------------------------------------------------------------------------
Marketing and Promotions
916 1,000 1,452 1,353 1,555 1,558 1,695 1,722 1,341 1,217 1,226 1,196
--------------------------------------------------------------------------------------------------
Salaries & Wages 4,042 3,616 4,337 4,317 4,335 4,119 4,838 4,769 4,637 4,636 4,472 4,544
Payroll Taxes & Benefits 2,463 2,091 1,920 1,863 2,376 2,001 1,881 1,852 1,820 1,851 1,790 1,828
Food and Beverage Costs 494 485 602 591 681 647 822 824 707 691 568 498
Contract Maintenance 557 440 597 487 622 559 626 629 626 627 626 626
Operating Supplies 184 210 269 228 263 200 254 246 244 248 224 223
Travel and Entertainment 3 7 8 8 5 5 2 3 5 3 3 5
SANDS CASINO HOTEL
OPERATING INCOME ESTIMATE
Twelve Months Ending December 31,
2003
(amounts in thousands)
12 Months
2003 Proj.
--------------
Table Drop $ 183,155
Table Hold % 15.35%
Slot Handle $ 2,137,869
Slot Hold % (Cash Basis) 8.14%
Revenues
Tables 28,113
Slots 173,985
Progressive Jackpot (3,850)
Poker 215
Simulcast 537
--------------
Total Casino Revenue 199,002
Rooms 11,795
Food & Beverage 21,431
Other 4,036
--------------
Gross Revenues 236,264
Less: Promotional 20,459
Allowances
Less: Cash Incentive 31,509
Programs
--------------
Net Revenues 184,296
--------------
Operating Expenses
Table Marketing 918
Slot Marketing 10,083
Advertising 3,761
Other Promotion Costs 441
Coin Incentive Programs -
Entertainment Costs 1,029
--------------
Marketing and Promotions 16,232
--------------
Salaries & Wages 52,664
Payroll Taxes & Benefits 23,735
Food and Beverage Costs 7,611
Contract Maintenance 7,023
Operating Supplies 2,793
Travel and Entertainment 57
J-1
IN CONNECTION WITH THE FAIRNESS OPINION ISSUED BY LIBRA SECURITIES, LLC FOR THE
TRANSACTION, GB HOLDINGS PROVIDED LIBRA SECURITIES THE PROJECTIONS SET FORTH
BELOW FOR THE PERIOD JUNE-DECEMBER 2003. PLEASE NOTE THAT BECAUSE THE PERIOD
COVERED BY SUCH PROJECTIONS HAS ENDED, YOU ARE RESPECTFULLY REFERRED TO THE
AUDITED FINANCIALS ON PAGES F-3-F-20 FOR THE AUDITED FINANCIAL STATEMENTS
COVERING SUCH PERIOD.
Bad Debt Expense 165 124 42 157 68 65 164 158 185 119 87 100
Other 343 243 282 313 324 314 382 350 335 320 310 310
--------------------------------------------------------------------------------------------------
Variable Operating Costs 8,251 7,216 8,057 7,965 8,674 7,910 8,971 8,831 8,559 8,496 8,079 8,135
--------------------------------------------------------------------------------------------------
Professional Fees 46 43 186 67 96 95 91 66 70 69 66 70
Property & Equipment 419 342 357 349 301 261 399 398 392 398 392 397
Casino Gaming Tax 1,120 1,083 1,325 1,312 1,455 1,243 1,584 1,642 1,440 1,396 1,310 1,133
Regulatory Costs 416 416 416 257 416 417 417 417 417 417 417 417
Insurance 248 262 202 233 226 230 230 237 237 246 246 248
Utilities 381 353 437 336 350 340 455 434 430 384 385 370
Property Tax 824 824 819 822 822 822 824 824 824 824 824 824
Royalty Fee 18 19 22 22 24 25 28 28 25 25 22 20
--------------------------------------------------------------------------------------------------
Uncontrollable Operating
Costs 3,472 3,342 3,764 3,398 3,691 3,433 4,028 4,046 3,834 3,759 3,662 3,479
--------------------------------------------------------------------------------------------------
Total Costs
12,639 11,558 13,273 12,715 13,919 12,901 14,693 14,600 13,734 13,472 12,968 12,810
--------------------------------------------------------------------------------------------------
EBITDA
225 638 1,468 2,612 2,737 1,323 3,847 4,615 2,844 2,573 1,926 204
==================================================================================================
EBITDA Margin 1.8% 5.2% 10.0% 17.0% 16.4% 9.3% 20.7% 24.0% 17.2% 16.0% 12.9% 1.6%
Bad Debt Expense 1,434
Other 3,826
--------------
Variable Operating Costs
99,143
--------------
Professional Fees 964
Property & Equipment 4,403
Casino Gaming Tax 16,043
Regulatory Costs 4,840
Insurance 2,845
Utilities 4,656
Property Tax 9,878
Royalty Fee 278
--------------
Uncontrollable Operating
Costs 43,907
--------------
Total Costs
159,282
--------------
EBITDA
25,014
==============
EBITDA Margin 13.6%
J-2
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